Economy: Public Finances

Debate between Lord Vinson and Lord Newby

Tuesday 24th March 2015 Lords Chamber

[Lord Vinson]

To ask Her Majesty’s Government, further to the Written Answer by Lord Deighton on 13 February (HL 4675), what plans they have to reduce the deficit and to make the public more aware of the effect on living standards of the United Kingdom’s debt servicing costs, which are currently £766 per annum per person or £1,841 per household.

[Lord Newby (LD)]

My Lords, the Office for Budget Responsibility forecasts that this year the Government will cut the deficit in half as a percentage of GDP from its post-war peak in 2009-10. It is forecast to fall every following year, reaching a surplus in 2018-19. The Government set out in the Budget document that reducing debt as a share of GDP will help to control debt interest and reduce the burden of these costs on future generations.

[Lord Vinson (Con)]

I thank the Minister for his very sagacious reply. Does he agree that, if the public were more aware of our huge national indebtedness, they would be more receptive to the need to put it right? So when he is a Minister in the next Government, will he ensure that every effort is made to encourage the nation to save more, export more, import less and reduce subsidies generally, not least the £14 billion a year net that we give to the European Union, which should be treated as overseas aid?

[Lord Newby]

My Lords, I thank the noble Lord for his optimism about my future career prospects. I agree with what he says about savings in particular. That is why the Chancellor announced at the Budget a new personal savings allowance of up to £1,000 for basic rate taxpayers, more flexibility in the operation of ISAs and a new Help to Buy ISA for first-time homebuyers.

Finance: Interest Rates

Debate between Lord Vinson and Lord Newby

Tuesday 18th March 2014 Lords Chamber

[Lord Newby]

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

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

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

[Lord Vinson (Con)]

My Lords, whoever is in charge, is it not time we had a monetary policy system that paid due regard to the rate of exchange? A trading nation cannot ignore the rate at which it exchanges its goods. Is it not time our policy embraced the effect of interest rates on the rate of exchange as well as on inflation?

EU: UK Contribution

Debate between Lord Vinson and Lord Newby

Wednesday 30th October 2013 Lords Chamber

[Lord Vinson]

To ask Her Majesty’s Government what action they are taking to raise public awareness of the United Kingdom’s net contribution to the European Union’s budget over the last six years exceeding £53 billion, as set out in the HM Treasury Pink Book 2013, and the effect that has on the United Kingdom’s public sector borrowing requirement.

[Lord Newby (LD)]

My Lords, to ensure transparency and increase public awareness, HM Treasury publishes details of UK contributions to the EU in its European Union finances and public expenditure statistical analyses publications. The previous Government gave up a significant portion of our abatement, and consequently our net contributions were always likely to increase. Following the real-terms cut to the 2014 to 2020 payment ceilings negotiated by the Prime Minister in February, they will now be going up by less.

[Lord Vinson (Con)]

My Lords, I thank the Minister for his considered reply. Perhaps I may illustrate my point. Recently, the Chancellor returned from China, pleased that he had raised £13 billion to build the new nuclear power station so desperately needed for our energy security. Is it not paradoxical that over the past six years our net contribution to the EU, which is substantially used for infrastructure, has been over £50 billion? That is enough to build at least three nuclear power stations. How is it that we can find the money to build other people’s infrastructure but not our own?

[Lord Newby]

My Lords, by looking at the net contribution to the EU, the noble Lord is concentrating on only one dimension of our relationship with the Union. He is ignoring the very substantial economic benefits that we enjoy through increased internal trade via the single market, increased external trade via, for example, the recently concluded EU-Canada trade agreement, and increased investment in the UK by companies such as Nissan. He is also ignoring the non-economic benefits of membership in the fields of the environment, justice and external affairs.

Bank of England: Monetary Policy Committee

Debate between Lord Vinson and Lord Newby

Tuesday 9th July 2013 Lords Chamber

[Lord Newby]

My Lords, the American experience demonstrates how tricky it is for central banks to give forward-looking guidance without it having an effect on the market. However, as the MPC said at its meeting just last week, it viewed the implied rise in the expected future bank rate as not warranted by recent developments in the domestic economy. It is trying to be cautious and reduce any potential volatility.

[Lord Vinson]

My Lords, the world’s biggest gilt brokers, PIMCO, wrote about four weeks ago, as reported in the Financial Times, that the new Governor of the Bank of England would have only one shot in his locker, and that is to let the pound depreciate. Is it such a bad thing if, after 30 years, a trading nation begins to consider the rate at which it trades with the rest of the world? Is not our failure to look at the rate of our exchange in the past one of the reasons why we have such a high imbalance of trade?

[Lord Newby]

My Lords, the pound has fallen in value against other international currencies by about 20% in recent years and that has not automatically had a vast impact on the balance of payments. There are considerable signs of optimism about that. For example, exports in goods to the EU increased by almost 7% last month. However, I think that recent experience has shown that devaluation on its own does not cut the mustard—we also need to have a whole raft of supply-side measures in place. That is why things ranging from the additional resources to UKTI, at one end, to bringing more money into science and apprenticeships, at the other, are necessary if we are to have a significant improvement in the balance of payments.

Economy: Fiscal Framework

Debate between Lord Vinson and Lord Newby

Tuesday 4th June 2013 Lords Chamber

[Lord Newby]

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

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

We agree.

[Lord Vinson]

My Lords, does the Minister agree that this country currently has to borrow over £50 billion a year to meet its obligations, largely due to our inability to export? That £50 billion comes after selling some of our prime assets like our water companies and utilities which, for some reason, pension funds abroad think better of investing in than our own pension funds do. Leaving that aside, we have a floating pound and the only way that we can actually make ourselves more competitive is to let the pound float down. I hope that the Government and the new governor will encourage this.

[Lord Newby]

My Lords, as the noble Lord said, we have a floating exchange rate. The Government do not set a target for the exchange rate; it responds to economic circumstances, including the decisions taken by the independent Bank of England.

Bank of England: Monetary Policy

Debate between Lord Vinson and Lord Newby

Tuesday 19th March 2013 Lords Chamber

[Lord Newby]

My Lords, the Government’s view is that it is in the long-term interests of everybody, including pensioners and families, that we deal with the deficit and get growth going on a sustainable basis. In the short term, the Bank has taken the view that to keep within the inflation target and, subject to that, to support the economic policy of the Government, including their objectives for growth and employment, it should keep interest rates low.

[Lord Vinson]

My Lords, does the noble Lord agree that many people increasingly feel that the brief given to the American Fed, which is rather wider than the brief given to our Monetary Policy Committee, would be advantageous? Instead of looking solely at inflation, it would enable the Monetary Policy Committee to examine the effect of high interest rates on the rate of exchange. The pound has been kept higher than its purchasing power parity for years and, as a result, we have a huge trading deficit. A trading nation really ought to look seriously at its rate of exchange, which ought to be one of the factors that a new remit should cover.