Finance (No. 2) Bill

Debate between Lord Forsyth of Drumlean and Lord Davies of Oldham

Thursday 26th March 2015 Lords Chamber

[Lord Davies of Oldham (Lab)]

My Lords, we live in a strangely surreal world with regard to this Finance Bill. My noble friends and noble Lords on the government side will recall when they were in the other place long days and nights spent on Finance Bills, watching dawn break across the river as we struggled with the issues presented by their depth and significance. This Finance Bill went through the Commons in one day. The Budget was debated. There was a very good debate in the other place over several days. Of course, yesterday in this House we had four hours of excellent contributions to the general issue of the economy and what the Budget represented in relation to that economy. But I can scarcely for the life of me engender the same degree of intense scrutiny of this one little Bill. Even the Minister was able to dispatch it in 20 minutes or so.

In any case, this Finance Bill is a pretty mean-spirited effort. The Chancellor tried to boast and establish the fact that living standards were not lower than they had been in 2010. It is a strange thing to boast about—that there has been no growth in living standards since that time. In the area where he suggested that there had been some progress, others, such as the Resolution Foundation think tank, challenged his figures and indicated that far from there being income growth for people, incomes had fallen.

We know who has been hardest hit over these past five years—young people, in particular, and middle-aged people with low-paid jobs. There are plenty of those about. We know that there are 1.8 million zero-hours contract jobs at present. I do not know how the Government can be proud of a low-wage economy that has slumped to that level but that is what faces us. When the Minister blithely says that the Government are increasing the personal allowance, he ignores the fact that for 5 million people that is utterly and totally irrelevant as they do not earn enough to pay tax. The changes in the allowance are of absolutely no relevance to them at all. However, the more you earn, of course, the more relevant the changes become. It is typical of the Government to look after the better-off while doing very little to help the less well-off.

What does this mean-spirited little Bill mean? We had the Chancellor trying to talk about success in a land where food banks proliferate. In my old stomping ground of Oldham, rickets has emerged in recent months. Is that the society over which this Government wish to preside? Are the Government content that the pay of chief executives of FTSE companies and of some people in the public sector has increased to the extent that it has while those at the other end of the spectrum experience the difficulties that I have mentioned? We know of chief executives in local authorities who earn considerably more than the Prime Minister. We are also well aware that high salaries are paid to some officeholders whose posts were never distinguished by high earnings in the past. For example, a university vice-chancellor can earn £640,000 a year. I have great respect for British universities. They have done tremendously good work. However, one has to ask questions about the relationship between vice-chancellors and the rest of the scholastic community when their incomes almost equal those of FTSE chief executives. One also has to ask questions about the differential between vice-chancellors’ pay and the average pay of university staff. We hoped that the Government would address some of these issues. When they did address them, on the whole they rewarded the very rich with further tax cuts.

I am grateful for the fact that three of my noble friends have spoken in this debate. I note that no one from the government Back-Benches thinks that it is worth speaking in support of this Bill, although their presence may be an enthusiastic endorsement of what the Government are doing. However, it is a pretty limited endorsement. At least, three of my noble friends have sought to address the Bill. In all honesty, their talents would have been better deployed yesterday because my noble friend Lord Haskel, who spoke so eloquently about the fundamental issue of productivity, a phrase which I do not think passed the Chancellor’s lips at all—

[Lord Forsyth of Drumlean (Con)]

I am most grateful to the noble Lord. If this is such a bad Bill, which parts of it would he reverse if his party were to win the next election?

[Lord Davies of Oldham]

Not a great deal. I am not arguing that it is such a bad Bill but that it is such an irrelevant Bill. It contains absolutely nothing of any significance. As I said, my noble friend Lord Haskel alighted on productivity, but that was not mentioned at all in the Chancellor’s speech. However, as my noble friend clearly identified, we have to see improvement in that area if Britain is to earn its way in the world. We cannot be ignorant of our current balance of trade problems.

I listened carefully to what my noble friend Lord Desai argued. He put his case with considerable force and I hope it will get a sympathetic response from those who will lead the next Labour Government after the general election and that they will acknowledge some of the cogent points he made.

My noble friend Lord Soley is absolutely right to say that we need to concentrate on growth. However, as we established yesterday, the Government spent the first three years in office dissipating any potential for growth, and we even dropped back from the growth levels obtained by the Labour Government in their last year in office. There is, of course, growth this year, just before the general election. It is just like the Government’s public expenditure plans: there will be three years of vicious cuts—greater cuts in three years than the country has suffered in five—but there will be a certain easing back by 2018-19 in preparation for the next general election.

The Chancellor has a reputation for being political. He has certainly earned it in this tawdry little Bill.

Corporation Tax (Northern Ireland) Bill

Debate between Lord Forsyth of Drumlean and Lord Davies of Oldham

Tuesday 17th March 2015 Lords Chamber

[Lord Davies of Oldham (Lab)]

My Lords, this has been a fascinating debate, in which two obvious problems with the Bill have been identified that might not have been entirely anticipated. They broadened the debate to such an extent that I sympathise with the Minister responding to it. The breadth that has developed is obvious enough. First, questions have been directed to points of such substantial detail that we want answers this evening because this is a money Bill and we have no chance to press the issues any further. Therefore, I hope that the noble Lord—I know how scrupulous he is in observing time limits when he is winding up—will indulge himself sufficiently to respond to those very detailed points, one of which I will refer to in a moment, so that we can make as much progress as we can before we pass the Bill, defined as it is as a money Bill, by taking all its stages after Second Reading.

The second aspect that has broadened things was raised by the noble Lord, Lord Forsyth. He was not alone in this respect, although he probably presented the most challenging dimension on it. The noble Lord, Lord Shipley, accurately reflected this as well. They said that the Bill raises issues relating to devolution powers and the position of the United Kingdom.

I am absolutely delighted to welcome the contribution of the noble Lord, Lord Forsyth, on the prospects of a convention immediately after the election. He has only to vote Labour and he will help with that. Unfortunately, he is not allowed to but perhaps he can persuade the other members of his family to vote Labour to ensure that we have a convention after the election.

The noble Lord, Lord Shipley, also identified in his very useful contribution that there are real issues at stake here. I do not doubt that the noble Lord, Lord Newby, will be somewhat reluctant to indulge in that part of the debate to a very large extent. However, it is clear that this is a further step towards devolution, which is welcomed on all sides. We heard in all speeches—and know from the deliberations in Northern Ireland, particularly in the business community—that people are in favour of this measure. Of course, as the noble Lord, Lord Bew, indicated, that might be on the basis of a fairly limited perspective on what the implications are for devolution and the position of the United Kingdom as a whole—the interaction of the parts. We heard some very challenging contributions today. It is a great pity that we are able to raise them only in the context of a Second Reading debate that concludes very shortly.

Of course, we support the Bill and will give every assistance to its progressing satisfactorily. However, we have anxieties about it. Noble Lords raised the question of the trade-off between this and the block grant. Extending wider than that, there is the whole question of devolution arrangements as well. The Barnett formula came into the debate, too. We have anxieties on those issues and the Minister must recognise that when the Bill goes through, the hoped-for increase in revenue in due course will be balanced against the block grant. I hope he will appreciate that this has considerable ramifications for the Northern Ireland public.

My noble friend Lady Blood emphasised the fact that loss of resources for government might crucially affect the amount that the Government are able to invest in, for example, training and education. These are clearly issues of great importance to making a strategy for increasing the private sector’s capacity to compete successfully. Reference was made to the days of the Republic of Ireland tiger, but it was not just the business rate taxation that was crucial to Ireland. A great deal was made of that, of course. As the noble Lord, Lord Forsyth, reflected, certain companies hived themselves off to the Republic to take advantage of that, but other factors at play also made the Republic attractive at that time. Northern Ireland has a clearly important task to fulfil in matching up in certain respects.

That is why we are concerned about the effect of this. The Government have made it clear that there is a delaying timetable for the implementation of this measure. It is dependent on the Northern Ireland community, particularly the Assembly at Stormont, reaching an agreement that gives the Government confidence that there is fiscal security in the economy, and gives strength to that economy. Two years is a pretty short timetable to make that demand—it is a pretty substantial demand as well. The Minister must flesh out what his tests are for this demand being met before corporation tax reduction powers are vested in Northern Ireland.

None of us regards corporation tax as a panacea. It can play its part, and we are aware of the strength of opinion in the business community that it will help, but it is not a panacea for the economy; much more substantial improvements need to be made as far as the Northern Ireland economy is concerned. Therefore, the only thing I can say to the Government is that I understand their need for delay—they want to get the Bill through before this Parliament concludes and so they built in the delay before implementation—but delay is no friend in circumstances where things are not improving as rapidly as one would hope.

I hope the Minister will address these issues and at least have a shot at the broader constitutional problems.

[Lord Forsyth of Drumlean]

I wonder whether the noble Lord, Lord Davies, can help me by answering the question that I put to his noble friend Lord McAvoy. I am just a bit puzzled. Of course the business community welcomes the Bill, because profitable businesses will pay less tax at the expense of the resources that are available for public services. Why is the Labour Party supporting such a measure?

[Lord Davies of Oldham]

My Lords, we see that there is support in Northern Ireland for the Bill, which will give some chance of rebalancing the economy to a certain extent. We are in favour of that, but recognise that the development of the Northern Ireland economy, as with all the other parts of the United Kingdom, will depend on much more fundamental issues than the rate of corporation tax. That is why we regard this as a marginal Bill in these terms. However, it would be fruitless of us to object to it, although I accept his point about why we did not address ourselves to other issues, rather than the reduction of corporation tax. He will know, because he is so well informed on Labour Party policy, that we propose to increase the corporation tax rate for the rest of the United Kingdom, with the specific objective of reducing business rates for small and medium-sized businesses. We think that is a quicker and more effective way of giving stimulus to the business community. There we are: on two areas of policy, the noble Lord, Lord Forsyth, and I are in full agreement. I did not expect to say that this evening.

[Lord Forsyth of Drumlean]

If it is the policy of the noble Lord, Lord Davies, that it is better to reduce business rates and that that should be applied to the rest of the United Kingdom, why is it not his policy to do that in Northern Ireland? If he believes that that is the right approach, why is he proposing something that he rejects as being the right approach in the rest of the United Kingdom?

[Lord Davies of Oldham]

My Lords, has the noble Lord not noticed that I am speaking from the opposition Benches? We are not in a position where we can implement our policies at present. It is only a matter of a short delay, as the noble Lord, Lord Forsyth, will readily appreciate. But at this stage, the Government put Bills before us and this is the Bill we have. I have only two alternatives: to reject the Bill whatever its benefits, or to accept it but state that we can do better. That is exactly what I have argued.