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.

Tax: Aggressive Tax Avoidance

Lord McFall of Alcluith Excerpts

Wednesday 9th July 2014 Lords Chamber

[Lord Newby]

The noble and learned Lord points to a very important problem. There are over 1,000 tax allowances, all of which have been introduced individually for very good economic development reasons. The problem is that they are now very complicated. Some tax advisers have been extremely creative at finding ways to use these allowances, which were developed for perfectly good reasons, to enable people to avoid their tax.

[Lord McFall of Alcluith (Lab)]

My Lords, is the term “aggressive tax avoidance” not just semantics? Tax avoidance is tax avoidance, whether aggressive or not. By doing this we are encouraging complexity, which is to the benefit of sharp-witted accountants and lawyers. Tolley’s Tax Guide is now 20,000 pages long. I suggest that the Minister should have two ambitions: first, to have the tax book the same length as War and Peace at 1,200 pages. Secondly, he should take up the suggestion of the noble Lord who said that we need to ensure these tax-avoidance schemes are referred to the Treasury first of all to determine whether they are tax avoidance. That would eliminate the complexity.

Payday Loans: Debt Collection

Lord McFall of Alcluith Excerpts

Tuesday 1st July 2014 Lords Chamber

[Lord Newby]

My Lords, there have been recent reports about the Student Loans Company. My right honourable friend David Willetts is in the process of establishing the facts of the practice. The offending letters that the SLC sent out are no longer being sent. Certainly, if it is found that the SLC or any other arm of government has adopted unsatisfactory practices, appropriate and firm action will be taken.

[Lord McFall of Alcluith (Lab)]

My Lords, it is important to note that no fine whatever has been imposed on Wonga. It has been asked only to redress customers at a rate of 8% interest, compared with the 5,853% that it charged its distressed customers. Despite the potential criminality in at least four areas here, Wonga has been allowed to continue as though nothing has happened, portraying itself as the good guy in a bad industry when it is the bad guy in what should be a good industry.

[Lord Newby]

My Lords, I think Wonga is finding it increasingly difficult to portray itself as the good guy. That has been demonstrated by this episode. The key thing to point out is that the action of the FCA has resulted in prompt redress and that 45,000 consumers will be getting a payment from Wonga. Until the FCA had the powers that it assumed in April, there was no provision under the previous regime for the OFT to secure redress for customers in that way. If, under the old regime, the OFT had initiated a criminal process, it is quite likely that it would have taken the best part of three years to reach a conclusion; whereas, under this process, consumers have got money back from Wonga very quickly.

Pensions

Lord McFall of Alcluith Excerpts

Thursday 26th June 2014 Lords Chamber

[Lord Newby]

The answer is that it may be or it may not be, depending on what people want to do. One can envisage there being cases at workplace level, where there is a workplace scheme, where it is sensible to start off, for example, by having a collective session followed up by individual guidance. The key thing which we want to underline is that individual guidance will be available. As I said earlier, however, not everybody will want to receive it in the same way.

[Lord McFall of Alcluith (Lab)]

My Lords, the Budget Red Book indicates a bonanza for the Treasury in the next few years as a result of this annuities treatment. This policy could have echoes of the pensions mis-selling scandal of the 1980s, which cost £12 billion. If the Government are not clear and unambiguous that this means individual advice, people will be left on their own and be mesmerised. It is a good thing for the Government, but a bad thing for individuals. The Government need to act very quickly on this.

[Lord Newby]

My Lords, the Government are acting quickly on it, and we absolutely agree that this must be seen as a good thing for individuals. This scheme is not being introduced to make a short-term improvement in government finances. I remind noble Lords that a number of countries—for example, Australia, Denmark and the US—already have the kind of provision that we are proposing. The FT recently reported that, when the leading finance and pensions expert was asked about this, he said:

“There’s nothing to suggest that Poms are any more stupid than Australians”.

I agree with him.

Queen’s Speech

Lord McFall of Alcluith Excerpts

Wednesday 11th June 2014 Lords Chamber

[Lord McFall of Alcluith (Lab)]

My Lords, my speech on the Scottish issue will be vigorous and a statistics-free zone. While I recognise the centrality of the economy—not least the currency, which I have mentioned previously—I want to focus on what we have built together these past 307 years and what we may lose if we wake up as foreigners to each other on 19 September. Have no doubt that both of us will be diminished: Scotland in terms of its trade and investment, prosperity and security, and the rest of the United Kingdom in its global authority and position in the world—not least with multinational bodies—and its leadership role, where it has been a beacon as a liberal and harmonious society to many developing and emerging countries.

My simple message today is that all of us need to engage in the national conversation, where warmth and friendship dominate. Let us minimise the abuse and the bitterness so eloquently expressed by the noble Baroness, Lady Liddell, who mentioned the abuse encountered by JK Rowling and Clare Lally, a former constituent of mine. We need to elevate this discussion to include what is good, valued and treasured in our relationship in which we have worked together for more than 300 years. However, being Scots, reality must prevail. In my view Simon Schama correctly assessed the situation when he wrote in an article in the Financial Times a couple of weeks ago that the UK is a,

“splendid mess of a union”,

but one which we tear asunder at our peril. He went on to assert that there will be,

“incredulous sorrow at the loss of our common home … A psychological wound will open that is unlikely to heal for a very long time”.

Why should there be sorrow? It is because we have seen the friendships enabled by the union outweigh its enmities. That great Scot Adam Smith introduced a concept of sympathy in 1759 in The Theory of Moral Sentiments which he defined as the capacity to enter into an experience of someone not necessarily like you. In his opinion this was the fundamental principle around which just societies, as well as rich ones, evolved. That has been the history of the United Kingdom.

The very exciting Scottish actor James McAvoy appeared on the “The Andrew Marr Show” two weeks ago. He would not be drawn on how he would vote but in my view he went to the core of the issue when he said that if it matters to your heart and you look at yourself in the mirror and it is important to be separate from people down the road, then you should vote for independence. Therefore, if one needs to jettison the unionist part of one’s soul in order fully to express one’s Scottishness, the only option is to vote yes. However, most of us are content to live with our multilayered identities. Indeed, even Alex Salmond stated as late as January this year that being British was part of his identity.

All my life I have been resident in Scotland but I have lived in England and Ireland and have visited Wales many times. Never have I felt that I was among others who differed fundamentally from me in terms of culture and values. I was struck by differences in background, wealth and political philosophy but those same differences exist within Scotland as they do elsewhere.

The noble Lord, Lord Parekh, who has first-hand knowledge of colonialism in India, and, indeed, is a former professor of Glasgow University, expressed the issue succinctly in a previous debate when he described the UK as a liberal democracy and,

“a beautiful synthesis of English liberalism and the Scottish sense of community and solidarity”.—[Official Report, 30/1/14; col. 1422.]

The First Minister has said:

“Scotland is not oppressed and we have no need to be liberated”.

He also said:

“Ours is a lucky nation, blessed with natural resources, bright people and a united society. We have an independent education system, legal system and NHS. They are respected worldwide”.

I say “hear, hear” to that. The question I ask Mr Salmond is, “Why divorce?”. Has any of us experienced a painless or good divorce? Absolutely not, so why are we going through this possibly painful experience?

In his poem Mending Wall, the eminent US poet Robert Frost wrote:

“Before I built a wall I’d ask to know

What I was walling in or walling out,

And to whom I was like to give offence”.

We are all walled in presently but, before we wall some out and perhaps needlessly give offence, we need to converse about our common home—the UK—in order that we continue to walk together rather than walking apart and ensure that on 19 September we will engage as fellow citizens rather than as foreigners.

Economy: Inflation

Lord McFall of Alcluith Excerpts

Tuesday 11th March 2014 Lords Chamber

[Lord Newby]

My Lords, as my noble friend is aware, we took action in the autumn to reduce household energy bills. In the longer term, the key aim is to ensure that we have sustainable energy supplies; the Government’s energy policies are designed to do just that.

[Lord McFall of Alcluith (Lab)]

My Lords, the figures indicate that in four years’ time, in 2018, typical living standards for a household will be 3.5% lower than they were in 2007, before the financial crash. Does that not indicate that the Government have to be open and honest about the situation, so that, in the Budget next week, the Chancellor will bring forward policies that will assist hard-working families and households in this country who feel the pressure ever so much as the months go past?

[Lord Newby]

My Lords, the GDP is going to be higher in the second half of this year than it was before the crash. We are going to have more people in work. These are the two key determinants of how the average household is going to feel. In the mean time, by taking actions such as freezing fuel duties and increasing the threshold for income tax, we have given some relief to tens of millions of individuals and we intend to maintain those policies.

Economy: Growth

Lord McFall of Alcluith Excerpts

Tuesday 11th February 2014 Lords Chamber

[Lord Newby]

My Lords, there is increasing evidence from the business community that it believes that its involvement in the Scottish economy would be reduced were Scotland to become independent; for example, in recent weeks, Bob Dudley from BP has said that there would be “big uncertainties” about its continuing investment in Scotland. He is just one of a number of representatives of major firms who have questioned their long-term involvement in the Scottish economy if Scotland became independent.

[Lord McFall of Alcluith (Lab)]

My Lords, the SNP White Paper said that,

“Scottish taxes will fit our distinctive social context”.

That seems curious and inexplicable, but does the Minister agree that in terms of the social context the single market between Scotland and England is crucial, since more than 70% of Scottish exports go to England and any disruption of that market will result in instability and will not be in the interests of either Scotland or the rest of the United Kingdom?

[Lord Newby]

My Lords, I absolutely agree with the noble Lord. The Treasury has done some work on the so-called border effect: what happens to growth if the Scottish economy and those of the rest of the UK are separated by a border. Its best estimate was that over a period of several decades, the Scottish economy could be about 4% poorer than would otherwise be the case, compared to a reduction in the rest of the UK economy of 0.2%. There are much bigger risks for the Scottish economy through independence than there are for the rest of the UK, but both sides would suffer.

Public Sector: Debt

Lord McFall of Alcluith Excerpts

Thursday 23rd January 2014 Lords Chamber

[Lord Newby]

My Lords, sadly, we are not going to abolish the debt by 2018, although I hope that we shall abolish the annual deficit by then. The Government have set out expenditure plans for 2015-16; how expenditure falls beyond that will, as I said, be the task of the next Government. The parties will set out their plans, and my party has already explained that it would expect further fiscal consolidation to take place, but that a proportion of that fiscal consolidation will need to be borne by the shoulders that are broadest.

[Lord McFall of Alcluith (Lab)]

Is there a case for the Government to establish an education programme to distinguish between the deficit and the debt? Is it not misleading for them to focus only on the deficit, particularly when their actions are making the national debt increase by more than 60% compared with any other European country?

[Lord Newby]

My Lords, the Government are trying to get under control a disastrous fiscal situation that we inherited from the previous Government. I am not quite sure whether the noble Lord is saying that we should cut expenditure more, but if he is, I would be grateful to hear his specific proposals.

Pensions

Lord McFall of Alcluith Excerpts

Thursday 12th December 2013 Lords Chamber

[Lord Newby]

My Lords, we have discussed many times the fact that low interest rates are a key determinant in supporting growth, and that growth is in the long-term interest of the entire community. The Bank of England has given forward guidance in respect of when interest rates might rise. Monetary policy is firmly in its purview rather than the Government’s.

[Lord McFall of Alcluith (Lab)]

My Lords, the research in this report indicates that insurers can make £35,500 out of a £100,000, 25-year pension pot. That illustrates that this is a dysfunctional market. The Government have been told this for years. Given that the annuities market will double by 2015, is there not a case for the Government to consider a standing commission on pensions, which can look at the industry and pensions in the long term to ensure that people are not ripped off and that they get the best deal for their retirement?

[Lord Newby]

My Lords, as the noble Lord will be aware, the big new development in pensions is around auto-enrolment. In this area, the Government have set a cap on allowable fees, precisely to deal with the problem of high fees going forward. More generally, the FCA is undertaking a thematic review of annuities, which will look at fees among other things. There is a lot going on and we will see action without needing to set up any further bodies to bring it about.