Self-employment: A1 Forms
Lord Macpherson of Earl's Court Excerpts(2 years ago)
Lords ChamberRead Full debate Read Hansard Text Watch Debate Read Debate Ministerial Extracts
Baroness Vere of Norbiton (Con)
The A1 certificates are issued all the time. As the noble Lord, Lord Livermore, pointed out, in many cases a worker needs a certificate for every time they go to a certain country, because of course the circumstances may change. However, in other cases, forms can be valid for up to two years. Therefore there is not an April deadline per se. The April 2024 date is when HMRC expects to be processing back to its normal target arrangements.
Lord Macpherson of Earl’s Court (CB)
My Lords, I declare an interest as my son is a rock musician. Does the Minister agree that the provision of music, particularly rock music, is something in which Britain has a comparative advantage? Does she also agree that, for all its benefits in other areas, Brexit has unambiguously increased the barriers to trade in this area?
Baroness Vere of Norbiton (Con)
I absolutely agree with the noble Lord that the UK has one of the finest music industries in the world, which of course includes rock music but also classical music and opera. It is the second-largest recorded music market in the world and contributes £6.7 billion to the UK economy. Brexit has meant that there have been changes to certain arrangements. However, the A1 form process has remained relatively stable for many years.
Autumn Statement 2023
Lord Macpherson of Earl's Court Excerpts(2 years, 2 months ago)
Lords ChamberRead Full debate Read Hansard Text Watch Debate Read Debate Ministerial Extracts
Lord Macpherson of Earl’s Court (CB)
My Lords, I too congratulate the Minister on her move to the Treasury. It is a much-maligned institution, but I am confident that she will enjoy her time there. I hope that, with time, she is given a more glamourous title than Parliamentary Secretary, if only to avoid being confused with the Chief Whip, whose official title is Parliamentary Secretary to the Treasury.
As a student of fiscal Statements—I reckon that I have worked on 30, including seven that can be termed “pre-election”—I rate this one as better than average. First, I welcome the cut in national insurance. This reverses the trend of the last 40 years, which has been to raise national insurance to finance income tax cuts. Over my adult life, the basic rate of income tax has been cut from 35% to 20%, while the employers’ national insurance rate has risen from 8.75% to 13.8%, and the rate paid by employees has more than doubled from 5.75% to 12%. This sleight of hand has been bad for the economy. The fact is that national insurance is a tax on jobs—it penalises working people and the young—while income tax cuts tend to favour the old, rentiers and those who live off capital. So I welcome the 2% cut to 10%; I hope that it will start a trend. Can the Minister say whether it is now government policy to prioritise national insurance cuts over income tax cuts? Of course, whether it is affordable is another matter, and one to which I shall come back.
Secondly, I welcome the focus on growth and, in particular, the full expensing of business investment. Normally, I would favour the widest possible tax base with the lowest tax rate, but Britain has a chronic problem of underinvestment, which is a contributory factor to our low growth, so it is right to try to tilt the playing field.
Finally, I welcome the Chancellor’s commitment to fiscal rectitude, if only by 2028. He did a great job in pulling the Truss Government back from the brink a year ago and in restoring confidence. Whoever governs in the coming period will need to keep on bearing down on borrowing and get public debt on a downward path in relation to the nation’s income. We may currently be benefiting from a rally in the bond market, but we cannot be sure that that will be sustained. The fact is that debt interest is eating into resources better spent on the public services people need.
That brings me to what I see as the problem with the Autumn Statement: I fear that the public expenditure projections are simply unrealistic. The National Health Service and the state pension are accounting for an ever-increasing proportion of public spending. The triple lock is a luxury that the country can ill afford, but all our parties seem to be committed to it. Of course, there is more the Government can do on the productivity and efficiency of public services, starting with the Civil Service, but the so-called unprotected programmes, such as criminal justice, housing and local government, have already been cut too much—as the noble Baroness, Lady Pinnock, mentioned—and the results are beginning to show.
Moreover, as the international security situation deteriorates, we need to spend more on defence, diplomacy and intelligence. Demographic pressures will only increase over the next 20 years. Much of this was set out in the OBR’s fiscal sustainability report, published in July. Can the Minister assure me that that report is informing Treasury policy and will inform the Budget come March?
I fear that, sooner or later, the Government will have to grasp the nettle and reintroduce a health and social care levy. When they do so, it should be based on the income tax base, rather than that of national insurance. The better-off elderly—I should declare an interest as the possessor of a free bus pass—should pay their fair share.
My other concern is that the Government are not going far enough on growth. Here I agree with the noble Lord, Lord Eatwell, that more private investment needs to be combined with more public investment. Yet the Government are projecting that net public investment will fall over time from some £72 billion this year to £56 billion by 2028. When inflation is taken into account, that is a cut of at least 30%. One of my biggest regrets as a Treasury official was recommending the cancellation of what is now called the Elizabeth line in the early 1990s. Of course, we need to focus on investment projects with the biggest economic return— to that end, I am no fan of HS2—but we also need to ensure that infrastructure gets sufficient resources. That means consuming less and investing more. I welcome the Chancellor’s words on planning reform, but I fear they do not go far enough. We need to make it easier to build houses and to make progress on infrastructure. Only yesterday, a telecoms industry veteran told me about the planning obstacles to delivering infra- structure in Scotland, and I see little evidence to suggest that the planning system is much better in the rest of the UK.
Finally, the Autumn Statement does not go far enough on skills. Many of Britain’s problems with immigration stem from our inability to develop a labour force for the 21st century. We used to rely on the Polish and central European taxpayer to train our workforce. If on the day after the 2016 referendum the Prime Minister had said we were going to prioritise further education and vocational skills and then relentlessly focused on the problem, we might just, seven years on, be beginning to see some results, but she did not, and her successors have shown even less interest in the subject. It is not too late to put that right. If we do not rise to the productivity and growth challenge, the public finances will only get worse. This Autumn Statement represents a small step forward, but whoever forms the next Government is going to have to do a whole lot more.
Bank Accounts
Lord Macpherson of Earl's Court Excerpts(2 years, 6 months ago)
Lords ChamberRead Full debate Read Hansard Text Watch Debate Read Debate Ministerial Extracts
Baroness Penn (Con)
My Lords, I am not sure that events recently pertain to the particular case raised by the noble Lord. I was pleased to meet with him and as I committed to then and commit to on an ongoing basis, we will continue to engage with the Ministry of Defence to ensure that we have an understanding of the issue and that people do not face a wider systemic barrier.
Lord Macpherson of Earl’s Court (CB)
My Lords, I declare my interest as chairman of C Hoare & Co. Does the Minister agree that customer confidentiality should lie at the heart of banking, and that a bank apparently commenting on the income and wealth of a customer is completely unacceptable?
Baroness Penn (Con)
I agree with the noble Lord on both points. When it comes to assessing whether that has taken place, that is a question for the regulator.
Income Tax Threshold
Lord Macpherson of Earl's Court Excerpts(2 years, 7 months ago)
Lords ChamberRead Full debate Read Hansard Text Watch Debate Read Debate Ministerial Extracts
Baroness Penn (Con)
My Lords, I could not disagree more with the noble Lord. On the personal allowance, the increases we have seen under this Government since 2010, even with the freeze in thresholds, will be more than if it had been raised in line with inflation. We have put in place unprecedented support for people after the two major shocks of Covid and Russia’s invasion of Ukraine. We need to consolidate our public finances in the face of that and it is right that everyone contributes. We have looked to change corporation tax rates while protecting the smallest businesses, and we have frozen tax thresholds. We brought down the additional rate threshold at the Autumn Statement 2022, which is a sign of those with the broadest shoulders bearing the biggest burden.
Lord Macpherson of Earl’s Court (CB)
My Lords, does the Minister agree that the impact of inflation on taxpayers is corrosive, and therefore the sooner the Bank of England gets inflation back to target, the better? Does she further agree that the amendment introduced by the noble Lord, Lord Rooker, along with Audrey Wise back in 1977 is perhaps the most important principle informing our tax system?
Baroness Penn (Con)
On the first point, I absolutely agree with the noble Lord. As I said in answer to my noble friend, bringing inflation under control is the most effective tax cut we can give to families across the country. On the second point, I will have to check the record; it was at least a decade before I was born.
Money Laundering Regulations: Politically Exposed Persons
Lord Macpherson of Earl's Court Excerpts(3 years, 2 months ago)
Lords ChamberRead Full debate Read Hansard Text Watch Debate Read Debate Ministerial Extracts
Baroness Penn (Con)
My Lords, the standards for our anti-money laundering regulations come from the FATF, which defines an international approach. My noble friend is right that we have the opportunity, having left the EU, to adapt the anti-money laundering regulations to make them more proportionate and more effective. We have already done that in a number of areas, and the piece of work we are going to do, looking at the evidence around the risk of domestic PEPs, is a further area in which we can do some work.
Lord Macpherson of Earl’s Court (CB)
My Lords, I declare an interest as chairman of Hoare’s bank. To pick up on the point made by the noble Lord, Lord Forsyth, it is now several years since we left the European Union. The Treasury has regulatory powers to change the relevant legislation, and the Government are determined to prove the benefits of Brexit. Surely it is time to use those powers to make progress on this issue.
Baroness Penn (Con)
I agree with the noble Lord that we should make use of the new powers we have. As I said to the House previously, we have already made a series of amendments to the money laundering regulations to reduce unnecessary burdens—for example, scrapping the requirement for the creation of a bank account portal, which was seen as disproportionate. There is more work to do in this area, and that work is under way. We published the review of our anti-money laundering regulations in June, and we are committed to consulting on broader changes to our approach. The main focus of that is on the supervisory bodies for anti-money laundering regulations, but this issue is also being looked at as part of that work.
Budget Statement
Lord Macpherson of Earl's Court Excerpts(8 years, 11 months ago)
Lords ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Lord Macpherson of Earl’s Court (CB)
My Lords, I should first declare my interests as chairman of Hoare’s bank and a director of British Land. I had the privilege as a Treasury official of working on 34 Budgets. If there was any pattern to them, those which attracted the greatest opprobrium on the day turned out to be the most sensible in hindsight.
The good news I take from the OBR’s detailed and thorough report is that the economy is growing—and so it should be. The US economy is strong and, defying the doom-mongers, so is the eurozone. The pound has fallen by 15% and weakened again in the last week. In the old days, there was a Treasury rule of thumb that a 4% depreciation in sterling was broadly equivalent to a 1% cut in interest rates. I do not think that that relationship still holds, if it ever did—but it is a reminder of the expansionary effect of devaluation.
This means that macroeconomic policy is extraordinarily loose. Interest rates are at a record low. The Bank of England has embarked on further quantitative easing. It cut rates as an emergency measure last summer and I am a little surprised that it did not reverse that measure when it emerged that the economy was still growing at a good pace. That is what the noble Lord, Lord Lawson—who sadly cannot be here this afternoon—did in February 1988 when it became clear that the stock market crash of the previous October would not have the deflationary impact that conventional wisdom had suggested. However, the Bank of England is independent and I would not seek to influence it.
In setting fiscal policy, the Government must take monetary policy as given. The Chancellor should be congratulated on not loosening fiscal policy further. He has taken the view that any increase in public spending should be paid for through tax increases, but the fact is that fiscal policy is already very loose. The OBR notes that the economy is broadly on trend—or, to put it another way, we are at full employment. That means the structural deficit will be 2.9% of GDP next year, which is too high given that it is almost nine years since consolidation began under the noble Lord, Lord Darling.
Even more importantly—as my former Treasury colleague the noble Lord, Lord Livermore, pointed out —the national debt is still rising. Because of the effect of QE, it will not now fall as a percentage of GDP until 2018-19, by which time debt will have risen for 16 successive years, which I think might be a record in peacetime: eight years under a Labour Chancellor and eight under a Tory Chancellor. At the moment, the debt interest bill is flattered by unsustainably low interest rates, but when yields begin to rise, so will the debt interest burden. As ever, future generations will pick up the bill. We need a proper debate about how much public spending citizens are prepared to pay for, in particular on the so-called triple lock. We also need to think through how to finance the NHS in the longer term.
Successive Governments have found it all but impossible to raise the tax burden, which means that they enter new spending commitments at their peril. The source of the Chancellor’s current difficulties is no doubt the result of the extra spending announced in the Budget. Raising national insurance on the self-employed is right in principle. The lower rate was justifiable in the old days, as the noble Baroness, Lady Neville-Rolfe, pointed out, because employees were entitled to earnings-related benefits and the self-employed were not—but earnings-related pensions and unemployment benefits were abolished long ago.
Of course, the Treasury hates anomalies. A sensible tax system should generally not favour one group over another. I can remember contributing advice to the noble Lord, Lord Lawson, to raise national insurance on the self-employed. I can say this since it was more than 30 years ago. We got a predictably dusty response. The lesson I took from this and from my time at the Treasury more widely was that there are certain no-go areas when it comes to tax. Sadly, residential property is one. Inheritance is another. The self-employed are perhaps the most significant no-go area of all. I hope that it will be possible for the Chancellor to stick to his guns, but I fear that it will not be.
In an ideal world, the main political parties will not go into the next election having made quite so many irreconcilable commitments on spending and tax. I remember in the run-up to one general election pleading with the then Chancellor to drop some of the Government’s most egregious spending commitments when it came to drafting the manifesto. His response was that that was all very well but the fact was that whoever was sitting across the table from me at No. 11 after the election would be the person who had entered into precisely those spending commitments. I would like to think that next time it will be different—but I shall not be holding my breath.