Agricultural and Business Property Reliefs: OBR Costing
Lord Whitty Excerpts(3 days, 23 hours ago)
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Lord Livermore (Lab)
They have been costed jointly at £0.5 billion, as the noble Baroness, Lady McIntosh of Pickering, said.
Lord Whitty (Lab)
My Lords, while I am not entirely happy about this policy, I recognise that it has been done and that it will stand. However, I suggest to the Treasury and Defra that, if they are looking for taxation from landowners, they should look at the companies, individuals and institutions buying agricultural land to set against their profits elsewhere—or indeed to greenwash their carbon-creating activities elsewhere—and at those who make a killing from a change of use, rather than directing their tax increases at small family farms.
Lord Livermore (Lab)
Just to be clear with my noble friend, we are not doing what he says at the end of his question. I think it is worth revisiting the rationale for this policy in the first place. Of course, the Government recognise the role that reliefs play in supporting farms and small businesses. Importantly, the reliefs will continue to play that role, but the reality is that the full, unlimited exemption, which was introduced in 1992, has become unsustainable. Under the current system, the 100% relief on business and agricultural assets is heavily skewed towards the wealthiest landowners and business owners. According to the latest data from HMRC, 40% of agricultural property relief is claimed by just 7% of estates—that is just 117 estates claiming £219 million of relief. It is neither fair nor sustainable to maintain such a large tax break for such a small number of claimants.
Long-duration Energy Storage (Science and Technology Committee Report)
Lord Whitty Excerpts(3 weeks ago)
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Lord Whitty (Lab)
My Lords, I join others in thanking the noble Baroness, Lady Brown, both for the report and for the clarity with which she has introduced this debate. I also thank the committee and its staff. Every time the last Government introduced an energy Bill or an energy Statement, I asked what they were doing about storage. I did not get any clearer reply than the committee evidently got from Ministers then. I do not think things have improved subsequently, but I welcome the Minister, the noble Baroness, Lady Gustafsson, and I hope that in her reply she will indicate which departments are responsible for which in this area—I am glad to see the noble Lord, Lord Hunt, here. I mention this partly because I listened to the introduction from the noble Lord, Lord Borwick. I worked for the father of the noble Viscount, Lord Stansgate, as a Minister even earlier, when we had separate ministries of technology and of fuel and power, and they failed to get on. Subsequent Prime Ministers have altered the demarcation several times since, and I would like to know what the new Government’s structure is, not only between those two departments but right across Whitehall.
It is important that we focus on storage. I have asked the previous Government and I ask this Government whether they agree that we will not approach the recommended path to net zero unless we have a very significant storage contribution reasonably quickly and, hopefully, as cost effectively as we can manage. I hope that this Government will rapidly move to a clear strategy for storage—of all technologies.
In the meantime, I want to concentrate on one dimension of this, which is the availability of hydrogen for both production purposes and storage, and the way in which we produce hydrogen at scale which does not itself create carbon emissions and slow down the approach to net zero. The last Government issued a number of White Papers on hydrogen; this Government have issued one, but it does not answer that question. At present, nowhere in the world to my knowledge is very substantial, at-scale production of green hydrogen being made available to industry. We have grey and blue hydrogen and we have moves to make hydrogen production somewhat cleaner and more cost efficient, but we do not have green hydrogen at scale. Yet most of the sectors which we are intending to transform by 2030, or, in some cases, by 2035, require some input of hydrogen.
The last Government and this Government have implied, but never stated definitively, that they have abandoned any idea that hydrogen will be the main replacement for natural gas in our home and office heating systems, except in very exceptional circumstances, but there are still places where the assumption is that hydrogen will be used: in heavy industry, possibly in heavy transport and possibly even in marine and aviation. There will be lots of demand for hydrogen. Hydrogen for storage will be but one of them. Yet we are not clear how we produce that hydrogen in a way which is not itself a contributing factor to emissions of carbon if we use methane and other means.
I hope that this Government will commit themselves to making clear within the next 12 months or so where the hydrogen is going to come from, how rapidly we are able to deploy it and what technologies will be used in addition to hydrogen to provide the necessary electricity storage, which the committee has drawn attention to. Unless we answer that question, we will fail not only on long-duration electricity storage but on providing decarbonisation of some of our most significant industrial and service sectors. I hope therefore that, in whatever government department it is, attention is drawn over the next few months to hydrogen production, because even with major policies as advocated by the noble Baroness, Lady Bennett, on demand reduction and energy efficiency, we will not meet that transition pathway without it.
Autumn Budget 2024
Lord Whitty Excerpts(2 months, 2 weeks ago)
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Lord Whitty (Lab)
My Lords, I am glad to follow the noble Lord, Lord Shipley, because he reminds us that solving the economic and fiscal problems of the country requires solving the economic and fiscal problems of local government and its services, of which social care is one of the biggest. That needs to be part of the Government’s economic strategy.
I congratulate the Minister on giving us such a coherent introduction; I add my congratulations to his boss, the Chancellor of the Exchequer, who gave a bravura speech, which I listened to in full the other day. She has given the country at least a sense of direction and hope, even though there are some details that the House has demanded.
I warn the Minister that I was going to focus entirely on the areas I disagree with or feel need revisiting. But I was so provoked by the lead spokesperson for the Opposition being so blind and in a sense of denial and misrepresentation about the inheritance we have received. There was the whole period of austerity, followed by ludicrous claims about Brexit and then serious increases in taxation for businesses and individuals. The legacy we have had is a very difficult one for Treasury Ministers and the Cabinet to deal with, and this Budget makes only a start on that. As the noble Lord, Lord Shipley, emphasised, it has to be paralleled with other key strategies, two of which I have a particular interest in. One of them is environmental and the other is on equality.
My noble friend Lady Lister talked about the equality impact of this Budget, particularly in the social security system. I agree with her about some of the measures that are implied in this Budget in relation to the winter fuel arrangements and the two-child limit. I feel those both need to be revisited by the Government at some time during the next few years, if not immediately in this Budget or the next.
On the environmental side, I welcome the allocations to what are basically green projects and support for green energy but, as the noble Lord, Lord Young, who is no longer in his place, and others have said, the interventions on transport seem completely wrong. The previous Government were completely wrong in freezing fuel duty when we have a problem. I was on the committee that recently reported to your Lordships on the difficulty of changing to electric vehicles; that is not helped by the freezing of fuel duty on fossil fuels. We need to do the opposite and raise fossil fuel duty while encouraging the uptake of electric cars to reduce congestion and the air quality effects of fossil fuel emissions.
If we are moving in the wrong direction on the environment in certain key aspects, we need to review the basis of taxation policy in transport as a whole, as others have referred to. That needs to be part of the project for the next five years.
We also need to look at the basis of local authority finance. There are local authorities up and down the land, of all political persuasions and sizes—from regional mayors down to local town councils and so forth—who get nothing from this Budget. We need a new, solid and growing basis for financing the services that are delivered through local authorities. Unless the Treasury is prepared to look at that in real detail over the next few years—starting with a spending review this year and hopefully subsequent Budgets—we will not be able to deliver not only social care but most of the services to which people have referred, including education, that are so vital to sustaining the growth strategy.
So, this is a good start on a growth strategy, but it needs a lot more solid allocations to other strategies. In particular, it requires us to address the growing inequality that has persisted in our land over the last few years, and at the same time to address the problems of the environment which are threatening our whole world.
King’s Speech
Lord Whitty Excerpts(1 year, 2 months ago)
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Lord Whitty (Lab)
My Lords, that impressive and wide-ranging speech by the noble Baroness, Lady Moyo, indicates what an extraordinarily wide range is covered, at least notionally, by the title of this one-day session. I say “notionally” because the main burden of the contributions so far, including mine, concerns not what was in the King’s Speech but what was not. Enormous opportunities have been missed. I shall not dwell on the specifically economic aspects—the noble Lord, Lord Bridges, has spelled out all the things not being addressed by the Government in that respect—but shall concentrate mainly on the environment.
That said, the economy is being experienced by ordinary families in a particularly acute way at this time: falling real living standards, the precariousness of employment, the inability to improve jobs and a lack of training to do so. That needs to be addressed. As my noble friend Lord Woodley said, we did not see the employment Bill that was promised in 2019; instead, the Government have ignored the decline in working standards and in training for future challenges. We need an employment Bill, but I doubt it will come from this Government; it may come from the next.
So, there are serious economic problems, but the environmental ones are even more serious. We are not even prepared. The King’s Speech does not address the issues that the public themselves have brought up in the last few months. The most important issue they have concentrated is water: sewage and the state of our rivers and seas, the effect on wildlife and biodiversity, and the effect on agriculture, as the noble Baroness, Lady McIntosh, has referred to. There is nothing about water in the Speech. We had a debate a few weeks ago in which some of us argued for a new approach to water regulation, but that has not been addressed at all.
Water is an important issue but it is not the only one, and perhaps not even the most important. The real problem with the Speech, one that demonstrated enormous government insensitivity, is that its first legislative commitment is to continue indefinitely to give licences every year to North Sea oil and gas. As my noble friend has just explained, we do not actually need it, and it sends the signal that we appear to be departing from a major climate change commitment. Probably the most important, positive achievement of the Johnson Government was holding the COP 26 conference in Glasgow. It was not perfect, but Alok Sharma did a tremendous job, and it gave us the opportunity to tackle climate change globally. Yet we are now signalling, as the first item in our legislative programme, that we are going back on that.
A few weeks ago, the noble Lord, Lord Deben, argued successfully that if the UK is to take a lead, it is impossible for us to continue exploring for oil and gas in the North Sea, when we are arguing that countries much poorer than us should not increase their dependence and open mines and oil wells. If we do that, we will have lost our leadership position. I am glad that the noble Lord, Lord Stern, who has spent a long time looking at these issues over the last two decades, emphasised that the loss of that leadership position is important.
I am afraid that that is part of a more general theme. We have set back the date for phasing out the internal combustion engine. We have put back the date by which landlords are expected to achieve a certain level of energy efficiency for their homes. We have put back the date for ending new gas boiler sales. As others have said, this is part of a political ploy to try to differentiate the Government from what they see as a woke green agenda. I do not believe the British electorate will buy it, and it is a real fault of this Government to think that such ploys are important, when there are many profound global issues that they should be addressing. To undermine what was previously a very effective position for the Government by doing that at this point is a political mistake of the first order.
UK Economy: Growth, Inflation and Productivity
Lord Whitty Excerpts(1 year, 7 months ago)
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Lord Whitty (Lab)
My Lords, I thank my noble friend Lord Eatwell for his masterly introduction to the debate, which means that I am scrapping half my speech, and my noble friend Lord Leong, particularly for his last point: that we need to invest in our workforce, in our people, in this country as part of solving the productivity problem.
Productivity is part of the intent of this debate, but it is of course simply a statistical calculation: it is output over the labour force. To that extent, I suppose I could say facetiously that the fact that we have cut the workforce by older workers being deterred from staying at work and by cutting off the flow of migrants post-Brexit means that the Government have at least inadvertently managed to achieve part of keeping productivity up, but, as other noble Lords have said, we are behind on productivity and growth of output compared with almost all our competitors.
In order for productivity to be raised, we need three things: we need increased quality of input, both capital and workforce, increased quality and dimension of output but also general macroeconomic stability and context in which those things work. As other noble Lords have said, we have seen a serious relative decline in investment in the UK. As the noble Lord, Lord Howell, said, we are losing our share of international corporate direct investment. We are also failing in domestically generated investment. There is quite a lot of money around, and quite a lot of foreign money around, but it is coming in by slightly shady methods and is not, by and large, being invested in productive industry but in property, land and housing, distorting the housing market and worsening problems in it as a result of investment in what is basically a dead asset, making it impossible for families and landlords to operate efficiently in the housing context.
One of the difficulties of an overall debate is that the Government blame everybody. They blame the greedy workers going on strike. They blame, as I see the Chancellor did this week, “greedflation” in the supermarkets. They blame President Putin, maybe rightly, and they blame world economic conditions. But those world economic conditions apply to every one of our competitors. What is so unique about this country is that economic policy has been seriously incoherent for most of the past 13 years, as we move from austerity to quantitative easing to the Kwarteng/Truss debacle to the present incoherence and lack of direction. That is what the Government need to address at this stage. They even, of course, blame the previous Labour Government, but I will not go there.
We need to provide the context in which the owners of money—capital, or whatever we like to call it—put it into productive investment. In order for that to happen, we need to ensure that we have workers trained to operate that capital and the management to manage it. According to statistics published last week, one in four British workers is a manager but very few get any training in management, and the lack of organisation and incoherence of many of the decisions—in both the public and private sectors—is caused by the failures of our management class. It is not a result of their own failings, but of our failure to put enough into management training.
It also means that the regulators have to operate effectively. By the regulators, I do not just mean the Treasury and the Bank of England—although it would be handy if they had the same policy and were not pulling in opposite directions—but the rest of the regulators. I understand that the Chancellor, who has been quite busy, met the economic regulators this week. We have seen the failures of Ofgem and the incoherence of the energy market in recent years, moving from an oligopolistic system with six companies to one of nearly 70 companies, and then back again, as many of those companies went bankrupt. We have seen the failure of Ofwat in the water industry. There is not only sewage in our rivers but now, apparently, a complete overgearing of several companies within that sector. The economic regulators, the Treasury and the Bank of England need to get their act together, and it is only really the Government and the Chancellor that can get them to do so.
One other aspect is our own savings. It is ridiculous that the recent high interest rates are not being passed on to savers. The reality of the broader role of the Bank of England is to ensure that the financial sector operates to encourage saving in this country. If we encourage saving, even by 2% or 3% more, we will have additional investment moneys to go into our industries. I accept that that is a failing of successive Governments—we have always had a relatively low savings rate—but we cannot continue in the way we are.
There is real incoherence in government. Let us get some coherence. Abandoning the industrial strategy was daft but there is an industrial strategy—it is called the net zero strategy. However, just yesterday, the Climate Change Committee produced a chart which shows that most of the objectives of that strategy are at red or amber. In other words, it is failing so far. Let us get back to a clear strategy for the medium to long term, but one that is coherent and through which all aspects of government work together.
Budget Statement
Lord Whitty Excerpts(9 years, 10 months ago)
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Lord Whitty (Lab)
My Lords, I very much agree with the remarks of the noble Lord, Lord Brooke, on housing. I do not claim I will be able to match the erudition of the rest of his speech, however.
I was provoked into speaking in this debate by sitting through the whole of the Chancellor’s performance the other day. It was an amazing performance, full of new-found self-confidence, chutzpah, ringing phrases and even a few quite good jokes. But the one thing that was clear about it was that we are in an election period. I, therefore, have to abandon my normal consensual approach in this House and make it clear that I also am in an election period and that that election needs to be fought largely on the economic battlefield.
The speech, although showing a commendable Stalinist commitment to a long-term economic plan, was very tinkering. The Budget did not amount to very much; as one commentator put it, it was a good day for drinkers and a good day for the manufacturers of smoke and mirrors. Apart from that, the speech was, as my noble friends Lord Rooker and Lord Layard have already spelled out, a complete distortion of recent economic history. Indeed, arguably the most successful aspect of the Chancellor’s economic strategy has been to convince the media and large sections of the population—as my noble friend Lord Rooker says, even some members of the Labour Party—that the economic crash of 2008 was entirely due to the last Labour Government’s public spending profile. Never mind that the crisis started in America; never mind that it hit every western country; never mind that prior to the crisis Britain was relatively low in ratios of both debt and deficit to GDP; never mind that it was primarily a crisis of a corrupt banking system that, at the time, the then shadow Chancellor was arguing was far too overregulated; never mind that it was therefore a crisis of private debt, not public debt, and it was the state that had to bail out the financial sector. The Chancellor’s thesis appears to be to blame the cure and not the acute disease of the banking crisis.
If that position were just propaganda, we could probably live with it. The problem is that the Chancellor clearly has believed over the last few years quite a lot of his own propaganda—always a pretty dangerous thing for politicians. For the first three years of this Government, Budgets appeared to reflect that propaganda, and, with it, the nascent economic growth that we were beginning to see in 2010 was stalled and reversed at huge cost to many parts of the economy. Infrastructure spending was the first to go; public services, particularly local authority public services, were cut; housing spending was cut. The continuing lack of recovery, which the Chancellor was blaming on problems in the eurozone and commodity prices, was actually due to the deliberate decisions and austerity programme of the Government.
It is true that, after the rather disastrous Budget of 2013, the Chancellor appeared to panic and change direction a little. Thankfully, we have had some recovery. But most of that recovery is despite rather than because of the Chancellor’s ministration. After all, capitalist economies inevitably are cyclical and eventually there is always a recovery. But the recovery that the Government and the Chancellor are crowing about has, in reality, been the longest coming recovery from a depression in a century, and the nature of the rising tide that is now thankfully here is not one that has raised all the boats at the same time—it is a very unbalanced and divisive recovery. Nor is it really attaining major improvements in economic efficiency. As others have said, our basic productivity rates are behind most of our competitor nations and are very sluggish. Low productivity both causes and reflects the situation in the labour market of low pay. Yes, jobs have been created, but most of the new jobs are at relatively low levels of real pay and most workers have still hardly had a rise in their real wages under this Government. Many of the jobs are highly insecure as a result of a deregulated labour market with a weakened ability to enforce the rights for workers that still exist as they are watered down and access to justice is denied or priced out.
The recovery is deeply divisive: divisive between rich and poor; between old and young; between different parts of the country; between the south-east and the rest of the economy. Only in this last Budget has the Chancellor begun to recognise that the south-west and the north need substantial infrastructure investment. The recovery is socially divisive between those who have paid off their mortgage or are close to doing so and those who are forced to rent in the private sector, trying desperately to get on the housing ladder, or live in social housing. Indeed, this Government appear to wish to see the abolishment of social housing altogether. I have often warned this House that the housing crisis is perhaps the greatest economic disaster, as well as social disaster, that we are faced with, compounding dysfunction in all forms of housing tenure, with families with a head of household who is under 40 facing a continuing prospect of inadequate and overexpensive housing. This is particularly the case in London, but it affects many other cities and many villages and towns in our rural areas. Unfortunately, the Chancellor’s response has been simply to underwrite more pressure on the demand side and do nothing to increase the supply side of new housing. The inevitable result of this is an escalation in the housing benefit bill. More generally, the escalation in welfare payments is a reflection of the low incomes of in-work families and not a result of skiving or people trying to avoid their economic obligations to the rest of society.
The Chancellor’s record is one of nearly four years of unnecessary cuts followed by one year of unequal and divisive recovery—and what does he promise us for the next few years? Pretty much the same: three years of deeper cuts, with a bit of relaxation post-2018.
Others, more informed than I, have talked about the problem of defining economic success in terms of the deficit and debt. The current level of debt, around 80% of GDP, is about the average for the last 200 years, as my noble friend has said. The deficit needs to come down, but not at the expense of economic performance. The repayment of debt depends on the cost of that debt and on the timetable for the repayment of it. If they are manageable, then the debt is manageable. That is indeed the UK’s case. We are not Greece and we never have been, despite the Chancellor’s propaganda. Closing the deficit depends on increasing the income to the Exchequer, as well as controlling expenditure, and that in turn requires a growing economy, not a further round of harsher public sector cuts and the prospect of another five years of a rollercoaster economy. There must be another way. This side of the House will support another way.
Small Business, Enterprise and Employment Bill
Lord Whitty Excerpts(10 years ago)
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Lord Hodgson of Astley Abbotts (Con)
My Lords, I also have a number of amendments in this group. I think the answer to the noble Lord’s question is that these amendments are all about Clause 42 and the subsequent groups are about subsequent clauses. What we are doing here is debating the whole of Clause 42, rightly or wrongly. It may be too big a group but that, I think, is the background. I think other amendments to subsequent clauses form other groups.
The Government have said that they will accept the spirit of the amendments passed in the other place, but I am afraid that despite the Minister’s assurance—
Lord Whitty (Lab)
My Lords, before the noble Lord, Lord Hodgson, proceeds, the point made by my noble friend Lord Berkeley indicates a more serious procedural problem. It is not that these amendments are not serious, but they are specific. I also have some amendments in this group, but if I degroup them, a decision would have been taken on the Minister’s amendments before we reached the appropriate point in the text of the Bill.
We have a very new clause, inserted at the final stage in the Commons. The Minister quite rightly said that there has been limited chance for consultation on that. We have a huge amendment from the Government deleting an entire clause and replacing it. The noble Lords, Lord Berkeley and Lord Hodgson, and I, all have amendments to the original amendments. My noble friends Lord Mendelsohn and Lord Stevenson have amendments to the Government’s amendments. So, there is not only a large number of amendments, but it is going to be a very confusing debate.
That is not to say that we should not have the debate today. However, the way that this has been dealt with, and the fact that consultation since the Commons decisions until now has not allowed consultation with the bodies that represent tied landlords, has not allowed for significant debate with those in the Commons who pushed this amendment. We have a few weeks between now and Report stage for proper consultation to take place. I am very happy to have the discussion today because that will inform the Government, but at the end of that discussion it will behove all of us to withdraw our amendments and move them for a proper discussion on Report, which could have been preceded by some effective consultation between the Government and the various parties involved, both politically and industrially.
Although we can degroup this group, there is a rather more profound problem here. If all noble Lords agree to withdraw their amendments at the end of the debate, there is no great problem and we can have a sensible discussion over the next three weeks. However, if we proceed, we proceed as per normal. It would be sensible, even from the Government’s point of view, if we allowed ourselves a bit of a breathing space to have those discussions.
Lord Berkeley
Is my noble friend suggesting that the Minister should withdraw her amendments as well?
Lord Whitty
My Lords, I have a number of amendments in this huge group. I should point out that none of them applies to Clause 41, which, strictly speaking, is what the noble Baroness’s amendment relates to, but I have a number that apply to Clause 42: Amendments 69ZC, 71A, 72A, 74ZA, 74ZB, 87A to 87C and 89ZA. However, in view of the way this discussion is going, and my earlier points, I hope the Committee will forgive me for straying somewhat wider. For the avoidance of any doubt, I have no interests to declare, ancestral or otherwise, except as a consumer—and even then, not in January, which is probably why I am in such a bad mood.
The Committee probably should be grateful to the noble Lord, Lord Hodgson, for explaining the structure of the industry and how it works, and those situations where the tied arrangement has worked very well for both sides, but it was an explanation that was really from the point of view of the large pubcos. He also explained the context in which they work—the economic context, the social changes and so forth—and that the whole industry is under some significant pressure. But my concern in this area is for those small businesses—and they are small businesses—of the tenants who are in tied or partially tied accommodation. This Bill is called the Small Business, Enterprise and Employment Bill; it is not called the big brewers’ restrictive contracts and exploitation Bill. Were it so, it might have been closer to what some Members of the Committee appear to be wanting.
The Minister and the Government have to recognise that the Bill we are dealing with, and Clause 42 as brought over from the Commons, is a result of a quite unusual political event and a quite unusual level of lobbying, if you like, on behalf of those small businesses we are talking about. Actually, in substantive terms, it is the first major defeat that this Government have suffered as a coalition. I think, therefore, that we should take seriously what the Commons have sent to us rather than trying to redraft virtually the totality of it, even though the Government, as the Minister has made clear, accept that MRO should be in there. I would also point out to noble Lords that this is not saying that this is the end of tied tenancies; it is simply putting those tied tenancies on a fairer basis. I know that there are those—I suspect my noble friend Lord Snape is one of them—who wish to abolish tied tenancies in total. But this is in a sense much more of a compromise position.
Lord Snape
I would be grateful if my noble friend would not portray me as being a raving left-winger on these matters. I am not seeking to abolish the tie completely; like most people, I just want a fairer system than we have at present.
Lord Whitty
In that case, my noble friend and I are on exactly the same point in the ideological spectrum—as ever. We are discussing these as amendments to the pre-existing text that we received from the Commons. Government Amendment 89A effectively rewrites that proposition from the Commons.
At Second Reading the Minister said on behalf of the Government that there were things that needed to be done to ensure that the proposition was going to be workable and did not have unintended consequences. I understand that, and that means there are parts of the noble Baroness’s amendment that I would be in favour of. But under the amendment as we now have it—and we have not had it for very long; the fact that we are debating it today puts us in some difficulty given that the consultation hitherto, as I said earlier, has been somewhat attenuated—the Government’s changes in detail do a number of things. They delay the implementation because whereas the proposition adopted by the Commons set the situation on the MRO in primary legislation, therefore bringing it into effect at the earliest point when the Bill came into law, we are, instead, reliant on the drafting of the code and the bringing forward of secondary legislation.
The Government’s amendments also change a number of the trigger points, thereby diluting the effectiveness of the MRO proposition. Amendment 89A changes the threshold because it confuses the issue of tied pubs with all tenanted pubs. The Pubs Code ought to relate to all relationships between the pubcos and their tenants, whether they are tied or not. The MRO relates to the tied pubs but the threshold of defining who this applies to should be the size of the company as a whole, which includes all sorts of tenancies. Restricting it to tied tenancies lays open the possibility of them ending one or two ties to get below the 500 mark. I do not suppose I could prove it in a court of law, but there are indications that some of the pubcos are looking to split their company structure so they would not hit the 500 mark for tied tenancies. We ought not to lay that temptation before them. The Government’s proposition fails to recognise that there is a distinction between how a Pubs Code—which I think we are all in support of—operates and the MRO option, which relates only to tied tenants. I hope, therefore, that my propositions do a number of things. They separate out the issue of the code from that of the MRO. The code is set out clearly in Clause 41 and, at the beginning of Clause 42, the MRO coming into effect is not dependent on the code. The amendments in my name would also change the definition of the threshold, although most of that comes up in a later group, in relation to Clause 66.
I do not like the procedure on this Bill because the Government have misjudged the mood, not just in the Commons and among those tied tenancies and other organisations which have pressed for this. They have succumbed unnecessarily to pressure from the larger breweries. There is no need for some of the changes to the proposition that we have received. There is, therefore, a need to reinforce those rather than go in the opposite direction, which the Government’s amendments are doing. What came to us from the Commons was not perfect, but the Government are proposing to make it worse. For that reason, we all need to take a step back and look at what we agree on in the original proposition, the amendments we are discussing today and the Government’s proposed complete redraft. We need to see whether we could, in discussion with all sides of the industry, come up with something closer to an agreement in time for Report or, possibly, send it back to the Commons and let them sort it out.
We are in an unfortunate position today. This is a complex group of amendments and none of us understands all the issues. Whatever comes out of this is going to be pretty unsatisfactory and not a good basis on which to go to Report at this point in a parliamentary Session. This does need sorting: it needs to be workable and I agree with the noble Baroness that we do not want to see unintended consequences. However, we need to be clearer as to what the consequences are that have led to the propositions in the Government’s redraft.
I hope that the Government take a step back and talk to everyone concerned. The easiest way to do that would be to withdraw all the amendments today. If the Government will not do that, we are probably in for a fairly rocky time between now and Report. If we have not met at least the overwhelming spirit of what the Commons decided, the Bill will be back in the Commons and we are in for ping-pong on the Bill. I cannot believe that the Government’s business managers really want that. There is a way to deal with this quietly and consensually. It may not work, but it might, and it would get the Government out of an awful lot of trouble. As usual, I am trying to be helpful to the Government, and I hope that they heed my words and those of my noble friends.
Lord Borwick (Con)
My Lords, I want to speak to Amendments 82A and 83A and thereby take in my noble friend’s Amendment 88. Amendment 82A concerns the amount of time for the negotiation of the MRO. In the original Bill, it was stated to be 21 days, which I think is too short. The difficulty for identifying a time for any negotiation is that the time required at the beginning of the process, when it is new to both parties, will be different to the time to produce a market rent in a negotiation in, say, five years’ time, when everyone knows what the rules are. When the lawyers are helping both sides with their arguments, it could take substantially longer than 21 days.
My noble friend may say that that will come out in the detail of the Pubs Code and the statutory instrument, but how will that time be judged? Will it change from the beginning of the period and a few years’ time?
Amendment 83A concerns the problem that under the Bill and the government amendments, existing tenancy agreements would continue. So the lease would continue in all respects other than in the rental. That brings up the difficult subject of SCORFA—an acronym standing for “special commercial or financial advantages”, and is designed not to flummox the great people of Hansard but to refer to all the advantages given to the pub tenant, all the way down to providing glasses, ashtrays and beer mats.
If the lease is being changed to rent only, it is unreasonable to leave the landlord, the pub owner, in the position of providing those benefits when he is not providing the rent. My noble friend may say that all those points will be dealt with in the statutory instrument that forms the Pubs Code, but it will be subject to consultation. What if the result of that consultation is a mass of people saying that it should not be included? If so, will we have landowners subject to a lease that is not right, where one important clause has been removed?
Surely my noble friend will agree that a matter as reasonable and important as this should be in the Bill and bring forward government amendments to deal with the issue.
Baroness Neville-Rolfe
Before the noble Lord sits down and the noble Lord, Lord Whitty, takes the Floor, the answer is 12 months—but that is 12 months after the Bill comes into force. Apparently it will take two months for the Bill to go through to Royal Assent, so the maximum is 14 months. However, the message that I was trying to impart to the Committee is that we are determined to get on with this, push ahead and find workable solutions in that time.
Lord Whitty
My Lords, I am not sure that the Minister is procedurally correct to say that I have the first amendment. She has the first amendment in this group, which she can move at this point. Although mine is the first amendment on Clause 42, it is not the first one in this group. If she is asking whether she has said enough for me to roll over in relation to her own amendments, the answer is probably, “Almost, but with great regret”.
She has said that she is prepared to talk to all the parts of the industry involved, and she has done that in a very generous way. However, when she went through this clause by clause, there seemed to be fairly clear opposition to all the areas of concern that had been expressed by me, the noble Lord, Lord Stoneham, and my noble friends Lord Berkeley and Lord Snape. If she is prepared to say that all these things are open for discussion before we get to Report, I suppose that the sensible thing for me to do would be to say that I did not object to her clause. While I was clear on the conciliatory tone at the beginning, when it came to any individual item it seemed to be the firm position of the department to oppose it. However, it is not really my position to object at this point.
Baroness Neville-Rolfe
Okay. I welcome the lecture on procedure and apologise for not getting it right. As a new Minister, I am learning. The answer is yes, we are very open to discussion. What I was trying to do, I thought, was to be helpful in going through our thinking about why the various provisions were set out in the way that they were. I have already indicated that there are one or two places where I can see that the points made today would lead to further discussion. The answer is that we are open-minded and are keen to find a workable way forward, and are happy to do that in discussion in this House. I beg to move.
Lord Whitty
Lord Whitty
My Lords, this amendment is the first in my name relating to Clause 42. Clearly, I cannot press it today if the Government do not agree with it but I hope they understand that, in the discussions that the Minister has promised us, we will wish to return to all the issues that relate to the distinction between the Pubs Code provisions and those of the MRO. Subject to that, I will not press the amendment.
Lord Howard of Rising (Con)
My Lords, I wish to speak to Amendment 91D in this group. Its purpose is to remove uncertainty and so give smaller breweries a stable background in which to run their businesses. Helping small business is after all the purpose of the Bill. For these smaller breweries—indeed, for any pub company—to be successful in a declining market, it is essential that they make significant investment in their pubs. This necessary investment is not practical if they do not know under what rules they are operating. My noble friend mentioned changing the figure of 500 by affirmative resolution, but while change by regulation or order goes some way towards parliamentary examination it is, for practical purposes, a rubber stamp. Between 1950 and 2014, only 11 resolutions were rejected in the other place and only five in your Lordships’ House.
For that reason, if the Secretary of State can change the 500-pub definition to a different number by regulation, that will create uncertainty and severely restrict, if not halt, the investment necessary for the survival of the smaller breweries—which, by the way, generally speaking, have been increasers rather than closers of pubs. If noble Lords think that it is overpessimistic to say that investment will dry up, I remind them that under the last change in the rules governing the ownership of pubs many famous names, as my noble friend Lord Hodgson alluded to earlier, such as Whitbread, Bass, Scottish & Newcastle, Courage and Watneys have been absorbed by multinationals. It would be against the spirit of what we are trying to achieve today if a consequence was to contribute to the demise of small breweries.
Any change to the number of 500 should be subject to primary legislation. I urge the Minister to consider the amendment seriously so that those smaller breweries can continue to invest and create the prosperity necessary to maintain that part of the pub sector and help stem the decline of pubs.
Lord Whitty
My Lords, I have three amendments in this group which go in exactly the opposite direction of the noble Baroness’s amendments.
We could keep the question of definition to talks between now and Report. I do not want to go over the arguments that we had earlier, but to define the owners, the pubcos, to which this applies in reference solely to tied pubs runs the danger of those pubcos altering their tenancy arrangements so that they fall below the threshold. I assure the noble Lord, Lord Howard, that this provision is not intended to hit the family and small regional brewers. We know that the large companies have a range of arrangements with their tenancies and are defined by the totality of their portfolio. It is relatively easy, given the turnover of tenants, for the companies to switch from one form of tenancy to another. They would have a motivation to do so, in order to fall below a tenancy threshold related to tied accommodation alone.
This is one of the issues on which we should have further talks. It is possible that we would have a different tied-specific definition, but that would require other obligations being put on the pubcos so that they would not change the designation of their portfolio to get around this threshold. I suppose that it would be difficult to draft such clauses, but there is a real danger of them gaming this situation. We know that some companies are already contemplating breaking their structure up.
We need more talk about what the definition covers. In a sense, this is the wrong way to go about it, but I would hope that the noble Baroness would not press the amendment and would rather make it subject to the talks to which she has committed for the coming period.
Lord Hodgson of Astley Abbotts
The noble Lord, Lord Whitty, and I have taken common cause on various things but he will not be surprised to know that I cannot take common cause with him on this tonight. A managed pub, as I explained at some length in my opening remarks, has an employee. It is a totally different relationship. To say that pubcos could switch their estate from being tied to being managed would mean changing the whole basis of the employment. The fact is that they are employees with salaries and bonuses and fringe benefits. It is not possible to undertake the sort of gaming that the noble Lord is describing—in terms of switching from managed to tied—which is why managed pubs can safely be left out. The question of what the tie means is something which we have been discussing tonight, but managed pubs form no part of this because they have employees with all the applicable rights and responsibilities.
Small Business, Enterprise and Employment Bill
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Lord Watson of Invergowrie (Lab)
My Lords, I was certainly in accord with the noble Lord, Lord Stoneham, on his last remarks, but I find it rather strange that he should pray in aid of his argument that any fines should be affordable by the small businesses concerned. Small businesses have no need to incur any penalties whatever; all they have to do is abide by the law and they will not be forced to pay a penny more than they are legally obliged to do. There is no merit to that argument. If you do not want the fine, pay the national minimum wage.
While I suspect that the Government will resist the move from £20,000 to £50,000, my point in respect of the amendment has two prongs to it. One is that I want to know why there should be an upper limit at all at £20,000. Why is there a need for an upper limit? In earlier parts of this clause, it says that the total amounts should be in respect of the amount owed to the individual. But if there is an upper limit of £20,000—and goodness knows what kind of employer would incur a debt of failure to pay the national minimum wage in excess of £20,000—why should we use that as a cap? What is the logic, first, for having a cap at all and, secondly, for that to be the figure? If £20,000 is not to be a sufficient disincentive, £50,000 might just about do the job, and for that reason this amendment ought to be accepted by the Government.
Lord Whitty (Lab)
My Lords, I, too, support this amendment and I take issue with the noble Lord, Lord Stoneham. The worst thing for a small business that is obeying the law is that there is another business down the road that is not. There has been quite some fragmentation at the bottom end of the labour market since 1998 and we know that the way people are employed—or quasi-employed—is now much more dubious in terms of what they are entitled to and how you can check on it. Where people are not being paid the minimum wage for the hours that they work, it is important that the authorities can both check on it and enforce it. I fear that, at the moment, there are not many resources for doing either. Strictly speaking, the wages inspectorate is part of this as well as HMRC, but this is not top of its priorities and the number of prosecutions in this area has been very limited. I am not denying that there have been noises from BIS and from the noble Baroness’s fellow Ministers on this front, and I welcome that. However, the reality is that are a lot of people who are either on zero-hours contracts, which we will debate in moment, or on various other quasi- terms which they cannot argue with the employer and whose money is below the rate they should be getting.
The Agricultural Wages Board used to have a particular inspectorate—it was not even five people at last knockings —but when the board was abolished last year we received assurances that that resource would be transferred into HMRC. I understand that no such increase has actually occurred, either in the wages inspectorate or HMRC. Regarding HMRC, I would be reluctant to agree with Amendment 68ZR that enforcement should go entirely to local authorities. HMRC often has a way in because it sees the books, so I would keep a role for it. That could be followed through in rather the same way as local authorities follow through environmental health legislation by being given more of a role in that respect. Local authorities would also need the resources to be effective in this area.
We need to recognise that the present situation is not adequate. The enforcement resources that would be subject to the annual report are not adequate either. Having a maximum penalty of £20,000 is also not a deterrent for a lot of employers who operate on the murkier side of the labour market. It is not always small companies that are doing this; it is often large companies, or their sub-contractors, or labour-only suppliers who are paying below this rate. We therefore need a step change. Amendment 68ZN would go a considerable way to providing a degree of deterrence. Amendment 68ZQ would mean that Parliament would at least know what the level of resources in this area ought to be and actually is. On Amendment 68ZR, I would hope that local authorities would have some role, but HMRC and its resources are also an important element.
Lord Storey (LD)
My Lords, when the Minister replies, perhaps she could clarify whether it is £20,000 per person or £20,000 for the company. I do not think there is any difference between us. The noble Lord, Lord Stoneham, is right to say that the most effective way of ensuring compliance is by actually prosecuting. So far, the number of prosecutions is very small and is not even steadily rising. Now that HMRC has the information on tax avoidance, we have the power and the tools to make sure that businesses comply. I hope that the Minister will say something in her reply about how we ensure that we use the full force of HMRC and that action is taken against the very few businesses that do not comply.
National Infrastructure
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Lord Whitty (Lab)
My Lords, I think my noble friend Lord Adonis was right to put the proposal for a national infrastructure plan at the centre of his speech, and I think this debate has rather brought that out. We need a mechanism whereby we have an overall prioritisation; an overall allocation of resources; an effective form of scheduling, as the noble Earl, Lord Attlee, said; a consistency of project assessment, as my noble friend Lord Hollick implied; and something therefore that investors of all sorts can have confidence in, so that they can avoid the tendency to short-termism and to knee-jerk political or financial reaction.
The investors include the Treasury, but they also include the corporate headquarters of multinational companies, the banking system, the finance markets and institutions such as the pension funds. At the moment they can have virtually no confidence. For those who say that a national infrastructure commission would simply be a bureaucracy and produce all sorts of favours, I refer to all the papers emanating from several different government departments and agencies that we should have read if we were to be properly informed on this debate, as recommended by the Library. We need an overall plan. The glossy that the Government produced on the national infrastructure plan in the past month is very helpful but incomplete; it does not give its basis or, in most regards, its timescale.
I shall concentrate my remarks on areas that are not in there: energy efficiency, which is hardly there apart from a brief reference to smart meters, and housing, which is hardly there at all. Had I had longer, I would have liked to have talked about transport and flood defence, but not in four minutes. However, I say to the noble Lord, Lord Sassoon, if I may depart briefly from my bipartisan approach to this, that the areas that the Government cut when they came in were exactly those: housing, energy efficiency, roads and flood defence. That was a ridiculous short-term decision, but luckily the Government have recovered from it. I hope that therefore we have a basis for bipartisanship in future.
On energy efficiency, the noble Lord, Lord Teverson, has spelt out the need for investment in energy efficiency at the point of use, and I echo virtually all his remarks. There is also energy efficiency in the system itself. We lose the bulk of our energy before it gets to the point of use. We need to look at improving the transmission and distribution of energy, at decentralised energy, at CHP and at carbon capture and storage, which is mentioned there but only briefly. That should all be part of an investment and infrastructure plan, and should be assessed on the same basis as, if you like, the sexier parts of the agenda, which relate to big roads and big airports. At the moment the process of assessment of such projects is very differential and, if you like, politically and subjectively charged, depending on which area you are looking at.
The same applies to housing. In a sense, the noble Lord, Lord Horam, must be right that this is the biggest lack of infrastructure failure of successive Governments in the past 30 years. Housing for our people must be a central part of the infrastructure agenda. At the moment it is not in the December document, and it ought to be. I hope that we can rectify this as we go forward. I hope that we can do so on a consensual basis, but I think we also have to recognise that we need new structures in order to be able to do so. Sir John Armitt’s report is a very good basis for starting.
Autumn Statement
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Lord Whitty (Lab)
My Lords, I begin by apologising to the noble Viscount that my Select Committee duties kept me from being in the Chamber at the beginning of this debate. My thanks to the Whips for letting me in.
The problem with this economic debate is that it is defined almost entirely in terms of the deficit. Indeed, we have become obsessed with the figures for the deficit in the same way as we were obsessed in the 1970s with the trade gap, which nowadays is largely ignored. I recognise that the deficit is important both in absolute terms and in terms of the way in which we finance it. But focusing on it takes away from focusing on the two sides that create the gap—income and expenditure. I want to focus largely on one reason why both public income and expenditure are affected by the very serious reduction in real wages. I follow the noble Lord, Lord Skidelsky, and my noble friend Lord Desai in focusing on real wages.
Low real wages both reflect and cause one of our underlying problems: low productivity. Indeed, as others have said, low productivity is one of the main constraints on our recovery. There are many reasons for real wages having declined in recent years, some directly and some indirectly to do with the Government. They relate to the public sector wage freeze, the absence of collective bargaining in large parts of the private sector, the increase in part-time work for many people who would prefer to work much longer hours, down to those on zero-hours contracts, and so forth, and the increase in what is termed self-employment, which often is not by choice either. Indeed, the real incomes of the self-employed have fallen faster than for anybody else since the financial crisis, although the numbers of self-employed have increased.
The effects of low income have been felt on both sides of the equation. They have clearly lowered the actual receipt of taxes to below what the Chancellor expected and they have increased the level of expenditure through tax credits and housing benefit, which has been aggravated by the complete failure to deal with the underlying housing crisis. Housing costs are going up at the same time as real incomes are going down. Also, we should not ignore the fact that low real wages have toxified other aspects of the body politic. We have intergenerational conflict. As someone said, the young are most hard hit by the decline in wages. We also see it in sensitive debates around immigration, the EU and the whole future of welfare.
The Chancellor and the OBR seem to expect real wages to recover, but there is no obvious reason why they should—particularly if we reduce the role of the state to that in the 1930s. If we are going back to that, we should remember quite what the 1930s brought us in terms of both economics and politics. We need instead to introduce structural and legal changes that raise the level of incomes of the poorest in our workforce. If we do that, we will begin to increase income to the Exchequer on the one hand and to reduce expenditure on benefits on the other. We will also help to remove some of the dangerous tendencies in our society and in the body politic.
Let me be fair; there are aspects of the Statement to which I can give a qualified welcome. I agree with most of the infrastructure commitments—but, like my noble friend Lord Hunt, I regret that they also reflect those areas which the Government cut five years ago. Nevertheless, they are back, although I regret the absence of any commitment to a housebuilding programme. I welcome the more progressive moves in relation to the structure of stamp duty, although while it may help on the one hand, on the other it may aggravate the housing market in the short term. But the overall message I want to send is that unless we as a society and as a Government or alternative Government address the issue of declining real pay, we will end up remaining in this situation for many years to come.