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House of Lords

Monday, 15 October 2007.

The House met at half-past two: the LORD SPEAKER on the Woolsack.

Prayers—Read by the Lord Bishop of Coventry.

Introduction: Baroness Warsi

Baroness Warsi—Sayeeda Hussain Warsi, having been created Baroness Warsi, of Dewsbury in the County of West Yorkshire, for life—Was, in her robes, introduced between the Lord Strathclyde and the Baroness Morris of Bolton.

Introduction: Baroness Neville-Jones

Baroness Neville-Jones—Dame Lilian Pauline Neville-Jones, DCMG, having been created Baroness Neville-Jones, of Hutton Roof in the County of Cumbria, for life—Was, in her robes, introduced between the Lord King of Bridgwater and the Lord Taylor of Holbeach.

Energy: Gas Supplies

2.48 pm

Lord Ezra asked Her Majesty’s Government:

The Minister of State, Foreign and Commonwealth Office & Department for Business, Enterprise and Regulatory Reform (Lord Jones of Birmingham): My Lords, as National Grid’s Winter Outlook Report confirmed, the delivery of new gas infrastructure means that we are in good shape going into this winter. New flows of gas are expected from Milford Haven’s Dragon liquefied natural gas terminal and the Aldbrough storage facility. Increased flows are also expected from Norway with connection of the Langeled pipeline to the Ormen Lange field. However, with the weather having the single largest effect on demand, we cannot, and will not, be complacent.

Lord Ezra: My Lords, I note what the noble Lord has just said. Although this is a bit before his time, is he aware that this is the fourth year in succession that I have asked a Question about the reliability of winter gas supplies? Does he agree that, in spite of improvements in the import infrastructure and as both National Grid and Ofgem have stated in their reports, interruptions to the supply of gas from the Continent are still possible due to factors entirely beyond our control? In those circumstances, is it not desirable that in the short term we should substantially increase storage capacity and overcome the planning delays which are preventing this from happening so as to act as a buffer and, in the longer term, we should make it an absolute priority to diminish what would otherwise be our increasing dependence on imports of gas from abroad?

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Lord Jones of Birmingham: My Lords, I am grateful to the noble Lord for a tour d’horizon of the current issue, much of which was before my time. The planning regime of the nation has needed and will continue to need constant review, and it needs to be improved with a degree of speed in many areas of infrastructure. Gas storage facilities are no stranger to that.

Of course, the greatest risk that we face is always the weather. I am not here to give noble Lords a forecast of the weather—I even forecast that the All Blacks would get to the final of the World Cup—but, ultimately, we must ensure that our imports come from a spread of sources. Being reliant on one sort from one place is not in the national interest and does not take place; we must keep a variety and ensure that we can dip into one if, as the noble Lord rightly says, another is interrupted. That is the plan; it is in place, and I am confident that it will work.

Lord Berkeley: My Lords, can my noble friend tell the House what proportion of imported gas comes from Russia, bearing in mind the fact that in the past year or two the Russian suppliers have doubled—or more than doubled—the price of gas, possibly in pursuit of political goals? How much are we at risk if the same thing should happen with supplies from Russia to this country?

Lord Jones of Birmingham: My Lords, I can assure my noble friend that I shall be in touch to give the exact figures with regard to Russia, because I do not know; but I do know that we are not reliant only on gas from Russia. I am pleased that at last we have the Milford Haven terminal, which is very close to completion. That will enable Qatari gas to come to the United Kingdom, and the Norwegian pipeline is very much on song already; the first tap was turned just a couple of weeks ago. I shall get back to my noble friend on his question about Russia, but noble Lords can rest assured that this nation’s ability to keep gas flowing does not rely only on Russia.

Lord Baker of Dorking: My Lords—

Lord Lawson of Blaby: My Lords—

Lord Baker of Dorking: My Lords, I give way to a former Energy Secretary.

Lord Lawson of Blaby: My Lords, I am most grateful to my noble friend, who is always the soul of courtesy.

Noble Lords who have already spoken are rightly concerned about the problem of energy security in the light of reliance on Russia and the geopolitical factors involved. The noble Lord will be aware that there has been a lot of talk within the European Union about how to address this matter, but no agreement has been reached. Will he give an assurance that in the absence of European Union agreement—which may or may

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not be desirable, although it is not there—this country will ensure that it has whatever gas storage capacity is necessary to secure us from a serious potential threat?

Lord Jones of Birmingham: My Lords, the most important thing for noble Lords to understand is that it is not the function of imports that makes this country vulnerable; it is single sourcing in any form. First, a spread of different sources has to be encouraged, and we must ensure that the storage of those sources takes place. The noble Lord is right that we must make sure that we have adequate storage facilities.

Secondly, we must make sure that our membership of the European Union is maximised when it comes to dealing with the issue of Russian imports, just as if we were today in Germany, Spain, France or anywhere else within the European Union. Our membership of the EU gives us a bit of clout to negotiate on that basis. We are not alone in being dependent on various sources of imported gas—Germany has it big time, as does Spain. But we must ensure that we keep it varied and make sure that it is stored in adequate quantities.

Lord Redesdale: My Lords, the Minister said that weather is a factor. That is because boilers are switched on at this time of year for heat. Can he say what the Government are doing to replace the 4 million G-rated boilers still in operation in this country?

Lord Jones of Birmingham: I do not know, my Lords. I shall definitely write to the noble Lord.

Lord Baker of Dorking: My Lords, does the Minister remember that when he was head of the CBI he made eloquent speeches in defence of a capital gains tax of 10 per cent to encourage enterprise and activity in the gas supply industry? How does he reconcile that with Mr Darling’s proposal to increase that tax by 80 per cent to 18 per cent? Before he answers that, can he take the House into his confidence? Does he sometimes lie awake at night, worrying whether he has joined the wrong ship?

Lord Jones of Birmingham: My Lords, as a former serving officer in the Royal Navy, I have never worried about joining the wrong ship. Questions of tax would be better addressed to noble Lords from the Treasury.

On my attack a couple of years ago, I was worried when I headed the CBI about whether we had enough gas to get us through a cold winter. The noble Lord is quite right; I made my views felt. The two things that I said we needed desperately were to get Milford Haven online and the Norwegian gas coming in—then, if we had a mild winter that year, we would be fine. That is what I actually said, and those things happened. I have no doubt that we will be fine this winter. I am pleased that what I said then brought about the awareness that led to those actions being speeded up.

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Taxation: Corporation Tax

2.57 pm

Lord Teverson asked Her Majesty’s Government:

Lord Davies of Oldham: My Lords, it is wrong to suggest that business does not pay its fair share of tax. As the NAO report notes, the Revenue raised £23.6 billion in corporation tax from large businesses in 2006-07, 54 per cent of all corporation tax raised. International studies consistently show that the UK has one of the most competitive business climates in the world. The UK’s corporation tax rate is the lowest in the G7, and will be cut to its lowest ever level of 28 per cent in April 2008.

Lord Teverson: My Lords, I thank the Minister for that run of statistics, but is there not a real risk to the Treasury, given that a large proportion of our corporation taxes comes from the oil industry, insurance and banking, with hardly any coming from other areas? Is there not something rotten about the business I visited in Cornwall last week, which employs up to 20 people, having paid more corporation tax over the past two years than Sainsbury’s, one of the most successful corporations not just in this country but worldwide?

Lord Davies of Oldham: My Lords, Sainsbury’s has heavy investment in its pension fund, helping to explain its low level of corporation tax. More generally, the noble Lord is right that the great majority of corporation tax currently comes from the industries he has identified. Industries and corporations can of course have good reasons for their corporation tax commitment being low, not least because the Government have been concerned to put expenditure on research and development against corporation tax, which has shown itself in the development of our economy in the past decade.

Lord Bilimoria: My Lords, this Question is about large companies not paying tax. In the spring Budget, the previous Chancellor reduced corporation tax on large companies and increased it on small companies. As the noble Lord, Lord Baker, has just said, the current Chancellor has effectively almost doubled capital gains tax by increasing it from 10 per cent to 18 per cent, affecting SMEs and the entrepreneurial community. Why have the Government taken this backward step and used such a blunt instrument, affecting entrepreneurship and the SME community, who make up the engine of our economy?

Lord Davies of Oldham: My Lords, it is an important dimension of the economy, and we want to see enterprise rewarded and developed. But one of the insistent and consistent representations to Government about taxation is that it should be simplified and clear, and the advantage of the 18 per cent rate is that it is a simple, straightforward tax across the board.

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Baroness Noakes: My Lords, the Government have belatedly reduced the headline rate of corporation tax to 28 per cent, but that is still only around average for the OECD and has done nothing to restore our international tax competitiveness. Do the Government accept that there are sound arguments for the UK moving to lower rates of corporation tax that will lead to increased yields?

Lord Davies of Oldham: My Lords, I am somewhat surprised that the noble Baroness does not recognise the significance of the reduction in the rate of corporation tax. It makes the British corporation tax rate one of the lowest in the OECD. Only Germany has as low a rate, at 28 per cent. When the rate was 30 per cent, the Opposition clamoured for a reduction. It has now been reduced to 28 per cent, and I would have expected just a little greater generosity from the other side, although I might have been looking in vain.

Lord Haskel: My Lords, does my noble friend agree that it makes more sense for companies to use the allowances for investing in their own businesses rather than to pay out money in corporation tax? We should be encouraging people to invest in their businesses rather than to pay out dividends and corporation tax.

Lord Davies of Oldham: My Lords, my noble friend is right that it is important that businesses develop, grow and have the necessary investment. Although corporation tax is important, it amounts to only about one-seventh of the taxation that large companies pay across the board through other aspects of their business. It is important that the sector thrives because that benefits returns to the Treasury, the welfare of the economy and our wider society.

Lord Oakeshott of Seagrove Bay: My Lords, does the Minister accept the support of these Benches for the principle of simplification, particularly of capital gains tax, which was announced last week? Does he also accept that there is no case for making major changes such as this in a blue funk in response to the Conservatives who, in turn, stole quite a lot of those policies from the Liberal Democrats?

Lord Davies of Oldham: My Lords, I react vigorously against the word “blue” in this framework. As far as the Government are concerned, the reduction of corporation tax, which is the basis of this Question, was not in reaction to the Conservative Party. I merely indicated that it made one of the myriad representations on this front. The Government decided this to make sure that our corporation tax was internationally competitive. I merely referred to the Conservative Party en passant in the hope of greater generosity of spirit.

Lord James of Blackheath: My Lords, the Minister has already mentioned the virtues of the simplification of the tax system. The NAO, in its usual immaculate form, has set out a wonderful checklist of the items that the Treasury could now address with a view to

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closing loopholes which would win it several billions of pounds, far more than the Government would need to undo the damage to investment in private industry that was done by their legislation a week ago.

Lord Davies of Oldham: My Lords, the Government and the Treasury, in particular, take the reports of the National Audit Office very seriously and look at these issues. I assure the noble Lord that our concern is to plug loopholes. Where the NAO has identified loopholes that can be remedied, we will be working positively towards that objective.

Debt and Pensions Advice

3.04 pm

Lord Oakeshott of Seagrove Bay asked Her Majesty’s Government:

The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord McKenzie of Luton): My Lords, we believe that there is a need for generic financial advice, which is why we have asked Otto Thoresen to consider how a national service could be provided. We await his report.

In the mean time, we are spending £31 million this year to provide additional face-to-face debt advice. This is targeted especially at the financially excluded, many of whom will be on lower incomes. The Government are also contributing to the National Debtline. The Pensions Advisory Service and the Pension Service offer information at the end of a phone, on websites and in a range of booklets on private and state pensions.

Lord Oakeshott of Seagrove Bay: My Lords, I thank the Minister for that Answer, but noble Lords will see that it is too bitty and does not begin to add up to the scale and urgency of the problem. Does he not accept that the queues outside Northern Rock have hammered what is left of the savings culture in this country and that there is now only one name, one trusted brand, that people will respect; that is, Citizens Advice? Its resources are being cut, but surely it should be made the key to giving advice to the many people with deepening financial problems in this country.

Lord McKenzie of Luton: My Lords, I acknowledge the fantastic work done by Citizens Advice. In relation to debt, it dealt with some 1.4 million inquiries last year alone. A range of people are engaged in providing financial and debt advice. We need to see this in the context of the Government’s financial capability strategy. Specifically on debt we have the BERR face-to-face advice, the National Debtline, CLS Direct run by the Legal Services Commission, and some 2,750 agencies across the country, ranging from housing associations to Citizens Advice, which advise on these matters. In

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relation to savings, there has been a substantial increase—72 per cent in real terms since 1997—in household assets.

Lord Borrie: My Lords, does my noble friend agree that while there are plenty of organisations to which a debtor can go for advice, it is not always possible for the debtor to distinguish between those which offer independent, objective and unbiased advice and people who purport to give advice but who may not fully reveal their own personal and commercial interests in some particular scheme which they would prefer to impose on the debtor?

Lord McKenzie of Luton: My Lords, I agree with what my noble friend says. It underlines the importance of the need for generic financial advice, which of course is unregulated advice, which takes account of the specific financial circumstances of the individual but which does not result in any particular product recommendation.

Lord Skelmersdale: My Lords, the Minister says that quite a lot of advice is available in these circumstances, and of course I accept that. However, is not means testing, rather than the lack of access to financial and debt advice, the real deterrent to those on low incomes saving more, which of course is what we would all like to see? Why will not Her Majesty’s Government give thorough consideration to lifetime savings accounts rather than dismissing them out of hand, as they did during our consideration of the Pensions Bill earlier this year?

Lord McKenzie of Luton: My Lords, I think that the debate we had around lifetime savings accounts was connected with the taxation treatment; in particular, the desire for some to parcel and use the pensions system to avoid or mitigate inheritance tax. So far as advice is concerned, we have through the personal accounts encouraged, and will continue to encourage, investment in pensions. The Government have done a lot, for example, through ISAs; something like 17 million households are currently saving through ISAs

Lord Brookman: My Lords, when adding to the list of those who give advice, should not the Minister have added trade unions? Is it not the case that more than 150,000 people would not have had proper advice had it not been for trade unions, which are fighting tenaciously to ensure that they have a pension?

Lord McKenzie of Luton: My Lords, I agree with my noble friend: I was remiss in not identifying trade unions. They have a long and proud history in helping working people gain their just rights in relation to pensions and many other things.

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