Euro Area Crisis Update (EUC Report)

Lord Davies of Oldham Excerpts

Wednesday 23rd July 2014 Lords Chamber

[Lord Davies of Oldham (Lab)]

My Lords, I, too, congratulate the committee on this latest stage of its continuous hard work on these issues. I very much appreciated the excellent introduction by my noble friend Lord Harrison, who covered all the significant points in the report and rendered nugatory any intention on our part to mention them in detail. However, of course, we need to look at the report as a pointer to what needs to be done and the situation that we are in as far as Europe is concerned. There is some cause for optimism: the euro appears to be out of crisis although, as I think my noble friend Lord Harrison said, the storm has not exactly and entirely passed by. That will do as an analogy, but the situation is a good deal better than the one we were facing only a short while ago. Clearly, several countries have significantly improved their economies on the way to some recovery. Ireland in particular has made progress in these terms, as have Spain and Portugal, although, as has been mentioned and is emphasised in the report, employment levels are very low. That leads to an important issue, which I will comment on later, about the level of demand in the European economy.

I am grateful to my noble friend Lord Davies for expanding on what the report makes clear, which is that the euro crisis is part of a global crisis. We are so used to the Conservative perspective on the crisis as being manufactured in the UK and being solely the responsibility of the Labour Government, who spent too much money. There is no comment of course about the collapse in receipts going to the Labour Government at that time because of the crisis that affected the banking and financial sector in particular, which is such a crucial part of our economy. This report puts the euro position into the broader perspective. It is important, therefore, that we recognise that a great deal still needs to be done.

As the report indicated, austerity has been costly. It is costly, of course, in terms of living standards. We have seen that in our own country but, because the margins for some in the euro area have been so low, austerity has had a very bleak impact on populations there. As has been indicated in this debate, we have seen a loss of confidence in and support for Europe because austerity brings discontent where people’s living standards fall as rapidly as they have been doing. The report indicates that it is essential that we see policies that return to growth, and we have to make sure that we pursue the necessary reforms to create that growth. None of us underestimates in a number of European countries how deep the problems are—referred to as requiring structural reforms. They are mighty challenges but it is clear that both Europe and particularly Britain, with its relationship to the European economy, want to see those reforms carried out because it is very much in our interests to have an effective single economy.

The single market is of great advantage to this country in our trading relations but it is also important to the City of London, which is a pivotal point of our economy as a major financial centre. I agreed very much with the point made by the noble Lord, Lord Kerr—that we had better take steps to ensure that there is a close relationship between the institutions in Europe. The Central Bank also clearly helped to avert the crisis in the eurozone and we now need to see the Bank of England establishing closer relationships for the good of all countries in the Community.

The problem with all this is that the challenges are big but we have a Government who seem to exacerbate the issue. The Prime Minister says that he is setting out to reform Europe in meeting these challenges. The task that he has set himself is to effect significant reforms in Europe in the next 24 months with the support of 27 states, when at the moment his support extends to none, except for the United Kingdom, of which he is Prime Minister. We saw a dimension of the failure of diplomacy in the rather ham-fisted attempt to prevent the appointment of Juncker as head of the Commission.

How can we make progress when the Prime Minister seems to be more concerned with negotiating with his party than with Europe? We saw an instance of this in this House this very day. On Monday, we all read in the press and on Sunday we had seen on “The Andrew Marr Show” the new Foreign Secretary making it absolutely clear that he had a terminal point when it came to membership of Europe, and that if there were not very significant changes in the structure of Europe and Britain’s relationship to it, he was voting for “out”. In this House today, the Government’s business spokesman said in answer to a question that there is no question of withdrawal. These are not just members of the same party; they are important figures in the Government of this country because of the role that they play in the party, yet, from what I can see, they have quite contrary positions. What does the Minister have to say about how he proposes to wrestle with those kinds of difficulties?

Finally, I want to make what might be regarded as a minor but quite clear point. We are also losing influence in Brussels because we no longer provide people who operate part of the civil service there. In 2004, more than 9% of civil servants in Brussels were British. That is down to 5.3%. Not a single Briton has gained entry to serve the Commission through the highest-level examination. That is loss of influence and it is a reflection of the fact that the Community’s confidence in Britain is being lost by the stance the Government are taking. It is being reflected in a grievous way, which will adversely affect this country.

Finance Bill

Lord Davies of Oldham Excerpts

Wednesday 16th July 2014 Lords Chamber

[Lord Davies of Oldham (Lab)]

My Lords, this has been a wide-ranging debate. I wish the noble Lord, Lord Flight, well in his campaign to wrest control of supply from the other place; he has to reverse more than a century of history and quite significant political obstacles before he achieves that objective.

We have had very interesting contributions. Of course, I particularly enjoyed that from the noble Lord, Lord Lawson. I appreciated him as a historian when he indicated to us that spads going on to become prominent parliamentarians is by no means a new phenomenon but went back more than half a century. As I shall show in a moment, he is also pretty good as a forecaster, because I shall be critical about the Budget. He is right on both counts.

First, I pay tribute to the noble Lord, Lord MacGregor, who introduced his report on limited liability companies and has played such a significant part in enriching our debates on Finance Bills through the reports of his committee. This was one of the more challenging reports in many ways, because it asked the Government to delay what they had clearly set their mind to do and indicated why consultation ought to be respected more clearly than appeared to be the case by both the Treasury and HMRC. My noble friend Lord Joffe put a particular perspective on that, suggesting that the committee itself could enhance its role in relationship to future Finance Bills by ensuring that it consulted in greater depth and produced reports that established contact with the smaller organisations in the country—even the very smallest. After all, this report was significantly about limited liability partnerships and SMEs. Of course, they are small. I gather that the danger for the committee was that it listened to representative organisations and a little less to those who are active on the ground. I am sure that my noble friend Lord Joffe has a significant point there. However, we all very much respect the work of the noble Lord, Lord MacGregor, and thank him for his contributions over the years. We know that he will still contribute significantly to our deliberations, even when he has retired from the chairmanship.

The noble Lord, Lord Wakeham, also introduced an interesting dimension to the debate. I identified three quite significant taxes which he wanted the Revenue to wipe out in terms of receipts. We are often accused on this side of the House of spending money too easily—quite wrongly, of course—but the noble Lord is in great danger of reducing the receipts of government in a dramatic way. Unless he comes out with some pretty clear proposals for where other tax revenues are going to emerge, I am quite sure that the Government will be giving fairly limited consideration to that at present.

The noble Lord, Lord Razzall, indicated that there will be choices before any Government after 2015. We know those choices to be harsh and challenging but he indicated that some amelioration might occur if the economy grew. My goodness: that is partly to recognise the Opposition’s case that the economy has not grown fast enough over these past few years, hence the level of privation. It is also not likely to grow very fast over the next few years, with the Government hell bent on following the principles which they have up until now.

I want to demonstrate that the Bill does of course show a long overdue growth in our somewhat fragile economy. There clearly is growth in the economy but in 2010, the Chancellor forecast that over this period, the economy would have grown by 9.2%. In fact it has grown by exactly half that, or 4.6%. Is it therefore any wonder that the Chancellor is short of some resources? I might add that if it is suggested that the economy now is doing well compared with other economies, first, it has risen from a very low base and, secondly, the United States and Germany have still both had growth rates over this period which have been far higher than those of the United Kingdom. There is not much to boast about there. It is also the case that the Chancellor is borrowing over this period £190 billion more than was planned and, as the Minister made quite explicit, the Chancellor is going to clear the deficit in 2018 when the proposition in 2010 was that it would be cleared by five years of coalition government. It is a pretty tawdry success that the Government are presenting to the House in this Bill.

Of course, we are all in this together, as has been emphasised on all sides. It is true that the top 1%, in order to be along with the rest and in it together, needed a tax cut which has been worth £3 billion while 7 million people who are at work are in poverty. That is the nature of it. I know that the Government constantly emphasise the employment figures but we are going to examine them more carefully. The nation knows the quality of the jobs that are being created. There are people who define themselves as self-employed, move out of the unemployment category and are living hand to mouth. That is why there is so much concern in the country about the constant use of food banks, and why on all sides there are indications that pressure upon ordinary people is very intense.

What is at the root of this? Quite clearly, it is that wages have continued to fall behind prices, and the Government know this to be so. Even this month, that has been confirmed for the most recent period. So people’s living standards have fallen over these five years. It may be that the Government think that because we now have a recovery—the slowest recovery for 100 years—people’s minds will wipe out the level of deprivation over these past years. They may not be right. If ordinary families are £974 worse off through tax and benefit changes than they were in 2010, these problems are deep.

Is the coalition completely unaware that in the past four years a massive stimulus has been given to the continuing creation of the unfair society, where wages stagnate and the resources devoted to the highest rewarded sections of our society continue to escalate? I know that from time to time it hits the headlines that some shareholders carry out a minor revolt against their chief executive but what continually goes on, day in and day out, is the widening of differentials between the pay of the super-rich—I am including people who work; I mean the chief executives of companies—and the average pay in their companies.

This growing inequality brings, as so much research now indicates, a clear problem of dissatisfaction in society, a sense of unfairness that may express itself in passive disillusion but may not be reflected at the ballot box in quite that way. The Government have opted for a low-wage, low-skill economy. That is what we have, with all these people working harder and longer for less, yet the Government pretend that they can congratulate themselves on the employment statistics that they represent. Surely the clearest indication of the Government’s limited success in this area is the decline in productivity and the problem of Britain being able to earn its way. Our balance of payments continually shows an increased deficit.

We are clear that this Budget and Finance Bill should have been based on much fairer principles than have been reflected in them. Hard-pressed families need help with their energy bills, which we have all seen rise rapidly and unfairly. Indeed, although the noble Lord, Lord Lawson, waxed strong on certain issues regarding energy, I do not think that he commented on whether he thought the public had been exploited by private monopolies in the way in which energy bills have gone up in recent years.

We will of course get rid of the dreadful bedroom tax. I am not sure that Members of this House are at all aware of the cost to families of very limited resources who are in real need and the misery that they suffer when they are told that they must give up the one room that they hold for a visitor or another member of the family, to give them some respite, particularly when it is concerned with the disabled, and the bedroom tax forces them into penury or having to move. We think that the ordinary earner also needs a fairer basic rate of taxation, and will attend to that.

Another area where we think there should have been much more emphasis in these past four years is housing stimulus. I understand the Minister’s role with regard to infrastructure and we applaud many of the initiatives taken in that area, but where is the support for the construction industry and the building of houses? Surely that has to be recognised as a priority, otherwise we are faced with a situation where the Government provide a token measure to help people to buy while house price inflation is rampant.

We believe that this Budget is a missed opportunity. The Government could have tried to get the people on their side, and they will pay the cost for not having done so.

Income Tax: Top Rate

Lord Davies of Oldham Excerpts

Tuesday 15th July 2014 Lords Chamber

[Lord Newby]

Yes, my Lords, and that is why the Government have taken a raft of measures which will ensure that those with the broadest backs pay very much more than the additional amount of income tax that they might have paid had the rate remained at 50%. For example, we have increased higher rate capital gains tax, raised the stamp duty on higher value homes and reduced the cost of pensions tax relief. These measures, taken with other measures, mean that the additional amount being paid by high earners was more than £1 billion last year and will be more than £2 billion this year and more than £4 billion next year. This is real cash coming into the Exchequer as a result of measures we have taken to hit those who otherwise were avoiding tax.

[Lord Davies of Oldham (Lab)]

My Lords, how can the Government claim that they are being fair when they cut the top rate of tax, giving a £3 billion tax reduction for millionaires? How does the Minister think that squares with the ordinary taxpayer in the country? To say that it brings in more revenue because people who have been dodging tax altogether actually decide that they will make a contribution scarcely sounds like good government.

[Lord Newby]

My Lords, there is no £3 billion, as I have explained. The effect of the cut is £110 million. The other measures we have taken will bring in over a three-year period some £7 billion extra from the same people. For people on ordinary incomes, the rise in the income tax threshold means that by next year the typical basic rate taxpayer will be £805 per annum better off and 3.2 million people who were otherwise paying income tax will not be paying income tax at all.

Economy: Public Sector Net Borrowing

Lord Davies of Oldham Excerpts

Monday 14th July 2014 Lords Chamber

[Lord Newby]

Yes, my Lords; my noble friend is absolutely right. The report to which he refers demonstrates two things: first, with an ageing population, there will over a long period be significant pressures on the public finances, everything being equal; secondly, that a number of steps which have been taken with cross-party support, such as raising the retirement age, are making those long-term additional burdens more acceptable and possible to deal with in a sensible fiscal framework.

[Lord Davies of Oldham (Lab)]

My Lords, did not the Government promise in 2010 to balance the books by 2015, and is it not now the case that they will be lucky—well, they will be out of office, but they would have been lucky—to have balanced the books by 2018? Is the Minister aware that in the early months of this year borrowing was £2 billion higher than in the same period last year? So it is not getting better.

[Lord Newby]

My Lords, it is getting better. It has got better in the year up to now. The OBR says that we are on track to reduce borrowing during this year. As the noble Lord knows, there were substantial economic headwinds from the euro area crisis, high commodity prices and the ongoing impact of the financial crisis. I am not sure whether he is really proposing that we should have cut the deficit more quickly by cutting public expenditure further or putting taxes up.

Finance: Fiscal Devolution

Lord Davies of Oldham Excerpts

Wednesday 9th July 2014 Lords Chamber

[Lord Newby]

My Lords, I was waiting for the last part of that sentence. I am sure that all noble Lords will bear the noble Lord’s expertise in mind, should a commission be established. I think that, once we have the outcome of the Scottish referendum, all parties and all people who are interested in constitutional change in the UK will want to revisit the issue. The exact way we do it is also something that I think all the parties are thinking about as they draw up their manifestos.

[Lord Davies of Oldham (Lab)]

My Lords, the Government seem to be extraordinarily complacent about the response to increasing demand from our great cities for increased powers. The Minister said that it was all too complex, and then his noble friend from the Liberal Benches produced the usual note of cynicism that people never fulfil their promises when in government. I assure the Minister that we intend to have a thorough examination of the powers to allocate greater resources to our cities and regions, very much in line with the noble Lord, Lord Heseltine. Does the Minister agree?

[Lord Newby]

My Lords, I am always pleased when the Labour Party rethinks its policies. However, the premise of the point that the noble Lord raised was misguided. This Government, through the city deals, has devolved significant funding to the major cities for the first time. As I said earlier, with the growth deals which we announced at the beginning of this week, £12 billion is being devolved to the LEPs from what were central government allocations. This is a very big shift of economic and social decision-making going down to the cities and regions.

Economy: House Prices

Lord Davies of Oldham Excerpts

Thursday 3rd July 2014 Lords Chamber

[Lord Newby]

The Government have a comprehensive infrastructure plan, which includes a number of major new initiatives in the north-east of England. As the noble Baroness will know, over the years the Treasury has been very much opposed to hypothecating particular taxes for specific purposes, largely on the basis that they may be buoyant one year but may not be in another. Leaving aside stamp duty, the key point is that we have a comprehensive infrastructure programme in the north-east, and I believe that we have one for the next decade.

[Lord Davies of Oldham (Lab)]

Is the Minister aware of the town of Altrincham in the north-west? The Chancellor certainly is because it is close to his constituency. Altrincham is one of the most prosperous towns in the north-west. Is the Minister aware that house prices in Altringham are half those in three inner London boroughs—not Kensington and Chelsea but Hackney, Southwark and Lambeth? Does that not show how chronic the situation in London is?

[Lord Newby]

Yes it does, my Lords.

Children: Television

Lord Davies of Oldham Excerpts

Tuesday 1st July 2014 Lords Chamber

[Lord Newby]

When I look back to my own childhood—it was a long time ago, although I am not that old—the BBC had a pre-eminent role in terms of children's television. It has continued in that capacity and in that role for many decades.

[Lord Davies of Oldham (Lab)]

My Lords, the Minister was in self-congratulatory mood in response to the first Question. Does he accept that the Government’s television tax relief scheme is based on the hugely successful film tax relief introduced by the previous Labour Government? We would now like to know what is the impact so far of the measures that he is commenting on?

[Lord Newby]

My Lords, the noble Lord will know that we changed the basis of film tax relief. But as far as last year is concerned, some £868 million was generated by 37 major international firms making the UK their production base. As far as TV is concerned, the reliefs that we introduced last year—we have figures for only nine months—show that some £276 million worth of production has benefited from the reliefs, of which some 58% is from inward investment.

Economy: Interest Rates

Lord Davies of Oldham Excerpts

Wednesday 18th June 2014 Lords Chamber

[Lord Newby]

The noble Lord is exactly right. One of the benefits of a gradual increase in interest rates will be that savers, who have had a very poor return on their savings, will start to get what they would consider a more normal return in the future.

[Lord Davies of Oldham (Lab)]

My Lords, will the Government contemplate giving forewarning of a rise in interest rates? It is quite clear that people have become used to this very low rate indeed, and the Minister is beginning to indicate that it is not going to be tolerated for much longer.

[Lord Newby (LD)]

My Lords, there is incessant speculation in the media about when interest rates might rise. The Governor of the Bank of England and the MPC’s inflation report help to guide people as to when this is likely to be the case. In February, the latest inflation report set out a number of criteria against which the Bank would judge when rates should rise. Anybody is capable of seeing how the economy is going and reading what both the governor and commentators say about when such rate rises are likely.

Airports: Heathrow Third Runway

Lord Davies of Oldham Excerpts

Tuesday 17th June 2014 Lords Chamber

[Lord Newby]

My Lords, my noble friend raises a very important point—which is that whatever happens in terms of a particular airport in London in the future, it is very important that we have a range of airport capacity. Manchester Airport and Birmingham Airport play very important roles. My noble friend also referred to Gatwick. On current projections, Gatwick has spare capacity at the moment and will not fill it until about 2020.

[Lord Davies of Oldham (Lab)]

My Lords, will the Minister accept two propositions: first, that good aviation links are vital for Britain’s competitiveness and our future economic success; and, secondly, that to govern is to choose? What items in the manifesto of the two coalition parties carried the rubric, “We will make up our minds possibly in five years’ time on this issue”?

[Lord Newby]

My Lords, the noble Lord will have to contain his impatience as far as manifestos are concerned, I suspect. I would just point out to him and to the House that the five airports serving London currently offer at least weekly direct services to more than 360 destinations worldwide. That is more than Paris, Frankfurt or Amsterdam.

Payday Loans: Advertisements

Lord Davies of Oldham Excerpts

Thursday 3rd April 2014 Lords Chamber

[Lord Newby]

My Lords, that is exactly why the Broadcast Committee of Advertising Practice is looking at this issue. We expect to hear from it in the next few months and there may be consequences for the ASA code. I have some difficulties about the use of the word “grooming” in this context. It has come to have a specific meaning in relation to sexual exploitation, and, whatever the problems with payday loans—and there are very considerable problems—they are not of that degree of difficulty.

[Lord Davies of Oldham (Lab)]

My Lords, the Minister has indicated that there has been a minor reduction over the past year, but the scale of payday loans is astonishing—and they are directed at children because that is a soft way to get at parents. Is this not something that we all ought to criticise and deplore, and on which we ought to expect authority to take action, because the only reason that daytime children’s television in particular is deluged with these loan advertisements is that it puts pressure on parents?

[Lord Newby]

My Lords, this Government have taken very strong action in respect of payday loans by giving the FCA very considerable powers in this area, which it has started to exercise. It is a sign of the times that yesterday DFC, one of the country’s three biggest payday loan providers, issued a profit warning and surrendered to a takeover, citing the tougher new regulatory regime. The weather is changing for payday loans.