Queen’s Speech

Lord Lucas Excerpts

Wednesday 16th May 2012 Lords Chamber

[Lord Lucas]

My Lords, I cannot help my noble friend on the question of which economist has the best recipe for growing the economy—growing hair, yes, but not the economy. Therefore, I shall concentrate instead on fairness, regulation and votes in this House.

It seems to me that we are going to experience tough times for some while. Under those circumstances, fairness is terribly important. We have to be sure that particular groups do not manage to feather their own nests while the rest of us are having a hard time of it. Therefore, I entirely support what my noble friend Lord Tugendhat said about executive pay. There are structural reasons why executive pay has escaped reality in the way that it has and we need to make structural changes to bring it back into balance. I am grateful to my right honourable friend the Chancellor for the steps that he took in the direction of fairness in his Budget, particularly as regards the payment of stamp duty on the part of people who were dodging paying it by means of measures connected with overseas companies.

I am also grateful to my noble friend the Minister and his colleagues for their help on low-value consignment relief, a nice little dodge that enabled pirates in the Channel Islands to make off with a couple of hundred million quid of our money every year. However, he should know that he has scotched that snake but not killed it. The likes of The Hut, which was one of the companies involved, now ships out of Chicago, sending stuff marked as “a gift”. Others bulk ship into Europe and then treat their merchandise as if it was a postal packet coming in, shipping it round Europe in the European mail systems in contravention of postal regulations and VAT regulations. However, with open borders, it is hard to see ways of stopping that. Therefore, I very much hope that my noble friend and his colleagues will remain in close contact with Richard Allen and will use all his understanding and expertise to deal with the remnants of that abuse.

We also need to deal with big companies that are getting away with not paying tax. Goldman was in the news again the other day. That will not do. It is not fair and something has to be done about it. My favourite bogeyman is Amazon, which has £7 billion of sales but pays no corporation tax. That is just taking the mick. The Government have plenty of ways of pressurising Amazon. It is running a most unprincipled monopsony. I cannot find a major book publisher who will come to tea in this House and talk to me about what Amazon does. I have to find out what is happening from the little boys, who are less frightened. If you sell through the Amazon marketplace, you are not allowed to sell anywhere else in the world at a lower price. Amazon makes you keep your prices up elsewhere at the level at which you sell on Amazon, and it appears to be allowed to do that. There does not seem to be any thought of a referral to the Competition Commission. Amazon encourages people who use its marketplace to evade VAT. It was also extremely slow in complying with regulations that require it to produce information about who people are buying from in its marketplace, and it is still not acting satisfactorily in that regard.

There are lots of ways in which the Government can bring pressure to bear on Amazon. They are dealing with the supermarkets in a very similar situation; it is time that they dealt with Amazon. Having these major corporations destroying jobs and tax-paying businesses while paying no tax themselves absolutely will not do.

I want to speak about the benefits of regulation. I am looking forward to our changes in financial regulation. Investor protection has been a positive thing in this country, although it has sometimes been overenacted. I encourage my noble friend to consider extending investor protection because, once people get used to the idea of it, they assume that investments offered in newspapers have some level of protection. However, a few weeks ago the Guardian, which ought to know better, had a supplement carrying pages and pages of advertisements for investments in tropical forestry, offering 18% compound for 15 years. These are total scams, and the people who will make money out of them are the promoters. The uncertainties are enormously played down and the track records do not bear out the projections. A moment of proper financial regulation would see these scams swept away, yet the Government allow them because technically they are not collective investment schemes. In any ordinary sense of the word, they are collective investment schemes in that a lot of people are being herded into one investment. However, because each investor nominally owns a tree or two separately, they are not seen as collective investments and are not regulated. A lot of people are going to get hurt by such schemes and the Government really ought to tackle them. We have got used to protection and we deserve it.

The other area where regulation will do some good is in disintermediation. A number of companies, such as Zoopla, disintermediate basic banking. You can borrow from them and lend to them but you do not; you lend to the borrower and the borrower borrows from you directly. If you are a lender and a borrower, you can get much better rates from them than from a high street bank because you are cutting out all the intermediary functions and, in particular, you are cutting out all the costs that come from banks having to carry capital. You are doing away with one of those comfortable lies, which is that it is possible for banks to borrow short and lend long without carrying undue risk. You are taking that risk straight through from borrower to investor and are therefore able to offer much better rates. However, businesses such as Zoopla do not grow very fast and they are not very big, one of the principal reasons being that they are outside investor protection. People do not know how these businesses are run. They are not subject to any overt regulation. However, people have got used to safety and they want it. These businesses are basically good, worth while, sensible, money-saving and growth-generating, and they ought to be brought within the ambit of financial regulation so that people can trust them and use them as part of their ordinary range of investments. The same applies to venture capital.

Earlier, one of my noble friends talked about the price of annuities. If older people want income and young people want capital, matching the two can be done through disintermediation. One does not need to go through the horrible arrangements that have to be gone through at the moment based on gilt rates. If we could extend disintermediation to collective investments, that would be a real attack on executive pay. I am sorry; I am too old to be frightened by the Whips.

When it comes to votes in this House, we like to tell ourselves that we are a House of expertise, experience and independence. If change comes, that situation will degenerate and we shall become a House of politics. We are letting that happen. On all sides in this House, we are becoming more and more subject to the Whips; we are voting according to politics rather than according to our expertise. However, we are being freed from this by the Government because the Government have decided that they have no loyalty to us. They are prepared to sell us down the river for their own political ambitions. Therefore, we do not have to show loyalty to them for a while. We can vote on the basis of our expertise and our understanding. I think that that would improve the politics in this House. If what we sent back to the other end were not the product of political pressure, but the product of our own wise judgment, that would improve the performance of this House. I hope that we shall do that more in the coming year.