Spring Statement — House of Lords, 2019-03-20
Topic: Macroeconomics
Howard Leigh (Conservative, Centre-right): My Lords, it is an honour to follow the wide-ranging speech of the noble Earl, Lord Lytton. I welcome the chance to contribute to today’s debate, in which we are asked to take note of the economy in the light of the Spring Statement. It is important that we take note of it; with everything else that is going on and the demands on our time with regard to exiting the European Union, we are in serious danger of missing some good economic news. As we size up our European past, present and future, it is important not to lose sight of our current economic position and its not inconsiderable strengths To name but a few of those, there are record numbers of people in work, household spending has never been higher, inequality is in retreat—and, of course, the deficit is at its lowest level since 2003. That is evidence, if any more were needed, that so-called austerity need not be regressive. Indeed, it is proof that the worst thing that we, as economic stewards, can do for the least well-off, is to run high deficits. There is nothing progressive about spending more and more of our national income on debt interest instead of public services We are meeting on a day when Toyota has announced further investment in Derbyshire, and the opening of a new production line. I believe that we have had more quarters of successive economic growth than any other G20 country, and, unusually, our FDI has gone up, as opposed to that in Europe, which went down in 2018 I am sorry that the noble Lord, Lord Macpherson of Earl’s Court, is not in his usual place, because I do not know whether he would agree that in economic matters—or, rather, fiscal matters—there are only two statistics we can rely on. These are, first, tax receipts—hard cash—which are currently at record levels, and, secondly, the proportion of unemployment claimants, which, for the first time in decades, is lower than 4%. Coupled with real wage growth of 1.3%, that represents good news Critics who carp that those are lagging, not leading, indicators should note that the OBR has predicted that employment is expected to rise over the next five years, with the number of people in work rising to 33.2 million by 2023. It clearly does not see a change of Government on the horizon, as we know that no Labour Government have left office with unemployment lower than when they started I shall highlight some specific areas of note from the Statement. The Chancellor continues to highlight productivity. Indeed, he refers to low wages and low productivity as "twin demons", and mentions the importance of the £37 billion National Productivity Investment Fund in helping to tackle those problems. This is an important issue, but I still wonder whether we will ever get to the root of it until we modernise our interpretation of productivity itself. After all, services, now the mainstay of our modern economy, are, in my opinion, not properly accounted for in the productivity statistics. I have never been happy with the statistics that measure productivity as output per hour, because they fail to recognise total output, which for us is very good. Moreover, as we have full employment, we will use less productive labour. So our productivity will appear low even if that is not really the case. I say to the Chancellor, and to my noble friend the Minister, that we should not allow our opponents here or abroad to criticise our productivity levels unfairly, or unchallenged It is also worth highlighting measures that recognise the importance of Britain as a trading nation, open to talent and open for business. Putting an end to landing cards, as the Minister mentioned, and allowing passengers from key partner countries, particularly the United States, to use e-gates, is really important, and complements the new measures to support UK Export Finance. In particular, the general export facility, which allows UKEF to support the working capital requirements of exporters as companies, rather than just for specific projects, will have a big effect. I hope that such measures are just the beginning: we need to do more, and communicate better the support on offer for exporters, and, of course, inward investors Like the noble Lord, Lord Wakeham, I shall refer to the papers published by the Chancellor with the Spring Statement on tax issues, particularly avoidance and evasion, which remind us that HMRC reckons that some £900 million spent in 2010 is estimated to have brought in an additional £7 billion of revenue. The report then lists some of HMRC’s successes in fighting evasion, which I applaud. For the record, I take issue with its definition of tax avoidance, which it describes as "bending the rules"—but I totally agree that contrived and artificial schemes must be stamped out That takes me to my final, and familiar, subject: VAT and online fraud. The Spring Statement gives important context, with a new strategy document from HMRC. This report cites a VAT tax gap of £11.7 billion for 2016-17. Yet the UK Alliance of Online Retailers suggests that the £205 million in VAT collected from overseas sellers is only 7% of what should have been collected. This suggests that current measures in place to combat fraud are not working For example, presently, HMRC applies "seller checks" to overseas sellers but not to UK ones. This is particularly relevant to online sellers and has led to literally thousands of overseas sellers registering as UK sellers, knowing that online marketplaces do not check whether the seller is actually the legal owner of that business name and the associated VAT number. In other words, fraud is going on under the noses of the likes of Amazon and eBay and they are taking no action. Meanwhile, the Exchequer loses out on considerable revenue and genuine UK sellers are punished Does the Minister agree that the solution is to get these online marketplaces to take more responsibility? First, they should collect VAT themselves and, failing that, HMRC should copy the German model whereby the sellers cannot trade without a VAT compliance certificate, which comes only after VAT returns and import invoices have been properly reviewed by HMRC. Furthermore, all anti-money laundering legislation should apply to online market places so that all business details are properly displayed and verified. HMRC’s statement is to be welcomed in the round, but in this instance we can do more with some relatively simple interventions I hope your Lordships agree that it is important that the UK builds on its strong economic fundamentals, demonstrated again by this year’s Spring Statement with measures that support our status as a trading nation. However, as in the case of online VAT, there is also an opportunity for the UK to play a leadership role in setting out new approaches and standards for the challenges posed by a globalised digitalised economy and not allowing competitive pressures to conflict with a sense of fairness and standing up for the rule of law.