Winter Fuel Payment

Lord Macpherson of Earl's Court Excerpts

Thursday 12th June 2025 Lords Chamber

[Lord Macpherson of Earl’s Court (CB)]

My Lords, as the Minister knows, I did not welcome this decision. Turning to principles, does he agree that cliff edges in the tax and benefits system are undesirable? Can he explain whether, when a pensioner’s income moves from £34,999 to £35,000, support will be tapered away, or whether £1 in extra income will result in a £300 loss of winter fuel allowance?

[Lord Livermore (Lab)]

I am grateful to the noble Lord for his question. He knows much more about the tax and benefits system than I do, I suspect, having spent many more years working on it than me. The answer to his question is that it is the latter: it is up to and including £35,000, so it will be at £35,001 where that happens. At that point, they will lose the winter fuel payment in its entirety.

Winter Fuel Payment

Lord Macpherson of Earl's Court Excerpts

Tuesday 10th June 2025 Lords Chamber

[Lord Livermore (Lab)]

That may be one option, but it is not the option we have chosen.

[Lord Macpherson of Earl’s Court (CB)]

My Lords, as one of the few supporters of the original measure—like my friend, the noble Lord, Lord Clarke—I feel the Minister’s pain. But when the Treasury has to retreat, it is best to concede more rather than less; in that respect only, I congratulate the Minister on the proposal. Can he provide an assurance that, as and when the Government have the resources to consider further tax and benefit changes, they will prioritise working-age families rather than the elderly, who have benefited from considerable government largesse, not least through the triple lock?

[Lord Livermore (Lab)]

I am grateful to the noble Lord for his qualified support for the policy. The Government absolutely know that their number one concern and mission is to increase the living standards of working people and to do so through increasing growth in the economy, and that absolutely will be the focus of our policies going forward.

Regional Growth

Lord Macpherson of Earl's Court Excerpts

Thursday 5th June 2025 Lords Chamber

[Lord Livermore (Lab)]

No, that is not the case at all. The noble Lord refers to promises made by the previous Government, which the noble Baroness, Lady Neville-Rolfe, also referred to. Promises were made. Let us be clear: not a single penny was allocated by the previous Government to a single promise that they made. The noble Lord can compare what this Government are doing with what the previous Government did, but this Government are putting money towards those announcements.

The noble Lord then said that announcements were—in his bizarre phrase—“rushed out”. Making announcements is not rushing anything out. It is setting out very clearly what our policy is for the connectivity of the city regions. We will publish the review of the Green Book next week. That will make sure that, in future, additional investment is not biased towards any one region but that the entirety of the country is considered when it comes to those announcements. That makes perfect sense. I do not recognise the analysis that the noble Lord is putting forward.

[Lord Macpherson of Earl’s Court (CB)]

My Lords, I welcome the Government’s announcements in relation to regional growth. As the sometime author of the Green Book, I welcome the direction of travel in terms of investment appraisal. However, inevitably, resources are finite. Can the Financial Secretary confirm that the Government are prioritising those projects with the greatest economic return? Does he agree that the private sector also has a critical role in delivering regional growth? Can he reaffirm the Government’s commitment to sound public finances, the better to bear down on the cost of borrowing?

[Lord Livermore (Lab)]

I agree with the noble Lord’s points. He asks about the Green Book. He has much more experience in this matter than I do. We have set out—and I hope that he agrees—that for too long the guidance in the Green Book has been biased against certain parts of the country. We want to address that. On whether we will prioritise the spending on where it has the greatest return, yes, this is key to the methodology that the Green Book sets out. The Green Book reinforced investment in areas that were already successful. It did not necessarily enable investment in areas where there was a high degree of potential. That is what we want to do. By investing in areas of high potential, there will be huge returns. We have already set this out. There could be a potential increase of about 3% of GVA if we can get the city regions up to the average productivity of the country, as the noble Baroness, Lady Neville-Rolfe, said. That is the intention and why we are doing what we are doing.

The noble Lord talked about the importance of fiscal responsibility. He will know that this Government inherited a £22 billion black hole in the public finances. Restoring fiscal responsibility is the central driving purpose of the stability pillar of our growth mission. We have set out very clear fiscal rules that require no borrowing for day-to-day spending, unlike the previous Government, who had that £22 billion black hole in their day-to-day spending. We have repaired that. At the first opportunity, when the fiscal rules were tested at the Spring Statement, we repaired the headroom against the fiscal rules in full to what it was before. We have set out very clear fiscal rules. We will stick to them, and everything that we set out in the spending review next week will be shown to be fully funded and fully in line with the fiscal rules.

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

Lord Macpherson of Earl's Court Excerpts

Friday 25th April 2025 Lords Chamber

[Lord Macpherson of Earl’s Court (CB)]

My Lords, I congratulate the noble Lord, Lord Bridges, and his committee on their timely and well-argued report. I agree with pretty much all of it. The fact is that Britain’s national debt has more than doubled as a percentage of national income in 20 years and we have nothing to show for it in terms of increased productive capacity. The country is now far more vulnerable to the vagaries of the bond market, the performance of which reflects global as much as domestic factors.

I confess that I spent much of my final decade at the Treasury crying wolf about the potential inflection point in the gilt market. I was proved wrong at the time; helped by QE, the gilt market navigated the global financial crisis and Brexit. But every dog has its day. The Truss Government tested the bond market to destruction and, since 2022, funding the national debt has caused the Treasury more worry than at any time since 1976.

In recent years, fiscal rules have come and gone at alarming speed. Of course, “rule” is a misnomer. They are not rules any more than the inflation target is a rule, and successive Governments have found there are few consequences for breaking them—you just claim force majeure and adopt a new one. I accept that Governments need a fiscal framework, and that the guard-rail the rules provide helps the Chancellor manage her Cabinet colleagues. But, like my noble friend Lady Wolf, I worry that excessive focus on so-called rules can discourage Governments from focusing on the substance. As my noble friend Lord King put it, the rules, especially those of a rolling variety, allow Governments to pursue an Augustinian policy. We never quite get fiscal consolidation, invariably because spending projections prove undeliverable.

I broadly welcome the changes the Government have made to the framework, but what matters is not whether the Government stay within the rules. Much more important is the substance of fiscal policy. Is the deficit being reduced at sufficient speed? When will debt begin to fall in relation to national income? Is the proportion of public expenditure accounted for by debt interest on a downward path? Are fiscal policy decisions addressing long-term pressures, and are the policies the Government are putting in place likely to facilitate economic growth or to hinder it? The Government have taken some tough decisions over the last six months, but I fear they will have to take many more if they are going to deliver a sensible fiscal policy.

I shall finish with two small points. First, I encourage the Chancellor to agree a new framework for future bouts of quantitative easing, which will give the Treasury a greater locus to debate the implications for fiscal policy with the Bank of England and make the Treasury more accountable for the outcome. This did not seem necessary when the then Chancellor Alistair Darling agreed the first framework with my noble friend Lord King back in 2008. QE was thought to be an emergency measure that would not last long. But future rounds of QE, whether or not they were necessary—and I have my doubts—have changed the relationship between monetary and fiscal policy and we need to recognise this.

Secondly, my final point is that the Government should do all they can to raise the profile of the OBR’s fiscal risks and sustainability report. For my part, like my noble friend Lord King, I would amend the Industry Act so that the Government no longer have to produce two economic forecasts a year. Instead, the parliamentary time set aside for the Spring Statement should be devoted to a debate on the OBR’s fiscal risks and sustainability report, to raise its profile in the country and to encourage a greater focus on long-term projects. Who knows? It might even result in better proposals when the Chancellor comes forward with her annual Budget.

Capital Investment and Share Ownership

Lord Macpherson of Earl's Court Excerpts

Thursday 13th March 2025 Lords Chamber

[Lord Livermore (Lab)]

I am very interested in what the noble Baroness says, and I will look at that further. As I say, the 10-year infrastructure strategy will be the point at which we set out the Government’s approach to private investment in infrastructure. I cannot say more than that at this point.

[Lord Macpherson of Earl’s Court (CB)]

My Lords, does the Financial Secretary agree that, generally, the quality of PFI projects has improved over time, with an increasing number transferring risk successfully to the private sector and the projects being delivered on budget and on time? Given that the ONS now classifies pretty much all PFI projects as being on balance sheet, can he encourage the Treasury to provide sufficient expenditure cover in the spending review to support innovative public/private partnership proposals?

Growing the UK Economy

Lord Macpherson of Earl's Court Excerpts

Monday 3rd February 2025 Lords Chamber

[Lord Macpherson of Earl’s Court (CB)]

My Lords, the history of direct support for industrial investment is not a happy one, with much money wasted and few jobs created. Can the Financial Secretary confirm that the Treasury will continue to take a rigorous approach to assessing support for inward investment, based on the best value for money principles?

[Lord Livermore (Lab)]

Yes, I can, and I am happy to say that I cut my teeth in the Treasury when the noble Lord was Permanent Secretary to the Treasury, and I learnt a lot from him. I very much agree with his view of the Treasury’s role within Whitehall.

Agricultural and Business Property Reliefs: OBR Costing

Lord Macpherson of Earl's Court Excerpts

Monday 27th January 2025 Lords Chamber

[Lord Livermore (Lab)]

I certainly agree with my noble friend on the specific point that farmers’ incomes are under pressure, and we must do everything we can, as a Government, to support farmers in that respect. It is worth adding that we will continue to work in partnership with the large supermarket chains. We are determined to work with businesses right across the country to drive economic growth.

[Lord Macpherson of Earl’s Court (CB)]

My Lords, does the Minister agree that the OBR note confirms that farmers and businesspeople have a large number of options for reducing their inheritance tax liability? Does he agree that, in so far as the measure encourages farmers to pass on their farms to younger, more dynamic successors, it is as likely to increase productivity as to reduce it?

[Lord Livermore (Lab)]

I absolutely agree with everything that the noble Lord said. Last week’s publication from the OBR does not contain any new information about its view on the fiscal impact of this policy; it remains the same as it set out in its Economic and Fiscal Outlook for the 2024 Budget. The noble Lord’s question relates to that of the noble Baroness, Lady McIntosh of Pickering. The OBR described this as “highly uncertain” because such a wide range of tax planning options are available to respond to this policy change, including being able to pass on up to £3 million tax-free. The noble Lord was also correct to say that the current system, particularly the extent to which it drives up land prices, has locked out young farmers from being able to own property—and them being able to do so is undoubtedly a good thing.

National Insurance Contributions (Secondary Class 1 Contributions) Bill

Lord Macpherson of Earl's Court Excerpts

Committee stage
Tuesday 21st January 2025 Grand Committee

[Lord Ahmad of Wimbledon (Con)]

My Lords, briefly, I agree with much of what the noble Baroness, Lady Kramer, said. But again, to dwell on the coalition, she and I served in the same Government, so agreeing with her is not unusual for me.

I wanted to make a brief point. Both previous speakers highlighted the impact on the hospitality industry. The figures are quite startling. There will be an impact of about £1 billion on the industry itself, thereby impacting 750,000 workers. As we have just heard from the noble Lord, Lord Londesborough, the impacts of this are already being felt by an industry which is already challenged. We should look at this again. Perhaps in a later group when we talk about the importance of impact assessments it will again be underlined that we do not just need reviews. Doing the work beforehand, consulting and working with the industry is an essential prerequisite to ensure that these changes are not detrimental and lead to a depression of growth, which I know ultimately was not the intention of the Government, as they stated.

[Lord Macpherson of Earl’s Court (CB)]

My Lords, usually I have a lot of sympathy and respect for the noble Baroness, Lady Kramer, and my noble friend Lord Londesborough. However, on this occasion I am going to disagree, first, because if you cut tax in one area, you are only going to have to raise it somewhere else. It might benefit the hospitality industry, but some other industry is going to suffer as a consequence.

--- Later in debate ---

[Lord Macpherson of Earl’s Court (CB)]

My Lords, I will try to be extremely brief because no doubt I will be interrupted again. The point I was making was that if you cut tax in one area, you are going to have to raise it somewhere else. That is always problematic.

There are two other reasons why I have some reservations about this amendment. First, it is often thought—the Financial Secretary will remember this because we worked together on measures in the early 2000s—that part-time workers are poor. However, if you look at the poverty statistics, many part-time workers live in quite affluent households. My point is that as a measure to target people on low income, this is a very blunt instrument. It is far better to target them through tax credits, or universal credit as it is now called.

My final points relates to having worked on national insurance over three decades or more and is about the danger of creating steps in the system. I remember large numbers of workers bunching below the lower earnings limit, which was totally understandable as it was in their interest and their employer’s interest. By creating steps in the system, you discourage people from moving up the earnings ladder. In the short term, I could understand that cutting national insurance for the self-employed would genuinely incentivise the employment of part-time workers, but once in place, over time the existence of the step would trap many workers in this part-time zone because their employers would not want them to cross the step that resulted in higher national insurance. I warn against targeted measures such as this as they tend to cause difficulty and disappointment.

[Baroness Neville-Rolfe (Con)]

My Lords, I thank all noble Lords for their contributions, particularly the noble Baroness, Lady Kramer. I regret that the noble Lord, Lord Bruce, is not in his place and associate myself with the request for some information about Scotland.

The amendments address a matter of real importance, which is the impact of the measures on part-time and seasonal workers, SMEs, hospitality and tourism. The noble Baroness, Lady Kramer, is right about the importance of part-time working in tourism, pubs, restaurants and events. That sector is sometimes neglected in public policy-making, but it is vital to growth.

National Insurance Contributions (Secondary Class 1 Contributions) Bill

Lord Macpherson of Earl's Court Excerpts

2nd reading
Monday 6th January 2025 Lords Chamber

[Lord Macpherson of Earl’s Court (CB)]

My Lords, I am in no doubt that taxes have to rise. The spending decisions made by the last Government—or rather the lack of them—the cost of the pandemic, higher interest rates and increasing demographic pressures all point in the same direction. Therefore, with a heavy heart, I broadly support the Bill.

In a sensible world, the Government would not have made the manifesto commitments on personal taxes that they did. For my part, I would have preferred to see an increase in income tax, as Denis Healey implemented in his first Budget, or even an increase in VAT, as Sir Geoffrey Howe and George Osborne implemented in their first Budgets. But we are where we are, and I recognise that tearing up a manifesto commitment in a first Budget rarely ends well for a Chancellor. It is much better to raise a large tax a little than lots of small taxes a lot. Those who oppose the Bill really need to explain how they would fill the void which its defeat would leave.

My main worry about the recent Budget is that it did not go far enough in stabilising the public finances. Fiscal headroom is remarkably small, long-term interest rates remain stubbornly high, and spending pressures—in particular those relating to the so-called triple lock on pensions and to the National Health Service, social care and defence—are as likely to increase as to decline. Although I remain an optimist about Britain’s long-term growth prospects, given the global move to protectionism there is every chance that the economy will underperform over the next 18 months.

I understand the concerns about the impact of this tax increase. We should be in no doubt that national insurance is indeed a tax on jobs; generally, the more you tax employment, the less you will get of it. The change will undoubtedly add cost pressures, both for the public and the voluntary sectors, which the Government will need to address. But in assessing the impact of this measure, we need to recognise that the economy is close to full employment; indeed, that is one of the reasons why it has been so easy for inflation to take root in recent years.

It is important to look at national insurance in the round. The incidence of employers’ national insurance is almost identical to that of employee national insurance. The last Government cut the rate of employee national insurance from 12% to 8% earlier this year. They should not have done so, since that only added to the deficit, but they did, and I am happy to make a virtue of its economic impact in the labour market broadly off-setting the negative impact of the measure in the Bill. The cuts in employee national insurance make it cheaper to employ people; the rise in employers’ national insurance makes it more expensive. The net effect is broadly neutral, and many have argued that it would have been a lot easier to cancel the employee cut and leave employers’ national insurance unchanged, but here we come back to the manifesto commitment.

I will confine my remaining comments to how national insurance contributions might develop from here, given that whoever is in power in the decades ahead will be under pressure to raise more in tax. First, I worry that national insurance rates are too high and income tax rates too low. During my adult life, the combined rate of national insurance has risen from 14.5% to 23%, while the basic rate of income tax has fallen from 34% to 20%. The only reason I can see for this change is a belief that taxpayers are less averse to paying national insurance than income tax. However, the evidence for that is increasingly thin. More significantly, to use the language of the last century, the trend has benefited rentiers and capitalists at the expense of the workers.

Secondly, if Governments remain determined to keep income tax and national insurance separate, I would encourage the Treasury to consider the base for national insurance contributions. As I said, it is anomalous that national insurance is not chargeable on interest income, dividends or rents. It is also anomalous that employees cease to pay national insurance at pension age. I declare a personal interest, since I will reach pension age in six months’ time.

Thirdly, there is the issue of the self-employed. I completely understand why the Government have chosen not to increase self-employed national insurance in the Bill. The last Chancellor who sought to do so was, after all, the noble Lord, Lord Hammond of Runnymede, and that was what is known in the trade as a courageous decision—I was not entirely surprised when he was forced to back off very quickly. There may have been some logic for the self-employed paying lower national insurance when we still had income-related benefits to which they were not entitled, but those days are very long gone. As the OBR and others have pointed out, the Bill will encourage employers to find ways of recasting their employees as self-employed. I therefore ask the Financial Secretary what plans the Government have to make this more difficult.

Finally, I encourage the Government to consider how the costs of an ageing population will be financed. I have long argued the case for a health and social care levy paid by employees, employers and the self-employed. The last Government were sensible enough to introduce one—indeed, its abolition is one of the only surviving measures of the notorious Truss-Kwarteng mini-Budget—and sooner or later, and probably not in this Parliament, a Government will have to return to such a levy. As and when that happens, I would encourage the Treasury to consider as wide a base as possible, the better to keep the rate down. In the meanwhile, painful though it is, I see no alternative but to support the Bill.

Fiscal Rules

Lord Macpherson of Earl's Court Excerpts

Tuesday 29th October 2024 Lords Chamber

[Lord Livermore (Lab)]

The noble Lord is far more experienced in these matters than me, and I have the greatest respect for him. He mentioned three types of activity. The first one he mentioned was the manifesto commitments we gave: he mentioned the major taxes and he is absolutely right. In our manifesto, we committed to not increasing taxes on working people, which is why we will not increase the basic, higher or additional rates of income tax, national insurance or VAT. I think it is perfectly right that we do that and specify that in our manifesto. He also mentioned speculation. There has been huge speculation ahead of this Budget around specific taxes which at this Dispatch Box, on multiple occasions, I have been unable to comment on, and I think he will understand why. As for announcements being made ahead of a Budget, that is a perfectly routine thing to do, and it is right that Parliament then has the opportunity to scrutinise those at the appropriate moment.

[Lord Macpherson of Earl’s Court (CB)]

My Lords, I broadly welcome the Government’s Statement, but we have to recognise that so many fiscal rules have come and gone in recent years that the credibility of the macroeconomic framework has been severely dented. Can the Financial Secretary confirm that the investment rule will apply to a specific year and not take the form of a discredited five-year rolling period where fiscal virtue is for ever deferred? Does he agree that what matters more than any rule is whether the Government have a credible plan for promoting growth and for stabilising and ultimately reducing the country’s debt in relation to national income?

[Lord Livermore (Lab)]

Once again, I address a noble Lord who has far more experience in these matters than I do. I agree with a huge amount of what he says. I think that stability in fiscal rules is incredibly important and that they should not change particularly frequently—perhaps at the point when Governments change. I am tempted to agree with a lot of what he said, but unfortunately the Chancellor will set out the Government’s full fiscal plan, including the precise details about fiscal rules that he asks for, in tomorrow’s Budget, alongside an economic and fiscal forecast produced by the OBR.