Economy: Interest Rates

Debate between Lord Barnett and Lord Newby

Wednesday 18th June 2014 Lords Chamber

[Lord Barnett]

To ask Her Majesty’s Government what is their assessment of the analysis of likely interest rate movements by the Governor of the Bank of England.

[Lord Newby (LD)]

My Lords, the UK’s monetary policy framework, set out in the Bank of England Act 1998, gives operational responsibility for monetary policy to the independent Monetary Policy Committee, the MPC. Decisions on setting bank rates are for the judgment of the MPC, with the aim of meeting the inflation target of 2% in the medium term.

[Lord Barnett (Lab)]

My Lords, I take it from that that the noble Lord is saying that the Chancellor agreed with the Governor of the Bank of England. It was a long-winded Answer but I assume that was what was saying. It has very serious consequences in many different areas for people who are already paying interest rates of well above 0.5%. However, the biggest problem is growth. At the moment it is very good, but the consequences of higher interest rates could be very serious for growth, and could mean that growth levels might not be sustainable. What evidence does the Minister have for saying that inflation is going to rise so much that we require this interest rate hike?

[Lord Newby]

My Lords, I did not actually say that. As the noble Lord is aware, the level of inflation at the moment is at a low of 1.5%. The Governor of the Bank of England has made it clear, through the work in reviewing forward guidance, that interest rates will rise when the Bank believes that excess capacity in the economy is being used up and where the forward outlook is for higher inflation over a two-year period, which is the remit of the MPC. The Bank has made it very clear, though, that any increase in interest rates, whenever it takes place, will be gradual, and that any new equilibrium rate of interest that is reached is likely to be significantly less than the 5% that obtained before the financial crash.

Airports: Heathrow Third Runway

Debate between Lord Barnett and Lord Newby

Tuesday 17th June 2014 Lords Chamber

[Lord Newby]

My Lords, I am not going to speculate on what might happen in any scenario, but one of the key points which I think lies behind the noble Lord’s question is that having an aviation hub in the UK is extremely important for the economy. The aviation sector employs tens of thousands of people and the Government believe that maintaining that hub status is very important.

[Lord Barnett (Lab)]

Would the Government care to give us a case for delaying the decision—or is it the Lib Dems’ fault?

[Lord Newby]

I am tempted to say that I sometimes think that everything is the Lib Dems’ fault. However, this is an extremely important decision. It is a difficult decision, and it is very important that it is taken after the fullest possible consideration of all the factors.

Finance: Interest Rates

Debate between Lord Barnett and Lord Newby

Tuesday 18th March 2014 Lords Chamber

[Lord Barnett]

To ask Her Majesty’s Government whom they consider ultimately responsible for United Kingdom interest rates.

[Lord Newby (LD)]

My Lords, the UK’s monetary policy framework, set out in the Bank of England Act 1998, gives operational responsibility for monetary policy to the independent Monetary Policy Committee. Decisions on setting the bank rate and the remuneration rate on reserves are for the judgment of the MPC. It uses its macroeconomic tools to aim to meet the inflation target of 2% in the medium term.

[Lord Barnett (Lab)]

My Lords, the noble Lord did not quite answer my Question, about where the ultimate power rests. The Bank of England Act, which he cited, is worth quoting. Section 19(2), on reserve powers—as he knows, the Treasury never gives away old powers without some reserves—says:

“An order under this section may include such consequential modifications of the provisions of this Part relating to the Monetary Policy Committee as the Treasury think fit”.

In those circumstances, surely the noble Lord must accept that the real power rests with the Chancellor, who has power as he thinks fit. Will he be so kind as to tell us, first, why he normally never answers the question properly and, secondly, whether he now accepts that the Chancellor has the ultimate power, as my Question asked?

[Lord Newby]

My Lords, interest rates are set by the Monetary Policy Committee. The noble Lord quoted rather selectively from the Act. If he had read Section 19(1) instead of Section 19(2), he would have found that the Treasury’s powers to which he referred are applicable only if they are,

“required in the public interest and by extreme economic circumstances”.

In the absence of “extreme economic circumstances”, the Treasury has no reserve powers.

Economy: Inflation

Debate between Lord Barnett and Lord Newby

Tuesday 11th March 2014 Lords Chamber

[Lord Newby]

My Lords, I agree with the EEF on the desirability of wage increases, particularly for those on lower incomes and not only, as has happened all too frequently in recent years, for those on the board. I also agree that raising the income tax threshold further is an excellent way of helping people on modest incomes and I hope that we can do more of it.

[Lord Barnett (Lab)]

My Lords, I take it that the noble Lord agrees with Robert Peston of the BBC—I am not referring to my dear and noble friend Lord Peston—who said that, on the figures given by the Government, the change from RPI to CPI would cost £83 billion over 15 years. That would mean substantial losses in retirement for pensioners in private sector businesses, not those in the public sector. This is a substantial loss in revenue for those people. What plans do the Government have to compensate those pensioners in retirement, who will suffer considerably?

[Lord Newby]

My Lords, the noble Lord knows that this Government and the previous Government decided to move to CPI from RPI as a measure of inflation simply because we believe it is a more appropriate way of measuring inflation. It is as straightforward as that. Everyone who is affected by CPI rather than RPI will be affected by a better measure of inflation.

Taxation: Fuel Duty

Debate between Lord Barnett and Lord Newby

Wednesday 15th January 2014 Lords Chamber

[Lord Newby]

My Lords, the policy that we have already adopted will assist people in those areas, as it will everywhere else. We are looking at the scope for extension of the rural fuel rebate scheme, which gives an additional 5p rebate in the most sparsely populated areas. We hope to be able to make an announcement of that in the relatively near future.

[Lord Barnett (Lab)]

My Lords, the Question on the Order Paper asked the Minister a simple question. Should not his answer have been no?

[Lord Newby]

No, my Lords. The noble Lord knows better than anybody else that it would be foolish to set out at this point firm plans for individual taxes for the course of the next Parliament.

National Savings and Investments

Debate between Lord Barnett and Lord Newby

Tuesday 14th January 2014 Lords Chamber

[Lord Newby]

My Lords, the Government are not doing quantitative easing, the Bank of England is. On the rate payable on National Savings, as the noble Lord will know, the role of National Savings is to contribute to the Government’s funding requirements. In doing that it has to operate in line with market rates because otherwise the Government are paying more for their money via National Savings than through the gilts market.

[Lord Barnett (Lab)]

My Lords, does the noble Lord’s answer to the noble Lord, Lord Lamont, mean that the Chancellor is advising the Governor of the Bank of England that if he has early plans to increase interest rates the Chancellor will use the reserve powers given to him under the Bank of England Act to stop it?

[Lord Newby]

My Lords, the reserve powers in the Bank of England Act are to be used principally when inflation is outside the target level. That is not the case at the moment. The question of interest rates is very much a matter for the Bank of England. It has adopted a new policy that incorporates forward guidance, which was agreed with the Chancellor in the middle of last year, and that is the basis on which it is operating.

Banking: Lending

Debate between Lord Barnett and Lord Newby

Tuesday 12th November 2013 Lords Chamber

[Lord Barnett]

To ask Her Majesty’s Government what steps they will take to encourage banks to prioritise their lending to the manufacturing sector compared to the property sector.

[Lord Newby (LD)]

My Lords, the Government are committed to improving the flow of credit to all businesses, including those in the manufacturing sector. The Funding for Lending scheme has contributed to an improvement in the bank funding environment and banks are now passing this on to the real economy, including to small businesses. The Business Bank and the Business Finance Partnership are developing alternative sources of finance for smaller businesses.

[Lord Barnett(Lab)]

That is a very different story from the one given by the chief executive of RBS, who, as the noble Lord will know, has told us that the bank is working very closely with the Treasury—by which he means Treasury officials. RBS has now set up an internal bad bank, while the Chancellor, whom I assume the officials talk to occasionally, has refused to set up a bad bank. Between them, they have found £38 billion of high-risk assets which they have decided will go into the bad bank. They have also said that they propose to finish the rest after writing off £4.5 billion by 2016. For those who owe that money, there is now an incentive to wait until the very end, which will mean the bank having to write off even more. Is that something that the officials, with the Chancellor’s consent, have agreed to?

[Lord Newby]

My Lords, as the noble Lord knows, there was a review about whether there should be a formal good bank/bad bank split of RBS. The Government decided that the cost and disruption of doing this was not justified. However, as the noble Lord says, the bank has itself decided to make an internal split, enabling it to have a greater focus on lending and on dealing in a more orderly way with many loans which will not be repaid or will be only partially repaid. Many of these are related to the property sector.

--- Later in debate ---

[Lord Newby]

My Lords, it is important to look at what is happening in the real world. The CBI’s SME trends survey, published yesterday, showed that SME business optimism was rising at the fastest rate since the survey began some 25 years ago. Among SMEs, output grew for the fourth quarter and is expected to grow more rapidly going into 2014. More generally, vacancies—the best indication of growing or falling demand for labour—are rising at the sharpest rate for more than six years.

[Lord Barnett]

My Lords, the noble Lord forgot to answer my question. Did the Chancellor agree with his officials in setting up the internal bad bank?

[Lord Newby]

My Lords, the decision on setting up the bad bank was, primarily, for the management of RBS. The Treasury and UKFI are obviously in regular contact with RBS.

Bank of England: Monetary Policy Committee

Debate between Lord Barnett and Lord Newby

Monday 14th October 2013 Lords Chamber

[Noble Lords]

Hear, hear!

[Lord Newby (LD)]

My Lords, I am sure that the whole House will wish to join me in congratulating the noble Lord on his 90th birthday. There are clearly two Barnett formulae. There is first the public one that we regularly discuss in your Lordships’ House, but secondly there must be a secret elixir that enables the noble Lord to continue to play an energetic part in our deliberations undiminished by the passage of the years. We wish him many happy returns.

The UK’s Monetary Policy Framework, set out in the Bank of England Act 1998, gives operational responsibility for monetary policy to the independent Monetary Policy Committee. The Chancellor of the Exchequer has frequent discussions with the Governor of the Bank of England on a wide range of issues in the UK economy.

[Lord Barnett (Lab)]

My Lords, I thank the noble Lord for his initial comments. In the light of those, I had better be kind to him, but I am afraid that when he answered a similar question on 9 July, I believe that he misled the House on an important issue of the independence of the Monetary Policy Committee and the Governor of the Bank of England. I gather that he was depending on a command paper and on an exchange of letters between the Chancellor and the governor, but surely you cannot change a major Act of Parliament—the Bank of England Act 1998—by an exchange of letters and a command paper. That is clearly impossible. Can he explain how he has done that? The independence of the Monetary Policy Committee is important, as the new governor has told the country that he believes in long-term forecasts. He has forecast interest rates which clearly would be affected by QE, on which he is apparently being given unfettered power. Whether or not he has those powers, could the Minister explain and confirm that the Chancellor has agreed to allow the governor and the Monetary Policy Committee unfettered control over interest rates and QE?

[Lord Newby]

My Lords, that is what the Bank of England Act says. The Monetary Policy Committee is operationally independent. The remit of the Monetary Policy Committee has to be set by the Governor of the Bank of England. It has to be renewed every year. It was renewed this year. The difference between this year and previous years is that the Chancellor asked the governor to look at possible methods of forward guidance which would give greater certainty to the markets about the medium-term movement of interest rates and, indeed, QE. That is exactly what the governor did, in line with the request from the Chancellor which was in line with the provisions of the Bank of England Act.

Taxation: VAT on Retrofitting Buildings

Debate between Lord Barnett and Lord Newby

Thursday 25th July 2013 Lords Chamber

[Lord Newby]

My Lords, I think that we are all aware of the complications of trying to make a building such as this energy efficient, and I pay tribute to the work being done in that respect. Sadly, under EU legislation, the scope for a reduced rate of VAT on non-residential royal palaces is, I am afraid, non-existent. However, I commend, and refer the noble Lord to, the work that the National Trust is doing on green energy projects—for example, installing a biomass boiler system at Chirk Castle, which just shows what can be done. I remind the noble Lord that the Green Deal will apply to homes that are listed buildings.

[Lord Barnett]

My Lords, is the noble Lord’s strong support for energy saving why his right honourable friend the Chancellor is so strongly supporting shale gas, especially in Lancashire, where many jobs will be created? Lancashire will be very grateful for the support of the Chancellor.

[Lord Newby]

Shale gas is a significant potential new source of energy. As the noble Lord will be aware, we announced a series of measures in the spending review that will facilitate the development of shale gas. We think that it can play an important part in our future energy mix. Of course, the development of it will generate a number of jobs.

Banking: Regulation

Debate between Lord Barnett and Lord Newby

Thursday 11th July 2013 Lords Chamber

[Lord Newby]

Yes, my Lords, and of course that is exactly what we are doing with the banking reform Bill.

[Lord Barnett]

My Lords, the draft banking Bill came from the House of Commons yesterday. I have only just had a chance to glance at it, but it clearly is not quite in line with what was recommended on the important issue of regulation regarding ring-fencing. Why not?

[Lord Newby]

My Lords, as my colleague the Financial Secretary has made clear in another place, there are some aspects of the commission’s views on the speed and timing of ring-fencing that the Government are going to look at further and revisit when the issue comes back to your Lordships’ House. We have Second Reading of the Bill on 24 July, and my noble friend Lord Deighton will look forward to telling the House more about the provisions of the Bill at that point.

Bank of England: Monetary Policy Committee

Debate between Lord Barnett and Lord Newby

Tuesday 9th July 2013 Lords Chamber

[Lord Barnett]

To ask Her Majesty’s Government what is the Chancellor of the Exchequer’s assessment of the latest statement by the Monetary Policy Committee of the Bank of England.

[Lord Newby]

My Lords, the Bank of England Act 1998 gives powers of operational responsibility for monetary policy to the independent Monetary Policy Committee of the Bank of England. The updated MPC remit set at Budget 2013 by the Chancellor requests the MPC to provide an assessment of the merits of using intermediate thresholds in monetary policy in its August 2013 inflation report, which will be published on 7 August.

[Lord Barnett]

My Lords, in the House last week, in answer to me, the Minister quoted the Prime Minister as saying at the G8 that the UK Government were “supporting … [an] active monetary policy”. How can he say that when it is not their responsibility? Is it because the new governor is virtually unsackable at the moment? Or is it that the Government are simply not interested at all in monetary policy? The new governor took his first meeting, to which the Minister referred. During the meeting, unusually for a governor, he gave some guidance and said that interest rates would be low for a long time, and could even go a little lower. In those circumstances, the pound dropped substantially. Some people are very happy with that. Is the Chancellor?

[Lord Newby]

My Lords, on the first point, the Government updated the remit of the Monetary Policy Committee at Budget 2013 to give it greater powers to clarify the trade-offs that are involved in setting monetary policy to meet a forward-looking inflation target. That is what the governor and the Monetary Policy Committee will do over the coming months. On exchange rate policy, as the noble Lord knows, the previous Government did not have a policy for an exchange rate, and this Government do not have one, either.

G8: Eurozone and UK Growth

Debate between Lord Barnett and Lord Newby

Tuesday 2nd July 2013 Lords Chamber

[Lord Barnett]

To ask Her Majesty’s Government what discussions the Prime Minister had on the issue of economic growth in the eurozone and the United Kingdom at the recent G8 summit.

[Lord Newby]

My Lords, the G8 summit economic discussion focused on the issues that matter—jobs, growth and mending our economies. The UK’s approach to supporting the recovery through fiscal sustainability, active monetary policy and structural reforms was shared by all other G8 members.

[Lord Barnett]

My Lords, I am not sure whether that means anything. However, can the noble Lord tell me whether it means that the Prime Minister explained that there was nothing in last week’s review to help growth? In practice, we may, happily, get some over the next year or so but the Bank of England has reversed its former forecast for 2015. In fact, as the Chief Secretary has said, the expenditure for infrastructure will not start until 2015, so what on earth did the Prime Minister tell the summit about what we are doing to enhance economic growth, which is so vital, between now and 2015?

[Lord Newby]

My Lords, the noble Lord has no doubt seen the report today from the British Chambers of Commerce, which shows that services and manufacturing report confidence rising to levels last seen in the last pre-recessionary period. Service exports reached levels not seen since 1994, and the proportion of the BCC’s members who are exporting rose in a year from 32% to 39%.

Bank of England: National Debt

Debate between Lord Barnett and Lord Newby

Monday 24th June 2013 Lords Chamber

[Lord Newby]

My Lords, the Government are not responsible for the way in which banks may or may not raise capital. We are very keen for the banks to continue to lend money to SMEs and, indeed, to increase the extent to which they do it. One way in which we hope that this will happen is through increased competition in the banking sector. We hope that current trends in some aspects of that, with some of the new smaller banks lending to SMEs, will continue.

[Lord Barnett]

My Lords, does the Minister recall that in 2010 the Chancellor forecast that the total national debt as a percentage of GDP would start to fall in 2015? He later changed that to 2018. Now that forecast might need to be altered, given the review that he will announce on Wednesday, and further cuts. When does the Minister expect the national debt itself to start falling?

[Lord Newby]

My Lords, the noble Lord is right to say that the point at which the national debt will fall as a proportion of GDP has been pushed out by a couple of years. The statements made at the Budget showed that we still believe that it will happen in 2017-18, and the spending round being announced later this week is designed to ensure that we meet that target.

Economy: Fiscal Framework

Debate between Lord Barnett and Lord Newby

Tuesday 4th June 2013 Lords Chamber

[Lord Barnett]

To ask Her Majesty’s Government what was meant by the reference to “flexibility in the fiscal framework” in the Chancellor of the Exchequer’s speech to the International Monetary Fund in Washington in April.

[Lord Newby]

My Lords, the Government’s fiscal strategy is grounded in the clear, credible and specific consolidation plans and new fiscal framework announced in the June Budget of 2010. The fiscal mandate to achieve a cyclically adjusted current balance by the end of the rolling five-year forecast period has ensured a flexible fiscal response to economic developments by allowing the automatic stabilisers to operate and by protecting the most productive public investment expenditure.

[Lord Barnett]

My Lords, if that was an answer to my Question, I thank the Minister. The Chancellor used to be proud to claim the IMF as a supporter of his policies, but it has now said a number of times, and it is worth repeating, that the Chancellor might revisit his austerity programme. Does that mean that he is or he is not?

[Lord Newby]

My Lords, I know that the noble Lord is a great reader of IMF reports and that he will, therefore, have read the following from its recent report:

“The commitment to a medium-term plan has earned the government credibility … While adhering to the medium-term framework, the government has shown welcome flexibility in its fiscal program”.

We agree.

Banking: Quantitative Easing

Debate between Lord Barnett and Lord Newby

Wednesday 27th March 2013 Lords Chamber

[Lord Barnett]

To ask Her Majesty’s Government whether they agree with Sir Mervyn King, the Governor of the Bank of England, that quantitative easing should be increased by £25 billion, as stated at the most recent meeting of the Monetary Policy Committee.

[Lord Newby]

My Lords, the Bank of England Act 1998 gives powers of operational responsibility for monetary policy to the independent Monetary Policy Committee of the Bank of England. It is for the MPC to make decisions on monetary policy, including the scale of quantitative easing, based on its own judgment and the balance of risks to inflation in the medium term.

[Lord Barnett]

My Lords, under Section 19 of that Act the Chancellor has power by order to stop the committee doing that just that. Can I assume that as he did not say he did, he does not oppose the idea of there being more QE? On the other hand, we have a new remit for the new Governor of the Bank of England. The Chancellor said:

“the Monetary Policy Committee may need to use unconventional monetary instruments to support the economy”.—[Official Report, 20/3/13; col. 935.]

Does that not mean that there will have to be a change to the Bank of England Act? Without it, how can there be such a change?

[Lord Newby]

My Lords, to deal with that last point I will say that we do not need a change in the Bank of England Act because its basic provisions—namely, of inflation-targeting, and this year, as in previous years, we have a 2% inflation target—remain in place. The Chancellor has suggested, in changing the remit, that it would be appropriate for the MPC to deploy new explicit forward guidance, including intermediate thresholds, in order to influence expectations and meet its objectives more effectively.

Bank of England: Monetary Policy

Debate between Lord Barnett and Lord Newby

Tuesday 19th March 2013 Lords Chamber

[Lord Barnett]

To ask Her Majesty’s Government whether they intend to give more powers over monetary policy to the Bank of England.

[Lord Newby]

My Lords, the Bank of England Act 1998 already gives powers of operational responsibility for monetary policy to the independent Monetary Policy Committee of the Bank of England. The Act requires the Treasury to specify the objectives of the MPC at least once every 12 months. The Chancellor set the remit for the MPC at Budget 2012 to target inflation of 2%, as measured by the 12-month increase in the consumer prices index.

[Lord Barnett]

My Lords, there have been widespread reports that the Chancellor was looking at that remit with the possibility of changing it. I appreciate that it may have been only a Lib Dem Budget leak but is it true and, if so, what does he propose to do about that kind of leak? Does the Chancellor, as has been said, believe in a looser monetary policy, and has he told the new Bank governor that that is what he wants him to do?

[Lord Newby]

My Lords, as the noble Lord will be aware, it is Budget Day tomorrow. That is the day on which the Chancellor will re-express the remit for the Monetary Policy Committee. I am afraid the noble Lord will have to wait for 24 hours.

Regional Development

Debate between Lord Barnett and Lord Newby

Tuesday 12th March 2013 Lords Chamber

[Lord Barnett]

My Lords, the Barnett formula, which, sadly, bears my name, should have been changed a long time ago, as a powerful Select Committee of this House, chaired by my noble friend Lord Richard, and many other senior Members of the House have recommended. When is that recommendation going to be put into effect by the Government?

[Lord Newby]

Not during the course of this Parliament, my Lords.

EU: Eurozone Financial Transaction Tax

Debate between Lord Barnett and Lord Newby

Tuesday 5th March 2013 Lords Chamber

[Lord Newby]

My Lords, the estimate that the Commission has produced is that the tax would raise €35 billion. It would not be raised from all financial institutions across the EU; it would be raised only from those established in countries which levy the tax. A tax such as this, which covers things like shares, trickles down through multifarious channels but, obviously, at the end of the day, a very large number of people end up paying a small amount towards it.

[Lord Barnett]

If the treaty eventually proposes a tax that would affect this country, will the Minister make it clear that we would veto it?

[Lord Newby]

My Lords, the noble Lord needs to understand the difference between a tax which we would levy, where there is a veto, and a tax which we would help collect, of which there are a number of existing examples in EU law and this would be another.

Taxation: Tax Collection

Debate between Lord Barnett and Lord Newby

Tuesday 5th February 2013 Lords Chamber

[Lord Newby]

My Lords, I think everybody agrees that we have a particularly barnacle-encrusted tax system. This Government have set up the Office of Tax Simplification, which has started work in this area. One advantage of the general anti-abuse rule is that once such a rule is in place, it should not be necessary to introduce as much new tax legislation to deal with tax abuse, because the general rule will cover it.

[Lord Barnett]

My Lords, will the legislation include a definition of aggressive tax avoidance as compared with ordinary tax avoidance?

[Lord Newby]

I think that the noble Lord is crying for the moon.

Bank of England

Debate between Lord Barnett and Lord Newby

Tuesday 22nd January 2013 Lords Chamber

[Lord Barnett]

To ask Her Majesty’s Government whether they agree with Mark Carney, the new Governor of the Bank of England, that the Bank’s target should be changed from inflation to nominal gross domestic product.

[Lord Newby]

My Lords, the Chancellor set the remit for the Monetary Policy Committee at Budget 2012 to target inflation at 2%, as measured by the 12-month increase in the consumer prices index. The Government have no plans to change the inflation-targeting framework.

[Lord Barnett]

That was not really an Answer to my Question. I understand what is in the current Monetary Policy Committee target and that it has not changed. However, is the Minister aware that the ONS has recently found that GDP—real GDP, that is—was 3% less than it was before the recession and that growth, as most forecasters are saying, is not likely to be very good? So at least it would be helpful—if anybody can do anything about it—if the man whom the Prime Minister described as the best in the world was given these additional powers. Does this mean that if the Governor took those powers to himself, the Chancellor would override them with the current powers that he has?

[Lord Newby]

My Lords, the Question that has been raised, about whether to change the inflation target, is an important one. Before any change is made, however, the question that we have to answer conclusively is: what could the MPC do under that target that it cannot do now? A debate is currently going on that is academic in part and in which all the commentators are involved. For the time being, however, we see no reason to change the current framework.

Taxation: Tax Havens

Debate between Lord Barnett and Lord Newby

Wednesday 9th January 2013 Lords Chamber

[Lord Newby]

My Lords, the Government greatly welcome the enthusiasm from the Benches opposite for the initiatives which we are now taking.

[Lord Barnett]

My Lords, global agreement is clearly important and I am glad that the noble Lord and the Government are seeking it. However, that will take a very long time. Would it not be better to do as I think my noble friend Lord Dubs was saying—to seek agreement among some of the smaller areas where countries are doing these things, such as the Channel Islands and the Isle of Man? Are we doing anything there?

[Lord Newby]

My Lords, there has been a lot of activity to increase transparency in relation to the Channel Islands and the Isle of Man so that we can now request information about an individual’s tax affairs. A major change is that we are moving towards what is called an enhanced automatic tax information exchange, the first of which was signed with the Isle of Man. This means that every year we will automatically get details of the tax affairs of UK-based individuals with accounts in those countries. We will find out what payments have been made into bank accounts in those countries so that we can make sure that those people are paying adequate amounts of tax. That deals with individuals, however, whereas the Question of the noble Lord, Lord Dubs, deals more with corporates.

Economy: Effect of US “Fiscal Cliff” Solution

Debate between Lord Barnett and Lord Newby

Tuesday 8th January 2013 Lords Chamber

[Lord Barnett]

To ask Her Majesty’s Government what assessment they have made of the effect of the “fiscal cliff” solution in the United States on the United Kingdom economy.

[Lord Newby]

My Lords, the Office for Budget Responsibility based its December 2012 forecasts for the UK economy on the assumption that fiscal policy would be tightened in the US by between 1% and 2% of US GDP. This is what is now happening. The Congressional Budget Office’s assessment of the American Taxpayer Relief Act, the measure agreed by Congress last week, is that it will produce a fiscal tightening of 1.7% of US GDP.

[Lord Barnett]

Of course, my Lords, the cliff-edge solution did not solve any fundamental problem, any more than our fundamental problem in this country has been solved. That problem requires us to achieve sustainable growth. The Government are taking a few steps in that direction with their infrastructure plans but none of those will do anything now, and urgent action is needed now. Does the noble Lord accept that one way of doing that would be for the Government to find some modest capital, comparatively speaking, because companies are simply not willing to borrow, whether under guarantee or not? The Government will have to kick-start infrastructure if they want to see growth start. Does he agree that that would be a way forward?

[Lord Newby]

My Lords, the noble Lord will recall that in the Pre-Budget Statement my right honourable friend the Chancellor announced another £5.5 billion of additional capital spending on roads, science infrastructure and schools, and that earlier in the autumn we passed an Act providing guarantees for £40 billion for infrastructure and another £10 billion for housing. The Government are making considerable efforts to increase the amount of infrastructure activity.

Taxation: Avoidance

Debate between Lord Barnett and Lord Newby

Tuesday 11th December 2012 Lords Chamber

[Lord Newby]

My Lords, tobacco smuggling is a significant issue but in the overall quantum of tax that is currently not paid but should be, it represents a relatively small proportion.

[Lord Barnett]

My Lords, my noble friend Lord Dubs is quite right, but should the answer not be that there is nothing whatever that the Government can do until there is international agreement which, sadly, is unlikely to happen in the very near future?

[Lord Newby]

We need a greater degree of international agreement and that is why, along with France and Germany, we have just contributed an extra €150,000 to the OECD’s work to change the basis of accounting. We can do only a certain amount ourselves. It would be a counsel of despair to say that we cannot change the rules; the rules exist and can be changed.

Banking: Regulation

Debate between Lord Barnett and Lord Newby

Monday 10th December 2012 Lords Chamber

[Lord Barnett]

To ask Her Majesty’s Government what action they propose with regard to the regulation of the banking industry.

[Lord Newby]

My Lords, Her Majesty’s Government have committed to fundamental reform of financial regulation in the United Kingdom through the Financial Services Bill, which received its Third Reading in the House last week. Further regulation of the banking industry will be contained in the Banking Reform Bill, which is currently the subject of pre-legislative scrutiny by the Parliamentary Commission on Banking Standards.

[Lord Barnett]

Has the noble Lord seen what was said by the present Governor of the Bank of England last week that this can be dealt with without even bothering with regulation? First he criticised the banks for hiding £60 billion of debts and then he went on to suggest that banks should increase their capital reserves immediately. Does the Minister agree with that, or does he agree with the banks that say that if they increase the capital reserves they cannot also lend as the Chancellor has suggested? Which one of those does the Minister agree with?

[Lord Newby]

My Lords, the fact that the governor can make statements at the moment that are aspirations and have no direct impact shows why the new regulatory architecture, particularly the Financial Policy Committee, which is a new body designed specifically to look at these things, is so important. I am sure that they are reflecting on his views and will be opining on them very shortly.

Banks: Funding for Lending Scheme

Debate between Lord Barnett and Lord Newby

Tuesday 4th December 2012 Lords Chamber

[Lord Newby]

My Lords, one of the core principles and purposes behind the scheme is to increase lending to small and medium-sized businesses. We are confident that as the scheme gathers pace, it will be clearer that it has been effective. On figures on lending to small and medium-sized businesses, the Bank already publishes the quarterly Trends in Lending report, which covers SME lending. The most recent report was published in October. This report gives a very good time series about what is happening to lending to SMEs, and we are not convinced that having a second, broadly equivalent, series produced on a slightly different date would help to explain what is happening any more clearly than is already the case.

[Lord Barnett]

My Lords, the press to some extent has supported the Minister. The Financial Times said:

“The government’s flagship scheme to encourage banks to lend more to businesses and consumers is showing some signs of working—for banks, at least, if not yet for their customers”.

That is what most of the press have been saying: the banks have been taking the money and not lending it. If, in the process, the Bank of England loses money on the swaps it is doing on mortgages, will those losses be transferred to the Treasury in the same way as its profits were?

[Lord Newby]

My Lords, I think that the noble Lord is missing the fact that, over the period, the banks that are signed up to this scheme have made an additional £500,000 of loans to businesses and individuals. This is exactly what the scheme was intended to do. All the evidence is that the participating banks intend to use it to a greater extent in the future than they have up to now—it is very early days—and therefore I am sure that the question that the noble Lord has in his mind will not arise.

Financial Services Bill

Debate between Lord Barnett and Lord Newby

Monday 26th November 2012 Lords Chamber

[Lord Barnett]

The FCA is the regulator but the OFT is referred to throughout this section of the Bill. Now, under new Section 140A, we have the FCA as well. This new section is headed, “Interpretation”, which should be interpreting for us—although I am blessed if I am interpreted in that sense. Consultation between the bodies must be sensible. I assumed that that would happen and I assume that the Minister will tell us that this amendment again is unnecessary and therefore should not be in the Bill. The officials should reply to this debate because only they understand what is being talked about because they drafted it. I assume that the Minister was not responsible for the drafting: he has enough to do without drafting a Bill of this size.

Who is the regulator here? If it is the FCA, what is the OFT doing? Perhaps the Minister will tell us. Who is the lead regulator? Is it the FCA, as is implied here, or the OFT? I am totally confused but, no doubt, he will be able to explain everything because it is written there in front of him.

[Lord Newby]

My Lords, perhaps I may deal first with the amendments and then come on to some of the specific points that noble Lords have made about them.

The amendment and Amendment 106ZB would require the FCA to put in place a statutory MoU with the competition authority. Amendment 86A would additionally restrict the competition authority to carrying out market studies in financial services markets only in exceptional circumstances.

Amendment 106ZA seeks to provide for market investigation reference powers for the FCA. There are differing views on whether the FCA should have market investigation powers. The Government accepted the recommendation of the Treasury Select Committee that the case for MIR powers had not yet been made and that the issue should be reviewed when the FCA had bedded into that new role. The Bill instead gives the FCA a power to make a reference to the OFT or, in future, the Competition and Markets Authority, which would be very similar to a market investigation reference power but would leave the decision over whether to launch a second phase of investigation with the OFT or the Competition and Markets Authority. The OFT may choose to make an MIR without carrying out a further market study of its own, thereby avoiding duplication and delay.

However, before the FCA has fully bedded into its new role, it is important that the OFT, which has established competition experience and a track record of making MIRs, does not step back from competition scrutiny of financial services markets. It will of course be important that the FCA and OFT co-ordinate closely. We obviously agree with Amendment 106ZB in that respect. The FSA and OFT already have an MoU in place and are working to put in place a new MoU for the FCA. There is therefore no need for statutory provision to make this happen. There will be an MoU that deals with the issue of co-ordination on all these matters. We think that that amendment is unnecessary, because it is happening already.

Amendment 86A goes further than merely requiring an MoU and seeks to restrict the competition authority to carrying out market studies only in exceptional circumstances. However that is too rigid an approach. The underlying focus should be on the promotion of effective competition in the interests of consumers, and tying the competition authority’s hands is not the way to achieve that.

In terms of who takes the lead and is best qualified to do so, the comments of the noble Lord, Lord Borrie, answer that question. There will be some areas where the competition authority is simply best placed to take the lead, when compared to the financial regulators, because the competition authority has had decades of experience of that. We do not want to throw away all that experience by being too prescriptive about who takes the lead.

As to the specific comments that noble Lords have made, I was extremely grateful to the noble Baroness, Lady Hayter, for referring to the clear BIS advice, which not all noble Lords will have heard before. I am sure that she will agree with me, and they will agree with her, that it was very helpful.

In terms of competition and making sure that there are more new entrants into the financial services market, not least in banking, we have had this debate at every stage of the Bill. The Government have made it clear that they are extremely keen to see greater competition, not least in banking, but that is not done by putting detailed rules into the Bill, other than a general rule to promote competition; it is something for the regulators to reflect in changed rule-making powers of their own.

The noble Viscount, Lord Trenchard, reinforced the view that we need to promote competition. This is an example of how we are trying to make sure that the legislation goes far enough in this area. The noble Lord will be aware that under a government amendment debated last week, the PRA will be required to have regard to competition as one of its objectives. This has been a long-discussed point: will the PRA be so risk averse that it chokes off competition or will it not? We hope that by agreeing the amendment a few days ago, we made it clear that competition is absolutely central, and that everybody in the regulatory environment, including the PRA, will have to take it seriously.

The noble Lord, Lord Peston, asked about the reference in new Section 140B(5) on page 107 to the,

“acquisition of any goods or services”.

It does not say “financial services”, but the subsection relates to new Section 140B(4) above it. These matters all relate to the actions of the regulators, who have powers only in relation to financial services. The whole context of the subsection relates to financial services.

Banking: Offshore Accounts

Debate between Lord Barnett and Lord Newby

Tuesday 20th November 2012 Lords Chamber

[Lord Newby]

My Lords, I do not think that I will be able to help the noble Baroness in the case of Mr Maluf, who is a Brazilian citizen. We are not in a position to comment on his case. In respect of international corporations, the key thing is the extent to which we can extend international co-operation in that respect, which is why the recent announcement of the UK Chancellor and the German Finance Minister, following a G20 Finance Ministers’ meeting in Mexico, was very important. We are now looking at concerted international co-operation to strengthen international tax standards. However, at the moment, it may mean that international companies can pay less tax than they would otherwise owe. We are trying to catch up with new forms of commerce and to make sure that tax is paid in proportion to where people are undertaking their business.

[Lord Barnett]

My Lords, I declare a past interest as a senior partner in an accountancy practice. Does the Minister recall that the advice best given is the thickness of a prison wall between tax avoidance and tax evasion? We all welcome everything that the Government are doing to try to deal with the evasion side. However, does the Minister accept that there is a serious problem on the avoidance side in that there is a danger that an accountant could be held in abuse of his work and could be sued for negligence if he does not give advice on the best form of tax avoidance?

[Lord Newby]

My Lords, when it comes to tax avoidance, it is important that we begin to tilt the balance towards what is considered acceptable behaviour. That is one of the reasons why we will be introducing in next year’s Budget, or Finance Bill, a general anti-abuse rule. Those, including accountants, who undertake tax schemes, the principle purpose of which is to avoid tax, will find themselves subject to the rigour of that rule.

Property: Commonhold

Debate between Lord Barnett and Lord Newby

Monday 19th November 2012 Lords Chamber

[Lord Newby]

The Government and I will be very happy to make that commitment. The problem with commonhold is that virtually no one knows what the word means. Since being asked this Question, over the past week I have asked a number of housebuilders and senior chartered surveyors whether they thought that it was a good idea. More than half of them said that they did not know what it was. There is a big education job to be done.

Very often the management of mansion blocks is by a management company in which each leaseholder has a share. At their best, they can work very effectively and are almost identical to commonhold, but clearly there are ways in which we can improve how those blocks are managed.

[Lord Barnett]

My Lords, does not the noble Lord appreciate that there is a major need for large infrastructure plans to be implemented now? Industry has made it quite clear that guarantees are not sufficient. They want some Treasury cash. Why is the Treasury not willing to introduce just a little cash to implement these plans?

[Lord Newby]

Our experience is that everyone wants some Treasury cash but, sadly, they cannot all have it. It may be of some comfort to the noble Lord to know that in the past quarter, housing starts were up 18% over the previous quarter. In terms of social housing, housing association starts were up almost one-quarter.

Small and Medium-sized Enterprises

Debate between Lord Barnett and Lord Newby

Monday 29th October 2012 Lords Chamber

[Lord Newby]

My Lords, I think that a large proportion of these funds will be used for SMEs. That is why the banks have introduced new products specifically for SMEs following the introduction of the programme. I have already referred to RBS. Lloyds has done a similar thing and is reducing the interest that SMEs pay by 1%. Lloyds has placed double-page ads in some of the papers, which noble Lords may have seen. So the banks are directly targeting at SMEs a significant proportion of the funds that will now be available.

[Lord Barnett]

My Lords, given the urgent need for lending now, how soon does the Minister expect the first scheme to be in operation? Are the banks likely to offer 100% guarantees or will they require deposits?

[Lord Newby]

The scheme is already in operation and the process under which the loans are approved is going through. I do not know whether the noble Lord meant 100% in respect of mortgages as opposed to loans but, for mortgages, the scheme is being made available for first-time buyers, particularly in respect of the Government’s new buy scheme.

Infrastructure (Financial Assistance) Bill

Debate between Lord Barnett and Lord Newby

Tuesday 23rd October 2012 Lords Chamber

[Lord Newby]

My Lords, I am delighted to be able to open the proceedings on the Infrastructure (Financial Assistance) Bill. The purpose of the Bill is to help accelerate significant investment in major infrastructure projects and it will increase the number of homes being built and occupied.

Before I set out the main features of this legislation in more detail, I briefly remind your Lordships’ House of the Government’s commitment to delivering a sustainable, private sector-led recovery. This will be possible only by maintaining our credible fiscal stance and so keeping interest rates low. We want to see a recovery that is balanced across industrial sectors and across geographic regions. To achieve this ambition—

[Lord Barnett]

Is this putting into law the loan guarantee scheme?

Budget Responsibility and National Audit Bill [HL]

Debate between Lord Barnett and Lord Newby

Wednesday 1st December 2010 Grand Committee

[Lord Barnett]

Listening to the previous debate, I am even more confused than I was before about which staff are now being employed by the OBR and what the plans are for the future. Perhaps the noble Lord can help us on that. I know from a Written Answer in which I got a proper answer from the noble Lord that 12 Treasury members were still working officially for the OBR—full time, I assume. As I now understand it, having listened to the previous discussion, there are a lot of non-executive members as well as executive members. Quality will be required in the new members of the OBR, but they will not necessarily be non-executive or executive members.

I do not quite understand what we are talking about when we refer to “staff”. For example, I understand that Robert Chote, quite rightly, retired from his position as head of the Institute for Fiscal Studies. I am not clear whether that institute is continuing with another head. I think that it probably is. I see the noble Baroness, Lady Noakes, nodding—perhaps she is the new chair—but it is just adding to the 50-odd independent forecasters that we have, or whatever the number was before, plus one. I should be glad if the noble Lord could clarify that.

In Amendment 12, my noble friend Lord Peston and I say that the staff must not be civil servants, because we were both worried about them either remaining as officials of the Treasury or being temporarily transferred to the OBR, which we would not find very satisfactory. The whole point about the OBR is that not only must it be independent, which I am sure it will be, but it must be seen to be independent. If we are not careful, because of its proximity to the Chancellor and the Treasury, it will not necessarily be seen to be as independent as it should be. For example, on the previous amendment my noble friend Lord Myners talked about the OBR moving its office to Victoria Street. However, it may be moving to the offices of the Department for Business, Innovation and Skills for all I know. Perhaps the Minister can clarify that as well. My noble friend was worried about whether they would have to keep traipsing backward and forward between the OBR offices and the Treasury, rather than inviting any Treasury officials to whom they want to talk to come to them. The foreword of the recent OBR report makes it clear that it sees not only the Treasury. It states that,

“we have also drawn heavily on the help and expertise of officials across government”.

There is a whole load of them, including Revenue and Customs, and the Department for Business, Innovation and Skills. The OBR officials go to lots of offices, so there is a wide-scale connection with government. I do not object to them seeing officials in government departments—that is sensible—but it makes me wonder, when I see the number of departments that the OBR visits, just how big it is, or is going to be. Perhaps the noble Lord, Lord Sassoon, could tell us how many staff the OBR has now, how many are full time, how many are part time, how many are quality, how many are not quality—doing the footwork, you might say—how many are experts, how many are executive, and how many are part-time executive. For example, are Robert Chote and the two people with him full time or part time? I do not know. Unfortunately, I have not seen the minutes of the Treasury Select Committee, where the answers may have already been given. Perhaps the Minister can tell us. I beg to move.

[Lord Newby]

My Lords, the provision in paragraph 8(2) of Schedule 1is sensible. It states:

“Staff are to be employed on such terms as to remuneration and other matters as the Office may, with the approval of the Minister for the Civil Service, determine”.

Surely that is the sensible way of doing it, with the chairman deciding which staff he wants. It would be slightly surprising if none of them came from a Civil Service econometrics background, which would bring strength to the office. Just because they have come out of Whitehall does not mean that they are somehow tied hand and foot to Treasury thinking. No doubt, people will come in from academia and elsewhere. It is for the chairman himself to decide who the best people are to do the job.

Budget Responsibility and National Audit Bill [HL]

Debate between Lord Barnett and Lord Newby

Monday 29th November 2010 Grand Committee

[Lord Barnett]

My Lords, I hope this group will last only a very few minutes and that the Minister will accept the amendments. As we debated this afternoon on the Floor of the House, this is not a money Bill. I do not think the Speaker in any way thought about certifying it as a money Bill. Every Bill costs a few bob, but in no way could this be described as a money Bill. I assume that the Minister is going to say that he will accept the amendments. It is quite straightforward: there is no reason whatever why the House of Lords and its Economic Affairs Committee should not be involved in looking at what the OBR is saying. When I was on the Economic Affairs Committee and the Select Committee on the Monetary Policy Committee, my noble friend Lord Peston was in the chair, and we had the Governor of the Bank of England, the Chancellor and almost everybody else there. I can think of no good reason for the Minister having the word “resist”. I hope he will not use it because there is no reason to refuse these amendments. I hope he will support them.

[Lord Newby]

I rise to support the noble Lord, Lord Barnett, and possibly to bring to the Minister’s attention the fact that when the Monetary Policy Committee was established, a specific committee of your Lordships’ House was established for the sole purpose of reviewing the way in which that committee worked. There can be no issue of propriety about whether the House of Lords should have a role here. This raises a broader question about the coalition’s view of the role of the House of Lords on financial and economic matters. The previous Government and the former Prime Minister were almost implacably opposed to this House having anything to do with economic affairs, which I thought was a pity because there is clearly expertise here. Last week, we discussed ways in which the House of Lords might play a part in tax policy-making. That would be very sensible as well and it would form part of the piece, along with these amendments, under which the House of Lords would have an enhanced role.