Brexit: Bank of England Report
Lord Davies of Oldham Excerpts(5 years, 5 months ago)
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Lord Bates
Similar claims were made before the referendum took place. The choice that will be faced by Parliament—by the House of Commons on 11 December —is between the deal that the Prime Minister has negotiated and no deal. The focus should be on that. The Bank of England analysis and that produced by the Government yesterday to inform that debate show that the deal proposed is overwhelmingly better than no deal. That is what we will work towards.
Lord Davies of Oldham (Lab)
My Lords, in producing the report, the governor is fulfilling his obligation in preparation for the Treasury Select Committee, as the Minister has indicated. So let us have no nonsense about the fact that the governor is exceeding his powers in any respect. We would expect the Bank of England to be well informed about the present situation and to be in a position to offer warnings to the Government. The basis of the warnings is the preparedness of British industry and commerce to adjust to the catastrophic position of a no-deal Brexit and to the Government’s proposed position. Is it not clear that the Minister needs to convey to his colleagues that there is enormous anxiety about the lack of preparation for the development of deals, which will be far below the level anticipated when the negotiations began? The governor is quite right to have identified in his report the Bank of England’s anxieties.
Lord Bates
The noble Lord is absolutely right: the Bank of England has a statutory duty to inform its own analysis and to look at the worst-case outcomes to ensure that the economy is resilient to meet them. That is for the Financial Policy Committee and the Monetary Policy Committee to undertake, and they do so routinely. What is different about this analysis is that it was prepared at the request of the Treasury Committee in another place to inform the wider debate that it will have. Next week, the committee is taking evidence from the Chancellor of the Exchequer, and that will all be thoroughly debated ahead of the vote on 11 December.
Mortgages: Cerberus
Lord Davies of Oldham Excerpts(5 years, 5 months ago)
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Lord Bates
The noble Lord is right to highlight that this traces back to 2008 and the financial crisis, when we had immense irresponsibility in the mortgage lending system. Some mortgages were offered at 120% of the value of the mortgage, allowing people to self-certify their income. Those mortgages, banks and institutions were then rescued. As a result of state aid rules, they were then unable to offer new mortgages. The mortgage prisoners, to use the noble Lord’s term, were then doubly blighted by the fact that in the intervening time, the European Union mortgage credit directive came into effect, which introduced an affordability test which meant that they could not apply to transfer to another lender to achieve a mortgage at a lower rate—they were indeed trapped.
We have tried to find how we can help that situation. We are working with the FCA—we are aware of the representations being made—and will continue to do so. My honourable friend the Economic Secretary to the Treasury will be writing further on this important issue.
Lord Davies of Oldham (Lab)
My Lords, the months and years slip by. The Minister says that every constructive effort is being made, but there is precious little in the way of a solution to this problem for these mortgage holders. When a question involves a number of people in considerable difficulty and relates to difficulties with the banking and mortgage sector over a decade, it behoves the Minister to produce a better response than that we are looking four or five years ahead before we have made even a significant gesture.
Lord Bates
There is that aspect to it. I do not want to make a partisan point, but it is part of cleaning up the mess of the irresponsible lending happening in the past. These people find themselves in this situation. We and the Financial Conduct Authority are asking how we can work with the industry to come up with solutions whereby there might be greater flexibility for some people who are trapped to move to lower interest rate mortgages. At the moment, people who are on UK Asset Resolution mortgages may be paying 4% to 5%, but there are better deals, potentially, at 3% to 4%. How do they get on to them? If they have equity in their property, are up to date with their mortgage and have the income to justify it under the new rules, they can already move. It is those people who do not fall into those three categories for whom we need to work for a solution within the new European rules. That is what we are turning our attention to.
Brexit: Economic Analysis of Various Scenarios
Lord Davies of Oldham Excerpts(5 years, 5 months ago)
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Lord Davies of Oldham (Lab)
My Lords, I am grateful to the noble Lord for that short series of comments on this important issue.
Of course Her Majesty’s Opposition respects the referendum result but no one can offer much respect to the botched Brexit negotiations, in which the Prime Minister neither meets our six points nor her own red lines. Do the Government accept that the choice cannot be between her deal and no deal? Do they not recognise that we need a deal to support jobs and the economy, and which guarantees that important standards are sustained and protections are clearly in place?
There is a real worry about the Government’s position as a result of the negotiations, and this House and the other place will hear a great deal about that in the next few weeks.
Lord Bates
The choice before us is clearly between a deal and no deal. Many people have speculated over the past two and a half years as to what would happen. They said that no agreement would be reached in December and that we would not get the EU (Withdrawal) Act through Parliament. Both those things have happened. Also, crucially, they said that we would not reach a deal this November, which the Prime Minister has secured. It is a good deal for this country, which is being put before Parliament as promised. Also as promised, we are supplying, in a transparent way, the economic analysis of that, included in technical notes, so that the House can come to an informed decision.
Brexit: Economic Effects
Lord Davies of Oldham Excerpts(5 years, 5 months ago)
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Lord Davies of Oldham (Lab)
My Lords, the Minister’s Answer to my noble friend Lady Quin was somewhat elliptical and roseate in hue. When we come to the question of the Commons having to consider the issue of the meaningful vote, is it not the case that the Minister in the Commons confessed on Monday that the economic analysis would of course depend on aspects of withdrawal, but with Britain still a full member of the European Community? How on earth can that prove to be realistic in people’s judgment on the withdrawal position?
Lord Bates
That was the decision that Members of the other place came to in the debate on Monday. They introduced Amendment 14 to the Finance Bill, which called on the Government to consider the long-term costs and benefits of moving to a new trading relationship with the EU and the rest of the world. The Exchequer Secretary said:
“I am happy to confirm that the baseline for this comparison will be the status quo—that is, today’s institutional arrangements with the EU”.—[Official Report, Commons, 19/11/18; col. 661.]
So we are doing what we have been asked to do by the other place.
Economy: Budget Statement
Lord Davies of Oldham Excerpts(5 years, 5 months ago)
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Lord Davies of Oldham (Lab)
My Lords, this has been an excellent debate. The Minister began it in the normal way that Ministers do; he described the Budget and took us through it in considerable detail as if these were normal times. The noble Lord, Lord Higgins, said it was his 60th Budget, and he is therefore in a position to know that there is something a little abnormal about this Budget. The noble Lord, Lord Skidelsky, called on us to talk about the economy and not the Budget. The Budget, in a sense, was not the Chancellor’s creation. We cannot recall him earlier talking about the end of austerity or the sunny uplands now facing the economy. He is always referred to as the cautious, somewhat gloomy Chancellor. But there was a conference speech by the Prime Minister on the necessity of ending austerity, and the Chancellor found himself forced by that speech—and by the pressure of public opinion; we should not underestimate the extent to which the country is reacting against austerity—to follow her will as a consequence. He took the opportunity to follow the somewhat fortuitous forecasting advantages and found himself able to predict greater expenditure than he otherwise would have done.
As my noble friend Lord Wood of Anfield pointed out early in the debate, the expenditure proposals fall a long way below the level necessary to make a real dent in austerity. The most graphic area of government responsibility identified has been local government, as the noble Lord, Lord Kerslake, referred to, among others. It is quite clear that the kind of crisis that came to public attention in the Conservative authority of Northamptonshire—and is common to so many other local authorities—is not remediable by a small, one-off addition from the Chancellor. It may be an earnest of intent—that if things go well with other matters, such as Brexit, local authorities may be promised greater resources—but at present everybody is aware that there is a crisis, to whose resolution this Budget makes a very limited contribution indeed.
The Budget terminates not austerity but the long-term economic plan. Do we all remember that Chancellor Osborne in 2010 set out to eliminate the deficit by 2015? There was a slight extension, which enabled the Conservative Party to edge the next election—shedding its colleagues in coalition as it went—on the basis that it was still fully in control of the major priority that it had identified for the nation: the elimination of the deficit. The Conservatives would do it in three years—fairly shortly after the 2015 election. There is none of this nonsense from this Chancellor, is there? He does not make any pretence or question that the realisation of that objective will obtain in the mid-2020s. Most commentators, even the OBR, think that is rather optimistic. The major priority of the Conservative Administration over the past eight years—carrying all the consequences, some of them very detrimental indeed, for so many people—has been the elimination of the deficit. They are nowhere near achieving even that as yet. But they have hit departmental spending, and the services that the Government are responsible for providing to the nation, very hard indeed. The Chancellor indicated that we should not take the present situation quite so seriously, because departmental decisions would be taken next year, when he deals with the spending plans. So this Budget gives a very limited indication of what is to be done; the real work comes in almost a year’s time. Perhaps that helps to explain why, as every noble Lord who has spoken in this debate in any kind of critical mode has identified, extra expenditure for departments falls a long way from the position that the departments actually face. It does not matter which area of policy one chooses. It is quite clear that the Chancellor’s decisions at this stage are inadequate to be much more than even a token towards ending austerity.
The second point the Chancellor makes is that this is a very difficult time in which to draw up a meaningful Budget. Have we ever seen greater uncertainties? The answer almost certainly is no. Brexit is creating such turmoil across the whole economy, and no one can foresee the outcome with great accuracy. You can see enough, and with sufficient accuracy, to put a spending plan for a huge amount of money on the side of a bus, but no one who is actually serious about allocating public resources thinks that this is a time in which fruitful decisions can be taken. The Chancellor indicated that he might have to bring another Budget in mighty soon if, in fact, the Brexit position proves that to be necessary. Far from this Budget being the focal point of a change in the economy and a big advance in the nation’s fortunes, it is pretty well a holding mechanism until things begin to clear, so that the Chancellor can identify his priorities later.
That does not alter the fact that in every policy area, as my noble friends were keen to point out in this Budget debate, the additional resources that the Chancellor has allocated are inadequate. The most insulting concern the schools budget. In circumstances where schools have taken cuts over the past eight years, that they should be beneficiaries of the “little extras” that the Chancellor can find seems a gratuitous insult.
I applaud the recognition on the other side of the Chamber that, however welcome the £1.7 billion towards social credit is—and it is of course welcome—it is a long way below the amount necessary to pick up all the needs of those who depend on benefits. The Chancellor would have to allocate £7 billion if he was going to ensure that the freeze on the rates of working-age benefits destined for next April would be taken off the agenda. So the story goes on, through all policy areas.
I pick up a point made most strongly by colleagues on my side of the House, I must admit, but that should be borne in mind by the whole House: austerity has failed the economy. As the noble Lord, Lord Skidelsky, said from the Cross Benches, and my noble friends Lord Hain and Lord Livermore said from behind me, this past eight years has in fact been a period of growth below the period after the Second World War. It has cost this country dear. When you operate from a position of 1.6% growth, you are selling the country short on economic success. In that period, we saw not just the fall in government resources available to people but wages not rising for the most extraordinary length of time.
As my noble friend Lord Haskel presented in his very clear speech, investment is falling in the United Kingdom. At present, UK business investment is the lowest in the G7, and public sector investment is £18 billion less than it was in 2010. There was also, of course, considerable discussion on the issue of the United Kingdom’s productivity. I agree that we need to think clearly about what would improve our productivity. But it is absolutely clear that this Government, in almost every Budget speech, continually emphasise their concern about productivity, yet it is 15% lower than in the other major economies in the G7. As my noble friend indicated, if in fact we had been serious about improving productivity, we would have put more investment into training and into supporting those sectors that specialise in vocational education. Instead, those sectors have been decimated. Further education colleges have taken a devastating cut over these past eight years and part-time education, which was always looked upon as a possible source of people changing jobs in a changing economy, has been almost wiped out.
This is not a Budget of success. It is an indication by the Chancellor of the fact that he had to pay more than lip service to the question of austerity. He would never have chosen that as his objective, given the mammoth task that awaits the country in ridding itself of the costs of austerity. But the Chancellor did what he was obliged to do. He presented a Budget that the whole party on the other side will try to sell to the nation as a huge success, and as the end of austerity and the expansion of the economy, even when the predicted growth rates are lower than they have been over recent years.
Housing: Rent Payment History
Lord Davies of Oldham Excerpts(5 years, 6 months ago)
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Lord Bates
That is why the consultation is being extended, and it is open to all those parties to feed into it. I gave the example of Experian. By categorising the rental contributions of people in social housing, it was possible for 80% of the 1.2 million people included in the survey to increase their credit rating, meaning that they would have access to lower-cost credit. That is very much what we want, and we believe that, after a long time and a lot of pressure, we are beginning to head in the right direction.
Lord Davies of Oldham (Lab)
My Lords, first, we too congratulate the noble Lord, Lord Bird, on the progress that he has made on this issue and on the progress of his Bill. Her Majesty’s Opposition will of course be supporting the Bill in the Commons, as we did here. Will the Government? Secondly, if the Minister is committed to ensuring that advances are made on the basis of legislation such as this, has he or any other Minister participated in meetings with credit service providers to discuss how to use the data which is now being compiled and which ought to be used as rapidly as possible to the benefit of ordinary citizens?
Lord Bates
A review of high-cost credit was undertaken by the Financial Conduct Authority, which took evidence from a wide range of people. On the specific point about the Bill, the noble Lord will recall that when we discussed it, while being sympathetic with its ambitions, we chose to go another route and to introduce the Rent Recognition Challenge to see whether fintech companies could come up with a solution. We believe that that is beginning to bear fruit. The announcement made by Experian last week is evidence of that.
Green Finance
Lord Davies of Oldham Excerpts(5 years, 6 months ago)
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Lord Bates
The investment going in is substantial. We are a leader in this area. Since 2015, the rate of emissions has fallen faster in this country than in any other G20 country, which we can be proud of. The fact that one in five electric vehicles sold in Europe is manufactured here in the UK is again something that we can be proud of, and we are investing heavily in that. We have a clean growth strategy, and an industrial strategy that has these issues at its heart.
Lord Davies of Oldham (Lab)
My Lords, the Intergovernmental Panel on Climate Change emphasised just how urgent it is for Governments to act. The Minister cannot produce the gloss that we are doing rather well on investment when we have slipped from first place to third, behind the Netherlands and Sweden. He has to recognise that there are aspects of government policy, such as fracking and the fact that the Government are reducing their subsidies for green energy—I will not mention Brexit at this stage—that must cause concern among investors and help to produce a rather more depressing picture than the Minister has suggested.
Lord Bates
I do not accept the picture that the noble Lord is painting. In the index that we are talking about, the City of London was ranked number one in the world for the quality of green finance offered—something that we can be proud of. It has gone down to number three in terms of penetration, but look at other financial centres: Paris was fifth, Frankfurt 21st, Tokyo 29th and New York 39th. The City of London is leading the global agenda on leveraging private finance to meet the challenges identified by the IPCC, and we should celebrate that.
Brexit: Economic Forecasts
Lord Davies of Oldham Excerpts(5 years, 6 months ago)
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Lord Davies of Oldham (Lab)
My Lords, the Minister is answering on a hope and a prayer. In this age of uncertainty, to claim categorically that Brexit will be beneficial to the nation is extraordinary. Will he not accept that economic predictors in the past have been broadly correct? They have been right over the last seven or eight years that the economic growth rate in the United Kingdom would decline to one of the lowest in the G7. They also got right that the people who would pay for austerity would be working people, as their wages would not increase over this period. But there was one prediction that the Government got wholly wrong; the Minister partially reflected on it a moment ago. That was for the Prime Minister to go post-haste to the President of the United States to take steps towards an advantageous trade deal after Brexit. What was the reply? “America first.”
Lord Bates
As far as we are concerned on this negotiation, we want a deal, we expect a deal and we want good, positive relations with our European friends. If it is important that we continue to have access for goods worth £423 billion into the EU, is it not also crucial that it continue to have access so that it can sell us goods worth £518 billion each year? It is in the enlightened self-interest of both parties to reach a deal, and that is what the Prime Minister seeks.
Brexit: Economic Effect
Lord Davies of Oldham Excerpts(5 years, 6 months ago)
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Lord Bates
I do not accept my noble friend’s view that we have had little to say. I was in the Chamber earlier this week when the Leader of the House repeated the Prime Minister’s Statement and some people suggested we had too much too say. Some 106 technical notes have been put out, and we have had significant debates. The crucial thing is that businesses have known since the referendum took place, and certainly since the general election, what the outcome of the referendum was and the Government’s intention in implementing the outcome of that referendum. As a result, they have done incredible work in boosting their exports around the world. We are seeing that export growth is at record levels in terms of goods and that the fastest growth for those markets is in countries outside the European Union, such as India and China.
Lord Davies of Oldham (Lab)
My Lords, the Minister knows that the north-east’s average disposable income is only three-quarters of the national average. That is why my noble friend has raised this issue at this point. The Minister’s reply that we will hear the Government’s analysis before the crucial vote gives no indication of just how much time there will be for it to be compiled and to be analysed by this House and the other House before the meaningful vote. He must recognise that there are great anxieties about the present situation, and the Government are doing nothing to give any reassurance.
Lord Bates
I accept that there will be anxieties, but we have to point to the hard facts: businesses are still coming here and people are still buying British goods in greater quantities than ever before. Furthermore, it is an incredible achievement that last year unemployment in the north-east fell faster than in any other region in the country. It is now lower in the north-east than in London or the West Midlands—something that we have never seen in our lifetime. Therefore, there is a lot for people in the north-east and in Britain to be confident about in the future.
Poverty Premium
Lord Davies of Oldham Excerpts(5 years, 8 months ago)
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Lord Davies of Oldham (Lab)
My Lords, I congratulate the noble Lord, Lord Hodgson, both on securing this debate and on introducing it so precisely. As he identified, those dependent on cash are living in an increasingly disadvantageous world, and the use of cash has reduced very significantly over the last decade. The rate of decline, as new technologies are employed, will mean that quite a small proportion of the population will be dependent on cash. Those people are, however, dependent on a disadvantageous system, as was so clearly identified in this debate by the noble Lord, Lord Hodgson, supported immediately by the noble Lord, Lord Empey, who pointed out just why the poor can be at such an obvious disadvantage. One obvious aspect is that direct debit has its rewards—we all know the incentives to choose it—but you need a regular income and certainty of payment before you can take advantage of it.
The noble Baroness, Lady Bottomley, emphasised the fact that we live in a society where unemployment figures are relatively low. The trouble, however, is that an awful lot of our fellow citizens are in employment but not under the old criteria—they are on zero-hours contracts, and a person with an uncertain income, on basic wages, can only be in a position of extreme disadvantage when making payments. The advantages of direct debit, of not having to pay excessively for credit and being able to access money easily are not available to those who are on uncertain incomes and poor.
That is why we need considerable action by the Government, as has been called for in this debate. It is comforting that the Government are at least aware of the problem and addressing certain aspects of the decreasingly cash-using society. Action will be necessary, and the Government are not shaping up to the requirements. The noble Lord, Lord Bird, emphasised with his usual accuracy and passion the extent to which people living on very low incomes are a burden on society to which society pays only lip service. If not, in an economy in which we are supposedly making so much progress, food banks would not be proliferating all over the country. Furthermore, some people with clear earning patterns are dependent on food banks, because their pay is below the necessary level of income.
That is why I think we have to do what the noble Lord, Lord Bird, identified. We have to take responsibility for getting people out of poverty. We have to address ourselves to crucial issues such as the question of the minimum wage, which needs to be at a level that guarantees that households can avoid poverty. We need to tackle the question of zero hours, and change our employment laws so that this particular malign development, which has occurred over the last decade in such profusion, is brought under control. We also need to tackle how benefits are paid. Universal credit seems to be engineered to guarantee that people are plunged into poverty in certain circumstances. It cannot be right that we have a benefit that renders people vulnerable at crucial times through the way in which it is paid.
This has been a stimulating debate, which has addressed the issue of the poor. We all ought to feel the greatest concern about that: we cannot constantly talk about an economy that is making progress when child poverty, and poverty generally in our society, is as pronounced as it is today.