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House of Lords

Wednesday, 7 December 2005.

The House met at half-past two of the clock: the LORD CHANCELLOR on the Woolsack.

Prayers—Read by the Lord Bishop of Chelmsford.

Lord Turnbull

Sir Andrew Turnbull, KCB, CVO, having been created Baron Turnbull, of Enfield in the London Borough of Enfield, for life—Was, in his robes, introduced between the Lord Butler of Brockwell and the Lord Burns.


2.42 pm

Lord Steinberg asked Her Majesty's Government:

What is their response to the Confederation of British Industry estimate that tax rises since 1997 have cost British businesses £50 billion.

Lord McKenzie of Luton: My Lords, the CBI's figures do not offer a fair and accurate comparison. They include, for example, the yield from windfall taxes and measures to reduce distortions in the tax system, but do not take account of measures to improve the UK business environment. International analysis consistently shows the UK to have the most stable economic framework with some of the lowest burdens on business and lowest barriers to enterprise anywhere in the world.

Lord Steinberg: My Lords, I thank the Minister for his reply, but is he really looking at the facts—retail businesses dropping; manufacturing industry disastrous; confidence dull, dreary and depressing? Does he agree that lower taxes help business?

Lord McKenzie of Luton: My Lords, it is interesting that noble Lords opposite seek to talk down the economy and the success that it represents. The economy has grown continually throughout the life of this Government, with low inflation, low interest rates and high employment levels. On the issue of the impact of taxes on growth, a number of things impact on growth but certainly a stable macro-economic environment is key to that.

Lord Barnett: My Lords, I declare an interest as the chairman of a small AIM-listed company which is not a member of the CBI and, indeed, would not dream of joining while Digby Jones is its director-general. Is my noble friend aware that our main concern regarding taxation is to increase profits and pay more, but the problem is that productivity is very often difficult to achieve because of the regulations that apply especially to small companies? The Chancellor of the Exchequer
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indicated in his Pre-Budget Report that he had it in mind to reduce unnecessary regulations. Will my noble friend try to ensure that a list is provided for us of where the regulations are to be removed, or, indeed, where they are not to be removed so that we can make representations?

Lord McKenzie of Luton: My Lords, my noble friend is right to focus on regulation as a key aspect of improving productivity, but under this Government we have closed the gap and overtaken Germany in productivity levels; we have certainly closed the gap on France; and we are ahead of Japan. Regulation and reduction of regulation is a key part. My right honourable friend the Chancellor of the Exchequer outlined what is happening in carrying forward the Hampton recommendations to look at the stock of existing regulations, to prevent and remove gold-plating and enable the risk assessment to regulation that needs to be adopted to relieve the burdens on industry, small and large.

Lord Newby: My Lords, does the Minister accept that one of the additional burdens that the Chancellor has placed on businesses of all sizes has flowed from the increasing scale and complexity of tax legislation? Given that the Chancellor is fond of targets, will the Minister suggest to him that he sets a new target with next year's Finance Bill—that at the end of the Finance Bill process there will be fewer pages of tax legislation still on the statute book than there are at present?

Lord McKenzie of Luton: My Lords, the Government have just gone through a significant simplification of the pension legislation, which removed a significant number of pages of legislation relating to pension taxation. It highlights the dilemma that exists between equity on the one hand and simplification on the other. Simplifying the legislation on SIPPs, for example, opened up an attack that was not warranted or intended from the legislation, which has now had to be closed down. There is a balance between getting equity into a system and having simplicity.

Lord Blackwell: My Lords—

Lord Forsyth of Drumlean: My Lords, on simplification of SIPPs, do the Government recognise the importance of having stability in the tax system? For nearly two years the Government encouraged people to set up SIPPs and to put residential and other assets into them. Four months before—after people had invested considerable sums—the scheme is suddenly withdrawn. What about the Government's decision to impose a huge increase in tax on our North Sea oil companies, despite the fact that on the last occasion it resulted in revenues going down? Can we have a bit of stability so that business can plan? If business cannot plan it will invest elsewhere.

Lord McKenzie of Luton: My Lords, it is important for business that there is stability in the system. The
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macro-economic framework that the Government have put in place has created that. That is why we are the primary destination beneficiary of foreign direct investment into Europe. On the issue of SIPPs, it was made clear from the start that detailed tax rules had to come forward. Given all the publicity that surrounded the possible exploitation of those opportunities, the Government made it clear both in this House and in another place that we would monitor the situation and act if necessary.

It is interesting to hear the comments on oil taxation from Members opposite, given what happened in the 1980s and the huge influx of revenues that were created and wasted by that government propping up economic failure. All this Government have done is recognise that the increase in oil prices—which has produced returns of something like 40 per cent on capital for North Sea oil companies—ought to be more fairly shared. The proceeds of that extra taxation are being shared in part to protect pensioners from the impact of higher oil prices.

Lord Rosser: My Lords—

Lord Howarth of Newport: My Lords, does my noble friend agree that additional taxation spent on health, law and order, education, training and research has been greatly to the benefit of British businesses? How would he advise the noble Lord and the CBI to factor those sums into their calculations?

Lord McKenzie of Luton: My Lords, I agree entirely with my noble friend. When the CBI looked at tax levels it looked at only one part of the equation. Public investment can be good for productivity and good for business—and it has been under this Government.

Baroness Noakes: My Lords, the Minister has painted a very rosy picture of the economy under his Government, but he has not mentioned that we have plunged down the international competitiveness league tables, and the World Economic Forum says that is to do with the tax burden. In the light of that, can he explain why the Chancellor added another £2 billion, and more, annually to the corporate tax burden?

Lord McKenzie of Luton: My Lords, the announcement that was made on Monday concentrated on the North Sea, and I have dealt with the point on the huge and unexpected additional returns that happened in the North Sea as a result of oil price increases. The noble Baroness need not take my word for the stability that has been created:

That was said by Mr Digby Jones of the CBI in November last year on Radio 4.
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Schools: Infrastructure

2.50 pm

Baroness Walmsley asked Her Majesty's Government:

Whether their policy of upgrading the schools infrastructure is fulfilling the aims of the Department for Education and Skills' sustainable development plan.

The Parliamentary Under-Secretary of State, Department for Education and Skills (Lord Adonis): My Lords, the schools capital investment programme is resulting in sustainable facilities nationwide. We now expect most building projects that we fund to achieve a "very good" or "better" rating under the new schools environmental assessment method, which was developed for us by the Building Research Establishment. This week we also launched the design quality indicator for schools, which will help schools achieve high standards of building design, including energy efficiency, recycling facilities and waste management.

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