The Chancellor has said a Windfall tax on domestic oil and gas is on the table. That is the low tax Chancellor. He says if the industry does not get on and invest he will think about it. He should know there is already a large windfall tax in place on UK oil and gas profits. They pay double corporation tax.

The Chancellor has a problem. Investment is lower than we would like. It is lower than many rival economies. It needs to be higher to help boost productivity, the key to rising living standards. There is an additional issue. UK policy in the EU was based on increasing our imports in industry, energy and agriculture leaving us with a large balance of payments deficit. We need plenty of inward investment to meet the bills in foreign currency for all those imports.

The Chancellor has decided to increase the UK corporation tax rate from next year. This is bound to deter more investment and put off some that might have otherwise have come. Ireland choosing a much lower corporation tax rate than ours greatly exceeds us in the amount of foreign investment it attracts, and collects more corporation tax revenue in relation to its GDP than we do. Treasury models and sages say this is impossible. In order to offset the negative effects of higher tax on investment the Chancellor offered super deductions against corporation tax this year to encourage  an investment surge. It has helped but it has not been on anything like the scale needed. Many investors look through the super deduction to the higher rates to come and do not like what they see.

The Chancellor promised us he would spend the spring and summer studying what new types of offset or deduction he could offer to try to embed a more favourable tax regime for new investment into his corporation tax proposals from next year. We await those with interest. I can assure him the threat of a Windfall tax is not part of such a package.

The best way to attract more investment is to have low simple and stable rates. The more you change it and the more complex it is the more investors will decide to go elsewhere. Threatening investors who you want to make large long term commitments is a particularly bad idea. That is Labour policy, which I oppose.

This week when many of us would have liked more time to debate the cost of living response or to talk to people on doorsteps in the run up to the Council elections MPs have been detained late at Westminster each day to vote down a large number of Lords Amendments to the Borders Bill and a couple of other pieces of legislation. I have  no problem with our second chamber wishing to probe, criticise and propose improvements . That is their worthwhile and legitimate constitutional function. There is more to question  when they persist in challenging the Commons on matters where there is public will, manifesto commitments and a clear statement of intent by the elected House.

Of course in a free society peers like anyone else are entitled to their views and can use their constitutional rights to the full. They also need to ask themselves if it is wise to constantly disagree with central policies they do not like when they have been put to electors and when they attract large majorities in the Commons. The bishops with a guaranteed 26 unelected seats in Parliament say they intend to oppose the government’s policy to reduce people trafficking and illegal migration when the majority of the public and the majority in the Commons is urging the government on to do more to tackle these abuses and dangers. They highlight this issue when there are so many injustices and abuses worldwide at a time of war in eastern Europe, of starvation and civil war in some African states, and serious human rights abuses in a number of autocracies.

There is  no likelihood of Lords reform on a grand scale. Tony Blair looked at it when he had a large majority and strong political support countrywide and decided it was too difficult given the likely opposition of the Lords themselves to reform.  This present government would be wrong to divert energies to it when there was no Manifesto proposal and so many other matters more relevant to people’s lives. Maybe it will  be possible over time to evolve a better Lords. The current imbalance in membership means it heavily over represents an establishment view that does not favour an independent UK shaping her own policies, preferring a world of global treaties, so called independent bodies and the rule of the technocrats. It could do with a few more people who are entrepreneurial and freedom loving. Maybe it should move to single ten year terms for peers. Maybe retirement should be accelerated, allowing people to keep the title but lose the vote. The Lords is very large and only works because a good number of peers do not seek to engage day by day in its proceedings. It needs  to show a bit more political balance or avoid looking like an establishment stitch up against the popular will.

Rt Hon Sir John Redwood MP (Wokingham) (Con): Has it been possible to trace any foreign companies or foreign interests that are involved in these matters? Will they be making their contribution?

Stuart Andrew, Assistant Whip, Minister of State: My right hon. Friend raises an important point. I shall address that specific point later in my speech.

…

Rt Hon Sir John Redwood MP (Wokingham) (Con): Would it not in future be possible for the Government, when offering a subsidy to companies, to specify that they need to meet certain labour standards so that the subsidies regime would apply?

Paul Scully, Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy: Again, that is up to the public authorities. The whole point about this regime is that it is a loose, permissive framework, rather than something more onerous which adds layer upon layer to recreate the EU state aid system. None the less, I would expect that, again, because of value for money and good governance, any public authority, whether national Government, local government or another public body, would expect to have exactly that kind of criteria—

Comment A lack of clarity over the  terms of public procurement

The ONS published revised figures for the debt and deficit in the year to March 2022. Compared to the figures released as recently as the Spring Statement they now think borrowing last year was £20bn higher than they thought in March, though still massively down on the budget 2021 forecast. They also warn us that the figures will be subject to future revision and that could be material. As the cash requirement figures they published are so much lower than the deficit figures it seems likely the deficit will be revised down again before we are finalised with the history.

Revenues were well up on the original 2021 forecasts and were even up on the recent Spring Statement forecasts. it leads me to ask again how can the Treasury be so sure they needed an extra £12bn from a National Insurance rise when the revenues increased last year by several times that amount over their forecast? And how come they can afford to withgo a portion of the £12bn now they have raised the threshold for paying National Insurance?

The latest figures tell us that there has been a large rise in debt interest, to £69.9bn.  This figure combines genuine cash payments of interest on borrowings, with more complex non cash items relating to index linked borrowings repayable often in many years time.

Debt interest remains low relative to GDP and spending thanks to low interest rates . Much of the borrowing is long term, locking in these favourable low interest rates for the full term of the loans.

The fact that the Bank of England owns a large portion of the bonds is also helpful as a 100% owned servant of the state. The Treasury pays interest to the Bank on these loans, but can get a dividend back from the extra money  the Bank receives as a result.

The Treasury now adds the increase in repayment value of indexed gilts each time inflation numbers emerge to the debt interest figure. This is not a bill the state has to pay month by month as inflation rises. As they confess it is a non cash item.

The extra cost of the debt is only passed on to the bond owner on maturity of the bond. At this point the state will simply refinance it, so there is never an immediate cash cost that needs financing out of tax revenue. Some of these bonds are  not repayable for many years.

Normal bonds do incur cash costs with the payment of interest and these are properly considered a running cost to the state.

Last year  out of the total cost of debt interest attributed by the Treasury of £69.9bn, £34.7bn was indexation. The true cash cost of the debt was £35.2bn, around half the stated figure.