Great Britain and Northern Ireland: Access for Goods
Lord Lilley Excerpts(5 years, 5 months ago)
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Lord True (Con)
My Lords, as I said earlier, the Government certainly take extremely seriously the need to ensure the security of this trade. I agree with the noble Lord that the protocol obliges both the UK and the EU to seek to streamline trade between GB and Northern Ireland.
Lord Lilley (Con)
Will my noble friend gently remind the European Union that any obstacles to trade between Northern Ireland and Great Britain would be contrary both to Article 6 of the withdrawal agreement and to the Act of Union, which is a fundamental part of our legal order which the European Union has pledged to uphold? I hope and expect that the EU will agree arrangements to prevent such obstacles, because to refuse such agreement would constitute bad faith, justifying the activation of those parts of the internal market Bill that I hope the other House will reinstall and this House will duly accept.
Lord True (Con)
My Lords, I very much agree with what my noble friend said. I underline his last remarks: it is astonishing that Keir Starmer required the Labour Party in this House to vote against a legitimate legal commitment to unfettered access.
EU Exit: Negotiations and the Joint Committee
Lord Lilley Excerpts(5 years, 5 months ago)
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Lord True (Con)
My Lords, the United Kingdom is a sovereign nation and has relations with every other country in the world. Of course, our relationship with our European neighbours is important and we will continue to negotiate with them, whether in this process or in whatever circumstances we find in the future.
Lord Lilley (Con)
Can my noble friend confirm that EU negotiators have been gently reminded that, if there is no free trade agreement and, regrettably, tariffs are applied to trade in both directions across the channel, the cost to EU exporters will be getting on for three times the cost to UK exporters, because they largely export highly protected goods to us, which we will be able to obtain far more cheaply elsewhere once we are outside the customs union?
Lord True (Con)
My Lords, we were told by the Front Bench opposite yesterday that the House was sending a signal to the European Union, so I infer that our proceedings are followed closely in Brussels, and I am sure my noble friend’s remarks will have been noted.
EU: Future Relationship
Lord Lilley Excerpts(5 years, 6 months ago)
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Lord Lilley (Con)
My Lords, ever since the referendum, my advice to businesses has been “prepare for no deal”. It has always been far more likely than is generally assumed. However, partly because of the controversial internal market Bill, I am inclined to think that the chances of a deal have now risen. I will explain why.
There are two unusual features about the negotiations between Britain and the EU. One makes them simpler than other free trade negotiations; the other makes them harder. They are simpler because we start where most free trade agreements and negotiations end up after years of haggling. We have zero tariffs and we want zero tariffs; it cannot take more than 10 minutes to negotiate. We have identical or equivalent rules and regulations, and we need to agree only a divergence mechanism: what happens when one side or the other changes their rules from the starting point. Such arrangements exist in most free trade deals and are comparatively straightforward to negotiate.
Why, then, are these negotiations harder than normal free trade agreements? Normal agreements and negotiations are win-win affairs: each side tries to offer concessions that cost it the least but will be of greatest value to the other side. Therefore, a mutually beneficial win-win outcome usually emerges. However, the European Union has an overriding political imperative, which is to discourage other member states from following our example. The EU believes that this means that Britain must be seen to get a bad outcome even if that means that the EU gets a less good result, economically, than was possible.
When one side is more interested in the other side losing than itself gaining, that creates a very unstable negotiating dynamic, which is why no deal has always been a significant possibility and even been used as a threat. However, as we have approached the endgame, it has become clearer to both sides that, although no deal would be a suboptimal outcome, it would not be as painful to the UK as the EU and many in the UK—and, indeed, in this debate—have supposed and that it would be more painful to the EU itself than they or others had initially assumed.
If there is no deal, each side will apply its tariffs to the other. That will cost British exporters to the EU about £5 billion a year. That is half the £10 billion saving from not making a net contribution to the EU any more. Therefore, UK plc will be a net £5 billion better off: small beer, but not negative. By contrast, losing tariff-free entry to the UK market would cost EU exporters £13 billion a year and, of course, the EU will also lose the £10 billion a year that we pay it. Therefore, the EU will be a net £23 billion worse off; again, that is not huge compared with the size of the European economy, but it is more difficult to cope with in these difficult times.
Why do EU exporters stand to lose nearly three times as much from tariffs as British exporters to the EU? It is partly because the EU exports far more to us than we do to it, but the main reason is that the goods that it exports to us are highly protected goods, which it can sell to us only because we are currently prevented by the EU external tariff from buying them more cheaply elsewhere. Therefore, it is the realisation on both sides that no deal, though not the best outcome, is not a disaster for the UK but would be a problem—or a cost—for the EU that has made the latter look to the Northern Ireland protocol for other negotiating levers.
The withdrawal agreement has even more loose ends and internal contradictions than most international agreements. That is not surprising, given that Boris was given only 100 days to renegotiate it, during which Parliament did its best to shackle his negotiating powers, but we signed it and accepted it because it has a mechanism to resolve those internal contradictions: the joint committee, within which both sides are treaty-bound to negotiate in good faith to resolve outstanding problems by the end of the transition period.
However, recently the EU has been pointing out—doubtless as a negotiating lever—that if it simply refuses to reach agreement in the Joint Committee then, arguably, all goods going from Great Britain to Northern Ireland will have to pay the EU tariff, and all goods coming from Northern Ireland to Britain will have to fill in EU export declarations, and if the EU refuses to list the UK as a third country from which it will accept food imports, not only will we be unable to export food to the continent, but it would be illegal, as the EU has threatened, to take a single kilo of butter from Great Britain to Northern Ireland. As far as I am aware, the EU has not seriously denied making those implicit threats.
Those outcomes would be economically damaging to Northern Ireland, flagrantly in conflict with the Belfast agreement and contrary to the Acts of Union with Ireland and Scotland. They would inflame unionist opinion, demonstrate manifest bad faith and breach the clear intention of the withdrawal agreement itself, so the UK Government had no option but to introduce legislation enabling them to override those potential interpretations of the withdrawal agreement, should they emerge.
In doing so, the UK Government adopted the EU’s own approach to international law, clearly set out by the Advocate-General in the European Court of Justice in the Kadi case. He said that
“it would be wrong to conclude that, once the Community is bound by a rule of international law, the Community Courts must bow to that rule with complete acquiescence and apply it unconditionally in the Community legal order. The relationship between international law and the Community legal order is governed by the Community legal order itself, and international law can permeate that legal order only under the conditions set by the constitutional principles of the Community.”
I cannot see that we are doing anything different from what the EU would, very sensibly, do if there were a conflict between international law and its internal legal order. I invite the noble Baroness, Lady Ludford, as the last remainer of note due to speak in this debate, to be as critical of the EU doctrine as I have no doubt she will be of the Government’s behaviour. However, because we have effectively called the EU’s bluff, there is every reason to suppose that it will in practice resume negotiating sensibly and help us to resolve those issues, and there will be an agreement at the end of the day.
The Deputy Chairman of Committees (Baroness Fookes) (Con)
My understanding is that the noble Baroness, Lady Ludford, is not participating in the debate this afternoon, so I now call the Minister to reply.
Finance Bill
Lord Lilley ExcerptsFriday 17th July 2020
(5 years, 8 months ago)
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Lord Lilley (Con)
My Lords, it is unfortunate that because, during the worst recession in two centuries, we have not had a full debate on the economy, we have to use this debate on the Finance Bill, but so be it.
Most recessions are the result of a shortfall of demand. This, uniquely, is caused by suppression of supply. There is considerable pent-up demand. I agree with my noble friend Lord Lamont, who said we must end the lockdown and encourage people to return to work, and Parliament itself and this House should set an example in that.
If we do so, and if the economy is enabled to, many businesses will spring back—more rapidly, I suspect, than some suppose—to full activity, but some sectors will have permanently shrunk. Many viable businesses have spent the last few months devising ways to produce previous levels of output with fewer employees, so we face a vast potential increase in unemployment, and unemployed buildings and other resources. We need to make it easier and quicker for new businesses to set up and expand, and for existing firms to expand, grow and diversify.
During the crisis, we have learned that public regulatory bodies can, in an emergency and under public pressure, take in days and weeks decisions that previously took months or years. We need to ensure that they do so henceforth to enable businesses to increase their activities rapidly. In most areas, we cannot scrap regulations, so we should accelerate decision-making in planning, building controls, environmental measures, health and safety and so on by, for example, setting time limits. If those time limits are not met, consent will be deemed to have been given. Every department should be required to publish at six-monthly intervals the times that it takes to give approvals or refusals or to make decisions when requested by business. Every Select Committee should hold those departments to account. Past experience has shown that the British labour market is more dynamic than any other in Europe; if we do this, we will be able rapidly to bring people back into work in viable and productive employment.
House of Lords and Machinery of Government: Consultation on Changes
Lord Lilley Excerpts(5 years, 9 months ago)
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Lord Lilley (Con)
My Lords, the problems of moving this House away from the Commons and Whitehall may be insuperable. However, should we not, perhaps by moving the Moses Room and Westminster Hall to York, try to bring Parliament closer to people from whose views and values it was so clearly estranged during the last Parliament? It would surely strengthen this House, first, if more people saw your Lordships’ excellent work as a revising Chamber and, secondly, if closer contact with people outside the metropolitan bubble made us more respectful of their views.
David Frost
Lord Lilley Excerpts(5 years, 9 months ago)
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Lord True
My Lords, again, I do not agree with the characterisation of the presumed danger. The Prime Minister is responsible for the integrated review, as chair of the National Security Council. Mr Frost will be involved, but there will be a cross-Whitehall process. Even as a humble special adviser, I felt it part of my duty often to give unwelcome advice to a Prime Minister, and I am sure that any decent public servant, political or otherwise, would always feel the same.
Lord Lilley (Con) [V]
Does my noble friend agree that David Frost will be a valuable Member of this House and welcomed by all noble Lords, even those who may be embarrassed by his presence, given that they firmly declared he would never succeed in reopening the withdrawal agreement, dropping the original Irish protocol or completing negotiations by the end of November, and who now object to the robust way in which he is negotiating to achieve the mandate of the British people, democratically asserted in the referendum and the last general election? We should sympathise with their embarrassment but not allow it to mute our welcome for his presence.
Covid-19: Economy
Lord Lilley Excerpts(5 years, 10 months ago)
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Lord Lilley (Con)
My Lords, it is not clear how much lockdown has helped to control the pandemic, but it is absolutely certain that it has created the worst recession in 300 years. Unlike most previous recessions, this is the result of the suppression of output and not a collapse of demand. Indeed, there is substantial pent-up demand, so the remedy is not primarily Keynesian pump-priming. It is, first, to release the lockdown as speedily as possible to enable viable businesses to recover and resume production. Most important is the reduction of the social distancing rule from two metres to one metre and scrapping the absurd plans to quarantine all tourists, without which the hospitality and travel industries cannot survive.
However, not all businesses will be viable once the lockdown ends if the pattern of demand has changed permanently, so the second priority is to encourage and facilitate the growth of new businesses and expansion of existing firms. The most effective ways to do that are tax cuts designed to bring forward activity—for example, by increasing capital allowances so that instead of taxing companies when they invest, we do not tax them until their investments generate profits. There should also be time-limited cuts, so that companies have an incentive to invest and produce sooner rather than later.
Equally important is speeding up regulatory decision-making, without lowering standards, to enable businesses to go ahead with new projects. The key lesson of the pandemic has been that state regulatory bodies, which normally take months or years to reach decisions, can, under intense public and political pressure, take decisions in days or weeks instead of months and years. Wherever possible, regulators should be given tight deadlines to reach decisions and if they do not do so in time would be deemed to have given consent. Then businesses can get out and invest to bring an end to this recession.
Economy: Personal Savings
Lord Lilley Excerpts(7 years, 9 months ago)
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Lord Lilley (Con) (Maiden Speech)
My Lords, I am grateful to noble Lords and staff of this House for their warm welcome and unfailing helpfulness since I arrived here.
I perhaps owe noble Lords an explanation of the title I have adopted of Lord Lilley of Offa, since many have assumed that this refers to Offa’s Dyke along the Welsh Marches, with which I have no known connection. In fact, King Offa gave his name to the ward of Offa in my constituency of Hitchin and Harpenden, where he had his palace and I for the last 20 years have had my home. He also built the abbey in St Albans, which was my previous constituency, so I selected the name Offa as a tribute to both the constituencies I had the privilege to represent for more than 34 years.
Having done so, I thought I had better check out King Offa, in case he had done anything embarrassing. I discovered that he reigned from 757 to 796 AD. At that time, our European neighbours were united under Emperor Charlemagne in what historically minded Euro enthusiasts see as a precursor to the European Union. Charlemagne, hoping to bring Britain under his sway, proposed that his son marry King Offa’s daughter. Offa, wary of England becoming a vassal state and wanting a fair and equal partnership, as the Prime Minister might say, determined that he would accept only if Offa’s son married Charlemagne’s daughter simultaneously. Emperor Charlemagne was so enraged by this impertinence that he closed all European ports to English shipping—an early example of a “no deal” outcome. However, the trade war hurt Europeans at least as much as it hurt us and, thanks to the mediation of the Church—I hope right reverend Prelates will stand by in case they are needed in the future—trade was resumed after a year or two. I am happy to say that King Offa negotiated the first trade treaty between this country and our European neighbours. This certainly is not an occasion to reflect on the lessons to be drawn from this and subsequent attempts throughout history by continental rulers to bring this country to heel by restricting our trade, except to note that they all failed.
Before moving to the less contentious subject of this debate, I hope noble Lords will bear with me if I mention, as I have been advised by several noble Lords is normal procedure on maiden speeches, the experience I hope to bring on subjects which may come before this House in future. Certainly, trade is a subject I hope to return to in future debates, though not primarily in the context of Brexit. My first career was working in developing countries on aid and development programmes and, because of that, David Cameron asked me to chair his policy commission on globalisation and global poverty alongside Bob Geldof—an unlikely pairing, but one which would bear fruit, not least in my conviction that the best route out of poverty for developing countries is trade. As a result, I founded and co-chaired for 10 years the All-Party Parliamentary Group on Trade Out of Poverty, which remains a passion of mine.
My second career was as a partner of a major firm in the City where I specialised in investment in the energy sector. In the Commons, I served on the Energy and Climate Change Committee—I hope to return to those topics, too.
As Secretary of State for Trade and Industry, I was involved in negotiating the last successful international trade treaty, the Uruguay round, and also implemented the single market programme in this country, as well as negotiating the first passporting directive, all of which I hope may be of use in forthcoming debates on the Trade Bill and Brexit.
Finally, in my five years at the Department of Social Security, followed by 20 years as an ordinary constituency Member on the Back Benches, I came to the conclusion that most of the social problems in this country are either caused or aggravated by the acute housing crisis we have in Britain—that is one of the issues I want to focus on in future—and that most of our economic problems were related to the lack of vocational and technical skills of our indigenous population. Those are the two issues I care about most, and I hope to offer every support to my supporter and noble friend Lord Baker of Dorking—he does great work on that front.
I congratulate my noble friend Lord Leigh of Hurley on securing today’s debate on an important subject, when the level of savings in this country is so low. It is matter of importance to me because, as Social Security Secretary, I was responsible for the pension system and for coping with those who had been unable or unwilling to acquire sufficient savings to cope with emergencies or, above all, with their old age.
I shall make a few brief observations. First, discussion about savings in this country is dominated by an unhealthy obsession with tax reliefs and incentives. In fact, there is little evidence that tax reliefs affect the amount people save; they affect merely the form in which they save it. Moreover, the main beneficiaries of tax incentives are, by definition, those with large savings, who are also usually those with large incomes. Tax reliefs can have no impact on those who are too poor to save and have little, if any, effect on those whose time horizons are too short to recognise the need for saving. This obsession with tax reliefs has created a bewildering labyrinth of incentives which is costly to navigate and off-putting to those with limited financial expertise, so they have the reverse effect to that which is intended.
Secondly, that is not to say that there should be no recognition of savings in the tax system. On the contrary, the tax treatment of savings should be based on the simple principle that income should not be taxed twice. You should not be taxed when you earn the money you save and when you realise those savings as a pension or whatever. This is a matter of equitable principle rather than incentives.
Thirdly, as long as people pay the same marginal tax rate when they draw down their savings as when they earned them, it makes no difference whether tax relief is given on contributions, as we do for pension schemes, or on withdrawals, as we do for ISAs. Despite what many people believe, both methods have an identical arithmetical impact. We should give one relief or the other on any source of savings, but not both or neither.
Fourthly, there may be a case for using the tax system to channel some savings into specific kinds of investment—for example, more risky equity or early-stage investments—but we should not imagine that that will increase the total level of saving and investment in the economy, and we should be cautious about encouraging people to take undue risks with their money if they are not in a position to do so.
Fifthly, the main concern of the state is to ensure that people who have the means to save for a rainy day, for temporary hardship and, above all, for their old age do save when they have that opportunity rather than becoming a tax burden on more prudent citizens. People who cannot defer gratification or have very short time horizons are the least likely to be motivated by tax incentives, however generous or ingenious. Reluctant though I am to say it, ensuring that everyone builds up their savings when they have the means to do so requires an element of compulsory saving and/or restrictions on drawing down savings. Auto-enrolment in workplace pensions is a good step in that direction, particularly for those who perhaps cannot bring themselves to go to full-scale compulsion.
Sixthly, unlike with tax reliefs and incentives, requiring everyone to save a minimum amount of their disposable income may increase the total level of saving and investment in the economy and thereby increase the level of incomes in future.
Those were the principles that lay behind the scheme that I announced in 1997 for what was called basic pension plus. It was intended that, over a generation, it would ensure that everyone received a basic pension, not only guaranteed by the state as at present—and that guarantee would continue—but backed up by a savings pot. Moreover, it would have massively increased capital ownership because everyone would own their pension pot, they could pass it on to their family if they died before it was drawn down as a pension and they could put more money into that pot and benefit from superior investment performance while being protected by the guarantee of their basic pension against underperformance. If it increased the total level of investment in the economy and that boosted economic growth by just 0.1% a year, the scheme would have paid for itself.
That particular scheme died with the 1997 election defeat and I do not imagine that it will be resurrected, but I still believe that the principles that I have outlined today should guide the evolution of our savings and pensions system in future.
Oral Answers to Questions
Lord Lilley Excerpts(8 years, 11 months ago)
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The Prime Minister
We want to ensure that we have a system that properly assesses people who apply for benefits. As the hon. Gentleman has said, and as other Members will know, there have been issues relating to the way in which the system has operated. The Department for Work and Pensions has been looking very carefully at it to ensure that it makes proper assessments and delivers the right results for people.
Mr Peter Lilley (Hitchin and Harpenden) (Con)
Does my right hon. Friend realise that I am standing down after 34 years because of her? I am standing down because I am confident that the country will be safe after the election under her strong and stable leadership. Does she agree that seizing the opportunities presented by regaining control over our laws, our money, our borders and our trade will be more important than the terms of any exit deal and that, if we are to secure a reasonable deal, we must accept that no deal is indeed better than a bad deal? To deny this signals that no price is too high, no concession too grovelling to accept—a recipe for the worst possible deal.
I wish my right hon. Friend, all hon. Members and this House I love Godspeed.
The Prime Minister
I thank my right hon. Friend for the tremendous contribution that he has made throughout his years as a Member of the House, not only on behalf of his constituents but during his time as a valued Minister in a Conservative Government. He has rightly highlighted the importance of the decision that was made last year by the people of the United Kingdom, and I commend him for the role that he played in the referendum campaign.
It is right that we get on with the job of delivering Brexit and making a success of it, which means having a strong hand in negotiations. The only way to ensure that that is the case—for the people of Hitchin and Harpenden and for the whole UK—is to ensure that a Conservative Government is elected on 8 June.
European Council 2016
Lord Lilley Excerpts(9 years, 3 months ago)
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The Prime Minister
It is precisely because we need to look with great care and consideration at the wide range of our relationships with Europe that we have taken time before we trigger article 50. This is exactly the sort of work the Department for Exiting the European Union is doing: looking at the range of organisations, some of which are linked to membership of the European Union and some of which will not be so linked to membership of the European Union, and making a decision; and, crucially, talking to each sector about what is important for them, so we understand what really matters to business.
Mr Peter Lilley (Hitchin and Harpenden) (Con)
While welcoming my right hon. Friend’s calm, considered and thorough preparations before triggering article 50, does she agree that a speedy conclusion of the subsequent negotiations will be in this country’s interests, both to put an end to damaging uncertainty and because, according to the Office for Budget Responsibility, every week’s additional delay in leaving the EU costs this country £250 million net per week?
The Prime Minister
As I said in an earlier response to the Leader of the Opposition, the treaty sets out a potential two-year process of negotiations. For how long, over those two years, it is necessary for the negotiations to take is a matter for the progress of those discussions and talks. My right hon. Friend makes a very valid point that the sooner certainty can come the better that will be for business, but we need to make sure we are getting the right deal for the United Kingdom.