Queen’s Speech — House of Lords, 2016-05-25
Topic: Domestic Commerce
Howard Emerson Flight (Conservative, Centre-right): My Lords, I add my congratulations to the right reverend Prelate on her warm and human maiden speech I welcome in the Queen’s Speech the digital technology and pensions Bills and I hope that they will underpin what is needed in the two key areas that I will say a little about. First, the Government need to focus more on the need for and advantages of supporting UK digital ID for financial services, especially for areas such as pensions and in order to save people a huge amount of wasted effort in having to repeat AML requirements. Digital ID would benefit consumers by making it easier to manage their savings and investments; it would improve competitiveness by removing physical barriers to switching; and it has the potential to provide the whole foundation for the digitalisation of UK financial services The initial focus of ID digitalisation is to establish a secure store of basic client information to satisfy "know your client" and AMLC requirements. This is being led by the savings industry body TISA, and I declare an interest as a long-standing adviser to it. I ask the Government to take a greater interest and get a little more involved. There has been liaison with BIS, the Treasury and the Cabinet Office so far This leads to me to the second territory: savings and pensions. First, I repeat my hobby-horse point: what has been particularly wrong with the UK economy for 30 years, if not longer, is too low a rate of savings, which has led to investment and productivity being low. We now have a savings rate hovering around 3%, whereas I suggest that for an economy such as ours that it should average closer to 10%. We are, like it or not, in Macmillan’s famous phrase, "selling the family silver". Half the buildings in the City of London are now foreign owned; most of the central West End is foreign owned. We will soon run out of things to sell. This is because overconsumption, along with inadequate saving, has produced a cumulative current account deficit of some £700 billion over the last 15 years, which has effectively been financed by selling assets Further to a Question earlier today, I am sure the Minister will agree that the size of the external current account deficit will depend on the government spending surplus or deficit and the savings rate. In a practical way, inadequate savings now mean that people are inadequately financed for their old age. I regard it as a disgrace that this country, which 25 or 30 years ago was the leader in pension provision in the whole of the western world—much better than anywhere else—has somehow, under Governments of both parties, become one of the worst. That has been a function of a whole lot of mistakes, but it is definitely correct to identify overcomplication as one—Andrew Haldane’s comments were extremely appropriate. The very complexity of pension funds is one reason why ISAs have prospered reasonably well I support the auto-enrolment measures and NEST, although the contributions are insufficient to provide an adequate income in old age. I would like to see much greater simplification, for example by restricting the tax credit to 20% for everybody but also by lifting the constraints on how much you can contribute and what your pension pot can be. At present, many of the better-off are simply ceasing to save because they have reached the tax limits on their pots. The other point I would make is that there is a growing unfairness between those who are fortunate enough to be in receipt of public sector pensions, which are still final salary in the main, and those in the private sector who have seen their pensions reduced to wholly inadequate levels Finally, there is the wider economy. I congratulate the Chancellor on having got this economy going, even though all those brilliant IMF economists who are now saying we must not leave the EU said then that he was completely messing up his economic policies. In fact, he got it right. But it is apparent that his plans to phase out the deficit are being hit fairly badly by a lower rate of economic growth than was projected. Rather sadly, we are still borrowing £72 billion this year; there has to be a more aggressive focus on putting the public finances on to a better basis I regard it as pretty horrific that this year, welfare will be about £270 billion—including some of the payments that go under other channels—health £145 billion and education £102 billion. That is 70% of total public spending, forgetting defence and other key areas. We are now spending £39 billion a year on debt interest. I do not believe that the sort of unlimited growth that has been occurring over the last 15 years in this area is going to be practical in the future. Some form of constraint will be unavoidable, to my mind, partly because the scope to raise taxes without damaging the economy is also pretty limited. So we need to get rid of constraints on areas that cannot be looked at for savings, and we will have to take a tougher attitude to reducing the budget deficit.