King’s Speech

Lord Wakeham Excerpts

Monday 13th November 2023 Lords Chamber

[Lord Wakeham (Con)]

My Lords, I enjoyed the speech of the noble Lord. I have not heard him speak before. As he said at the beginning of his speech, he has been here only about a year and I have not managed to speak in the House for quite a bit longer than a year because I have been in and out of hospital. I am now, I think, getting better, but I have my stick here in case I wobble while I am speaking.

It is interesting that when you are away from the House for a time after you have been here—in my case now, in both Houses, getting near to 50 years—you think about the things you got wrong rather than the things you got right. One of the most important sentences in the King’s excellent Speech was that we should

“make the difficult but necessary long-term decisions to change this country for the better”.

I applied that to the time when I was Secretary of State for Energy, some 30 years ago, when I privatised the electricity industry. I can forget about the things we got right; I think about the things that have not been quite right. At the time, I remember the tremendous difficulties we had and the things we had to abandon. We wanted to include nuclear power, but we were simply not able to do it because nobody could tell us what it cost to close a nuclear power station, so that was out of the question. Secondly, looking at more recent days, it is quite clear that the arrangements we then made for wind power have not really stood the test of time; I think that has to be looked at again.

The new Secretary of State therefore has two important areas to oversee. I would like to see nuclear power given a substantial revival and I would also like to see wind power. She also has to look at the wider question. One report by the Economic Affairs Committee of this House, of which I was chairman for many years, wrote about how it is thought that the economic growth in the world for the rest of this century will mean that the standard of living in the underdeveloped parts of the world will rise to the point where it will be very near the levels of the developed world. Of course, that will produce great wealth; it will probably stop people wanting to emigrate to other countries as much as they did; it will do all sorts of things and it will also add to the problems of global warming. There are some massive challenges to deal with in the years to come.

What we have probably not developed enough in the world is solar power. There is more to do. I was reading the other day, for instance, that 60% of the facilities for global solar power are in Africa and that they produce 1% of the solar power in the world. There is a lot to be done. We will go through a difficult time in which, I am pretty certain, fossil fuels will gradually die out in the end, although not as quickly as some people want. A lot of things in this world will be great for my grandchildren, let alone my children. I am delighted to be back.

Autumn Statement

Lord Wakeham Excerpts

Thursday 3rd December 2015 Lords Chamber

[Lord Wakeham (Con)]

My Lords, it is a pleasure to follow the right reverend Prelate as I have just retired after 18 years as a trustee of HMS “Warrior”, right in the middle of his diocese, and I have had a very happy time doing that job.

I would like to say a word or two about the role of the House of Lords in the recent Autumn Statement. I listened at Question Time, although I am not too sure that Question Time is the best way of solving these problems when the proposals that we hope are going to come forth have not even been delivered. Nevertheless it is clear that recent events did not satisfy the Government, but nor did they give those opposed to the Government a very satisfactory way of expressing that opposition. As we all know, conventions are a big part of the House of Lords, but circumstances change and, necessarily, conventions need to change as well.

A myth seems to have emerged this year that the Chancellor was lucky and was able to adjust some of his earlier thinking on tax credits. In my view, it was not the Chancellor who was lucky but the House of Lords. If the Chancellor had not had revised estimates that enabled him to change his thinking, we would be faced with a serious difficulty as to what was the proper role for an unelected House of Lords. I fully recognise that many Peers felt strongly about what the House of Commons had passed but, if I may leave aside entirely for one minute the merits of the issue, it is simply not acceptable for the unelected House of Lords to seek to overrule a decision of the democratically elected House of Commons on a financial matter of that magnitude.

I also fully accept that our procedures are inadequate in dealing with secondary legislation. Indeed, 15 years ago my royal commission report proposed another way of dealing with these issues that gave the House of Lords a say but left the final decision to the democratically elected House of Commons. I ought to add that there are also a fair number of other proper procedural ways that could be thought of in which these matters could be dealt with more satisfactorily.

The House of Lords should have its say, but in the end financial matters are for the House of Commons. For the House of Lords to seek to overrule the House of Commons is a recipe for disaster. No democratically elected Government, whether Labour, Conservative, or Liberal, would stand for it. Indeed, this issue arose in a major way in 1909 when Mr Asquith’s Liberal Government took on the House of Lords. He won because the diehards backed off; they simply did not want an influx of 250 more Liberal Peers in the House. It was rumoured that the reason they did so was that many of them, Curzon included, had married rich American wives who were not prepared to see the peerage devalued in this way.

So what is the lesson from recent events for the House of Lords? To me, the way forward is clear. The Prime Minister has asked my noble friend Lord Strathclyde to look at these matters and suggest what we should do. That is a very constructive suggestion and I hope that all those Peers who have a view will engage with my noble friend to see if we can find a way forward that is acceptable for everyone.

We in this House should remember that we are a revising Chamber, and in my view that means we should seek to help the Government and the House of Commons to implement their policies in a better way, not to try to inflict our views on them. If the House of Commons is sure of itself, our role is necessarily limited. If they are singing on an unclear note, however, that is the time when the House of Lords plays a very important part. I suggest that we engage very constructively with my noble friend and see if we can find sensible and agreed ways forward. I very much fear for the future if we do not address these and other issues constructively.

Finance Bill

Lord Wakeham Excerpts

Wednesday 16th July 2014 Lords Chamber

[Lord Wakeham (Con)]

My Lords, this has been an extremely wide-ranging debate. Perhaps the Minister might like to take some comfort if I tell him that I support the Finance Bill that he has brought before the House and that I would like to see it passed. That would be an encouragement to him. I add my congratulations to my noble friend who has just finished his time as chairman of the Economic Affairs Select Committee. In fact, not many of us have been chairman of that committee because when it was set up the noble Lord, Lord Peston, was chairman. He was extremely good and when his term of office came to an end we changed the rules so that he could do another session as chairman. He might even have done a third term. He certainly did it for a very long time and was extremely good, so when I followed him as chairman some years ago, it was a bit of a revelation to have someone without the deep knowledge that he has. Certainly, my noble friend Lord MacGregor has tackled a number of very important issues very well. I remember my time particularly because the committee produced, as my noble friend Lord Lawson will remember, the first serious report on the economics of climate change. It was a unanimous report. As he was a very prominent member of the committee, we had a job to educate one or two members of some of the finer points but we got it through.

The Government need credit for their improved consultation but our report indicates that it is still not good enough. They are still not as good as I would like to see them in their consultation. Certainly, when plans change, they do not consult about the new plans. We are very impressed with the people who give us evidence. But I sometimes wonder whether, in practice, some of them know what they are saying or whether they are taking from their own members what they tell them to say. The noble Lord wanted experts in tax to come and tell us how to collect more tax, but I want these advisers to be very practical about telling us the unintended consequences of what the Government are doing. That is what I think these advisers are best at, or ought to be best at.

While the Government have made progress in all sorts of areas, the truth of the matter is that virtually every one of our taxes in this country will need some very serious looking at over the next few years—not necessarily to reduce the tax rates; that is not what concerns me. Virtually every tax has anomalies and difficulties. For example, with income tax, if you earn between £100,000 and £120,000 a year, your effective rate of tax is 60%, because as the personal allowances fall and you go up to the 45% rate, you end up paying 60% on your income. That is complete nonsense and it should not be so. The Government know this perfectly well and they should change it.

I will not go far into corporation tax because my noble friend Lord Lawson made a scathing attack on its inadequacies. However, if the Government think that they will get international agreement to deal with the problems of Starbucks and other such companies by negotiating on corporation tax in a wider world, they should forget it; that is not going to be the way. Corporation tax has passed its sell-by date as far as international business is concerned. We have to find some other way.

In the past I have talked about capital gains tax. Somebody in the Labour Party made a speech the other day to say that a rate of capital gains tax for long-term holders of investments should be considered. If that is not recognition that a substantial part of the capital gains tax that people pay is a tax on inflation, I do not know what is. Capital gains tax is very substantially —not completely, of course—a tax on inflation, and sooner or later we will have to face that.

I have had a go before in the House about stamp duty. It is fundamentally a bad tax. It is a tax on change. What we need in the country and in the world is for things to change and to improve. Of course, the Inland Revenue loves stamp duty because it is an easy tax to collect, but it is fundamentally a bad tax. The economic effects are being felt now. Things that would happen are not happening because stamp duty is too high. Lastly, I turn to inheritance tax. The Prime Minister has said in a speech that he thinks it needs to be looked at. Right across the board, you can see things that need to be done to bring our tax system up to proper modern standards.

The Minister quoted from a report about the greatly improved way in which tax policy is being achieved, but the formal review that was promised has not actually happened. I hope that it will happen. I am not saying that there are not some good things in what has been done, but I am not sure that it is as good as it might be. If the Government come to do their formal review, I would invite the people to look at one particular paragraph in our report. It is a quotation from the senior tax partner in a firm that I used to work for. I suspect that I left the firm long before he was born, so I do not know him, but he is very good. He is referring to the division of expertise between the Treasury and HMRC and whether that is right—whether the Treasury has sufficient experts. He says,

“if HMRC’s role was to ‘own’ the policies, ensuring that any proposals are rigorously evaluated by both the policy lead and those with practical experience of the operation of the tax system, then a number of the concerns of detail might be identified and addressed up front. HM Treasury would then have a clearer ‘scrutiny’ role, which would provide the ‘challenge function’ to the policies being developed”.

That is the way that policy arrangements between the Treasury and HMRC should develop rather than as it is at the moment, where there seems to be a division of expertise between the two. I am not sure it is as good as it might be. But I finish by saying that I am in favour of the Bill that the Minister has brought before the House.

Budget Statement

Lord Wakeham Excerpts

Thursday 27th March 2014 Lords Chamber

[Lord Wakeham (Con)]

My Lords, it is always a pleasure to hear the right reverend Prelate making his remarks in the House. Indeed, it is always a pleasure when there is more than one Bishop on the Benches. Of course, the original purpose of the Bishops being in the House of Lords was not for their spiritual qualities at all but because they were some of the great landowners in the country. Those days have gone but they still make a very useful contribution.

When I was Leader of the House, I had a meeting with the then Archbishop of Canterbury and said I thought that the Bishops ought to speak more often in the House; just coming here and saying prayers and doing nothing else was not good enough and they ought to be able to make more of it. These days they do and it is very welcome indeed, and what the right reverend Prelate said was absolutely right.

Of course, ever since I started to take an interest in Budgets and such matters, there has always been a debate as to whether Budgets themselves are useful and whether the debates that follow them are useful. The view was, and it is still held, that it is better that changes in taxation and so on are made separately when they are ready than for there to be the great anticipation of the Budget and then letdown. That has been so as far as I can remember: some people think that they are useful and some do not. The very first Budget that I ever heard was that of the noble Lord, Lord Healey, in 1974—it was lovely to see him here in the House the other day. I was then a new Member of Parliament and on a committee in the House of Commons chaired by, as some people will remember, Ian Mikardo. He called a meeting of the committee to coincide with the Budget Statement. I went to him and I said, “I want to listen to the Budget and I actually want to make my maiden speech later on that day if I can”. He said, “Well, you’ll learn better as you’ve been around a bit longer, but I understand. If that’s what you want, I’ll change the meeting of the committee so that you can listen to the Budget”. Ian Mikardo said—as he used to say to everybody: “I’m not nearly as nasty a man as I look”. So he agreed to that and we got on extremely well.

The second moment in all these 40 years that I remember is that Budgets can occasionally be used for demonstrations. I remember the 1988 Budget, the first Budget of my noble friend Lord Lawson. At the crucial time in the Budget when he was announcing very substantial tax reductions, the honourable Member for Banff and Buchan, one Alex Salmond, rose up in absolute fury at these proposals, shouting, “Outrageous! Outrageous! Outrageous!” and the Speaker had no option but to name him. I was then the Leader of the House and had to move the Motion that the honourable Member be excluded. He was thrown out in the middle of the Budget debate for not being able to accept the fact that we were reducing taxation. That was Alex Salmond in those days. Mind you, I was an expert at that, because I happen to have thrown more people out of the House of Commons on Motions than any other Leader of the House since the war, which I think is a really obscure record.

However, I do not think that this Budget, whether you approve it or not, is likely to be forgotten, because it contains some substantial and important points, in particular the long overdue changes to the savings and pensions regime. I was very pleased that that was done and, what is more, that it seems to have been universally accepted across the nation. That is also a very good sign in a Budget. I am not sure that I agree with the noble Lords, Lord Hollick and Lord Myners, on this. In my view, the savings ratio will improve as people realise that they have a much better arrangement for dealing with their savings than they had. I think that the measure will be a great encouragement. I guess that those who sell annuities will be busy mopping up the last of the defined-benefit schemes from companies that still have them.

I do not think that we could have expected there to be any greater changes in the tax regime in this country, but, much as I would like tax rates to be reduced, I would like Chancellors not necessarily to reduce taxes but to get them on to a better basis. Nearly all our taxes have some serious flaws in them at whatever rate they are. For example, I have nothing against capital gains tax—it is an essential part of the process—but very much of our capital gains tax is taxing inflation. We should be able to find a better way of taxing real capital gains than taxing inflation. Let us look at stamp duty. I was in the Treasury 30 years ago, probably in the same office as the Minister—it might have had a coat of paint on it since I was there. I am told that it has not; it used to have terrible lino on the floor in my day. I tried to persuade the officials in the Treasury that stamp duty was a bad tax. It is a tax on change, and we want to encourage change, but the Treasury looks at it another way and says that it is a jolly good, easy tax to collect. That is why it is very difficult to get a rational discussion about stamp duty, but somebody has to face up to the fact that it is not a good, helpful tax.

I am delighted that the Prime Minister said that he hoped to have a look at inheritance tax in the near future, because, again, there are illogicalities in that which need in this day and age to be looked at. Of course, I would like all the taxes to be down—most people would—but there are exemptions and all sorts of things which should not be in a modern tax system.

The view I take is that we have had a good Budget Statement. I am not convinced that we can do away with Budgets—I fear that we are going to have them for much longer and they are often constructive—but I hope that my right honourable friend the Chancellor will continue to tackle the anomalies that are in the tax system to get them on a more logical and reasonable basis.

Finance Bill

Lord Wakeham Excerpts

Monday 15th July 2013 Lords Chamber

[Lord Wakeham]

My Lords, my noble friend Lord MacGregor has said in his usual clear way virtually all that needs to be said about our report, so I want to add very little. I would like to reflect for a few minutes on the process by which Parliament approves Finance Bills and how it has changed over the years. I have been involved in Finance Bills, year by year, for some 40 years, sometimes as a Minister in the Treasury, sometimes in opposition and sometimes as a Back-Bench supporter of the Government. In some ways things have improved and in some ways they have not, but there really is nothing more important in the parliamentary year than the granting of supply to the Government.

Many years ago, when I had some responsibility for these matters, one of the things that I tried to get agreement to was two annual finance Bills, one at this time of year dealing with rates of tax and major matters and one in the autumn to deal with technical and other smaller matters that otherwise get crowded out. For a number of reasons we were never able to get agreement to that and I do not think it has been pursued since, but it is an improvement that ought to be reconsidered. As a result, the passage of the Finance Bill is done mainly in a bit of a rush just before we rise for the summer.

The big change this year is that we have a draft Bill, which is an excellent innovation. The Minister has given us a good account of it and I congratulate him on what he said. What has also changed substantially in those 40 years is the ministerial representation in the House of Lords. For many years, under both Governments, we did not have a Treasury Minister in the House. That has now changed, and very good Ministers they have been, but quite often we did not have one.

I recall one instance when I was Leader of the House, when a Minister not in the Treasury made a very good speech from the Dispatch Box introducing the Finance Bill. Something made me ask to see the briefing that he had received from the Treasury, and it was an absolute disgrace—I was appalled. I put it in a brown paper bag and sent it to the Permanent Secretary, saying, “If you think this is the briefing a Minister in the Lords should be given to introduce your Finance Bill, it’s not my idea”. I got a very good letter of apology from him and I think that things have improved since, although of course now we also have Ministers who are able to look after themselves. Still, I hope that the message was received loud and clear in the Treasury that in this House there are many noble Lords who are more experienced than many Members of the House of Commons, and that that experience ought to be used.

Finance Bills are not always treated on their merits; sometimes they get caught up in a wider debate. For instance, a good many years ago the Opposition thought that a Conservative Government—this is strange, really—were about to bring in a Bill to change the trade union levy to opting in and not opting out. We were told that if this was true, their opposition to the Finance Bill would know no limits. I was government Chief Whip at the time and I knew this not to be true. I eventually managed to persuade the Opposition that it was not true, and the then opposition Chief Whip claimed credit for the whole thing. He had persuaded the Government not to go ahead with their proposal, but he had to agree to give us the Finance Bill in, I believe, one week, which was the object of the exercise in the first place. It was a great victory for their wonderful Chief Whip. The concession was given. The whole purpose of the exercise was to get a very difficult and dispirited Opposition into some sort of order and disciplined enough to pass the Finance Bill, with proper scrutiny but no filibustering, and to get both Houses up before the Summer Recess. I will not mention the name of the opposition Chief Whip but those sitting on the opposition Front Bench know exactly who I am talking about—a great man.

Some things change and some stay the same. One thing that has changed, of course, has been the Economic Affairs Select Committee sub-committee of this House that considers the Finance Bill. That has not always been easy. Gordon Brown, when he was Chancellor, strongly disapproved of it and did what he could to get rid of us because he did not approve of the House of Lords having any say on taxation matters. He was quite wrong. The House of Lords, of course, has an absolute right to discuss and debate Finance Bills in any way it wishes. What we do not have the right to do is to amend or delay them. The terms of reference under which the sub-committee operates are a self-denying ordinance that we, as the House of Lords, have imposed on the sub-committee, which we could change if we wanted to. In fact, I see no particular need to do so.

This year we considered, as my noble friend said, a draft Finance Bill under his excellent chairmanship, and we have done a very good job in a totally non-partisan way. We made a number of practical suggestions, which have found their way into the Finance Bill. They are sensible and often detailed suggestions that will make the legislation work better. One part of our work that I find particularly valuable is the hearing of evidence from experienced practitioners, who make mostly useful suggestions to us on how the legislation can be worked, with plenty of emphasis on the difficulties.

This year our deliberations on the so-called GAAR—the general anti-abuse rule—were especially important. We thought that the Government were right to bring this in, but it was never going to be able to solve all the problems of what we now call aggressive tax avoidance. We explain ourselves in some detail in our report, but I will make a further suggestion to HMRC to tackle these matters. Each new rule sets off clever people to think of ways to avoid it, and the more specific the rule, in some ways the easier it is to find a way around it. I was brought up in a different age, when “true and fair” were the watchwords. In a way, the GAAR seeks to replace them. However, the more we can relate our taxation, and particularly tax planning, so that the taxpayer is under an obligation to demonstrate that the records of the enterprise to be taxed show a “true and fair” view of what has been going on, the sooner aggressive tax avoidance will become yesterday’s problem. Years ago, in the Ramsay case in the House of Lords, which was a very special case, the courts gave a very clear signal that they would support that straightforward way of looking at things. The Government have certainly made a start in these matters, but there is still a long way to go.