Economy: Overseas Trade Deficit

Debate between Baroness Kramer and Lord O'Neill of Gatley

Wednesday 25th May 2016 Lords Chamber

[Lord O'Neill of Gatley]

I am very grateful for the accurate suggestion by my noble friend Lord Leigh as to what is really going on below the data. I emphasise—as, rather generously, Ernst & Young did yesterday in a very important report—that the recent deterioration is due to the growing attractiveness of the United Kingdom, especially areas outside London, in the minds of investors all over the world. Narrowing this deficit requires us to invest more in other places in the world that give a higher return.

[Baroness Kramer (LD)]

I wonder whether the Minister has seen today’s FT interview with the director-general of the WTO, in which he explains that, if we were to leave the EU, the UK would be required to put tariffs on imports from all 58 countries with which the EU has trade arrangements, and they in turn would be required to put a surcharge on UK exports. This is not an area where we will have a choice. We cannot say, “We’re not charging duties here”. That would be impossible and illegal. Hence, would the Minister recommend that Brexiters take note of the damage they could cause?

[Lord O'Neill of Gatley]

My Lords, I thought that I had read the Financial Times thoroughly this morning but I missed that particular piece. If we want to reduce our current account deficit by reducing our attractiveness to foreign investment, we need to be very careful on 23 June.

Income Inequality

Debate between Baroness Kramer and Lord O'Neill of Gatley

Thursday 21st January 2016 Lords Chamber

[Lord O'Neill of Gatley]

My Lords, as I suggested in my opening formal comments—and I am happy to provide plenty of data to back up the substance because it is so wide—true measures of income inequality, whether in terms of disposable income or of what is called original income, have for many years shown a decline in income inequality. How chief executives are remunerated by their companies, particularly in the quoted sector, depends on the decisions of their boards and shareholders.

[Baroness Kramer (LD)]

My Lords, do this Government expect that the planned changes to universal credit will increase or decrease the number of children living in households with below-average incomes? Given the public interest, will the Minister report back to this House on that measure?

[Lord O'Neill of Gatley]

My Lords, I am sure that we will have further debates on this topic in the weeks and months ahead, but, as has been clearly articulated by me and others on a number of occasions in this place and the other place, our prime policy is to ensure that as many people as possible throughout our society achieve employment, supported by an increase in the national living wage. I should add that I make these comments after remarkably strong employment data published yesterday.

Spending Review and Autumn Statement

Debate between Baroness Kramer and Lord O'Neill of Gatley

Wednesday 25th November 2015 Lords Chamber

[Baroness Kramer (LD)]

My Lords, it is always a pleasure to follow the noble Lord, Lord Davies of Oldham, but I confess that he disappointed me today. He did not throw anything, so we have missed out on the drama of the other place. I was also somewhat disappointed in the Budget. It is less generous than it appears on first viewing: we still have a £12 billion cut in welfare. If I understand it correctly, that will now happen as people transfer into universal credit. I am sure that the Minister will advise noble Lords about that—it would be good to understand how it will work. Of course, I am absolutely delighted that the Chancellor reversed his plans to cut tax credits for poor working people. I think, with some interest, that had the Chancellor been a Member of this House a couple of weeks ago, when the relevant statutory instrument was debated, he would have supported neither the Conservative nor the Labour Motion, but the Liberal Democrat fatal Motion.

We are also pleased with the upfronting of money for the NHS in this Budget, especially the investment in mental health. That is welcome, but can the Minister confirm whether that £600 million is new money for mental health and does not contain any former promise within it? We are supportive of stamp duty on buy to let and very supportive of the increased spending on infrastructure. We note that the Chancellor partially explained that that was because borrowing is now cheap. That is what we have been saying for weeks, so we are very glad that he has listened to that argument.

However, if I lived in a deprived community, I would be exceedingly concerned today. Perhaps the Minister can help us. Although the Government have said there will be no cuts in the policing bill, I am somewhat confused. Does that mean that the grant levels for policing will continue to be the same from central government, or is part of the money to be replaced by a precept raised locally, by police and crime commissioners? I did not follow that and therefore do not understand what might be happening. If I am in a deprived community and find that I have an additional bill on my council tax for policing, I am almost certainly going to have an additional bill on my council tax for social care, because, as Members of this House will know, the most vulnerable elderly tend to live in the most deprived communities, with the narrowest council tax base. Therefore, paying for social care through an additional precept on council tax will be very tough for those communities. I would indeed be worried.

I would also be worried in another sense. The Chancellor significantly slashed the revenue side—that is, the operations budget—of the Department for Transport. Immediately in my head went up the warning sign that much of that is spent on bus grant. Again, with local authorities under great financial pressure, are we looking at either losing a lot of our bus services outside the big urban centres, where the systems can wash their face themselves, or are we looking at additional council tax being raised to pick up bus services?

The repatriation of business rates is something that we have always supported in principle, but I did not quite follow that; again, perhaps the Minister can help us. If I understood the Chancellor correctly, the equalisation will disappear. As this House will know, business rates have been centrally collected and then redistributed on the basis of need. As that is eliminated, will we again find that our most deprived communities, with the least capacity to generate new business and new business rates, will be the ones that suffer, while somewhere such as Kensington and Chelsea or Westminster will be in heaven? I hope very much that the Minister can support us, because one knows that, with Budgets, the devil is very much in the detail.

Perhaps the Minister can help us also on further education. What I heard was a real-terms cut in the further education budget, which will be protected only in cash terms. In this House, we have all discussed—indeed, the Minister himself has discussed—the significant problem of the lack of skills that is holding back economic growth. Especially now, as we are constraining migration, it is really important that British people have lifelong learning. Apprenticeships and universities have a huge role to play, but the underpinning in our ever-changing world, where people constantly need to update their skills, means that further education is absolutely critical. Have we just heard a cut in that sector?

Perhaps the Minister can help us with this policy of equalising per pupil spending in schools. It sounds on the surface not to be an issue, but does this mean that schools, for example, in London, in some of our most difficult communities and which have delivered outstanding success, are about to have a cut in their per pupil spend based on this equalisation? We really need to know and understand the detail of that.

I will make just two more comments. Although there were many measures to support new ownership, the private rental sector was ignored. We have 1.6 million people on the waiting list for social housing who will obviously not be helped, and so many in generation rent, who spend half their income on rent, have not been helped either.

My last point is that this Budget relies on a £27 billion find by the OBR in increased tax receipts and low interest rates. I point out that both could change or disappear. Given the constraints of the fiscal charter, what are the consequences for this Budget if that should happen?

[Lord O’Neill of Gatley]

My Lords, I thank the noble Lord, Lord Davies, and the noble Baroness, Lady Kramer, for their interesting and detailed responses to the Autumn Statement and the spending review. One of the unfortunate consequences of their detailed response is that I have only three minutes or so to respond.

Let me start by trying to make some overall comments. An important backdrop to today’s Autumn Statement and spending review is that the independent Office for Budget Responsibility has become more optimistic about our economic growth than it was previously, consistent with other respected domestic institutions. Importantly, in line with that, it has become more optimistic about our modelling of the path and profile of tax receipts.

As highlighted by the Chancellor, the OBR now calculates that this means a £27 billion improvement in our overall public finances over the forecast period. This allows the Government to borrow £8 billion less than forecast and, importantly, and in contrast to what the noble Lord, Lord Davies, suggested, spend £12 billion more on capital investment and cut less in the early years, while still achieving a budget surplus consistent with what was previously projected. In fact, that surplus will be slightly higher, by £100 million, by 2019-20.

In practical terms, this means: a £10 billion real-terms increase in the NHS budget; investment in our national security; real-terms protection of the police budget—I will have to write to the noble Baroness, Lady Kramer, on the technicalities of her question; doubling the housing budget; the largest ever investment in free childcare; a 50% increase in transport capital spending; extra support in science and innovation, in contrast to what was widely expected by the media; the biggest real-term increase to the basic state pension in 15 years; and, of course, avoiding the need to lower the tax credit thresholds.

Through the spending review, the Autumn Statement also sets out the details of the Government’s commitment to deliver £12 billion of savings to the cost of governance. It delivers the economic security on which our future growth is based and protects national security, which it is, of course, the first duty of any Government to provide.

I shall quickly try to respond to some of the key specifics. The noble Lord, Lord Davies, as he has done in previous debates in this House, referred to a number of aspects of the economy. I have probably had more access and time to look at some of the things presented in the Autumn Statement and, crucially in this regard, by the independent OBR. With respect to, for example, the never-ending references to our balance of payments deficit, as significant as that has been, one of the sources of the upward revision by the OBR is the improvement in the balance of payments position that has recently occurred. As I pointed out in the Chamber a week or so ago, the trade part of the current account balance of payments has been improving for some time.

With respect to other specific asks, I am particularly pleased with some aspects of this in the context of what the noble Lord, Lord Davies, said, both from the northern powerhouse perspective and in terms of our broader energy dependency. In that regard, I should like to highlight the announcement of £250 million towards research for small nuclear reactors, which will benefit a considerable number of parts of the north of England. In addition, there is £250 million for a devoted potholes fund.

With respect to the ongoing and crucial issue of skills, the Autumn Statement spells out specifically how the apprenticeship levy will be funded. While some are making reference to that being some form of tax, as we have discussed here before—and as I have been among those most prominently pointing out—it is important that our corporate sector, which is at the forefront of pointing out our skills shortage, takes ownership in providing the necessary skills. It will apply only to the largest employers, and anyone who achieves their target will get their funds returned in any case.

I have already touched on answers to some of the interesting comments made by the noble Baroness, Lady Kramer, but I want to start by bringing us back to universal credit. I will refer to what the Chancellor himself said this morning and then make additional comments. He said with respect to tax credits:

“Because I have been able to announce today an improvement in the public finances, the simplest thing to do is not to phase these changes in, but to avoid them altogether. Tax credits are being phased out anyway as we introduce universal credit”.

He concludes the section of his wonderful presentation by saying that the House—that is, the other place,

“should know that helping with the transition obviously means that we will not be within that lower welfare cap in the first years, but the House should also know that, thanks to our welfare reforms, we will meet the cap in the later part of this Parliament”.

With respect to the observations about the role played by this House, it is important to remember that the Chancellor said the day before our debate that he was prepared to listen and there was on offer an alternative Motion that could have been respected.

Budget: Household Impact

Debate between Baroness Kramer and Lord O'Neill of Gatley

Wednesday 16th September 2015 Lords Chamber

[Lord O’Neill of Gatley]

My Lords, contrary to that question, as a result of some discussions involving the Chancellor, the specific distributional analysis that was requested was posted on the government website on 21 July. There followed a number of conversations outlining the Treasury’s belief that the new analysis was intellectually superior to those in the preceding Parliaments. I should add, however, that the requested distributional analysis has indeed been published, despite the apparent lack of awareness of it displayed in the previous question.

[Baroness Kramer (LD)]

My Lords, it is certainly a disgrace that the distributional analysis was not published with the Budget, a practice followed by the coalition every year so that questions could be asked during Budget-related debates. Can the Minister confirm the analysis of the IFS around the distribution that the only gainers from the tax and benefit changes are the richest eighth and ninth deciles, and that the big losses are all concentrated in the poorest first to seventh deciles, with the very poorest among the biggest losers?

[Lord O’Neill of Gatley]

My Lords, the distributional analysis subsequently published on the government website, as I just outlined, actually shows that if one needed to specifically pick where the impact was felt most severely across the different quintiles of income distribution, it was in the highest 20%.

Income Per Capita

Debate between Baroness Kramer and Lord O'Neill of Gatley

Tuesday 14th July 2015 Lords Chamber

[Baroness Kramer (LD)]

My Lords, I am pleased that the Liberal Democrat plan to help to close the gender pay gap has been reannounced by the Government. Will the Minister join me in congratulating the former coalition Minister, Jo Swinson, who pushed through the relevant amendment on corporate disclosure? Will the Government now take steps to close the pay gap between older people and the under-25s, who will not be eligible for the new minimum living wage?

[Lord O'Neill of Gatley]

I would like to make reference to the presentation of the Budget and the policies included, which, I think I am right in saying, considered many ideas from many people in undertaking its commitments to raise the living standards of everyone in the UK.

Economy: Productivity

Debate between Baroness Kramer and Lord O'Neill of Gatley

Monday 8th June 2015 Lords Chamber

[Lord O'Neill of Gatley]

My Lords, as your Lordships can tell, I am not yet very familiar with the exact procedural formalities. I apologise, as I should be. I have been immersed in studying issues to do with productivity for a large part of my adult life. It is dangerous to associate productivity improvements with a so-called focus either on austerity or on some other particularly cyclical fiscal policy stance.

We are living through a moment in time when a very large number of diverse developed countries are all apparently showing a dramatic slowing in measured productivity, whether it be Germany, which is generally regarded as successful and whose measured productivity has been even weaker than ours in the past few years, or the United States, which is frequently regarded as a beacon. In my maiden speech last week, as those of your Lordships who were here would have heard, I highlighted a number of factors that will be focused on. When the Chancellor makes his presentation, I think your Lordships will see that those feature highly in the appropriate steps we plan to implement.

[Baroness Kramer (LD)]

My Lords, does the Minister agree that employee ownership models, such as the John Lewis model, tend to enhance productivity? If so, will he take steps to share that understanding, especially with small and medium-sized companies, and consider tax incentives?

[Lord O'Neill of Gatley]

The ideas that are being thought about include appropriate incentives to boost long-term investments and greater incentives for both the owners and participants in any company, whether privately owned or otherwise. The role of tax incentives is very important and they will be looked at further.