King’s Speech

Lord Razzall Excerpts

Monday 13th November 2023 Lords Chamber

[Lord Razzall (LD)]

My Lords, as a number of noble Lords have found, the debate on the gracious Speech provides the opportunity to comment on the current state of the British economy without having to comment on specific proposals. Notwithstanding the Minister’s brave attempt in his opening speech, and the Prime Minister’s remarks, I agree with the noble Lord, Lord Londesborough, that few can doubt that our condition is parlous. Although we may have just avoided a technical recession, we are bumping along at the bottom with little prospect of growth. Commentators now even predict that in 10 years there will be six major trading entities—China, India, the USA, Japan, Russia and the EU—and we will play no significant role.

I fear it is now appropriate, today of all days, to quote from Kipling’s “Recessional”, written in 1897:

“The tumult and the shouting dies;


The Captains and the Kings depart …

Far-called, our navies melt away …

Lo, all our pomp of yesterday

Is one with Nineveh and Tyre!”

I fear that is us—and that the noble Lord, Lord West, who is not in his place, will never get the ships he requires.

Notwithstanding our parlous position, the right wing of the Tory party consistently calls for tax cuts, believing, as the noble Baroness, Lady Noakes, said—although she did not describe it as such—in the Laffer curve, which has never been shown to work. But why, in 13 years of government, have the Tories not reformed the tax system to raise revenue in a growth-friendly manner? The noble Lord, Lord Forsyth, sadly not in his place, produced ideas in 2006 to reform our tax system which have not been implemented.

No one could deny that the tax system itself is a structural mess. Take the major revenue-raising taxes. The VAT system has numerous exceptions and zero-rated items and is a mess. We have two different personal taxes in income tax and national insurance running simultaneously, with strange marginal tax rates for individuals. In addition, business taxes have been on a rollercoaster. Corporation tax was reduced to 19% but is now back to 25%. Why have the Government not sorted out this mess? It is significant that the Government have even recently abolished the Office of Tax Simplification.

Instead of calling for reform of the tax system, many Tories such as the noble Baroness, Lady Noakes, cling to the idea that there is now £20 billion of room for tax cuts in the short term. In the short term, this is because the budget deficit for the first six months of the fiscal year is £19.8 billion lower than the OBR March forecast. However, the deficit is still £15 billion higher than the corresponding period last year, when on the way to a full-year outturn of £128 billion, which is 5% of GDP. No: in my view, advocates of tax cuts should listen to last year’s speaker at the Mais lecture, who said:

“I am disheartened when I hear the flippant claim that ‘tax cuts always pay for themselves’. They do not. Cutting tax sustainably requires hard work, prioritisation, and the willingness to make difficult and often unpopular arguments elsewhere. And it is hard to cut taxes at a time when demands on the state are growing”.


That was not a left-wing economist or a member of the Liberal Democrats or the Labour Party. It was Chancellor Sunak—and I hope Jeremy Hunt is listening.

Theatre Tax Relief

Lord Razzall Excerpts

Thursday 9th March 2023 Lords Chamber

[Baroness Penn (Con)]

The noble Baroness is right that we should think about our international competitiveness. Tax reliefs for the cultural sector are not actually that common, but she has identified one in New York. We have looked at our scheme against that and, overall, our scheme is more generous than the New York one. We are confident that it provides great support for our theatres, not just within the UK but as international competitors as well.

[Lord Razzall (LD)]

My Lords, given that the Minister has mentioned it, may I extend the Question to cover the Government’s attempt to modify HETV tax relief for all audio-visual productions? I appreciate that this is out for consultation, but does she agree that it would be a mistake to increase the minimum expenditure threshold for HETV relief to above the current £1 million per hour, as to do so would threaten the production of many low-budget domestic British dramas, comedies and documentaries? Does she acknowledge that, on this basis, even “Happy Valley” might never have been made? Will she either confirm that the Government have no intention of making this change or, if they are proposing to do so, agree to have an impact assessment before the decision is made?

[Baroness Penn (Con)]

My Lords, as the noble Lord has noted, that proposal is out for consultation. As part of a package of reforms, we are looking at reviewing the £1 million per hour minimum expenditure threshold and considering whether it should be increased to reflect current production costs. However, I assure the noble Lord that, in considering these different reforms, the Government remain committed to ensuring that the final package of reforms best serves the need of our audio-visual industry.

Autumn Statement 2022

Lord Razzall Excerpts

Tuesday 29th November 2022 Lords Chamber

[Lord Razzall (LD)]

My Lords, nobody could doubt that the British economy is a basket case, and I see nothing in the Autumn Statement that can help what most people regard as the sick man of Europe.

The economic indicators for the next few years are all negative. First, our growth forecast for 2024, 2025 and 2026, as indicated by the OBR, is the worst of all the G20 countries other than Russia. Secondly, government borrowing is at its highest ever level, as noble Lords have indicated, and as a proportion of GDP, it is the highest since the Second World War. Interest costs are helping to cripple the public sector, and as the OBR tells us, the actions of the Bank of England through quantitative easing to get us through the pandemic have involved swapping long-dated gilts for floating rate reserves, thereby giving an early rise in interest rates for government debt as inflation increases. This has made the situation worse. Thirdly, as always, our productivity is the worst of all the G7 countries. The only way to improve productivity is growth and investment, but any policies to help growth have been damaged by the recent antics of the former Prime Minister and Kwasi Kwarteng. Investment possibilities have been reduced; we are no longer the desirable market we once were. Although I disagreed with a lot of Tory policies, I used to believe that at least the economy was safe in their hands—would that were still the case.

Turning to the Autumn Statement itself, first, the freezing of tax allowances to increase tax revenues is a con, if your Lordships will pardon the pun. This is simply designed to enable the Chancellor to stick to the manifesto commitment not to put up income tax rates, but so-called fiscal drag will put up tax for most people. This is clearly an unfair way to proceed.

Secondly, the Government have refused to admit that they have introduced a windfall tax on energy companies despite the fact that they have. Presumably they are saying they have not because the Lib Dems and Labour were calling for it—but they have done it and called it something else. Nevertheless, they have not taken proper advantage of the opportunities given by the huge energy profits. Putting up the rate is not enough. It is ridiculous that the availability of an investment allowance has allowed, for example, Shell to pay no windfall tax despite worldwide profits of nearly £30 billion this year. This tax needs serious reform.

As usual, as my noble friend Lord Shipley said, we have had the clobbering of local authorities. They will be allowed an increase in council tax to fund essential expenditure so that they can be blamed for tax increases to pay for services which should be funded by central government—the same old con trick.

Of course, your Lordships would not expect me to pass on this speech without indicating the elephant in the room: Brexit. The Government say that the major reasons for our disastrous recent economic performance are the pandemic and the war in Ukraine, but our European neighbours have been affected by those factors, and they are doing better than us. As the previous Governor of the Bank of England indicated recently, before the referendum the UK economy was 90% of the size of Germany’s, but that figure is now 60%. As the noble Lord, Lord Eatwell, indicated, despite the fact that the value of the French stock exchange was half of ours in 2015—before the referendum —ours is now smaller than theirs. The OBR let the cat out of the bag over a year ago when calculating that there would be a 4% per annum reduction in our GDP as a result of Brexit, which is significantly greater than the effect of the pandemic. Without Brexit, we would have the growth we need—and, dare I say, maybe Liz Truss might still be Prime Minister.

There are countless examples of the economic damage done by Brexit. I am sorry that the noble Lord, Lord Frost, is not in his place to respond to this, but I will simply mention three. First, we have difficulties exporting our shellfish to Europe; this should have been dealt with in the negotiations. Secondly, our musicians cannot tour Europe because of individual European countries’ restrictions, despite the loss of export earnings from this. The noble Lord, Lord Frost, indicates that this was an oversight. Thirdly, many SMEs have stopped exporting to Europe because of increased bureaucracy.

Any improvement in our economic relationship with Europe is frozen while the Northern Ireland protocol issue is not resolved. Even Andrew Neil told us in the Mail last week that Brexit has not delivered what people voted for: a reduction in immigration. We can forget the ONS figures from last week of net migration of over 500,000 last year, as there were clearly special factors involved. However, the OBR figures for 2025, 2026 and 2027 are based on over 200,000 net migrants generating economic activity, without whom our growth prospects—already the worst in the G20, other than Russia—will be even worse.

Is this what the Government planned when they won the last election on the slogan, “Get Brexit done”? Is this what their red wall voters voted for? When will the Government recognise that Brexit has not brought the proposed sunlit uplands that we were all promised? Does the reaction to the floating, apparently from Downing Street, of a Swiss-type deal mean that we are frozen for ever in a disastrous economic limbo? When will the Government begin serious talks with the European Union to improve our trading relationships and help our economy?

Stock Markets

Lord Razzall Excerpts

Thursday 17th November 2022 Lords Chamber

[Baroness Penn (Con)]

My Lords, I do not accept the premise of the noble Lord’s question, which he may be unsurprised to hear. In fact, in 2021, over 120 companies chose to list in London, the highest number since 2014 and ahead of its European competitors. These listings raised a total of £17 billion, the most raised in 15 years.

[Lord Razzall (LD)]

My Lords, I am sure that the noble Baroness must accept that in 2015 the value of the London Stock Exchange was twice that of the French stock exchange, and today it is lower. Will she also accept that there could be a number of reasons for this? First, it could be, as the Governor of the Bank of England said this week, that the markets have lost confidence across the board in the UK economy. Secondly, could it be because of the damage to the economy that the previous Prime Minister did in her 44 days? Thirdly, could this be—whatever the noble Lord, Lord Lilley, might think—a result of Brexit, as the Times said today? Or does she agree that it is all three?

Budget Statement

Lord Razzall Excerpts

Tuesday 14th March 2017 Lords Chamber

[Lord Razzall (LD)]

My Lords, in our experience, the world is divided between people who see the glass as half full or who by temperament see the glass as half empty, and in some cases totally empty. I have always regarded myself as in the first category, which noble Lords may say is not surprising for a Liberal Democrat. But notwithstanding the valiant attempt by the Minister to talk up the Budget, when I contemplate the future of the economy, rather like the noble Lord, Lord Hain, I fear that I have moved to the half empty, almost totally empty category.

Recent reports from the Institute for Government and the Rowntree Foundation demonstrate that the financial position of what Labour used to call ordinary working people and what the Prime Minister now calls the just about managing is deteriorating and is likely to deteriorate faster. As the noble Baroness, Lady Wheatcroft, did, let us look at the numbers. Real incomes for the bulk of people have barely grown since the 2008 financial crash. On many calculations, this means that average income will be 18% lower by 2020-21 than if life had continued as before. Rather surprisingly for a Tory Government, home ownership is falling for the first time in 50 years, and the worst-hit group are those in the middle-income category, who now have little prospect of home ownership.

We are seeing now real pressure on public services. In hospitals where delays in cancer services and A&E are rising, clinical standards have been maintained only by running record deficits. Bed-blocking cases rose 40% from 2014 to 2016 because no social care was available. In prisons, assaults against staff are up 60% in two years. As the noble Lord, Lord Beecham, indicated, inevitably, local authority cuts imposed by central Government have meant the elimination of many services which are so necessary to make our society civilised. I do not need to remind noble Lords of the crisis in social care for the elderly. If I may bastardise the phrase of the noble Lord, Lord Kinnock, in the 1992 election campaign, “Be very afraid if you are ill or elderly in Britain today”. As Jenni Russell memorably put it in the Times last week:

“A rolling austerity programme with bursts of emergency spending is no way to run a country”.


Of course, as many noble Lords have indicated and as all economists know, the only real solution to our problem is for our existing workforce to become more productive so that we can increase the value of what we produce in every hour worked, which will feed through to increased wages, taxes and profits. To achieve the productivity gains that we need, we must have a vibrant and growing manufacturing sector. As my noble friend Lord Shipley and other noble Lords have indicated, unless the Government negotiate a soft Brexit, irrevocable damage will be done to our manufacturing industry.

First, as 52% of manufacturing exports go to the European Union, it is essential that access to the European Union for goods and services be maintained, even, contrary to the desire of the serious Eurosceptics, if some continued financial contribution is required. Secondly, it is not just potential tariff barriers that are of concern: non-tariff barriers must be removed that deal, for example, with regulatory issues, technical barriers, standards and measurements. Harmonisation of standards has worked well in recent years, so there is real nervousness in the manufacturing community that following our exit, we will revert to the bad old days of Germany setting rules that suit its manufacturers. It is also essential that lengthy customs checks are not introduced that would be damaging, particularly in industries where there is a significant flow of components to and from the European Union.

Thirdly, British manufacturing requires significant skilled immigration from Europe. There are many examples of a likely skills shortage. I pick just one: the need of some engineering companies for analogue design engineers. British universities now teach only digital electronic engineering, but skilled analogue design engineers can still be found from the Czech Republic, Slovakia, Romania and Bulgaria and must be given the right to work in the United Kingdom. There is considerable scepticism among most manufacturers about whether the skills shortage can be made up by UK employees once we have left the European Union, as David Davis rather confirmed in his speech in Estonia a few weeks ago. If the Government get this wrong, the Chancellor of the Exchequer’s fighting fund to deal with the financial fallout from Brexit will be small beer in comparison with the damage the Government will have caused the British economy.

Income Tax: Top Rate

Lord Razzall Excerpts

Monday 16th March 2015 Lords Chamber

[Lord Newby]

My Lords, I am afraid that the noble Lord’s figures are just completely wrong. The figures produced by HMRC, which I am sure he has read, showed that its central estimate of the effect of reducing the top rate from 50p to 45p was a cost of £100 million, against which should be set—among other changes that this Government have made that exclusively hit the very affluent—the changes in disguised remuneration, which brought in £3.5 billion this Parliament, and the reduction in pensions tax relief, which will bring in £5 billion a year.

[Lord Razzall (LD)]

My Lords, following up on the question from the noble Lord, Lord Kinnock, does the Minister accept that a by-product of the much welcomed coalition pressure on banks and other organisations in the City to reduce bonuses, which I assume is welcomed by the Labour Party, has been a reduction in tax revenues?

[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.

Banking System

Lord Razzall Excerpts

Monday 9th February 2015 Lords Chamber

[Lord Newby]

My Lords, we do have a business bank. This Government have created one and it is growing very rapidly. As for standards, I completely agree that the standards that are adopted by bankers need to improve. Of course, the industry has itself recognised this by establishing the Banking Standards Review Council.

[Lord Razzall (LD)]

My Lords, I am sure the Minister is aware that the recently publicised excesses of HSBC’s Swiss subsidiary occurred under the regime of the previous Government. Does he believe that the system of banking regulation introduced by this Government would have made the excesses of HSBC less likely?

[Lord Newby]

My Lords, I think that all those involved in banking before the crash adopted laxer standards than they now accept are necessary. I know from discussions that I have had with senior representatives of HSBC before today that the new regulatory regime is far more intrusive and has been forcing them to address the way they do business in a manner which I am sure all noble Lords will welcome.

Autumn Statement

Lord Razzall Excerpts

Wednesday 3rd December 2014 Lords Chamber

[Lord Razzall (LD)]

My Lords, I very much welcome the Autumn Statement—little surprise, as this is a coalition government Statement in which the Liberal Democrats have clearly had considerable involvement. I thoroughly enjoyed the demolition of the Labour Party case by the Minister. I am surprised that he did not mention one obvious point, which comes on page 6 of the Autumn Statement. For the last couple of years we have listened to the Labour Party indicate that real wages have not increased. On page 6, the Statement indicates that the OBR now forecasts that wages will exceed inflation for the next five years. I would have thought that that rather shoots the fox.

I will ask one or two questions. First, the Chancellor deals with spending cuts on page 9 of the Autumn Statement. Even as a friend, I suspect he rather glosses over the impact that spending cuts are likely to have after 2015-16. I do not know whether the Minister can add anything on where these cuts will come from. As the Minister rightly indicates, infrastructure spending has been quite significant in these proposals, not only in the Autumn Statement, but in the road scheme announced on Monday and the infrastructure plan announced on Tuesday. Does he agree with the argument that the Liberal Democrats have been making that, when looking at spending cuts in the next Parliament, infrastructure spending should be ignored because of the long-term capital effect and capital advantage of such spending? On the proposal for postgraduate loans—a topic that is obviously very dear to my right honourable friend Vince Cable—does the Minister agree that this will have a significant impact on the possibility of research into science? Finally, on the desirable attempt to extract the tax on multinational companies, the proposal is that there should be a 25% tax on the profits of a multinational company earned in the United Kingdom. Is he able to expand on that? I understand that one of the arguments of companies such as Amazon and Starbucks is that they do not make any profits in the United Kingdom.

[Lord Deighton]

There were five questions there. First, I obviously accept the point that my noble friend makes about real wages, although wages exceeding inflation has been coming through only in the last year. He is absolutely right that the forecast from the OBR is that that will continue and that we will see earnings outstrip inflation, which would be a good thing.

Secondly, what is the story behind the spending cuts, which are quite significant? The simple story is that we plan to continue at the rate we have successfully implemented in this Parliament. We know that we can do it. In fact, we have managed to do it every year and still end up with an underspend. My right honourable friend the Minister for the Cabinet Office put out a paper this morning on how we will find another £10 billion of efficiency reforms on top of the nearly £15 billion that we have achieved in this Parliament. There will of course be a continuing review of welfare to ensure that we are focused on getting people back to work and that we are targeting those who really need to receive it. It represents a significant amount of our public expenditure, so that has to be part of the programme.

My noble friend asked whether we would effectively ring-fence the infrastructure investment. There is a commitment—effectively a fiscal rule—that we will retain public sector gross investment at a consistent level. If we stick to that, that is what will happen. Of course, the great success of all that we have accomplished is that so much of our infrastructure has been financed by the private sector, so it is not constrained by that measure anyway.

I think that postgraduate loans are a terrific initiative because not having money was becoming a constraint on people doing research. Therefore, that is a good thing on a number of grounds.

The multinational tax measure is looking at companies which put in place elaborate structures effectively to move their profits to offshore locations with a lower tax rate. The mechanism to capture that will dismantle those structures and look at the real profits, which we can then tax.

Income and Wealth Inequality

Lord Razzall Excerpts

Wednesday 26th November 2014 Lords Chamber

[Lord Newby]

My Lords, the commission has put great priority, in all its reports, on the importance of work in households. One of the telling statistics, for me, about what has happened in recent years is that there are now 390,000 fewer children in workless households than there were in 2010 and that the proportion of children in workless households is now at its lowest level since records began. We know that the family environment is extremely important to how children think about the workplace and to their chances of getting jobs.

[Lord Razzall (LD)]

My Lords, in the context of this important discussion on relative income and wealth inequality, do the Government have a view on the opinion of the Institute for Fiscal Studies, expressed yesterday, that since 2010 the position of pensioners has increased significantly relative to those in work, however palatable that might be to your Lordships’ House?

[Lord Newby]

My Lords, as for how resources are allocated, and where people feel more could be done or less, it is a bit like squeezing air round a balloon. It is interesting that I do not think that there has been a single question in your Lordships’ House on one aspect of the Government’s policy—the level of support the Government have given to pensioners.

National Insurance Contributions Bill

Lord Razzall Excerpts

Tuesday 25th November 2014 Lords Chamber

[Lord Razzall (LD)]

My Lords, this is clearly an important Bill, bearing in mind the number of people in the workforce in the United Kingdom who are now self- employed. Indeed, there is an ever-increasing percentage in that position and I suspect the Minister will agree with me that, as so often in your Lordships’ House, the importance of this legislation is in inverse proportion to the number of people who want to speak on it.

On these Benches—as indeed, I understand, on the Labour Benches—we welcome this legislation. On the first point of tax simplification, every Government come in saying they are going to simplify the tax code and four years later the tax legislation is even more complicated than it was when they came in. Anything that can be done, even of a minor nature, to simplify tax legislation is clearly desirable. All noble Lords will welcome the attempts to reduce tax avoidance in this area—again, all Governments want to do that and having practical examples there is obviously beneficial.

In supporting the Bill, I will just raise three or four questions. First, the Minister was correct that concerns were expressed in another place regarding the position of self-employed women claiming maternity allowance, which he referred to in his remarks. I understand the answer that the Government have given, which is a combination of responses from the Treasury and the DWP. However, as I understand it, the Chartered Institute of Taxation has suggested that the Government should review these changes at the earliest opportunity—maybe in a couple of years’ time. I would be grateful if the Minister could indicate whether that is a suggestion that the Government welcome. The idea is to ensure that the introduction of these provisions has not resulted in the reduction in the number of claims for the standard rate of maternity allowance, which would obviously be hitting women who wish to claim the allowance.

Secondly, the Chartered Institute of Taxation has pointed out that there will be a gap of 22 months between the collection of class 2 payments for 2014-15 and for 2015-16, as the liability moves from a weekly basis to arising at the end of the tax year. Have the Government considered the cash-flow implications of class 2 NICs coming in up to 10 months after the end of the tax year rather than being paid in-year as they are at the moment? That is clearly quite a significant point in relation to the Government’s finances.

Thirdly, there are significant changes being brought in to the entitlement to contributory benefits. I would be grateful if the Minister could confirm that the Government are satisfied that moving class 2 into self-assessment will not adversely affect entitlement to contributory benefits. In particular, what proposals do the Government have in mind to educate and inform people as to these changes? For example, direct debits will have to be cancelled before the introduction of the programme in 2015.

Finally, I have a general question. As the Minister will well know, a number of people have advocated for some time the merging of the NIC structure with the general income tax structure. Do the Government feel that these proposals, when implemented, will be neutral, negative or positive on that issue?