Finance (No. 2) Bill

Lord Myners Excerpts

Monday 22nd November 2010 Lords Chamber

[Lord Sassoon]

My Lords, the debate on the Bill this afternoon has been interesting and wide-ranging, even though it has been between relatively few of us. It has covered a fair amount of ground. I normally respond thematically to points made in debates, but I am trying to get to grips with the number of them. They cover a wide area and I will try to group one or two together. It is interesting that no noble Lord who has spoken has touched on the details of the measures in the Bill, as opposed to the process by which the new Government are going about making tax policy. I stuck my neck out in my introduction and said that the measures were uncontroversial, and I welcome the fact that they appear to be. I am grateful to have that confirmed.

I will start with one or two comments on growth and the broader strategy. First, it is important to remind noble Lords that we have been rolling out a very considerable suite of growth-enhancing policies, right from the start of the new Government. First, we sent a very strong signal to the markets that we had the deficit gripped and that we had indeed come back from the brink of bankruptcy. That is what has convinced the markets that interest rates can remain low, which underpins what business needs in order to invest.

[Lord Myners]

My Lords, I come back to a point made in an earlier debate when I asked the Minister whether the differential between UK and US bond rates has widened or narrowed since 11 May. At the time, he shook his head, indicating that they had narrowed. In fact, as he has now been obliged to cover in a Written Answer, they have actually widened. The Government can claim no credit for the reduction in interest rates. It is a global phenomenon and, if anything, the risk to the UK economy is deemed by financial investors to have increased since 11 May, rather than decreased.

[Lord Sassoon]

My Lords, the noble Lord, Lord Myners, is a master at selective quoting of the evidence. There has been a marginal widening of the spread over the 10-year Treasury, and there has been a significant narrowing against the 10-year bond, which is a much better comparator, and against all the other comparators that I look at on a daily basis. I am very happy to go on answering the noble Lord's questions on this point for as long as he would like, but the predominant evidence suggests that not only have spreads narrowed against the comparators but the price of CDSs on UK gilts has fallen considerably as others have gone up. That is proof that people get the message that we have the growth policies in place. It extends to cutting the deficit, low interest rates, tax policy, the focus on investment in infrastructure in a very tight spending review, the attack on regulation, and I could go on. Whether we shall have White Papers, Green Papers or discussion documents, there has been a very full suite of growth policies and there is plenty more to come.

As to whether I should explain what I mean by the brink of bankruptcy, the noble Lord, Lord Barnett, has already stepped in to point out what I was going to point out: that he has already tabled a Question for oral answer. He has got to the front of the queue, and I do not want to be discourteous to him. He will receive a considered answer.

--- Later in debate ---

[Lord Sassoon]

I am grateful to my noble friend Lord Marlesford for pointing that out; I absolutely agree. Any country that has total debt—he is talking about wider debt—of 400 per cent of GDP, as this country has, is indeed skating on very thin ice.

[Lord Myners]

Surely it is a matter of the purpose for which that debt is used. If the Minister is criticising people for taking out mortgages to buy their homes, which is the largest single source of domestic debt, that is a novel and important statement from the government Benches. Surely, Minister, you need to have regard to both the assets and liabilities on both the public and the private sector balance sheets.

[Lord Sassoon]

I am grateful for the noble Lord’s attempts to put words into my mouth, but of course we want to see a steady and sustainable mortgage market.

I want to get back to the question of growth and getting the economy on track, which is where we got into this interesting debate but somewhat sidetracked from the main thrust of the debate this afternoon. The noble Lords, Lord Eatwell and Lord Desai, asked about growth, which is important. The question is whether the growth will be sustained and at what levels. I was just looking at the latest of the international forecasts issued: the OECD's November 2010 economic outlook from last week. It is now forecasting growth for 2010 to be 1.8 per cent, growth for 2011 to be 1.7 per cent, and growth for 2012 to be 2 per cent. Of course, we wait until next week to see what the OBR’s latest forecast will be.

On one point of detail from the question asked by the noble Lord, Lord Desai, I do not think it is correct to say that the quarter 2 growth numbers have been revised down. There has been some discussion about what was always seen as a surprisingly high number, but there has been no formal revision of those numbers. If there is, it will be on 22 December. Growth prospects remain robust in the view of most independent commentators, although, as I have said here before, of course the recovery is bound to be choppy.

We then had a couple of comments about child benefit policies. That links into the general state of the economy that we inherited. My right honourable friend the Chancellor announced the withdrawal of child benefit for families containing a higher rate taxpayer in order to make a contribution to addressing the deficit that we inherited from the previous Government. In current circumstances, it is simply wrong that the lower paid should be subsidising the better off. Times are very tough; this is a tough decision but a necessary one. There have been all sorts of suggestions as to how it could be implemented, but the Chancellor was explicit about the need to avoid a complex system of either means-testing or something that would require significant changes to the existing PAYE and self-assessment systems.