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House of Lords

Thursday, 22 March 2012.

11 am

Prayers-read by the Lord Bishop of Durham.

UN Convention on the Rights of the Child


11.07 am

Asked by Baroness Massey of Darwen

The Parliamentary Under-Secretary of State for Schools (Lord Hill of Oareford): My Lords, the Government take their obligations under the UN Convention on the Rights of the Child very seriously and are implementing the commitment made in December 2010. The Government have used the home affairs clearance process to consider the implications of their proposals for children's rights. The Minister for Children has also written recently to all government departments to reinforce this commitment, and departments are being given further guidance and support on the UNCRC in preparation for the next legislative Session.

Baroness Massey of Darwen: I thank the Minister for that response. However, does he agree that, despite that commitment, since 2010 only one Bill out of 11 has been scrutinised and child-proofed? Could he say what the barriers to such scrutiny and child-proofing are, particularly in light of the progress made in Wales and Scotland?

Lord Hill of Oareford: I agree with the noble Baroness that we need to make sure that the commitment that my honourable friend made in December 2010 is fulfilled. As we prepare for the next legislative Session, part of the way in which we do that is through some of the processes that I outlined. Specific guidance is being prepared by the Cabinet Office, and will go to all departments, on making sure that they take specific account of the UNCRC requirement when considering legislation. There is also a very snappy guide called the Guide to Making Legislation. Therefore, I hope that we will be able to move in the direction in which the noble Baroness wants us to move.

Baroness Walmsley: Does the Minister agree that the convention gives children the right to protection from violence in all places of learning, both secular and religious? What is his department doing to ensure that?

Lord Hill of Oareford: The Government are working to ensure that children can be educated in an orderly way in all schools. As for making sure that they are safe from violence in those settings, the noble Baroness will know that we are keen to do that in a number of

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ways. We are taking new measures on behaviour, and guidance on them is going to schools. All schools will want to make sure that they deliver on that commitment.

Lord Elystan-Morgan: My Lords, on the Government's intentions in relation to adoption and accelerating adoption, will the Minister confirm that, however laudable that objective might be, adoption should always be confined to cases where it is in the best interests of the child, taking into account the child's anticipated life, and should never be regarded as a soft option for a local authority, which might otherwise be saddled with a care order for very many years?

Lord Hill of Oareford: I am sure all noble Lords would agree that we want to make sure that adoption processes are delivered in the best interests of the child. As the noble Lord says, the Government are keen to try to accelerate the process because we know that the average length of time it takes for a child to be placed in adoption is more than two and a half years. If it is the right thing for a child, we are very keen that that process should happen as quickly as possible in a sensible way, and to try to address the great disparity in practice between different local authority areas.

Baroness McIntosh of Hudnall: My Lords, would the Minister be so kind as to return to the question asked by the noble Baroness, Lady Massey? She specifically asked what the barriers were to the proper scrutiny of Bills that have already been passed into law. I am not sure that the Minister gave us an answer to that question.

Lord Hill of Oareford: Forgive me if I did not deal with that. I do not know that there are barriers in the sense in which the question was put. We need to make sure that post-legislative scrutiny takes these factors into account; and that, while legislation is being drawn up within departments, the requirement to take into account the UNCRC obligations is taken properly into account, and that Ministers and departments are aware of that. Another factor that will help is the new powers which we hope will be given to the Children's Commissioner, if we can get a legislative slot to do so, which will make the Children's Commissioner more independent of my department and accountable to Parliament rather than to the department. That will also have a role in shining a spotlight on this.

Baroness Knight of Collingtree: My Lords, has my noble friend noted the number of cases being reported of children being taken from their own parents on a very extraordinary basis of reasoning? Bearing in mind that it is always best if children can have a home with their parents, does he accept that this is a serious matter that worries many of us?

Lord Hill of Oareford: I am aware of the issue and of my noble friend's concerns about it. Clearly if one can be certain that the parental home is the right place for a child to be, that is obviously where one would want them to be: in a loving family. I know that my honourable friend Mr Loughton, who is responsible for adoption, takes those concerns seriously.

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Lord Ramsbotham: My Lords, can the Minister confirm whether the instructions from the Cabinet Office will also include impact assessments in the post-legislative study of the impact of Bills such as the Legal Aid, Sentencing and Punishment of Offenders Bill, which has been going through this House?

Lord Hill of Oareford: I will need to check to find out precisely what areas that guidance covers. When I have an answer, I will reply to the noble Lord and tell him what I am able to.

Baroness Jones of Whitchurch: My Lords, may I follow up the point made by my noble friend Lady McIntosh with a particular example? The Children's Commissioner recently concluded that the Welfare Reform Bill contravened the UN convention in a number of ways. For example, she argued that the benefit cap risks children suffering unjustified discrimination. In those circumstances, will the Minister explain how the Government took that message on board and went about modifying the legislation to bring it back into line with the convention, because being a signatory does not seem to make much difference to the way in which the legislation eventually pans out?

Lord Hill of Oareford: My Lords, the Government believe that the Welfare Reform Bill is compliant with the UNCRC. We know that those issues were debated at length in this House and concerns were expressed about the effect of the benefit cap. The Government said that transitional arrangements would be put in place to deal with some of the concerns that noble Lords expressed, and they have committed to having a report a year on as to the effect of the benefit cap. However, our core position is that if we can help and encourage more people into work, that will be good for those families and for their children.

Baroness Walmsley: Will the Minister allow me to clarify my earlier question? I was referring not to bullying by other children but to violence and ill treatment by members of staff. I particularly had in mind certain madrassahs and Christian fundamentalist Sunday schools where the treatment of children is not up to the standard that we would expect in this country.



11.15 am

Asked by Lord Risby

The Minister of State, Foreign and Commonwealth Office (Lord Howell of Guildford): My Lords, we remain concerned about the situation in the Maldives. We agree with the Commonwealth Ministerial Action Group that early elections are required to establish confidence in the legitimacy of those who govern the country. We welcome the appointment of Sir Don McKinnon as the Commonwealth's special envoy. We are pressing for all sides to show calm and restraint and to work towards a sustainable political solution.

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Lord Risby: My Lords, the image of the Maldives as a tropical tourist paradise is indeed correct but it was not a democracy until 2008, when elections finally took place. The individual who was selected as president by the people of the Maldives, Mohamed Nasheed, had suffered personal abuse and imprisonment and had exile in this country-a terrible personal saga. A few weeks ago he resigned, clearly under duress, and the new Government are unwilling to hold elections. If democratic underpinnings and democratic consent are the basis of the Commonwealth, unless these elections take place quickly, should not suspension of the Maldives from the Commonwealth be considered?

Lord Howell of Guildford: My noble friend is very close to the situation and has followed it over the years. On the last part of his question, it is for the Commonwealth as a whole, not for an individual member, to decide about membership. That is a decision that the Commonwealth comes to when it judges it appropriate. That has not arisen so far in this case, but the rest of my noble friend's analysis is exactly right. We must move to encourage democratic elections, and that is what is proposed in the India-brokered plan, which we welcome and support, for there to be early elections. So far a commission of inquiry has been established, a special envoy has been appointed, the Commonwealth Ministerial Action Group was there last month on a fact-finding mission and our own high commissioner was there last week. My noble friend is right that elections are what are needed to establish legitimacy.

Lord Bilimoria: My Lords, I was privileged to get to know President Nasheed very well and was impressed by that young, dynamic world leader. As a member of the Commonwealth, are the Government doing enough to ensure that there is a genuine independent international inquiry into what happened, which some say is tantamount to a coup? Do the Government agree with that and will they press for early elections? That has to be the best solution.

Lord Howell of Guildford: We do not recognise this as a coup, although obviously there has been a change. Mr Nasheed is known to many people and greatly admired. We still need to establish the full circumstances of what occurred and we hope that the commission of inquiry will do that. Yes, the pressure is on: the Commonwealth, through Don McKinnon and others, is pressing very hard that there should be early elections and that it should be established who the legitimate Government of the Maldives are. We can then proceed calmly to repair the damage and see that the situation is restored so that the Maldives, as my noble friend has said, remains the paradise and attractive tourist area that it has always been and continues to be, because at the moment we do not judge that there is any danger in the tourist areas.

Lord Anderson of Swansea: My Lords, is it not encouraging that the Commonwealth, true to its proper role, is playing such a positive and key part-just as, for example, Chief Emeka Anyaoku did as Commonwealth Secretary-General over South Africa? Is it not therefore disappointing that the Perth CHOGM

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failed to reach agreement on an enhanced role for both the secretary-general and the secretariat as a whole? Is there any positive progress regarding the role of the secretariat and the secretary-general, or might it emerge over the coming year?

Lord Howell of Guildford: Yes, but the position is not quite as the noble Lord described it. They did not fail at the Heads of Government meeting to reach agreement; in fact, they agreed on a whole range of reinforcement of the upholding of standards in the Commonwealth by the Commonwealth Ministerial Action Group and the new mandate for the secretary-general. The action in the Maldives is a welcome demonstration of what I hope is a much more active role to come. A whole range of other proposals put forward by the Eminent Persons Group is being discussed. The proposals have not been shelved. They are to be discussed by a ministerial task force and analysed further when Commonwealth Foreign Ministers meet in the autumn to take them forward. My hope is that a great many of them will be implemented. Some remain difficult, I fully agree, but generally, there is a huge surge in commitment throughout the Commonwealth to be a body that truly upholds its standards of democracy, human rights, good governance and the rule of law.

Lord Avebury: My Lords, has it now been agreed that the committee of national inquiry which has been formed to investigate the legality of the transfer of power in February should be reinforced by a person nominated by the United Nations? Secondly, will the CMAG at its meeting in April look into a plan B in the event of it being unable to persuade the parties that elections should be held before the end of the year?

Lord Howell of Guildford: Both those propositions are really up to Sir Don McKinnon, the special envoy. He has been in the islands, in Male, in the past few days; I think he leaves today. He will be looking at precisely those points. Our hope and determination must be that elections are brought about. If they are not, of course we would have a new and more difficult situation that would require further resolution and effort. For the moment, we concentrate on following the plan which the Indians have so helpfully brokered.

International Criminal Court: Rome Statute


11.22 am

Asked by Baroness Stern

The Minister of State, Foreign and Commonwealth Office (Lord Howell of Guildford): My Lords, the International Criminal Court is now a cornerstone of the international criminal justice system. Since 2002, it has opened seven investigations and 15 cases have

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been brought before the court. It delivered its first verdict last week in the case of the Congolese militia leader, Thomas Lubanga. We are currently discussing options on how to mark the 10th anniversary occasion. I shall write to the noble Baroness with details once they have been finalised.

Baroness Stern: I thank the Minister for the support that the Government give to the International Criminal Court, which I am sure is widely welcomed in this House. The Minister will know that 118 countries have ratified, representing all regions of the world, but there are some notable absentees from the list: the United States, China, Russia and India. Does he agree that the ICC would have much more global authority if those countries decided to ratify? Have the Government made representations to those four countries about ratifying? If so, what was the outcome of those representations?

Lord Howell of Guildford: I am grateful to the noble Baroness. My brief says 120 countries, not 118, but she may be right. She is quite right to say that some key countries are not signatories. She mentioned the United States, China, India and Russia; there are also Pakistan and Turkey and some others, including Syria. Obviously, the more signatories come on board, the more effective the ICC will be in future. Do we make representations? At all times. It is known in ICC circles and international circles that it would be good to get those countries to sign. The noble Baroness asks about the response. I have to say that, so far, in relation to the United States in particular, there is not a very encouraging response. There are real internal difficulties in those other countries and in the United States which prevent them signing at the moment, but we will keep pressing.

Lord Marks of Henley-on-Thames: Does my noble friend agree that future successful referrals to the court are imperilled by the absence of the countries that the noble Baroness mentioned and also those that he mentioned? By way of example, what steps have been taken to secure commissions of inquiry into crimes committed in Myanmar and in North Korea, with a view to UN Security Council referrals to the court in respect of crimes against humanity in those two countries?

Lord Howell of Guildford: My noble friend has mentioned two more countries that are not signatories: Burma and North Korea. In reality, the only way that the ICC can raise charges, commence prosecutions or anything similar with regard to non-signatories is through a resolution from the UN Security Council. That would have to be the way forward, as it was, for instance, with Libya, Sudan and Darfur. So if the UN Security Council could agree, there could be a reference to the ICC in relation to Burma and North Korea. However, my noble friend knows as well as I do that the UN Security Council has differing opinions within it; and on many issues, including the sort he has raised, there are problems.

Lord Morris of Aberavon: My Lords, one of the driving forces for the passing of the Rome statute and the setting up of the International Criminal Court was

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Labour's Foreign Secretary, the late Robin Cook, whom I had the privilege to support as Attorney-General. Regrettably, as we have been reminded this morning, the United States has failed to ratify it. Given the recent emphasis placed on the special relationship during the Prime Minister's visit, what specific steps have been taken by Her Majesty's Government to persuade our American friends to become members of the court so that there is a venue recognised by most major states for the trying of international wrongdoers?

Lord Howell of Guildford: The noble and learned Lord is quite right that Robin Cook was the driving force when we took the legislation through the House-with support from both sides; I was sitting on that side at the time-for setting up this remarkable body. The court is getting going but that takes time, so many of the crimes and horrors of the past are still being tried under previous legislation and therefore in separate courts. However, the ICC is making progress. What can we do about the non-signatories, particularly our allies and friends in the United States? They know perfectly well our views. For reasons that I have mentioned-or hinted at-to do with internal pressures in the United States, they have not signed; and frankly, I think that they are not very likely to. However, in terms of co-operation and help in making the operations of the ICC work, the United States has been extremely constructive and extremely helpful.

Lord Alton of Liverpool: My Lords, is the Minister aware that, two weeks ago in Parliament, Dr Mukesh Kapila, a former British and United Nations official, talking about South Kordofan, said that the second genocide of the 21st century is now unfolding, with more than 1 million people now affected? The area is being bombarded and people are being raped and being killed. Given that the International Criminal Court has indicted the head of state in Sudan, Omar al-Bashir, and also the governor of South Kordofan, Ahmed Mohammed Haroun, for war crimes and crimes against humanity, how can we continue to justify full diplomatic relations with mass murderers and fugitives from justice? What is being done to assist the ICC in enforcing arrest warrants in those cases?

Lord Howell of Guildford: Diplomatic relations, as the noble Lord knows from his great experience, are always a dilemma. If you break relations off completely that will be the end of contact and the opportunity to influence. Sometimes that is necessary, but we have to make a careful judgment; and that is the one that we have made so far on this matter. As for the International Criminal Court's jurisdiction, it is quite right that the charges are outstanding against President Bashir. I think that there would have to be a further UN Security Council reference to the ICC for it to go ahead in examining these other alleged horrors and atrocities. I do not for a moment doubt what the noble Lord says about the horrors that have been going on-I think that they have been going on. It may be that the process will get under way. However, that is the only path through which we can get the ICC qualified. It cannot itself take an initiative without the support of the established procedures through the UN.

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Baroness Kinnock of Holyhead: My Lords, we should of course welcome the conviction this week by the ICC of Thomas Lubanga, who was found guilty of terrible rapes and murders in Congo. Does the Minister agree that the conviction represents real progress for international justice and confirms that the judges of the ICC were scrupulously fair? Does it not also raise questions about the work of the court? Should it learn lessons from what the judges called a flawed investigation and prosecution? The pre-trial detention of the prisoner for seven years was one example of that inefficiency.

Lord Howell of Guildford: The noble Baroness is right; there are lessons to be learnt. Certainly when I looked at the briefing I, too, remarked that it was extraordinary that we had set up the court in 2002 and the first conviction had come almost 10 years later. There must be ways of speeding up these things. However, the cases are immensely complex; all sorts of political pressures are brought to bear before people can be indicted at The Hague; and there are great difficulties in getting some of these people located, charged and transferred to The Hague. Certainly there are lessons to be learnt, and improvements can be made to make this an even more effective organisation in future.

Police and Crime Commissioners


11.31 am

Asked by Lord Hunt of Kings Heath

Baroness Stowell of Beeston: My Lords, the Government recently completed a consultation with the Electoral Commission and others, which included consideration of how the public can receive information about police and crime commissioner candidates. We are looking at options, and in reaching a decision an important consideration will be ensuring that members of the public can gain access to information by a range of means.

Lord Hunt of Kings Heath: My Lords, the elections are in November. Will the noble Baroness say why so far the Home Secretary has turned down requests for the funding of election materials for distribution by candidates, which is directly contrary to the practice both for MPs and for elected mayors? Will the noble Baroness confirm that the Government's intention is to see a low turnout in the elections?

Baroness Stowell of Beeston: My Lords, election addresses are an important and routine part of the election process. The Home Office proposes a cost-effective way of distributing election addresses for PCC candidates. As the noble Lord will know, election addresses are not the only form of communication that takes place during a campaign. The Electoral Commission is responsible for raising awareness of the election. The Government will make sure that the policy of the

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creation of PCCs is widely known-as it is already. The candidates must take responsibility for communicating their messages through their campaigns.

Lord Condon: My Lords, I declare my registered interests, which are police-related. Does the Minister share my concern that it seems increasingly likely that the only candidates who will succeed in November will be party-political nominees or personalities who are already household names, and that the flaws exposed by the Electoral Commission will deter talented, independent candidates from standing-or will ensure that, if they do stand, they will be frozen out by the process?

Baroness Stowell of Beeston: No, I do not agree with the noble Lord's proposition. The system of election is open. Some high-profile candidates have come forward, including at least one Member of your Lordships' House. There are also independent candidates who are expressing an interest in putting themselves forward for this important role. It is encouraging how many people are embracing what will be a new and very radical way of increasing public accountability and encouraging a relationship between people and the police.

Baroness Browning: Does my noble friend take some encouragement from the fact that people from both Houses of Parliament have expressed an interest in standing and that several independent candidates are now emerging? That is to be welcomed. Does she see that as a vindication, because although there was a lot of opposition to police and crime commissioners when the Bill went through, a great many people, including in this House, now believe that it is a job worth doing?

Baroness Stowell of Beeston: I agree. Indeed, I am delighted that, after such fierce opposition to elected police and crime commissioners, senior Labour politicians are now embracing this opportunity to increase public accountability. I think that the noble Lord, Lord Prescott, put it as clearly as I can when he said in some of his recent media interviews:

"The public should have much more of a say in determining the force's priorities and responsibilities",


"That's never been done before. That's quite a radical reform".

Lord Prescott: My Lords, this is a scandalous decision to deny 7 million people, according to the Electoral Commission, the right to vote simply because they do not have access to the website. In my area, Humberside, where I may well have an interest in the future that I perhaps should declare, that will mean 170,000 people, mostly elderly, will be denied their democratic right to information about the candidates. Will the Minister tell me why there appears to be two departmental positions? In the same elections, department for employment says that it will finance the mayor and exercise all democratic right to information, but then the Home Office comes along and says, "No, we will not fundamentally say that". What is the Government's position when there are two different departments in the same election denying democratic rights?

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Baroness Stowell of Beeston: The Government are not denying anybody a democratic right. We are putting forward a proposal that will allow clear and effective communication by candidates via a website, together with a national helpline that will be well advertised and made available to people so that they can ring up and request the information on paper as well as being able to access it electronically. We think this is a cost-effective way. I am sure somebody as experienced as the noble Lord will know that election addresses, while important, are not what will secure success for any candidate. It is for the candidates themselves to ensure that they communicate very effectively to the electorate.

Arrangement of Business

Announcement of Recess Dates

11.37 am

Baroness Anelay of St Johns: My Lords, with the leave of the House, I shall make a short statement about business. On the first of this month, my noble friend the Leader of House announced in the usual Written Statement that the Queen will be pleased to open a new Session of Parliament on Wednesday 9 May. As this is the first mid-Parliament spring opening for many years, I should now like to say a word or two about the end of the Session and Prorogation. My right honourable friend the Leader of the House of Commons has today announced that the other place will be considering the Finance Bill in the week of 16 April. Unlike Easter, the Finance Bill is an immovable feast which follows the Budget. While the other place is in Committee of the Whole House-the Chamber-on the Finance Bill, the two Houses cannot effectively deal with ping-pong. For that reason, I now propose to add a week to the Easter Recess. We will now return from Easter on Monday 23 April instead of on Monday 16 April.

It is my intention that our legislative business on this Session's Bills should be concluded by the end of Thursday 26 April, or thereabouts. That may include a Bill to be introduced in this House to relax the Sunday trading laws for the period of the Olympics and Paralympics, for this summer only, of course. That will go forward only if fast-track legislation on that is agreed between the usual channels. I confirm that discussion is under way at the moment in the usual channels about whether fast-track legislation may be agreed to. In short, we will return from the Easter Recess on 23 April for the outstanding Bills and, potentially, the Olympics Sunday trading Bill. Parliament will then be prorogued in the usual way a few days before the start of the new Session.

Lord Bassam of Brighton: My Lords, I have no desire to strike a discordant note at the news of your Lordships' House having an extra week's holiday, but I will take a moment to reflect on how we have arrived at this point.

We had an 18-month legislative programme that was extended over two years. The House was brought back for a September sitting. We had a week added to our work in October, and we had a half-term Recess cancelled last November. We have had a rather chaotic

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approach to legislation in the past two years. With all the pressure that has been applied to our Front Bench to conform to late sittings and early starts, it seems deeply ironic that we have ended up in a bizarre situation where the Government forgot that they had to deal with their Finance Bill before they could deal with ping-pong.

Will the noble Baroness consider taking back to the Prime Minister a request from this House for a reconsideration of the timings of the parliamentary terms? Spring to spring just does not work. We have purdah, we have Budget debates and of course we have the moveable feast of Easter. There is a disconnect. On Monday we are going to be asked to consider extending the hours in which we deliberate in Grand Committee. We are being asked to do more work yet here we are, in April, being given an extra week off. This does not strike me as a sensible way of doing business.

Baroness Anelay of St Johns: My Lords, this House is indeed a very hard-working House. The noble Lord said that he thought the House was going to be asked to do more work. There will be a debate on the Procedure Committee before the House on Monday, if the House agrees to a Motion later today. Noble Lords will be able to make their points at that stage. The opposition Chief Whip is aware that it is the Government's intention only to make proposals with regard to Grand Committee that will enable the House to have more opportunity to scrutinise legislation without having the late finishes or early starts that were only tabled at the express request of the Opposition.

We had a September sitting last year. It proved unpopular. I listened to the House and therefore there will not be a September sitting this year. Of course, I always listen to the views of the House. Indeed, on Monday the House spoke with such a loud voice on the Health and Social Care Bill that the Government found that we no longer needed to consider that Bill at further stages in the normal procedure of ping-pong. My overwhelming duty is to ensure that this House sits because it has pressing matters of business and to provide the circumstances in which the House can do so. I am the first to applaud the work this House does and I know it will continue to do it to the best.

Baroness McIntosh of Hudnall: My Lords, can the noble Baroness clarify one point she made in her initial statement? She said that she expected the business on current legislation to be concluded by the end of business on 26 April. Was she implying that that would be the last sitting day before the opening of the next Session? Perhaps I could also remind the noble Baroness that by extending the Easter vacation she may have done irreparable damage to the audience for the Parliament Choir on 18 April.

Baroness Anelay of St Johns: My Lords, I am told just the reverse: that there is great relief that there will not be the prospect of ping-pong on the legal aid Bill on that day, and there is huge welcome around the House that I have managed to ensure that the audience-and particularly the superb performers from this House-will be able to attend and not to disappoint their Chief Whips on that occasion.

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The noble Baroness is right to want further elucidation of my comment about 26 April. It is of course never the case that the Government announce the precise date of prorogation until business can be secured. I notice the noble Lord, Lord Bach, looking eagerly forward, because of course he speaks for the Opposition on the legal aid Bill. I am also aware of the number of defeats that the Government have so far faced on that, so there will be time for that Bill. I carefully said, "26 April or thereabouts". Of course, I will be meeting with the opposition Chief Whip later today to ensure that by the end of today there is a notice of forthcoming business reissued to the House to assist the House.

Lord Cormack: My Lords, will my noble friend confirm that if the Motions to which reference has already been made are approved on Monday, that will result in most Bills going into Grand Committee rather than being taken on the Floor of the House? There are real constitutional implications here. I should be grateful for clarification.

Baroness Anelay of St Johns: My Lords, I know that my noble friend the Leader of the House will clarify the situation to make clear that my noble friend Lord Cormack is labouring under a misapprehension. That matter will be debated on Monday.

Lord Grocott: My Lords, the Chief Whip, by her statement today, has made it clear that in her estimation there is plenty of time in terms of sitting days left before we need to prorogue to complete government business and to have any essential debates. She will know that the Joint Committee on House of Lords Reform will report immediately after the Recess. Can she assure the House that, with all this spare time available, there will definitely be a full day for this House to debate its future as determined or otherwise by the Joint Committee? She says she listens to the House, so "yes" will do.

Baroness Anelay of St Johns: My Lords, the assurance that I can give to the noble Lord is that when we have all had an opportunity to see that report there will be discussions about what time should be set aside for debate. Clearly, we have not seen the report yet and I know that the committee is hard at work on it.

Lord Dubs: My Lords, given that we understand the point about the Finance Bill even if we are not sympathetic to it, and given that we understand not wishing to have September sittings for this House, apart from that, will the Government accept that it is better that the two Houses should sit at the same time? A few weeks ago, we were out of synch: we sat for one week and the Commons sat on a different week. That makes Joint Committees and all-party groups very difficult, and is probably more costly. Could we synchronise where it is possible?

Baroness Anelay of St Johns: My Lords, I cannot agree with the noble Lord, Lord Dubs, which is rather unusual because I agree with him on many things. This House has its own rhythm of business. It does not slavishly follow the business in another place in the way that it has to be scheduled. We do not

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have matters as yet-I hope not ever-on timetabling and guillotine. Therefore, there has to be flexibility.

I know that cost was raised before and it is really a matter for the Chairman of Committees. I can repeat the assurances that he has given by Written Statement. There is no greater cost if the two Houses sit at different times. There is only a greater cost when this House sits for more days. As one will appreciate, that is simply because of the cost of Peers' expenses, which for a week run at about £496,000.

Baroness Taylor of Bolton: Will the noble Baroness clarify a little what she was saying about a debate on the report from the Joint Committee on House of Lords Reform? Does she agree that it would be undesirable if the Joint Committee were to publish its report when just one House is sitting and not when both Houses are sitting? Does she also agree that if we have a debate on that proposal, it probably should be more than a one-day debate because of the amount of interest in this House?

Baroness Anelay of St Johns: My Lords, reports are often published when neither House is sitting. I have given the answer that at the moment we do not have sight of that report. It is keenly awaited and has not yet even reached the last committee stage. It would be premature for me even to consider giving any undertakings as to business management and I do not propose to do so.

Lord Campbell-Savours: On the question of the £490,000 to which the noble Baroness referred, where will that now go? Could it go back into our budgets and be spent on Select Committee work? As the noble Baroness knows, the Liaison Committee has been under considerable pressure on the matter of resources.

Baroness Anelay of St Johns: I am grateful to the noble Lord, Lord Campbell-Savours, for trying to assist the House in making savings. He is a valued member of the Administration and Works Committee, a job that I know he takes very seriously since I serve on that committee with him. However, I regret to say that there will not be any savings as such because of the hard-working nature of this House. I should explain that in the calendar year 2011, whereas another place sat for 149 days, this House sat for 156 days, so we actually cost another week. I can give an assurance that in the forthcoming Session, 2012-13, we will sit overall for the same number of weeks as the House of Commons. It is just that we have a slightly different pattern of sitting days.

Lord Howarth of Newport: My Lords, reverting to the matters raised by my noble friends Lord Grocott and Lady Taylor, if I did not misunderstand the Chief Whip I think she said that there would be discussion between the usual channels after the publication of the report on Lords reform by the Joint Committee to consider when a debate might take place, but she did not say that we would have the opportunity to debate that report before the conclusion of this Session. Is it not very important that this House should be able to

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express its views on the report of the Joint Committee before the Government finalise the content of the Queen's Speech?

Baroness Anelay of St Johns: My Lords, I have said two things which I am happy to clarify again. The first is that the report has not even been concluded, let alone published, and we do not yet have confirmation of the publication date. Of course, as would anyone, I would prefer to wait until publication before making decisions on the programming of business. I would expect the programming of forthcoming business to be carried out in the normal way between the usual channels.

Lord Hunt of Kings Heath: My Lords, perhaps I may come back to the point raised by my noble friend about when the report of the Joint Committee is to be published. The noble Baroness will know that there have been extremely helpful discussions in the usual channels and there has been an understanding that the report would be published when both Houses are sitting. I wonder whether the Chief Whip would take that matter back. Surely it would be respectful of this House if the report were published when it is sitting.

Baroness Anelay of St Johns: My Lords, publication of the report is a matter for the Joint Committee and I would not ever seek to interfere with the Select Committees of this House.

Baroness Farrington of Ribbleton: My Lords, I thank the government Chief Whip for the information she has given to the House on the financial implications of the changes being proposed this morning. May I seek a total assurance that when we deliberate these issues on Tuesday afternoon, all the financial implications in detail on any possible changes in procedure will be available in advance to Members of the House?

Baroness Anelay of St Johns: My Lords, I am sure that those taking part in the debate will read what the noble Baroness has said.

Lord Kennedy of Southwark: My Lords, can the noble Baroness tell the House what is to happen to the Oral Questions that have been tabled for the week beginning 16 April? I have tabled one myself.

Baroness Anelay of St Johns: That is a very fair question. I understand that the clerks are going to talk urgently to those noble Lords who have been successful in tabling their Questions.

Business of the House

Motion to Agree

11.52 am

Moved byBaroness Anelay of St Johns

Motion agreed.

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Economy: Budget Statement

Motion to Take Note

11.53 am

Moved by Lord Sassoon

The Commercial Secretary to the Treasury (Lord Sassoon): My Lords-

Lord De Mauley: My Lords, I wonder if noble Lords would kindly leave the Chamber quickly and quietly so that we can proceed with the debate.

Lord Sassoon: My Lords, yesterday's Budget reinforces this Government's determination to restore the UK to prosperity. It is because of the decisive action that the Government have taken, starting with the June 2010 Budget, that we have secured and maintained the stability of the UK economy. The private sector has already responded vigorously. Since the election, private sector employment has risen by more than 630,000 and the Office for Budget Responsibility forecasts that between the start of 2011 and the start of 2017, some 1.7 million jobs will be created in the UK's private sector-an extra 1.7 million jobs creating wealth, leading innovation and driving our recovery across the nation. The dynamism of UK businesses is truly remarkable. As the Government, we have to continue to reduce the burden of the state. If we do that, the economy will flourish.

Yesterday's Budget builds on a strong foundation, safeguarding our economic stability, creating a fairer, more efficient and simpler tax system, and driving through reforms to unleash the private sector enterprise and ambition that are critical to our recovery. As my right honourable friend the Chancellor said yesterday, Britain will earn its way in the world.

We can succeed in that goal only if we continue to safeguard our economic stability by tackling the record deficit and debt that we inherited from the previous Government. It is because of our determination to tackle that legacy that we have sheltered the UK economy from the turbulence that undermines our nearest neighbours. It is because of our commitment to stick the course that, in the past two years, the cyclically adjusted primary deficit has been halved, falling from 7 per cent of GDP in 2009-10 to 3.4 per cent in 2011-12 and approaching balance in line with our fiscal mandate. Indeed, borrowing over the forecast period will now be £11 billion lower than was predicted in the Autumn Statement last year.

Stability is the vital precondition for growth and will continue to be our key priority, but as the Office for Budget Responsibility said in its report yesterday,

to the UK's economic forecast. The OBR also identifies a risk of a,

22 Mar 2012 : Column 1032

Despite these headlines, however, there are positive signs for the UK economy. The OBR continues to forecast positive but subdued growth. Along with the Bank of England, it forecasts that the economy will avoid recession, with this year's growth forecast broadly unchanged at 0.8 per cent, then 2 per cent for next year, 2.7 per cent in 2014, and 3 per cent in both 2015 and 2016.

Economic stability is the vital foundation for securing that growth and the Budget reaffirms our commitment to safeguarding that stability. That is why this year's Budget has a neutral impact on the public finances, implementing fiscal consolidation as planned. It keeps us on course to achieve a balanced structural current budget by 2016-17, with debt falling as a percentage of national income by the end of this Parliament in 2015-16.

Restoring fiscal sustainability will remain this Government's number one priority. Such is the scale of the challenge that we must remain vigilant on spending. In particular, it is vital that we maintain control over welfare spending. That is why my right honourable friend the Chancellor announced yesterday that the additional costs of universal credit will be capped at £2.5 billion. We will also address the rising costs of an ageing population and the burden which that places on future generations. That is why there will be an automatic renewal of the state pension age to ensure that it keeps pace with increases in longevity. However, as the director of the Institute for Fiscal Studies said this morning, when you look at all the Government's measures, you see that pensioners have not been hit as hard as other taxpayer groups.

We have also taken the difficult decision to remove child benefit from high earners. It is right that we focus support on those who need it the most, but we have to do it in a way that is fair, without setting up a cumbersome tax credit system and avoiding a cliff-edge for millions of families. That is why, instead of withdrawing child benefit all at once when people earn more than the higher-rate threshold, the benefit will be withdrawn only when someone in the household has an income of more than £50,000. And the withdrawal will be gradual, so that only those on an income of more than £60,000 lose all their child benefit. Overall, child benefit will continue to benefit 90 per cent of families with children.

These are tough choices to make, but this Government will not shirk their responsibility to restore fiscal sustainability and economic stability. We have learnt, to all our costs, the consequences of unsustainable spending and ever increasing debt.

As my right honourable friend the Chancellor said in the Budget, if Britain is to earn its way in the world, then we need to build a recovery based on private sector enterprise, investment and export, and if we are to succeed in that ambition then we have to undertake far-reaching reform to ensure that our tax system is simple, predictable, fair and supports work.

First and foremost, we are committed to creating the most competitive tax system in the G20-a tax system that supports work, encourages growth and keeps our most successful businesses here in the UK. While the previous Government increased taxes on small businesses, we have cut the tax rate on small

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companies to 20 per cent. While the previous Government wanted to increase national insurance on jobs, we have cut it, and while the previous Government sat idly by as our competitiveness drained away, we have already committed to reduce the headline rate of corporation tax to 23 per cent by 2014 because it is necessary to cut one of the most growth-impeding taxes there is. As we announced yesterday, we are going even further, cutting the rate of corporation tax to 22 per cent by 2014. That is a headline rate of corporation tax dramatically lower than our competitors and a spur for prosperity and job creation across the economy.

That is why we are also cutting the 50p rate of income tax. That rate was higher not just than the US, but higher than France, Italy and Germany-the highest in the G20. It was a rate that damaged our competitiveness while raising next to nothing in additional revenue. From April next year, the top rate of tax will be 45 per cent, restoring our competitiveness and galvanising our entrepreneurs and hard-working families. But at the same time, we will continue to ensure that those with the broadest shoulders carry the heaviest burden. That is why the Chancellor has announced a new cap on income tax reliefs that are currently uncapped. From next year, for anyone seeking to claim more than £50,000 of these reliefs in any one year, a cap will be set at 25 per cent of their income.

While the Chancellor ruled out a mansion tax, it is right that those with considerable assets do pay a fair share. That is why we are also introducing a new stamp duty land tax rate of 7 per cent on properties worth more than £2 million, and why we are tackling the abuse whereby people avoid stamp duty on their homes. Taking the cumulative tax, tax credit and benefit changes in the Budget together, it is the top decile of the income distribution that sees the largest reductions in income and the top quintile that makes the greatest contribution to reducing the deficit. That is exactly how it should be.

At the same time, we are taking decisive action to support working people on the lowest incomes. The Government believe that the best way to support working people on low incomes is to take them out of tax altogether. Next month, the personal allowance will rise to £8,105. Taken with the previous increase, that is more than 1 million low-earners taken out of tax. But we are going further and sooner. Yesterday, my right honourable friend the Chancellor announced the largest ever increase in the amount that people can earn tax-free-an increase from next April of £1,100 to £9,205. That means that around 2 million low-income earners will have been taken out of tax altogether and there will be a tax cut of £3.5 billion for working families. These are substantial tax reforms that demonstrate our commitment to tackling the deficit in a fair way.

But tax is only one part of our ambition to restore competitiveness, promote business and encourage investment. As your Lordships are well aware, this Government have already set out ambitious infrastructure plans, setting the stage for some £250 billion of investment in the next decade and beyond. That investment is critical to enabling Britain to compete with emerging giants in the global market. Yesterday, the Chancellor provided further details on those ambitions, for example

22 Mar 2012 : Column 1034

confirming that Network Rail will extend the Northern Hub and improve the Manchester to Preston and Blackpool and Manchester to Bradford lines. We will live up to our commitment to devolve power and responsibility to local authorities. That is why we concluded a groundbreaking deal with Manchester to support £1.2 billion of investment in infrastructure, will support £150 million of tax increment financing to help local authorities promote development and are providing an extra £270 million to the Growing Places Fund to help local authorities unblock stalled infrastructure projects.

Just as we invest in our physical infrastructure, we have to invest in our digital infrastructure. That is why we are funding ultrafast broadband and wi-fi in 10 of the UK's largest cities, providing £50 million to increase urban broadband in our smaller cities as well, and helping build on our long and rich history of scientific and technological leadership. It is right that we capitalise on and commercialise that leadership, which is why we went even further in the Budget to commit £100 million of support, with the private sector, for investment in major new university research facilities, £125 million towards making UK advanced manufacturing supply chains more competitive, and £60 million to establishing a UK centre for aerodynamics, creating a springboard for innovative businesses and entrepreneurs to lead our economic recovery. Government, local authorities, universities, businesses and entrepreneurs are working together to catalyse private-sector growth and innovation.

All this is of particular interest to my noble friend Lord Heseltine. I look forward with particular anticipation to his maiden speech today. My noble friend's extraordinary work in Liverpool has rightly been recognised by that great city. Now, my noble friend has kindly agreed to review how spending departments and other public-sector bodies can better work with the private sector to support economic development.

Of course, while we can provide the right conditions for a private sector recovery, we also have do all we can to remove barriers to those businesses attempting to seize new opportunities. That is why we are simplifying the administration of tax for our smallest firms, consulting on a new cash basis for calculating tax for firms with turnover up to £77,000, making tax returns dramatically simpler for up to 3 million firms. Of course, bureaucracy does not end with tax. If we want those businesses to lead our economic recovery, then we have to match their "can do" attitude. That is why the Budget endorsed a fundamental overhaul of the planning system, replacing 1,000 pages of guidance with just 50, and introducing a presumption in favour of sustainable development and a new planning guarantee so that no decision should take more than 12 months, including appeals.

Just as we encourage businesses to expand at home, we want to encourage British businesses to expand overseas. It is a damning statistic that, over the past decade, our share of world exports shrank as Germany's grew. In the past three years, UK exports have risen almost 30 per cent, rising above their pre-crisis peak, with exports to India and China nearly doubling from five years ago. But we can and must go further. By 2014-15, UK Trade and Investment will be working with 50,000 small firms a year to expand their sales

22 Mar 2012 : Column 1035

abroad-double the current number. We have set the ambition to more than double the UK's annual exports to £1 trillion by 2020.

At the same time, we have to ensure that our businesses have the finance to feed their ambition. In particular, it is critical that we support the small businesses that provide more than 50 per cent of private sector jobs and 30 per cent of private sector investment and which have the potential to become the global leaders of tomorrow. That is why we launched the National Loan Guarantee Scheme earlier this week to give smaller businesses with a turnover of up to £50 million access to cheaper loans. We have provided up to £20 billion of guarantees under the scheme. This Government's deficit reduction strategy has earned market credibility and low interest rates, and this Government are ensuring that the full benefits of those low interest rates are passed on to businesses across the UK.

In conclusion, this Government are committed to making Britain the best place to start, grow and finance a business. We are providing businesses with the most competitive tax environment; access to low-cost finance, capitalising on record low gilt yields; reduced bureaucracy and simplified tax rules; access to emerging economic giants; world-leading physical and digital infrastructure; and investment in our technology and innovation future. That is why the OBR forecasts that between the start of 2011 and the start of 2017, 1.7 million jobs will be created in the market sector. That is why Nissan has decided to move new production to the north-east, creating more than 2,000 jobs in the region; why Jaguar Land Rover has confirmed that it is creating 1,000 new jobs in its Halewood factory, on top of the 1,000 new jobs in Solihull; why Tesco has announced that it will create 20,000 new jobs in the UK over the next two years; and why GlaxoSmithKline, Britain's biggest pharmaceutical company, has today confirmed plans to invest more than £500 million and create up to 1,000 new jobs because of the tax incentives in the Budget.

This Government are building a sustainable and prosperous economy, a recovery that builds on our strengths across all regions of the country and all the creativity and productivity of our private sector. Whereas under the previous Government, the country borrowed its way into trouble, under this Government, we will earn our way out of trouble.

12.12 pm

Lord Eatwell: My Lords, a year ago the Chancellor of the Exchequer presented a Budget for "enduring growth and jobs" and published a plan for growth that would,

That was some fuel. Growth collapsed and unemployment rose by 150,000, and more than 1 million young people are now unemployed. This year, once again, the Chancellor has presented a Budget that he claims,

and supports growth.

The auguries are not good. The OBR's forecast for the growth of business investment this year is down from 7.7 per cent in November to nearly 0.7 per cent

22 Mar 2012 : Column 1036

now. The forecast for growth of exports and for house-building is down. As for unemployment, another 150,000 are on the dole in 2012. No wonder that the OBR states that it has made no,

as a result of the Budget 2012 policy measures. In other words, the policy impact of the Budget on the prospects for growth and jobs is nil.

Why is the Government's growth strategy such a spectacular failure? Why did last year's plan for growth vanish without trace? Why does the plethora of encouraging-sounding micro-measures on energy, exports and science not make a scintilla of difference to the OBR's growth forecast? The answer is provided by the Institute of Directors in its response to the Budget:

"The key factor blocking implementation of these"-


How right it is. The Government simply do not seem to understand that it matters not how cheap finance might be, or even what the corporate tax rate might be; if companies believe that investment will yield no return, they will not invest. What is the point of investing if you have no confidence in the prospect of sales? You are simply going to lose your money.

The source of the Government's central policy failure is revealed in a chart published in the Budget Statement. Chart 1.5 on page 20 shows what has happened to public sector net borrowing-the deficit-since 2005. Those of your Lordships who have had to suffer the interminable repetition by the noble Lord, Lord Sassoon, of the record deficit-we heard again today that the Government inherited it-may be somewhat surprised by this chart, for it shows that from 2005 to 2008 the deficit was falling from £40 billion a year to around £32 billion a year. Then, following the failure of Lehman Brothers in September 2008, the financial crisis devastated the public finances. A veritable financial tsunami cut revenues and increased spending, driving net borrowing to the peak, which we hear so often from the noble Lord, of £157 billion in May 2010.

In fact, the Government inherited a composite position: a perfectly sound financial stance, overlain by the financial consequences of the crisis. They chose to treat a unique post-war event as if it were due to policy excess. They threw the economy into reverse, devastated business confidence and cut the growth they inherited from 2 per cent to zero. That is the growth rate they inherited, and that is the consequence of their policies.

As an illustration of the Government's folly, let us suppose that instead of a financial tsunami Britain had been hit by a real tsunami that destroyed 6 per cent of productive capacity, resulting in a sharp fall in tax revenues and an equally sharp rise in government expenditure. Would they then have chosen the path of austerity to restore the public finances? Of course not; they would have set about funding reconstruction. A sinking fund would have been established to spread the cost of restoring the economy, and would in consequence have restored the public finances, over a lengthy period. No one would have recommended bearing all the cost in just a few years, and no one would have imagined that reconstruction could be

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guided by market forces alone. What is the difference between this hypothetical tsunami and the all too real financial tsunami that the country has suffered? There is none, other than the Government's failure to distinguish between a unique shock and a normal policy stance.

However, perhaps my characterisation of coalition policy as folly is a little too harsh. After all, the supposed need for austerity has provided the Government with the opportunity to dismantle the welfare state with a zeal that would never have been tolerated in normal times. To assess the impact of this budget on the bottom 50 per cent of incomes, it is necessary to include all those measures that were announced over the past year, in the 2011 Budget and in the Autumn Statement, which will come into effect next month-measures that the Institute for Fiscal Studies estimates will cost families with children an average of £530 per year.

Now set that figure of £530 against next year's increase in the personal tax allowance announced in the Budget. Taking people out of tax sounds like a laudable goal until you remember that the poorest do not pay tax. Then consider the consequences carefully. As a result of this measure, the poorest 10 per cent of households will gain £10. The richest 10 per cent of households will benefit to the tune of £111. Indeed, of the overall cost of this measure, 70 per cent goes to the top half of the income distribution. Yet that is what Liberal Democrats call "progressive".

Compare these crumbs thrown to the poor to the £1.6 billion of cuts to the working tax credit about to hit them this April-cuts that are supposed to increase the incentive to work, when there are no jobs. Yesterday, in addition to what has been done already, the Chancellor announced, and the noble Lord confirmed, that the coalition is planning a further £10 billion of cuts to the welfare budget. I never cease to be amazed at the savage pleasure that Tories and Liberal Democrats take in attacking the living standards of the poor. However, my credulity has been stretched to breaking point by their naked pandering to their rich friends.

It is worth examining in some detail the coalition's case for the pre-announced cut in the 50p tax rate. HMRC's evaluation of the impact of the tax is based on one year's data-a sample that no self-respecting economist would ever rely on. Moreover, the self-assessment figures are clearly distorted by income being brought forward in the preceding tax year-a predominantly one-off effect.

Next, let us consider the Chancellor's claim that as a result of changes to stamp duty and capping unlimited tax reliefs, which will yield about £500 million in a full year,

The origins of this claim can be found in Table A2 of the HMRC review. The table shows that the 50p tax without what is politely called "behavioural impact"-tax avoidance-would yield £3 billion in a full year. However, extraordinarily the 45p tax will result in revenues of £2.9 billion, as the 5p difference will be enough to reverse the behavioural impact. So, while 50p triggers almost complete avoidance, 45p is paid with equanimity. If you believe that, you'll believe anything.

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There is more to come. A Government who quite rightly declare tax avoidance to be "morally repugnant" have created the perfect tax avoidance scheme. Everyone knows that the top rate will fall from 50p to 45p next year, so all those who shifted their income back to avoid the 50p rate last year will shift their income forward to avoid the 50p tax this year. This is a stealth subsidy on a grand scale. To pay for the stealth subsidy, there is the stealth tax on pensioners. Never can a £1 billion a year tax grab have been explained as "simplification" that helps the poor old dears who find the forms too complicated.

Table 2.1 of the Budget Statement provides a helpful guide to the cumulative effect of the measures taken by the Chancellor since assuming office. As of today, 90 per cent of his planned benefit cuts are still to come, resulting in a cumulative 6 per cent taken out of aggregate demand over the next four years. That is the government headwind that business in this country has to battle against.

So what are the overall effects of the Government's policies? With total output still 4 per cent below the peak achieved in 2008, we will not return to the level of 2008 for another three years. They have transformed a shock as large as that experienced in 1930 into a depression that will last two years longer than the 1930s depression. It is no excuse to argue that everyone else is adopting the same policy. There is only one prize for the quickest lemming.

This country needs policies for growth and jobs. The coalition believes that the rich must be made richer to encourage them to work and the poor must be made poorer to encourage them to work. In the mean time, the economy stagnates, the prospects of growth retreat before our very eyes and the pain of fiscal consolidation intensifies. The Government's stance, echoed in this mean little Budget, is fundamentally misconceived. Without measures to boost confidence in the growth of demand, supply side reforms, however worthy, will have a negligible impact. A new approach is needed. This Budget illustrates that the coalition has neither the imagination nor the will to meet that challenge.

Lord De Mauley: My Lords, perhaps I may respectfully remind noble Lords that this is a time-limited debate and that contributions, other than that of my noble friend the Minister and the noble Lord, Lord Davies of Oldham, are limited to 10 minutes.

Lord Eatwell: The noble Lord is mistaken. The Opposition have 12 minutes to reply to the opening statement by the noble Lord, Lord Sassoon.

12.25 pm

Lord Newby: My Lords, it is a welcome break with precedent for your Lordships' House to debate the Budget so close to Budget day. We normally do it significantly later, so I welcome the fact that the usual channels have been able to agree this.

In my 10 minutes I will concentrate my remarks on tax and growth. The specific tax measure that has given most satisfaction to those on these Benches is,

22 Mar 2012 : Column 1039

needless to say, the decision to raise the tax threshold to £9,205 next year. This is an important way of giving incentives to hard-working people and taking people on modest wages out of income tax altogether. Unlike every other change in the Budget, this one has been almost universally welcomed, although doing so was beyond the noble Lord, Lord Eatwell, who-in a typically bilious speech-was unable to mention a single specific thing that his party thought should now be done.

Moving on to other changes, on pensions, the Government have, as noble Lords will be aware, implemented a record increase in the level of the state pension this month. They have introduced a triple-lock for future rises in the state pension and are moving towards a universal pension of £140. That will mean a significant increase in income for many of those who have not had adequate pension provision in the past, particularly women. In the light of those changes, the change to the pension allowance seems a reasonable measure.

Equally, given our concern about the way that changes in tax and expenditure hit people at the lower end of the income scale, it seems perfectly reasonable that those at the top should cease to get child benefit. There is an argument about what it should be and exactly how it should be done. I accept that, even with the changes made, there is something of a cliff edge and an anomaly over single-income and two-income households. However, for many years, we, the Labour Party and others have argued for individual taxation, rather than household taxation, to benefit women in particular. It seems to us that that principle should remain. Therefore, the way in which the child benefit changes take effect is inevitable.

The 50p tax rate has generated arguably the most heat, if not the most light. I may be wrong about the Labour Party, but I think all parties saw it as a temporary measure from which would move away as the economy and the fiscal position improved. It will be no surprise to noble Lords that we on these Benches would not have made that move now. However, the reasons for doing so are primarily political, not economic. The noble Lord, Lord Eatwell, may not have read it but PWC and many others argue that the optimum higher rate for revenue maximisation is 45p. Therefore, in terms of income generated for the Exchequer, a rate of 45p has much to recommend it. That is the rate in France and Germany, and it clearly does not disincentivise entrepreneurialism there. Incidentally, I hope that the Government, having made this change now, will make no further changes to the higher rate in the lifetime of this Parliament.

I take with a pinch of salt all the estimates of how much the 50p rate would generate in the medium term and the cost of bringing it down to 45p. However, it is also deeply misleading to give precise figures about how much millionaires or billionaires will gain as a result of the reduction from 50p to 45p because we know that they are not paying the 50p rate. If they were paying the 50p rate in full, the income would be significantly greater and all the arguments would be different. Therefore, those who argue that millionaire X will now be paying Y extra, or getting Y a tax

22 Mar 2012 : Column 1040

rebate, just fly in the face of the evidence about the behaviour of those individuals. The argument for maintaining the 50p rate was, therefore, political because the reduction in the rate looks as though the Government are simply favouring the wealthy. In many people's eyes, that will remain the case even though some of the other measures in the Budget go quite a way to counter that assertion. I should like to deal with three of them.

First, the treatment of high-value properties-those worth over £2 million-goes some way towards what we have been arguing for in respect of a mansion tax in four respects. All those who keep such properties within a corporate wrapper will pay an annual amount. The 7 per cent stamp duty-15 per cent if you put it into a wrapper going forward-and the capital gains tax that will be payable on the sale of these properties if you are non-resident are also extremely welcome changes and will hit the wealth of the very wealthy. The general anti-avoidance rule, which was resisted doggedly by noble Lords opposite, is long overdue and will act a bit like an electric fence. No one wants to walk into an electric fence or get too close to it, so it will stop many abusive tax schemes occurring. The limit on the previously unlimited tax reliefs is also potentially of great significance. It is one of those things which is extraordinarily arcane but will make a significant difference to the behaviour of very wealthy individuals.

I hesitate to say anything about growth, given that we are going to hear from the noble Lord, Lord Heseltine, who has such experience in this area. I almost had to pinch myself when I noted that the noble Lord is to make his maiden speech today. He knows more about growth than probably the rest of the House put together, so we look forward to hearing from him.

When the noble Lord, Lord Eatwell, says that there is a problem about confidence and then implies that confidence will be restored by a combination of Messrs Balls and Miliband, frankly, I wonder what planet he is living on. As regards what the Government are doing on growth, the area where they can make a significant medium-term difference relates to infrastructure. There are a number of very important areas in the Budget in this regard where further movement is required in my view.

On the Pension Infrastructure Platform, the first £2 billion will be spent by early next year but I think we need to go much further than that and do so more quickly. The Government have said that £20 billion is available. We need to get more than £2 billion out of the door more quickly.

I am very pleased to see the plan to pilot a programme of enterprise loans for young people. I hope very much that the Government will look at the scheme which is already doing the rounds, under which young people who want to start a business are able to take out a loan on the same basis as young people going to university and repay the loan at the point when they have a significant income. That seems to me an extremely interesting idea.

I am very pleased to see the review of employee ownership. I am particularly pleased that that is moving forward quickly, with measures to be announced in

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the Autumn Statement. I am also pleased to note the other physical infrastructure proposals, not least the improvements that are planned for the transpennine rail route. On one area where, as a loyal Liberal Democrat, I disagree with party policy, I am pleased to see that the Government are pressing ahead with looking for new runway space in the south-east and London because without that in the medium term our growth prospects are jeopardised.

In the short term, this Budget will not transform the prospects for growth, nor would any Budget do so. However, promoting growth must remain a top priority. What is required now is a steely focus on delivering those programmes which the Government have already announced and which will really impact on growth. It is on their ability to deliver these programmes, in tandem with the continuing deficit reduction programme, that the Government's economic record will ultimately be judged.

12.34 pm

The Lord Bishop of Chichester: My Lords, the Chancellor has noble aims-a stable economy, a fairer, more efficient and simpler tax system and the encouragement of growth. From these Benches, I am pleased to endorse all three of those objectives. The debate is therefore not so much about the Government's declared intentions as whether the Chancellor's proposals are best calculated to achieve them.

A stable economy and sustainable growth are clearly in everybody's interests. Rising prices and rising joblessness impact especially on the least well off, so the Chancellor is right to see maintaining confidence in our public finances, tackling inflation and creating the conditions for more job creation as priorities. Within this we therefore welcome the raising of the threshold of the basic rate of tax, given the benefit that will provide for lower-paid workers. Also welcome is the Chancellor's belated rethink about the cut-off for child benefit payments. The higher figure removes the unfairness in the previous announcement, which would have created the perverse incentive for two parents on relatively low, modest salaries both to work outside the home rather than enabling one to be devoted to the care of very young children. It would also have hit a large number of middle-income families. We are very pleased to see that the Chancellor has had second thoughts about that. Other things to welcome include the anti-tax avoidance measures, the introduction of a new gift aid small donations scheme, more money for Armed Forces accommodation and some of the proposals designed to undergird the Prime Minister's aspiration that those with the "broadest shoulders should bear the greatest load".

In the present situation, it also seems sensible that the Budget should, overall, be fiscally neutral. "Overall", however, is a slippery word. It inevitably implies losers as well as winners. We shall continue from these Benches to highlight concerns for the most vulnerable in our society. We therefore note with some concern the Chancellor's suggestion that he will be looking for further reductions in the welfare budget in the next spending review period. Of course we accept that reform is necessary, but the question is: who pays the price?

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When it comes to the proposal to freeze the tax allowances for the over-65s, I need to declare a double interest. First, I am about to become one of the "poor old dears" to whom the noble Lord, Lord Eatwell, referred, but secondly, and much more importantly, from my experience as the bishop of a diocese which contains a large number of pensioners who do not often have the benefit of occupational pension schemes and are struggling under the burden they are already bearing, I know of the fear which they experienced at hearing some of yesterday's announcements.

My second concern is about the intention to change the law to relax the restrictions on Sunday trading. I am well aware that any attempt to question what the Government have proposed in this regard will sound either like party-pooping or special pleading. These will be the first Olympic Games in this country for 64 years and it is understandable that the Government want to maximise the commercial opportunities they will provide. Therefore, I do not wish to speak against the principle of a strictly time-limited and tightly drawn element of deregulation while the Games are in progress and in locations close to the main events. To remove all restrictions for an eight-week period, however, sounds suspiciously like a stalking horse for the wider deregulation for which some large retailers have been campaigning for a long time. Therefore, we will watch this space with a degree of scepticism. It is important that the regulations are drawn in such a way as to cover the Olympics and the Paralympics equally, but I remain to be persuaded that a Bill as widely drafted as the Government seem to intend is justified. I seek an assurance that there will be time for proper scrutiny of it in this House.

Thirdly, as part of the extension of VAT, the Chancellor is intending to remove zero rating from agreed alterations to listed buildings, so that, as is already the case with repairs and maintenance, the standard rate is payable. The Treasury document says that this is targeted mainly on listed dwellings but concedes that it will also affect listed places of worship and other buildings used for charitable purposes.

I need to remind your Lordships' House that 45 per cent of all grade 1 listed buildings in England are places of worship. About 12,300 Church of England churches are listed out of 14,500 listed places of worship altogether, and 356 of those listed buildings are in my diocese. It is welcome that the Treasury has said that DCMS will extend the eligibility rules of the listed places of worship grant scheme so that alterations as well as repairs can qualify, and of course we are grateful for the extension announced in October 2010 of a further four years for a grant scheme.

However, the scheme is cash-limited, and I fail to see any reference to the amount of money available being increased. If so, does not the extension simply mean that the available money, which has already been reduced to £7 million this year, will have to be spread even more thinly? It rather blows any talk about the big society out of the water to make VAT non-refundable on agreed alterations by extending the VAT liability to improvements. Because the change will not affect places which charge for entry, it will increase the pressure on large churches and cathedrals to introduce admission

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charges. Of course, some already do that, but many, including my cathedral, as a matter of principle do not charge for admission and wish to remain in that position. The way in which the new rule will impact on them is particularly difficult.

Ordinary local people, members of local churches and communities, have been volunteers for years looking after our glorious heritage of listed buildings-and they pay for it as well. About £107 million is spent annually on Church of England churches, on the 2008 figures, and £70 million of that is raised by local people for their local parish churches. They did not choose to build those places; they inherited them. Now they are to have a 20 per cent tax on their efforts to improve them. They will be taxed for volunteering to support the nation's built heritage in that way. They want to leave their building in an enhanced, improved state for the next generation, which has direct implications for introducing energy-saving and other improvements into medieval churches. Some joined-up thinking needs to be done here, or the impact of VAT on improvements will have a deleterious effect on some of the things that the Government think desirable.

All of that will be a bad blow for the churchwardens and parochial church council members of about 12,500 listed churches, many of whom strive tirelessly to raise money for basic improvements so that better facilities can be installed and churches are available for greater community use. I very much hope that the Government will be prepared to think again before the law is changed.

12.42 pm

Lord Higgins: My Lords, this is an excellent and imaginative Budget and I strongly support all of what is in it, but it is singularly unfortunate that the presentation should have been spoilt by what seems to me to be a disregard for the convention that Parliament-that is to say, the House of Commons-should be the first to be told what is in the Budget and its details. It is a long time since Hugh Dalton resigned simply because he spoke to a journalist on his way into the Chamber to announce his Budget, but none the less, I believe that the convention remains extremely important-not least because of the dangers that arise with market-sensitive information in the Budget. In that context, I was worried by the front page of the Financial Times yesterday, which states:

"Mr Osborne will confirm that he is cutting the top rate of income tax from 50p to 45p, but the wealthy will be hit by a punitive array of higher levies on the purchase of expensive homes and a crackdown on avoidance schemes.

The chancellor will introduce a 7 per cent stamp duty rate on sales of property costing more than £2 million-according to officials involved in the Budget".

That is a very worrying statement indeed. We must not allow this kind of thing to happen. I do not know whether my noble friend would care to comment on that.

The other thing is that clearly, in public relations terms, it was a disaster. Almost everything was released in advance, except for the proposals on pensions, so almost every front page this morning carries scathing remarks about pensions although, as my noble friend

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just said, pensioners have in fact been hit less than other taxpayers. Those headlines are misleading, but that is a worrying development.

On the specific proposals, I am very pleased to see the rise in the tax threshold which will take people completely out of tax, which is always a great advantage if it is possible. I believe that we must move more in that direction. Equally, I believe that the cut in corporation tax is very important if we are to get growth. It certainly makes us competitive with our European partners.

I am also pleased about what the Chancellor did not do. He did not, as the Labour Party had been suggesting, cut the basic rate of VAT. It is true that it has gone up, since I introduced VAT through the House of Commons at 10 per cent, to 20 per cent, but none the less, it seems to me that the present rate is necessary. I am particularly glad that the Chancellor went out of his way to reaffirm the present structure of VAT, which gives zero rating to those items most important in the household budget, something which no other VAT in Europe does. All of that is very good news.

We are debating the effect of the Budget on the economy. The reality is that the effect of the Budget on the economy will be virtually nil. It is a fiscal-neutral Budget. This is a micro tax-managing Budget-in many admirable ways-not in any way a major macroeconomic management Budget. Therefore, the reality is that the weight of economic management has been shifted from fiscal management, from the Budget, on to monetary policy. There has been a very big change in that.

I originally deplored the fact that what was called the Monetary Policy Committee was not a monetary policy committee at all, it was an interest rate committee. It went on for years and years fiddling around with one particular interest rate, rather than being concerned with the supply of money. One worry has been that monetary policy in the sense of control of supply has, until recently and the advent of quantitative easing, been virtually ignored. We now have quantitative easing. Throughout, I have come out strongly in favour of it. Given the other restraints, given the level of interest rates, it seems to me that that must be the right approach.

I was therefore delighted to see a beautifully written article-I could not possibly have written it anywhere near as well-by Mr Martin Wolf in the Financial Times of 15 March. It said absolutely everything which ought to be argued on quantitative easing. He poses two particular questions: first, is it effective and, secondly, is it dangerous? As the OBR report states, it remains to be seen whether this round of quantitative easing is as effective as the previous one, but it has certainly assisted in the growth of the economy. That is something which we should all welcome. The risks depend on inflation, but we have to take that in the context of the general state of the economy. The OBR report contains fascinating passages on that. In a section on monetary policy, it specifically points out that we must be very careful in that regard, but one has to take into account on the inflation risk the level of excess capacity in the economy. The OBR proposes,

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and I am sure it is right, that we should gradually increase the level of demand through monetary means until we have mopped up a large part of that excess capacity, particularly in terms of unemployment. It is none the less very important, to the point where it does become an inflation risk, that other action should be taken.

In that context, I have some queries about the way in which quantitative easing is being operated. It is undoubtedly having adverse effects, particularly on pension funds, as lower interest rates affect the pension funds' ability to fund future pensions. Perhaps at some stage we should ask whether quantitative easing as currently operated is the right way of increasing the money supply. There might be other effective methods that do not have the adverse effects to which I referred. As we are, let us make no bones about it, printing money, dare I say that it might even be a good idea simply to print it and distribute it on an equitable basis across the population? We have, after all, an election coming up fairly soon.

Be that as it may, I think that there is some confusion about the way in which quantitative easing is operating. It is not in the least bit clear whether the Bank's purchase of gilts from the market is the right way to do it. The tendency is for the banks to use the money to build up their balance sheets rather than to extend it in loans to small or other businesses. None the less, it is not at all clear what the Bank is going to do with these gilt-edged securities. Will it hold them in reserve until such time as the economy starts to overheat and it needs to take the opposite action from that which it is taking at present, or should it simply cancel the gilts in its portfolio? I have searched in vain throughout the mass of documentation to find out what, in pure book-keeping terms, is really happening with this operation in relation to the Debt Management Office and so on. Perhaps we should look at that in order to illuminate what is really going on.

Overall, this is an excellent Budget. I believe that it does as much as possible in the circumstances to help particular individuals and, on the economy, to increase our competitiveness abroad. Europe is still a terrible risk. At least it has dealt with the debt problem for the moment. However, it has totally failed so far to deal with the exchange rate problem in the European Union. That is certainly a big risk, which we face.

12.53 pm

Lord Wood of Anfield: My Lords, yesterday we saw a Conservative Chancellor give a Budget at a time of stagnant growth, rising levels of unemployment not seen since the mid-1990s, youth unemployment at more than 1 million, with unemployment among certain groups such as young black males now around 50 per cent, and real living standards dropping-confirmed yesterday-for the second year in a row, which is the first time that that has happened for 36 years.

The Government would have us believe that all that is exogenous-the fault of the fallout of the economic crisis, or the previous Labour Government, or the eurozone, or spiking oil prices. Let us put aside the fact that the Government cite international factors to explain tough times on their watch but conveniently

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forget about them when it comes to their account of the previous Government. It would be reasonable, I think, for families, for small business and for pensioners to expect a Chancellor who finds himself in power in such an economic moment to use his Budget to respond to the squeeze and insecurities that they face. So what did we get? We got a Budget that was underpinned neither by an argument about how to counter economic stagnation nor by any measures to get growth and jobs going again. Instead we got a Budget that was focused on redistribution rather than growth-a venerable Labour tradition, you might think. However, the redistribution is in favour of the very wealthiest in our society-which, combined with the totality of decisions taken, is at the expense of pensioners and ordinary families.

I want to talk about two themes: growth and tax. I shall start with growth. Little was said about it yesterday, and I can understand why. Last year growth was expected to be 2.5 per cent this year. In his speech this year, the Chancellor sought to get credit from his own Back-Benchers because he now thinks that growth will be 0.8 per cent instead of the 0.7 per cent predicted at the time of the Autumn Statement. However, hidden in the forecasting is cause for continuing concern about the prospects for growth and the sources of growth. Despite some highly optimistic projections in the Budget documents for the growth of total investment in the next four years, the estimate of business investment growth was revised down considerably yesterday. As the National Institute of Economic and Social Research said, although some of the announcements will undoubtedly help the sectors to which they apply and should be welcomed,

What about borrowing, control of which the Government have put at the heart of their economic strategy? As announced yesterday morning, net borrowing increased by £15.2 billion in February. That is a record for a monthly figure. The City had forecast that it would be half that amount. As my noble friend Lord Eatwell explained, after yesterday's Budget, the Government are still on course to borrow more than £150 billion more over the Parliament than they forecast in their spending review.

On tax, I want to look specifically at the decision to cut the 50p rate for the approximately 1 per cent of the population who earn above £150,000 a year. Assuming that there is no avoidance-I take the point-this income tax cut will give 14,000 people in Britain a windfall of, on average, £42,500 each. The justification for a higher rate of tax for those on very high incomes is that it reflects a distributional truth about our economy. Over the past 30 years, as we all know, the incomes of the very rich have taken off relative not simply to those at the very bottom but to the remaining 97 per cent of the population. Since 1979, nearly a quarter of every extra pound earned in the UK has gone into the pockets of the top 1 per cent. It is a higher rate for those whose salaries are not just higher but stratospherically higher than those of the vast majority.

What is the possible justification for prioritising, of all things, the reduction of the 50p tax rate? The advocates say, "You don't understand. There are two

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effects of the 50p tax rate: first, it doesn't bring any money in, because it is eminently avoidable; and secondly, it deters people, who will bring in wealth, from coming to this country". You cannot have it both ways-either it is eminently avoidable, or it is an apocalyptic deterrent. If it is a deterrent that is avoidable, perhaps I may suggest that Her Majesty's Revenue and Customs should focus resources on telling everyone how easy it is to avoid so as to bring the rich of other countries to our shores. Or perhaps we should adopt a more conventional measure-clamp down on avoidance, which makes our tax revenues less reliable, less predictable and produces greater unfairness.

What was striking yesterday was the discriminating approach that the Chancellor displayed towards tax avoidance. On stamp duty and general avoidance, George Osborne said that he will come down like a tonne of bricks on morally repugnant behaviour and sharp practices. At the same time, he was recommending the scrapping of the 50p tax rate for those earning more than £150,000 a year, on the grounds of a resignation to the unavoidability of avoidance of income tax. "But", the defenders of the 50p tax rate continue, "you still don't understand. The 50p rate stops people working". Does the 50p tax rate stop people working? I have not seen any evidence of it. If it does, and if the productivity of the wealthiest in our society is dramatically on the wane, the fact that their incomes continue to rise way ahead of median and mean wages suggests that there is something deeply dysfunctional about the labour market at the very top. Perhaps that is something that a government inquiry might look at.

Even if there is evidence-although I cannot find any-that the abolition of the 50p rate will lead to people coming to Britain, there are two further questions that need to be answered. First, will the very wealthy who want to come to Britain pay income tax while they are here? Secondly, will they be wealth creators, as opposed to income gainers? On the first question, I would like to see evidence. In 2008, only 16 per cent of those who earned more than £10 million paid income tax. A policy based on worry about tax revenues that is aimed at bringing people who pay precious little income tax does not have the feel of evidence-based policy-making.

To the second question of whether they create wealth, we do not have the answer. We hear that it is important to signal that we are open for business-but is there any evidence that those who might be attracted to move here would use their wealth to create jobs and income for others? The Government had better hope so, because there was precious little in the rest of the Budget for those out of work.

The cut in the 50p rate was an ideological choice that has had its advocates scrambling around for a rationale. As the IFS said, the argument that 50p brings in no extra income is based on data for one year. This point was made by my noble friend Lord Eatwell. In the year on which the evidence was based there was a transition from 45p to 50p. The irony is that by scrapping 50p from April 2013 the Chancellor has thrown down the gauntlet to the accounting profession to meet another challenge. It has months to work out how to defer the income of its very wealthy clients for another

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year so that they may benefit from the 45p rate in 13 months' time. The race is on. Perhaps the Minister will tell us whether the Treasury has factored in behavioural responses of the wealthy to this transition in its revenue calculations for the coming year.

The collection of courageous assumptions lying behind the Treasury's optimism about tax revenues made me want to applaud the Chancellor for his mathematical pyrotechnics. The Budget assumes that the ostensible cost to the Treasury of reducing the income tax rate will be only £100 million, because all those who avoided the tax at 50p will come flooding back into the tax system at 45p. This is an assumption about tax elasticity of heroic proportions. The Government are resigned to income tax avoidance but think that a 5p reduction will be sufficient to eliminate it completely. I wish them luck with that.

On the income that we will recoup from getting tough on stamp duty, the Government's optimism continues. In contrast to their approach to income tax, they put their faith in a crackdown on corporate envelopes holding residential property. We should welcome the new stamp duty rates. However, my concern is not with them but with the idea that there is equivalence between a tax on the income or even the property of the very wealthy, and a tax on the very occasional and up until now eminently obscurable transactions on property worth more than £2 million. About 1 per cent of those earning more than £150,000 are likely to move to a house worth £2 million or more in the next year, so 99 per cent this group will enjoy a straightforward and sizeable tax cut.

I will end by focusing on two quick points. First, yet another Budget has passed without signs of a growth strategy. As a leading BBC economic journalist said on Tuesday, cutting taxes for a hedge fund manager and cutting taxes for his cleaner do not a growth strategy make. Even setting aside poor performance on growth and the escalating problems of unemployment-data were published today on consumer confidence and retail sales that should give us serious cause for concern-we will struggle to find in the Budget documents a growth strategy to meet the scale and urgency of these concerns.

Secondly, the Budget reveals something else. The Government talk constantly about tough choices. They are right that for all sorts of reasons they have to make them. However, yesterday saw the Chancellor make a decision that was big but not tough. It was a choice in straitened times to favour those who have the most. It was not the end of the Government's macroeconomic strategy-that remains in place, and we are the poorer for it-but it was the moment when their credibility as a Government who asked every section of society to bear its fair share of the pain was fatally undermined.

1.03 pm

Baroness Randerson: My Lords, this was a highly intelligent Budget. At a time of economic austerity, it was highly intelligent to produce a Budget that has been received so positively. I have felt rather sorry for the Labour Party over the past 24 hours. It has been living in a parallel universe, responding to a Budget that it thought the Chancellor would make but which

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he did not. It has cast around for any stone to throw when, across the piece, there has been a very warm welcome for a very large part of the Budget.

I will concentrate my remarks on two key issues. The first is fairness and the second is economic growth. The concept of fairness is very complex. It is not just a question of tax rates. In our modern society, it has become an issue of the tax that is actually paid. The UK has a very complex tax system, which became even more complex under the Labour Government. With complexity you get a lack of transparency, inbuilt unfairness when one tax rate does not fit with another, and loopholes. Therefore, I welcome the variety of measures in the Budget to close loopholes, in order to establish the principle that the rich should not pay a lower rate of tax than the poor.

The vast majority of people regard aggressive tax avoidance as unfair if not downright immoral. I welcome the move from taxing income to taxing wealth, because it is much less likely to deter investment and entrepreneurship in this country. A property tax is ideal. Put simply, you can move your money to Belize but not your house. However, people have been moving their company to Belize-and their company, in essence, is their house. The Chancellor's announcements on higher rates of stamp duty are therefore particularly welcome.

The exploitation of the loophole that allowed the richest people to buy properties in company names has meant that there are now thousands of companies, the majority offshore, which consist entirely of one house. I do not accept the noble Lord's assertion that this is an unusual arrangement. Unfortunately, it has become all too common. I will give the example of One Hyde Park-not a building that I have ever visited-which is known as the world's most expensive apartment block. It has 62 apartments. Only nine pay council tax-and five of those get a single-person discount as they are second homes. This is not a fair result from the financial arrangements of the people who own the apartments. It is the kind of tax avoidance that makes ordinary people on PAYE very angry; and it is being stopped as a result of the Budget.

The consultation on an annual charge on residences valued at more than £2 million that were purchased by companies, to begin in April next year, is also very good news-as is the extension of the capital gains tax regime, to capture gains on the sale of UK residential property, or the sale of shares in property, by non-UK companies. Finally on this issue, I welcome the proposals on the general anti-avoidance rule, following the Aaronson report, which proposed a moderate rule, targeted at abusive tax avoidance arrangements. This will enable us to tackle tax avoidance without damaging competitiveness.

I turn now to the second issue: economic growth. The Budget does not just help ordinary families, but ordinary businesses. The cut in corporation tax-24 per cent this year, going down to 22 per cent in 2014-means that we will have the lowest rate of corporation tax in the G7. The increase in the bank levy, which will raise £2.5 billion, will ensure that the banks continue to pay their share. That harks back to the public view of fairness. Measures on credit easing will help keep money flowing to businesses.

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Although it is obvious that the biggest ever increase in the personal tax allowance will inevitably and rightly be seen as assistance for ordinary families, it is important to look at it also from the perspective of business, because £220 a year left in the pockets of 21 million working people will be a major stimulus to the economy. By definition, these are largely people who spend their money-and spend most of it in the UK.

We judge Budgets by how they deal with people, but this Budget should also be judged by how it dealt with the nations and regions of Britain. This coalition Government have consistently sought to rebalance the economy, which was left by Labour to rely much too heavily on the overheated financial sector concentrated in the City, with disastrous results when the bubble burst. This coalition Government have tailored their policies to assist those parts of the UK that got left behind in the scramble of the financial sector under Labour. My country of Wales gained significant benefits from this Budget, and it needs them because under the Labour Government the GDP of west Wales and the valleys declined from 79 per cent of EU average to 68 per cent of EU average, despite receiving £6 billion of EU aid. Most parts of Greece have been doing rather better than most parts of Wales, so Wales needs the economic stimulus that was in this Budget. As a low-pay economy, it will gain particularly from the increase in personal allowances-an additional 42,000 will pay no income tax at all as a result of this Budget, and there are specific measures, such as the £12 million confirmed for ultrafast broadband in Cardiff and the agreement to make 100 per cent capital allowances available for plant and machinery for designated areas in enterprise zones, most of them in Deeside, which will create 5,000 jobs. Wales's economy has suffered, at least in part, as a result of infrastructure problems, so commitments on the consideration of the creation of an electrified valleys metro are also very welcome. I believe that the key thing in this respect is that the Budget has laid firm foundations.

Finally, I wish to refer very briefly to the creative industries, which have long been a particular interest of mine. I greatly welcome the measures in this Budget to assist them. The introduction of corporation tax reliefs for the video games, animation and high-end television industries is very welcome. It will incentivise investment, both from within the UK and from abroad. A number of competitor countries already have such incentives: France, Canada, some states of the United States, Ireland and Hungary. Those industries in Britain employ 15,000-plus people. They are mainly based in SMEs, and they have huge potential to offer our economy. These incentives go along with the Government's policy of backing British success stories-car manufacturing and marine technology, to name but two-and they are part of laying the foundations for a successful, broadly based economy in future.

1.13 pm

Lord Heseltine: My Lords, yesterday in another place, the Chancellor of the Exchequer announced that the Secretary of State for Business, Innovation and Skills had invited me to look at aspects of the Government's industrial strategy and, particularly, at the interrelationships of that strategy with other parts

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of the economy. I thought it might be for the convenience of the House if I was to expand on this remit at rather greater length than would have been appropriate for the Budget speech itself. I am extremely grateful to have the chance to share my thoughts directly with your Lordships at the earliest opportunity.

The coverage of the Budget inevitably focuses on the economic forecasts and tax changes that represent the Government's strategy. The tax, regulatory and spending decisions of the Budget are obviously of prime importance in the execution of that strategy, and it is well known that it is a strategy to restore the economy to growth and to enhance competitiveness. Competitiveness is measured against other economies' performance. I have been asked to undertake a benchmarking exercise to compare our approach with that of our competitor countries and to look at the way in which those countries pursue the implementation of their industrial strategies.

I am the first to recognise that it is no easy task to define the concept of an industrial strategy. They may differ widely from country to country dependent on those country's histories, their culture and the precise involvement of government. What cannot be denied is that one way or another all Governments play a crucial role in determining the effectiveness of their economic performance. In this exercise, we cannot, of course, look at every economy with which we compete, but I shall try to examine those that are our most formidable competitors.

There is one point I should make-although as a former Minister I was, I think, responsible for more individual acts of privatisation than any other Minister in British history-which is that wasteful subsidy or unnecessary lame duckery is not part of any thinking of mine. Competitiveness is not about headlines, and it is particularly not about headlines that imply that it is all somebody else's fault. It is often about grinding detail over long periods of time. There are no quick wins and no easy options because all other countries are watching us, just as we watch them. Best practice is rapidly copied, so we have to look ahead. We have to determine to get ahead, and we have to have policies to keep us ahead.

I thought it might be helpful today if I simply asked some rather obvious questions that will preoccupy me in the months ahead. I do not need to be told, and nor do your Lordships, that we have some of the best companies in the world. They are out there winning every day, but is our average performance good enough and how can the underperforming tail be persuaded or encouraged to catch up? Do we set our industrial standards high enough in the modern world?

Of course, as many of your Lordships have reflected, we need to improve our infrastructure, invest in research and development and think long term, but our competitors are doing this all the time. All of us can list the new growth markets. We can put forward the exciting technologies of tomorrow. Of course, everybody is doing just that, so we have to do it just in order to keep up with where we are now, but if we want to get ahead, we have to do it better, and no matter how successful our companies may be in creating jobs in the industries

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of tomorrow, only a tiny proportion of our young generation now at school will actually find jobs in those exciting new industries.

There is a very proper focus on the quality of our education, and I have to say that I am one of those who is very critical of the past 100 years of government responsibility for education. Our industry depends on world-class results if it is to create and sustain first-class jobs. So can our industrialists expect to see the necessary improvements in our attainments quickly enough to meet the challenges that the markets thrust on them? As important is the need to attain standards in literary and numeracy simply to sustain jobs in the traditional industries, such as housing, retail, construction and logistics, where many more people will continue work than in the newer industries and the ones with fashionable titles. Is our training and skills agenda in line with our industrial expectation and is higher education playing a big enough role in converting the inventive genius of leading academics into jobs here in the UK?

At the heart of the growth strategy is increased priority for the private sector-quite rightly so. It is therefore important to recognise the potential for the LEPs-local enterprise partnerships-in their challenge to rebalance local decision-making towards the creation of wealth in the same way as that which underlay the rise of our cities 200 years or so ago. Over 200 years, the balance in local government has swung decisively towards social provision. There were very good political reasons for this, but it is has happened at the expense of local initiative, as more and more decisions are effectively taken by the functional departmental monopolies of Whitehall. We need to be confident that the LEPs are doing the job that the Government intended.

Every industry in this country is sponsored by a government department. What does that mean in practice? Do the government departments have the people with the skills and experience to sponsor industries effectively? Can our chambers of commerce and trade associations give their members the support that is commonplace in competing economies? Are those who claim to speak for industry and commerce prepared to tell the slowest ships in their industrial convoys that their failure may actually be their fault and not that of government or the economy?

There is much concern about what is called short-termism in our approach to industrial investment. Who owns British industry and do such owners see themselves as having any responsibility for anything other than the short-term valuations of the shares that they own? There has been a continuing debate about the destructive effect of regulation but it appears that those who express the greatest concern are reluctant to convert frequent generalised criticisms into detailed examples of the changes that they would support.

Everyone knows that we face huge challenges in this country in enhancing our competitiveness, but in practice, in everyday life, does the scale of the threat transmit itself into any sense of urgency to get decisions taken or results achieved? Your Lordships only have to think of our planning system to realise that that is a rhetorical question.

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Many other issues will be raised as we seek to fulfil our remit, which, according to the letter of invitation, is to:

I have been asked to report by early autumn and such a timescale must act as a valuable discipline on the scale of our work. It will not be possible to visit every factory, meet every representative group or travel extensively. However, I am extremely grateful for the support not only of the Secretary of State and the Chancellor but of the Permanent Secretaries of the Whitehall departments for their co-operation in making available to me a formidable team of officials. We shall do our best to involve the private and relevant sectors extensively in the work that we undertake.

Finally, I should stress that this is not a government inquiry. I have been asked to give my views. It can therefore be only a very partial contribution to a debate about the quality of our national performance, in which we are all involved.

1.24 pm

Lord Bilimoria: My Lords, when I found out yesterday that the noble Lord, Lord Heseltine, was going to be making his maiden speech today, luckily I was sitting down. I remember very clearly bumping into the noble Lord soon after I joined your Lordships' House. I asked him whether it was true that he had not made his maiden speech, having already been in the House at that time for five years. He said it was absolutely true, and I asked why. He replied, in a very humble manner, "Who wants to hear from me?"

He was in the other place for 35 years; a Cabinet Minister for over 20 years; what a shame it is that we, as a House, were losing out on all that wonderful experience. Yesterday was the Chancellor's day, as all Budget days are, but it was also the birthday of the noble Lord, Lord Heseltine. Yesterday was also a special day for me as a Zoroastrian Parsi, as it was our new year, the first day of spring. So it is an excellent new year's resolution for the noble Lord finally to make his maiden speech, more than a decade after joining your Lordships' House.

Look at what we have missed out on. I am sure that some of your Lordships would have wished for a decade's silence from certain of our fellow Peers, but certainly not from the noble Lord, Lord Heseltine. We know the wonderful apocryphal story about Michael Heseltine, as a young undergraduate, jotting down his future on the back of an envelope: "Millionaire at 25, Cabinet Minister at 35, party leader at 45, Prime Minister at 55". Of course, the noble Lord denies this, but the reality is that he has achieved so much, and he could have-and many would say should have-become Prime Minister.

The noble Lord might not have reached this final milestone, but there was never a dull moment in his career. He was in the unique position of being a truly successful entrepreneur in his own right, while also serving as a very successful politician. He was an impactful president of the Board of Trade in the early 1990s. There is no better person to have been selected

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by the Government to chair a review into the potential for links between the state and private sectors. How the Chancellor would have benefited from having that review before yesterday's Budget. Thanks to this, we in this House have now had the benefit of hearing the fantastic contribution of the noble Lord, Lord Heseltine, today, and we hope that his famine of speaking will turn into a veritable feast for us in the years ahead.

Noble Lords: Hear, hear.

Lord Bilimoria: My Lords, our economy has been in recession, and thereafter bumping along the bottom, for coming up to four years now. There is no question that the Government's tough stance and posturing with regard to austerity have sent out the message internationally that has enabled our borrowing rates to remain extremely low. It has also sent out a message to the country that we need to tighten our belts and make sacrifices. To that extent, the Chancellor has had to try his best to balance his books. Of course, a balanced budget is a very prudent thing indeed. However, we have to ask ourselves, what is the point of a zero-sum game? As Martin Wolf said in the Financial Times today, this is:

"A Budget without economic significance".

On the one hand, as an entrepreneur I have been thrilled with so much of what the Chancellor announced yesterday. The reduction in corporation tax rates, which will give us one of the lowest rates in the G20, is an excellent decision. The removal of the 50p rate of tax, albeit not back to 40p where it should have gone, is at least a move in the right direction and makes a huge impression in attracting investment and the brightest talent to this country from abroad. Psychologically, the 50p rate was over the tipping point, and I am happy to see it removed.

On the other hand, this Budget has hurt a great many people. Our fuel taxes are the highest in Europe by far. Consumers have been squeezed with high inflation, and in many cases falling earnings, and higher taxes such as VAT. In my own industry, as chairman of the Cobra Beer Partnership, a joint venture with Molson Coors, I have seen the damage excessive taxes have done. While we are fortunate that our brand is growing, the beer industry in Britain has shrunk by nearly 30 per cent in 30 years.

As Mark Hunter, chief executive of Molson Coors UK, said in today's Times:

"There are no winners from the beer duty escalator. Ordinary British drinkers are paying more tax to drink less beer, reducing overall government tax revenues and forcing British brewing into a deeper, duty-fuelled decline".

Mark Hunter also happens to be the chairman of the British Beer & Pub Association. He said further:

"Beer drinkers in Britain already pay a whopping 40 per cent of all European beer tax and yet drink only 13 per cent of the beer-and we are disappointed that the Government has chosen not to end this crippling policy".

Sadly, we are still seeing 15 pubs close each week-pubs that are at the hearts of our communities. When you hit beer, you do not just hit pubs and the brewing and manufacturing industries, you also hit our farmers. Our beer is brewed in Burton upon Trent and 100 per cent of our barley is British, and we are proud of it.

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What we have lost in this country over the past decades is a balanced economy. As president of the UK India Business Council, the origins of which are the Indo British Partnership, which was launched by the noble Lord, Lord Heseltine, when he was President of the Board of Trade in 1993, I know that India aims to have manufacturing making up 25 per cent of its GDP. In our case, manufacturing is heading towards 10 per cent of GDP. Increasing manufacturing increases jobs, and manufacturing jobs lead to services jobs, both directly and indirectly, and to jobs in the supply chain. My big concern about this Budget is that I do not believe it is doing enough to generate growth and jobs. In fact, the growth forecast is 0.7 per cent to 0.8 per cent, and then to more than double to 2 per cent next year. When can we believe any of these forecasts? Will the Minister give us some reassurance on that?

The Minister talked about the £20 billion of credit easing for SMEs, which is fantastic news. But I was disappointed that, sadly, the media hardly covered this. Will the Government talk more about the scheme? Will it be like the Government's small firms loans guarantee scheme? Will this money flow to the banks? Already I have heard that HSBC will not sign up to it. How will the Government ensure that banks lend this money to the entrepreneurs who need it? The Government urgently need to flesh out their plans and communicate this to business and to the country because it has the potential to have an enormous impact on SMEs, which are, after all, the engine of the growth of this country.

As the noble Lord, Lord Heseltine, has said, we need to invest far more in research and education if we are to make this country competitive and improve our productivity. This is, unfortunately, where the United States, time and again, is way ahead of us. While we are bumping along the bottom, the United States economy has been growing. One of the main reasons for that is that it invests far more in higher education and in research and development than we do. I do not think that this Budget has done enough to close this gap. Will the Minister respond to that please?

As regards our Armed Forces, we have been in Afghanistan longer than World War I and World War II put together. We have lost precious lives and have so many badly wounded soldiers, which has caused huge loss, pain and grief to friends and families, and to our whole nation. But the monetary cost has also been huge. I am happy to hear that the Government will be reinvesting the money saved from an early pull-out from Afghanistan by putting some of it into the accommodation which is desperately needed for our troops and their families. However, I am greatly concerned that the Government have chosen to freeze the raise of our soldiers' salaries to only 1 per cent. The soldier's basic salary is £7,000 lower than the national average. Is this the way for us to uphold the military covenant? Is this the way we show our gratitude to our brave Armed Forces?

The Government rushed through the SDSR, destroying Nimrod, getting rid of Harriers and getting rid of our carriers. We could have used those carriers, those Harriers and those Nimrods in Libya. Now we learn that the change to catapult-based aircraft carriers will

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have to be scrapped, which will result in billions of pounds wasted and in cutting our capability. We did not predict the Arab spring. We need to be prepared for what will happen in the future.

As has been said so often, this Budget has also hit our pensioners. They are currently being squeezed by low interest rates, which are necessary but are affecting their savings. They have also been hit by high inflation. As I have said, I support the reduction of the 50p rate of tax but the so-called "granny tax" that the Chancellor announced makes this look like a Budget that is helping the rich at the expense of poor pensioners. Is that the message that the Government want to send out? As we have heard, it has been a PR disaster.

I have heard that the Budget Committee of the House of Lords, of which I was a member last year, will no longer be convened this year. Hence, we will miss out on the wonderful expertise that we have in this House. Will the Minister confirm that that will be the case?

In conclusion, I am grateful to the Government for the many business-friendly measures in this Budget. It is reassuring to see further cuts in areas where cuts are required, such as in welfare, which is the largest area of spend-£10 billion. The infrastructure spend, broadband and looking at a third runway at Heathrow are all essential. But I am afraid that this Budget has not addressed enough the fundamentals of economic growth, job creation, research and education. A balanced Budget is not enough-it cannot be a zero-sum game. A good Budget balances the books, gives a more balanced economy for industry and innovation, and encourages a growing and competitive economy.

1.34 pm

Lord Sugar: My Lords, I join the noble Lord, Lord Bilimoria, in welcoming the noble Lord, Lord Heseltine. I feel honoured to participate in a debate in which the noble Lord has made his maiden speech. I am sure that I will be joined by other noble Lords in saying that we look forward to hearing him speak a little more in the future. His maiden speech was interesting in the sense that there was no need for the normal preamble of him telling us who he is.

It is common knowledge that Governments across the world tend to spend far more money than they collect by way of taxes and hence create great piles of debt. Every so often there is a wake-up call where certain initiatives are put in place to try to reduce that debt. We are no different in this country. I understand, albeit that it is no consolation, that from 2014 we will receive itemised tax bills, which among other things will show how much each of us is paying by way of debt interest. Indeed, one may ask whether the current spending budgets of the Government are forecast to exceed income again. One thing for sure is that the debt is going to rise as we seem to be borrowing far more than was forecast since the last spending review.

The fact is that the economy of the country is supported by business. If one were to run a company in that manner-continually spending more than one's income-we all know that that company would go bankrupt. If one of my companies did that and I started printing money, as mentioned by the noble

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Lord, Lord Higgins, to ease my situation, no doubt I would be put in prison for counterfeiting. We will not get this deficit down unless we have a plan for jobs and growth to get the economy moving. To do that, we need to encourage small and medium-sized businesses to invest, to be daring and to kick-start the economy and employ lots of people.

It amazes me that the Government's Business Secretary announces a lot of hollow initiatives under the guise of helping small businesses, yet he has never been in business. He has never been on the coal face, never run a business and has never understood the needs of a small business. I am sure that if the noble Lord, Lord Sassoon, had a pain in his groin, he would not want me to remove his appendix since I am not a surgeon. That may be a stupid analogy, but I am sure that I am making my point.

Yesterday's Budget contained the usual lip service of how the Government are going to help small business. They have continually made these statements but so far we see no evidence of it. As my noble friend Lord Eatwell mentioned, it is the same as the promise made to put fuel into the tank of the British economy. Instead, the economy has stalled and unemployment has risen, as has the aforementioned debt.

On the subject of lip service, I am concerned about politicians deflecting the real issues and placing blame elsewhere-for example, jumping on the bandwagon of bank bashing and singing the same old songs about the lack of money being lent to small to medium-sized enterprises, or bonuses being paid to bank executives. All this does nothing other than depress the business environment. It is not encouraging in any way, shape or form. It is sheer political capital. I urge all politicians to change the record and to start to instil confidence in the marketplace instead of depressing it.

One never hears outrage expressed at the bonuses payable to, say, Sir Terry Leahy, Sir Stuart Rose or Sir John Rose in their capacities as chief executives of Tesco, Marks & Spencer and Rolls-Royce. I say "quite rightly so" because that is business: you employ experienced top executives and set them targets to get things done-in other words, incentivise people. Yet when banks, some of which have a large public shareholdings, employ top executives whose sole purpose is to take over, clean up the mess, and improve the financial position and in turn the public's investment, those executives are chastised for accepting bonuses. The reality is this: carry on doing that and those people will simply go and get a job in a different type of company where the culture of paying bonuses is not frowned upon. Replace them, pay peanuts, and you will get monkeys. There is no question about that. You will delay recovery of the billions that have been invested from the public purse.

Then there is the alleged issue of banks not lending to small and medium-sized enterprises. I had first-hand experience of this issue just under a couple of years ago when I was a government adviser. I investigated it in depth and discovered what I believe is still the position today, and that is that many companies out there are depressed by the messages of doom and gloom about the current economic situation. They are not investing, they do not wish to invest, and in fact

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they are tightening their belts. They do not want any money and are not asking for it because they are nervous due to the lack of confidence in the marketplace, and much of that is created by politicians jockeying for position or applause on BBC "Question Time" and a very mischievous media.

Then there are some companies that do want to borrow money. However, I regret to inform noble Lords that none of your Lordships would lend some of these businesses one brass farthing because they are simply not worthy and a bad risk. Yet it is those people who shout the loudest and make a lot of noise, which again attracts the newspaper headlines that are regretfully being used by certain politicians to popularise themselves. The noble Lord, Lord Bilimoria, mentioned the £20 billion credit-easing scheme. I am sorry to be so sceptical about this thing, which is designed to underwrite cash lent by banks to SMEs. I hope that it is not an open invitation to the banks to act in an irresponsible manner by dishing out loans that they would normally have rejected as high-risk. We must bear it in mind that they now have the Government underwriting those loans.

I have always stated that the last thing any businessperson wants is government interference. All that businesses require is an environment where enterprise can prosper, and that of course means allowing people to trade freely on a level playing field, and to work in an environment where taxation is reasonable and where there are no onerous regulations or obstacles. That is the sole job of the Government. They also need to create a more positive feeling in the marketplace to encourage small to medium-sized enterprises and indeed give people the confidence to start up their own businesses, become self-sufficient and in turn go on to employ other people.

Noble Lords have already talked about the Budget so I shall restrict my own comments. It should have contained some meaningful offerings to encourage investment and instil confidence. We need things that are tangible and can be touched, such as a reduction in VAT, a one-year national insurance holiday for small businesses taking on extra workers, a reduction in business rates and a reduction in duty on diesel. Those are just a few things that would make an immediate impact and be a genuine help to small businesses. Instead, regrettably, we have the hollow promises that we continue to hear.

1.43 pm

Lord Fink: My Lords, it is my great pleasure to have the chance to speak in your Lordships' House on the Budget, but perhaps I may start by joining the noble Lords, Lord Bilimoria and Lord Sugar, in congratulating my noble friend Lord Heseltine on a most thoughtful and elegant maiden speech. I should say that he is held in great esteem by businessmen and politicians across the political spectrum. Indeed, in my home town of Manchester, and in Liverpool where I have the privilege to sponsor an academy in Anfield, he is held in enormous esteem. Anyone who doubts the Government's commitment to a growth agenda has only to look at my noble friend's appointment to see the seriousness with which they take the issue of growth. I also agree with the comments of the noble Lord, Lord Sugar,

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about the mood music made by politicians in all categories, and how that mood music does not always help business. Sadly, that cuts across all parties.

I shall return to the Budget. In order to decide whether a Budget is good or bad, we have to look at it in the context of its time and the financial circumstances that the country is in. Given our straitened circumstances, in my view there are five questions to ask about a Budget to see if it is a good one, a bad one or, indeed, an excellent one. First, is the Budget consistent with the Government's strategy of achieving medium-term fiscal goals? Secondly, does it help the country's small businesses to grow and increase employment? Thirdly, does it help businesses to compete for talent and business in an increasingly competitive global marketplace? Fourthly, does it help the country's citizens, particularly the less affluent, either by cutting their tax burden or by giving them the dignity to pay less tax and not have to claim back what is in effect their own money through benefits like working tax credit? Finally, we can add a new test that no Budget in living memory has achieved: does it provide a degree of financial transparency to taxpayers in terms of how much tax they are paying and where the money is going? These factors are much more important than the cheap populism of large giveaway Budgets, false claims of "prudence" or-dare I say?-"ending the cycle of boom and bust".

If one takes these tests in turn one can see that, first, the Budget is clearly consistent with achieving the Government's medium-term fiscal goals. As my noble friends Lord Higgins and Lord Sassoon have said, the Budget is fiscally neutral over a five-year period, but it does contain modest reductions in both taxation and spending. The economic forecasts agreed by the Office for Budget Responsibility agree that borrowing is on course to achieve a cyclically adjusted current balance over the next five years and debt will be falling as a percentage of national income by the end of the Parliament. That means that it is successful in this measure.

Secondly, I asked if the Budget will help small businesses to grow. As we know, growth in small businesses is key to reducing unemployment. The combination of continuing low market interest rates gained by prudent management of the deficit combined with a reduction in credit spreads, which credit easing should provide, will form a favourable backdrop for small businesses. The cuts in corporation tax rates and planning changes will also help small businesses. Finally, tax simplification, particularly cash accounting, will have a disproportionately beneficial effect on very small businesses.

The next factor to consider is how we can help larger businesses to compete. There is no doubt that the reduction in headline higher rate income tax will help to attract international talent to the UK as well as signalling, as others have said, that Britain is open for business. I know personally several ultra-high net worth individuals-and former large taxpayers, for that matter-who have moved overseas to escape the 50 per cent tax. Sadly, I do not believe that a small reduction of 5 per cent will bring them home just yet. I also know of many multinational firms which say that high-performing

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executives who they have wanted to poach into the UK will not come here unless they are offered income tax equalisations, something that, frankly, has not happened for 20 or 30 years.

As my noble friend the Minister said, the fact that international companies like GlaxoSmithKline are now creating hundreds of new jobs in Britain is very good news and an early sign of success in this area. Also the improvements being made to our infrastructure, particularly the expansion of northern train lines, should allow the economy, particularly in the north, to grow without too much traffic congestion. The accelerated reduction in corporation tax and support for ultra-fast broadband and wi-fi, which have become so important for many businesses, are also helping growth.

Many people say that research and development are absolutely key, but I think that most noble Lords have missed the development of The Francis Crick Institute close to St Pancras station. It is probably the most exciting biomedical development in a generation. It will employ over 1,500 scientists and is a joint venture between the Wellcome Trust, Cancer Research, the Medical Research Council and three London universities which between them are associated with five or six foundation hospitals. This is something which has not been achieved in any other country in the world, particularly not in the US. The head of the institute, Nobel scientist Paul Nurse, has said: "This project could never have been achieved in most countries around the world and is a first internationally".

Fourthly, does the Budget help the country's citizens, particularly the less affluent? The increase in personal allowances to £9,205 from April 2013 is a real achievement. It made no sense to tax families earning modest wages and to make them claim back similar sums in a variety of allowances. It created almost as great a dependency culture among those in work as those out of it. When income tax was originally introduced, it was designed as a temporary tax on the rich. I am proud that the Conservative-Liberal Democrat Government are stopping taxation for the less well-off and lifting many hundreds of thousands of people out of the income tax net.

Fifthly, offering taxpayers transparency on how much they pay and where it goes is an extremely good and innovative idea. It has always struck me that Governments around the world who operate PAYE-type systems seem to be able to charge and tax citizens more. I guess that it is a much less painful way of paying tax than finding a capital sum, as do people on schedule D, but perhaps the balance is wrong. If citizens knew how much they were paying and what it went towards, they might be more assertive in their views on expenditure.

Hence, on all the five measures that I have set out, this seems to be a good, possibly excellent, Budget given the financial constraints. However, lest I am seen as no more than a mere cheerleader for the Government, I will ask about the income tax reliefs of 25 per cent or £50,000. I have no problem with the principle of having limits on deductions, which could stop abuse in many areas, and I also believe that the rich should pay their fair share, but the one exception should be philanthropy. Although I was not sure whether it was normal to declare a potential conflict of interest in a

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general budgetary debate, I must declare it here. I chair several charities and I know that many philanthropists who support them give more than 25 per cent of their income to them. I also know that one or two of the charities that I support would not be able to operate without that generous support of the wealthy. Will my noble friend the Minister give me some assurance that he will try to intervene to help the plight of charities affected by the cap?

1.52 pm

Lord McFall of Alcluith: My Lords, I am delighted to participate in this debate and particularly to follow the noble Lord, Lord Heseltine, whose civic award this week from Liverpool was richly deserved.

The power and influence of the social media in the form of Twitter were in evidence immediately after the Budget. Within minutes of the Chancellor sitting down after a carefully crafted and supposedly voter-friendly speech, it was labelled a "granny tax" Budget. The Chancellor's tactical nous, for which he is supposedly famous, has let him down, and I suggest that there is a reason for that; every dot and comma of this Budget was publicly debated with his coalition partners. There were no surprises, save one.

As a keen observer of Chancellors and Budgets, I saw the Chancellor lose eye contact with his audience, bow his head to the Dispatch Box and say sotto voce that he was simplifying the system for age-related allowances for pensioners on the basis that they did not understand it. I along with others said, "Wow". I suggest to your Lordships that pensioners certainly do understand the system now. Incidentally, the NAO last examined it on behalf of the Government in 2009, so the Government did not base their calculations on real-time information. This is a Budget that raises £4 billion, with £1.5 billion coming from pensioners. Almost half the revenue is coming from pensioners. I suggest that the "granny tax" storm will take some time to abate.

The Budget was big on politics but small on economics, being fiscally neutral. According to the Government, the extra £150 million of borrowing incurred on their watch left them with no room for manoeuvre: hence the Budget's political emphasis, with the Chancellor eyeing the leadership and being the darling of the right wing of the Tory party at the expense of Nick Clegg-goodness knows why he went along with it.

Lords spiritual in this House regularly emphasise the concepts of faith, hope and charity. Let us look at those concepts in the context of the Budget. On faith, for all the emphasis on business innovation and investment, the OBR has drastically pruned its forecast for growth for 2012 following very weak figures for the last quarter of 2011. With recovery predicted at 0.8 per cent, the economy is not far from stagnation, so the Chancellor really is left on the sidelines, fingers crossed, and praying for sunny uplands in 2017. He has reduced corporation tax, which on the surface is a good initiative, but as Martin Wolf and others have described it in today's Financial Times, this could be a zero-sum game, with global competition ensuring a race to the bottom. The interaction with personal income tax would encourage corporate retentions. We might therefore

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be exacerbating an investment black hole, with corporations hanging on to their money. The big issue is how we ensure confidence among those corporations to invest.

On hope, the issue of jobs and growth has been mentioned, but the Chancellor barely used the word "growth", which I think was banned in his coverage of the Budget yesterday. However, what are we doing about the 1 million young people who are unemployed to give them any hope for the future? What are we doing about the north-south divide? I applaud the noble Lord, Lord Heseltine, for engaging in that, because instead of coherence between north and south, there is a divergence that will be to the detriment of the country. The prospects for the country will be diminished.

There is stronger case for fiscal stimulus this year than there was last year. Two members of the MPC, David Miles and Adam Posen, are calling for that-indeed, Adam Posen has long been on record as saying that the country needs a spare tyre for lending to small and medium-sized enterprises. I would have liked to see the Government ask in the Budget, "How can we create our own Mittelstand in this country, where we can support small businesses, rebalance our economy and take a renewed, fresh approach to manufacturing?". I suggest to the Minister that it is not too late to consider the concept of a British investment bank, espoused by the noble Lord, Lord Skidelsky, and others, because banks do not lend to small and medium-sized enterprises because there is not much money in it for them. That is the basic issue that we must face. Therefore, the Government have a job to do to stimulate the economy in that area. We also have the tyranny of the PSBR, which I have cried out for Chancellors to sort out in the past. Why do we not do that, so that we could look at our economy afresh and ensure that it had a social dimension as well as a strict economic one?

On charity, the Budget will be judged on the fairness agenda. The esteemed philosopher, Amartya Sen, came to a Treasury Committee hearing quite a number of years ago and made the point that there is a connection between effort and reward, and that people judge fairness on the basis of that connection. I put it to this House that, while 14,000 people earning £1 million per annum will receive a tax cut of more than £40,000 each year, a family with children earning £20,000 will lose around £700 when the cuts and the VAT increase are taken into consideration. Undoubtedly, the winners from the Budget include the rich people, who can save lots of money, while the vast majority of taxpayers are given £14 a month as a result of the Liberal Democrat-inspired tax threshold initiative. The leader of the Liberal Democrats, Nick Clegg, has called this a Robin Hood Budget. However, far from the poor benefiting, the rich will benefit; it is the opposite way round. I suggest to noble Lords that we look at it as a Robbing Who? Budget. That will be the question reverberating around the country over the coming months.

Aspiring citizens have been hit as well. At a stroke, the Chancellor has just created an extra 300,000 new 40p higher-rate taxpayers, which has gone unnoticed, because he has reduced the tax threshold to £41,450. A family with a few children, having an income at that

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level, are now in the higher tax band. That will have a very serious effect on family finances. It will be the less well off, the middle-income and the aspiring and upwardly mobile citizens who in this Budget will be well and truly mugged.

There was reference in the past to Mondeo man and woman. What price Mondeo man and woman now? I suggest that with every passing day, the chances of Mondeo man and woman thumbing a lift rather than owning the vehicle will increase.

2.01 pm

Lord Marlesford: My Lords, the toughest challenge that politicians have is to face reality. I know of no one who has in his career been better at facing reality, both in business and in politics, than my noble friend Lord Heseltine. That is why I am so glad that he will be facing, and I hope telling us how to deal with, the reality of our own competitiveness. That is a crucial issue, but facing reality is actually a challenge for all of us. It is a challenge that the financial world failed massively, especially in the United States in the years of unsound lending to unsound borrowers that led up to 2007, and the inevitable financial crisis that has created a continuing problem for the world economy.

The Chancellor started his speech by referring to two major risks to Britain's economy-the situation in the euro area and a further spike in oil prices. I will say a brief word on both before making some comments on the tax changes and suggesting one or two further possibilities for progress.

On the euro area, everyone would now agree that the fundamental design of the euro is flawed-a single currency without a single fiscal and budgetary policy. It is a flaw that the designers must have been well aware of. Indeed, some cynics even think that the intention was to have it as a means of forcing a crisis that would result in the integration of the EU economy in a way that was, and probably still is, politically unacceptable. The real problem with the euro area is the refusal to face reality. The powers at the centre of the EU still deny that Greece is bust and has defaulted on its debt. It is assumed that the ECB backed by Germany can bail out any euro country that is threatened with default. Bailouts lead to bailouts until eventually there is a country that is too big to bail out.

Even today, the EU Commission is producing some really dangerous, ill thought-out proposals, and I will refer to one-the financial transaction tax. Were it to be introduced, it would do immense damage to the City of London, which is the world's leading financial centre, followed by New York and Hong Kong. Financial services account for some 10 per cent of the UK's national income and 11 per cent of government tax receipts. Perhaps more relevant is that, as it has been designed, the FTT is actually unworkable. I hope very much that when the moment comes, Her Majesty's Government will veto it.

On oil, the price will, over the coming years, certainly fall steeply due to increasing competition from oil and gas from shale and from the revival of nuclear power. However, as the Chancellor said, there is now a risk of a sudden price hike, which of course is the equivalent

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of a tax increase and is therefore strongly deflationary. The risk is almost entirely political and was very well debated in your Lordships' House last Friday. The overall conclusion of that debate was that the problems of the Middle East can now be met only by diplomatic and economic policies. Military action in that area could be catastrophic for the world economy.

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