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Deficit Reduction

Volume 724: debated on Tuesday 18 January 2011


Asked By

To ask Her Majesty’s Government why the Chancellor of the Exchequer has excluded potential privatisation proceeds from his deficit reduction plans.

My Lords, since 1998, HM Treasury’s overall deficit reduction measure has been public sector net borrowing, or PSNB. Under this measure, privatisation proceeds from the selling of shares in companies do not affect the deficit.

Yes, my Lords, but, as the noble Lord knows, the Chancellor, replying to questions at the Select Committee recently, admitted that there are large sums that they are considering from the sale of assets. He also said that not all the proceeds must be used to reduce the national debt. The Conservative chairman of the Select Committee then said that he must have quite a bit in his back pocket; he was referring to the tens of billions of pounds from sales. I know that the noble Lord cannot reverse what the Chancellor said, but can he at least assure us that there is no basis in the dastardly charge that the Government are trying to build up a large fund to reduce taxation rather than some of the worst, most painful cuts that are now taking place?

The noble Lord, Lord Barnett, called it a “dastardly charge”; I am sure that I would not characterise it quite like that. The fact is that my right honourable friend the Chancellor is hiding nothing. It is simply that, as I have explained, under the measure that has been used since 1998 for measuring the deficit, privatisation sales—the sales of shares in companies—do not rank against the deficit, so my right honourable friend can have nothing up his sleeve.

However, it is important that the Government exercise stewardship over all their assets, fixed and otherwise, so that we have an ambitious programme to raise proceeds—they may not all count for deficit reduction—which will affect the debt position. That chimes in with the modernisation of government. Of course, among the most valuable assets the Government have are the shares in the banks which were nationalised. We want to ensure that the taxpayer gets a good return on those shares.

This is a difficult Question, and I am pleased to hear the Minister say that he wants the taxpayer to get a good return on the relevant assets; in other words, they will not be sold at less than their value to the taxpayer. Can the Minister say where in the Government’s accounts the proceeds of these sales will appear? I have looked myself and I cannot find anywhere where I would put them, but then I am not an expert.

My Lords, they will and do appear in tables in the Office for Budget Responsibility’s forecasts and records of sales. For example, the sales of fixed assets are dealt with in table 2.2, and the sales of financial assets when they come in are—

The noble Lord, Lord Peston, shakes his head, but I am looking at page 21 of the OBR’s Budget 2010 supplementary material which has tables. There are not yet financial sale numbers to go in for future years, but table 2.2 is there on page 21.

My Lords, will the Minister ensure that he gets his timing right on selling the shares in the banks, and not make the same mistake as Gordon Brown when he was Chancellor of the Exchequer, who sold most of our gold stock for $280 an ounce when the price is now $1,300 an ounce?

My Lords, I do not want to give any hostages to fortune, but it would be difficult for any Chancellor to get it as disastrously wrong as that Chancellor did on the gold sales.

My Lords, the Minister has made clear that he expects to reap the rewards from Labour’s investment and make profits in due course. Will he be a little clearer to the House about the banks? Will the Government introduce criteria on the effectiveness of banks in lending, for example, and even, perhaps, control of bank bonuses?

Well, my Lords, it has come to a pretty pass when the noble Lord characterises the investment in the banks as some sort of voluntary investment to make a return. It was necessary to bail out and save the British economy because the previous model of financial regulation had completely failed. Under the stewardship of the new Government, we will do our best to get back the investment, and hopefully more, that was necessarily put in by the previous Government. That is what we are doing.

My Lords, would my noble Friend confirm that Royal Bank of Scotland and Lloyds banking groups have considerable liabilities, which will be added to the country’s net debt in due course?

My Lords, as my noble friend says, there are liabilities as well as assets on the Government’s balance sheet as a result of the bailout of the banks. It will be a long process, in which the management of those banks is taking the leadership, to restore them to health, both for the benefit of the shareholders, including the nation, but also to ensure that they can continue to lend money to the businesses of this country.

Will the Minister give a straight answer to the supplementary question of the noble Lord, Lord Barnett? Will he also give a commitment that the Government will set out how the proceeds will be used?

My Lords, as and when there are proceeds they will be fully accounted for. That is the position.

My Lords, will the Minister agree that if the Government take more energetic action to deal with the tax dodgers, of which there are many—probably amounting to over £100 billion a year—there will then be less need to sell state assets?

My Lords, we want to see that the taxpayers of this country pay what they properly should pay. Indeed, we are investing an extra £900 million over the spending review period to ensure that HMRC is able to generate many billions of pounds in additional tax revenue each year. That is quite independent of the need to look properly and hard at Government-owned assets—companies and otherwise—to see what revenue can properly be derived from those assets.