Autumn Budget 2024
Lord Sherbourne of Didsbury Excerpts(1 month, 1 week ago)
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Lord Sherbourne of Didsbury (Con)
My Lords, Ministers, in trying to defend the Budget, keep saying in a rather pained way that they have had to take some very difficult decisions; the Minister said that today. Of course, that is what government is all about, and they should not be surprised by that.
However, I do accept that the Chancellor had a particular challenge which all Chancellors face when presenting their Budgets: the voracious demand of the public for ever more public spending. Yet every Government know that these expectations are unrealistic. So why is it? How does this happen? The reason is that Governments, of all parties, hide from the public basic information. The 362 pages of this Budget do not contain the information the public need to have; it is deliberately hidden. That is the problem Chancellors have to face.
Let us take taxation. Nobody has the faintest idea how much VAT they pay. People know the cost of their BBC licence fee because they pay it directly; it is visible. They know the price of their council tax bill. The things they pay for directly, they know. However, they do not know that, when they go to John Lewis and buy a washing machine for £350, £60 of that goes to the taxman. They do not know that, when they get a £25 takeaway, £4 of that goes to the taxman. Every time those prices go up, the Government are taking more—a bigger amount of tax. Of course, the Chancellor does not go to the House of Commons to say that taxes are going up, but they are.
And how the Treasury loves it. It likes nothing more than stealth taxes, which make it much easier to raise tax without protest. How much more honest it would be if, as in the United States, all goods and services showed their net price and, separately and just as clearly, the tax being levied on them. When people go to the States, they are often amazed that they have to pay tax on the goods there, while they do not have to pay it here—they think. How wrong they are. When you do see the VAT—when, for example, you are having building work done and your builder is in the VAT system and charges you £1,000—you then realise that you are paying a whopping £200 on top. What an eye-opener that is.
Let us take income tax. Freezing tax thresholds will, as people earn more, push them unwittingly into a higher tax bracket and paying more tax than they should. If you are on PAYE, the only figure you really see is your take-home pay. Why are gross pay, net pay and tax not shown deliberately and separately—all equally clear? Again, the Treasury would hate that, because its job is so much easier if people do not know how much they are paying.
The same is true about public services. Soon after I came into the House, I heard a speech made by the noble Lord, Lord Desai, who was then speaking from the Labour Benches. He said that it would be a good idea if, when people went for medical treatment, they were shown how much that would cost—not to charge them, but simply to inform them. I remember seeing on television some years ago a young man who thought he was having a heart attack. The NHS treated him brilliantly with an ECG and other tests. He was okay, and he asked the consultant afterwards how much that would have cost. The consultant said £25,000 and he was amazed. I just think that if people were aware of how much such things cost, they would be aware not to expect too much from endless public services. The Government may say, “It is very difficult to provide this information”, but surely, if an organisation is well run, and if the NHS is well run, that information should be available.
If Governments are not more honest and open with the public about the cost of public services and the total amount of tax the public are really paying, I am afraid that the public will go on making unrealistic demands on the public purse. That will go on being a problem for all Chancellors, and it will be a problem partly of their own making.
Working From Home: Public Sector Productivity
Lord Sherbourne of Didsbury Excerpts(1 month, 4 weeks ago)
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Lord Livermore (Lab)
No, there would not. One of the benefits of working from home is a much more efficient use of office space. It has a beneficial impact on capital in terms of releasing office space for more productive use, and that is currently what is under way.
Lord Sherbourne of Didsbury (Con)
My Lords, how does the Minister measure productivity in the public sector?
Lord Livermore (Lab)
There are a variety of measures, as I understand it. The ONS has a fairly standard measure. However, the noble Lord is absolutely right that it is much harder to measure productivity in the public sector than it is in the private sector. Measures that the Government are undertaking, such as increasing the number of GP appointments or reducing waiting lists, increase public sector output and therefore productivity.
Spring Budget 2024
Lord Sherbourne of Didsbury Excerpts(9 months ago)
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Lord Sherbourne of Didsbury (Con)
My Lords, it is a great pleasure to follow my noble friend Lord Tugendhat. I echo many of the remarks made by other Members of the House, including the noble Lord, Lord Lamont, a former Chancellor of the Exchequer, the noble Lord, Lord Macpherson, a former head of the Treasury, and many others, in being very optimistic at the start of my speech.
The economy, which was so badly hit by the pandemic, the war in Ukraine and so on, is now beginning to show signs of recovery. Inflation is falling, interest rates look set to fall and the prospects for growth are good. There has been a positive reaction to the Budget. I have some quite interesting figures which show popular reaction to those proposals; the approval ratings range from 56 %, 63 % and 76 % to 81 %. I can only hope that it will not be long before these figures are reflected in more important opinion polls in the country.
There was an optimistic theme running through the Chancellor’s speech, and it was the same in the published Budget Report—the Red Book—although all 36 paragraphs of the executive summary had so upbeat a theme they were almost Panglossian: the best of all possible worlds.
However, I was struck by one other thing in the Budget Report. The text was not in black but in light grey—making it slightly more difficult to read. It is as if the Treasury were trying to tell us, “Well, it is not all black and white. The pale grey is sending a subliminal message that what we, the Treasury, say is nuanced with cautious subtexts”.
I will take one example: government borrowing. The Chancellor, in his speech, and my noble friend the Minister in her speech this afternoon, talked about falling national debt. It is forecast to fall every year from now until 2028-29. That, of course, is national debt, not the annual deficit, but what determines the national debt is the deficit—or surplus, if we ever get back to those days—and the deficit depends on two variables: revenue coming into the Government and spending by the Government. Both are highly variable.
Public spending depends on many events outside the control of government. We have seen already, as I have said, the pandemic, the war in Ukraine, and the oil and energy crisis. On the home front, much of the public spending is also outside government control. Here is something that the OBR says, which I think everybody in the House knows, and which should worry us all:
“The number of inactive working-age adults is … 9.3 million … 700,000 more than before the pandemic … Around one third of the working-age inactive population cite long-term illness as their principal reason for not being in the labour force”.
This should set alarm bells ringing, not just about the cost to the public purse, but about the nature and causes of these illnesses and the economic loss to the country. This requires serious analysis because, ultimately, it is unsustainable.
For these reasons and many others, the forecasts of public spending and borrowing are bound to become ever more speculative with every future year, which is why we need a substantial contingency reserve. This year, it is forecast to be £9.2 billion. Is this enough? Is it based on the recent experiences of the crises we have had?
Even without the predicted pressures on public spending there will be increasing further demands on the health service and, as my noble friend has said, on defence. Looming ahead there is one other horror, if there were a Labour Government—the rolling back of the trade union reforms brought in by previous Conservative Governments, which were broadly accepted by the Blair/Brown Governments but which would be repealed by a Starmer Government. I wonder whether the noble Lord, Lord Livermore, who served in No. 10 when Gordon Brown was Prime Minister, is a whole-hearted supporter of his party’s proposals to ditch these trade union reforms.
Finally, and quite separately, I make two simple pleas to the Treasury. First, despite the voluminous information published in the OBR report and in the Chancellor’s Budget Report—or perhaps because of it—it is sometimes difficult to find the most basic information. Hardly anywhere is there a table setting out clearly, side by side, government revenue and government spending. The nearest you get to it are the two pie charts stuck away in an appendix on the very last two pages of the Budget Report—pages 93 and 94. We need more of a plain man’s guide to help the general public understand the basic realities.
My second plea echoes what my noble friend Lord Horam said. It may be just me, but I am losing track of Budget Statements, Autumn Statements and Spring Statements. Again, this seems to make it more difficult for lesser mortals to understand the relationship between public spending and taxation. Surely it is possible to have just one Budget Statement a year setting out public expenditure, tax rates and government borrowing.
Autumn Statement 2023
Lord Sherbourne of Didsbury Excerpts(1 year ago)
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Lord Sherbourne of Didsbury (Con)
My Lords, it is always a great pleasure to follow the noble Lord, Lord Desai. He always makes everything sound so seductive and simple.
This afternoon, we have heard many speeches from noble Lords welcoming the excellent provisions in the Autumn Statement. I therefore hope that the Minister, whom I also welcome warmly to the Treasury, will forgive me if I do not go down that avenue, because I want to focus on one point this evening, and that is the national debt that we have in this country. We are, at present, paying £100 billion a year servicing the debt. That is £100,000 million, or 10% of government revenue, and it does not pay for a single service. It is more than we spend on education, twice as much as we spend on defence and five times as much as we spend on local government, housing and communities. Of course, government spending is still outstripping government revenue, so each year we go on adding to our total national debt.
Imagine you have built up a huge credit card bill and that you cannot pay the interest, so you have to borrow to pay. That adds more to your debt and eventually the bank is going to say that you cannot go on borrowing. Germany is already in some difficulty. It has a constitutional court which constrains it, of course, but there may well be an emergency budget in Germany, and that may well put at risk its coalition Government. On Monday, here in the UK, the chief executive of JP Morgan described America’s fiscal stimulus as “drugs in the system”. He is reported as having said:
“we’re now spending a lot of money … That money is like heroin”.
There are only two ways to deal with overspending: more borrowing, which the Government are committed to reducing; or more taxation, and we should not pile more taxes on business or individuals. The answer has to be control of public spending. That means that this Government, and any Government, must sometimes say no. It is not easy, especially for Ministers in this House, because they are then given a very hard time by Members opposite. If there were to be a Labour Government —I hope there will not be, but if there were to be—we would soon see what stuff Labour Ministers in charge of spending departments were made of. I suspect they would be under enormous pressure to give in, and we would end up with higher taxation.
I want to make two observations about public spending. First, I believe that recent decisions to ring-fence the spending of certain government departments is unhelpful. Economic circumstances change. Priorities change. Giving some government departments protected status means that they are let off the hook in having to argue their case against competing and often more deserving demands from other government departments. My second observation is that it is very easy to call for efficiency savings, but these rather glib words conceal the deep-seated and complicated workings of public bodies. Take, for example, the health service. Yes, for millions of patients, NHS nurses and doctors provide outstanding care, but talk to them and they will often complain about lack of executive grip and lack of accountability, despite—or maybe because of—the layers of management. I accept that public bodies have a real difficulty because they are not subject to the market and competitive pressures, which should keep a commercial company on its toes.
Another problem is the difficulty which public bodies often have in letting go people who, decent and honourable as they may be, are not really up to the job. Only today, the National Audit Office is reported as saying that one in five government departments did not know how many underperforming workers they had, and that a majority did not know what happened to staff who were told to improve. If public bodies are to become more efficient and to manage resources better, there will have to be fundamental changes in administration, in personnel and in culture, and that cannot be done quickly. It will take time. The public sector needs executive managers with the right business experience and expertise. We already have some, but we need more, we need to retain them and we need to attract them. Of course, rewarding people of talent at all levels costs money, and public services cost money, so if we are going to cut borrowing and avoid further taxation, we will soon have to answer one of the toughest questions of the next Parliament: what should the state do and what should the state not do?
Taxation: Avoidance
Lord Sherbourne of Didsbury Excerpts(9 years, 10 months ago)
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Lord Sherbourne of Didsbury (Con)
My Lords, can I endorse what the noble Lord, Lord Howarth, said? I know my noble friend Lord Green, who I agree is a man of great integrity. I agree also that the acquisition by HSBC at the time of a great many companies, producing a loose federation, caused management stretch in terms of organising it—I think that it has learnt the lessons of that. It is important that people outside this Chamber understand the measures that this Government have taken to strengthen controls on banking behaviour.
Lord Newby
My Lords, I agree with the noble Lord. It is important to stress that, as a result of initiatives led by this Government, there will be in place automatic information exchange agreements with more than 90 countries within a couple of years, including Switzerland, which means that the kind of egregious behaviour which today’s revelations have brought to light simply will not be possible in future.
Greater Manchester
Lord Sherbourne of Didsbury Excerpts(10 years ago)
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Lord Sherbourne of Didsbury
To ask Her Majesty’s Government what steps they are taking to develop the economy of Greater Manchester.
Lord Newby (LD)
My Lords, this Government are committed to rebalancing the economy and to supporting growth in Greater Manchester through a growth deal, city deal and enterprise zone. Earlier this month the Government and councils in Greater Manchester agreed to create a directly elected mayor for Greater Manchester with wide powers over economic development, housing, policing and planning.
Lord Sherbourne of Didsbury (Con)
My Lords, I welcome the decision to establish a Greater Manchester Combined Authority, but does my noble friend agree that there must be effective scrutiny of the decision-making of such a body, so that local people and businesses know who is deciding what and how? Will the Government, therefore, encourage these councils to make sure that that happens, so that there is transparency and clear accountability?
Lord Newby
My Lords, I absolutely agree that clear accountability is vital. That is why the Government and councils have agreed that there will be a democratically elected mayor to oversee the new powers and funding. Indeed, beyond 2016-17 these new powers will be conditional on the elected mayor being in place.
Economy: Public Sector Net Borrowing
Lord Sherbourne of Didsbury Excerpts(10 years, 5 months ago)
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Lord Sherbourne of Didsbury
To ask Her Majesty’s Government by how much public sector net borrowing has fallen between 2009-10 and 2013-14; and what is their forecast for the current financial year.
Lord Newby (LD)
My Lords, between 2009-10 and 2013-14, public sector net borrowing fell from £157.3 billion to £107 billion, or from 11% of gross domestic product to 6.6%—a fall of more than a third. The independent Office for Budget Responsibility forecast in March this year—2014-15—that underlying public sector net borrowing will fall to £95.5 billion, or 5.5% of gross domestic product, half its peak in 2009-10.
Lord Sherbourne of Didsbury (Con)
Does my noble friend agree that the reduction in the deficit over the past four years has been crucial in generating economic growth and employment? Does he also agree that it is therefore vital that the deficit reduction programme continues? Can he give the House some indication of when we might expect the deficit to be eliminated and the nation’s finances returned to balance?
Lord Newby
My Lords, on the current forecast we expect there to be a surplus in 2018-19. At the moment, as my noble friend points out, the economy is growing; we are the fastest growing economy in the G7 in the year to Q1 2014. The most recent employment figures showed that in the past year employment had risen by 780,000 and the claimant count had fallen by 406,000.
Scottish Independence: Currency Union
Lord Sherbourne of Didsbury Excerpts(10 years, 9 months ago)
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Lord Sherbourne of Didsbury
To ask Her Majesty’s Government whether they have made any assessment of the constitutional, political, financial and economic implications if there were to be a currency union between an independent Scotland and the rest of the United Kingdom; and, if so, whether they intend to publish it.
Lord Newby (LD)
My Lords, Her Majesty’s Government assessed these issues in the recent paper Scotland Analysis: Assessment of a Sterling Currency Union. This is the analytical basis on which the Chancellor of the Exchequer has said that he could not recommend that the other parts of the UK share the pound with an independent Scottish state, because it would not be in the economic interests of either the continuing UK or of Scotland.
Lord Sherbourne of Didsbury (Con)
Does my noble friend agree that the sure way for Scotland to keep the pound is to vote to stay in the UK, which I hope it will? If it were to vote to leave the UK and any future Westminster Government were ever to be minded to enter a currency union with Scotland—or, for that matter, with the eurozone—would that not require a referendum so that the people could decide?
Lord Newby
My Lords, before you got to that point, it would require the rest of the UK Government to wish to recommend such an outcome. It is worth quoting the conclusion of the official Treasury study, which says:
“On the basis of the scale of the challenges, and the Scottish Government’s proposals for addressing them, HM Treasury would advise the UK Government against entering into a currency union. There is no evidence that adequate proposals or policy changes to enable the formation of a durable currency union could be devised, agreed and implemented by both governments”.
As a result, I do not think we will get to that point.