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Lord O'Neill of Clackmannan: My Lords, I follow the noble Lord who, in other circumstances, I would call a friend, but that word seems to be used rather loosely in this place at present, so I shall not go down that route. Suffice it to say that we have debated and in large measure agree on a number of matters, but I shall not go down entirely the same route as him this evening, although I offer my congratulations to the Minister in her absence. However, her speech from the Dispatch Box this evening was uncharacteristically platitudinous when compared with the elegance and rigorous authority that my noble friend Lord Myners brought to the subject in the round. I hope it was not a valedictory address. I also hope that he does not view sitting on the Back Benches in opposition with too
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Tonight, I shall focus on a couple of areas relating to energy. I should start by declaring an interest: I have a position in two fuel poverty charities-one in Scotland and one in England and Wales-and I am also chairman of the Nuclear Industry Association. I want to draw attention to the plight of people who spend more than 10 per cent of their disposable income on keeping their homes warm and their water hot. Their number has increased considerably in the past six or seven years. It has done so in spite of a strategy, supported in large measure by the Liberal Democrats, who might even be prepared to accept some blame for it as well as credit because the Government responded to legislation that they promoted. There are three main reasons for fuel poverty: the straitened circumstances of the household; the price of gas and electricity; and the poor condition of the house, which is usually attributable to a combination of the age of the property, its construction and its inadequate insulation.
While social security for the poorest and winter fuel payments for pensioners and the elderly have, in many instances, exceeded inflation and have therefore been something of a help, the speed at which we deal with the inadequacy of our housing stock will be the most fundamental challenge to fuel poverty. What are the Government's intentions here? There is no great reference to this in the election manifestos of both members of the anti-Labour alliance. There is now a kind of nod in the direction of affordability, but I am concerned about the future of the Warm Front programme, which is important because it is a means of improving the housing stock and keeping in employment people whose skill base is not all that great, but who can be important to the viability of households and, indeed, in the case of the elderly, to their lives. The surge in deaths among the elderly in the winter months is attributable in large measure to inadequately heated homes. A lot of good work has been done there, and we want that momentum to be sustained.
I will touch briefly on nuclear power. Despite the convolutions in the original statement about what Liberals can and cannot do to support nuclear power, I am reasonably hopeful that a fair amount of the programme will be carried out consensually. I have misgivings about planning-the previous speech highlighted one or two concerns that some of us might have-but we will have to wait and see. Part of the trick to recreating the nuclear industry in the United Kingdom will be our ability to support the supply chain.
When the Minister sums up, will he indicate what will happen to the promised £75 million loan which the previous Government agreed with Sheffield
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This is not just import substitution; it is the meeting of a major international shortage and it is fundamental to the next phase in one aspect of our manufacturing industry. If we do not get answers from the Government on this, our worst fears will be realised. At the moment, we do not have much faith in this Government's capacity to understand the problems of manufacturing and to take it forward. If they can assure us this evening, some of our anxieties will be allayed, at least in small part, and potential investors in the nuclear renaissance in Britain will be extremely encouraged and very hopeful. The Nuclear Industry Association, which I chair, will certainly be very happy, as will all its members.
6.22 pm
Lord Oakeshott of Seagrove Bay: My Lords, that was a sparkling and penetrating speech. I am sure that if the noble Lord, Lord Myners, leaves a gap on the Front Bench, the noble Lord, Lord O'Neill, will be well able to fill it if he so wishes. I, too, congratulate the noble Baroness, Lady Wilcox, on her appointment. Having had the privilege of working closely over the past few years with my right honourable friends David Laws and Danny Alexander, I think that David is a tragic loss and I very much hope that we will see him back soon at the highest levels of government. Anyone who knows Danny knows that he will do an exceptionally good job in David's place.
I declare an interest as a pension fund investment manager since 1976. I now specialise in commercial property, and Vince Cable has just appointed me as chairman of his business advisory group of experts to give him private, informal, and indeed unpaid, advice on business and economic policy.
I will talk today about tax and tax avoidance as the Liberal Democrat Treasury spokesman. Tax was at the very heart of the general election campaign. Our pledge to take anyone earning under £10,000 a year out of income tax struck a real chord with people of all political persuasions and none: combining, as it did, fairness with incentives to work for our fellow citizens trapped by cripplingly high rates of tax if they come off benefits into paid work. That is why that same pledge is now at the heart of our coalition's Programme for Government. We also welcome the support of the noble Lord, Lord Myners, for the coalition policy on CGT. May I say to him that the coalition's door is always open?
It is worth reminding ourselves what the Programme for Government says about tax:
"We will increase the personal allowance for income tax to help lower and middle income earners. We will announce in the first Budget a substantial increase in the personal allowance from April 2011".
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That will be funded partly by,
We will prioritise increasing the personal allowance,
- "over other tax cuts, including cuts to Inheritance Tax ... We will seek ways of taxing non-business capital gains at rates similar or close to those applied to income, with generous exemptions for entrepreneurial business activities. We will make every effort to tackle tax avoidance, including detailed development of Liberal Democrat proposals".
It is important that we remember all those words. A great deal of noise is coming from right-wing commentators, who are trying to chip away at this agreed programme of government, and indeed from Back-Bench Members of Parliament. I was both flattered and alarmed to be quoted by Mr David Davis in apparent support of his campaign against the coalition's policy on CGT in a full-page article in the Daily Mail the other day, so I checked what I actually said. I was talking about the Tax Reform Commission of the noble Lord, Lord Forsyth, last year, and I am sorry that he is not in his place. I actually said:
"Raising the tax-free personal allowance, slashing fringe benefits and cutting business and personal tax rates by closing loopholes are all our priorities, too".-[Official Report, 7/5/09; col. 677.]
That is what I said and what I say now, and it is the exact reverse of what Mr Davis implied.
Tax dodging in Britain is a deep-seated, pervasive, pernicious disease that infects our body politic and eats away at society. Of course, some of it has always gone on, and it is difficult to quantify, but I have been working pretty close to the heart of the City now for 34 years. I started at a time when tax rates were much higher than they are today, and I have no doubt at all that highly organised, aggressive, abusive tax avoidance, which used to be a marginal and rather spivvy operation that was frowned on by the main banks and institutions and shunned by top accountants and lawyers who were concerned about reputational risk, has now mushroomed out of all recognition.
Last month, a tax specialist at one of the big four accountancy firms, which by the way charge the British taxpayer hundreds of millions of pounds in fees for consultancy services, explained to me how they convert the hundreds of thousands, or indeed millions, that are earned every year by each of the partners in some of the main magic-circle law firms into so-called capital profits that are taxed at only 18 per cent. These same solicitors also charge the British Government and the British taxpayer millions of pounds for their advice. I do not know how these professionals, who pride themselves on their high ethical standards and high standards of corporate governance, look at themselves in the mirror in the morning. It is not just the private equity bosses who pay less tax than their cleaners.
Tax avoidance is obviously widespread in other areas. Last year, the Guardian exposed Barclays' highly aggressive tax avoidance operations. Anyone who knows their way around the property market will tell you that precious few luxury houses or flats worth more than £10 million these days ever feature on Land Registry records with stamp duty having been paid. I am pleased to say that, with the support of many noble friends here, we have at least established that after 7 July no one can sit in this place who does not pay full British tax, but that just shows you what a battle this has been.
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Taxing non-business capital gains at rates that are similar or close to those that apply to income tax will not just raise revenue to help low and middle-income earners; it is also essential in order to fight the tax-dodging cancer that is simply uncontrollable. There is a yawning gap between an 18 per cent capital gains tax rate and income tax rates of 40 or 50 per cent. As the noble Lord, Lord Lawson, said, CGT needs to be simple and straightforward, as it was under him in the 1980s. Taper relief, as Vince Cable has made clear, is an open invitation to avoidance. It is complicated and just does not work. I would like non-business capital gains to be indexed in line with the retail prices index so that you do not pay on gains over inflation, and to be included simply with income at whatever rate the individual pays. People of modest means would pay no tax on their annual exemption limit or 20 per cent above that, while those on an above-average income would pay a higher rate and pay more. Let us remember that the average income in this country is £24,000 a year. Only about 250,000 people have second homes, on which they have had substantial gains in recent years. Therefore, it is fair, right and essential that we stick to the whole coalition programme on capital gains tax and other things. I am sure that the Chancellor will do the right thing on 22 June.
6.30 pm
Lord Higgins: My Lords, I congratulate my noble friend Lady Wilcox on her speech and on her appointment. I am sorry that she is not in her place. I assume that she has gone back to the department to make sure that Mr Vince Cable stays on the straight and narrow. We are relying on her to do that.
Looking back over the period of the Labour Government, one thing is absolutely clear; namely, that Mr Gordon Brown inherited the best economic situation ever inherited by a Chancellor of the Exchequer. As the former Prime Minister, he leaves behind the worst economic situation that we have probably ever faced. It is therefore crucial that we should proceed on cutting the deficit as soon as possible.
In that context, it is important to cut out wasteful expenditure. At a time when the Prime Minister is saying that we need to cut the size of the House of Commons to save cash, it seems to me that to move towards an elected and inevitably paid House of Lords is going in exactly the wrong direction. All that we would get in exchange would be a second-class House, which would not be as expert or as representative in terms of gender and race, and which would be whipped more and less able to defend the situation if the Government were to take excessive measures on human rights or whatever. I hope that we will avoid that increase in expenditure. It is not true, as Mr Clegg has said, that it would increase democracy. We already have 100 per cent democracy embodied in the House of Commons. Splitting it between the two Houses would reduce its effectiveness rather than increase it.
On taxation, I was very worried a few weeks ago when the IMF announced that the British indirect taxation system should be changed and that the zero rating on the most essential items for households
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It is widely anticipated that capital gains tax will go up. If we are not to have a tax, because of inflationary gains, which is really a tax on wealth rather than a tax on a real capital gain, it is crucial that we should have either indexation or a tapering system, which existed under the previous arrangement before the Labour Government cut the rate. I am very worried that a number of people, particularly pensioners, may be taking mistaken decisions because they think that their gains will be taxed with no relief, and that then they will find out after the Budget that it was a mistake. I hope that the Treasury will indicate that there will be tapering or index relief so that people do not take mistaken decisions.
It would be very pleasant to have a long discussion on monetary policy, but I am running out of time. As I have said to the noble Lord, Lord Myners, on many occasions when our positions were reversed, it is crucial that we should have a clear policy on funding. It is extraordinary, but not generally understood, that the policy of quantitative easing has not led to any significant increase in the money supply. I am glad that I, as usual, have the assent of the noble Lord, Lord Myners. It would be very sad to lose him from the Front Bench. The Labour Government were immensely fortunate to have him as an expert during the banking crisis. Goodness knows what would have happened if he had not been there. We need a clear establishment of a situation where the funding policy is known. My very strong view is that the Debt Management Office should be returned to the Bank of England. We would then get a coherent attitude on monetary policy, which we have not had because the Debt Management Office has been frustrating the actions of the Bank of England on quantitative easing. If we do not have a steady growth in the money supply, we will not get the growth in the economy which is essential. Monetary policy has to be linked with the fiscal policy and the policy of cuts on expenditure and increases in taxation.
6.36 pm
Lord Whitty: My Lords, this is a wide-ranging debate and I intend to say a few sentences about every area of it. First, I warmly welcome the noble Baroness to her position on the Front Bench. I am very gratified to see her there. Not only has she done the hard slog of opposition, but-I declare my interest as chair for at least a few more weeks of Consumer Focus-she was a distinguished consumer champion at the National Consumer Council. I am not entirely disinterested in
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On the BIS part of the agenda, we have had references to financial regulation. Now that my noble friend Lord Myners is no longer influential in this area, I fear that we are not clear in which direction we are going. The banking industry and, above all, those who depend on banking services need to know what the future system of regulation will be. Will we abolish the FSA? Will we give a bigger role to the Bank of England? A commission is being set up to decide those things, but people want certainty. Above all, I hope that these issues are decided not on the basis of relatively arcane arguments about Glass-Steagall or whatever, but on the basis that we get a better service to business and to individuals from the banking system. We want more competition and more diversity, but not at the expense of less service and less choice to consumers.
There is a whole bit on regulation in the coalition agreement, in the manifestos and in earlier papers, particularly from the Conservative Party. Despite the fact that some of what the Government are arguing is sensible, the first thing that is picked out-the one-in, one-out process-is completely bonkers. The previous Government had a go at it. It cannot be worked in that way. There are other things in the programme on which the Government should focus. Looking at whole groups of regulation and the operation of a sunset clause for regulators would be much more effective than trying to have a first-in, first-out process. That is a bit of advice to those who believe in better regulation rather than less regulation.
On the Post Office, I was a bit surprised to see almost exactly the proposition of my noble friend Lord Mandelson, of which I was not entirely in favour, back on the agenda. I am not clear whether we are looking for capital for the Post Office or for a new organisation-presumably one of its competitors-to take over its management. Either way, we need certainty within the organisation. The employees need it, but above all customers, businesses and individuals need to know which way the Post Office is going. I am not at all convinced that the Bill that seems to be envisaged will do that.
On the environment and energy agenda, I have just two or three points to make. We need to pursue all aspects of the low-carbon agenda and, behind that, we need to reconvince the public that the fight against climate change is indeed one of the priorities of this Government and of society as a whole. There have been some rather unfortunate beginnings, but I hope that the Government can recover from them. The cut in help to business in terms of low-carbon investment is not a particularly helpful signal, nor is the dropping of part of the heat initiative. I am less confident than the noble Lord, Lord Jenkin, that dropping the
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I welcome, I think, the commitment to the green deal, which will enable householders effectively to take out loans to improve the energy efficiency of their homes. However, that does not address seriously the position on fuel poverty to which my noble friend Lord O'Neill just referred. It will help a lot of middle-income groups and improve energy use among household consumers, but it will not tackle the problem of fuel poverty. We need a clear indication from the Government of where they intend to go on that front.
I am running out of time, so I will not go into detail on agriculture, which the noble Lord, Lord Henley, will no doubt be relieved to hear. On transport, the one thing that I want to do is to compliment the coalition on its decision not to go ahead with the third runway at Heathrow. That was a brave and important decision and I hope that the Government can follow through on the environmental agenda and on other decisions about the environment.
I was not going to mention this, but I shall, as the noble Lord, Lord Monson, who is no longer in his place, raised it. There is one apparently bad decision on the part of the Government. I do not believe that it is helpful to society or in the interests of rural areas to repeal the Hunting Act. I had some most unpleasant times in this House when I promoted the Bill. Straight repeal, which the Government seem inclined to allow via a Private Member's Bill, is not a licensing system, is not a middle way and does not allow for local discretion; it is a straight repeal. That would be a regressive step by the Government and I hope that they do not give priority to it.
6.43 pm
Lord Low of Dalston: My Lords, it is a pleasure to follow the noble Lord, Lord Whitty, and I, too, welcome the Ministers to their new positions. At the weekend I attended a lecture entitled, "Do we get the politics we deserve?", which drew attention to the mixed emotions that the coalition has aroused. On the one hand we welcome the new politics of consensus and co-operation and of people working together for the benefit of the country. It would indeed be good if we could see a more bipartisan approach to the vexed question of social care and an end to the competitive auction on who can build and fill the most prisons. We breathe a sigh of relief at the prospect of stability and cheer on David Cameron as, like an auctioneer on speed, he knocks down the prized possessions of new Labour-going, going, gone. I welcome particularly the smack of firm government seen in the firing of the chairman and chief executive of the Student Loans Company.
Already, however, we can see the shine coming off as the Government begin to do the sort of things that Governments do: announcing measures to the media before Parliament; demonstrating the arrogance of power in a strident and partisan tone, so different
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