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House of Lords
Monday, 24 July 2006.
The House met at half-past two of the clock: the LORD SPEAKER on the Woolsack.
Prayers—Read by the Lord Bishop of Sheffield.
Lord Browne of Belmont
Wallace Hamilton Browne, Esquire, CBE, having been created Baron Browne of Belmont, of Belmont in the County of Antrim, for life—Was, in his robes, introduced between the Lord Molyneaux of Killead and the Lord Rana.
Lord Bilimoria
Karan Faridoon Bilimoria, Esquire, having been created Baron Bilimoria, of Chelsea in the Royal Borough of Kensington and Chelsea, for life—Was, in his robes, introduced between the Lord Dholakia and the Baroness Prashar.
Oil Prices
2.49 pm
Lord Berkeley asked Her Majesty’s Government:
What assessment they have made of the effect on the United Kingdom economy if the price of oil remains at its current level.
Lord McKenzie of Luton: My Lords, the effects on the UK economy of oil prices remaining at their current levels would depend on the factors driving oil prices—for example, the extent to which prices were maintained due to demand pressures or supply constraints.
Lord Berkeley: My Lords, I am grateful to my noble friend for that illuminating Answer. Is he aware—presumably he is—that the DTI and the Treasury still use a figure of $35 a barrel, reducing after 2010, compared with today’s price of somewhere between $75 and $80 a barrel? Does he not agree that such a difference must affect industry and transport costs and appraisals, and is it not time that the Government joined most analysts in at least looking at the effect of a price that is currently double the one given in their own assessments?
Lord McKenzie of Luton: My Lords, according to my information, the oil price included in the Budget 2006 forecast was $57.40 a barrel; that price is determined by an average from independent forecasters and is audited by the NAO. As my noble friend indicated, since then prices have become more volatile and moved upwards, trading recently between $66 and $75 a barrel. I am sure that he will agree with me that having the near doubling of oil prices in the past 18 months accompanied by a still expanding economy and by inflation running at just over 2 per cent is an astonishing achievement in the Government’s economic policy.
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Lord Forsyth of Drumlean: My Lords, now that the motorist has to pay nearly £1 a litre for fuel, how much extra tax is the Chancellor raking in from that increase in oil price? Would it not be fairer to reduce the cost of fuel by reducing the tax to what the Chancellor originally expected to collect?
Lord McKenzie of Luton: My Lords, it is a myth that an increase in oil price will produce additional revenues for the Exchequer. The oil duty is not ad valorem but is based on a price per litre. Prices going up means that consumption declines. The estimate for 2005-06 was a reduction in oil duties of about £300 million. With VAT, generally people consume less of one good or service that generates VAT to cater for the extra VAT in the oil price.
Lord Barnett: My Lords, there used to be something known as balance of payments crises. Are the Government concerned about balance of payments if the oil price stays at its present level and, if so, what do they plan to do about it?
Lord McKenzie of Luton: My Lords, the balance of payments issue is one of the factors that the Government take into account when making a range of judgments. When we look at the inflows that we get from outward investment, we do not see that there is a particular problem in sustaining an appropriate level for the currency.
Baroness Noakes: My Lords, last September, when the Chancellor ruled out cutting fuel duty to ease the impact of rising oil prices, he was quoted in the Financial Times as saying:
- “the first action that we must take is to tackle the cause of the problem: ensuring concerted global action is taken to bring down world oil prices”.
I think that the Minister will agree that that first action is not looking very good, so will he now commit to bringing down fuel duty?
Lord McKenzie of Luton: My Lords, noble Lords will be aware that there was an announcement last week that the fuel duty increase proposed for this year would not be imposed and that it would be reviewed at the time of the Pre-Budget Report. High oil prices are a global problem that requires a global solution. That is why the Chancellor has been leading on a number of initiatives, working with other finance Ministers throughout the world and improving transparency on oil market data with a strong commitment to dialogue between consumers and producers. I have outlined the position on fuel duty, which in real terms is below the level for 1999-2000.
Baroness Trumpington: My Lords, what about the reduction for the motorist?
Lord McKenzie of Luton: My Lords, the Government take into account the price at the pump for the motorist, which is why they have deferred the increase proposed in the Budget. The Government cannot unilaterally determine what happens to world oil prices. Naturally,
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Lord Brooke of Alverthorpe: My Lords, would it be very green if we started reducing the duty?
Lord McKenzie of Luton: My Lords, it is interesting that not increasing the duty had an impact of something like 0.15 million cubic tonnes of carbon, whereas the impact of the oil price has apparently been to reduce emissions by something like 0.5 million cubic tonnes.
Lord Newby: My Lords, I congratulate the noble Lord on his birthday. Have the Government assessed the likely impact on North Sea investment, development and production if the oil price is sustained above $70 a barrel?
Lord McKenzie of Luton: My Lords, I thank the noble Lord for his kind wishes. So far as concerns the North Sea, we have recently seen an increase in forecast total expenditure. Indeed, the recent 24thlicence bidding round produced a record number of bidders for licences. The forecast for capital investment for 2006 has increased by 35 to 50 per cent, or from $1.2 billion to $1.7 billion, over the same period, so the oil price will obviously have a positive impact on the North Sea regime.
The Countess of Mar: My Lords, what assessment has been made of the effect of oil price rises on home-based food production and our agriculture industry?
Lord McKenzie of Luton: My Lords, oil price increases have an impact on the whole economy. For sectors that can take advantage of rebated fuels, duty obviously has a significantly lesser impact. There is a negative impact on the economy, but that has to be balanced against all the other factors that affect our economy, which will be updated at the next PBR.
Lord Tomlinson: My Lords, as my noble friend pointed out in his original Answer, oil prices are affected not only by supply constraints but by demand. Does he agree that it would be an act of consummate folly to follow the advice offered by the Conservative Party this afternoon to reduce the price of oil and therefore to stimulate demand?
Lord McKenzie of Luton: My Lords, my noble friend is right: it would be folly to follow the advice of noble Lords opposite—certainly in this matter. We should recognise that oil prices have increased sharply since 2004, principally because of stronger-than-expected demand, particularly from the growing economies of China and India. More recently, the high prices have reflected potential and actual supply disruption in the Middle East and north Africa.
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Lord Dearing: My Lords, I follow on from the question of the noble Lord, Lord Barnett, on the balance of payments. Given that the deficit has increased every year since the Government came to office, does not the sustained high level of oil prices cause concern that there will continue to be increasing deficits?
Lord McKenzie of Luton: My Lords, a number of things have an impact on the deficit. There has been a spurt in our export activity, which will help balance of payments issues, but you have to look at the capital account as well as the trading account to evaluate the overall impact on the balance of payments.
Supreme Court
2.59 pm
Lord Campbell of Alloway asked Her Majesty’s Government:
The Secretary of State for Constitutional Affairs and Lord Chancellor (Lord Falconer of Thoroton): My Lords, the capital construction costs remain as described in my Written Ministerial Statement of 14 December 2004, subject to those costs having been adjusted for inflation, and they now stand at £35.3 million. There will be additional associated costs, such as fees and furniture. Westminster City Council is currently considering a local planning application, on which it is expected to reach a decision over the Summer Recess. We do not yet know whether this decision will have an impact on the costs. Therefore, when the application has been decided, I propose to make a full report to the House, including the overall estimated costs, once Parliament returns. Subject to a successful application, it remains my intention that the UK Supreme Court should open for business in October 2009.
Lord Campbell of Alloway: My Lords, I thank the noble and learned Lord for that reply—I am not sure whether I should refer to him as the Lord Chancellor or the Minister. In any event, he accepts that costs and completion date shall not be knowable for quite a long time. Does that not afford an opportunity for the House to reconsider the consequences of his preferred option—consequences such as depriving the House of irreplaceable expertise on committees and on the Floor of the House and leaving 300 cases stranded at the Guildhall waiting for trial?
Lord Falconer of Thoroton: My Lords, traditionally I am called the noble and learned Lord the Lord Chancellor. There is a precise date, and a precise date on which the costs will be known. No, let us not have another debate such as that which took up the time, energy and emotion of the House over two or three years. I think that the decision was ultimately made.
Lord Davies of Coity: My Lords, can my noble and learned friend advise the House of the anticipated extent to which the work of the Lords in Appeal will be improved and enhanced as a result of moving from this place to another building?
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Lord Falconer of Thoroton: My Lords, the quality of the Law Lords is second to none, and I am happy to see some noble and learned Law Lords in the Chamber today. It is right, however, that the final Court of Appeal should have its own building and be separate from the legislative Chamber. That was the basis on which we proposed the measure and Parliament passed it.
Lord Trefgarne: My Lords, given that the noble and learned Lord presided with such distinction over that great financial triumph called the Dome, what confidence can we have that this project will be completed with equal success?
Lord Falconer of Thoroton: My Lords, it makes me so much more careful.
Lord Goodhart: My Lords, does the noble and learned Lord agree that, although the Middlesex Guildhall is not a building of great merit, its location is ideal and that changes to its interior can make it far more suitable and accessible to the public than the present arrangements in your Lordships' House, which are cramped and virtually inaccessible to members of the public who wish to see what the Law Lords are up to?
Lord Falconer of Thoroton: My Lords, I agree with everything that the noble Lord said save for one thing: he is wrong to say that the Middlesex Guildhall is not a building of merit. When it becomes the Supreme Court, its merit will become even more apparent.
Earl Ferrers: My Lords, perhaps the noble and learned Lord will be good enough to agree on this thing, too. Is it not a fact that in order to place the new Supreme Court in the new buildings, about 14 other courts will have to be rehoused? Do the figures that he has given us include the rehousing of those courts?
Lord Falconer of Thoroton: My Lords, the figure is seven, not 14; and no, they do not. The Question is on the cost of the Supreme Court.
Lord Kingsland: My Lords, will the noble and learned Lord kindly inform us how much the Law Lords cost at present?
Lord Falconer of Thoroton: Well spotted, my Lords. The construction costs involved in taking the seven courts out of Middlesex Guildhall was given as £15 million; they are now in the region of £18.2 million. There will be associated costs in relation to that.
Lord Kingsland: My Lords, I am afraid that the noble and learned Lord did not address my question, which was: what do the Law Lords cost in your Lordships' House at present? Plainly, your conscience was gnawing at you.
24 July 2006 : Column 1540
Lord Falconer of Thoroton: My Lords, I was so excited because I thought that the noble Lord had spotted what the noble Earl, Lord Ferrers, was talking about. The approximate annual cost of having the noble and learned Law Lords here is between £3 million and £4 million, and the approximate annual cost of running the new Supreme Court will be somewhere between £8 million and £10 million. So it will cost substantially more.
Lord McNally: My Lords, can the noble and learned Lord the Lord Chancellor tell us when the House will get the benefits of the Lord Chancellor’s apartments and of the various other rooms that the lawyers are occupying at present?
Lord Falconer of Thoroton: Sadly, my Lords, that is not a matter for me any more. It is a matter for the Lord Speaker.
Works of Art: Funding
3.05 pm
Lord Sheldon asked Her Majesty’s Government:
What plans they have to increase funding for the acquisition of works of art by both the public and private sectors.
Lord Evans of Temple Guiting: My Lords, the Government have no plans to increase direct funding for works of art by the public sector. There is a popular misconception that the amount of public money available for acquisitions has decreased; this is not the case. The DCMS’s sponsored museums and galleries received a £1.6 billion settlement for the three years 2005-06 to 2007-08. This was an above-inflation settlement. The Government do not ring-fence allocations for acquisitions, and this allows our sponsored bodies freedom to choose how much of their grant-in-aid they spend on acquisitions. We do not fund the acquisition of works of art for the private sector.
Lord Sheldon: My Lords, I thank my noble friend for that reply. I am sure that, with his background, he is as concerned as I am that so many works of art are being lost in this country, in both the public and private sectors, because there are insufficient funds to finance them. What action are the Government taking to increase funding to secure many of the important parts of our national heritage? Is there not a further danger that the Department for Culture, Media and Sport will spend more of its resources on the escalating cost of the 2012 Olympics at the expense of so many of our national treasures?
Lord Evans of Temple Guiting: My Lords, I am slightly surprised to hear such wonderful talk coming from an ex-Treasury Minister, and I wonder what he did for the arts when he was there.
We all share the problem of soaring prices in the international art market and requests to purchase pictures for the state that cost up to £50 million, as
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Viscount Astor: My Lords, is the Minister aware that, when the noble Lord was at the Treasury, it was the job of the Treasury to raise money and the job of other departments to spend it?
The Minister will be aware that I am not an avid reader of his party’s manifesto, but one sentence in its manifesto for the previous election caught my eye. It stated that his party,
- “will explore further ways to encourage philanthropy to boost the quality of our public art collections”.
Will the noble Lord give us one small bit of evidence of how it has done that?
Lord Evans of Temple Guiting: My Lords, the Government will continue to explore options for encouraging philanthropy and are in discussion with the working group on the UK’s literary heritage, chaired by my noble friend Lord Smith of Finsbury. On 10 July, there was a meeting between DCMS and key people and directors in the museums and galleries world where all the concerns that we are talking about today were raised and discussed. One of the important government initiatives resulted from the strong feeling that the existing system of tax incentives for potential donors was neither well known nor well publicised. The DCMS will address that over the next few months.
Baroness Bonham-Carter of Yarnbury: My Lords, funding for acquisitions is important, but so is funding for those working in the arts. The Government’s Creative Partnerships scheme, which sends artists into schools to work with teachers and pupils, has been a huge success: 90 per cent of teachers involved found that it had improved their ability to help young people to achieve their full potential, something that all teachers want to do. However, funding is only guaranteed until 2008. Can the Minister reassure us that the scheme will be supported and funded beyond that date?
Lord Evans of Temple Guiting: My Lords, in an arts debate we had a month or so ago the same question was asked by the same noble Baroness. I said then that we recognised that it had been a huge success. We very much hope that we will be able to continue something that has done an enormous amount of good for people.
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