5 July 2006 : Column 229
House of Lords
Wednesday, 5 July 2006.
The House met at three of the clock (Prayers having been read earlier at the Judicial Sitting by the Lord Bishop of Chester.): the LORD SPEAKER on the Woolsack.
Personal Statement: The Baroness Scotland of Asthal
The Minister of State, Home Office (Baroness Scotland of Asthal): My Lords, perhaps I may make a personal statement. I have to make an abject apology to the House. In answering a Question yesterday, I said to the noble Earl, Lord Onslow, that I was confident that,
- “he
understands the rules of sub judice, just as every other person
in the House does”.—[Official Report, 4/7/06; col.
136.]
Armed Forces: Expenditure
3.01 pm
Earl Attlee: My Lords, I beg leave to ask the Question standing in my name on the Order Paper. In doing so, I remind the House of my peripheral interest.
- To
ask Her Majesty’s Government on whatbasis they compare
United Kingdom defence expenditure with that of other developed
countries.
The Parliamentary Under-Secretary of State, Ministry of Defence (Lord Drayson): My Lords,Her Majesty’s Government conduct no formal comparison of defence expenditure against that of other developed countries. The level of defence expenditure is a reflection of UK policy requirements and is therefore not related to the amount spent by any other country.
Earl Attlee: My Lords, I thank the Minister for that reply. I am a little surprised that he did not mention percentage of GDP as a useful comparator. On that basis, has UK defence expenditure effort gone up or down?
Lord
Drayson: My Lords, as a percentage of GDP, UK
defence expenditure has gone down. That is because the rate of GDP
increase has accelerated.
5 July 2006 : Column 230
Lord King of Bridgwater: My Lords, if this is a time of sustained increase in defence expenditure, it is also a time of sustained increase in defence commitments. Anybody who either heard or had a chance to read the Hansard report of your Lordships’ debate on defence will know that no fewer than three Chiefs of the Defence Staff pointed to the serious challenges that are now faced—the shortage of equipment and the challenges faced by our forces in two extremely dangerous undertakings to which the Government have committed them. It is not sufficient to say that there has been a sustained increase in defence expenditure, because clearly that is not enough. Will Ministers do all that they can to ensure that the Treasury sustains the Ministry of Defence rather better?
Lord Drayson: My Lords, I am grateful to the noble Lord for making my point for me. The key point is that defence expenditure matches the commitments that we have to meet. That does not relate specifically to a percentage of GDP. Like other departments, the MoD is fully engaged in the review of long-term policy and will robustly set out the case for defence expenditure to meet such commitments.
Lord Garden: My Lords, the Minister keeps saying that the percentage of GDP is irrelevant. Does he not agree that the personnel costs of the Armed Forces increase at just about the same rate as GDP and that defence equipment costs increase at a greater rate? Therefore, a falling rate in percentage of GDP is bound to lead to front-line cuts over time, as it has done year after year. He says that he does not do comparisons of percentages of GDP, but will he update the Ministry of Defence website? It states:
in GDP terms. Given that the 2006 military balance from the International Institute for Strategic Studies reports that the French are spending 2.6 per cent and rising and that we are spending 2.3 per cent and falling, that needs updating.Lord Drayson: My Lords, I am explaining to the House the basis on which we set our defence expenditure. That is a bottom-up approach, reflecting our policy and commitments. It is not made on the basis of comparisons with any other country's expenditure. As for the tables, of course on its website the MoD notes what other countries are spending. I am clearly telling the House that the basis of our defence expenditure is the level of commitment that we must match.
Lord
Desai: My Lords, can my noble friend confirm my
recollection that the first decline in the percentage of defence
expenditure came in 1994—I
5 July 2006 : Column 231
Lord Drayson: My Lords, I am grateful to my noble friend for his points. He is correct that, under the party opposite, there was a significant real terms decrease in defence expenditure, which was a reflection of the changes that came about at the end of the Cold War. The track record of this Government shows that, since 1997, there has been a sustained increase in real terms defence expenditure. That is the number that we should focus on.
Lord Campbell of Alloway: My Lords, why, ifthe requirements of our forces to which my noble friend Lord King of Bridgwater has referred are complied with, sourced and adequate, comparison with other developed states with a disparate series of requirements is relevant in any sense?
Lord Drayson: My Lords, I am grateful to the noble Lord. I completely agree with him.
Lord Tomlinson: My Lords, does my noble friend agree that, with the exception of France, which has already been mentioned, if we are to be critical of defence expenditure, perhaps we should criticise not the United Kingdom but the performance of some of our NATO European allies? What steps are we taking to ensure that they, in the interests of collective security, play their part in meeting the obligations that we should all be sharing on a much more equal basis than at present?
Lord Drayson: My Lords, I am grateful to my noble friend for those points. Of course, we need to exhort our coalition partners to make their full contribution to the burden that we must all share in relation to the challenges that we face in the modern world, not least the challenges that we face in reconstruction in Iraq and Afghanistan.
Lord Kilclooney: My Lords, if the Government do not make comparisons about defence expenditure, do they make any comparison of the exports of defence materials and armaments? Is it not a surprise that Israel is now exporting more armaments to the rest of the world than the United Kingdom or China?
Lord Drayson: My Lords, in December last year, the Government set out a clear defence industrial strategy, which set as our number one priority making decisions based on putting our Armed Forces first. It takes into account the great importance of industrial issues, such as defence exports, but sets a clear priority of ensuring that decisions that we make on defence equipment—exports and procurement—put the needs of our Armed Forces first. That is what the Government are doing.
5 July 2006 : Column 232
Common Agricultural Policy: Single Farm Payment
3.09 pm
Baroness Byford asked Her Majesty’s Government:
The Minister of State, Department for Environment, Food and Rural Affairs (Lord Rooker): My Lords, I refer the noble Baroness to the detailed Written Statement that I made this morning, which reported the latest position at the close of the 2005 single payment scheme window on 30 June. In summary, as of that date, more than £1.438 billion had been paid from the total fund; 91,720 applicants had received a full payment; and a further 16,168 had received a partial payment but still await the remainder of their claim. This leaves an estimated 8,500 claimants who are yet to receive a payment, of whom approximately 460 have claims valued at more than €1,000. These remaining claims are complex, but they remain the agency’s topmost priority.
Baroness Byford: My Lords, I thank the Minister for that reply, but does he also accept that, in cash terms in part and full payment, the payment rate achieved at that stage was only 94.9 per cent, not the 96.1 per cent target, and that the actual payment rate achieved for farmer claimants was only 92 per cent? Does he not accept that, through the sheer incompetence of the RPA, there are still 460 farmers, to whom he has just referred, who have received nothing at all, of those who are due more than €1,000?
Lord Rooker: Yes, my Lords. The noble Baroness’s figures are correct; they are taken from the detailed Statement that we made. Some 92 per cent of applicants have been paid—107,888 of the total of about 116, 467—and 8,500, as I said, are yet to receive a payment, but, for most of those, the payment will be less than €1,000. I do not say that that is unimportant, but that is the fact of the matter.
On the 460 who have not received a penny but who will get more than €1,000, it is worth pointing out that, although each one is important, approximately 140 to 150 relate to probate and liquidation, which will inevitably take a while, and almost 200 will be paid for English fields but will be paid by the Welsh and Scottish devolved authorities because their farms transcend those boundaries. Those issues still haveto be dealt with, but they relate to incredibly complicated claims. Okay, I apologise; we have got within 1 per cent of the target.
Lord Sewel: My Lords, the Minister will be aware that England distinctively chose the area basis for payments, rather than the historical basis—I think, quite rightly. Can my noble friend outline the reasons for that, and say what he thinks the prospects are for payment in 2006?
5 July 2006 : Column 233
Lord Rooker: My Lords, the answer to the second part of my noble friend’s question is that the payments for 2006 are no better than for 2005. There will be no promises and no commitments. We will do our best, but we will not give any dates of forecast payments. The first that the farmers will know about it is when they get the money. We will not be hung on any petards or promises. The fact is that 2006 has already started, more than 110,000 claims have been received and 32,000 have passed through the first stage of validation. We will do our best, but there will be no promises about payment.
On the English system being different from that of the other three devolved Administrations, those Administrations chose an area basis. In the long term, the system will produce more money for more of the farmers because it includes specialist producers who did not get any subsidies from the common agricultural policy. That is what caused the problem. There were new claimants with field boundaries that still had to be measured. Indeed, there were over 1,000 per cent more changes to field boundaries and mapping, which partially caused the problem. It was not an IT problem; it was a business case and management problem because of the extra claims. The root cause of the problem was trying to get more people involved in the scheme.
Lord Livsey of Talgarth: My Lords, the Minister has reported a vast improvement in the payments for 2005, but he has just said in response to the noble Lord’s question that Defra had received 110,000 forms. That is still a shortfall of 10,000 forms not received out of 120,000, and the deadline has passed for receiving forms. What will happen to the 10,000 who have not submitted their forms?
Lord Rooker: My Lords, I should like to correct a minor point for the noble Baroness, Lady Byford. The 200 farms where there are problems, where part of the land is in England and part is in the devolved Administrations, are in addition to the 460. That is the kind of figure we are talking about, but the claims are very complicated.
As regards the question raised by the noble Lord, Lord Livsey, we always worked on a figure of 120,000 claims. The reality is that, as the claims are validated, some drop out or are not right. Ultimately, there are about 116,000 claims for 2005. For 2006, 110,390 claims have been made out of 118,000 forms requested. People chose not to return the forms for various reasons. We are working on the claims. We had the window changed for penalties, so 4,000 farmers who would have been penalised will not be, because we got the date for entry moved. We will work on the 110,390 claims. As I have said, 32,000 have already passed through the level one validation.
The
Lord Bishop of Exeter: My Lords, I should like to
express appreciation to the Minister for the general change in style of
approach that we have encountered in the matter since he came into
office and there has been a new Secretary of State. However, there are
issues on which I would be grateful for further
5 July 2006 : Column 234
Lord Rooker: My Lords, on the hill farm allowance, 6,800 of the 10,500 eligible claims have been paid. It is treated as a priority. Everything cannot be a top priority. The top priority is those 400 or so claims with a value of more than €1,000; next are the hill farmers.
To the right reverend Prelate’s other question, the answer is “no”. We are trying to learn the lessons from what happened in 2005. We cannot with any confidence predict. Obviously, we want to move Heaven and Earth to do better, but I would say to farmers that, in adjusting their business for 2006 claims, they should look at what happened in 2005—very little can be changed. The forms cannot be changed. There can be no de minimis. It will be 2007 before we can make substantial changes.
The legal window in which the Government are required to pay the money is from 1 December 2006 to 30 June 2007. That is the target date for the window of payment. There will be no promises about percentages of payments paid during that window, target dates in that window or percentage of applications made. We will not go down that road because we will not have the confidence of the figures. We will not fall into the trap of giving misleading information. We will make an assessment over the summer on whether we can make or should make partial payments—our preference is full payments—but we will not make a decision on that until probably October. However, we will at that point make a decision.
Inward Investment: Company Headquarters
3.18 pm
Lord Barnett asked Her Majesty’s Government:
- What
steps they are taking to encourage international companies to move
their headquarters to the United Kingdom and to discourage other
companies from
leaving.
The
Parliamentary Under-Secretary of State, Department of Trade and
Industry (Lord Sainsbury of Turville): My Lords,
UK Trade & Investment works closely with the regional development
agencies and the devolved Administrations to put together
5 July 2006 : Column 235
Lord Barnett: My Lords, I thank my noble friend for that Answer. Is he aware that my Question stems from an article by the noble Lord, Lord Rees-Mogg, which was as usual excellent and well researched, whether one agrees with what he says or not? He indicated that we might be losing international companies to the Republic of Ireland because of the higher rates of tax in this country. In fact, I was so surprised by the article that I sought further information, as my noble friend is aware, and found that over the past 10 years only four international companies had partially moved their headquarters to the Republic of Ireland. While only two international companies moved in in the first year, by 2004-05 the number had risen to 108. Those figures were so surprising and so good that I could not understand them. Will my noble friend consider carrying out some research to show whether those figures are accurate and whether we really are doing everything possible to ensure that international companies both come here and stay here?
Lord Sainsbury of Turville: My Lords, subject to the obvious restrictions on the figures in the sense that they are from UKTI and relate to the projects that it knows about—they are not internationally published figures—I can assure my noble friend that they are accurate. They indicate that, certainly on the question of company headquarters, this country is doing extremely well, with many companies obviously coming to London—interestingly, from all parts of the world. Last year, about 52 companies came from the United States, 28 from India, 14 from Japan and 10 from Australia. We are performing well. However, we must be clear that there are cases where we have lost manufacturing plants to the Republic of Ireland because it has offered large financial incentives. I still think that it is the right policy that we do not try to match those incentives but stick to making this country attractive economically for companies to come to.
Lord
Forsyth of Drumlean: My Lords, can the Minister
confirm that what the noble Lord, Lord Rees-Mogg, wrote in his article
is right? The corporation tax now being levied in the Republic of
Ireland is 12.5 per cent; here it is 30 per cent. Can he also confirm
that under this Chancellor our comparative competitive advantage
because of a low burden of tax has been greatly eroded, so that we have
slipped down the league tables? The Minister must be aware, as I am
aware from evidence that we have received at the Tax Reform Commission,
of the complaints being made by companies through the big four
accountants that the aggressive attitude of the Inland Revenue is
forcing people to look to countries such as Ireland and the
Netherlands, which now offer
5 July 2006 : Column 236
Lord Sainsbury of Turville: My Lords, one needs to look at the whole package of conditions offered by a country, not at just one tax rate in the entire tax regime. What the figures clearly show is that a lot of companies from other countries looking at us from the outside think that we are the best country to come to. That is a pretty fair judgment.
Lord Razzall: My Lords, does not the Minister accept that one of the results of the free market in takeovers in the United Kingdom is increased evidence of the transfer of headquarters overseas following a foreign takeover? No doubt he will agree that the free market in takeovers in the City of London is a major advantage for it in its role as the leading financial centre in the world, but is he satisfied that there is a level playing field in foreign takeovers, particularly with our European partners and with state-owned and state-subsidised purchasers, of which two obvious examples are what is happening to our ports and with Gazprom and Centrica?
Lord Sainsbury of Turville: My Lords, I do not think that anyone would pretend that there is a level playing field in takeovers, but what should be realised is that, although you can impose restrictions that in the short term may give your country advantages, we now see more and more that American companies will not locate plant or headquarters in other European countries because of such restrictions and the lack of flexibility. That is why they come to this country; they think that it is a more benign environment.
Lord Trimble: My Lords, has the Minister looked at the possibility of raising in the European Union the question of unfair tax competition? That is particularly relevant with regard to corporation tax. The rate in the Republic of Ireland has been mentioned: it is12.5 per cent. It used to be 10 per cent, and it rose by 2.5 per cent partly because of pressure from Europe. Would it not be sensible for the Government to pursue those avenues to try to ensure a reduction in the level of unfair tax competition?
Lord Sainsbury of Turville: My Lords, discussions on unfair tax competition can very much lead to an argument on the harmonisation of tax rates. We are not at all keen to get into the question of the harmonisation of tax rates, a matter that, we think, should remain within the country. Countries need to look at the total package that they offer—and it is a question of the total package. A country can have a very good rate for one form of tax, but it is the total tax rate and overall conditions that really matter.
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