Economy: Public Finances

Lord McFall of Alcluith Excerpts

Tuesday 24th March 2015 Lords Chamber

[Lord Newby]

My Lords, last month’s trade figures were the best for 15 years. No doubt the noble Lord would say that that is not good enough. However, we have spent more money more effectively through UKTI in building up our trade with less traditional countries such as China. Further support was given to that in the Budget.

[Lord McFall of Alcluith (Lab)]

My Lords, in 2010 the Government inherited £786 billion of debt. Five years later that figure is now £1,540 billion—almost double. The Chancellor in his Budget said that the Government were paying the debt down. Was he telling the truth?

[Lord Newby]

My Lords, it is no secret that this Government have borrowed over half a trillion pounds as we have slowly got to grips with the mess we inherited. Debt has come down by about 1% of GDP for each year we have been in government—the level of consolidation that the IMF says is most appropriate in these sorts of circumstances.

Income Tax: Top Rate

Lord McFall of Alcluith Excerpts

Monday 16th March 2015 Lords Chamber

[Lord Newby]

My Lords, there has been a reduction in the amount paid in bonuses in the City. This will undoubtedly have meant a fall in the amount of tax on those bonuses, but I am sure that the whole House will welcome that development and hope that it will lead to something of a change in bank culture.

[Lord McFall of Alcluith (Lab)]

My Lords, I refer the Minister to a recent ONS study which looked at the combination of direct and indirect taxation and found that the group paying most—paying more than the really well-off—was in the bottom quartile. Is not the big social injustice in the tax system in this country that the poorest are indeed paying the most? That is not helped by the Chancellor, George Osborne, and his cohorts rubbishing social security and welfare payments. Does the Minister not agree that that only compounds and exacerbates the problem that we have in our iniquitous tax system?

[Lord Newby]

But, my Lords, the top 1% of income tax payers is now paying between 27% and 28% of all income tax, which is a higher proportion than at any point during the last Labour Government. The two changes that I have mentioned, which bring in more than £6 billion extra a year, apply only to the highest earners.

Small Businesses: Finance

Lord McFall of Alcluith Excerpts

Wednesday 25th February 2015 Lords Chamber

[Lord Newby]

I am extremely grateful to my noble friend for his suggestion.

[Lord McFall of Alcluith (Lab)]

Can the Minister explain why the British Chambers of Commerce has stated that small and medium enterprises are being increasingly left out in the cold by lenders?

[Lord Newby]

As I explained, gross lending to small businesses was up by 25% last year. That is the figure, my Lords. The noble Lord shakes his head, but that is the figure. Banks have not been as open-handed to small businesses as they were before the crash, partly because at that stage in some cases they were lending irresponsibly and partly because they have had to strengthen their balance sheets—something which the noble Lord has been very keen to encourage.

Credit Unions

Lord McFall of Alcluith Excerpts

Tuesday 3rd February 2015 Lords Chamber

[Lord Newby]

Absolutely, my Lords, and I commend the noble Lord for his work in this area. Increased collaboration is vital if the sector is to become more competitive and grow. The Credit Union Expansion Project, to which the noble Lord referred and which the DWP is funding to the tune of £38 million, is aimed at doing exactly that—for example, by providing shared back-office services to cut costs. However, the sector would also be strengthened if it were able to speak with one voice, which requires a reduction in the number of trade associations currently operating in the sector.

[Lord McFall of Alcluith (Lab)]

My Lords, our ambitions for the growth of credit unions on a national scale have a long way to go. Given that banks and building societies have extensive networks and operational systems, is there now a case for the Government to consider establishing a community reinvestment Act, as in the United States, as a solution to the problem of providing affordable finance for all individuals?

[Lord Newby]

My Lords, there is scope to look at a whole raft of new initiatives, to make sure that there is access to finance for people on more modest incomes. One development in recent weeks has been agreement with the banks on fee-free basic bank accounts, which will be a good improvement for many people who are currently denied even the most basic bank accounts.

National Infrastructure

Lord McFall of Alcluith Excerpts

Thursday 22nd January 2015 Lords Chamber

[Lord McFall of Alcluith (Lab)]

My Lords, I congratulate the noble Lord, Lord Adonis, on generating this debate. I shall focus on three areas: the mindset of the Government, the present strategy, and the consistency or inconsistency of approach. The Government’s mantra has been fiscal consolidation, which is nothing more than a euphemism for cuts in public spending. That view was shared by the IMF, but it changed its tune dramatically in October, in its World Economic Outlook, where it said that there was a need for a substantial increase in public infrastructure investment globally. It asserted that properly designed infrastructure investment would reduce, rather than increase, government debt burdens. In other words, it would pay for itself. There is therefore an overwhelming case for investment now, and on a substantial scale.

The second issue is strategy. The Government’s strategy needs to embrace the entire country. That is mentioned in their document on transport, Rebalancing Britain, but it has to mean what it says.

I note that the Prime Minister is in Scotland today. He has to emphasise that the tools to deliver such projects need to come from the decentralisation proposals which will be implemented in England and the devolution proposals which will be implemented in Scotland, Northern Ireland and Wales.

The Economic Affairs Committee is looking at HS2 at the moment. I had a revealing exchange recently with Sir David Higgins, who is in charge of that. Sir David is a man of great integrity and impeccable professional credentials. However, I questioned him about his statement that we need an east-west train line in the north of England. He had called for that to be built alongside HS2, at a cost of £15 billion. It was revealing that Sir David replied:

“I do not think we were even talking about east-west six months ago, and as I started spending time with northern politicians, a number of them said, ‘Why do you not at least consider the issues?’ … the more I thought about it the more I thought that this debate needs to be had”.

Under questioning from me on whether the six-month timescale added up to a national strategy, he replied:

“You are right, so it is not a national transport strategy”,

so we are building HS2 without a national strategy. His advice to the committee was that,

“you need to say, ‘There needs to be a national transport strategy’”.

Two conclusions can be drawn from that: first, that we have a London-centric approach; and, secondly, that we have a lack of clear strategic planning. The Public Accounts Committee report published last week was very clear that the Department for Transport is making decisions about which programmes to prioritise for investment on unclear criteria. Indeed, it has still to publish proposals for how Scotland will benefit from HS2, including whether or not the route is extended into Scotland. What goes for transport goes for other areas such as energy, airports and housing, which have been mentioned.

The third issue is inconsistent government policies. To deliver projects there needs to be public-private collaboration. There was a great initiative a few years ago whereby pension funds were going to invest £25 billion in infrastructure projects. However, for them to do so, they needed to match their investment with long-term liabilities. The Chancellor radically redesigned the pensions landscape in the 2014 Budget. The result will be a net gain to the Treasury in the next four years of £3 billion, and £17 billion a year by 2030 at 2013-14 prices, but uncertainty for pension funds and long-term investment.

There is a case for greater certainty in long-term strategic policy. That can be delivered only by an independent national infrastructure commission, as has been said. Sadly, that task will be left to the next Government, who need to make it a primary responsibility.

Childcare Payments Bill

Lord McFall of Alcluith Excerpts

Wednesday 17th December 2014 Lords Chamber

[Lord Newby]

My Lords, I absolutely take that point. However, as my noble friend will be aware, the chairman of the committee wrote to my honourable friend and she replied to the chairman of the committee a couple of days ago, I hope giving useful information which will be for the benefit of the committee.

[Lord McFall of Alcluith (Lab)]

My Lords, on the issue of childcare, as chairman of a civic welfare and benefits group in Scotland, along with my colleagues in the churches, trade unions, local authorities and charities I visited a food bank in Drumchapel last week. We were informed there that over 25% of the clients were working poor, mostly women with childcare needs. That supports research for the Joseph Rowntree Foundation which stated last year that there were more working poor in the UK than non-working poor households. Given that situation, if the Government are to live up to their rhetoric of helping hard-working families, is there not a case for Iain Duncan Smith—who, incidentally, visited Drumchapel—to look at this situation urgently so that we can indeed help the working poor and so that the Government can live up to their promises?

[Lord Newby]

My Lords, the Government are doing a whole raft of things to help the working poor. One of the main reasons why the working poor are quite so poor is that they are not working as many hours as they would like to work. One of the interesting findings from recent survey evidence is that nearly a quarter of employed mothers said that they would increase their working hours if they could arrange reliable, convenient, affordable and good-quality childcare. Many of those are exactly the kind of parents to whom the noble Lord referred.

Bank of England

Lord McFall of Alcluith Excerpts

Thursday 30th October 2014 Lords Chamber

[Lord Newby]

My Lords, that is an extremely sweeping statement and I would need prior notice before I felt that I could absolutely agree with it in every case.

[Lord McFall of Alcluith (Lab)]

My Lords, in 1999, Alex Salmond described the Bank of England as a “millstone round Scotland’s neck”. Fifteen years later, he was pledging his love and fidelity to it. Does that not prompt the question that, if it was good enough for Alex Salmond as the Bank of England, it is good enough for the rest of us?

[Lord Newby]

I am not sure that that is a general principle that one would wish to apply more widely.

Young People: Alternatives to University

Lord McFall of Alcluith Excerpts

Thursday 23rd October 2014 Lords Chamber

[Lord McFall of Alcluith (Lab)]

My Lords, I warmly welcome the debate initiated by my noble friend Lord Monks on the grounds of my being an early school leaver at 15 years of age, who started off in the vocational line, and also subsequently as a deputy head teacher responsible for what we damagingly refer to as “Christmas leavers”. These were young people who were in school but were not going to university, damaging their self-esteem in the process. Compared with their contemporaries in full-time higher education, these young people in the vocational scheme had a lack of structured support and pastoral care. Consequently, the challenges facing them were considerable. They faced these challenges largely alone. The best advice matching their skills and abilities was absent.

Such individuals—and the poorer ones in higher education—are still coming off worst in Scotland. A recent study by Edinburgh University’s Centre for Research in Education, Inclusion and Diversity concluded that only students from relatively high-income homes enjoy consistent, superior benefits from the Scottish education system. It has seen a transfer from low-income to high-income households. It adds that the Scottish system of higher education does not have the egalitarian, progressive effects that are commonly claimed for it.

It is important to debunk these notions. The bias against poorer individuals and those not in higher education is even more skewed. If there is an opportune time to reappraise this bias it is now. Youth unemployment in the country is greater than 17%; there are almost 900,000 young people still not in work.

The age of austerity is giving way to the age of secular stagnation. The characteristics of this are high unemployment, increasing poverty, wage stagnation and debt burdens. As we have seen this week with this Government, debt burdens do not decrease. The buzzword in the markets, the IMF, the World Bank and other global institutions is “investment”. We need an economic system that offers hope, not despair, and one that serves the interests of everyone.

We have cheated our children through lack of public investment and a failure to provide jobs. The policy for young people has failed. My noble friend Lord Monks referred to the document, Sense and Instability, produced by the City and Guilds. That looked at the record for the past 30 years. He quoted a number of points, not least the 61 Secretaries of State. The policy has been flipped between departments or shared with multiple departments 10 times since 1980.

Given this catalogue of failure, we can conclude only that a single youth policy agenda across government departments is necessary. Devolution to local level, where the needs fit the training, is very important, because of the huge gap in skills. That way we could encourage diverse, high-quality routes into work. Is it not time to commit to a youth guarantee to fill that skills gap—a guarantee that gives high-quality training placement or a paid job? My noble friend Lady Taylor said that such a youth guarantee should establish parity of esteem between vocational education and the academic route.

We must recognise that the UK economic has been damaged since the financial crisis in 2008. The Institute for Public Policy Research concluded recently that full economic recovery will not solve the youth unemployment problem. The link between youth unemployment and economic growth, between youth unemployment and GDP, is broken—not least in the striking mismatch between what people are training for and the types of job available.

Without radical change by the Government focusing exclusively on a coherent youth policy and a decentralisation of the responsibility for skills development to local level, where the needs of availability of young people with the required skills coalesce, and without the parity of esteem between vocational and academic education, we shall simply repeat the mistakes of the past. The next generation’s economic, social and life-enhancing prospects are too important to allow such an opportunity to change course. We cannot allow that to happen by default.

This debate has been timely and crucially relevant. I congratulate my noble friend Lord Monks for instigating it.

Credit Unions

Lord McFall of Alcluith Excerpts

Thursday 16th October 2014 Lords Chamber

[Lord Newby]

The noble Lord is right that the number of members of credit unions and the amount of money involved is a lot less here than it is in some other countries. There are now about 1.1 million members of credit unions. Although by the standards of some other parts of the world that is not very high, it does represent something like an eightfold increase over the past 20 years, so credit unions have been growing. The challenge for everybody now, having got to a firm base, is how to get a step-change up in professionalism and the ability of credit unions to manage larger volumes, and a better marketing campaign to ensure that people understand why credit unions might in many cases be better for them than the traditional banks.

[Lord McFall of Alcluith (Lab)]

My Lords, I bring attention to my membership of the Credit Union Foundation and the Lloyds Banking Group grants committee for credit unions. One of the lessons of the past has been that grant funding has made the sector weaker rather than stronger. Capital ratios are the key. Given that mutuals are unable to raise capital, any proposals by the Government should ensure that the capital allocation of credit unions is improved. Will the Minister keep this point in mind so that we have a credit union sector which is growing, is more stable and can serve the best interests of the poor members of this country?

[Lord Newby]

I begin by recognising the valuable work that the noble Lord does with Lloyds in this respect. The part that the big commercial banks can play, not so much in funding—although that is useful—but also in transferring expertise, is very important. One of the key things now for credit unions in increasing the amount of capital they have at their disposal is to encourage large numbers of people with some relatively small amounts of capital to become members of a local credit union and deposit some capital with it. The work of the Church of England, for example, is potentially very important. There are many members of the church who would be able to join a credit union and put in a relatively small amount of money which could collectively transform the capital position of the many credit unions with a very small capital base.

Income Tax: Top Rate

Lord McFall of Alcluith Excerpts

Tuesday 15th July 2014 Lords Chamber

[Lord Newby]

My Lords, the Government are very keen to ensure that the tax regime is internationally competitive. That is the effect of the corporation tax changes. As the noble Baroness said, it is having a number of beneficial effects.

[Lord McFall of Alcluith (Lab)]

My Lords, Martin Sorrell of WPP said that for large corporations, corporation tax is a voluntary activity. Is that what the Minster meant by his answer to the last question?

[Lord Newby]

It certainly is not. As the noble Lord knows, we have taken the lead internationally to make sure that companies—which for many years in some cases have not paid much tax—will pay a proportionate amount. We have taken the lead in the G20 and the OECD to make sure that we have different rules in place, rather than rules that were designed more than 100 years ago. We are going to see the first fruits of that in September; the long-term effect will be that some companies that have been able to avoid paying tax in the past almost altogether by deciding where they were domiciled will not be able to avoid it in future.