Financial Services Bill

Lord Newby Excerpts

Monday 8th October 2012 Lords Chamber

[Lord Newby]

My Lords, I agree strongly with the motivation behind the amendments of the noble Lord, Lord Eatwell. The process for approving new entrants to the market should be streamlined to the maximum possible extent because it is clearly a flaw in the current financial services market that while in many sectors there is strong competition, in some, particularly banking, we wish to see significantly more competition. In terms of giving an impetus to the speedy processing of applications, we strongly support his view. However, I hope that I can persuade him that the Bill already makes it clear how the two regulatory bodies are going to deal with applications for firms that will be jointly regulated. In Clause 9, proposed new Sections 55E to 55G set out in detail who is to determine applications for authorisation, while new Sections 55U to 55Z1 set out the detail of the procedure which the regulators have to follow. We have already attempted to clarify who does what.

Those who are applying to become a dual-regulated firm are required to make a single application for authorisation to the PRA, and there will be a single administrative process. The PRA and the FCA will be under a duty to co-ordinate which will cover all of their functions, including those related to authorisations. They are under a duty to set out in their memorandum of understanding, in high level terms, how that co-ordination will be delivered. To deliver the duty to co-ordinate, the two authorities are required to put processes in place that will allow for efficient co-ordination. They also need to establish a process for authorisation and variation of permission, and to communicate that to firms. The FSA does this at present, and guidance is available on authorisation from its website. I do not think there is a need for an express requirement in legislation about exactly what the regulators should publish.

I shall move on to Amendment 149AC. We are aware that the ESAs are to assist in preparing equivalence decisions relating to supervisor regimes in third countries under relevant sectoral legislation, such as Article 33 of the ESMA regulation. Where EU law provides for the ESAs to have a role in determining equivalence of an overseas regulator, of course the regulators must comply with EU law and recognise that decision. However, we believe that it would be inappropriate to extend the role of the ESAs by requiring our regulators to have regard to any equivalence decisions they make in contexts that are not required by EU law. But, of course, the question is really one of whether the regulatory bodies are going to take account of the overseas regulators supervising those firms which are applying for passporting into the UK. When the FCA or the PRA is assessing a firm seeking to passport in to the UK from outside the EEA, the opinion of an overseas regulator that knows the firm, its operations and its management extremely well is quite likely to be helpful. The FCA and the PRA must also consider how the overseas regulator supervises the firm and take this into account, but in doing so, they may well wish to consider any view that the EU regulatory authorities may have about the overseas regulator.

I turn now to Amendment 150B, spoken to by my noble friend Lady Kramer. The Bill already provides that the regulators may exercise their powers of intervention, including the power to vary permission, at the request of an overseas regulator. In considering any such request, the regulators are required to have regard to whether they are required by EU law to assist the overseas regulator. The relations between the FCA and PRA and the European supervisory authorities, which are not technically regulators in the same way, are set out comprehensively in primary EU law. For example, Regulation 1093/2010/EU establishing the European Banking Authority runs to 82 articles and covers in detail matters such as the role of the EBA in settling disagreements between national competent authorities, the limited circumstances in which the EBA may direct the national competent authorities to take action, the status of the national competent authority when it attends the EBA and the sharing of information between EBA and the national competent authorities. There is considerable scope for our regulators to work with the European supervisory authorities established in EU law. So while I agree with the importance of the two sets of bodies working closely together, I do not think that this amendment is strictly necessary.

We now come to Amendment 151 tabled by the noble Lord, Lord McFall of Alcluith, which, sadly, takes us back to a discussion of the use of the English language. I say sadly because the debate about whether “may” or “must” should be used has exercised some of the finest brains in the Treasury to a greater extent than almost any other provision in the Bill. I found myself getting drawn into the debate and I became extremely enthusiastic about something that I was then persuaded was not of as much significance as I had originally thought.

Amendment 151 is one of the cases where we have looked very carefully at whether we should change “may” to “must”. We have come to the conclusion that to do so would impose a disproportionate and unnecessary burden on the regulator and, indirectly, on existing and potential authorised persons. The reason for this conclusion is that the amendment taken literally—and people do sometimes take these things extremely literally—would require the regulator to consider, when taking a decision on an application for permission or whether to vary or cancel a permission or to impose a requirement on a firm, each relationship which was “relevant” to the matter in hand. The amendment does not introduce any kind of materiality thresholds; all relevant relationships would have to be considered.

Even for a relatively simple provider such as a sole trader IFA, the range of relationships that are potentially relevant to the matter could be very significant. For a complex firm such as Barclays, the range of relevant relationships would be absolutely mind-boggling. Therefore, we think it is very important to retain the “may” to keep proportionality to the level of relationships that would have to be investigated.

[Lord Peston]

My Lords, am I right in thinking that the noble Lord is talking about the “may” on line 27 and that he is well aware that there is a “must” on line 33? I get a bit bored with mays and musts, although I have had my fair share of them. However, I cannot make any sense of them, and if I switched them around, the Bill would look to me just as sensible or not. Could he tell us why the “must” is there?

My other question relates to the point that my noble friend Lord Eatwell made on the importance of regulatory authorities abroad. Is the position at present symmetric? In their regulations and regulated activities elsewhere, do they have a series of mays and musts to take account of what our regulatory authorities say about our firms? In other words, is there any danger that people overseas will prevent our firms competing with their firms under regulations where we are following the quite correct line—which I totally support—that competition is generally to the good? Therefore, we are broadly saying that we must welcome overseas competition rather than reject it. How much danger are we in from the mercantilist views that we know dominate French policy-making and that of others?

[Lord Newby]

My Lords, I can deal with the first part of that intervention more quickly and easily than the second. The first “must” in subsection (2) is there because it is an EU legal requirement. If we are asked to do something, we have to do it; we do not have the option of not doing it. There is a good reason for a “must” there.

With regard to the noble Lord’s second point, I was speculating about the Romanian or Hungarian or Finnish languages as he was speaking and wondering whether there was the same absolute distinction between “may” and “must” in every case. I am not an expert in every bit of regulation in every member state. I realise that this is a major deficiency but I do not think that it pertains very strongly to the amendments before us today. For the second time, the noble Lord has raised a potential other amendment that is not on the Marshalled List. If he will excuse me, I will go back to concentrating on the ones that are.

[Lord Desai]

Perhaps I may say one word in favour of my noble friend’s amendment. It strikes me that there may be what we call a multicultural problem here, that in an investment situation relatives are defined much more broadly in certain communities than others. The noble Lord may be right that “may” will do and “must” will not do, but I have been asked to be non-executive director of some Indian companies and the number of relations they ask me to certify who do not hold assets in that company runs to something like 30. I hope that the regulators are aware that “must” may be a better word than “may”, but I concede the point, as long as the noble Lord assures me that the regulators are aware of the multicultural problem.

[Lord Newby]

I am sure that the regulators are aware of the multicultural problem, but the example given by the noble Lord absolutely exemplifies the problem. If one had a single-trader IFA who came from a particular culture and had a very large extended family, it would be at a disproportionate cost that the regulator looked at every single relationship that he or she had, which could run to many hundreds.

[Lord Desai]

Until it goes wrong.

[Lord Newby]

That is why the regulator has to look at relevant and appropriate relationships rather than everybody who could be conceivably considered to have a relationship with that regulated entity or individual.

Amendment 152 was also put forward by the noble Lord, Lord McFall. I hope that I can persuade the Committee that, again, this is unnecessary. It is important that those to whom permission is granted are not subject to influences that may act in a way which is not in the best interests of potential clients. That is why new Section 55R(1) is in the Bill. The current text in new Section 55R(1) refers to “relationship”. It deliberately does not specify the nature or type of the relationship, so that out of all conceivable relationships—including family, business, and other associations—the regulators can exercise their judgment on which relationships should be investigated and which should be factored in to the instances of decision-making set out in new Section 55R(1). This reiterates the point that I have just been making to the noble Lord, Lord Desai, that a degree of judgment needs to be exercised by the regulator over which relationships are taken into account.

However, I assure the noble Lord, Lord McFall, that the specific types of relationships to which his amendments refer will be among those considered by the regulator and will be looked at where appropriate. Therefore, I hope that the noble Lord will be satisfied that the amendments are unnecessary.

[Lord Eatwell]

My Lords, I welcome the noble Lord, Lord Newby, to the consideration of the Bill but I suggest that he has failed to take the point of Amendment 149AA. His argument consisted of two points. First, he argued that there was sufficient requirement for the PRA and the FCA to work together in giving permissions under new Sections 55E, 55F and 55G. Secondly, he argued, extraordinarily, that it was not the task of the Bill to require either the PRA or the FCA to publish guidance on these matters. One of the great failures in the current process in giving permissions is the inadequate guidance which firms have in preparing their permissions. It is one reason why the permission process has become so extended and has so limited the development of competition in financial services which we would all like to see. In particular—

[Lord Newby]

What I said was that at present the FSA does make guidance available on its website. The new regulators intend to do the same. For that reason, I did not think there was a need for an express requirement in the Bill to do so.

[Lord Eatwell]

They may intend to do lots of things, but it would be nice if the Bill could actually require them to do so in this particular case. However, the more important point I would like the noble Lord to help me with is that Amendment 149A requires the collaborative activity of the FCA and the PRA to publish guidance for applicants, so that an applicant is not caught between two stools, continuously going backwards and forwards between one and the other in the application process. If this is already in new Sections 55E, 55F, and 55G, can the noble Lord point out to me precisely where this requirement appears?

[Lord Newby]

The PRA and FCA are under a duty to co-ordinate covering all their functions, including those related to authorisations. They are under a duty to set out in their MoU how that co-ordination will be delivered. Therefore, the noble Lord’s concern that there will not be adequate co-ordination, and that even if there were, it might not be readily available to regulated or would-be regulated firms, is mistaken. There is recognition that there is a potential problem, obviously, with two regulators, but the Bill and the MoU seek specifically to address those problems.

[Lord Eatwell]

Pushing things into the MoU is unsatisfactory, particularly when the noble Lord pleaded in aid new Sections 55E, 55F, 55G, and so on. It does seem that there is a problem with the whole current application process. Anybody who has been involved with, or been approached by, people involved in the application process knows that as it stands it is not working very well. Once we have two regulators responsible for the approval of applications, there is the possibility that it will work less well, which will not be good for the health and vitality of financial services, particularly banking, in this country. However, we will no doubt return to this matter at a later stage. In the mean time, I beg leave to withdraw the amendment.

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Moved by

[Lord Newby]

149H: Clause 9, page 48, line 8, at end insert—
“(6A) Without prejudice to the generality of subsections (1) and (2), the FCA may, in relation to an authorised person who has permission to carry on the regulated activity specified in article 24A of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (which relates to bids in emission allowance auctions), exercise its power under this section to vary the Part 4A permission of the person concerned by removing that activity from those to which the permission relates if it appears to the FCA that the person has seriously and systematically infringed the provisions of paragraph 2 or 3 of Article 59 of the emission allowance auctioning regulation.”

[Lord Newby]

My Lords, this is a small group of minor and technical government amendments. They serve, among other things, to update the Bill to reflect European legislation and update the schedule that makes consequential amendments to legislation as a result of the changes introduced by the Bill.

Perhaps I may speak briefly about two sets of amendments in this group. The Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) Order 2012 has recently come into force to implement the requirement in Article 18 of the Commission regulation 1031/2010 on the timing, administration and other aspects of the auctioning of greenhouse emission allowances. The order amended FiSMA to enable the FCA to authorise certain categories of persons to make them eligible to bid in auctions of emissions allowances on their own account or for clients under the EU emissions trading system.

Amendments 149H, 173ZAA, 173AAA, 183ZA, 183ZB, 183ZC and 183ZD amend the Bill to ensure that where the order has amended FiSMA, those provisions are reflected in the Bill. Amendments 187TB, 187TC, and 187TD make some technical clarifications to the provisions in FiSMA relating to the Lloyd’s insurance market. They make no changes of substance; there are no underlying changes in policy. Amendment 187TD replaces a reference to Part 10 of FiSMA with a reference to Part 9A of FiSMA. Clause 22 of the Bill replaces the rule-making provisions of Part 10 of FiSMA with new provisions in a new Part 9A of FiSMA. This amendment simply updates a cross-reference to those provisions in Section 316.

Government Amendment 187VA is a minor and technical amendment which maintains the current position under FiSMA whereby the FSA may disclose information obtained by HMRC for the purposes of a criminal prosecution without the consent of HMRC. Government Amendment 193B is a minor technical amendment to remove an unnecessary reference to Section 328 of FiSMA. Government Amendments 193C and 193D make minor changes to the technical provisions of the Bill relating to the special resolution regime and bank administration. Specifically, Amendment 193C relates to a situation where the holding company of a failing bank has been taken into public ownership. The amendment will allow shares that have been transferred, whether within public ownership or to a private sector purchaser, to be transferred back to their original ownership.

Amendment 193D is a consequential amendment, reflecting the insertion of a new Section 81A into the Banking Act by Clause 86(2). Amendments 198A, 200A and 200B amend Schedule 18 to include further consequential amendments required by the Bill. They amend references to the FSA and to Part 4 of FiSMA, which is repealed by this Bill.

Amendment 198A is a consequential amendment to the Lloyd’s Act 1982. The Act currently lists FSA-approved persons as one of a list of specified persons who may sit on the disciplinary committee. The amendment replaces FSA approval with FCA or PRA approval.

Amendment 200A makes a consequential amendment to the Charities and Trustee Investment (Scotland) Act 2005 to update the reference to Part 4 of FiSMA, with the new Part 4A. Finally, Amendment 200B adds the Prudential Regulation Authority and the Financial Conduct Authority to the list of bodies that are required to comply with standards of record keeping in the Welsh language. The Bank of England is already listed. Noble Lords will be relieved to hear that I do not plan to attempt to pronounce the translation of the two authorities to the House. I beg to move.

[Lord Tunnicliffe]

My Lords, we are very happy, in a sense, to accept the blanket assurance that these amendments are minor and technical and we will not probe them in any detail. However, we are going to have a host of government amendments to the Bill, as was discussed earlier. We did, on this first day back, request a written explanation of this group of amendments so that we could study them at our leisure before the Committee met. Unfortunately, there has been no response to that request. It is important that the Government get into the habit of extremely comprehensive supporting documentation for their amendments. Therefore, I will study with care what the noble Lord has said and make sure that I can be comfortable that they are minor and technical, but it would have been much better if we had had a response to our request. I would value an assurance from the noble Lord that, as these amendments come along over the rest of the Bill—we will all try to work together to ensure the success of debates about new government amendments—the Government will facilitate those debates by providing proper documentary support.

[Lord Newby]

I hope I can give the noble Lord two assurances. First, I can assure him that the amendments are indeed technical and have no policy substance attached to them. I also assure him that, wherever possible, we will make available adequate written information about government amendments in good time so that people can look at them and ensure they are what they say on the tin.

Amendment 149H agreed.

--- Later in debate ---

[Lord Newby]

My Lords, as both noble Lords have said, these amendments are about fairness and transparency. The regulators will have wide powers to take action against firms. Therefore, it is right to be sure that the Bill requires the regulators to use those powers in a fair and proper manner. I therefore very much agree with the thinking behind the majority, if not all, of these amendments. Perhaps noble Lords will forgive me if I explain why I think that they are either unnecessary or inappropriate.

Let me deal first with Amendments 150, 165, 168, 171, 173, 177 and 178, which are all in the name of the noble Lord, Lord McFall. These amendments would require the regulator to carry out an investigation before taking regulatory action. I agree that the regulators should not take invasive regulatory action against a firm unless they have carried out a thorough investigation. I also agree with the thinking behind Amendments 169, 170, 172, 175, 179 and 180; namely, that the regulator should give a statement of reasons when it takes regulatory action. However, these amendments are unnecessary as these are already requirements under existing law and the Financial Services Bill will not change that position.

First, as a matter of ordinary administrative law, a regulator could not take action against any person unless it had sufficient evidence for doing so. This would normally mean that it had undertaken an investigation or an inquiry of some kind. The regulator cannot act on a whim. The FSA’s enforcement manual sets out at great length how its investigation procedures are fair and appropriate.

Secondly, Sections 387 and 388 of FiSMA already require warning and decision notices to give the regulator’s reasons for the action it proposes or the decision it has taken. There are similar requirements in the new provisions inserted by this Bill for other notices where that is appropriate. Of course, if the person concerned disagreed with the reasons that the regulator gave, he or she could challenge the action or decision before the tribunal.

Amendment 176 seeks to compel each of the regulators to consult with persons whom it considers appropriate when preparing and issuing a statement of policy with respect to the imposition of penalties and the amount of penalties under the new powers in new Part 12A of FiSMA in relation to unregulated holding companies. Again, I entirely agree with the spirit of the amendment: the regulators should consult on their statements of policy. But let me reassure the noble Lord, Lord McFall, that this amendment is not required, as new Section 192N(9) already requires the regulators to consult when preparing and issuing a statement of policy.

--- Later in debate ---

Clause 25, as amended, agreed.

[Lord Newby]

My Lords, I beg to move that the House do now resume. In doing so, I inform the House that because the Question for Short Debate tabled by the noble Lord, Lord Alderdice, will now be taken as last Business, the time limit for the debate becomes 90, rather than 60, minutes. Speeches should therefore be limited to nine minutes, except for those of the noble Lord, Lord Alderdice, and the Minister, which will remain limited to 10 and 12 minutes respectively.

House resumed.

Arrangement of Business

Lord Newby Excerpts

Wednesday 16th May 2012 Lords Chamber

[Lord Newby]

My Lords, if Back-Bench contributions to today’s debate on the gracious Speech are kept to seven minutes, the House should be able to rise before midnight.

Value Added Tax: Listed Places of Worship

Lord Newby Excerpts

Tuesday 24th April 2012 Lords Chamber

[Lord Sassoon]

I am grateful to my noble friend for pointing out that there was an important meeting on this topic yesterday, led by the right reverend Prelate the Bishop of London and my right honourable friend the Chancellor of the Exchequer. My understanding is that they had a very open and constructive discussion. The Chancellor made it clear that the £5 million which the Government have committed to the listed places of worship grant scheme in the Budget is on top of the £12 million which the scheme already had. We accept, having seen the churches’ numbers, that the VAT change will indeed be more than £5 million and that we need to commit more money, and discussions will continue next week to look at what the projected numbers and our commitment should be.

[Lord Newby]

My Lords, does the Minister acknowledge that the VAT changes are particularly damaging to projects that are already under way? For example, for a project in Kingston, the church reckons that it may have to pay as much as £400,000 additional VAT as a result of this change, when it has already raised several million pounds. Can the Government, at the very least, give a commitment that schemes that are already under way and on which there has already been significant fundraising will not be disadvantaged by the more general proposals in the Budget?

[Lord Sassoon]

My Lords, I confirm that there are indeed transitional arrangements in place for approved alterations to listed buildings, which cover contracts in place before Budget day. Contracts in place on that day will retain the zero rate if the work is performed by 20 March 2013. Our consultation paper specifically asks for comments on whether the transitional period is sufficient. We will of course listen to any reasonable comments about these transitional arrangements and will consider whether any more generous arrangements could be implemented.

Sunday Trading (London Olympic and Paralympic Games) Bill [HL]

Lord Newby Excerpts

Tuesday 24th April 2012 Lords Chamber

[Lord Newby]

My Lords, when I first saw this Bill, I found it quite perplexing. It raised a number of questions in my mind. The first was the question that the noble Lord, Lord Cormack, has already raised: why has it taken seven years since we were allocated the Olympics for someone, with fewer than 100 days to go to the Games, to realise that there is a bit of a problem? When talking to people, it has been suggested to me that it was only because the retailers on and adjacent to the Olympic park realised that they were not going to be able to be open to sell souvenirs on a Sunday. If that is indeed why this is coming forward at this time, someone in the Olympic organisation has been pretty incompetent. Even if one accepts, as seems perfectly reasonable, as the Minister said, that the shops on and adjacent to the park itself and other major Olympic venues should be open for the full duration of sessions of the Games, it seems a very big leap to get to the provisions of the Bill. Why should a B&Q in Carlisle or a Comet in Margate be able to stay open all hours on eight Sundays just because we want attendees at Olympic events to be able to buy a T-shirt on their way home?

It could be argued that actually it does not really matter and that this is a storm in a teacup. No one could argue that this is the most significant problem facing the nation, but it seems to me that it matters for two reasons. The first relates to the public debate about Sunday trading. The current Sunday trading laws are the product of years of debate, and I believe that they reflect a broadly settled view of an acceptable balance between the right to shop at virtually any time of the day or night and the recognition that Sunday, whether you are religious or not, Christian or not, is a separate and special day, and we should retain at least a vestige of that specialness because it benefits individuals and families. It is also the case that the restrictions on larger stores on Sundays go some way to halt the ever-onward march of the bigger boys against small shopkeepers. Therefore, I very much welcome the Minister’s assurance that this is not a Trojan horse, the thin end of the wedge, or whatever analogy one would like to use, to change the settled view of the country on Sunday trading.

The second reason why this is of greater significance is that shops are not machines. They need people to run them and, to put it mildly, the people who run them are less keen than the Government on this legislation. No doubt a number of noble Lords will have seen the representations from USDAW about the views of its members. Admittedly, they are USDAW members, not an absolute representation of everyone who works in a shop, but when you ask 20,000 shop workers what they think, and 78 per cent are opposed to longer working hours for the Olympics and 73 per cent believe that the Bill will lead to more pressure on them to work on Sundays against their will, it is a matter of concern.

I heard what the Minister said about Morrisons. In the nicest possible way, it would say that, wouldn’t it? I believe that many people who do not want to work additional hours on Sundays, whatever the rules about them being able to request an exemption, will be pressurised to work on Sundays and, in the current climate, will feel that they have to work on Sundays for longer hours against their will.

I very much welcome the Government’s planned amendments to make it easier for people to opt out if they do not want to continue working longer hours or to have longer hours on Sunday. I just question how effective in reality, on a shop-by-shop basis, that will be.

If I am pretty grumpy about the timing of the Bill and its geographic extent and implications for shop workers, what are the reasons why I might adopt a more balanced view and even support it? The first is that it is obvious that the Olympics are a unique event. They are a global festival. The eyes of the world are going to be on the UK and, as we have done with so many other things to do with the Olympics, whether it is the cost of the stadiums and ancillary facilities or accepting that we have special lanes for the cars of Olympics officials, we have accepted that you do not do the Olympics in a half-hearted way. That is the right approach to take. To a large extent, one is bound by the rules of the organisers, and in assessing how to run the Olympics one must have in one’s mind how other countries have done it and how we can be seen to do at least as well as many other countries that have had the Olympics. In many ways, the preparations for the Olympics in the UK have been extremely well organised, and while I am being grumpy about this issue, in many other respects the organisation, the planning and the construction work have been exemplary.

The other thing that flows from that is the Minister’s point about how other countries have approached Sunday trading. It is quite extraordinary that in Germany the rules on Sunday trading were relaxed to the extent they were because Germany has a much stronger view about Sundays and their role than we do. It is very interesting that the academic research done about the positive and negative impacts of the World Cup in Germany showed that, in aggregate, the economic impact was as near zero as made no difference, but the great impact was that people in Germany felt better about Germany to a quite considerable extent. That is clearly a very positive benefit. Despite meeting other grumpy people, who in some cases are grumpy because they do not want to be involved in the Games at all, I have no doubt that I, like most people in the country, will be absolutely captivated by them, and I suspect that on the middle Sunday of the Games, I will be glad that there are no people grumbling that the shops are shut.

Economy: Budget Statement

Lord Newby Excerpts

Thursday 22nd March 2012 Lords Chamber

[Lord Newby]

My Lords, it is a welcome break with precedent for your Lordships’ House to debate the Budget so close to Budget day. We normally do it significantly later, so I welcome the fact that the usual channels have been able to agree this.

In my 10 minutes I will concentrate my remarks on tax and growth. The specific tax measure that has given most satisfaction to those on these Benches is, needless to say, the decision to raise the tax threshold to £9,205 next year. This is an important way of giving incentives to hard-working people and taking people on modest wages out of income tax altogether. Unlike every other change in the Budget, this one has been almost universally welcomed, although doing so was beyond the noble Lord, Lord Eatwell, who—in a typically bilious speech—was unable to mention a single specific thing that his party thought should now be done.

Moving on to other changes, on pensions, the Government have, as noble Lords will be aware, implemented a record increase in the level of the state pension this month. They have introduced a triple-lock for future rises in the state pension and are moving towards a universal pension of £140. That will mean a significant increase in income for many of those who have not had adequate pension provision in the past, particularly women. In the light of those changes, the change to the pension allowance seems a reasonable measure.

Equally, given our concern about the way that changes in tax and expenditure hit people at the lower end of the income scale, it seems perfectly reasonable that those at the top should cease to get child benefit. There is an argument about what it should be and exactly how it should be done. I accept that, even with the changes made, there is something of a cliff edge and an anomaly over single-income and two-income households. However, for many years, we, the Labour Party and others have argued for individual taxation, rather than household taxation, to benefit women in particular. It seems to us that that principle should remain. Therefore, the way in which the child benefit changes take effect is inevitable.

The 50p tax rate has generated arguably the most heat, if not the most light. I may be wrong about the Labour Party, but I think all parties saw it as a temporary measure from which would move away as the economy and the fiscal position improved. It will be no surprise to noble Lords that we on these Benches would not have made that move now. However, the reasons for doing so are primarily political, not economic. The noble Lord, Lord Eatwell, may not have read it but PWC and many others argue that the optimum higher rate for revenue maximisation is 45p. Therefore, in terms of income generated for the Exchequer, a rate of 45p has much to recommend it. That is the rate in France and Germany, and it clearly does not disincentivise entrepreneurialism there. Incidentally, I hope that the Government, having made this change now, will make no further changes to the higher rate in the lifetime of this Parliament.

I take with a pinch of salt all the estimates of how much the 50p rate would generate in the medium term and the cost of bringing it down to 45p. However, it is also deeply misleading to give precise figures about how much millionaires or billionaires will gain as a result of the reduction from 50p to 45p because we know that they are not paying the 50p rate. If they were paying the 50p rate in full, the income would be significantly greater and all the arguments would be different. Therefore, those who argue that millionaire X will now be paying Y extra, or getting Y a tax rebate, just fly in the face of the evidence about the behaviour of those individuals. The argument for maintaining the 50p rate was, therefore, political because the reduction in the rate looks as though the Government are simply favouring the wealthy. In many people’s eyes, that will remain the case even though some of the other measures in the Budget go quite a way to counter that assertion. I should like to deal with three of them.

First, the treatment of high-value properties—those worth over £2 million—goes some way towards what we have been arguing for in respect of a mansion tax in four respects. All those who keep such properties within a corporate wrapper will pay an annual amount. The 7 per cent stamp duty—15 per cent if you put it into a wrapper going forward—and the capital gains tax that will be payable on the sale of these properties if you are non-resident are also extremely welcome changes and will hit the wealth of the very wealthy. The general anti-avoidance rule, which was resisted doggedly by noble Lords opposite, is long overdue and will act a bit like an electric fence. No one wants to walk into an electric fence or get too close to it, so it will stop many abusive tax schemes occurring. The limit on the previously unlimited tax reliefs is also potentially of great significance. It is one of those things which is extraordinarily arcane but will make a significant difference to the behaviour of very wealthy individuals.

I hesitate to say anything about growth, given that we are going to hear from the noble Lord, Lord Heseltine, who has such experience in this area. I almost had to pinch myself when I noted that the noble Lord is to make his maiden speech today. He knows more about growth than probably the rest of the House put together, so we look forward to hearing from him.

When the noble Lord, Lord Eatwell, says that there is a problem about confidence and then implies that confidence will be restored by a combination of Messrs Balls and Miliband, frankly, I wonder what planet he is living on. As regards what the Government are doing on growth, the area where they can make a significant medium-term difference relates to infrastructure. There are a number of very important areas in the Budget in this regard where further movement is required in my view.

On the Pension Infrastructure Platform, the first £2 billion will be spent by early next year but I think we need to go much further than that and do so more quickly. The Government have said that £20 billion is available. We need to get more than £2 billion out of the door more quickly.

I am very pleased to see the plan to pilot a programme of enterprise loans for young people. I hope very much that the Government will look at the scheme which is already doing the rounds, under which young people who want to start a business are able to take out a loan on the same basis as young people going to university and repay the loan at the point when they have a significant income. That seems to me an extremely interesting idea.

I am very pleased to see the review of employee ownership. I am particularly pleased that that is moving forward quickly, with measures to be announced in the Autumn Statement. I am also pleased to note the other physical infrastructure proposals, not least the improvements that are planned for the transpennine rail route. On one area where, as a loyal Liberal Democrat, I disagree with party policy, I am pleased to see that the Government are pressing ahead with looking for new runway space in the south-east and London because without that in the medium term our growth prospects are jeopardised.

In the short term, this Budget will not transform the prospects for growth, nor would any Budget do so. However, promoting growth must remain a top priority. What is required now is a steely focus on delivering those programmes which the Government have already announced and which will really impact on growth. It is on their ability to deliver these programmes, in tandem with the continuing deficit reduction programme, that the Government’s economic record will ultimately be judged.

Economy: Quantitative Easing

Lord Newby Excerpts

Monday 19th March 2012 Lords Chamber

[Lord Sassoon]

My Lords, the estimate of the effect of QE was set out in the Bank’s Q3 quarterly bulletin in 2011. The Bank estimates that quantitative easing raised real GDP by around 1.5 to 2 percentage points, so it has had a very significant impact on the real economy. As to the flow of credit to SMEs, that is not the purpose of quantitative easing. The purpose of quantitative easing, as I have attempted to explain, is for the Bank of England to meet the 2 per cent medium-term inflation target. Credit easing is a government policy and, in the next few days, details of the £20 billion national loan guarantee scheme will be unveiled. It is targeted at credit easing for SMEs, which is still a very important issue.

[Lord Newby]

My Lords, will the Minister underscore his last comment in that credit easing is now seen as crucially important in getting funding into SMEs? Can he confirm reports in the papers yesterday that the overall impact or scope of credit easing might not be the £20 billion which he has just mentioned but might increase over time to £40 billion?

[Lord Sassoon]

My Lords, I am certainly not going to pre-empt any announcements this week of that kind or any other, or I may not be here to answer the next Question at the Dispatch Box. I think that the £20 billion, which has already been announced, and reducing the interest rate that SMEs would otherwise have to pay by the order of 1 per cent would be a very good start.

EU: Economic and Financial Issues

Lord Newby Excerpts

Monday 12th March 2012 Lords Chamber

[Lord Sassoon]

Well, I have not been asked the question in those terms before. It is for the eurozone members to bear the brunt of sorting out the eurozone. That is exactly what they are getting on with doing, which is why we welcome the fiscal compact intergovernmental treaty as a necessary step towards the remorseless logic that with currency union comes much closer fiscal union. We keep close to it. Meanwhile, we are working with many like-minded states on an ambitious pro-growth agenda, which is what Europe also desperately needs.

[Lord Newby]

My Lords, the noble Lord mentioned ECOFIN, but tonight there is a meeting of the 17 Finance Ministers of the eurozone. Will the UK be represented at that meeting, which is discussing the size of the firewall, and if so, what line will it be taking?

[Lord Sassoon]

No, my Lords; the UK will not be represented at the euro group meeting later today because we are not in the euro group. On the other hand, there will be a debrief of Ministers before the formal ECOFIN starts at breakfast time tomorrow.

National Insurance

Lord Newby Excerpts

Monday 5th March 2012 Lords Chamber

[Lord Sassoon]

My Lords, first, a position in which youth unemployment is more than 1 million is not at all acceptable. While I am very happy to receive Budget submissions from wherever they come from around the House or outside the House, what is important here is that the Government have a clear strategy for dealing with the youth unemployment challenge. Only last November, we introduced the new youth contract, which becomes live on 2 April, with more than £940 million of funding going into it in the spending round. This youth contract will enable up to 500,000 young people to get into employment and education. The Government are actively on the case.

[Lord Newby]

My Lords, the Minister will be aware that in the budgetary provisions already made for the forthcoming tax year, some £300 million has been made available by way of national insurance holidays for new companies employing new people. It is clear from experience to date that the Budget level will not be reached. Could that money be redirected beyond new companies employing additional staff either to existing small businesses employing additional staff or specifically to small businesses employing young people who are currently unemployed?

[Lord Sassoon]

Again, I am happy to hear the thoughts of my noble friend about what might be done. The national insurance holiday, which is estimated to be already supporting some 40,000 jobs in new firms, is only one part of the package to help small businesses: the reduction of the corporation tax rate, the extension of business rate relief for a further six months from 1 October this year onwards, the coming national loan guarantee scheme, as well as what the Government did with the above-indexation increase in national insurance thresholds. This is a significant package of which the holiday is only one element.

Government Resources and Accounts Act 2000 (Audit of Public Bodies) Order 2012

Lord Newby Excerpts

Monday 27th February 2012 Grand Committee

[Lord Eatwell]

My Lords, I have no comments on this order.

[Lord Newby]

My Lords, I am sorry to detain the Committee. A number of years ago I was an adviser to the School Food Trust and I should simply like to ask which of the two categories it falls into. I believe that it has become a private sector body rather than abolished. Both the Explanatory Memorandum and the Minister’s speech have failed to clarify into which of those two groupings it falls.

[Lord Sassoon]

I am very grateful to the noble Lord, Lord Eatwell, for giving me an easier time. I hope that this is a precedent he will follow on many occasions after this. In answer to my noble friend Lord Newby, the School Food Trust has been redesignated as of September 2011 by the ONS to the NPISH. In effect, it is removed from the public sector and has become a private-sector body. I can confirm that he is right in his supposition. There is no more that I need to say other than to commend this order to the Committee.

Budget Deficit

Lord Newby Excerpts

Wednesday 15th February 2012 Lords Chamber

[Lord Sassoon]

My Lords, economic growth has been weaker for reasons that include, particularly at the moment, the ongoing eurozone crisis. Inflation has been high but is now coming down significantly from its peak last September. In those circumstances, the automatic stabilisers apply and expenditure goes up. However, we are getting two very different messages from the party opposite, one implicitly urging faster consolidation and the other asking for more expenditure. Which is it to be? This Government will get borrowing down by £147 billion a year by 2016-17. That is what is important.

[Lord Newby]

My Lords, on Monday, Moody’s said that the UK’s triple A rating could be downgraded by,

“reduced political commitment to fiscal consolidation, including discretionary fiscal loosening”.

Does the Minister have any idea what Moody’s might have had in mind?

[Lord Sassoon]

My noble friend probably thinks that Moody’s have in mind what I have in mind: the policies of Mr Ed Balls. However, the chances of those being implemented are, fortunately, small. Only yesterday, a respected City broker from BGC Partners said:

“Ed Balls can whinge all he likes but you only have to look at a compendium of 10 year bond yields to know that the UK Chancellor, George Osborne is on the right track. For the Chancellor to take his foot off the gas in terms of cutting the debt reduction would be insanity personified!”.