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Finance Bill

My Lords, I thank the noble Lord, Lord Vallance, for what he has said and how fairly he has summed up the unanimous views of the sub-committee, on which I was happy to be able to participate. I will not deal with all four of the issues with which we dealt; I will deal just with pensions. As always, we did not look at these matters from a political standpoint. We did not have a Minister before us. We had only officials. I say "only", but we had the people who matter on these occasions. HMRC was unable to answer for us what is happening, for example, on the effects of the policy—although we were not looking at the policy— on savings, on pensions and on the future of people who save. I declare a past interest as a substantial beneficiary, like many in professional activities, who invested through annuities, and received tax relief and benefits from it. I thank whoever was in charge at that stage. After our committee had met, I put down a Written Question on whether the Government agreed with the CBI, which said that there was an effective tax rate of 150 per cent in some circumstances. The answer from my noble friend was that they did not agree, but it was a somewhat less than absolutely clear reply. He tried again this evening, but he did not altogether convince me then either. When he winds up, I should like him to have another go at perhaps 149 per cent or 100 per cent. What is likely to be the effect on, possibly, a small number? That small number is not unimportant because professional men and women prepare for their retirement in a variety of ways. This way is very important both personally and, from the point of view of the country as a whole, it is beneficial. I hope that my noble friend will give us a clearer reply. However, I mainly want to say a few words about the economy. As one recognises on these occasions, the noble Lord, Lord Lang, made a great deal of his criticism of the present economic position of the country. I listened carefully to what he had to say—but unlike the unanimous views of the Select Committee, for which I thank him, on the Barnett formula where I absolutely agree with what it said—but tonight I found him less than constructive in his alternative proposals to what the Government are doing. No doubt, future speakers—there seem to be a great number of them on the Opposition Benches—will give us the benefit of those constructive proposals. The noble Baroness, Lady O’Cathain, is pointing to this side of the House, which I appreciate, but the Government have got my noble friend Lord Sheldon and I, and they are more than happy with the two of us. On the economy, I very much agree with what the Government are trying to do. They have not, during the course of a recession, started to cut public expenditure and perhaps increase taxes. That would not reduce debt; it would be more likely to increase it. I very much agree with the Government, but that is about the only thing on which I will agree with them tonight. Precisely what do they propose to do—I know that my noble friend likes to be precise on these occasions—when the recession comes to an end? Incidentally, I was pleased to hear him say that—he told us about a sort of preview of the Pre-Budget Report—we are at the bottom now. I have forgotten his exact words, but he certainly implied that we were out of the recession. Perhaps I may add that he did not refer to green shoots. Outside the Government, economists almost across the board have come to the conclusion in their guesses—we all know that they are guesses—about the future of the economy that the recession is largely coming to an end. Unlike my noble friend, they seem to feel that when the upturn comes it will be rather slower than seemed likely even in the last Budget. Perhaps my noble friend would comment on that too. When the recession comes to an end and we are in a reasonable upturn, the important question that faces any Government is how they will balance the books—except no one balances the books—and bring them more closely into line and sustainable. I should like to know whether my noble friend has seen the report—I have not—which was referred to in the press this morning, about the study on public expenditure by the King’s Fund and the Institute for Fiscal Studies. The Guardian had a headline, "‘Tax or axe’ warning on future NHS spending". It is clear that with an ageing population—I am happy to say especially for Members of your Lordships' House—the National Health Service—whoever is in charge, private or public—will need to spend rather more than less in the years to come. In many areas of National Health Service spending more will need to be spent. The article quoted the study as saying that "across-the-board" there would need to be a, ""2.3%-a-year cut in spending"," which did not exclude the National Health Service. With £700 billion of public expenditure of course there is waste. Everyone talks about cutting waste. When I had some slight responsibility as Chief Secretary to the Treasury, public expenditure was a much lower figure and I had to cut it for five years almost, but there was waste. There is always waste. When £700 billion is being spent, there is bound to be waste even when it is being spent by the private sector, let alone by the Government. Everyone is in favour of cutting waste, but how it is done, and where and when, we have yet to hear from any of the major political parties. We are told that all parties are telling us the truth about the fact that there will be a need for cuts after 2011. On the surface that is being honest and telling the public the truth, but just saying it does not tell us where people are going to be hurt, and when. Speaking for myself as a former, retired politician—an emeritus politician, unlike the Cross–Benchers in your Lordships’ House—I do not expect either of the major parties to tell us, before the election, where it will hurt. We will not hear the truth, but we will hear talk of honesty. But we will not hear anyone say precisely where the cuts are going to fall, on whom and when. However, major cuts will have to be made when the recession is over, and very likely tax increases as well. I would be surprised if VAT does not go up substantially. VAT has been mentioned in this context, and if the recession is not really over, I do not know if the Government will seek to extend the cut for another year; it may be sensible to do so. Again, I wait to hear what my noble friend has to say. However, on public expenditure, on the tax front and on balancing the Budget, will my noble friend tell us whether it is the Government’s clear intention when we see a reasonable upturn in the economy—not a huge rise but perhaps 2 or 3 per cent, which were the average levels of the past—to make those precise cuts after the recession is over?