Finance (No. 2) Bill

Lord Davies of Oldham Excerpts

2nd reading (Hansard): House of Lords & 3rd reading (Hansard): House of Lords
Wednesday 26th April 2017 Lords Chamber

[Lord Davies of Oldham (Lab)]

My Lords, I, too, thank the Minister for describing so fully the remaining sections of the Finance Bill to be considered today. We all recognise the constraint in terms of the general election’s imminence. She will anticipate that, as what is before us is an agreed position in the famous wash-up procedure, I am unlikely to add too much controversy to this debate. Well, we shall see. I appreciate the fact that she explained accurately what is in the measures. Of course, I have no debate with the measures at present.

I very much appreciate the contribution by my noble friend Lord Haskel. As ever, he has the ability both to identify the minutiae of a problem and to draw some general principles from it. It is a facility I wish I had to the same degree because it is important in economic debates that we understand the full implications of what is going on with discrete pieces of legislation.

I am also grateful to the noble Lord, Lord Kerr, who took from me the responsibility of analysing in particular the problems with regard to the controversial digital tax proposals. These are controversial, of course, because quite clearly a lot of people considered that their interests had not been taken sufficiently—if at all—into account. Both the committees to which the noble Lord referred indicated their views that the Government had made a pretty poor show of this.

In principle, we are in favour of the digitalisation of the taxation system but, pursued under a Labour Government, it will be after due consideration of the needs of business, particularly the categories to which the noble Lord, Lord Kerr, referred: businesses with limited resources being put under very substantial demands indeed. Meanwhile, of course, the Government have to wrestle with the fact that the intended taxation is not necessarily coming in at the rate they would have wished.

The Government have not been too lucky with Budgets in recent years. We all recall the rather embarrassing business of the pasty tax. We recall that the tax credit cuts were reversed by wiser counsel in this House. We remember the cuts to personal independence payments, which the Government had to rethink. Of course, we remember that in his Budget the Chancellor introduced a national insurance contribution proposal that turned out to be something of a fiasco. All the key features of recent Budget proposals have had more than their fair share of difficulty, to the extent that one can wonder whether one can trust a Conservative Chancellor these days to get the fundamentals of the Budget right.

It is the job of the Opposition to point out when the Government have got things wrong and we will continue to pursue that role, even under the constraints of this Bill. We are now considering a gutted Bill left with those parts which both the Government and Opposition agreed should become law.

Of course, the Government tend to avoid tough choices while at the same time pursuing tax cuts for the multinationals and the super-rich, to be paid for by the mass of our people, who have rather more limited resources. So we take it with more than a pinch of salt when the Government put their proposals before us and suggest that they have some concept of fairness.

The Government fail to realise the need for additional fiscal resources, even when the NHS is in crisis. There is not a person in this country who is not aware of the current privations of the National Health Service. The one that is often cited is that the NHS has been obliged to jettison its target of dealing with people requiring hip or knee operations within an 18-week period. This is evidence of the considerable difficulties that the health service is in, and it is not at all clear that the Government have shown the political will to resolve the issue.

Of course, the health service has also been acting as a proxy for the problems of the social care service. Hard-pressed local authorities have not been able to sustain their share of the resources in social care. The fundamental responsibility for this crisis in two absolutely critical public services rests with the Government, and there is nothing in this Bill which indicates that the Government are prepared to face up to these issues effectively.

The Government’s fiscal policy shows a ruinous performance on the public finances, as their target period for clearing the deficit has now been surpassed. It has gone from five years originally on to a further five years. It is now suggested that it will be a further seven years before the Chancellor can see his way to hitting the target, which between 2010 and 2015 dominated the then Chancellor’s objectives. There was never really a recognition of the extent to which failure was enjoined in that period.

The weakness is not helped by cuts in HMRC staffing. In 2011, when I first addressed this issue in the House, I could not understand how the Government could be serious about indicating that they wanted to improve their taxation collection capacities—they had that as a major issue on the agenda—while pursuing their clear ideological objective of reducing the size of the state. The HMRC began to suffer its significant cuts at that time. How can a Government be so committed to a philosophy that they cannot recognise that cutting the efficiency of a government department, which does not just pay for itself but brings in huge resources far in excess of the cost of that department, is surely a nonsensical position to take up? But of course the Government did not accept that argument in 2011 and are not accepting it in 2017. I have not the slightest doubt that if they were to continue in power, they would not accept the argument beyond 2017—but of course the electorate might have some say in that.

This weakness is not helped by the fact that over this period, the Government have misdirected their taxation targets in any case. The work of cutting staff resources in these terms is just emblematic of the fact that the Government are prepared to reduce their services, even when it is quite clear that the costs borne by the community are very significant. That is true not just in our health service and in social care but certainly in education. How can the Government waste resources on private schools when the state school system as a whole is crying out? The obvious fact is that every school is facing a reduction in the resources available to it.

The Government have a lot to answer to. They have at times paid lip service to one important feature of improving the economy: improvement in productivity. I well remember, and I welcomed, the appointment of a Minister who specialised in productivity and I regretted his departure after a very short time—too short for him to make any real impact on the issue. From what I can see, the Government have largely given up on this matter. They talk about certain areas in which there will be expenditure for contribution but the simple fact is that under their period in office since 2010, we have slipped crucially against the G7 criteria of productivity. We now have the largest gap since 1991 with the G7. How do the Government expect us to be successful in our trade negotiations with other countries if our productivity stays so low that our comparative costs are high, and we are not in a sufficiently competitive position with other countries?

This would be bad enough if we were in a relatively steady state, but of course Brexit has occasioned a complete convulsion in the country’s prospects with regard to international trade and earnings. That means that the Government are going into this election with a great question mark over whether they have the will and the capacity to tackle the fundamental issues of our economy that ought to have been addressed long since.

This Budget is consistent with the performance of the Government since the Conservative Party became the dominant force in politics in 2010. There has been a conspicuous failure to hit economic and fiscal targets, backed up by taxation and social strategies which on the whole reward those who are already well off and hit the average working family and those on lower incomes hardest. So much for fairness. What we are actually seeing is the ever-growing inequality in our society which is prompting a response which the Government will have to reckon with in the very near future.

As my noble friend Lord Haskel pointed out, the Government’s greatest failure is on growth. We have hit very low levels of growth ever since they have been in office. There has been a slight improvement in the past 18 months, but all forecasts show that within two to three years even those low growth levels will begin to subside. The Government cannot expect the country to be able to afford all that the public need in terms of personal resources and public provision if we cannot get growth in our economy.

I was grateful to my noble friend Lord Haskel and the noble Lord, Lord Kerr, for embellishing this debate with degrees of precision in areas on which the Minister should respond. Although she may think that, because I am trammelled to a degree by the fact that there is an agreement about the provisions in the Budget which should go ahead, I hope that at the very least the Minister will feel obliged to respond to their cogent points.