Economy: Government Policies

Lord Oakeshott of Seagrove Bay Excerpts

Thursday 24th March 2011 Lords Chamber

[Lord Oakeshott of Seagrove Bay]

My Lords, I welcome my noble friend Lord Hussain, who is sadly not in his seat at this moment. I found his speech fascinating and moving. I also congratulate the noble Baroness, Lady Stedman-Scott. I think that she is the big society in person.

I thank the noble Lord, Lord Lawson for introducing this debate. He has lost nothing of his focus or timing. Some of us on these Benches might possibly have drawn our breath in slightly to hear ourselves described as his allies and friends. He is certainly a friend, ever since we used to discuss politics over the dinner table together at Nuffield College, Oxford, in the early 1970s—I am much fatter than I was then, sadly, but at least he is much thinner—but allies? Up to a point, Lord Lawson.

I declare my interest as a pension fund manager for the past 35 years and as an entrepreneur for the past 25. I started my own business in one room with a partner and a secretary and I am still running it today. Our size has increased to eight employees so I welcome Vince Cable’s pledge of no new regulations for the next three years.

I support the broad thrust of the Budget and the overriding need not to run risks with the markets while they have Britain over a barrel. On the day when Portugal’s Government have just fallen, when Greece is staring down the barrel of default on its debt and with Greek bonds yielding 13 per cent, Irish bonds nudging double-figure yields and Spain, as my noble friend Lord Newby pointed out, looking shakier by the day, we must err on the side of caution. When you have been dumped with a mountain of debt from the disastrous Brown/Balls double act at the Treasury and you have to borrow tens of billions every year just to buy time, I am afraid that you have to tough it out while you trade your way out.

I remember that Roy Jenkins, when I worked for him, always told me how much he regretted the biggest mistake of his chancellorship when he took over from Jim Callaghan after devaluation in 1967. He did not cut as much as he should have initially and had the agony of having to go back for a second bite a year later.

I also support, as do all Liberal Democrats, the further substantial move towards taking the low-paid out of income tax. The pledge that we made at the election to take everyone earning less than £10,000 a year out of income tax was very powerful and an important reason why people voted for us. It is at the centre of the coalition agreement, which says:

“We will increase the personal allowance for income tax to help lower and middle income earners. We will announce in the first Budget a substantial increase in … 2011”.

We have now done that twice. We must press on to achieve the full goal over the period of this Parliament. If we do, it will be our proudest Liberal Democrat achievement in government, and will give millions of people a real reason to vote for us. Do not forget—you can vote Tory, Labour, Liberal Democrat, UKIP or Green, but what you cannot do at the next election is vote for the coalition.

The other key point in how we will fund this is to give priority to increasing the personal allowance over other tax cuts, including cuts to inheritance tax. That is just as well. Do noble Lords remember the great triumph of the present Chancellor, George Osborne, at the Tory conference two or three years ago, when he announced that he would make big cuts in inheritance tax, funded by a new levy on non-doms? When the Minister replies, he might remind us of how much George Osborne claimed that levy would raise. In practice, last year 5,600 non-doms paid the £30,000 charge, raising the magnificent sum of £168 million. You do not get much of an inheritance tax cut from that.

In the coalition agreement we also promised to focus on tax avoidance, including detailed development of Liberal Democrat proposals. The Treasury has developed our proposals, but why has it ignored them? On non-doms, I am afraid the Chancellor has bottled out, just like Gordon Brown. What is particularly distasteful is the announcement that there will be no further change in non-dom taxation over the course of this Parliament, which is exactly what the previous Government did. The Guardian today rightly points out that there has been a “big sigh of relief” from people advising non-doms. Sean Drury, the international mobility partner at PWC said:

“I am checking the temperature with my senior non-dom clients but I think that ultimately there will be a big sigh of relief … It could have been worse”.

That says it all. For rich non-doms, £30,000 a year is a flea bite and £50,000 a year is a minor irritant. They will be laughing all the way to the Caymans.

On stamp duty, the Chancellor’s speech highlighted correctly the problem of abuse. Everyone who knows the property market in this country knows that precious few properties worth more than £5 million ever show up in the Land Registry with proper stamp duty having been paid when they change hands. However, the Budget speech highlighted the problem but offered no solution. We Liberal Democrats can; it was in our manifesto and was quite clear. The abuse is simple. Rich people hide their houses behind a company cloak, so stamp duty is payable at 0.5 per cent when they change hands, rather than at 4 per cent or—from 1 April—5 per cent on properties worth more than £1 million. That is what honest taxpayers have to find when they move. Therefore, we say: just strip away the sham companies and charge the full stamp duty on the underlying property value. What is the Treasury waiting for?

The Chancellor must stick to the course he has set, but it will be far easier if the country believes we are all in it together. That must include the non-doms and the super-rich, who are still paying nowhere near their fair share.