Working Tax Credits

Lord Sassoon Excerpts

Monday 14th May 2012 Lords Chamber

[Lord Touhig]

To ask Her Majesty’s Government whether they will reconsider the changes to working tax credits.

[The Commercial Secretary to the Treasury (Lord Sassoon)]

My Lords, the changes to the working tax credit are necessary in order to tackle the record peacetime deficit which this Government inherited. Tax credit spending increased to around £27 billion in 2010-11 and extended to those high up in the income distribution. This was unsustainable. The package of changes to tax credits introduced in April will save £4 billion in 2016-17 while ensuring that the most vulnerable are protected. For that reason, they will not be reconsidered.

[Lord Touhig]

My Lords, this year, more than 200,000 low income families who work less than 24 hours a week will lose thousands of pounds as a result of the withdrawal of the working tax credit. In the present economic situation, a great many employers are not able to offer these people extra hours. Does the Minister agree that the phrase “making work pay” must seem pretty hollow to these impoverished families? I plead with the Government to take an interest in the poorest in our society and do something about this group who desperately need our help.

[Lord Sassoon]

My Lords, what underlines this change and the need for it, as well as the unsustainability of the huge cost of working tax credits, is some of the unfairness and behavioural incentives in the system. This Government firmly believe that working people on low earnings should gain through money that they earn rather than from government subsidies. The switch from reducing reliance on benefits to increasing personal allowances is part of a significant change to getting more families to gain more from working than has been the case to date and for incentivising second earners into work. There was also a basic unfairness in the system as it was in that a single parent had to work 16 hours but a couple had to work only 16 hours between them. Therefore, underlying what the Government have announced are a fairness and an incentivisation and behavioural change that are very important.

[Baroness Lister of Burtersett]

My Lords, what advice would the Minister give to the woman interviewed on the “Today” programme last month? She is in a part-time job that she loves. Her husband is an unemployed builder who cannot find work. She is at her wits’ end because her employer will not give her extra hours and no alternative work is available to her. What is she and thousands of others in a similar situation supposed to do when they are struggling to manage without working tax credit and the only alternative realistic option is to give up work, which is the very opposite of what the Minister says that this Government believe in?

[Lord Sassoon]

My Lords, I did not hear that particular case and it is very difficult to comment on individual cases, particularly when one has not heard the details. I appreciate that many of the changes we are making across the tax and spending playing field are painful for very many people in this country. I do not minimise the effect on the 200,000 or so, including couples with children, who we are asking to find another eight hours on top of what they may do otherwise.

We should not play down the prospects for finding employment in this country. Nearly 1.1 million people found a job in the fourth quarter of 2011. Some 600,000 of those had been unemployed and had got into employment, and 459,000 were previously inactive. At the moment, the number of job vacancies is rising. At the last count, it was 464,000. I do not underestimate at all the effect on individual cases but there are jobs out there and more than 1 million people in one quarter found employment.

[Baroness Kramer]

My Lords, I think that a significant number of companies are somewhat fixated around the idea that 16 hours is the gold standard for part-time work. Given that for many people affected by this change, 24 hours becomes the standard number of hours they would wish to be in employment, are there means by which the Government could communicate, through the trade associations and others, to try to change some of the cultural attitudes towards the various shift structures and others that set part-time hours?

[Lord Sassoon]

First, I congratulate my noble friend on her new responsibilities as her party’s spokesman on the economy. I can see that she is not going to give me an easy time. It is an important question. First of all, there are important elements of the present tax credits system, such as the child tax credit, which do not relate to hours worked. Of course, when universal credit comes in, the link to hours worked will go altogether. As my noble friend knows, that change will start with natural migration, coming in from October 2013. Then managed migration will take place from August 2014 in a way that means that nobody loses out in cash terms. So it is a transition that has been carefully thought about by my noble friend Lord Freud.

[Lord Eatwell]

My Lords, the examination by the Institute for Fiscal Studies of the impact of the April measures demonstrates that the greatest proportionate burden of those measures falls on those in the lowest deciles of the income distribution. In the light of that independent finding, would the Minister like to correct his inaccurate first Answer to my noble friend Lord Touhig?

[Lord Sassoon]

My Lords, of course I shall read the record very carefully, and if I made any inaccurate response I shall correct it—but I do not believe that I did. There were, of course, a large number of tax and benefit measures announced to come into effect in the last Budget, including 24 million households that will benefit by up to £6.50 a week from the changes to allowances as well as benefits. There are the significant above-indexation increases to child tax credits as well. Therefore, one should look at the total effect, which is very much designed to make sure that those at the lower end of the income scale are protected.

Tobacco: Smuggling

Lord Sassoon Excerpts

Thursday 26th April 2012 Lords Chamber

[Lord Dubs]

To ask Her Majesty’s Government what is their estimate of the loss of revenue through the smuggling or illegal sale of tobacco products in the United Kingdom.

[The Commercial Secretary to the Treasury (Lord Sassoon)]

My Lords, the latest estimate from 2009-10 of the annual lost revenue to the Exchequer through the smuggling or illegal sale of tobacco products is £1.3 billion for cigarettes and £750 million for hand-rolling tobacco.

[Lord Dubs]

My Lords, given that this large sum of money is lost to the Exchequer, what do the Government propose to do to reduce the amount? Above all, does it not drive a coach and horses through the policy of trying to reduce smoking if there are cheap cigarettes, some of them even worse for health than the cigarettes that we make in this country, on sale on street corners up and down the country? We have both a revenue problem and a health problem.

[Lord Sassoon]

My Lords, the strategy has many different strands. The Government issued a comprehensive tobacco smuggling strategy in April 2011. Specifically, £25 million of HMRC’s total expenditure on tax avoidance is going in this area. It has to be said that over the past decade, the illicit market in cigarettes has come down from 21 per cent of the market in 2000 to 10 per cent in 2009-10. As I am sure the noble Lord knows, very significant progress has been made, and the Government are fully committed to continuing with that. On the other side, there is the tobacco control plan to make smoking less affordable. The noble Lord, Lord Dubs, is quite right regularly to press on this. It is a multi-layered strategy, and the present Government will continue to press on all aspects of this challenge.

[Lord Palmer]

My Lords, is the noble Lord aware that if plain packaging is introduced, as is threatened, this will increase the amount of tobacco smuggled? I declare an interest as convenor of the Lords and Commons Cigar Club.

[Lord Sassoon]

My Lords, that is a helpful contribution to the consultation about plain packaging. These issues are all interrelated and we need to consider the second-order effects.

[Lord Clement-Jones]

My Lords, following the split of UKBA in the wake of the Vine report, will its successor bodies be able to implement the 2011 strategy and also the new FCTC protocol that has just been agreed?

[Lord Sassoon]

My Lords, I can point to the success over the past decade of HMRC in particular, helped by the contribution of the UKBA, and it will be the same people, however configured, carrying on. As I have explained, money has been specifically targeted. As my noble friend also indicates, under the World Health Organisation there is a legally binding international treaty, which will also contribute to the further drive in this area.

[Lord Ribeiro]

My Lords, I congratulate the Government on their plain packaging campaign, which aims to reduce smoking by the young. Will the Minister confirm that the identification codes on packets of cigarettes make it easier to identify contraband products and thus remove them from this country?

[Lord Sassoon]

My Lords, on plain packaging, it is important to recognise that this is an open consultation on which the Government do not have a view. The contributions we are getting are important and helpful to that ongoing consultation.

[Lord Glentoran]

My Lords, do the Government understand the enormous costs for those who manufacture the packaging? I was once part of Kodak and ran a print packaging outfit. Up and down the country, a huge number of people, as well as a lot of tax and money, are involved in the packaging of cigarettes. Frankly, I do not believe that plain packaging will make a tuppenny-bit of difference.

[Lord Sassoon]

Again I thank my noble friend and my answer is the same as I gave previously.

[Lord Davies of Oldham]

My Lords, in tackling the illegal sale and smuggling of cigarettes and some other commodities, do the Government make any assessment of the potential reduction in their capacity to tackle these issues by the loss of staff in crucial government departments?

[Lord Sassoon]

I know that the noble Lord, Lord Davies of Oldham, is an expert on the subject because I think that he had exactly the same Question from the noble Lord, Lord Dubs, about two years ago. He will know about the considerable efforts that his Government made. As I have already said, very specifically within the overall reduction that government departments are facing, HMRC has allocated £917 million to deal with revenue avoidance issues in the spending review period, of which £25 million is targeted at the area about which we are talking today. His concerns are fully recognised and have been met.

[Lord Patel]

My Lords, we have had several hours of debate about plain packaging and its effect on young people who take up cigarette smoking. Which evidence do the Government not accept on the basis of science? Is the Minister aware of today’s report from Cancer Research UK about plain packaging and its effect on children taking up cigarette smoking?

[Lord Sassoon]

My Lords, we are in an open consultation period. At the end of that period, it will be for the Government to assess all the evidence. But I am grateful to the noble Lord for drawing our attention to another important piece of topical evidence.

[Lord Flight]

My Lords, many noble Lords may remember reading Parson Woodforde’s diaries in the 18th century when duty on brandy and coffee was very high and Parson Woodforde, along with everyone else, bought smuggled goods. Have the Government dispassionately looked at what might be a level of taxation that would deliver optimum tax revenues?

[Lord Sassoon]

My Lords, I remember vaguely reading Parson Woodforde’s diaries. I did not read them in the 18th century, as my noble friend suggested, but in the 20th century. It is a difficult balancing act. As noble Lords know, the policy of the Government has been to raise duty above inflation in order to deal with health issues but that has implications, of course, for smuggling and other illegal sales. Therefore, this is a more difficult balancing act where we have a health priority as well as a revenue maximisation one.

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

Lord Sassoon Excerpts

Thursday 26th April 2012 Lords Chamber

Moved by

[Lord Sassoon]

1: After Clause 1, insert the following new Clause—
“Opting out of Sunday work
(1) Where a shop worker gives an opting-out notice in the pre-Games period that relates to work at an exempted large shop, section 41(3) of the Employment Rights Act 1996 has effect as if the notice period in relation to the shop worker were the period which—
(a) begins with the day on which the notice is given, and(b) ends two months after that day, or with Saturday 21 July 2012 (if that is later).(2) Section 42(2) of that Act accordingly has effect in relation to the shop worker as if the reference to three months were a reference to the notice period as it is modified by subsection (1).
(3) Where the opting-out notice includes an express statement to the effect that the shop worker objects to Sunday working only during the suspension period, the shop worker is to be treated for the purposes of that Act as having given an opting-in notice at the end of that period.
(4) The “pre-Games period” is the period which—
(a) begins with the day on which this Act is passed, and(b) ends with Monday 9 July 2012.(5) An “exempted large shop” is a shop to which paragraph 2(1) of Schedule 1 to the Sunday Trading Act 1994 would apply during the suspension period were it not for the disapplication made by section 1(1).
(6) In this section—
“opting-in notice”, “opting-out notice” and “shop worker” each have the same meaning as in the Employment Rights Act 1996, and
“suspension period” has the meaning given in section 1(3).”

[The Commercial Secretary to the Treasury (Lord Sassoon)]

My Lords, we had a very good Second Reading debate two days ago, so I was not intending to preface my remarks with an extended speech about the purposes of the Bill. However, I remind the Committee that the Bill is a time-limited and temporary measure to allow flexibility in trading hours on the eight Sundays that bracket and include the Olympic and Paralympic Games. This is a unique occasion for this country. We want to demonstrate that we are truly open, flexible and accommodating of all the athletes and visitors who will be in the country for the Games, and indeed that for all the millions of UK citizens who take advantage of the Games, watching on big screens and taking part in the other events around the country, we make the experience as good as it possibly can be. In achieving that, there may indeed be opportunities for economic benefit and for some people to earn extra money at a time when the economic conditions are not great. Therefore, this is a temporary Bill that is important to the overall Olympics and Paralympics experience.

As I said on a number of occasions at Second Reading, not only is it temporary but it has an explicit sunset clause. If at any stage the Government were to come forward with a further measure on Sunday trading, which is not planned, then of course that would involve the full consultation, impact assessments and all the other things that permanent measures have.

With that brief preface, I shall talk to Amendment 1. This amendment will insert a new clause into the Bill to deal with concerns that shop workers who want to opt out of Sunday shop-working in time for the start of the suspension period, by exercising their opt-out right under Part 4 of the Employment Rights Act 1996, may have to have given their opting-out notice prior to the Bill receiving Royal Assent. This is because the usual period for such opting-out notices is three months, and there will be a bit less than three months between Royal Assent in early May and the start of the suspension period on 22 July.

The first question that might arise is: why is this being brought forward as an amendment rather than having been in the Bill in the first place? The reason is that we had initially believed that the amendment was not necessary, as we would expect shop workers who do not wish to work on a Sunday at all for religious reasons to have either already exercised their right to opt out or to have come to an arrangement with their employer. Furthermore, many employers require only a one-month notice period, whether in the terms of their employment contracts or in the good practices that they adopt. At Second Reading I gave a number of examples of that from major retail groups. In fact—this is an important point for the Committee to understand—a one-month period is the default under the Employment Rights Act 1996 if an employer has not informed employees of their right to opt out of Sunday working. Therefore, the back-stop of a one-month opting-out period is there in the Act.

Nevertheless, initially we had constructive discussions with the Opposition about the Bill. We would not have brought it forward under the fast-track procedure if we had not had indications and discussions with the Opposition on this issue. The amendment was tabled following a request from the Opposition, which we quite understood, to make it clear what the protections were and to put in another layer of protections. I am disappointed that, notwithstanding the opposition Front Bench making it clear at Second Reading that the Opposition would not oppose the Bill, further points have now come up which we will be debating this afternoon.

In addition to the government amendment, as I already committed to the House at Second Reading in response to other good points that were raised by the Opposition, the business department will be putting out on its website full guidance notes if and when the Bill gets Royal Assent so that employers and employees will understand the full ramifications. This is not an easy area of law, so it was a helpful suggestion which we are committed to following up. In response to their concerns and those expressed by the Federation of Small Businesses, and indirectly by the Association of Convenience Stores, I have also committed that if the Government were to bring forward further measures on flexibility of trading hours on Sundays for large shops, the impact of this temporary measure would be taken into that assessment.

Turning to the amendment, it is important to remember that shop workers already enjoy strong employment protections around Sunday working. Their rights specifically in relation to Sunday working are unique and are not shared by almost all other sectors of the working population who may be required to work on Sundays. To take one example that is close to the retail industry, workers in the catering industry are not protected and, of course, may well be asked to work extended hours around the Olympics, as they can be at other times. The rights in relation to Sunday working were put in place to give protection to those shop workers who did not wish to work on a Sunday as a matter of principle—for example, for religious reasons. As I have said, shop workers who do not wish to work on a Sunday at all for religious reasons may well have already either exercised their right to opt out or would have come to an arrangement with their employer. If their employer has not already brought to their attention the terms of the Act on their right to opt out, then indeed they have a fall-back period of one month.

However, the Government have listened to the concerns and share the concern that some shop workers may wish to exercise their right to opt out of Sunday working during the suspension period, given the possibility of having to work longer or different hours, and will not have enough time after Royal Assent to give their employer the usual three months’ notice in time for the start of the suspension period. For many workers in large retail groups, the notice period is only one month, and these employees will be totally unaffected by the amendment. We have met the trade unions, businesses and other interested parties to ensure that we are protecting the rights of shop workers to opt out of Sunday working in the least burdensome way possible, both for employees and employers.

Subsection (1) of the proposed new clause has the effect of temporarily shortening the usual three-month notice period that applies in respect of opting-out notices given by shop workers to their employers. An opting-out notice is a written notice whereby the employee indicates to his or her employer that he or she objects to Sunday working. The effect of serving a notice is that following the notice period the employee can refuse to do shop work on Sundays and will be legally protected in that regard. It would be unfair dismissal to dismiss an opted-out shop worker because of their refusal.

--- Later in debate ---

[Lord Addington]

It might have been long but it was appropriate—the right thing done at the wrong time. What I would like him briefly to clarify again is what the Government will do to make sure that everybody is aware of this change. I do not think that the amendment of the noble Lord, Lord Davies, will be necessary if we get greater assurance that the Government intend to place a duty on employers to make sure that their workers know what is coming.

There are other issues to do with Sunday trading. If we had the Olympics every six or seven cycles, I am sure that we would have rather more of a point to make. The fact of the matter is, we do not. Most people in this Chamber will not see the Olympics in this country again in their lifetime—virtually all of us, I suspect. It is a special event and a special occasion. If the Minister can give us some assurance that, in the context of these new rights for this special occasion, a real effort will be made to make sure that nobody finds themselves in the situation of thinking, “I did not think I had to do that but I am doing it,” then I think that many of the objections here will be removed.

[Lord Sassoon]

This is a very direct and important point. I gave confirmation on Second Reading but let me do it again. Not only do I have my noble friend Lady Wilcox from the department here but I am sure that the walls have ears and the department will hear the message loud and clear. It has committed to putting out clear guidance, if and when the Bill gets Royal Assent, so that both employers and employees understand exactly the position under the Bill. That guidance will go beyond narrow legalistic explanations to try and be helpful about what should be done and how and about the timescales. I will make sure that my honourable friend the business Minister, who will be taking this Bill through another place if it passes your Lordships’ House, gets these messages loud and clear. I know that he is going to continue to discuss these issues with business and employee groups. I hope that that helps my noble friend.

[Lord Addington]

That is exactly what I wanted to hear.

--- Later in debate ---

[Lord Myners]

Those data were not included—I shall give way to the Minister if he wishes to correct me—in the Bill’s economic impact assessment, at attachment C, when I obtained the documents from the Printed Paper Office yesterday morning.

[Lord Sassoon]

I do not like to intervene often but as the noble Lord, Lord Myners—who I know likes occasionally to intervene on me, quite properly, while I am at the Dispatch Box—has invited me to do so, it might help if I say that a formal impact assessment under the accepted procedures is not required in this case because this is a temporary measure. Such an assessment is not required precisely because, among other things, it is often difficult with a temporary measure to make an assessment that is up to the very high standards imposed on full impact assessments.

I thought that it would help the House if there were an assessment that, although not a formal impact assessment, would give a great deal of relevant and, I hope, helpful information—and my noble friend has just quoted from it. I make no apologies that boxes which would have been filled in for a formal impact assessment were not filled in in this case, as that would give a spurious impression of accuracy. We did not have to give the House anything in this form but we thought that it would help the debate to provide such information as is available. My noble friend has given some of that information but it also includes statistics from USDAW and others and I believe that it presents a balanced picture. The noble Lord, Lord Myners, should understand that this was never intended to give, nor should it give, a spurious, false picture. It is not up to the standards that would be required for Bills that have permanent effect.

[Lord Myners]

I am grateful to the noble Baroness, Lady Browning, for her intervention, and to the Minister for correcting the noble Baroness by saying that there was no impact assessment and that the data from which the noble Baroness quotes do not constitute an impact statement. The numbers quoted by the noble Baroness, incidentally, are probably less than a week-end’s takings at Westfield and take no account of displacement—that is to say, the spending which would have taken place in any case but is now being brought into these Sunday trading permitted-hours figures or displaced from smaller stores to larger ones.

I should like to talk about treating people fairly, because that seems to be the issue on which the House wishes to focus in Committee.

--- Later in debate ---

[Lord Sassoon]

It might be helpful to the noble Lord, Lord Graham of Edmonton, who went through a useful list of restrictions on Sunday trading in other countries, to refer to the restrictions in Germany, which I did not hear him mention. That country, which I think he will find on the list that he read out has very restricted weekend shopping hours, as we discussed at Second Reading, opened up that restrictive regime for the 2006 World Cup and it has now reverted to what it was before. That is a good, current European example of a very restrictive regime opened up for a major sporting event and then reverting to what it was before. That will give the noble Lord comfort that what we seek to do here is well precedented.

[Lord Graham of Edmonton]

I may help the Minister by quoting from a document given to me by the Library called The Economic Costs and Benefits of Easing Sunday Shopping Restrictions on Large Stores in England and Wales, a report for the Department of Trade and Industry in May 2006. On Germany, it says that shops are closed,

“except convenience and travel goods at railway stations and airports. Local authorities may grant permission for retailers to open on Sundays (maximum 4 per year)”.

[Lord Sassoon]

My Lords, that makes the point that Germany had a much more restrictive regime than the UK, and that country freed it up much more significantly compared with the normal regime for the 2006 World Cup to give everyone the sort of experience that we want for the Olympics here. Then it reverted to what it was before. I am grateful to the noble Lord for bringing up that point.

[Lord Bates]

In the debate at Second Reading views were expressed on the broader issue of Sunday trading. The position that I stated in that debate was that I did not think that the economic case was at all convincing and that it did not manage to clear the retail growth review from the Treasury or clear the recent red tape review. A number of respondents did not say that this was something that they wanted to go ahead. The noble Lord, Lord Myners, who has very significant experience in this whole area, looked at the case and said that it was at least questionable, certainly ordinarily. I agree that we are talking about exceptional times. Normally the restriction on larger stores is not just a restriction on them but is to protect the smaller stores.

The noble Lord, Lord Myners, referred to Justin King from Sainsbury’s serving on LOCOG and asked whether the position was different given that Mayor Boris Johnson had put him forward. Like others on this side of the House, I am spending a fair bit of time campaigning for Boris Johnson at the moment. He has made a great priority of strengthening the high streets and supporting small business. That is essentially what this measure is about.

That point made, I turn to the amendment, which I welcome. Let us be clear what we are talking about on the date, which as it stood in the Bill was at 24 April. We were effectively going to say that the minimum notice period that had to be given under the Bill was that, two days ago, before this legislation had been passed, somebody would have had to give notice to their employer that they did not want to work on 22 July. On that point it is obvious and the Minister, who is wise in these things, has brought forward this amendment, which is very simple in its present form. I do not buy in any sense the idea that Amendment 1E, tabled by the noble Lord, Lord Davies, simplifies the thing. If anything, it makes it more complicated because you almost go back to the potential for three months, with a two-month notice period then a one-month response period to come back in. You are potentially going back into this very difficult situation.

It is also worth noting a little more about which Sundays we are talking about, because we know where this argument is coming from. It is from the big stores, particularly the London-based stores and development companies that sponsored the research pointing to the benefit, to which my noble friend Lady Browning referred. In fairness, I did not mean that as a jibe. We are in a recession and we want to make money. When we have people actually coming here, we want jobs so they absolutely ought to try to make the case. I am simply pointing to the fact that there is an element of that. The impact assessment refers to the fact that there will be 450,000 visitors, but they are not going to stay for the whole period. They will predominantly be clustered around the summer Olympics rather than the Paralympics. I would wish it to be the other way round, because the Paralympics espouse to me more of what the Olympic spirit is all about, but the reality is that most of the attention will come from 27 July, when the opening ceremony takes place. Therefore, the first Sunday on which there will be the desire to celebrate sporting achievements by visiting shops for more hours, for which we accept the case because the cake will be larger, will be 29 July and not 22 July. Moreover, the Games will be going on until 12 August, which happens to be a Sunday in my diary, while on Sunday 19 August, for which liberalisation is being made, nothing will be taking place—other than a lot of people working very hard to get the site ready for the Paralympic Games to start. However, those Games do not start on 26 August; they actually start on 29 August. To add insult to injury, the dates finish on the closing date of the Paralympics themselves, 9 September. That part is absolutely right.

This is a simple adjustment. The opposition amendment makes this not simpler but more complex. Most of the visitors and the economic activity will be early on, which again is the reason for giving maximum notice to people. If they have problems, we need to make sure that that happens as quickly as possible and therefore the adjustment to two months, as proposed in my noble friend’s amendment, would seem sensible in this case.

[Lord Elton]

My Lords, the noble Lord, Lord Myners, greatly underestimates my noble friend Lord Sassoon’s ability if he thinks that my noble friend’s excellent speech—I agree about that—at Second Reading is anything like the high point of his parliamentary career, as the noble Lord said it would be. My noble friend has a long way to go. Now he is looking at me as if he is wondering what is coming next, which is quite right.

I simply want assurance on what I think are called Pepper v Hart terms—in other words, for the guidance of people trying to work out what this law is meant to mean when they come to examine it in court. I am concerned rather along the lines that the noble Lord, Lord Graham of Edmonton, put forward. I am an inveterate opponent of Sunday opening in principle, but the House has given a Second Reading to the Bill. I accept that so what we are discussing are the means of exempting on grounds of conscience those who do not wish to be ruled by it—and of course I am in favour of that. However, throughout the Second Reading debate and in conversations thereafter, everybody has been seeking reassurance that this is not to be used as a precedent. The phrase actually used was “stalking horse”; I take it that that means a precedent. When the noble Lord, Lord Graham, made that point forcefully he got a reply from my noble friend with some information in it, but not an avowal again that this is not to be used as a precedent or that that is not the Government’s intention. All I ask is that my noble friend reiterates that assurance, so that it will be on the record in this debate as well as at Second Reading.

[Lord Sassoon]

My Lords, I am happy to reiterate for my noble friend Lord Elton the assurances on that point which I gave at Second Reading.

The debate was going so well that I had thought that there might be more points. It has been a good debate around this subject, but perhaps I might make some remarks about Amendment 1F, which the Government do not see merit in. That amendment, as we have heard, seeks to require employers to give two months’ written notice to any shop worker who works only in a large shop affected by the Bill, and who has not already given an opting-out notice that they wish to work on a Sunday during the suspension period, requesting them to do so. I may have said Amendment 1F; I meant Amendment 1E. I apologise to the Committee. My notes say Amendment 1A, but I think that was probably the Government’s amendment. For the avoidance of doubt, I am objecting to Amendment 1E, while the Government’s amendment is the one in which I hope the Committee will see merit.

Amendment 1E gives the shop worker an opportunity to give a written objection to the request within one month. If done, this has the effect of making the employment contract unenforceable to the extent that it requires the shop worker to do shop work on Sunday during the suspension period—in other words, it gives a temporary opt-out. This amendment is unnecessary, as I will come on to explain, but in introducing it I think that the noble Lord, Lord Davies of Oldham, said on three occasions that it was a clear amendment. I suggest that it is not clear and, regrettably, certainly not workable. Let me explain its unworkability, because it is quite important and comes to some of the points that noble Lords have made in the debate.

First, if a large retailer was concerned about the additional burden that this amendment, if passed, would place on them and went to seek legal advice, it is my belief that any competent employment lawyer could pick this provision apart in minutes. The amendment’s main fault is that it contains no effective sanction against non-service of the proposed notice from the employer. If the employer does not serve this notice, the effect is that the shop worker never acquires the right to opt out of Sunday working during the suspension period as envisaged by subsection (3) of this proposed new clause. As there is no sanction in place for non-service of the notice, the advice from an employment lawyer would likely be to ignore this provision in the Act, as it would then be.

In addition, I suggest that the amendment would have some strange and undesirable effects. First and foremost, it could constitute a huge burden upon employers, particularly large ones with many staff. Doing this in respect of every employee who might be asked to work by a large retailer would be a substantial burden, added to which there would be staff hours involved in producing the notices and monitoring the responses. Employers might also need more than one notice per employee, as the requirement relates to each individual Sunday. I accept that employers could roll them up into one notice, but that is not what the amendment says. If circumstances changed—for example, if a retailer did not get enough staff for a particular Sunday—they might need to serve some more notices, assuming that they had the time to do so. And so on.

The provision does not give employers much time to plan. They might not know until one month after the date of their notice that the employee was not going to exercise their right. It would also have the effect that even those employees currently contracted to work only on Sundays would find themselves receiving a notice from their employer that they were requested to work on one Sunday or more during the suspension period. While I understand that the underlying concern here is a perfectly reasonable one, the effects of the amendment begin to get into Alice in Wonderland territory if people contracted to work only on Sundays were required to get notices from their employer. They would then have an opportunity to object to this within one month, even though they were contracted to work only on Sundays anyway.

Similarly, a notice would have to be given to those shop workers for whom the employer does not propose to make any changes to their usual or contracted hours for the Sundays concerned. The amendment would even have the rather bizarre effect that a large shop currently subject to the restrictions, even if it did not intend to change its opening hours during the suspension period, would still have to serve this notice on its shop workers to be able to be staffed for its current opening hours. This plainly means that that employer would face a burden in just opening at all, even if it did not seek to change its current opening hours. That would be totally contrary to the intention of the Bill.

The amendment is unworkable and in the view of the Government, as I said, it is also unnecessary. We should not lose sight of the fact that if a shop worker does not want to work on Sundays, whether for religious reasons or any other reasons, they will already have been able to exercise their right to opt out or will be automatically protected because their contract cannot require them to work on Sundays, as my noble and learned friend Lord Mackay of Clashfern has already pointed out.

At this point it is right to think a bit about the views of employees. This important issue has been raised by the noble Lords, Lord Judd and Lord Davies of Coity, and the noble Baroness, Lady Gibson of Market Rasen. These are important points, but we must remember that there may be many employees who would like the opportunity of a few extra hours as they could make some considerable extra money if they wanted to work on all eight Sundays. In these times, we should not be dismissive of that and just look in dramatic terms at the other side of the argument.

Yes, there was an USDAW poll. I have seen its document that talks about polling 10,000 of its members. I think that the noble Baroness, Lady Gibson, talked about 20,000 members but the document that all Peers received talked about 10,000. At one point the poll was described as independent but I am not sure that that is right, as USDAW says that it did it itself, and it was taken from only 10,000 or perhaps 20,000 out of its 414,000 members. It would be good if we had some independent polls that we could debate but I do not think that we do. My noble friend Lady Trumpington carried out more of an in-depth qualitative survey that came to a rather different view; she told us that the people she had talked to during her research were perfectly relaxed about this. All I can say is that the evidence we have on this is incomplete at best, and we have to regard it in that way.

There may be a number of different effects on families. The noble Baroness, Lady Gibson, referred to it being harder to arrange childcare on weekends, but interestingly the submission from Working Families, a group that represents working families, to what was then the Department of Trade and Industry on its informal consultation on Sunday trading in 2006, said that it was beneficial for many parents to work on Sunday as childcare is easier to arrange than on other days of the week. Although this is a second-order effect of the Bill, it is also right to recognise, because all these concerns are being raised, that it is a perfectly reasonable concern but the Working Families submission made the point that the Bill could give families some greater flexibility over the eight-week period. I do not dismiss these concerns but we should look at them in a balanced way.

We should also remember that in many cases the main national retailers are already in discussion with their staff on this issue. They are not waiting; they have to plan ahead. I think that the noble Lord, Lord Myners, said at one point that no major retailers support this. He indicates that he did not—maybe I misheard him—but he certainly quoted the example of one major retailer. To take a major retailer that has made a statement on this, Morrisons says that it is excited, like its customers, that the Olympics are almost upon it and welcome the Government’s decision to relax the Sunday trading laws during the Games. We know that other retailers are already planning ahead because there will be very little time between the Bill receiving Royal Assent and the start of the suspension period. That is why the government amendment proposes a simple reduction in the opting-out notice period from three months to as little as two months.

In seeking to protect the rights of shop workers, as I have tried to explain, the Opposition have come up with a bureaucratic nightmare for employers, the vast majority of which want to co-operate with their employees to reach mutually acceptable agreements regarding working arrangements, and a potentially confusing measure for employees who would find themselves served with one or more notices stating that they might be required to work on a particular Sunday but not necessarily specifying the hours that they were required to work, nor indeed explaining why the notice was being given out. My noble friend Lord Bates referred to the complexity of all this and I can only underline that.

The amendment could have the no doubt unintended consequence that employers served this notice on all their employees to ensure that they had sufficient staff to cover not only the extra opening hours, if they decided to take advantage of the flexibility under the Bill, but also their current opening hours. Indeed, one of the major supermarket groups has estimated that it would have to serve 180,000 such notices to comply with this amendment, so the amendment would be costly and unnecessary for employers if they even decided to comply with this provision.

I shall say a word or two about the economic impact, about which things have been said. The main purpose of the Bill, as I explained at Second Reading and as my noble and learned friend recognises that I have explained, is to enhance the Olympic experience for all concerned. But of course another purpose of the Bill is to make sure that we do this in a way that is capable of contributing to an economic boost, not an economic cost, to the country. Clearly, individual retailers will make up their minds in respect of this, but if retailers find that they need to serve hundreds of thousands of these notices, any gains that the Bill would otherwise have are likely to be wiped out in whole or in very considerable part by compliance with that amendment. I hear what my noble friend Lord Bates and the noble Lord, Lord Myners, say about the economic impact. The one thing that we absolutely do not want to do is to put in place something that imposes an economic cost.

We know that some large retailers already operate a one-month opting-out notice. I cannot imagine why on earth these stores in particular should have to serve an additional notice to their staff when the notice period that they already apply is more generous than the three-month one, when their staff will have adequate time to opt out before the suspension period begins. Again, the amendment would get us into perverse territory. We know already that some employers are talking to their staff via their store management teams. We are told that another has started a staff availability survey that specifically asks staff whether or not they would like to volunteer to work additional time on Sundays during the suspension. This is a sensitive process that the people who we have talked to appear to be putting in place. We understand that one retailer has already made it clear to its staff that no one will be forced to work additional hours during the suspension period, and any request from management to change current Sunday working times will be done on a purely voluntary basis. So far, this store has had more than enough volunteers to work the additional time on Sundays during the suspension period. It will have no trouble resourcing its stores during the suspension. I would very much like to put names to these stores, but noble Lords will understand that, because they are in the middle of these discussions with their staff and the commercial arrangements around what they decide in terms of opening, they would rather their names were not made public in this debate.

In summary, for all of these reasons, the amendment of the noble Lord, Lord Davies of Oldham, is unnecessary. As I have explained, it is also unworkable. I appreciate that there have been constraints on time that may have contributed to it being less well thought out than might otherwise have been the case. It would be very burdensome for business and confusing for the shop workers that it is designed to protect. I ask the Committee to vote, if invited to do so, against the noble Lord’s amendment, but to support the government amendment, which gives proportionate protection in the context of this Bill.

--- Later in debate ---

[Lord Davies of Oldham]

My Lords, I apologise to the Committee that this is a manuscript amendment but the intention behind it is, as I indicated on Second Reading, that although we favour the extension of Sunday opening during the Olympic period, some limits should be put upon the opening hours of shops. The reason for submitting the manuscript amendment is that I discovered to my horror that the conclusion of the Olympic Games at the closing ceremony was not at 10 pm but at 10.30 pm. Given that the importance of the closing ceremony was germane to our case, I have submitted a manuscript amendment that extends opening hours to 11 pm.

We are of course in favour of the extension of opening hours, but there should be some limits upon the length of time that large stores and others can open during that period. The amendment goes some way towards recognising that Sunday is Sunday and is different from the rest of the week, and we are paying due regard to what is after all a widespread position held in the country on that matter. Our proposal to limit opening hours offers some protection to the workers. We have had a discussion on giving notice to people in the workforce of the intention to work on Sunday and the time in which they can reply. However, some constraint on hours offers at least an element of protection against possibly excessive demands made upon workers during the Games period.

The amendment also gives some recognition to the concern about this legislation that we discussed at Second Reading but was not germane to, or expressed during, our debate on the previous amendments—the concern of convenience stores and small shops that they will be adversely affected by the Sunday opening hours of large stores. The Minister recognises the difficulties that we all face, but the background against which the stores have been working is that the impact assessment provided by the Government is a fairly limited document. What is more, we received it after Second Reading and it is therefore difficult to make an assessment of its value. Moreover, if we are in that position, so are interests outside.

It is clear that convenience stores feel that they may well suffer during the period of extended Sunday opening during the Olympic Games because of the superior competitive power of the large stores. At least this limitation on the hours proposed in the amendment recognises that.

The noble Lord, Lord Bates, said today that shops will open only when they think that there is market potential. They will open when they will be profitable. This will operate for a limited period and it will be extremely difficult for people to make such assessments. Therefore, we think that, at the very least, the legislation should indicate for what time shops should be open. I recognise the limitations that not opening before 10 am, in particular, represents, but it goes some way towards the recognition of Sunday being a less busy and challenging day than the rest of the week in the wider community.

Finally, I hope that the Minister will be prepared to accept the amendment. That might be a forlorn hope, but all along he has been keen to emphasise that this is emergency legislation to deal with a limited, restricted period and that it is no precursor to widening Sunday trading in future; it is solely related to the Olympic Games. If he gives fair wind to the amendment, that would indicate that we are concerned about the implications of this change for the wider community. While realising all the potential benefits of Britain being open during the Olympic Games, there should also be some recognition that on Sundays, special hours should obtain. I beg to move.

[Lord Sassoon]

My Lords, I will not disappoint the noble Lord, Lord Davies of Oldham. The Government do not see favour in the amendment. As he explained, its effect would be to restrict the Sunday opening hours of large shops deregulated by the Bill so that they can open during the suspension period only between the hours of 10 am and, now, 11 pm, the intention being to prevent large shops from being able to open any earlier on Sundays than they can now or until too late in the evening. I wish that, along with all the other things that we discussed with the Opposition, we had been able to discuss this before, because we might then have been able to point out one or two of the difficulties with the proposal.

The starting point is that the Government have been clear from the beginning that the Bill is about flexibility. It is not about the Government imposing opening and closing times on large stores during the suspension period; it is about allowing shops to make their own decisions based on what is best for themselves, their staff and their customers. I do not think that it is right for your Lordships’ House to second-guess any of that. It is not that all large stores will suddenly open for 24 hours a day during the Olympic period; that would be absurd. We have discussed opening times with the large retailers and it is clear that there will be a variety of opening and closing times within individual groups. Some will deal with it on a regional, geographic basis. Within the whole group, some will stay open late, some will open earlier, and some will not change their opening times at all. The important thing is that the Government want that to be a decision for them.

The amendment is unnecessary. I do not want to overlabour the point, but as we have seen from the scrabbling around by the party opposite, they realise that putting a 10 pm stop would be before the closing ceremony had finished. Well, putting an 11 o’clock closing time after an event where 80,000 people have to get out of a stadium, adding an extra half-hour, is absurd if the change to the amendment is intended to reflect what is really going on at the events.

Even to reflect the situation at the event that the noble Lord, Lord Davies of Oldham, identified, half an hour for 80,000 people to get to a large shop near the stadium is plainly not doable. There are events that will finish as late as midnight on a Sunday. The beach volleyball finishes at 10 to midnight on 29 July. What about all those events that start before 10 am? Why should not we allow shops, if they want to, to service all those people who will be going into events? Again, I could give a very long list, but if we just take 29 July, there is an 8.30 start for the badminton, 8.30 for the hockey, 9 am for the basketball, shooting and archery, and so on.

The amendment does not work in relation to the narrow Olympic events themselves. It does not reflect the fact that retailers are already taking individual decisions to open early, late or make no change at all. As with the other opposition amendment, I note that it does not impose any sanction or penalty for breach of the 10 am to 11 pm restriction, so large shops may well ignore it. It would be a duty with no sanction, which I suggest is simply bad law. That contrasts with large shops which breach the current restrictions, which can be fined up to £50,000, which is clearly a significant punishment in relation to the gain. It does not work, it is unnecessary and I ask the noble Lord to consider withdrawing his amendment.

[Lord Myners]

I intervene briefly. Both my points relate to the earlier intervention by the noble Lord, Lord Elton. First, the noble Lord sought an assurance that this was not a stalking horse.

[Lord Sassoon]

He is not in his place.

[Lord Myners]

As the Minister correctly notes, the noble Lord is not in his place. This is not a stalking horse or a Trojan horse; this is strictly an emergency piece of legislation. However, one has to note that the central thrust of the Minister's response about customers and shops having freedom of choice would be exactly the same argument that would be brought forward were the Government to be proposing a much broader exemption to restrictions on Sunday trading. The noble Lord, Lord Elton, was right to seek the assurances that he did.

I also congratulate the noble Lord, Lord Elton, on his prescience. I observed that the Minister’s contribution to the Second Reading of the Sunday Trading (London Olympic Games and Paralympic Games) Bill was the high point of his parliamentary career. The noble Lord, Lord Elton, said that that would not be the case but I have to confess that, even in talking to this amendment, the Minister has in Olympic terms established another personal best.

--- Later in debate ---

Moved by

[Lord Sassoon]

2: Clause 2, page 1, line 15, leave out “This Act is repealed at” and insert “Sections 1 and (Opting out of Sunday work) are repealed immediately after”

--- Later in debate ---

Moved by

[Lord Sassoon]

3: Clause 2, page 1, line 16, at end insert—
“(1A) Subsection (1B) applies in a case within section (Opting out of Sunday work) where—
(a) the opting-out notice was given less than three months before the end of the suspension period, and (b) section 42(2) of the Employment Rights Act 1996 (which sets out the case in which the notice period is to be one month beginning with the day on which the notice was given) does not apply.(1B) For the purposes of section 41(3) of that Act, the notice period (which, as a result of the repeal made by subsection (1), reverts to being the period of three months beginning with the day on which the notice was given) is to be treated as ending immediately after that repeal.”

--- Later in debate ---

Moved by

[Lord Sassoon]

4: In the Title, line 2, at end insert “; and for connected purposes”

Economy: Credit Easing Policy

Lord Sassoon Excerpts

Thursday 26th April 2012 Lords Chamber

[Lord Barnett]

To ask Her Majesty’s Government what evidence they have that the Chancellor of the Exchequer’s credit easing policy is increasing business investment.

[The Commercial Secretary to the Treasury (Lord Sassoon)]

My Lords, the national loan guarantee scheme was launched on 20 March to provide cheaper loans for smaller businesses. Businesses have now started to benefit from these loans. Also, under the £1.2 billion business finance partnership, the Government intend shortly to invest up to £700 million with some or all of the seven shortlisted fund managers. Although it is too early to draw conclusions on any impact, credit easing is expected to have a positive effect on the economy.

[Lord Barnett]

Bearing in mind that the Answer that the noble Lord has just given me is not quite relevant to the Question on the Order Paper, surely the Answer should have been that the Office for Budget Responsibility—which meets regularly with the Chancellor and the Treasury—said in March, at the time of the Budget, that there would be a 6.9 per cent fall in business investment. Why did he not want to tell us that? At the same time the OBR told us that there would be growth this year. As the Minister knows, in the first quarter we have had negative growth of 0.2 per cent. In those circumstances, do he and the Chancellor believe that without QE we would have had even worse negative growth? Is that the Government’s position? What do they plan to do? Are they planning to increase QE, or are they taking note of the Treasury Select Committee’s recent report which pointed out the serious effect it was having on retired people who are taking out annuities and getting very low interest rates?

[Lord Sassoon]

My Lords, I fear that I will not be able to do justice to all the six questions that I thought I detected, but let me try to deal with one or two. First, we should distinguish between credit easing, which is the policy announced by the Chancellor and made manifest in the national loan guarantee scheme, and quantitative easing, which is the responsibility of the Bank of England. As to quantitative easing, if the noble Lord, Lord Barnett, had asked me I would have answered that the Bank of England’s own assessment is that under quantitative easing the economy has benefited by between 1.5 to 2 per cent. One can therefore draw inferences from that for what a more limited scheme targeted at small businesses will achieve.

As to the question of the levels of investment in the economy, that is set out in the latest report from the Office for Budget Responsibility. It is therefore its independent figures, not mine, which point out that the fall-off in levels of business investment and the expected sharp recovery very much follow the pattern seen in the recession of the early 1990s. It is territory that we have been in before and the Government believe that we should respond in the ways that we have. As to the evidence that the national loan guarantee scheme is gaining traction, Barclays has already issued a £1.5 billion bond backed by the scheme, and Lloyds has issued $1.4 billion since the scheme started on 20 March. So it is indeed, unlike some of the schemes introduced by the previous Government, up and running and having an effect.

[Lord Lawson of Blaby]

My Lords, is my noble friend aware of the very recently published unanimous report of the Economic Affairs Committee of this House on development aid which urged the Government to abandon the wholly arbitrary target of allocating 0.7 per cent of GDP for development aid? Is he further aware that if the Government were to accept this all-party recommendation there would be scope for expediting carefully chosen public investment plans, to the great benefit of the economy and without infringing the Government’s overall public expenditure plans?

[Lord Sassoon]

My Lords, I think that we are straying a little bit but my noble friend has, of course, ultimately tied it back to the Question. Of course, if lots of other things were changed in government policy then we could free up money for all sorts of other good things. The Government have no intention—notwithstanding the excellent report from your Lordships’ committee—of changing their policy on development aid.

[Lord Myners]

My Lords—

--- Later in debate ---

[Baroness Kramer]

My Lords, the noble Lord very kindly gave way and I appreciate it.

Perhaps I may suggest to the Government that they missed an opportunity in this round of credit easing by not including community development financial institutions, which, after all, serve micro and small businesses considered unbankable by the big five. Will the Government reconsider and see if a tranche could be made available under this round, or certainly under future rounds?

[Lord Sassoon]

I am grateful to my noble friend, who rightly comes back to this issue, which is important. We have certainly extended the reach of the present scheme beyond previous comparable schemes. For example, the NLGS includes asset-backed finance, which other schemes have not in the past; we have the non-bank finance schemes, through the business finance partnership; and we have one non-traditional big bank—Aldermore—which is in principle committed to the NLGS. So we are pushing out the boundaries. As to the specific question about CDFIs, as my noble friend may be aware, the banks, under the BBA’s better finance initiative, are putting in place procedures to make sure that banks formally pass customers whom they think appropriate towards CDFIs. That is an important step which the BBA has initiated.

[Lord Myners]

My Lords, the Minister is no doubt aware that earlier this week the Bank of England reported another very substantial drop in bank lending. Quite clearly Project Merlin did not work; otherwise it would have been repeated. There is very little evidence that the banks are particularly interested or enthusiastic about credit easing—which, of course, as funding support, is to the advantage of the banks rather than the borrowers. Is not the truth about why companies and businesses are not borrowing is that they have no confidence in the Government’s ability to steer the economy back towards growth?

[Lord Sassoon]

My Lords, as I have already explained, the pattern we are seeing in business investment is one that has largely been replicated from previous recessions. Since, on the top of this recession, we also have the enormous burden imposed by the previous Government of an unsustainable fiscal position, businesses are putting in a remarkable amount of investment. They have created over 600,000 new private sector jobs since the last election.

Value Added Tax: Listed Places of Worship

Lord Sassoon Excerpts

Tuesday 24th April 2012 Lords Chamber

[Lord Northbrook]

To ask Her Majesty’s Government whether they will reconsider the extension of the standard rate of VAT to alterations to listed places of worship and the restriction on the amount of VAT claimable on repairs to those places.

[The Commercial Secretary to the Treasury (Lord Sassoon)]

My Lords, the Budget removes a VAT distinction, which is notoriously difficult to apply in practice, between alterations to protected buildings, which include listed places of worship, and repairs to all buildings. The listed places of worship grant scheme, which makes grants towards the VAT incurred on works of repair and maintenance for listed places of worship, currently allocates £12 million a year. We are exploring options with the church authorities, including committing more money to the scheme, so that listed places of worship are not adversely affected by the Budget proposal.

[Lord Northbrook]

My Lords, I declare an interest as chairman of my local listed church restoration committee. What progress was made at the meeting yesterday between church leaders and the Treasury to mitigate the reported £20 million VAT effect of these measures for listed churches, which is causing concern for church building projects throughout the land?

[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.

[The Lord Bishop of Bath and Wells]

My Lords, of the 563 churches in my diocese, 503 are listed—some 89 per cent. Their upkeep relies almost entirely on voluntary fundraising and support from their congregations. In promoting the big society, many wish to open those buildings to wider community use. What incentive does the Minister believe is being created for congregations to do so by making them pay VAT up front only to claim it back through a scheme that is not adequately funded? Would not a simpler and real incentive for local churches to improve their buildings be to retain the current exemption on VAT?

[Lord Sassoon]

The right reverend Prelate raises some important points. I can give him only partial comfort, or the answer that he wants, in respect of some of his question. First, as I have already explained, we intend to make sure that the compensation number fully reflects the additional costs of the Budget change. The element that troubles us most is that under the previous VAT arrangements the incentivisation worked in favour of alterations of listed buildings as opposed to repair and maintenance. We do not want to see anything that incentivises people against repairing and maintaining and therefore preserving the core heritage features of the property, so we think that it is right to put alterations, repairs and maintenance on an even basis. Therefore, although I cannot give the right reverend Prelate the comfort that we intend to revisit that issue, I stress again that we want to make sure that the churches are fully protected against the impact of the Budget change.

[Lord Davies of Oldham]

My Lords, is this a good time to reduce demand for the construction industry? In January this year, its output fell by 14 per cent. It is true that there was a slight improvement in February, but in the first quarter of this year output from the construction industry is certain to fall, with all the implications that that has for economic growth. Can the Minister look at this issue again?

[Lord Sassoon]

My noble friend was perhaps being excessively charitable to the noble Lord, Lord Davies of Oldham, in saying that he was always right on matters. I am afraid that on this one he has not got it right. As I explained, the Government are fully compensating churches for the changes in VAT so that there will be just as much money available to listed places of worship before and after the change for them to put into something that we want to protect—the ongoing repair and maintenance of our listed places of worship.

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

Lord Sassoon Excerpts

Tuesday 24th April 2012 Lords Chamber

Moved By

[Lord Sassoon]

That the Bill be read a second time.

[The Commercial Secretary to the Treasury (Lord Sassoon)]

My Lords, I am grateful for the opportunity to debate Sunday Trading in connection with the 2012 Olympic and Paralympic Games. The Games begin in just over three months and, on all sides of the House, we are determined to make a success of this once-in-a-lifetime opportunity. Both occasions will draw a significant number of visitors from home and abroad to the events themselves, to our tourist attractions, to our pubs and restaurants, and also to our shops.

This is an opportunity for our runners, swimmers and cyclists to showcase their talents. They will be seeking to emulate the achievements of the noble Baroness, Lady Grey-Thompson, and of the other distinguished Olympians and Paralympians in this House. It is also an occasion to show the rest of the world that the UK is open for business. We will be showcasing everything that the UK has to offer at a time when the world’s attention is on us, and that includes our retail sector. The Games offer a unique chance for everyone to sample the UK’s superb retail outlets. We have to do everything we can to fully exploit this unique opportunity in a way that fits with the schedule of the Games.

At present, however, the Sunday Trading Act 1994 limits the opening times on Sundays of certain shops with a relevant floor area of more than 3,000 square feet. In particular, the Act restricts them to opening on a Sunday for a maximum six-hour period between 10 am and 6 pm. Just imagine the situation: it is the evening of Sunday 5 August, at 10 pm, and Usain Bolt has just won the 100 metre final; or a week earlier, on Sunday 29 July, and Becky Adlington has just set a new record in the 400 metres freestyle. Thousands of spectators, pumped up with pride and with the Olympic spirit, stream out of the stadium to purchase their souvenirs or their celebratory Olympic mascot, only to find that a host of shops are in fact closed. Under the current rules, only shops of up to 3,000 square feet are open. One square foot over that and they are closed, unless of course they are in a specially exempt sector. Try explaining that to visitors from Germany, Russia, China, India or Japan, let alone the millions of British spectators at the Games, or think about the thousands of spectators at big screens up and down the country who will not be able to do their regular Sunday shopping before or after these events. That is why my right honourable friend the Chancellor of the Exchequer announced in the Budget that we will remove this restriction during the Olympic and Paralympic Games, starting on Sunday 22 July and concluding on 9 September.

The Bill that we are discussing today will give shops the opportunity, should they wish to take it, to open for longer to make the most of the economic benefits of the Games. It presents retailers with a chance to increase sales, shop workers with a chance to earn some extra money, consumers the flexibility to shop when they want to and it could help to increase temporary employment. It will be good for the Games and good for the economy in these challenging times.

I recognise that the use of the fast-track procedure for this Bill is not ideal. However, I believe that exceptional use of this procedure is justified given the imminence of the Games. We do not want hundreds of thousands of visitors to be welcomed to the UK with closed signs across our shopping centres, and not just here in London.

[Lord Cormack]

I am very grateful to my noble friend for giving way. Have we not known about these Games for a little while—seven years?

[Lord Sassoon]

My Lords, many arrangements needed to be put in place for the Games. This is an important one, as are many others. We are putting this in place now and it also follows the introduction of a Bill dealing with Sunday trading in another place, which helped to prompt some of the thinking that this is an additional measure to round out what will be spectacularly successful Games with everything laid on. Yes, I have said that it is not ideal that we are dealing with this now. The Government believe that it is important and there is appropriate time for your Lordships to debate what is a relatively simple measure over two days this week.

The Government believe that the Bill should apply to all of England and Wales. The Games are for the whole of the UK, not just for London. Indeed, many of the Olympic and Paralympic events are based outside London. There will be football in Manchester, Newcastle and Coventry; sailing in Weymouth; mountain biking in Essex; rowing at Eton; and canoe slalom in Hertfordshire. In all those sports there will be events on Sundays, including Paralympic sailing and rowing.

Big screens will be put up in towns and cities around the country to enable people to get together to watch the Olympic and Paralympic Games. We want tourists and visitors to those events also to take advantage of longer shop opening hours in the vicinity of those locations. Of course, tourists may travel to other parts of the UK during the Games. We want families, whether they are in east London, the East Midlands or the north-east, to have the flexibility to plan their weekends around local and national events.

However, we recognise that the Bill causes concern for important groups. We have worked with the Opposition, unions and retailers to make sure that the concerns are addressed. In particular, there was concern that shop workers would not have sufficient time after Royal Assent to opt out of Sunday working in time for the start of the suspension period, should they wish to do so. This is because the usual notice period for opting out is three months, and there will be less than three months between Royal Assent in early May—subject of course to the agreement of your Lordships and of another place—and the start of the suspension of the restrictions on 22 July. It is of course important that shop workers in large shops that are affected by the temporary suspension in the Bill who wish to exercise their right to opt out of Sunday working during this period should be able to do so. Although they can give their opting-out notice before Royal Assent—and those who object to Sunday working will generally have opted out already—we recognise the concern that they should be able to do so after Royal Assent.

This right to opt out of Sunday working is already a unique employment protection that is not shared by almost any other sector of the working population, including, for example, the catering sector. The Bill will not diminish the rights that are set out in law. However, in recognition of this concern, we have brought forward an amendment to the Bill that temporarily reduces the three-month opting-out notice period to as little as two months for shop workers in large stores that are affected by the Bill. I will move that amendment in Committee on Thursday. On top of that, and very importantly, shortly after Royal Assent the Government will publish guidance on the implications of the Bill for employers and employees.

I am pleased to see that many large shops are taking a sensible attitude to working with their staff to take advantage of this opportunity. Morrisons, for example—one of the many stores that we spoke to—told us that it will speak to its employees so that they understand the proposals and any impact that they might have on their working hours. It also said that,

“whilst it represents an opportunity for them to earn extra money, it is also important that any of them who do not wish to work on Sundays will still have the right to opt-out”.

That is characteristic of the sensitive approach that large retail groups are taking.

Furthermore, the Government are very mindful that for many people Sunday has a particular religious significance as a day set aside for worship, and a day that is different from the rest of the week. The Government consulted with the church in advance of the Bill to ensure that it was recognised that this is emphatically a temporary measure for the period of the London Olympics and Paralympics only. I make it clear that this is not a test case or Trojan horse for a future permanent relaxation of the rules. The Bill is time-limited in its effect and contains a clear sunset clause. The suspension will be in effect from 22 July 2012, the Sunday before the opening ceremony of the London Olympics, to 9 September 2012, the date of the closing ceremony of the Paralympic Games. If the Government ever wanted to look at a permanent relaxation of the rules, new legislation would be required and consultation would be undertaken. Parliament would also have the opportunity fully to debate the issue. This Bill does not indicate any new government policy on the wider issue of Sunday trading restrictions.

I will also address the potential impact of the Bill on small shops, which has been highlighted. It is not clear whether, how, and to what extent small shops will be affected. However, both the Opposition and the Federation of Small Businesses have asked the Government to carry out an assessment of the impact of the temporary suspension. I assure the House that were the Government ever to decide to look at a permanent relaxation of Sunday trading restrictions, a full impact assessment would be carried out. As part of that, they would of course consider any evidence of the impact that the temporary suspension had had on relevant businesses, large and small.

We listened to the concerns raised about the Bill. We made every effort to consult and to work with a range of interested parties. We spoke to large businesses, including supermarkets and other retailers; to representative organisations such as the CBI, the British Retail Consortium and the British Council of Shopping Centres. We spoke to representatives of small businesses such as the Association of Convenience Stores, the National Federation of Retail Newsagents and the Federation of Small Businesses, which I mentioned. We also spoke to trade unions including USDAW and Unite. As I mentioned, we spoke to the Church of England, the Church in Wales and the Roman Catholic Church.

We also offered briefing sessions on the Bill to all Peers and Members of another place. We had numerous discussions and exchanges with the Opposition. They agreed several weeks ago to the use of the fast-track procedure for the Bill, subject to us considering employees’ notice periods for opting out of Sunday working. As I explained, I brought forward amendments that I believe will deal with precisely that point. Despite that, and despite further letters from me and my right honourable friend the Secretary of State for Business at the end of last week, we have not yet had confirmation from the Opposition that they will fully support the Bill. I hope that the noble Lord, Lord Davies of Oldham, is about to give us that confirmation. After all, it was the party opposite that secured the Olympics for the UK, and it was a great achievement for all concerned with the bid. It would be a huge shame if it was now not to support a temporary measure aimed at ensuring that the UK can make the most of the opportunity that the Games will give us. I hope that we can demonstrate to the world in a small way through this debate that we are pulling constructively together to put in place a further measure that will ensure the success of the Games.

As I said, the Games are an opportunity to showcase the UK’s skills, talents and businesses to the rest of the world. They will be an occasion for unparalleled entertainment, and we want to make sure that everyone can enjoy them to the full. Allowing extended Sunday trading for UK retailers will be a small change that could have a significant impact on the enjoyment of the Games, on our national economy and on our international image. It is one that has been done elsewhere on similar occasions. It may surprise noble Lords to learn that even Germany, with its notoriously tight restrictions on Sunday opening—far tighter than ours—eased its opening hours restrictions during the football World Cup in 2006 and then reimposed them. If Germany could do it, I am sure that we in the UK can and should. The Bill will give employees, consumers and businesses the opportunity fully to seize the vast opportunities that will come from this once-in-a-lifetime event. I commend the Bill to the House and beg to move.

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[Lord Sassoon]

My Lords, it might help if I just explain that I think in Recesses some things do not get checked as carefully as they would normally, and there were no annexes A and B. Indeed, the advice was that the economic impact is very difficult to assess because of the nature of this Bill and the nature of the assessment that could reasonably be made. However, I am happy to make sure that we publish the impact assessment and make it available tomorrow ahead of the Committee stage. I stress to noble Lords that it does not strictly need to have been published, but in the name of full disclosure of information ahead of further consideration of the Bill, I am happy to make sure that it is available to noble Lords ahead of Committee.

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[Lord Sassoon]

My Lords, first, I am grateful to all noble Lords for their valuable and insightful contribution to today’s debate. With just over three months until the Olympic and Paralympic Games, it is certainly clear that whatever the views of individual noble Lords on this Bill, there is a shared enthusiasm for the success of this once in a lifetime event. I am grateful to the noble Lord, Lord Davies of Oldham, for confirming that the Opposition will not oppose the Bill.

There is a great commitment across the country to making the Games a great success for the athletes, and indeed for the visitors, and it is in that context that we are making a modest but, I think, important contribution to the overall success of those Games through the measure that we are bringing forward today. It is important to bear in mind what my noble friend Lady Trumpington had to say. I am sure that she would never say—and I would never directly say, in terms—“Calm down, dears” to anybody, but she did say, in almost those terms, that we really should put this measure in perspective. It is important that we consider all the proper safeguards but it is a modest measure, which will contribute to the success of this great event.

I recognise and have already acknowledged that it is not ideal that this Bill has come forward this late in the day, and through the fast-track procedure, which we have only brought forward after discussions with the Opposition in the normal way. Sunday trading was subject to scrutiny through the Red Tape Challenge process that is going on for all regulation. We looked at it in that context and it did not support a permanent relaxation. Following that, a Private Member’s Bill was brought forward in another place by Mark Menzies MP in October last year, which proposed a similar suspension to that being introduced by this Bill, and that contributed to the narrowing down of our thinking on this issue. Following some reflection, we came to the conclusion that this Bill was appropriate and necessary. So there has been an evolving process. I can assure those noble Lords on both sides of the House who were insinuating that there was some pressure—some dark plots, even some panic—that there has been no panic as to whether this measure is necessary and no pressure from particular impacts groups. It was a realisation which evolved through reflection on the general question of attitudes to Sunday trading, and by thought about the opportunity which visitors and spectators at the Games and across the country should have through this period, that has led to the Bill coming forward.

There have also been questions around the economic impact. I am conscious that the more one talks about the economic impact, the more it could be portrayed, or perhaps misportrayed, as a Treasury Minister being drawn into talking about Trojan horses. I say again what I said clearly two or three times in my opening speech—this is a one-off measure. We took the belt-and-braces approach of putting the sunset clause in, which was not strictly necessary. The Bill is absolutely as it says it is on the tin.

I am nervous about getting drawn into questions of economic impact because they could be misconstrued, but a number of noble Lords referred to it. The impact is extremely difficult to assess. When noble Lords see the impact assessment tomorrow it will not give—because it would be wrong—spuriously accurate figures about the impact of this measure. There is a lot of qualitative discussion but I would not raise the expectations of noble Lords for the reasons that have been given already. On the one hand, we have heard quoted some relatively extreme figures for the particular impact to which the Association of Convenience Stores has drawn attention. On the other hand, the Centre for Retail Research has given numbers that go the other way showing the positive impact. We could look at the previous Government’s benefit study for full relaxation and the positive impact that that impact study gave as regards the relaxation of rules around Sunday trading.

The best we can say is that the studies show a mixed picture and are extremely difficult to interpret. If one looks at convenience stores, for example, it is quite possible, and very likely in some areas, that the generation of excitement and more appetite for people to go out and shop around the events associated with the Games could benefit convenience stores just as it may benefit larger stores.

Noble Lords will have received the interesting submission from the Federation of Small Businesses, which has asked for an impact assessment after the event. As I have already assured the House, if the Government were ever to come forward with a wider proposal for relaxation, the impact of this proposal for the Olympics would be one of the things that would quite properly be taken into account. That is what the Federation of Small Businesses has asked for.

As for the special nature of Sundays, I am very grateful for the measured positions that have been taken by some long-standing opponents to the relaxation of Sunday trading. The right reverend Prelate the Bishop of Bath and Wells gave a very balanced view. I am very grateful to my noble friend Lady Wilcox for the work that she has done to help me with this Bill, particularly the leading role that she has taken in conversation with the churches. I also thank my noble friend Lord Cormack, whose views on this subject are well known and were very clearly put in this evening’s debate. The conclusion that he came to about the Bill is much appreciated. I know that he does not like it but he has made clear that he will not stand in the way of it. I hear that very clearly and I hope that he has heard my assurances on the general topic on behalf of the Government.

The Bill is focused on the Olympics and the Paralympics, and the noble Baroness, Lady Grey-Thompson, in another balanced and measured contribution to the debate, addressed the question of the number of weeks covered. My noble friend Lady Berridge specifically asked why it is being done the week before. There is also the week in the middle. If the Government are going to put in place this measure, as they believe is appropriate, then certainly, as the noble Baroness, Lady Grey-Thompson, explained, there will be athletes and visitors arriving here before and staying between the two events. We certainly did not want to prolong this unreasonably but we believe that if we are going to bring it in it should cover the whole period during which visitors and athletes may have more opportunities to shop and get out and about before and after the Olympic Games. However, it is only for one week before the Games until the day that the Paralympic Games close.

I know that the hour is getting on. Of all the considerations that have arisen, clearly the other main issue was the impact of the Bill on employees. There were some rather overdramatic references to exploitation, historical lessons going back to the Greek period and comparison of the Games with what happened under other regimes going back to the Games in Moscow decades ago, which were perhaps taking what is being proposed somewhat out of context.

It is worth bearing in mind the point made by the noble Baroness, Lady Deech, that employees in the retail sector already have special protections which employees in just about every other sector of the economy do not have. That is not to say that we want to, or will, undermine those special protections in this Bill, but it is worth reminding the House that we are not doing anything in the Bill which has a terrible impact on a particular sector; it preserves the special rights which employees in this sector already possess. On the subjects of exploitation and pressure on workers, I understand that these are real issues but, nevertheless, the picture that we were given by one or two noble Lords on this subject was not balanced. The Games will provide an opportunity for some employees to earn more money, at a time when families are under pressure because of the general economic environment. In a balanced way, that opportunity should and will be available to people through this measure if it is approved by your Lordships’ House and in another place.

The Government cannot directly legislate to deal with the pressure that people feel under in these circumstances. They can only ensure that they have appropriate legal rights, and that certainly is what the Bill takes into account. We have been talking extensively to employers and are encouraging them to talk sensibly with their employees. We know that employers are already starting to do just that. It is not in the interests of large retail groups, who will normally be the owners and operators of the big stores that we are talking about, to expose themselves to reputational damage if they pressurise their employees. That is surely the last thing they want to see associated with the Olympic Games. It is also very important to realise that all the protection in the law, which is important, is very much a backstop protection, and that in reality the protections that are built into the employment contracts of the big retail groups will actually go well beyond the law.

I referred in my opening speech to the approach of one major supermarket group. Another of the major retail groups already has in its contracts of employment the right for staff to opt out of Sunday working on a one-month basis—a greater protection than anything in current legislation gives. Another major retail group has a longer opting-out period, consistent with the period in the legislation, but it recognises that and is already adopting an approach of having conversations at local level with its employees. Another supermarket group is in the position where Sunday working currently ranks as non-contracted hours, so they are usually a source of overtime for staff. That particular group is projecting a relatively high take-up, both from existing employees and from student workers wanting to work additional hours on Sunday. We should not think that legal protections, important as they are as a backstop, are what major retail groups apply in reality; they have contracts of employment that in many cases go much further. Even beyond that, they are already talking to their employees to sort out something sensible if they are given this modest but important opportunity around the Games.

A number of other issues have come up and we will have further opportunity to debate them on Thursday. I come back to the fact that the economic impact assessment is difficult to make in micro terms, but we can look at the enormous benefit of the Games, whether it was the £2.5 billion boost to the economy in Australia, the $5 billion in Atlanta or some of the other numbers that have been generated. I do not begin to say that we can link this measure in any scientific way to the generation ahead of time of economic benefit, but it is a small measure that primarily helps with the overall experience of visitors to the Games and of the whole UK population around the Games. However, it will contribute to what I hope, after the event, will be an important boost, associated with the Games, to the economy—including of course the huge amount of work that is going in to making sure that the legacy of the Games in the UK is second to none. These are things that we will only be able to assess after the event, but this measure will contribute to that.

As to the evidence around the popularity of this measure, we have heard certain numbers from USDAW, but on the other hand we have also heard about the YouGov poll—so this does not come from any particular interest group—which shows that the majority of the country believes that a combination of permanent and temporary relaxations are appropriate.

I come back to welcoming the broad statement from the party opposite, although I recognise that we have some detail to go through on Thursday. I am grateful for the contribution from all those around the House. I have not mentioned all noble Lords who have spoken, but I thought that in particular the very measured conclusions from the right reverend Prelate, the noble Baroness, Lady Grey-Thompson, and, at the end, in the unanticipated intervention from my noble friend Lord Glenarthur, were among those that summed up the appropriate spirit. I look forward to a further discussion on Thursday but ask that this evening the House gives the Bill a Second Reading.

Bill read a second time.

Scotland Bill

Lord Sassoon Excerpts

Wednesday 28th March 2012 Lords Chamber

[Lord Forsyth of Drumlean]

It is very straightforward. We are talking about devolution here, not about establishing a federal system. As someone said, although I cannot remember who, power devolved is power retained. The ability to create a completely new tax—a window tax, or whatever—has to reside with the other place down the Corridor. Within our constitution, in order to create a new tax, you have to have a finance Bill. It used to have to be on the Floor of the House of Commons when it came to Committee, and there is a set of procedures that needs to be followed. It is completely different from devolving the power to set a rate of tax, which this Bill purports to do and is the commitment made in the manifesto.

My constitutional problem is that that ability of the House of Commons to discuss, through a long-standing procedure, the imposition of taxation is being undermined because all that it requires now is an Order in Council, which by convention cannot be voted on in this House and cannot be amended. That is no basis upon which to create new taxes on the people. It is the nature of the procedure that is the constitutional outrage as far as I am concerned, not the nature of giving the Scottish Parliament the ability to raise a particular tax.

[The Commercial Secretary to the Treasury (Lord Sassoon)]

My Lords, I will just try to clarify the position here, which might be helpful to this ongoing debate. This is a very important point. We should be clear that we are talking about a power to devolve taxes, which is a constitutional provision that it is perfectly proper for Parliament, including this House, to have a role in. That is quite separate from the creation of the new tax, which will be the responsibility—if it is given it under the provisions of this Bill—of the Scottish Parliament. I suggest to my noble friend that it is misleading to say that somehow we are driving through the creation of new taxes via some improper provision of this Bill. The clauses we are talking about seek to devolve a tax, a power that is retained by this Parliament and around which there will be all sorts of safeguards, as we will come on to. There will be a joint assessment by the Government here and in Scotland before such proposals come forward. But the creation of the new tax will be for the Scottish Parliament and will go through a proper, full parliamentary process of that Parliament.

[Lord Pearson of Rannoch]

Forgive me, but that does not appear to be exactly what the Bill says. It may be helpful for those who follow our proceedings, but do not go into the detail of the Bill and the Explanatory Notes and all the rest of it, if I read out briefly what the Bill says and then put some questions to the Minister.

The part of the Bill that the noble Lord, Lord Forsyth, is attempting to remove is new Section 80B of the 1998 Act on the power to add new devolved taxes. It states:

“Her Majesty”,

who of course acts under the advice of Ministers, so it is not her fault,

“may by Order in Council amend this Part so as to … specify, as an additional devolved tax, a tax of any description … or … make any other modifications of the provisions relating to devolved taxes which She considers necessary or expedient”.

I repeat a question put to the Minister by the noble Lord, Lord Forsyth. Can he think of anywhere else where a new tax or taxes can be imposed on our people by Order in Council without their informed consent? Have they given that consent and, if not, how will they do so? Are the Government really suggesting that this process will take place without going through your Lordships’ House or the House of Commons? Are we not even to have the affirmative or negative procedure? We need to clarify this matter because, from what I know of it so far, this is going too far for our democracy.

[Lord Sassoon]

I do not want to keep popping up and down like a jack-in-the-box, but I shall try again.

[Lord Tordoff]

With all due respect to the Minister, he should not keep popping up and down. We are at the Report stage of the Bill and people should speak only once. I understand the pressure on him to intervene after what the noble Lord has just said, but this feels more like a Committee stage than a Report stage to me.

[Lord Sassoon]

My clear understanding is that as the Minister I have the privilege of being able to speak multiple times at the Report stage, unlike other noble Lords. I simply thought that it might be useful to intervene again now to answer this question before it is raised yet again and to help to shorten the debate.

A tax cannot be applied simply by Order in Council, as the noble Lord seeks to suggest and as I think my noble friend suggested. First, in answer to the specific point made by the noble Lord, Lord Pearson of Rannoch, it is an Order in Council subject to an affirmative procedure. That Order in Council simply devolves the responsibility and gives space to the Scottish Government and Parliament to decide how to fill that space with a new tax of their construction. It will be up to the Scottish Parliament. The Bill allows the Scottish Parliament to pass legislation in a Bill for a new tax in Scotland. Of course, the Scottish Government will have to give full consideration to the impact of the new tax, as they propose it, just as there will need to be an assessment—we will discuss it later—before the power under the clause is devolved.

--- Later in debate ---

[Baroness Rawlings]

My Lords, I remind noble Lords that on Report a Member may speak only once except for a short question of elucidation to the Minister.

[Lord Sassoon]

My Lords, I shall try to address some of the further points that have come up, although I have addressed one of the key points so I will not repeat myself. Although my noble friend Lord Lang of Monkton went rather wider—I thought we were going back to Second Reading—he provided some important context for the clause. We do not want to leave ourselves with the impression of a weak Scottish economy that my noble friend paints. It is right to remember that with 8.4 per cent of the UK’s population, the gross added value contributed by Scotland was 8.3 per cent, which is almost in line with the percentage of the population. I could cite many figures, including some which show that Scotland’s economy outperforms that of the UK as a whole. We should not think that we are making Scotland too reliant on the 10 per cent of tax base. I think my noble friend suggested that we were relying excessively on that 10 per cent. To be clear, under the Bill about 60 per cent of Scotland’s budget will still come from the block grant, so that context is important.

I wish to address one or two of the issues specific to this clause and the amendment. It is important to realise that the power we are talking about allows for the Scottish Parliament to be given full control over a specified tax. It does not allow for the Scottish Parliament to be given control over particular aspects of taxes such as the rate. It is a power to devolve complete control of a specific area. As I have explained, it will then be for the Scottish Parliament to go through a process to create a new tax to fill the space.

[Lord Forsyth of Drumlean]

On a point of information, is my noble Friend saying that the Scottish Parliament cannot think up a completely new tax, such as a window tax, for example?

[Lord Sassoon]

First, this Parliament needs to devolve the power to create the space and then the Scottish Parliament can move into it.

There are two reasons why we need this power. One is to enable those taxes and duties which are already in contemplation to be devolved. Then there is the question of future specified taxes, which relates to Calman. We may or may not come back to the question of an air passenger duty and an aggregates levy, which we discussed at length in Committee. However, this power is needed under the construct which the Government propose whereby we have APD and an aggregates levy to be devolved in due course. We are not in a position to do so at the moment and the power is required to enable that to happen. However, I completely accept that that is a separate matter from the identification of future taxes and how that relates to the Calman recommendation. It is clear that there are different interpretations of what Calman recommended, as we have heard this afternoon. I could read out large chunks but I suspect that would not lead to our agreeing on the precise construction of the words. I repeat that I believe that Calman envisages the devolution of future specified taxes rather than just taxes that have been specified up to this point. I agree that the words are not easy but I will quote a chunk from Calman:

“We see no reason why the Scottish Parliament should not be able to legislate to create new taxes that affect the whole of Scotland uniformly and not just via local taxation, if it does so with the agreement of the whole UK Parliament”.

I believe that that is the context in which this central power should be seen.

I will not repeat our previous discussion but I remind noble Lords that, whether they have noticed it or not, a very similar power is embedded in Section 30 of the Scotland Act. Therefore, like it or not, it is simply a fact that that power has existed for a number of years and there is a record. That relates to one of the points made by my noble friend Lord Lang of Monkton about abrogation or abnegation—whichever or both—of responsibility by HM Treasury. It is already clear from the operation of Section 30 and requests made under it to devolve tax and non-tax powers that the Government have a record of looking carefully at the evidence and rejecting any proposals that do not meet the tests that, in the context of the Bill, we will come on to talk about a little later.

I say to my noble friend that there will be no shirking of responsibility by the Treasury or any other part of government. The tax, and evidence base for any proposal to devolve responsibility for a particular tax, will be agreed between the UK and Scottish Governments before the Government bring any order before the House under the affirmative order procedure. We will come on to this, but the impacts will have to be assessed in line with the guidelines set out in the Command Paper. We will discuss what the standing of those guidelines should be, but that is how any proposal will be assessed.

The power is necessary and appropriate as regards the two taxes that have been identified but which we are not in a position to devolve at this time. The power is consistent with the construction of Calman, which I believe is appropriate, and consistent with the spirit of Section 30 of the Scotland Act. The evidential base will be properly assessed against the criteria set out in the Command Paper that we will discuss in more detail shortly. After this useful discussion, I ask my noble friend Lord Forsyth of Drumlean to withdraw the amendment.

[Lord Forsyth of Drumlean]

My Lords, I am most grateful to my noble friend for that very unsatisfactory response. He has not answered any of the points that have been made, particularly as to whether he could give an example of where taxes have been imposed by secondary legislation, subject to a vote in this House. His comparison with the Section 30 procedure in the Scotland Act to justify this is ridiculous. On that basis, Ministers could impose taxes on England using the secondary legislative procedure because there is a precedent of secondary provision in other legislation.

My noble friend did not read out the bits of the Calman report to which he referred because I suspect that they are crystal clear. It talks about specified taxes, and when I have repeatedly asked the Minister to specify the taxes that could be imposed using this power, we have been told that the aggregates levy and other taxes could be written into the Bill, with a commencement provision by order. I would not have a problem with that.

My noble friend says that he does not understand what the constitutional difficulty is, because the Scottish Parliament will follow its procedure in deciding on the tax. However, the ability to raise taxes on the people of this country should reside with the House of Commons. The House of Commons, having gone through the proper procedures may delegate decisions to the devolved institutions, but what my noble friend is doing is turning that principle on its head. I do not wish to embark on the debate on the next set of amendments and the sensible amendment of the noble Lord, Lord Browne, but one has only to look at the first subsection of his amendment, which states that the use of the section,

“shall be assessed against the following criteria … the potential for the new tax to create or incentivise economic distortions and arbitrage within the UK … the potential the new tax might create for tax avoidance across the UK”.

These are matters of interest to people not just in Scotland but in the rest of the United Kingdom, and should be debated properly in the normal way that applies to tax policy—on the Floor of the House of Commons, not in this place by order. We have no business in relation to the imposition of tax, and have not had any since 1911.

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Why can we not have clearly defined in the Bill the tax powers that are to be devolved, rather than creating this open-ended commitment that will be used in every way possible to argue for new taxes, which will put the Treasury in the role of the unco-operative man in Whitehall who knows better than the people of Scotland?

[Lord Sassoon]

I understand that my noble friend feels very strongly about these matters, but does he agree that the Scottish Government, in the process leading up to the Bill, asked, among other things, for the assignment of excise duty revenues and the devolution of corporation tax, but have not got them? With all due respect to him, the idea that the Government will somehow roll over to every request from the Scottish Government is simply wrong, as evidenced by the perfectly proper negotiations leading up to the Bill, where the Scottish Government have not remotely had all their asks granted.

[Lord Forsyth of Drumlean]

I am most grateful to my noble friend for the stand that he has taken on corporation tax. That is an example of an existing tax. We are not talking about existing taxes. My noble friend has confused the issue—I am sure not deliberately. We are talking about the creation of completely new taxes that would apply only in Scotland but which might have an impact on the rest of the United Kingdom.

I am simply saying that the procedure included in the Bill, which requires that to be dealt with by order, is inadequate. It should be dealt with by primary legislation. My noble friend is, in effect, enabling Ministers, by Order in Council—without having to go through the whole difficulty of introducing primary legislation—to give consent to new taxes that might be proposed by the Scottish Parliament. In doing so, he is driving a coach and horses through the way in which we levy taxation in this country. That is a huge step and that is why I feel strongly about it.

What is particularly irritating is that it is unnecessary to do that to achieve my noble friend’s objectives. In his reply, he said, “Of course, we have these agreed criteria”. Everything he said has been about how the Executive will ensure that there is protection. The whole point of our parliamentary democracy is that Parliament should provide protection for the people, because it is accountable to people in a way that the Executive are not. The Executive are accountable to Parliament. This procedure suggests that we should have an order. In this House, not only is it unamendable but, by convention, we do not vote against it.

That is a big step for no apparent reason other than administrative convenience—unless, of course, it is in the Government’s mind that they want to give more powers to raise taxes or create new taxes without the bother of having to go through the procedure of having another Scotland Bill. I can well understand, given the time that I have devoted to my noble friend, why he might wish not to have another Scotland Bill and prefer the convenience of this procedure, but that is not right. Therefore, I am not satisfied with his response. I can see that I am not going to change his mind, and I am certainly not going to win a vote on this, so I beg leave to withdraw the amendment.

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[Lord Pearson of Rannoch]

My Lords, I, too, take the amendment as a small step in the right direction. I merely ask the noble Lord, Lord Browne of Ladyton, whether he agrees that if the Government do not accept the amendment, it will give great force to the previous amendment of the noble Lord, Lord Forsyth. Of course, if the Government do accept the amendment, it will be a small step in the right direction. However, it does not abrogate the point that I and—much more huffily—the noble Lord, Lord Forsyth, attempted to make when we debated the previous amendment, which remains the best one. I do not know whether the noble Lord, Lord Browne, is in a position to answer that before the Minister replies.

[Lord Sassoon]

My Lords, I take that as a no.

[Lord Browne of Ladyton]

I am not allowed to.

[Lord Sassoon]

Then it was a no for a very good reason.

My Lords, I thank the noble Lord, Lord Browne of Ladyton, and the noble and learned Lords, Lord Davidson of Glen Clova and Lord Boyd of Duncansby, for the amendment, which exposes an important issue that it is quite right that we should debate. As was well anticipated, I say at the outset that it does not find favour. However, in the spirit in which the noble Lord, Lord Browne of Ladyton, led me on, I will be positive in my response, because there is further reassurance to be given here about what I hope your Lordships will think is a pragmatic and proportionate way forward.

I am not sure whether we are talking about Amendment 17 at this point. My noble friend did not speak to Amendment 17, which is a fundamental one about removing the ability of the Scottish Government to legislate on any taxes that are devolved. Perhaps I will not need to say very much about that; it links to our previous discussion.

[Lord Forsyth of Drumlean]

I have not moved Amendment 17.

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[Lord Sassoon]

I thank the noble Lord for that clarification.

Amendment 16 inserts the conditions and procedures required prior to the devolution of further taxes. It would put the considerations required for the devolution of a new tax outlined in the Command Paper on a statutory basis. Of course I confirm at the outset that the Government still fully agree that the criteria in our Command Paper are the right ones. In that sense, the words were picked up correctly and I am afraid that I have to hold up my hand to my noble friend Lord Lyell and remind him that the criteria came from the Government, so there is no way for me to avoid the accusation of Monty Python-speak—I cannot pass on the responsibility to the noble and noble and learned Lords who tabled the amendment.

I hope that my noble friend recognises the serious point that in devolving responsibility for taxes, we do not want knowingly to set up a massive opportunity for tax avoidance because of a mismatch in the tax systems between two parts of the United Kingdom. That is rightly what the criteria are intended to prevent. There is no question about the criteria; we endorse their aims. I think that even my noble friend, Lord Forsyth of Drumlean, would accept that if there are to be criteria, he has not suggested any better ones. So that is a good starting point. The question then becomes about the statutory basis or otherwise. First, I suggest that because we all agree about the nature of these criteria without debate, perhaps they are self-evidently the criteria which any Government would use. They are common-sense criteria which any Administration or Parliament would address in looking at these matters. They are self-evidently reasonable and have not been challenged. That questions why we need to state the obvious in statute. However, I appreciate the concerns and let me come to the positive of how we can reassure noble Lords on this point.

This links to Amendment 29, which we will come to later: the proposal to place a statutory requirement in the Bill for both Governments to provide updates to their respective Parliaments on the implementation of the Bill. That is the mechanism under which the Government propose these criteria should be properly considered. The criteria themselves can be debated and discussed before any proposals come forward to this House and another place, and to the Scottish Parliament.

This provision recognises that the implementation of these measures will be very important. Under the proposal that we will come to in Amendment 29, there is a requirement that both Parliament and the Scottish Parliament be well informed after the Bill completes its passage through your Lordships’ House but before further and future proposals come forward for taxes that might be devolved. I can specifically commit that the first report under this new power, which we will propose later, will be published within 12 months of Royal Assent and will include the criteria set out in the Command Paper. So the criteria will come in the first report that will be presented. They will be included in the detail of the report, which will allow consideration and possibly debate in this House if your Lordships consider it appropriate. In that way, I believe we will go as far as reasonable or necessary to have a specific debate, to make it absolutely sure for the avoidance of doubt in a paper which comes forward to both Parliaments that the criteria are indeed the criteria following passage of the Bill.

[Lord Forsyth of Drumlean]

Before the Minister draws this red herring across our path, it will be interesting to discuss these proposals when we come to that point in the Bill. As we all agree that this is a model set of criteria that in some way circumvent the use of this power, what is his objection to putting them in the Bill? Nothing he has said explains why he should not accept the noble Lord’s amendment and put it in the Bill. It is written by his Treasury staff, they are his own words, everyone agrees that they are sensible criteria and it will offer reassurance to us, so why is he not prepared to accept this amendment? Is it because he is worried about judicial challenge?

[Lord Sassoon]

No, I am not specifically worried about judicial challenge. I just think that it is reminiscent of debates I am becoming increasingly used to in your Lordships’ House. I am sure many noble Lords are much more familiar than I am with these arguments that regularly come up: if it is so obvious, we do not need to put it in because everybody understands it; or, if it is so clear and everybody accepts it, let us put it in. I have suggested to your Lordships that the criteria, based on the limited discussion that we have had here, are widely accepted. They should be debated if your Lordships want to debate them properly.

We do not have the opportunity here, and have not had it in Committee, to debate the criteria in detail because we have a “take it or leave it” provision to put them in. I believe that the proportionate, appropriate and sensible way forward is to set them out in the first report that we will require, if the House agrees, under Amendment 29. At that point, if your Lordships want it, there could be a specific debate on the criteria.

[Lord Kerr of Kinlochard]

The trouble with that is that it is retrospective. It is about things that have happened and the use that has been made of powers. That is what reports are about. The safeguards in the amendment tabled by the noble Lord, Lord Browne, and in the Command Paper are about affecting the procedure prospectively when the Parliament in Scotland wishes to introduce a new tax and the Government in London are considering an Order in Council. I see a huge difference there, and it would be very good to have these in the Bill. I have not heard a convincing argument against that from the Minister.

[Lord Sassoon]

I believe that the noble Lord, Lord Kerr of Kinlochard, has not quite got the construction right. The report proposed under Amendment 29 will be on the implementation of the Bill. The first report will come forward 12 months after the Bill is passed and will be about implementation matters. One of those implementation matters, which I am making a commitment to include in that report, is around the Command Paper criteria. It will be a report on implementation and will include things that have been done in the period since Royal Assent, which will include confirmation of the criteria. They will then be debated. It will have prospective effect in the sense that it is most unlikely that in that time any new proposals will have come forward for the devolution of further tax powers. Therefore, the debate on the criteria will happen before they take effect when any further proposals for devolved taxes come forward. The noble Lord shakes his head, but in that sense it is looking forward and is entirely consistent with the nature of the report that we envisage. I hope that reassures him on that point.

The second commitment around this issue, which it is important to get on the record, is that the Government are happy to commit to publishing an assessment on any occasion that the power is used. That report will confirm how any order brought forward under the new tax provision meets the criteria. Again, this information will not just be used by the Government in their assessment of the criteria coming forward, but will be wholly transparent to your Lordships’ House and be part of what your Lordships will have available to them to satisfy themselves that the Government are properly considering the criteria when they come to exercise this power and put an order forward.

The information will clearly need to cover all the relevant criteria included in the Command Paper. It will do so in a proportionate level of detail. I repeat for the avoidance of any doubt, by my noble friend in particular, that the Government have already been clear—I have said it this afternoon—that a number of tax proposals from the Scottish Government have already been made without the provision of sufficient evidence and requests have been declined a result.

On Amendment 16, I hope that I have responded to the specific request of the noble Lord, Lord Browne of Ladyton, to come forward with a new and positive proposal, which I hope addresses the substance of his amendment. I respectfully ask him to withdraw it.

[The Earl of Caithness]

My noble friend said that what the noble Lord, Lord Browne of Ladyton, had proposed in his amendment was self-evident. For many of us who live north of the border, what we consider to be self-evident is not what the Scottish Executive would consider to be self-evident. This causes huge concern, of which I am not certain that my noble friend is aware. We are very sceptical of what is happening north of the border. What to us might be self-evident, and what might be in a report produced by a UK Government under Amendment 29, still does not bind the Scottish Executive.

I ask my noble friend to reconsider the last point made by the noble Lord, Lord Browne of Ladyton. This will be subject to a legislative consent Motion, and if we can tie the Scottish Executive in under that, we will be happier.

[Lord Sassoon]

My Lords, I hope I can reassure my noble friend that that is exactly what will happen under Amendment 29, because that will require both Governments to provide updates to their respective Parliaments on the implementation of the Bill. If we are not able to give a report that confirms that the criteria envisaged under the Command Paper are accepted by both Governments, that will become clear when we see the first report after the passing of this Bill.

[Lord Cameron of Lochbroom]

Before the Minister sits down, perhaps he could help me. In his answer, he made reference to a tax being an “empty space”. In the Bill, new Section 80B includes,

“a tax of any description”.

Let us assume that this tax is not presently a United Kingdom tax or one that the Scottish Parliament has adopted, but a new tax that could have implications for the United Kingdom. On the point about space, I would have expected that the proposer of the new “tax of any description” would have a clear idea of what he wanted Parliament to provide for it—the shape and mechanics of it, and the rest—all of which would have to meet the Command Paper requirements.

Nowhere in legislation are these criteria set out, yet proposed new subsection (8) of Amendment 16 —which logically should come before proposed new subsection (7)—requires the “additional devolved tax”, this empty space, to comply with the criteria. You can argue that the criteria should be stated first and thereafter the proposal should be shown to be thought through in the context of statutory criteria, rather than leaving it on the basis that the proposals will come forward in the Order in Council and Parliament will not have any indication of why the Scottish Parliament considers it a space that is conclusive of the criteria. I see nothing in Amendment 29 which requires that kind of material to be reported to Parliament in advance of Parliament considering the Order in Council. Perhaps the Minister will explain. His metaphor of the empty space was very apt as the Bill stands.

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[Lord Sassoon]

My Lords, let me give a brief response to the noble and learned Lord’s question. If we take the example, say, of stamp duty land tax, we have not set out the new tax framework for land tax in Scotland, which will be for the Scottish Parliament to do. We have devolved the policy space. It will be for the Scottish Government to design a new system that suits the requirements of Scotland, which will go through the tax-making procedures of the Scottish Government and the Scottish Parliament. That is exactly the approach which will apply to any new tax devolution proposal. It is as simple as that.

[Lord Forsyth of Drumlean]

It is not as simple as that. The SDLT tax is in the Bill. Here, we are talking about taxes which are not in the Bill and could be completely new taxes. That is why the criteria are so important.

[Lord Sassoon]

We are going back to another question. I am answering the question about the empty space that is created. It is easiest to do that by reference to a specific example of where we are creating the space within which the Scottish Parliament will have the ability to create a new tax framework to fill that space. That example is specifically envisaged. By analogy, that is how I anticipate it will work for possible other taxes in the future if they meet a number of thresholds and requirements, legislative and otherwise, including meeting the requirements that we have been discussing in the Command Paper.

[Lord Browne of Ladyton]

My Lords, I am extremely grateful to all noble Lords who have spoken in this debate. I am particularly grateful to the noble Lords, Lord Forsyth of Drumlean and Lord Kerr of Kinlochard, for their comprehensive support, stated commendably briefly, for my amendment. I very much thank the noble Lord, Lord Sanderson of Bowden, and the noble Earl, Lord Caithness, for their specific support for the last argument I made, which is the key perhaps to the future of this amendment.

I am also extremely grateful to the noble and learned Lord, Lord Cameron of Lochbroom, who has made a suggestion that will improve the amendment. I agree with him that the order of the amendment would be more fortuitous the other way around but we may have an opportunity to come back to that. I have to say that I will come back to the noble Lord, Lord Lyell, but I thank him for his intervention about “Monty Python”. He has given me an idea for a peroration, which I think he will appreciate—but he will need to wait for it.

In the way in which the Minister has responded to the debate he has entered into the spirit of the day, but that is where it ends. He has only entered into the spirit of the day; we now need to get the content. The Government are listening and responding to the House’s position on this provision. I think that the Minister gets it and understands the point. Although I was a Treasury Minister for a period, I am not entirely sure where the blockage lies but I am sure that it can be moved.

The Minister says that he has made the arguments and hopes that they are convincing. I have to say that I do not think that he made any arguments on either my first or second points, the first being that it would be better if this extensive provision was ring-fenced by the Government’s own criteria in the Bill for the purposes of accountability, at least for the future. With respect to the Minister, a report—I will have to look carefully at the words he used about how it will work—which is an augmentation of one that is part of the agreement with the Scottish Government for the legislative consent Motion will not do. It will not do for all the reasons that the noble Lord, Lord Kerr, and others identified. Although it may have a degree of prospectiveness about it, the problem is that it would be more likely to be retrospective. However, even if it is prospective, it does not have the element of accountability about it that your Lordships’ House is looking for and the Opposition are looking for.

I could have been convinced by some offer that was more solid than the one that was put to me, but I am not persuaded by that offer. I am wary of the devolved taxation equivalent of an impact assessment report, which I think is what he also offered me. A statement by a Minister saying that these criteria are met will not be enough for this purpose. I am afraid that it will probably come to some Minister, whose bona fides I am not questioning in advance, saying, “The criteria that we set are met by this”, or “I assure the House”, or whatever. That will not quite be enough for this.

Even if I have not, and we cannot, find in this Bill a mechanism that gives the accountability that I—and, I sense, your Lordships’ House—would like to see, the Minister did not address at all the point about how we get the Scottish Parliament and Scottish Government to buy into and own these criteria. Experience tells us that that is essential. Even when they do buy into and own criteria or legislation by legislative consent Motions, they deny it later on, or they say that it was not enough, or they ask for more. That I can live with. We can debate that. That is politics. But we surely need to get the Scottish Government and Scottish Parliament to own the whole of this process. We cannot allow them the deniability of saying, “That was your Command Paper. It’s not got our imprimatur on it. We did not agree to it. What we agreed to is in the Act, so we are not having these London-based criteria imposed on us”. We all know this script. They need to own them. If they want these powers—and they do—then they need to own the whole package. I do not know whether the Minister or any of his colleagues have applied their minds to how to get the Scottish Parliament and Scottish Government to own this package, but there is a very simple way: get them to pass a legislative consent Motion for an Act of Parliament that includes them.

How, therefore, given that I am not convinced by the Minister’s arguments, do I propose that we deal this issue? Members of the House will be relieved to know that I do not intend to divide the House in the afternoon of the day before Recess. I do not intend to do so for this reason: that the Bill has another stage to go and I wish to continue talking to Ministers about this issue. I sense a growing coalition across the House for a revision and amendment of the Bill which could attract wide support and I have not had the opportunity to build that coalition. I am being open. I want an opportunity to try to build a coalition for an amendment that will find favour with your Lordships’ House and have some possibility of being passed.

I make one more offer to the Minister—I do not expect him to respond now—to engage to see whether we can find a way of amending the Bill or of obtaining from the Government a bankable undertaking that is owned by the Government and the Scottish Government. I cannot see what that can possibly be other than this amendment. I shall not be leaving the country during the Recess and I will make myself available for any discussions—if I can, I will bring members of our own Treasury team with me—to see whether we can find a way around this issue and, if we can, I shall be happy to commend it to the House.

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[Lord Sassoon]

My Lords, let me first thank the noble Lord, Lord Eatwell, for confirming what I and the Government strongly believe but clearly have not communicated to my noble friend Lord Forsyth—that the no-detriment principle simply does not have the sort of double-benefit effect to Scotland that he seeks to portray that it has.

[Lord Forsyth of Drumlean]

Of course it does.

[Lord Sassoon]

It is not a matter of “of course it does”. I regret that not all noble Lords seem to have been able to come to the briefing for all Peers that we had earlier this week to go through the Holtham-style block grant adjustment, because it is complex. Regrettably, under the conventions of the House, I cannot hold up charts and explain the money flows. However, that was precisely why we had an all-Peers meeting earlier this week, when we were able to go through the mathematics of this in detail.

[Lord Forsyth of Drumlean]

I am grateful to my noble friend. However, he organised that meeting in the middle of lunchtime on Monday. We were given a few hours’ notice of the meeting, and some Peers did not even know that it was happening. Some Peers were travelling down from Scotland. This Bill has been around for 18 months, so if the suggestion is that we have not been considering the arguments or been open to briefing, it is not correct.

[Lord Sassoon]

I am sorry—I have been very patient with my noble friend—but we had a very short window. We were asked to set up a meeting and we did so as quickly as we could. I appreciate that not all noble Lords could come but we did respond to the request for a meeting. If any other noble Lords had wanted a one-on-one explanation of the detail of how the adjustment works, my officials or I would have responded. I am not aware that any request was made because the meeting time was inconvenient. We have tried to be—

[Lord Forsyth of Drumlean]

My Lords—

[Lord Sassoon]

I am sorry, but—

[Lord Forsyth of Drumlean]

My noble friend has made an accusation; perhaps he will let me respond.

[Lord Sassoon]

I am sorry. I was merely trying to suggest that we have been as accommodating as possible in the very short time that we had available. I am not aware that there were any further requests for a detailed explanation of the complicated series of adjustments that would need to be made to make sure that the no-detriment principle works in a symmetric way, and is not a double hit to either the Scottish or the UK taxpayer.

[Lord Forsyth of Drumlean]

If my noble friend will allow me, the meeting was organised at 1.30 pm on a Monday when I was hosting a lunch. I replied to his officials saying that I might be able to do something at three o'clock. He will recall that the Scotland Bill came on later that day and that I had tabled a number of amendments to it. I was not able to attend, and other Peers were not able to attend because they were travelling. This is, by the way, not an argument about the technicalities. However, it is really quite unacceptable to suggest that we do not understand the arguments because we disagree with my noble friend, or to criticise us for not coming to meetings that were organised at short notice.

[Lord Sassoon]

My Lords, I do not want to prolong this but I resent the suggestion that we have not tried to be accommodating on this issue. We have all been considerably inconvenienced by the difficulties of the parliamentary timetable. I merely want to make the point that that timetable has been difficult and we have all sat around waiting for things to happen. I am sorry that we have not had an opportunity to take some of that time to discuss the details of this very technical series of adjustments under these arrangements. I say at the start of my response to this discussion that it is simply not possible to go through the adjustment line by line, but I shall make some points on it.

For those who have looked through the adjustment carefully—the noble Lord, Lord Eatwell, clearly has, as he does at such things—I believe that the way that the adjustment works means that the block grant is protected in the way that it should be. Scotland is exposed to the effect of decisions that are taken by any variation in the 10p rate, and that is all it should be exposed to in this case. That is entirely as it should be.

I turn to some of the questions about how the adjustment will operate. The first point related to when announcements are made and in-year adjustments or adjustments within the fiscal period. It is consistent with the Government’s approach to tax policy-making that we would seek normally to make any relevant tax adjustments and announcements well in advance. For example, the adjustments to the personal allowances that were announced in the Budget this year come into effect in just over a year’s time, giving time for any adjustments of a sort that will be needed to be worked up in future. So there is nothing more behind this than simply confirming that we are conscious that an adjustment will need to be made and it will be better if it can be made in advance. That is consistent with the normal approach that we now have to tax-making.

On the question about the OBR’s description of where it is at, the important point is that the OBR will use the period between this year, 2012, and the time when the new tax powers are transferred to refine its approach, including moving from historic to actual data, so that the impact from UK policy decisions will be refined and the methodology will evolve in the periods between 2012 and 2016. I am sure that, as it has done to date, the OBR assessments will set out transparently in successive reports how its methodology is changing. In the spirit of that—although I think this anticipates a situation that we are not remotely in—notwithstanding that there are four years to refine the methodology, if we get to a position where the OBR data are used to make some block grant adjustment and it subsequently discovers that it was misguided, something has changed and it refines that adjustment, I am sure that that will be taken into account. The more important question for the moment is the time period that it has to refine its methodology over the next few years before any question of block grant adjustments comes in.

On the question of macroeconomic shocks—

[Lord Eatwell]

I do not understand what that has to do with income tax and tax allowances. When you have a shock, you do not deal with it through the allowances or tax rates, because they take too long to have an effect; you deal with it through VAT or some other measure which has immediate effect in responding to a shock.

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[Lord Sassoon]

I certainly agree with the noble Lord’s analysis. However, if there were a significant reduction in the tax base as a result of a macroeconomic shock, the Holtham method of adjustment would take less out of Scotland’s budget. So there would be a dampening effect, entirely properly, to reflect the reduction in tax receipts from a shrunken tax base.

I have answered the questions about intra-Budget period adjustments. I come back to some of the overall numbers to see whether I can help my noble friend on the key consideration here. Under the proposals, from 2016 the income tax base in the UK will be shared between Scotland and the rest of the UK. As my noble friend says, the 10p taken out of all the rate bands in Scotland is expected to yield between the £4.3 billion and £4.5 billion that he mentions, up to £5.6 billion over the OBR forecast period, and the Scottish Government will receive around 3 per cent of total UK income tax receipts. The Scottish Government will then be responsible for setting their rate of income tax and the UK will be responsible for everything else. In such a system the UK must be accountable for the decisions that it takes on the structure of the tax. Conversely, the Scottish Government must be accountable for the decisions that they take in respect of the rate. At the moment, when the Government make decisions about personal allowances that will have a significant impact on many thousands of taxpayers in Scotland, taking them out of tax, it does not in any way affect the current settlement under the Barnett formula. In the same way, we want to make sure that in future, once the 10p rate is devolved, there is no adjustment to the block grant to the detriment of Scotland, just as there would not be now.

If we follow through my noble friend’s argument and apply it to the current situation, the logic would seem to suggest that if the people of Scotland benefit from a measure—as they will from the very considerable increase next year in the personal allowance and the starting rate of tax—the block grant should be reduced. If my noble friend is suggesting that then I would agree that the principles that we are applying under the proposed legislation are not appropriate. However, I do not think that my noble friend is suggesting that if the people of Scotland benefit from a reduction in their income tax, the block grant should be adjusted. We are simply saying that, going forward, there should be no such adjustment flowing out of decisions on changes to the personal allowance, and that the position should be neutral, just as it is now. On the other hand, if the Scottish Government want to make changes to the 10p rate or to the 3 per cent of total UK income tax revenue which will effectively be ceded to the Scottish Parliament or replaced by what it chooses to raise, they will be fully at risk. Perhaps the detailed discussion around the numbers that we were regrettably unable to have because of the pressure on everyone’s time—it was no one’s fault—may not have been necessary after all, if my noble friend is able to accept my attempt to bring the discussion back to the key simplicities.

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[Lord Forsyth of Drumlean]

My Lords, perhaps I may begin by commenting on the shortage of time and the pressure that has been put not just on Ministers but on Members of this House. That is nothing whatever to do with people who are not members of the Government. It is the Government who introduced the Bill more than 18 months ago; it is the Government who chose to wait so long between its introduction in this House and its Second Reading and Committee stages; it is the Government who decided to produce a consultation paper in the middle of the Committee stage, which meant that we had to delay consideration of part of the Bill; and it is the Government who landed us in a position where we were in Committee on Wednesday last week and had only one day in which to table amendments for Report.

The noble Lord, Lord Browne, raised the question about the formula that none of us, apparently, understands, and we received from the Bill team an invitation to come to a briefing at 1.30 pm on Monday. I travelled down from Scotland on a plane that arrived at London City Airport at 10.30 am. I did an interview with the BBC. I had a lunch to host. I got here at 3 pm and responded to the invitation to come to the briefing, saying that I could not come because I was hosting a lunch. I received a response asking whether I would like an individual briefing. I pointed out that the Report stage was happening at 3.30 pm but that I could do something at 3 pm. I received no response because, I would guess, the Bill team were preparing for proceedings on the Bill just as I was. Frankly, for the Minister to criticise us for not attending those briefings is, perhaps I may say, unfair. As it happens, his briefing is completely irrelevant to the argument. He seems to be satisfied with the technicalities. My argument is one of principle. The principle is clear. He asks: do I really expect the Scottish block to be reduced as a result of changes in taxation here? Yes, I do. That happens at present.

My noble friend shakes his head. I have been doing this for the best part of 20 years. When I was Secretary of State, I negotiated with the Treasury. I understand how Barnett and the block works, along with my noble friend Lord Lang. I also know how you can get round that and how you can pull the wool over the eyes of the Treasury. We spent some six or seven years of our lives doing that. I understand how it works.

My noble friend shakes his head to say that reductions in taxation do not actually result in a change to the block. Of course they do. How does my right honourable friend the Chancellor achieve reductions in taxation? He has to do it by reducing expenditure. If expenditure is reduced, the formula consequences are translated to Scotland. For example, when it was decided to privatise water, which helped the then Government to continue with their tax reduction programme, the Scottish block lost the block consequences of the money made available for the provision of water by public services. Of course there is a relationship between the size of the block and the spending decisions taken down here.

My noble friend is muttering. I am happy to give way to him if I am saying something that is incorrect.

[Lord Sassoon]

I completely agree with my noble friend about his last statement: there is a clear link through the Barnett formula to spending decisions here. There is not the same hardwired link between tax decisions on, for example, income tax and personal allowances and the block grant. I completely agree with him about the link between UK spending decisions and the block grant. That is clear, but it is very different from linkage between decisions about income tax matters and what is already agreed in the settlement for the block grant in a spending review period.

[Lord Forsyth of Drumlean]

Indeed, but I described the present situation. My noble friend proposes in the Bill to change it and to take part of the block grant, which is the equivalent of 10p on income tax, which, we agree, is £4.5 billion out of £28 billion, set it aside and say that that is the product of 10p on income tax. He suggests that that bit of the block grant is completely insulated from the effects of tax changes made at a UK level from which people will benefit. He says that I should have come to the briefing so that I understood it. I understand it. He is creating the illusion that the tax-raising decisions of the Scottish Parliament—whether it decides on 10p, 9p, 11p or whatever—will be directly related to its spending decisions if, at the same time, as a consequence of reductions in taxation down here, the block is automatically topped up to compensate the Scottish Parliament as a result of changes in allowances.

For example, if the threshold at which people pay tax was raised to £25,000, so everyone in Scotland who earned the average wage would not pay any income tax, that would have an enormous cost. As I understand it, under my noble friend’s equalisation proposals, the Government would say, “Your 10p on the basic rate no longer raises any money at all. That is a result of a decision that we have made here in the UK. Therefore, you have to be compensated for that and we will send you a cheque”. Do I misunderstand this? I will give way to my noble friend if he tells me that I am talking nonsense, but am I not correct in that understanding of the situation?

[Lord Sassoon]

My noble friend is positing a completely unrealistic situation. I do not see that that is ever going to happen.

[Lord Forsyth of Drumlean]

I agree. Of course it is not going to happen because our public expenditure commitments are so immense. I posit that in order not to get bogged down in complexity, formulae and detail because the principle here is quite clear. The idea that this is about Scotland raising its own revenue and being accountable for it is an illusion. My noble friend is simply recreating the block and saying that Scotland will in any event get the equivalent of the Barnett formula consequences because it will be compensated as a result of any changes in the allowances. That is what he is saying. Therefore, it is not what we are being sold; we are being sold—

[Lord Sassoon]

My Lords—

[The Deputy Speaker (Lord Brougham and Vaux)]

I remind the House that we are on Report, not in Committee, so I ask noble Lords to stick to the rules of the Companion.

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Moved by

[Lord Sassoon]

29: After Clause 36, insert the following new Clause—
“Reports on the implementation and operation of this Part
(1) The Secretary of State must—
(a) make reports on the implementation and operation of this Part (see subsection (5)),(b) lay a copy of each report before both Houses of Parliament, and(c) send a copy of each report to the Scottish Ministers, who must lay a copy of it before the Scottish Parliament.(2) The Scottish Ministers must—
(a) make reports on the implementation and operation of this Part (see subsection (5)),(b) lay a copy of each report before the Scottish Parliament, and(c) send a copy of each report to the Secretary of State, who must lay a copy of it before both Houses of Parliament.(3) A report must be made under each of subsections (1) and (2)—
(a) before the end of the period of one year beginning with the day on which this Act is passed, and(b) thereafter, before the end of each subsequent period of one year until the final reports are made under subsection (4).(4) Final reports must be made on or as soon as practicable after—
(a) 1 April 2020, or(b) if later, the first anniversary of the day on which the last of the provisions of this Part comes into force.(5) A report on the implementation and operation of this Part must include—
(a) a statement of the steps which have been taken, whether by the maker of the report or by others, since the making of the previous report (or, in the case of the first report, since the passing of this Act) towards the commencement of the provisions of this Part,(b) a statement of the steps which the maker of the report proposes should be taken, whether by the maker of the report or by others, towards the commencement of the provisions of this Part, (c) an assessment of the operation of the provisions of this Part which have been commenced,(d) an assessment of the operation of any other powers to devolve taxes to the Scottish Parliament or to change the powers of the Scottish Ministers to borrow money, and of any other changes affecting the provisions inserted or amended by this Part,(e) the effect of this Part on the amount of any payments made by the Secretary of State under section 64(2) of the 1998 Act (payments into the Scottish Consolidated Fund), and(f) any other matters concerning the sources of revenue for the Scottish Administration (within the meaning of section 126(6) of the 1998 Act) which the maker of the report considers should be brought to the attention of the Parliament of the United Kingdom or the Scottish Parliament.”

[Lord Sassoon]

My Lords, I was momentarily thrown by the unaccustomed speed at which we seemed to be going but I am grateful to my noble friend for enabling us to make a bit of progress. It is much appreciated.

The purpose of Amendment 29 is to provide information to both Houses of Parliament on the implementation and operation of the financial powers in the Bill. The clause requires the Secretary of State for Scotland to publish an annual report to be laid before Parliament within one year of the Scotland Bill becoming an Act until a year after the tax and borrowing powers are fully transferred to the Scottish Parliament. The last report is therefore expected to be published in 2020. The Secretary of State will send a copy of his report to Scottish Ministers, who will lay a copy of it before the Scottish Parliament. The clause also requires Scottish Ministers to lay a report of the same title before the Scottish Parliament on an annual basis and to provide a copy to lay before both Houses of Parliament. Scottish Ministers have been fully involved in the drafting of this proposed new clause and support its intention.

This duty will ensure that there is a transparent mechanism of reporting to both Parliaments on implementation. Both Parliaments will have direct access to an assessment of progress on implementation from the Secretary of State for Scotland, as well as from the Scottish Government. The Government intend these reports to be comprehensive and accessible to all. They must cover all aspects of implementing the Scotland Bill package—legislative and non-legislative.

The proposed new clause sets out the areas that each report must include but I will not take up the time of the House by reading through them. As set out previously, the first report under this new power will be published within 12 months of Royal Assent. It will formally set out the criteria against which new tax proposals from the Scottish Government will be judged and Parliament will be able to consider and debate these criteria as necessary. I believe that the amendment will help to ensure that the most significant transfer of powers to the Scottish Parliament is achieved in a transparent and open manner. I beg to move.

--- Later in debate ---

[Lord McFall of Alcluith]

Under the proposed new clause as far as it goes, I was taken with the Minister’s comment about taxation being an instrument of redistribution, as Calman noted. If that is the case, we need a deeper appreciation of the transfer of these powers. It is not just about money but how that money is spent. There is no association between tax levels and growth. As a Scottish citizen, I want to ensure that money from income tax in Scotland is spent properly and that I will benefit as a result.

As far as concerns subsection (5)(d) of the proposed new clause, it is important that the issue is looked at. As was suggested, Scottish public services are inefficient even by miserable UK standards. The Scottish health service, for example, spends 19 per cent more per person, and we have 30 per cent more doctors, yet in many cases—such as cancer survival levels for women—there are worse outcomes. This is a very important issue. If we are going to look at income tax levels, we should have reports from the Scottish and UK Parliaments to ensure that we spend our money in the proper way—as an instrument of redistribution, as Calman suggested.

[Lord Sassoon]

My Lords, I will respond briefly to the points raised. The noble Lord, Lord McFall of Alcluith, articulated what goes to the heart of the Bill. It was a bit away from the limited but important role of the new reports that we are suggesting, which will deal with implementation and cover important things such as the criteria in the Command Paper that we discussed. I completely agree with him about the need for broader accountability. That will be precisely what the Bill takes to the Scottish people and to the Scottish Parliament.

In answer to my noble friend Lord Caithness, I say that the noble Lord, Lord Browne of Ladyton, has already drawn attention to the obligation, in subsection (2) of the proposed new clause, on Scottish Ministers to submit a report. My noble friend shakes his head. Perhaps he would like to see one report agreed between the two Parliaments. I am not sure what further step he would like to see, but it was felt appropriate, since there are two Governments representing separately the people and interests of Scotland and the UK, to have two reports with slightly different perspectives.

The Scottish Parliament will have access to both reports. In the working up to the reports, the Joint Exchequer Committee and the other fora for joint working will be engaged in all the work. Any difference in the reports on the progress that is being made on implementation will be wholly transparent, but I do not anticipate that there will be any such difference. There will be a report by Scottish Ministers, it will be clear to everybody how the reports link to each other, and I fully expect them to present a consistent picture of the progress that is being made.

I appreciate what the noble Lord, Lord Browne of Ladyton, said in welcoming the reports. I fully understand, in the context of our earlier discussion, that the proposal does not go as far as he would like, but it is appreciated that he understands that this is a step forward which will help with reassurance on implementation.

The final point that the noble Lord made, which we discussed in Committee, was on the question of how well prepared or otherwise the Scottish Government are to take on the challenge. There are three further years to go. I appreciate that it is a big challenge. The UK Government are sharing all relevant expertise. Ministers from both the UK and Scottish Governments are overseeing progress. Now that the substance of the Bill has been agreed, we hope that the emphasis and focus will move to implementation, which I accept is an important challenge.

Amendment 29 agreed.

--- Later in debate ---

[Lord Eatwell]

My Lords, when I spoke on an earlier amendment, I said that I was participating in this debate with considerable trepidation. Having listened to this discussion, my trepidation has turned into a state of serious anxiety. However, I will attempt to proceed. My anxiety is raised particularly by the respect in which I hold my noble friend Lord Barnett and the power of the arguments that he put forward. However, as I listened to the debate, any support which I might have had for these amendments slowly drained away for three major reasons. The first is that there is a debate which centres round the need to devise a scheme to abolish the existing Barnett formula. However, that is not an argument in favour of the amendment; it simply identifies a public policy problem which needs to be dealt with, but which I suggest is not necessarily dealt with by this amendment. As those arguments multiplied, my support for my noble friend’s position started to fade away, as I said.

I put down a warning marker for those who have talked about a needs basis for the funding allocations to different parts of the UK. The noble Lord, Lord Lang, is absolutely right that the calculation of need can be done on a clear and objective basis. It could indeed be done by a commission looking at matters such as the number of people under a certain age and the number of people living in poverty according to a certain definition. However, when you start to attach monetary valuations to those needs, you create a policy because you are then weighting them in monetary terms. By weighting them in monetary terms, you are defining a particular policy which you wish to apply uniformly throughout the UK. If you wish to follow the purely unionist line enunciated by the noble Lord, Lord Deben, that may be a reasonable position. However, if you wish to devolve some elements of social policy to the constituent nations of the United Kingdom, you impose policy on them through the needs-based weighting of the funding associated with the underlying formula—and not only that, this amendment would impose the policy through an independent commission. Therefore, an independent commission would vary the policy. Therefore, for example, if one decided that one did not very much care about, say, care for children between the ages of five and 10, but cared very much about children from birth to the age of five, and changed the financial weighting in those two areas, you would be changing the policy because you would be changing the funding available. Handing out this sort of important policy choice to an independent commission would deny what policy-making is all about.

That is just a warning and is not the basis of my slowly ebbing support for my noble friend Lord Barnett’s position. What really settled it for me was the argument of my noble friend Lord Robertson, who made clear that this was an entirely inappropriate way to deal with an incredibly important question. I should therefore like to invoke the great academic principle of unripe time and suggest that we are facing an amendment that is distinctly unripe. We need a much more ripened argument to deal with this very complex matter.

[Lord Sassoon]

My Lords, this has been an interesting debate as we draw towards the end of consideration of the Bill. I am grateful to the noble Lord, Lord Eatwell, whose analysis I very much agree with. It has been a fascinating debate that has taken almost an hour. Sadly, as it has continued, more and more voices have been raised making all sorts of correct arguments that this is not the time and place for it. Many voices in this House accept the starting point of the noble Lord, Lord Barnett, which is that although his eponymous formula has stood the test of time, its time may nevertheless be coming. However, we are not at the point of having a ripe solution, and having a one-country answer within the vehicle of the Bill is not the way to address these proper concerns. I often find that noble Lords from all sides of the House are against me, but it is rare to find myself in substantial agreement with them.

Let me start by reminding noble Lords of one or two things that we should be clear about. First, one of the things that the Bill will do is devolve some of the financial management of income tax to the Scottish Government. However, it will not fix the Barnett formula in stone for the future, and we need to be clear about that, for the avoidance of doubt. It is also worth dwelling on Calman for a moment. My noble friend Lord Forsyth of Drumlean referred to the Calman report, but it is perhaps worth quoting at some length. Recommendation 3.4 states:

“The block grant, as the means of financing most associated with equity, should continue to make up the remainder of the Scottish Parliament’s Budget but it should be justified by need. Until such times as a proper assessment of relative spending need across the UK is carried out, the Barnett formula should continue to be used as the basis for calculating the proportionately reduced block grant”.

The Bill certainly does not therefore lock in the funding formula but, as a number of noble Lords, starting with my noble friend Lord Maclennan of Rogart, have pointed out, this is very much an issue for the whole United Kingdom and should be dealt with at the appropriate time.

Just before I come back to one or two more points on the broader issues, I should for completeness comment on the technical drafting of the amendments.

[Lord Forsyth of Drumlean]

No.

--- Later in debate ---

[Lord Sassoon]

My noble friend says no. Well, I will do so anyway—very briefly. I want to do full justice to the amendments of my noble friend and the noble Lord, Lord Barnett, even if they are so modest as to not want to go through the pain of my analysis.

Very briefly, I suggest that April 2016 is not the ideal timing—coming, as one would expect it to do, part way through a spending review. Timing is an issue. The noble Lord, Lord Barnett, himself pointed out that the current formula is an administrative procedure. It does not appear in legislation. The formula is not specific to Scotland. That goes beyond the purely technical question of the drafting into a wider debate, as I have mentioned. I suggest that it is not right to legislate for a United Kingdom formula that is not at the moment in legislation in a specific Bill related to Scotland that is about tax-raising powers rather than spending.

[Lord Forsyth of Drumlean]

My Lords—

[Lord Sassoon]

Of course I am always happy to give way to my noble friend.

[Lord Forsyth of Drumlean]

I am most grateful to my noble friend for giving way as we reach the end of these proceedings. I entirely accept, as I am sure that the noble Lord, Lord Barnett, does, that this may not be the ideal vehicle. I think that the House would be very happy to hear a commitment from the Minister that he will address the issue at some near date in future.

[Lord Sassoon]

This will not meet the stringent test that either my noble friend or the noble Lord, Lord Barnett, will set, but let me go as far as I can.

The Government understand the concerns expressed in this House and in another place about the devolved funding arrangements. The Government’s position is clear. As the noble Lord, Lord Barnett, recognised, there must be other priorities at this time. It is clear that the Bill does not rule out or in reform of the formula in future. The Government hear, loud and clear, concerns about the formula.

As is clear from our discussion, as well as to those who have followed the debate more broadly, most would concede that there is no consensus across the UK on how to measure the needs of the four countries. Therefore, it is not possible to say what the impact of replacing the Barnett formula might be. Within the devolved formula as it works now, the devolved Administrations determine their assessments of needs and priorities in the devolved areas. That is a strength of the Barnett formula—a point made by the previous Government in responding to the Select Committee’s recommendations then. It is a complex area. Successive Governments have acknowledged the difficulty both with the existing formula and of putting something else in place. The Government certainly do not dismiss that.

I will disappoint my noble friend and, I fear, the noble Lord, Lord Barnett, but I think that it is extremely useful—although not directly linked to the substance of the Bill—that we have had this discussion, because the linkages are clear. My noble friend Lord Steel of Aikwood points out one scenario in which it may all go away. Others have challenged that scenario but have nevertheless agreed that now is not the time to do it.

The issue will not go away. I am sure we will come back to it, if only because the noble Lord, Lord Barnett, will regularly ask me questions on it, and there may be other opportunities for more substantive debate. However, for the reasons that noble Lords from all sides of the House have given, important topic although it is, this is not the time nor the vehicle to address it. I therefore ask the noble Lord to withdraw his amendment.

Economy: Budget Statement

Lord Sassoon Excerpts

Thursday 22nd March 2012 Lords Chamber

Moved by

[Lord Sassoon]

That this House takes note of the economy of the United Kingdom in the light of the Budget Statement.

[The Commercial Secretary to the Treasury (Lord Sassoon)]

My Lords—

[Lord De Mauley]

My Lords, I wonder if noble Lords would kindly leave the Chamber quickly and quietly so that we can proceed with the debate.

[Lord Sassoon]

My Lords, yesterday’s Budget reinforces this Government’s determination to restore the UK to prosperity. It is because of the decisive action that the Government have taken, starting with the June 2010 Budget, that we have secured and maintained the stability of the UK economy. The private sector has already responded vigorously. Since the election, private sector employment has risen by more than 630,000 and the Office for Budget Responsibility forecasts that between the start of 2011 and the start of 2017, some 1.7 million jobs will be created in the UK’s private sector—an extra 1.7 million jobs creating wealth, leading innovation and driving our recovery across the nation. The dynamism of UK businesses is truly remarkable. As the Government, we have to continue to reduce the burden of the state. If we do that, the economy will flourish.

Yesterday’s Budget builds on a strong foundation, safeguarding our economic stability, creating a fairer, more efficient and simpler tax system, and driving through reforms to unleash the private sector enterprise and ambition that are critical to our recovery. As my right honourable friend the Chancellor said yesterday, Britain will earn its way in the world.

We can succeed in that goal only if we continue to safeguard our economic stability by tackling the record deficit and debt that we inherited from the previous Government. It is because of our determination to tackle that legacy that we have sheltered the UK economy from the turbulence that undermines our nearest neighbours. It is because of our commitment to stick the course that, in the past two years, the cyclically adjusted primary deficit has been halved, falling from 7 per cent of GDP in 2009-10 to 3.4 per cent in 2011-12 and approaching balance in line with our fiscal mandate. Indeed, borrowing over the forecast period will now be £11 billion lower than was predicted in the Autumn Statement last year.

Stability is the vital precondition for growth and will continue to be our key priority, but as the Office for Budget Responsibility said in its report yesterday,

“the situation in the euro area remains a major risk”

to the UK’s economic forecast. The OBR also identifies a risk of a,

“further spike in oil prices.”

Despite these headlines, however, there are positive signs for the UK economy. The OBR continues to forecast positive but subdued growth. Along with the Bank of England, it forecasts that the economy will avoid recession, with this year’s growth forecast broadly unchanged at 0.8 per cent, then 2 per cent for next year, 2.7 per cent in 2014, and 3 per cent in both 2015 and 2016.

Economic stability is the vital foundation for securing that growth and the Budget reaffirms our commitment to safeguarding that stability. That is why this year’s Budget has a neutral impact on the public finances, implementing fiscal consolidation as planned. It keeps us on course to achieve a balanced structural current budget by 2016-17, with debt falling as a percentage of national income by the end of this Parliament in 2015-16.

Restoring fiscal sustainability will remain this Government’s number one priority. Such is the scale of the challenge that we must remain vigilant on spending. In particular, it is vital that we maintain control over welfare spending. That is why my right honourable friend the Chancellor announced yesterday that the additional costs of universal credit will be capped at £2.5 billion. We will also address the rising costs of an ageing population and the burden which that places on future generations. That is why there will be an automatic renewal of the state pension age to ensure that it keeps pace with increases in longevity. However, as the director of the Institute for Fiscal Studies said this morning, when you look at all the Government’s measures, you see that pensioners have not been hit as hard as other taxpayer groups.

We have also taken the difficult decision to remove child benefit from high earners. It is right that we focus support on those who need it the most, but we have to do it in a way that is fair, without setting up a cumbersome tax credit system and avoiding a cliff-edge for millions of families. That is why, instead of withdrawing child benefit all at once when people earn more than the higher-rate threshold, the benefit will be withdrawn only when someone in the household has an income of more than £50,000. And the withdrawal will be gradual, so that only those on an income of more than £60,000 lose all their child benefit. Overall, child benefit will continue to benefit 90 per cent of families with children.

These are tough choices to make, but this Government will not shirk their responsibility to restore fiscal sustainability and economic stability. We have learnt, to all our costs, the consequences of unsustainable spending and ever increasing debt.

As my right honourable friend the Chancellor said in the Budget, if Britain is to earn its way in the world, then we need to build a recovery based on private sector enterprise, investment and export, and if we are to succeed in that ambition then we have to undertake far-reaching reform to ensure that our tax system is simple, predictable, fair and supports work.

First and foremost, we are committed to creating the most competitive tax system in the G20—a tax system that supports work, encourages growth and keeps our most successful businesses here in the UK. While the previous Government increased taxes on small businesses, we have cut the tax rate on small companies to 20 per cent. While the previous Government wanted to increase national insurance on jobs, we have cut it, and while the previous Government sat idly by as our competitiveness drained away, we have already committed to reduce the headline rate of corporation tax to 23 per cent by 2014 because it is necessary to cut one of the most growth-impeding taxes there is. As we announced yesterday, we are going even further, cutting the rate of corporation tax to 22 per cent by 2014. That is a headline rate of corporation tax dramatically lower than our competitors and a spur for prosperity and job creation across the economy.

That is why we are also cutting the 50p rate of income tax. That rate was higher not just than the US, but higher than France, Italy and Germany—the highest in the G20. It was a rate that damaged our competitiveness while raising next to nothing in additional revenue. From April next year, the top rate of tax will be 45 per cent, restoring our competitiveness and galvanising our entrepreneurs and hard-working families. But at the same time, we will continue to ensure that those with the broadest shoulders carry the heaviest burden. That is why the Chancellor has announced a new cap on income tax reliefs that are currently uncapped. From next year, for anyone seeking to claim more than £50,000 of these reliefs in any one year, a cap will be set at 25 per cent of their income.

While the Chancellor ruled out a mansion tax, it is right that those with considerable assets do pay a fair share. That is why we are also introducing a new stamp duty land tax rate of 7 per cent on properties worth more than £2 million, and why we are tackling the abuse whereby people avoid stamp duty on their homes. Taking the cumulative tax, tax credit and benefit changes in the Budget together, it is the top decile of the income distribution that sees the largest reductions in income and the top quintile that makes the greatest contribution to reducing the deficit. That is exactly how it should be.

At the same time, we are taking decisive action to support working people on the lowest incomes. The Government believe that the best way to support working people on low incomes is to take them out of tax altogether. Next month, the personal allowance will rise to £8,105. Taken with the previous increase, that is more than 1 million low-earners taken out of tax. But we are going further and sooner. Yesterday, my right honourable friend the Chancellor announced the largest ever increase in the amount that people can earn tax-free—an increase from next April of £1,100 to £9,205. That means that around 2 million low-income earners will have been taken out of tax altogether and there will be a tax cut of £3.5 billion for working families. These are substantial tax reforms that demonstrate our commitment to tackling the deficit in a fair way.

But tax is only one part of our ambition to restore competitiveness, promote business and encourage investment. As your Lordships are well aware, this Government have already set out ambitious infrastructure plans, setting the stage for some £250 billion of investment in the next decade and beyond. That investment is critical to enabling Britain to compete with emerging giants in the global market. Yesterday, the Chancellor provided further details on those ambitions, for example confirming that Network Rail will extend the Northern Hub and improve the Manchester to Preston and Blackpool and Manchester to Bradford lines. We will live up to our commitment to devolve power and responsibility to local authorities. That is why we concluded a groundbreaking deal with Manchester to support £1.2 billion of investment in infrastructure, will support £150 million of tax increment financing to help local authorities promote development and are providing an extra £270 million to the Growing Places Fund to help local authorities unblock stalled infrastructure projects.

Just as we invest in our physical infrastructure, we have to invest in our digital infrastructure. That is why we are funding ultrafast broadband and wi-fi in 10 of the UK’s largest cities, providing £50 million to increase urban broadband in our smaller cities as well, and helping build on our long and rich history of scientific and technological leadership. It is right that we capitalise on and commercialise that leadership, which is why we went even further in the Budget to commit £100 million of support, with the private sector, for investment in major new university research facilities, £125 million towards making UK advanced manufacturing supply chains more competitive, and £60 million to establishing a UK centre for aerodynamics, creating a springboard for innovative businesses and entrepreneurs to lead our economic recovery. Government, local authorities, universities, businesses and entrepreneurs are working together to catalyse private-sector growth and innovation.

All this is of particular interest to my noble friend Lord Heseltine. I look forward with particular anticipation to his maiden speech today. My noble friend’s extraordinary work in Liverpool has rightly been recognised by that great city. Now, my noble friend has kindly agreed to review how spending departments and other public-sector bodies can better work with the private sector to support economic development.

Of course, while we can provide the right conditions for a private sector recovery, we also have do all we can to remove barriers to those businesses attempting to seize new opportunities. That is why we are simplifying the administration of tax for our smallest firms, consulting on a new cash basis for calculating tax for firms with turnover up to £77,000, making tax returns dramatically simpler for up to 3 million firms. Of course, bureaucracy does not end with tax. If we want those businesses to lead our economic recovery, then we have to match their “can do” attitude. That is why the Budget endorsed a fundamental overhaul of the planning system, replacing 1,000 pages of guidance with just 50, and introducing a presumption in favour of sustainable development and a new planning guarantee so that no decision should take more than 12 months, including appeals.

Just as we encourage businesses to expand at home, we want to encourage British businesses to expand overseas. It is a damning statistic that, over the past decade, our share of world exports shrank as Germany’s grew. In the past three years, UK exports have risen almost 30 per cent, rising above their pre-crisis peak, with exports to India and China nearly doubling from five years ago. But we can and must go further. By 2014-15, UK Trade and Investment will be working with 50,000 small firms a year to expand their sales abroad—double the current number. We have set the ambition to more than double the UK’s annual exports to £1 trillion by 2020.

At the same time, we have to ensure that our businesses have the finance to feed their ambition. In particular, it is critical that we support the small businesses that provide more than 50 per cent of private sector jobs and 30 per cent of private sector investment and which have the potential to become the global leaders of tomorrow. That is why we launched the National Loan Guarantee Scheme earlier this week to give smaller businesses with a turnover of up to £50 million access to cheaper loans. We have provided up to £20 billion of guarantees under the scheme. This Government’s deficit reduction strategy has earned market credibility and low interest rates, and this Government are ensuring that the full benefits of those low interest rates are passed on to businesses across the UK.

In conclusion, this Government are committed to making Britain the best place to start, grow and finance a business. We are providing businesses with the most competitive tax environment; access to low-cost finance, capitalising on record low gilt yields; reduced bureaucracy and simplified tax rules; access to emerging economic giants; world-leading physical and digital infrastructure; and investment in our technology and innovation future. That is why the OBR forecasts that between the start of 2011 and the start of 2017, 1.7 million jobs will be created in the market sector. That is why Nissan has decided to move new production to the north-east, creating more than 2,000 jobs in the region; why Jaguar Land Rover has confirmed that it is creating 1,000 new jobs in its Halewood factory, on top of the 1,000 new jobs in Solihull; why Tesco has announced that it will create 20,000 new jobs in the UK over the next two years; and why GlaxoSmithKline, Britain’s biggest pharmaceutical company, has today confirmed plans to invest more than £500 million and create up to 1,000 new jobs because of the tax incentives in the Budget.

This Government are building a sustainable and prosperous economy, a recovery that builds on our strengths across all regions of the country and all the creativity and productivity of our private sector. Whereas under the previous Government, the country borrowed its way into trouble, under this Government, we will earn our way out of trouble.

--- Later in debate ---

[Lord Sassoon]

My Lords, I welcome the debate that we have had today and the valuable contributions that have been made, including particularly those from noble Lords in all parts of the House who have drawn attention to the many initiatives in the Budget that I did not have time to highlight in my opening speech. I am grateful for the opportunity to reply to as many of the points raised as I can, but I will not have the time to reply to everything—there have been a lot of questions.

I reiterate this Government’s number one economic priority: tackling the record peacetime deficit that we inherited from the previous Government and restoring economic stability. We will stick to our deficit reduction plans; I assure my noble friend Lord Flight of that. I noted the contributions from a number of Peers—the first was probably from the right reverend Prelate the Bishop of Chichester—acknowledging the need for a fiscally neutral Budget at this time. As my noble friend Lord Higgins pointed out, a combination of tight fiscal policy and loose monetary policy is the balance that we are taking forward. I assure my noble friend that the Bank’s holding of gilts under quantitative easing is completely transparent; it is updated day by day on the Bank’s website and the position will be unwound in due course.

Nevertheless, we have a steady stream of noble Lords from the Benches opposite who still preach the idea of free spending with as much money as is out there, with no fiscal discipline. They do not seem to have learnt lessons. I am not surprised by the noble Lord, Lord Liddle, espousing that but I am a little surprised at the noble Lord, Lord Desai, saying that we should spend this £28 billion from the Royal Mail pension plan. We inherit £28 billion of assets but we inherit liabilities to the pensioners that are considerably higher than that. Is it really right that we should spend that money? No, we will not. As for suggestions that we might like to recook the books, I think that we had enough of cooking the books under the previous Government. We will not go there. As it happens, the noble Lord, Lord Desai, was doing what I had been doing a little earlier to look for the GDP number. I assure him that it is there in table D2 of the Red Book, but I agree that you have to look some way into the document.

We will stick to fiscal rectitude. Even if we were to decide to hand out vouchers, which we will not, I do not know how we would be assured about where they would be spent—we could not be sure that they would all be spent on goods produced in this country.

I was rather hoping to keep away from too much historical analysis of how we got to where we are, but perhaps I should be grateful to the noble Lord, Lord Eatwell, for drawing our attention to chart 1.5 of the Red Book. He seemed to suggest that it showed what a good job the previous Government did to keep the deficit under control. Perhaps he would like to look closer at that chart. It exposes to the full glare of daylight exactly what the previous Government were doing. It shows that the Labour Government continued to borrow £30 billion to £40 billion a year while the sun was shining. That illustrates precisely the nature of the structural problem that we inherited: running budget deficits year after year to create the illusion of growth until the credit card finally ran out. We will not go back to that.

Having talked about the basic stance of the Government, let me deal with the question of leaks, because it relates directly to the way that the previous Government used to conduct their business. As the Chancellor said in the Budget Statement, a Budget produced within a coalition is different. The days of the Chancellor coming up with a Budget in secret are—whatever we think about the rights and wrongs—gone. This was not a Conservative or a Liberal Democrat Budget, it was a coalition Budget, as we have heard from the broad agreement from coalition Peers this afternoon. As the noble Lord, Lord McFall of Alcluith, recognised, that makes this Budget different.

In the course of coalition Budget negotiations, various proposals were raised, discussed and debated. I come back to what we have been used to in previous years. It has been more widely debated than in previous years, when the Chancellor briefed the Prime Minister on what was in the Budget the day before, if the Prime Minister was lucky, and even more than in the dying days of the previous Government, when the Prime Minister told the Chancellor what should be in the Budget the night before. We do not need lessons from Members opposite on how to conduct ourselves in the run-up to a Budget.

[Lord Higgins]

That was not quite the point I was making. I understand about negotiations within the coalition, but it appears—for example, from the front page of the Financial Times—that officials told the Financial Times before the Budget was announced what was going to be in it. I believe that the House of Commons has the right to hear first.

[Lord Sassoon]

That issue has been the subject of an Urgent Question in another place this afternoon, and the Government have explained their position in an answer there.

I have said that we will stick to our fiscal position. That means that there continue to be tough choices to be made. Some of those tough choices have been highlighted this afternoon. I start with my noble friend Lord Newby, who gave a fair and good analysis of the issues about pensioners and the fair deal that they are getting. However, because the noble Lords, Lord McFall, Lord Myners and Lord Davies of Oldham, and others raised the issue, let me underline it again. The Government are committed to supporting pensioners. The IFS confirmed today that that is indeed the case. Pensioners will get the largest ever rise in the basic state pension this April to £107.45 a week. The Government are protecting pension benefits, including winter fuel payments, free prescriptions and eye tests, free bus travel, free TV licences and, of course, the triple lock on the basic state pension is being introduced. The single-tier state pension will be introduced and has been estimated to be likely to be £140 in current terms. I refute the suggestions that pensioners have been poorly treated. We are all in this together.

My noble friends Lord Fink and Lord Sheikh have quite properly raised the issue of tax transparency. I agree with them on the importance of the new annual statements, which will show everyone who pays tax what they are paying and where the money will be spent across the different categories of expenditure. I am sure that will raise a healthy debate.

On tax reform, I am very confused about where the Opposition stand on the 50p tax rate. Are they really still saying that the Chancellor of the Exchequer should justify the continuation of a tax that is shown to produce next to no revenue for the country and which materially affects our global competitiveness? The noble Lord, Lord Eatwell, quotes approvingly the Institute of Directors, but the main part of the institute’s statement after the Budget called for the tax rate to be reduced to 40p. Is that what the noble Lord, Lord Eatwell, wants? The noble Lord, Lord Wood of Anfield, who is not in his place at the moment, questioned whether the Government had been fully transparent on this. The forestalling number that he was looking for is set out in bold type on page 51 of the Red Book, a complete contrast to what the previous Government did in not even recognising that there was a forestalling problem. The tax raised less than a third of the estimates that they put out. I believe that they are in no position to question the basis on which we have looked at the evidence in coming forward with a 45p rate.

[Lord Davies of Stamford]

How can a 50p tax rate possibly be devastating to our competiveness and at the same time raise no money? If people do not pay it, it will not have any effect on their behaviour.

[Lord Sassoon]

My Lords, the simple fact is that if you talk to businesses around the world about why they are not moving business into this country and are not moving high-earning individuals back to this country, you will find that it is simply because of the disincentive effect of the 50p tax rate. It is entirely consistent that there is a disincentive effect on business decisions, even though the net take is nothing. I listened to what the real businesspeople in this House—the noble Lord, Lord Bilimoria, and my noble friend Lord Fink—said about the damaging effect of high rates of tax. Their voices present the true position.

[Lord Haskel]

We have some real businesspeople on this side of the House as well.

[Lord Sassoon]

Indeed, there are distinguished businesspeople, including the noble Lord, Lord Haskel, on the other Benches, but I do not think that the noble Lord, Lord Haskel, made this particular point. He made other points which, if I do not have more interruptions, I might be able to turn to. There is also the noble Lord, Lord Sugar. I shall refer to as many speakers as I can, if noble Lords want to hear me rather than make additional points themselves.

My noble friends Lady Randerson and Lady Kramer importantly referred to the significance of our new anti-avoidance regime, particularly in relation to homes with a value of more than £2 million. Some issues have been raised on the measures that will claw back five times the amount of the cost of a 5p drop in the top rate of tax. My noble friend Lord Fink, and the noble Lord, Lord Davies of Stamford, in particular, raised the question of the capping of tax reliefs and the effect on philanthropists and charities. The Government will explore with philanthropists ways to ensure that the new limit will not significantly impact on charities that depend on large donations. It is an important restriction, but we will make sure that charities are protected.

On other areas of tax and tax avoidance, the noble Lord, Lord Davies of Stamford, asked about the general anti-avoidance rule. Under the new structure, a pre-clearance system will no longer be warranted. GAAR’s focus will be on artificial and abusive tax avoidance schemes. We will have a completely different construct from the present one, and it is not proposed that there should be a clearance system.

A certain amount was said in different ways on the question of distributional impact by the noble Lords, Lord Liddle and Lord Myners, the noble Viscount, Lord Hanworth, and others. Again, since the Government came to power, we have in the Red Book done the transparent thing and made it absolutely clear what the distributional effect is of Budget after Budget—something that the previous Government never did. I set out the figures in my opening speech. In cash terms, losses for the households in the top 10 per cent will be almost five times the average, and more than eight times those of the bottom 10 per cent by income. We have real and deep concern for the distributional effects of our tax and spending policies.

My noble friend Lord Northbrook, and the noble Lord, Lord McFall of Alcluith, asked about the lowering of the starting point of the 40p band. There is nothing untoward about this; it is simply a partial offset of the effect of the increase in the personal allowance, so that higher-rate taxpayers will receive only a partial benefit rather than the full one, which is targeted principally and rightly at lower earners.

[Lord Myners]

My Lords, the Chancellor used the term “simple” yesterday to describe the pickpocketing of pensioners. The Minister has now used the same term. The IFS today stated that the reduction in the allowance for the starting point of top-rate tax will take 1.5 million taxpayers into the highest tax bracket for the first time. The measure is not simple; it will expose more people to 40 per cent tax than was previously the case.

[Lord Sassoon]

My Lords, I will not repeat myself. I explained the rationale for doing this, which is to make sure that the benefit is targeted correctly. The position is completely clear.

I will address one or two issues that were raised on business taxes. The noble Lord, Lord Haskel, made the point about there being other businessmen in the Chamber. I listened hard to what he said about his recent visit to the US. I, too, was in the US recently. One place I visited was Chicago, which at the moment is the headquarters of Aon, the world’s largest risk management company. It is moving its global headquarters to the UK for a number of reasons, including our lower and more competitive tax regime. I do not remotely believe that we should follow US policies in a slavish way if we want to see a growing business base in this country.

[Lord Eatwell]

As the noble Lord brought up the point, does he agree that Aon announced its decision to move here before there was any intimation that top-rate tax would be reduced?

[Lord Sassoon]

My Lords, as I understand it, Aon based its decision principally on the very clear road map on corporation tax. However, I believe that the change in top-rate tax will see many other companies reconsider their location.

On oil taxation, my noble friend Lord Northbrook asked about the apparent position in the Red Book that shows that receipts are rising. Indeed, that is the case, but it is because decommissioning certainty and the new field allowances will lead to new investment that will in turn give rise to additional tax receipts, so it is a clear win-win situation.

Turning to one or two of the pro-growth policy questions that were raised, infrastructure remains very important, but I would say to my noble friend Lord Newby, who presses, quite rightly, on this important point, that the initial commitment to £2 billion of investment by the pension funds is good news, as he recognises. It is for the pension funds to decide how much further and faster they want to go. From my experience, I observe that rapid investment decisions sometimes lead to poor investments, but that is for the pension funds. The other thing is that there is only a limited pipeline of shovel-ready projects, but as projects come through, the appetite is there.

The right reverend Prelate the Bishop of Chichester asked about Sunday trading and the Olympics. I can assure him that there will be proper time for debate in this House. I know that the right reverend Prelate the Bishop of London has written to the Chancellor today and the Chancellor will be responding shortly. I will make sure that the right reverend Prelate gets a copy of that response.

Outstanding in the contributions on the Government’s pro-business policies was, of course, the maiden speech of my noble friend Lord Heseltine. It was a one-of-a-kind maiden speech in my experience and, I am sure, the experience of all of us. He set out in a very measured and realistic way the scope of the challenge that he is taking on in the benchmarking exercise, as he characterised it. We all very much look forward to the early autumn when, I think, we will get the fruits of his deliberations.

Turning to other pro-business areas, there were a number of questions from the noble Lords, Lord Bilimoria and Lord Sugar, and other noble Lords about the National Loan Guarantee Scheme. Let me assure your Lordships that there is now lots of publicity on the participating banks’ websites and in their branches. There is clear branding of the scheme. HSBC is not in it because its funding structure is different. There is nothing about it other than its funding structure. As to where the risk falls, it falls on the banks that make the loans. The credit risk remains there.

As to our progress on the rest of our plan for growth, I draw the attention of the noble Lord, Lord Eatwell, to the progress report that was put up on the HM Treasury website yesterday.

I come back to what I heard from my noble friend Lord Bates and others who reminded us of the very positive things that are happening in business and particularly in challenged areas, such as the north-east. That is an important reminder to us of what is really going on in the economy.

Lastly on areas of business policy, I say to the noble Baroness, Lady Worthington, that we took an important step forward in our energy policy in a joined-up way between DECC and HM Treasury yesterday when the Chancellor confirmed the important look at a gas strategy as part of our overall energy mix going forward. The picture I got from talking this morning to the chief executive of one of our largest companies invested in renewable energy in this country was that the company is very supportive of the Budget, while noting, quite rightly, that there are many policy areas in this area that we have to consider.

In conclusion, we will build a recovery in this country through the ambition of those who aspire to do better for themselves and their families. I am particularly encouraged by what I have heard from noble Lords with business experience on all sides of the House.

This Government are building a sustainable and prosperous economy and a recovery that builds on our strengths across all regions of the country and all the creativity and productivity of our private sector.

Motion agreed.

Economy: Quantitative Easing

Lord Sassoon Excerpts

Monday 19th March 2012 Lords Chamber

[Lord Barnett]

To ask Her Majesty’s Government why the Chancellor of the Exchequer agreed the latest increase in quantitative easing.

[The Commercial Secretary to the Treasury (Lord Sassoon)]

My Lords, the independent Monetary Policy Committee has operational responsibility for monetary policy. The MPC judged in February 2012 that without further monetary stimulus it was more likely than not that inflation would undershoot the 2 per cent target in the medium term. The Chancellor agreed that an increase in the asset purchase ceiling would provide the MPC with the scope to meet the inflation target in the medium term and gave his authorisation to proceed.

[Lord Barnett]

My Lords, I thank the Minister for that Answer. That increase was initiated by the Monetary Policy Committee but, under the terms of the original agreement in 2009, the Chancellor had to give his consent—which I assume he did. The current Chancellor took over that policy. As I understand it, he said at the time that it was a “leap in the dark”, designed because all other government policy had failed. Does he still feel that that is the case, or has he changed his mind? What does he now expect from QE?

[Lord Sassoon]

My Lords, I reiterate that the MPC has operational control and freedom here. The Government, on behalf of the taxpayer, indemnifies the Bank against losses, so of course any increase in the limit of the asset purchase facility has to be authorised by the Treasury. As to what people’s quotes might be, I know that I get into trouble if I start questioning whether the noble Lord, Lord Barnett, has correctly quoted my right honourable friend. I am sure that he did, but in completely different circumstances. The situation now is that we have tight fiscal policy. Against that discipline, the monetary policy of the Bank of England can be conducted with confidence. Tight fiscal discipline and loose money is the policy prescription. I suspect that that was not the policy prescription when my right honourable friend made that quote.

[Lord Bilimoria]

My Lords, can the Minister tell us of the effect of QE in helping lending flow through to SMEs? We hear about feast and famine with regard to lending to SMEs. Has QE really helped in banks lending to SMEs?

--- Later in debate ---

[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.

[Lord Peston]

My Lords, can I ask the Minister whether he agrees—which he seemed to say—that quantitative easing is part of monetary policy? If it is part of monetary policy, what business is it of either the previous Chancellor or the present one to claim that they have a decision-making role in this matter, since the Bank of England Act makes it absolutely clear, when discussing the reserved powers of the Treasury, that they can intervene only if they lay before both Houses of Parliament an order authorising them to intervene? Have not the Chancellor of the Government whom I supported and the present Chancellor both been acting illegally?

[Lord Sassoon]

No, my Lords, even the previous Chancellor, I am happy to say, was not acting illegally in this matter and the current Chancellor certainly is not. As I have already explained to the noble Lord, Lord Barnett, the only reason for the Chancellor having to authorise this is because HM Government indemnify the Bank for any losses that it may suffer by exercising purchases under the asset purchase facility.

[Lord Pearson of Rannoch]

My Lords, does the noble Lord agree that over history printing money has usually, if not always, led to inflation? If he does agree, can he tell your Lordships why quantitative easing will not do so this time?

[Lord Sassoon]

No, my Lords, I certainly will not. It has actually led to inflation already. In the estimates made by the Bank of England in the third quarter bulletin in September last year, it was estimated that quantitative easing had raised UK inflation by around 0.75 to 1.5 per cent. I firmly believe that the greater benefit of raising real GDP by around 1.5 to 2 per cent was what really mattered in the economic circumstances in which we find ourselves. Then the question is what happens to the unwinding of QE? The stock will be held and sold back into the market in due course.

[Lord Eatwell]

My Lords, the noble Lord’s reference to growth of GDP is rather odd, since that is no responsibility of the Monetary Policy Committee. Its responsibility is for inflation and, as he said, it added to inflation last year which, as noble Lords will remember, was already at 5 per cent. How does the noble Lord judge the success of QE and how is it to be balanced against the decimation of the annuities of hundreds of thousands of pensioners as a result?

[Lord Sassoon]

My Lords, first it continues to be the judgment of the MPC that if it had not acted on this operation under the asset purchase facility inflation would undershoot the 2 per cent target in the medium term. I remind this House that inflation has already come down from 5.2 per cent on a CPI measure last September to 3.6 per cent in January and is expected by the Bank, and most other commentators, to fall very considerably during this year. The success of QE will be measured on the performance of inflation.

As to the question of savers and pensions, as the deputy governor, Charlie Bean, said on 21 February:

“While annuity rates have fallen, that is only part of the story. Those pension funds will typically have been invested in a mix of bonds and equities, with perhaps a bit of cash too. The rise in asset prices as a result of quantitative easing consequently also raises the value of the pension pot, providing an offset to the fall in annuity rates”.

Banking: Accounting Standards

Lord Sassoon Excerpts

Monday 19th March 2012 Lords Chamber

[Lord Flight]

To ask Her Majesty’s Government whether they have any plans to review the application of international financial reporting standards accounting standards to the banking sector.

[The Commercial Secretary to the Treasury (Lord Sassoon)]

My Lords, following the financial crisis, the International Accounting Standards Board has taken steps to revise international valuation standards for complex financial instruments. The question of whether there should be a distinct accounting regime for banks was raised in the preliminary report of the Financial Reporting Council inquiry into going concern, chaired by my noble friend Lord Sharman. The panel is considering the response to this report at present. We await its final report with interest.

[Lord Flight]

My Lords, in reply to a question on 19 December the Chancellor of the Exchequer advised that there needed to be a debate about the role of IFRS in the banking crisis. On 19 January, the head of financial stability at the Bank of England commented in a speech that banks needed accounting standards other than IFRS. Does the Minister agree that IFRS contributed to the banking crisis, as it served both to exaggerate profits and capital in good times and vice versa in bad times, and is in need of review?

[Lord Sassoon]

My Lords, having a look at accounting standards in relation to banks is certainly significant. I would not go as far as saying that IFRS had a fundamental role in relation to the financial crisis. There is not significant evidence of that although, as I have had it rather neatly described, you could perhaps describe accounting standards as an accomplice after the fact rather than as being responsible. There are issues that very much need to be looked at. The review that the IASB is doing, very much with the encouragement of the G20, of the financial instruments standard known as IFRS 9, the work that the Financial Reporting Council is doing, which I have referred to, the inquiries coming out of your Lordships’ committee and the most recent hearing last week will all contribute to an important ongoing debate.

[Lord Lawson of Blaby]

My Lords, is my noble friend the Minister aware that my noble friend Lord Flight is on to a very important point? It is quite clear that accounting standards have created a major reduction in stability in the banking sector. They had a major part to play, and IFRS has simply made this worse. Has my noble friend the Minister read the Hansard report of the debate in the Grand Committee of Wednesday last week, in which these matters were among those discussed? If not, will he please do so and will he also listen to what Mr Andy Haldane, the director of banking stability at the Bank of England, which is responsible for these matters, has had to say on them?

[Lord Sassoon]

My Lords, I have not read every word that was said in the Committee last week, but I have certainly read the very interesting remarks of my noble friend Lord Lawson of Blaby and the very challenging seven proposals that he made, many of which the Government are already acting on in the structure of banking and regulation. I do not dismiss this issue at all, but there is a tension between the transparency and other requirements of investors on the one hand and the requirements of prudential regulators on the other. There are very difficult issues of conflicting objectives here, which it may be impossible for one set of figures fully to reconcile. However, I take my noble friend’s suggestions very much to heart.

[Lord Eatwell]

My Lords, as the noble Lord pointed out, the Financial Reporting Council is playing an important role in reviewing the IFRS proposals. However, the FRC also seems to be contemplating the abolition of the UK Accounting Standards Board. Do the Government agree with this, and will it not leave the UK without the expertise and credibility necessary to make an effective contribution to the international debate?

[Lord Sassoon]

My Lords, the structure of the various bodies that fall under the Financial Reporting Council is a matter for the Financial Reporting Council. I do not believe for one minute that anything it does to the structure of the number of bodies under the FRC will weaken the very distinguished and important contribution which the UK makes to international standard-setting.

[Lord McFall of Alcluith]

My Lords, has the fatal flaw not been the ability of banks and other financial institutions to book future projected income as profits—profits which did not materialise and on which bonuses were paid, thereby skewing the incentives of the whole financial sector industry? There is a time here for reassessment, and that is a black hole at the centre of these proposals.

[Lord Sassoon]

Again, this is an important issue. The Government have taken significant steps to increase both the transparency and the FSA rules around the payment of bonuses. However, we should be careful about this. First, it is worth noting that under UK GAAP, before IFRS was introduced, banks were required to account at fair value for their trading portfolios. Of course, accounting at fair value requires assets to be marked both up and down. It is certainly the case that under IFRS there were certain portfolios that previously would not have been counted as trading portfolios, which now are. However, we have to be very careful about attributing all that went on with banking bonuses to the accounting requirements. If I may suggest so, that was a small part of what was undoubtedly a series of inappropriate behaviours at the heart of the industry.

[Lord Phillips of Sudbury]

My Lords, given the importance of the matters to which my noble friend has alluded in answering this Question, might he put a plain Peers’ guide to the intricacies of the various bodies he has enumerated in the Library?

[Lord Sassoon]

My Lords, I will see what I can do. I have mentioned everything this afternoon from the G20 through to the Bank of England, the FSB and the FRC. I will see what I can do, but it is a big ask.