Destitution: Low Median Wage

Lord Livermore Excerpts

Thursday 23rd November 2023 Lords Chamber

[Baroness Vere of Norbiton (Con)]

I absolutely agree with my noble friend. It is an absolute turning point. It is about the long-term decisions that have to be made, and that is about investing not only in businesses but also in our people. From a business perspective, the full expensing has been widely welcomed across the economy. It will add an extra £3 billion of new investment. We already have the lowest corporation tax in the G7 and now, with full expensing, that will bring in the investments that my noble friend Lord Johnson really needs to see.

[Lord Livermore (Lab)]

My Lords, I join others in again welcoming the noble Baroness to her new role. Yesterday’s Autumn Statement saw growth down and inflation up every year for the next three years, debt rising every year for the next three years and the tax burden rising every year for the next five years, making this the biggest tax raising Parliament ever. Even after yesterday’s announcements, households are £1,900 worse off. Against this backdrop, what advice does the Minister have for the 11 million people with barely any savings as they now try to withstand the biggest ever fall in living standards since records began?

[Baroness Vere of Norbiton (Con)]

Yesterday did bring out some very important statistics, as indeed has the entire year. The noble Lord will know that, in terms of growth, it is true that the forecasts have been revised down. However, the actual assessment of the size of the economy has been revised up; indeed, it has been revised up by 2%, which is an enormous amount—that is the equivalent of the aerospace industry. On inflation, the OBR was absolutely clear that the discretionary fiscal policy measures introduced in the Autumn Statement do not have a material impact on the path of inflation. We have already halved inflation and by 2025 it will be at 2%. On tax, the noble Lord may have forgotten, but this Government intervened enormously during Covid, including £400 billion to support lives and livelihoods and, in our support for cost of living, £100 billion to support households through some very difficult economic shocks. Those things have to be paid for, but the things we introduced yesterday in terms of tax brought down the tax burden by 0.7%.

Resolution of Central Counterparties (Modified Application of Corporate Law and Consequential Amendments) Regulations 2023

Lord Livermore Excerpts

Monday 20th November 2023 Grand Committee

[Baroness Kramer (LD)]

My Lords, when the original legislation that sits behind all this was debated in the House—for many hours—I remember a conversation afterwards with one of the clerks, who had sat through nearly all of the proceedings. The clerk said to me, “I have sat in this House for years and have been through many debates of all kinds, but this is the first time I have sat through a debate and not understood a single word of the entire discussion”. I am feeling some brotherhood with that clerk at the moment. I remember the past, but I have to admit that I still find utterly daunting the complexity of CCPs and the various pieces of legislation.

I have been digging through my memory and am trying to understand whether these SIs are essentially tidying-up measures designed to give more flexibility to the Bank of England—in its role as the resolution authority—in somewhat changed circumstances, and measures to increase its efficiency. I ask the Minister: is there anything in here to which she would draw our attention as representing a more fundamental change? I admit that I cannot find it, but I thought I should ask the question, given the narrowness of my understanding of this complexity.

As I remember, the resolution of the insolvency of a CCP was structured using a waterfall of liability. First, equity and the CCP came into use, and, after that, if necessary, so did a default fund, to which the clearing members had contributed. My colleague, my noble friend Lord Sharkey, and I pushed on this question, because it seemed apparent to us that the combination of equity and a default fund could work if, say, one clearing member collapsed, or perhaps even two. But, if the collapse were systemic, very quickly only the taxpayer would have the resource to step in. The taxpayer would need to do so immediately to prevent chaos in the financial sector nationally and, probably, globally. The Minister will be aware that virtually all CCPs around the globe essentially have common ownership and, in many ways, need to be looked at almost as a network, rather than a series of individual operations—certainly when one thinks about resolution.

So we asked the then Minister—I believe it was the noble Lord, Lord Sassoon—to clarify why members should not be forced to make bigger contributions in the case of insolvency, above and beyond equity and the default fund, because, obviously, sitting behind CCPs are huge banking institutions and, in other cases, oil companies. As I remember, we were told that, if faced with additional liability, those who operate or participate in the CCPs would choose to use exchanges outside, rather than inside, the UK. So, do these additional SIs empower the Bank of England to require members to make additional cash contributions? I am somewhat concerned that the negative SI—which we are not debating today but which sits with these, as the Minister rightly said—and its cash call powers might have that possibility. I am not saying that I am opposed to that, but I just wonder whether the Minister can do anything to help me understand it and whether there are therefore any implications for the attractiveness of the UK as a location for clearing.

The Minister kindly assured all of us that assets held in the CCPs as margin—collateral, in effect—are fully protected, and there are no implications for netting or off-set. I think I have understood that correctly. But, in a dynamic situation, there must be some adjustment to netting and off-set because, if there is an insolvency, changes in value take place on a moment-by-moment basis. Is there a way to encapsulate how that piece of it works? I am concerned about saying that there are absolutely no implications for netting and off-set, when it is very hard to see that there would not be in an insolvency situation.

I just want to confirm again with the Minister that the “no creditor worse off” safeguard is still fully robust and whether the SIs—the negative and the positive together—weaken it in any way. Is the taxpayer liability, as the ultimate backstop, changed at all by these SIs? Are there, therefore, any implications for public sector net debt? In other words, regarding this liability to act as the rescuer of last resort—it is implicit in CCPs because we are looking at a “too big to fail” situation if we have systemic insolvency—are there any accounting implications for the national debt? Is there any possibility that these changes would drive towards putting the liability on the books?

The notional value of outstanding over-the-counter derivates, which represent the largest body cleared through CCPs, exceeds $600 trillion at any point in time. What is now LCH—I still call it the London Clearing House—dominates that market. A third of that business reflects the clearance of euro-based derivatives under an equivalence granted by the European Commission for UK clearing houses. However, that will last only until June 2025. I know that the City and the Treasury are convinced that the EU will extend that equivalence grant out of necessity, but if it does not, the implications for the City of London will be huge. This is not a time for complacency. I ask again: are there any competitive issues to which we should be alerted in these SIs and which may have consequences for either the EU grant of equivalence or our dealing with the consequences if that grant is not given?

[Lord Livermore (Lab)]

My Lords, I begin by warmly welcoming the Minister to her new role. I very much look forward to working with her in the months ahead.

[Baroness Kramer (LD)]

May I offer my apologies for not having welcomed the Minister to her role? We talk to each other across the House so often that I hardly realised a change had happened; I apologise.

[Lord Livermore (Lab)]

As the Explanatory Memoranda accompanying these two SIs note, the current CCP regime was implemented around a decade ago, in part as a response to the global financial crisis. The Financial Services and Markets Act 2023 has introduced an expanded CCP resolution regime, with that Act giving the Bank of England, as the UK’s resolution authority, what the Government call

“an expanded toolkit to mitigate the risk and impact of a CCP failure and the subsequent risks to financial stability and public funds.”

Preserving market stability is of paramount importance. The UK’s financial services industry plays a vital role in boosting economic growth and delivering skilled jobs in every part of the UK. Almost 2.5 million people are employed in financial services, with two-thirds of those jobs based outside London, and the sector contributes more than £170 billion a year to GDP.

The City of London is one of only two global financial capitals and is at the very heart of the international monetary system. The UK’s reputation and success as a leading international financial centre depends on high standards of regulation as well as a stable and independent regulatory regime. Much of what is being implemented by these two SIs is a carryover between the old and new CCP regimes. Paragraph 3 of the impact assessment outlines that, if these steps were not taken, it

“would mean that there is no protection in place to ensure that the Bank’s powers do not disrupt normal market procedure.”

We therefore fully support both these SIs.

However, I want to ask the Minister a number of questions. First, an issue frequently raised with this type of SI is the sheer breadth of legislation that it tends to amend and the difficulty that those in the sector may face in familiarising themselves with all the changes once they have taken effect. The first of the SIs we are debating today makes a long list of changes to corporate law to ensure that the new Schedule 11 CCP regime will function effectively. The second SI somehow manages to be even more technical; it deals with partial property transfers and the writing down of liabilities, needed to ensure that they do not disrupt the new system’s operation. I ask the Minister, therefore, how interested parties will be, or have been, notified of the contents of these instruments, and when the guidance referenced in paragraph 11.1 of both Explanatory Memoranda will be laid. Will that guidance be laid before Parliament, or at least sent to the relevant parliamentary committees?

Authorised Push Payment Fraud Performance Report

Lord Livermore Excerpts

Tuesday 14th November 2023 Lords Chamber

[Baroness Penn (Con)]

My Lords, I believe that an alternative route forward is already in train: the mandatory reimbursement requirement, which will apply across all payment service providers. As I said, there is currently a voluntary approach in place; a mandatory approach will ensure a much more consistent response for consumers when it is introduced next year.

[Lord Livermore (Lab)]

My Lords, the latest data from the Payment Systems Regulator shows that instances of payment card and remote banking fraud have fallen by 9% and 29% respectively, driven by greater use of much stronger customer authentication interventions. However, use of such initiatives varies markedly across the financial services sector. Does the Minister believe there is a case for stronger guidance on how digital banking platforms should make use of such technology?

[Baroness Penn (Con)]

The noble Lord is absolutely right that we need to use a range of tools to respond to fraud taking place through banking. The regulator does have the powers in place to ensure that payment services firms are taking the appropriate action, not just on reimbursement but to prevent the fraud in the first place.

Alternative Investment Fund Managers Regulations 2013

Lord Livermore Excerpts

Monday 13th November 2023 Lords Chamber

[Baroness Penn (Con)]

I reassure my noble friend that the FCA is indeed engaged in this issue, as are the Government. There are many problems with inherited EU financial services rules and we have set out a programme of work to look at how we can repeal them and replace them with UK-appropriate measures. These include the PRIIPs rules, which affect this issue, and the Government have set out our plans to repeal these measures and replace them with FCA rules, as soon as possible.

[Lord Livermore (Lab)]

My Lords, the primary duty of the FCA is to deliver stability, but the noble Baroness, Lady Altmann, raising this issue today is not the first time that concerns have been raised about apparent instability in certain markets. Does the Minister remain satisfied that the FCA has the tools and expertise it needs to uphold its duties, and is she confident that it has the capacity to meet its growing workload?

[Baroness Penn (Con)]

My Lords, I do remain satisfied and I believe that the Financial Services and Markets Act, which passed through this House earlier this year, updates the tools and framework for the FCA to do its job, now that we have left the EU.

King’s Speech

Lord Livermore Excerpts

Monday 13th November 2023 Lords Chamber

[Lord Livermore (Lab)]

My Lords, the King’s Speech promised to “strengthen our economy” and

“put the country on a better path”.

Such measures would indeed be welcome. The country is ready for change. Britain desperately needs national renewal, with a serious plan for growth. Yet, in reality, the King’s Speech delivered nothing of the kind. Just as with today’s reshuffle, it merely brought back more of the same.

Just as today’s reshuffle has seen the return of a man the Prime Minister himself described as part of a “record of failure”, the King’s Speech saw a continuation of a failed approach that has led to 13 years of national decline; no change from an economic model that has failed over 13 years to give working people the security and opportunity they deserve; 13 years of failure that began with the Cameron-era austerity that missed all its targets, then gave us a Brexit that broke all its promises—followed, inevitably, by a mini-Budget that gambled with people’s livelihoods, undermined our financial institutions, sent government bonds plunging and pushed the pension market to the brink of collapse; 13 years of chaos and instability that have left Britain weaker, and working people paying the price.

The Resolution Foundation has calculated that never in living memory have Britain’s families got so much poorer over the course of one Parliament, with typical working-age household incomes set to be 4% lower in 2024 than at the start of this Parliament in 2019.

Many of those families are home owners, who worked hard, saved for a deposit and have taken pride in having somewhere to call their own. But the security that that should bring, has, for many, turned to dread, as they receive letters from their lender telling them their bills are going up by hundreds of pounds a month. Interest rates have now risen 14 times to a 15-year high of 5.25%, while the average two-year fixed-rate mortgage rose from 2.6% to 6%. As a result, average mortgage holders have paid £2,900 more this year—8.3% of their disposable income. Some 1.4 million people will lose a staggering 20% of their disposable income.

The Government may well this week meet their own self-imposed target to halve inflation from the levels they allowed it to rise to. But, as for the actual inflation target, the Bank of England now expects inflation to stay above target throughout next year, with interest rates remaining at their current levels for—I quote—“an extended period”.

We have falling incomes, persistently high inflation, higher food and energy bills, rising mortgages and, if that were not bad enough, the highest tax burden for 70 years. There have been 25 tax rises since this Government came to power in 2010. Taxes are now £120 billion higher every year, equivalent to £4,000 more in tax every year for every household. Why is tax so high? Because growth is so low. UK GDP is still 5.2% short of its pre-pandemic trend, a far worse performance than either the United States or the euro area. At the start of this year, the Prime Minister promised to get the economy growing again, but we are now going backwards—from low growth to no growth. The latest GDP figures show that there was no growth at all in the third quarter of this year. The Bank of England’s latest forecast now shows no growth at all in any of the next three years—no growth this year, next year or in 2025. As a result, growth next year is now set to be the lowest in the entire G7.

After 13 years, the Government’s economic approach simply is not working, but where is their plan to fix it? So much of this King’s Speech is either insubstantial or trivial, when what we needed was a credible plan for growth. We needed a modern industrial strategy to show that we are serious about securing the jobs of the future. We needed an employment Bill, time and again promised but which once again failed to materialise. We needed a planning Bill to cut red tape and get Britain building. We needed a Bill to give British business the skilled workforce to succeed. What we got was a transport agenda 85% of whose projects were re-announcements, and an oil and gas Bill that everyone in the energy sector knows is a political gimmick. Despite Britain being the worst-hit country in western Europe during the energy crisis, even the Energy Secretary admits that the Bill will not take a single penny off anyone’s energy bills.

Increasing growth is clearly the biggest economic challenge our country faces. In government, and in our first King’s Speech, Labour’s defining economic mission will be to restore growth to Britain, with good jobs and productivity growth in every part of our country. Our plan to deliver that mission is built on three pillars. First, we will rebuild our economy on the rock of stability and fiscal responsibility, so that we can withstand shocks in an insecure world and families and businesses have the certainty to plan ahead. That means we need strong, robust and respected economic institutions. The last Labour Government gave operational independence to the Bank of England, and we will protect that independence. The next Labour Government will strengthen the Office for Budget Responsibility. We will guarantee in law that any Government making significant, permanent tax and spending changes will be subject to an independent forecast by the OBR, and we will provide greater certainty by committing to holding a single annual Budget by the end of each November, giving businesses and families four months to plan for the new tax year.

Together, these changes will be put to Parliament as a new charter of Budget responsibility, introducing a new fiscal lock on Britain’s economic institutions, strengthening our stability and our security. We will also introduce new fiscal rules. We will not borrow to fund day-to-day spending and we will reduce national debt as a share of GDP. Again, these rules will be put to Parliament to agree. With a Labour Government, fiscal responsibility will be embedded in the Budget process. Never again will a Prime Minister or Chancellor be allowed to repeat the mistakes of the Liz Truss Budget. Never again can we allow a repeat of the devastation that Budget brought to family finances, or allow a plan to be pushed through that is uncosted, unscrutinised and wholly detached from economic reality.

The second pillar of our plan for growth is to unlock billions of pounds of private sector investment into British industries. Investment is the lifeblood of a growing economy. It is investment that allows businesses to expand, create jobs and compete internationally so that new plants, factories and research can come to Britain. Yet today, business investment in the UK is at rock bottom. Among 30 OECD countries, Britain is currently 27th for private sector investment as a share of GDP. In government, we will seek to restore investment, as a share of the economy, to its level under the last Labour Government, bringing us back in line with our international peers.

The Government simply stepping back, looking only to business, is not the route to success. As our competitors understand, there is a role for the Government in energising and derisking investment into new and growing industries, so we will provide catalytic investment through a new national wealth fund to unlock billions of pounds more in private sector investment, delivering new gigafactories, clean steel plants and renewable-ready ports across Britain.

This new wealth fund will be set a target so that, for every pound of investment the Government put in, we will leverage in three times as much investment from the private sector. To further spur investment, a Labour King’s Speech will get Britain building the homes and infrastructure of the future, with a reformed planning system to remove the barriers to investing in new industries. We will introduce a modern industrial strategy to accelerate the building of critical infrastructure in energy, roads, rail and housing, and our energy independence Bill will create “GB Energy”, harnessing homegrown renewable power, so that we can cut energy bills, create jobs, tackle the climate crisis and give Britain back its energy security.

Our final pillar to restore growth is to give working people the skills and opportunities they need to succeed. To make work pay, we will introduce a genuine living wage. To ensure that the workforce can meet local skills needs, we will transform the further education system, with specialist technical colleges delivering tailored courses designed with local businesses, and we will turn the failed apprenticeship levy into a new growth and skills levy to give businesses the flexibility they are asking for to train their workforce and deliver growth.

Measures to restore stability, to boost investment, to get Britain building, to cut energy bills and to secure for Britain the industries of the future: this is a positive Labour agenda offering a decade of national renewal in place of 13 years of national decline. What a contrast this is to a King’s Speech from a Government who are out of ideas and out of time, and who have given up on governing; a King’s Speech that shows that a very clear choice now faces the British people—a continuation of 13 years of chaos and insecurity, or a changed Labour Party now ready to change Britain.

Home Office: ODA-funded Support

Lord Livermore Excerpts

Tuesday 5th September 2023 Lords Chamber

[Baroness Penn (Con)]

I will happily take the noble Lord’s point and make it to my noble friend and the government department. In addressing the point that maybe he was making, as I said, the Illegal Migration Act represents a vital step forward in the Government’s plans to tackle illegal migration. I reassure noble Lords that we will continue to report all ODA, consistent with OECD and DAC rules, and we will continue in our commitment to spending 0.5% until we can return to 0.7% when fiscal circumstances align. We keep all our ODA spending forecasts under review to deliver that, and will be closely looking at the evolution of eligible asylum spending as the Illegal Migration Act is implemented.

[Lord Livermore (Lab)]

My Lords, we are all familiar with the Government’s decision to purchase the “Bibby Stockholm” barge and to move asylum seekers on to it even though it was not fit for habitation. Can the Minister confirm whether that purchase was made, in whole or in part, using any ODA funds? Does she consider that purchase to represent good value for money, and are any other such purchases planned?

[Baroness Penn (Con)]

I reassure the noble Lord that all spending is done in line with DAC rules, and I can report back to him on the specific point about that spending. However, when it comes to looking at accommodation solutions for asylum seekers, we are driven by looking at what represents good value for money for the taxpayer. Accommodating asylum seekers in hotels is absolutely not good value for money, and we will continue to look at different solutions to help to accommodate those to whom we have an obligation.

Bank Accounts

Lord Livermore Excerpts

Wednesday 19th July 2023 Lords Chamber

[Baroness Penn (Con)]

FCDO colleagues have not raised this with me but if there is an issue, I will be more than happy to sit down with other departments and discuss what we can do about it.

[Lord Livermore (Lab)]

My Lords, access to financial services should of course never be determined by a person’s political views, but just as those with assets of £1 million should not unduly be denied a bank account with Coutts & Co., so those with substantially less should not be denied access to basic banking services. Yet the Financial Conduct Authority estimates that more than 1 million people in the UK have no bank account and one in four people will experience financial exclusion at least once in their lives. The Government recently overturned Labour’s amendment to the Financial Services and Markets Act to require the FCA to have regard to financial inclusion. Do the Government now regret that decision?

[Baroness Penn (Con)]

My Lords, I absolutely agree about the importance of financial inclusion, and we have seen significant progress on that issue in recent years, including through establishing provision of basic bank accounts. That means that anyone in society, whatever their means, has the right to access banking, and we will continue to promote access through our work on financial inclusion.

Consumer Rights Act 2015 (Enforcement) (Amendment) Order 2023

Lord Livermore Excerpts

Wednesday 12th July 2023 Grand Committee

[Baroness Kramer (LD)]

My Lords, I confess that usually when I speak on a statutory instrument I am trying to look for why it really should have been in primary legislation, not secondary. In this case, this strikes me as a genuine SI. It is almost a moment of great excitement.

I am very happy to say that these Benches support this measure, which, as the Minister says, enable trading standards to investigate more effectively illicit tobacco sales by small operators and retail outlets and to refer evidence of contraventions to HMRC for action, with potential penalties up to £10,000. We know from past surveys that some 18% of tobacco sales have been illegal. That leads me on to a series of questions to the Minister for further clarification.

At this time of cost of living pressures, some people will be tempted to buy cheaper, illegal or illicit cigarettes. I ask the Minister: is illicit activity increasing now at this time of increasing cost of living pressures, or are we continuing to see a diminution? I would be interested to know what the impact is and whether there has been any significant change that requires aggressive action.

When will the relevant guidance for businesses be published? I do not believe that is available yet. Indeed, when will the sanctions be implemented? Perhaps the Minister could give us some sense of the timetable. There is also no statutory review clause, so how will we know how effective these new powers are? If the powers are granted but are generally not used, I think the Minister knows that potential offenders will feel doubly empowered by new rules that then turn out to have no teeth, so it seriously matters that we track this. When we are tracking, will there be any measures to let us estimate the deterrence effect of the measure? That is probably one of its most important aspects.

Behind illegal sales by small and local outlets there is sometimes just a very small-scale operation, but at times it is very much linked to organised crime on a major scale. How is that link going to be investigated as trading standards becomes more engaged in this process?

The sale of tobacco to children is obviously a serious concern to all of us. Are outlets engaged in underage sales to be a particular target? Will there be any prioritisation, as far as the Minister is aware? Will enforcement involvement include the sale of non-compliant tobacco, blunts and shisha, which have sometimes been seen as a way to manoeuvre around the rules in the recent past?

The tobacco industry has a history of offering to help, or provide intelligence to, local trading standards. I have to say that civic society groups that are attempting to decrease smoking tend to view that with deep suspicion as a conflict of interest, designed to basically push tobacco sales from the illicit side but into legal purchasing rather than discouraging purchasing as a whole, and to improve the industry’s general standing and reputation. I wonder how that is going to be handled.

Does this measure also impact on non-compliant sales of e-cigarettes and vapes? We know these products are increasingly being targeted at non-smokers and youngsters, even though we have little information at the moment on what the effects are of the long-term usage of e-cigarettes and vapes.

The Government have a target to make the country free of tobacco smoking by 2030, and we support their goal of achieving a smoke-free generation. Smoking, as the Minister has said, remains a leading cause of premature death and is related to many severe and chronic illnesses and damages lives, as well as being a drain on the NHS. However, the pace of decline in smoking that followed the 2007 ban on smoking in English pubs and clubs has dwindled. How much is this measure expected to focus on reducing overall smoking? I confess that there is always a slight suspicion when HMRC is involved that the focus will be more on increasing revenues to HMRC than on reducing the overall activity—in this case, just moving it from the illicit arena into the legal arena.

If the Minister could add a little more enlightenment, we on these Benches are happy to support the statutory instrument.

[Lord Livermore (Lab)]

My Lords, we support this measure. I shall reiterate a couple of facts mentioned by the Minister. Smoking is the biggest cause of preventable death in the UK. It accounts for some 76,000 deaths each year, with half of all smokers dying of a smoking-related illness. It is estimated that smoking costs NHS England over £2.5 billion every year. Alongside high-level policy, such as the smoking ban introduced by the last Labour Government in the Health Act 2006, evidence suggests that high duty rates have had a positive impact by reducing the number of people who start smoking and increasing the numbers seeking to cut down and quit.

With 21% of cigarettes sold in the UK currently illicit, clearly the illegal trade in tobacco products undermines these important contributions to public health. It deprives the Exchequer of vital revenue and reduces the deterrent effect of high duty rates. We therefore support harsher penalties for those who seek to avoid paying such duties and commensurate powers for trading standards to tackle those who procure, supply and distribute illegal tobacco and profit from the illegal trade.

I would like to ask the Minister three questions. First, she mentioned that the combined application of fines, powers to seize illicit products and the new sanctions is designed to have a deterrent effect on retail outlets and street-level distributors. This point was also made by the noble Baroness, Lady Kramer. Are there any plans to communicate these powers to potential offenders so that the deterrent effect might be enhanced? Secondly, where illicit product is sold through retail outlets, what data exists on whether the owner of a retail outlet is aware of such sales versus illicit sales carried out surreptitiously by an employee, and therefore whether enforcement measures are always correctly targeted? Finally, what communication, co-operation and co-ordination exists between HMRC and the Border Force to tackle the supply of illicit product at source?

[Baroness Penn (Con)]

My Lords, I thank both noble Lords for their contribution to this short debate. I am afraid that the speed of our debate might mean that I will need to write to them regarding some of their questions. I will address the ones I can.

The noble Baroness, Lady Kramer, asked whether the cost of living pressures have caused an increase in the illicit market. My understanding is that there has been a negligible increase in it. Some smokers are switching, for example, to hand-rolling tobacco from ready-made cigarettes to save money. That is the kind of behaviour shift we are seeing.

As for when we will be implementing the provisions provided for in the two statutory instruments, trading standards will start work on 20 July when the tobacco tracking and security SI commences.

Regarding the types of tobacco that will be covered, I can say that the tobacco track and trace system applies to only cigarettes and hand-rolling tobacco, but this makes up approximately 97% of the tobacco market. The system and the penalties are intended to be extended to other tobacco products, such as cigars, cigarillos and shisha, but that will be from May 2024. There is a plan to extend over the remaining market.

Both the noble Baroness, Lady Kramer, and the noble Lord, Lord Livermore, asked about the deterrent effect. We should see a decrease in the current tax gap for tobacco duty. We anticipate that we will see an increase in compliance activities undertaken by trading standards. The visibility of businesses selling illicit products being penalised will have the deterrent effect that both noble Lords asked about.

Tackling this issue at the smaller scale, where trading standards visits premises—the noble Baroness, Lady Kramer, also talked about links to more organised crime—will continue to be a focus. Activity in that area is driven by HMRC, which is the delivery partner, rather than trading standards.

The noble Baroness asked whether outlets engaged in underage sales will be targeted under this measure. My understanding is that, in each local area, trading standards looks at the priorities for targeting enforcement activity. It has powers when it comes to underage sales. The effect of this SI is to ensure that trading standards can make use of the enforcement mechanisms under track and trace, in addition to its powers on underage sales, plain packaging and other consumer issues. The priorities for trading standards visits are set locally, rather than nationally.

The noble Baroness, Lady Kramer, asked about e-cigarettes and vapes. Track and trace does not apply to them but, as she may be aware, we have a call for evidence open at the moment that focuses particularly on the use of vapes among underage consumers or children, which will look at that issue more closely.

On the question of the public health benefits of this measure versus revenue protection, they are mutually reinforcing. Illicit tobacco can have health implications, because it is not subject to the same health and safety regulations as legitimate products. It has been found to contain arsenic, mould and rat droppings, for example, so that issue is at play. The availability and affordability of tobacco products also impacts on smoking rates, which is why the duty that we have in place helps to reinforce our strategy to stop smoking. Making sure that people do not engage in the illicit market also reinforces that strategy.

I will not pretend that protecting the duty owed to the UK Government is not an important objective for HMRC; it is one that we continue to support. However, it mutually reinforces the wider ambition for England to become smoke-free by 2030. As I said, the Department of Health and Social Care announced a package of measures to cut smoking rates, acknowledging that we need to go further in this space. They include expanding access to new treatments, rolling out a national incentive scheme to help pregnant women quit, and using a new approach to health warnings.

I am conscious that I have not answered all noble Lords’ questions, but I undertake to follow up in writing. There is broad support for the SI, but I am sure that the answers to those additional points will help your Lordships to understand how it will have the impact that we all hope it will have. I therefore commend this instrument to the Committee.

Gross Domestic Product: Wales and the UK

Lord Livermore Excerpts

Thursday 6th July 2023 Lords Chamber

[Baroness Penn (Con)]

The classification of these matters is for the ONS, and I shall get the ONS to write to the noble Lord.

[Lord Livermore (Lab)]

My Lords, the Government’s approach to levelling-up funding has forced local authorities throughout the UK to compete in a process that lacks any published criteria. In the second round of allocations earlier this year, local communities across each of the four nations of the UK, including Wrexham, Moray, Bolsover and Belfast, each had bids rejected without any public explanation. Ahead of the third round of levelling-up funding, will the Minister work with ministerial colleagues, the devolved Governments and local authorities to improve the transparency of the bidding process so that cities, towns and villages across the UK can have access to funding that is both fair and seen to be fair?

[Baroness Penn (Con)]

Just to reassure the noble Lord with regard to Wales, in the first two rounds of the levelling-up fund, £330 million has been invested so far. That exceeds the commitment that 5% of those funds would be invested in Wales, but we always seek to improve our processes around those issues, and I shall happily commit to working with colleagues in the Department for Levelling Up to make sure that we build on the success that we have had so far with this fund.

Finance (No. 2) Bill

Lord Livermore Excerpts

Committee negatived & 3rd reading
Tuesday 4th July 2023 Lords Chamber

[Lord Livermore (Lab)]

My Lords, the Spring Budget that this finance Bill seeks to implement was billed as a “Budget for growth”, yet growth in the UK is barely above 0%, the UK remains one of only two G7 economies to be smaller than before the pandemic, and productivity growth in the UK is the second lowest in the G7. Now, despite growth flatlining, the UK economy is already overheating. Inflation is stuck at 8.7%: the highest in the G7 and the highest in the UK since 1990. Core inflation last month rose to 7.1% —a 31-year high—while in other advanced economies, including in the eurozone and the US, it has started to fall. With growth stalled, one of the Chancellor’s most senior economic advisers has even now called on the Bank of England to “create a recession” to deal with the UK’s persistent inflation problem—a far cry from a Budget for growth.

Last autumn, the Government’s disastrous mini-Budget sent markets into meltdown. Since then, things have only got worse. Today, with inflation higher for longer than in similar economies, the two-year gilt yield stands at 5.38%—a new 15-year high, and above its US equivalent. It is the hard-working people of this country who are paying the price. Interest rates have risen 13 times to a 15-year high of 5%. The average two-year fixed-rate mortgage has increased from 2.6% to well over 6%, and average mortgage costs will this year increase by £2,900 per year. These increases in mortgage payments come after 13 years of low growth and stagnant wages, the biggest fall in living standards since records began and 25 tax rises in this Parliament alone—increases that have pushed the tax burden to its highest level for 70 years.

Spending public money is about priorities; it is about making choices to spend wisely and tax fairly. That is important at any stage for any Government, but in the middle of a cost of living crisis, when household budgets are stretched and mortgage payments are rising relentlessly, after 13 interest rate rises and 25 tax rises, it is more important than ever that we see a fair tax system and a plan to raise the living standards of everyone, in all parts of our country.

Let us look at the priorities for this Government, as revealed by what is included in, and what is absent from, this finance Bill. Although the Bill contains no mention of introducing stealth tax rises for working people, as my noble friend Lord Sikka observed, we know that is exactly what the Government are doing. We know that, in the Budget of March 2021 and the Finance Act that followed it, the then Chancellor, now the Prime Minister, froze the basic rate limit and personal allowance for four years. In the recent Autumn Statement of 2022 and in the Finance Act that followed, the current Chancellor extended those freezes by a further two years. Now, following this Budget, the Office for Budget Responsibility has made it clear that the Government’s six-year freeze in the personal allowance will take its real value in 2027-28 back down to its level in 2013-14.

We called for the freeze in fuel duty and the provisions to ensure that large multinationals pay a minimum level of 15% tax in each jurisdiction in which they operate, so we of course welcome those measures, but while the tax burden for working people is up, other important measures we have been calling for to make the tax system fairer are nowhere to be found in this Bill. There is nothing to close the loopholes in the windfall tax on oil and gas giants, which we have been urging the Government to do for so long. We pressed for an extension of the energy price freeze for many months, and we were glad that the Government followed our lead in the Budget, but it is wrong to still leave billions of pounds of windfall profits for oil and gas giants on the table when those windfalls should be helping support families through the cost of living crisis.

Also missing is any action to tackle non-dom tax status. We believe that those who make Britain their home should pay their taxes here. That patriotic point should be uncontroversial. Yet, while families across the UK face higher taxes year on year, the Government are helping a few at the top avoid paying their fairer share of tax when they keep their money overseas. The non-dom rules that allow this to happen cost more than £3 billion every year. Ending that outdated, unfair loophole and replacing it with a modern system could fund measures to strengthen our NHS, childcare and the economy.

So there are no measures to reduce the tax burden on working people and no measures to make the tax system fairer. Instead, the Government chose to abolish the lifetime limit on tax-free pension savings. In the middle of a cost of living crisis, this giveaway for the very wealthiest costs £1.2 billion, benefits only those with the biggest 1% of pension pots and increases the value of a £2 million pension pot by some £250,000. As my noble friend Lord Eatwell said, it also opens up an inheritance tax loophole, whereby it is now possible to accumulate unlimited sums within a pension fund and pass them on entirely free of inheritance tax.

The Minister said that this measure was necessary to keep doctors working rather than retiring early, but, as the noble Baroness, Lady Kramer, said, the Government could have introduced in this Bill a targeted scheme to do just that. Indeed, that is what the current Chancellor suggested less than a year ago. The British Medical Association has said that a scheme targeted at doctors could be introduced at a fraction of the cost.

The Government claim that their policy is about keeping people in work. Yet, as Paul Johnson, the director of the Institute for Fiscal Studies, says, it will cost in the region of £100,000 per job retained, and as the Resolution Foundation says, it may

“actually encourage some people to retire earlier than they otherwise would have done”.

The Government’s approach and the choice they have made fails the test of providing value for money. In the middle of a cost of living crisis, a blanket giveaway for some of the very wealthiest in our country is simply the wrong priority for more than £1 billion of public money every year.

That same failure to spend public money wisely is evident again in this Bill’s proposal to reduce air passenger duty for domestic flights. Again, at a time when public finances are under severe pressure, when household budgets are stretched in all directions and when the cost of inaction on climate change grows by the day, it is baffling that this is the Government’s priority for spending public money.

While we need action to make the tax system fairer, a proper plan for growth is the only long-term, sustainable way to make our country more prosperous and the British people better off. The UK has the lowest investment as a percentage of GDP in the G7, so it is disappointing that, as the Office for Budget Responsibility reveals, this Bill’s changes to corporation tax and allowances will make no difference whatever to medium-term levels of business investment. Rather than a long-term permanent change, these changes are for only three years. As a result, they only bring forward investment rather than increasing its overall level. The Government’s policy paper on temporary full expensing, published on the day of the Budget, makes that clear. It says:

“This measure will incentivise businesses to bring forward investment to benefit from the tax relief”.


Meanwhile, the OBR forecast makes it clear that business investment between 2022 and 2028 is essentially unchanged as a result of these measures. If anything, there is a very slight fall. That cannot be good enough. That is why, as part of Labour’s mission in government to secure the highest sustained growth in the G7, we would review the business tax system and set out a clear road map to provide certainty and boost investment. We believe that the UK’s long-term underperformance on capital investment needs long-term measures as part of a tax framework that supports and incentivises investment.

A fairer and more certain tax system, underpinned by a long-term economic plan, is crucial to helping businesses invest and grow, but an ambitious plan for growing our economy must go further, and we have made it clear that this would be Labour’s first mission in government. At the heart of our plan to grow the economy, create jobs and wealth and make everyone in our country better off is the partnership we would build between government and business. We understand, as do businesses, that growth comes from the Government supporting private enterprises to succeed in the industries of the future. That is why we would support growth in the digital economy and the life sciences, update our planning system to remove barriers to investment and improve access to capital for new and growing businesses. We would make sure that government and business work together and invest together for the good of everyone in every region and nation of the UK.

Our country needs a fairer tax system after 13 years of low growth and 25 tax rises that have pushed the tax burden to its highest level in 70 years. Britain’s businesses need stability and certainty in order to boost investment, create jobs and grow our economy. Our economy needs a credible, ambitious plan for growth that gets us off this path of managed decline, provides security for family finances and makes people across Britain better off. That it does none of these things is perhaps the greatest failure of this finance Bill and the Budget it seeks to implement.