Tax Increases

Lord Liddle Excerpts

Thursday 10th July 2025 Lords Chamber

[Lord Livermore (Lab)]

I am grateful to the noble Lord for his question. It is not for me to ban conversations about tax rises or cuts, but I understand what he says about tax simplification and will take his thoughts about ice cream cones back to my colleagues in the Treasury.

[Lord Liddle (Lab)]

My Lords, is it not the case that we have a serious long-term question here, beyond what the Chancellor will do in the next year? We have underlying pressures on defence and demography, on top of which we have the reforms on disabilities and SEND in schools that the previous Government introduced, which have led to rocketing bills that something has to be done about at some stage. Will the Government therefore engage in a long-term debate about how we finance the welfare state, which most of the British population strongly adhere to?

[Lord Livermore (Lab)]

My noble friend is right to point out the long-standing and long-term challenges that we face in fiscal policy. As the noble Lord opposite said, the OBR set out some long-standing economic realities in its fiscal risks report this week. That is why it is so important that we are committed to ensuring stability in the economy through our fiscal rules. My noble friend mentioned special educational needs. He is absolutely right that, right now, the system is not working; less than half of education, health and care plans are issued within the 20-week deadline and only 22% of children with special educational needs are reaching the expected levels in maths and English. We absolutely need to deliver better support for vulnerable children and their parents, which is why we will set out wider plans for SEND reform later this year as part of the upcoming schools White Paper. On the longer-term debate that my noble friend talks about, I am always more than happy to discuss those issues with him.

National Debt: It’s Time for Tough Decisions (Economic Affairs Committee Report)

Lord Liddle Excerpts

Friday 25th April 2025 Lords Chamber

[Lord Liddle (Lab)]

My Lords, I start by saying what an excellent and challenging report this is. It is exactly the kind of thing that the House of Lords exists to do and which political parties find very difficult to address. I congratulate the noble Lord, Lord Bridges of Headley, whom I have always seen as one of the stars of the Benches opposite, on his excellent introduction to this debate. I did not agree with some of it, but it was challenging, and he asked a lot of the right questions.

I suppose that the side of the argument that we should not be as worried about this question of debt, as the noble Lord, Lord Bridges, lays out, is that we are in the middle of the international pack. That is some reassurance. However, we live in a very unstable world—goodness knows what is going to happen in the United States. As the noble Lord pointed out, we have very particular vulnerabilities. We are dependent on the kindness of foreigners to fund our borrowing. We do not have the high domestic savings levels that countries such as Italy and Japan have. I do not want to get back into the European arguments that I have always made, but it is worth pointing out to the House that Greece now pays a lower interest rate on its debt than we do, because it has the power of the European Central Bank behind it. That is my view.

I also agree with the noble Lord, Lord Bridges, that really big challenges are coming down the track. My worry is that we must not set a debt rule that rules out investment in growth. If the interest rate is higher than the growth rate, we are in deep trouble, so we have to find a way of raising the growth rate, which requires a very strong policy of public investment, which the Government are doing. Things such as the Oxford-Cambridge link and the developments around it are very important. My own favourite development would be a massive transformation of urban connectivity in the north of England, which would have a very beneficial effect on productivity.

On spending, we must be really tough. We have to attack bureaucracy, as we are now doing in the National Health Service. We have to take on vested public interests. This is very difficult for people on our side of the House who have a lot of friends in the public sector trade unions, but we must be prepared to have a policy of reform. In addition to that, and to being tough on things such as PIP and SEND, which have got ridiculous in terms of their growth, we must be fair. I end on one this point. Being fiscally tough does not rule out fairness. One thing that I would like to see in future is a redistributive package which addresses child and pensioner poverty.

Financial Services: Mansion House Speech

Lord Liddle Excerpts

Thursday 21st November 2024 Lords Chamber

[Lord Livermore (Lab)]

I am very grateful to the noble Lord. It will not surprise anyone to hear that I agree with the sentiment behind his question. He is right that you cannot undo 14 years of damage in one Budget. Our economic strategy is based on the principles of stability, investment and reform; the Budget was about restoring stability to the public finances and therefore stability to the economy, which is the essential underpinning of any growth strategy. The Budget also talked about increasing levels of public investment in our economy; these Mansion House reforms are part of increasing private investment into our economy. The noble Lord is correct that there will be lags in that investment, but we very much hope to see growth coming through in due course.

[Lord Liddle (Lab)]

My Lords, I very much welcome the proposals on pension funds that the Chancellor has put forward. However, I have some sympathies with what the noble Baroness, Lady Kramer, said about City regulation. We must face the fact that, when the financial crisis hit us in 2008, because of the prudence of Gordon Brown as Chancellor of the Exchequer the debt to GDP ratio was less than 40%, whereas under the Conservatives over the last 14 years it has reached 100%. The chances of us being able to launch a massive rescue operation of banks in the way that Gordon Brown did with such success in 2008 will be constrained by that fact. What is the Minister’s judgment of that?

Secondly, what are the Government’s plans to improve access to finance for small and growing firms, particularly those outside London and the south-east? Lots of studies have demonstrated that growing firms find access to capital difficult. The British Business Bank is one response to that. Are the Government proposing to upscale it? That area is a key constraint on UK growth.

[Lord Livermore (Lab)]

I am grateful to my noble friend for his points. In the letter that the Chancellor sent to the chief executive of the Financial Conduct Authority, she made it very clear that the importance of competition, growth and risk-taking is to be seen in the context of its regulatory duties. She said that:

“The financial services regulators are key to driving forward”


growth;

“we must have proportionate, effective regulation that allows firms of all sizes to compete, innovate and grow, creates a stable, attractive environment which encourages businesses to establish and expand in the UK, and adequately protects consumers”.


She recognises that there are trade-offs to be made, but she would like to see a greater emphasis on achieving that secondary growth objective.

On supporting small businesses and their access to finance, my noble friend is absolutely right that, to date, the UK has been a very good place to start a business but a less good place to scale one, and access to capital is a vital part of improving that. He mentions the British Business Bank, which is incredibly important; it has been very successful in providing some of that finance, and we need to go further. Colleagues in the Department for Business and Trade will also be coming forward with proposals to help small businesses scale and grow.

Autumn Budget 2024

Lord Liddle Excerpts

Monday 11th November 2024 Lords Chamber

[Lord Liddle (Lab)]

My Lords, I add my congratulations to the noble Lord, Lord Livermore, on his coherent and brilliant introduction to this debate.

I am also looking forward to the maiden speech of the noble Lord, Lord Booth-Smith. It occurred to me, while listening to the very powerful speech of the noble Lord, Lord Bridges, that the noble Lord is in a very good position to tell us where the Conservative Party would have done less in order to balance the books. We hear all this talk about the need for the state to do less; we never hear what it means in practice. Is it not time, after 14 years of failure on this score, for the Conservative Party to tell us what it intended to do? You see, I take a completely different view. For far too long in Britain, we have been trying to have European levels of public service with American levels of taxation, and we have to face up to that problem.

I congratulate our Chancellor, Rachel Reeves, on what she has done and the tough decisions she has taken to make sure of the possibility of a catch-up and restoration of standards in our public services. I also congratulate her on the fact that we have restored public investment to at least a sensible level. Here I agree with the noble Lord, Lord O’Neill, who is no longer in his place, that we need a sustained increase in public investment, which of course would bring in private investment, if we are to raise our rate of long-term economic growth. Investment is crucial for reform of public services and we must make sure that the money we provide is spent on reform. Simply repairing school buildings and hospital roofs is not reform; we must be very rigorous about how we spend the money.

I cannot remember who mentioned it, but I worry that the boost to public investment is not being matched by a boost in skills training and apprenticeships, and providing the people who can actually do the work. We will set up the national skills council and are committed to firm action in this area, but I would like the Government to tell us what we are going to do to make sure we do not have lots of skilled labour shortages.

I agree with the noble Lord, Lord O’Neill, that this increased public investment has to have strong guard-rails around it. We have to demonstrate, not least to the financial markets, that the investment is being spent in a wise way.

We have got to be more ambitious for growth. I think people are being a bit unfair on the Government, in that the OBR does say that the longer-term impact of increasing public investment will be to raise the rate of growth over a five to 10-year timeline.

More immediately, the big challenge we face is on trade. As the noble Lord, Lord Bridges, said, that has not been made easier by the election of Donald Trump. It is in the national interest that we prioritise getting a much better trading relationship with the European Union, our main economic partner in the world. I look forward to assurances from the Minister that that will be at the top of the Government’s priorities.

Fiscal Rules

Lord Liddle Excerpts

Tuesday 29th October 2024 Lords Chamber

[Lord Livermore (Lab)]

I am not aware that the Government have any such plans, but I hope that tomorrow’s Budget will include good news for Wales.

[Lord Liddle (Lab)]

My Lords, the new policy on investment that has been announced will be widely welcomed on this side of the House as giving an opportunity for the public sector, in partnership with the private sector, to raise the dismal rate of growth that we experienced under the last Government. Will my noble friend not let noble Lords opposite get away with the total unsustainability of their fiscal plan to cut public investment from 2.6% of GDP to 1.9%, which would have had disastrous consequences for growth and public services?

[Lord Livermore (Lab)]

I am extremely grateful to my noble friend for that point and for his support for what we have set out. He is absolutely right to draw attention to the record we inherited. As he says, the UK lags behind every other G7 country on business investment as a share of our economy, and the plans we inherited from the previous Government would have seen public sector investment decline to the lowest level in over 10 years. Nothing we have heard so far today suggests that they think there is anything wrong with that.

My noble friend also drew attention to the importance of partnership with the private sector. To rebuild our country, it is vital that we increase investment in partnership with the private sector. As he says, we must first create the conditions for the private sector to invest by stabilising our economy and introducing reforms to things such as planning and skills. The Government must invest alongside business, through expert bodies such as the new national wealth fund, to catalyse more private sector money. As we have been discussing today, there is also a significant role for public investment to play.

Budget Responsibility Bill

Lord Liddle Excerpts

2nd reading & Committee negatived & 3rd reading
Monday 9th September 2024 Lords Chamber

[Lord Liddle (Lab)]

My Lords, I strongly support this Bill and congratulate the Financial Secretary on the very able speech with which he introduced it. I do not see how an attempt to prevent a repeat of Liz Truss can be regarded as performative. Surely everybody would want to see that consequence.

My worry is that this Bill does not go far enough. In the past two years, we have seen a real failure of fiscal responsibility in the way in which Rishi Sunak and Jeremy Hunt justified big cuts in national insurance on the basis of public spending forecasts that were, as the noble Lord, Lord Macpherson hinted, completely unrealistic. This has now landed us in a very difficult position. When they made their public spending forecasts, they did not take account of public sector pay, which is part of Chancellor Reeves’ black hole of £22 billion. They did not take account of the need for social care reform, without which, as Wes Streeting has said, there cannot be any wider reform of the NHS.

In an excellent report published just today by Unison, we learn that local councils are at risk of going bust. There is also a crisis in our courts and prison system. The Conservatives committed themselves to a defence target of 2.5%, which they seriously said could be achieved by “efficiency savings”. These were completely unrealistic public spending forecasts on which tax decisions were taken. Worst of all, in order to finance them, the Government pencilled in a cut in public investment from about 2.6% of GDP to 1.9%, which is actually the reverse of what the country needs: a big increase in investment.

So, we have a big structural deficit on our current account that we have to correct. We can try efficiency savings, benefit freezes or putting off change and reform in the hope that growth will naturally increase, but I argue that tax will have to be part of the solution to this, because the public were misled by the last Government. However, when I say “tax”, I do not believe some people from our own side, who seem to think that we can deal with this problem by simply taxing the top 1%. Yes, the broadest back should bear the heaviest burden, but it should be broader than that to work without economic damage.

We need tons of investment to launch a new nuclear energy programme, invest in our railway infrastructure, reconfigure the national grid, apply AI to public services, build new towns which have adequate social housing and fund the modern industrial strategy based on promoting a new wave of entrepreneurialism from our excellent science base. I believe that we need tough fiscal rules; we have to plan for current spending and revenue to be brought quickly into balance. But at the same time, I agree with my noble friend Lord Eatwell that the rules have to be sufficiently flexible to accommodate worthwhile, spend-to-save measures in public services and invest-to-grow measures for the wider economy. I believe that, although fiscal rules matter, a convincing growth strategy matters even more to the financial markets, and the bond markets will back our ambitions as long as our investment plans are well conceived.

Labour has a unique or huge opportunity ahead of it. We certainly need prudence and certainly need to be disciplined, but we also need radicalism—a radicalism from what I would describe as the politics of the centre ground.

Crown Estate Bill [HL]

Lord Liddle Excerpts

2nd reading
Monday 2nd September 2024 Lords Chamber

[Lord Liddle (Lab)]

My Lords, it is always a pleasure to follow the noble Lord, Lord Wigley. I share many of his values, but it is too dangerous and difficult for me to get into the questions of devolution that he raises. I wish him the best of luck.

When I first looked at this Bill, I thought that it was rather a minor and technical Bill, and was not really worth speaking on, if you see what I mean. What excited me to make me think that this was an important Bill was the announcement, in July, of the partnership between the Crown Estate and our newly established Great British Energy. I was a little disappointed that in my noble friend’s excellent introduction to the Bill he did not focus on that more. It seems to me that the change in borrowing powers and the requirement that the Crown Estate takes a more proactive role, particularly in our struggle to reach net-zero electricity generation, are the really interesting aspects of this legislation, along with what the extra borrowing power that the Crown Estate will have will mean in practice.

Given that this partnership with Great British Energy has been announced with such fanfare, it has to be said, with objectives to invest in ports and new technologies, and to take a more proactive, leading role in the development of the seabed and of wind and offshore wind, why is it that we are not proposing to borrow any more until the end of the decade? There seems to be a fundamental contradiction there: if we want to reach the 2030 goal then we are going to have to do something about it, not in five years’ time but now. I will be very interested in my noble friend’s response on that point.

If the Crown Estate is to take on these new responsibilities, there will have to be a change of culture. My father-in-law was a Crown Estate commissioner, and it is fair to say that it was a very conservative—with a small “c”—institution, extremely cautious in everything that it did. If it is going to do the things that were announced in the partnership with GBE in July, it will have to have a complete change of culture and become a more enterprising institution. Is that what is envisaged?

It is interesting that provision is made in the Bill for an additional four Crown Estate commissioners—presumably, this is to bring in the kind of expertise that the Crown Estate presently has. That is essential, particularly to bring people in from the private sector. In effect, if the ambitions of this partnership are right, we are talking about the Crown Estate becoming part of what will be a risk-taking investment business—and that requires expertise.

A lot of people think that investment in wind is a no-brainer, but tell that to the Siemens board, which at the moment is struggling with having to make billions of pounds of provision for the fact that its turbines have been shown to have major flaws. This job has to be extremely well done, by private sector people working with the Crown Estate and Great British Energy, and that means recruiting people who are able and not constrained by public sector salary constraints. Is this what is planned, or are we getting carried away with an excess of ambition about what might happen? I do not know; it is very difficult to tell.

Other noble Lords have mentioned that one of the constraints on the Crown Estate becoming a developer of offshore wind is the lack of grid connection. Something is actually being done about that. I was very interested that Ed Miliband, as the Secretary of State, has asked the National Energy System Operator—one of the good things that the Conservative Government did was to bring that into public ownership, so it is now a public body—what is needed to deal with the problems of grid constraints. Where does this Crown Estate partnership fit into that?

I also noted what the noble Lord, Lord Wigley, said about offshore developments in the Celtic Sea off the coasts of Wales and the south-west. When I was on the European Affairs Committee and we were looking at the role of co-operation between the UK and our continental friends, one of the great opportunities was in the North Sea—on the other side of our country. The concept of wind power linked to interconnectors that go across the North Sea is very attractive because if too much electricity is generated by wind on one side of the North Sea, it can be sold in markets on the other side and vice versa. Is this prospect being seriously examined? What would be the role of this partnership between the Crown Estate and Great British Energy?

I am an optimist about this. I want to think that we will be bold and get something done on our net-zero target by 2030. I hope that, in its minor way, this Bill might make a significant contribution.

King’s Speech

Lord Liddle Excerpts

Monday 13th November 2023 Lords Chamber

[Lord Liddle (Lab)]

My Lords, never in the last 40 years has there existed a bigger gap between the grim realities of our present national economic situation and the fantasy world that the Government, from their pronouncements, appear to live in. The Prime Minister declares that inflation is down, the economy is growing and debt is set to fall. The Prime Minister may meet his target of halving inflation, but the fact is that it is stubbornly higher than in the United States, France and Germany; the cost of living for millions, now dependent on food banks, continues to rise; and interest rates are going to stay much higher for longer than the Government think. Economic growth is, at best, at a snail’s pace; the Bank of England thinks there is going to be no growth at all for the next two years. As for debt falling, that is based on projections of public spending and borrowing that the Institute for Fiscal Studies regards as completely unrealistic, given the demographic pressures on our public services and the clear breakdown that exists today—and those projections are going to get even worse if there are tax cuts in the forthcoming Budget.

The fact is that the cumulative hangover from the 2008 banking crisis, Brexit, Covid and Liz Truss has put into reverse the catch-up in living standards that this country enjoyed in the years of John Major’s and Tony Blair’s premierships. Last week, the ONS produced figures on total factor productivity, which is the main driver of living standards. Under Major and Blair, total factor productivity rose by no less than 27%, but since 2007 it has grown by 1.7%.

Future historians are going to regard these 13 years of government as wasted years of destructive populism, when successive Governments failed to build patiently and constructively on Britain’s great strengths: our universities, our scientific pre-eminence, our technological opportunities and our massive creative strengths. There has been no building on them. Business investment has flatlined since 2016—remember what happened then, by the way. Britain stagnates while we have a City of London in decline, a hospitality sector unable to recruit the European workers that it needs, retailers desertifying our town centres and a construction industry that is failing to build the homes that our families need. Just on housing, we will see 250,000 housing completions this year—not enough—and this is estimated to fall next year to 151,000. There were supposed to be 144,000 housing starts this year, but the figures for election year are 70,000. What a record of failure this is, and an incalculable cost to many families.

We need new policies for growth—a modern industrial policy—but this has to be applied with consistency and discipline. We need the comprehensive planning reform that Michael Gove had to abandon because of Conservative Back-Bench pressure. We need a government drive for more apprenticeships, which have gone down under the present Government. We need reformed further education colleges—a real vocational ladder of opportunity. And we need a much better trading deal with the European Union than the one that the noble Lord, Lord Frost, negotiated.

I have just rejoined our Front Bench as a transport spokesman, and I am grateful to the noble Baroness, Lady Smith, for this. It takes me back to the department where, 47 years ago, I first started as a special adviser. Transport is a vital part of the growth agenda, as the noble Lord, Lord Birt, explained. A principal reason for our poor economic performance in this country is the huge and growing gap between our city regions in the north and Midlands and in London and the south-east. It is far bigger than in other European countries, and the lack of transport investment plays a major role when it comes to connectivity with London and within and between the city regions. We must change course and do better than this, and I am confident that a Government led by Keir Starmer will.

UK Economy: Growth, Inflation and Productivity

Lord Liddle Excerpts

Thursday 29th June 2023 Lords Chamber

[Lord Liddle (Lab)]

My Lords, I congratulate my noble friend Lord Eatwell on the brilliant clarity of his introduction to this debate. I also congratulate the noble Lord, Lord Sahota, who is a relatively new noble friend. I am not going to talk about Brexit, but I agree with virtually everything he said.

If we have a change of Government, which I am sure we will, it is clear that a Labour Government are going to inherit a situation of great economic difficulty, if not crisis. How do we deal with that? Robert Shrimsley had a very good column in the FT this morning about how to offer hope in this situation. One thing we have to do is to listen to a former Chancellor like the noble Lord, Lord Lamont. Inflation is a big problem, and a Labour Government will have to tackle it. I did not agree with everything he said, but on that fundamental point I think he is right. So how do we tackle inflation and do something to offer people hope as well?

I do not think there are any quick fixes. My life in politics started off with the Maudling boom, which led to the balance of payments difficulties that Harold Wilson had such difficulty grappling with. We then had the Barber boom, the second Wilson Government and the problems of very high inflation and all that. We had the Lawson boom at the end of the 1980s, which contributed to some of the difficulties that the noble Lord, Lord Lamont, had to grapple with. In a way, the Truss experiment was a repeat of that. The only thing is that in the intervening decades, the financial markets have got much quicker at reacting to problems.

It is very important that the Government do not think that they can break their own fiscal rules. They have to maintain the confidence of the financial markets if they are going to succeed. I am not an advocate of austerity—I think mistakes were made in the post-2010 period—but I am an advocate of stability. We have to prioritise stability.

If there is a parallel, it is when I first started working as an adviser for Tony Blair and Gordon Brown. It was in the 1992 Parliament, when the noble Lord, Lord Lamont, was Chancellor, and there was tremendous pressure from Back-Bench Labour MPs for us to support a great Keynesian expansion. Gordon stood out against that with absolute firmness and determination because he knew that that was not the way forward. I expect the same of Rachel Reeves, and I am very hopeful about that.

We have to somehow find a means of prioritising investment. In public services, the focus has to be on investing money now to save money in the medium to long term so that we reduce the pressure for further public spending increases. I can cite lots of examples where you could make a case: adult social care, the MacAlister report on children’s social care, education catch-up and making the NHS more community-focused and less hospital-focused. If we come up with those kinds of proposals, we have to have rigorous independent monitoring of them to ensure that their objectives are achieved and the targets met. We have to bring into government people with fresh ideas about how to run public services.

More importantly, we have to invest to grow. If we can find projects that produce a higher return than the borrowing we have to secure, it is logical to go ahead with them. However, at the same time, we have to find a way of meeting our debt rule in the medium to longer term. I support a modern industrial policy. We have to have policies that focus on competition; getting better access to the European single market; skills; R&D; and infrastructure. We also have to have a modern industrial policy that looks at sectors, such as the car industry, and sees what can be done to save them. Production has halved in the past three years; what are we going to do to save it? There seems to be a lack of urgency on the part of the present Government.

My final point is also on industrial policy. Again, it has to be rigorous. We have to have independent assessment of the investments we make; it cannot be done on the basis of ministerial favours and handouts. The next Labour Government should prioritise the policy of investing prudently in our future. That is how they will make a difference.

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

Lord Liddle Excerpts

Wednesday 17th May 2023 Grand Committee

[Lord Liddle (Lab)]

My Lords, I agree with the noble Viscount, Lord Trenchard on this. It has been a privilege to be a member of the European Affairs Committee and to work with him on many of the issues that we have addressed. Although we disagree on some things, I have always found his views to be of value and have learned something from them. That is important in any parliamentary system.

It has also been a very great privilege to work on this committee under the chairmanship of the noble Earl, Lord Kinnoull. I have the greatest regard for him. This is now one of the swansongs of his period as chair of the committee, but he has been a very good chair indeed. I have known the last four chairs of the European committee of this House very well. I met Lord Grenfell when I worked in government; Lord Roper was a very close personal friend; and I came to have enormous affection for the noble Lord, Lord Boswell. The noble Earl, Lord Kinnoull, however, has I think been the best of the lot. His ability to bring together the disparate views on that committee and to arrive at rational and sensible conclusions is something to be praised. Although the House gains from him becoming the Convenor of the Cross Benches, the cause of a sensible debate about Britain’s relationship with the European Union has suffered something of a loss.

As with all the outputs of this committee, this is a good report. It is a pity that we are debating it nine months after it was concluded, because a lot is changing in this world all the time. We have seen growing concern about the position of the City of London, with the feeling that it is losing out to New York and that Asian financial centres are rising up. The City is a huge national asset. I am not anti the City of London—I am a strong supporter of it and believe that it is one of the things that Britain is really good at. We have to try to build on its strengths.

It is a concern that people are worried about the problems facing the City, but we have also learned in the last year that there are grave risks in financial regulation. In the autumn, we had the confidence crisis in the bond markets, which was stimulated by the Truss Administration and required a huge rescue mission by the Bank of England to stabilise our pension funds. That is a matter a great concern to ordinary people, and we should be conscious of those risks.

Furthermore, we have also seen an outbreak of financial instability, with bank failures in the United States. We do not know what impact this might have on Europe in the future—who knows? As a social democrat, I have become a great believer in the workings of the market economy. Capitalism is the most dynamic way of getting economic growth, but I believe in the warnings of Keynes about the tendency to instability in capitalism and for there to be episodes of great banking collapse, which cause huge problems for ordinary people. With very little growth in our living standards, as we have seen since 2008—and we have not really recovered from that—it is very important that, as far as possible, we do not risk any further episode of financial crisis and uncertainty.

The paradox about the recent position of the concerns about the City of London is that it has all happened since Brexit but very few people think it has anything to do with Brexit. At least, that is what they claim. I have a certain question about that. The fact is that no one wants to challenge the reality of Brexit, because we know it is there. It is no good complaining about it—we have to do something about it. We have to make the existing arrangements work.

Although the evidence in our report is that Brexit has not caused the anticipated damage in terms of job losses in London, as far as we know, the unanswered question is: is business shifting elsewhere without us even realising it? When new business opportunities are created, are they created in the United Kingdom? This is a difficult thing to judge, because it is not as though there is a single continental financial centre which is taking over from London. There are signs of things going to Dublin, Paris or the Netherlands. To what extent Brexit is contributing to the relative decline of the City is, for me at any rate, an unanswered question.

A lot of people, such as my colleague on the committee, the noble Viscount, Lord Trenchard, think that Brexit provides huge opportunities for the financial sector. There have been calls for a new big bang and a decisive break with what is characterised as stifling European regulation. I have to say that I do not buy into this argument at all. My views are that, while it is sensible for Britain to steer its own course on financial regulation now that we are out of the EU—to be prepared to diverge, particularly as we are the leading financial sector player in Europe—I am not persuaded that the opportunities for divergence are massive or that they would bring great economic opportunities, without also creating great risks.

The reason for that is simple. Although Brexiteers think that these financial rules were imposed on us, they were not. We negotiated most of these rules at the Council of Ministers and it was the British position that was dominant in framing them. It would be surprising if there were to be lots of benefits from breaking with those rules, because they were framed with the interests of the City of London in mind. I know that from personal experience in government.

This Government have talked big about the opportunities of Brexit in financial reform and all that. What is actually proposed is reasonably modest; I read Jeremy Hunt’s speech on the Edinburgh reforms and it did not seem to be that great a shift. I am glad that the Government have abandoned the proposals that were canvassed at one stage for them to be able to override the judgment of regulators—although I do support the need for there to be parliamentary scrutiny of the actions of regulators.

One of the worries I have is this business about changing regulators’ objectives to include competitiveness. At a time when financial markets are extremely fragile, that could be a mistake. Our objective should be a strong City, perhaps with more of a focus on domestic growth—including how to get pension funds investing more in infrastructure and have more of a market for growing British companies, enabling them to access equity—so we do need reforms there, but we must put first and foremost the need to avoid financial crises such as another banking crisis. The national interest would best be served by a close relationship of dialogue and co-operation with the European Union. That is why I reiterate the calls made by the noble Earl, Lord Kinnoull, about the need to get on with signing the memorandum of understanding, which will lead to a structured relationship of co-operation with our European friends.