House of Lords
Monday, 27 November 2006.
The House met at half-past two: the LORD SPEAKER on the Woolsack.
Prayers—Read by the Lord Bishop of Manchester.
EU: Non-metric Terms
My Lords, the use of imperial units alongside metric units is permitted by current legislation until 31 December 2009. The Government think that there is a strong case for extending this permission beyond that date and, perhaps, permanently. We await with interest a consultation paper from the European Commission, which is expected to address this issue.
My Lords, my pleasure at finding myself in agreement with one of Her Majesty’s Government’s initiatives is almost too great to bear. Do the Government therefore agree that trade associations in this country, and all over Europe, are very disturbed by these proposals, as indeed is the United States of America, which shares our system? Further, is the noble Lord aware that the commissioner, Martin Bangemann, in 1996 revealed that the reason for this unfortunate measure was that the United Kingdom shared that common system of weights and measures with the United States and thereby enjoyed an unfair competitive advantage? Would the noble Lord care to comment on that? It perhaps gives the flavour of so much of the legislation coming our way from Brussels.
My Lords. First, I confess that when metrication was introduced to this country through Parliament, I did not follow the debate very closely—partly because I was six years old at the time. I do not believe that the dual labelling of cauliflowers will lead to the end of civilisation as we know it. Having said that, the Department of Trade and Industry is well aware of the attitude of industry, particularly on metrication. We have had useful meetings with representatives of a wide range of sectors, and we are very up to date with their views. Currently, most transactions are dealt with through metric units. Of course, we are aware that there are countries such as the United States, for example, that do not use the metric system.
My Lords, can the Minister be a little bit bolder on modernisation, bearing in mind the Labour pride in past modernisation? Is he not aware that metrication is wanted by the vast majority of trade associations in this country and in the other member states, including some of the new ones? Why do we not press ahead with it, allowing for the consultation and bearing in mind that even the youngest school child understands the metric system in this country perfectly, unlike the noble Lord, Lord Pearson of Rannoch?
My Lords, of course there are arguments on both sides. There are those who support the metric lobby and there are others, not necessarily the youngest people, who are more comfortable with imperial measurements. We need to take both strands of opinion into account. The European Commission is looking at the area, so we should await its consultation before holding our own in this country.
My Lords, is the noble Lord aware that, when in 1799 compulsory metric measures were forced on France, the system was so badly received by the populace that the old measures remained in use? Napoleon in 1812, when he had more pressing problems on his mind, authorised the usage of what he called mesures usuelles, which relegalised traditional French measures. They are still in use in France today. With that historical lesson in mind, will Her Majesty's Government tell the European Commission that they will not criminalise the use of non-metrical measures?
My Lords, I do not want to go back in history quite so far as 1812, bearing in mind that we are in 2006. The noble Lord has a point, but the Commission will look at the issue. It has already granted one extension on the regulations on dual labelling that came in in 1989, which have been reviewed and extended until 1999 and then again to 2009. The Commission is looking at a further extension of the use of dual labelling, and even a permanent derogation, so it is too early for me to comment on the issues that he raises.
My Lords, is it not important to hammer home the point that this is nothing whatever to do with the merits or demerits of metrication? What possible public benefit would follow from the likes of me being deprived of the right to know whether I was buying a shirt with a 15 and a half-inch collar? How will the banning of those so-called supplementary indications hamper free trade or the completion of the single market?
My Lords, it is the Cross-Benches’ turn, to be honest, and a Cross-Bencher did stand up.
My Lords, I declare an interest as a patron of the BWMA. Is the Minister aware that, unless something is done, in just over three years it will be illegal to sell not only the shirt with a 15 and a half-inch collar to which the noble Lord, Lord Waddington, referred, but a pair of size 9 shoes? It will be illegal to advertise a car that does 50 miles to the gallon or an executive jet that cruises at 30,000 feet above the weather. Moreover, what will happen about bicycles? The Minister may not be aware, but they are sold with 26 or 28-inch wheels all over Europe, not merely in the United Kingdom.
My Lords, as I said, the Commission is looking at that. We have already had two reviews that have extended the use of dual labelling, and we may well have further extensions or a permanent derogation of the scheme, so I do not think that the noble Lord’s fears are justified. After all, we still use the mile, the yard, the foot, the inch, the pint, the troy ounce, the acre and other imperial measurements, so perhaps he is being too doom-laden in his warnings.
Children and Young People: Bullying
My Lords, the Government fund the Anti-Bullying Alliance to help teachers and schools to tackle bullying, such as through the annual anti-bullying week, last week. Other initiatives to tackle bullying include our widely used anti-bullying guidance, Don’t Suffer in Silence, which we are supplementing with new guidance on prejudice-driven bullying, and the new Education and Inspections Act which imposes new requirements on schools, when framing their behaviour policies, to consult all pupils and parents.
My Lords, I thank my noble friend for that comprehensive reply. I am pleased that he mentioned anti-bullying week when a number of issues were raised about what was being done to and by young people to make them unhappy. What is being done about helping parents understand and tackle bullying in schools? Parents are often the last people to know, which causes much unhappiness for their children.
My Lords, my noble friend raises an important point. It is vital that schools engage fully with parents on all incidents of bullying. My department, the DfES, provides £200,000 a year to fund Parentline Plus, a telephone advice line offering guidance for parents on a range of subjects, including bullying. As well as the advice line itself, that money funds the Be Someone to Tell information campaign and booklet, aimed at parents whose children are bullies or are being bullied. I am told that schools and parents have been made aware of the campaign and associated resources via the PLP website. At first, I thought that that was a new function for the Parliamentary Labour Party, but I discovered that although that would be an important function for it, the initials stand for the Parentline Plus website, www.parentlineplus.org.uk. We urge all parents whose children are bullied to use the website and to take full advantage of the advice and guidance that is offered there.
My Lords, does the Minister accept the recent findings of the Children’s Commissioner for England, Professor Aynsley-Green, that children or young people with disabilities are twice as likely to be bullied as their peers and that those with learning disabilities are bullied even more? If so, what do he and the Government propose to do about them?
My Lords, the noble Lord raises an important point and he will be aware that, under the Disability Discrimination Act, from December all schools must have in place disability equality plans. The tackling of prejudice against disabled children, including bullying, is one of the features that schools will have to cover in those plans.
My Lords, I was delighted to see that Bolton Wanderers and celebrities such as Sara Cox led initiatives last week to highlight the problems of bullying. However, how we can avoid our children getting mixed messages, when many reality TV programmes that are widely watched depend on ritual humiliation and when a video game about bullying is just about to go on sale in our shops?
My Lords, first, I welcome the noble Baroness to her new duties on the Front Bench and I send the best wishes of the House to her predecessor, the noble Baroness, Lady Buscombe, who we congratulate on her appointment as chief executive of the Advertising Association.
The noble Baroness, Lady Morris, raises an important issue. We expect parents, who should be in the front line of tackling these issues, to exercise proper care and discretion over the activities engaged in by their children, including participation in those sorts of games and the high risks that they carry, as set out by the noble Baroness.
My Lords, the noble Baroness raises an important issue. One of the announcements made last week during anti-bullying week was an important project to examine faith-based and other prejudice-driven bullying in schools, in association with the Beatbullying group. This will cover issues such as Islamophobia and problems faced by pupils with disabilities. I shall certainly let the noble Baroness know when we have the results of that.
My Lords, on Islamophobia, is my noble friend aware that a recent survey by the Mayor of London showed that since the “veil debate” there has been a huge increase in the bullying of Muslim children? What instructions to deal with that, if any, have the Government given to school governing bodies or head teachers?
My Lords, we could not be clearer in the guidance and advice we give to schools on bullying. We have also issued guidance on tackling bullying specifically in relation to race, religion and culture, and next year we will publish guidance responding to homophobia and homophobic bullying. So we take all these areas of bullying very seriously indeed and we make advice available to schools. However, ultimately, schools have a duty to take this issue sufficiently seriously, and we rely on them to engage fully with parents and staff to see that that is so. We believe that the new powers in the Education and Inspections Act—particularly the much stronger powers that schools now have in respect of discipline and behaviour—will make it easier to enforce the policies that they have in place.
My Lords, everyone will be concerned to see that parents are thoroughly involved in the procedures, but do the Government think that the special arrangements in place are appropriate for young carers, whose parents are perhaps not as actively involved? For example, mentoring by older pupils of new pupils at a school might very well help in this respect.
My Lords, mentoring plays an important role in tackling bullying, not least in respect of young carers—a very important group mentioned by the noble Baroness. Last week, we set out plans to extend the successful peer mentoring scheme by adding nearly £500,000 extra to the Childline in Partnership with Schools scheme to expand the training programmes to cover more than 60,000 young people a year. So we are giving additional support in that area.
My Lords, government office records indicate that in the past five years disposals have affected 225 statutory allotment sites in accordance with the legislative and planning framework, which is in place to protect statutory allotments. We do not require local authorities to provide figures for the disposal of temporary or private allotments, allotment gains or gains for other types of green spaces, as it is a matter for local authorities to determine levels of provision to meet a community’s needs.
My Lords, I thank the noble Baroness for that reply but is she aware that in one year alone, out of 56 applications, 44 were approved, which is equivalent to 84 football pitches? Is she also aware that in many areas people are looking for allotments without success and that there is a long waiting list for them?
My Lords, I was not aware of those specific figures, but I am glad to have them and should like more details. There is no doubt that we have strengthened protection for allotments since 2002, when we put in place the regime under our planning policy guidance 17, whereby consent can be given only if an allotment is surplus to requirements, if adequate provision is made and if note has been taken of the numbers on the waiting lists. We have also made it clear that local authorities must audit their green spaces. This is an important matter. I am sure that the noble Baroness shares my passion for allotments, which bring great joy to the community. There is an increasing demand for them and we want to see more being provided.
My Lords, does my noble friend agree that the provision of allotments on a greater scale than is permitted at the moment could be part of the Government’s campaign to combat obesity? Allotments involve not only the direct production of healthy food but also exercise for the allotment holders. Is it not astonishing that so far the Minister has said only that this matter is up to local authorities when the Government themselves are campaigning on various matters relating to obesity among young people?
Absolutely, my Lords. We are in debt to the 1908 Liberal Government—perhaps the last Liberal Government—who introduced the requirement to provide allotments. There is no doubt that, as a result, we have a generation of very fit elderly men and, increasingly, a generation of very fit young women who work on allotments and come forward from all parts of the community to grow food. Of course, my noble friend is right: that forms part of our healthy eating regime and our passion for exercise.
My Lords, as things stand at present, local authorities are able to use Section 106 planning agreements to secure land for allotments and funding for various small-scale local projects. Is the Minister aware of the disquiet created by the proposal for a planning gain supplement, which will be distributed centrally, which will put under direct threat small-scale local projects such as allotments?
My Lords, the average age is certainly coming down. Interestingly, we have a very proactive policy for developing green spaces. The Public Accounts Committee praised the way that our green spaces, particularly parks, are improving in quality. We support the British Trust for Conservation Volunteers which has a wonderful scheme called Green Gyms under which young people go to green spaces, clean them up and improve them, and in the process improve their own health.
My Lords, I invite my noble friend to take a little further the advice given to local authorities. I recognise what the Government have done and that many local authorities have preserved a number of allotment sites against planning stress—I was gratified to find that my grandfather's allotment still existed in an area of great stress in west London—but does the Minister accept that a number of local authorities, including some in rural areas, allow transport, planning and housing decisions to override the need to preserve allotments of all sorts, not simply those that are preserved as a result of earlier statutory provision?
My Lords, allotments have been uniquely protected under the law since 1925. They are not treated as previously developed land. All the evidence suggests that when allotments are disposed of some are used for housing—necessarily so in some cases—but many are used for improving green spaces so they become other kinds of green spaces. That position is not categorical, and such decisions are very difficult to make, especially when they have to weigh up the criteria set out in PPG17.
Yes, my Lords. There is nothing to stop local authorities doing that. This particular planning statement requires them to audit and think about what green space they need and how they will use it. That would be a very good invitation to schools, particularly as school gardens are also coming back into fashion, which is a pleasure to see.
My Lords, statutory allotments are the responsibility of parish councils where they exist. Many parish councils would like to provide new allotments but cannot afford the capital costs of setting them up. Very often allotments are quite cheap to run and maintain—obviously a huge amount of voluntary labour is involved—but it is expensive to set them up, to buy the land and to create them in the first place. Would it be a good idea to have a better system of grants to parish councils to set up allotments?
My Lords, parish councils can raise certain amounts of money themselves, of course. I am sure that the noble Lord will be pleased that we are encouraging more parish councils to be created. There are other ways in which a small amount of land can be set aside and bodies such as Groundwork can help in that process. I shall consider what the noble Lord said.
Prisoners: Foreign Nationals
asked Her Majesty’s Government:
How many of the 1,023 foreign national criminals who were released from prison between February 1999 and March 2006 without the appropriate consideration of deportation or removal action had served sentences for crimes of violence; and how many have since been deported.
My Lords, the Immigration and Nationality Directorate’s director-general updated the Home Affairs Committee on 9 October regarding the 1,013 foreign national prisoners released without deportation consideration. That update outlined the progress being made in dealing with those who committed the most or more serious offences. The director-general explained that 38 of the 43 most serious offenders and two-thirds of the 146 more serious offenders have had their cases resolved or brought under control.
My Lords, I am grateful to the Minister for her Answer, as far as it goes. Of the kidnappers, arsonists, rapists, drug traffickers and murderers who the Government say were among the 1,023 criminals released without proper consideration of deportation, should the public not be told in plain language how many in each category have been rounded up and deported, and how many are still unaccounted for? Is it not correct that such progress as has been made in rounding these people up has been at the expense of the campaign to get rid of failed asylum seekers? In the past few months, the number of failed asylum seekers still in the country has actually gone up.
My Lords, we have made those details available, which is why the director-general made her regular reports. The details were contained in her statement. For the purposes of clarity, 20 individuals from that group have been detained, eight have been granted bail by the Asylum and Immigration Tribunal, four have been removed from the UK, a decision has been made not to deport seven, and five of the most serious are currently not under control. Those figures were given, and we are determined to drive them down.
We have two important issues. First, we must ensure that offenders are dealt with appropriately and not released until the issue of their deportation has been settled. Secondly, we must deal with the tipping point. Both of those issues are being worked at with great energy.
My Lords, the Human Rights Act is certainly not being undermined. I hear what the noble Lord says about shortcomings at the Home Office. I reassure the House that these issues are decades old, and the Government are tackling them with great energy.
My Lords, the noble Countess is right that judges have that power. We are making strenuous efforts to ensure that people’s nationality is accurately identified. Many do not disclose their nationality at the inception of proceedings. We are doing as much as we can to ensure that that is changed.
My Lords, the figures are fluid and I therefore want to give them accurately. About 10,000 prisoners purport to be foreign nationals. I put it that way because some will be EEA, Irish and Commonwealth nationals who will have rights to reside in this country under rules made under the last Administration, giving permission for people to remain after 1973. I shall write to the noble Lord about the figures for those who were here before 1997.
My Lords, in her answer to me, the Minister referred to a “tipping point”. Will she remind noble Lords what she was talking about? Was it not an undertaking by the Government that they would work for a situation where more failed asylum seekers were being removed from the country than were coming into the system as newly processed failed asylum seekers? Is the truth not that the Government have failed dismally in reaching that tipping point?
My Lords, it is not true that the Government have failed dismally. The noble Lord will know that for two quarters the tipping point was met and, in fact, surpassed. In the past two quarters, there has been more difficulty, and the tipping point has been narrowly missed. But the energy to get us to the stage where we are deporting more people than are making applications is certainly continuing and has been invigorated in the past year to make sure that the target is met.
Concessionary Bus Travel Bill [HL]
My Lords, I beg to introduce a Bill to make provision about travel concessions; and for connected purposes. I beg to move that this Bill be now read a first time.
Moved accordingly, and, on Question, Bill read a first time, and ordered to be printed.
Disabled Persons (Independent Living) Bill [HL]
My Lords, I beg to introduce a Bill to impose duties upon certain persons and bodies in respect of disabled persons; to confer certain rights upon disabled persons for independent living; to amend the Mental Health Act 1983; to amend the Care Standards Act 2000; and for connected purposes. I beg to move that this Bill be now read a first time.
Moved accordingly, and, on Question, Bill read a first time, and ordered to be printed.
Administration and Works Committee
Works of Art Committee
My Lords, I beg to move the Motions standing in my name on the Order Paper.
Administration and Works Committee
Moved, that a Select Committee be appointed to consider administrative services, accommodation and works, including works relating to security, within financial limits approved by the House Committee;
That, as proposed by the Committee of Selection, the following members together with the Chairman of Committees be appointed to the committee:
V Allenby of Megiddo,
L Cope of Berkeley,
B Hollis of Heigham,
E Mar and Kellie,
B Masham of Ilton,
L Shutt of Greetland,
Bp Southwell and Nottingham,
L Williamson of Horton;
That the committee have leave to report from time to time.
Moved, that a Select Committee be appointed to advise the House on the resources required for Select Committee work and to allocate resources between Select Committees; to review the Select Committee work of the House; to consider requests for ad hoc committees and report to the House with recommendations; to ensure effective co-ordination between the two Houses; and to consider the availability of Members to serve on committees;
That, as proposed by the Committee of Selection, the following Members together with the Chairman of Committees be appointed to the committee:
B Amos (Lord President),
B McIntosh of Hudnall,
B Thomas of Winchester,
L Williamson of Horton;
That the committee have leave to report from time to time;
That the committee have power to appoint specialist advisers.
Moved, that the Select Committee on Procedure of the House be appointed and that, as proposed by the Committee of Selection, the following Members together with the Chairman of Committees be appointed to the committee:
B Amos (Lord President),
L Cope of Berkeley,
B Hayman (Lord Speaker),
B Shephard of Northwold,
L Shutt of Greetland,
L Williams of Elvel,
L Williamson of Horton;
And that the following Members be appointed as alternate members:
B Thomas of Winchester.
Works of Art Committee
Moved, that a Select Committee be appointed to administer the House of Lords Works of Art Collection Fund; and to consider matters relating to works of art and the artistic heritage in the House of Lords, within financial limits approved by the House Committee;
That, as proposed by the Committee of Selection, the following Members be appointed to the committee:
L Bernstein of Craigweil,
L Crathorne (Chairman),
L Harris of Peckham,
B Hilton of Eggardon,
Ly Saltoun of Abernethy,
L Thomas of Swynnerton,
That the committee have leave to report from time to time.—(The Chairman of Committees.)
On Question, Motions agreed to.
My Lords, I shall say a word on advisory speaking times. Occasionally, such advice gives rise to exchanges in the House, but they are advisory speaking times. They are not compulsory, but unless the House has some advice from someone who has the job of doing the arithmetic about the number of speakers and the advisory finishing time, which is 10 o’clock today, no one will have the faintest idea of what a reasonable length of speech is. So, with that disclaimer, I am saying that, for us to finish at 10 o’clock, Back-Bench contributions need to be a maximum of 13 minutes long.
Debate on the Address
Debate resumed on the Motion moved on Wednesday 15 November by the Lord Giddens—namely, That an humble Address be presented to Her Majesty as follows:
“Most Gracious Sovereign—We, Your Majesty’s most dutiful and loyal subjects, the Lords Spiritual and Temporal in Parliament assembled, beg leave to thank Your Majesty for the most gracious Speech which Your Majesty has addressed to both Houses of Parliament”.
My Lords, it gives me great pleasure to open this debate on the Queen’s Speech. First, I take the opportunity to thank my noble friend Lord Sainsbury of Turville for his tireless work in your Lordships’ House and within the Government. He has consistently championed the case for UK science and technology and has had a significant personal influence on the drive to encourage more innovation and entrepreneurship in our universities and to bring more of the fruits of their work to the market. My noble friend has inspired enormous respect in the scientific community. He also spoke for the Department of Trade and Industry in your Lordships’ House and worked extensively on primary and secondary legislation in a number of areas, including energy, employment rights and company law reform. I am sure the whole House will join me in wishing him well and in looking forward to the continuation of his erudite contributions to your Lordships’ debates.
My Lords, I also take the opportunity to wish the noble Lords, Lord Bilimoria and Lord Rowe-Beddoe, well with their maiden speeches. We eagerly look forward to their contributions to today’s debate.
I shall start by looking at the economic climate and, in particular, at globalisation and how the Government can help to create the conditions for business success. Since 1997, we have created a strong and stable economy that has underpinned and strengthened the business environment. That has led to record continuous growth and high employment. We have had the longest period of low inflation since the 1960s and historically low interest rates. Over the past nine years, we have had the longest period of sustained growth for 200 years.
Globalisation is one of our major challenges and one of the major opportunities facing business today. The rapid growth of emerging economies, such as India and China, provide substantial opportunities for the UK, with new markets for our exporters and investors and cheaper and more diverse goods and services for our consumers. The Government cannot create business, but they can and should create the conditions where business can grow and flourish. This is a key role for the Department of Trade and Industry. We provide support to companies to ensure that this country remains one of the best places in the world to do business. There are now 600,000 more small and medium-sized enterprises than there were in 1997, supported by Business Link and the DTI’s Small Business Service. To maintain our economic position, we must continue to develop technology—£3.5 billion of the department’s budget goes to science and innovation. That is around half of the department’s total budget. That has more than doubled since 1997. That is necessary, as in our global economy we will prosper only if we are at the forefront of innovation and invention.
The UK continues to have an envied record in research. With just 1 per cent of the world’s population, we produce 9 per cent of all scientific papers and receive 12 per cent of all citations. We cannot compete on low wages or low skills, and nor should we. We can and must compete on quality and excellence, skills and high added value and particularly on our ability to innovate.
The UK is well placed to meet future challenges. We are restructuring our economy rapidly and effectively. We lead Europe in a number of knowledge-based industries, such as aerospace and pharmaceuticals, biotechnology, mobile communications and photonics. Since 1997 the value of collaborative research between universities and businesses has increased by more than 50 per cent. In the past two years alone, 20 spin outs from UK universities have floated on the stock market, with a combined value of more than £1 billion. We have developed new business opportunities in the creative industries and microtechnology and nanotechnology.
The UK must respond to globalisation by raising productivity and competitiveness. We are making progress in raising productivity growth over the economic cycle. We have made progress in closing the productivity gap with France and Germany. These improvements in productivity are all the more impressive because they have coincided with a very strong recent UK employment performance.
The UK competition regime is also well regarded. A recent report of individual competition enforcement agencies ranked the Competition Commission joint first in the world.
The DTI’s productivity agenda demands an efficient market framework. That includes, as I have just mentioned, rules to maintain competition to keep markets fair and protect employees and consumers. Regulation should be simple to understand and should avoid unnecessary burdens on business. Creating an effective regulatory regime is key to creating the conditions for business success, especially for small firms.
There can and should be no apology for laws providing for health and safety in the workplace. We have shown that you can deliver fairness in the workplace and a strong economy. We are determined to keep it that way. We want to ensure that where we have to regulate, we do so with as light a touch as possible. We need to ensure that the costs imposed are proportionate and do not undermine the benefits provided. We also want to reduce the administrative burden—unnecessary paperwork and red tape—associated with existing regulation. The DTI has already committed to delivering £1 billion worth of reductions in regulatory burdens by 2010.
As part of the Government’s drive for better regulation, departments will shortly publish simplification plans, as mentioned by my right honourable friend the Prime Minister at the CBI conference today. The DTI’s plan will have a straightforward purpose—to reduce the cost and complexity of the department’s regulation. A wide range of measures will reduce the DTI’s administrative burdens by up to 25 per cent.
We cannot discuss globalisation without referring to our low carbon energy future. There are no bigger challenges facing government than how we deliver energy security and tackle climate change. Sir Nicholas Stern’s report made it clear that the scientific evidence is now overwhelming and that the economic case for an urgent response is irrefutable. If we do not act, the overall costs of climate change are equivalent to losing at least 5 per cent of global GDP now and for ever. The costs of taking action can be limited to around 1 per cent of global GDP. With the publication of the Energy Review this summer, the Government have shown their determination to address the twin challenges of tackling climate change while securing the country’s energy supplies.
There is no doubt that tough decisions are needed. The UK is entering a new era for energy supplies. For years, we have been an energy island, self-sufficient in gas and oil, thanks to North Sea production. The Government are working with industry to extend the life of energy resources in the UK’s continental shelf, and there is record interest in our innovative exploration and production licences. But, by 2020, we are likely to be importing 80 to 90 per cent of our gas. My department is engaged proactively with the energy industry, which is meeting this challenge with £10 billion of investment in infrastructure to bring in and store supplies from diverse sources. At the same time, we need new investment in all forms of low carbon generation. We need energy in the future that will be affordable, secure and clean. And we need to use it more efficiently.
Our strong, long-term commitment to renewables is well known and is bearing fruit. Driven by the renewables obligation, we are already producing about 4 per cent of our electricity from renewable sources such as wind farms, but our ambition is even greater. We have our sights set on a fivefold increase—20 per cent—by 2020. But the reality is that renewable energy simply will not be able to provide all the new electricity generation we need in the timescale in which we need it. That is why our review concluded that we would need a range of security of supply measures and low carbon options, including nuclear, for the future, as well as new import options. Nuclear power currently accounts for a fifth of our electricity, but this is set to decline to about 6 per cent by 2020 as our ageing power stations reach the end of their lives. We believe that new nuclear power, as a source of low carbon generation, could make a significant contribution to our energy mix. The Energy Review has given us an invaluable opportunity to make informed, evidence-based choices on the future of our energy policy. We have already consulted widely and we are continuing to do so on the specific proposals in the review in the run-up to a White Paper in March.
On affordable energy, fuel poverty is an issue that has been raised by your Lordships’ House. The Government have taken significant steps in the past 10 years to drive down the number of people in fuel poverty. For example, the winter fuel payment was only £20 in 1996-97. This year, about 11.5 million pensioners in more than 8 million households will receive payments of £200, rising to £300 for people over 80. We are spending £800 million on improving heating and insulation in low-income households through initiatives such as Warm Front. But rising energy prices mean that we do have to keep up the pressure and use all the means available to reach and protect the most vulnerable homes, particularly during the winter.
The Consumers, Estate Agents and Redress Bill will give consumers a stronger voice. Our proposals on estate agent redress will put power back into the hands of the buyer and seller. Buying a home is one of the most important decisions that anyone can make. Most estate agents operate honestly and fairly, but some do not. Indeed, research shows that 21 per cent of sellers and 23 per cent of buyers experience problems with their estate agents. All estate agents will be required to belong to an approved scheme to determine disputes between estate agents and buyers or sellers of residential property in the UK. Approved schemes will also award compensation. The Bill will also ensure that agents refusing to join the scheme will be banned from operating, and that other rogue estate agents could be banned from continuing in business. We will also require estate agents to keep records of client dealings for six years, which trading standards officers will be empowered to inspect without notice.
On doorstep selling, consumers will be given the same seven-day cancellation and cooling-off rights for a sale made during a solicited sales visit as they have for a sale made during an unsolicited one. This will make it more difficult for rogue traders to operate successfully. The Bill will also bring together Energywatch, Postwatch and the National Consumer Council to form a more coherent and effective voice for consumers, giving them a single point of contact for dealing with problems. The Bill will be fair for business and good for the consumer.
The Statistics and Registration Service Bill has been introduced in another place. The Bill aims to entrench statistical independence through the creation of a new, independent board with statutory responsibility for ensuring the quality and comprehensiveness of official statistics. The board will be outside ministerial control, established as a non-ministerial department, with special funding arrangements outside the normal spending review process. The board will, as far as possible, replace the role of Ministers in holding the National Statistician to account for the running of the Office for National Statistics.
Moving on to issues covered by the Department for Culture, Media and Sport, I hope that noble Lords will support the Digital Switchover (Disclosure of Information) Bill. The country is due to switch its analogue televisual broadcast signals over to digital region by region between 2008 and 2012. Since 1998 the shift to digital television has been rapid and impressive. Today, more than 70 per cent of UK homes have a digital TV. Digital switchover, which will start in Whitehaven at the end of 2007 and the rest of the Borders region in 2008, will bring considerable benefits to the UK, primarily to the 25 per cent of homes that cannot get digital services through an aerial now. There will also be benefits from the release of spectrum currently used by analogue which can be used for new and dynamic services to support future economic growth. But switchover needs to be an inclusive process and no one should be left behind. That is why the Government have established a comprehensive help scheme for those aged 75 and above or with a significant disability. We want to make it as easy as possible for those who most need help to get the assistance they need through the transition to digital switchover. That is why we are introducing a Bill to allow the Department for Work and Pensions to share social security data with the operator of the help scheme. The measures are supported by the digital switchover Consumer Experts Group which is comprised of organisations such as Age Concern, RNIB, Help the Aged and the National Consumer Council.
Also regarding the Department for Culture, Media and Sport we will publish in draft a Bill to enable the subsequent ratification of the UNESCO Convention on the Protection of Cultural Property in the Event of Armed Conflict. The Bill will strengthen our commitment to the protection of our own heritage and formalise our responsibilities as part of the international community in respecting the cultural property of other nations. It will send a clear signal that the UK takes seriously its commitments under international humanitarian law.
This is a brief summary of the Bills we are about to receive. The measures the Government propose will bring new benefits to businesses and to the public, maintaining security and development and meeting the challenges of the future.
My Lords, it is a pleasure to speak on the final day of the debate on the Address and I welcome the noble Lord, Lord Truscott, to what I think is his first major debate in his new role at the Dispatch Box. It is good to see that so many noble Lords have saved their contribution for our debate on industry, the economy and consumer affairs. It is also a privilege for us that two noble Lords, the noble Lords, Lord Bilimoria and Lord Rowe-Beddoe, have chosen today to make their maiden speeches. I look forward to hearing them and have one confident prediction for both noble Lords: in around an hour’s time they will both wonder why they worried so much about it.
Today I shall speak on matters relating to the economy and from a Treasury perspective. My noble friend Lady Wilcox is our new shadow Minister for Trade and Industry and is to wind up for these Benches. She will focus more on industry and consumer affairs, and between us we hope to cover the whole pitch.
The gracious Speech contained the words:
“My Government will continue to maintain low inflation, sound public finances and high employment”.
This implies that the Government are currently successful on all these measures, but they have yet again, I fear, used the gracious Speech as an opportunity for spin. When the noble Lord, Lord Giddens, moved the humble Address nearly two weeks ago, he said that the health of an economy could be seen in its rate of employment, not its rate of unemployment. He then went on to compare the UK’s employment rate of 75 per cent with those of the sick economies of Europe: France, Germany and Italy. This is, at best, complacent. If we were not doing better than those countries we would be in very serious trouble indeed.
On these Benches we have very real concerns about the rate of unemployment. It is increasing month after month and now stands at more than 1.7 million—that is 5.6 per cent—which is the highest for seven years. Real unemployment, including those out of work and on benefits, is over 5 million. Furthermore, the number of 16 to 18 year-olds not in employment, education or training has risen by more than 40 per cent since 1997 despite the New Deal for young people. These issues need to be addressed.
We also need a word of caution about these statistics. We know that our population is rising, due largely to unplanned, rapid immigration. The governor of the Bank of England has cautioned that net migration has,
“become in the last two to three years a quantitatively more important phenomenon”,
but that we do not have up-to-date or reliable statistics. So we do not know what is happening in the labour market. There is also the impact of immigration on GDP growth, especially as our recent performance, while better than originally forecast, has been below the EU average. I hope that the Minister will say something about the Government’s view of the impact of recent immigration on what is happening in our economy.
The current rate of inflation means that the people of this country are experiencing falling living standards; wages are currently rising less than the prices experienced by ordinary people. The retail prices index currently shows inflation at 3.7 per cent. Fuel inflation, which of course hits the poor hardest, is running at nearly 30 per cent. People are less able to withstand this inflation hit because the Chancellor’s stealth taxes mean that there is also a squeeze on disposable incomes, which have been stagnating or even falling. So, when the gracious Speech referred to maintaining high employment and low inflation, it painted a picture that is contradicted by rising unemployment and falling living standards.
The gracious Speech also referred to sound public finances being maintained. I do not understand how the Government’s record on borrowing can be regarded as sound. Debt has gone up 8 per cent in the past year and is now nearly 37 per cent of GDP—and that is on the basis of the Treasury’s own measures. The Centre for Policy Studies has today published a pamphlet which calculates that, once hidden debt is included, debt is well over 100 per cent of GDP.
What the Queen’s Speech did not say was that her Government would carry on borrowing and raising taxes as if they were going out of fashion and then waste quite a lot of the proceeds by spending on unreformed public services. With regard to the NHS, since the Government came to power, spending on the NHS has doubled but efficiency has gone backwards in almost every year. A series of costly reorganisations does not amount to a reform programme. We now have the predictable results of cutbacks in major hospitals, closures of community hospitals and 20,000 NHS jobs being lost.
Only last week the Chief Secretary was bragging that the Government have already achieved £13 billion of the £21 billion savings promised by the Gershon programme. But these assertions have not a shred of justification and we must remember that the NAO reported that savings which have been previously claimed by the Government from the Gershon programme were,
“not based on clear audit trails”.
We simply do not believe these efficiency claims and we will not believe the Chief Secretary’s call for a further 3 per cent per annum of efficiency gains until they are delivered and audited.
All Governments say, quite sincerely, that they want value for money from their public spending, but achieving it is a different matter. It is pretty obvious that value for money is impeded by secrecy and aided by openness and transparency. There was nothing in the Queen’s Speech on this, so I will help the Treasury to achieve a higher quality and quantity of public scrutiny of departmental spending programmes by introducing a Private Member’s Bill in this Session to achieve greater transparency. I look forward to support from the Government Benches in this endeavour.
Our country needs a healthy business sector if we are to deliver the economic growth and prosperity that underpins healthy public finances and improved public services. But there is no evidence that the Government really understand this and nothing in the Queen’s Speech addressed the need to help British business to compete in the global economy, including in China and India.
Under this Government, we have seen the UK plummet down the international competitiveness league tables. We have heard a lot of talk about removing regulatory burdens—the Prime Minister and the Minister were at it again today—but those have remained relentlessly in place. The Chancellor told us in 1997 that productivity is a fundamental yardstick of economic performance, but he has not yet explained why since 2001, our productivity growth is only 57 per cent of the rate achieved in the five years to 1997.
The World Bank found recently that the UK has the longest corporate tax code of all developed countries, and it was no surprise to read this morning that the CBI’s latest research shows that the Chancellor’s tax changes have adversely affected the UK’s competitiveness. The tax commission report of my noble friend Lord Forsyth found that our system is too complex, too unfair and too unstable. The Treasury really should shake itself out of denial on this.
The Queen’s Speech promised us a Bill on pensions. This will deal only with the reform of the state pension system. There is a degree of consensus on the direction of the Bill, but there remain important issues—not least the level of means testing—on which we have strong reservations. We will have to wait at least another year for the equally important Bill to reform the way in which individuals and their employers will accumulate savings for retirement. That delay will compound the catastrophic decline in the savings ratio under this Government. Neither Bill will undo the harm of the Chancellor’s raid on pension funds in 1997 which has cost those funds at least £100 billion and decimated defined benefit pensions in the private sector. Equally, neither Bill will deal with the increasing disparity between public and private sector pensions or with the unsustainability of the burden of public sector pensions.
Two other Bills were mentioned in the Queen’s Speech which I must mention. The first, the Exchanges and Clearing Houses Bill, will allow the Financial Services Authority to protect our capital markets from unreasonable regulatory burdens. We give this Bill our wholehearted support and look forward to it arriving from the other place later this week.
The Statistics and Registration Services Bill is quite another matter. I was unable to be present at the State Opening, but I am reliably informed that when Her Majesty reached the part about legislation to,
“create an independent board to enhance confidence in Government statistics”,
laughter ensued. We have long argued that we need a new structure to deal with the loss of trust in national statistics, but that requires real independence running across the whole range of government statistics. It requires the role of Ministers and their spin machines to be minimised. The best that I can say about this Bill is that it is in the right direction of travel, but I serve notice that these Benches will be looking for significant changes to the Bill that has already been published. I look forward to hearing in particular the views of the noble Lord, Lord Moser, and my noble friend Lord Jenkin, who I believe will be covering this important Bill.
The gracious Speech gave us no hope that the real issues facing the economy will be dealt with in this Session of Parliament.
My Lords, I, too, join the noble Baroness, Lady Noakes, in congratulating the noble Lord, Lord Truscott, on his appointment and on his speech today, and in saying how much we are looking forward to the maiden speeches of the noble Lords, Lord Bilimoria and Lord Rowe-Beddoe. It is a depressing Queen’s Speech, particularly in proposing yet another raft of legislation on security measures when all the evidence suggests that implementation is lacking, not lack of legislative cover. It really is a holding statement until the new Prime Minister is in place.
However, the Queen’s Speech includes a proposal for a ground-breaking Bill on climate change. Although I do not intend to discuss the contents of the Bill, I do wish to concentrate on climate change. I believe that it is appropriate to do so in a debate on economics and trade because of its fundamental threat to economic activity as we know it. As the Stern report concluded, climate change is the greatest long-term threat facing humanity. It could cause more human and financial suffering than the two world wars and the great depression put together.
Therefore, at one level the Stern report is extremely gloomy reading. It demonstrates that we are on course for a degree of manmade global warming which is unprecedented in scale and potentially devastating in outcome. Business as usual could lead to a reduction in global GDP of between 5 per cent and 20 per cent per annum. Although the noble Lord, Lord Truscott, mentioned 5 per cent, Sir Nicholas Stern suggested that the 20 per cent figure might be nearer the mark. The costs would be unevenly spread, with the poorest nations, as usual, set to be the hardest hit. The report also demonstrates that the window of opportunity to reverse the rise in global emissions is narrowing and that to avoid catastrophic climate change carbon emissions must peak in the next 10 to 15 years. This is at a time when carbon emissions in much of the developed world are still increasing and those of the large developing countries, notably China and India, are racing ahead. Just to take one statistic out of many: the use of coal in China is set to double between 2000 and 2020. Against those pessimistic trends Stern demonstrates that if we take action now it should be possible to stabilise carbon dioxide concentrations in the atmosphere at a less than catastrophic level and at a manageable economic cost. He suggests that it could be the equivalent of 1 per cent of GDP.
I shall assume that the analysis in the Stern report is broadly correct—both as to the science and the economics. I believe that to be the case. Despite the misgivings of some Members of your Lordships’ House—the noble Lord, Lord Lawson, springs to mind—I believe that there is a growing consensus domestically and internationally to this effect. If so, we face a moral and economic imperative to take action and to do it without delay. Is it, however, even vaguely conceivable that mankind is far sighted enough to take action now although the benefits will be seen mainly by our grandchildren and their children?
In coming down on the side of the optimists, I have been greatly assisted by reading the book Collapse by Jared Diamond, in which he charts the histories of societies which have either succeeded or failed, depending largely on their ability to manage their natural resources in a sustainable way. The principal message of the book is that societies are capable of taking and implementing conscious decisions to change their way of life in order to protect their long-term future. He gives the example of the reforestation of Japan which started in the 17th century. Equally, if they behave in an unsustainable way, they can face total collapse. His examples include the Mayans, the Greenland Norse and the Easter Islanders. So we have a choice, and we have the chance to get it right.
The Government seem to share my optimism, in that they have accepted the conclusions of the Stern report. The lack of any coherent strategy to date, however, suggests that a sea-change in approach will be needed if the UK is to take the lead in combating climate change, as the Chancellor has now said he wishes to do. I will not weary the House with a catalogue of the Government’s failure or perversity in their policies on mitigating and adapting to climate change, but, just to show how far they have still to go, I shall mention three. First, environmental taxes have fallen as a proportion of GDP from 3.6 per to 2.9 per cent. Now they are at their lowest level for 18 years. Secondly, the Government are currently facing EU infraction proceedings because of their failure to implement the Energy Performance of Buildings Directive, because of an interdepartmental dispute about what constitutes a public building. Thirdly, in the Thames Gateway over 90 per cent of the land targeted for development lies in the flood plain. It is therefore hardly surprising that the Government’s credibility in this area is pretty low.
Let us be charitable, however, and assume that the Government mean it when they say they want to take a lead in this area. What should they do? They must obviously start by taking a lead at the international level, for it is widely accepted that international action is critical if we are to achieve a sustainable level of CO2 emissions. All major economies will have to curb their emission levels significantly. Because the greatest growth in emissions will be taking place in the developed world where resources are limited, financial and technological support will be needed to enable them to make the necessary changes.
Stern sets out an intellectual framework for achieving that. It begins by setting out a target sustainable level of CO2 concentrations, and although his proposed level of 550 parts per million may be somewhat high for the purist, it seems to be a pragmatic compromise. He then suggests that a price be established for carbon, and a market in emissions established by the use of tradable permits. He also proposes mechanisms for developing low-carbon transport fuels for reforestation and other technology transfers from the developed to the developing world.
There are of course formidable political and practical problems in getting such international mechanisms up and running. The attitudes of the US and Australian Governments have, until now, been major constraints. There are, however, encouraging signs of movement in both those countries. In the United States, California has taken a lead that has been matched by a number of other cities and states, and the White House looks increasingly isolated. Australia has an even bigger incentive to see effective international action, because global warming is set to have an even more devastating effect on the Australian economy, especially its agricultural sector, than on any of the other developed nations. That realisation now seems to be dawning as well.
In the short term there are three areas where the UK can lead international action. The first is at EU level. Manuel Barroso claims that the Stern report has forced him to change his mind and accept for the first time the importance of climate change for the EU economy. We should therefore seize this moment to press forward at EU level, not least by tightening up the allocations under the existing EU emissions trading system, but also by expanding the system to include aviation. We have an economic interest in doing so. The City of London is home to the world’s most active trade and emissions exchange. It already has over twice the volume of its nearest competitor, and looks well set to press home that advantage.
Secondly, we can take the lead in assisting developing countries to adopt more sustainable levels of energy use, and, indeed, to adopt more sustainable levels of energy generation for the world at large. Reports in today’s papers demonstrate how concentrated solar power, for example, has the theoretical potential to generate enough energy for the entire world’s needs from an area covering just 0.5 per cent of the world’s hot deserts. That is the kind of new technology we should be championing.
Thirdly, Stern is particularly clear about the value of trees in the overall carbon balance, the benefits of avoiding further deforestation and the relatively low costs of doing so. The British timber industry is willing and eager to assist in international work in this area and the Government should support it in doing so.
Domestically, the Government must accept that they cannot deal with the problem of climate change without the broadest possible support from the public and the business sector. They must therefore begin by making with passion and conviction the case for taking decisive action on greenhouse gas emissions. Frankly, if Ministers spent a small fraction of the time on this issue that they do on foreign adventures and macho posturing on anti-social behaviour, it would be time better spent.
I have two simple suggestions to help to get the overall message across. First, the Government should produce an edited version of the Stern report. The full version is not terribly digestible for a general audience, but an edited version could be. Secondly, they should distribute copies of Al Gore’s film “An Inconvenient Truth” to all secondary schools and make sure that all pupils see it. Galvanising public support, not least from young people, is the best guarantee that the Government will actually have the courage to take the lead on climate change.
The Government should then spell out that being a leader in this area need not harm the British economy. There are voices in the business community which are arguing that the UK should take action only as other industrialised countries do so. Some of their comments are childishly strident and should be vigorously rebutted. Stern himself convincingly argues that the competitiveness threat arising if some countries move quicker than others in mitigating greenhouse gases is, for most countries, not a macroeconomic one. Some industries will indeed face additional costs; others will have extraordinary growth opportunities.
The easiest way for government to directly affect greenhouse gas emissions in the short term is to change the way in which the public sector itself operates. The sector accounts for 11 per cent of all greenhouse gas emissions in the UK, and government at national and local levels have been extraordinarily complacent about reducing this level. For a Government who set literally hundreds of targets for public sector bodies, it is extraordinary that the performance measures for publicly funded organisations do not include performance targets to reduce greenhouse gas emissions. That should change.
It is not as though there is no good practice on which the public sector as a whole can build. Woking council has led the way with its climate change strategy, and that has led to reduction in energy use in its own buildings over the period 1991 to 2005 by more than 50 per cent. Every council in the country should be doing the same. The same general principle should apply to schools and hospitals. Although I accept that it may be difficult to improve the performance of many existing buildings, the Government should be setting higher standards in the current public sector building programme.
The Comprehensive Spending Review also gives a major opportunity for the Government to embed reduced carbon emissions through expenditure policies at national, regional and local levels. They should influence the sub-national review of economic development and regeneration, because a number of regions have nascent sustainability strategies that need further active government encouragement.
As I said, it is widely accepted that technological change must play a determining part in moving the globe to a carbon-neutral future. I believe that my noble friend Lord Vallance will have more to say on that later. But despite the recent creation of the Energy Technologies Institute, the Government are often too slow and inadequate in promoting technological change at home. It is, for example, widely acknowledged that cleaner coal technology has a major part to play because, even on the most optimistic scenarios, coal will continue to play a major role in energy production in the decades to come.
For coal-fired power stations in the UK, the first step is to install super-critical boilers. One of the largest power stations in Yorkshire is prepared to invest £100 million in a carbon-capture-ready super-critical boiler and is looking for £30 million support from the DTI, yet there appears to be a delay because bids from the relevant budget have been delayed from this autumn to later next year. A new sense of urgency is needed. It is hardly surprising that in a recent poll of energy experts, more than 70 per cent believed that the Government’s energy review would have no impact on achieving the UK’s 2012 Kyoto targets.
The Government can also affect behaviour by appropriate tax and regulatory change. On tax, these Benches have set out specific proposals for taxing higher polluting vehicles and for air transport, both passengers and freight. In Richmond, our council has put policy into practice by pricing car parking permits in line with vehicles’ levels of emissions. The Chancellor is suggesting that he might follow suit. We hope that he does. But we hope that when he does, he uses the revenues raised to ease the tax burdens of the poorest taxpayers rather than simply using the additional cash to reduce the budget deficit.
On regulation, clearly a number of changes need to be made from tightening up the building regulations—frankly, how pathetic it is that in recent decades we have constructed buildings which are less energy efficient than those built by the Tudors—to better energy labelling of domestic appliances and simplifying planning rules for microgeneration.
For the first time the Stern report brings together science and economics, sets a framework to help policy makers decide how much action to take and with what policy instruments, and quite simply helps people understand this most critical issue. The Government say that they want to carry forward Stern’s principal recommendations. For all our sakes, I hope that they do so. For the future of humanity, there is no time to lose.
My Lords, from the time that I walked into this House I have been showered by kindness from everyone; from my fellow Peers, the Convener of the Cross-Bench Peers and his team and all the officers and staff of the House. My supporters, the noble Lord, Lord Dholakia, and the noble Baroness, Lady Prashar, have both been an inspiration to me for many years. I am deeply grateful for the warmth of the welcome that I have received from everyone.
When my appointment was announced, I was surprised to discover that I was the first Zoroastrian Parsi to become a Peer. The Parsi community migrated to India from Persia more than a thousand years ago. Today, the Parsis number fewer than 100,000 people in India, a nation of more than a billion. To me the Parsi community has exemplified the principle that it is not good enough to be the best in the world, one must also be the best for the world. The Parsis historically have always put back into the community. I am so proud of what our tiny community has achieved, not only in India but also in producing the first three Asian MPs in Britain. The first was Dadabhai Naoroji, a Liberal, in 1892; the second, Sir Mancherjee Bhownagree, a Conservative; and the third, Comrade Sak, Shapurji Saklatvala, a Communist and Labour Party member. Then, of course, I realised that my appointment to the House of Lords has finally squared the circle, as I am a Cross-Bencher.
I came to this country as a 19 year-old from India for my higher education. I qualified as a chartered accountant in the City and graduated in law from Cambridge. But within six months of completing my studies I started my career as an entrepreneur. By this time my father, General Faridoon Bilimoria, was General Officer Commanding-in-Chief of the Central Indian Army. I remember that he said to me despairingly, “All this education, and you're becoming an import-export wallah”.
Being an obedient son, I started Cobra Beer from scratch. Entrepreneurship and enterprise were conspicuous by their absence in Her Majesty's gracious Speech, in fact there was very little mention of business at all, and yet today there is a movement in entrepreneurship in this country. As it happens, the same week of the gracious Speech was Enterprise Week, now in its third year and with 3,000 events spreading the spirit of enterprise throughout Britain. In addition to Enterprise Week and many other initiatives, two years ago the National Council for Graduate Entrepreneurship was established by the Chancellor to encourage university students to consider starting a business as a career choice. I am proud to be its national champion.
How far we have come? When I was a student at Cambridge in the 1980s, the words “business” and “entrepreneurship” did not exist in the university vocabulary. Today, Cambridge has a flourishing business school, Cambridge Enterprise, and the Centre for Entrepreneurial Learning.
I am also proud to be chancellor of one of Britain’s truly modern universities; Thames Valley University, which is headquartered here in London. I like to call it “tomorrow’s university today”. It is a university that supports lifelong learning. Talking about lifelong learning, it is truly a privilege for me to be a Member of this House. What I am looking forward to more than anything is not only contributing as best I can, but to learning, and learning, and learning from my noble colleagues here.
When I came to the UK in the early 1980s, Britain was the sick man of Europe and had no respect in the world economy. There was also very much a glass ceiling here. In fact, I was told by my family and friends in India that I would never get to the top because I would never be allowed to get to the top. But look at Britain today—it is a true meritocracy, with opportunity for all regardless of race, religion or background. One of Britain’s greatest strengths is our open and free market. There is no way that I would have been able to start a beer brand from scratch with £20,000 of student debt, in the most competitive beer market in the world, if it had not been a true free market. A free market means huge competition, but it also means that anyone can have a go. I would much rather have it that way round.
What has changed as well is that we now live in a globalised world, where countries are not only interdependent but also far more integrated. I was very happy to see in the gracious Speech that the Government will work to take forward the World Trade Organisation Doha talks. For the past three years, I have served as the UK chairman of the Indo-British Partnership Initiative, which is supported by UK Trade and Investment. We have created the Indo-British Partnership Network, and our mission is to increase trade, business and investment between Britain and India both ways.
The India that I was brought up in as a child was inward-looking, insular and protectionist. Even today, sadly, 300 million people in India live on less than a dollar a day. India is a country with enormous challenges; however some people fail because of, and others succeed in spite of. In spite of all its challenges, today India is one of the fastest-growing economies in the world, growing at 8 per cent a year. There is a thirst for liberalisation and reform and a new-found confidence in India, which is well on its way to becoming a global economic superpower. And yet, today India accounts for only 1 per cent of Britain’s total trade; and Britain has historically been a great trading nation. India accounts for less than 1 per cent of Britain’s investment abroad; and yet we are great outward investors. Although India is an enormous challenge for Britain, it is more importantly a tremendous opportunity for our country and for British business.
The Government’s role with regard to business has changed worldwide, from command and control to government being a catalyst, a helper and a supporter of business. For Britain to meet these new global challenges and opportunities, it is vital that the Government do all that they can to encourage and champion education, science and technology, entrepreneurship, innovation, and creativity. The Government must help British business to do business with India. The combination of government, education and business working together is very, very powerful. Britain is a tiny nation; we are just 1 per cent of the world’s population, and yet we have always punched above our weight. Today, we are still one of the five largest economies in the world. If we can stoke the flames of entrepreneurship in Britain, there is no limit to what we can achieve.
My great grandfather, DD Italia, came from the city of Hyderabad in India, where I was born. He was a Member of the Rajya Sabha, the Upper House in India, and he was a man in whose footsteps I am proud to follow here in our Upper House, the House of Lords. I am also proud to have been inspired by his motto, “to aspire and achieve”. My company and I have adopted this as our vision and added,
“to aspire and achieve against all odds, with integrity”.
It may seem against all odds for Britain in this global world, up against giants like China and India, but we must aspire, and we must continue to achieve, and most importantly we must do so with what we have always been renowned for, and that is our integrity.
My Lords, it is a great pleasure to follow the noble Lord, Lord Bilimoria. I congratulate him on an excellent and informative maiden speech, and I am sure that he knows that his great-grandfather’s grandson and I did our doctorates together at Birmingham University, so we have a lot in common. I also know that his finance director was born with me in the maternity ward, because his father was writing his thesis.
I was reflecting on the noble Lord’s biography during his speech; it is a story of consistent achievement and willingness to take risks. His knowledge of business, understanding of the importance of social responsibility as a holder of the royal society’s Albert medal, grasp of export markets, and not least the wine he produces—which, with proper respect, like a Parsi, he has named after his father—will all be welcome contributions to the life of this House. He has made a very good start and we all look forward to hearing many more speeches from him. I hope that it will not interfere too much with his recreation of making beer.
The gracious Speech allows us to focus on the longer-term challenges of the UK economy. It is an opportunity to reflect on not only the legislation itself, but the economic issues that underlie it. First, I want to join noble Lords from all sides in thanking the noble Lord, Lord Sainsbury, for his long service as a DTI Minister. He has been a true innovator and will be missed by the science and technology community. One of the changes at the DTI that we have seen recently has been the setting up of the technology strategy board, to encourage growth of applied research. For a long time, applied work supported by government near the marketplace was a taboo. For the first time, the technology strategy board, as an arm’s-length body, gives recognition to applied research that will help drive the creation of wealth. Of course its budget should be at least £600 million, not under £200 million, but a first step is always welcome and I congratulate the noble Lord and Sir Keith O’Nions at the DTI on setting up the body so promptly. I also congratulate my noble friend Lord Truscott on his appointment. I am sure that he will act with distinction and expertise. His expertise in Europe will certainly be of great benefit to the scientific community.
The response from the Benches opposite and the media when faced with the last decade of growth has usually been to say that it all goes back to a Conservative Government—the “golden legacy” argument. The Conservative Government made vital changes to the structure of the UK economy, yet the “golden legacy” analysis has a major flaw: it ignores the importance of stability and security. Even ignoring the human cost of economic failure, from a business point of view, instability hurts. If you cannot operate with a reasonable expectation of low interest rates, it is hard to plan ahead. That has changed over the past decade. Secure and stable growth has been a great achievement of this Government.
Another argument from the media and the Opposition Benches has been that taxes are strangling the economy. Of course there are always justified critiques of specific taxes and rates but, when I travel abroad, I see that foreign Governments are unanimously impressed by our achievement of growth without recession. Foreign Governments and businesses can see the bigger picture, which is one of growth, stability, increased employment and increased prosperity. As a result of this stability the Government have been able to tackle public service reform. It is one of the hardest issues for any Government to tackle, with so many stakeholders, employees and vested interests, so perhaps the Government raised expectations too quickly. There has been a lot of criticism as a result of those expectations, but we must admire the great number of achievements in the past five years.
The gracious Speech has been spoken of as being about security. Put another way, the legislation is all about managing risk. So, how do we manage risk? We seem to be free of the doctrine of economic nationalism in the UK, but we need to do more to encourage inward investment with the greatest potential for growth. Successive DTI Ministers have talked about the need to focus strategically on key industries, whether they are called sunrise industries, the knowledge-based economy or high value manufacturing, and leaving everything else to the developing nations. I understand the point, but the sector-based argument ignores the fact that our economic competition is growing across all sectors. After all, technology can move at the click of a button and the education base of developing countries is growing fast—two factors that will have a huge impact on the knowledge-based economy.
For example, Tata Motors, another Parsi company in India, developed the first indigenous-designed Indian car less than a decade ago and now has ambitious plans to produce over a million cars a year within the next few years. China, which produced less than a million cars at the end of the previous decade, is already producing 3 million cars a year and is well on the way to becoming the world’s second largest car manufacturer.
That progress means that British companies and governments should not patronise those in the developing world by implying that only we can be at the top of the technology and skills pyramid. Our competitive advantage should involve a fiscal framework to attract and maintain investment. Alongside this, there should be emphasis on both maintaining an expertise in skills and an R&D base, and in building mutually beneficial partnerships with companies in developing countries. In short, we have to be excellent in everything we do.
A lot of comment has focused on the need for a stronger skills base. This has been a post-war problem for the UK economy. There have been many attempts to ensure that we build our skills base and we await the Leitch report with great interest. Business also needs to do more. A good example of what can be done is Network Rail. Under John Armitt and Iain Coucher, it has set up the Westwood leadership centre, adjacent to Warwick University, which trains people from all across the workforce in a range of areas of expertise. Such investment will be vital for the future of Network Rail and other UK industries. It is good to know that Network Rail has made a profit for the first time.
The Government set up the regional development agencies, such as Advantage West Midlands, which are creating a framework for sustainable economic development. The sub-regions of the West Midlands are now seeing real benefits from economic investment, from Staffordshire in the north to Warwickshire and Coventry in the south. We have also seen the benefit of the RDAs when they have handled economic shocks such as the closure of Rover, Massey Fergusson and Marconi. Being able to act early and with local knowledge is a real advantage. I hope that the Benches opposite will change their views of RDAs, which should be given more power to deliver for their communities, to be bold and to take risks in preparing their regions for the changing global manufacturing and service markets.
Changes in manufacturing are not restricted to the UK. The fall in the share of GDP produced by manufacturing has been across the board in all the advanced nations. Why is this? It is not simply because of lower labour costs. It is because manufacturing companies want access to the markets of developing nations. China and India represent a market of 2.5 billion people with growth rates of between 8 and 10 per cent. What a massive purchasing power. As a result, even when buying the most advanced capital goods from western countries, they can demand huge offsets.
Even with those pressures, and after much restructuring, manufacturing still represents 16 per cent of UK GDP and substantially more if we include manufacturing-dependant industries. Because the UK market is important and we are a stepping stone for inward investment in Europe, manufacturing will remain a vital part of the UK economy. We can ensure its future by continually improving its competitiveness and by seeing ourselves as partners with businesses in rapidly expanding economies, not as rivals.
The same global understanding must inform our approach to climate change. We have known for a while the environmental risks of climate change; the Stern report now outlines the economic risks. It is not only a risk but a catastrophic risk, and it needs to be tackled. I agree with the noble Lord, Lord Newby, that climate change can be dealt with effectively only at a global level. That is not an argument for inaction, but it is clear that the solutions to climate change cannot be found simply in a Bill or a target but in international persuasion and compromise. The Foreign Secretary’s expertise in this area will be of great benefit to the Government.
There is a lot of debate about the impact of Chinese and Indian growth on climate change. With high growth rates, there is increased energy demand and, as we see, increased demand for fossil-fuel plants and a surge in hydroelectric power projects. That is good. We should also be aware that, although China and India are both building nuclear power capacity, that option is not available to other countries in south-east Asia, all of which are growing strongly and will require energy to fuel that growth. As it was in the UK in the 1960s, the impact of those developments on the local environment will lead to regulation of environmental controls. Although the cities are polluted, there is already a huge amount of pressure in Beijing, Shanghai, New Delhi and Mumbai for environmental control. I am glad that a Bill is to be presented on climate change. Although we can lead by example, we need to persuade others to go with us; a holier-than-thou approach will only do tremendous damage.
Since the publication of the Stern report, there has been a lot of debate about penalising the owners of SUVs and 4x4s, whether through taxation or congestion charges. When we consider these issues, we must remember that Britain produces the best 4x4 in the world. It is an export success and the industry is a major employer. We should make sure that we set a level playing field. For example, will our regulation levels match those of other advanced nations? If not, the economic consequences will be very negative. Companies should not be forced to produce different models for different markets.
We also need to be aware of the risks of globalisation when we develop tax policy. We cannot risk being outbid in that regard. There has recently been a great media debate on capital gains tax, inheritance tax and corporation tax. I am sure that the Chancellor and the Treasury are fully aware of that debate, and their decisions will be based on a proper analysis of the impact on the economy. This issue will be decided on the economic case, not by news headlines.
Managing risk is also the foundation of the debate over regulation. Every business can tell a story of crazy regulation and of staff time focused only on filling out forms, and the temptation to demand another bonfire of the regulations is never far away. I welcome the pressure from the top of government to reduce unnecessary regulation, as I do today’s announcement by the Prime Minister. Yet, we can see why consumers welcome regulation when businesses such as Farepak go bust.
We need to trust businesses which show that they can handle a light touch but we need to look more carefully at those which have real risks. I welcome the draft Bill that embraces risk-based regulation for local businesses, and I welcome the Consumers, Estate Agents and Redress Bill, which will help to create more trust in business.
Today, the CBI conference is taking place. Despite the rather predictable headlines that this event generates, Britain is a great place to do business. What better proof of that could there be than the number of bids for British companies and the number of non-UK companies looking to start British operations here?
It is true that the Chancellor inherited a growing economy a decade ago but, even if one grants the maximum possible credit to his predecessors, a decade of steady, stable economic growth is an achievement that every post-war Chancellor would give their right arm for. That record of growth is as good an indicator as any target, any annual measure or any statistic could be. I am familiar with advising business, and I would tell any company that a record that good means that the manager responsible is ready for even greater responsibilities.
My Lords, as foreshadowed by my noble friend Lady Noakes, I want to talk briefly about the sentence in Her Majesty's Speech:
“Legislation will be introduced to create an independent board to enhance confidence in Government statistics”.
I was not able to be present because I was attending a conference on statistics, convened by the Statistics Commission. I, too, have been told of the ripple of mocking laughter that greeted that sentence. That is a measure of the gravity of the problem that we face.
The legislation was introduced into another place last week and the temptation is to use my speech today as a kind of Second Reading speech, but I shall resist it because we do not know in what state the Bill will be when it eventually reaches us. With the record of the Legislative and Regulatory Reform Bill in the previous Session, we would be very wise to wait to see what happens. However, there are two general points, neither of which will expressly be in the Bill, which it would be appropriate to make at this stage. I look forward to the speech of the noble Lord, Lord Moser, with whom I have discussed these matters. I suspect that he knows 10 times more about statistics than the rest us put together, as for a very long time he was the chief statistician.
It is a couple of years since the chairman of the Statistics Commission, David Rhind, asked to see me as part of his wide-ranging inquiry into how the Office for National Statistics and the service were perceived by its different audiences. He may have asked to see me because I was responsible for the census of 1981 as Secretary of State at the Department of Health and Social Security. The census was run by the registrar-general who was a Mr Thatcher—I hasten to add a Mr Arthur Roger Thatcher. The Prime Minister had taken a very close interest in that census. She regarded many of the questions as deeply intrusive. I took Mr Thatcher to see the then Mrs Thatcher. Together we went through every question in the census, punctuated, as I am sure my noble friends will recognise—I hope I do not dramatise it too much—with the words “intrusive”, “unnecessary” and “impertinent”. As all my colleagues found from time to time, my noble friend could be persuaded of the sense of our proposals and, with one exception, we were given the green light. My recollection is that subsequently all went well and the results of the census were, in due course, published with no more than the usual level of interest.
However, events have now moved on. The concern is not now about the intrusiveness of the statistics but the public's mistrust of almost all statistics published by the Government. That was my message to David Rhind when he came to see me, and everything that I have read since then confirms that mistrust. I have queried the phrase in the gracious Speech, “to enhance confidence”—I would have preferred, “to restore confidence”. In fact, the Statistics Commission went further in its press release earlier this month when it said that the legislation,
“must transform public trust in official statistics”.
I do not disagree. If anyone doubts the need for that, I suggest they take a little time to read the substantial report of the Treasury Select Committee in another place, headed “Independence for statistics”, published in July this year. I shall quote only one brief passage which tells the story with stark clarity. Under the heading “Public confidence in statistics in the UK”, it states:
“Recent figures from the ONS show that, while 37 per cent of adults in Great Britain agree that official statistics are generally accurate, just 17 per cent believe that they are produced without political interference and only 14 per cent say the Government uses official figures honestly”.
The Government are aware of this. They have consulted widely, although I must add the criticism that they only published the results a few days ago. We have now been allowed to see their proposals. Of course, the House will wish to debate them in detail when the Statistics and Registration Service Bill reaches us, I imagine, early in the new year. I raise this as a preliminary to arguing wider issues.
It is clear that, whatever emerges as the role and composition of the new statistics board—which I welcome—Parliament must have a considerably enhanced role as the ultimate watchdog. This has been recognised by the Government in proposals in their response to the select committee’s report, which is worth reading. In paragraph 2.26, it says:
“Respondents generally welcomed the proposed central role for Parliament in holding the statistical system to account, although some questioned which Committee should take the lead in providing oversight over the reformed statistical system. Responses that raised this issue were broadly split between recommending the Treasury Select Committee and the Public Accounts Committee, although some also suggested a new Statistical Committee ought to be created”.
Of course, as the report goes on to say,
“it will be for Parliament to decide how best to play its central role in holding the statistical system to account”.
If it is going to be the Treasury Select Committee or the Public Accounts Committee, this will be exclusively the preserve of another place. Why should that be so? There is much expertise on these matters in this House. A Joint Select Committee would be a proper forum for the hugely important role of holding the statistics system to account. A number of people said in the consultation that a new statistical committee should be created. Why should it not be a joint committee of both Houses? That is not a novelty. We have a joint committee of both Houses on human rights legislation, and there are also joint prelegislative committees of both Houses. It will not be for the Bill to prescribe that; it is a matter for Parliament. I hope that the usual channels will listen to argument on this. I am seeking support from this House for that.
Secondly, which government department ought to act as the spokesman in Parliament for what is to be a new, non-ministerial department? Somebody must report to Parliament; some department must answer questions. The noble Lord, Lord Moser, can confirm that, in his day, this was the role of the Cabinet Office. As chief statistician, he had direct access to the Prime Minister. Why does this now have to be the exclusive preserve of the Treasury? Of course Treasury statistics are a hugely important element of the range of official statistics, but not so important that other departments should have a subordinate role in the process of accountability. I shall quote two recent examples illustrating this point.
Earlier this month a report of the review of crime statistics chaired by Professor Adrian Smith was published. In that document, which I got last week from the admirable people who help us in the Library, I read the terms of reference:
“The Home Secretary is concerned that public trust in the crime statistics produced by the Home Office has declined to such an extent that it is no longer possible to have a debate about alternative criminal justice polices on the basis of agreed facts about the trends in crime”.
In the executive summary, one can read:
“Both the scope and definitions of the national statistics that are produced need a radical overhaul. Significant groups of victims are not covered by current surveys and certain major current crime category definitions are confusing and misleading”.
What has that got to do with the Treasury? Is there not some other part of government that would better exercise an oversight on that?
My second example is, perhaps, even more striking. It comes from a recent report by the Royal Society. It looked into future supply and demand for science, technology and mathematics graduates. The figures for that usually come from the Higher Education Statistics Agency. Ministers have taken comfort because the figures apparently show a large rise in student numbers in mathematics and biology, but there were major changes in the way that students were counted and classified from 2002-03 onwards. The summary of the Royal Society report states:
“The society and the Office of Science and Innovation jointly commissioned HESA to produce data on a consistent basis for the whole period 1994/95 to 2004/05, to offset in particular the discontinuities introduced in 2002/03. From these new data, it is clear that the apparent large rise in student numbers in mathematics and to a lesser extent biology is actually just a consequence of the change in way that HESA has classified students on joint courses and education (initial teacher training) courses”.
How is the Treasury supposed to be answerable for that? Does it not need some more central oversight from a body, such as the Cabinet Office, with the chief statistician having direct access to the Prime Minister?
I would like to see two crucial decisions come out of this new legislation: the new board should be answerable to Parliament through the Cabinet Office, not the Treasury, and Parliament should hold the board accountable through a Joint Select Committee of both Houses.
I end with some wise words that I heard at that seminar a few days ago from a member of the Statistics Commission, Sir Kenneth Calman:
“Trust comes on foot, but departs on horseback”.
My Lords, I add my congratulations to the noble Lord, Lord Bilimoria, on his highly refreshing, entrepreneurial maiden speech. For my own part, I shall take up the theme introduced by my noble friend Lord Newby in his excellent speech and address the business end of climate change, following the Stern review and the Climate Change Bill. I should mention my interests as a member of the supervisory board of Siemens AG and of the president’s committee of the CBI.
The Stern review is an excellent ground-clearing exercise, which has allowed us to put behind us the scientific and economic cases for early and purposeful action on global warming. We are now free to concentrate on the difficult part; that is, the action that needs to be taken. The Government are to be commended for bringing forward a Climate Change Bill. It is right that the UK, in its inevitably small way, should set an example. Yet, the UK apart, we are still left with the real and substantive issue of what is to be done on the wider stage to address the global challenge of climate change on a meaningful scale.
The Stern review recommends action to mitigate global warning on three fronts: first, the establishment of a carbon price through taxation, trading or regulation; secondly, the development of a range of low carbon and high efficiency technologies on an urgent timescale; and, thirdly, the removal of barriers to behavioural change.
We might usefully ask ourselves where a betting man might put his money between these three broad approaches. They are not mutually exclusive, but reinforce each other. In deciding where to allocate our resources, we would do well to have a clear idea of which of them offered the best chances of success.
My guess is that our betting man would take the view that useful behavioural changes might be induced in some sections of society in some enlightened parts of the world over an uncertain timescale. Taken as a whole, this would be a worthwhile contribution, but the track record of self-denying ordinance across the globe is less than encouraging. While useful progress can be made, this runner has not shown encouraging form, and a modest flutter would be the most our punter would chance. He could well raise more enthusiasm over the prospects of carbon taxation or the emissions cap and trade schemes—taxes are more amenable than people.
Our betting man might, like me, favour an upstream carbon tax as potentially the most effective and comprehensive instrument available. But, there again, he would observe that, as such, a tax bears directly on electorates—and the odds on Governments across the world having the courage to promote it are less than overwhelming. So he might prefer to bet on cap and trade schemes for industry, which have had a modest run in the European stakes and in some parts of America. But no one seems too keen to put the permits up for auction, which is the way to make them bite. He might also feel that, as we have repeatedly failed to bring a relatively simple WTO trade round to a conclusion within an established negotiating framework, the odds are stacked against introducing a comprehensive raft of carbon trading schemes that extend beyond Europe, across the entire USA and to those parts of the world that really count—China and India. He might wager a slightly larger sum here. He would not want to give the race a miss altogether, but neither would he bet his savings on the outcome, let alone the future of our planet.
It is on the development of a range of low carbon and high efficiency technologies that I can picture the truly discerning punter feeling for his wallet. Then he has a real track record to go on. He will have noted that industry and technology tend to come up with the goods in short order when three basic conditions are met. First, sufficient financial resources and incentives are made available; secondly, that Governments and regulators establish a suitable competitive framework; and, thirdly, those same Governments stand back and let science and business get on with the job. He will also have noted that when industry and technology solve the problems of carbon emissions, the solutions are enduring and not dependent on a permanent enforcement regime of taxation and regulation.
My first plea is that we place our bets wisely and spend at least as much time, effort and resource on the boiler plate of technology and industry and on creating the conditions for success that I have just outlined, as we do on our natural inclination to legislate tax and regulate.
What does that mean in practice? I would like to look briefly at the resources and competitive frameworks. The Stern review has something interesting to say on both. On the resources front, what leaps out from the pages of the review is a massive market failure. We are faced with an incredible paradox. As the threat of global warming has become increasingly significant over the past 20 years or more, so have both public and private investment in energy, research and development gone into steep decline. This is madness and something that simply must be addressed.
In what I found one of the less convincing sections of the review, Stern suggests a doubling of investments in this area to $20 billion per annum globally, on the grounds that this would get us back to the levels of the 1980s. It is always incredibly difficult to determine how much to invest in research and development. There is never a right answer. But there is a right question here: why is the proposed investment in technologies, which could save the future of our world, less than we currently spend on research and development in defence? It makes no sense to be so lacking in ambition. Let us face it: if we get this one wrong, we may have nothing left to defend.
On frameworks for investment in a portfolio of new technologies, Stern makes a sound point in concluding that individual nations’ efforts will not have the direction or scale to come up with the answers we need across the globe. In other words, a series of initiatives such as the UK’s Energy Technologies Institute, although on the right track, cannot cut the mustard.
At the other end of the spectrum, we have the recent announcement of a $10 billion international investment in the development of the world’s first nuclear fusion reactor. This is excellent news, as it gets closer to the scale of resources we need. An internationally co-operative venture into a long-term, long-shot technology is entirely appropriate. But we should recognise that there is no competitive edge in this structure and that, at some point, that spur will need to be provided if real progress is to be made on implementation and rapid dissemination. What is missing between the two extremes of sub-scale national endeavour and non-competitive international co-operation is a competitive framework on a scale sufficient to bring about rapid acceleration in the development of medium-term technologies such as carbon sequestration and photovoltaics—something commanding the resources to make a major difference in advancing practical, cost-effective solutions that can compete with the traditional means of generating power through burning oil and coal.
The answer is staring us in the face. We have the necessary scale of financial resources, technology and skills within the European Union. Indeed, a coalition of the willing already exists at the European level. At the same time, a European initiative in this area would engender a truly competitive race with the United States, as they would have to follow suit in their own economic interests. That is where real progress can be made—if Europe and the United States run neck and neck, co-operating only in the sense of deliberately competing in the same event. How would such a race be started? First, an energy technology institute should be set up at the European level, managed by members of the scientific, economic and business communities. It should be at arm’s length from the current policy and advisory activities of the Commission. The UK Government’s national initiative provides something of a model, but the scale would need to be different. Next, European-wide upstream carbon tax should be levied specifically to finance the institute’s energy research and development programme, at a level closer to that spent on defence research. I believe people would understand that and accept it. It simply makes sense. Then, European emissions caps should be adjusted to allow for the effect of the carbon tax. This would have the incidental effect of spreading the financial burden of mitigation more evenly between sectors. Finally, we should stand back and watch the scientific and business communities get their act together, as they generally do when given the right resources and competitive frameworks in which to operate. They got us into this mess, and they are quite capable of getting us out of it, given the wherewithal to do so.
This is not rocket science. It is much simpler than setting up a European emissions trading scheme and, dare I say it, rather more likely to be effective in mitigating warming on a global scale. It is a golden opportunity for the UK Government to take the initiative and for the European Union to show its worth.
My Lords, the maiden speech of the noble Lord, Lord Bilimoria, was especially appreciated on the Bishops’ Bench, and if I may go beyond printed convention, I congratulate him on it. My intervention in the debate concerns the proposals on digital switchover in the gracious Speech. In the debate held on 9 December 2005 I asked the Government to pay careful attention to the difficulties likely to be faced by the elderly, the disabled and other vulnerable people over digital switchover. So I very much welcome the proposals which the Minister has already highlighted, in particular the intention through legislative provision to target the help required.
I was pleased that, for its trial to discover the type of people who would need such help, the DCMS wisely chose the Hulton ward in Bolton, which is part of Greater Manchester. I hope the BBC took note of that choice and that the Government will continue to give such heavy hints to the BBC about its plans for the move to Greater Manchester. The Bolton trial is a helpful piece of evidence, confirming the ease of switchover for most people and their warm appreciation of digital viewing, but it also rightly emphasises the value of giving practical help to those over the age of 75 and the disabled. That includes giving elderly and other vulnerable people the time to adapt to using digital television, which is estimated to be for most people in these categories on average about four weeks. I also welcome the trial report’s recognition of the vital role played by charities and the voluntary sector, working together with local authorities, in providing realistic support alongside families and friends. So there is a clear message in all this for the manufacturers of digital television equipment: there is no point in having available equipment if the elderly and others find it too complicated to use or the instructions too obscure to be understood.
Making the names of those needing help available to the providers is good resource management, but there are obvious dangers in that, and I welcome proposals to make misuse of the data an offence. That aspect will require careful scrutiny in debate. The source of the data, coming from social services records—including details of disability living or attendance allowances and other social benefits—underlines what was argued by the Select Committee on the BBC Charter, that this is a social cost and not a broadcasting cost.
When we come to debate the Bill, it will be helpful to know whether thought has been given to how long term the provision of help in using digital equipment will be. Someone who could cope initially but then has a slightly debilitating illness may require a level of help in using the equipment that was not needed earlier. In other words, the issue of how elderly and disabled people cope with or require further help with what are likely to be increasing sophisticated pieces of domestic technology is, in an ageing population, likely to become a bigger issue. The Government are rightly addressing digital switchover and it is currently the presenting problem, but as technology advances ever more rapidly I do not believe for one moment that it will be the only problem. If the future digital rollout is to be socially just, then access to broadband, for example, is an equally important issue for the disabled and the growing number of elderly people. Indeed, in common with many noble Lords, I find that personally I have an increasingly vested interest in these matters.
My Lords, I add my congratulations to those of previous speakers to the noble Lord, Lord Bilimoria, on his excellent maiden speech. He and I have much in common—not least that we are both immigrants, not least Cambridge and the law, and not least an appreciation of his excellent product.
This Queen’s Speech provides the legislative programme for the Government’s tenth year in office. The past ten years have seen major economic changes for this country and throughout the world which have posed significant challenges for business, both big and small. It is a sensible time for us to take stock and to consider the issues facing us. The best law is that which is made by legislators who are always striving to understand the needs of the modern world and balance these against the timeless principles which have served this country well.
In their first Queen’s Speech nearly 10 years ago, the challenge facing the Government was how best to create a macroeconomic climate that encouraged stability and sustainable growth. Central to this was, of course, Bank of England independence. The success that this move has had is striking. No letters from the governor of the Bank of England to the Chancellor have been necessary since the current policy has been in place. This indicates a very stable level of inflation.
In addition, it was necessary to introduce a sensible regulatory framework. This took some courage because it involved a reduction in government powers, not only in relation to the Bank of England but also—closer to home as far as I was concerned—in relation to the Competition Commission. In my view, these are marks of courageous government. Reducing the powers of government and thereby increasing the freedom to develop a sensible regulatory framework has worked.
We have not had the same hurried rush to legislation which has resulted in the Sarbanes-Oxley legislation in the United States. I was in the United States two weeks ago and it was notable that the Sarbanes-Oxley legislation is a major bone of contention between business and legislators. The visit this week of Secretary of State Paulson is significant. No doubt he will be exchanging views with our own Chancellor as to how to regulate with a light touch.
Because of the Government’s success and the high levels of successful business in this country, the challenges of the next 10 years will be very different. They will require a number of measures which, I am delighted to see, are addressed in the gracious Speech. The Local Government Bill will no doubt assist greatly in allowing our cities to develop further as economic power houses and business friendly environments. The draft Road Transport Bill will help in developing our transport infrastructure. It will increase powers to create toll roads and give councils more freedom to introduce their own schemes. In safeguarding London’s role as a financial centre, the Exchanges and Clearing Houses Bill will allow the FSA to veto regulatory changes made by UK-recognised investment bodies. It is an important Bill which will enable the encouraging regulatory framework our businesses enjoy at the moment to be maintained, no matter who owns the London Stock Exchange.
The Crossrail Bill and the Greater London Authorities Bill will continue the Government’s success in creating a city authority for London, which has contributed to its prosperity and value as a place to live.
I welcome the Pensions Bill and the commitment to continued consultation with business ahead of future legislation on private pensions. This will lead to a lasting pensions settlement which provides a coherent framework for business.
The noble Lord, Lord Vallance, spoke about climate change. I welcome the Climate Change Bill. The Stern review has been a useful indicator of the economic costs we will endure if we do not grasp the nettle of climate change.
There is a good climate of regulation in this country. We need to do more to help it. I welcome the draft Local Better Regulation Office Bill, which will help small businesses with trading standards and environmental health regulations.
Taken together, these are sensible measures which further enhance the UK’s enviable reputation as a good country in which to do business, where profitable, well-run businesses are seen as a good thing and profitability is not a dirty word. It is the profitability of our companies which delivers social justice and enables us, through tax and pensions, to achieve even more.
We must not get into the same place as the United States in developing an anti-corporate mentality. Sensible measures contained in the gracious Speech will meet the needs of the next 10 years, and I welcome them. There are, however, some areas where I would like to see more. It is important that we develop the education and skills of our people. If we are to compete truly on a global scale, we must not try to compete in those areas where others have greater advantages. Following the words of the noble Lord, Lord Bilimoria, we must encourage an enterprise culture. We must increase ambition and aspiration. In that way, we will improve our performance generally as a nation. We must invest more in our people. We must manage our human capital better. The keynote issues on which we must concentrate in the coming years are free trade, stability, flexibility, education, fairness and assistance with developing the growing nations of the world.
My Lords, I thought it might be useful for your Lordships to hear in this debate from someone who is still actively involved with small and medium-sized businesses. First, however, I congratulate the noble Lord, Lord Bilimoria, on an extremely good speech from a real entrepreneur.
I declare an interest as a director of a plc whose base is in the Channel Islands—I will come back to that later—and as chairman of a private company manufacturing in Scotland. In passing, I might say that I am delighted no longer to have to declare an interest as chairman of a bank’s pension fund. When I was chairman of that fund, as a result of the removal of ACT, I had to change our defined benefit scheme to what our employees considered a much less attractive defined contribution scheme. Like that job, that is history; however, that subject may well come to haunt the Chancellor in years to come. I am not a member of the CBI although what I say may very well chime with some of the things said today at its conference.
My purpose in speaking today is to question the assertion that the Government have been really friendly to business as has been alleged by some, including the Minister—in other words, that business has never had it so good. I do not believe that the running of business has become easier and less bureaucratic under this Government, and while certain actions have been extremely welcome—I instance the changes to business property relief which have safeguarded ownership of some private companies—the general thrust has not been business-friendly.
I said that I was a director of a plc registered and operating in the Channel Islands, with business interests in mainland Europe. Why the Channel Islands? Simply, the tax regime is business friendly and likely to become more so. By contrast, what about the position of plcs in Northern Ireland? The open border to the Republic means 30 per cent corporation tax in the north playing 12.5 per cent corporation tax in the Republic. I am not surprised that a cross-party agreement exists in Belfast for harmonisation or special treatment from the Chancellor to exempt companies in Northern Ireland from corporation tax on the first 60 per cent of profits. However, you can imagine what sort of reaction this would bring in our small company in Scotland, and in a Scottish election year. Does the Minister have any news on this subject?
The Chancellor inherited a business tax situation which was very competitive in the developed world. I fear that that is no longer the case. Between 10 and 20 years ago, the main UK corporation tax rate was among the most competitive in the world. That is no longer the case because other countries have reduced rates while the UK has kept the rate more or less constant. As the Minister said, corporation tax has to be considered in a global context. We cannot hope to compete in a global economy by setting corporation tax in a vacuum. I fear that we have to do something and I hope that the Chancellor may just do that. What should we do? We quite simply have to cut the main rate of corporation tax and simplify the system. It is easy for the Chancellor to say that he is a friend of business; it is quite another thing to prove it. The difficulty may lie in the fact that he has come to rely on that tax for an increasing part of his tax take. Twenty years ago, companies paid £10.7 billion or 19 per cent, of the direct tax bill. Now, this is estimated to be £41.3 billion or 22 per cent of direct taxes.
I hope that as the Chancellor approaches what may be his last Budget, he will bequeath to his successor in that last Budget something that is good for business. He should remember that in a recent survey, 59 per cent of small businesses described forms and other paperwork they have to complete as too complicated. Some 23 per cent acknowledged that there were tax reliefs which they could have claimed but did not because of the complexity of the system. Increased burdens of regulations add enormously to the load of a slim-lined business team, which is particularly so in small businesses such as the one in which I am involved where we have a very small team. Fire and health and safety regulations are all very worthy, but they get evermore burdensome. Any help that can be given by the Government would be welcome, particularly to small businesses. A lower corporation tax rate would allow big business to stay here and be content with a simple tax regime, which used to be the case in Britain.
I am very anxious that as plcs become more dependent on the global situation and, thus, very mobile, we do not become internationally less competitive. I applaud the Department of Trade and Industry showing that there is a rise in the number of 16 to 24 year-olds thinking of starting a business. Please do not let that seed-corn be snuffed out or stifled by unnecessary and onerous imposition on these budding entrepreneurs. Perhaps I may finish by citing the noble Lord, Lord Bilimoria, who said that, to succeed, this country has to punch above its weight. What a true saying that is.
My Lords, I shall use today’s debate to talk about our tourism industry. Sadly, it seems to have only limited interest here at Westminster, yet the industry employs over 2 million people, 7.7 per cent of our workforce. It is our sixth largest industry, with revenue production around £75 billion, and it is still growing. It is the dominant industry in the West Country, the Lake District and Scotland. It plays, and has played, a major regenerative role in many towns and cities in our country.
It was a great privilege to hear the maiden speech of the noble Lord, Lord Bilimoria. With his interests in food, wine and beer, I am sure he is a great supporter of our tourism and hospitality industry. We look forward to hearing the maiden speech of the noble Lord, Lord Rowe-Beddoe, who, as chairman of the Welsh Development Agency for a number of years, I am sure will appreciate the contribution that tourism has made to the regeneration of so many towns and cities in Wales.
I declare my interest as tourism Minister between 1987 and 1989. I have served on the English Tourist Board for a number years, chaired the Museum of Science and Industry in Manchester for many years, and currently chair the Association of Leading Visitor Attractions, a trade body for our larger national visitor attractions which have more than 1 million visitors each per annum.
Successive Governments have treated tourism as something of a Cinderella industry. Rather like an unwanted child, it has been passed from the DTI to the Department of Employment, then to the Department of National Heritage, and now to the Department of Culture, Media and Sport. Ministers over the years have done very little, apart from minor fiddling with the structures of the industry. The tourism industry had hoped that the current Administration, which came into power in 1997, would adopt a more supportive and appreciative approach, but that has not been the case.
My criticisms, primarily of government, are attitudinal, structural and financial. Turning first to the attitudinal—that is, the lack of interest or recognition—tourism is not included in the title of the DCMS. In a letter earlier this year to the Secretary of State, Tessa Jowell, setting out her priorities, the Prime Minister hardly mentioned tourism. The chairmanship of VisitBritain has been demoted to a six-day-a-month appointment, a totally insulting role that is something of a joke, given its huge responsibility for promoting England and the huge ambassadorial role it has overseas.
We have also a lack of joined-up government. Witness the disappointing and short-sighted decision recently to reduce funding to British Waterways, resulting in a significant reduction in their maintenance programme on the canal network, which is one of our most undervalued and underdeveloped tourism assets—purely, it would seem, because Defra has failed to control its budgets.
Above all, though, I criticise the relative lack of interest of the Prime Minister and the Chancellor of the Exchequer, where the axis of power in government really lies. To my knowledge the Prime Minister has held only one major tourism industry breakfast, and I cannot recall the Chancellor attending any significant tourism event. Indeed, for the tourism industry, the prospect of Gordon Brown becoming Prime Minister is about as attractive as Britain on a dark, wet, windy November afternoon.
Turning to my structural criticism, Wales and Scotland have clearly benefited from devolved tourism, both in decision-making and in terms of spend. In England it is vital that we have our own national board working with the regional partners—the RDAs—to market England effectively, to co-ordinate activities, not least research activities, and to share best practice, leaving VisitBritain to market the United Kingdom overseas. It is also vital that there is some high-level governmental co-ordination—perhaps a committee chaired by the Deputy Prime Minister or the Chancellor, to include the Secretaries of State for the tourism-related departments, the chairs of our national tourist boards, the chairs of the Tourism Alliance, the chairs of the RDAs and the equivalent representative of the Local Government Association, to lead and co-ordinate our national tourism policy.
I turn to my financial criticism. The current funding of VisitBritain is of the order of £35 million a year, which would these days barely buy half a Eurofighter. It has declined in real terms by 17 per cent since the Government were elected, and there is talk of a further 7 per cent in prospect. Surely it is madness for a country to spend £6 billion or more on the Olympics, the majority of which will be capital spend, and yet not adequately support in revenue terms VisitBritain, which really should be taking advantage of this spend and of the huge tourism opportunity.
Currently in the USA, our most important tourism market, 24 nations spend more than we do. Ireland spends four times as much in the United States. The industry certainly does not want a bed tax. As for the ability of our museums and galleries to add to their collections—we had a debate on this very recently in the Moses Room—the Metropolitan Museum of Art in New York has 70 times the purchasing power of the British Museum and eight times our National Gallery.
Next March there will be a British Tourism Week to raise tourism’s profile among the public and politicians. It is under the patronage of His Royal Highness the Prince of Wales. My own ALVA organisation has His Royal Highness the Duke of York as our president. The Royal Family plays a major role in supporting tourism in this country. Perhaps senior politicians will use British Tourism Week to demonstrate real interest in the sector and for the first time take tourism seriously.
The changes that I have advocated are relatively modest and easily achievable. But I have one final recommendation. Nothing would give a greater boost to domestic tourism than the bringing in of double summer time. It would substantially expand the tourism opportunity, save hundreds of lives and significantly contribute to a healthier nation. I urge the Government to embrace it without delay.
My Lords, I rise comforted and perhaps a little strengthened in the knowledge that the adrenaline coursing through my veins at this moment has been experienced by many noble Lords and noble Baronesses before me, and most likely overcome. From observation I realise that it is customary to acknowledge the professionalism and courtesy of the staff of this House. Custom it may well be but, endorsing the words of my noble friend Lord Bilimoria, let me assure you that the warmth of reception and attentiveness has been most extraordinary. Your Lordships have been equally generous in your welcome and our Convenor—my noble friend Lord Williamson of Horton—and his staff most helpful.
It is further customary, I note, when speaking in a debate, to declare an interest. Today I declare with pride an overwhelming interest in Wales—not the mammal, although that may be in this era of increased environmental awareness, but the country, a unique constituent of the United Kingdom. It is somewhat different today from the description given in my 1888 edition of the Encyclopaedia Britannica, which, when you looked up Wales, had two words: “See England”.
I had the privilege of serving as chairman of the Welsh Development Agency under four Secretaries of State and three Welsh Assembly Ministers. I am most proud to be in the House in the company of such distinguished former Secretaries of State: the noble and learned Lord, Lord Morris of Aberavon, who kindly introduced me, together with the noble Lord, Lord Griffiths of Fforestfach; the noble Lords, Lord Thomas of Gwydir, Lord Crickhowell, Lord Walker of Worcester and Lord Hunt of Wirral; and two former celebrated Ministers of State, the noble Lords, Lord Roberts of Conwy and Lord Rowlands.
In 1975, the noble and learned Lord, Lord Morris of Aberavon, steered the legislation which created the Welsh Development Agency; a development agency that was to become a benchmark for excellence not only in the United Kingdom but across western Europe. The WDA became synonymous with the term “inward investment”. In the 1980s and 1990s Wales regularly attracted some 15 per cent of the total inward investment flows into the United Kingdom, punching, as has already been said in other contexts, considerably above its weight when one considers that it has but 5 per cent of the UK population. However, inward investment was not the only activity of the agency. By the year 2000 it had completed the largest land reclamation programme undertaken in western Europe, returning more than 22,000 acres of derelict and contaminated industrial sites to commercial, leisure and residential use. Further, the agency encouraged, stimulated and assisted indigenous business innovation and entrepreneurship.
Why was all this activity so vital? Wales had had a fairly static workforce of 1 million, of which more than one-third was employed in coal and steel after the end of the Second World War. By 1975 it was estimated that more than 400,000 jobs had been lost from those industries. As the noble and learned Lord, Lord Morris, must have realised when he created the WDA, something must be done—a statement that some noble Lords may recognise was made by the then Prince of Wales on his visit to the south Wales valleys in 1936, and used, almost 65 years later, by the noble Lord, Lord Rowlands, as the title of a publication.
Something was done. Today I note that in the recently published UK competitiveness index, Wales increased 3.2 per cent year on year, the third best rate of improvement in the United Kingdom. However, we also sadly number two local authorities among the UK's worst performing five. Employment in Wales is standing at 1.3 million—an annual increase of 18,000. For much of 2005 the unemployment rate was below that of the UK. How different this story might have been if successive Governments had not seen fit to assist the transformation of the Welsh economy from black gold to computer chips.
However, today the future is equally challenging. Each week the manufacturing jobs that came into Wales in the 1980s and 1990s from all parts of the world move overseas. Of course they do not move just from Wales; this phenomenon is occurring throughout the United Kingdom as the culture of globalisation embeds itself completely in the corporate psyche. Flows of large, job-creating investment are over. Downsizing and closures are the reality. It is imperative, therefore, that in the face of the diminishing manufacturing base, in which employment is now at an historical low, we redouble our focus on high value-added production to maintain some semblance of activity in this sector in the long term. There is also an increasing urgency to stimulate entrepreneurship—as we have heard this afternoon on more than one occasion—and innovation to create and sustain appropriate funding for our students and pioneering research so as to achieve and maintain leadership.
We must also heed the warnings of the past and current leadership of the Confederation of British Industry that the present level of corporation tax is unsustainable if we are to retain competitiveness not just with Asian economies but with the rest of Europe. It is particularly concerning as outward flows have now begun to include regional and global headquarters and, with them, goes higher paid employment. To complicate the issue further, a World Bank study published three weeks ago, to which the noble Baroness, Lady Noakes, referred, reported that the UK lies second only to India in the global table of most complicated overall tax regimes, with the tax code in the UK about twice the length it was a decade ago.
An increasingly significant factor in our economy is the role of the creative industries. Here I declare another interest. In a recent communication to the Chancellor from the National Campaign for the Arts, it was pointed out that the Department for Culture, Media and Sport believes that almost £1 in every £12 of the UK’s total gross value added is generated by the creative economy. Creative industries have grown far faster than the rest of the economy. From 1997 to 2004, employment grew at 3 per cent per annum, in comparison with just over 1 per cent for the rest of the economy. The UK’s creative industries account for 8 per cent of GDP and provide some 2 million jobs. They provide some 4 per cent of UK exports. In Wales, the creative industries are a great source of innovation, enterprise and prosperity, employing 63,000 people directly, which represents 5 per cent of the economically active workforce.
Recalling the reception given by this House to that part of the gracious Speech that dealt with the proposed legislation to create an independent board to enhance confidence in government statistics, I use those figures with an appropriate health warning. However, I do know more surely about the economic impact of the Wales Millennium Centre. Coincidentally, today marks the second anniversary of its formal opening by Her Majesty the Queen. Since that day, the centre has attracted 1.2 million visitors, of whom 700,000 have watched performances. It has generated an economic contribution that is estimated at some £120 million. It is becoming a national icon, significantly increasing the profile and tourism potential of Cardiff and of Wales as a whole. It has stimulated local business and growth; 30,000 business people have attended 830 conferences. Some 28,000 schoolchildren have attended formal educational visits. This morning, at the centre, I took part in the launch of an imaginatively constructed, zero coupon, Welsh Coalfields Bond, designed to liberate creative talent in all age groups. I could go on, but suffice it to say the performing arts specifically can and do make a difference in monetary terms, but they are also vital to our education system and to community well-being.
In the company of the fledglings of your Lordships’ House, I await the results of the consensus that is being created on its reform, wondering perhaps which of the accounting principles, LIFO or FIFO, may apply. Meanwhile, I thank noble Lords for their patience, and I look forward hopefully to the opportunity of future participation in your Lordships’ deliberations.
My Lords, congratulations are warranted on a first-class maiden speech, as was the previous one. I am sure that all noble Lords present share my view and warmly congratulate the noble Lord, Lord Rowe-Beddoe. He and I have much in common. No, I did not go to Cambridge, but I did go to grammar school. We were born in the same year, but I won’t tell what year if he won’t. We did our national service at approximately the same time, he in the Navy and me in the RAF. Of course, as you can tell by my accent—not necessarily by his accent—we are both Welsh, and very proud Welshmen we are. The similarities end here—he has three daughters and so have I, hence our aged look.
The noble Lord has had a distinguished career. As chairman of the Welsh Development Agency—we have just heard him talk a little about that—he was successor, some years down the track, to Dai Davies, my predecessor. He was some eight years in that job. His work in the Wales Millennium Centre is recorded and has been invaluable. The noble Lord has made a major contribution to the people of Wales, and I sincerely hope that we will hear from him on many more occasions in this House.
I am grateful for the opportunity to speak in this debate and to focus on the approach to British industry and economic development, as well as to refer to climate change. Under Labour’s stewardship, in my view—I realise that it is not necessarily the view of many present in the House—our nation has prospered from nearly a decade of growing employment, steady economic growth and low inflation. In that respect, I agree with the Minister in his excellent opening address to the Chamber. Much of the benefit has been skilfully and imaginatively deployed to restore and develop the NHS and our public education. Much has been done, but much more needs to be done.
However, noble Lords would not expect me to intervene in the debate just to celebrate the successes of the Government whom I support. No, I speak from the perspective of a former general secretary of the steel workers’ union, the Iron and Steels Trade Confederation, now renamed Community—a union with a new and imaginative approach that is capturing the imagination of many. I speak to reflect once again—I have said it before in this Chamber—my deep concerns for the millions of people whose employment and standards of living depend on manufacturing industries. I, for one, believe in a strong manufacturing base. Therefore I am sad to have to say that my Government could do more for manufacturing.
For some, the Government offer little comfort to British manufacturing. Our manufacturing industries are losing jobs at a much faster rate than the competing industries in all other European countries. That is especially true of the steel industry, whose productivity has maintained an average of 10 per cent annual improvement during the past 20 years. British productivity in steel is among the highest in the world, yet output has declined. Indeed, our output per capita has fallen below that of every other western European steel-producing country and the United States of America. Why? Following privatisation under a Conservative Government, the stewardship of the main player in this country, then named British Steel, was—I have to make the point—disastrous. Many noble Lords will recall that, by March 2003, the share price had fallen below 4p. In other words, the company came to the brink of collapse. Thankfully, new and effective management, consulting constructively with my old union and the other steel unions while investing large sums of money in all its major installations in Britain and the Netherlands, has seen the unconsolidated share price rise to just over £1.
It has been said before that the challenges are considerable and will intensify; the Minister said so himself. That will be the case whether the owner is Tata Steel, CSN—the Brazilian company—or any other company with or without access to cheap slab or iron ore, because UK producers suffer greatly compared to other European producers. That is my key point. For example, why was a decision taken to move from the tested method for calculating new entrant allocation for steel companies under the Emissions Trading Scheme in its second phase, and to move to arrangements not used by any other European producer? That will penalise the very investments likely to yield increased carbon efficiency.
In my considered view, my Government do not ensure a level playing field—and they should. Community and other unions are correct in saying that on this issue and in other areas the Government should listen to their representations. Some weeks ago in this Chamber, the noble Lord, Lord Lamont, in a question to the Minister said that it was outrageous—I paraphrase him, but that is the feeling that he conveyed—that the French and Luxembourg Governments were examining and questioning the bid for Arselor by Mittal Steel. I disagreed with the noble Lord, Lord Lamont, but the Minister agreed with him. Those Governments were trying to ensure that the workers’ interests and their national interests were being safeguarded. I have no difficulty with that. In these troubled times, is it not the case—and if it is not, let us be told—that steel is still a strategic industry? I have always held that view and if that is not the case I should like to hear it from the Minister. If it is a strategic industry, the Government should support it in every way possible.
Take our policies on climate change—we know that it is of great importance to this country and to the world, as has been said here most eloquently, but heavy users of energy in this country are again at a disadvantage relative to the rest of Europe. That is an undisputed fact. For example, in recent months, Avesta Polarit, a stainless steel manufacturer in Sheffield, closed, citing the high cost of energy as a key factor in that decision. Last week, Alcoa, the Canadian aluminium manufacturer, closed its plant near Swansea for exactly the same reason. Carbon steel companies in the UK pay between 40 and 50 per cent more for their energy than their competitors in western Europe. Our European partners will and do not stand idly by while their steel or other manufacturing industries become uncompetitive because of mounting imports from countries without Kyoto obligations.
I have a great fear that carbon steel efficient plants in the United Kingdom will suffer greatly at the expense of China, Brazil or countless other countries that are not party to Kyoto. That is not right and my Government, the Government who I support wholeheartedly, will have failed if they sit idly by.
Finally, I was privileged to attend the Aneurin Bevan memorial lecture given by John Monks, once general secretary of the TUC and now general secretary of the European Trade Union Confederation. I recommend his first-class thesis and that it be widely read. He spoke of “new capitalism”—yes, “new”, which is the operative word—in which firms were bought up and then restructured, before being sold off at a profit. John talked of “Wimbledonisation”, whereby we in the UK provide a good location, but the top prizes are won by foreigners. That speech is worth a read. He is a moderate man making a case worth listening to.
My Lords, I wish to draw attention to the needs of the technology industry’s small business sector and the venture capital available to it. First, I congratulate our two maiden speakers today; it is a privilege to be taking part in a debate in which we have heard two such excellent speakers and I look forward to hearing them on many future occasions. I am particularly enthusiastic because they are so keen on developing the economy and on enterprise, in which I strongly believe.
I declare two interests. First, I am chairman of the RisingStars Growth Fund Ltd, a company set up some four or five years ago to promote a venture capital fund involved in starting and funding small technology companies. I am also chairman of Midas Capital Partners Ltd of Liverpool, which is five years old and number one in the cautious managed sector in the UK.
We started the RisingStars fund because, having been involved in start-up businesses at Manchester University and having tried to spin out technology companies from the university and others, I was very much aware of the shortage of start-up capital. It was difficult to arrange the sort of funding that we required, but I managed to raise some £19 million from institutions in the north-west and from the RDA to create a fund, which I gave to enterprise ventures as the managers of the fund. We continue to promote further funds and have just achieved the first closing of a new fund called RisingStars 2, which will cover the whole of the north of England, whereas the first covered only the north-west. We hope to work with the eight major research universities across the north of England to provide start-up capital for the spin-out companies that will come from them.
It is interesting to note that from the first fund we made 33 investments, with a total cash investment of £13,082,000 and a total of 1,541 inquiries. For RisingStars 2, which we are only just starting and for which to date we have raised just over £15 million, although it will be £30 million when completed, we have already made three investments with a cash investment of £160,000. The total number of inquiries for that fund to date is 248. That indicates that there is a very large gap between the amount of money available and the demand in the system.
I have spent a lot of time in this sector because I feel strongly that wealth creation is very important. We spend much time in this Chamber hearing about how we should spend money, where everyone wants the money to go and how we should hand it out to this and that group, but we rarely mention that every pound that this Government spend has been made by a business. We should just think about that: every pound distributed by any Government has been made by a business—by a hard-working individual entrepreneur or a large business. The vast majority of our businesses are small, and all big businesses start as small businesses. But, unless we have a very positive policy of creating new companies, the proportion of wealth creation will gradually reduce.
Some people might think that the figure that I am about to give is very good: 50 per cent of people employed in the north of England are paid by taxpayers’ money. They are paid by money that comes not from a business but from you and me and all the taxpayers in this country: they work for government, local government or a public body. Perhaps the Minister can give me an idea of the stage at which he considers that proportion to become unacceptable. Can we employ 60 or 100 per cent of people in that way? At what level does the balance between those who earn and those who work for government become unacceptable?
I want to mention a couple of things that we have learnt during our money-raising exercise. Clearly, there is an enormous amount of money about, and there has never been more equity available for all kinds of investment opportunities, but there is no encouragement for that money to be put into the small business sector. A number of shortages have clearly been identified. A group of people at Liverpool and Bangor universities recently carried out an investigation into the availability of venture capital, particularly for start-up technology businesses. They assumed that, considering the large number of projects and exercises operated by the Government in recent years to encourage money into the venture-capital sector, that must have done some good and more money must be available than there was a few years ago when we did not have the various activities now being operated by the Government. However, the disappointing thing was that they found exactly the opposite. Less money is now available in the system for technology start-up businesses than there was 10 years ago. The investment going into the start-up sector is only one-tenth of that going into the small business sector in the United States. Obviously, investment in the US is very much higher than it is here, but it is interesting that that country appreciates the importance of the small business and small technology sector far more than we do.
There is one issue that I should like the Government to consider and I shall be interested in the Minister’s response on it. The large amounts of money that are now available for investment and are being invested by very wealthy people in the UK are going into management buyouts, large investment deals, and taking equity and turning it into debt. All these new technologies and financial systems are being invested in large companies, but how can we move more of that to the small sector? The Government should be thinking seriously about these issues. They are not going to achieve their objective of creating financial strength in this country, which it is necessary to do if they want to keep spending money as they have been doing, unless someone earns the money. If that does not happen, we are going to miss out on an enormous opportunity.
Technology is the driver that makes things happen. I have listened to noble Lords saying how we will change global warming by living differently and by giving up this and that. But that is not going to happen: it has never happened yet and it never will. If we want to solve the problem, it will be solved by technology. Society has always solved its problems with technology—from inventing the plough and starting to milk cows to the latest developments in micro-processing—and that is how we will solve global warming. We will find other ways of producing and using our energy more efficiently, but we will not do that unless we encourage the development of that new technology. Whatever Government are in power in the future, I believe they will have to do far more than we are doing now to solve these problems.
There is another issue related to the investment in and development of technology companies. It is not just a question of money; we need far more effective managers of investment funds. One reason that many financiers have not made the investments that we expected of them is that some very nasty colds have been caught on the end of small venture capital funds. That has had much to do with the poor management of those funds, although the situation is improving dramatically. The fund that we now have in the north-west has been extremely well managed, with a lot of professional people who were not there previously having been brought into it.
It is important to understand the details of the business that you are investing in and to control the level of investment that you make; in other words, you do not put all the money in at once but measure it against success in the business. You need a range of quality people and managers within the venture capital company who can deal with the company’s problems as they arise. You do not just need people who go in, assess the situation and make the investment; you need people who understand the marketing and sales aspects and the financial dealings with the banks and can give technical advice that brings growth. You also need far more mentoring, which is the key to the success of this sector. That means that you need people from outside on whom you can draw.
Many successful directors are not prepared to get involved in what they see as the risky end of the business—again, this has a lot to do with government regulation and our attitude to failure—because they are frightened of being involved in something that might not work. That is a very poor attitude to life. As noble Lords know, I come from a farming background and I always say that if one has never had a dead cow, one has never had a cow at all. That is true of all things in life. If one has never experienced the downside one has not done very much. People with any ability have to be prepared to take risks and understand the opportunities that they can bring.
Another interesting point came from an inquiry carried out on behalf of Liverpool University and the management school at the university: the attitude towards entrepreneurs—those who want to drive their businesses—and investors. Investors seldom understand the technology—what an entrepreneur is looking for—and sometimes an entrepreneur can be very inarticulate at expressing his views, his long-term development plans and his hopes to investors. So the relationship does not click as it should for a successful business, with money on the one side and ideas and technology on the other side.
The Government could do more to help entrepreneurs when they come to consider selling equity in their businesses. Someone who wants to drive a large business will not be able to keep all the equity; it is far better to have a little share of a big business than to have a big share of a little business. How those two issues work together needs to be expressed more, so that entrepreneurs and investors understand the relationship and how it works.
In conclusion, I want to put across my personal conviction that it is absolutely necessary to increase our investment in new technology and in the development side of industry; we should do everything that we can as a nation to support and encourage that. The future wealth and prosperity of all our people will come from what are now very little ideas in people's minds, but over the next 40 or 50 years they will become the economic drivers that will enable this country to continue to be great.
My Lords, the noble Lord, Lord Wade, has combined traditional northern common sense with a very distinguished career in business and in politics. I am sure Members of the House were listening very carefully to his wise advice. He has been a very distinguished chairman of Midas. It is also a pleasure to record thanks to others who have taken part in this interesting debate, which has not ranged over too many subjects but has concentrated on very interesting ones, such as the relationship between government and business, which is an important matter for all Governments.
First, I have pleasure in congratulating the noble Lord, Lord Truscott, on his arrival on the government Benches. For some time, we were both members of European Union Sub-Committee C. I deliberately embarrass him by saying that when he made his many contributions in that committee, I guessed that it would not be long before he was on the government Benches, making contributions such as that made today. We thank him for his remarks. Equally, I am sure that the noble Lord, Lord McKenzie, in reply will concentrate on the many important matters that have been raised in the debate.
Of course, the greatest pleasure, as already recorded by a number of noble Lords, is to thank our two maiden speakers, the noble Lords, Lord Bilimoria and Lord Rowe-Beddoe. The passion of both was very extraordinary indeed and it was a great privilege for us to hear their speeches. I do not want to embarrass or annoy the noble Lord, Lord Bilimoria, by constructing a totally artificial and false connection, but it was marvellous to hear him in the House today. He mentioned with pride his antecedents as a Parsi. That coincides with Julian Barnes’s excellent book about the son of a Parsi vicar. The vicar was Parsi by birth but became a Church of England vicar in Staffordshire and his son was cruelly, wrongfully and illegally imprisoned for crimes he did not commit in Staffordshire in the first part of the 20th century. Although there is absolutely no connection, it is wonderful to see the progress of the Parsi tradition. I hope he takes that in the spirit in which I offer it. I wish him well in his career in this House.
The noble Lord, Lord Rowe-Beddoe, showed all the passion for Wales that we expect from our colleague, my noble friend Lord Roberts, when he is in his place. He too is well known for that passion. We wish him great success.
It is worth repeating that the noble Lord, Lord Sainsbury, made a great contribution as Minister and I am sure we all hope that he will continue to be a very active Member of this House.
Considering the Queen’s Speech, the contributions made today and people's thoughts on the economy, business, future progress and the huge problem of climate change, a number of themes emerge. What a contrast to the sad and terrible disaster in Iraq and the mess in the Middle East which is partly the responsibility of the US—and Britain in following the US unwisely down paths which I am sure the Government now regret. That has also been a personal tragedy for the Prime Minister who has been a very competent Prime Minister in many other ways. There is an extraordinary contrast between that failure overseas which commands so many column inches now in British newspapers—quite rightly as the mess continues and everyone wonders how we will get out of it—and the extraordinary competent success of the Government on the British economy. I believe that, since 1997, the Government are entitled to claim full credit for a number of significant achievements, especially after the years of stop-go, which were referred to, when Ministers first took office after the 1997 election.
Against a background of higher than usual economic growth and lowish interest rates—not as low as they could be perhaps—until the recent rise from the Bank of England to 5 per cent, and substantial new public sector and private sector capital formation, the UK has been judged to be doing very well in recent years, with a spectacular growth in earnings from some invisibles and an excellent record in foreign direct investment. As ever was, there is always a price to pay for those tangible achievements. Pollution and damage to the environment from consumer and corporate excess has become alarming in a small national territory where thinking people feel increasingly vulnerable to congestion, traffic chaos and even overshopping, including on Sundays. Some people remain opposed to that concept but we have had to accept it, although—increasingly as time goes on—it may not be to people's liking. The house price boom has added its own pressures, not all on the plus side.
At the same time the UK is, as ever, a curate's egg economy if ever there was one. Our output base remains fundamentally small and truncated, as the noble Lord, Lord Brookman, said, particularly in relation to manufacturing. While we have many individual examples of highly successful companies—entrepreneurial companies, very impressive companies not only in retailing and clothing and those obvious sectors but also elsewhere, and in financial services too—sadly, for some reason, we cannot shake off our perpetual chronic trade deficit, except temporarily when the United Kingdom, post-war, has from time to time devalued. This deficit has to be propped up, as do our long-term debts, by interest rates that are often double the euro-land figures.
In other words, in contrast to very successful trading corporations of all sizes in Britain and small companies, the United Kingdom and its economy is like someone who is perpetually in debt and who cannot get out of it. Our investment rates in new assets as well as our savings ratios remain stubbornly low relative to other like nations, except for recent years' big rises in public sector investment. Furthermore, the huge mistake of not joining the euro earlier has added millions of often uncalculated extra costs to companies and consumers alike in onerous exchange and bank transfer rip-off costs. Meanwhile the consumer debt ratio has rocketed to an unacceptable level in Britain. The noble Baroness, Lady Noakes, referred to that with some concern, which I share.
There is increasing concern about a large number of households’ viability. As a ratio of GDP the figure recently had risen to 17.4 per cent compared with 8.5 per cent in France, 7.5 per cent in Germany and 3.4 per cent in Italy. With the size of our excess imports, including of course finished durable goods, it means the public are now almost uncontrollably locked into massive unsecured debts with bank and credit card real interest rates of 30 per cent or more, and the Government do nothing about that at all.
The comics called newspapers in the UK are now up to 350 pages of weekly or daily rubbish in huge supplements urging people to buy things they do not even need. It always amuses me how the right-wing neo-con economic fanatics and journalists such as Anatole Kaletsky castigate Germany and Japan for having low rates of domestic consumption, very high savings ratios and massive trade and export surpluses. How sinful can they get?
In many ways, Japan has the reverse syndrome to our own economy. It has high output, massive exports and a large manufacturing and processing base, but more backward farming systems shielded from competition and quite old-fashioned service structures in some areas. As the noble Lord, Lord Brookman, said, we have a pitifully small manufacturing and industrial base, perpetual deficits in visible trade and too much private debt, but highly efficient agriculture—notwithstanding the problems of the common agricultural policy—and highly organised and impressive service sectors in many fields. As my noble friend Lord Lee mentioned, tourism is an important area of success and achievement.
Perhaps the best blend of the two examples of the more virtuous dual economy in Europe is therefore to be found in Germany, despite the huge on-costs of East Germany it is currently bearing. However, the UK will benefit from the recent rises in FDI I referred to—presumably in output and some job creation, at least—which was $165 billion in 2005. That is well ahead of the US at just under $l00 billion and, successively, the People’s Republic of China, France and then, interestingly for a small country, the Netherlands. I hasten to add that the UK figure is, however, overwhelmingly dominated by mergers and acquisitions activity. Indeed, one transaction, Royal Dutch/Shell merging with Shell Transport (UK), accounted for $74 billion of the total. So the right-wing economists should not get too excited about magic new developments appearing here, there and everywhere.
In the last full period, incidentally, the number of production industry workforce jobs fell by 47,000 and the number in service industries rose by 256,000—an illustration of the changing trends in the British economy. The largest fall and the lowest rate of unemployment were in the West Country at 9 per cent down and now at 3.4 per cent, while the London region showed 8.4 per cent jobless. I was glad that the noble Baroness, Lady Noakes, reminded the House that the real unemployment figure is well over 5 million, adding back those on long-term benefit who the Government are trying to persuade to get out of that situation as fast as possible.
While house prices are fuelling inflation pressures, things like transport costs are exerting downward pressure, especially for personal transport costs. It is sad to note that the biggest upward boost to the annual inflation figures came from the rise in university tuition fees. I am sure there will be many future cases of students in financial difficulty because of that.
I hope the Minister will have time today to deal with a number of queries. Can he clarify the Government’s future intentions on the further penalising of the anti-social, polluting, gas-guzzling 4x4s hinted at by the Chancellor? That follows the excellent example in Liberal Democrat-controlled Richmond, and Mayor Livingstone’s commitment to deal with Chelsea tractors outside Chelsea as well. A sharp fall in second-hand prices of these obnoxious vehicles, particularly the civilian version of the American Hummer—I do not know how many Lords have seen the civilian Hummer, but it is grotesque and right in your face—will concentrate the minds of these selfish motorists. Indeed, it should be happening already.
Secondly, will the Government help the EU Commission in its battles to control outrageous mobile phone roaming costs and excessive bank and credit card transfer charges across national borders from 1 January 2007? This is an important matter for the Government to watch carefully, ensuring that the Commission succeeds in reducing those excessive costs. They should now be single market transactions, rather than across national frontiers. Consumers also need to be helped to get out of the debt I referred to earlier, when a chronic case of family disutility arises.
Finally, can the Minister confirm that the programme of reform in the public services—here we usually mean mainly hospitals, other NHS entities and schools—will of course continue, but on a rational basis? Will it have heed to the urgent necessity of restoring morale to the operatives at all levels in both sectors, who feel increasingly battered after so much government spin and tampering in recent years? Although the debt figures of some NHS trusts need tackling, the deficit figure remains minuscule in relation to the total of NHS activity, and no hysteria engendered in the media about this is necessary. Economic achievements have to be tempered with social well-being and the avoidance of gratuitous alienation.
My Lords, I want to say a few words on the economy. I start by referring to the commission of the noble Lord, Lord Forsyth. I mentioned this to the noble Lord, who said that he is sorry he cannot be here today due to an important engagement outside. Of course, we all understand.
The report is rather more serious than some of the comments about it have been. In particular, I refer to what it said about the level of taxation and its effect on the economy. Although I doubt whether the noble Lord, Lord Forsyth, was too upset about the headlines he received—he probably welcomed them—he did not talk about a £20 billion tax cut next year, but rather over the whole of a Parliament. One would not have gleaned that from reading the media headlines. I should complain on the noble Lord’s behalf that the media got it so wrong but, as I say, he will not mind.
Of course, I still disagree with what the noble Lord said, not only about the economic aspect to which I shall refer in a moment, but also about the unfairness of his tax proposals, which I hope to refer to on another occasion. His economic points were important. One, which is made constantly, is that tax cuts improve economic growth and tax increases, of course, reduce it. In his report, the noble Lord quoted in aid some serious surveys and reports by the OECD. He did not, in citing four small countries with successful economic growth, choose any large countries to talk about, for one good reason: many large countries have not had the level of economic growth that he—and I—would have liked to see.
I was surprised that the noble Lord did not tell us how well the OECD countries had done until I checked and found that the OECD average economic growth over the past 10 years was 2.4 per cent. In the UK, with its high levels of taxation, it averages 2.5 per cent. I find that 2.5 per cent too low; I would like it see it much higher. To put it kindly to the noble Lord, Lord Forsyth, of whom I am fond, the case for tax cuts bringing about economic growth is, shall I say, not proven. Tax increases may be a factor, but they are not the main one. We have had lower growth than we could have achieved for another reason, to which I shall come in a moment.
I do not often speak kindly of government policy, but in four successive quarters the Government have achieved an unchanged UK GDP growth record of 0.7 per cent per quarter: 2.8 per cent annually. That is a considerable record and achievement, for which the next Prime Minister, Gordon Brown, deserves our congratulations. The noble Baroness, Lady Noakes, could not find it in her to congratulate the Chancellor—which I understand perfectly well—because she thought it better to refer to the level of public debt, taxes being too high and the £100 billion that had gone from pension funds. She spoke for only 12 minutes but could not find an extra few minutes to explain precisely what she would do to improve that situation. No doubt she will on another occasion. By international standards, economic growth of 2.5 per cent deserves congratulations, but what did the 2.8 per cent increase of the past four quarters achieve? It achieved the decision of the MPC—the Monetary Policy Committee of the Bank of England—that it was much too high and to increase interest rates.
The main remit of the MPC is inflation. In that, it has achieved great success and I congratulate it. However, as it regularly states in its inflation report, it has another remit. It is told in those famous three words that, “subject to that”, it should consider the Government’s economic policy for higher and stable growth and higher employment. I guess—well, it is more than a guess, it is a certainty—that the MPC gives very little consideration to anything other than inflation. The Governor of the Bank of the England, like successive Governors of the Bank of England, has a horror of sending a letter to the Chancellor of the Exchequer saying that the committee has gone 1 per cent above its remit of 2 per cent inflation. I would rather have 1 per cent more inflation and an average rate of economic growth of more than 2.5 per cent, but that is not the view of the Governor of the Bank of England and a majority of the members of the Monetary Policy Committee. The MPC has a greater impact on economic growth than any of the tax increases we have seen or any tax cuts that might be recommended by the Forsyth commission, or, eventually, by any Government formed by the Opposition.
The front page of the summary of the Stern report states that there is a unique challenge for economics. The noble Lord, Lord Newby, who I am sorry is not in his place, said that there is a consensus about the Stern report. That consensus must be that hardly anybody has read its 700 pages, which is perfectly understandable. I am not sure how many people have read the 30-page summary. The plain fact is, as the Stern report initially states:
“No one can predict the consequences of climate change with complete certainty”.
Of course, we then get headlines about the economic forecasts in the Stern report. Stern can be critical of the media because the headlines were not exactly what the report stated, although he should have known better about what he was likely to get from media headlines. However, it is worth quoting what the summary on page 10 states:
“Economic forecasting over just a few years is a difficult and imprecise task”.
The report goes on to state that analysis requires us to look over 50, 100 or 200 years and that economic forecasting “requires caution and humility”. But it then proceeds to make a forecast. The media took that forecast and gave it as a certainty. The report gives the average expected cost of climate change as 1 per cent of GDP, not next year, but in 50 years’ time, and tells us to be cautious and have some humility about economic forecasts. It then goes on to state that, by 2100, we shall see some rise and some fall in growth but has already stated that we should not look at forecasts for more than a year or so ahead.
When we reach 2100—and I am sure that many of us will—we will know how right the Stern report was. It refers to the greater uncertainty because of the costs of seeking more innovative methods of mitigation. We all know how much technological innovation we have seen in the past 50 years. Are we to suppose that there will be none in the next 50? That is what makes me sceptical, to put it mildly, of the Stern report. The report very fairly and clearly sets out the problems that will be created, but says nothing about what will happen because, as it tells us, it cannot.
I sum up by saying that we need to do as much as possible relating to the dangers of climate change, of which the Stern report speaks so eloquently. We must do everything we can here in the UK, although if we were all as good as David Cameron and put windmills on our roofs, it would not make a blind bit of difference because we need the rest of the world to do the same, in spades.
Future levels of UK economic growth will not be affected by climate change or tax. They will be affected by sensible and serious government policies and by not having an MPC that sees its remit too narrowly. Indeed, my recommendation, which I hope my noble friend Lord McKenzie will pass on, is that the Chancellor of Exchequer thinks again about the remit of the Monetary Policy Committee and thinks about changing it a bit.
My Lords, it is a particular pleasure to follow the noble Lord, Lord Barnett, who was a model user of statistics in his ministerial days and has been ever since. I wish the same could be said of all Ministers. I am also grateful to the noble Baroness, Lady Noakes, and the noble Lord, Lord Jenkin, for their remarks on statistics, which is the subject that I shall talk about.
This is the first time for 60 years that we are facing legislation dealing specifically with official statistics. To some people—I am sure not to your Lordships—it may seem a marginal, perhaps even unnecessary, subject. However, as we all know, that is not so. Over the years, I have learnt how enormously important and influential official statistics are, not just because they are needed by Ministers and officials as a basis for policy-making and strategy, but also because of the role they play in business decisions, for the City, for the academic world, for all of us as citizens and, not least, for Parliament. I hope it will not seem rude in any sense if I say that I regard Government as not the most important client for official statistics. It is society at large that matters.
Virtually every subject debated in this House or the other place is liable to depend on official statistics at some point. Almost all the legislation before us this Session will call on government statistics. I think of migration, crime, pensions, further education, social services, climate change and all the obvious economic issues. It follows that any legislation to reform our statistical system, especially if, as now, it promises to introduce degrees of independence from Ministers, will be of lasting importance to society and to all of us.
The Statistics and Registration Services Bill originated in the decision the Chancellor of the Exchequer announced about a year ago and repeated in his Budget speech. He was right to be concerned about the poor state of public trust in government statistics. That led him to propose that a new level of independence from Ministers should be entrenched in legislation. Let me say straight away that I warmly welcome the Chancellor's initiative. If we get the legislation right in detail there will be every chance that his initiative will not only give our high-level government statistical service the independence it deserves, but will also improve public confidence and trust in official data.
The essence of the reforms, outlined in the final document from the Treasury issued only a week or two ago, is to create in statute a new independent statistics board, which will replace Ministers as the top layer of governance for the Office for National Statistics but with a wider remit, in that the board will have responsibility for promoting and safeguarding all official statistics. The board will be independent of ministerial control and be a so-called non-ministerial department.
Your Lordships will also want to note that under the new arrangements, Parliament will have a central responsibility for the first time in holding the statistical system to account. I welcome this structure developed by Treasury Ministers and officials and set out after a very helpful process of public consultation, for which we were grateful. The provisions were summarised in the Treasury's final document. So it is a great surprise to me, to put it mildly, that in one important respect the Bill, of which I have had sight, seems to take us in a different direction from that last Treasury document. By that I mean that the new statistics board, whose role we understood was to oversee, scrutinise and monitor the work of the ONS, is to become the ONS. I was most surprised to see in the Bill that the ONS is to be abolished.
I think I understand the legal reasons for that, but it goes a long way in a different direction from what was originally put to us in the consultative process. The Bill proposes to abolish not only the Statistics Commission, which we knew, but the ONS is to hand over its functions to the new board. That means that the new board will not only monitor statistics but will also produce them. I see in a remote subsection that the National Statistician is to create a new executive committee or company or board, which, I take it, is to recreate the ONS. So all I can say at this point is that I am puzzled, to put it mildly again, at this evident change in direction. That is one aspect of the Bill that will need further consideration.
In today's debate it would be improper to deal with details. So let me just mention three points which seem to me to be of particular importance. By far the most important relates to our decentralised statistical system. At the centre is the ONS with enormous responsibility, basically for economic data. As we know, all departments and some agencies have their own statistical offices. I have always believed in this system and I am glad that it is to remain. But it needs to be run and monitored as a single integrated system, a point which I think is recognised in the Bill. It means that the National Statistician—the role I occupied for many years—should not only have the authority to run the ONS if it is recreated in some form—as it must be—but should also have professional responsibilities throughout the whole of the government statistical service. That is why Prime Minister Wilson, the first Prime Minister I served directly, gave me the double title of director of the CSO and head of the GSS. The same must apply now.
Equally—and much more important now—the new independent board must have a clear responsibility, a non-executive authority, not only for the ONS but for statistics throughout all policy ministries. I cannot stress enough that the problems of public trust relate not to the ONS statistics, but to departmental statistics in fields such as crime, migration, waiting lists and so on. That is where the trouble arises and so the system must be run as a single system.
I have three more points of substance. First, where will the non-ministerial department be placed? I understand that there will be some residual—I think that is the term—role for Ministers, supported of course by civil servants and political advisers. I understand that the intention is for these residual responsibilities to remain with the Treasury. Secondly, there is the alternative—already mentioned by the noble Lord, Lord Jenkin—that the statistical office should be placed in the Cabinet Office. That was my position. I was in the Cabinet Office and reported through the Cabinet Secretary directly to the Prime Minister. It makes much more sense to have the statistical office located there finally, rather than in a key policy department like the Treasury.
My third point of substance concerns the trickiest issue of all; namely, the pre-release of government statistics. In this country a number of people get sight of key statistics 40 hours before they are published. Compare that with the President of the United States—not an unimportant person—who gets sight of the figures 30 minutes before they are published. This is the source of most public trust problems. Unfortunately, the legislation contains the proposal that this should be subject to secondary legislation, which is another point for discussion.
I picked out these two or three points of substance. Wherever we end up, one thing seems very clear—and I concur totally with the remarks of the noble Lord, Lord Jenkin—Parliament will have a new and major role in overseeing all our official statistics. That is to be strongly welcomed. But it means there must be a proper structure for this. We have two relevant committees—the very powerful Treasury sub-committee in the other place and our own Economic Affairs Committee. However splendid they are in their traditions and work, as these reforms cover much more than economic issues, whatever committee is in place should be far more wide ranging in policy terms. It seems to me obvious that this House, as well as the other place, should be involved. So if ever there was an overwhelming case for a Select Committee of both Houses, this is surely it.
I end by reminding the House that this subject will come to us for proper consideration early next year. Whatever else, I hope I have said enough to remind your Lordships that official statistics are of importance across the whole range of topics we deal with, so that we should have a key role before the debate finalises.
My Lords, I am very happy to follow the noble Lord, Lord Moser, in this debate. His statistical expertise has had a valuable effect on our economic life over so many years. It is, as he has pointed out, crucial that public trust in government statistics is maintained and improved.
Climate change occupied the speeches of the noble Lords, Lord Newby and Lord Vallance of Tummel, and my noble friend Lord Barnett. China puts up a new coal-fired power station every week, while we are responsible for only around 2 per cent of total global warming. Why are we taking such a lead when other countries such as the United States and India expend so much energy? We should be supporting other countries rather than taking the lead ourselves. Other countries may become overheated, but it would be no great disaster to us if the south of England were to become like the Mediterranean. I would be quite happy if Manchester and the north of England were like the south of England. Manchester has had some improvements, but we can still go further.
The Intergovernmental Panel on Climate Change anticipates a large range of horrors at the end of the century—a hundred years from now, as my noble friend has pointed out. This is absolute nonsense. A hundred years ago, the question was what was going to happen when the coal ran out. Disasters were forecast, but of course oil, gas and nuclear energy came in to fill the gaps. Other countries, which may be more at risk, should take the lead in reducing fuel use. No one can doubt that technology 100 years from now will be a great improvement. We cannot tell how, but things will not have stood still 100 years from now. There are more scientists and technologists now than there have been in the whole of our history. There are large numbers of them, so there will be enormous changes that we cannot anticipate and cannot know. Our role is not to be the leader here. With 2 per cent of the problem, let us follow, by all means, but others should take the lead.
On the economy generally, when the Government gave the Bank of England the power to set interest rates, they did so with the reservation that they could give instructions for a limited period. In the 10 years since then, however, they have never done so. Their confidence has not been misplaced. It was quite important that the Bank of England did well in maintaining the levels of inflation. The Chancellor of the Exchequer took the major decision in 1997 to give this power away. The Government did so, and it has been successful. Inflation has never been under such control. People now regard it as normal. Memories of the years of inflation have faded away. Indeed, many younger members of society have never had them.
There was a time when government control of interest rates regularly involved the Prime Minister at a time of crisis. The reputation of the Chancellor of the Exchequer was affected by each crisis and the cause of each crisis. Governments were undone in a matter of days, and it was a long time before any political recovery could be made. We only have to think of Black Wednesday on 16 September 1992 to recall one of the most recent and memorable failures of post-war British economic policy.
How is the level of inflation influenced? The Monetary Policy Committee considers the economic and monetary factors and determines interest rates. But any change in interest rates means that a lengthy period—sometimes a year or two—is required to work through to inflation. People need time to adjust to the impact of changing interest rates and its effect on their purchasing, selling and investment decisions. We now have a Treasury participant at the MPC, but it is not clear what his role is. Does he comment or even, to some limited degree, influence the MPC? I must ask my noble friend to inform us of the activity of the Treasury member of the committee.
Then there is the question of house inflation. Ideally, if house inflation is very different from price inflation, one wants a system that can deal with each separately. They have moved further and further apart in the past 10 years. Eventually it is hoped that the two might come rather closer together, but hope is a poor alternative to some procedure that could act on both types of inflation. The difficulty is that we have no action that could bring house inflation nearer into line with price inflation. According to the Halifax, house prices have risen by an average of 187 per cent across the United Kingdom since 1996. All we can hope for is that the escalating rise of house prices will meet the difficulty of buyers unable to service their loans. There was a time when house purchases could be subject to capital gains tax, which limited the rise in house prices, but that period is long gone.
All this makes it very difficult for the Bank of England to get a proper balance between house inflation and price inflation. The sudden popularity of interest-only mortgages is a striking reflection of the change in the housing market. Three years ago, only 6 per cent of all mortgages were interest-only. Today, the figure is 16 per cent. Interest-only, of course, means that monthly mortgage payments pay off only the interest on the debt. At the end of the term, the capital—the original amount borrowed—is still outstanding. The big advantage for hard-pressed first-time buyers is that monthly repayments are lower. It is clear that an interest-only mortgage can make sense for some, for example for people who plan to move in a couple of years, but not for all. The danger comes when someone goes for an interest-only mortgage purely because it is cheap, but puts nothing in place to pay the capital sum back. They get to the end of their mortgage term, nearing retirement, and they still owe a lot of money. The housing market cannot continue in this way. The only hope is that a collapse might be avoided by a steadying over a period of years.
Another issue that I want to discuss is the manufacturing industry, which concerns me particularly. United Kingdom manufacturing does not have the role in our economy that it used to have, but it is still crucial to our country’s prosperity, now and in the future. The problem for our manufacturing industry is the rise of so many industrialising nations, in particular China and India. They have cheap labour, which will continue as there are many people in these countries who can be attracted into the manufacturing cities from outside. Those who hope for an exchange-rate rise in these countries, which will increase the prices of their manufactured goods, are likely to be disappointed. The only certainty of such an exchange-rate rise is when the manufacturing companies find themselves short of labour—a situation that is not likely to occur for a long time yet in these countries. Meanwhile, they are benefiting from western countries supplying technology and investment. Much of that investment comes from this country and diminishes the amount of employment that we can provide here.
Globalisation and trade liberalisation mean that our companies face increasing competition from goods and services produced in lower-wage economies. The UK cannot compete on low wages. Nor should we want to. The future of UK manufacturing depends on raising investment, and on applying science and innovation. Even so, successful companies are transferring much of their production to the East.
The reality is that manufacturing output still contributes 15 per cent of the United Kingdom gross domestic product and directly accounts for over 3 million jobs with an estimated 3 million further jobs dependent on the sector through related and supplier industries. It is responsible for around three-quarters of all business research and development. It also accounts for 55 per cent of UK exported goods and services and performs a critical role in our balance of payments. Our productivity has closed the gap with Germany on an output-per-worker basis, while the gap with France and the US has also narrowed. The productivity gap is often explained by poor performance in a range of factors, including capital expenditure, investment in R&D, and low-cost economies such as China and India.
Last Thursday the House of Lords European Union Committee reported that the addition of a “high-skilled, low-cost” workforce from eastern Europe has allowed UK companies to compete with their Asian counterparts. Economic immigrants from recently acceded European Union member states have been entirely beneficial. Immigration from the 10 new EU countries since 2004 has meant the influx of a skilled, low-cost workforce. The UK economy as a whole may have benefited from its policy towards migrant workers, but it is hard to estimate the benefits received. It has been said that European expansion has boosted the UK economy and put it in a strong position to deal with growing globalisation, but that many western Europeans feel that the prospect of cheap labour threatens their jobs.
I shall put it this way. The fact is that our economy is enjoying success, but more attention must be paid to our manufacturing industry. It creates the kind of advancement we enjoy throughout our entire economy and it is the sector to which we should now turn our attention.
My Lords, I believe that the capitalist system has developed and spread in such a way that it now has the potential to deliver unparalleled benefits to the peoples of all the continents of the world. Based on advances in technology and techniques of both government economic management and business practice, we seem to have found a way forward without the problems of world trade cycles which caused such misery in the 1930s and led eventually to world war. Even the long stagnation of Japan, the world’s second largest economy, was sustained with barely a few blips in the economies of the United States and Europe, while at the same time China and now India have been able to embark upon their amazing economic growth. This change is based at least in part on the Thatcherite revolution which has now become a consensus, one which Mr Blair as Prime Minister has tried, in part successfully, to maintain over the past nine years.
I am quite often asked, especially by members of the business community on the other side of the Atlantic, whether the general economic strategy in Britain will change under a Gordon Brown Government. I do not know whether Gordon Brown was one of the early believers, but I think that his nine years in No. 11 and as Chancellor of the Exchequer have probably made him someone who does believe in the sort of economy which the Government appear to be trying to run. So when I reply to that question, I usually quote a response made by President Deng Xiaoping to the late Lord MacLehose who as Governor of Hong Kong inquired in 1979 about the future of Hong Kong after the Chinese takeover in 1997:
“Set your hearts at ease”.
I am also asked what a Cameron Government would look like. In response to that question I say—without any great inside knowledge, but perhaps in hope—that a Conservative Government will hold fast to the essentials of economic Thatcherism, avoid the mistakes made over the past 10 years, and try to correct some of them.
I should like to refer to some of the specific issues which could be significant over the next two years to the leaders of all three political parties. The first is that I believe passionately in free trade, on which all economic progress and prosperity in the world must be based. In that context, as members of the European Union we are entitled to look at other major countries within the Union. I want particularly to talk about France, where what I can see augurs ill, regardless of the result of the next presidential election. Sadly, France seeks to be the nanny of Europe and is still suffering from the curse of 1789. It has long been a very difficult country to govern.
I do not know how many of your Lordships read the interview given on 13 November by Mr Sarkozy to Les Echos—which noble Lords will know is the French equivalent of the Financial Times—during which he set out an extremely clear and strong protectionist programme. He declared himself to be against globalisation and that the main objective of companies should be to employ people rather than try to make profits. He said that he believed in the differentiation of taxation between home-produced and imported products, and that neither EU preference nor protectionism were ugly words. He went on to say that he believed in progressive taxation and in toughening both wealth tax—which we avoided in this country 30 years ago—and inheritance tax. He also wanted to toughen up taxation on both second homes and all chattels. Of course he may not become the next president in April because I suspect that the French will find it hard to resist voting for the delightful Madame Royal. But in an interview through one of her people reported in the Daily Telegraph on 20 November she said that the French will insist on a new treaty for Europe, saying that if the British do not sign up to it they will have to go it alone. She says that she will get a new deal, along with Germany, Spain and Italy. That treaty would opt for widespread protection and convergence of tax rates. So this Government and the next, which I hope will be a Conservative one, will need to resist firmly.
I move on to public spending. The most important thing about public spending is that it should be efficient. I believe that there is a moral imperative not to use public money to help those who do not need help at the expense of those who do. The noble Lord, Lord Truscott, said that he praised particularly the winter fuel payment. That universal payment to all pensioners is not taxable and is, in my view, one of the worst possible uses of public money. It gives many Members of your Lordships’ House, including myself, untaxed money which we do not need at the expense of those who do need it. We need to look very carefully at spending on programmes such as the winter fuel payment.
That brings me to the question of poverty. There has been much discussion recently about relative and absolute poverty. I believe that absolute poverty should always have the priority. Relative poverty is a somewhat meaningless concept on the basis that, by definition, we can never bring everyone to the average and yet it is easy to describe relative poverty as relative in relation to the average. We must focus on the needs of those at the bottom, whether they are there through bad luck or inadequacy, or whether they are victims of structural changes in the economy. Whatever the reason, if they need a helping hand, that is where we should focus our efforts.
I am sorry that the noble Lord, Lord Barnett, is not in his place because I particularly enjoyed his remarks about taxation and inflation—not only because I share the general affection in which the noble Lord is held in this House but also because he played a very important part in the running of the economy of this country. He was the Chief Secretary of the Treasury between 1974 and 1979, when his noble friend Lord Healey was the Chancellor of the Exchequer. That, of course, was a period when taxation and inflation were very interesting. Taxation reached the level of 98 per cent—if you adjust the threshold at which it reached 98 per cent to today’s money it is about £76,000—and inflation reached 25 per cent. The noble Lord referred to the functions of the Monetary Policy Committee and said that it should not worry about a change in inflation of 1 or 2 per cent but, of course, in 1975 and 1976 inflation was running at 25 per cent.
It is useful for us to recollect some of those changes. When my noble friend Lord Lawson in his 1988 Budget cut the top rate of taxation to 40 per cent, for the first time ever during a Budget speech the House of Commons had to be suspended in disorder such was the outrage expressed from some on the Labour Benches. It is much to the credit of Prime Minister Blair and Chancellor Brown that we still have that 40 per cent top tax rate. I believe that it has made a significant contribution to the economic performance of this country.
Deregulation was referred to by the noble Lord, Lord Truscott, as a great aspiration but it is hellish difficult to achieve; all the forces are against it. The only government Minister in whom I would have confidence to tackle it is the noble Lord, Lord Rooker, because he is a tough guy; he could and he would. If I were Prime Minister, I would put him in charge of deregulation. The need for deregulation has been emphasised by many speakers in the debate today. It is a crucial point.
Perhaps I may raise a couple of other points which are of great importance to this or any other Government. First, probably the biggest single structural change needed to keep the economy balanced between the working and the retired population is to raise the age level of retirement. The efforts of the Government in this respect have so far been pathetic.
Secondly, the City of London has been a major contributor to the economy. It is taking over from New York and took over from Tokyo a long time ago. It has made a tremendous contribution to the prosperity of this country. It has no competitor in Europe and probably no competitor in the world. If it is involved in mergers and acquisitions, I do not mind. It is bringing prosperity to this country and therefore must be encouraged.
Let me say a word about the Monetary Policy Committee. I believe strongly in an interest rate policy; it is a valuable instrument for managing an economy. But, of course, to do so, you must be able to raise and lower interest rates. As a general rough rule, it is desirable that real interest rates should either be around the long-term growth rate of an economy or around 3 per cent, which are often quite close together. If you want a demonstration of the importance of being able to move interest rates you only have to look at Japan, where 10 years of stagnation with zero nominal interest rates meant that it was unable to use monetary policy to stimulate the economy. I was very worried when the Fed reduced interest rates to 1 per cent. I am glad they are now at a healthy 5-plus per cent. I believe that the current level of interest rates in Britain is about right.
Finally, the highest industrial priority we should have, which is of crucial importance, is that we should make a real effort to go for nuclear power. This is not only because of global warming, although, of course, it meets the demands for controlling it. When the noble Lord, Lord Sainsbury—an extremely effective science Minister in this House—had the courage to say that nuclear power is indeed a renewable, many people did not like it. But he said that from the Front Bench. We need to save hydrocarbons, not only because of the Middle East situation but also because of Mr Putin, in whom we perhaps have diminishing confidence. We must meet future energy demand through nuclear power.
Big developments are taking place throughout the world. Interestingly, the thorium reactor has been introduced in India instead of the uranium reactor. Thorium is a new technology invented by the Indians and has the great advantage that it does not produce plutonium. The Chinese are busily increasing their output of nuclear power and the United States at last—after 35 years of stagnation in a field where it once led the world—is also turning in that direction. I hope very much that Her Majesty’s Government will do the same and that my party will support them.
My Lords, there are many things in the gracious Speech that the sole Green Party representative in Parliament might have chosen to speak on. For a time, I was tempted to speak on international affairs to protest against our illegal involvement in two wars and to point out that no one had ever dabbled in the affairs of Afghanistan or Mesopotamia with profit to anyone concerned. Not all that long ago, the Commonwealth Parliamentary Association sent me to Tonga. I learnt there that there is a lot to be said for a policy of no entanglements and dubbing one’s islands the Friendly Islands.
Even two illegal wars are not the most important matters on our plate. Much the most important and dangerous problem is climate change. We very much welcome the forthright challenge of the Stern report, in which the risks of making only small cuts in our CO2 production are laid out in full, including the risk of an increasing likelihood of
“abrupt and major irreversible changes”.
The major changes include the melting of the Greenland icecap and the resultant six-metre rise in the sea level that this implies, which will affect London, New York, Shanghai and Mumbai.
While mentioning Mumbai, perhaps I may say that I have not heard a better maiden speech in my 37 years in your Lordships’ House than that of the noble Lord, Lord Bilimoria, who, I see, modestly left the Chamber the moment before I was able to pay him a compliment.
For the UK to do its share to avoid such drastic consequences, annual reductions of 9 per cent are needed to cut CO2 production to 90 per cent of 1990 levels by 2030. That is the Green Party’s message. The modest 3 per cent cuts envisaged by the Climate Change Bill are simply not sufficient. Annual reductions in production of 9 per cent may sound ambitious but are not impossible, requiring only political will in the place of political rhetoric.
The first necessary economic steps include putting an effective value on carbon emissions through a capped, tradable quota system. They include ending airport expansion and embarking on serious investment in energy efficiency and renewables. They include market mechanisms such as the feed-in tariff scheme deployed by Germany, Japan and Spain, which has resulted in Germany installing 56 per cent of the world’s solar panels.
By paying households to generate clean, green electricity, such feed-in tariff schemes can be used to shift our electricity production by making investment in renewables cost-effective for the individual. And let no one sneer at the efforts made by Mr Cameron. These are early days in exploring the way forward, and Mr Cameron is at least trying.
We also need to take responsibility for all the carbon production in the whole of our economy. After the demise of much of British manufacturing and the coal industry, it should come as no shock to noble Lords to learn, carbon emissions in Britain briefly dipped in the early 1990s. But, in truth, those now rising levels of CO2 emissions are an underestimate of what our economic activity produces, for we are now exporting CO2 production to China and other countries. Products manufactured abroad use carbon in production and transit. The production is counted in the carbon figures where it is produced and the transportation, under the Kyoto protocol, is not considered at all. If we took those factors into account, our society would be seen to produce around 20 per cent more carbon emissions. The most obvious and significant conclusion is that if we were to meet our needs for food, clothing and household goods from local, sustainable production, we could drastically reduce carbon dioxide emissions.
The Green Party advocates a system of strengthened local economies where we have a role as producers as well as consumers, thus not only reducing our impact on climate change but reinforcing our identity and self-esteem within local communities. Trade should return to its right role as the exchange of goods we cannot produce within our own economies. This seems far from the thrust of current economic thinking on any of the Front Benches, which ought to be a source of deep concern to us all. Instead, we continue to hear from them about competitiveness in a globalised economy which provides ever cheaper goods, manufactured abroad for consumption in countries such as ours. Such a view is fundamentally incompatible with serious and sufficient action on climate change.
Without addressing these fundamental measures, the Government and the Opposition continue to be insufficiently ambitious and wrongly focused for the sake of supposed economic stability, thereby risking catastrophic climate events. The Green Party, however, believes that we must begin to localise our economies into more efficient and sustainable units to guarantee the future of our planet and economy. Such a vision offers greater community and personal satisfaction—a world where conviviality replaces consumption, where local identity replaces global trade and where community spirit replaces brand loyalty.
My Lords, I echo the Minister’s fine words about my noble friend Lord Sainsbury and agree that my noble friend’s contribution has been quite outstanding.
Quite rightly, the gracious Speech starts with stability in the economy and how that is the foundation of a fair and prosperous society. Like other noble Lords, I congratulate the Government on consistently and successfully working at this policy over the past 10 years and welcome the promise to continue working towards the same objective. It is very laudable.
Your Lordships have already debated public services, immigration, health, security and the role of the state, global warming and foreign policy. Today it is the turn of business and the economy. The Government are wise to have launched policy reviews covering virtually all these issues. By looking to the future, they will revitalise themselves—that is what progressive Governments do.
Of course, the Tories are carrying out the same reviews, but let me say to the Front Bench opposite that, although the issues may be similar, their reviews have a different feel. Instead of being about the future, they seem more about escaping from the past. With apologies to the noble Lord, Lord Marlesford, they seem to be about holding an inquest into Thatcherism. Perhaps the explanation is that these reviews are being carried out by people loaded down with the baggage of the past, and all that baggage has yet to be unloaded.
Recently the Government have initiated a number of reviews designed to help business, led largely by people from business. We have had reports on housing, the health service and cutting red tape; we are promised reports on how to improve the transport infrastructure, deal with the skills gap and the financial health of the creative industries. With all that work going on, I find it difficult to understand why the CBI and the Institute of Directors accuse the Government of lack of support for business. This seems based on the level of corporation tax; the words of the noble Lord, Lord Sanderson, reflected that. In my business experience, tax is only one part of the equation.
Last week we had the Varney review, which dealt specifically with relations between business and the tax authorities, and how to improve them. I hope that noble Lords opposite will agree that this, too, is business-friendly, and that they will not provide comfort to the tax avoidance industry by querying the review.
The most important report, of course, has been the Stern report on climate change. It was welcomed by business and Government alike, with the exception of my noble friend Lord Barnett. It stimulated the promised Climate Change Bill. Indeed, business asked for long-term goals to reduce carbon emissions plus a legal framework in which to achieve that because long-term certainty will enable business to invest in the equipment and technology to achieve this reduction. I hope that the Minister will assure me that the Bill will also put in place monitoring and reporting arrangements so that it is fairly administered. Business is in agreement with this objective; indeed, some firms already say that they are carbon-neutral, and many more say that they are working towards this objective. Detailed confirmation appears in company annual reports all the time. I hope that the determination of many companies to become carbon-neutral will persuade the Tories to stop flip-flopping on this issue and that they will firmly support the Bill.
The real challenge is to maintain our continuing prosperity while achieving a low-carbon economy. The noble Lord, Lord Newby, is right: business has to meet this challenge and produce the action for which the noble Lord, Lord Vallance, called. The challenge lies not only in the more efficient use of energy, waste reduction and carbon trading but also in the materials that we use. Metals, plastics, rubber, textiles, packaging, composites and building materials represent an enormous part of our economy—some say nearly 20 per cent. All over the world, people will have to adapt to these new pressures. Some materials will have to be substituted by other more sustainable ones that use less metal or require less water. Others will have to be used in different combinations and quantities. In addition, we will have to look at reuse, disassembly and recycling on a scale far greater than in the past. That will involve redesigning many products, which will provide the kind of entrepreneurial opportunity that the noble Lord, Lord Wade, spoke about. How will we tackle this? The materials community is diverse but, fortunately, some time ago in this country the Materials, Innovation and Growth Team realised that the differentiation of materials, one from another, is becoming less important. It is more important to look at what materials communities can share so that they and their supply chains can satisfy consumers’ needs in an increasingly sustainable and innovative way.
My noble friend Lord Bhattacharyya referred to the work of the DTI and the Technology Strategy Board. For this purpose, they formed Materials UK. I declare an interest: I was invited to be its honorary president. Interestingly, these mighty companies of the materials industry asked the design companies and organisations to join them. Jonathan Ive, who designed the Apple iPod—he comes from Newcastle—explained why rather well. He said he tried to design products that solved problems and that truly innovative companies often had to change their approach to how they develop, evaluate, make and market products. In this country, our creative capability is an important national resource. Participating in efforts such as Materials UK makes a lot of sense.
Both maiden speakers spoke of the problem-solving, innovation- and design-based, research-based, service-giving, brand-promoting, fast-moving economy—now referred to as the knowledge and creative economy. I agree with them. Much future wealth lies there. Happily, it is growing and expanding in this country all the time, but I am not sure whether we are aware how much, or whether our national statistics fully represent this kind of economy and present a true picture. We capture very well our investment in buildings, the equipment in them, our labour and the products and services, but do these figures really capture a knowledge economy? Are we quantifying creativity and the marketing of knowledge? Are we measuring our trade in best practice, innovation and product design, brand building and many of the other things which are required in order to compete in today’s global sustainable economy? A piece of packaged software is measurable, but what about the far greater amount of software which is not packaged? What about the skills which we import through immigration and those we export through know-how, services and the creative industry?
The noble Lord, Lord Moser, explained why the Statistics and Registration Services Bill mentioned in the Queen’s Speech is so important. He and the noble Lord, Lord Jenkin, told us that one purpose of the Bill is to raise public confidence in our national statistics by putting the Office for National Statistics under an independent board beyond the reach of politicians, which is laudable and desirable. But statistics must also reflect what is actually going on in our economy. Perhaps the Bill also can help with the transparency for which the noble Baroness, Lady Noakes, called.
The Minister who is to reply, a former distinguished accountant, knows about this. Perhaps he listed a lot of these investments as intangibles and, as a result, they never appeared in our statistics, but now these intangibles play a crucial role in our competitiveness. So I hope that he will ensure that the board of the Office for National Statistics will guarantee not only that the work is independent and of high quality, but also that the output is comprehensive so that it measures what is really going on in our modern knowledge economy. Without that, our national statistics may be accurate and independent, but they may also be incomplete and misleading and will fall into all the perils which the noble Lord, Lord Moser, told us about.
Most speakers seem to agree that we cannot master the challenges ahead in the old ways. It requires new politics and new business models. I, and other noble Lords, have tried to provide a few signposts. I hope that the Government are listening.
My Lords, I should like to focus on communications and, within that, the increasingly convergent industries of telecommunications and broadcasting. I have to declare an interest as chairman of Ofcom, which received its duties and powers from the Communications Act 2003, which your Lordships’ House spent a great deal of time considering. The UK communications sector plays a key role in the dynamism of our economy and society. It is difficult to think of any sector of the economy which does not depend on its ability to communicate with customers and suppliers at home and around the globe—whether through electronic and broadcast media or through telecommunications and the internet. Communications matters to us all as citizens and consumers. A successful communications sector is also crucial to society more broadly and to the health of our political system.
I think it is fair to say that we have a strong story to tell about the UK communications sector. Consumers enjoy lower prices for a widening array of services. Competition has driven down the price of residential services by one-third on average in the past five years. Research published by Ofcom last week shows that this has not come at the expense of customer satisfaction, which remains high, nor of choice, which is wider than ever. For the first time, total household spend on communications fell during the past year. We are getting more for less. But greater competition and choice also raise wider social policy questions and the need for effective consumer protection. I therefore welcome in principle the Government’s intention as part of their legislative programme to give consumers a stronger and more coherent voice, but, importantly, in a way that leaves unchanged the highly effective consumer representation in Ofcom through the consumer panel given by the Communications Act. I look forward to the detailed debate of these proposals.
Under the Communications Act, Parliament rightly gave Ofcom marching orders that involved a complex balancing of a range of duties; that is, to drive competition, choice and deregulation, which has been emphasised particularly in this debate, to sustain the range of public service broadcasting and to provide appropriate safeguards for consumers and citizens. Sometimes these duties pull in different directions and entail more rather than less regulation. To take a case in point: our recent proposals on the restriction of TV advertising to children of food high in fat, sugar and salt shows that conflict of duties. On the one hand, there is concern about the influence of advertising on the diets of our children and, on the other hand, concern to maintain the quality of UK-originated children’s programming. We have had to consider carefully the evidence that TV advertising shapes children’s food preferences. But other influences, particularly parents, are much more significant. Some draconian measures, such as a pre-watershed ban which is favoured by many, would cut broadcast revenue by more than the entire commercial TV-sector spend on children’s programming and national news coverage combined. We have had to consider carefully what goes into children’s stomachs but also what goes into their minds, and judge what we think to be proportionate and effective action—regulatory, to be sure, not deregulatory, but, in our view, proportionate. Inevitably, however, the decision has not been without controversy.
I have spoken about how competition and choice have taken hold over the past few years, to the general benefit of consumers. Ofcom welcomes the Government’s measures to simplify regulation wherever possible—although I have illustrated that sometimes it is not possible—but we should all recognise that simplification can be complex. For example, we have been able to remove retail price controls on BT line rentals and calls, 22 years after they were first imposed at privatisation. This significant bit of deregulation could only have happened with the reality of a competitive market, made possible by the operational separation of BT, the creation of Openreach and the commitment of BT to deliver what has become known as “equivalence of input”, delivering to BT’s retail competitors the same service as BT Retail itself receives from the other parts of BT.
One could argue that that operational separation was a regulatory intervention deep into the heart of BT’s business; more interventionist, possibly, than what went before. However, it has enabled major deregulation of other parts of BT, with substantial benefits overall. The high level of investment in local loop unbundling deep in the network signals the wider benefits of this policy, and supports the view that competition benefits consumers much more than retail price controls.
Market mechanisms have been extended to that other crucial national asset, the radio spectrum, an economic asset now worth at least 3 per cent of GDP. We will see, as a result of the extension of market trading, the radio spectrum’s value and importance growing further, together with a flourishing of innovation as new services and technologies find it easier to gain and trade spectrum rights. Over the next three years Ofcom will make available a large tranche, 400 megahertz, of new, prime spectrum. Together with the liberalisation of existing spectrum use and allowing spectrum trading, this will make it easier for new applications and technologies to emerge faster for innovative companies to bring new services to market and thus for consumers to benefit quickly.
Already we are seeing the emergence of new technologies that could make dramatically more efficient use of the available spectrum and render its scarcity less of a factor. When the next big thing emerges, its spectrum needs will be met by the market, not regulatory fiat. That will make it more likely to emerge quickly, and more likely to emerge in the UK than elsewhere.
Within that major use of spectrum broadcasting, the changes are no less significant. How public service broadcasting is sustained through the transition to a fully digital world is a crucial question, particularly now that digital switchover is a near-term reality. The BBC has a central role to play in the provision of public service broadcasting, but we need to sustain plurality of provision in the digital world, as we have had in the analogue world. That is why we are undertaking a major review of the finances of Channel 4, thinking hard about the future of television news reporting and fleshing out the idea of a public service publisher.
The noble Lord, Lord Truscott, has spelt out the considerable benefits that will flow from digital switchover, and I will not repeat them. The process will affect every household in the UK. It is right, therefore, that the Government are bringing forward urgently needed measures to ensure that the information is available to allow targeted help to those who will need it in what for some could be a confusing process.
Looking ahead, we should recognise that the digital age will bring important challenges to the traditional model of linear broadcasting to mass audiences. Traditional TV and broadband are colliding, as viewers switch to content delivered on demand via the internet and online viewing cuts into traditional TV viewing. Internet content is viewed within a different context, if not in a different way. I have no doubt that consumers will need to rely much more in future on self-regulation and co-regulation of that content, probably taking advantage of smart navigational devices that will become available, and much less on the centralised decisions of the Ofcom Content Board. It is welcome, therefore, that the British Government have successfully argued against a general extension of content regulation to the internet, in the context of the review of the audio-visual media services directive that has been considered by Sub-Committee B of the European Committee of your Lordships’ House. The old model of content regulation cannot be extended to new media and to internet content, and will come under pressure elsewhere as well.
I cannot leave broadcasting without alluding to a more immediate issue. Your Lordships will not have missed the widespread and sometimes noisy comments in the press on the recent acquisition by BSkyB of 17.9 per cent of ITV’s shares. Ofcom has invited both ITV and BSkyB to comment on whether this acquisition represents a change of control in any of ITV’s licences. We will in due course consider the evidence on that point, as the Communications Act requires us to do. I have little doubt that your Lordships will be hearing much more about this in the coming weeks.
To conclude, the story is of a sector that is growing in value and significance to the economy and society. There are significant challenges ahead, but I believe Parliament, particularly your Lordships’ House, can allow itself some satisfaction that the regulatory approach it set in train with the Communications Act—an effective balance of powers and obligations, with a healthy presumption against doing things but with a capability to act when necessary—is bearing fruit, and will continue to do so.
My Lords, I start by welcoming my noble friend Lord Truscott to the government Front Bench. He opened the debate, which is the easier of the two jobs. I think he will find, when he has to reply to debates in future and has to deal with his supposed “friends”, such as my noble friend Lord Barnett and me, that life will not be quite as easy.
I start with climate change. The Prime Minister said that the Stern report was the most important to appear in his period of office. It is surprising, therefore, that the usual channels have so far not set aside a full day to debate that report. We must certainly have a full day’s debate before we should even remotely consider looking at the proposed legislation.
I have two points of substance to make. I say with deep regret that, I think for the first time ever in our period in this House, I disagree strongly with the noble Lord, Lord Newby; I take exactly the opposite view. I apologise to him, of course. My view is that the overarching criterion to be applied in this case must be for the Government to act in the interests of our country. Goodwill gestures will get us nowhere. Being thought highly of by the rest of the world will not buy you a cup of coffee, let alone anything else. The countries that are the main sources of carbon emissions have every intention of carrying on regardless. They will free-ride on any minuscule gains that emerge from our own independent policies, a point that was made by my noble friends Lord Sheldon and Lord Barnett. Those other countries’ industries will flourish, while ours are damaged by so-called “green taxes” and all the other measures that are being proposed.
Secondly, even if you believe—which I do not for one moment—that a major collaborative international effort will occur, any effects will take decades to appear. That is in the Stern report. Thus, the Government’s duty now is to initiate an optimum response to what is going to happen. That optimum response must be to adapt to the climate change that is going to occur. A strategy of not adapting is simply not one of the available options.
I welcome the statistics Bill. Again I have three comments, which largely just underline what the noble Lords, Lord Jenkin of Roding and Lord Moser—my old teacher—have said. Our concern must be with all the relevant statistics and not a narrower set of statistics. As it happens, our economic statistics are as good as any in the world, and probably better than those of nearly any other country, but the same cannot be said for those on health, crime, transport, the environment and so on. Thus it would be a serious error to concentrate on economic statistics as the main point of the Bill.
It follows—again, as the noble Lords, Lord Jenkin and Lord Moser, said—that the home for the non-ministerial department should be the Cabinet Office; but, wherever it is, it absolutely should not be the Treasury. Further, parliamentary scrutiny—and I emphasise parliamentary, meaning your Lordships' House—should not be undertaken by the Treasury Select Committee in the other place, although that is up to it, and certainly not by our Economic Affairs Committee. The noble Lord, Lord Jenkin, thinks that we might get a collaborative committee. I do not believe that either—you see that I am in a very negative mood this evening. I think that we must have our own statistics committee in this House that would do the job of scrutiny.
I now turn to the economy itself. I speak as someone who bears the scars of advising Governments during the 1960s and 1970s. I can only tell noble Lords that, for the past 10 years, this economy has been almost like utopia. In my notes I used the words “reasonably good”, but that is very much an understatement. Inflation is at a low and stable level. The GDP growth rate is at its long-term level and the annual GDP rate has been stable, at about that trend. There have been at worst minor recessions, and annual GDP change during the period of this Government has never been negative.
I am in difficulty about my next point, and noble Lords will see why in a moment. This morning, again following the GDP point, I wrote that, “Whole-economy productivity growth is also positive and pretty stable and has been very much at the level of its long-term trend”, which I then added is “pretty good”. I said it was pretty good because the economy is moving ever more to emphasise the services sector, where we do not measure productivity gains correctly, or perhaps they do not occur—but I agree with my noble friend Lord Haskel that we certainly do not measure them correctly. I thought that that was pretty good. But I then added, and this is my difficulty, “There has been no productivity revolution”. I thought that my noble friend Lord Truscott, unless I misheard him, said that there had been. I do not like to criticise him or make a problem, but perhaps someone could check whether I misheard what my noble friend said. I looked at the data this morning and there was no sign of a productivity revolution. However, I still think that what has been achieved is very good indeed.
Employment has been increased, which is a good thing, but unemployment is too high and appears to be rising. I notice that the noble Baroness, Lady Noakes—I assume as part of the remodelled Conservative Party—laid particular emphasis on unemployment as something we need to look at. I therefore came to the conclusion that it is not so much that Polly Toynbee is now the main source of inspiration for noble Lords opposite as that Karl Marx has replaced Edmund Burke as their most important philosopher.
Unemployment is, however, certainly too high. It was generally agreed by economists from about the late 1970s onwards that we had previously given too much emphasis to unemployment and too little to inflation targets, and so we moved over. But if you go over to inflation targeting, it is not surprising in the least that you must accept higher unemployment levels. It is an inevitable consequence of the way that economies work. You cannot wriggle out of that by saying, “We will go for some microeconomic measures that will make the labour market work better”. I certainly agree that we should go for such measures, but it is a total failure to understand economics if you think that those measures to improve the workings of the labour market can deal significantly with aggregate unemployment.
I should like to make a point that no one else seems to have made, which surprises me given that almost everything else has been covered. One surprising feature of what has happened to the economy is that inequality has increased, and the rich in particular seem to be getting very much richer. I understand the case for targeting measures to help the poor, but all targeted measures have very distinctive disincentive effects. As for talk about tax measures, I say to the noble Lord, Lord Marlesford, that I know the story about the 98 per cent tax rate, but no one has ever been able to find anyone who paid it. The reason why that policy might have been mistaken is that accountants did very well out of it, not that anyone ever paid that rate. However, there are people who pay a 98 per cent or 100 per cent tax rate, and they are poor people. If they are very keen to get off benefits and into the labour market, they start to incur taxes. But, more to the point, they also lose benefits on a pound-for-pound basis. They pay 100 per cent tax rates at the margin. My advice to the Conservatives, if they wish to become a progressive party, is to look at that end of the spectrum and forget about the Forsyth report, much as I enjoyed reading it.
Another plus point is the balance of payments—at least I think it is a plus point. The current account has been in deficit to varying degrees for the past 20 years. The amazing thing—which shows that, when I taught economics, I really misled the students very much—is that we have been able to finance this deficit year in, year out. That has to be a plus, because we have financed that deficit by people feeling that it is worth while investing in our country. Our interest rates are a bit on the high side, but if the world lost confidence in us, interest rate policy would never offset that. So it has to be world confidence that matters.
We want that confidence to continue. I know as a matter of arithmetic that if some countries in the world have massive current account surpluses, others such as our own must have deficits. Equally, if they have those surpluses, they also accumulate finance capital. They have to put it somewhere and we are a place where they are likely to put it. So you could argue that, as long as they have confidence in us, there is no problem. But, deep down, something nags at me, “Can I be right?”. In other words, I go back to the reason why I became an economist: my innate pessimism tells me that economics is the subject to be in.
I have two additional worries. I start with the MPC. I have read the latest inflation report, which as usual offers an excellent account of the recent history and the current state of the economy. I have also read—they have just arrived—the latest minutes of the MPC, which are most revealing. But I do have a serious difficulty. I cannot find any connection either logically or economic-theoretically between what is in those two documents and the policy decision. To quote the MPC’s conclusion: “Given that outlook”, which is what the whole of the rest of the inflation report was about,
“and bearing in mind the balance of risks, the Committee judge that an increase of 0.25 percentage points in Bank Rate to 5 per cent was necessary to bring CPI inflation back to the target in the medium term”.
I can only respond, again following my noble friend Lord Barnett, by saying that I am amazed. Apart from the fact that I cannot see that the MPC’s decision follows in any rational way, I am concerned very much at the risks that it is willing to take with the real economy.
My second and final comment—nearly final; there is always an extra one—is on the fiscal position. It is not right to anticipate the Pre-Budget Report, but I am concerned that public expenditure and aggregate taxation are getting close to an upper limit. What worries me even more is that pressures for more expenditure are growing. It is the age-old problem that the Government want this new improvement to be made, that pension to be increased, the nuclear deterrent to be modernised and so on, but they are less inclined to say what expenditure should be reduced to make room for those or what taxes should be raised.
The Chancellor’s economic policy depends on a sound fiscal position, with borrowing to be strictly for productive investment. He is entirely right on that. However, it follows that in a few weeks’ time he must give us a tough fiscal package. Wearing my old academic hat, I would tighten the fiscal side to persuade the MPC to see sense, forget about raising the bank rate from now on and start to bring it down again.
In conclusion, going back to an earlier point—I know that it is terribly irresponsible to say this in your Lordships' House—I sometimes wish that we had a crisis. We, especially the economics profession, need extreme events both to test our macroeconomic theories and, more properly, to evaluate our policy mechanisms, but perhaps noble Lords should ignore those last few sentences.
My Lords, I shall concentrate on one vital element of the national economy—London. I should therefore begin by declaring my interest as chief executive of London First, an organisation which seeks to make London the best city in the world in which to do business.
My sights are not solely on London. The shape of the UK, and indeed the world economy, has changed. In this increasingly global environment, London has the potential to be the world city, and the UK needs it to succeed. London's contribution is clear. With 12.5 per cent of the population, London contributes 18 per cent of the UK's GDP and in recent years accounted for 40 per cent of the UK's export growth. Up to £20 billion of taxes raised in London every year contribute to public spending in the rest of the country.
The underlying issue for London is its success. Its population has increased by 700,000 in the past 15 years and is set to grow by the same amount in the next decade. Around 375,000 people came to live and work in London last year, 345,000 left and 100,000 were born—a phenomenal rate of social change, representing 10 per cent of London's population. Legislation needs to keep pace, specifically addressing the following challenges: first, the UK's tax and regulation regime needs to remain competitive, a point ably made by the noble Lord, Lord Rowe-Beddoe, in his maiden speech. Secondly, the capital needs devolved decision-making to enable the public sector to respond quickly and efficiently. Thirdly, Londoners' skills need to match the jobs on offer. Fourthly, immigration needs to be competently managed. Finally, the capital needs investment in its overstretched transport system.
I turn to these in order. London is one of the most important financial centres in the world. I look forward to measures in the exchanges and clearing house Bill to limit the chances of importing over-restrictive US regulation. The sector is already fighting a continuous battle against inappropriate European legislation. The Chancellor's new high-level group for financial services and the creation of the role of Minister for the City are a welcome recognition of the need for constant dialogue in this fast-changing arena. I also welcome the Chancellor’s pledge to reduce regulatory burdens by 25 per cent, but as others have pointed out, saying it is one thing, doing it is quite another.
I look forward to further measures to devolve power in the Greater London Authority Bill. Your Lordships may be interested that in a recent survey of businesses asked whether they felt that the GLA, no London government, or the GLC were more effective, around 60 per cent endorsed the current GLA, 17 per cent preferred no government and 12 per cent preferred the GLC. I leave others to speculate on what this says about the current Mayor of London and previous leader of the GLC, Ken Livingstone.
Two important measures are proposed: new powers for the mayor to direct planning development decisions and devolution of responsibility for adult skills training. It is unfortunate that, on the eve of the First Reading of the Greater London Authority Bill, the Secretary of State has called in an application for offices in Fenchurch Street in the City. The Government are planning further reform of the planning system to address productivity and competitiveness. It is just this sort of intervention that causes the uncertainty and delay which undermine competitiveness.
The decision to enable the mayor to take over strategic planning decisions from the boroughs in exceptional circumstances should enable broader economic and social issues to be addressed, but goes against local concerns. It is crucial that these new powers do not result in developers getting caught in the crossfire between local and London government, each jealous of their own position. As London First, we will argue for the greatest possible certainty and clarity in the process, which is not the case with the current proposals. We look forward to more workable provisions in the Bill.
Among the employed, London has the highest skills levels in the country, but 1.5 million adult Londoners have low or intermediate skills and London also has the highest unemployment rate at 8.2 per cent. It is not surprising therefore that London attracts international migrants at the rate of around 200,000 a year to fill the vacuum in the middle. The Further Education and Training Bill will provide for the five learning and skills councils in London to merge and a new employment and skills board will be established to set adult skills strategy, chaired by the mayor, with a majority of business members. This should create the opportunity for business to introduce a sense of market reality to skills provision and for the mayor to provide leadership across the government institutions working in London. We have to make training deliver jobs for London’s unemployed, not just qualifications.
That brings me to the Asylum and Immigration Bill. While it is vital that we improve Londoners' skills, we also need to recruit the best talent from around the world. Businesses in London would like to see a continuation of the open door policy that has made London thrive. I agree with the noble Lord, Lord Bilimoria, who in his excellent maiden speech stressed the need for an open and free market. I also support the Governor of the Bank of England in calling for reliable immigration statistics—a subject on which others touched.
As London continues to grow, major new housing and commercial development is needed. Planning procedures are still taking too long. While it is convenient to argue about legislation, the main scope for improvement lies in doing things better. Borough planning departments need to be better resourced and the appeals process speeded up. Targets for increasing housing supply will also not be achieved without investing in infrastructure. In particular, in the Thames Gateway actual housing development is running at 5,000 per year against a target of 16,000. A planning gain supplement would not raise significant funding since the majority of the development is on brownfield sites. Instead, national, London and local government need to make house building less of an endless obstacle course.
The Thames Gateway, London and the UK are becoming severely constrained by the need to invest in transport. If London were permitted to invest the money it collected in taxes, it could not only solve its own transport problems but increase the national tax take. I look forward to the Eddington report, which is due to set out the economic benefits of investment in transport and recommend ways of speeding up planning for major projects.
I touch briefly on capacity constraints on London's roads. With potentially 400,000 more vehicles by 2025, congestion will grow by 25 per cent. Road construction on this scale is impractical. The only option is to ration resource through pricing. I welcome the inclusion of a Road Transport Bill in the legislative programme. However, if road user charging is to gain public acceptance, it must be seen as a net economic and social contributor. This means hypothecating the charge to invest back into better management of local roads, public space and more public transport.
Where will all the displaced drivers go? Crossrail is the only mass transit system which is deliverable in the foreseeable future, and that is only by 2016, by which time London will have grown by the size of the city of Leeds. The hybrid Bill for Crossrail should reach your Lordships' House in the spring. The one outcome that business in London looks for above all else is to complete the legislative process and resolve its funding so that construction can begin without delay.
My Lords, we have a strong economy, with the longest period of sustained low inflation since the 1960s; growth of over 25 per cent since the Government came to office compared with 15 per cent in the nine years prior; interest rates low by historic standards; mortgage rates at their lowest sustained level for 50 years and record numbers in employment—2.5 million higher than in 1997. The recent OECD survey ranked the United Kingdom first for all measures of economic stability, describing the UK as a “paragon of stability”.
We have also seen the Government take steps to lift significant numbers of children and pensioners out of poverty, as well as to improve the position of the lowest paid at work through, first, the introduction of the minimum wage and, subsequently, by increasing the level of the minimum wage. Through such measures, as well as those addressing social exclusion, the Government have sought, allied to a stable and thriving economy, to provide the foundations for a fairer and more cohesive society.
However, not all developments and trends appear to be working in this direction. Many of your Lordships have rightly referred to the important contribution made to our economy by the financial markets, and I would not want my agreement with that point to be forgotten. Changes in the way that the financial markets work, though, are creating an environment that is geared more than would seem desirable to a short-term approach to investment. The changes in the financial markets are many. More extensive use of stock options, particularly when applied to senior directors, creates considerable incentives for top managers to give priority to raising stock prices, which only encourages short-term thinking.
A more market-driven pension system is leading to pension fund managers investing in riskier assets, changing their portfolios more frequently, reducing firms’ certainty with regard to future funding, and intensifying pressure for higher returns from their investments in productive companies, thus depriving the latter of much-needed resources. The expansion of private equity funds does not promote economic stability. Investment by such funds is frequently highly leveraged, with the buy-out debt financed, and the firm purchased left saddled with responsibility for servicing the debt. The strategy for investment by such funds is too often asset stripping or restructuring, leading to jobs being lost and established companies being destroyed, while the ones who benefit most appear to be the fund managers.
Gate Gourmet, of Heathrow airport fame, is one example of what can happen when an organisation is bought by a private equity firm which, in this instance, hired hundreds of contract workers before carrying out the next stage of the strategy, which was to attack the existing workforce, many of whom were Asian, and their working conditions.
Takeovers where the driving force is a high and quick return do not promote stability. The threat of takeovers also influences thinking. The desire to minimise the threat of a hostile takeover results in the existing management taking action to raise the company’s share price in the short run, through measures such as deferring investment and creating redundancies, which have a negative effect on the longer-term performance of the company.
A significant part of the UK economy is now controlled by private equity players, who determine the futures of one in five private sector employees. Despite that, and the investment of company and private retirement funds in this sphere, the industry is unaccountable and lacking in transparency in comparison with public companies. The expansion of hedge funds has been dramatic. Something like 70 per cent of Europe’s hedge funds are London-based—except, of course, for tax purposes. The funds that they manage are equal to the gross domestic product of the eighth largest economy in the world, namely Brazil. Such relatively unregulated investment funds adopt unconventional investment strategies in pursuit of their scarcely-disguised goal of a rapid double figure return.
The goals of the longer-term investor are not for them. Objectives such as improvements in production or services, consumer needs, new product lines and increased productive capacity are not at the forefront of the minds of hedge fund managers. Even though the objective is to gain control of companies, the managers of hedge funds do not then see themselves as employers, committed to invest in and develop both the company and the relationship with the staff. They want, and all too often achieve, a commitment that is without obligation, and one in which there are no barriers to taking whatever action they intend in the quest for a quick and significant financial return. In theory, they are hedging risk, but they are also speculating, and economic stability, long-standing firms and industries, and jobs are the pawns on their chessboard.
A short-term approach also impacts on future generations. If the capital markets seem to be moving more towards the short-term investment approach that is geared to a rapid financial return, where does that leave us in the future over the funding of research and development and innovation, which requires a very different approach? Climate change and renewable energy are issues that have moved rapidly up the scale, and much-needed investment in environmental technology is unlikely to interest those seeking quick financial returns.
The changes in the way that financial markets work have been a factor in the dramatic increases in remuneration in the sector, particularly in London. It has been reported that at least 3,000 people received bonuses of £1 million or more for last year. That was not a unique occurrence; it has happened in previous years and is likely to happen again in the next few months, with predictions of 4,200 people receiving bonuses of £1 million or more, with bonuses in the City totalling £8.8 billion. The situation is similar at the highest level in Britain’s largest companies. Over the past 12-month period, boardroom earnings rose by 28 per cent, seven times faster than average earnings and nearly twice the increase in the FTSE 100 index. That was not a one-off, since the latest figures simply repeat rises of 16 per cent, 13 per cent and 23 per cent over the previous three years.
The argument advanced is that such increases reflect achievement, but it falls down when it becomes clear that, leaving aside their size, the increases are too often not related to the performance of a company. The other argument is that repeated increases of such magnitude are needed to remain competitive. That is a very convenient argument but one that the organisations and individuals involved never risk allowing to be exposed to public scrutiny.
A great many others in the world of business and commerce, technology, manufacturing and engineering, research and development and public service achieve and bring great benefit to the community and the economy, just like those in the financial markets—but they do not receive or expect increased remuneration packages that are way in excess of everyone else in return for delivering and remaining in their posts. The overwhelming majority of companies and organisations will seek to ensure that work brings a fair, but not excessive, reward and, for some, that approach will mean high rewards. The evidence though is that in recent years that approach is being interpreted rather differently in some boardrooms and in certain parts of the financial markets than it is everywhere else.
There is now a rapidly widening gap between those receiving the highest incomes and both those at the bottom end of the income pile and those on average earnings. With the changed priorities in some parts of the financial markets, and the implications for company stability and development, for jobs, and for the longer-term commitment to a firm of those who own it, these are developments that do not assist in achieving a fairer and more socially cohesive society, which ought to be as much a goal of any Government as economic growth and prosperity.
My Lords, I start by welcoming my noble friend Lord Truscott to the Front Bench. I first knew him when he was an agent for the Labour Party, but he got over that and moved on to greater glory in the European Parliament and now, I am sure, on the Front Bench here. He is very welcome. I couple that by joining the tributes to my noble friend Lord Sainsbury, who not only was my roommate for many years but has made a great contribution to science and to the proceedings of this House.
I intend to touch on three interrelated aspects of the economy and economic policy, all of which a few years ago probably would not have been regarded as mainstream, but which I now regard as mainstream. Climate change and the economics of climate change have been touched on by a number of noble Lords; the other two less so. Inequality is one of my other themes. My noble friends Lord Rosser and Lord Peston have latterly touched on that theme.
The third is the interest of consumers in that process. On the latter, I declare an interest as chair of the National Consumer Council, and I probably should on the climate change issue as a member of the board of the Environment Agency and the London Climate Change Agency.
Three Bills directly relate to consumer matters. We will debate the Consumers, Estate Agents and Redress Bill only next Monday, so I shall curtail my remarks on it, but I need to say that I very much welcome its broad thrust in its objectives of creating a single, cross-sectoral advocacy and policy body for consumer interests; improving the ombudsman function, particularly in the energy sector; and enhancing and making more comprehensive the role of Consumer Direct. That seems a sensible package for reorganising the institutions of consumer protection in this country, although we need to be concerned that the complaints functions of Energywatch and Postwatch are covered in the new structure.
Also on the consumer front, we have the Legal Services Bill. I very much welcome it, partly because it was originally suggested by the National Consumer Council some years ago, well before my time. I hope that lawyers in this House and elsewhere back off from their initial great hostility to the Bill and recognise that legal services, like all others, have to take account of the consumer, client and customer interest.
I also have an interest in the digital switchover Bill. I listened with interest to noble Lords discussing that, including my noble friend Lord Currie. It is important that, in the process of digital switchover, the interests of the more vulnerable consumers are recognised; I was glad that he referred to that. I particularly draw his attention, and that of the House and the Minister, to the position of people in council and other multi-occupied housing, for whom there is the possibility of paying a much higher cost for digital switchover than in areas where individual households make the choice. That needs to be covered by the Government, the regulator and the BBC’s approach to supporting vulnerable households.
On climate change, we have had some differing views, and it is with great temerity that I have to say that I disagree with three of my most distinguished noble friends, two of whom have just disappeared, but I hope that they will be back in a moment. Here is one of them. Many years ago, one of them—he has probably forgotten—attempted to teach me economics, and the other two have taught me a lot about politics. It is important that we recognise that the Stern report finally gives us a robust analysis of the economics of climate change, although there are obviously wide ranges of probabilities involved in it, as there are in the science. I have been long convinced of the science of climate change but, on the Front Bench and since, I always felt slightly nervous that its economics had not been fully explored. The Stern report fills a major gap with that. One of Stern’s major recommendations is, in effect, on the cost-effectiveness of measures to not only mitigate climate change but, as my noble friend Lord Peston emphasised, adapt to inevitable climate change. The sooner we make decisions on that, the more economically sensible and rational it is.
That means huge responsibilities on government, nationally and internationally, and on industry, but there is also a consumer dimension to the subject. One of the NCC’s responsibilities is to promote sustainable consumption, which is a difficult task. A proportion of consumers are of course very aware of climate change and other green-related issues, and make choices based on those values. We need to enable them more easily to make those choices, in terms of labelling, education and presentation of the various products that face them. They are, I hope, a growing minority of consumers, but they are nevertheless a minority. Frankly, most consumers still make their choice on price, availability and quality, as consumers always have.
That will continue to be the case, but government and industry can affect the framework in which that choice is made. In relation to quality, I go back to some remarks by my noble friend Lord Haskel. Industry and government ought to deploy the creative design facility of this country—we have leadership in the area—to ensure that the products and services we offer maximise the take-up of the greener options. On availability, there is a significant role for regulation in setting standards and requiring labelling, and in banning some high energy-use or resource-use products. On price, there is a major role in relation to taxation. That is a difficult area as there is often regulation, and presentation is difficult. It appears that the consensus among the political parties, at least in principle, is that there should be some shift towards green taxation. I approve; it should be done, broadly speaking, on a revenue-neutral basis. In other words, you tax the bads and incentivise the goods in terms of energy content or other green measures.
We have to recognise, however, that there is another problem about the switch to green taxation—that, in some forms, it could disproportionately affect the lower-income groups. Even if operated on a revenue-neutral basis, green taxation, like all indirect taxation, can disproportionately affect the poor, and can be in some forms extremely aggressive. A concomitant of going for more green taxes as a proportion of the tax burden must therefore be that the rest of the tax system is put on a more progressive basis. That particularly applies to the structure of and threshold for income tax, and to council tax. If we have a more progressive system of that form of direct taxation, we can accommodate a shift to green taxation to deliver our environmental objectives in a way that does not penalise the weakest elements of our society.
That also touches on my final theme, equality. By equality, I make no apology for saying I do not just mean equality of opportunity; I mean equality of outcome. On both, the progress has been sadly lacking in the past two decades. Inequality in our society has grown over the past 25 years. After the war and for some time afterwards, the UK was one of the most equal societies in western Europe; it is now one of the least. That is true not only in the static sense of the immediate snapshot, but in social mobility, where we have gone backwards. The Government have engaged in major efforts to reverse or hold that trend. The tax credits system, the minimum wage, interventions such as the New Deal and other provisions of benefit into work have all attempted to do that, but the net effect is that we have, broadly speaking, frozen the distribution of income at roughly the levels we inherited. There has been a slight improvement here and there, but in general that is the picture.
The distribution of wealth has actually deteriorated in terms of equality over the past few years. Although pensioners, the poorest families and some people for whom the minimum wage is properly enforced have benefited in relative terms, others—those on benefit who are single; those who are just above the benefit level, particularly those living in social housing, where the costs have gone up significantly; and other groups of the working poor—have not fully benefited from the improvement in the economy over recent years, as the Conservative Party pointed out only this week. As my noble friend Lord Peston pointed out—I agree—there is still a clear poverty trap for such people moving in and out of benefit, of paying almost 100 per cent taxation as they move into work.
At the other end of the scale, there is the situation pointed out by my noble friend Lord Rosser—that there are obscene increases in income in elements of the City and some of the boardrooms of our country. That is not justifiable on economic or social terms, and is extremely dangerous to our social cohesion. Frankly, it cannot be justified in terms of competitiveness and globalisation. I do not go along with the noble Lord, Lord Beaumont, or Nicolas Sarkozy in opposing globalisation; free trade brings many benefits. When I was taught economics—probably not by the noble Lord, Lord Peston, in this case—free trade and trade depended on a comparative advantage and an absolute advantage, certainly not an absolute advantage enforced by exploitative wage rates.
Globalisation has many benefits and does not mean that we on the one hand should move towards Chinese wage levels for fruit pickers, cleaners and textile workers while we have Texan levels of remuneration in our boardrooms and among our City brokers. I would submit that that outcome of economic policy would seriously threaten the social cohesion of this country and cannot be justified in any economic policy terms.
My Lords, I declare my interest as a pension fund investment manager for the past 30 years, but before the noble Lords, Lord Rosser and Lord Whitty, draw in their breath, perhaps I may say that I agree with almost every word that they have said.
I have to declare another interest; I am afraid that I am a long-standing, over-enthusiastic consumer of Cobra beer. I was most impressed by the splendid maiden speech made by the noble Lord, Lord Bilimoria. If he has a bottle of Cobra on his coat of arms, may it always be full. We heard also a very moving maiden speech by the noble Lord, Lord Rowe-Beddoe, on the problems of manufacturing employment, particularly in Wales, and I look forward to hearing much more from him.
My noble friends Lord Newby and Lord Vallance combined their usual expertise and great good sense in their speeches on the Stern review. Perhaps I may tell the noble Lord, Lord Peston, that I had not realised he was such a cynic. I was particularly struck by the scepticism of the noble Lord, Lord Vallance, regarding defence research spending. I share that in spades. My noble friend Lord Lee spoke on tourism. I thought that my noble friend Lord Dykes was initially pitching for a place on the Government Front Bench, but he quickly corrected that impression. Finally, perhaps I may tell the noble Lord, Lord Marlesford, that the Thatcherite consensus does not extend to these Benches and that some of us might even have been on the side of the sans-culottes against the aristos in 1789.
In replying to this debate, I wish to focus on the dangers of three types of debt—private, corporate and public. Debt in Britain is a monster gnawing away at the security and future of far too many lower-income and middle-income families, and threatens a whole generation of young people. For them, high house prices are a curse. If they are less educated and less skilled, the collapse of council house building under successive Governments and the shortage of affordable homes to rent can plunge them deep into debt, even in northern Britain, when they have to buy a house of their own. In southern England, lower-paid young people now see the housing ladder pulled high above their heads.
Many of the brightest and best-educated young people coming out of university into well paid jobs also risk drowning in debt. Starting £15,000 or £20,000 under water from student loans and top-up fees as soon as they graduate, they will gasp for breath a few years later when they take on their 100 per cent, interest-only mortgage, as the noble Lord, Lord Sheldon, highlighted, to buy a basement flat or a tiny terraced house if they work in the south-east or other high-priced property areas. No wonder the personal finance editor of the Times calls herself “young, gifted and broke”. And no wonder that a whole generation of young people are starting work with no realistic prospect of saving for a pension until it is too late to build the pot that they will need for a reasonably comfortable old age. Some 20 or 30 years ago, many young people saved without thinking for a pension when most large private-sector employers offered a defined benefit pension scheme. Now that happens only in the public sector.
Crippling personal debt is a problem so far only for a minority of households. The November inflation report from the Bank of England shows how household debt has doubled since 1999 and is now equivalent to one and a half times the post-tax income of households. About one in six households in that survey said that they faced problems repaying debts, and about 0.2 per cent of the population became insolvent over the past year. That sounds a reassuringly small statistic, does it not? However, it represents more than 100,000 men, women, and children in families who have fallen off the financial cliff. For them it is 100 per cent, not 0.2 per cent, disastrous. And how many more families are peering over the edge?
The chief executive of Debt Free Direct says there are now 2 million “irreversibly indebted families”. They may be able to pay their monthly interest bills, but have no realistic prospect of ever paying back the loan, short of a lottery win. And he should know—debt is a booming business in Brown's Britain. The Association of British Insurers last week published its annual survey of how British people save, if at all, for a pension. The figure that really struck me was that 43 per cent of us owe credit card debt carried over from last month. That is a key indicator of someone at financial risk, because they will be paying a real interest rate in double figures on that debt. By carrying on with hard-core credit card debt you must be either overstretched or stupid, when much cheaper debt is freely available.
The Bank of England inflation report also shows how the effective interest rate on household loans, mainly mortgages, was over 2 per cent above base rate in 1999, but today is only just over 1 per cent above base rate, so the interest rate margin has halved. Paying the interest on your mortgage is now easier, but paying back the capital is a real struggle. Perhaps I may tell the noble Lord, Lord Peston, that my scars of advising Government may go back only to the 1970s, but I certainly remember when inflation was 25 per cent. High inflation did at least wipe out a big chunk of your mortgage in real terms over the years, but now you have nowhere to hide if you borrow too much.
These frightening figures on families in debt come after 10 years of high employment, falling interest rates and steady economic growth. That has created a balmy climate for borrowers—I disagree with the noble Baroness, Lady Noakes—for which the Chancellor can claim some credit, as he always does. There is one golden rule that he never takes the slightest risk of breaking: the politician’s golden rule—“If you don't blow your own trumpet, no one else will do it for you”. He may prove me wrong in his Pre-Budget Report, but I would not count on it.
Seriously, though, the economic cycle has not been abolished and the British economy will go through tough times. Far too many of our fellow citizens are already on a debt knife edge with no margin of safety as unemployment and house repossessions creep up. We on these Benches call for a massive expansion of integrated debt and pensions advice centres, building on and working alongside the National Association of Citizens Advice Bureaux. Only a one-stop shop with a trusted brand name can reach millions who need help. Otherwise, there is a real risk that the national pensions savings scheme will involve serious pensions mis-selling. Auto-enrolment in pensions, combined with a means-tested state pension for many years to come, could easily be a toxic cocktail.
Turning to the points powerfully made by the noble Lord, Lord Rosser, we may also be storing up a potential debt problem in the corporate sector with the explosion of private equity funds. Richard Lambert of the CBI is right to warn about the risky financial structures of private equity-backed companies and the public policy questions for an economy, as he put it, where large swathes are held in these high-debt structures. The British Venture Capital Association today launched a campaign to protect those companies’ favourable tax status. Its Government lobbying operation is pretty slick and it enjoys a powerful voice in the Chancellor’s ear in Sir Ronald Cohen, who built Apax Partners into a $20 billion private equity group.
But today’s multi-million pound buyout funds are more about fancy financial engineering, not real venture capital, as the noble Lord, Lord Wade of Chorlton, described in his fascinating speech, which backs start-up and early-stage entrepreneurs and small companies. Sir Ronald’s firm, Apax Partners, helped by the Economist Intelligence Unit, produced a report, Unlocking global value, which points out,
“Most major buyout firms have little or no involvement in pure venture capital, where there is less money and higher risk”.
That is their business decision, but shuffling the ownership pack of mature companies has none of the economic or social benefits of successful early-stage venture capital.
This year has seen a flood of private equity bids for water companies and other privatised utilities. How does our economy benefit? Where is the value added for Britain when a secretive buyout fund bids billions for a publicly quoted British water company and loads it up to the eyeballs with debt so that it pays no corporation tax to the UK Exchequer? The Apax report also shows how buyout deals are getting riskier and more highly geared: in 2005, buyout firms borrowed, on average, five and a half times the target company's earnings before interest, tax, depreciation and amortisation, against only four and a half times in 2004. So, if British pension funds invest in this buyout vehicle, they are just paying higher fees to the Goldman Sachses or Apaxes of this world to invest in the same underlying water company assets that the pension funds previously owned anyway in their quoted share portfolios. No pension funds would publicly borrow several times their stake to invest in the equity market, but that is what they are doing indirectly through these big buyout funds.
A fat chunk of the current mergers and acquisitions boom in the City of London is private-equity driven. The buyout bonanza is paying for plenty of multi-million pound mansions in Notting Hill and agreeable country estates across southern England. When the noble Lord replies for the Government, can he tell us what estimates the Treasury has made of the loss of corporation tax from major British companies being taken privately into these highly geared tax-deductible vehicles, and can he assure us that that will be taken fully into account in the Treasury’s review of how these funds are taxed? Like the noble Lord, Lord Rowe-Beddoe, the Liberal Democrats want a straight cut in corporation tax for all businesses, not favourable tax treatment for a few.
This Government are not straight in accounting for their own debt. I have tried from these Benches over the past five years to help to expose the worst examples of their off-balance-sheet accounting. It misleads Parliament and the public and they hand out billions of pounds of public money to private financiers in unnecessary consultancy fees and long-term liabilities on uncommercial terms.
Two particular examples stand out in my memory. The first is the public/private partnership deal for London Underground. The noble Baroness, Lady Valentine, in her businesslike speech, called for more investment in transport in London, but on the Tube today Londoners suffer a disgraceful service without the absolutely essential safeguard of being able to sack a failed supplier. The second is Network Rail—a creature of creative accounting if ever I saw it.
The noble Baroness, Lady Noakes, the noble Lord, Lord Jenkin, and the noble Lord, Lord Moser, in his excellent speech, have all already stressed the significance of the Statistics and Registration Service Bill, which will in due course come to this House. On this, I am delighted to say that we are on the same side as the angels, as is the noble Lord, Lord Peston. We are telling the Government today that we will scrutinise and amend that Bill as rigorously as we can when it comes to this House to make public accounting open and honest once again. National statistics must be truly independent in future. Statisticians who are embedded in separate departments must also report directly to the National Statistician, and I see no need at all for the pre-release of sensitive statistics to government Ministers. Playing fast and loose with statistics is second nature to new Labour. The words “Iraq” and “peerages” will feature on the front of Tony Blair’s political tombstone, but “spin” will certainly be there on the back.
The other vast unquantified debt on the Government's balance sheet is in respect of public sector pensions. When historians judge this Government's record in 10 or 20 years’ time, their harshest criticism may well be on their total surrender to the public sector unions over pension ages, paid for by tax and council tax payers in the private sector who have far worse pensions or none. Two nations in pensions are simply not sustainable.
If you get a grip on public sector pension costs, that helps to pay for a non-means-tested decent state pension for all. That is the only way to give women a fair pensions deal and to ensure that savers keep every extra pound they save for a pension. Neither the Government's nor the Conservatives' pension proposals face up to the scale of the problem. But, as with PFIs and PPPs, Gordon Brown prefers to spend the taxpayers' money now and leave someone else to pay the bill later. That is not prudence; it is just putting off the evil day.
These debts are cunningly concealed for now in the public sector, and millions of ordinary families in the private sector are just making ends meet with debt looming over them. But if the Chancellor is in No. 10 after the next election, both the private and public sector debt monsters will come back to get him.
Returning to today’s subject, I am afraid that this Queen’s Speech is just a flat swansong from a lame-duck Prime Minister.
My Lords, we have had an excellent insight into the broad remit of the debate this afternoon. We have had two wonderful maiden speeches. In the noble Lord, Lord Bilimoria, I welcome our first Parsi. He is an entrepreneur—how terrific—and, better than that, he makes Cobra beer, which is the only beer I have ever been able to drink. It is absolutely delicious, and I am delighted that he is here. The noble Lord, Lord Rowe-Beddoe, who comes from the Welsh Development Agency, has brought to us a tremendous depth of knowledge. We will benefit from having these two Members on the Cross Benches to add to the wisdom of this House.
Today I have the opportunity to stand up for the first time with my DTI hat on and to greet the noble Lord, Lord Truscott, who has taken the DTI portfolio for the Government. We are both from Devon—we are only half an hour away from each other—so we will at least understand each other’s language, even if we do not always agree with each other on what we say.
I thank my noble friend Lady Noakes for her superb overview of the state of the economy and her insight into the workings of the Treasury. The gracious Speech has given noble Lords the opportunity to reflect on an eventful 18 months in your Lordships’ House. It seems a long time since the noble Lord, Lord Giddens, moved this Motion with his witty speech at State Opening. Since then, we have been debating the many and varied Bills that the Government are putting before us this Session.
It is clear that it will be another busy Session; already, noble Lords have taken a day out from the debate to pass the first Bill, on Northern Ireland. Today, we have heard not only from my noble friend Lady Noakes but also from the noble Lord, Lord Oakeshott, my noble friend Lord Jenkin of Roding, and the noble Lords, Lord Peston and Lord Moser, on the new “enhanced confidence” statistics Bill. From these Benches we will listen with great care to what the noble Lord, Lord Moser, has to say, with all his wisdom and experience. My noble friend Lord De Mauley is the new Cabinet Office Minister, and I am sure that he will be particularly interested to hear everyone support the idea that this should all be going to the Cabinet Office instead of to the Treasury.
In the following months we look forward to debating Conservative Bills. We can expect a Climate Change Bill, which is a Conservative proposal. The Treasury has been forced to make the provision of statistics independent—again a Conservative proposal. What is more, the Government have seen the sense of a Conservative manifesto commitment to link the basic state pension to earnings and have even borrowed the idea for their own policy. I am delighted to see those proposals on the timetable for the coming year. I sincerely hope that they will be proper Bills and not watered-down versions of what might have been.
The House defeated the Government no fewer than 62 times in the past year. That is a sad state of affairs. It is not really what should happen. Legislation that we can support should be proposed. I am delighted to say that there is some that we certainly shall be able to support in the coming months. I add my support for the Government spending transparency Bill that my noble friend Lady Noakes will introduce in your Lordships’ House. It will allow taxpayers to Google their tax through a powerful search engine.
The Consumers, Estate Agents and Redress Bill has the potential to be a very welcome step towards improving consumer information. As a former chairman of the National Consumer Council and now president of the National Consumer Federation, I work to improve consumer confidence and believe that we should do everything in our power to do so. The National Consumer Council has been providing world-class policy on consumer issues for the past 32 years. It is unique in the world. It has been fully funded by successive Governments yet it has always been allowed to be independent, to choose its own agenda and to write the policy papers that have been taken up all over the world. I am proud to say that this low-cost, guerrilla force has had the British consumer at the forefront of consumer representation.
That is why I am extremely concerned that the National Consumer Council is to be quangoised. Its great strength has been that it is a market leader in consumer affairs and now it is set to become yet another government mouthpiece. Consumer Voice, as the NCC will come to be known, will be nothing more than a signposting organisation. I have heard the noble Lord, Lord Whitty, speak today. He is the new chairman of the National Consumer Council and he seems more confident of the proposal so far than I am. I shall listen to him carefully because in the midst of what he was saying I could hear him going as native as I did when I took that post at the National Consumer Council. Who knows what he may decide at the end of the day.
These matters may not arouse as much passion in your Lordships' House as foreign affairs did, but they are crucial to the great majority of consumers—we are all consumers. Buying a house is the biggest financial commitment that most people make, so I welcome the redress scheme for homebuyers yet I fear that we have before us a watered-down version of what might have been. I am concerned that redress will not provide an incentive strong enough to discourage rogue trading. I hope that the Minister can explain how effective a deterrent he expects the redress scheme to be, how many redress schemes there will be and whether redress will be available for those who did not buy their property through an estate agent. I recognise the importance of strengthening the position of the consumer and I wholly support the deregulatory principle of the Bill based on the Hamilton review. The Minister said today that the Government seek to reduce costs for and pressures on consumers, but consumers are picking up the tab for this Government’s crippling burdens on business.
This Government just cannot stop issuing regulations. We can see at a glance the impact that that has had on business. Regulations are costing businesses more than £50 billion, with more than 14 new regulations issued every day. Business investment is at the lowest point on record, at a mere 9.5 per cent of GDP. Since 2000, we have consistently averaged lower than France, Germany and the United States. Even the deputy governor of the Bank of England has said that he is “puzzled” by the lack of investment. I was disappointed, but not surprised, to read the CBI's report this morning stating that burdens on businesses are higher than ever before; 95 per cent of business people have said that the tax system is just too complex and should be simplified. What is more, over one fifth of firms, 22 per cent, have been forced to relocate activities overseas. Almost a fifth of businesses have considered moving their headquarters overseas. These are not the symptoms of incentive, but of a stultified economy. We heard today from my noble friend Lord Wade, passionately talking for his rising stars: the small technology businesses. We also heard from my noble friend Lord Sanderson, who spoke from his public company and small business experience.
It is not only business that is suffering. Before 1997, Britain enjoyed a surplus on trade and goods but has suffered a deficit since January 1998, with a record high in 2005 of £44 billion. This does not just affect us at home; we have heard often today that Britain has dropped from being the seventh most competitive economy in the world in 1997 right down to 13th in 2005. The Minister mentioned a £3.5 billion spend on science and technology, so I hope he will explain why, according to the Institution of Engineering and Technology, 40 per cent of British businesses are unable to recruit enough engineering graduates and apprentices.
The story of standstill goes on. As my noble friend Lady Noakes has already said, official unemployment is at its highest for seven years, with 1.71 million people out of a job. That does not account for the real unemployment, however. In real terms, almost 5 million people are out of work and on benefits in this country.
In the first three months of this year insolvency was greater than in the whole of 1997. I come back to a vital point raised by my noble friend Lady Noakes. My noble friend and my party held a summit on personal debt on 20 November. This issue affects every aspect of people’s lives, particularly the consumer, who is vulnerable to aggressive marketing from all sectors and to aggressive persuasion to accept a bankruptcy status. What sort of society is this for Britain? Between July and September this year, 27,644 people went bankrupt or entered into individual voluntary arrangements. These instruments are viable, but the problem lies in IVAs often being aggressively marketed. My party has called for a more vigorous enforcement of the rules governing the marketing of IVAs. I hope the Minister can tonight assure noble Lords that this is also a priority of his Government.
I look forward to examining in more detail the DTI’s simplification plan that the Minister so briefly described. If I understand it correctly, the DTI will seek to reduce the complexity of DTI regulations. I hope the Minister’s department will seek to reduce the amount of regulation as well, if possible.
We support those measures proposing what is for the common good. There are some important opportunities to look forward to in this Session. We will have the opportunity to change our impact on the environment. Energy and climate change is an issue close to the heart of your Lordships’ House. As my noble friend Lady Miller of Hendon, who so ably led from these Benches both as a government Whip for the DTI and opposition spokesperson, stated during the passing of the Energy Act 2004, that Act was a missed opportunity for the Government to take the bull by the horns.
The Stern report was a wake-up call for us all, and not before time. Concern over energy increases and the record of Her Majesty’s Government over the past nine years is dispiriting. The Government promised to reduce emissions by 20 per cent by 2010, a target set independently by the Royal Commission on Environmental Pollution. Yet, three manifesto commitments later, Her Majesty’s Government have rewritten the rules. The target has been dropped. It was already in deficit, emissions having risen consistently since 1997. In spite of promises to tax the bads, not the goods, green taxation has fallen from 7.7 per cent of total tax in 1997 to 6.2 per cent this year. I await with bated breath the Government’s White Paper on energy in the spring and the proposals in the Climate Change Bill, but agree with many others that it is all taking too long.
The Minister mentioned increasing the use of renewables to a fifth of all energy by 2020. I hope noble Lords will forgive my scepticism in asking the Minister whether he can detail the plans for this reduction, and what safeguards will be in place to ensure that the targets are met. Without the safeguard of independent targets, the Government have shown a propensity for shifting the goalposts.
Can the Minister inform noble Lords whether energy provisions will be accounted for in the Climate Change Bill? Can he reassure us that his Government will bring in a Bill with real teeth and real ambition? I wonder whether he can give that commitment today.
I hope that the Minister will agree with me that it is essential that we focus on reducing carbon emissions and setting the right framework so that industry can develop a broad energy mix to guarantee security of affordable supply. Annual, independently set targets and stocktaking of emissions are essential to provide real accountability and progress with no rewriting of the rules. Decisions on future energy provision must be agreed by us all and must not be made on a political whim. Where the Government see nuclear power as the first choice, under our framework it would be a last resort. Where the Liberal Democrats rule out nuclear power, we rule out subsidies and special favours for nuclear power. Let us be responsible, not argumentative, about energy provision. We must view energy provision globally, in every sense of the word. Carbon reduction and security of energy supply are priorities, but hand in hand with green energy not to its detriment. We do not believe in special favours for nuclear power; we believe in a level playing field for all types of energy. We need to effect an entire culture change by deregulating business, simplifying taxes and revolutionising green energy.
This has been a long debate at the start of a busy Session. I welcome many of the opportunities and challenges that we face in the Session to come and can reassure the Minister that noble Lords on these Benches will ensure that those opportunities are realised to their fullest potential. My noble friends and I will do our best, as always, to scrutinise all the Bills promised in the gracious Speech. Some we will criticise and others we will support, as my noble friends have said over the past six days’ debate.
We wholeheartedly support the Motion moved by the noble Lord, Lord Giddens, and seconded by the noble Baroness, Lady Morgan of Drefelin. Her Majesty deserves our thanks, not only for the gracious Speech, but for the way she continues to do her duty and set an example to us all.
My Lords, this has been a wide-ranging debate. Before I respond to it, like other noble Lords, I should like to place on record my admiration for the service given to this House and the Government by my noble friend Lord Sainsbury of Turville. He has a fine record, particularly in his promotion of science and innovation. I also add my welcome to the Front Bench to my noble friend and colleague Lord Truscott. He comes with impressive credentials, as will already be clear from the way he opened this debate. I also welcome the noble Baroness, Lady Wilcox, to her new role on the Conservative Front Bench.
Today, we have benefited from two first-class maiden speeches. The noble Lord, Lord Bilimoria, a fellow chartered accountant, spoke with the authority of somebody who has built and run a business, with a little help from me, and I warmed, in particular, to his ethos of putting something back into the community. The noble Lord, Lord Rowe-Beddoe, also brings a strong business background to your Lordships’ House, and he has already applied it in the service of the Welsh Development Agency. I was delighted that he spoke in particular about the importance of the creative industries. I look forward to both noble Lords continuing to swell the ranks of those who speak in this House on matters of business and the economy.
The Chancellor will present his Pre-Budget Report on 6 December. It will include a full update of the Government’s economic forecasts and fiscal projections. We will obviously discuss and debate those matters in due course. Before I take stock of some of the Government’s key economic achievements, I shall deal with some of the points raised in today’s debate.
The noble Baroness, Lady Noakes, talked about unemployment. Unemployment levels and rates are low by historic standards. The IMF noted that a flexible and dynamic labour market is one of the UK economy’s key strengths and that unemployment in the UK is significantly lower than in the euro area. The UK is enjoying the longest period of sustained low inflation since the 1960s. With regard to public debt, the Government are meeting their strict fiscal rules, even under cautious assumptions. The Budget 2006 projections show that both the golden rule and the sustainable investment rule will be met over the cycle.
The noble Baroness also asked about economic migration. The economic impact of migration from new EU member states has been modest but broadly positive, reflecting the flexibility and speed of adjustment of the UK labour market.
Competitiveness was raised by several noble Lords. We have a productivity gap with France, Germany and the US. The UK has made progress since 1995 in closing the gap with France and Germany and is the only G7 country not to have fallen further behind the US. Since 1997 the UK has had the best combination of unemployment and inflation in the G7. Before 1997 the UK had one of the worst.
The noble Lord, Lord Sanderson, queried whether the Government are friendly to business. I would assert that they certainly are. I point to the capital gains tax changes, the inheritance tax relief—a matter I think the noble Lord acknowledged—the reduced lower and basic corporation tax rates and of course the lower income tax rates than those we inherited. Noble Lords probed the OECD figures. The UK is a relatively lightly taxed economy. According to the latest information, in the UK the tax rate on corporate income is 8.1 per cent of GDP, the OECD average is 9.6 per cent, and in the EU 15 it is 8.2 per cent. So we compare favourably on those grounds.
On the approach of the Government, the DTI simplification plan is addressing industry’s concerns about complex rules, inconsistencies and other irritants, the frequency of the changes and the need for greater co-ordination between government departments.
My noble friend Lord Bhattacharyya spoke about the significance of the longer-term challenges that we face in the economy, in particularly the influence of China and India on the global economy. As he basically demonstrated, it is impossible to debate the domestic and global economy without reference to Asia, especially China and India. Indeed, they are in a league of their own. But, in the past two years UK exports of services to China have grown by 54 per cent, and the UK is the largest EU investor in China, with more than 5,000 investment projects. To put it all into context, India and China educate about 4 million graduates each year and the UK educates around 250,000. That shows the nature of the challenge we face.
I welcome the right reverend Prelate the Bishop of Manchester’s welcome of the Digital Switchover (Disclosure of Information) Bill. He pointed out the risks of data sharing. But the scope of the Bill is similar to the Television Licences (Disclosure of Information) Act 2000, which gave free licences to those aged over 75.
My noble friend Lady Kingsmill welcomed the Exchanges and Clearing Houses Bill. It is important that this preserves the light regulatory touch for our exchanges. I am pleased that this also has the support of the Conservative Benches.
The noble Lord, Lord Lee of Trafford, said that the Government are not interested in tourism. I reject that assertion. One has only to look at the Prime Minister’s engagement with the Olympic bid and what that could mean for this country and tourism and beyond. Total tourism consumption was £92 billion in 2003, which equates to 3.4 per cent of total UK GVA. The number of visits made to the UK by overseas residents in 2005 was the highest ever recorded—30 million—with investors spending a record £14.2 billion.
My noble friend Lord Brookman spoke with passion about the steel industry and its community. Despite major restructuring over the past 30 years, the UK steel industry is, and will continue to be, a significant employer and an R&D intensive contributor to the UK economy. In 2005, Corus made investments totalling £280 million to improve quality and productivity. That was a real vote of confidence by the company in its employees and the long-term strength of the UK economy. There are issues about the UK steel industry’s competitiveness with India and China. India and China are Kyoto signatories but, as developing countries, they have no fixed targets. Energy-intensive users such as the steel industry have, by their nature, predominantly local markets, so UK competition basically comes from the EU.
The noble Lord, Lord Wade, referred to his RisingStars fund and the importance of technology and of spin-out companies from universities. I agree. He also referred to the importance of seed capital. Of course wealth creation depends in part on the infrastructure of skills, of education, of research and transport. The private and public sectors are inter-dependent.
On the public sector balance, the Government have set out their fiscal frameworks—the golden rule and the sustainable investment rules—which are being met.
On the investment funds for the start-up sector and finance for business, we successfully launched the first phase of the enterprise capital fund of Pathfinder 2006 to help the development of high-growth SMEs caught in the equity gap. There are other provisions, too.
The noble Lords, Lord Dykes and Lord Oakeshott, mentioned debt. The Government are aware of these issues and aim to provide a framework of macro-economic stability and awareness of financial issues within which people can make informed, responsible decisions about how much debt it is prudent to incur. The Treasury has worked closely with the DTI and the DWP on reform of consumer credit regulation—we had the Consumer Credit Act—and its Tackling Over-Indebtedness: Annual Report 2005 provided an update on the large amount of work that has already been done.
The noble Lord, Lord Dykes, tempted me on what the Chancellor is going to do about gas-guzzlers, but I think that is a matter for the Chancellor at Budget. He also referred to the public sector. The Government public sector is leading on a reduction in carbon emissions, which falls under Defra’s energy performance target. The Cabinet is leading by example with a pledge that the Government estate will go carbon-neutral by 2012.
The noble Lord, Lord Barnett, focused the spotlight on the Conservative’s tax reform commission proposals—a package which, if ever implemented, would be regressive. He probed the question of whether tax cuts would generate growth. Indeed, if the assertion is that they will, presumably they will become Conservative policy. We look forward to pronouncements in due course on that. He will understand, as will my noble friends Lord Sheldon and Lord Peston, that the Government do not comment on decisions of the MPC. It is truly independent, which is why it was created.
The noble Lord, Lord Sheldon, asked why we should take the lead on climate change. Is it not right that this is an international problem above all others, and that we have particular responsibilities to developing countries?
The noble Lord, Lord Marlesford, asked whether the economic strategy would change under a Gordon Brown Government. The economic strategy is the strategy of the Government. The Chancellor has clearly been at the forefront of that strategy, and I have no doubt that it would not change under a Government of which he were the Prime Minister. The country can be assured of that. The noble Lord also spoke about the dangers of protectionism emerging in France. He is right: that is a worrying development.
The noble Lord, Lord Beaumont, offered some interesting views, which it is difficult for the Government to accept, on how to deal with the consequences of climate change. It is, of course, important that we have a full discussion on these matters.
The noble Lord, Lord Currie of Marylebone, talked about the importance of the telecommunication sector. There is a strong story to tell—prices are down, choice is wider, and satisfaction is up—but he supported targeted help for vulnerable people on switchover to digital. He illustrated some of the challenges that regulators face. An example is the complex area of food promotion to children, where Ofcom has sought to strike a balance that protects the health of children but also considers the impact on the broadcasting industry.
The noble Lord, Lord Peston, talked about productivity—I think I have dealt with that—and inequality. We should be clear on this. I think that my noble friend Lord Whitty recognised that the Gini coefficient, the measure of income inequality, has turned down a little after an inexorable rise from the 1980s. The bottom quintile of real growth in household net incomes before housing costs was 2.6 per cent over the period of this Government to 2004-05, while the top quintile was 2.1 per cent, so change is happening in the right direction. However, there is still much to do.
The noble Baroness, Lady Valentine, spoke of the significance of London; indeed, it is one of the only two truly global financial centres in the world. One of the Bills before the House aims to ensure that we keep our light-touch regulatory regime concerning exchanges. She also stressed the importance of transport infrastructure. Crossrail is important for London’s future and that is why the Government have introduced a hybrid Bill, but there are issues about how it should be funded. The Tube PPP is delivering a network capacity increase of 25 per cent by 2016, with eight lines to be upgraded and other investment.
When my noble friend Lord Rosser speaks, I am reminded of why I came into politics. He acknowledged the progress made by the Government on the economy, but stressed the issues that still remain in order to narrow the gap on inequalities. So far as private equity and hedge funds are concerned, these can bring financial benefits to markets by providing liquidity and help to drive financial innovation. However, the Government are mindful of the risks to which the wider economy associated with hedge funds can be vulnerable. The Treasury, together with the FSA and the Bank of England, continues to monitor these issues.
My noble friend Lord Whitty welcomed the consumer legislation and that related to digital switchover. The proposed help on digital switchover is for the over 75s and households with one person with a significant disability, but I note his point about those in social housing. I have ranged over some of the key statistics related to inequality. I shall come on to green taxation in a moment, but increasing the percentage of GDP represented by green taxes is not necessarily the right outcome. Sweden and the Netherlands are the only two other countries likely to hit their Kyoto targets, but their percentage of green taxation has reduced over the past four or five years. That is because if you have climate change agreements, for example, you are reducing the take from green tax. There are also equity issues, about which my noble friend Lord Whitty made an important point.
The noble Lord, Lord Oakeshott, asked about loss of corporation tax from highly leveraged buyouts. I do not have the data and perhaps I should encourage him to listen to the Chancellor when he next pronounces on these matters. On debt, I think we do have to get away from challenging every decision made by the ONS or other government departments that is not acceptable to the Opposition. So far as concerns Network Rail going off balance sheet, the ONS is an independent statistical agency and its judgment was supported by the European statistical agency, Eurostat. On PFI liabilities, some were on balance sheet and some were off; an independent judgment is made on those.
The noble Baroness, Lady Wilcox, asked about redress schemes. The detail of those has not yet been decided, but such schemes will enable rogue estate agents to be banned. She challenged the issue of regulation, although I recall that the noble Baroness was involved in the consideration of the Regulatory Reform Act. We should look at what is happening in that area. We have the Davidson and Hampton reviews, the process of government in putting forward the code, regulatory impact assessments and new regulations. A great deal of work is going on, including work on the simplification plans to which my noble friend Lord Truscott referred. Consumer protection will be strengthened by providing a single point of contact on consumer issues. Business investment is not at a record low. It has risen by one-third since 1997, over twice the rate of growth seen in the preceding eight years.
I turn briefly to the Statistics and Registration Service Bill, to which several noble Lords have referred, including the noble Lords, Lord Moser, Lord Jenkin of Roding and Lord Oakeshott, and my noble friends Lord Peston and Lord Haskel. To ensure statistics produced across government are of the highest professional quality and integrity standards—and are seen to be so—the reforms will cover official statistics produced across government, a point probed by my noble friend Lord Peston. In particular, the independent board will oversee the ONS.
The noble Lord, Lord Moser, of course, speaks with particular authority on this matter. He served with great distinction as the head of the Government’s statistical service and I welcome the fact that he welcomes the Chancellor’s initiatives, the structure and the consultation involved. I note his point about what seems to be a change of direction in the status of the board. Doubtless there will be opportunities to debate this in the passage of the Bill as we discuss the legislation in detail. The fact that it remains a decentralised system within a single integrated system is important. The Government recognise the pre-release and doubtless there will be discussion on that also.
The noble Lord, Lord Jenkin, raised a similar point about which government department should be involved. I am sure we will discuss that in due course.
The noble Lord’s other point related to—
My Lords, yes, indeed, and how Parliament will be involved in that. I think that is a matter for Parliament. I am grateful to the noble Lord.
My noble friend Lord Haskel raised an interesting point about whether we are measuring the right things in the modern economy, with all its intangibles and what is happening in our changing world. The new arrangements certainly emphasise the fact that what statistics should be determined are an executive function. But we need the strength of the new arrangements to make sure that they are relevant.
A number of noble Lords referred to the Stern report, including the noble Lords, Lord Newby, Lord Vallance and Lord Beaumont, and my noble friends Lord Haskel, Lord Barnett, Lord Peston and Lord Whitty. I have dealt with the point about the percentage of GDP which is taken in green taxes. The Government welcome the Stern review of the economics of climate change. It leaves us in no doubt as to the seriousness of the threat to our economies.
The noble Lord, Lord Newby, attacked the Government’s record on the environment but he was less than fair. If he looks at the Government’s intervention and the principled framework outlined in the statement of intent on environmental taxation and tax in the environment, he will see that the strategy is, in a sense, consistent with what is coming out of Stern. Funding has been provided for newer, cleaner technologies.
The noble Lord, Lord Vallance, made some interesting propositions about the role of science. Indeed, the business community has helped to drive a solution on this. He acknowledged that we have funded, on a joint basis, the Energy Technologies Institute.
As to the upstream carbon tax, the Government’s approach is to ensure that the climate change levy is driving energy efficiency. The emissions trading scheme is the right way to get the pricing of carbon into the system.
The UK economy has performed extremely well since 1997, both compared with its own historical record and relative to other major economies. The strengthening of the underlying UK performance reflects a number of policy innovations. The Government’s macroeconomic framework is designed to maintain long-term economic stability. Large fluctuations in inflation add to uncertainty for firms, consumers and the public sector and can reduce the economy’s long-run growth potential. Stability allows businesses, individuals and the Government to plan more effectively for the long term, improving the quantity and quality of investment in physical and human capital and helping to raise productivity. My noble friend Lady Kingsmill spoke about this and it was acknowledged by the noble Lord, Lord Dykes, as well.
In 2005, the economy was affected by sustained rises in oil prices, weak euro-area demand and a subdued housing market. In previous decades, these factors would have risked being accompanied by recession. By contrast, through this challenging period, the Government’s macroeconomic framework has continued to deliver unprecedented macroeconomic stability, with GDP having grown for 57 consecutive quarters, compared with the previous longest expansion of 24 quarters.
Reforms to monetary and fiscal policy frameworks have been crucial in putting the UK economy on a sound and stable footing and strengthening underlying performance. My noble friend Lord Bhattacharyya reported how, on his travels around the world, this was widely acknowledged. My noble friend Lord Peston called it, I think, a near-Utopia. So the UK continues to strengthen and evolve to reflect the requirements of a modern global economy.
Let me spell out in more detail the benefits that our macroeconomic reforms have delivered. In 1996, Britain was seventh in the G7 for national income per head, while in 2005 it was second. Growth has been more stable and stronger than in the past, and by international standards. No other OECD economy has enjoyed an expansion as long as the current one in the UK in the post-war era.
Inflation has been kept low through policy credibility, and without high interest rates. Base rates in the UK remain low by historical standards; they averaged over 10 per cent between 1979 and 1997, hitting a peak of 15 per cent, compared with the current rate of 5 per cent. Mortgage rates have been at their lowest since the 1950s. We also have a robust labour market.
Whereas once low inflation came at the cost of high unemployment, now the UK labour market is an example of international best practice. Developments in the UK economy are obviously heavily influenced by what goes on in the world economy. The world economy presents challenges as well as opportunities, but the economy was able to weather these challenges well with a short and shallow downturn, contrasting with previous periods of prolonged recession, and has now gained momentum. GDP rose at its fastest rate since mid-2004 in the third quarter and provisional business investment growth saw its strongest quarterly growth for two years in the third quarter of 2006.
Manufacturing output is rising, with growth in the first quarter of 0.9 per cent and 0.6 per cent in the second. Retail sales growth has picked up since 2005. The Treasury has long been expecting a slowdown in private consumption, and business surveys suggest further gains in activity in the business sector to come, consolidating this rebalancing.
Unprecedented macroeconomic stability and microeconomic reforms are providing the right environment for UK business to succeed in a competitive global economy. That is one reason that the UK remains at the heart of global direct investment patterns.
The UNCTAD World Investment Report 2006 shows that in 2005, the UK had the world’s largest stock of inward FDI. As a percentage of GDP, this is the highest stock of any G7 country.
The domestic stability delivered by the Government’s macroeconomic framework, with volatility in the UK economy at historically low levels and the lowest in the G7, puts the UK in a strong position to respond to the global economic challenges of the next decade. Far-reaching and fundamental changes in technology and trading patterns are transforming the global economy. Meeting the long-term economic challenges and opportunities will require sustained effort from across a range of policy areas aimed at entrenching macroeconomic stability; promoting an enterprise culture; strengthening innovation; opening up skills to all; ensuring fairness through a flexible and responsive welfare state; and promoting sustainable development, including through multilateral action.
There is no room for complacency and the Government are aiming even higher; they want the UK to become the global hub for international, high-value and creative economic activity, including inward investment from China and India.
The economy continues to perform strongly, with the best combination of economic fundamentals seen in a generation. It is open and flexible, and has responded quickly to changing global markets. Consumer spending and retail sales have undergone some necessary rebalancing. We should be proud of this record.
Since 1997, the Government have shown that they can deliver a strong economy and sound public finances hand in hand with sustained and substantial growth in investment in public services. But the world has not stood still, which is why we are publishing today the examination of the key long-term trends that will shape the decade ahead. It will also shape our debates in the coming Session and beyond.
On Question, Motion agreed to nemine dissentiente, and the Lord Chamberlain was ordered to present the Address to Her Majesty.
House adjourned at 9 pm.