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?

Money Laundering: UK Parliamentarians

Lord Razzall Excerpts

Tuesday 14th October 2014 Lords Chamber

[Baroness O’Cathain (Con)]

My Lords—

[Lord Razzall (LD)]

My Lords—

--- Later in debate ---

[Lord Deighton]

I can confirm that that will be precisely the message in the final negotiations on the fourth money laundering directive.

[Lord Razzall]

My Lords, I am sure that the Minister will accept that his answers have not entirely reassured Members of this House who are treated as politically exposed persons. Perhaps he can explain to me and to many of my colleagues who are not members of the Government: what is it that we might do, or what might be done to us, that makes us politically exposed people?

[Lord Deighton]

The thing to remember is that although the intention behind this approach is to catch potentially corrupt public officials around the world, defining someone as a PEP is not an end in itself—it is merely a trigger point at which an assessment should be made of the individual’s business and whether it is high risk. It is that assessment of whether it is high risk that is not working well enough at the moment.

Finance Bill

Lord Razzall Excerpts

Wednesday 16th July 2014 Lords Chamber

[Lord Razzall (LD)]

My Lords, I am glad that the noble Lord, Lord Lawson, has just contradicted his statement in The House magazine that the Liberal Democrats have only two policies; apparently, he has just added a third.

Many people outside your Lordships’ House regard this House as being rather pickled in aspic and stuck in procedures that have applied for the past God knows how many centuries. However, since I came to this House in 1997, there have been two significant procedural alterations. First, as demonstrated by this debate, although we cannot amend it, we now debate the Finance Bill. I remember the pressure to do that. The noble Lord, Lord MacGregor, was very much part of that and I think that the noble Lord, Lord Saatchi, also used to press for that to happen. Secondly, since 2003, we have had a Finance Bill Sub-Committee, which examines selected topics of the Finance Bill. This year, as we are debating today, it examined the detailed measures affecting changes in tax law for partnerships.

As a practising lawyer for over 30 years, I am well aware of the significant role that professional partnerships have played, especially the lawyers and accountants, in the development of the financial services industry. In my professional lifetime, there have been two very significant events in this area. First, a lot of people forget that, until 1967, no partnership could contain more than 20 partners. Our Victorian forefathers took the view that if you wanted to have a business with more than that, the appropriate thing to do was to have a limited liability company. Those of us who have attempted to manage professional partnerships in later years will realise their wisdom because of the significant problems of managing a large professional organisation where the owners of the business are also the means of production. The problem for the law and accountancy firms was that they could not incorporate because their professional organisations did not allow them to have limited liability. It was not until the Companies Act 1967 that, under pressure from the big firms of lawyers and accounts, the limit of 20 partners was removed. That has resulted in the huge organisations that have subsequently been created in both those industries.

The second major change was the Limited Liability Partnerships Act 2000. The major driver for that was the desire for individual firms of accountants and lawyers to obtain a limited liability to protect themselves against large negligence claims. Nowadays, almost all major professional firms have become limited liability partnerships and the structures of those organisations are well established. It would be common ground that, where a limited liability partner is in reality a salaried employee, he or she should be treated as such for tax purposes. However, as the noble Lord’s committee has indicated, there has been significant pressure from the professions that a case law test should apply to the definition of the nature of partnership rather than a legislative one. As the noble Lord, and his report, indicated, there has been significant concern that the consultation set up by the department was inadequate because the proposals on which it was based were not the same as those set out in the Finance Bill. I strongly support the recommendation by the sub-committee to delay implementation of these proposals until 15 April, not only to make sure that the rules are correct but to give a longer opportunity for firms to make any structural changes needed to comply with them. For example, this would enable them to put in place adequate resources so that the capital requirement needed by partners could be met.

As this House now has the opportunity to discuss the Finance Bill, I, like the previous speaker, cannot miss the opportunity to make an overall comment on the last effective Finance Bill before the general election. The tax provisions in the Bill must be looked at in the context of the overall economic position and the policy to reduce the deficit and the public sector borrowing requirement. As the Institute for Fiscal Studies has pointed out, no Government raise taxes in the year before an election but, surprise, surprise, taxes tend to go up straight after one. As noble Lords will be aware, both coalition parties are committed to eliminate the budget deficit in 2017-18, although there is some political difference about to how to do it. The Tories seem to propose that it should be done primarily through cuts in expenditure. I think that the Lib Dem members of the coalition think that there should be a mix between expenditure cuts and tax increases. The problem, as the Institute for Fiscal Studies has certainly demonstrated, is that if all the savings were to come from departmental cuts in order to get back to a budget equilibrium in that year, the cuts would have to accelerate from 2.3% per annum to 3.7% per annum.

Whoever is in government after 2015, if the decision is maintained to protect the National Health Service, the schools budget and overseas aid, and if they are immune to cuts in real terms, it is estimated that other departments will have to deliver annual cuts of more than 20% per annum for the three years after the election. The Home Office, the Ministry of Justice, Defra and DBIS, let alone other departments, could not deliver the current level of services if they were compelled to make cuts on that scale. Whatever political party, or combination of political parties, forms the Government after the general election, it would be impossible to achieve that in practice.

What is likely to happen? It may be that growth in tax revenues as the economy picks up will, to some extent, come to the rescue of a future Chancellor, or it may be that a future Chancellor will contemplate a modest deficit if the debt burden is falling as a share of GDP and if the economy is continuing to grow. In any case, I am sure that all noble Lords will accept that if we are forced by then to accept a drastically smaller state, a proper debate will need to take place.

Economy: Public Sector Net Borrowing

Lord Razzall Excerpts

Monday 14th July 2014 Lords Chamber

[Lord Newby]

My Lords, there are always questions when statements are made outside the House as to whether they should have been made inside the House. If the noble Baroness is concerned about it, she of course has the option of asking an Urgent Question.

[Lord Razzall (LD)]

My Lords, is the Minister prepared to take this opportunity, in view of the questioning, to move from the short to the long-term and comment on last week’s report by the Office for Budgetary Responsibility, which states that by 2050 the public sector borrowing requirement will be more manageable than it would have been were it not for the actions of the coalition since 2010?

[Lord Newby]

Yes, my Lords; my noble friend is absolutely right. The report to which he refers demonstrates two things: first, with an ageing population, there will over a long period be significant pressures on the public finances, everything being equal; secondly, that a number of steps which have been taken with cross-party support, such as raising the retirement age, are making those long-term additional burdens more acceptable and possible to deal with in a sensible fiscal framework.