Economy: Purchasing Managers’ Index

Debate between Lord Forsyth of Drumlean and Lord Bates

Thursday 11th April 2019 Lords Chamber

[Lord Bates]

I do not dispute that there are headwinds and that uncertainty is bad for business, which is why we want to resolve matters and move forward. However, one of the points about the purchasing managers’ index is that it asks people what their future intentions are, so if people had been “stockpiling” from the beginning of the year, that would not explain why they are now saying that they believe that they will buy more goods and are more positive about the future outlook. So that is not necessarily the right way to read the numbers.

[Lord Forsyth of Drumlean (Con)]

My Lords, given the performance of the German, French and Italian economies, which are all doing considerably worse than our economy, what explanation does the Treasury have for this?

[Lord Bates]

Given that it is hard enough to answer for the UK Government in your Lordships’ House, I will not attempt to answer for other Governments. However, I believe that the resilience we are seeing in the British economy is a tribute to a number of factors: the fact that the UK remains a prime location for foreign direct investment—we have the largest stock in Europe and the third largest in the world—and Forbes identified the UK as the number one location to invest and set up a business in 2018 and in 2019. All those factors—low taxation, a competitive economy and great skills—are the reasons why people are backing Britain.

Sibling Couples

Debate between Lord Forsyth of Drumlean and Lord Bates

Thursday 21st March 2019 Lords Chamber

[Lord Bates]

There would be a tax consequence, because the spousal transfer in inheritance tax costs the Treasury some £2.5 billion per year. To extend the scope of that would involve a charge, and our judgment is that this case does not merit that.

[Lord Forsyth of Drumlean (Con)]

My Lords, given that the Financial Secretary to the Treasury has refused on four occasions to come to the Economic Affairs Committee and its sub-committee on the loan charge and shown himself unwilling to look at the evidence of hardship being caused, might my noble friend try lobbying the Chancellor on this matter instead? Could my noble friend acknowledge that this is not about avoiding inheritance tax? This is about people being able to continue to live in the family home. It is unjust. Is the Liberal Democrat policy not absurd—that the ability to live in the family home should depend on having a sexual relationship rather than a caring one?

[Lord Bates]

My noble friend makes his point. His point on the loan charge was debated here last night, when he and his representations were mentioned in dispatches by my noble friend Lord Wakeham. However, the point remains that we feel that there is a small number of cases. If a property is worth £1 million, and you divide it and take into account the personal thresholds of £325,000 times two, the liability on the death of one sibling will amount to some £70,000 in tax, which can be spread over 10 years.

Student Tuition Fees and Maintenance Loans

Debate between Lord Forsyth of Drumlean and Lord Bates

Tuesday 18th December 2018 Lords Chamber

[Lord Forsyth of Drumlean (Con)]

My Lords, is my noble friend aware that this was a recommendation of the Economic Affairs Committee of this House? One of the issues it focused on was the effect of counting the interest on student loans as income, which flattered the deficit and therefore provided some explanation as to why students were being charged as much as 6.3% on their loans. Given that we now have honest accounting on this matter, can we look forward to the Government implementing the committee’s recommendation that there be an immediate cut in the interest rate for student loans to 1.5%—the cost the Government bear in borrowing this money?

[Lord Bates]

We of course looked at the report, as I am sure the ONS did, and its recommendations were influential. I take the point my noble friend makes about the interest rate at one level, but at another, it is graduated so only those earning more than £45,000 a year will pay the full 3% above RPI. Those earning over £25,000 would pay only RPI. All of these things can be looked at in the post-18 education review, which is under way and due to report next year.

--- Later in debate ---

[Lord Bates]

Perhaps I misunderstood the question—I do apologise. I thought the noble Lord had asked what the effect was on the programme of sales of student loans—to which the answer is that there is no change. He is asking a different question: what about loans that have already been sold and will there be an effect? Of course, for those loans the value of the assets will be a matter for the institutions and organisations that have purchased the loans to account for in the correct way on their balance sheets. If that is still not the correct answer, I will be very happy to meet the noble Lord and write to him to clarify.

[Lord Forsyth of Drumlean]

My Lords, can my noble friend confirm that, had this change not been made, in 2050 the write-off in cash terms on the student finance book would be £1.2 trillion?

[Lord Bates]

I cannot confirm that number: I will have to look at it. The reality with these things is that we set them out, we follow the rules set down by the ONS and the OBR and we report accordingly in the Budget Statements.

International Development: Co-operation with the EU

Debate between Lord Forsyth of Drumlean and Lord Bates

Tuesday 11th December 2018 Lords Chamber

[Lord Bates]

I am very happy to reiterate the commitment on the important matter of humanitarian programmes in the unlikely event of a no deal. The more general point is covered in paragraph 108 of the political declaration, which talks about and articulates that very clear ambition. Of course, the EU itself is in a process of change in the instruments available. The EDF is coming to the end of its lifetime, and there is now discussion about a new neighbourhood instrument. We want to see what shape that takes before making any longer-term decisions, but the noble Lord is absolutely right to say that our interests and those of our European friends are very much aligned in this area.

[Lord Forsyth of Drumlean (Con)]

My Lords, would my noble friend agree that one of the biggest barriers to prosperity and development for developing countries is the European Union’s customs union, which results in their products being made less competitive and unable to reach our markets?

Brexit: Bank of England Report

Debate between Lord Forsyth of Drumlean and Lord Bates

Thursday 29th November 2018 Lords Chamber

[Lord Bates]

We were covering that very point when the Office for Budget Responsibility produced its forecast along with the Autumn Budget. This showed that the forecast made in April about what would happen was underscored, and actually we achieved more. It increased its forecast going forward because it believed there would be more employment, more taxes and less debt.

[Lord Forsyth of Drumlean (Con)]

My Lords, in defence of the Governor of the Bank of England, can my noble friend confirm that these are not forecasts but scenarios whereby the Government think of three impossible things that could happen before breakfast and then ask the banks to plan accordingly to show that they would have the capital required to meet those extreme conditions? To present these as forecasts is misleading and undermines the Bank of England in carrying out its responsible activities.

[Lord Bates]

My noble friend has immense experience in the financial services sector and banking. What he sets forward is precisely the position. These should not be misinterpreted. They should be placed in the wider debate going forward and not taken out of context. I wholeheartedly agree with him.

Brexit: Economic Effect

Debate between Lord Forsyth of Drumlean and Lord Bates

Thursday 18th October 2018 Lords Chamber

[Lord Bates]

I am very happy to reiterate that commitment which was given to ensure that, before the meaningful vote—and, indeed, the debate in your Lordships’ House—takes place, there will be an appropriate level of analysis to look at the consequences of the deal. Of course, we cannot set that out in detail now, because we do not know what the shape of that deal will be, but when it comes, that analysis will be made so that people can make an informed decision.

[Lord Forsyth of Drumlean (Con)]

My Lords, given that the Treasury model for short-term forecasting has been right for only one quarter since the referendum, and that the Chancellor has indicated that it is defective, what faith can we put in any long-term forecast, and why does the Treasury believe that its long-term forecasts are likely to be any more accurate than its short-term forecasts?

[Lord Bates]

My noble friend raises an interesting point. When we look at the actual economic data rather than the forecast, we see: unemployment falling to record low levels; inflation and the deficit on the way down; employment on the way up; wage increases at their highest level for a decade; and exports increasing. All this points to the fact that, as with all forecasts, these are not targets to be met but something to be beaten.

Debt Advice Services

Debate between Lord Forsyth of Drumlean and Lord Bates

Thursday 6th September 2018 Lords Chamber

[Lord Bates]

We have provided significant additional funding to the credit unions. Wonga, which is in administration at present, is not a matter directly for government. The Financial Conduct Authority has issued advice that those who have loans with Wonga should continue to service those debts to avoid getting into further potential debt in the future.

[Lord Forsyth of Drumlean (Con)]

Perhaps I should declare an interest as chairman of a bank. Is my noble friend surprised that debt problems are growing when our daytime television is filled with ads for gambling and loans at exorbitant APRs?

[Lord Bates]

Certainly these are causes for concern. That is why we had a gambling review and followed the recommendation to introduce a £2 limit on fixed-odds betting terminals. That is why we put a cap on payday loans, abolished surcharges on credit and debit cards, and why we are currently undertaking a review through the FCA into high-cost credit. All those things are necessary for the reasons suggested by my noble friend.

Royal Bank of Scotland

Debate between Lord Forsyth of Drumlean and Lord Bates

Tuesday 5th June 2018 Lords Chamber

[Lord Forsyth of Drumlean (Con)]

My Lords, does my noble friend recall that, when the noble Lord, Lord Myners, was in charge of this matter and bailed out the Royal Bank of Scotland, I asked him what he expected the loss would be as a result of that involvement? He replied, “We will make a profit on this transaction”. Will my noble friend not take advice from the Opposition, which also sold our gold at a record low price?

[Lord Bates]

We recall the selling of half our gold reserves between 1999 and 2002 at the rock-bottom market price, but it is more important here to say that of course there is a problem. Then, in 2013 a Liberal Democrat Chief Secretary to the Treasury and a Conservative Chancellor produced a report which was put into the public domain saying what the future of RBS was. That involved radical restructuring, which is taking place, and as it is being concluded we are gradually disposing of the assets. That is the correct thing to do and we are right to do it.

Overseas Development

Debate between Lord Forsyth of Drumlean and Lord Bates

Wednesday 1st November 2017 Lords Chamber

[Lord Bates]

It may not be the case in the BVI, but it certainly may well be in countries such as Anguilla which have only recently graduated from the list of least developed countries. We are talking about losses that would be equivalent to the entire GDP of the country, so it is important that we offer assistance to them. After all, the primary purpose of aid is to help people in need—people in poverty—and for the purpose of economic development. In my view, and in the view of the Secretary of State and the DAC earlier this week, all those criteria apply in this case.

[Lord Forsyth of Drumlean (Con)]

Does my noble friend not think that the Secretary of State is to be congratulated on ensuring that money is directed where help is needed and on not being intimidated by bureaucratic rules which have resulted in people in need not being helped?

[Lord Bates]

My noble friend is absolutely right. This country has a proud record of providing leadership in the international community in the area of aid and assistance. It is important to put on record in the case of the Caribbean that the total assistance we provided immediately was some £62 million, of which only £5 million was ODA eligible. So the fact that it was not ODA eligible did not stop us from helping those in need, but because its purpose was obviously humanitarian and obviously going to people in need and distress, it should count.

Sterling: Euro Exchange Rate

Debate between Lord Forsyth of Drumlean and Lord Bates

Monday 9th October 2017 Lords Chamber

[Lord Forsyth of Drumlean (Con)]

My Lords, will my noble friend take this opportunity to remind people that the strength of the euro has been bought on the backs of those unemployed young people in Greece and the southern European states, that the eurozone is embarking on a project to screw that down even harder, and that the misery that will create is one of the reasons why we are best out of the eurozone?

[Lord Bates]

My noble friend is absolutely right that we are out of the eurozone as far as that is concerned. The strength of the UK can be recognised not only in how people respond to our market but in how they respond in terms of foreign direct investment. That is a much more concrete and long-term form of investment. The UK continues to be the second-largest recipient of foreign direct investment in the EU and second in the world only to the United States. The fact that companies such as Nissan, Toyota, Apple and Bloomberg are making major long-term investments in the UK should encourage us to do the same.

Barnett Formula

Debate between Lord Forsyth of Drumlean and Lord Bates

Thursday 13th July 2017 Lords Chamber

[Lord Bates]

We are certainly always open. That is why we spend £120 in Wales for every £100 that we spend in England. We continue to be committed to that. It is why we increased the overall capital borrowing limit to £1 billion from £500 million, and we continue to look for opportunities to grow the economy in Wales, both within and outside the Barnett formula.

[Lord Forsyth of Drumlean (Con)]

My Lords, given the Prime Minister’s emphasis on fairness and on strengthening the United Kingdom, why are the Government so resistant to taking the advice of the late Lord Barnett and of the committee of this House that looked at the Barnett formula, which unanimously concluded that Wales lost out as a result and that a system based on needs would unify the United Kingdom and be fair to England, Scotland, Wales and Northern Ireland?

[Lord Bates]

I recognise that—and of course for 40 years there has been an ongoing debate about the Barnett formula. Our response to that, as my noble friend will recognise, is to believe that we should devolve to the devolved Administrations more responsibilities and financial accountability in taxation and how money is spent in the Budget. That is the best way in which to eventually work towards a needs-based rather than population-based formula.