Economy

Lord Agnew of Oulton Excerpts

Monday 28th September 2020 Lords Chamber

[Baroness Kramer (LD)]

My Lords, the Government have not really grasped the double whammy of Covid and our departure from the single market and the customs union, even assuming that there is a free trade deal.

The measures announced last week, including job support modelled on the German Kurzarbeit, are welcome but fall far short. Many jobs in sectors such as the creative industries, sports and hospitality are long-term viable if they can survive the next six months, so can the Minister explain why the Chancellor has not targeted the necessary funds to get them through that six-month period? Three million members of our workforce were excluded from support the first time around, especially a swathe of independent contractors. Why are they excluded again, especially when so many who have become redundant will become independent contractors if they are to live?

The pace of companies being dropped from European supply networks is accelerating. Future FTAs outside the EU only marginally offset the lost business. This is completely aside from the issue of chaos at the borders. Why are these injured firms and workers not getting meaningful help? Are they now considered non-viable? Where are the scaled-up and innovative retraining schemes that are needed to deal with over a million redundancies by year end? Firms of all sizes are accruing levels of debt that will cripple their future growth. Where is the fund to recapitalise overindebted SMEs? Can the Minister explain how Scotland and Wales can meet their constitutional responsibilities to set a budget with no Budget this year from the UK? When will we hear from the OBR and get a good working forecast that deals with the situation as we now understand it? Being £2 trillion in debt may be something which the Government are comfortable with, but most of us would like to know what the principles are going to be on how that will be tackled and how it will eventually be reduced and repaid.

[The Minister of State, Cabinet Office and the Treasury (Lord Agnew of Oulton) (Con)]

My Lords, in replying to the noble Lord, Lord Tunnicliffe, and the noble Baroness, Lady Kramer, I gently remonstrate with him on us being “reactive”. We have tried to move as quickly as possible at all stages of this crisis but, as we can see from across the world, it is extremely difficult to be ahead of the curve. The announcements made by my right honourable friend the Chancellor last week demonstrate that a lot of hard thinking has gone on over the last two or three months, and the fact that the Statement might have been prompted by a Question shows that the work had been done.

I do not accept that it is too little, too late. The amount of support that we have provided for the economy over the last few months is almost without precedent, with £39 billion on the furlough scheme protecting at one point up to 9.5 million jobs—that figure has now reduced to some 3 million because many millions have come back to work—and £5.6 billion for almost 2.2 million self-employed people under the second grant self-employment income support scheme. I could go on.

The noble Lord asked about the intention of the job support scheme to keep part-time workers rather than to just go for a single full-time worker. The idea is to keep as many people in work as possible with their skills so that, when the economy recovers, the skills have not been lost. While on a hard, simple basis, it might be more viable to keep one person, in the longer term any employer would try to keep part-time people. I suggest that the noble Lord takes on board the job incentive scheme: £1,000 for those coming back into work between now and January.

The noble Lord asked about good-quality training. Earlier in the year we announced the kick-start scheme, a £2 billion scheme for young people which subsidised employment, as it was a concern that 800,000 young people left school and education over the summer.

The noble Baroness, Lady Kramer, asked about the hospitality sector. We have extended the reduction in VAT for that sector. We also have in place the grants and rates support, again a very considerable sum of money. She asked about us formally leaving the European Union and customs. She will not like it, but that is a major employment opportunity for that sector. We have only 5,800 customs intermediaries. They all need to increase employment. We have provided grants for them to upscale. Another example of new training needed is police officers. Sectors of the economy will grow, and the Chancellor’s comments are to encourage people to move across to those over the next few years.

On the devolved authorities, we have made considerable grants to them under the Barnett formula. While the Budget has been postponed, we are working at pace on the comprehensive spending review which, I would suggest, is a more important long-term method of looking at how we are going to rewrite the economy after the crisis that we have faced over the past six months.

The noble Baroness also asked about the debt. The debt is very worrying. No one is going to pretend that it is not. It was last at 100% of GDP in the year I was born—1961—and, therefore, we are going to have to be very careful over the next few years about how we address that. We were fortunate that, having got the economy and the financial position into a relatively stable state over the past few years, we had the headroom to do what we have been able to do, which has all been about trying to reduce the impact on citizens over the past seven months.

[The Deputy Speaker (Lord Bates) (Con)]

My Lords, we now come to the 20 minutes allocated to Back-Bench questions. I ask that questions and answers be brief so that I can call the maximum number of speakers.

[Baroness Buscombe (Con)]

My Lords, I congratulate the Chancellor on his Statement, which injects an important degree of realism into all this. I pay tribute to my noble friend the Minister who, I know, with his considerable expertise and experience, is an invaluable person at the Treasury.

The Chancellor talked about living without fear. Many of us do not fear Covid. What we fear is how on earth we are going to pay for it. The Chancellor referred to collective responsibility, costs paid by all of us and truths, so I shall suggest to my noble friend just two of a number of changes that are needed to demonstrate collective responsibility and truth before we have to pay, as we will, more tax. I am not expecting answers today. Will the Treasury lean on the Department for Work and Pensions to use mechanisms already in place with the banks to tackle tax evasion and to expose benefit claimants who do not declare their true assets, because we have to be sure to target welfare where it is needed? Secondly, will the Chancellor once and for all deal with and end the crazy truth that the United Kingdom is a tax haven for people living here who were born beyond our shores? There has to be equality and fairness for all in the tax system.

[Lord Agnew of Oulton (Con)]

I thank my noble friend for her questions. In short, I will write to her on the DWP’s policy on fraud checks for newly registered universal credit claimants. It suspended a number of the checks at the height of the crisis, but I am aware that it is going to reintroduce them. I do not have the date, so I will write to her. On us being a tax haven for dubious people, I share her concern. It perhaps takes a crisis such as the Covid crisis to focus minds, and I hope very much that we will taking much more assertive action.

[Lord O’Neill of Gatley (CB) [V]]

My Lords, I broadly compliment the proactive role played by the Treasury in response to this crisis, which has, sadly, been in marked contrast to the overall policy of the Government. Notwithstanding the sometimes confusing and certainly erratic policies of the Government, and possibly aided by the Treasury and the Bank of England, at least through mid-September the UK, perhaps surprisingly, appeared to be sharing in what some economists might describe as a V-shaped recovery through the third quarter. What will happen beyond this month and through the next quarter looks very uncertain, and the more pessimistic scenarios are not implausible. To avoid them may greatly depend on the introduction of a successful vaccine and a much more truly successful test and trace system.

But what I really want to speak about today is to inquire about the so-called levelling up agenda. Is there ever going to be anything beyond the endless rhetoric? The Government talk frequently and ambitiously about levelling up and the northern powerhouse agenda. They have done so since they were elected and have continued to do so despite Covid-19, yet they show no sign of this rhetoric being backed up by deed. They were close to presiding over a colossal levelling down in school education attainment, they repeatedly postposed plans for a spending review in which infrastructure spending is highlighted as being in the centre—

[Lord O’Neill of Gatley (CB) [V]]

What is happening to this and the spending review as well as the much-talked-about Green Book review as well as the promised paper on devolution? Surely the ongoing consequences of this crisis suggest an even greater need for true levelling up rather than excuses and repeated delays.

[Lord Agnew of Oulton (Con)]

I can confirm to the noble Lord that levelling up is very much on the Government’s agenda. I am, as part of my portfolio, the Minister responsible for government property, and one thing that I have instituted is to ensure that no break clauses for major buildings in London are allowed to run over during the next three or four years to force the issue of moving staff out of London. In addition to that, I receive monthly all the job advertisements for senior civil servants, and I am continually pressing and challenging departments that do not advertise those jobs outside London. That is improving slowly.

In the Budget in March, we announced one of the largest infrastructure commitments since the war, with some £600 billion-worth of infrastructure, and I can confirm that a great deal of that will be going into areas which have been left behind in the past.

Lastly, the noble Lord asked about the comprehensive spending review. I can confirm that 24 September was the deadline for all departments to submit their returns and their bids. We will be responding to that within the next couple of months.

[Lord Monks (Lab) [V]]

I welcome the fact that we will have a short-time working scheme, which the TUC has been pressing for for some time, and that we have learned something from the successful scheme in Germany. Can we be assured that this scheme, while not protecting every job, will be adequate to avoid cliff-edge surges in unemployment at the end of October and at the end of the Brexit transition period? Otherwise, British workers will face a double whammy, and it seems to me important that the Chancellor is open-minded about taking further measures. Finally, how do the Government define “viable” jobs which need support? How is that done and how is it to be carried through?

[Lord Agnew of Oulton (Con)]

My Lords, I can only reply honestly and say that I do not know whether the support announced last week will be adequate. It depends on simply too many moving parts. We all know that if a vaccine is discovered in the next couple of months it would completely change the game. At the other end of the spectrum, if we had a very bad surge which led to huge levels of hospitalisation, that would push us in the other direction. The Chancellor has been consistent in saying that he will respond to the circumstances.

[Lord Fox (LD)]

My Lords, even with the job support scheme, economists and others are predicting at least 1 million being made unemployed by the end of the year. For many of them and their families, the only recourse will be universal credit. The Minister claimed to be proactive, so here is a proactive idea. The Economic Affairs Committee has just issued a report which lays bare the shortcomings of universal credit, so will the Minister undertake that he and his Government will take a look now at that report and respond much more quickly than they normally do because this is an oven-ready way of making sure that universal credit is adequate for all the millions of newly unemployed people?

[Lord Agnew of Oulton (Con)]

My Lords, universal credit has turned out to be a total game-changer for those thrown out of work by this crisis. It has been extraordinarily flexible. If we look at the past three or four years, we have always responded to criticism and have improved universal credit when it has been clear that it needed improving, and I can assure the noble Lord that I will make sure that the report to which he referred is made available to my right honourable friend.

[Baroness Stroud (Con) [V]]

My Lords, since the coronavirus pandemic has struck, two in three, or 65%, of those employed and in deep poverty prior to the crisis have seen reduced hours or earnings, been furloughed and/or have lost their job. I welcome the Chancellor’s strategy of balancing measures to combat the spread of the virus with measures to preserve viable jobs and grow the economy, but what is the Minister’s strategy for ensuring that those who are working and already on the lowest of incomes are protected at this time, particularly as the nature of the work they undertake is often already less stable?

[Lord Agnew of Oulton (Con)]

My Lords, the furlough scheme has protected probably millions of jobs. That was the idea of it. We continue to want to protect jobs that are viable in sectors that will recover quickly. Beyond that, the emphasis, particularly for lower-paid people, is on skills upgrading and training, and that has to be the future for the group of people that my noble friend refers to.

[Baroness Meacher (CB)]

My Lords, despite being a pension recipient, I am appalled that the Prime Minister appears to have blocked the Chancellor’s plan to suspend the triple lock. Does the Minister agree that it is wrong for pensioners to receive a very generous pension increase next year, at vast cost, despite the fact that the incomes of working people will inevitably have fallen dramatically due to Covid, despite last week’s statement of support?

[Lord Agnew of Oulton (Con)]

My Lords, the Prime Minister is hesitant to address this because it was a very strong manifesto commitment and he is very anxious not to break those. As we know, in politics it is very easy to break promises.

[Baroness Blackstone (Ind Lab)]

My Lords, the Statement claims that new investment is being provided in training and apprenticeships. Can the Minister elaborate on what is new rather than already announced? Can he tell the House whether the Government will ensure that workers on reduced hours have real opportunities to use the time they have to develop much-needed additional skills? What conditions will be required from employers to fulfil that need?

[Lord Agnew of Oulton (Con)]

My Lords, the announcements last week included a number of matters around the extension of existing loan facilities and keeping open the window for loan applications under the various support schemes that the Treasury has created. On encouraging part-time working to enable staff to use the spare time for training, I think that that has to be an individual matter between employees and employers. However, to me it seems fairly straightforward that a part-time employee can access, in particular, online training, which has become the method by which most training is now distributed.

[Lord Mackenzie of Framwellgate (Non-Afl) [V]]

My Lords, as vice-chairman of the all-party group, perhaps I may make a plea for assistance for travelling fairs and circuses. This sector, which has been ignored, forms part of our heritage and culture in the UK and is much loved by the public. It needs support to ensure that it is still there after the pandemic. I ask the noble Lord to treat it in the same way as theme parks, for example, and I ask the Government to do what it takes to wrap their arms metaphorically around funfairs and the big top.

[Lord Agnew of Oulton (Con)]

I agree with the noble Lord that this is an important part of our heritage. Only three weeks ago, I went to the Great Yarmouth Hippodrome, which I think is the oldest functioning hippodrome in England. Those working there have used their own initiative, and it was the very first venue to open up after lockdown. They explained to me the various measures that they are using to deal with these restrictions. It takes ingenuity and imagination but they are managing to do it, and I encourage all in that sector to do the same.

[Lord Jones of Cheltenham (LD) [V]]

I want to ask about our valuable music industry. The Government have been interested in getting theatres open and getting bums on seats, but they have given little thought to the people needed on stage in front of those bums. Does the Minister understand that the music business is a pyramid, with stars at the top, and that the bottom of the pyramid is in dire trouble? I refer to the pubs and clubs, where, without exception, musicians, including the Rolling Stones, Michael Bublé and the Kinks, get their break and learn their trade. The Musicians’ Union says that 38% of musicians are considering quitting the industry entirely. What are the Government going to do about it?

[Lord Agnew of Oulton (Con)]

My Lords, the Chancellor has consistently said that his interventions have to be macroeconomic. However, we have tried to create safety nets to protect as many people as we can in the economy. I share the noble Lord’s concern for the music industry. My own father read music at Cambridge before the war, and I completely agree with the noble Lord that it is a very important part of our culture.

[Lord Cormack (Con) [V]]

My Lords, my noble friend says that he is anxious to protect jobs that are viable and has just talked about some jobs in the music industry. Does he accept that the heritage sector would be given a boost and that many skilled craftsmen would be able to retain their jobs if VAT, which is not charged on new buildings, were removed from the charge on repairs to listed buildings of historic importance?

[Lord Agnew of Oulton (Con)]

My Lords, I should probably disclose that I live in a listed building and that what my noble friend suggests would therefore greatly benefit me personally. However, the reality is that in this crisis we have to look at a higher level. I am encouraged to see that the construction industry is coming back at full throttle and that the large number of construction workers who were furloughed in March and April have largely been reintroduced into the sector. We are also about to announce the green energy scheme, which is a £2 billion to £3 billion investment in energy improvements for public buildings that will also be available to the public.

[Baroness Quin (Lab) [V]]

My Lords, at a time of great difficulty for so many of our citizens, do the Government agree with the British Retail Consortium that a no-deal Brexit at the end of this year would add over £3 billion to the cost of importing food and drink, making life even more difficult for those on low incomes? If the Government do not accept the British Retail Consortium’s figures, what is their own assessment of the effect?

[Lord Agnew of Oulton (Con)]

My Lords, I think that we have published our worst-case scenarios for a no-deal Brexit or leaving the European Union without a free trade agreement. Of course there are risks, but we remain optimistic that a deal will be done.

[The Earl of Clancarty (CB)]

My Lords, “viable” is a dangerous word if all that can be said to be truly viable financially in these unusual times is a prescribed number of businesses, including those making money out of Covid. How do the Government intend to further protect the self-employed—including those working in the creative industries, who will fall off the edge of the cliff at the end of October if the Self-Employment Income Support Scheme is not extended—because the job support scheme is clearly not nearly enough? That includes freelancers, who make up 70% of the workforce in the performing arts, which are so important to this country both culturally and financially in the longer term, as the noble Baroness, Lady Kramer, pointed out.

[Lord Agnew of Oulton (Con)]

I share the noble Earl’s concern about the creative sector. I am sure that he is aware of the support being given under the latest SEISS grant extension, which of course will be available to those who were previously in it. But I do accept that we face difficult times.

[Lord Davies of Gower (Con) [V]]

My Lords, following the Chancellor’s Statement last week, the Welsh Labour Government issued this Statement in response:

“More needs to be done to help people find new jobs and incentivise employers to hire new workers.”


They added that there was a need for

“more action on skills, training”

and a

“greater focus on supporting job creation”.

Does the Minister agree that responsibility for the devolved issues of growth and development of business, and support for inward investment and enterprise, rests firmly with the Welsh Government and that they should refrain from passing the buck and get on with accepting their devolved responsibilities?

[Lord Agnew of Oulton (Con)]

I am not quite sure that I heard the full question from my noble friend, but I absolutely agree that inward investment is crucial for the future. As I mentioned in response to an earlier question, I believe that the huge infrastructure projects that we have committed to in the Budget will form part of the regeneration of the economy.

[Baroness Donaghy (Lab) [V]]

The Government modelled this scheme on those adopted in France and Germany, but in a rather half-hearted way. The German scheme is set to last for two years, compared with six months for the UK scheme. How did the Government reach that decision, when it would have added stability to employers’ plans to have two years?

[Lord Agnew of Oulton (Con)]

My Lords, I think the noble Baroness is looking too narrowly at the comparison. If we summarise the total fiscal interventions of the various economies over the last few months, the UK contribution has been somewhere just under 11%, those of Canada and France under 10%, Germany’s about the same, and Italy’s is about eight and three-quarters. My point is that you should not look at any one of these individual interventions as the single solution; we have tried to aggregate them.

[Lord Lea of Crondall (Non-Afl)]

My Lords, as has been said by the noble Lord, Lord Monks, and the noble Baroness, Lady Kramer, there is a need to integrate policy that arises from Covid and policy that arises from Brexit. Does the Minister agree? This is described as a plan for the winter, and there is the danger of a Brexit without even a framework agreement with the European Union, as is the case with Switzerland.

[Lord Agnew of Oulton (Con)]

My Lords, I agree with the noble Lord that there needs to be integration. The overriding priority is to crank up the economy again; that is why we have created a group in Downing Street called Project Speed, which is designed to take hold of any opportunity that is being blocked in any way, to shake it and make it happen quicker. I remain optimistic, as I said in response to an earlier question, that we will resolve our difficulties with the European Union and will have some form of workable deal by the end of the year.

[Lord Browne of Ladyton (Lab) [V]]

My Lords, in the other place, the Chancellor was asked four times about help for the 3 million working UK taxpayers who, until now, have had no access to any of the Government’s Covid-19 support packages. Four times he ducked the question. So, in the words of my honourable friend Gerald Jones, I now offer the Minister the opportunity to correct that repeated omission. What assurances can he offer that the measures announced in this Statement, and any ongoing policy, will not continue to exclude them?

[Lord Agnew of Oulton (Con)]

My Lords, while there might not be individual schemes available for the group of people that the noble Lord talks about, we have made wider funding available through the uprating of universal credit and additional grants to local authorities. I am very aware that there are people in difficulty but we believe that the wider social security safety net is there to support them.

[The Deputy Speaker (Lord Bates) (Con)]

My Lords, all those listed to ask questions on the Statement have now done so.

Restriction of Public Sector Exit Payments Regulations 2020

Lord Agnew of Oulton Excerpts

Wednesday 23rd September 2020 Lords Chamber

Moved by

[Lord Agnew of Oulton]

That the draft Regulations laid before the House on 21 July be approved.

Relevant document: 25th Report from the Secondary Legislation Committee

[The Minister of State, Cabinet Office and the Treasury (Lord Agnew of Oulton) (Con)]

My Lords, each year, hundreds of millions of pounds are spent on exit payments to public sector workers that exceed £100,000. The money funding these payments comes from taxpayers. This statutory instrument will fulfil the Government’s 2015 manifesto commitment to end six-figure pay-offs by capping public sector exit payments at £95,000. This House discussed the proposals in great depth when considering the parent Act, the Enterprise Act 2016.

Public sector workers play a vital role in the running of our economy. Earlier this year, we accepted the recommendations of the independent pay review bodies and announced a significant, real-terms pay increase for around 900,000 public sector workers. For the majority, this was the third inflation-busting pay rise in a row. But we must ensure all aspects of public sector pay and renumeration deliver value for money for the taxpayer. It is our view that these large exit payments do not deliver that aim.

The coronavirus is having a very significant impact on the economy, labour market and fiscal position, and the Government will need to continue to take this into account in setting public sector pay and renumeration. Exit payments are important to an employer’s ability to reform and react to new circumstances. They are also an important source of support for individuals as they find new employment or as a bridge until retirement age.

However, these payments must be value for money and fair to the taxpayer. The high exit payments we have seen granted in recent years clearly breach this principle. That is why the Government are taking forward regulations to cap public sector exit payments as £95,000. The proposed cap, amounting to almost six times the maximum statutory redundancy payment entitlement, will still offer a significant level of compensation and support to employees.

The Secondary Legislation Scrutiny Committee noted these regulations as a statutory instrument of interest. I will address the points raised in its report. First, a number of bodies are exempt from these regulations. These include the armed services, the Security Service, the Secret Intelligence Service and the Government Communications Headquarters. This is appropriate due to their unique career requirements. Often, individuals working in these fields experience lifelong impacts, sometimes at early ages. It is right these individuals should be properly compensated, and their reward packages are typically designed to reflect that.

The regulations also outline which payments are deemed an exit payment for the purpose of the cap. The Government are clear that all payments conditional on an individual’s exit from employment must be in scope of the cap to avoid opportunities for manipulation, with a few exceptions. Payments such as death in service will not be capped and should be paid in full.

The second point raised by the Secondary Legislation Scrutiny Committee is that public sector pension schemes may need amending to account for these regulations. Where required, these changes are the responsibility of the parent department. Some of these amendments are already under way, with the Ministry for Housing, Communities and Local Government publishing its consultation on amendments to the Local Government Pension Scheme on 7 September this year.

Prior to amendments being made where the application of the cap would result in an employer being unable to make a pension strain payment due to pension scheme rules, it may instead pay the pension scheme member an equivalent cash sum. The aggregate of that cash sum and any other exit payments must not exceed the cap.

The Government accept that in some limited circumstances, it will be appropriate for employees to receive an exit payment that exceeds £95,000, including where imposing the cap would cause genuine hardship. To account for these circumstances, a waiver has been designed that ensures flexibility, while maintaining an appropriate level of scrutiny from Ministers.

Today, the Government are taking forward regulations that deliver a long-term manifesto commitment and ensure value for money for the taxpayer. The regulations do this in a proportionate and thorough way, while ensuring the flexibility to protect the most vulnerable. I beg to move.

--- Later in debate ---

[Lord Agnew of Oulton (Con)]

I thank noble Lords for their contributions to this debate, and I will seek to address their comments and queries in my closing speech.

The noble Baroness, Lady Bakewell, together with several other Peers, raised the issue of pension strain. All payments relating to exit should be in scope of the cap. The option of employer-funded early retirement is often the most costly element and is ultimately funded by the taxpayer. There is of course a difference between redundancy and early retirement, and I think they can often be conflated.

I will address the points on the impact assessment a little later. The noble Earl, Lord Devon, also raised the issue of pension strain, which I have addressed. The noble Lord, Lord McCrea, also mentioned the waiver system. This allows us to look at the application of the cap on a case-by-case basis to consider whether an uncapped exit payment would be appropriate, as I mentioned in my opening remarks. We have that there to ensure that there are not cases of genuine hardship.

The right reverend Prelate the Bishop of Worcester is concerned about lower-paid people. The guidance document outlines situations where the waiver system may be used. It explicitly states that the discretionary waiver may be exercised with the approval of the sponsoring department and the Treasury if capping a payment would result in genuine hardship.

The noble Baroness, Lady Falkner, asked about the BMA judicial review. It is now a matter subject to litigation so I am not able to comment. However, we have certainly considered the issues that have been raised on that; no doubt they will come out further in due course.

The noble Lord, Lord Wigley, again asked about the waiver. The power to waive the cap is delegated to the full council as the decision-maker for local government pay. If the full council approves a waiver case, sign-off is required from the Ministry of Housing, Communities and Local Government, and then the Treasury if the waiver is discretionary. We believe that the waiver system as currently designed is appropriate, as the Government need to maintain oversight of how the system is being used. Any cases put forward for relaxation will be considerable sums of money and need to be properly scrutinised. Of course, we will ensure that cases are processed in a timely manner.

The noble Lord, Lord Tunnicliffe, addressed a number of points. I reiterate what I said in my opening remarks: we are very grateful to public servants for the work they do. The noble Lord is correct that we are in difficult times at the moment and public servants have had to go beyond the call of duty on many occasions. However, these regulations are simply about ensuring that rewards and remuneration provide value for money by capping exit payments at £95,000. These payouts are funded using taxpayer money so it is right that we take action.

Since the beginning of the Covid-19 outbreak, the Government have agreed specific pay and pension packages for a number of public sector workforces—including the NHS—both to increase system capacity and, importantly, to recognise their work. As we respond to the financial impacts of Covid-19, the inappropriateness of large exit payments is reinforced. Ensuring that rewards are proportionate and taxpayer money is spent fairly must be prioritised.

Like many others, the noble Lord referenced the system—I hope that I have addressed this—in relation to the guidance and directions outlining the situations where the cap must be waived, including where a payment is made to settle a discrimination grievance, and where it may be waived, such as instances where implementing the cap may result in genuine hardship. Guidance and directions explaining the way the systems were published at consultation—and updated versions of these documents—will be published in due course.

Similarly, the noble Lord suggested that no equality impact assessment was undertaken. However, the Government did conduct and publish an assessment of the primary legislation. The previous impact assessment was linked to the 2019 consultation document. In addition, the 2019 consultation asked for comments and information related to impacts; an updated impact assessment has since been conducted based on the final regulations laid before Parliament and will be published in due course. We outlined this in the published consultation response.

As is also outlined in that response, we do not propose changing the level of the cap, as we still view £95,000 to be an appropriate level. However, the primary legislation allows for the figure to be changed in the future, taking into account the full contextual factors. The inclusion of the nuclear workers in the scope of these regulations has been debated extensively throughout the passage of the primary legislation and in a recent Commons Committee debate on Monday. I refer the noble Lord to Hansard, where some extensive passages deal with that.

We are able to exercise our own judgment, but, for the most part, the scope has been guided by the ONS, which makes objective judgments independently from these regulations. Based on the ONS classification, it is appropriate that the Nuclear Decommissioning Authority and its site licence companies are within the scope of these regulations. However, we have listened to concerns, and a mechanism to waive certain pension-related payments upon redundancy has been designed. This was agreed by the Treasury, BEIS, unions and the Nuclear Decommissioning Authority in 2017.

I believe that the Government are right to take this course. We are strongly of the view that these regulations will deliver value for money for taxpayers and put a stop to excessive payouts, which we have unfortunately seen too often in recent times. After a long period of consultation, it is now right that this policy comes into force.

Motion agreed.

Equivalence Determinations for Financial Services (Amendment etc.) (EU Exit) Regulations 2020

Lord Agnew of Oulton Excerpts

Wednesday 2nd September 2020 Grand Committee

Moved by

[Lord Agnew of Oulton]

That the Grand Committee do consider the Equivalence Determinations for Financial Services (Amendment etc.) (EU Exit) Regulations 2020

Relevant document: 21st Report from the Secondary Legislation Scrutiny Committee

[The Minister of State, Cabinet Office and the Treasury (Lord Agnew of Oulton) (Con)]

My Lords, the Treasury has been undertaking a programme of legislation to ensure that after the end of the transition period there continues to be a functioning legal and regulatory regime for financial services in the UK. The Treasury is laying SIs under the European Union (Withdrawal) Act 2018 to deliver this legislative programme and the majority of these SIs have already been approved in this place and in the House of Commons.

As part of this financial services legislative programme before exit day the Treasury laid the Equivalence Determinations for Financial Services and Miscellaneous Provisions (Amendment etc) (EU Exit) Regulations 2019, commonly known as the Equivalence Regulations 2019. Those regulations were designed to ensure that if the UK left the EU without a transition period, the UK would have a fully functioning equivalence framework from exit day. The additional time afforded by the transition period has provided us with the opportunity to put in place supplementary measures in the Equivalence Regulations 2019 to ensure that the UK continues to have a robust and functioning equivalence framework for financial services, both during and after the end of the transition period.

The measures in the instrument being debated today complement the Equivalence Regulations 2019 by creating additional stand-alone powers in this instrument for the UK-relevant financial services regulators—the Bank of England and the Financial Conduct Authority in this case—which are appropriate for those regulators in the transition period. They also make minor amendments to the earlier 2019 regulations, again as appropriate for the transition period. This SI will, finally, make minor amendments to add to the powers available to the regulators after the end of the transition period and to correct errors in earlier financial services EU exit legislation.

I am grateful that this SI was raised as an instrument of interest by the Lords Secondary Legislation Scrutiny Committee in its July report and for the question that the committee raised. I intend to address the question now and in the course of the debate.

The instrument being debated concerns the UK’s future regime for equivalence, a process to determine that another country’s regulatory and supervisory regime is equivalent to the UK’s corresponding regulatory framework. Recognising the regulatory equivalence of third countries is a key component of financial services regulation. Equivalence of determinations can help to reduce regulatory burdens on firms and can facilitate cross-border market access. This may lead to increased competition that can benefit both UK firms and consumers by engendering healthy market incentives to lower prices and offer innovative products.

At present, equivalence functions are performed by the European Commission and the European supervisory authorities. At the end of the transition period, these functions will be transferred to HM Treasury and the UK regulators as provisions in retained EU law. During the transition period, equivalence determinations can be made for EEA states via powers within the 2019 equivalence regulations. This instrument provides a UK equivalence framework that is appropriate for use during the transition period in relation to the EU’s existing framework. It allows the UK financial services regulators to complete the associated actions that mean that HM Treasury equivalence determinations taken during the transition period can take full effect at the end of that period.

This is a technical SI that provides for the UK’s transition to its new position outside the EU. I will turn now to the main categories of fixes that are being introduced here. The first three changes provide UK regulators with the appropriate powers to complete the associated actions to ensure that HM Treasury equivalence determinations can take effect fully at the end of the transition period. Currently, the 2019 equivalence regulations allow HM Treasury to make equivalence determinations by direction during the transition period for EEA states where these directions would not enter into force until the end of the transition period. As part of the equivalence process, almost all equivalence provisions in retained EU law will require UK financial services regulators to conclude co-operation agreements with the relevant regulatory authority or authorities for that EEA state before the determination can take effect.

There is currently no mechanism to allow regulators to undertake this during the transition period. Where the Treasury has made an equivalence determination by direction, this SI will make transitional provision for UK financial services regulators to have the power to enter into relevant co-operation agreements with the appropriate EEA regulatory authorities before the end of the transition period. These co-operation agreements would come into effect at the end of the transition period for the necessary provisions in retained EU law.

In addition, as part of the direction-making process, almost all equivalence provisions require regulators to issue recognition or registration decisions for non-UK firms. Where the Treasury has made an equivalence determination by direction during the transition period, this instrument puts in place a regime for firms to make an application to the appropriate regulator, and for that application to be processed. It will therefore ensure that regulators have the power to process applications and issue recognition and registration decisions during the transition period to come into effect at the end of that period for the necessary provisions in retained EU law.

This SI will also give regulators the power to request fees from applicants for such regulatory decisions. I appreciate that the House of Lords Secondary Legislation Scrutiny Committee questioned whether there is enough time for UK regulators to establish co-operation agreements with EEA regulators once an equivalence determination is made and then process applications made by EEA firms. I am pleased to say that regulators have a period of one year to process applications from EEA firms once the required co-operation agreements have been established. Both the Treasury and the regulators consider this to be ample time for the regulators to decide any applications.

Secondly, this SI will amend the Credit Rating Agencies (Amendment etc.) (EU Exit) Regulations 2019, which in turn make provision for the onshoring of the EU credit rating agencies regulation. The amendments will onshore powers to enter into co-operation arrangements currently held by the European Securities and Markets Authority, such that in the future they will be held by the FCA. The amendments also make provision for existing EU equivalence determinations that will form part of retained EU law by operation of Section 3 of the European Union (Withdrawal) Act 2018.

Finally, two minor but necessary amendments are made to the Central Securities Depositories (Amendment) (EU Exit) Regulations 2018. The first relates to a provision which stipulates that equivalence may be granted only to states that have a regime for the recognition of central securities depositories authorised in other states. The amendment ensures that the UK is one of these states. The second amendment ensures that the Bank of England has the appropriate timescales to make recognition decisions for central securities depositories.

In summary, the Government believe that the proposed instrument is necessary to ensure that there is an appropriate equivalence framework for financial services during the transition period and to complement that already put in place by the 2019 equivalence regulations. I hope that colleagues will join me in supporting these regulations, and I commend them to the Committee.

[Lord Ashton of Hyde (Con)]

My Lords, we have no room for manoeuvre on time for this debate, so I would be grateful if Peers could keep to time and ideally go slightly short.

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[Lord Agnew of Oulton (Con)]

My Lords, I thank noble Lords for their questions and for the important points raised in this debate. I will try to answer as many as I can in the time available, and, where I am not able to, I will ensure that we write to noble Lords.

The noble Baroness, Lady Bowles, asked about progress on co-operation agreements. That is an ongoing process, and we will of course keep this House updated on that process of engagement over the next few months. My noble friend Lord Trenchard asked whether we should continue with a policy of holding to equivalence with the EU regime. That is certainly our policy at the moment, because that is how the City has worked over the past 40 or so years. However, by being in control of our own regulatory policy, we will have the opportunity in the coming years to keep reviewing that. The noble Baroness, Lady Kramer, made the important point that the growth is now in Asia. By having our own regulatory regime, we will have the flexibility to consider those opportunities.

My noble friend Lady Wheatcroft raised a number of questions. Possibly the most important one was whether the EU will grant equivalence. We are of course at the tail end of these negotiations, a time at which things will be most fraught. It would certainly be absolutely in the interests of the EU to grant equivalence, but I cannot prejudge the outcome of the discussions over the next few weeks.

On the capacity of our regulators to take on these decisions, we have engaged in depth on this issue and we are assured that they have this resource. Fees will be a matter for individual regulators in order to recover their costs in processing any applications.

My noble friend Lady Altmann asked what provision should be made beyond the 12-month period to process these applications. Certainly, that was the period of time that was considered reasonable. My noble friend made a perfectly reasonable point that the transition period has seemed tight, but we have had the worst pandemic in nearly at 100 years in the middle of it, so I am confident that we can deliver on that. She raised one or two other technical questions on defined benefits, and I will write to her in an attempt to answer them.

The noble Lord, Lord Bruce, made one or two points on paragraph 7.2 which states,

“The UK has now left the EU with a deal.”


While decisions on equivalence are autonomous and unilateral in many areas of financial services, it is essential to understand the approach of the other party when deciding how to approach an area of cross-border activity. While the UK has undertaken an assessment of the EU, we will not be making equivalence decisions at this stage; we will make decisions where and when we determine that it is in the UK’s interest. Our ambition is to achieve a reciprocal equivalence, supported by the effective regulatory co-operation of an ambitious FTA, and we continue to work towards that goal. We continue to believe that comprehensive mutual findings of equivalence between the UK and the EU are in the best interests of both countries. However, as I said in relation to earlier questions, it will be a very rough few months. We must be perfectly realistic about that.

My noble friend Lady McIntosh asked about the handling of a breach. The normal rules of public law will apply, and, after the transition period, equivalence will be covered by provisions in retained EU law, as amended under the European Union (Withdrawal) Act 2018.

The noble Baroness, Lady Kramer, asked about the status of the negotiations. We have completed round 7. We have been clear in discussions throughout that this intensified process continues to be constructive, but there are still significant differences. Our preference is to leave with an FTA as long as it guarantees our political and economic independence, and these are tricky issues.

On plans for divergence, as I mentioned on an earlier question, we are committed to regulatory autonomy but at this stage to providing as much equivalence as we can. We are committed to the highest standards of regulation and the appropriate levels of supervisory oversight. In many areas we already go beyond what the EU rules require. Where we make changes, they will be for good reasons, but our starting point will be what is right for the UK, our economy and to ensure financial stability.

The noble Lord, Lord Tunnicliffe, raised a number of questions. He was worried about the quality of the guidance documents and felt that they were not in a spirit of providing clarity. That is a fair criticism, and I will certainly encourage officials to try to provide a more accessible guidance for future SIs, which I expect we will have over the next few weeks and months.

The noble Lord asked whether the instrument, which provides for subsequent co-operation agreements and regulatory decisions, introduces any significant new policy. I can confirm that that is correct; the provisions in this SI complement existing provisions and make minor amendments to earlier EU exit instruments and retained EU law but do not alter the policy of the earlier instruments or introduce any new policy.

The noble Lords, Lord Tunnicliffe and Lord Bruce, asked about the progress on the questionnaires, which have a deadline of the end of June of this year, and about the implications of not having met that deadline. We returned all 17 questionnaires received from the EU as part of its assessment process. The returns totalled some 2,500 pages. We received the first questionnaire only in late March, and the last 250 pages of questions reached us only at the end of May. The equivalence assessments are a technical process which each side is carrying out separately and are not linked to the UK-EU trade negotiations. Many, if not most, of the questions relate to explaining the details of the rules and regulations in the UK and the rules and regulations that we share with the EU. We have made sure that the EU has the information it requires to make a positive decision for the UK for all regimes, and we have always been clear that as the UK and EU start from a position of having very similar financial services regulations, that should be a straightforward process. We continue firmly to believe that comprehensive mutual findings of equivalence between the UK and the EU are in the best interests of both parties.

The noble Lord, Lord Tunnicliffe, asked about statements from my colleague the Economic Secretary, which he believes are optimistic. Equivalence is a unilateral autonomous process that is distinct from the FTA negotiations, and the politicisation of the financial services sector is not in anyone’s interest. The financial stability that underpins our economy and the EU’s economy depends on trust and predictability in relation to regulatory matters. A thriving financial services sector is clearly important to our economy but also to the EU’s economy. The UK is a global financial hub. Among other things, it channels investment into Europe cost effectively and manages the assets of millions of EU firms and consumers. Fragmentation of that market would be costly and disruptive and, given the shock of the pandemic over the past few months, it would be an odd decision for the EU to make that more difficult for its member states.

The noble Lord asked what is my assessment of the impact on cross-border financial services trade between the EU and the UK if the equivalent ruling is not given, or at least not in a timely manner. We continue firmly to believe that comprehensive mutual filings of equivalence between the UK and the EU are in the interests of both parties. We remain open and committed to continuing the dialogue with the EU about its intentions on this. The financial stability that underpins our economy and that of the EU depends on trust and predictability in relation to regulatory matters.

This SI is needed to ensure that the UK continues to have a robust and functioning equivalence framework for financial services in the UK during and after the end of the transition period. The SI will also make minor amendments to modify the errors in onshore legislation. I hope that the Committee has found this afternoon’s sitting informative. I will write on technical questions that I have not been able to answer. I hope that noble Lords will join me in supporting these regulations.

Motion agreed.

Finance Bill

Lord Agnew of Oulton Excerpts

2nd reading & Committee negatived & 3rd reading & 2nd reading (Hansard) & 2nd reading (Hansard): House of Lords & 3rd reading (Hansard) & 3rd reading (Hansard): House of Lords & Committee negatived (Hansard) & Committee negatived (Hansard): House of Lords
Friday 17th July 2020 Lords Chamber

Moved by

[Lord Agnew of Oulton]

That the Bill be now read a second time.

[The Minister of State, Cabinet Office and the Treasury (Lord Agnew of Oulton) (Con)]

My Lords, with the leave of the House I will also speak to the remaining Motion standing in my name on the Order Paper.

[The Deputy Speaker (Lord McNicol of West Kilbride) (Lab)]

The question is that the Bill be now read a second time. I call the next speaker: the noble Lord, Lord Livermore.

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[Lord Agnew of Oulton]

My Lords, we are here to debate the annual Finance Bill, introduced in the other place following the Budget on 11 March, over four months ago. During that time, the circumstances in which we find ourselves have changed beyond recognition. The passage of this year’s Finance Bill has taken place in the shadow of a pandemic unprecedented in living memory, to which the Government have responded with one of the largest and most comprehensive economic responses in the world, aiming to protect people’s jobs, incomes and businesses.

The Government have already supported more than 11 million people and jobs through the Coronavirus Job Retention Scheme and the Self-employment Income Support Scheme, and have helped over 1 million businesses to protect jobs through tax caps, tax deferrals, direct cash grants and over 1 million government-backed loans.

In his summer economic update last week, the Chancellor set out plans for phase two of the Government’s economic response. An ambitious plan for jobs will give a job retention bonus to firms that keep on furloughed workers. The new kick-start scheme will directly pay employers to create new jobs for 16 to 24 year-olds at risk of long-term unemployment. To support the high-employing hospitality and tourism industries, the Government will cut VAT on food, accommodation and attractions from 20% to 5% for six months, and fund an “eat out to help out” 50% discount at participating businesses for the month of August.

Additionally, the Covid-19 pandemic and subsequent lockdown have resulted in uncertainty in the housing market. Property transactions fell by as much 50% and house prices have fallen for the first time in eight years. What is more, any housing market freeze is bad for jobs and businesses whose custom relies on a confident housing market, such as retailers, tradespeople and the construction industry.

As lockdown eased, there were signs that the property market was waking up. It is important to encourage this and to drive momentum. The Government are therefore cutting stamp duty land tax by temporarily increasing the nil rate band for residential property from £125,000 to £500,000, with effect until 31 March next year in England and Northern Ireland. It will cut bills for every person who buys a property for more than £125,000 and will support and create jobs. The average buyer, getting on or moving up the housing ladder, will save £4,500, with a maximum saving of £15,000. These measures have all been carefully designed to protect and sustain our economy, the public finances and the health and well-being of the British public while we weather the impact of coronavirus.

Of course, there is still some way to go to overcome this pandemic. As we do so, the Bill will make its own valuable contribution to the efforts of our health and emergency services across the country. The Bill exempts from vehicle excise duty those vehicles purpose-built to transport NHS products. It introduces legislation to ensure that workers who have returned to public sector jobs to help fight the effects of this pandemic will face no adverse pensions consequences from doing so. It legislates reforms to the pensions tapered annual allowance, so that doctors can spend more time treating patients without facing exceedingly high tax bills.

However, our collective efforts in the here and now cannot come at the expense of planning for tomorrow. In the words of the Prime Minister,

“our long national hibernation is beginning to come to an end”.—[Official Report, Commons, 23/6/20; col. 1170.]

Alongside the measures we have already taken in our plan for jobs to support employment across the country, now is the time to set about reinvigorating the economy and safeguarding our public finances.

Our police, teachers, armed services and many other public sector workers have all played their part in this pandemic, alongside the tremendous efforts of front-line NHS staff. These public sector workers cannot be provided for if the public finances are not protected with a fair and sustainable tax system. Maintaining the corporation tax rate at 19% instead of pursuing further cuts is the right approach—this is still the lowest headline rate in the G20, which demonstrates the UK’s strength as a location for inward investment.

This Government have always been clear that everybody must pay their fair share of tax. We have therefore introduced the digital services tax, legislated for in the Bill. This tax, set at a rate of 2% on revenues from digital services of larger companies, will ensure that digital businesses pay a fair share of UK tax and more accurately reflect the significant value that these businesses derive from their UK users.

As we look ahead to recovery, we must ensure that businesses receive the support that they need. That is why, in addition to all the measures the Chancellor set out last week in his plan for jobs, we have also delayed the extension of off-payroll working reforms to the private sector to April 2021. Businesses need time to prepare for these reforms and requiring them to do so during the pandemic would have been burdensome.

This Bill goes even further to support enterprise in this country, which will be desperately needed in the coming months. This Government remain committed, as ever, to levelling up all nations and regions of the United Kingdom. Britain has a long and proud history of innovation. Increasing the research and development expenditure rate to 13% will allow this to continue for businesses across the country. The structures and buildings allowance rate increase will aid investment in new shops, factories and agricultural buildings, helping to stimulate capital investment across the UK.

We must also acknowledge that Covid-19 is not the only challenge that we face. This Government have committed to reducing the United Kingdom’s carbon emissions to net zero by 2050. The Bill will take us further towards that target. Not only does it pave the way for the upcoming plastic packaging tax but it removes the vehicle excise duty expensive car supplement for zero-emissions vehicles and legislates for a carbon pricing regime now that the UK has left the European Union. Together, these measures will help ensure that the UK’s post-Covid-19 economy is greener than before.

During this Bill’s passage, our daily lives and our economic outlook have changed dramatically. However, alongside the Chancellor’s ambitious package of measures, including most recently the plan for jobs, this Bill represents a strong foundation on which to rebuild our economy and protect the public finances as we weather the impact of the virus. The Bill supports businesses, it supports the vulnerable and it supports our fantastic key workers. For these reasons, I commend it to the House.

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[Lord Agnew of Oulton]

My Lords, this has been an excellent debate, and I thank noble Lords for their expert and insightful contributions. I shall use what time remains available to address some of the issues raised by your Lordships in the debate. First, I shall briefly review some of the Bill’s achievements, for, despite the unprecedented events of the past few months, it is still significant.

The introduction of the digital services tax places the UK in the vanguard of global digital tax policy development—I will build on that later in response to individual queries—even as we continue to drive forward an international effort to secure a long-term multilateral solution. Our reform of IR35 off-payroll working rules represent a significant step towards ensuring the fair and equal treatment of individuals working in the same way across the labour market.

We are delivering on the Government’s manifesto promises to increase the rates of relief for businesses investing in R&D from 12% to 13%, and, as provided by the structures and buildings allowance, from 2% to 3% per annum. This underlines our commitment to incentivise businesses to invest in research and capital assets that will drive our future prosperity as we level up across all four nations of our union. It is worth reminding noble Lords of the colossal sums committed in this budget that have been forgotten and washed away with the crisis. We have committed to increase the capital budget from £71 billion in 2019-20 to £113 billion per year up to 2024-25. That is a 40% cumulative increase.

Over the next five years, the public sector will invest more than £640 billion for our future prosperity. The OBR has said that the large planned increase in public investment should boost potential output, and indeed, when we look at the crisis we are facing, there are two ways to get through it: to increase tax or to reduce services to the public. I do not agree with that because I believe that there is another way. We can improve the productivity of this country and make the delivery of services by the Government a lot more efficient, so I want to be a little more optimistic.

I turn now to the various points raised by noble Lords and will try to address some of their queries. The noble Lord, Lord Livermore, asked about a more sector-specific approach. The view of the Government is that it would be challenging to target the comprehensive job retention scheme in a fair and deliverable way if it was sectorised. It may not be the case that this is the most effective or sensible way to provide longer-term support, but in A Plan for Jobs 2020 the Chancellor announced measures to support firms in particular sectors, including the hospitality and tourism sectors. It is the case that some firms will be affected by the coronavirus outbreak for longer than others. The Government will seek to support these firms appropriately by engaging with businesses and representative groups with the aim of ensuring that the support provided is the right kind and relevant to them.

A number of noble Lords, including the noble Baroness, Lady Wheatcroft, and the noble Lord, Lord Livermore, asked about the dead weight of the job retention bonus. This bonus will provide an additional incentive to firms to keep their employees as demand recovers. Several noble Lords talked about the horror of mass unemployment, and we want to try to instil confidence in employers so that they bring their staff back. The Chancellor has given compelling reasons to justify the introduction of the job retention bonus, which falls outside the confines of the Managing Public Money guidance. The chief executive of HMRC has asked for a direction, but it is important to remind noble Lords that that has happened on a number of the schemes announced over the past few months, many of which have been supported both here and in the other place. For example, the discretionary grants top-up required a letter of direction, as indeed did the loan schemes. This is not an unusual mechanism. We are all working at pace and trying to be proactive in the face of the enormous challenges that exist.

Noble Lords asked about support for the self-employed and the noble Baroness, Lady Bowles, said that we should do more. On 29 May, the Chancellor announced an extension of the Self-employment Income Support Scheme and eligible individuals may now qualify for a second and final grant when applications open in August. This means that the UK continues to have one of the most generous self-employment Covid support schemes in the world as the economy reopens. Around 95% of those with more than half their income from self-employment may be eligible for the scheme. By 12 July, some 2.7 million individuals had claimed grants worth £7.8 billion in total. As the Government begin to reopen the economy, it is right that state support is tapered off and the focus shifts to getting people back to work.

A number of noble Lords, including the noble Lords, Lord Livermore, Lord Wood, Lord Bruce and Lord Empey, commented on the stamp duty land tax. I should like to speak briefly about the value of this tax and the measure announced last week. SDLT continues to be an important source of government revenue, raising several billion pounds a year to help pay for services. Any permanent changes would have a significant impact on the Exchequer. The Government believe that this is the time to encourage and bring forward transactions in the property market. This measure is there to increase confidence. First-time buyers will save up to £10,000 in addition to the £5,000 that they have already saved from the holiday. The Government are committed to helping to support first-time buyers on to the property ladder. They will still pay no SDLT on purchases worth up to £300,000 once the holiday ceases, and although second home and buy-to-let property buyers will benefit from the tax change, they will continue to pay the 3% top-up of the standard SDLT rates. It is worth reminding noble Lords that it is this Government who have reduced some of the tax incentives for buy-to-let borrowers over the past few years.

The noble Baroness, Lady Bakewell, and the noble Lord, Lord Shipley, asked about the market’s concentration in the hands of 10 developers. After the 2008 crisis, the number of SME housebuilders was reduced. We have extended the short-term home building fund with an additional £450 million boost to provide support for smaller builders and developers and help them access finance for new housing developments. This additional funding will help to provide finance to firms experiencing cash-flow issues, and we anticipate that it will support the delivery of over 7,000 new homes.

Taking a broader view of the Government’s efforts to date, the noble Lord, Lord Macpherson, my noble friend Lord Lamont, the noble Baroness, Lady Falkner, and the noble Lord, Lord Young, all spoke about longer-term financial sustainability. The immediate focus of the Government’s economic and fiscal strategy is ensuring that it continues to support workers and businesses as the country recovers from the Covid crisis. I cannot speculate on the contents of future Budgets but we will set out further plans at the next Budget as the economic and fiscal outlook becomes clearer.

Noble Lords—and the noble Lord, Lord Greaves, in particular—asked about support for local authorities. The Government have provided over £3.7 billion in new grant funding to councils to help them respond to the pressures. We have provided a further £600 million to support social care and £300 million to support track and trace. On 2 July, the Government announced a major scheme to help reimburse councils for their loss of income during the pandemic.

A number of noble Lords, including my noble friends Lady Verma and Lord Cormack, raised the issue of reskilling. We are creating a new skills fund worth £2.5 billion to transform people’s lives and give businesses the workers they need. We will invest £1.5 billion in dramatically improving the entire further education college estate. We recognise that it has been something of a Cinderella, and we are addressing that. We have committed to 20 new institutes of technology, where we will connect students learning about the world of science to the real world of business and industry.

We have also committed to a dramatic increase in the number of careers coaches in jobcentres, with an additional 14,000 careers coaches between now and the end of March next year. We are unashamed in taking an idea used by the previous Labour Government during the 2008 crisis. We hope that we can learn from that experience how it might work better.

A number of noble Lords, including the noble Lord, Lord Bruce, my noble friend Lord Blencathra and the noble Lords, Lord Haskel and Lord Snape, all stressed the need for a digital services tax. We would all have preferred an international response to the rise of these new juggernauts over the last 10 years. However, we have now put in place the framework to ensure that they start to contribute to our tax base.

Going slightly off piste, I ask my noble friend Lord Blencathra to forward any ideas he has on curtailing the anti-social behaviour that occurs on some sites. My own idea, which I would like to push further, is to have the platforms designated as publishers. As such, they would not be allowed to air all the dreadful things that appear on some sites. I apologise for digressing. The Government’s preference is for a strong global solution, and we have been at the forefront of this. One noble Lord mentioned retaliation from the United States. We have been very clear in our discussions with the US that this is not aimed at a particular country; it is a solution for any large platform.

The rates system is a matter of concern for noble Lords. We have committed to a fundamental review of business rates, and we published its terms of reference in the Spring Budget. As they set out, we invite expressions of interest from everyone who is interested in coming up with solutions. As noble Lords will know, people are much keener to see the abolition of taxes than the creation of new ones, but it is an important part of our tax base and we need to come up with a sensible alternative. The DST is intended as a temporary measure until the international world catches up. I hope that we can have a system that will operate in a uniform way across the developed world.

We have published an online harms White Paper where we set out the Government’s plans for a world-leading package of online safety. We are designing our proposals, and the next step will be to publish a full response to the White Paper consultation later in the year followed by legislation.

The noble Lord, Lord Snape, referred to the US digital services tax. As I have mentioned, we are engaging and trying to show to them that this is not a matter of discrimination.

Noble Lords, including the noble Lord, Lord Bruce, asked about the loan charge. Those affected by the loan charge are already able to defer submitting their self-assessment return for 2018-19 until September this year without having to pay any late filing charges or penalties. Changing the date would impact customers who legitimately made provision to help pay in the 2018-19 year. HMRC will keep the situation under review over the coming months and take a proportionate and reasonable approach to anyone who is unable to do this.

The noble Lord, Lord Goddard, suggested that the loan charge was retrospective. It is not retrospective; it is a new charge on disguised remuneration loan balances outstanding as at April 2019. It is worth reminding noble Lords that this scheme was simply too good to be true. People were offered their remuneration on the basis that they would never have to pay tax. In the recent High Court case Zeeman and Murphy, the judge explained that the loan charge only altered the timing of the payments received and held that it was

“well within the generous margin of appreciation for Parliament to decide that it would tackle the matter in the way that it did, and impose a present … liability in respect of money whose use, tax-free, had been enjoyed by the recipient over a number of years.”

A number of noble Lords expressed concern about the changes to insolvency and making HMRC a preferred creditor. The measure is not expected to have a significant impact on financial institutions. The reforms are forecast to raise approximately £220 million a year. That money will be spread thinly and recouped from both unsecured creditors and holders of floating charges. Bank lending to small and medium-sized businesses in 2019 alone was £57 billion, which is of a massively different order of magnitude. A financial institution holding fixed charges over assets will remain above HMRC in the creditor hierarchy and will be unaffected by this reform. The Government recognise that floating-charge creditors will recoup less than under the current law as a result of the way in which such tax debts are treated. However, we believe that the measure is right. It takes a fair and proportionate approach and applies only to taxes that have been paid by employees and customers in good faith and are held on their behalf by a business before being passed on to HMRC.

Another point of contention for some noble Lords is the IR35—the noble Baroness, Lady Bowles, and other noble Lords referred to it. It is true that falling within the off-payroll working rules does not change an individual’s status in respect of employment rights, as there are separate legal frameworks for determining employment status for tax and for rights, with no direct link between the two. Again, I urge noble Lords to consider common sense. There are some very simple principles of self-employment status; for example, if you are able to send a replacement for yourself to the person or firm employing you, if you are being directed regularly by that company, and if the tools of trade that you are using are not owned by the company contracting or employing you, they are marks of self-employment. Those who wish to challenge their employment status rights can take their case to the employment tribunal. The Government are making good progress on implementing the recommendations of the Taylor review and we continue to work across government on these issues.

On green policy, noble Lords have reiterated the fact that climate change issues are a massive priority for the Government, but it is worth reminding the House that we have been a leader on climate change and have reduced our emissions faster than any other G7 country since 1990. In the spring Budget, we reinforced our strong track record in this area, announcing at least £800 million for carbon capture and storage, more than £1 billion for further support for ultra low emission vehicles and a commitment at least to double funding for energy innovation. Many of the actions will take time to deliver on climate targets, but they will also help the UK’s economy recover from the impacts of Covid. Between 1990 and 2017, the UK reduced its emissions by 42% while growing the economy by more than two-thirds.

I am running out of time, but I want to pick up on one or two other comments made by noble Lords. On the future of manufacturing, for example, the noble Lord, Lord Empey, and several other noble Lords raised concerns that we have pivoted too far away from manufacturing over the last 30 years. What this crisis has shown us, and all countries in the developed world, is that we must have tighter and more accountable supply lines. I think we will see a renaissance in manufacturing.

I have some uplifting examples of that from my own experience during the last few months. For example, I have run a small initiative to build non-medical masks in this country. One of the British companies making the masks is in the south-west called Expert Technology, which previously made car parts. It has swivelled its whole operation to build these machines. Very movingly, when I spoke to the chief executive a couple of weeks ago, he had brought 70 of his staff back from furlough to build these machines. It shows the ingenuity that lies in the bedrock of our manufacturing industry that he could move so quickly to make such a dramatic change.

Another one that I was involved with was the manufacture of CPAPs; these are a kind of oxygen support mechanism, not an intrusive ventilator. UCL teamed up on this with Mercedes, which took its Formula 1 staff from making high-performance engines and built 10,000 of these units in less than a month. It shows what we can do, and this crisis will showcase and give us the potential for doing more.

The noble Lord, Lord Oates, asked about hydrogen. I completely agree that this is a crucial development. It will take the production of offshore wind energy so that we can capture it and the hydrogen can then be used for other forms of energy creation. We announced in the Budget £121 million to support a range of projects to explore and develop the potential of low-carbon hydrogen; I am sure that more will follow.

The noble Baroness, Lady Falkner, asked about using the German reunification tax as a model for a short-term tax, but she may not know that the tax, introduced in 1991, is still there in various forms. This is the problem with these taxes; as one noble Lord mentioned, income tax was brought in to help fund the Napoleonic War, which is now some 200 years ago.

My noble friend Lord Shrewsbury asked whether he could meet officials to talk about a company in his area called SD Technology. I will be very happy to organise that.

A number of noble Lords were anxious that we are still leaving the EU in the midst of this crisis. We need to draw a line under this very divisive debate that has scarred our whole body politic, certainly for 10 years. I stood as a Referendum Party candidate in 1997, which is 23 years ago. I would like to try to get through the important message that we want to negotiate in good faith with our EU partners. We want to have a collaborative and successful relationship with them, going forward. We do not expect to be treated like a third-class citizen. When we suggested that we should be treated in the same way as they had Canada, we were told that we could not even have a Canada deal. They need to come to the table in a constructive way.

I want to pick up what the noble Baroness, Lady Andrews, said on housing. She mentioned what we call office-to-resi. I declare an interest as I have done some of these. I actually live in one, and they are not slums. There are crooks, vagabonds and bad people in any situation and walk of life, and I am sure that there have been some poorly built office-to-resi units. But tens of thousands of good-quality properties have been built; as I say, I live in one myself.

I want to raise an important point on pushing economic activity forward. I apologise to the Deputy Speaker; I will finish after this point. There are two important things. We are bringing forward an omnibus Bill in the autumn, which will have a number of levers to accelerate economic reconstruction in this country. That will include things such as looking very carefully at planning regulations. I declare an interest as having built properties over many years. The regulations are beyond parody. I have a potting shed in my garden; it took me 12 years to get planning permission and then I was told that I could not go into it before 9 am. That is the madness of the system, so I hope very much that we will attack this once and for all.

We are bringing forward a Green Paper on procurement. It will be out in the next couple of weeks in a preliminary consultative form. It will not be a formal consultation, though I am pushing it very hard as it falls in my own specific area of responsibility. This might sound dry as dust but we spend £290 billion a year on public procurement in this country, and this is a fantastic opportunity post Brexit and the OJEU rules to recast it and make sure that we can point it to parts of this country where we can generate activity. Included in there will be the first time that we have used something called social value, so we will be able to assess a contract beyond just the pounds and pence of a bid.

I have sought to address noble Lords’ questions to the best of my ability. I will of course review the record of the debate, which has been of high quality; indeed, as is so regularly the case, many of the expert interventions illustrate the significant value of the ongoing scrutiny by this House. If in my closing remarks I have missed a point of substance, I will follow up in the usual way and write to those before me. I commend the Bill to the House.

Bill read a second time. Committee negatived. Standing Order 46 having been dispensed with, the Bill was read a third time and passed.

Unemployment

Lord Agnew of Oulton Excerpts

Thursday 11th June 2020 Lords Chamber

[Lord Randall of Uxbridge]

To ask Her Majesty’s Government what assessment they have made of the projected level of unemployment over the next 12 months.

[The Minister of State, Cabinet Office and the Treasury (Lord Agnew of Oulton) (Con) [V]]

My Lords, we must accept that the coronavirus will have a very significant adverse impact on our economy. The Office for Budget Responsibility reference scenario assumes that the unemployment rate will rise to 10% in the second quarter of 2020. However, the Government have announced unprecedented support for public services, workers and business to help mitigate the impact of the current economic emergency. As the OBR said,

“the cost of inaction would ultimately have been … higher.”

[Lord Randall of Uxbridge (Con) [V]]

I thank my noble friend for his Answer. Sadly, we will hear of many redundancies in the coming weeks and months. Can I ask Her Majesty’s Government to be bold in initiating a range of green infrastructure projects that will provide much-needed jobs as well as improving the nation’s quality of life?

--- Later in debate ---

[Lord Agnew of Oulton [V]]

My noble friend raises an important point. Certainly, a great deal of thinking is going on at the moment about how we can turbocharge investment in green energy. Indeed, our Budget for virus lockdown provided a plank for a lot of these initiatives.

[Lord Reid of Cardowan (Lab) [V]]

My Lords, yesterday, the OECD said that the UK had experienced the worst economic impact in the G7 from the Covid-19 pandemic, which is on top of the fact that we are already seeing a surge in job losses. What targeted help can the Minister offer the hardest-hit sectors of the economy, such as hospitality and tourism which, when the furlough scheme comes to an end, will take longer to reopen and recover?

[Lord Agnew of Oulton [V]]

As the noble Lord will know, we have announced an unprecedented level of support across the economy which includes these particularly hard-hit areas. As he will also know, we announced yesterday that shops will be able to reopen next week as part of our gradual and phased reopening of the economy. The Government are meeting regularly with members of the entertainment and leisure sectors to look at all possible solutions to help them get back into business as quickly as possible.

[Lord German (LD) [V]]

My Lords, during this period of great instability for businesses, many self-employed people have received no help at all. Freelance musicians, cleaners, taxi drivers, hairdressers and millions more have seen their incomes evaporate. As we move forward to a staggered start to normality, will the Government put in place a bespoke system of support for the self-employed so that their businesses and jobs do not disappear as well?

[Lord Agnew of Oulton [V]]

The Government’s overarching priority is to reopen the economy as quickly as is safely possible. That is how the groups the noble Lord has referred to will be able to start earning their incomes again as quickly as they can. We have in place a suite of support mechanisms for all those who have been the hardest hit, including the groups listed by the noble Lord.

[Lord Caine (Con) [V]]

My Lords, some of the latest forecasts about the economy are extremely worrying, especially for younger people. Is it not the case that the best way to avoid levels of mass unemployment as we exit lockdown is through policies designed to promote enterprise and growth and to set businesses free? Does my noble friend agree that, in this respect, tax rises on business, tempting as that might be for some, would be absolutely fatal to recovery and employment right across the United Kingdom?

[Lord Agnew of Oulton [V]]

Of course we want to see businesses feeling confident in their approach to coming out of this crisis. However, I cannot give a commitment on behalf of the Chancellor on what the future tax structure will look like. These matters will have to be looked at in the light of how the economy responds over the next few months.

[Baroness Meacher (CB) [V]]

My Lords, the OECD has predicted that the level of unemployment in this country will reach 11.7% in the third quarter. Will the Minister and his colleagues work with the DWP to adjust the universal credit system and introduce active labour market policies that support unemployed people back into work effectively, as Sweden has shown most particularly? Many of those jobs could be green jobs; such policies could take the place of the sanctions regime in the universal credit system, which does little else other than punish people who are unable to find work.

[Lord Agnew of Oulton [V]]

As the noble Baroness will know, our furlough scheme has been one of the most generous in Europe, and the whole point of it is to protect productive capacity. We certainly hope that, over the next few months, its gradual withdrawal will give businesses time to adjust and come to terms with what the opportunities are for them to get back into business. We will certainly keep the mechanisms of universal credit under review. However, it is a far more flexible system than existed in the past.

[Lord Livermore (Lab) [V]]

My Lords, as my noble friend Lord Reid pointed out, the OECD said yesterday that Britain’s economy would suffer the worst damage from the Covid-19 pandemic of any G7 country. I do not think that the Minister gave my noble friend a specific answer to his question, so perhaps I may ask again what specifically targeted help he will be able to offer those in the hardest-hit sectors of the economy, which will take longer to reopen and recover.

[Lord Agnew of Oulton [V]]

As the noble Lord probably is aware, we have given significant support to areas such as entertainment in the form of grants and business rates relief. For those that missed out on rates relief, we brought in the additional £600 million facility for local authorities to support those businesses that were not in the business rates relief regime. We will continue to assess the situation and we have ensured that several of these types of businesses, such as garden centres, have reopened recently. Yesterday, we announced that zoos can reopen. As we come up with a formula for businesses to reopen safely, we will continue to do that.

[Lord Taylor of Goss Moor (LD) [V]]

My Lords, millions of people depend on work in businesses that could function well if we had the one-metre rule recommended by the World Health Organization and adopted by countries such as China, which have successfully repressed the coronavirus. We still have a two-metre rule, which makes many of those jobs impossible to do. How quickly will the Government come to a conclusion to change the distance to one metre, which medical advisers have made clear is a decision for Ministers, not simply a medical one?

[Lord Agnew of Oulton [V]]

The noble Lord makes a good point and I certainly expect the debate about the distance to carry on. I share his concern about seeing the distance reduced, because it would enable a lot more businesses to open. We will see what the outcome of that debate is over the next few days and weeks.

[Lord McConnell of Glenscorrodale (Lab) [V]]

My Lords, on 28 May, the Prime Minister said that we needed to work together to get our shared goals, including the sustainable development goals, back on track. He has also spoken about the need to “build back better”. On Tuesday, more than 100 leaders of major businesses and organisations called on the Government to include the sustainable development goals at the heart of their recovery plan. Will they heed this advice?

[Lord Agnew of Oulton [V]]

The advice will be taken in the context of our overall economic recovery. Our first priorities have to be keeping this country safe and getting our businesses reopened, and it is only by having a healthy economy that we will be able to become heavily involved in the sustainable issues referred to by the noble Lord.

[Lord Forsyth of Drumlean (Con)]

My Lords, can the Minister indicate what assessment the Government have made of the number of people who will lose their jobs as a direct result of the two-metre rule? If no such assessment has been made, how is it possible for the Government to credibly continue with this policy in the light of the World Health Organization’s advice that one metre is adequate?

[Lord Agnew of Oulton [V]]

My Lords, I think that the scientific evidence is relatively clear that the risk of transmission of the disease declines exponentially with the distance between people who are interacting with one another. The argument, of course, is about the level of risk that we are prepared to take—the shorter the distance, the greater the risk; it is relatively simple. However, I support my noble friend’s concerns and I hope that the debate will continue.

[The Deputy Speaker (The Earl of Kinnoull) (Non-Afl)]

My Lords, the time allotted for this Question has now elapsed.

Covid-19: Public Wealth Investment Fund

Lord Agnew of Oulton Excerpts

Tuesday 9th June 2020 Lords Chamber

[Lord Haskel]

To ask Her Majesty’s Government what plans they have to establish a public wealth investment fund to support those businesses affected by the COVID-19 pandemic.

[The Minister of State, Cabinet Office and the Treasury (Lord Agnew of Oulton) (Con) [V]]

My Lords, the Government have announced unprecedented support for public services, workers and businesses to protect them against the current economic emergency. Our interventions have been targeted to protect UK jobs while also protecting the taxpayer. Our aim is to protect the productive capacity of our economy and to enable a strong and sustainable recovery from this crisis. As we move through this crisis, the Government will continue to keep our economic response under review.

[Lord Haskel (Lab) [V]]

To rebuild our economy, the Government should listen to the many calling for our recovery through investment instead of paying down debt, which is where they seem to be concentrating. These are debts which some may never repay. Since I tabled my Question, investment ideas such as Project Birch have been floated, but will the Government make it clear that, in return for equity, firms should work towards our social objectives of responsible company behaviour, local levelling up and ensuring that all benefit?

[Lord Agnew of Oulton [V]]

I agree with the noble Lord that social benefit is an extremely important part of the recovery. To that end, we are consulting on our rules for public procurement at the moment to include social values as part of the scoring system.

[Lord Livermore (Lab) [V]]

My Lords, bold and ambitious schemes, such as a public wealth fund, will be necessary to support businesses in the medium term. However, we are seeing an immediate surge in insolvencies and job losses, and action is needed before such schemes can be established. What targeted help can the Minister offer the hardest-hit sectors of the economy, such as hospitality and tourism, which will take longer to reopen and recover?

[Lord Agnew of Oulton [V]]

Our first priority as a Government has been to try to protect the productive capacity of the economy, which is why we have one of the most generous furlough schemes in Europe. On the hospitality side, we have provided cash grants of £10,000 for properties with small rateable values of under £15,000, and cash grants of £25,000 for those with a rateable value of between £15,000 and £51,000. We will continue to monitor how the leisure sector recovers from this crisis.

[Lord Purvis of Tweed (LD)]

At the time of the Budget, the OBR forecast that taxpayer losses in the RBS had increased to £4.7 billion compared to the Government’s estimate of just two years ago. Would it not be better for British businesses across the UK to think more creatively about the use of our shares in RBS and to expand the role of the British Business Bank, established by Sir Vince Cable during the coalition, so that we can see the early stages of a genuine UK-wide investment wealth fund?

[Lord Agnew of Oulton [V]]

I agree with the noble Lord on the role of the British Business Bank, which has played an extremely important part in the economy over the last few years. It has given some £7 billion of finance to almost 95,000 SMEs and has been part of the distribution for much of the support over the last few months. We will continue to review the greater part that it can play.

[Lord Leigh of Hurley (Con) [V]]

My Lords, I refer to my register of interests. There is no question that we need some sort of public wealth investment bank to replace CBILS—perhaps using the old model that 3i had. However, the BBB is not the answer. It does not have the mechanics, the experience or the expertise to make the direct investments in SMEs that are badly needed. Would my noble friend meet me and other practitioners to discuss the mechanics of how we can get relatively small equity investments into SMEs in the very near future?

[Lord Agnew of Oulton [V]]

I am very happy to meet my noble friend to discuss that, but I stress that we expect the private sector to step up to the mark in investing in these small businesses in future. We have the EIS and the SEIS, and we will continue to review them.

[Lord Hastings of Scarisbrick (CB) [V]]

My Lords, given the heightened and highly appropriate focus on justice and opportunity for black and minority communities, what considerations has the Treasury given to working with existing black business finance networks, such as the number one black lending and investment agency, Lendoe, led by Mr Demi Ariyo? Will the Minister chase a reply, due a month ago, to Mr Ariyo’s letter to the Chancellor of 12 May, setting out practical and detailed advice on how to boost black business recovery?

[Lord Agnew of Oulton [V]]

I certainly commit to chasing up a reply to the letter that the noble Lord mentioned. Businesses run by the BAME community are of course vital to our economy.

[Lord Liddle (Lab) [V]]

My Lords, I want to press the Minister on the key point of principle in my noble friend Lord Haskel’s excellent Question. Do the Government accept the need to set up a mechanism whereby the state can take equity stakes in overindebted companies? Do they accept that this is vital to what the Minister describes as safeguarding our productive capacity and to a strong and sustainable recovery? Does the Minister accept that the debate is not about whether this should happen but about how it should happen? The sooner we start talking about this, the better.

[Lord Agnew of Oulton [V]]

There are two parts to that question. First, on 20 May, we announced the future fund of an initial £250 million for co-investment with businesses. There has been enormous interest in that; some 460 applications have been made up to the end of May. On the noble Lord’s reference to overindebted companies, we have to deal with the issue that the shareholders and management of those companies have contributed to that problem. They need to resolve the substantial concessions that they will have to make to their own equity, and to the lenders who have lent—and possibly overlent—to these businesses. There are two separate strands to this, but both will be active in future.

[Lord Hussain (LD) [V]]

My Lords, the Government have put millions of pounds aside to help businesses struggling due to Covid-19. How do the Government monitor the take-up of these funds by black and minority-ethnic businesses?

[Lord Agnew of Oulton [V]]

I will have to write to the noble Lord to provide specific information on that.

[Viscount Trenchard (Con)]

My Lords, if the Government were to establish a sovereign wealth fund, might one of its objectives be to invest in major infrastructure projects, such as the currently suspended Horizon Nuclear Power project at Wylfa, Ynys Môn?

[Lord Agnew of Oulton [V]]

Infrastructure is a vital part of rebuilding from this crisis. I am unsure at this stage whether it will be done through the mechanism of a sovereign wealth fund. At the moment, we have the opportunity as a national Government to borrow cheaply, which, if invested well in infrastructure, could be a simpler approach than a sovereign wealth fund.

[Lord Holmes of Richmond (Con) [V]]

My Lords, we have a tremendous challenge but a real opportunity for an economic bounce out of Covid. It needs a whole-government, whole-economy approach. Will my noble friend salute the consultation currently being undertaken by the Bank of England around a central bank digital currency, and note the positive impact that this potentially could have for the whole of the country and the economy?

[Lord Agnew of Oulton [V]]

I certainly agree with the noble Lord that it is an extremely important consultation. As he implies, any serious crisis such as this gives the country a chance to look beyond the normal way of dealing with problems. I am very hopeful that initiatives such as he has mentioned will be much more evident over the next few months.

[Baroness Altmann (Con) [V]]

My Lords, I declare my interests and congratulate the Government on the establishment of the future fund. Would my noble friend consider encouraging the use of pension funds, as well as expanding the EIS and the SEIS, so that we can boost investment in smaller companies via equity, rather than debt, and increase the emphasis on social values?

[Lord Agnew of Oulton [V]]

I agree with the noble Baroness that pension funds in this country could play a much greater role in investing in early days businesses. The noble Baroness will know better than I that how we change the investment allocations that pension funds are allowed to take is a very complicated business, but I hope that we will continue to push the boundaries on that, because there is enormous potential.

Covid-19: Economy

Lord Agnew of Oulton Excerpts

Thursday 4th June 2020 Lords Chamber

[The Minister of State, Cabinet Office and the Treasury (Lord Agnew of Oulton) (Con)]

My Lords, I congratulate the noble Lord, Lord Eatwell, on his initiative in securing this debate. I am grateful for the opportunity to discuss this matter.

Noble Lords have spoken about the threat to our economy, how we have sought to protect it during this crisis and what we might seek to do afterwards. The coronavirus is the biggest threat that this country has faced in decades and this country is not alone. All over the world, we see the devastating impact of this invisible killer.

The Government’s action plan aims to slow the spread of the virus so that fewer people need hospital treatment at any one time, protecting the NHS’s ability to cope. That is the right thing to do, but people are also justifiably concerned about their livelihoods during this difficult time. We recognise the extreme disruption that the necessary actions are having on people’s lives, businesses and jobs. Just as we face a health emergency, so we face an economic emergency too. There can be no doubt about the seriousness of the situation. It is important that we are honest: it will have a very significant impact on our economy.

That is why the Government have announced unprecedented support for public services, individuals and businesses to protect against the current economic emergency. That includes the Coronavirus Job Retention Scheme, which has already helped businesses to keep millions of people in employment and has been extended until October, and the Self-employment Income Support Scheme, which benefits 95% of people who are mainly self-employed. To support firms and businesses through the crisis, the Government have announced unprecedented support, including government-backed loans for businesses of all sizes and grants for small businesses and highly innovative firms.

Through the Coronavirus Business Interruption Loan Scheme, over 45,000 facilities have been approved so far, worth more than £8.9 billion, and 700,000 loans, worth more than £21 billion, have been approved through the new bounce-back loans scheme, supporting the very smallest businesses. Over £10 billion-worth of grant payments have been made to over 800,000 business premises so far.

Further government support measures mean that almost half of all business properties in England will pay no business rates at all this year, notably in those sectors hardest hit by the lockdown, 2.3 million businesses have been offered a VAT deferral and up to 2 million employers will be able to access the statutory sick pay rebate. The Government are supporting people on low incomes or those who find themselves facing hardship through a significant package of temporary measures. That includes a £20 per week increase to the universal credit standard allowance and working tax credit basic element and an increase in the local housing allowance rates for universal credit and housing benefit claimants so that it covers the cheapest third of all local rents. Mortgage lenders are also offering a three-month payment holiday for those customers struggling with their finances as a result of the coronavirus.

Throughout the past few months, the Government have worked closely with the Bank of England, business groups, trade unions and many others around the country to develop these support measures. Taken together, these measures are protecting millions of people and businesses across the country through a set of economic interventions on a scale never previously attempted, and they are working. In developing our economic policy, the Government have listened to a wide range of evidence and views.

As the Chancellor said, it is premature to speculate about future public finances, budgets and the economy, but it is notable that the independent Office for Budget Responsibility and the Bank of England both agree that the actions that we have taken will help to mitigate the impact of the virus on our economy and that, without our package of measures, things would have been far worse. Not taking those steps would result in the temporary effects of the Covid-19 virus leaving permanent scars on our economy. Although we are spending unprecedented amounts, the consensus both in the Government and among external economists is that not spending at these levels would cause even more damage.

The work of the last 10 years in bringing borrowing and debt back under control has ensured that public finances are well placed to deal with the challenges posed by Covid-19. The overwhelming evidence indicates that British people and businesses are following the Government’s guidelines. Thanks to people’s hard work and sacrifice, and despite the tragic loss of life, the UK has slowed the spread of coronavirus. Our health system has not been overwhelmed.

Now we must begin to recover and eventually restore our way of life. The Government have set out a conditional road map for reopening certain economic activities, while continuing to suppress the Covid-19 outbreak. Our economic strategy will be closely co-ordinated with the public health strategy. As infection rates fall, we will take stock of the economy and public finances to make the right decisions for the circumstances in which we find ourselves.

In formulating this road map, the Government have considered: the country’s long-term economic future, which could be harmed by people being out of jobs and by insolvencies; the sustainability of public finances, so that the Government can pay for public services, including the healthcare response; and the UK’s international economic competitiveness. Ultimately, a strong economy is the best way to protect people’s jobs and ensure that the Government can fund the country’s vital public services.

I will pick up on comments made by noble Lords. I will not name each noble Lord individually in the interests of time, and if I am not able to address all of the points raised, I will write at the conclusion of the debate.

The noble Lord, Lord Eatwell, and others raised the issue of public sector spending and investment in the NHS. The Government have backed the NHS during this crisis with more than £16 billion for the Covid-19 response fund, which has gone towards public services, including the NHS and local groups involved in the fight against coronavirus. But beyond that, the NHS settlement committed in January last year provided one of the largest tax increases in public services since the Second World War—an additional £34 billion a year by 2023-24. The 2019 spending round confirmed the Government’s commitment to the NHS with £139 billion for health budgets in 2021. The Budget provided over £6 billion of further funding to strengthen the NHS in England and pay for vital services. That will improve people’s health, reaffirming the Government commitment to health and social care.

The new life assurance scheme for front-line NHS and social care workers recognises the increased risks faced by these staff in the crisis during the course of their essential and life-saving work and the need to encourage retired doctors and nurses to fill staff shortages and boost service capacity. The Government will continue to review the support provided to key workers on the front line.

On the matter of reopening the economy, the Government have a carefully planned timetable for lifting restrictions. This is a difficult balancing act. The timetable depends on successfully controlling the spread of the virus. If the evidence shows that sufficient progress is not being made in controlling the virus, lifting restrictions may have to be delayed.

Social distancing is again a matter of strong debate. It is absolutely vital for controlling the virus, but we need to keep that debate alive. The criteria are reviewed every three weeks and are driven by the latest available data analysis and scientific advice.

In terms of business support, the Government continue to work closely with businesses and sector leads to monitor the impact of Covid-19 across the whole economy. The Chancellor recognises the challenges that businesses face and is focused on taking the necessary steps to support a strong and sustainable recovery. He will publish such plans in due course. As I have already said, to support firms and businesses through the crisis, the Government have announced unprecedented levels of support, including government-backed loans for businesses of all sizes and grants for small businesses and highly innovative firms.

On the equity side, our new future fund provides loans that convert into equity to high-growth companies that can raise equivalent match funding. The Government are aware of proposals around equity investment. For some companies, further debt may not be the right answer, but the private sector should be the first port of call for businesses seeking new equity investment. The Government will keep the policy under review and vigorously test any proposals for their value for money.

On the culture and performing arts sectors, we have set up a task force to work with industry representatives to develop safe ways for industries to reopen at the earliest point that it is safe to do so. The Government completely recognise the contribution that the culture, leisure and entertainment sectors make and how they have been particularly affected by the crisis. Theatres and performing arts institutions can benefit from the range of support schemes that have already been introduced, including the CJRS and business loans. There is a task force for recreation and leisure, led by the Culture Secretary. It covers all industries relating to tourism and culture, including libraries, entertainment and sport. The task force first met on 22 May and is meeting every week.

On the construction and housing sector, the Government have committed to building at least 1 million more homes by the end of this Parliament, continuing progress towards our target of delivering 300,000 additional homes every year, on average, by the mid-2020s. Over 240,000 additional homes were delivered in 2018-19, the highest level for the last 32 years, representing a 65% increase since 2009-10. The Government plan to publish very shortly a comprehensive list of planned government procurement linked to the delivery of infrastructure and construction projects for the financial year 2020-21.

Turning to the insurance sector, the Government are working closely with the FCA to ensure that the rules are being upheld during this crisis. They recognise that businesses that do not have appropriate insurance cover will require support from elsewhere. As such, businesses should explore the full package of support.

Going further into the recovery, as the Chancellor has said, it is premature to speculate about the future public finances. First and foremost, we are thinking about protecting people’s health and jobs and supporting businesses.

A number of noble Lords mentioned VAT. We have already deferred VAT for businesses during the crisis, so UK VAT-registered businesses will not need to pay any VAT that is due alongside their normal VAT return from 20 March through to the end of June—a deferral worth over £30 billion or 1.5% of GDP.

My noble friend Lady Buscombe asked about the tax status of foreign nationals. The statutory residency test determines an individual’s residency status when they move between countries and ensures that they know whether or not they are resident when they spend time in the UK, and thus whether they should correctly pay UK taxes. Nationality has no bearing on the tax that an individual pays. An individual who moves permanently to live in the UK will pay tax on their worldwide income and gains, just as any other UK resident does. The UK has a special tax regime for individuals whose permanent homes are outside the UK—referred to as non-domiciles—but when they are UK-resident, they will pay UK tax on all their UK income and gains.

A number of noble Lords raised the issue of low pay. Low-paid workers will benefit from the April 2020 increase in the national living wage, which represents an increase of over £930 in the annual earnings of a full-time worker on the national living wage, equivalent to a total increase in annual earnings of over £3,600 since the introduction of the national living wage in April 2018. We have also taken a large number of people out of income tax thresholds over the last 10 years. That has always been a priority for this Government.

A number of noble Lords raised the need for a green recovery. The Government completely agree. The Budget reinforced the UK’s strong track record in this area. Announcements included £640 million for tree planting and peatland restoration, over £1 billion of further support for ultra-low emission vehicles, and at least a doubling of the funding for energy, innovation and tax measures to encourage greater energy efficiency and to reduce plastic waste, among other things. We recognise the importance of a strong economy in supporting the transition to net-zero emissions and will continue the UK’s leadership in clean growth. The Government have announced unprecedented support for public services, workers and businesses to protect against the current economic emergency.

On hydrogen, we have announced £120 million to explore opportunities in energy efficiency. We are extending support to 2028 at the current level of the energy company obligation scheme funding, with £6 billion of investment to improve energy efficiency. It is also worth noting that coal emissions have fallen by nearly 80% in the last decade, and carbon emissions have fallen in the last seven consecutive years. According to some measures, in 2019, our emissions had fallen back to the level they were at in 1888.

Levelling up was raised by several noble Lords. Despite the immediate challenges facing the UK, we are still absolutely committed to bringing prosperity to the whole country. The Civil Service has, for example, committed to move over 20,000 jobs out of London, and that process has begun. We have identified 15 hubs around the country to which civil servants will move. These will become hubs for good-quality jobs in the future.

Well-being is already part of the Treasury Green Book and it took a more prominent role following the 2018 updates. The Government are mindful of the evidence of how previous recessions have impacted health outcomes. The unprecedented support for public services plays to this point. In developing our economic policy, the Government have listened to a wide range of evidence on this.

A number of noble Lords raised the issue of EU exit. We will not extend the transition period, as it would simply defer the moment at which we were in charge of our own destiny. The Government believe that there is time to strike a deal based on free trade and friendly co-operation. We are looking for an agreement largely like the one that the EU has agreed with other countries. Therefore, we cannot see why it should be so complicated.

On trade, during the crisis, G7 and G20 Finance Ministers have released statements committing to do whatever is needed to restore confidence and economic growth, including supporting trade ministries’ efforts to address disruptions in international trade and supply chains. We are continuing to strengthen our trade relationships around the world. For example, last month, the Secretary of State for Trade launched the first round of trade negotiations with the US.

The range of contributions that we have heard here today demonstrates what a broad and complex issue this is. Through the measures they have taken, the Government have sought not only to protect people’s health and livelihoods, and to shield the most vulnerable in our society, but to preserve the productive power of our economy in order to bring about a swift and lasting recovery from this crisis. The Government will continue to act on the basis of scientific advice, and they will continue to listen to the voices of employers and business, trade unions and others as we navigate our way through the crisis and back towards a future of growth and opportunity.

I finish by thanking all noble Lords for their contributions, but especially the noble Lord for securing this valuable debate.

Covid-19: Economic Package

Lord Agnew of Oulton Excerpts

Wednesday 13th May 2020 Lords Chamber

The Statement was made in a Virtual Proceeding via video call.

[The Minister of State, Cabinet Office and the Treasury (Lord Agnew of Oulton) (Con)]

My Lords, with the leave of the House, I shall now repeat in the form of a Statement the Answer to an Urgent Question given yesterday in the other place by the Chancellor of the Exchequer. The Statement is as follows:

“Mr Speaker, the Government’s economic plan is one of the most comprehensive in the world. We have provided billions of pounds of grants and loans for businesses, tens of billions of pounds of deferred taxes, income protection for millions of the self-employed, and a strengthened safety net to protect millions of the most vulnerable people. These schemes speak to my and this Conservative Government’s values. We believe in the dignity of work and we are doing everything we can to protect people currently unable to work.

Yesterday, my right honourable friend the Prime Minister set out our plan for the next phase of the public health response, and today I can confirm the next stage of our job retention scheme. This scheme has been a world-leading economic intervention, supporting livelihoods and protecting futures. Seven and a half million jobs have been furloughed—jobs that we could have lost if we had not acted. Nearly 1 million businesses would have closed shop.

As we reopen the economy, we will need to support people back to work. We will do so in a measured way. I can announce that the job retention scheme will be extended for four months, until the end of October. By that point, we will have provided eight months of support to British people and businesses. Until the end of July, there will be no changes whatever, and from August to October the scheme will continue for all sectors and regions of the UK but with greater flexibility to support the transition back to work. Employers currently using the scheme will be able to bring employees back part-time. To change their incentives, we will ask employers to start sharing with the Government the cost of paying people’s salaries.

Detailed guidance will follow by the end of May, but I want to assure people today of one thing that will not change: workers will, through the combined efforts of the Government and employers, continue to receive the same level of overall support as they do now, at 80% of their current salary, up to £2,500.

I am extending the scheme because I will not give up on the people who rely on it. Our message today is simple. We stood behind Britain’s workers and businesses as we came into this crisis and we will stand behind them as we come through the other side.”

[Lord Livermore (Lab)]

My Lords, I am grateful to the Minister for repeating the Chancellor’s Statement. We welcome the extension of the job retention scheme, the additional flexibility provided and the fact that the Chancellor has listened to concerns by maintaining a level of support at 80%. Advanced briefing to the media suggested that people need to be “weaned off” state support. I hope the Minister shares my concerns about the use of such language and agrees that nobody ever wanted to find themselves in this situation. The amount that firms will be asked to contribute must avoid triggering further redundancies, so could the Minister confirm when employers will be required to start making contributions, whether these contributions will be phased in and what level of contribution they will be asked to pay?

[Lord Agnew of Oulton]

My Lords, all the details that the noble Lord has asked about are being worked out at the moment. That is why we will not be able to announce the full details until the end of this month. However, as was set out in my right honourable friend’s Statement yesterday, our overriding priority is to protect jobs in this country and to protect businesses. A balance needs to be struck to achieve those two things.

[Baroness Kramer (LD)]

My Lords, I have just three very quick questions for the Minister. First, will the Self-employment Income Support Scheme also be extended in the same way that the furlough scheme is being extended for those who have been in employment, which is obviously a vital decision? Secondly, in the light of leaked Treasury documents today, will he confirm or deny that the Government are looking at a two-year pay freeze in the public sector to deal with what will be an extremely high deficit, estimated at £337 billion this year? Lastly, he will be aware that alternate funders are finally getting accredited to participate in the Government’s Covid schemes, but many banks are now cornering the market because only they can access cheap money from the Bank of England. Will the Government level the playing field and open up the Bank of England’s term funding scheme to all accredited funders and do so rapidly to limit the damage?

[Lord Agnew of Oulton]

My Lords, the newly announced Self-employed Income Support Scheme, which opened today, will be kept open as long as it is needed. That is what we have said all along: we will do what is needed. We need to see how successful it is and how many people it gets to. I am not aware of any advanced thinking on a pay freeze on the public sector or any other measures. As my right honourable friend said yesterday, it is too early for us to be looking at these measures. We need to get through this stage of the crisis. On the noble Baroness’s third question, we have been increasing the number of lenders available on all schemes since they opened. I am sure that this will continue.

[The Deputy Speaker (Lord McNicol of West Kilbride) (Lab)]

I remind all noble Lords to please ask brief questions.

--- Later in debate ---

[Lord Agnew of Oulton]

I thank my noble friend for his supportive comments. The self-employment income support scheme opened today at 8 am, and by lunchtime we had had 110,000 applications, worth in aggregate some £360 million. HMRC has undertaken to do everything possible to get payments out within the next six working days.

On my noble friend’s other point about the furlough scheme being too generous, as the Office for Budget Responsibility has said, if we do not take these sorts of measures, the cost to our country and our society will be even greater. However, we will be vigilant to ensure that the scheme is not abused.

[Lord Singh of Wimbledon (CB)]

While the measures announced are welcome, does the Minister agree that more fine-tuning will be needed in the coming months to meet the needs of different parts of the country and different economies, for a fair and balanced recovery?

Will the Minister find ways of adding to the well-deserved clapping of hands for low-paid members of the NHS and staff in care homes with some degree of monetary reward, to emphasise how much their dedication —often at real risk to their own health—means to us all?

[Lord Agnew of Oulton]

I assure the noble Lord that we are aware of the regional differences that will emerge in the aftermath of this crisis. It is worth reminding the House that the furlough scheme, for example, applies across all devolved regions.

On his comments on health sector and social care workers, I add my congratulations on, and respect for, the huge amount that they have done. We cannot at this stage commit to any future payments, because, as I mentioned, we will have an enormous financial hill to climb at the end of this crisis. However, I recognise the great work that they have done.

[The Lord Bishop of Durham]

The extension of the JRS is extremely welcome. Here in the north-east, we have a worryingly high infection rate and among the highest average death rates per capita. Will Her Majesty’s Government consider taking a regional approach to phasing out the JRS, ensuring that the economic and social needs of each region are reflected adequately in the Government’s ongoing support?

[Lord Agnew of Oulton]

To answer the right reverend Prelate’s question, what we have always done through this crisis over the past few months is take a flexible approach and respond as events confront us. If we see that different regions are suffering more than others, we will, of course, look on that as sympathetically as we can.

[Baroness Neville-Rolfe (Con)]

Could my noble friend explain in more detail what the Chancellor meant when he said he would ask employers to share with the Government the cost of paying people’s salaries under the furlough scheme from August? In spite of what he said, I hope he can give us an idea of some of the thinking going on. For many reasons, I support the aim of weaning people off government support, but businesses need to quantify this extra cost very soon to determine their route ahead.

[Lord Agnew of Oulton]

In response to my noble friend, unfortunately I cannot give any more information at the moment, but businesses will be made aware within the next 10 days to two weeks.

[Lord Desai (Lab)]

Will the Minister bear in mind that, given the prospect of higher unemployment for a long time, universal credit and other arrangements will have to be enhanced for a considerable period? Have the Government budgeted for an increase in unemployment benefit and universal credit?

[Lord Agnew of Oulton]

My Lords, we have improved the terms of universal credit since this crisis began by increasing payments by £20 a week. We have seen 1.6 million claims since the beginning of the crisis, and all new and existing claimants will benefit from the increased generosity of these payments.

[Lord Taylor of Goss Moor (LD)]

Given that the Government have clearly not finalised the scheme as they cannot tell business how much they will contribute, will the Minister ensure that his colleagues take account of two figures that might cause perverse consequences? One is that individuals who need to be shielded and therefore cannot work, even if the business has work for them, are currently eligible for the furlough scheme. Clearly it is important that that continues, but it would be unreasonable and perverse if businesses found that they were financially advantaged by putting those people on statutory sick pay or even making them redundant when they cannot work. Businesses are being asked to support people in that situation, and it is important that they are fully protected on the furlough scheme cost. Similarly, there are businesses and charities that are not allowed to open by the Government and may still not be allowed to open. If they are not allowed to take people into employment, surely it is right that they should be fully covered for the cost of the furlough scheme, for the risk is that these businesses, which are bleeding money, will be forced to make people redundant.

[Lord Agnew of Oulton]

My Lords, my right honourable friend in his Statement yesterday extended the existing terms of the furlough scheme until the end of July. I think we will have better knowledge of the disease and our ability to contain it by then, but I take on board the noble Lord’s comments and I will take them back to my colleagues in the Treasury.

[The Deputy Speaker]

My Lords, the time allotted for the Statement is now up. Today’s Virtual Proceedings are complete and are adjourned. Good night.

Income Equality and Sustainability

Lord Agnew of Oulton Excerpts

Wednesday 6th May 2020 Lords Chamber

[The Minister of State, Cabinet Office and the Treasury (Lord Agnew of Oulton) (Con)]

My Lords, I begin by congratulating the most reverend Primate the Archbishop of York on his valedictory speech in this House. I echo the many tributes to him that we have heard today. We thank him for 15 years of service as the Archbishop of York and recognise his valuable work across his career, speaking out against authoritarian regimes and championing diversity, the environment and a range of social causes. I know noble Lords will join me in wishing him a very happy and well-earned retirement from his office. I draw particular attention to his work as chair of the Living Wage Commission, where he has rightly championed the need to end low pay, an ambition this Government share. In this role, in his career and today in this House, the most reverend Primate has chosen to highlight the important issue of inequality in our society.

Because of the limited time available and the large number of speakers, I may not be able to address each individual’s points, but I hope to cover the bulk of the issues. I shall begin with income inequality, the main subject of the debate. The Government take inequality very seriously. We are committed to improving the living standards of all in our society. I am pleased to report that in the latest data available, income inequality was lower than it was in 2010. However, it is striking how little overall inequality has changed over the past 20 years, given the efforts of all Governments—Conservative, Labour and coalition. This shows just what a challenge it is to shift. Furthermore, it is important to acknowledge that, whatever the overall statistics on inequality tell us, as noble Lords have highlighted, there are clearly groups in our society struggling to make ends meet.

It is right to consider how government policy as a whole impacts upon people’s lives and incomes. While the world has changed dramatically since the Spring Budget, Treasury modelling published at that time demonstrated that this Government are supporting the poorest in our society, showing that the poorest 60% of households receive more in public spending than they contribute in tax. For pensioners, the absolute poverty rate has fallen since 2010. It is also right that those with the broadest shoulders in society take their fair share of the burden. The top 1% of taxpayers are estimated to have paid over 29% of all income tax in 2018-19. Their contribution has increased since 2010-11, when it was 25% of the overall burden. I respectfully point out to noble Lords that the money has to come from somewhere, and they are doing their bit.

We know that work is key to improving people’s living standards and quality of life, providing more than just financial rewards—a sense of social glue, connection, well-being and aspiration. The Government have a strong track record on work, with the statistics for the three months to February 2020 showing a record high employment rate. Of course, we have seen significant events unfold since February, and I will turn shortly to the action the Government have taken to protect jobs in recent months. I reassure the most reverend Primate that work continues, and we have set an ambitious target for the national living wage, building on the progress so far. Supported by the national living wage, the lowest paid, defined here as full-time workers in the fifth percentile, saw their wages grow by 11% above inflation between April 2015 and April 2019. This is higher than at any point across the earnings distribution.

The Government have also confirmed an ambitious target for the national living wage to reach two-thirds of median earnings by 2024, if economic conditions allow. Since the national living wage was introduced in 2016, it has delivered the fastest pay rise for the lowest paid in 20 years. I accept that this may not go far enough for some noble Lords—the noble Lord, Lord Boateng and the right reverend Prelate the Bishop of Durham—who would like to see a universal basic income, but I believe that this is solid progress.

For those who need it, the welfare system provides a strong safety net. Before the current response to Covid-19, the Government were continuing to spend more than £220 billion on the benefits system, including an additional £1.7 billion a year on universal credit, increasing by £1,000 the amount that 2.4 million households could earn each year before their universal credit begins to be tapered.

Coronavirus has been one of the biggest crises that this country has faced in 80 years. The latest figures show that over 29,000 people have tragically died in the UK. At this time, the Government are rightly focused on saving lives. Our science-led action plan aims to slow the spread of coronavirus so that fewer people need hospital treatment at any one time, protecting the NHS’s ability to cope. That is why the Government have announced unprecedented support for public services, individuals and businesses to protect against the current economic emergency. We will protect, as far as possible, people’s jobs and incomes. In 2018-19, income inequality was lower than in 2009-10. In 2020-21, households in the lowest income decile will receive more than £4 in public spending for every £1 they pay in tax.

We are ensuring that the public sector has the funds it needs. The coronavirus emergency response fund will provide more than £14 billion to public services, including the NHS and local authorities. This builds on the £5 billion fund announced at the Budget and includes nearly £2 billion for the devolved Administrations. On top of this, we have announced a package to help individuals affected by the crisis. This includes the Coronavirus Job Retention Scheme to help firms keep millions of people in employment. As at 3 May, 800,000 employers had claimed £8 billion to help protect 6.3 million furloughed jobs. To support those on low incomes through the outbreak, we have also announced a package of temporary welfare measures. This includes a £20 per week increase to the universal credit standard allowance and working tax credit basic element. We have increased the local housing allowance rate so that it covers the cheapest third of all local rents, and we have extended statutory sick pay to self-isolators and those in their households.

We know that, for some, this period will be more difficult than for others. We are making every effort to ensure that the most vulnerable are protected. Our shielding package is in place to safeguard over 2 million people in England with the most serious under- lying health conditions. To answer my noble friend Lord Caithness, we have provided assistance to some 325,000 people, who have received predominantly food supplies in the last seven days. On the broader question of whether a trade deal will reduce the quality of food coming into this country, there has to be a balance between keeping food affordable for people such as those mentioned by the noble Baroness, Lady Boycott, to ensure that they are able to eat healthily, while not undermining in any way the quality of the food we eat.

We have worked with local authorities and homelessness charities to offer safe accommodation to over 90% of rough sleepers, either on the streets or in communal shelters, who were known to local authorities at the start of this crisis. In addition to the wider package of support for English local authorities, we have provided £3.2 million specifically to meet the cost of accommodating rough sleepers with Covid-19 who needed to self-isolate. This is on top of the £492 million already committed to address homelessness and rough sleeping in 2020-21. Public Health England has also published guidance for those working in hostels and day centres. We absolutely understand that local authorities are under considerable pressure, both to continue providing essential services and to respond to the challenges of Covid-19 during these difficult times. This is why we have provided an additional £3.2 billion for local authorities, as well as further measures to aid their cash flow.

Now, more than ever, charities and those who work and volunteer for them are providing essential services to support the most vulnerable. We are supporting them with a £750 million package, including funding for hospices, St John Ambulance, Citizens Advice and charities supporting vulnerable children, victims of domestic abuse and disabled people. As well as this, the Government have pledged to match whatever the public donate to the BBC’s “Big Night In” campaign with the same amount to support further charities.

I will now try to pick up on the individual points raised by noble Lords. To save time, I will not mention everyone by name. A number of noble Lords asked about furlough extensions. I can confirm that the Chancellor has made it clear that there will be no cliff edge to the job retention scheme. The Government are working at pace to come up with the most effective way to wind down the scheme and ease people back into work in a measured way. We will ensure that the approach is coherent, with any necessary non-pharmaceutical interventions to protect public health, while considering the status of the economy, the scheme’s affordability and the need for certainty for employers and employees.

A number of noble Lords asked about rents and protection for tenants, particularly vulnerable ones. The Coronavirus Act required that landlords would be unable to start proceedings to evict tenants for at least a three-month period. We have targeted support at lower-income households to provide financial support to pay rent. Universal credit provides support for housing costs; we have increased the amount available to ensure that the lowest third of local rents will be covered in full.

The noble Lord, Lord Young, asked about the longer term and restoring a fiscal balance to the economy. As he will know, we have spent the last 10 years bringing borrowing and debt under control. This has ensured that our finances were well placed to deal with some of this crisis. We expect the spike in borrowing to be temporary; under the OBR scenario, borrowing is expected to fall back reasonably quickly in 2021-22 as temporary policy costs end and the economy starts to recover. By the end of the scenario horizon, the OBR expects borrowing to have returned to close to the Budget forecast.

The Government are currently considering options to fund social care, which would consider the financial impact on taxpayers as a whole, along with competing demands on taxpayers’ money from other public services and how to fund reform on a sustainable balance. All views, solutions and concerns are being considered as part of that process; we are absolutely looking at the longer term.

The most reverend Primate asked about the real living wage. As I have mentioned, low-paid workers will benefit from the April 2020 increase in the national living wage. That represents an increase of over £930 for the annual earnings of a full-time worker on the national living wage, equivalent to a total increase in annual earnings of more than £3,600 since its introduction in April 2016. The Government have also confirmed their target to push on, as I mentioned earlier, to reach two-thirds of median earnings by 2024 as long as economic conditions are secure. The Government are responsible for setting the legal minimum wage floors, which protect vulnerable low-paid workers. We commend employers who pay more when they can afford to do so. The Living Wage Foundation is clear that its measure is voluntary.

Regarding pay rises for key workers, they deserve to be properly rewarded for the work that they do. Last July the Government delivered a second year of above-inflation pay rises for almost 1 million public sector workers, in addition to the previously agreed multiyear pay deal for NHS non-medical staff, including nurses. More than 1 million NHS workers continue to benefit from the three-year “Agenda for change” pay deal. The reforms will see the starting salary for a newly qualified nurse rise to £24,900 in 2020-21, 12.5% higher than in 2017-18. The Government have also agreed temporary pay and pension packages for a number of public sector workforces, including the NHS, to increase system capacity and recognise their work tackling the Covid-19 outbreak.

We are determined to do everything we can to ensure that our social care workforce is safe, supported and truly valued. Supporting our workforce is one of the four pillars of our core action plan, published on 15 April. In March we provided local authorities with £1.6 billion of emergency funding which could be used to pay for additional costs we knew the sector would face. In April we announced a further £1.6 billion of emergency funding for local authorities.

A number of noble Lords raised universal basic income—UBI. There are, of course, fundamental problems with the realities of UBI. A flat rate of UBI would not take into account people’s circumstances and the additional needs and costs faced by some individuals. Therefore, it would not target support where it was most needed. The Government have therefore announced alternative measures to support people’s jobs and incomes, which can be delivered relatively quickly and effectively through existing benefits. At a time when the DWP and HMRC are experiencing unprecedented demand, the Government have to prioritise the safety and stability of the existing benefit and tax system.

The noble Baroness, Lady Warwick, raised sustainable public housing. The only way to stabilise and improve affordability over the long term is to build more houses in the right places. That is why this Government are committed to building at least 1 million more homes by the end of this Parliament, continuing the progress towards our target of delivering 300,000 additional homes a year, on average, by the mid-2020s. More than 241,000 additional homes were delivered in 2018-19, the highest level in the last 32 years, representing a 66% increase since 2009-10. Since 2010 we have increased housing supply by more than 1.5 million, including 460,000 affordable homes. We have helped more than 600,000 additional households purchase a home since spring 2010 through government-backed schemes, including Help to Buy and the right to buy.

Noble Lords raised free school meals. The Government are committed to ensuring that children who receive free school meals do not miss out. We have asked schools to work with their existing catering providers to continue to offer free school meals. Demand has been extremely high, but they are reaching families and we continue to work with our suppliers to improve the service. We thank schools, which we know are doing their best for parents and children while the system is upgraded. It is also worth pointing out that while we considered initially that a 20% occupancy of schools would be safe and reasonable during the crisis, we are seeing less than 2%, so there is the opportunity for more children to be in school, particularly children who are vulnerable, who were considered a priority area, along with the children of key workers, at the time.

Noble Lords raised child poverty and benefits. The Government’s official statistics on poverty for 2018-19 show that there was little change in overarching poverty rates between 2017-18 and 2018-19. Child poverty rates fell before housing costs, and the relative child poverty rate reduced by 2 percentage points and the absolute rate by 1 percentage point. Since 2010 there are 100,000 fewer children living in absolute poverty and the absolute child poverty rate has fallen by 2%.

On progressive taxation, as I said earlier, the top 1% of taxpayers are estimated to have paid over 29% of income tax in 2018-19. The poorest 60% of households receive more in public spending than they contribute in tax. The Government have already taken steps to ensure that those with the broadest shoulders bear the greatest burden, including reforming dividend taxation, reducing the amount of tax relief on pension savings that an individual can accumulate over their lifetime, and ending permanent non-domiciled status.

Between 2010 and 2015 we took 4 million people out of income tax altogether. Around 1.7 million people have been taken out of tax between 2015-16 and 2019-20. We cannot add those two figures together because one uses the RPI and the other the CPI, but it gives an indication of the work we have done and the priority we have focused on some of the lowest paid. The income tax personal allowance was £6,475 in 2010-11. That is rising to £12,500 in 2021. The basic rate—the lowest rate of income tax—was 20% in 2010 and has remained stable but it is now applying to fewer people.

A number of noble Lords raised the issue of the environment. The Government continue to take our environmental responsibilities very seriously and are committed to meeting climate change and wider environmental targets. The Budget reinforced the UK’s strong track record in this area. Announcements included £640 million for tree planting and peatland restoration, over £1 billion for further support for ultra-low emission vehicles, at least doubling funding for energy innovation and tax measures to encourage greater energy efficiency and reduce plastic waste.

The most reverend Primate the Archbishop of Canterbury asked about support for migrants. We are facing a rapidly evolving and unprecedented global health emergency and the Government are committed to doing whatever it takes to support people through this. We have announced a range of measures to ensure that people can stay safe and many of these are available to those with a no recourse to public funds condition, such as the Coronavirus Job Retention Scheme, the Self-employment Income Support Scheme, protections from eviction for renters and a mortgage holiday for those who need it. Statutory sick pay and some contributory-based benefits are not classed as public funds, so are also available to all. Local authorities may also provide basic safety net support if it is established that there is a genuine care need that does not arise solely from destitution, for example when there are community care needs.

I am running out of time, but what I have tried to illustrate is that we are making a lot of interventions to support people, in particular the most vulnerable in society. The range of contributions we have heard today demonstrates what a broad and complex issue this is. I have highlighted some of our actions. I will finish by thanking noble Lords for their contributions, and especially the most reverend Primate for securing this valuable debate. I am sure that noble Lords will join me in once again giving him our very best wishes ahead of his forthcoming retirement.

Tax Avoidance

Lord Agnew of Oulton Excerpts

Wednesday 29th April 2020 Lords Chamber

[The Minister of State, Cabinet Office and the Treasury (Lord Agnew of Oulton) (Con)]

My Lords, the initiatives introduced by the Government to address the economic impact of Covid-19 are designed to support businesses that contribute to the UK economy. Since 2010, we have introduced over 100 new measures to tackle avoidance and evasion, securing and protecting over £200 billion that would otherwise have gone unpaid. The Government remain committed to continuing their strong track record on clamping down on those who seek to avoid or evade paying their fair share.

[Lord Berkeley (Lab)]

My Lords, I am grateful to the Minister for his response. The OBR is suggesting a 35% fall in GDP. As the Minister said, the Government obviously need as much tax revenue as they can get, but it needs to be fair. In the Times, there are reports of examples from Arcadia, The Range, and Starbucks, which is in line for rate relief alone of £28 million. Virgin Active, which is on a turnover of £168 million and paid virtually no tax, could gain £16 million in rate relief. There are similar examples of many other companies, but will the Minister confirm that it is wrong for companies making large profits in the UK not to pay their fair share of tax? Will the Government refuse to give such companies rate relief?

[Lord Agnew of Oulton]

My Lords, all the support that we have offered has been aimed at keeping businesses going and securing employment, mostly through the furlough scheme. While I take on board the noble Lord’s concerns, I believe that the rapid action that we have taken, which has to be general by the definition of the time period that we have had to operate in, has helped to secure businesses’ long-term future, which is our priority.

[Lord Livermore (Lab)]

My Lords, many other countries have set out strict requirements to prevent state support enabling not only tax avoidance but excessive executive pay and high dividend payments. Do the Government support a moratorium on dividend payments and share buybacks for companies that receive state support, and will they introduce specific rules to prevent tax-avoiding companies benefiting from government schemes?

[Lord Agnew of Oulton]

I assure the noble Lord that all these things are continuously under review. As I mentioned briefly in the previous Question, we have introduced in days things that could often take years, so by definition we are keeping a very careful eye on them. To give the noble Lord some reassurance, with most of these loan schemes, businesses have to show that they are viable, and if they are going to continue to pay dividends the banks will take a view on that and decide whether it is appropriate. These are not automatic entitlements; they have to be justified.

[Baroness Falkner of Margravine (Non-Afl)]

My Lords, I declare my interest related to the Bank of England, as set out in the register. The Minister referred to the plethora of regulation and law that came in in the period after 2008-09, but he will recall that the bankers who were bailed out paid themselves excessive bonuses and therefore suffered in the court of public opinion. Will the Government go a little further and at least publish the list of companies that are benefiting from all kinds of taxpayer support on offer this time, so that we can see who is benefiting from it in a transparent manner? Where the Government give support to those companies, will they at least require an equity holding as collateral and preferably give only loans, not grants?

[Lord Agnew of Oulton]

The noble Baroness makes very good points, and I will certainly take her ideas back to the Treasury. We also ought to acknowledge that a number of senior managers have announced pay cuts during this difficult time. Our overall macro concern at the moment is to protect businesses and employment and to make sure that we can bounce back as quickly as possible from this crisis, but I take on board her helpful comments.

[The Lord Speaker (Lord Fowler)]

The noble Lord, Lord Leigh of Hurley, does not appear to be there. I call the noble Baroness, Lady Kramer.

[Baroness Kramer (LD)]

My Lords, quite a number of companies will make extraordinary profits as a consequence of Covid-19. At this point in time it is hard to identify which they are, but we can see that it is happening with some traders and private equity players, and it may well be happening in the digital industry, which is becoming more and more dominant and, as others have said, pays almost no tax in the UK despite the size of its presence. Following our exit from lockdown and the pandemic, will the Government look at a windfall tax so that those who have sacrificed during the pandemic understand that the burden is being spread over everyone’s shoulders?

[Lord Agnew of Oulton]

The noble Baroness makes a sound point. It is just too early to make those sorts of assessments. I want to pick up on the point about digital companies. We have introduced the digital services tax, which came into play on 1 April this year; it is a 2% tax on the revenues which search engines and social media platforms derive if they generate more than £2 billion over the next five years. We have made a start on this but, as the noble Baroness will probably know, these things need international collaboration. If there are excessive profits over the next few months, we will of course review things.

[Lord Harries of Pentregarth (CB)]

I am sure the Minister is aware that 80% of the population believes that registering a company abroad in a tax haven to avoid paying full UK tax is wrong. At a time of unprecedented social solidarity, would it not help to cement that solidarity if the Government made it clear that they will offer bailouts only to companies that do not follow this practice? After all, France, Poland and Denmark have done that. It would be sad if we stayed a long way behind those countries. If I may, I will send the Minister a list of five criteria drawn up by the fair tax alliance to help the Government to make fair decisions in this area.

[Lord Agnew of Oulton]

I take on board the noble and right reverend Lord’s points, and I would be interested to see the five criteria that he mentioned. I reiterate that the thrust of our approach has been to support businesses that are active in this country with premises and people. In a way, our approach is quite similar to that of Poland, because we require that foreign businesses have a permanent establishment here. I reassure the noble and right reverend Lord that we have taken a huge amount of action over the past 10 years to clamp down on poor tax practice.

[Baroness Altmann (Con)]

I support the Government’s broad, sector-wide approach to helping to preserve jobs as an emergency measure, but the companies based offshore that have avoided paying taxes in the UK have in many cases made windfall profits from those at home in isolation. Echoing the remarks of the noble Baroness, Lady Kramer, should we not look at ways of introducing windfall taxes so that these companies contribute fairly to the taxpayer’s support for other firms that have suffered Covid-related losses as a consequence?

[Lord Agnew of Oulton]

I think that most of us share the noble Baroness’s views on abusive tax measures by companies. Apart from all the measures that we have introduced over the past seven or eight years, we announced that we will legislate this year in a Finance Bill for 2021 to strengthen HMRC’s existing anti-avoidance powers to make it more difficult for promoters, in this case, to sidestep their obligations. We will continue to bear down wherever we can.

[Lord Purvis of Tweed (LD)]

One measure highlighted by the Minister was the new tax evasion offence for corporations and partnerships that do not act properly in their operations. Will the Minister consider expanding that offence to include enterprises that aggressively pursue individuals—mainly those who are potentially vulnerable or re-entering the workforce, such as NHS workers. Tax evasion is an act that morally subverts the law, especially for self-employed people who will have to pay extra tax at the end of this crisis.

[Lord Agnew of Oulton]

I am sure that the noble Lord will contribute to the legislation when it comes through. I support his ideas. I assure noble Lords that we have closed the tax gap quite dramatically over the past 10 years. In 2005-06, it was £4.9 billion; in 2017-18, it was £1.8 billion. HMRC has won 90% of the avoidance cases that it has litigated on since 2018.

[The Lord Speaker]

My Lords, I regret to say that the time allowed for this Question has elapsed. I apologise to noble Peers who were excluded; I think there were two or three of them.