The Economy

Lord Spicer Excerpts

Thursday 28th April 2016 Lords Chamber

[Lord Newby]

I think it may be his objective and I find it the most irresponsible statement I have ever heard, given the history of Europe through which we have lived and which we know from the history books.

Whatever the relationship with the EU is likely to be, it will not be on the same terms as now. Even in the closest feasible relationship, such as that with Norway, we will have to accept the rules and costs of membership with no say over them. This will have a negative effect on trade, particularly in services. In financial services, failure to retain the right of companies to passport their services from the UK to the rest of the EU, if we form an agreement on those lines, would undoubtedly lead to significant job losses in the City— some estimate as many as 100,000—to the benefit of Frankfurt, Paris and Dublin, which certainly have the capacity to pick up the baton. If we were unable to keep the passporting rights, rules set by the EU would undoubtedly over time, as sure as night follows day, disadvantage the City. So, whatever the post-Brexit relationship, our position re trade with the EU will be less favourable than it is now.

What do the Brexiters say? They say we do not need to worry about trade with the EU because outside the EU our trade with the rest of the world would blossom, particularly with the fastest growing countries in Asia and Latin America. This argument has been used in recent days by as wide a group as not only Michael Gove but the noble Lord, Lord Owen, and Sir Ian Botham. However, for this to be true it would have to be the case that UK companies are currently hobbled from exporting outside the EU, that we would be able to get better trade deals by negotiating on our own and that there is a reserve army of UK companies waiting in the wings ready to take up those new opportunities.

All these assertions are false. Are British companies currently constrained from exporting outside the EU because of EU rules? There is no evidence for this. True, we export less than Germany by a factor of over two to China, India, the US and Brazil. However, the fact that Germany exports so much shows that EU membership in itself is not a barrier to successfully exporting globally. Indeed, over the past decade, our exports to some of these countries has greatly increased—to China by over 70% and India by almost 30%. The reason for our relatively poor historic performance and relatively strong recent performance has had nothing to do with the EU—it is because there has been a concerted push by British exporters, backed by the Government, to increase exports to those countries which was largely lacking before. It is worth emphasising that our exports to the BRIC countries, even if you include South Africa in that definition, is well under 10% of the total, compared to 17% to the US, let alone the 44% to the EU.

The second myth is that we would get better trade deals on our own if we were not held back by the EU. This myth has been romantically advanced by Ian Botham in respect of the English-speaking, cricket-playing members of the Commonwealth.

[Lord Spicer (Con)]

One of the wisest observations on this matter of trade was made by my noble friend Lord, Lord Lawson. He said that it was all irrelevant anyway because 75% is covered by the World Trade Organization rules.

[Lord Newby]

The World Trade Organization’s rules are, in many ways, the worst option. Why are we having all these trade negotiations with countries around the world when we already have the WTO rules? The reason is that they are not good enough—otherwise we would not be spending years trying to get better deals. Incidentally, we spent years trying to get another round of WTO improvements and failed. The only reason for bilateral deals as the EU is because we could not get better deals via the WTO route.

As I was saying, all the Commonwealth countries that play cricket, as far as I am aware, have said that they wish us to remain in the EU. Indeed, the reason we have had difficulties in exporting to India is because of the protectionist policies of the Indian Government. It has ranged from difficulties in exporting Scotch whisky through to extreme difficulties for British lawyers and accountants doing business and setting up businesses in India. As to the US, President Obama made the position starkly clear last week. We would be at the end of the queue for a trade deal, a position supported by Hillary Clinton.

The third myth is that there is an army of companies champing at the bit to do business in far-flung parts of the world rather than in the EU. However, the surveys undertaken by the Federation of Small Businesses when I was a Minister pointed out that the vast bulk—well over two-thirds—of small businesses thinking of exporting for the first time looked to do so to the EU. The reason is obvious. It is inelegantly expressed in the Treasury’s equations as “dist”—that is, the distance between the UK and EU compared to other markets. Small companies often cannot afford the time, expense and complexity of undertaking sales and marketing activities in China, say, compared to France. This was borne in on me with a small manufacturing company in the high Pennines that I know. Out of the blue it got a £50,000 order from Brazil. The marketing manager was immensely excited and went to the manager saying, “I want to go to Brazil to meet these people, whoever they are, and to expand over there”. He was told, “I am terribly sorry but you can’t. We can’t afford the time or the money”. If that had been an order from France, he would have been on the next plane.

The growth rates of some of the alleged El Dorados of the BRICs and elsewhere are now lower than those in the EU and the challenges of corruption and weak legal rights in many of them have not materially abated. The overwhelming arguments about the straightforward trading advantages of being inside the EU are reinforced by the beneficial effect of membership on direct investment and productivity. The Minister has outlined those arguments and so I will not refer to them.

It seems to me that all the arguments in respect of trade are absolutely compelling and need to be deployed as effectively as possible over the coming weeks. They are set out comprehensively in the Treasury’s analysis of the long-term economic impact of EU membership and the alternatives. However, the document, despite a perfectly good summary, is not easily accessible to the lay person. Therefore my only question for the Minister is this: what is the Treasury going to do to promulgate the headline arguments in that document in a clearer and more readily understandable way?

I have not said anything about the short-term shock which leaving the EU would undoubtedly cause the UK Government, but clearly that will also be considerable. The judgment the Government have taken in having a referendum in the first place is an extremely risky one and is probably the decision by which they more than any other Government will be judged. It is in all our interests that we get it right.

Economy: Balance of Payments and Industrial Productivity

Lord Spicer Excerpts

Thursday 10th December 2015 Lords Chamber

[Lord O’Neill of Gatley]

My Lords, again there are many questions about the arcane world of economic statistics with which I am very familiar. I suggest that there is no clear correlation between the level of manufacturing and the overall level of productivity. I spent considerable time yesterday discussing this with my many friends in the north of England.

[Lord Spicer (Con)]

My Lords, there are signs that we may be on the brink of a recession. Is this really the right time to think of putting up interest rates?

[Lord O’Neill of Gatley]

My Lords, luckily the decision on what happens to interest rates has absolutely nothing to do with me and is the responsibility of the independent Bank of England.

Spending Review and Autumn Statement

Lord Spicer Excerpts

Wednesday 25th November 2015 Lords Chamber

[Lord O'Neill of Gatley]

My Lords, as I have already said, it is indeed the case that the new baseline that the OBR presented allowed for considerably more flexibility in today’s announcements. However, it does not change the overall thrust of economic policy. What it has done, as I emphasised, is given more flexibility across the board in respect of three areas. As has been debated considerably in this House recently, there is a £12 billion increase in public sector investment spending over what was previously planned, which covers particularly housing but also transport, including both road and rail. Relative to the Budget in March in particular—the coalition’s final Budget—but also to the summer Budget, there is also a lesser pace of spending reductions across the board. The Chancellor highlighted that, going forward, the aggregate real cuts would be something like 0.8%, compared with 2% previously, and that is a slower pace than was previously the case. If one looks at the mix—and there are some very interesting tables presented in the Treasury document and particularly by the OBR about the shifting balance—previously spending reductions made up significantly more than 50% of the planned savings but are now a bit less than 50%, and the balance is made up in other areas, including lower debt payments, which I think the noble Baroness, Lady Kramer, indirectly referred to.

[Lord Spicer (Con)]

My Lords, one potential massive investment that could take place, which would not require taxpayers’ money or affect the public borrowing requirement, would be investment in Heathrow and the London airports system. Why is more not being made of that?

[Lord O’Neill of Gatley]

My Lords, I am pleased to say that the matter of Heathrow Airport is a bit above my pay grade, but I think that a decision on that subject will be made and announced before the end of the year.

Airports: Heathrow Third Runway

Lord Spicer Excerpts

Tuesday 17th June 2014 Lords Chamber

Asked by

[Lord Spicer]

To ask Her Majesty’s Government what forecast they have made of the tax revenue which will be raised from employment and investment as a result of the construction of a third runway at Heathrow.

[Lord Newby (LD)]

My Lords, the Government have not made any forecasts of this type. The Airports Commission has been tasked with independently assessing the options for proposed new airport capacity and will present its analysis and conclusions in its final report in summer 2015. In the mean time, the Government do not propose to comment on any of the shortlisted options.

[Lord Spicer (Con)]

If it requires a third runway to make Heathrow fully effective, I suspect that many if not most of your Lordships would accept that it should be built. Indeed, I guess that many of your Lordships will agree with me that it is almost bound to be built at some point in the future. The Cornish, I think, would call that “shortly”, but we would just say “in the future”. There is only one supplementary question that I can think of to ask my noble friend—politely and agreeably, I hope—and that is: when?

[Lord Newby]

I am tempted, of course, to say “shortly”, but it is the next Government who will respond to the report of the Davies commission. However, I think that it is worth pointing out that the Davies commission concluded that although one new runway will be needed, it will not be needed in the south-east until 2030.

Economy: Inflation

Lord Spicer Excerpts

Tuesday 11th March 2014 Lords Chamber

[Lord Newby]

There is a question over whose deficit we are talking about here. The noble Lord knows that since the 2010 election, employment has increased by 1.3 million; unemployment is down by 152,000; there are more women in work than ever before; and every single survey for the future suggests higher income, more people in work and a growing economy. That is a record to be proud of.

[Lord Spicer (Con)]

This has all become a little bit distorted. Does my noble friend agree that inflation is a bad thing and that keeping it down is the rightful priority of the Bank of England?

[Lord Newby]

Indeed, my Lords. Whatever the forward guidance of the Bank of England, it does not detract from its basic purpose, which is to keep inflation at or around 2%. That is the position we are now in and we believe that it will be the position going forward.

Economy: Growth

Lord Spicer Excerpts

Tuesday 11th February 2014 Lords Chamber

Asked by

[Lord Spicer]

To ask Her Majesty’s Government what are their latest projections for the economic growth of (1) the British, and (2) the Scottish, economy in 2014.

[Lord Newby (LD)]

My Lords, the Office for Budget Responsibility is responsible for producing independent economic and fiscal forecasts for the UK economy. The OBR published a full analysis of the prospects for economic growth, employment and inflation in its forecast at the Autumn Statement. The OBR forecast for the UK is that the UK economy will grow by 2.4% in 2014. The OBR does not make separate forecasts for the countries that make up the UK.

--- Later in debate ---

[Lord Spicer (Con)]

Does my noble friend agree that there is a great difference between the two economies, and that this provides one reason why the Governor of the Bank of England was so right when he said that it would be virtually impossible for an independent Scotland to keep the pound? Indeed, is it not the case that if Scotland does fly the nest, it will not take many eggs with it?

[Lord Newby]

My Lords, there is increasing evidence from the business community that it believes that its involvement in the Scottish economy would be reduced were Scotland to become independent; for example, in recent weeks, Bob Dudley from BP has said that there would be “big uncertainties” about its continuing investment in Scotland. He is just one of a number of representatives of major firms who have questioned their long-term involvement in the Scottish economy if Scotland became independent.

Financial Services (Banking Reform) Bill

Lord Spicer Excerpts

Tuesday 26th November 2013 Lords Chamber

[Lord Eatwell]

I am sure that the noble Lord, as a distinguished solicitor, would attest to that, as indeed he has done. It seems to me that if members of the professions are required to pass examinations to show professional competence and to undertake rigorous training, bankers should do the same. That is what Amendment 21 seeks to achieve. For example, proposed new Section 65A(2)(b) says that the licensing regime must,

“specify minimum thresholds of competence including integrity, professional qualifications, continuous professional development and adherence to a recognised code of conduct and revised Banking Standards Rules”.

[Lord Spicer (Con)]

What is a minimum threshold of integrity?

[Lord Eatwell]

Being a “fit and proper person” would perhaps be appropriate. If the noble Lord is not aware of the phrase, it is the standard regulatory threshold which anybody operating in financial services must attain.

Amendment 21 seeks to capture the need for proper training, continuous development and the maintenance of proper professional standards via a licensing regime. I have enormous sympathy with Amendments 50 and 51, tabled by the commissioners, but I am afraid that they do not capture the need for professional qualifications.

With respect to the government amendments in this group, they are mostly concerned with the correct definition of a bank. I am delighted to see that we now have a definition of a bank. It may be of interest to the House to know which banks are now included that were excluded in the past. Barclays Capital, Citigroup, Credit Suisse Securities and Goldman Sachs International were not included in the previous definition of a bank, but I am glad to say that they are now. I congratulate the Government on appropriately incorporating them. However, those government amendments stand slightly aside from the issue of professional standards addressed in Amendment 21 and in Amendments 50 and 51, tabled by the commissioners.

I suggest to your Lordships that this House asserting that the banking industry must maintain appropriate professional standards is the minimum that the public expect of us. I beg to move.

--- Later in debate ---

[Lord McFall of Alcluith (Lab)]

I do not think that we should run away with the idea of codes of conduct because, if you look back over the past 10 or 20 years, you will have seen a proliferation of codes of conduct and ethics from banks. When they had rules, they circumvented them, so we must have something deeper here.

On the Parliamentary Commission on Banking Standards, if we heard the phrase, “This time it’s different”, once, we heard it 10,000 times. We were told that there was new management and a new executive, that the past was behind us and the future here, with new staff—and that everything would be better. Since we have taken evidence, tumbling out every month there has been another scandal. So we need to attest to something deeper here.

The lack of individual responsibility at the top is at the core of the problem. I say this with no understatement: many of the very senior individuals who came before the Parliamentary Commission on Banking Standards were economical with the truth. I give an example on PPI, where we now have a scandal of about £25 billion to £30 billion. There was a “no see, no tell” policy from those at the top. Why? Because they preferred to be seen as incompetent than to have any responsibility. There was a hiatus of responsibility from the top to lower down.

My own view was not accepted by the banking commission, which was fair enough. I thought that every year there should be an individual meeting between the chairman and chief executive of a bank and the regulator. That meeting would be recorded but it would not be made public—but they would have to attest to the regulator that they were responsible for their institution and what went on in their institution was their responsibility. If we implement a code, we will only repeat the mistakes of the past; there has to be a deeper cultural change.

Culture has been mentioned. Again, we had individuals coming before us saying, “Look, we have a new chief executive and a new culture—everything is okay”. You would ask how many employees were in that organisation and be told that it was 150,000. When we asked how long it would take to change the culture, they said, “Oh, three months”. That is for the birds. So the responsibility needs to start at the top.

The example I give of PPI is of a chief executive who came along to the commission and said, with a straight face, “As far as PPI is concerned, my organisation is on the side of the angels”. That organisation is the one with the highest PPI penalties in the United Kingdom. So do not let us kid ourselves that we can sort this problem with codes. We need to give the regulator authority—and we have seen a regulator that was captured, cowed and conned by the industry. There should be someone to go to in the organisation to whom we can say, “That was your responsibility”. If we are told, “Well, that person left”, we need to ask for the handover document that indicates that there was a transfer of responsibility that can be understood.

The director of enforcement at the FSA came before the commission at the time of the UBS scandal, which cost the bank billions of pounds. We had four from the top management of the bank before us and, when we asked them if they knew who the individual was, they said that they did not know at all. Then we asked them how they found out, and they said, “Bloomberg wires”. That is how corrupt the institutions are in terms of accountability.

We need to change. I am happy for the Government to accept this amendment, but I am certainly not happy for warm words or for anyone to say, “This time is different”. This time ain’t different. The scandal has kept going and will continue, and we need to do something severe to ensure individual accountability by those at the very top of those organisations.

[Lord Spicer]

I have enormous respect for the noble Lord, Lord McFall, but I think the idea of legislating to be more responsible—in fact, legislating for human character—is a very dangerous path. It is why I intervened on the question of minimum standards of integrity: you are either honest, or you are not honest. It is quite dangerous to keep loading the statute book with matters which attempt to affect human characteristics. I think that there should be some caution about some of these amendments.

[Lord Newby (LD)]

My Lords, this is a very large group of amendments dealing with another key aspect of the Government’s reform-namely, how to drive up standards across the banking system. The Government’s amendments in this group, and in the following group, widen the range of firms covered by the reform. They respond to points made in Committee, and I am grateful to the noble Lord, Lord Eatwell, for his welcome for them, but we will deal with them in more detail when we come to the next group.

I would like first to respond to the concern that the Government’s Committee stage amendments did not implement the commission’s recommendations for what it calls the licensing regime. To be completely clear, the Government are committed to implementing the vast majority of the commission’s recommendations on the regulation of individuals in banking, including its recommendations to introduce a licensing regime. The regulators, in their responses to the commission published in October, confirmed that they would do this.

The Government’s amendments in Committee put in place all the essential features of the commission’s licensing regime proposals in Clauses 22 and 23. These clauses give the regulator power to make rules of conduct imposing binding standards on employees and ensure that the regulators can take action when there is any breach of these rules. The relevant provisions would form part of FiSMA and confer powers on the regulators in the normal way.

However, we recognise that this may not be seen as giving the full weight and impetus to the commission’s proposals, so we are looking to see whether we can bring forward at Third Reading amendments which will highlight the proposals more and put beyond doubt the determination which we all share to see real change in this area. In the light of this, the Government are looking to introduce amendments at Third Reading to impose obligations on banks and PRA-regulated investment firms, first, to verify before appointing someone as a senior manager, an employee in a role that could do significant harm to the firm or another role requiring regulatory pre-approval that the person is fit and proper to perform that role in the firm; secondly, to maintain up-to-date lists of such persons which could be made available to the regulators when required; thirdly, to notify the appropriate regulator when they take formal disciplinary action against such persons—formal disciplinary action could include giving a formal written warning, dismissal, suspension or clawing back remuneration; and, fourthly, to notify all such persons of the banking standards rules that apply to them. All these obligations will be regulatory requirements under FiSMA. Failure to comply with the obligations will be a breach of regulatory requirements, and actions could be taken against the bank concerned by the regulators. In addition, deliberately or recklessly submitting a materially false or misleading list of persons to a regulator will be a criminal offence.

The Government will also look at tabling amendments requiring, rather than simply empowering, the regulators to set out those functions for which a bank must do the above. We anticipate that this class will match the category of staff defined in the PCBS report as being those whose actions or behaviour could seriously harm their employer, its reputation or its customers. I hope that when we produce those amendments they will satisfy the concerns addressed by the most reverend Primate.

There are certain detailed respects in which the Government have decided not to follow the recommendations of the commission. These do not change the substance of the impact of the regime, but they will ensure its effectiveness. First, the commission envisages that the licensing regime provisions would entirely replace the regime of regulators, giving pre-approval to people below senior management level. That would mean dropping regulatory pre-approval for all appointments below senior management level, including in areas such as money laundering, with which the noble Lord, Lord Brennan, and others were particularly concerned in Committee.

Queen’s Speech

Lord Spicer Excerpts

Monday 13th May 2013 Lords Chamber

[Lord Forsyth of Drumlean]

That is all right, then; we will just write it off, there will be no problem and the world will continue to treat the pound in the same way. One of the extraordinary things is that although the pound has sunk significantly on the markets relative to other currencies, we are still not able to increase our exports and improve our productivity. As the noble Lord, Lord Empey, said, the key to this is being able to sell goods and services to a global marketplace competitively. Unless we can increase our revenue, we will not pay back the debt or, more importantly, provide the public services that the right reverend Prelate rightly emphasised as being of importance. The issue for us is how we do that.

The gracious Speech is a bit disappointing in the vision stakes. It is a list of Bills. One of the things that I have learnt in almost 30 years of being associated with Parliament is that legislation is seldom the answer to any problem, and usually creates considerably more. The idea that we should address every problem by thinking of a Bill or a new regulation comes out of this gracious Speech. To be fair, many people have said that they thought that the Speech was a bit thin, and in some regards it was. Perhaps it was modesty on the part of my noble friend, but I do not know why Her Majesty did not refer in the gracious Speech to the fantastic success that we had last summer with the Olympics, when Britain was advertised across the world as a competitive, successful and enterprising nation that was proud of its young people. My noble friend Lord Deighton played his part in ensuring that the Games were an enormous success, along with my noble friends Lord Coe and Lord Moynihan. Perhaps we could have done with a touch of levity in the Speech: I was itching to know whether Her Majesty had any further plans for appearing in Bond movies, for example.

I think that we have to go back to 1946 for the last time that there was a proposal to amend a Motion on the gracious Speech, which is happening in the other place. That amendment arises, again, because of the issues that the noble Lord, Lord Empey, pointed to—because Banquo’s ghost continues to haunt us. I cannot believe that it is now so many years since we discussed the Maastricht treaty yet I find myself mouthing the same arguments now to colleagues as appeared then.

I want to touch on the central themes of the gracious Speech. We have to improve Britain’s economic competitiveness and get Britain working and our economy growing again by investment in infrastructure.

I have to say to my noble friend Lord Deighton, who is a very clever chap, that whatever one’s views on the high-speed train—I have views that I had better not repeat because I want to be supportive of the Government—the immediate need is for jobs now. In roads and transport, we want people out fixing the holes in the road that are there today. We need more activity now in order to create employment. It is no good dreaming up fantastic, high-profile, wonderful schemes that will take place in 25 years’ time. We may not be around to see the benefits of those projects.

Similarly, there is talk of wanting another Bill to reduce regulation. Why do you need legislation to get rid of legislation? I should declare an interest as chairman of a small business that my daughter runs selling handbags—which are very good, by the way. Small businesses are not allowed any rates relief while they are setting up and before they start trading. Rates are a huge burden, particularly on the retail sector. They are competing with companies, such as Amazon, that pay no corporation tax or rates because, thanks to the splendid efforts of many entrepreneurs—not least the noble Baroness, Lady Lane-Fox, whose speech we very much look forward to hearing this afternoon—they are using cyberspace and are therefore able to escape taxation. Their competitors on the high street in bricks and mortar are faced with a burden of rates that they must pay regardless of whether they are profitable. It is no good saying that we are reducing the burden of corporation tax because you pay corporation tax only if you are making a profit, and our high streets are bleeding. We need to look at the burden of business rates and shift it in a direction that takes account of the needs of entrepreneurs and people starting up, particularly in retail.

The gracious Speech also refers to our commitment to encourage people to save for their pensions, but why do my noble friend and his colleagues in the Treasury continue to interfere and change the rules that apply to pension schemes? Raids started with Mr Gordon Brown’s on dividend tax relief. Then we had A-day; rules were going to be set in stone and people could rely on them, but in every Budget and finance Bill we have another nibble at the rules on pension saving. Why does that matter? People might say that it affects only the very wealthy who have built up very large pension pots. It matters because it undermines confidence in a long-term saving vehicle in a country that needs more long-term saving. Then you have the Government, who say that they are holding down interest rates because of their control on public expenditure—which, incidentally, is going up in cash terms—and who are funding their own borrowing by quantitative easing and creating, through quantitative easing, an artificially low interest rate. You then have the contributions that employers and companies must make to company pension schemes determined by the gilt yield. The result is that billions of pounds that would otherwise be going into growth and investment to create jobs for the future are going into pension funds, whence they will never come out because the assessed liabilities of those pension funds have been exaggerated by the Government’s quantitative easing policy. Far from quantitative easing helping, it is causing enormous damage and sucking productive funds out of the economy, from the private sector, which would otherwise be invested in job creation.

There is also the commitment to supporting the union, which, of course, I very much endorse, but if people are being asked to vote in a national referendum about Scotland’s continued place in the United Kingdom, which is in the interests of Scotland and the rest of the United Kingdom, we need to sort out the issues that remain unresolved from devolution and, in particular, the role of Scottish MPs voting at Westminster on devolved matters: the so-called West Lothian question. People voting in the referendum need to know what they are voting for. The Government simply cannot continue to run away from the West Lothian question. They need to say what the arrangements will be in future.

Similarly, if we are to continue with a devolved Parliament, we need a system of funding that is fair to Wales, England and the rest. Barnett is certainly not that. Repeated reports, including one from the House’s own committee that was set up for the purpose, have drawn attention to the unfairness of Barnett. The Government simply cannot say that they are concentrating on reducing the deficit and are therefore not doing anything about Barnett. That is a non-sequitur. There is no relationship between these two arguments.

On what is going on at the other end of the Building in respect of Europe, it seems that the central theme of the gracious Speech is our country being competitive and creating those jobs and opportunities that the noble Lord, Lord Empey, talked about. That depends on our looking outwards and recognising what is going on in Europe. It is not a matter of our leaving Europe; the rest of Europe is leaving us. It is going off on this madcap scheme to have a single currency. There seems to be no price that it is not prepared to pay in terms of the misery being created, particularly in the southern European states. They have unemployment among young people of 60%—more than half their youngsters unemployed. That is not only an outrage but simply unsustainable. The rest of Europe is determined that no sacrifice is too great for the sake of this project.

[Lord Spicer]

Can my noble friend confirm that one of the reasons why it will be so difficult to renegotiate the repatriation of powers that he has implied already is the acquis communautaire? The acquis insists on all movement, all the changes in the treaty, going in one way: towards a federal state. It is endemic in the treaty and is always supported by the court.

[Lord Forsyth of Drumlean]

My noble friend is absolutely right. I remember, when I was an Employment Minister, spending hours trying to prevent the working time directive coming into being, which ended with our challenging it in the courts and being advised that we would lose because the court has a duty to promote the acquis, which is about integration. We are involved in a club that has a particular direction. That direction is to create a country called Europe with one Finance Minister, one currency and one set of interest rates, which will take no account of the relative competitiveness of the member states. We can see what is happening. The result will be years of economic decline. It is our marketplace. It is a big marketplace, of course, but the rest of Europe actually sells more to us than we sell to it. We have a Commonwealth. We have relationships around the globe. We need to get out there and sell to those parts of the world that are growing. That is where our future lies. It does not lie in being tied up in sclerotic bureaucracy created by this organisation called Europe.

As to the referendum, all the political parties are split to one degree or another on our membership of the European Union. We should have a referendum as soon as possible. Just as it was argued in Scotland that we should have a referendum in order to end the uncertainty as quickly as possible, so we should have a referendum to end the uncertainty about our continuing membership of the European Union. Some of my colleagues who are of the same view as me say, “We might lose. Perhaps we should delay it. Perhaps we should put the arguments for longer”. Others, who are in favour of us maintaining our current relationship, take the same view. Let us trust the people and let them decide.

I say to my noble friends that the most disgraceful thing has been the behaviour of the Deputy Prime Minister and the Liberals on this matter. I took part in the general election campaign. I saw the leaflets that were produced asking us to sign a petition to send to Liberal headquarters, with a picture of the Deputy Prime Minister saying that the people of Britain must be given an in/out vote. That is what the Liberals fought the general election on. Indeed, the former Prime Minister, Gordon Brown, was attacked by Nick Clegg at Prime Minister’s Questions for not giving the people an in/out vote. Nick Clegg says that he wants to restore trust in British politics. Holding the Prime Minister hostage and preventing him giving the people a say on this crucial matter is a very funny way of doing that. Let us have a referendum, get it out of the way and then concentrate on building our prosperity by selling our goods and services to the rest of the globe, and using those relationships—our soft power—to make Britain produce the resources and revenues that we need to fulfil our obligations to our fellow citizens.

Finance (No. 3) Bill

Lord Spicer Excerpts

Monday 18th July 2011 Lords Chamber

[Lord Ryder of Wensum]

My Lords, I applaud the general direction of the Chancellor’s attack on public spending, yet I nurse concerns about the Government’s economic coherence. The Government’s growth strategy is deficient. Growth requires stronger supply-side measures, starting with deregulation. I tabled a Written Question when the Government had been in office for almost a year, inviting Ministers to set out the number of regulations revoked since the general election. The answer was none. It appears that despite languishing in Opposition for 13 years, the Conservatives were unprepared for Government, otherwise action would have been taken by now.

Is not the Chancellor at least willing to remove reams of onerous employment laws, bearing in mind that expensive regulations to meet environmental targets lurk in the pipeline? The ligature of red tape stays tight around our businesses and their growth is further hampered by high tax rates. The Institute of Directors has just gauged that taking all taxes into account, the overall tax burden for a medium-sized firm is no less than 43 per cent.

The Chancellor has asked HMRC to examine likely tax revenues from different rates of personal taxation. I had half hoped that Mr Osborne’s apparent belief in the enterprise culture would have informed his opinions without this digression. The noble Lord, Lord Myners, quoted John Maynard Keynes in 1933. I am sure that he knows even better than I do that this was the year in which Keynes advised the then Government to cut taxes. Now, even the IMF has urged our Government to slice tax rates. So there is no deregulation, no lower taxes, except corporation tax, and to compound these defects the Government also harm our economic recovery and competitiveness and fuel inflation at the same time with so-called green measures. Last year, the Government raised £40 billion from green taxes with householders paying an extra £200 in hidden charges on gas and electricity bills. The Global Warming Policy Foundation has shown that one-fifth of our soaring energy bills are accounted for by the hidden subsidies and other costs to decarbonise our electricity industry. This injures our recovery. The cost of the low-carbon economy will be £13 billion a year, soon rising to £18 billion. China, India, and to a lesser extent the USA, have rejected constraints on carbon-based energy. Investment and jobs will be forced overseas by the Government’s actions. The director-general of the CBI has wryly observed that green taxes on cement, steel and lubricants will mean that even windmills will soon be too expensive to manufacture in this country.

We cannot afford such follies. Last year our trade deficit was £50 billion, despite the 25 per cent devaluation. The benefits of devaluation in terms of exports have been so marginal that I query whether they are worth the manifest inflationary costs condoned by the Monetary Policy Committee.

[Lord Spicer]

My noble friend is making a very important speech, and I am particularly struck by what he is saying about inflation. Will he accept that the problem with inflation is that it can get out of control so that it becomes cumulative? I wonder whether he had in mind any figure of inflation at which that might occur. My own view is that it is between 5 and 7 per cent, but I wonder what his view is.

[Lord Ryder of Wensum]

My noble friend has consistently warned about the dangers of inflation over the past 30 to 40 years. As I recall, in his maiden speech last year he highlighted this threat. I agreed with him then, and I agree with him now, because inflation, as he knows, has been above target for more than four of the past five years. We can feel very thankful that the MPC members are not paid performance bonuses. The Business Secretary gently chided me for complaining about inflation in a debate a year ago, implying that it had little to do with the Treasury. Up to a point, Lord Copper, only up to a point. I confess to acting as a foot soldier, like my noble friend Lord Spicer, in the battles against inflation during the 1970s and 1980, sharing Milton Friedman’s belief that,

“inflation is one form of taxation that can be imposed without legislation”.

I wager that inflation is built into every economic calculation made by the Treasury. The suppression of inflation may not be the Treasury’s responsibility but it is, I say to the Minister, its lasting burden.

A week after the general election, the Prime Minister, eager to encourage economic growth, implored the Foreign Office to play a livelier role in helping our export drive, though it later took him seven months to put a trade Minister in post. How can the Prime Minister’s wishes be achieved when the Foreign Office budget has been slashed with severity? DfID’s budget will soon exceed that of the Foreign Office by a factor of five. We donate in this country twice as much as Japan and nearly twice as much as Germany. Our Government raise the equivalent of £300 per household for overseas aid. Surely a segment of that figure would be better deployed in the Foreign Office to promote British exports?

The late Lord Bauer, who I know worked closely over many years with the noble Lord, Lord Desai, at the London School of Economics, argued about overseas aid transfers cash from poor people in rich countries to rich people in poor countries. Indeed, the DfID Permanent Secretary admitted earlier this month that the department had no idea how much British aid is being lost to fraud and corruption, thus underlining a recent World Bank investigation unearthing massive corruption in the aid field. Rumours still persist about the Karzai clan’s links with new blocks of flats in Dubai, partly through the collapsed Kabul Bank. Yet we continue to pour aid into Afghanistan. Parents of dead soldiers must rue the extravagance of the aid budget when compared with the lack of military equipment given to their sons and daughters. I would prefer my donations to be voluntary. In other words, I opt, even if the Prime Minister does not, for the free-will offerings of the big society over the compulsion of big government.

I am pleased that the Prime Minister went to Africa to preach the gospel of free trade. I hope that on his journey he found time to read Dambisa Moyo’s book, Dead Aid: Why Aid Is Not Working and How There Is a Better Way for Africa, in which the leading Zambian economist argues that aid fosters poor government, dependency, corruption and poverty. To paraphrase Bill Clinton, economic success is not a matter of chance but of choice. Let chance be the road not taken and choice of the economic road taken, with belief and without fear.

Monetary Policy Committee

Lord Spicer Excerpts

Wednesday 6th July 2011 Lords Chamber

Asked By

[Lord Spicer]

To ask Her Majesty’s Government whether they will maintain the inflation target as the primary criterion of the Monetary Policy Committee.

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

My Lords, the Bank of England Act 1998 states that the objectives of the Monetary Policy Committee of the Bank of England are to maintain price stability and, subject to that, to support the economic policy of the Government. The Chancellor reaffirmed in Budget 2011 that the MPC will continue to target 2 per cent inflation as defined by the 12-month increase in the consumer prices index.

[Lord Spicer]

I thank my noble friend for that Answer—and take it as a yes. In the light of that, what response are the Government giving to the stream of letters of apology from the Governor of the Bank of England for not meeting the inflation target?

[Lord Sassoon]

My Lords, it is part of the discipline of the way in which the Monetary Policy Committee operates that it is required to write letters to the Chancellor when inflation is outside the target range. The most recent exchange of letters was in May 2011, in which the Chancellor recognised the factors driving short-term inflation, including, particularly, the very high commodity prices. However, it is important to recognise that the MPC’s mandate enables it to look through short-term movements in prices towards a medium-term target.