Finance (No. 3) Bill

Viscount Chandos Excerpts

2nd reading (Hansard): House of Lords & 3rd reading (Hansard): House of Lords & Committee: 1st sitting (Hansard): House of Lords & Report stage (Hansard): House of Lords
Thursday 7th February 2019 Lords Chamber

[Viscount Chandos (Lab)]

My Lords, I thank the Minister for his courteous introduction to the Second Reading of this Bill, which follows on from the debate on the Budget report in November—perhaps a rather more popular event in the calendar of your Lordships’ House than today’s proceedings. I also draw the attention of noble Lords to my entries in the register.

Even if the principal measures in the Bill and the economic issues surrounding them have therefore already been extensively debated, I welcome the chance for noble Lords to review them again while the Bill enjoys its rapid passage through this House. It is undoubtedly right, as the noble Lord, Lord Turnbull, has just said, that as a money Bill it should not be capable of amendment by your Lordships. I cannot help thinking that the Government Front Bench, based on its expressions of outrage that other legislation is subject to proper detailed scrutiny and amendment by your Lordships, may believe that the convention covering money Bills should also apply to the avalanche of Brexit-related legislation that threatens to bury Parliament in the weeks—or, more likely, months—to come.

This is a modest Bill from a Government with very much to be modest about—a holding measure designed to mark time while we pass through the maelstrom of Brexit. There is,

“no sign of a long-term strategy”,

concluded the IFS in the immediate aftermath of the Budget. This is nevertheless also an historic Bill in one respect, as my noble friend Lord Tunnicliffe has already said. It is the first Finance Bill for more than 40 years on which the Government have been defeated—through the amendment moved by my right honourable friend Yvette Cooper, which is now included in Clause 90(7). Like many other Members of your Lordships’ House, I welcome this important, if perhaps symbolic, expression of Parliament’s determination to ensure that our departure from the EU is not a disastrous crashing out. Even if that was not as strongly reinforced by the House of Commons’ votes last week as it could have been, I am confident that the wisdom and judgment of the majority of Members of that House will ensure that we will not leave the EU without a deal.

Even though the Prime Minister today returns to Brussels for, in all likelihood, another pummelling in her misconceived attempt to renegotiate the withdrawal agreement to satisfy the unsatisfiables in her party, today in your Lordships’ House we can have a day off from the relentless grind of Brexit—but only up to a point, Lord Copper, since even if Brexit is not in the foreground of this Bill, it is an inescapable gloomy background to our economic situation.

Advocates of a hard Brexit—members of the Donald Tusk mutual admiration society—persistently argue that the prospect of Brexit has had no adverse economic effect on the UK. This claim is as suspect as their nonchalant dismissal of the economic impact of crashing out. The UK slipping from being one of the fastest-growing G7 economies to the slowest has been widely highlighted, yet the Government have proudly boasted of a fractional increase in the projected growth in GDP in 2019 from 1.3% to 1.6% while lowering some long-term projections to a depressing and monotonous sequence of 1.4%, 1.4%, 1.5%, 1.6%, all based on a presumption of an orderly exit from the EU.

We should remember that these figures are for overall GDP. Since 2005, the UK population has been growing at a rate of 0.6% to 0.8% per annum, and this trend is expected to continue, whatever changes there may be to the immigration regime, so GDP per capita is forecast to come in at under 1% per annum year in, year out. That is hardly a scenario in which it is possible to be confident about any increase in disposable income for most people who have suffered 10 years of stagnant earnings or for any increase in spending on public services. The independent commentator IHS Markit has written that it is the,

“weakest growth spell for six years”,

and at the same time it estimated that growth in the fourth quarter of 2018 could have fallen to as low as 0.1%. How confident is the Minister that even these dismally low projected growth rates from 2019 to 2023, on which the Finance Bill is based, will be achieved?

In January, the purchasing managers’ index for manufacturing fell to 52.8%, the second-lowest level since July 2016, while even more ominously, in the light of the Government’s casual neglect of the services sector in its proposed future relationship with the EU, the equivalent for services was announced last Friday to have dropped to 50.1% against consensus expectations of 51%. That is a hair’s breadth away from implying negative growth in what is 80% of the UK’s economy.

Of course there are other factors that lie behind this economic malaise, of which a decade of stalled productivity growth from an indifferent starting point is foremost. Despite the Minister’s protestations, there is little or nothing in the Bill that begins to address the scale of this problem, particularly in relation to the even more depressing position on productivity growth in most regions and nations outside of London and the south-east. I feel a degree of ambivalence about pressing the Minister further on the actual or likely deterioration of economic indicators since the Budget Statement and your Lordships’ debate in October; I fear giving the Government any encouragement to reverse their declared “ending of austerity”—even if that is more in their fevered imagination than something being implemented where economic deprivation is at its most acute.

A clear understanding of where we are and accurate figures for the national accounts are an essential starting point for good policy decisions, whatever level of confidence may be felt in this Government’s ability to make good decisions even with accurate figures at their disposal. Will the Minister confirm that the implications of the ONS’s decision in December to change the accounting treatment for the student loan book will not lead to any tightening of fiscal policy, at least in the short term, since the underlying position has not changed? The cynical manipulation by the Government of both the carrying value of loans and the treatment of outrageously high interest charges was a case of creative accounting of which even the board of Patisserie Valerie would be embarrassed. The estimated impact of the accounting changes proposed by the ONS would be to increase the deficit in the current year from £40 billion to £52 billion and by 0.6% per annum of GDP thereafter. However regrettable the Government’s past treatment of student loans has been, the overdue correction of the accounting treatment must not cause harm either to the UK economy as a whole or, vitally, to the position of the higher education sector.

I end by drawing the attention of the Minister to the point made from his own Benches by the noble Lord, Lord Horam, during the November debate on the Budget report, to which he made no response. As the noble Lord pointed out, there are an estimated 1,200 different tax reliefs, costing the Exchequer up to £400 billion per annum. I have highlighted in previous debates in your Lordships’ House the indefensible reliefs in the area of inheritance tax, on which the Office of Tax Simplification is due to report in the next few months. Will the Government will take a much more concerted and focused approach to examining the effectiveness of these tax reliefs and the scope for a substantial increase in revenue for the Exchequer?