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House of Lords

Thursday, 4 December 2014.

11 am

Prayers—read by the Lord Bishop of Derby.

Iran: Ghoncheh Ghavami


11.06 am

Asked by Lord Moynihan

To ask Her Majesty’s Government whether they have made representations to the government of Iran on behalf of Ghoncheh Ghavami, a joint British and Iranian citizen who was jailed for a year after attending an International Volleyball Federation World League match in Iran.

Lord Wallace of Saltaire (LD): My Lords, the Government have raised the case of Miss Ghoncheh Ghavami with the Iranian authorities on many occasions, most recently on 23 November. We welcome the news that Miss Ghavami has been released on bail, and will remain in close touch with her family.

Lord Moynihan (Con): My Lords, while welcoming the news that following the Foreign Secretary’s intervention, Ghoncheh Ghavami, a British and Iranian national, is no longer serving the sentence of a year in prison for seeking to attend a men-only volleyball match in Tehran, will the Government do all that they can to ensure that the result of her forthcoming appeal does not return her to prison, that all charges against Ghoncheh are dropped and that she is released from her two-year travel ban?

Lord Wallace of Saltaire: My Lords, the Government have been actively engaged on this case and will continue to be so.

Lord Bach (Lab): My Lords, I thank the noble Lord, Lord Moynihan, for raising this case. When a British citizen is being wrongly treated anywhere in the world, we have to be active on that person’s behalf. I thank the Foreign and Commonwealth Office and Ministers for the efforts they have made, as well as the work done by Miss Ghavami’s Member of Parliament, the honourable Andy Slaughter, on his constituent’s behalf. Please will the Minister ensure that the strenuous diplomatic efforts that have already been made continue—perhaps in the margins of today’s Afghan conference—so that, as the noble Lord, Lord Moynihan, said, this British citizen may return home as soon as possible?

Lord Wallace of Saltaire: My Lords, I understand that Mr Zarif is not attending today’s Afghan conference, but there will be Iranian representation. Those conversations certainly continue. One problem is that Miss Ghavami is a dual national, and the Iranians do not recognise the status of dual nationality.

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Lord West of Spithead (Lab): My Lords, talking of returning home, 92 years ago yesterday, the cruiser “Calypso” steamed into Phaleron Bay and picked up a family going into exile. The youngest child was 18 months old and was in an orange box for his cot. He became an Admiral of the Fleet 30 years later. Would the Minister like to thank the Duke of Edinburgh for the huge amount he has done for our nation over that period?

Lord Wallace of Saltaire: When the noble Lord mentioned an orange box, I thought we were getting into Mosaic dimensions. Of course, we thank him for his contribution.

Lord Phillips of Sudbury (LD): My Lords, does my noble friend accept that it is a delicate business to seek to interfere with the judicial and legal process of another country? However deplorable we know it to be, the law of Iran is the law of Iran. We must therefore act delicately, let us say, in seeking to assist this young woman.

Lord Wallace of Saltaire: My Lords, we are certainly acting delicately. We all understand the delicacy of raising human rights issues with other countries. However, the human rights situation in Iran is dire. The periodic universal review of the Iranian position on human rights by the Human Rights Council, which is now under way, has raised a number of serious issues. Her Majesty’s Government contributed to raising those issues and we look forward cautiously to Iran’s response at the next meeting of the Human Rights Council in March 2015.

Lord Cormack (Con): My Lords, while I do not necessarily suggest that we emulate the Don Pacifico incident, there is a limit to delicacy.

Lord Wallace of Saltaire: My Lords, of course there is a limit to delicacy. The Iranian political system is one of the most complex in the world. We are dealing with a democratically elected President, a judiciary that is partly responsible to the clergy and a Supreme Leader, not to mention the Iranian Revolutionary Guards. We are never quite sure, as we negotiate with the Iranian authorities, which authorities have the key ability to respond.

Lord Dholakia (LD): My Lords, an area of serious concern is the public hangings that take place in Iran. Next week, we celebrate International Human Rights Day. Is it possible for the Government to make representations to see whether some sort of moratorium could be established until such time as progress is made with these discussions?

Lord Wallace of Saltaire: My Lords, we all know that Iran is second only to China in the number of people executed per year. That is an issue that we and others have raised during the UN human rights review.

Lord Carlile of Berriew (LD): My Lords, given that Iran has apparently been involved in bombing IS in Iraq, will the Government take great care to ensure that human rights are not decoupled from other activities in relation to Iraq, as well as Iran? Will my noble friend assure the House that representations will be

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made to ensure that the Iranian Government do not begin to hold sway over human rights issues arising in Iraq, where they are looking extremely influential at the moment?

Lord Wallace of Saltaire: My Lords, Iran is not the only state in the Middle East with which we have issues about human rights. We certainly do not intend to uncouple human rights from other issues, but we are also in the middle of some immensely complex nuclear negotiations with Iran, and then there are the many complications of the anti-ISIL campaigns.

EU: Justice Opt-outs


11.12 am

Asked by Lord Dykes

To ask Her Majesty’s Government what recent discussions they have had with the Government of the Republic of Ireland on the United Kingdom’s justice opt-outs under the Lisbon Treaty.

The Parliamentary Under-Secretary of State, Home Office (Lord Bates) (Con): My Lords, on 20 November, the Prime Minister notified the Council of the UK’s wish to rejoin 35 EU police and criminal justice measures listed in Command Paper 8897. On 1 December, decisions were adopted by the European Commission and Council formally approving this application. Ministers have been in regular contact with their Irish counterparts throughout the process and the Home Secretary wrote thanking the Irish Justice Minister earlier this week.

Lord Dykes (LD): I thank my noble friend for that Answer. Given that the Irish wisely kept miles away from the bizarre pantomime of opt out and then opt back in unleashed on the British Parliament by the two Conservative Secretaries of State, contrary to the advice of the European Union Select Committee, would my noble friend not agree that now the important thing is to emphasise the list of the renewed opt-ins, particularly the European arrest warrant, which is critical to the successful co-operation of the Irish and British police?

Lord Bates: My noble friend is right that it is critical to have the European arrest warrant in place to avoid any operational gap—which we did as a result of the documents being deposited and agreed on 1 December. It is important that that continues, as is the case with all 35 measures. It is also good that we have retained and repatriated powers from the 100 that we did not opt into.

Lord Boswell of Aynho (Non-Afl): My Lords, in the matter of the opt-outs, while it is gratifying to know that the Government have been keeping in touch with the Irish authorities, sadly they have not always succeeded in fulfilling their duties to this House. After repeated failures on deadlines, in a letter that reached me within the hour the Government have now admitted that in relation to the decision of 1 December, which is welcome in substance, they broke the scrutiny resolution. When

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the European Union Committee had already written to assert its right to demand an Oral Statement consequent on this failure of the process, why are the Government now apparently resisting or refusing to make one? Is it not high time that the Government realised that it is as useless as it is impertinent for them to seek to avoid continuing embarrassment by putting their head in the sand?

Lord Bates: Obviously, we take the noble Lord’s criticisms extremely seriously, given his position. I know that he does not raise these issues lightly. We also take seriously our obligations, set out in the appendix to the Companion, on scrutiny reserve powers. I urge him to accept that exceptional factors were at play in this instance, relating to the objections that were lodged by the Spanish, the Poles and the Austrians in July, which we did not anticipate. This then coincided with the recess period. The Spanish objections were listed only on 7 November and we needed to avoid an operational gap. That was why, in these exceptional circumstances, the Home Secretary had to take the decision to override scrutiny—which she did not do lightly. She did so to avoid people being at risk through the European arrest warrant not being in place. We have met the chairs and the work will be ongoing to ensure that this does not happen again.

Baroness Smith of Basildon (Lab): But, my Lords, very early on in our debates about opt in and opt out, I asked the Minister which other countries the Government had discussed this with. I was told from the Dispatch Box that there was no need to discuss this with any other country; it was a matter for the UK Government. On the matter of substance, how many of the measures that the UK has now permanently opted out of in policing and criminal justice were relevant to the UK, were actually being used and had any value to the UK?

Lord Bates: The noble Baroness says that we were not engaging in discussions, but these discussions through the working groups were absolutely ongoing all the time. That was the reason why we secured the improvements which we got through to the European arrest warrant in terms of proportionality, dual criminality and avoiding lengthy pre-trial detentions. In terms of every single one of the 135 measures, again, we set out very clearly in Command Paper 8671, which was laid before your Lordships’ House in July 2013, our view as to what the application was and whether it was necessary. From that, we took the view that 35 were necessary; that was why the Prime Minister wrote in July last year.

Lord Forsyth of Drumlean (Con): Can my noble friend explain to me, as someone who voted for the Maastricht treaty on the basis of an assurance that justice and home affairs would always remain within the jurisdiction of this Parliament, why, instead of opting into the European arrest warrant, we could not simply have made a bilateral arrangement with the rest of the EU?

Lord Bates: I obviously acknowledge the fact that we both voted for the Maastricht treaty. We were both in another place at the time and were part of the Government

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who did that. I recognise that that was the right thing to do, but the reality is that the pass was sold on this in the 2009 signing of the Lisbon treaty. That is, we have to live in the real world, as we are now, and keep our borders safe. It was good that the opt-in on justice and home affairs was negotiated to be included by the previous Government, but it was this Government who actually took it and have exercised it in this regard.

Lord Richard (Lab): But does the noble Lord not recognise that if in fact we went back to a system of bilateral arrangements between this country and other countries concerning extradition, the process would be longer, more difficult and more expensive than operating the European arrest warrant?

Lord Bates: The noble Lord is absolutely right. Let us imagine the process just in relation to the original Question and what it would mean for negotiations with the Republic of Ireland: we would be back to the bad old days of highly politicised extradition proceedings. We do not want to go down that route; that is why we have taken the decision that we have.

Lord Sharkey (LD): Concerning the JHA opt-outs, can the Minister confirm that the Government will make an Oral Statement to the House on compliance with the House’s scrutiny reserve resolution, as requested by the EU Select Committee?

Lord Bates: The current plan is that in normal procedures on matters of this nature, we would issue a Written Ministerial Statement. It is of course up to Members of your Lordships’ House to seek further debate, should they wish it, but we have already had an extraordinary amount of debate on these issues. On 12 November there was a majority of 426 in the other place; they discussed it again on 20 November; we discussed and debated it on 19 November. I think that at some point, people need to say that we need to move on.

Legal Aid


11.19 am

Asked by Lord Howarth of Newport

To ask Her Majesty’s Government whether, in the light of criticism from the judiciary, they plan to reconsider their policies for legal aid.

The Minister of State, Ministry of Justice (Lord Faulks) (Con): My Lords, we have a good working relationship with the judiciary, and I am a strong advocate of the independence of judicial decision-making. When concerns are raised by the judiciary, the Government reflect upon them. The government policy on legal aid continues to be that limited legal aid resources are made available for the most serious cases and to the most financially vulnerable.

Lord Howarth of Newport (Lab): My Lords, does the Minister acknowledge that in a judgment on 31 October the President of the Family Division made some excoriating observations, of general application,

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on the unjust effects of the denial of legal aid in a case where parents stand to lose custody of their child for ever? He stated that to “require” them,

“to face the local authority’s application without proper representation … would be unconscionable … it would involve a breach of their rights under Articles 6 and 8 of the Convention; it would be a denial of justice”.

In the words of the judge,

“the State has simply washed its hands of the problem”.

What steps is the Lord Chancellor taking to ensure that Her Majesty’s Government are not in breach of their legal obligations under the European Convention on Human Rights and the Human Rights Act to ensure that no parent facing proceedings for the removal of a child is prevented by a lack of resources from getting paid legal representation?

Lord Faulks: It used to be a convention that judges did not criticise politicians and politicians did not criticise judges. I do not propose to depart from that convention. What I can say is that both those litigants have in fact been able to get legal aid. There remain the exceptional funding provisions under Section 10 of the Legal Aid, Sentencing and Punishment of Offenders Act, which apply to cases in which there is said to be a violation of the convention or an EU provision. In fact there is a difference, and one should not conflate this, between scope and eligibility. Usually there is scope for these things, but the individual applicants nevertheless have to satisfy the tests of eligibility.

Baroness Turner of Camden (Lab): My Lords, is the Minister aware that the Bar Council has recently reported, after a review of LASPO, that the Act means that poor people generally speaking cannot get their cases heard in courts at all? Many of them try to represent themselves, though not very effectively. It is not a very good way to celebrate Magna Carta, as we shall be asked to next year, when we have a situation in which poor people simply cannot get their cases heard at all. This is particularly true as far as employment issues are concerned.

Lord Faulks: Litigants in person have always been a feature of the legal system. Clearly, any judge—I speak as someone who has sat as a judge—would much rather have a case in which both parties were represented by highly competent lawyers. Unfortunately, we have had to make certain cuts. The cuts, when fully implemented, will reduce the amount that we spend from £2 billion per year to £1 billion. This still makes us one of the most generous countries in the world. We are of course listening carefully to any anxieties that people have about there being injustices. We have committed to review LASPO on a period of three to five years.

Lord Carlile of Berriew (LD): My Lords, reverting to the question from the noble Lord, Lord Howarth, does the Minister agree that there will be cases in which parents will be unable to be represented on financial grounds in cases in which their children will be removed from them? Does he bear in mind that there was severe criticism in one court last week of the

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activities of a local authority in relation to just such an issue? Does he think that it is conscionable that there should be a single case in this country in which, because of financial indigence, parents cannot be represented in such cases?

Lord Faulks: I am not in a position to comment on the individual case but, in a number of cases, as the noble Lord will know, the legal aid scope remains. In cases of abuse, for example, it was retained. After careful scrutiny of the provisions by this House among others, we have tried to ensure that in all sorts of cases where it is most necessary there will still be legal aid.

Lord Low of Dalston (CB): My Lords—

Lord Scott of Foscote (CB): My Lords—

Lord Clinton-Davis (Lab): My Lords—

Lord Horam (Con): My Lords—

Noble Lords: Cross Bench! Low!

Lord Low of Dalston: My Lords, will the Government give serious consideration to making provision for the continuation of the advice services transition fund when it comes to an end next summer? That would surely be a way to ensure cost-effective provision of a basic legal advice service and, if it is to be maintained when the fund comes to an end next summer, provision will need to be made before the election.

Lord Faulks: The noble Lord has frequently, before this House and elsewhere, helpfully advanced suggestions for providing legal assistance other than through legal aid. The Government are grateful for those suggestions and they continue to consider the report that he provided.

Lord Beecham (Lab): My Lords, the Lord Chancellor’s fig leaf to conceal the damage he has wrought to the legal aid system was the exceptional funding scheme, which he estimated would attract 6,000 applications a year—in itself, only around 1% of the former case load. In the event, applications are running at only around 1,000 a year, of which only some 14% are granted. Will the Government urgently review that scheme, and if not, why not?

Lord Faulks: My Lords, in fact, the number of applications in 2013-14 was 1,520. It is extremely difficult to anticipate precisely in what circumstances exceptional funding might or might not be appropriate. A considerable number of judicial reviews are taking place with regard to the exceptional funding scheme generally and on specific cases. The noble Lord of course objects to any cuts in legal aid. It must be remembered that despite what was in the manifesto of the party opposite, it has objected to every single cut to both criminal and civil legal aid. I look forward to hearing how it will justify an additional spending of half a billion pounds; that did not feature in the debate on the Autumn Statement.

Noble Lords: My Lords—

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The Lord Privy Seal (Baroness Stowell of Beeston) (Con): My Lords, we still have time. Order—I am standing at the Dispatch Box. We have not heard from the Conservative Benches on this Question. My noble friend Lord Horam is due to speak next, and I know that the House is keen to hear also from the noble and learned Lord, Lord Scott.

Lord Horam: My Lords, would it not be better if more lawyers in the legal aid field followed the example of Michael Mansfield QC, who closed his chambers but has reopened a new set of chambers on a lower cost base? Would the lawyers not be better advised to pursue that route, which many others in the public and private sectors have had to do at great cost over the last few years? We could then get a decent service at less cost to the taxpayers within the remit of what the public can afford.

Lord Faulks: It is important to emphasise that nothing will change under the criminal legal aid provisions. Everyone who is accused of a crime is entitled to legal aid. I agree with the noble Lord that the way in which criminal lawyers practise, as was reflected in the report by Sir Bill Jeffrey, will mean a certain agility on their part to make sure that they can continue to provide their very high standard in a more economic way.

Lord Scott of Foscote: Does the Minister agree that access to justice by citizens, either to enforce their legal rights or to defend themselves against claims made by others, is an essential ingredient in promoting and maintaining in this country a healthy respect for the rule of law? Does the Minister also accept that if an individual is unable on account of his impecuniosity to assert his claims or properly defend himself against claims made by others, the consequence will be a diminution in the respect which that individual has for the rule of law and a damage to the cohesion of the rule of law in the country as a whole? It has sometimes been said that the Ritz hotel is open to all, but of course it is open only to those with deep enough pockets. Would it not be a disgrace if the same could be said of the civil justice system in this country?

Lord Faulks: I of course entirely accept that access to justice is an important and fundamental part of the rule of law. Nevertheless, the country has to assess where best to spend the limited amount of resources on legal aid—on which, as I have said, we still spend a considerable amount of money. We will continue to review whether improvements can be made to this, and we will continue to review the situation depending on the financial state of the country.

Fraud: Phone Scammers


11.29 am

Asked by Lord Kennedy of Southwark

To ask Her Majesty’s Government what action they are taking to deal with fraud associated with phone scammers.

The Parliamentary Under-Secretary of State, Home Office (Lord Bates) (Con): My Lords, the Government take the issue seriously. We are working with Action

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Fraud and the National Fraud Intelligence Bureau to ensure that all reported frauds receive an appropriate response from the police and that victims of phone scammers are provided with the right support. We are also working with Financial Fraud Action UK, which has issued advice to the public on avoiding phone scammers.

Lord Kennedy of Southwark (Lab): My Lords, a few months ago, I got a phone call saying that I had won £50,000 in a competition that I had never entered. All that I needed to do was to give them my date of birth, my national insurance number and my bank details. They said that they had my home address, so I said, “Well then, pop a cheque in the post—you don’t need this information”. The phone was soon hung up, but I am still waiting for the cheque.

The serious point is that people are ripped off by these criminals. What are the Government doing to ensure that our laws are as robust and up to date as possible and, when the perpetrators are based abroad, what are we doing with our foreign partners to sort these criminals out?

Lord Bates: I apologise on behalf of the Government that the noble Lord has not received his cheque yet. It may be in the post, as they say. In terms of what the Government are doing on this very serious issue, which has received publicity in the run-up to Christmas, when some 75% of people will undertake online sales, it is very important that people think of their own security. In preparing for this Question, I was thinking that the system is very complex and difficult to remember—but it is incredible, the audacity of people ringing up and asking for PIN numbers. Amazingly, people actually do give them. Part of it is law enforcement, but another aspect is having a bit of common sense in dealing with our security.

Baroness Sharples (Con): Would my noble friend agree that on television virtually every day there is a warning that you should never give out your PIN number or your account number?

Lord Bates: My noble friend is absolutely right. It is a fact that your bank, the Government and the police will never ask you to reveal your PIN number or your online password, and that message needs to get out to people.

The Earl of Listowel (CB): My Lords, what can be done to protect people with dementia?

Lord Bates: My Lords, that is a very good question. That is part of where we all have responsibility to assist those people with dementia to protect them. But there are some sensible steps that can be taken in ensuring that payments made by people through direct debit cards or direct to bank accounts go through approved payment mechanisms such as major credit cards or PayPal.

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Baroness McIntosh of Hudnall (Lab): My Lords, does the Minister agree that one question that arises from my noble friend’s original Question is how the people who contacted him got hold of his telephone number in the first place? Does he also agree that the systems that are designed to prevent the sort of calling that results in people having to take that sort of call are extremely inadequate? It would be very helpful if we could have some information about how they are to be strengthened.

Lord Bates: That is something that Ofcom is looking at. There is, of course, the Telephone Preference Service—

Baroness McIntosh of Hudnall: Is that relevant?

Lord Bates: It is relevant in this regard—that you can go online, as I did this morning, and in five steps put in your mobile telephone number, and it will then be removed from the mass-mailing contact numbers that are often the first port of call for many of these phishing and vishing exercises.

The Countess of Mar (CB): My Lords, my family have been members of the telephone preference scheme for years and we still get telephone calls from people in the United Kingdom, not just Indian calls. How can they be stopped?

Lord Bates: It is very difficult. Sometimes they are using data that were provided before the person delisted from the system. That is something that Ofcom is looking at, and the Government are engaging with Ofcom in that matter, but it is an ongoing problem that we will have to live with.

Lord Hunt of Chesterton (Lab): Why are local authorities now asking people to give all this personal detail when they are registering to vote? If it is voluntary, you either do not give it or you do—and I suspect that a lot of people are giving too much information, which the local authorities proudly say that they are selling. I cannot understand it.

Lord Bates: Again, in that particular piece of legislation there is a provision whereby someone can choose not to have their details revealed.

Lord Hunt of Chesterton: It is not easy.

Lord Bates: Right, but the point is that that provision is there. A lot of what we have to do is in terms of making people aware of their rights in the disclosure of information, as well as being responsible.

Lord Rosser (Lab): As we know, a joint declaration by the UK banks, supported by the police, has been issued to make it clear what kind of information the banks would never request over the phone. Will the Government be taking any action to help spread that message, particularly to older people, who seem especially vulnerable to this sort of scam? Secondly, has the number of officers and civilian staff in local police

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forces engaged full-time in fighting the ever rising incidence of phone and computer scams and fraud increased or decreased over the past three years?

Lord Bates: The number of individuals tasked with looking after cybercrime in the National Crime Agency has significantly increased, and that is mirrored by regional operations. We are working with various organisations, including the Financial Ombudsman Service and Ofcom, which we have already talked about. There is also an online facility at actionfraud.police.uk, where people can report suspected frauds. All those help in the intelligence-gathering operation. It is more difficult dealing with people who are not familiar with online operations, but perhaps that is where family members and friends can gather round, as they do in the instance of dementia, to help and protect those they know and love.

Baroness Farrington of Ribbleton (Lab): My Lords, could the Minister investigate how the Conservative association in the City of Westminster got my name and address? I am not on the electoral register, but in a communication addressed to me by name at my London flat I am being invited to join the Conservative Party. I do not know where they got those two details from, because I am deliberately not on the electoral register. The noble Lord’s party is wasting a lot of money inviting me to join.

Lord Bates: Speaking as a member of the City of Westminster Conservative association, I can tell the noble Baroness that we are never without hope—particularly in the run-up to Christmas. That approach was perhaps speculative, and perhaps wrong.

Business of the House

Motion on Standing Orders

11.37 am

Moved by Baroness Stowell of Beeston

That Standing Order 46 (No two stages of a Bill to be taken on one day) be dispensed with on Tuesday 9 December to allow the Childcare Payments Bill to be taken through all its remaining stages that day.

Lord Forsyth of Drumlean (Con): My Lords, I do not want to detain the House, but may I ask my noble friend if there will be another opportunity to debate the Autumn Statement? Does she really think that it is acceptable for speeches to be limited to five minutes on such an important subject?

The Lord Privy Seal (Baroness Stowell of Beeston): My Lords, yesterday we repeated the Autumn Statement and had an opportunity for questions to my noble friend on that Statement, and now we have the debate today. We have had frequent debates on the economy, and I would expect to see that continue. I am not in a position to confirm when there will be another debate,

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but I am pleased to see that there is a great deal of enthusiasm for today’s debate. I wish everyone participating in it a very successful debate.

Motion agreed.

Business of the House

Timing of Debates

11.38 am

Moved by Baroness Stowell of Beeston

That the debate on the motion in the name of Viscount Younger of Leckie set down for today shall be limited to 3 hours and that in the name of Lord Moynihan to 2 hours.

Motion agreed.

Autumn Statement

Motion to Take Note

11.39 am

Moved by Viscount Younger of Leckie

That this House takes note of the Autumn Statement and measures to promote economic growth and to support businesses in the United Kingdom.

Viscount Younger of Leckie (Con): My Lords, as we near the end of this Parliament, and on the back of the Autumn Statement, I am pleased to have this opportunity to appraise both progress on growth in the economy and the support that the Government are providing for business. But first, stealing thunder springs to mind. I am grateful to my noble friend Lord Borwick, who otherwise might have led this debate but unavoidably cannot be in his place. I also think that much of your Lordships’ thunder may be stolen today by the maiden speech of my noble friend Lord Rose of Monewden. I feel sure that his words of wisdom, honed by so many years of distinguished service in business, will provide a certain magic and sparkle. I can only assume that this is it; this is his Plan B.

The robustness of the economy and the opportunities for government to give resources to vital projects or services are inextricably linked. It is only because of a strong and growing economy that we are able to fund vital public services and major infrastructure projects. That is why it is so pleasing that my right honourable friend the Chancellor has been able to announce an essential annual £2 billion front-line boost for the health service, where expected increasing demands has put the ability to deliver at point of need under strain. That is why there is room to provide £15 billion to fund 100 projects, of which more than 80 are new, from improving links to the port of Liverpool, upgrading the A1 up to near the Scottish border, constructing the Stonehenge tunnel and in effecting the so-called “smart” conversion of the M62. That is why there is funding available for other major projects, such as £200 million for the proposed Manchester science research and innovation centre in the northern powerhouse and a £100 million housing boost for the second garden city at Bicester, that great centre for retail near to where I live.

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This is welcome news because such projects are of national importance but also generate growth for local communities. They provide more jobs for skilled labour around the UK, including for the north-east and north-west, some of the supply for which will emanate from the new apprenticeship and the university technical colleges. This positive news builds upon the growth deals announced in July, including the city deals in 26 urban areas and support for the 39 local enterprise partnerships, with the provision of £6 billion-worth of cross-sectoral funding for transport, housing and business support and, of course, skills projects.

Growth and the health of business are important for every individual around the country because the ability to create jobs and gain new skills gives families greater financial security, opportunity to increase their spending power, more hope to plan for their careers, and it allows them better to realise their own personal plans and ambitions for the longer term. So, to be effective, growth must impact the employee, too. The news yesterday of the rise in the personal tax allowance to £10,600 next April is a direct boost to net pay. My right honourable friend the Prime Minister has pledged to raise this further to £12,500 by 2020. That is why I welcome the Autumn Statement which builds on these important values and ambitions and looks well beyond this Parliament to increase prosperity right around the country.

According to the ONS, growth since 2010 has seen the creation of more than 2 million private sector jobs, leading to the UK reaching a record 30.79 million employment level, and 1.8 million apprenticeships have been created. The UK was the fastest growing economy in the G7 in 2014 and is predicted to be the fastest in 2015 after the US. Annual GDP growth is now a confirmed lively and sustainable 3% for 2014, with 2015 predicted to be 2.4%, with marginally slower growth, primarily due to the continuing crisis in the eurozone and some other key export markets.

However, competitively, the UK is in a much stronger position, having grown 2.5 times faster than Germany but, less surprisingly, more than seven times faster than France. Some of the reasons for such strong growth stem from 2012, when the industrial strategy was launched by BIS. A strong and lasting foundation was built, with the emphasis and impetus placed on 11 key sectors, and with a £600 million boost to support eight key technologies. It was designed as, and remains, a long-term strategy to stretch well beyond this Parliament, with manufacturing and exports set to play a bigger role in rebalancing Britain’s economy.

To aid this, the Government in 2013 doubled the annual investment allowance to £500,000, meaning that businesses would not pay tax upfront for their investing in the future. Government lending to exporters was doubled then, while cutting the interest rate on export loans. It is therefore encouraging that since the Budget the OBR states that it has now revised upwards, from 4% to 27%, its estimate of business investment over this Parliament. But on exports, there are challenges. UKTI has taken splendid strides in reaching beyond the depressed eurozone into many new overseas markets, such as in Africa and Asia, with promising signs for securing contracts in Mexico and Colombia, for example.

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In April 2014, UK organisations won four new contracts worth £1 billion to establish 12 technical and training colleges in Saudi Arabia. Growth has to come primarily from selling our goods and services overseas, and our 40-plus ambassadors, envoys, and overseas embassies and high commissions are working well as a team to make this happen. It was pleasing yesterday that an extra £45 million package has been made available for exports. Can my noble friend the Minister say how and where this money will be spent and give a brief update on the prospects for our export markets?

Relentlessly pushing to increase productivity, to sell our goods abroad, on the back of the industrial strategy, is a key reason why the Government must continue to support business. To attract new markets, the eight great technologies—for example, robotics and energy storage—are in the forefront of research into innovation. They are supported by Innovate UK, which bridges that crucial gap between the universities and research institutions, and converts such ideas into marketable global products at the business end. This bridging is essentially aided by the nine catapults—for example, high-value manufacturing, cell therapy, satellite applications and transport systems. The importance of such initiatives cannot be underestimated as this will allow the UK to make its mark as the global base of choice, the centre of excellence for future technologies, making products and components for global markets.

There is a fascinating project focusing on the development of autonomous vehicles, interconnecting smart technology and the “internet of things”, robotics, and sensor technology. Such innovations are nascent, but they are the future and require sustained funding. Yesterday, we heard that the UK is now ranked second in the Global Innovation Index, having been number 14 in 2010.

Manufacturing is now growing faster than any other UK sector, and faster in the UK than in any other major advanced economy. The High Value Manufacturing Catapult is a particularly vital ingredient for such growth. Its ultimate aim is to more than double the contribution of the manufacturing sector to the UK economy. With an innovation order book of in excess of £218 million, industry demand for the services of the HVM Catapult is clearly strong. So I am delighted that £89 million has been designated further to fund this, spurred on from the recommendations of the Hauser review. A direct benefit is seen in the development and manufacture of fan disc and fan blade technology for Rolls-Royce. This has resulted in two new production facilities in this country—in the north-east and Yorkshire—generating hundreds of high-quality jobs. Can my noble friend give the House an absolute assurance that funding for the catapults will continue as a priority?

It is, of course, not just big business that drives growth. I am pleased that the Autumn Statement has placed an important emphasis on small and medium-sized business with the unlocking of £1 billion-worth of support. Britain is once again a nation of entrepreneurs. It is a well worn truism but worth repeating: small businesses are the engine room of the economy. They now account for 60% of employment and nearly half—47%—of turnover. It is very promising that around

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20% of small businesses say they want to grow significantly. At the start of 2014, there were a record number of small businesses at 5.2 million—up 330,000 on a year ago. It is the first time that the figure has exceeded 5 million. It is the entrepreneurial spirit in the individual that is particularly prevalent: 7.3% of working adults were actively involved in starting a business last year. It helps to explain why last year 500,000 new jobs were created.

This is not in the Autumn Statement specifically but in a report. Emerging from the generic description of SMEs, high-growth small businesses are highlighted for the first time. They are defined as enterprises with an average annual growth greater than 20% over a three-year period and with an annual turnover of between £1 million and £20 million. Promising statistics on these HGSBs have been published by Octopus Investments on behalf of the Centre for Economics and Business Research. HGSBs represent only 1% of total business assets but were responsible for 68% of employment growth between 2012 and 2013. For the past year, this meant that 5,000 new jobs were created per week from as few as 30,000 businesses and there was an 18% growth in this sector between 2011 and 2013. More pleasing is that two-thirds of these businesses are based outside the south-east.

However, the report cited two significant barriers to growth. Skills shortages were highlighted by one in five HGSBs, in particular in science, engineering and technology. The second, an old chestnut, was access to funding. Some 25% of the HGSBs stated that borrowing was “difficult” or “very difficult”. It is noted that net lending from the banks fell by £300 million in the second quarter of 2014. Venture capital trusts, enterprise investment schemes and angel co-funds, for example, remain critical backstop funding sources, in addition to the successful UK AIM market. However, through the British Business Bank, yesterday’s extension of the enterprise capital fund programme will provide £400 million, with the guarantee of new lending of up to £500 million for SMEs. That is most welcome.

A strong economy allows for greater flexibility in reducing taxes for companies and individuals, and in making businesses more competitive. We welcome the review of business rates for 2016, as well as the doubling of small business rate relief for another year, the strengthening of the entrepreneurs’ relief, the social investment tax relief and the increasing of the R&D tax credit for SMEs right up to the maximum allowed. On tax, and with my old intellectual property hat on, can my noble friend the Minister update the House on the status of the tax advantage on the patent box? Secondly, how satisfied is he with businesses’ ability to access finance? What more can be done to encourage the banking sector to stimulate growth and productivity? I welcome the measures in the Small Business, Enterprise and Employment Bill that will take further steps for banks to be more transparent in their lending policies. But, as the Chancellor was at pains to point out, there is much more to do. Of greatest importance is the need to redouble our efforts to continue to tackle the deficit.

I return, finally, to what also matters: the individual, the employee and the benefit to him and her from business growth. Interest rates remain at an all time

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low, but wages still lag behind inflation in many sectors. The signs for individual pockets becoming deeper are encouraging: 85% of the working population are in full-time work, the claimant count is down 23%, the tax threshold is raised at the lower and higher rate levels, and the OBR has significantly revised inflation downwards and is predicting that wage growth will rise above inflation from next year for the next five years. Already, those who have been in work for over a year are experiencing a 4% growth in their wages. Even oil prices are reducing. We are earning and growing our way back to prosperity, which is the right way.

A journalist wrote last week that the Prime Minister and his party,

“need to draw the spotlight away from Nigel’s saloon bar and back to Dave and George’s repair shop”.

This is correct, and, because of the deficit, I believe that “repair shop” is still the right term to use. This Autumn Statement allows us to be safe in the knowledge that we have the stimuli, with the right spanners and the right workforce in place, to effect not just a patch up job but to continue a quality repair job which must be sustainable for the UK in the long term. I beg to move.

11.54 am

Lord Adonis (Lab): My Lords, I warmly endorse what the noble Viscount said about the economic importance of small businesses. May I also say how much we look forward to the maiden speech of the noble Lord, Lord Rose?

In responding to questions yesterday, the noble Lord, Lord Deighton, said with refreshing candour:

“I fully accept that this country has a long-term productivity problem”.

He continued,

“earnings have not recovered as fast as we all would have wanted … because the economy recovered more slowly than we expected … that explains why it is taking longer to get the deficit down”.—[

Official Report

, 3/12/14; col. 1337-38.]

The Minister sums up the weakness of government policy over the last four years: the failure to make much impact on productivity, reflected in particular in poor export performance; too few high-growth companies; a record balance of payments deficit; and average earnings still far below their 2010 level in real terms.

So the key question is: what impact will the Autumn Statement have on productivity? The measures on science and support for postgraduate students are welcome but the word virtually absent from the Chancellor’s Statement was “skills”. Every recent business survey of obstacles to growth highlights a skills shortage—in particular, the acute shortage of technicians. To tackle this, we need, in particular, a transformation in the number and quality of technical apprenticeships, by which I mean far more school leavers and young employees with good literacy, numeracy and social skills going through an intensive work and training route, leading to reputable technical qualifications, yet this is not happening.

The Government, and the noble Viscount in his speech, parade big figures for the growth in apprenticeships, but these largely involve older employees doing short work-based training courses and did not even count

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as apprenticeships until the Government reclassified and renamed them in 2010. Meanwhile, the number of apprentices under the age of 19 has been falling, the number in their early 20s has barely risen, and a high proportion even of these apprenticeships are of short duration and low quality, while the proportion of employers offering apprenticeships of any kind remains pitifully low.

Until this skills crisis is addressed systematically, productivity will remain poor and the underlying cause of much of the concern about immigration will continue —namely, the shortage of good employment with training opportunities for the two-thirds of our young people who do not go straight from school to university.

In my remaining minutes I want to comment on infrastructure, which is critical to long-term productivity. The single biggest infrastructure challenge facing the country was ducked by this Government in 2010—the expansion of hub airport capacity in south-east England, supplementing our most important port for goods and business people: Heathrow Airport. Heathrow has a big sign outside saying “full”. On this, we are still waiting for an independent review, which may or may not chart a viable way forward in a year’s time. There have been five years of delay, with seriously negative economic consequences.

In his remarks yesterday, the noble Lord, Lord Deighton, lumped public and private investment together to suggest that overall infrastructure investment was fine and we need not worry. This week we have had from the Treasury a long list of proposed road and flood defence schemes. However, although I pay tribute to the noble Lord’s work in driving many schemes forward—particularly HS2—the Government have performed more U-turns on road investment than a hapless driver following rogue sat-nav diversions. There was a mass cancellation of schemes in 2010, followed by the reinstatement of some in 2012, then this week’s list—lots of promises for the future. Meanwhile, far too little has actually been built—or even begun—in the five years that the Government have had to get things done. The same is true of flood defences and energy.

I should also note that HS3, which the Chancellor rightly highlights as vital to the northern powerhouse, is still only a slogan. A year after he announced the upgraded east-west rail scheme between the northern cities, and five years after the previous Government started work on the electrification of the Liverpool to Manchester line, which is the first section of the east-west link, there is still no plan setting out the upgrade projects from Manchester going east to Leeds and Hull, with costs and timelines, without which HS3 is just words and a press release. When he responds, can the Minister tell us when the project plan for HS3 will be published and by what date HS3 will be completed?

Housing supply is the gaping infrastructure hole at the heart of both the Autumn Statement and the Government’s record. The coalition is building fewer than half the number of homes needed just to keep up with population changes, and the Prime Minister has presided over the lowest level of housebuilding in peacetime since the 1920s. The announcement of a new garden city in Oxfordshire is welcome but it is not

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a substitute for the new contract needed between local authorities, central government and the housebuilding industry to double the rate of housebuilding.

Those are just some of the challenges facing the country on which Ministers are either silent or complacent. It will take a Labour Government to provide answers and to deliver.


Lord Popat (Con): My Lords, I remind the House that this is a time-limited debate and when the clock shows 5, time is up. Thank you.

Lord Wrigglesworth (LD): My Lords, this is a welcome, if short debate. We are very much looking forward to the maiden speech of the noble Lord, Lord Rose, with his extensive business experience, and to his comments on the Statement published yesterday.

My noble friend, in opening the debate, outlined the many positive aspects of the Autumn Statement, and did so quite extensively. I do not want to follow him, but from these Benches I very much want to welcome the £150 million that has been promised to mental health expenditure, which we have championed, particularly in recent times. I also welcome the £100 increase in personal allowances for low and middle earners. This has had a major impact on low earners in this country in the programme of increases in personal allowances that have been made. This further increase will help those on low pay.

I also welcome from these Benches the removal of national insurance for apprentices under 25. That will undoubtedly encourage many firms to take on more apprenticeships, and that massive expansion and improvement in quality will, I hope, continue. I welcome the infrastructure spending and the roads programme, as capital expenditure is vital to the long-term productivity improvement and long-term benefits of the economy.

I also mention the postgraduate loans that have been introduced. This has been a gaping hole in the provision of funds for students, and those loans will make an enormous impact, just as the other loans have, on student numbers in our universities. The final thing that I would mention, which my noble friend touched on, is the whole industrial strategy being pursued by BIS. It has had an enormous impact and is very much welcomed, particular by manufacturing industry, and is helping to rebalance the economy in the way that everybody in this House wants to see.

When it comes to the balance of the Autumn Statement, I have some anxieties. I did not see whether the Chancellor or the Chief Secretary had their fingers crossed yesterday, but in many ways it is a fingers-crossed Autumn Statement. It is tremendously important that confidence is sustained, not only in the bond markets of the world but in the many businesses and institutions throughout the world that will be investing in this and other economies. I hope that the Autumn Statement will help to sustain that confidence in a way that will keep investment going. Those of us who have been involved in business know just how important confidence is in deciding to invest millions or billions of pounds in projects. Confidence is vital and I hope that the Statement will keep confidence high.

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There is no doubt that the economy is growing at an incredible rate. To put on 2 million extra jobs—more than the whole of Europe combined—is tremendously consoling to somebody like me from the north-east, where we still have the highest levels of unemployment in the United Kingdom. It is an incredible achievement by the Government, and it is that growth in the economy that is sustaining the confidence to which I have just referred. However, the forecast cuts in expenditure that have to come in the next Parliament are enormous, and I am not sure that people outside this House, or even in the House, have fully understood the scale of the proposed cuts, which we need to think about very hard.

Under the proposals, the Foreign and Commonwealth Office will have had a 65% cut in spending. It is proposed that the Home Office should have a 46.5% cut in spending, and that BIS will have a cut of 30%. If those departments are going to face cuts on that scale, it will cause major difficulties for their own services and for the services they provide. Inevitably it raises a question about the ring-fencing of all departments, particularly the National Health Service, if the cuts are to be sustained.

The only hope, of course, is that growth really takes off not only in the economy generally but in the tax revenues that are coming in. That will enable future Chancellors not to have to make cuts on the scale that is being suggested. We need to be very cautious about whether we can sustain either ring-fencing or should make cuts on that scale. Anyone who thinks about this will see that they are probably impossible to achieve. That is why I described the Autumn Statement as a fingers-crossed one. If we get the increased revenue, we will not need to bring in some of the cuts that are causing such great disfavour.

12.05 pm

Lord Lawson of Blaby (Con): My Lords, I shall begin by saying that I agree very strongly with my noble friend Lord Wrigglesworth. In no way does it make sense to continue with ring-fencing in the next Parliament. All public expenditure has to be judged on its merits, whichever department happens to be responsible for it.

In the short time we have, I do not want to talk about the particular measures in the Autumn Statement—I will discuss wider issues—save to say one thing. I know that my right honourable friend George Osborne is very anxious to go down as a tax-reforming Chancellor. This year, he has lived up to that with the reform of the annuities system in the spring Budget and the reform of the stamp duty system in this autumn budget—because that is what it is. Both of them are substantial and, in my view, welcome reforms.

On the wider issues, nothing is perfect in this wicked world, but by any reasonable standards the British economy is a success story. It is a success story despite, I have to say, the difficulties of conducting economic policy in coalition with my noble friends the Liberal Democrats. It has made the task immensely harder and I hope that this will not continue and we will be able to conduct policy untrammelled by this complication; it is difficult enough without them. It has also been a

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success story despite the public deficit having been halved. It is still too big but it has been halved, which puts into perspective the views of the naive Keynesians, some of whom are in our midst. I welcome in particular the consensus we now have between the two major parties that it is important to continue to bear down on the deficit. The two parties may have different ideas about how this should be done, but there is a consensus that it needs to be done.

One of the signs and proofs of the success of the British economy is to be seen across the Channel. The difference between the British economy and the economies of the rest of Europe is striking. There are two main reasons for this. One is that we are not members of the eurozone, which is a disaster. I regret that because I do not wish our neighbours to be suffering under the regime, but there it is. The other reason, which is probably more important, is that the massive range of supply side reforms brought in by the Conservative Governments of the 1980s have made the British economy far more flexible than any other economy of Europe. Fortunately, most of those supply side reforms have stuck. They have endured because even the Labour Party can see that they were successful in the 1980s and have remained a great strength for this country.

Looking ahead, much has been said about the warning lights flashing about the world economy. The world economy is tremendously important to a major trading nation such as ours, but it is very much a mixed picture. There is both bad and good. On the bad side, there is the eurozone, which I mentioned a moment ago, and also the problem of Japan going back into recession despite a massive Keynesian boost. The good is that the emerging world is still powering ahead. Obviously, no one would expect China to continue at the huge rate of growth it was achieving, but it is still growing and so is much of the emerging world. The other thing is the reduction in the oil price, which is hugely beneficial.

What do we need to do to continue with our success? There are two areas of importance. I have not got much time so I will mention one just briefly. We have to do far more to clean up the British banking system, which is so important to us as a great world financial centre and to the rest of British industry. The other thing is that we have to radically change our energy policy. We have an absurd energy policy, predicated confidently by DECC and its Secretary of State on an inexorably rising oil and gas price. In fact, the price has fallen and since the things that made it fall continue to exist, it is likely to continue to be weak. We have moved from a market-driven energy policy to one of state control of everything—and largely unaccountable state control. It is damaging for British industry, damaging for the poor and it is deterring investment in electricity and energy generally. We have to move back to a market policy for energy.

Lord Hunt of Chesterton (Lab): My Lords—

Lord Lawson of Blaby: I do not have time to yield to interventions. That is the nature of a debate in which we are limited to five minutes each. We cannot accept interventions. But my time is already over so I will end by saying that I warmly commend my successor-but-five,

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George Osborne, on his Autumn Statement yesterday and on his stewardship of the economy over the past few years.

12.12 pm

Lord Haskel (Lab): My Lords, I, too, was disappointed that in the Chancellor’s Statement we heard hardly anything about productivity. In fact, more has been said in this House than in the other place—and it needs to be said. In the past six years output per hour in this country has fallen by 3%. In the US it rose by 7.6%. In Germany, France and Italy it also rose. I assume that the Government’s view is that weak productivity is the price worth paying for the kind of labour market they have created.

I put it to the Minister that productivity determines our standard of living—our standard of living has always risen as productivity has risen. By neglecting this, the Autumn Statement is condemning us to yet more stagnation in our standard of living. Are the Government just hoping for the best? Are they hoping that as demand strengthens so our productivity performance will improve? I put it to the Minister that this is a gamble the Government should not be taking. Instead, the Government should be taking action because the benefits of rising productivity—equally shared between employer and employee—benefit us all, including the Government.

During an Oral Question on welfare on 24 November, I asked the Minister how much would be saved in housing benefit paid to those in work if their productivity went up by 1% and was equally shared between employer and employee. The Minister did not have a number, but he thought it was a good idea. A couple of days later I received a letter from a professor of economics with a calculation. The answer is £210 million—a nice contribution and it could even pay the bedroom tax.

The Government’s policy of subsidising low pay to encourage employment has certainly helped raise the number of people in work in the short term, but it has downgraded the quality of jobs. Surely, this is one reason why our productivity has been stagnant: most of the jobs created since this Government came to power have been part- time or in the self-employed sector. Many of these jobs are in an expanding service economy that has lacked the strong investment and skills needed to raise productivity.

The noble Viscount, Lord Younger, spoke of the rise in GDP, but GDP considers investment and consumption to be the same. It does not differentiate between money spent on research or new equipment and money spent on going on holiday or getting your hair cut. Indeed, GDP also includes value-destroying expenditure, like pollution or traffic jams: it does little for productivity. The living wage movement has given a number of examples where higher pay has actually bred higher productivity. The Low Pay Commission has said that raising the minimum wage, alongside improved training, could even help raise the UK’s productivity.

Yesterday, the Minister referred to productivity rather indirectly, through infrastructure and lower taxes; he even asked for suggestions. My noble friend Lord Adonis has spoken of skills, and there he was absolutely right. I would be happy to oblige further, but I see that my

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time is nearly up, so it will have to be on another occasion. Perhaps the Minister thinks that getting business to raise its game and be more productive is anti-business or interference. It is not: it is pro-business and pro a business community that wants to raise its game, improve its performance and improve its engineering and technology. We have to ensure that rising productivity results in rising real wages for all, not just for the top earners. This Autumn Statement is a missed opportunity to change our focus from short-term rises in GDP fuelled by low-paid jobs—subsidised by the taxpayer and yet more credit—to lifting our ambition to raising the standard of living of us all through productivity. This is where the next Government—a Labour Government—will have to turn their attention.

12.17 pm

The Lord Bishop of Portsmouth: My Lords, it is a pleasure to add to others’ my welcome to the noble Lord, Lord Rose, in eager anticipation of his maiden speech. The Statement of the right honourable Chancellor of the Exchequer has been welcomed and applauded in some quarters and criticised in others for its emphasis on what it means for individuals and families, as well as for the national economy. I am glad to see specific, though limited, encouragement for some individuals and welcome support for some often overlooked but important groups in society. The most noticeable and eye-catching announcements yesterday highlighted the changes to stamp duty, ISAs, fuel duty and air passenger tax. For some in our communities, these will be welcome news after an extended and extending period of fiscal tightening and often reduced disposable income. There will, however, be changes—as those on these Benches serving all parts of England know—that will make little or no difference to many who would echo the Chancellor’s wish to back the aspiration to save, work and own a home.

The dignity of work—with the capacity to provide for a family and save for the uncertainties of the future—and the ambition of home ownership remain beyond many. I shall look, and I am sure that I am not alone, for the benefits of the anticipated economic growth to reach those who may now be among the welcome record number in employment, but are still dependent—despite a full-time job—on benefits. The Chancellor’s new target of a personal tax allowance of £12,500 is undated and would just take those working full-time on minimum wage out of tax. Even then, at some future unspecified date, there would indeed be no income tax for those on the minimum wage but still national insurance contributions payable on income above just less than £8,000—an income tax of 12% by another name. Surely the time has come, for the sake of honesty and clarity, to name the reality and not perpetuate a fiction. I echo the conviction, used in a different reference last night, that we challenge this candour deficit.

The Chancellor’s confidence that we,

“stay on course to prosperity”—[

Official Report

, Commons, 3/12/14; col. 327.]

is not yet the personal experience of many known to me and to the parishes and clergy in my diocese, including the urban and rural areas of coastal south-east Hampshire and the Isle of Wight.

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There is much to welcome in the less publicised parts of the Statement. I know that many in this House will delight in the refund of VAT on expenditure by hospices. The taxation of such hugely valued provision and care, predominantly funded by voluntary donations, has long been overlooked and been for many of us indefensible. I welcome, too, the extension of the £2,000 employment allowance to carers, who do so much for family members, friends and neighbours in sickness and disability.

With less individual significance but of great importance to community and business, I am grateful to the Chancellor of the Exchequer for granting £15 million towards the repair of roofs on listed places of worship. This is recognition of the importance of our church buildings, many of which are at risk, to our national heritage. They are a tangible link with our past and very often a focus of local identity. Today, they are increasingly used not only for worship but for wider community activity, and are visited and enjoyed by a large and diverse number of people.

The support scheme for first-time exporters, the expansion of the Funding for Lending scheme with its focus on smaller firms, and at least a partial limit on the amount of past losses banks can off-set for tax purposes against future profits are important steps in encouraging small and medium-sized enterprise in our nations and ensuring that the biggest and strongest pay their proper share of what we should together fund.

This Autumn Statement sets a high level of aspiration and raises the hopes of many. I know your Lordships will understand if I conclude by saying that I pray, and not just hope, that, as we approach further substantial cuts in public spending, the aspiration for the nation will be enjoyed by the many and not just those who now benefit from the welcome but modest steps that the Chancellor has taken.

12.23 pm

Baroness Bottomley of Nettlestone (Con): My Lords, I am delighted to follow the right reverend Prelate, particularly with his responsibilities in Portsmouth, since I have a special affinity with the Isle of Wight as Baroness Bottomley of Nettlestone. I strongly endorse his comments about assistance for hospices. So many of us have campaigned for so long for that small measure, and it is welcome to see it achieved. On his comments about carers, I worked for many years with the late Lady Seear on what was the precursor to Carers UK. Even the smallest change in assistance for those caring seemed impossible—like getting blood out of a stone—so this is another welcome new development.

I also agree with the right reverend Prelate about the dignity of work, but the fact that 1,000 new jobs a day have been created since this Government came to power is an extraordinary achievement. I am not Mary Poppins, but the success of the changes in very difficult circumstances in the UK compared with the rest of Europe—France and Germany have been mentioned, while Japan is in recession—is a remarkable achievement. A great deal of tribute should go to the Chancellor. I do not say that only because I am sitting

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next to his father-in-law and feel that if I misspoke I might get into trouble with my neighbour. It is a remarkable achievement.

I pay tribute also to the Commercial Secretary. How many appreciate that this tremendous investment in infrastructure has been very much the responsibility of my noble friend Lord Deighton since he came into government? When I was a Minister in 1987 and again in 1992, I solved the Stonehenge problem. We were going ahead. It did not happen. How many infrastructure projects have been stuck on the drawing board? The Commercial Secretary has brought particular skills to make things happen. The House should pay tribute to him for that work.

Most especially, I commend the priority given in the Autumn Statement to the northern powerhouse. I speak as the Chancellor of the University of Hull and also, I am delighted to say, the Sheriff of Hull. The noble Lord, Lord Mandelson, is the high steward, but I am the sheriff. I agree with and endorse one specific comment made by the noble Lord, Lord Adonis: when is HS3 going to arrive in Hull? It is exciting to see the recognition of the northern cities, the northern powerhouses. In the same way that it was rivers and waterways that brought prosperity to so many parts of the country, today it is rail and road. The only way we will restore the economic strength of those cities is through this substantial infrastructure investment.

I link that with investment in human intellectual infrastructure. The Autumn Statement at long last introduces loans for postgraduate studies, which we should all welcome enormously. It has been widely welcomed. Nicola Dandridge, chief executive of UUK, said:

“We support the government's recognition of the substantial benefits arising from postgraduate taught education, and the need for support to ensure that some students are not priced out of further study”.

Don Nutbeam, vice chancellor of Southampton University, said:

“For many professions, a postgraduate degree is essential. Without affordable access to postgraduate education, many professions were simply out of reach of those who could not afford to pay”.

The NUS vice-president called it,

“a major step in the right direction”.

That is really important and very exciting.

I also celebrate the fact that the Francis Crick Institute in London will have a brother in the Sir Henry Royce development in Manchester. That is very exciting. I see my noble kinsman, the noble Lord, Lord Hunt of Chesterton, in his place. Our shared grandfather was at the age of 32 the principal of Central Manchester College of Technology, and we have always been brought up to have huge respect for the intellectual capital in that area.

Let me speak briefly about the National Health Service. A flourishing National Health Service facilitates economic growth and business opportunity. A healthy population with readily accessible health treatment, care and prevention is critical. The additional funding is hugely important. The £2 billion is very welcome, using the fines from the banks to support GP premises. Like others, I am greatly looking forward to the maiden speech of my noble friend Lord Rose of—well, an

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unspeakable name, but it is near Saffron Walden—because I hope that he will share with us how in the commercial world across the country people have to transform, reinvent and re-engineer services. With our sacred cow and much loved institution, we must translate the way in which services are developed.

This is a really encouraging Autumn Statement, and I support those who paid tribute to the Treasury team who made it possible.

12.29 pm

Lord Desai (Lab): My Lords, we seem to have achieved the best of all possible worlds: a Conservative Chancellor was determined to eliminate the budget deficit in one Parliament and has achieved his predecessor’s idea of halving the budget deficit in one Parliament—so a Conservative Chancellor has achieved a Labour goal. We must welcome this but obviously it will take another Parliament to eliminate the rest of the deficit because life is never easy when you are Chancellor of the Exchequer.

In what little time I have, let me try to make sense of what is going on in the economy. As your Lordships may see, economics is very difficult because not only is it impossible to forecast, it is not even possible to tell what happened in the recent past. We have been told that our income was higher than we thought it was and that we had no double-dip recession—indeed, we had more or less continuous growth over the last five years. That is one fact. We also know that while employment has grown, wages have not kept up with prices and that therefore we face a problem with average real earnings. As my noble friend Lord Haskel pointed out, we also have a productivity problem.

The way to understand these things is, first, that the upgrade in national income was due mainly to things that are not visible in the economy. They are mainly abstract goods and services: this is not the old-fashioned idea of productivity, with a person working in a factory producing something physical. Our idea of productivity is very old-fashioned and the economy is moving away from that, so more or less when we talk about productivity we are really measuring only wages. In the public sector, the wage defines the product—but when you shift people from the public to the private sector, they get a lower wage because private sector wages are lower than public sector wages. Also, only a portion of the output counts as the productivity of the worker because there is a value added, which goes to profit.

So, first, the shift from public sector to private sector will lower productivity as calculated; whether a person is less productive or not does not really matter. Secondly, we have growth, thanks to IT, of jobs that are no longer contributing in any skilled way to output because a lot of what one would call the lower clerical jobs in retailing and elsewhere have now been replaced by IT. What people are doing is something further down the scale, in which productivity is bound to be low because there is not much work being done that involves skills.

These compositional effects of national income mean that we may be stuck with low productivity growth for some time to come: while income growth will happen, productivity growth will not. The first phase of this happened when a lot of manufacturing moved away from

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the UK and went to Asia. Manufacturing jobs declined, people went into services and productivity growth stopped. We will have a persistent problem of the tax receipts never matching up to the growth numbers—and if that happens, we will have to rethink how we are going to achieve the elimination of the deficit in the next five years. That is the bad news, as it were, but the bad news does not stop there. As far as one can see with what the world is going through, it is not just the UK but the eurozone, in particular, and the rest of the developed world. We used to call the other ones emerging economies. They have emerged and we are submerging, so the submerging developed economies are going to be in a low-growth, low-inflation environment for the next 10 or 15 years, as far as one can tell.

If that is going to happen in one of those long cycles, whoever is the Chancellor is going to have to come to terms with the fact that growth will be low. Maybe our growth will be higher than the world’s growth rate but it is not going to be 3% or 3.5%; it will be 2% or 2.5%. Given that, the budgets are going to be very tight, and even after we eliminate the deficit, there will be no room for any parties. As Crosland said many years ago, “The party’s over”. I think that the party will continue to be over.

12.34 pm

Lord Skidelsky (CB): My Lords, I do not have time to answer the disparagement by the noble Lord, Lord Lawson, of Keynesian stimulus. Perhaps one day we will be allowed to have a proper economic debate in this House in which we can pursue these issues further.

I will concentrate on one point: the Chancellor’s failure to meet his budgetary targets. Growth has been revised up to 3% this year, to be followed by 2.4% in 2015, then 2.2% and then 2.3% thereafter for ever and ever. My first point is that these forecasts are not worth the paper that they are written on because they are conditional on all sorts of unlikely things happening in that period. Their importance lies in the fact that they are the basis of his budget projections. In 2010 the Chancellor forecast GDP growth of 2.3% in 2010-11, 2.8% in 2011-12 and 2.9% in 2012-13. In fact the upwardly revised figures show that it was 1.6% in 2010-11, 0.7% in 2011-12 and 1.7% in 2012-13. According to the Chancellor the economy should have grown 8.2% compounded in that period, but in fact it grew by 4.1%. No wonder his deficit reduction plans went awry.

Agreed, it was not all his fault. Of course it was not; what happens to the budget is determined by what happens to the economy, and what happens to the economy is not all within the Treasury’s control. It is equally important to remember, though—here we do a little bit of Keynesian economics—that what happens to the economy is also determined by budgetary policy. That could hardly not be so, as government spending accounts for about 40% of GDP.

Ever since I started writing and speaking about these matters in 2010, I have been predicting that the Chancellor would not meet his budget targets. The reason I gave was that the pursuit of those targets in itself would slow down the economic growth on which their achievement depended. Why? Because it slows

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down the rate of spending in the economy, and growth depends on spending. The cuts have hit spending, and the spending has hit growth. So it is not surprising that the Chancellor finds himself with a projected deficit of £91.3 billion this year, when in 2010 he promised to balance the budget by the end of this Parliament.

According to the OBR, the discrepancy between the projection and outcome results from the “unexpectedly weak” performance of tax receipts. Perhaps it was unexpected only to the experts at the Treasury. In fact it was the logical consequence of growth being so much below what was expected between 2010 and 2013, and of what has been happening to the labour market since then. The Government have congratulated themselves on the fall in unemployment. We would expect falling unemployment to increase tax revenues and reduce public spending—but not if unemployment is replaced by jobs that pay so little that those who fill them pay no direct tax and their income has to be propped up by benefits. For example, the number of housing benefit claimants who are in work has doubled since 2009.

So why has the British economy been growing at all? The answer is very largely because there are more people in the country. The population was 62.3 million in 2010; today there are 64.1 million, 2 million more, virtually all of them of working age, and more people are coming in every month. Any economy will grow if it has more people working. The only relevant welfare measure—the measure by which any Government deserve to be judged—is GDP or national income per head. Our GDP grew by 4.1% between 2010 and 2013, but GDP per head has grown by only 2.3%. Real wages have fallen between 5% and 10%, and the typical earner is £1,600 a year worse off.

In conclusion, we are left with the prospect of another round of brutal spending cuts with the rolling five-year deficit reduction programme rolling ever further into the future. With productivity growth likely to be so weak, for the reasons pointed out by the noble Lord, Lord Desai, the Chancellor’s new projections will prove as delusional as his previous ones. It sometimes helps if the people running economic policy do know some Keynesian economics.

12.39 pm

Lord Rose of Monewden (Con) (Maiden Speech): My Lords, I speak, for the first time in this House, with both nervousness and trepidation. Before addressing the House from the perspective of a lifetime in shopkeeping, I offer heartfelt thanks to everyone for the very warm welcome that I have received in the few weeks since my introduction. Like many newcomers to this House, I, too, have found myself on more than one occasion being gently intercepted and redirected on my second or third passage round a particular place, always in the most courteous and helpful way. I also extend my sincere thanks to my two sponsors who introduced me to this House: the noble Lord, Lord Myners, and the noble Baroness, Lady Lane-Fox. Particular thanks are also due to my noble friend Lady Noakes, who has been endlessly generous with her time and both wise and firm in her advice.

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That I am in this House at all is a matter of amazement to me, and of considerable amazement to my friends and colleagues. It is a matter of amazement also to my father, but one of considerable pride; for I am one of those who would not have been here at all if my father had not been plucked from war-torn China in 1938 by a Quaker spinster lady. She brought him to England at her own expense, educated him and sponsored his British citizenship.

People often ask me how I planned my career. In truth, I did not. Following a failed attempt to enter medical school I wrote to more than 50 companies seeking employment. Only one replied—Marks & Spencer. It also offered me a job, so there was no margin for error there. My new employer set about instilling in me most of the business values that I have tried to follow over the past 40-plus years It was not all plain sailing and it was not all fun, but it must have been pretty effective because it worked for me and for the four other Peers from the same stable at Marks & Spencer who have preceded me. After 17 years I moved on to various other retail chains in other pastures, learning new skills under some very inspirational leaders, returning to my old employer at the end of my full-time career.

Your Lordships know that retail is a competitive and dynamic trade and a very important part of our economy. Indeed, it is the largest private sector employer in the country. Attention to detail, quality, value, service, innovation and trust are the keys to success, and we forget them at our peril. Staying close to our customers in this fast-changing world is also important. Successful retailing is about having your finger on the pulse of every trend, behavioural change and new technology, and anticipating what changes they will bring. The ability to react to these changes, in a world which is itself changing at an ever faster rate in a truly global economy, requires boldness, imagination and investment.

We in the United Kingdom are once again enjoying growth, because businesses of every complexion have continued to drive efficiency and deliver goods and services that are innovative and highly competitive. Our economy has seen real recovery, but it is potentially fragile. It is also highly dependent on growth returning to the global economy, particularly to Europe. Consumers and all businesses, be they retail, manufacturing or others, need to be able to plan for the future in an economic climate and landscape that encourages investment and promotes confidence.

I travel frequently throughout the United Kingdom, wearing various business hats, and I see clear signs that confidence is returning—and that is borne out by the statistics. We have had record business start-ups, and unemployment has fallen. These improvements are, in my view, the result of the tough but very necessary measures put in place over the past few years to create a business-friendly environment. However, the job is not done, and it is vital that we continue to keep providing the stable economic backdrop and the incentives necessary to finish the job and return the UK balance sheet to robust health.

Yesterday’s measures announced in the Autumn Statement are most welcome, particularly as we see some further faltering in the global economy. The measures

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announced further to invest in infrastructure and stimulate small business growth are right. The review of rates is to be welcomed, although here I must declare an even-balanced interest as chairman of Ocado, a wholly online grocery delivery business, and of Fat Face, a purely bricks-and-mortar business.

UK business has done an enormous amount to recover and regroup over the last few years. Now is the time to continue to invest and, to do this, business and government need to work together to ensure that our future prosperity is put in place by having the right incentives, right financing and right regulatory framework.

Confidence has always been a driver of business and investment, and lack of confidence is a big deterrent. Business needs an economic climate that encourages and rewards long-term investment. Investment today is our livelihood tomorrow—our future economic security. We have come a long way, but in this world, where so much of what happens is outside our control, we must have a firm hand on the tiller of what we do control.

12 45 pm

Lord Leigh of Hurley (Con): My Lords, I welcome the noble Lord, Lord Rose of Monewden, to the House and congratulate him on an exemplary maiden speech. This is the second time this year that I have followed the noble Lord, as he left the board of Blue Inc earlier this year for me to join. He brings to this House a wealth of experience at some of the country’s leading businesses, such as Argos, Arcadia, Ocado, Booker, Woolworths, Fat Face and the Burton Group. As he said, he started as a management trainee at Marks & Spencer to rise to CEO and then executive chairman. In 2006, the World Leadership Forum gave him its Business Leader of the Year Award, but he survived that accolade. I am delighted to say that, since then, on leaving M&S, he has become involved in a significant number of start-ups and SMEs. So he brings to your Lordships’ House invaluable international business expertise, and we look forward to many future contributions.

I would like to lend my support to the package of measures announced by the Chancellor in the other place yesterday as further evidence that this Government continue to strike the right balance between fiscal responsibility, on the one hand, and measures to encourage growth and investment, on the other. Indeed, with the deficit down by a half, and projected growth of 3% this year—the envy of our peers in the developed world —on both measures we are succeeding. The Opposition have long said that we are cutting too far and too fast. Indeed, in 2012, the Leader of the Opposition said somewhat opportunistically that we should be more like France. He hailed the election of President Hollande, and gave a description of their first conversation:

“We talked about growth and austerity in Europe and how we can tilt the direction of where Europe is going”.

Well, that tilt has been tried in France and, as we now know, it has led to recession, higher unemployment and, this week, protests in Paris by business men and women frustrated at the unfriendly policies to business adopted by the French President, whose current low rating in popularity is matched only in the UK by his admirer the Leader of the Opposition.

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Because we ignored our critics and stuck to our long-term economic plan, Britain is now growing seven times faster than France and we have created record numbers of private sector jobs in the UK. Unlike in other parts of the world, where finance and business continue to be vilified, this Government are encouraging investment, particularly in smaller companies. For example, I welcome the one-year extension of the Funding for Lending scheme to January 2016 and the additional help for the enterprise finance guarantee scheme of some £2.9 billion to small businesses, extended by a further £500 million.

When the banks simply will not lend, we need alternative sources of finance. It is a welcome development that, within the ambit of the British Business Bank, there will be an extra £400 million to support the enterprise capital funds programme. Support for SMEs does not end there; business rates, as the noble Lord, Lord Rose, said, remain a significant impediment to all businesses, but particularly small ones. So I am very pleased to see that small business rate relief will be doubled to 2016, meaning that 385,000 small businesses will continue to have 100% relief, and a further 190,000 will benefit from taper relief, which will be a great help to them.

However, we must also make sure that, as the economy grows, large multinational corporations pay their fair share in helping to get the deficit down. There can be little doubt that globalisation has completely outpaced and outgrown our system of national taxation and, as a result, global corporations are paying less and less tax while acting within the law. So we must change the law. As my noble friend Lord Lawson has said, it is pleasing to see that the Chancellor has taken such dramatic, innovative and radical steps in many areas, but particularly in taxing multinationals. I suspect he must have been listening to the debate in this House on the excellent House of Lords Economic Affairs Committee report, entitled Tackling CorporateTax Avoidance in a Global Economy, led by my noble friend Lord MacGregor of Pulham Market. The noble Lord, Lord Rose, might be interested to know that by a happy coincidence, it was on that subject and in that debate that I gave my maiden speech.

The Prime Minister, through his leadership of the G8, has put tax evasion on the political map, and this Autumn Statement keeps it there. At a time when we have asked public sector workers to accept difficult pay freezes, it is only right that corporations and high net-worth individuals pay their fair share as well. The OECD is doing vital work in this area in trying to secure international agreement, but at some point one country has to show leadership, and I am proud to see that this is the UK.

12.50 pm

Baroness Donaghy (Lab): My Lords, one phrase that, for me, leapt off the page in the Chancellor’s Statement was:

“In fact, the net contribution of the richest 20% will be larger than that of the remaining 80% put together, proving that we are all in this together”.—[Official Report, Commons, 3/12/14; col. 311.]

I thought that that took some brass neck—and then the Minister repeated it in his Statement yesterday. I

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assume that the Government are adopting the Boris Johnson approach to wealth and poverty: to paraphrase him, “The top 1% keep you lot in shoe leather and Sky television”. I can only hope that that strap line is played in the streets of Peckham, where I live, during the general election—and incidentally, I hope that the Lib Dems will be too ashamed to use it. To make a virtue of the country’s inequality points to a new school of PR, which I have not come across before. A report by economists at the LSE and Essex University has found that in the past four years there has been a significant transfer of income from the least well-off half of the population to the more affluent. If I had time I would deal with that in more detail.

On a different subject, why is there no mention of local government? I presume that it will suffer disproportionate cuts, similar to those in defence and the Foreign Office. No doubt any news will slip out quietly over Christmas. Local government is important, and we should be standing up for local government and its workers, not consigning them to the ranks of the disappeared. The same applies to the Civil Service. It is the lower-paid who need and use our public services. The Government pay lip service to the national minimum wage, but fail to enforce it. A quarter of a million people are paid less than the national minimum wage, and the Government have had four and a half years to deal with that. Putting £3 million into enforcement in their very last Autumn Statement does not impress.

As we have already been told, the Chancellor’s target to see debt falling as a share of GDP by 2015-16 was abandoned two years ago. Now the structural deficit will almost certainly grow, which means that borrowing could increase by a further £2 billion. The economics editor of the Times, Philip Aldrick, said this week:

“Having softened austerity in this pre-election year, breached his golden rules, taken three years longer than expected to eliminate the structural deficit and doubled the length of the austerity programme to a decade, questions should be asked about the chancellor’s credibility”.

The measures announced to crack down on tax avoidance by such companies as Google and Amazon may be welcome, but the revenues are difficult to estimate. My question is: if the Chancellor is relying on this income to balance his books, what are his estimated odds for achieving it?

The Government have promised to deal with the banks, yet despite government sweeteners, there is no evidence that they are changing their behaviour. RBS has had to apologise for misleading the Treasury Select Committee on profiteering from winding up companies, and the scandal of mis-selling payment protection insurance still haunts the financial sector. Banks have paid out £16 billion to people after 13 million complaints in seven years. A further £23 billion has been set aside for further claims. Time and time again we hear that most of these problems are caused by rogue juniors. Even if that were true—which I doubt—what does it say about the corporate governance of the banks? How much will it take to have a system which prevents these massive scams in the first place and saves the individual or small business money, time and unnecessary stress? Claims management firms have charged

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£155 million in commission in the past year to people applying for compensation. One company has made £40 million through its 39% commission on payments. Why is that not illegal?

Finally, we need to put a spotlight on the Government’s assertion that the gender gap is closing and poverty levels are falling. When the tide goes out, nearly everyone is paid less and it goes without saying that the relativities narrow. This is being touted as an example of government success. As I said earlier, the Government really do have a brass neck.

12.55 pm

Lord Palumbo of Southwark (LD): I add my congratulations to the noble Lord, Lord Rose, on his excellent maiden speech. We look forward to his future muscular contribution.

The Autumn Statement goes like this: the Chancellor stands up and says what a wonderful job he has done; the Opposition respond with a ritualistic attack. There is no sanction for the Government having missed all their targets. The “would-be Prime Minister” is not dismissed for showing basic economic illiteracy and the Prime Minister is not censured for his previous comment, “We are paying down Britain’s debts”.

Let us look at some of the promises made versus the outcomes achieved. We were promised a deficit of £35 billion this year; it is £100 billion. We were told that debt would fall to 67% of GDP next year; now the OBR tells us that it will be over 80%. At last the welfare beast was going to be slain with £19 billion of promised savings; instead spending this year will be the same in real terms as in 2010. We were promised that there would be restraint in public spending; this year it is 42.5% of GDP, higher than Alistair Darling planned in his final Budget, and next year it will be £732 billion which, accounting for inflation, is almost exactly the same as in 2010. Any one of these failures would be instantly sackable events in the private sector but bear no immediate penalty in democratic politics. As a businessman, it seems to me that in the political world there is a disconnect between words and deeds.

We can debate the Autumn Statement all we like but the reality of our country’s financial situation is this: government debt is now £1.4 trillion, double its level in 2010; unfunded pensions are double this amount; bank debt is even more; and private sector debt—mortgages, households, business—adds another layer. Then there is debt—off-balance sheet/private finance initiative—which politicians like to pretend is not debt, even though it really is. On any basis, our debts are 600% of GDP. This makes us one of the most indebted countries in the world.

Given this, it might be worth looking at the system which has produced these results. It strikes me that the skills a politician needs to succeed in a democracy are increasingly irrelevant to those required to run a country. In a media-obsessed world, voters want politicians with good personal appearance, likeability and communication skills and, of course, who promise nice things. In what way are these connected to running a country? What the country needs are skills in getting things done, managing people, finance and economics and, most of all, total honesty, the basis for solving all problems.

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However, I do feel a certain sympathy for my colleagues in the other place. As we all know, in a modern democracy it is impossible to speak hard truths and get elected. For example, we all sense that the extra £2 billion which the Chancellor has promised for the NHS will not solve its long-term problems. It needs wholesale reform, but who dares say so? To say so risks the accusation of failing to support the NHS, or worse, of advocating its privatisation. This is the great hypocrisy of our times. People complain about the dishonesty of politicians, yet any politician who spoke the truth would be annihilated in the polls. “All truth is good”, goes the proverb, “but not all truth is good to say”. This is what Jean-Claude Juncker meant when he said, “We know what to do, but we don’t know how to get re-elected once we’ve done it”.

So our politics is stuck: benefits, votes, debt. Europe has 7% of the world’s population but 50% of its welfare spending. Is this sustainable? What happens if it is not? Over the past 50 years, voters have been given ever more benefits and public services. But here is the great paradox of our time—nobody is happy. People today loathe politicians—we can see it all around us and in other European countries—but no one questions the system in which politicians operate. People hate the practice but never question the theory. I wonder whether one day the Autumn Statement and tit-for-tat debate which follows will be held to serve no purpose, politicians will be held to account in the world of financial reality rather than that of electoral politics, it will not be possible to miss targets or spin figures, cliché and ritualistic attack will no longer be acceptable, and excellence, ability to deliver and doing things properly are held to be the greater virtues. Let us hope that, should that time come, it will not be too late.

1.01 pm

Lord Hunt of Chesterton: My Lords, I enjoyed that speech. I join in welcoming the noble Lord, Lord Rose, and comment, which others have not done, that Marks & Spencer has always been a very progressive capitalist organisation. Indeed, one of its founders—Lord Marks, I think—used to contribute openly to the Labour Party, so it obviously knows that that party exists.

The Government’s Autumn Statement was, as expected, an occasion to announce further planning, further cuts in public expenditure and measures to make the UK a less fair and meaner society, which the Chancellor and, indeed, some Ministers seemed to relish, as we heard this morning. One can only be worried that these policies will continue. Over the relevant period, other countries such as the United States put more money into government. If we had had a Conservative Government from 2008 to 2010, doubtless these impacts would have been greater. Over the period in question, many people’s living standards fell and we now have food banks in the UK. Perhaps the one benefit of the Chancellor’s Budget is its provision of money to the churches so their roofs are all right while the food banks operate down below.

The main omission in the Statement is that there is no mention of the greatest fundamental risk to the future of the UK’s economy—that is, the threat posed by the UK leaving the European Union. That has not

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been mentioned this morning either. That seems to me quite extraordinary. If you were a trader seeking a loan or investment and, while seeking that loan, you did not tell your bank or backers that you were about to deliberately tear up the existing business plan and do something quite different, you would be considered grossly dishonest. Indeed, if you were a director of a company, I believe that you could well be prosecuted for not operating correctly. Perhaps this goes back to the point made by the noble Lord, Lord Palumbo. For example, I know that the noble Viscount, Lord Younger, who made an excellent opening speech but is not in his place, is firmly pro-Europe, although he did not mention that.

However, I want to make one or two positive points. I am sure that we all welcome the financial help given to health workers helping with humanitarian disasters such as the Ebola outbreak in west Africa. The only mention of that by the Chancellor was in connection with inheritance tax but many of these people will have no money to hand on as they are not rich. Surely we should be talking about significant ex gratia payments for people doing this extraordinarily dangerous and important work. I would like the Minister to comment on that.

It is also welcome that the Statement announces that small businesses will benefit. However, it should be remembered that there was considerable concern that the incoming Conservative Government would withdraw the tax relief for R&D. I know this as I am a founder director of a small company in Cambridge. There were many rumours going on all the time in these businesses and we had no idea what was going to happen. For two years we had great uncertainty about this investment. Now we are told that research is terrific and should be invested in, but that is not the way you run a country, with a stop-start process. In fact, Gordon Brown said that we no longer have a stop-go policy—but, of course, that happened under a Labour Government.

The Government’s remarks on infrastructure are another example of stop-go government. When the parties opposite came to power, they immediately cut expenditure on flood protection for no good reason. As Lib Dems generally have to walk around in gum-boots in many of their wetter constituencies, it is rather surprising that they did not demur, as they did not demur on most of the big cuts made by this Government. We are surprised, of course, that it has taken so long for the Government to come round to investing in flood protection. Our colleagues in the Netherlands were astonished by the incompetence which the UK has displayed in this area. Under the Labour Government, a Foresight programme was established which mentioned the need for further investment in flood protection, so now we are learning.

My next point is, again, positive—namely, that the Autumn Statement includes references to further funding for science and technology and that this expenditure should be maintained at an approximately constant level in real terms. The Government have outlined institutions that should be supported and expanded, such as the one in Manchester. However, I was at a meeting this week of a society of which I am a member, where

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real concern was expressed about the low salaries and weakening job opportunities for scientists. Of course, it is a good thing that there will be loans for postgraduate work but, if at the end of that there are not enough jobs, that is serious. Why will there not be enough jobs? One of the causes, of course, is the considerable uncertainty in the UK, and on the part of our partners, about the UK’s future in Europe. I tabled a PQ and the answer came back that there was uncertainty about that, so whether it is weather forecasting, high-energy nuclear physics, fusion physics or many other areas, doubt has been cast by government policy in that regard.

Finally, this Government, the Treasury and the City of London still do not understand that it is a good thing for the UK to have companies that are owned and based in the UK. Recently, we nearly lost a big pharmaceutical company. Fortunately, it had European directors who did not want to sell it. Now we have Airbus. It is no longer regarded by many people as a significant British company; they consider that we are subcontractors. Again, this is because the Treasury and the City seem to want us not to own businesses but just to have places where the businesses operate in the UK. Surely in the long term we should change that policy.

1.07 pm

Lord Stevens of Ludgate (UKIP): My Lords, I congratulate the noble Lord, Lord Rose, on his excellent speech. The noble Lord, Lord Palumbo, has hit the nail exactly on the head. The figures that he mentioned are completely ignored in most debates on economics and yet, in my view, they will come to haunt future generations.

We all know that the Government inherited an economic disaster caused by a previous Government who consistently, in their later years, ran a budget deficit when a surplus was appropriate, and boasted about economic growth that was partly financed by debt—the same trap that this Government are in. The last Government increased the money supply and oversaw—or did not—poor regulation. The bankers—or, should I say, gamblers?—took over the casino. They should have known better, bearing in mind the absurd salaries and bonuses they received. Sadly as we know, some of their illegal practices have continued for far too long. This must be cleaned up.

However, after four and a half years, we cannot go on blaming the last lot. Where are we now? The Government tell us that we have the fastest growth rate of any of the 28 countries in the EU. Well done for that. However, we also have the second largest budget deficit as a percentage of GDP of any country apart from Greece. We have, therefore, one of the fastest growing rates of national debt of any country in the EU, nearly doubling under this Government. How often do we hear that from the Government? If you spend £110 for every £100 you take in tax, you would expect the economy to grow. If it did not, you would really have a problem.

The Government, in my view, should have cut spending when they came to power. Instead, even on their own forecast, spending increases year on year. Spending is

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up this year by more than 2%. In Ireland, it is down 30% since its peak, and in Spain, Portugal and Greece by 7%, 8% and 16%. Admittedly, their debt-to-GDP ratios have increased because their economies have contracted. I am not advocating cuts on that scale but it shows that cuts, although very painful, can be achieved.

What did the Government do? They raised VAT and slashed government infrastructure spending. Surely a more effective approach would have been to cut current spending—welfare, for example, where benefits were initially linked to relatively high rates of inflation. Interest on the national debt costs £55 billion a year. The Chancellor congratulates himself on low interest rates, helped perhaps by quantitative easing; the unravelling of that is another story. What happens when rates rise, as they surely must?

However, at least we are not getting the talk of the “end of boom and bust”. There is good news—a large increase in small business start-ups and a big rise in self-employment—but only now are the Government starting to get a grip on benefits, which is not helped by vast and uncontrolled immigration, imposing huge strains on health, education and social services, holding down wages and, therefore, income tax receipts. It is a failure of this Government to control expenditure, immigration and many basic items of housekeeping, which is concerning. Costs can always be cut. Only now do we have proposals to stop those receiving redundancy payments being re-employed with no redress. This is basic housekeeping. I wrote about this to the Prime Minister four years ago; where is the implementation? Then we had the proposal to pass a law on balanced budgets—presumably to embarrass the Opposition. It is just a gimmick, as we all know; one Government cannot bind the hands of another. We cut our Regular Forces when world conflicts and terrorism are on the rise. Surely the saving of just over £2 billion would be better achieved by a cut in overseas aid.

However, much has been achieved—but sadly still not enough—to simplify the tax system. Noble Lords should look at the book I have here on claiming benefits. Written by the Child Poverty Action Group, it contains nearly 2,000 pages. Where is the simplification there? Disappointing as it is incurring debt to finance growth, the Government’s Statement is better than the Labour Party’s alternative, which is spend, tax and spend.

1.12 pm

Lord Higgins (Con): My Lords, somewhat to my surprise, I find that I have been making speeches in Parliament on Budgets and Autumn Statements for 50 years. Over that time, things have changed quite a lot. On the one hand, the Autumn Statement has been made increasingly close to Christmas, while, on the other, it has become more like a Budget. In that context, this Autumn Statement therefore contains two elements: specific proposals and economic management.

As to the first, this is one of the most imaginative autumn “Budgets” that we have ever had. It is extraordinary to cover everything from stamp duty to international tax avoidance, and from Select Committees on apprenticeships and so on to umbrella companies.

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Noble Lords may well ask what umbrella companies are. This is precisely the question that a Select Committee was set up in your Lordships’ House—for one of these rapid, six-month reviews—to deal with. It is gratifying to find that, apparently, the Chancellor is proposing to act on the problems that that Select Committee identified.

There were a great many proposals in the Statement and, as I said yesterday, I particularly welcome the VAT relief on hospices. I was wondering why I did not include that when I was steering the original VAT legislation through the House of Commons. The answer was that there were very few hospices. At that time, I had been involved in founding the second of them. That perhaps explains why that was so, but I am slightly surprised that the Chancellor thinks he can do that, because the Treasury has been assiduous in preventing the extension of VAT reliefs to anyone. Perhaps my noble friend can confirm the answer: that the relief will be given in the form of a refund, rather than zero-rating. If that is the case, it will be still be just as welcome and help hospices considerably.

I turn to the question of economic management and, of course, the deficit. We must recognise, and the Government recognise, that the Chancellor failed to hit his targets. I am not surprised by that. In the first speech I gave when the coalition came into operation, I pointed out the immense difficulties of cutting public expenditure. I have been through that set of problems myself but, none the less, we have reached a stage where it has been halved, and that is most certainly to be welcomed. However, crucially, the Chancellor has made it absolutely clear that he is going to persist with carrying through in his determination to eliminate the deficit and move us into surplus. The fact that Gordon Brown allowed himself to go on increasing the deficit, rather than running a surplus, when things were going well is much of the cause of our present problems. I therefore very much hope that the Chancellor will persist with reducing the deficit.

None the less, the economy is growing at 3%. That is nearly—in fact, I think it is—the fastest rate we have ever achieved. The difficulty now is to judge at what stage we run into the limit on productive potential. We need to ensure in the end that capacity, the productive potential and the level of demand are increasing at the same speed. The difficulty is that we do not really know how much of our productive potential was destroyed in the crisis. None the less, it is right to see how we go on that. It is crucial to increase the productive potential, and I therefore welcome the paper published the day before the Autumn Statement on the need to improve our infrastructure. A measure of how behind we have fallen on this is the road programme. As someone who has been advocating a bypass for Worthing for 33 years in the Commons and for another 17 here, what I do not understand is why now it is said that there will be some improvements to the A27 but the bypass will be at Arundel. My noble friend Lord Eden, from the south coast, may laugh but there is no main north-south route running to Arundel, whereas there is to Worthing. At all events, my noble friend the Minister who is to reply is involved in the infrastructure programme and I very much welcome what he is proposing.

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Lord Hunt of Chesterton: Why not have a toll road? We never have toll roads in this country; perhaps, as a Tory finance person, the noble Lord could tell us why.

1.18 pm

Lord McKenzie of Luton (Lab): My Lords, I should like to touch upon three issues in my five minutes. The first has been prompted by a splendid article in the IFS’s Fiscal Studies, written by Paul Johnson, which encouraged a glimpse of what has been happening to tax policy in the UK, from the perspective of consistency and coherence. This is a chance to take some stock.

So far as income tax is concerned, we know that the Government’s focus has been on raising the personal allowance, at a cost of some £12 billion currently. There has been less focus on reducing the marginal rates of tax, specifically the basic rate. Policy under the coalition has complicated the starting point in a number of ways. The starting point for national insurance contributions has diverged from the point at which income tax has become payable; the contributions threshold has been maintained in real terms. I am not sure that we have ever heard a good reason and justification for that from the Government, particularly because they claim to be helping hard-working families—who of course pay national insurance contributions. Marginal income tax rates have been increased because of the transferrable allowance for married couples. That is because it is withdrawn once higher-rate tax becomes payable, so an extra £1 of income at the threshold can result in a £210 tax bill. Marginal tax rates are also affected by the taxing away of child benefit at income levels above £50,000. This can reach more than 70% for larger families. Marginal rates rise again, once income reaches £100,000, to 62%, then fall away. Can the Minister explain the thinking behind this rate structure and what coherence is attached to it?

We see again short-termism and the sticking-plaster approach in the treatment of the annual investment allowance for business. It was increased to £100,000 in 2010, cut to £25,000 in 2012, increased to £250,000 in 2013 and raised again to £500,000 in 2014. Can the Minister explain how this helps business to plan for the long term? However, we should acknowledge that changes have at last been made to the structure of what has been described as the UK’s worst-designed tax, stamp duty land tax. However, it is clear that our current tax system is far from coherent and consistent in all its aspects. I would not lay this charge just at the door of this Government, but we need to find a way to build a coherent tax system on a long-term basis.

My second point concerns the tax avoidance measures referred to by others. The thrust of these should be supported. Of course, much of the avoidance and evasion can be effectively challenged only by international efforts—by a global response. There is much being done by the OECD and the G20, particularly around base erosion and profit shifting, exchange of tax information and anti-hybrids. However, these wheels grind slowly. The measures listed in the Statement for domestic action demonstrate the scale and ingenuity of those who seek to avoid their obligations.

All this heralds another bumper finance Bill to add to the more than 2,500 pages the coalition Government have brought forward so far. It is inevitable that

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sophisticated avoidance is met by detailed, sophisticated anti-avoidance legislation, but it raises the question of how the parliamentary process can readily cope with all this, let alone have processes for post-legislative scrutiny. The headline measure is the diverted profits tax. This principle should obviously be supported, but it raises questions about how it is to be successfully implemented. Is it intended that it will be introduced as part of the BEPS—the base erosion procedures—with the OECD initiative or otherwise? Can the Minister say what discussions have taken place with the OECD on the proposal?

My final point is a reflection on the overall impact of this Government’s tax and benefits policy, which my noble friend Lady Donaghy touched on. The Minister will doubtless be aware of last month’s report, authored by the LSE and the Institute for Social and Economic Research at the University of Essex. This work examined the distributional impacts of changes to benefits, tax credits, pensions and direct taxes from an indexed May 2010 base. It is suggested that that analysis is not displaced by yesterday’s Statement. Its conclusion is that, overall, the net effect of these changes, so far as the public finances are concerned, is neutral. However, the distributional effect has certainly not been neutral. Overall, the poorest 20th of the population lost nearly 3% of their incomes and the next five-20ths nearly 2%. Apart from the top 20th, the income groups in the top half of the distribution were net gainers, as were the top 1%. This is largely because benefit reductions were greater for the bottom half than their gains from lower income tax. Remarkably, without having any net effect on the public finances, the effect of the reforms has been an income transfer from the poorer half of households to most of the richer half. How on earth does the Minister justify this? Why should the poor bear a disproportionate share? Is this truly a legacy of which the Government are proud?

1.24 pm

Lord Flight (Con): My Lords, in his absence, may I add my congratulations to my noble friend Lord Rose on his maiden speech and welcome him to the House? I would like to put on record my congratulations to the Chancellor on what I am going to call an Autumn Budget, both in an economic and political sense. Others have said much about the surprising success of the UK economy over the last five years, particularly in comparison with continental Europe. I will focus in particular on the entrepreneurial explosion that is going on—the greatest I have known in my business lifetime and something that will be extremely good news for the future.

As well as that, the Chancellor, supported by the OBR, has set down his long-term plans for the economy, which are, amazingly, to achieve a budgetary surplus of £23 billion by 2018 and to bring public spending down to 35.2% of GDP by 2019-20. That is a commitment to a competitive, low-tax economy, which is the only way in which we are going to generate the tax revenues to finance the constantly increasing costs of the National Health Service.

I will point to one or two interesting statistics that came out of the Autumn Statement. The first are

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simply the revised figures, showing 8% growth of the UK economy since 2010. I am not sure whether the noble Lord, Lord Skidelsky, was up to date with the revised figures. Secondly, although the deficit remains too high—indeed, as the noble Lord, Lord Desai, pointed out, we have had a strong element of Keynesian support of the economy—the annual deficit is now down to 5% of GDP, a halving of its extent since 2009. Thirdly, we have all heard that business investment is far too low, yet I note that rather than being growth of 4% it is actually growing at 27%, which must be one of the highest growth rates on record.

The decline in youth unemployment is extremely good news. The whole issue of what is happening to wages is also quite interesting. The Statement points out that, for those in employment, increase in pay is currently running at 4% per annum, even though the average is far lower, largely because of all the new jobs for the young. I was interested to note some recent comments by former Chancellor Darling, to the effect that he was saddened that, while tax credits had been introduced with the intention to boost living standards, they had served largely to keep down wages: why would employers pay when the Government would top it up? That has had a material impact on wage growth and on poor productivity figures.

A key political measure has been reform of the extremely unfortunate stamp duty “slab” system, which the Labour Government brought in. Some 98% of the population will benefit from that. Moreover, the rather harsh 12% stamp duty charge on properties worth more than £1.5 million will serve to kill, one way or another, the wholly impractical mansion tax proposals.

I will highlight one small measure for which I have campaigned for a number of years, which is that the surviving spouse can now inherit her husband’s or his wife’s ISAs intact, with their tax benefits. It always struck me as unfair that, while that occurred for pension saving for retirement, a lot of self-employed people use ISA savings for retirement, so that the widow was quite often, to my mind, robbed of the tax incentives that ISAs offer. I am grateful to the Chancellor for having finally implemented that.

To comment on some of the measures to raise taxes and address things that needed addressing, I would just say that the 12% stamp duty at £1.5 million is on the high side and anti-aspirational, particularly for people living in London. Secondly, on the additional £4 billion of tax on the banks by disregarding 50% of past losses, I am pleased to note that the Government excluded new banks from that for their first five years. However, I think that there is some risk. If you want the banking system to lend more, it needs more capital, with capital requirements going up. If it is constantly being fined due to extra amounts being taxed, there is only one thing that can happen, which is that bank balance sheets contract and lending reduces. I think that that needs to be borne in mind.

While the 25% special tax on multinationals transferring profits is certainly justifiable, when put together with the big increase in non-doms taxation, we need to be careful not to kill the goose that lays the golden egg. This country has benefited hugely from talented entrepreneurs—I refer to the likes of my noble friend

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Lord Rose—coming to the UK and living and establishing their businesses here. If we get the reputation of being tax-unattractive, that can be nothing other than damaging. However, overall this is an excellent Statement and it demonstrates that this Government have done remarkably well with our economy in very difficult times.

1.30 pm

Lord Lea of Crondall (Lab): My Lords, I draw attention to the contrast between the prospects for our economy, particularly on the deficit, so starkly set out in the report of the Office for Budget Responsibility, and the preposterous gloss put on it by many speakers on the Conservative Benches, who ought to know better and who ought at least to be able to read a balance sheet and understand gross national product figures. I include in that the former Chancellor, the noble Lord, Lord Lawson, whose figures were totally wrong when he referred to ours being the most successful economy in Europe. There are two points here which we have to nail as lies—if that is not an unparliamentary word; if it is, I will withdraw it. What has been said is not true. I will quote from a chart the figures that show what has happened to some economies since the peak of 2007 to 2009, followed by the trough and then a comeback.

First, on the level of economic activity, Germany is still the best part of 20% more productive than we are—over 10% per head. Secondly, Germany has never had a big trough. I shall quote some figures, which are in billions of euros, so they are all consistent. The figure for Germany’s gross domestic product for 2007 was €2,428 billion. It is now €2,737 billion—an increase of 16%. Our GDP stood at €2,086 billion in 2007, and the latest available figure, published by Eurostat, is €1,899 billion for 2013. We understand from recent Treasury announcements that we have just got back to the previous peak. Even France did not have the great trough that we had and its economy is at least at our level of prosperity.

The propaganda coming from the other side of the House is relentless. This is a highly political debate and the more I listen to it, the more I believe that what is coming from the Conservative Party is purely political propaganda. We know that the maxim in the minds of those in the Conservative Party at the moment is that you can fool some of the people for some of time and indeed that you can fool all of the people all of the time—at least until May 2015. However, I do not think that that will happen because, as we have heard, people have their own experiences of productivity, wages, living standards and cuts. My noble friend Lord McKenzie touched on this. The cuts have been not two, three, four or five times but the best part of 10 times more onerous for the bottom quarter than for the top.

I should like to ask the Minister—he has time to get advice on the Eurostat and other figures—whether he agrees that my figures are correct and that the figures from Conservative Central Office being trotted out by the previous speaker and many other speakers are preposterous and wrong.

I want to make one point on our productivity performance, which my noble friend Lord Adonis made one of his major themes. I very much welcome the recognition, finally, in this country that we have to

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benchmark and learn from other economies in Europe. Mr John Cridland, the director-general of the CBI, in a speech the other day said that we ought to study the Mittelstand—the medium-sized enterprises—in Germany. I hope that there will be an opportunity for the TUC and the CBI to discuss these matters together. I hope that people do not think that that would be a retrograde step; I think that it is a rather good thing to do in all successful economies. So far as the companies in this country are concerned, those economies, as well as the multinationals, need to get together to look at what happens to skills and productivity. World market share is always on the agenda for the European works councils. That is what they are for: to see whether X, Y or Z is needed to increase world market share. However, we do not have that for our companies.

I hope that at some point we can be a little more objective about the prospects for our economy and not just, as too many people on the opposite side have done, regurgitate statistics that relate to a fantasy world. On that, I think that the chickens are coming home to roost with a vengeance.

1.37 pm

Lord Bilimoria (CB): My Lords, in his first Budget in 2010, the Chancellor said that the Government would,

“have debt falling and a balanced structural”,

budget deficit,

“by the end of this Parliament”.—[

Official Report

, Commons, 22/6/10; col. 168.]

Despite the Chancellor’s tough talk about austerity and cutting public expenditure, the reality is that public expenditure as a percentage of GDP has continued to increase. I thank the noble Viscount, Lord Younger, for leading this debate.

Yesterday, it was announced that the Government will spend £746 billion in 2015-16, rising to £765 billion in 2018-19, compared with £692 billion in 2010. Government spending is increasing and, as a percentage of GDP, our national debt is rising. According to the OBR, it will now peak at 81% of GDP in 2015-16. This means that the Chancellor will completely miss his target to ensure that net debt is falling relative to GDP by 2015-16.

We have a perception of austerity that has simply not been matched by reality. Yesterday, the Chancellor acknowledged that we are at least another four years away from that target. To build on what the noble Lord, Lord Skidelsky, said, if we are borrowing £300 billion more than the Chancellor said he would in 2010, why should anyone believe him this time around? The OBR has predicted that public expenditure is going to have to fall to 35.2% of GDP by 2019-20—the lowest level since the 1930s. Let us remember that the 1930s were pre-welfare state days. Can the Minister confirm that that is really achievable?

In order to achieve those cuts, it is predicted by the OBR that the defence budget, which is already negligently too low, will have to be cut by 60%. Can the Minister confirm that that might have to happen, although it is hoped that it never will? However, I was delighted to hear that the Government will be giving money to veterans, including £2 million for the Gurkhas. I was

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privileged to have been brought up with the Gurkhas. My late father, Lieutenant-General Bilimoria, was commissioned to the 2nd Battalion, Fifth Gurkha Rifles (Frontier Force), and was president of the Gurkha Brigade when he was commander-in-chief of the Central Indian Army. I was privileged to have been brought up with two Victoria Cross holders from birth—they were living legends. Therefore, I thank the Government for doing that.

However, it is the low level of interest rates for a prolonged period, at the level of 5% that led to the financial crisis from which we suffered. Yet today we are being propped up by interest rates that are 10 times lower—at 0.5%. Government borrowing has been increasing year on year and expenditure on debt interest has contributed to it. It is more than £1.27 trillion and is costing us £1 billion a week—more than the entire defence budget.

Does the Minister agree that interest rates might have to rise? The Governor of the Bank of England made a ridiculous statement that he would start increasing interest rates when unemployment fell below 7%. Unemployment is at 6% now and interest rates have not gone up, but they will go up at some stage, and if they do the debt interest levels will go up. The SNP made the mistake in its budgets with the oil price and its budgets are shot to tatters at the moment. Will the Minister give his views on future interest rates?

Wearing my hat as chancellor of the University of Birmingham I have seen that our higher education sector is one of the jewels in our crown. I am delighted that the Government are about to announce loans for postgraduate studies. On the other hand, we highly underinvest in higher education as a proportion of GDP compared with the OECD, the EU and America. On R&D and innovation, the patent box is all very well—it is stored—but if we invested the same proportion of GDP as countries such as America, the OECD and the EU, we would help our productivity hugely. Our current account deficit has reached 5.2% of GDP, which is worse than Italy and France. Our fiscal deficit of 5% is almost double that of the United States, let alone Germany which has just 0.2%.

As the noble Lord, Lord Adonis, said, skills are so essential. I am proud to be an ambassador for Studio Schools. Last month I opened the Vision Studio School in Mansfield. That is the sort of initiative that I am glad the Government are backing. Tax breaks to apprentices are excellent but, on the other hand, the word “entrepreneurship” was completely missing from the SME Bill. Entrepreneurship should be the cornerstone of our future growth. I launched the 10th anniversary of the Cambridge University Centre for Entrepreneurial Learning this week. That is what we should be backing. The Sirius campaign, backed by UKTI, bringing young entrepreneurs to Britain to develop their businesses, is a great initiative that the Government should be doing.

The Government are doing a lot, but are they doing enough on the big things? We have a tax system that is so complicated that the tax code is now 17,000 pages long. The Office of Tax Simplification is an oxymoron. Our corporation tax rate is low but our income tax rate is too high. Capital gains tax is too high. The Indian

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restaurant industry which we supply and the Bangladesh Caterers Association UK are constantly complaining about VAT and asking for it to be reduced. Our hospitality and tourism industries say that VAT is far too high. We do not have a competitive tax system.

The noble Lord, Lord Rose, in his excellent speech, spoke about confidence. We need confidence, productivity, and a better educated and more entrepreneurial workforce who think globally. Government expenditure should be at a believable rate: 35% is unachievable; 40% would be a realistic rate. We could then balance our books and have an educated, productive, confident and enterprise-based economy so that, even as 1% of the world’s population—that is all we are—we can continue to punch above our weight.

1.43 pm

Lord Lexden (Con): My Lords, I shall confine my remarks to the part of our country that matters most to me—Northern Ireland. The responsibility for setting corporation tax rates there could now be devolved to its power-sharing Executive and Assembly as a result of an extremely important announcement in the Autumn Statement. The announcement has been long awaited. Widespread consultations were initiated more than three and a half years ago when the Treasury published a paper to pave the way for a detailed examination of, in its words,

“the extent to which a phased reduction in the rate of corporation tax could support a rebalancing of the economy”.

The rebalancing of the economy is, of course, one of the principal objectives of this Government’s policy. Nowhere is a significant rebalancing needed more than in the Province, which has for so long been overwhelmingly and dangerously dependent on the public sector. The Treasury’s work on the issue of corporation tax devolution was completed some time ago. I pressed for an announcement as soon as possible. I am glad that it has at last been made.

Many of the Province’s politicians and economic experts believe that Northern Ireland needs rates of corporation tax significantly lower than the rest of our country, welcome though the Chancellor’s steady reductions in the tax over years have been. That is because Ulster faces severe competition for the inward investment that it needs so badly from its neighbour across its border, the Republic of Ireland, which has a 12.5% rate of corporation tax. Substantial inward investment and the new private sector jobs that it could create are vital if the rebalancing of the Northern Ireland economy is to be achieved. The Government estimate that low rates of corporation tax in the Province could lead to the creation of some 50,000 new jobs in the years ahead.

The devolution of corporation tax does not command universal assent in Ulster, but the majority of the Province’s political parties and large numbers of its business leaders favour this immensely important proposal. The Northern Ireland Chamber of Commerce said yesterday that,

“our politicians must grasp this opportunity”.

With the opportunity comes a severe challenge. The immediate consequence of special low rates of corporation tax would be the reduction in the revenue generated by

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them, which would lead in turn to the reduction in the block grant which the Northern Ireland Executive receive. So, as my noble friend Lord Empey, chairman of the Ulster Unionist Party, who cannot be in his place today, has often reminded me, careful consideration would need to be given to the manner in which low rates of corporation tax were phased in if they were devolved. A gradual introduction over several years would seem to be the right course.

The Government will be aware that yesterday’s announcement in respect of Northern Ireland will stir keen interest in Scotland and Wales. The Smith commission ruled out the devolution of corporation tax to the Scottish Parliament. Nicola Sturgeon, however, is unlikely to let the matter rest there. In Wales the Silk commission recommended that the tax should be devolved to the Welsh Assembly if Northern Ireland was given it. The Government will need to consider these repercussions, remembering always their overriding duty to preserve the unity of our country. Unfortunately, and through no fault of the Government, the corporation tax announcement does not come at a propitious moment in the political fortunes of the Province. Its power-sharing Executive are in turmoil. One consequence of that turmoil has been a £100 million loan from the Treasury to cover the current deficit. The Chancellor was right to say that the Executive must demonstrate that they are,

“able to manage the financial implications”,—[

Official Report,

Commons, 3/12/14; col. 314.]

of corporation tax devolution. That is a fair and proper condition to stipulate.

Cross-party talks are now taking place under the chairmanship of my right honourable friend the Secretary of State for Northern Ireland. I hope that the financial and other issues that are now seriously jeopardising the work of the Northern Ireland Executive will be diminished to the point where the Chancellor’s welcome announcement can be the subject of serious cross-party discussion in the Province. Those who seek to impede Northern Ireland’s search for economic progress will not be readily forgiven.

1.47 pm

Lord Whitty (Lab): My Lords, I begin by apologising to the noble Viscount that my Select Committee duties kept me from being in the Chamber at the beginning of this debate. My thanks to the Whips for letting me in.

The problem with this economic debate is that it is defined almost entirely in terms of the deficit. Indeed, we have become obsessed with the figures for the deficit in the same way as we were obsessed in the 1970s with the trade gap, which nowadays is largely ignored. I recognise that the deficit is important both in absolute terms and in terms of the way in which we finance it. But focusing on it takes away from focusing on the two sides that create the gap—income and expenditure. I want to focus largely on one reason why both public income and expenditure are affected by the very serious reduction in real wages. I follow the noble Lord, Lord Skidelsky, and my noble friend Lord Desai in focusing on real wages.

Low real wages both reflect and cause one of our underlying problems: low productivity. Indeed, as others have said, low productivity is one of the main constraints

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on our recovery. There are many reasons for real wages having declined in recent years, some directly and some indirectly to do with the Government. They relate to the public sector wage freeze, the absence of collective bargaining in large parts of the private sector, the increase in part-time work for many people who would prefer to work much longer hours, down to those on zero-hours contracts, and so forth, and the increase in what is termed self-employment, which often is not by choice either. Indeed, the real incomes of the self-employed have fallen faster than for anybody else since the financial crisis, although the numbers of self-employed have increased.

The effects of low income have been felt on both sides of the equation. They have clearly lowered the actual receipt of taxes to below what the Chancellor expected and they have increased the level of expenditure through tax credits and housing benefit, which has been aggravated by the complete failure to deal with the underlying housing crisis. Housing costs are going up at the same time as real incomes are going down. Also, we should not ignore the fact that low real wages have toxified other aspects of the body politic. We have intergenerational conflict. As someone said, the young are most hard hit by the decline in wages. We also see it in sensitive debates around immigration, the EU and the whole future of welfare.

The Chancellor and the OBR seem to expect real wages to recover, but there is no obvious reason why they should—particularly if we reduce the role of the state to that in the 1930s. If we are going back to that, we should remember quite what the 1930s brought us in terms of both economics and politics. We need instead to introduce structural and legal changes that raise the level of incomes of the poorest in our workforce. If we do that, we will begin to increase income to the Exchequer on the one hand and to reduce expenditure on benefits on the other. We will also help to remove some of the dangerous tendencies in our society and in the body politic.

Let me be fair; there are aspects of the Statement to which I can give a qualified welcome. I agree with most of the infrastructure commitments—but, like my noble friend Lord Hunt, I regret that they also reflect those areas which the Government cut five years ago. Nevertheless, they are back, although I regret the absence of any commitment to a housebuilding programme. I welcome the more progressive moves in relation to the structure of stamp duty, although while it may help on the one hand, on the other it may aggravate the housing market in the short term. But the overall message I want to send is that unless we as a society and as a Government or alternative Government address the issue of declining real pay, we will end up remaining in this situation for many years to come.

1.52 pm

Lord Horam (Con): My Lords, I congratulate my noble friend Lord Rose of Monewden—I hope I have pronounced that correctly—on his maiden speech. We will all be interested to hear from him on business matters. I understand that he also has experience of turning round failing hospitals. As a former health Minister I shall be very interested to hear about that as well.

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As this is the last Autumn Statement before the general election, it obviously has more than a whiff of politics about it. As an economist and as a politician, I have sometimes felt torn in two by the conflicting priorities that these occasionally impose—but not on this occasion. For the first time, the Chancellor of the Exchequer has seriously hit the holy grail of economic policy, which is economic growth with low inflation. He has done that partly through his own efforts, which have been somewhat more Keynesian, as the noble Lord, Lord Desai, implied, than he might perhaps have thought earlier on. He has also done it because of the enduring legacy of the Thatcher and Major years.

My noble friend Lord Lawson of Blaby referred to those years, but did not mention that he himself played a central part in the microeconomic management from which we still benefit. Ed Conway, the “Sky News” economics editor, wrote in the Times the other day:

“Europe is still awaiting its Thatcher moment”.

That is because of the regulations and problems of the labour market which are still prevalent, particularly in southern Europe. Even Germany has problems because it is still waiting for its Keynesian moment. It does not understand that there has to be some expansion from time to time in order to get the economy going. Believe you me, if you are in the eurozone and you have not had a Thatcher moment and you still have not had a Keynesian moment, you are in real trouble. That is the difficulty they face—and it will impinge on us in due course.

I welcome particularly the centrepiece of the Statement about infrastructure development. As a former transport Minister, I welcome the points about roads and railway development, although, as the noble Lord, Lord Adonis, rightly pointed out, under both Governments, far too often these have been stop-start projects. We should not forget one thing, which is that we have done particularly well on broadband. When this Government came to power, the UK was one of the worst countries in western Europe for broadband development; now we are the leader. That is a very good example of how government policy should be conducted.