Queen’s Speech

Viscount Trenchard Excerpts

Thursday 5th June 2014 Lords Chamber

[Viscount Trenchard (Con)]

My Lords, I thank my noble friend Lord Deighton for his excellent introduction to today’s debate and congratulate the right reverend Prelate the Bishop of Rochester on his excellent and thought-provoking maiden speech. Yesterday, I was able to listen to the excellent speech by my noble friend Lord Fowler, which was entertaining and informative, proposing the Motion for an humble Address. As he rightly pointed out, it is a great pity that our noble friends on the Liberal Democrat Benches were unable to support the totally justified constituency boundaries proposals. It is widely but mistakenly believed outside the House that their position on that was justified by the fact that your Lordships’ House declined to support proposals for its reform, whereas, as your Lordships are well aware, the quid pro quo for the parliamentary boundaries Bill was actually the referendum on adopting the alternative vote system, which was granted to our coalition partners but was decisively rejected by the electorate.

The gracious Speech states that the Government will work to promote reform in the European Union, including a stronger role for member states and national Parliaments. I trust that the Minister will make clear whether a stronger role for member states actually means repatriation of powers over certain areas of our national life. In particular, I believe we strongly need to recover full control of our financial markets and their regulation. The FCA and the PRA should sit at the same table as the EBA, ESMA and EIOPA and should not be subordinate to them. The latter three should be the regulators for the financial markets of the eurozone countries. The recent European elections, albeit on a low turnout, show clearly how important people think this matter is, and I look forward to the next Government being able to negotiate a better settlement with our European partners. It is a pity that negotiations with them cannot start until after the general election in May 2015.

In connection with that, I have to say that I do not think the adoption of fixed-term Parliaments has necessarily been a good thing. If we have to have fixed-term Parliaments, I believe the term should be four years rather than five. The average term of Parliaments since the Second World War has been rather less than four years, and those countries that have adopted the fixed-term Parliament system in the main provide an opportunity for the people to elect their representatives once in four years or less. In the United States, it is four years; in Australia, a Parliament can run for a maximum of three years. Furthermore, it makes our political life rather dull if there is no opportunity to speculate on the timing of the general election. Ironically, the absence of speculation on timing probably limits the power of the electorate against that of the Executive even though, theoretically, the reverse is the case. I understand the reasons why the coalition Government decided to adopt the fixed-term Parliament principle four years ago, but many people feel that this Parliament is already a little bit stale. It is a pity that the Prime Minister does not have the opportunity to go to the country for nearly another year. That is notwithstanding the notable achievements of the coalition Government in saving the economy from the disaster for which it was headed.

The next Conservative Government will need to start the urgent task of negotiating with the European Union as early as possible. To start only after May 2015 does not allow much time to negotiate both real reform to the structures of the Union and the repatriation of powers over matters better decided at the nation state’s level. This will be extremely complicated and needs to be agreed with our partners before a new basis for membership can be put to the people in the referendum promised for 2017.

Although I do not think that fixed-term Parliaments are a good thing for all time, I must congratulate the coalition Government on all that they have achieved in their four years to date. They have clearly confounded the sceptics who denied the reality of the recovery that has been taking place, and the reduction in the budget deficit has been much greater than many had predicted. This has been recognised by the IMF. Also, the employment statistics are most encouraging. It is heartening to know that we have recently been more successful than any other G7 country in reducing our deficit.

Although it is not the subject of today’s debate, the centrepiece of the gracious Speech was the proposals to reform the pension system. I believe that the automatic enrolment pensions which were introduced two or so years ago have met with only limited success. I ask the Minister whether these reforms to workplace pensions are intended to replace the auto-enrolment pensions or to supplement them. The Government’s press release states:

“By no longer forcing people to buy an annuity we are giving them total control over the money that they have put aside over their lifetime and greater financial security in their old age”.

I am very clear that it will give them greater freedom and control. As for greater financial security, I am not quite sure that that will necessarily follow.

I am not quite sure why the measures concerning pensions reform are not combined into a single Bill. The pensions tax Bill provides the freedom for individuals aged 55 or over to have free access to their savings held in defined contribution schemes subject to paying tax at their marginal rates at the time of draw-down. However, it is the private pensions Bill which would allow the Department for Work and Pensions to decide whether to allow recipients of defined benefit schemes similar access to their savings or not. While I welcome the Government’s decision to give individuals the right to access their defined contribution pension pots in principle, it is important that an appropriate health warning is provided to those exercising their new freedom. Those who buy an annuity today can still receive a return of more than 5% and do not bear the risk that they may not receive this return for the 40 years or so that they may well live after retirement. Those who withdraw their funds and invest them in managed funds or a mixed portfolio would do well to receive higher returns than they would from an annuity. The impression given recently by the media is that the pensions industry has been exploiting people’s savings by providing poor returns and applying hidden charges. This is less than fair. To purchase an annuity on retirement will still be the best course of action for many.

I note the Government’s plan to introduce a third type of pension: defined ambition schemes. Under these schemes, risks will be shared between pensioner and provider. It will be interesting to see in what terms “ambition” will be defined by pension providers and whether prospective contributors to such schemes will have similar ambitions.

The noble Lord, Lord Adonis, was too dismissive of many of the measures in the gracious Speech. The Federation of Small Businesses has warmly welcomed the small business Bill. The childcare payments Bill has also been widely welcomed. The Government propose to make childcare tax deductable to the extent of £2,000 per annum per child. This amount is, of course, not nearly enough, but it is nevertheless very welcome.

I strongly support the opinion expressed by my noble friend Lady Noakes that too little has been done to simplify tax and it is disappointing that the gracious Speech contains no Bill to achieve this. The combination of income tax and national insurance makes a great deal of sense. I ask my noble friend the Minister whether the Government will commit to move ahead with this.

I strongly agree with my noble friend Lord Marlesford in what he had to say about the EU financial transaction tax and hope the Minister can assure the House that London will be completely protected from the negative effects of this tax.

I strongly support the Government’s proposals to stimulate investment in shale gas projects included in the Infrastructure Bill. Shale gas can certainly provide an economic and relatively clean contribution to our energy mix. However, the best and ultimately most economic way to obtain energy security in the nick of time is to accelerate the development of new nuclear power stations. Hinkley Point is a start, but much more progress needs to be made soon with the other proposed projects.

It has been a privilege to participate in this debate. Even if this Parliament is already a little stale, we will have plenty to do. I look forward to the remaining speeches and especially the Minister’s winding up.