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Queen’s Speech

Volume 715: debated on Wednesday 25 November 2009

Debate (5th Day)

Moved on Wednesday 18 November by

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, I am sure that noble Lords due to speak in today’s debate will welcome the news that my noble friend Lord Myners will address in his winding-up remarks the substance of the Statement made by the Chancellor earlier in the other place, rather than repeating the Statement in full now.

What we are really debating today is how Britain thrives and prospers in a globalised economy, our immense strengths, the immense potential of our people and our companies and what we need to do to bring that strength and that potential to bear in a knowledge economy, in a low-carbon, digital age. In this Parliament we will present Bills that will reform the financial sector, putting it back at the service of consumers and the real economy; lock in the recovery, by committing the Government to halving the deficit by 2014, without stripping out vital support for growth, demand and front-line public services; and, finally, help us to invest in our future growth, specifically by upgrading and reforming the landscape of our digital economy and by new rules to balance flexibility and fairness for agency workers.

Britain has to concentrate on the fundamentals of industrial competitiveness, not just turning over a quick profit. We have to be flexible and innovative. We have to invest in people’s skills and help people to invest in themselves. We have to continue to re-energise our regional economies with a new generation of public and private investment, so that they can drive the next industrial revolution in the same way as they drove the first.

Most important, we need a Government who play an active role in achieving these things, not a Government who get in the way or hold business back, but not one either who cling on to a 30 year-old dogma about the inexorable rightness of the judgments of free markets. There is a strategic role that government must play not just in guiding the economy out of recession and into recovery but in preparing our country for the competitive, low-carbon, high-tech global economy that will define our future. I have called this approach industrial activism.

First, and perhaps most fundamentally, we recognise that we must change the way in which we manage financial markets so that they can no longer put the wider economy at risk. We had no choice but to save the banking system. Our actions prevented a financial crisis from becoming a business and human catastrophe, but paying for that rescue has imposed costs on this country that will stretch into the future. The price that we can and must demand in return for that rescue is a sounder, more responsible banking industry. If some bankers end the year with less money in their pockets, well, so does the country that made sure that they are still in business at all.

The 2009 Banking Act gave the Treasury, the Financial Services Authority and the Bank of England new powers to intervene when a bank is failing and could endanger consumers or wider stability. The new Financial Services Bill contains measures that further renew, toughen and widen UK financial regulation and make it more intrusive where required. This includes establishing a new, more transparent Council for Financial Stability, made up of the Chancellor, the Governor of the Bank of England and the chair of the FSA.

For a decade we have built up the FSA into a regulator with knowledge and expertise that is now recognised around the world. It would be reckless and foolish in the extreme to respond to the global financial crisis by dismembering the very body with the unique qualification to provide effective regulation in the future, yet that is precisely what the Conservatives propose to do.

The Bill will also ban unsolicited credit card cheques, with their hidden costs and reduced consumer protection. This will end a practice that draws too many people, who may already be in financial distress, deeper into debt.

We also look forward to receiving Sir David Walker’s recommendations on reform in bank boardrooms and governance, which we have made provision to implement. They will be a reminder that the best form of regulation in our banking system will always be managers who understand risk and fear failure.

It is clear that a new financial regulatory system must ultimately be global and it must provide a level playing field. It will remain a core aim of UK policy that New York and others follow us in taking action to reform financial markets so that we remove the risk of regulatory arbitrage. This is why we have made the G20 process the centre of this work. Our goal must be competitive financial markets, not competition between financial jurisdictions.

Since October 2008, we have implemented a package of support and stimulus measures that have helped millions of businesses and families through the worst of this recession. Through our enterprise finance guarantee scheme, 6,200 businesses have been offered loans totalling £648 million—lending that would otherwise not be there. Through the VAT cut, we have put an additional £1 billion each month into the pockets of families and retailers and enabled more than 150,000 businesses to defer more than £4 billion in tax to assist their cash flow during the recession. These essential measures, or the spending to fund them, were of course opposed from the Benches opposite.

The Government’s £5 billion package to support the labour market, coupled with the flexibility volunteered by employers and employees, has helped to ensure that unemployment remains at around 200,000 lower than at the same point in the recession of the early 1990s. The housing repossession rate is also lower than it was then, as is the business insolvency rate. In other words, this recession could have been much worse in many respects, had its impact and duration not been blunted by the Government’s actions. Indeed, the IMF said:

“These aggressive policies have successfully contained the crisis, and there are tentative signs that confidence is returning”.

The head of the IMF went on to say to the CBI this week that,

“it is too early for a general exit … We recommend erring on the side of caution, as exiting too early is costlier than exiting too late”.

On this, the IMF, all the G20 Governments and the British Government agree. Prematurely withdrawing this support for demand in the economy would put at risk the very jobs, skills and capacity that we have worked so hard to protect during the recession. We need an exit strategy for the stimulus, not a rush for the exits.

Only one party disagrees with that and it is sitting opposite. Its policy would risk choking off recovery before it is properly locked in. The Conservative Party got it wrong on the recession. It is now getting it seriously wrong on the recovery.

In the fiscal responsibility Bill, we have captured the balance that we need. It commits the Government to halve the deficit by 2014 and put debt on a sustainable path in the medium term. There is no escaping the fact that tough choices on cutting spending will need to be made and justified. We all know that Britain’s credibility rests on a responsible approach to the national finances. None of us needs lectures on that point. But I should say just this: no credible definition of responsibility extends to cutting away vital demand or vital investment in growth just when they are needed most.

I will make some final points on the question of investing in growth. Growth is the biggest antidote to debt, which is why I was surprised to hear the shadow Chancellor, in his speech at his party conference, make literally no mention of the word “growth”. I note that the Leader of the Opposition attempted to remedy this glaring hole in Conservative economic policy on Monday at the CBI, but unfortunately, and as so often with Mr Cameron, the soundbites on growth were not matched by substance. He has simply rebadged his existing policy of retrenchment and called it “growth”. You cannot say that you want to go for growth while in the same breath committing to pull support from the economy prematurely and to make deep cuts in the very investment in future growth that business needs, yet that is what Mr Osborne proposes to do.

The problem that those in the Conservative Party have is their ideological conviction that government itself is the source of all our problems. This prejudice acts as a mental check that prevents them from even considering the active role that government needs to play in building up new sources of comparative advantage in today’s global economy. The reality is that the global economy that emerges from this recession will be a fiercely competitive place. Competing effectively in that world will demand a smarter, more strategic approach from government that invests in the capacities that create our competitiveness. Our low-carbon infrastructure, our universities and adult skills system, our research and science base—

My Lords, I am most grateful to the Secretary of State for giving way and wonder whether he can help me. He talks about the importance of not taking resources out of the economy when you have a strategy for growth. Will he tell me how increasing national insurance charges and marginal rates of tax is not taking resources out of the productive part of the economy against the interests of growth?

My Lords, such decisions would be faced by any Government in current financial circumstances. My point relates to the resources and capabilities that we need in order to sustain growth. Building and sustaining growth in our economy will be the only way, in the medium and long term, to reduce our deficit and pay off the debt that we have inevitably taken on during the recession.

Our low-carbon infrastructure, our universities, our adult skills systems, our research and science base and our capacity for high-tech innovation and company building are all vital keys to our future success. Over the past six months, the Government have announced major initiatives in every one of these areas: reshaping the skills system to create a new technician class; launching the UK Innovation Investment Fund and the Rowlands review to help to fill the structural finance gap for companies; creating a new framework for strengthening our world-class university system; and setting out plans for major rail electrification and nuclear and renewable energy generation. We have already committed more than £700 million through the Strategic Investment Fund set up in this year’s Budget to strengthen Britain’s capacities in key technologies and sectors such as industrial biotech, low-carbon cars and plastic electronics.

The Digital Economy Bill will deliver a critical further piece of this jigsaw. In the Digital Britain White Paper, we set out plans to create the legal frameworks and digital infrastructure in Britain that a knowledge economy will require and demand. These will be essential not just for our exceptional creative industries but for every industry that relies on digital communications. We are making important changes to our radio licensing regime and opening up the field for next-generation mobile broadband services through spectrum modernisation. We are bringing forward new measures to enable British businesses to build new commercial models that reflect the way in which we access and use content online without being undermined by online piracy. We will also secure the future of public service broadcasting content in a rapidly changing world through a commitment to diverse sources of news with the creation of new regional and local news providers.

One of the key strengths of the UK through this recession has been the flexibility of our workforce and our labour market. The model that we have pioneered over the past decade—the so-called Anglo-social model—has proved that it is possible to protect people at work without damaging the underlying strength of the labour market and without backing away from our duty to equip people to cope in times of economic change.

We will enact legislation that will put us in a position to implement the agency workers directive. This will enable us to ensure greater fairness for the 1.3 million agency workers employed across the UK. We will do so in line with the agreement reached between the CBI and the TUC that, following 12 weeks in a given job, an agency worker will be entitled to equal basic working and employment conditions as though they had been recruited directly to occupy the same job. Getting this acceptable agreement required positive engagement in Europe—something that this Government are committed to continuing but something that would be directly threatened by the Conservative Party’s pledge to try to repatriate such social and employment legislation from Europe.

We are a year and a few months on from the Lehman collapse. The consequences of that extraordinary week and the events that led up to it can still be seen everywhere. However, the freefall in the economy has been stalled, thanks in large part to the banking recapitalisation and stimulus pioneered by the Government. Our measures have blunted the impact of the recession, which is a considerable achievement when we recall, as I have said, the consequences of the recessions of the 1980s and 1990s.

We have also had to mobilise huge resources to help those who lost their jobs and who need to retrain, to provide alternative sources of credit for small businesses and to extend lifelines such as the car scrappage scheme. After a difficult year of retrenchment, rising business confidence suggests that we have moved from fighting crisis to building recovery. Indeed, confidence even seems to be spreading to the Benches opposite. I note that the other day the shadow Business Secretary was commending my department for producing such workable policies. He even suggested that he would try to match them. On this, as on so many other points, I am grateful for his support.

These Bills are about prospering in the global economy on the other side of the recovery. They are about fighting for our future prosperity as boldly as this country has fought off the recession. I commend these measures to the House.

My Lords, I begin by drawing attention to my interests as set out in the Register.

I thank the noble Lord the First Secretary of State, Secretary of State for Business, Innovation and Skills and Lord President of the Council for introducing this very important debate. I also welcome the latest expansion of his portfolio. I know that his role as Minister for Information has not yet been publicly confirmed but, having presumably become dissatisfied with the domain temporal, I understand that the First Secretary of State has now extended his remit into the domain spiritual as well. I apologise to him for not mentioning this before, and I sense a slight flurry of unease on the Bishops’ Benches, but the noble Lord is to be congratulated on becoming a Church Commissioner.

I should also say how much we are looking forward to the maiden speeches of the noble Lords, Lord Sugar and Lord Martin of Springburn, who we all welcome to this House. The noble Lord, Lord Martin, is an old friend and was briefly my pair in the other place—an arrangement that suited us both very well indeed. He has already attended debates in this House assiduously, including virtually every speech that has been made in this debate since it started a week ago. We all look forward to what I suppose must be his first full parliamentary speech in almost a decade.

The House will also be looking forward with great and special interest to the maiden and subsequent speeches of the noble Lord, Lord Sugar. As the noble Lord, Lord Davies, confirmed on 12 November, when the noble Lord, Lord Sugar, speaks on business matters, he speaks with the full authority of the Government, not that this Government have much authority left these days.

I do not think that this country has ever been in greater need of a clear and effective legislative programme. Consumers, entrepreneurs and businesses need confidence, and today’s news about the covert—not my adjective of choice, but that used by the noble Lord, Lord Myners, in answering John Humphrys on the “Today” programme this morning—dealings with certain banks can serve only to undermine fragile confidence even more. There will have been much spluttering of cornflakes at breakfast tables across the land when the noble Lord asserted his view that the banking system had worked in the past couple of years—an interesting description of a sector that has seemed to be lurching from crisis to crisis from day to day, or even from hour to hour.

It was demonstrably clear by the end of 2008 that Labour’s policies had failed, and failed miserably. Ever since, Ministers have sought to exculpate themselves. Their favourite scapegoat, which we heard again in the noble Lord’s speech, rapidly became the rest of the world—anyone but themselves. We have been subjected to the endless repetition of the phrase “global economic downturn”. It is astonishing that Ministers have continued to use this excuse even when it became blindingly obvious that the problems with which we are struggling are far more entrenched and pervasive in this country than elsewhere.

There is an old trade union phrase with which noble Lords—particularly those on the Benches opposite—will be familiar, which is first in, last out. That sums up this Government’s economic record—first in Europe into the recession and now last out of it. Ministers are driving us into eye-watering levels of debt to fund an unprecedented fiscal stimulus, but what do they have to show for it? Almost 5,000 companies went bust in the third quarter of this year, and every day nearly 400 people declare themselves bankrupt. One in five young people is unemployed and one child in six is growing up in a household where no one works. On both counts, we have the worst record of any of the 27 countries in the European Union. Just as they did in the 1960s and 1970s, Labour policies have brought our country’s private sector to its knees, and still the First Secretary of State persists in maintaining that the traditional Labour mantra of spend, spend, spend is the answer.

What has happened to the money that the Government have so recklessly borrowed and spent? The successive, snappily named schemes announced earlier this year have evidently not provided what businesses need. The enterprise finance guarantee scheme, which by the way is just a pale shadow of the far more robust Conservative policy, has only managed to persuade businesses to draw down some £340 million out of a potential £1,300 million. That poor uptake rate is apparently being repeated in the capital for enterprise fund, the trade credit insurance top-up scheme and the automotive assistance programme. If you ask businesses why they are not taking advantage of these offerings, the answer is plain and forthright: the restrictions, requirements and red tape involved are so burdensome that it is simply not worth the time, trouble and effort. So the much-needed, much vaunted flow of liquidity—the lifeblood of business—is simply not coming through yet. The idea of enmeshing struggling businesses in yet more red tape when the burden was already dangerously onerous in the good times is one that could occur only to this Government.

This legislative programme shows a consistent lack of comprehension. It does not recognise the cold reality that prevails outside the cloud-cuckoo-land that Ministers seem to inhabit. We have a Bill that criminalises the sort of reckless fiscal behaviour in which only this Government would ever dream of engaging. I shall leave it to my noble friend Lady Noakes to give the Financial Services Bill and the Fiscal Responsibility Bill the treatment that they deserve.

We have deafening silence on so much that really matters to our economic well-being. The failure of this Government can best be summed up in the short, troubled life of one Bill—the Postal Services Bill. Where is it? We have a company in difficulty, facing identifiable problems and offering a feasible solution. It is being denied the opportunity to reform and modernise itself purely because of political manoeuvring and the Prime Minister's characteristic refusal to face facts.

I recognise the personal commitment of the First Secretary of State to that essential legislation, and I will spare his blushes by not quoting back at him now all the statements he once made about how important it was to get that Bill to Royal Assent as quickly as possible. I fear that he has several notable failures to his name, but the failure to deliver on the Postal Services Bill may come to be seen as the most abject of them all. I could almost feel sorry for the First Secretary of State—almost.

There is, however, one Bill that I am happy to welcome. An effective Digital Economy Bill is, as the First Secretary of State said, a necessary step in the right direction. We shall be looking closely at it as it passes through the House to ensure that it really encourages investment, innovation and modernisation within sectors crucial to our economy. However eye-catching that Bill may be, with all its modernistic bells and whistles, it cannot address the fundamental economic weaknesses that this Government will leave behind.

In a country that appears to be ready for change, many people have drawn parallels with the situation in 1997. Those parallels are highly questionable. For a start, in 1997, my good friend Kenneth Clarke—a star who continues to shine brightly in another place—left behind him what everyone has always described as a golden economic legacy, the result of firm, calm, responsible stewardship of the economy. How wise it is for the leadership of my party to draw on his wisdom once again.

Back in the late 1970s, we did not have the benefit of such stewardship of the economy. It is a time that the First Secretary of State and I recall well, because we were both involved at the time in the leadership of the British Youth Council. I am certainly not going to quote his words at him—I know him too well for that—but together we had to lament and to suffer the social and economic crisis that, by 1979, had left this country all but ungovernable. Now we are reliving the worst aspects of those dark days.

My noble friend Lord Howell of Guildford wrote at the time in his excellent book, Freedom and Capital, about how social tensions and economic strife feed off each other. He wrote:

“Quality of life ... has deteriorated. Fewer families feel they ever have spare cash to spend or put aside … Household budgets get tighter, family arguments more tense, under economic strain … Outside the front door the surroundings are often getting scruffier, not cleaner, and life outdoors certainly more dangerous and violent after dark … Public services have been getting worse, not better”—

et cetera, et cetera.

How prescient my noble friend was, for could not that charge sheet have been written only yesterday? Every day that the last Labour Government remained in office was, for this country, another day wasted. How history repeats itself.

In their justly celebrated book Britain’s Economic Problem: Too Few Producers, which was published in 1976 and updated in 1978, Robert Bacon and Walter Eltis vividly and stoutly demonstrated how weak political leadership and the growth of the corporate state were stifling the life out of the free enterprise economy:

“With growing public expenditure and taxation, profits can become so low that the market sector will generate insufficient investment ... Economists … can support the allocation of investment resources through the market, or they can support policies of higher public spending, but they cannot have both”.

New Labour was elected on the false premise that this country, and the state, in particular, could have its cake and eat it. Perhaps there is indeed nothing new in heaven and earth because that is exactly the old Labour message. Sooner or later, it always turns to bust, or dust. As my noble friend Lord Patten of Barnes once put it, the facts of life are Tory. Like the Bourbons, the First Secretary of State and his colleagues forget nothing but they also learn nothing. Another Labour Government, another fine mess.

Fortunately for us, once in every generation there comes a leader who can rise to the Conservative Party’s historical role: namely, putting right what Labour has got so patently wrong. My noble friend Lady Thatcher was such a leader, and I was proud to serve her for 11 years. She was certainly the greatest peacetime Prime Minister of my lifetime. She rescued our economy, she revived the spirit of free enterprise and entrepreneurship and she restored our national pride. I strongly believe that David Cameron will be such a leader. What a challenge he will face, if and when he becomes Prime Minister. Labour is now the party of unemployment, and we have to be the party of new jobs and new opportunities. We shall also be honest with the people of this country about the challenges we face. We shall toil, not spin.

Nothing in this legislative programme should give us the slightest confidence that this enfeebled Government can answer any of our problems, the problems that their own wilfully self-indulgent policies have caused. This programme contains 13 Bills. If this Parliament runs, as expected, until the end of March, we shall have about 13 weeks to consider them, and we shall then be looking back over 13 wasted years. Thirteen Bills, 13 weeks and 13 wasted years are unlucky for some. They are unlucky for all of us. They are unlucky for this great country of ours. This legislative programme is a feeble attempt on the part of a dying Government to embarrass the Opposition when there are real problems demanding serious policies. The countdown to change has begun. I hope it is the countdown to the arrival of a fresh new Administration that will deliver much-needed hope, energy and inspiration to government and to our country.

My Lords, I thank the Secretary of State for his exemplary tour d’horizon of government economic policy both in the past and in the future. I also join the noble Lord, Lord Hunt of Wirral, in saying how much we look forward to hearing the maiden speeches of the noble Lords, Lord Sugar and Lord Martin. I suspect that people may make many comparisons between the two of them, but I doubt that they have ever appeared on the same bill before today.

I thank the noble Lord, Lord Hunt of Wirral, for making the first point that I was going to make in this debate on the gracious Speech—that it was not a speech to set out a legislative programme but a speech to fire the first gun in the election campaign. I was looking ahead and not at the noble Lord when he made his speech, and I thought that it was being read by someone else. It was not a “Lord Hunt of Wirral speech” at all; he is usually measured and calm. First he read out quotations by someone who could have read them out himself, because he is here. Secondly, his peroration was an attack on the Government and demonstrated perfectly what has been wrong with the Government’s approach in the gracious Speech, which we might as well not have had at all as the election gun has been fired and we have heard the first rumbles from the noble Lord, Lord Hunt, on the Tory side.

My second criticism of the gracious Speech—I am not the first to make it; it is just that we come in this order in our debate—is that a number of the Bills, particularly those that fall within the remit of the Ministry that I have the honour of shadowing, demonstrate the Labour characteristic of assuming that something will happen if a law is passed saying that it will happen. Most of them will not be passed because we do not have the time, as the noble Lord, Lord Hunt, has indicated.

I will take but two. The fiscal responsibility Bill makes it law to halve the deficit in four years. We could debate that Bill for one year, two years or four years, but it will not halve the deficit in four years. The Child Poverty Bill sets a legal target for the elimination of child poverty by a certain date. That is a worthy aspiration, but it will not put one penny into the pockets of needy families to help them to eliminate child poverty. The Government, in their last days, really must learn that saying that it must be so does not necessarily make it so.

I have three or four proposals for Bills if that is how we legislate to make happen whatever the Government decide will happen. I have the “Win the World Cup in South Africa Bill 2010”, the “Win the Ashes in Australia Bill 2011”, the “Win 100 Gold Medals at the Olympics Bill 2012”, and the “12 June Sunshine Bill”—a guarantee of sunshine on the birthday of the noble Lord, Lord Razzall, every year. Perhaps the Government will consider them if this is their approach to legislation.

There is one exception to this, the Digital Economy Bill, on which I entirely agree with the noble Lord, Lord Hunt. We, with the other opposition party, will subject that Bill to scrutiny as it passes through this House. It is very sensible for the Government to have started it in the House of Lords. We will give it much more detailed scrutiny than it would be given if it started in another place, and I very much hope that it will be passed in an appropriate form before the election.

In the time available to me, it will be better if I concentrate on the wider business and economic issues on which the noble Lords, Lord Mandelson and Lord Hunt of Wirral, have touched. It is only a year since our debate on the previous gracious Speech. It was, I think, six weeks after the collapse of Lehman Brothers, and around the time the Government had to support the banking system to ensure that it did not collapse.

We on these Benches, both here and in another place, have certainly broadly supported the Government’s approach to stabilising the banking system and endeavouring to ensure that the British economy does not fall into too deep a recession. We have broadly supported the measures that have been taken. We certainly thought that the Bank of England’s decision to make a massive cut in interest rates was correct. Indeed, Vince Cable, my friend and colleague in another place, was the first opposition politician to call for that. We agreed that what has become known as quantitative easing was desirable. Of course, quantitative easing was a phrase coined by Milton Friedman, the right-wing economist, who, when asked what he would recommend were America to fall into a deep depression, said that the Government should hire helicopters and drop $5 bills over every major American city. When the Government started quantitative easing, I stood outside the Palace of Westminster in the hope that that would happen, but no $5 bills or £5 notes fell into my hands. On the other hand, we have certainly as a party supported the Government’s programme of quantitative easing. We also felt that it was right to take large parts of the banking sector into public ownership, which of course has happened. The taxpayer now owns significant sections of the UK banking sector.

We have not agreed on a number of matters of detail, and we would not have been expected to do so. We would not have cut VAT when the Government did. At that stage, we thought that an income tax cut would have been more effective because it would have put money into the hands of people who could spend it. Interestingly, I seem to remember a disagreement at the time between Clarke and Osborne in another place about whether that VAT cut was desirable.

When significant holdings were taken in our clearing banks, we would have taken full ownership of those banks rather than leaving a minority part in the private sector. And when the time came, we probably would not have promoted the Lloyds-HBOS merger. Noble Lords may remember the timing. Initially it looked as though Lloyds had to rescue HBOS, because otherwise it would be part of the banking collapse. But by the time all the legalities and due diligence, if there was any, had been gone through, it probably would have been better—with the benefit of hindsight, and I suspect that the Lloyds Bank shareholders would agree—if the Government had ceased their promotion of it and we had not permitted the waiver of competition rules which was required for it to happen. Because of the time it would take to agree a Tobin tax, we have called for a one-off surcharge on the clearing banks as an alternative. However, these are all matters of detail. By and large, we feel that the Government have handled these issues pretty well.

We now look forward, as we did last year, to a number of challenges that are obviously facing the Government. We are looking at a structural deficit in the economy of somewhere between 10 and 13 per cent per annum. Let us forget the amount of the borrowing and what has been spent. Currently, government revenues are running somewhere between 10 and 13 per cent below government spending. Clearly that cannot continue indefinitely. The Tories seem to think that they will be able to solve the problem by a combination of tax and public expenditure cuts, but people are beginning to realise now that the only way of solving this deficit is by pursuing policies of economic growth as we come out of the recession, with economic growth generating tax revenues. I was very interested to see that David Cameron, when he spoke to the CBI conference in the past couple of days, seemed to be moving on to the growth agenda. I assume that that is a recognition that public expenditure cuts alone will not solve the structural deficit problem. I think that the Government realise it.

The second problem that the Government are left with is how to get growth if they cannot get the commercial banks to lend adequately. I know that the noble Lord, Lord Sugar, has views on how to get the banks to lend; he may touch on them in his maiden speech. Many businessmen will tell you—I think that the noble Lord, Lord Hunt, was saying this—that the process of generating lending, particularly to SMEs, is cumbersome and tricky. The Government have a problem in any event, because if every bank lent the same amount that they lent two years ago, we would still probably be a third or a quarter short of capacity because of the collapse of the Irish and Icelandic banks, which have simply disappeared from the market. That is the Government’s second problem and their second challenge.

The third challenge for the Government is this. Are they going to separate retail banking from investment banking—what other people have called casino banking—or will they carry on permitting the major institutions to operate both retail and investment banking? I was intrigued by the interview the other day with John Varley, the chief executive of Barclays Bank, who made a vigorous defence of why his and other banks should be able to operate both as a retail bank taking public deposits and an investment bank acting for major companies. In a throwaway line he said that of course his remarks did not refer to proprietary trading. It is proprietary trading that has caused all the problems; that is, when banks use their own money to invest in derivative securities and second, third and fourth mortgages in American cities. When the Minister, the noble Lord, Lord Myners, answers the debate, I would be interested to know whether government policy will be to permit the retail banks to carry on with their, albeit regulated, proprietary trading models.

I cannot avoid turning to the Tories, and I think that the noble Lord, Lord Mandelson, gave me the green light to do so. Normally one would not take a lot of notice of what the other opposition party said in the debate on the gracious Speech, but some people have suggested that by the time the next gracious Speech is debated, there might be a Tory Government. So what the Tories are doing needs a little more general criticism than I might otherwise have made.

I have two serious concerns about current Tory policy in so far as it affects the British economy, the first of which is the European issue. I will not go into the question of whether it is right or wrong for the Tory party to have pulled out of the mainstream Conservative party grouping in Europe to consort with people who glorify the Waffen SS; that is not the purpose of this debate. What I am concerned about is the potential effect of this on the British economy. As we know, the way that Europe works is that the powerful groupings, whether the big right-wing grouping, the liberal or the socialist grouping, really do influence what is happening in Europe. Just when the Tories have alienated themselves from the grouping of Sarkozy and Merkel—that is, the mainstream Conservative parties—we are facing an unprecedented challenge from Europe to defend our position in relation to the likely attack on the financial services industry based in the City. What we now have is the Tory party not participating in the discussions of the major Conservative grouping in Europe on this issue, and the result is that the French and the Germans, who are no friends of the City of London, will be more likely to have their way.

The second reason why I have concerns about the Tories’ approach to the economy is that they have been wrong on so many issues over the past 12 months. They were wrong on the financial stimulus, they were wrong on borrowing, and they were wrong on the timing of tax increases and cuts. Perhaps I may quote their leader, David Cameron, when he spoke at the Tory party conference. He said that for him it was,

“the only option. We must pay down this deficit. The longer we leave it, the worse it will be for all of us”.

I can do no better than to précis the analysis of Professor Blanchflower of that comment. Professor Blanchflower was a well respected member of the Monetary Policy Committee and is now an economist at an American university. He said:

“Lesson number one in a deep recession is you don’t cut public spending until you are into the boom phase. John Maynard Keynes taught us that. The consequence of cutting too soon is that you drive the economy into a depression, with the attendant threats of rapidly rising unemployment, social disorder, rising poverty, falling living standards … Such proposals [from the Tory leader] could push the British economy into a spiral of decline that would be impossible to reverse for a generation. In a deep recession, the choice is, ‘the Government does it, or nobody does it’”.

I have never welcomed the prospect of a Tory Government, but with their policies on Europe and the economy, that prospect terrifies me.

My Lords, it is a strange convention that the topic of most interest to the British people should be relegated to the fourth day of the debate on the Address. I know that it has always been the convention but I hope that it might be amended at some point.

I enjoyed the speech of the noble Lord, Lord Hunt; it was very gung ho. I kept waiting for the economic analysis—it never came. As your Lordships know, we have been living through the worst economic downturn since the great depression. The most important thing the great depression taught us is that if economies suffer a great dislocation or shock they do not automatically recover; they can stay depressed for a long time. John Maynard Keynes was the inventor of the theory of the stimulus: that is, the theory that they have to be helped back to rude health. Since 2008, Governments and central banks all over the world have been implementing stimulus policies. I would argue that in combination these packages have cut off the slide into another great depression and may well have been instrumental in bringing about the first green shoots of recovery.

However, a lot people who ought to know better are ready to say that the stimulus is no good, it only makes things worse and it ought to be stopped as soon as possible. Some of these benighted souls are to be found among the leaders of the Conservative Party. The shadow Chancellor has dismissed the stimulus as “a failure” and as “ill conceived”. At the CBI on Monday, David Cameron said that recovery depended on cutting the Government’s deficit. By contrast, the Prime Minister said:

“Choking off recovery by turning off the life support prematurely would be … fatal to British jobs, British prosperity and British growth”.

I do not always agree with what the Prime Minister says, but on this occasion he was absolutely right and I support him.

Everyone agrees that the deficit should fall and that we need a credible medium-term path to its reduction, but the fall in the deficit will come about as a consequence of the recovery of the economy and will not be the cause of it. If you try to cut the deficit now in the mistaken idea that it will boost confidence, you will simply be adding to unemployment. Do Messrs Cameron and Osborne want to hand the Government the slogan, “If you want higher unemployment vote Conservative”? That is what their pronouncements can fairly lead people to expect. I do not believe that they want this to happen, but they are economically muddled and the sooner they can resolve their muddle the better it will be for all of us.

The theory of the stimulus is that as the economy recovers the budget deficit will automatically shrink as the Government’s revenues rise faster than the national income, a point made by the noble Lord, Lord Razzall. Not all of it will disappear—of course not; most of it will still have to be the subject of a medium-term financial strategy—but the basic point is that it will shrink as recovery occurs, and the same will be true of the national debt. This, in a nutshell, is what happens. It is not theory; it has happened many times in history already. We have had much higher national debt than we have now and, as the economy grew, it always came down, and the budget deficit tended to shrink as a result of the same process. The pace of the deficit reduction should be contingent on the pace of economic recovery. That is my first point.

The Opposition allege that the cost of government debt and of borrowing generally will go up unless the Government cut their spending now. In fact, the cost that the Government have to pay for their debt is at its lowest in almost 40 years. The 10-year gilt yield is below 4 per cent, well below the average of the past 10 years, and a mere third to a quarter of the levels in the 1970s and the 1980s. However, not only is it low now, but it is expected to stay low for years to come. It is evident that the markets are not experiencing the panic wished on them by many Conservative commentators.

Economists of a conservative bent also go on about the risks of inflation. This is given as another reason for cutting the government deficit now. However, CPI inflation, having dropped 3 per cent since June 2008, is still below its 2 per cent target, and the Bank of England expects it to decrease to 1 per cent after a short rise in early 2010. I take the view, therefore, as do many reputable economists, that the danger is still on the side of deflation, not inflation.

The biggest problem is that we may not have had enough stimulus. Despite a monetary easing of £200 billion, GDP has dropped by 6 per cent, or £80 billion, since the end of 2007. Monetarists, who have also come out of the woodwork recently, believe that flooding the banks with money will increase spending by a kind of natural magic. This is nonsense economics. Most of the extra money has gone into rebuilding the banks’ balance sheets. In America, there has been a strong demand for short-term US treasuries offering a near-zero yield. That indicates a continuing flight to safety or, as Keynes would say, continuing strong liquidity preference. The best way to mitigate this flight to safety is to restore confidence in the economy; the best way of restoring confidence in the economy is for it to start growing again; and the best way to get it to start growing again is to continue with the stimulus and, if necessary, have another stimulus if this one is not enough.

If we want to print money, I would direct it not to the banks but into the pockets of the British people. This is akin to Friedman’s helicopter money. Here are two ideas: first, we could have a temporary wage subsidy paid to employers to encourage them to take on more workers; secondly, the Government might give every household a Christmas present in the form of a voucher to be spent on British goods within three months. There are many other methods, but the object would be to get the biggest bang of spending per buck of money.

If we had a reasonable bipartisan politics, many good ideas would become politically possible which are now aborted by the duty of the Opposition to oppose everything that the Government do. I only hope that this duty does not abort the recovery.

My Lords, I join noble Lords in looking forward to the maiden speech, next, of the noble Lord, Lord Sugar, and, later, of the noble Lord, Lord Martin of Springburn.

Back in 1997, when I entered your Lordships’ House, only 9 per cent of UK households had access to the internet in the home. Today, that figure is 70 per cent. So mention in the gracious Speech of a Digital Economy Bill is a clear sign of the Government’s recognition of the scale and pace of the digital revolution. I join my noble and long-standing friend Lord Hunt of Wirral and the noble Lord, Lord Razzall, in welcoming it in this debate on the gracious Speech.

However, my welcome to the Bill comes with a warning: in becoming a digital economy, we may forget the importance of being also a digital community. The Digital Britain report put the matter memorably:

“We are at a tipping point in relation to the online world. It is moving from conferring advantage on those who are in it to conferring active disadvantage on those who are without”.

In other words, getting universal broadband, for example, is a laudable aim, but it is not laudable if the poorer or more rural communities find themselves excluded from the benefits of the digital revolution.

That is why the Government’s plans to dedicate £300 million for the home access scheme for low-income families and to create a digital inclusion programme are welcome. I was also pleased earlier this month when, in response to my friend the right reverend Prelate the Bishop of Exeter, who is not in his place today, the noble Lord, Lord Davies of Oldham, reaffirmed the Government’s commitment to use surplus digital switchover funds to help to meet the universal service level. But now I find myself rather concerned. The Bill appears to begin to use that same pot of surplus money also to fund the proposed regional news consortia. Of course, I welcome, as all noble Lords do, any strengthening of regional news, but is the commitment given by the noble Lord, Lord Davies, on 9 November now rather less than it appeared then?

I am also concerned about the universal connection speed. There are already groups—the Country Land and Business Association is among them—suggesting that the bar has been set too low for the speed. Are the Government getting this right? It is vital that access and speed alone are not the limit of our aspirations. What we need to create is an environment in which high-quality content is readily available on a variety of platforms and in which audiences are empowered with media literacy to make informed judgments. Simply providing the pipeline is not enough; people at the receiving end need to understand how to process and evaluate the material that passes through it.

I turn to what was previously called public service broadcasting, described by Ofcom as,

“essential to retaining our cultural identity and maintaining social cohesion”.

I come within that remit to local news. All noble Lords will agree that accurate or balanced local news is the lifeblood of a healthy civic society and active democracy. That is certainly true in the north of England, where I serve as bishop of England’s second city. Indeed, rather like in the Church of England, where we are at our most transformative and effective at grass-roots level, the power of good local journalism, informing and inspiring people to action, though hard to measure, is nevertheless undoubted. But even the growing number of hyper-local, web-based services, many not for profit, such as the citizen journalism blog People’s Voice Media in Manchester, cannot fill the void left by shrinking regional broadcast news services.

While I welcome the Bill’s proposed changes to media ownership rules following Ofcom’s recommendations as a pragmatic step towards helping local media organisations to survive in these challenging times, I regard the pilot scheme for regional news consortia as more significant. The potential that these partnerships have for plugging the regional news gaps—on ITV, for example—and for unlocking the capacity for local community media groups to get involved could herald much more genuinely local local TV news. This takes me back to the need for clarity on the funding mechanisms for these pilot schemes. Can digital switchover surplus really be expected to cover the three proposed pilot schemes as well as the necessary investment in communications infrastructure?

While on the matter of finance, I welcome the Government’s decision to postpone any decision about top-slicing the BBC licence fee to give time to explore other funding solutions. As the Communications Select Committee, on which I serve, concluded in its report The Ownership of the News, introducing a contestable element of the licence fee would turn it into something very different. That is why, in welcoming the updating of Channel 4’s remit to include the provision of public service content on a range of media platforms, I emphasise the BBC’s unique and innovative role in leading the development in this digital revolution.

In rushing to carry out the switchover from analogue to digital on radio, there may be an unintended consequence. For when the moment for switchover comes, will it be timed precisely to the by then obsolete but accurate FM pips or to the new but delayed and therefore inaccurate digital pips? Are the Government consigning us to eternal lateness? However, it would be churlish for a mere pip to get in the way of giving general support to the Government’s proposals in this Bill. I give that support, with the proviso that the funding is right and that the whole country is enfranchised to benefit from the amazing advances in communications technology that the Government are so rightly seeking to embrace.

My Lords, it is a great honour to be speaking here in your Lordships’ House for the first time today. I am the new boy on the block; in your Lordships’ House, I am certainly the apprentice. I would like first to thank the very hard-working and helpful staff of the House for the assistance that they have given me over the past few months. I take the opportunity of thanking those of your Lordships who have taken the trouble to offer their kind wishes and welcome.

I am, as your Lordships know, Lord Sugar of Clapton. Clapton is in the London Borough of Hackney; Clapton is where I was born, where I was educated and where I started my first business venture. I was born into a low-income working-class family; we lived on a council estate and I was the youngest of four children. In fact, there was a 12-year gap between me and my elder twin brother and sister. I often joked with my mother that perhaps I was a mistake—she preferred to call it a pleasant surprise. Some of your Lordships may not agree.

On the subject of surprise arrivals, I think it fair to say that my appointment earlier this year as the enterprise adviser to the Government, as well as to this House, was not met with a chorus of wild approval. As a realistic person, I fully understand the reaction from certain quarters; it is, after all, human nature for people to form an opinion from what they read in the media or, in my case, what they see on TV. Apart from the wonderful title of “Lord Sugar of Clapton”, I seem to have been awarded another—that of a “telly Peer”.

With that in mind, those of your Lordships who may have stumbled upon the TV show might recall that, when it started six years ago, I made a statement: “Never, ever, underestimate me”. As an example, at the age of 16 I failed an aptitude test at the head office of IBM in Wigmore Street, where I had applied to be an apprentice programmer. Twenty or so years later, I signed the licence agreement with IBM, because I had captured from it 30 per cent of the European home computer market. Forgive my little boast, but today I own its European headquarters on the south bank of the river.

My business career started in 1966 at the age of 19, when I withdrew £100 from my Post Office savings account. I bought a second-hand minivan and some stock and by the end of the week I was earning three times more than I would have been doing the same job for someone else. From that point on, I learnt all aspects of business—bookkeeping, credit control, advertising, hiring staff. I have done my fair share of working on the production line—I have loaded lorries and packed parcels. I did not make my fortune by sitting in front of a screen trading in shares and currencies. The only hedge fund that I ever had was to buy my gardener a new Black & Decker. I made it by fair, honest and simple trading.

Your Lordships will see why I consider myself qualified to advise the Government on small to medium-sized enterprises. I have spent the past 12 years or so visiting schools and universities—including the Oxford Union three times and the Cambridge Union Society twice—and speaking at seminars to the small business community. My message is that business is hard and competitive, but if we are realistic with ourselves about our weaknesses and strengths we will succeed and create something to be proud of.

In Britain, small businesses have a lot to be proud of. They employ over 50 per cent in the private sector and they generate as much turnover as big business—in fact, 99 per cent of all businesses are SMEs. The credit crisis has pushed our SMEs to the limits. Some companies have struggled, not because of failure in business, but because of the tougher credit conditions. The Government have stepped in, as they should, with temporary schemes, but it is important that the Government continually reassess their objectives. It is here, with the support from small business membership bodies, that I will be lending a hand by talking to businesses around the country.

I have spent the past few months visiting Business Link centres. I have seen some great examples of businesses thriving in these difficult times. But I have also seen some poor examples of businesses that simply will not succeed, even in the best of times. The reality is that, however good the help provided by government, some businesses simply do not work. Government and banks cannot just write blank cheques to anyone who thinks that they have a good idea.

I have said this to people I have met on my recent travels. As I said, I am a realist. I am straight and I am blunt and I will not always be popular, but I promise your Lordships this: I will always be honest and passionate about assisting SMEs and getting our young people to think about business as an opportunity. If we can, in Britain, do more to make our kids realise that the business world is far from dull and boring, we will have done a great service.

I am proud and glad through my TV programme to have inspired millions of young people. That was my real purpose in participating in it. If we as a country can be bold enough to honestly look at ourselves and acknowledge the challenges that we face, we will emerge stronger in the upturn. It is this quality of honesty and straightforwardness that has served me well over the past 40 years. Many of my employees who have stayed with me for much of that period and those I have done business with would attest to that. It is that straightforward approach that, I hope, will allow me to advise the Government and small businesses for the benefit of all involved, including this House.

My Lords, it is my very great pleasure to congratulate the noble Lord on his maiden speech. I had the honour a couple of years ago of awarding the noble Lord an honorary doctorate at Brunel University where I am chancellor. On that occasion, he was very popular with the students. He made a forthright and blunt speech, which they appreciated. They also appreciated that he had been a great success in his business career and I think most of them hoped that one day they might be able to emulate him in his success.

I am sure that he will find in this House that there is no difficulty in being forthright and speaking his mind. In fact, the House appreciates noble Lords who speak their minds. I might add that, as a former Chief Whip, I am not entirely sure that Governments always appreciate noble Lords who speak their minds too bluntly. Nevertheless, I am sure that the noble Lord will know from the reception that he got that he was well received in the House today and we congratulate him on making his maiden speech. We hope that he will speak on many other occasions in the House when we shall enjoy listening to him.

I have had a hand in drafting as many Queen’s Speeches as, I suspect, anybody in the House. I do not think I was ever accused of using the Queen’s Speech as an election manifesto. I do not think that that is a reasonable criticism of the Government. If that is what they were doing, it was a pretty daft idea. I do not do it.

It seems that the return of confidence in our economy is still the most urgent task facing us. I am not sure that either the Fiscal Responsibility Bill or the Financial Services Bill are adequate to that task. As one distinguished commentator put it:

“Will the Great Recession be followed by the New Caution”,

much as happened in the 1930s, following the great depression? Has the damage of recent years so shaken confidence that the effects will bug us for a good many years ahead? The blunt truth is that people have discovered that the stock market is not a one-way street. Depositors and savers do not have the confidence that they once had in the banks, and feel the need to spread their money around more, rather than keep it in one bank. Also, what people thought was an adequate provision for their retirement has proved to be woefully inadequate.

If you look back at the great depression, you will see that it took considerably longer for confidence to return. Indeed, 1929 was by no means the worst part of that depression. There were many speeches by distinguished people in late 1929 and the early 1930s about how the recovery was coming, but it was a false dawn. The Dow reached the real bottom of the market in 1932 and did not recover its levels until 1954, some 22 years later. The precedents for making a recovery now are not all that good.

The Minister who is replying to this debate, whom I have known and respected for many years, reminded me the other day that I gave him his first big job. I had forgotten that, but he told me. He was a great success at it, if I may say so. He will no doubt defend the Government’s record loyally and with vigour, but I do not envy him the mess that he must have found in the Treasury. I think his memoirs will be much more interesting than the speech that he will make this evening.

If we are going to get out of this mess and see a return to confidence in the economy, of one thing I am absolutely certain: government forecasts have to be believed. The promise of a Fiscal Responsibility Act may well be a move in the right direction, but if it is no more effective than the 1998 code for fiscal stability, it will not be. In any case, it misses the essential point. It is the failure in recent years to make reasonable forecasts of our public finances that has been especially damaging. For instance, a Government who forecast in 2009 that the net borrowing requirement would be first £30 billion, then £118 billion, then £175 billion—and I read the other day that it will be even higher than that—have a lot to do to get credibility back.

The Fiscal Responsibility Bill is presumably to reassure potential purchasers of government bonds that the government finances will be run responsibly. My understanding is that no one with responsibility for investing in government bonds uses the Chancellor’s forecasts as a guide. They prefer to use their own non-government forecasts. As far as I can make out, virtually every forecast from the Treasury in recent years has been overoptimistic. This has been accompanied by a moving of the goalposts when it suited the Government. To help our recovery, the urgent need is to return some sort of credibility to the Government’s forecasts for the economy. We have debated in this House at considerable length the difficulties we have had with dodgy statistics. That has been put on a more satisfactory basis although it should not have been necessary in the first place.

I would be the last person to say that resolving some of the banks’ problems is easy, even if a substantial part of the lack of confidence arises from the Government’s own earlier mismanagement. Bank supervision has been the creature of this Government for the past 10 years or so and has proved inadequate. I wait with interest to see how the proposed Financial Services Bill will help. The Government are right to take a close interest in how the banks are run as the taxpayer keeps them in business. The Government fully realise that confidence in the banking system is there only because depositors have assumed that the Government have no option but to bail them out if necessary. This, of course, applies to all banks, whether or not they have actually needed a government bail-out.

Despite the massive support the Government have given the banks—I suspect that there is more to come—confidence has still not returned. We still do not know the extent of bank losses. My message to the Government is that the first prerequisite for a return of confidence and the ability of the banks to stand on their own feet is transparency. We will then be able to judge whether the Government have done enough. I fully understand the Government’s reluctance to divide up the banking system into utility banks and casino banks—certainly without obtaining international agreement—but we must have clear indications that they will take other steps to secure the banking system and avoid a return to the chaos of recent months. What concerns me is whether the Government and the banks have learnt the lessons. A return to business as usual would be unacceptable.

My Lords, I am happy to follow the noble Lord’s plea for honesty in government statistics. I believe that these two Benches have secured considerable improvements in that regard. I congratulate the noble Lord on his measured and balanced speech.

I wish I could say the same about the speech of the noble Lord, Lord Hunt. I was going to attack the Conservatives’ economic illiteracy, as I saw it, but the noble Lord, Lord Skidelsky, with his unique knowledge of the 1930s, has done that demolition job far better than I ever could.

I am sorry to say that I think the noble Lord, Lord Sugar, is no longer in his place—he left rather suddenly. I listened with particular interest to his punchy speech, having received correspondence from him and his lawyers over the summer. I have apologised to him for any personal distress that my comments may have caused and I would be happy if he chose to make my whole letter public, but that, of course, is entirely up to him. I declare my interest as a commercial property investment manager for pension funds, charities and investment trusts. Indeed, I sold Lloyds Bank in Romford to the noble Lord a few years ago. Noble Lords may not realise that he is one of our most successful property tycoons, with net assets estimated at £730 million in this year’s Estates Gazette rich list. The Amsprop Estates website displays a fabulous selection of prime West End properties from Bond Street to Park Lane, so if the noble Lord ever gets bored with starring in “The Apprentice” I am sure that he would be equally brilliant in “Location, Location, Location”. We welcome the noble Lord as the most propertied Labour Peer in history. Is it not wonderful how well the super-rich—the bankers and the property magnates—have done out of 12 years of Blair and Brown?

We have finally been told today how near to catastrophe our cowboy bankers drove us last year, and how they needed an extra £62 billion secret bail-out. The noble Lord, Lord Hunt, talked of choking on his cornflakes this morning. I nearly choked on a slice of melon when I heard the noble Lord, Lord Myners, say that the owners of the banks must begin to step up to the challenges of ownership. Of course, he meant pension funds and insurance companies, the traditional institutional shareholders, as both he and I were for many years in the City. Of course he is right in principle. But do not he and the noble Lord, Lord Mandelson, who is sitting beside him, realise that they and the Government are now the owners on behalf of us all? The buck stops with them on enforcing government lending targets, changing the banks’ casino culture and stamping out short-term bonuses. That has certainly not happened at RBS.

I wrote to the Chancellor on 9 November, nearly three weeks ago, asking him to clear up the confusion left by his Statement to the House of Commons on 3 November on RBS bonuses. It was clear from Stephen Hester’s letter to his employees that most of RBS’s investment bankers could cash in half their bonuses in seven months’ time—in June 2010. They can order their Ferraris now. If my letter has not reached the Chancellor’s desk, perhaps the noble Lord can check and obtain a proper reply for me soon.

The Government are acting as the banks’ biggest absentee shareholder. They cannot wash their hands while the banks continue to fail the country. The noble Lord, Lord Myners, yesterday also encouraged shareholders to take a long-term view and reject hostile takeover bids. I agree with him. Why is he letting the Royal Bank of Scotland bankroll Kraft’s hostile bid for Cadbury? I thought that British taxpayers had poured billions of pounds into banks to support British businesses, not attack them.

The other main topic I wish to cover is the most serious threat to government finances over the next few years—public sector pension costs. I give a particularly stark example. In the past three years, we have had to pay twice for police pensions—first through council tax and now through income tax, through a Home Office top-up grant to police authorities. I received parliamentary Answers last week which showed that this top-up tax shot up from £201 million in 2006-07 to £340 million in 2007-08, and to £482 million last year. That is a 140 per cent increase in just three years.

A police constable is retiring with an index-linked pension pot which typically would cost £1,050,000 to buy from Legal & General. For a superintendent, the figure would be nearly £2 million and for an assistant chief constable nearly £3 million. The main reason is that life expectancy figures have been shooting up. A policeman retiring today could typically expect to draw his pension for five years for every four years that he has worked, and a woman police officer could draw her pension for three years for every two years that she has worked. Even after the reform of police pensions in 2006, most will retire in their early to mid-50s, when they are still able to work and earn, unlike most private sector workers who do not draw a full pension until they are in their 60s, if they are lucky enough to have a pension at all.

Meanwhile, the basic state pension age is increasing to 68, because rising life expectancy makes pension provision unaffordable at the ages of 60 for women and 65 for men. We urgently need an independent pensions commission—a Turner mark 2—to review all public sector pension costs to make them affordable, sustainable and fair for public employees and the income tax and council tax payers who have to foot the bill. Pension rights earned already must be protected, but future accrual and contribution rates and pension ages will have to be based on a thorough assessment of what is fair and affordable for the 80 per cent of taxpayers who do not enjoy public sector pension rights. No economy can pay pensions for on average longer than people work, never mind an economy such as ours with a serious structural deficit.

Getting a grip on ballooning public sector pension costs will be the acid test of any Government’s credibility, and Britain’s shaky credit rating, over the next five years. The Conservatives are wrong to want to slash and burn when Britain is in deep recession, but any Government must face the hard medium-term choice that we have all ducked for far too long. We must start to close our unfair public/private pensions divide and stop turning a blind eye to the spiralling pension cost of delivering our essential public services.

My Lords, time is short and I will be brief. I will address two issues. The first relates directly to a proposal in the Queen’s Speech, the second to an issue that should have been included.

The first issue relates to the Bill that will transform the way in which the financial sector is policed. The measures were outlined against the background of 12 months of financial turmoil. We must continue to remind ourselves and others how and why the catastrophic situation arose. The steps taken by the Government to protect their citizens from the disaster of a potential banking meltdown are easily forgotten by those who wish to forget. None of us will ever forget the television pictures of queues outside Northern Rock branches. It was a heart-stopping moment. Nor should we ever fail to acknowledge that but for the Government’s intervention, the outcome would have been unthinkable; so measures outlined in the Financial Services Bill are to be warmly welcomed. The proposed framework ensures that the banks themselves, not the taxpayer, must be held fully responsible for bank failures. Strengthening the tripartite system will be a triple lock on the banks. We also welcome the accountability to Parliament. We look forward to seeing the details of the Bill and urge the Government to resist any attempts to water down these essential changes.

The second issue is relevant to all the headings in today’s debate. It impinges on business and economic affairs, consumer affairs and culture—especially if “culture” includes sport and recreation. I refer to the need to stop putting the clocks back in the autumn and plunging the country into totally unnecessary misery and darkness. I have a new role in this project, having recently taken over the torch from the noble Lord, Lord Tanlaw, as chair of the Lighter Evenings All-Party Parliamentary Group. Whenever this is raised in the Chamber, the only opposition that we get is in the form of ridicule—although perhaps not today. Whenever no valid arguments are offered against the proposal, only scoffing is offered. Shame on them.

We treat the issue with the seriousness that it deserves. We are serious about the thousands of people whose health and well-being are adversely affected by dark evenings—sufferers of SAD syndrome. We are equally serious about the cost to the country, City, businesses and high streets of keeping us out of step, time-wise, with our continental neighbours. We are equally serious about the negative effect on the tourism industry. Some put it as high as a 10 per cent reduction, equating to 30,000 job losses. We are totally serious about the loss of light and of the opportunity for children to play outside after school, and for all of us who would like to walk the dog, do some gardening and so on—at a time when doctors are warning us of the dangers of obesity. We are extremely serious about the potential saving of energy. Some 3 per cent of electricity could be saved when we are striving to reduce emissions in the battle against climate change. We are deadly serious when ROSPA tells us repeatedly and categorically that 100 children’s lives could be saved and many serious injuries avoided if we stopped the unnecessary practice of turning back the clocks.

We are best when we are boldest, but we are also best when we work to the principle of the greater good. The case for lighter evenings is well made by many people. I hope that the Minister will give some assurance that the matter will be reconsidered. Public opinion is overwhelmingly on our side and the arguments are powerful. This change would also be virtually cost-free. It has everything to commend it and should be pursued.

My Lords, it gives me great pleasure to follow that marvellous speech by the noble Baroness, Lady Bellingham. I am not a scoffer and support her 100 per cent.

The first sentence of the gracious Speech states that the overriding priority of the Government is to ensure sustained growth. Let us take time to look at that. Since the Government came into office, resources have been remorselessly and systematically siphoned off from the private to the public sector. My noble friend Lord Forsyth mentioned this earlier and got a rather evasive answer. There has been virtually no growth in the private sector for the past 12 years. What has been the object of this exercise? Presumably, it has been to see the public sector grow. However, measured by outputs rather than input employee costs, economic growth in the public sector has been modest. What has not been modest in the public sector is the mushrooming of jobs, and the mushrooming continues relentlessly. In the past 12 months, while 900,000 jobs have been lost in the private sector, 289,000 jobs have been created in the public sector.

Do the words “sustained growth” mean sustained at the level we have had over the past 12 years? That would be nothing to be proud of, nor would it go anywhere towards reversing what has become an inexorable decline in our competitiveness compared with the big five Asian economies and the economies of some Latin American countries. My noble friend Lord Howell of Guildford gave a masterly exposition of the transfer of economic might to these countries in the debate on the Queen’s Speech on 19 November, at col. 36 of Hansard. I commend it to Members of this House who might have been lulled into a sense of comfort by the endless repetition of claims that the Government have managed the economy quite brilliantly for the past 12 years. The Government have not been asleep on the job all the time but when not asleep they have been dozing and dreaming—yes, daydreaming.

In the first paragraph of the gracious Speech, the Government say that their aim is,

“to deliver a fair and prosperous economy for families and businesses”.

Can we have details please? What are they going to do? What new strategy will they employ which will deliver something that they have spectacularly failed to deliver in the past 12 years? By the way, have the Government, elected by 20 per cent of the voters, the right to determine that it is only families and businesses who should benefit? What about the pensioners and the hard-working single people who live alone and who are always left out and constantly discriminated against by many sectors of this economy, including supermarkets, shops, hotels and the travel industry? They are not even on the Government’s radar screen. No, they do not count. They are not expected to benefit from a fair and prosperous economy; they are just part of silent groups that have to grin and bear it.

I am very grateful to the noble Baroness for giving way. She mentioned that this Government had been elected by 20 per cent of the voters. Does that mean that she is in favour of reforming the voting system to something fairer?

I really admire the noble Lord, Lord Oakeshott, as he well knows, but I think that that was a particularly petty intervention, if I may say so.

The gracious Speech says:

“Through active employment and training programmes, restructuring the financial sector, strengthening the national infrastructure and providing responsible investment, my Government will foster growth and employment”.

However, do we believe that? It would nice to but, based on the Government’s record, the answer has to be no. They have claimed to be doing all these things, with the possible exception of restructuring the financial sector, for year after depressing year. How can these well used stratagems work now when they have not worked before? Have they any ideas as to how to engender growth? I am sure that the true answer is no. For pity’s sake, hand it over to those who can—to those in charge of the economy immediately before May 1997 who left this Government a golden economic legacy, as my noble friend Lord Hunt has already said.

It is crucial that we start as soon as possible to rebuild our economy. In simple terms, government borrowing at 40 per cent of GDP will increase to 100 per cent, burdening future generations with a 250 per cent increase in the cost of servicing the debt. The burden will fall on each and every household in the country. However, I very much doubt whether this will be explained by the Labour Party in its manifesto for the next general election. Unless plans are put forward to restore the public finances over the next five years, there is a very serious risk of government not being able to fund the borrowing requirement—namely, not being able to sell enough gilts.

Long before the current crisis, I referred several times to the necessity to have a savings ratio of over 10 per cent. On the last occasion, I remember that I was told, “We don’t do the savings ratio any longer; things have moved on. It’s an old-fashioned economic indicator”. Old-fashioned it might be but relevant in today’s situation it certainly is. The last time I spoke about the savings ratio, it was negative, at minus 1.5 per cent. It has moved into positive territory but it is still nowhere near sufficient to finance government debt. How can we remedy this? Unless there is a pretty huge increase in the savings ratio, we will be dependent on persuading overseas investors, particularly the Governments of the big five Asian economies to which my noble friend Lord Hunt, referred, to buy our gilts. That is serious and Britain’s creditworthiness hangs in the balance.

How will the Government legislate to halve the deficit? As the noble Lord, Lord Razzall, said, the Government seem to think that by stating their intention to legislate, that will make it happen. Do they intend to ensure that the Asian sources of finance will be readily available to help us out? We can live on other people’s savings for so long, but not for ever. Alice in Wonderland looks like a serious book compared to all of this.

In simple terms, the facts are these. First, the IMF advises that the credit crunch in the UK is the worst in the developed world. I know that the noble Lord, Lord Mandelson, selectively quoted from the IMF, so I am doing likewise. Secondly, the financing gap—the difference between what people need to borrow to keep the economy in good health and what they can actually lay their hands on—is £215 billion this year and next, or 15 per cent of GDP compared with 2.4 per cent in the US and 3 per cent in the euro zone.

Thirdly, the Institute for Fiscal Studies advises that the growth in public sector spending since this Government came into office will need to be reversed completely by 2017—in eight years—to get public finances back under control. We are in a dire economic situation, the worst for 80 years, and it is worsening by the day. The revelations this morning that last autumn, on top of the revealed £500 billion to support the banking sector, the Bank of England secretly gave a bridging loan of almost £62 billion from the taxpayer to further shore up RBS and HBOS, does not fill me with confidence that we have been given accurate data. What other secret deals will be revealed? While I am at it, let me ask the Minister a very simple question. How many directors of the banks bailed out by each and every one of us have subsequently been disqualified from ever having future directorships? I suspect that I know, but I would like it confirmed that the answer is none.

None of that will instil confidence in anything proposed by the Government. The economy must be managed with real courage and purpose, not with the facile, pie-in-the-sky words in the gracious Speech. The time for a Government of purpose and courage is now. We cannot afford to disintegrate further. I am taking a risk, but I quote from the Lady in the Scottish play:

“Stand not upon the order of your going, but go at once”.

Perhaps I should be gentler, and kindly suggest that the Government should retire gracefully—and now.

My Lords, you honour me by allowing me to address this House during the gracious Speech debates. I was deeply touched by the great welcome I received on coming to your Lordships’ House from my old colleagues on both sides of the House who were in the other place with me and from Peers who have never been in the other House. That goes for the staff of this House, including Black Rod’s messengers, security, the police and cleaning staff, and many others who have made me feel so welcome and who were so friendly towards me and my family when they came down here on the day of my introduction.

I have no need to tell noble Lords that we are in a recession and that the last time we were in such a recession we did not train our young people. When we came out of it, we needed skilled men and women, but we could not fill vacancies because we had failed to train at the appropriate time. I urge Ministers that this is the time to train our young people. When I was Speaker, I was deeply saddened that we in the Palace of Westminster, with this beautiful craftsmanship all around, had no apprentices. I approached the foremen, forewomen and managers of all departments and asked whether they would be willing to embark on a scheme involving the schools across the river—it should be remembered that in this city of plenty there is poverty—and received first-class co-operation from them all.

I included the traditional craft apprenticeships, and also the chefs, the security people and those who worked in administration. They all embarked on a scheme that was a success when it started and is still a success. Only two weeks ago, when I walked through the Royal Gallery and spoke to the carpenters who were preparing for Her Majesty coming, the foreman carpenter told me that a young joiner will be completing his apprenticeship and has decided that when he becomes a journeyman, he will stay here in the Palace of Westminster.

Take my word for it, praying in church is a lot easier than it was in my younger days. When I popped into the cathedral at Westminster, I found that after a prayer, you can go to the cafe downstairs. That was not the case when I was a young boy. The lady who was serving me told me, “I’ve got a photograph taken with you”. I said, “Tell me the circumstances”. She said, “My son got his first-year training certificate as a chef in Westminster. We got a photograph with you, and I was very proud of my son”. That is an indication that when an apprenticeship comes to a family, it gives dignity and standing not only to the young apprentice but to mothers and fathers and the rest of the family.

We are a substantial employer here in this Palace of Westminster. If we have to approve legislation stating that small and large companies must get involved in training, we must set a good example and train our young people.

I had the honour of representing Glasgow North, which used to be known as Springburn, a community that I have lived in all of my adult life. I was proud to represent that constituency in another place for 30 years. There was recently a by-election there and for some, it seemed to be a very successful result—but I am neutral in these matters. During the by-election, many commentators came from far and near and said all sorts of negative things about the community that I represented and have lived in since I was aged 14. I wish only that when they come to such communities—and I know that this is an inner-city community with difficulties—they will look at the positive things.

I declare an interest. I am a member of the Glasgow North Housing Association. As we speak, men and women, on a voluntary basis, will be discussing housing in their local, community-based housing association, to build decent houses for their neighbours and friends, houses suitable for the different communities in that constituency. I wish only that during the by-election, those commentators had at least mentioned some of those positive things that are going on.

I can tell you something very positive about apprenticeships. I urge the Government to see that if Glasgow can be involved in the apprenticeship training scheme, other parts of United Kingdom can also be involved. There is a company that is an offshoot of the old direct works department, but which is now completely independent, known as City Building. It is non-profitmaking. City Building has taken on 500 apprentices. Two hundred of them will be involved in the work for the Commonwealth Games. Some of the boys and girls are still at school and are training on day release. Head teachers have said that they have found that the behaviour of pupils on day release and their attention to other matters in school and study have been excellent. A contract is drawn up between the apprentice who is still at school, the school and his parents. City Building trains plumbers, electricians, painters, roofers and gas engineers. When the young people become journeymen—pardon me for being politically incorrect; I mean journeywomen as well—in these trades, they do not need a workshop. They can carry their equipment in their hands. If they so wish, they can go from door to door, looking for work, and can become self-employed. City Building has done a positive thing, and I hope that it is mirrored throughout the United Kingdom.

When I was at school, the Marist Brothers encouraged me to study the life of the saints. I was always fascinated by their occupations. Some were fishermen, Our Lord was a carpenter, and so was His father. One saint was a tax collector—as Robert Burns would say, an excise man—so perhaps he was not too popular. I was always interested in Paul. He was a tent maker. In my young mind, that meant working with canvas, but it did not mean that. Paul was a tent maker to the Roman army and was a leatherworker. When he preached to congregations throughout the Roman world, he would not take money for his preaching. If he needed food and shelter, he turned to his trade for them. It was said that he said, “In my hands, I have a skill. Therefore, I owe no man”. I hope that we can train our young people so that they can one day say, “I have a skill and I owe no man”.

My Lords, I congratulate the noble Lord, Lord Martin of Springburn, on his excellent maiden speech. He has given over 30 years of his life to serving the British people in Parliament, and that long experience will be incredibly valuable to this House. In his maiden speech in the other place in 1979, he powerfully championed the need for more council housing in his constituency of Glasgow Springburn, as it then was. That was the first of the many interventions he would make, where he would fight tirelessly for the underprivileged in our society. The noble Lord's rise from modest beginnings to one of the great offices of state demonstrates a determination of spirit that few possess. It has been said, and we noticed, that the noble Lord is a softly spoken man, but that when he needs to make a noise, he is more than capable of doing so, particularly with his bagpipes. I trust that the noble Lord will bring a harmonious tone to this House from the Cross Benches. He spoke like a true Cross-Bencher, and we look forward to hearing many contributions from him over the years to come. We also welcome our apprentice, the noble Lord, Lord Sugar, who is not in his place. I hope that he has not gone to fire somebody, that he is not being fired and that he is not firing himself.

I am happy that in Her Majesty's most gracious Speech, the Government stated that their overriding priority is to create sustained economic growth. That is what the noble Lord, Lord Mandelson, emphasised time and again. However, I take us back 30 years to 1979, when Britain was the sick man of Europe—a country riven and wrecked by strikes, a country in which the word “entrepreneurship” conjured up images of Del Boy. Let us not forget. What happened over the decades to follow? What transformed Britain from being down and out to being the fourth largest economy in the world? It was transformed by liberating the power of enterprise, entrepreneurship and creativity and by unleashing the genius of a country that, as a tiny nation for centuries, has created so many world-changing and life-changing innovations and inventions, be it the steam engine or the world wide web.

Britain was transformed by lowering taxes and freeing up the economy, by the big bang in 1986 and opening up the City. It was transformed by promoting, encouraging and celebrating entrepreneurship, creating scores of world-class entrepreneurs creating world-class products, such as Sir Richard Branson and Sir James Dyson. I could go on. It was transformed by the creation of an attitude of meritocracy in a country in which anyone could succeed, where there was no glass ceiling, and where there was opportunity for everyone regardless of race, religion or background. Inspiration led to aspiration, and aspiration led to achievement.

Where did it all go wrong? Why are we still in recession when other countries have started to grow again? Why do we have a deficit of £175 billion? Why is a high tax rate of 50 per cent coming back in? Why do we have a non-doms levy that is insulting and turning away people who have helped to make the City of London the powerhouse that it is today?

Last month, I asked the noble Lord, Lord Myners, why I continue to hear from everyone in the SME sector that they are still finding it very difficult to obtain lending from banks. I asked why the Government have saved the banks but are not doing enough to save the businesses that the banks serve. It is no secret that I have come through the most challenging year in my business career. The Minister replied:

“It was quite clear … that the primary issue in terms of lending to creditworthy, well managed and solvent businesses is demand. I cannot speak to personal experiences in which those definitions of business may not necessarily apply”.—[Official Report, 14/10/09; col. 221.]

I would like to ask the Minister about the creditworthy, well managed and solvent banks that the Government have bailed out with hundreds of billions of pounds. Surely this is sheer hypocrisy. Just yesterday, we heard that £62 billion was lent secretly to HBOS and the RBS. In comparison, how much have the Government done for the SMEs? The Government help the banks and not the companies; yet these are the companies that will lead this country in the charge out of recession. SMEs employ 13 million people in this country.

We have lost a sense of balance. We do not need a nanny state; we need balanced regulation, transparency and an end to the wretched blame-go-round between the FSA, the Treasury and the Bank of England. This is not just about bankers’ bonuses. We have had the longest prolonged period of low interest rates in history. This has led to Wall Street flowing into main street, with unemployment rising and with great uncertainty as to what the future holds for us. Whether we have Sir Martin Sorrell’s LUV recession, a double dip, a V or a U, we are not addressing the fundamentals. We are treating the symptoms, not the disease. We need faith, respect and trust in the Government. Yet all the signals are that the Government have not got their priorities right when it comes to business.

To be fair, reassuringly, some steps are being taken. It is good to see that the Prime Minister is taking notice of the Rowlands review, which recommends the creation of a £1 billion growth fund for growth-focused SMEs. This is just the sort of thing that we need. Yet what is £1 billion compared with the hundreds of billions—some say up to £1.2 trillion—to bail out the financial sector? It is encouraging that the Opposition have placed a focus on creating growth and wealth. Again, however, whether there are policies to support this aspiration remains to be seen.

British business needs to look far more to countries overseas than it does. As president of the UK India Business Council, which is supported by UK Trade & Investment, I have seen the huge potential that a country such as India holds for British business. India has been growing and its economy has been forecast to grow at 6 per cent, while we are still in recession. In the UK we have large world-class, cutting edge, high-tech manufacturing. British manufacturing is by no means dead. I am privileged to take part in this sector and to see it first hand every day.

Britain’s higher education system is funded at half the percentage of GDP compared with the United States, but year after year we churn out the best universities in the world—four out of the top 10. Yet, as captains of industry are now openly saying, there is a deficiency in the basic skills level of our school-leavers, which is alarming. There is much to be done and we cannot go on with this ping-pong of electoral rhetoric between the Government and the Opposition about who will and will not make spending cuts without addressing the heart of the problem.

I will never forget one of my physics lessons: energy is never created or destroyed, but transferred. Energy is being wasted in the blame-go-round between the banks, the Government, the FSA and the financial institutions. We have to move forward. Then we will see this country improve and prosper once again.

To conclude, we have forgotten all that we did to rebuild Britain from the sick man of Europe that it was 30 years ago. Throughout history, it was not the banks that made Britain great. World-class, world-beating higher education, entrepreneurship, enterprise and innovation have always been responsible for the great in Great Britain.

My Lords, I, too, welcome the Government’s Financial Services Bill. I welcome it for three reasons. First, we have learnt that, if the financial sector is not working properly, the rest of the economy suffers. Secondly, the current system just does not stand up to public scrutiny. Thirdly, the Bill again demonstrates that it is from a Labour Government—I repeat, a Labour Government—that you get progressive policies. My concern is that it does not go far enough.

Like many others, I used to think that there was a clear separation between the financial economy and the real economy. Recent experience has clearly demonstrated that that is no longer true. When Christine Lagarde, the French Finance Minister, came to London for the G20, she said that,

“you cannot kick-start the economy if you do not fix the financial sector”.

That blunt and forthright sentiment was worthy of my noble friend Lord Sugar. But she was right; we have to fix it.

Some accuse the Government of being populist by putting this Bill in the gracious Speech. It is not being populist. It deals with a public concern, which is whether the present system of doing business in the financial sector is fit for purpose. For the past year and a half, the sector has been held up to public scrutiny and it has obviously failed. It is a fact of political life that, if something does not stand up to public scrutiny, it has to change. Look no further than the expenses of parliamentarians. The evidence of this public concern is everywhere.

The financial market is perceived as a place for speculation rather than allocation. Some, like the noble Lord, Lord Bilimoria, are bringing into question the balance of the economy. The ownerless corporation and its impact on jobs and services is a matter of interest and public concern. Responding to that concern is not jumping on a political bandwagon; it is delivering change that the public want and need. That change is not only in the way in which the financial system handles money, but also in its sense of purpose. High bonuses and salaries have been discredited. That is not the politics of envy; it is the politics of what is reasonable to sustain our industrial and commercial base.

Another reason for supporting this Bill is that it is progressive. Like many noble Lords on these Benches, I was brought into the Labour Party through a commitment to progressive politics. Therefore, I was both interested and surprised when recently someone sent me a speech about progressive politics delivered by the Leader of the Opposition. I hope that noble Lords opposite will explain to their leader that it is not big government that squeezes out human kindness, generosity and imagination. As my noble friend Lord Mandelson reminded us, it is inequality and lack of opportunity. Progressive politics means the state acting to allow individuals to realise their potential, to reduce inequality and to regulate a market economy so that it helps us to grow together, not apart. That is what the Bill does. It is progressive in the moral sense and it builds the confidence that the noble Lord, Lord Hunt, spoke about. That is why I support it.

My concern about the Bill is that it does not go far enough to rebuild trust between our financial institutions and society. The Prime Minister has spoken about the breakdown of the implicit contract between our financial institutions and the society that they serve. I am afraid that it is going to take a lot more than this Bill to rebuild that contract. Surely the financial institutions themselves must be anxious to rebuild it because, after all, how can you do business with a public who do not trust you?

This breakdown of trust has been fuelled not only by a cavalier attitude towards risk with our money but by a suspicion of the closed and opaque way in which financial markets work. We are learning how bankers and brokers provide each other with market colour so that they can benefit at the cost of the rest of us. Some financial institutions use special information to bet on shares—betting, an activity that has nothing to do with supporting business or industry. Off-balance-sheet accounting, off-exchange trading in so-called “dark pools”—all of this destroys trust and creates anger. If taxes are raised and when we do feel the effect of cuts in public services, the banks will be blamed by a yet more angry public.

With all this going on, rebuilding trust is a heavy task. Yes, Sir David Walker, who is reporting tomorrow, should provide the transparency called for by the noble Lord, Lord Wakeham. Yes, the Bill gives more power to the FSA to fine or suspend banks, companies or individuals who break the rules. Yes, there will be a Council for Financial Stability. But most of this is after the event and only if you get found out.

Reform has to go further, which is why it makes a lot of sense to have two kinds of bank. We should have service banks—or retail banks, as the noble Lord, Lord Razzall, put it—so that the public can learn to trust more easily, and investment banks. If we cannot split the banks, perhaps we can at least insist on Chinese walls with different licences for different banking activities.

The other area where I wish the Minister would go further is with a transaction tax. I know that the IMF is studying this, but the justification for it is not difficult. The worrying fact for me is that the volume of financial transactions in the global economy is 73.5 times the global GDP. I am aware of the arguments for liquid markets, but do we really need £73.50 traded for every £1 of goods and services that are actually produced? Twenty years ago it was 15 times global GDP, and I thought that that was unnecessarily high. Is this not yet another example of dangerous leverage? Is it not yet another bubble waiting to burst? A tax would help to deflate it and maybe even dampen speculation. Would it harm long-term investment or lead to a mass exodus from the City of London and a so-called race to the bottom? The answer is no. I hope that, as part of their progressive policy agenda and risk reduction, the Government will be more supportive of a transaction levy.

A crisis brings both danger and opportunity. Hopefully, this is the best crisis that we will have for some time. The Government are right to give this priority and I hope that we shall be able to deal with it in the short parliamentary time available. But in the name of progressive politics, I say this to the Minister: please go further.

My Lords, I join other noble Lords in welcoming the maiden speeches of the noble Lords, Lord Sugar and Lord Martin, especially that of the noble Lord, Lord Martin, because he referred to the Bible rather more often than Members on these Benches usually feel that they have the freedom to do. We look forward to his further speeches—perhaps he will encourage us in the sources that we draw upon in the future.

The diocese of Chester has a long-standing link with the Solomon Islands. The wisdom of British rule in those islands is shown in the way in which many traditional aspects of the indigenous culture were sustained and encouraged. One involves the way in which land is held, usually on a custom basis—that is, the land is regarded as belonging to a certain family and is then allocated to members of the wider family or community to provide for their needs. In western terms, people do not own the land as such but have the custodianship of it on a life-tenure basis.

In the capital of the Solomons, Honiara, this older custom basis of holding land has given way to a concept of ownership, with land able to be sold from one person to another. This has led to disputes and violence as one system of landholding overlaps with another. On a visit there, a local bishop emphasised to me the importance in the wider Solomons of maintaining the traditional custom-based community ownership of land and said how much he feared for the traditional stability of community life if the western model were to be more widely introduced. I am not suggesting that our traditional property-owning democracy is inferior to this alternative model, but it serves to remind us that there are different bases upon which a democratic society can choose to organise its economic life.

In this country, for many decades during peacetime, we have had a shifting emphasis between free market economics and state-regulated economics with varying degrees of state ownership. The period immediately after the Second World War saw a move towards nationalisation and state regulation on a scale that we find unfamiliar today. There was then a period under both Conservative and Labour Administrations where Governments broadly accepted the post-war status quo. The period since 1979, as we have been reminded, has seen a sharp reversal towards free market economics and an accompanying programme of privatisation. Since 1997, the free market model has largely been continued under new Labour but with a steady rise in overall public expenditure.

Over the past couple of years we have seen a financial earthquake, with the main causes being traced to an overreliance on unregulated free markets. It is understandable and welcome that the gracious Speech should contain proposals for greater regulation of financial markets, including greater consumer protection, and for a long-term framework for fiscal stability. The Fiscal Responsibility Bill attempts to respond to the problem of deficits, which seem to be slipping out of control. Real questions can be asked, as we have heard, about the appropriateness of this type of legislation. It reminds me of legislating that people shall be good, which, on the whole, does not succeed terribly well.

The underlying dilemma is that, as a country, we have aspired to European levels of public expenditure while also aspiring to North American levels of taxation. You cannot really have it both ways, with one economic foot in Europe and one in America. Perhaps that dilemma will never be fully resolved given the oscillations of the past 60 years or so, but unless we attempt to resolve that dilemma we are likely to yo-yo between different Governments pulling in different directions as the pendulum swings one way or the other. That in itself is bad for Britain and bad for business. When I hear businessmen speaking, above all they want stability in economic management so that they can make their investment decisions with a sense of long-term stability.

In our complex world, many decisions have to be taken with a horizon that stretches far beyond the five-year horizon of a given Government. That is even truer today as our world becomes more complex and more globalised. The delay in facing the need for the replacement of our nuclear plant is a case in point. Successive Governments with short-term horizons put off addressing an obvious long-term issue which should have been faced. Now we are trying to play catch-up.

To take a different area, I think that later generations will look back with some horror on the way in which my generation has essentially squandered the benefits of North Sea oil and gas, spent in one generation and, frankly, with precious little nationally to show for it. I have always believed that a substantial proportion of this one-off windfall tax revenue should have been set aside in a long-term national investment fund, rather as the Norwegians have done. But that would have required successive Governments to have reduced their immediate spending power, which would hardly have made them popular. Given the tension between the desire for European levels of public spending and American levels of taxation, that has not been an attractive prospect for any Government. Unless we can resolve that in some way, we shall just go on yo-yoing, with the pendulum swinging, in the years to come.

I conclude with a different point. We are now set for a new balance between free market practices and regulation, which I welcome. Markets never exist in a pure state, in a socio-economic vacuum. They are necessarily shaped by the political forces of society. My fear is that the new regulation that is promised is too negative in tone, in terms of limiting bonuses, of limiting risk and so forth. Up to a point, perhaps that is where the immediate need is, but we should look further to the positive goals that society can properly set and beyond the immediate horizons of economics. For example, I would welcome a clearer legal and financial framework that sought more directly to counter the tendency of free market policies to produce exaggerated winners and losers.

In recent decades, we have seen a sharp growth in financial inequality in our country, but with negative social effects, which are ever more clearly documented in obesity, teenage pregnancy, underachievement, school crime and much more. It has sometimes been said that inequality is the price that has to be paid for economic efficiency. While there may be some truth in this, it now seems clear that the drive to subject all areas of our lives to market competition risks eroding the fabric of the social life and social institutions of our society, with the kickback that that ends up costing more and weakening the economy in the process.

For an economist, the opposite of competition is monopoly, but beyond both of these is a need to foster a sense of community solidarity and common values—a social co-operation that economics seeks to serve and not dominate. I began by referring to the way in which South Sea islanders attempt to maintain their wisdom of the ages in the face of the destabilising encroachment of unregulated market economics. Beyond the Bills in this short Session, where is our wisdom of the ages to be found?

My Lords, I start by declaring a quarter century of interest. For that time, I have been the director of the Warwick Manufacturing Group, which uses research, technology and knowledge transfer to support British and international industry.

The gracious Speech makes it clear that securing sustainable growth is the main challenge facing the nation. My group’s experience of recent rapid growth in China and India underlines the importance of industry and manufacturing to wealth creation. The speed of expansion there has been relentless. In Britain, however, the past three decades of growth in financial services meant that those of us who championed manufacturing were voices in the wilderness.

It often takes a crisis, such as the financial tsunami that has hit across the world, for views to change. It has become clear that we need a different route to prosperity. I am delighted that there is now a convergence of views that we need to support manufacturing and encourage industrial exports. It is especially refreshing that my noble friend the Secretary of State has focused government thinking on manufacturing with his concept of industrial activism. My noble friend is making the right statements and I only hope that he is in place long enough to secure this as his legacy.

The Government’s principles are right, but every engineer knows that achieving sustainable growth is not as easy as it looks. It will take time, effort and sustained policies. Every nation aims to be an innovation-led economy. The reality is that Britain must make careful choices to get the most out of our scientific research.

Let us take low-carbon vehicles. This year, China announced that it would invest $3.5 billion in low-carbon vehicle research. If the UK were completely to focus on electric vehicles, we would put severe pressure on our power generation industry. Therefore, I applaud the Secretary of State for announcing pilots in many cities to see the consequences of electric vehicles. I hope that they are successful and that we shall soon see the results of his activism.

As Britain has expertise in developing low-carbon conventional vehicles, including advanced hybrids, where should we fund research to get the best results for our industry, while maintaining and creating employment? These are difficult questions, so it is no surprise that this House has heard many debates on how British industry might benefit from our undoubted excellence in research, going right back to the formation of DSIR during the First World War. The debates on manufacturing and science and technology are often cross-party. The Callaghan Government commissioned the Finniston report, which proposed a greater focus on engineering in universities. The report was implemented by a Conservative Government. A decade later, the White Paper of the noble Lord, Lord Waldegrave, Realising Our Potential, was widely welcomed. This report cited wealth creation as a vital force for science and technology research. Unfortunately, it was not supported with funds.

Under this Government, we have seen the doubling of science research funding, including the launch of the Technology Strategy Board, which I advocated for many years. Unfortunately, over time, the role of wealth creation has received little more than lip service. These changes are encouraging entrepreneurship. We can see it in the increasing number of successful UK research companies. Last year, Britain had 923 spin-out companies that had been in business for more than three years, an increase of a third. Yet this is not enough. British scientific history is littered with breakthroughs made in our universities but made profitable abroad. To prevent that from happening again, we must ensure that our research funding system really drives forward applied research.

The Higher Ambitions framework makes it clear that the Government see impact as a key part of the next research excellence framework. As I said in this House before the launch of the research excellence framework, it is vital that we measure real impacts. The Government must keep their nerve, no matter how many petitions are launched on websites. The danger is that impact assessment turns into a box-ticking exercise, not a measure of the ability to create jobs, attract private investment or develop new products and processes. To avoid this, we must give equal status to real-world impact, at least in the engineering research excellence framework. This is appropriate because engineering is all about the application of principles to reality.

If most scientific research is about improving a theory, engineering research should be about improving the world. The Engineering and Physical Sciences Research Council has supported much outstanding work. Now the challenge is to get that knowledge out into the world. We must make it easier for universities and companies to work together to create wealth through technology. A vital step is to increase the research budget for industrial and academic collaboration in the Technology Strategy Board. The research councils get nearly £3 billion a year from the Government, but there is scope for much more collaboration between the research councils and the Technology Strategy Board. It is not asking for extra money; it is about the reallocation of funds. The £120 million of programmes proposed in the spending review is not enough.

We must also learn how to act quickly. We are a nation of bureaucrats, committees, boards and councils. The problem with such institutions is that they can move slowly and, in operating by consensus, endorse the lowest common denominator. Such a system also means that one or two key figures can gain huge power over research and technology funding. This process can lead to decisions that reflect particular views, not the wider interest. When dealing with outside groups, this becomes a real obstacle to building partnerships. Of course, it takes two to tango. Business must also play a part. British industry does too little research and development. That will take a long time to improve. Universities must play a central role in that change. To attract business partners, we need a well funded system with a grant process that is straightforward, not a more complex version of a Kafka novel.

We scientists and engineers were fortunate to receive a decade of increased funding. We now need to put the application of that research at the heart of our industrial strategy. Growth requires world-class products and processes. We have a world-class research infrastructure and we must now make the most of it. If we do, the prospects for long-term growth will be bright.

I shall focus on just a fraction of the responsibilities carried with such brio by the Lord President and say a word or two about higher education and research. I thought that the noble Lord, Lord Bilimoria, made some very important remarks about that subject in relation to national competitiveness. I declare an interest in that I was, for 10 years until this summer, the chancellor of Newcastle University, and I am still the chancellor of Oxford University, where my term of office expires at the same time as I do.

I missed the Statement that the Lord President made on higher education at the beginning of the month. I was in New Zealand, lecturing at universities there. However, I read his statement in the Official Report and was grateful for the extensive way in which he quoted a speech that I had made on higher education at an earlier date in this House. Apart from his usual charity, why did he quote from my speech? I suspect that it was because I pointed out how much higher education had been underfunded in the 1980s. I painted a fairly bleak picture of the consequences of that underfunding. It is perhaps another example of how in this House we move such a distance beyond political ambition. Presumably, the same is conceivably true of the Lord President, who is very unfairly compared from time to time with Pompey, the great warden of land and sea.

Just assuming for a moment that he is prepared to put politics on one side and consider this subject with a degree of honesty, I shall concede at the outset that higher education today is better funded than it was in the 1980s and 1990s. However, nobody should pretend that Labour Ministers have been tooth fairies. If we compare funding in this country for higher education to that in most of the rest of the OECD, we find that we do very badly. We fund higher education with a smaller proportion of GDP than the average of OECD countries. We provide less money per student and less total spending. We spend 1.3 per cent of our GDP on higher education, while the United States spends 2.9 per cent. We spend less on services for students, including research activity, than most of our comparators—Australia, the United States, the Nordic countries and Germany. So it is not a very cheerful picture.

We can see some of the consequences of that in the report done recently for the Higher Education Funding Council for England—HEFCE—on sustainability. The report by JM Consulting and the Financial Sustainability Strategy Group suggested that our universities are increasingly finding it difficult to sustain their activity. It pointed out that there are particular threats in three aspects of the student learning experience—the accessibility of staff to students; the physical infrastructure for teaching and learning; and student support services. It worried that the structure was unsustainable and pointed out how higher education was increasingly trying to find coping strategies to manage its way through. That is the background against which higher education faces the next few years.

I do not think that there is really any doubt that, whoever is in government in the next few years, and whatever people say about the relationship between public spending and growth, there will have to be substantial cuts to reduce our historically high fiscal deficit and that that will have an effect on public spending programmes, including higher education. Already the humanities and social sciences are suffering very considerably. I accept that the Lord President has found some more money for so-called STEM—for science, technology, engineering and management—but, increasingly, it looks as though the view of HEFCE and the Government is that we should privatise the humanities and social sciences and regard them as a cost, not an investment. The Lord President and I are both beneficiaries of an education in humanities and social sciences, but the situation at present in those areas is extremely difficult.

Looking ahead, the Lord President will know that while the CBI, for example, has argued that there should be quick and substantial reductions in public spending to reduce the deficit, it is also argued that neither the present Government nor a future Government should make heavy cuts in spending on higher education and research because of their importance to the competitiveness of the country. He will also know that President Obama has, as part of his fiscal stimulus package, put an extra $1 billion into higher education. I hope that, whoever wins the next election, we can develop a consensus across the House that higher education as a trigger for future competitiveness should be looked after rather better in the aftermath of this recession than, perhaps, it was looked after in the 1980s and 1990s.

I make one other brief point. The vice-chancellor of Cambridge has in the last year made two remarkable speeches on the importance of diversity of provision in higher education. She has argued passionately that perhaps we need to look more fundamentally at higher education to make the best use of the investment that we can afford, to provide the best experience for her students, and to focus spending on research in the most effective ways. She has in particular drawn attention to the sort of lessons that could be learned from the remodelling of the higher education system in California in the 1960s by Clark Kerr. A review of tuition fees has now been parked with a committee—and I think both main political parties and conceivably even the Liberal Democrats are rather grateful for that, although I cannot remember whether they are in favour of tuition fees these days or against them; perhaps we will learn that later in the debate. I hope that as well as considering the income stream from those fees in the future, we can have a more fundamental look at higher education to ensure that we can still, at the end of the next Parliament, say that we have the second-best higher education system in the world.

My Lords, as the son and brother of distinguished academics, I start by saying that I totally agree with the arguments put forward by the noble Lord, Lord Patten of Barnes. That, of course, is not what I have come to speak about today, which is a subject that was appropriate for debate in your Lordships' House last Monday and to a certain extent was debated, but which is even more appropriate for debate today. That subject is the Bribery Bill. The department responsible for the Bill is, of course, the Ministry of Justice, but the Bill’s impact is almost entirely on the business community—and that is why it is relevant to today’s debate.

I declare an interest as an ordinary, not official, member of Transparency International UK, the UK branch of the leading international NGO on the subject of corruption. It is a terrible disease which literally kills thousands of people every year. It has a devastating effect on developing countries, particularly in Africa and parts of Asia. In far too many countries, money which should have improved the living standards of the ordinary people has found its way into the foreign bank accounts of the countries’ leaders and their associates. Surely it is the duty of government and business in the developed countries to eradicate bribery in their dealings with government and business in less fortunate countries.

There is, of course, bribery within the United Kingdom; we need to keep a watchful eye on it, but it is not, these days, a very serious matter. However, the UK has not, up till now, played anything like its proper part in preventing businesses based in the United Kingdom committing bribery abroad. United Kingdom laws are far behind the times. The main laws against corruption were enacted in 1889, 1906 and 1916, and are still in force. They were concerned with corruption in the UK, not abroad. The Anti-Terrorism, Crime and Security Act 2001 extended the earlier Acts to bribes paid abroad by United Kingdom citizens and companies. But except for one case only, which happened earlier this year, no United Kingdom company has been convicted of corruption abroad.

We are far behind the standards set by other countries. We have nothing like the USA’s Foreign Corrupt Practices Act of 1977 which has been extremely effective in controlling corruption. We have failed to bring our own legislation into line with the requirements of the OECD’s convention on bribery, to which we are a party. Evidence given to the Joint Committee by witnesses from the OECD—I was a member of the Joint Committee which considered the Bill—was highly critical of the United Kingdom’s past failure to improve its legislation on bribery.

This Bill is long overdue. The process of reforming the law began with the Law Commission, which produced a consultation paper in 1997, followed by a report in 1998. The Government, five years later, produced a draft Bill which was referred to a Joint Committee of both Houses for pre-legislative scrutiny. That Joint Committee, which was chaired by the late Lord Slynn, was very critical of the draft Bill and called for its revision. Reform then went into limbo for another four years until 2007 when the Law Commission, at the request of the Government, started consultations again. The Law Commission produced a consultation paper in November 2007, followed by a report and a draft Bill in October 2008. The Government produced a modified version of the Law Commission’s draft. A Joint Committee of both Houses was set up in May of this year to report on the Government’s draft Bill of which, as I have said, I was a member.

It was clear from the beginning that the Bill which was put forward by the Government earlier this year was a great improvement on the Bill which had been rejected in 2003, which was seriously defective. There were several issues, however, which the committee debated and on which amendments were considered. At the end of the first meeting of the Joint Committee, I was convinced that it could never come to agreement on what changes to the Bill should be proposed. But I was wrong: the committee’s final report was unanimous. I will not go into the detail, because that is a matter for the Bill’s Second Reading or subsequent stages. The Bill will have its Second Reading here on 9 December. However, I can say that the Government accepted most of the committee’s recommendations, including what I believe was easily the most important—the removal of a clause in the Government’s draft which would have made it nearly impossible to achieve a successful prosecution of companies even if they had not taken proper steps to prevent bribery committed by people acting on the companies’ behalf. That defective clause was replaced by the present Clause 7, which will make enforcement against those who have failed to take proper steps to prevent bribery a good deal easier.

This Bill is very important. It is a vital step against corruption and the terrible consequences for poor countries. The Bill has not attracted much attention in the media, but that is not a bad thing, and it may well be because it is not seen as controversial. I would be happy to support the Bill as it now stands, taking in the Government’s new proposals. I am not saying that it is incapable of being improved, but I hope that we will not get involved in lengthy debates on amendments.

This is a real step forward. Not all the Government’s Bills in this Session could or should be enacted, but this one plainly should.

My Lords, given the breadth of the issues the Minister is being required to address and the length of the speakers list, I will restrict myself to focusing on the Digital Economy Bill and, within that, its possible effects, intended and unintended, on the future of public service broadcasting.

At the outset, I should declare an interest as deputy chairman of Channel 4, one of the likely beneficiaries of the proposed legislation, and also as president of the Film Distributors’ Association, which has argued strongly for effective measures to curb the theft of commercially financed intellectual property.

It seems appropriate at this point to commend my noble friend Lord Carter of Barnes, who is not with us this evening, for his work on the Digital Britain report, the recommendations of which paved the way for the legislation that will reach this House next week. His report offered a powerful and incisive analysis of the potential of the digital economy, and set out what I felt to be a clear direction of travel, which is now being acted upon.

As the former chairman of the joint scrutiny committee for the 2002 Communications Bill, I am particularly pleased that the Government are now bringing forward legislation which refreshes and updates a number of Ofcom’s duties. In particular, I point to the proposal in the Bill that Ofcom must have regard to the need,

“to promote appropriate levels of investment in public service media content”.

I am keenly aware that Ofcom’s own research shows that there has been a decline in overall levels of public service content over the past few years as audiences have fragmented and advertising revenues, in particular, have declined. Noble Lords from all sides of the House argued successfully during the passage of the 2002 Bill that Ofcom should have a duty towards citizens, not just consumers. For that reason, I am especially pleased that the new draft Bill explicitly recognises that Ofcom should maintain a close watching brief on levels of investment in public service content.

While speaking of Ofcom, there is one important point which should not be overlooked. That is the fact that despite a lot of self-serving huffing and puffing from a variety of quarters, Ofcom is, in itself, a real success story. I travel a great deal and I can say quite unequivocally that Ofcom is increasingly becoming the gold standard by which media and telecoms regulation is being judged around the world. Unfortunately, as with that other gold standard, the BBC, its role and importance to civil society are hopelessly underappreciated by commentators who should, and in many cases do, know better. Unfortunately, as the House knows to its cost, the current media fashion is never to let the facts, let alone the broad truth, get in the way of a good, preferably controversial story.

Plurality must continue to be at the heart of our broadcasting and media industries in a digital world. And a plurality of information sources is essential to maintaining a genuinely informed democracy. To achieve this, the output of the BBC needs to be complemented by a range of other providers of public service content; and in particular by a strong, well financed Channel 4 that is able to continue to play to its strengths by investing in news, film and in its growing commitment to online educational content. So I am particularly pleased that the updated remit in the Bill sets out in the clearest possible terms what is expected of us and sets us on a path to build on our traditional strengths and contribute to the ambitions for our shared digital figure as set out in the Government’s proposals.

The remarkable depth of creative talent in this country is both the cause and the consequence of the very high levels of investment that we make in original content. The Digital Economy Bill puts in place a framework which will help to ensure that these levels of investment remain appropriate to the needs of future audiences.

I also stress the continuing importance of news and current affairs in our remit because there continues to be a very strong case for a regulatory framework which provides for different sources of impartial news. The market alone, sadly, cannot be relied on to deliver this.

Were we to be foolish enough to undermine, let alone sacrifice, the twin pillars of plurality and impartiality, we could quickly find ourselves facing the British equivalent of what was brilliantly described by the journalist Tom Friedman writing in last Sunday’s New York Times as a,

“TV culture [which] encourages shouting and segregating people into their own political echo chambers”.

Since much of our press have opted increasingly to resemble that political echo chamber, not least in their collective and entirely self-serving attacks on public service broadcasters, and by extension the civic values that underpin them, there is a stronger than ever need for plurality and impartiality to be embedded in our broadcasting ecology.

During the passage of the Bill, I hope to attract support from all sides of the House in exploring means by which our traditional commitment to impartiality in broadcast newsgathering can be further safeguarded in legislation. I am personally concerned that at present it is far too narrowly defined. My intention is to achieve a legislative environment in which it would require significant changes in legislation in order to permit the type of news service best exemplified by Fox News in the United States. In my judgment, that is not a direction any nation wishing to embed the values of plural democracy can ever afford even to contemplate.

I also add a broad welcome to the proposals that throw a spanner in the proliferation of online piracy. As a rights-holder, I have every interest in seeing piracy dealt with firmly, effectively and proportionately. It is my hope that the increasing sophistication of digital technologies can be used to help in the fight against piracy, but clearly there is a need for a legislative backstop.

Finally, I am conscious that the Bill is called the Digital Economy Bill. I am a passionate believer in the power of digital technologies to transform not just our economy but the social and cultural fabric of this nation and indeed the way in which we teach and learn. I hope that in the debates surrounding the Bill we will not lose sight of the fact that its impact is likely to extend far beyond purely economic concerns. In fact, it has the potential to help the positive transformation of just about every aspect of our lives in the early 21st century.

My Lords, I will confine my remarks to questions about bank regulation and supervision because the financial crisis has undercut in a very severe way conventional wisdom about accountability and responsibility in banks. There were two strands to that conventional wisdom. The first was that competition coupled with the threat of bankruptcy would pressure banks into serving the needs of their customers. Otherwise, they would be likely to go bankrupt because customers would migrate elsewhere and the prospect of bankruptcy would require them to behave responsibly. The second strand was that the role of shareholders was key to making the boards of banks responsible. If boards could be made responsible, those boards in turn would have a strong incentive to make their managers responsible.

However, the crisis has drastically undermined both of those strands of conventional wisdom. In terms of bankruptcy, we have had to face the “too big to fail” syndrome rather graphically illustrated by the loan revealed yesterday. First, if banks are too big to fail, the bankruptcy constraint is weakened as one of the market-based forms of discipline. Secondly, and perhaps even more importantly, the global trade in securities has implicated one bank deeply in the affairs of another so that the effects of the bankruptcy of one bank cannot be insulated and detached from its effects around the system in the other banks with which it has dealings and relations in terms of trading in securities and so forth. Banks at dire risk of bankruptcy have a ripple effect on the others, as Lehman Brothers showed last year. The competition/bankruptcy constraint has been weakened by the financial crisis.

It could be argued that the second strand then comes in as the way of making banks more responsible—namely, the role of shareholders. The shareholders should, as my noble friend Lord Myners has been arguing—and I applaud him for that—exercise more power over the boards of banks. They should be more assertive and take their responsibilities as owners more seriously. I agree with all of that. Nevertheless, there are limitations and those limitations have been exacerbated by the current crisis. First, there is an asymmetry of motivation between the shareholders and the board of a bank. The board of a bank and indeed the managers within a bank have a much stronger incentive to want not to be regulated and not to be made responsible than the shareholders have to make them responsible. That is the asymmetry of motivation, which is a difficult thing to overcome. There is a strong incentive for the board and managers to evade accountability. There is no such strong incentive for shareholders to assert the need for accountability. That needs to be changed and no doubt there are ways in which it could be changed.

There is also an asymmetry of information, which has become important in the light of the financial crisis. It is clear that the boards of banks, never mind the shareholders, usually had a hazy idea of what their managers were getting up to. They did not understand many of the financial products that the bank owned and was investing in. If the boards of banks have an insecure grasp of the products that the banks own and do not understand what they are doing, how are shareholders to exercise their power of making the banks accountable? The financial crisis has revealed the problem involved in asserting some kind of accountability over institutions that have exotic assets. That has to be tackled, too.

My noble friend Lord Myners made a point in the past few days that the difficulty of emphasising the role of shareholders has become exacerbated by the fact that shareholding can take place for a very short period of time—seconds, apparently, on the basis of what he was saying last week. You can be in and out of shareholding in a firm in the space of just a few seconds. If that trading becomes more generalised, how can shareholders be expected to exercise some form or control of banks?

My noble friend Lord Haskel raised the issue of utility versus casino banking, and I am rather sympathetic to that. The week before last, the noble Lord, Lord Skidelsky, dropped a hint in the New Statesman about the need to distinguish between risk and uncertainty. Not being an economist, I am not sure how economists draw that distinction, but in philosophy, which is my subject, a risk is something that you can give some kind of numerical value to. It has some kind of root in a market and so forth. You can calculate and model risk. You cannot do that with uncertainty. If banks are trading not only in risks but in uncertainty in the casino side of what they do, the rational response to uncertainty as opposed to risk is to rank outcomes by the worst possible, and choose the best of the worst outcomes. If you followed that through in terms of institutional design, you would end up separating casino banking from utility banking, because it would protect the best worst outcome in a way that the mixture of the two banks cannot.

What we must not do as a result of all this is expect any change in attitude on the part of bankers. Bankers, like the rest of us, tend to pursue their own rational self-interest. Some kind of exhortation to bankers to be more virtuous may work in the short term, but will not work in the long term. We need to re-read David Hume and treat everyone as a potential knave in business and devise subtle institutions to avoid the consequences of that.

My Lords, no one can complain that this Queen’s Speech is a bit thin, given the inevitably short nature of the Session that it opened. However, I thought it worrying that no mention was made of small businesses in the gracious Speech, and very little in the Minister’s speech, although he referred to them briefly at the end.

I have worried about small businesses all my political life and I remain a member of the Small Business Bureau and the Genesis Initiative, a cross-party umbrella which draws together in discussion the representative organisations, covering about 1 million small businesses and employing about 3 million in practically every sector of the economy. I am glad that the noble Lord, Lord Sugar, is advising the Government on small business because, as he told us, small businesses are suffering in the recession and we will need them when the economy turns up. Their problems will change but they will still have serious problems. Unless we look out for them, we will lose too many, with a consequent loss of jobs, initiative and flexibility in the economy.

Maybe the Pre-Budget Report in a day or two’s time will bring some tax changes to help, but in the gracious Speech I would have liked to hear that the Government were taking seriously the problem of overregulation. A complete review of government regulations on business is necessary. The Government have sporadically paid attention to better regulation and taken some initiatives in the past, but they should do so again. Regulations are very like weeds in a garden. If you turn your back, they flourish in no time and throttle the plants that you want to grow.

We all see here the statutory instruments pouring through the system. Of course, many of those are regulations that affect businesses of one sort or another. Here we have the hard-working Merits Committee—reappointed again yesterday—which helps us to keep in touch with them and sort them out. Imagine trying to do it as a one-man business or small business when they all potentially affect you. Last year there were well over 1,000 statutory instruments—slightly fewer than in the previous year but nevertheless a huge number. In passing, I hope that there will be an opportunity soon to debate the Merits Committee’s excellent report on post-implementation review of statutory instruments. It found that over half the statutory instruments had no provision for follow-up consideration to see if the regulations were working and to assess their impact after the event. Of those that theoretically had follow-up provision, only half had been followed up.

It is very difficult to see how a business, without the guidance that we have, can keep up with more than a fraction of the new regulations which may apply to them. The European Commission issues each year, on average, 200 new regulations and directives to do with food hygiene and related matters, each of which potentially applies to food businesses. That is roughly one new food regulation every normal working day. Of course, shops are open seven days a week, so they get less than one a day in that sense. Two hundred new regulations just in that one field is an enormous number for small businesses to have to deal with. On an earlier day in this debate the noble and learned Lord, Lord Woolf, complained about the sheer volume of criminal law that has poured out of the Home Office and the Ministry of Justice, making it difficult for the judiciary to keep up. Small firms would know exactly what he was talking about.

I was told recently that there are now 436 separate enforcement agencies in Britain. That is an enormous number. I do not know whether that is the correct number, but, if it is not, I would be grateful if the Minister would tell us what it is. Most of those are chasing businesses, as well as other people. That is why it is time for another vigorous bout of regulation-weeding by the Government. If we can release the energy that is being spent on complying with ever more regulations, it can be used in building businesses and jobs.

I also want to plead for a change in public sector purchasing practices to encourage buying from small businesses. When, many years ago, I was the Small Firms Minister, we had a programme of encouraging public sector purchasing officers across Whitehall and the public sector to look at small businesses for value for money. It was not so as to pay more but to be alert to the possibility that, while it may well be easier to buy from one massive supplier, value for money can often be found by shopping around, particularly in small businesses. These days I am no longer in a position to make that point to government purchasing officers, but I make it to my wife occasionally when she does all the shopping in the supermarket, rather than the smaller shops. That is easier, too, but it is the same point. Government purchasing officers are now actively discouraged from buying from small businesses by the rules and guidance on how to do their job. That is most damaging to small businesses and I do not believe that it is good for getting value for taxpayers’ money either.

Some small businesses grow into large businesses. The presence of the noble Lord, Lord Sugar, here today reminds us of that fact. Some small businesses fill niches. They are often highly innovative. They provide choice for customers and jobs for 13 million of our fellow citizens. We must look after them as well as the banks.

My Lords, like many others I welcome the inclusion in the gracious Speech of the Government’s Digital Economy Bill, to be introduced in this House next week. Compared with the scope and scale of the Digital Britain White Paper which preceded it, it is perhaps relatively modest in its aspirations but it contains a number of significant provisions. Some have already been mentioned by other noble Lords but not, I think, one in particular—the provision in Clause 40 for the classification of video games. It draws on Professor Tanya Byron’s very important work on safer children in a digital world. I am very pleased to see that clause included in the Bill. I hope it will encounter no difficulties as the Bill progresses.

In particular, I congratulate the Government on beginning the difficult and complex business of tackling the growing problem of online copyright infringement, which has been mentioned by several noble Lords. There is little doubt that this is causing significant damage to the creative economy and some effort to bring it under control is essential. The proposed new obligations on internet service providers are clearly central to successful implementation. However, probably like some others, I have a residual worry about how the issues of privacy and data protection will be addressed and what the mechanisms will be for ensuring that the new legislation is fairly and proportionately applied. I hope the Minister can make some observations on that when he replies.

The two matters that I want to raise both relate to the proposed new obligations to be placed on Ofcom by Clause 1. These have already been touched on with great eloquence by my noble friend Lord Puttnam, who I am sorry to see is not in his place but who I know had an urgent appointment elsewhere. These two obligations, as he said, are to promote appropriate levels of investment in public-service media content, and to promote appropriate levels of investment in electronic communications networks.

I am, I learnt today, once again a member of your Lordships’ Select Committee on Communications, which will imminently produce its report on UK-originated content in film and television. I must not—indeed, I cannot—pre-empt what the report might recommend, but the committee has received a vast amount of evidence pointing to the pressures on providers of UK public-service content. The Bill focuses on news provision but other types of programming, notably drama and material produced for children, are also acutely vulnerable. The UK has an exceptionally good story to tell about the creation of high-quality content in both these areas. I have spoken before about the extraordinary archive of excellent television drama, generated both by the BBC and the commercial television companies that has been built up over the past 50 years. However, I have also wondered whether my children and grandchildren will have as much to look back on when the next 50 years have passed. The cultural impact of television drama is enormous, whether it is viewed on a television screen or online. Protecting the output of original UK drama for television, including that made for children, should be high on Ofcom’s list of priorities as it takes on its new obligations.

I also very much agreed with what my noble friend Lord Puttnam said about the future of Channel 4 as a public service broadcaster, and how important it is that that be safeguarded, and I am pleased to see attention devoted to this in the Bill. I wonder how many of your Lordships were, like me, up late last night watching the first episode of a new Channel 4 drama, “Cast Offs”, in which virtually all the main actors were disabled. It was brilliant, funny, touching and completely unsentimental. I venture to suggest that it is something that only Channel 4 would have made. Channel 4 is a crucial player in the provision of truly innovative public service content, and makes a major contribution to the UK film industry, but in a tough environment its way forward is still not clear. I hope that Ofcom and the Government will do everything in their power to promote an outcome that will ensure a healthy, diverse public service landscape for the next generation of citizens and consumers.

As regards Ofcom’s new obligation,

“to promote appropriate levels of investment in electronic communications”,

“appropriate” can be a slippery word, leaving much to the judgment of the regulator, with the possibility of consequences not intended by Parliament. We have one example already before us in the current plight of the UK’s Programme-Making and Special Events sector, PMSE. This sector is largely defined by the technologies it uses and the activities that rely on them. Those technologies are wireless microphones, commonly known as radio mikes. The activities for which they are essential include musical theatre, news gathering, live music, film-making, TV production, sports events, concerts, community events at all scales and, indeed, party conferences. Justified, in its own view, by duties enshrined in the Communications Act 2003, Ofcom has decided to clear and sell the 15 channels relied on by the PMSE sector, with auction revenues going to the Government. As a consequence, the vast majority of the industry’s stock of radio mikes will become unusable. If the activities and events I mentioned are to continue even at current levels, all affected equipment will need to be replaced in one go, and at enormous cost to those who own and supply it, many of whom will not have the resources to make the necessary new investment. Nor can the sector plan ahead, as it has not been told which alternative channels it will be offered. All productions that depend on the availability of this equipment will therefore be under threat.

I understand that the Government are committed to offering limited compensation to those who are being cleared from one of the 15 bands due to be sold. This leaves those to be evicted from the other 14 entitled to nothing. This cannot be right. The PMSE sector is running an excellent campaign on this issue, Save Our Sound, and I am grateful to it for briefing me. It aims to persuade the Government that none of those whose equipment will be rendered redundant should suffer financially as a consequence. I sympathise with this aim and ask my noble friend whether he can assure me that the Government will act promptly to mitigate the damaging consequences of Ofcom’s interpretation of its current duties under the Communications Act by providing compensation to all those affected, not just to some. This is not a small matter. If it is not resolved, we shall all notice the difference whether we are theatre or concert-goers, sports fans or involved in events in our local communities, even in our churches. Perhaps the Government might learn from this problem and, looking ahead, beware of giving regulators broad powers couched in vague language.

I am a slightly reluctant citizen of Digital Britain; on good days I delight in its diversity and on bad days I long for the information superhighway to be dug up. I am a realist, however; I know that I and everyone else must engage with what a digital future has to offer and I commend the Government for taking steps to help our economy to make the best of it.

My Lords, while the business environment is greatly different to that which prevailed 12 months ago, I strongly suggest that the green shoots that have been described by the Government as sprouting everywhere are still very green, very small, and, indeed, many are in great danger of disappearing without the urgent application of strong economic fertiliser.

Small and medium enterprises, often rightly described as the backbone of the economy, report this month, through surveys commissioned by the British Chambers of Commerce, that 33 per cent of their number found that accessing finance had been more difficult over the past three months—a deterioration on the 20 per cent that had reported this condition in June.

Despite some £200 billion injected into the financial system to boost lending, this does not appear to have improved the financial position of the SME sector. The number of companies stating that the situation had improved fell from 6 per cent to 3 per cent measured over the same period. It would appear that the huge volumes injected into the system through quantitative easing are not reaching small and medium-sized businesses. I remind your Lordships that total employment in the SME sector is 13.7 million, representing some 45 per cent of our total workforce. Many of these employers are finely balanced between tipping one way or the other. I suggest that the introduction of a Fiscal Responsibility Bill will not secure and sustain the future of these businesses which are so vital to our economic well-being. A better course, for example, would be to instigate immediate action arising out of the Rowlands review published earlier this week, and “welcomed” by the Government. Action must quickly follow “welcome”, otherwise it will be long-grassed, in a similar fashion, perhaps, to what may be happening to the report of the Select Committee of your Lordships' House on the Barnett formula.

Back to the Rowlands report, however, entitled Provision of Growth Capital to UK SMEs. This has been welcomed by the noble Lord, Lord Mandelson, the First Secretary of State. The report highlights in particular the problems in accessing growth capital between the levels of £2 million and £10 million, the former being the upper limit of public/private provision while the latter is the minimum level which can be funded by private equity. Proposals are basically for a mezzanine financing solution where funding can, at a later stage, be converted into equity. I understand that Mr Rowlands personally believes that a first fund needs to be in the order of magnitude of some £l billion. The situation of many good SMEs is perilous, so if this initiative is going to be implemented it should be done with expedition.

Far from leading the world out of recession, we are lagging the world. Quantitative easing is, of course, part of a solution, although with potentially dangerous effects in the mid to long-term, but as a measure alone it is no substitute for focused, clearly targeted action to close a much identified gap.

Last week, a German newspaper commended Chancellor Merkel for taking courageous decisions at the start of her second term. Faced with similar problems of burgeoning public debt, she has chosen to kick-start the German economy by aggressive tax cuts, leaving the deficit aside for a while. The newspaper states:

“Seldom has a German leader shown such chutzpah”.

Most of your Lordships will have received last week a top 10 wish list from the chairman of the Federation of Small Businesses in connection with the Pre-Budget Report, in which the FSB concentrates largely on employment and includes suggestions or requests for delaying the VAT rise, not increasing national insurance contributions and not increasing corporation tax, as proposed for April 2010.

When he opened the debate, I noted that the noble Lord, Lord Mandelson, suggested strongly that there was great danger in prematurely withdrawing fiscal stimuli, some of which he listed and is clearly contained in the chairman of the FSB’s list. It also contains a plea for regulatory reform and review for a reduction in the current administrative burden, by creating a regulatory environment to encourage innovation and enterprise. The noble Lord, Lord Mandelson, would appear to agree with that, so why do the Government not take heed?

Should not this Government, with their strong European commitments and claims of leadership, understand and even consider carefully Chancellor Merkel’s measure? Such a policy would not only reinforce the SME sector, but encourage all UK wealth-creation activities to redouble their efforts to produce the levels of economic growth that are so desperately needed.

My Lords, I shall take as the basis of my contribution what the gracious Speech said. It stated:

“As economic recovery is established, my Government will reduce the budget deficit and ensure that national debt is on a sustainable path. Legislation will be brought forward to halve the deficit”.

It is important to read those words carefully. The first phrase,

“As economic recovery is established”,

is important because, as the noble Lord, Lord Skidelsky, said in his speech, which was brilliant as usual, we cannot prematurely stop the recovery being established. The problem with economics is not just that you are conducting policy while looking in the rear-view mirror; the problem is that a rear-view mirror does not actually exist. We do not know not only what the future will bring but what the past was like, because we do not know whether, in the third quarter of 2009, output has reduced by 0.4 per cent. Caution is very much to be exercised, therefore, because we are not yet out of the woods.

There is not only a problem of establishing the recovery—and I think that the Government have done many things that will establish a recovery—but we will have to be sure that we can some day catch up after the permanent loss of output caused by the recession. There is a lot of talk about going for growth, this way or that way, but I urge caution in two areas. First, we should be sure that the recovery is established. The risks of inflation are less likely than the risks of deflation. Secondly, sooner or later we have to give a signal, when the time comes, that we will establish a sustainable path on which to reduce the deficit.

I remind the party opposite that when they were in a similar situation in 1992, the budget deficit was £24 billion. The noble Lord, Lord Lamont, was the Chancellor of the Exchequer. I was sitting in the Peers Gallery with Lord Cockfield when the Chancellor proposed that the budget deficit should be enhanced to £26 billion. I remember that Lord Cockfield sighed and shook his head. But that was the correct situation at the time. The Conservatives should also remember that in the 1990s, after the decision to reduce it, the deficit increased. The party opposite increased it to an unsustainable ratio in relation to GDP, and the Labour Government reduced it. My right honourable friend the Prime Minister, then Chancellor of the Exchequer, made the largest repayment of debt in living memory. We have delivered 10 years—41 quarters—of sustained growth, which is a record for any UK Government.

However, when a recession occurs and the financial system does not function, you have to do drastic things, and we have done such things. I emphasise that the path that we lay down to reduce the deficit must be not only sustainable but credible. Credibility is a problem for every Government, because, given their powers, they are tempted to renege on their promises. In a democracy, the political pressures are always to spend more and tax less. Therefore, we have to find a way of making our deficit predictions and our timetable credible.

I have a suggestion. This Government divested themselves of the power to intervene on interest rates and entrusted the power to make such decisions to the Monetary Policy Committee of the Bank of England under a legislative framework. The problem with fiscal policy is that it is difficult to establish a superior authority outside Parliament that can place a check on the Government. I suggest, therefore, that since your Lordships’ House does not have a power to tax but is part of the legislature, it should set up a committee that would be similar to a fiscal responsibility body and be able to tell another place and the Chancellor whether what they are doing is consistent with legislation. The committee should also be able to stop future Governments misbehaving, which they are always tempted to do.

Along the way, we will have to put up taxes and cut spending. There is no other way. No one should believe that any tax-cutting miracle shown on any Laffer curve will generate sufficient revenue to tackle the deficit. If you do, you will undermine the market’s confidence in the credibility of your stance. I should also say that, from the point of view of equity, a number of spending items are unjust. My pet concern is tuition fees for undergraduates. Subsidy for undergraduate education has no justification whatever. I have said again and again that British students should pay what foreign students pay—£10,000. That is the only sustainable fee, and we should immediately adopt that. There is no reason why students in a rich country should be subsidised for receiving higher education. If there is money to spare, it should go to research, which is starved of money. As my noble friend Lord Bhattacharyya and the noble Lord, Lord Patten, said, we need good funding for research.

I shall stop there. There is a lot more to say, but I have said enough.

My Lords, I was pleased to hear the very good maiden speech of my fellow countryman, the noble Lord, Lord Martin. We have had several meetings. As chairman of the Clydesdale Bank, I was able to welcome him as the first Speaker of the House of Commons who had ever been a customer. I am pleased that he is here with us.

I suppose that, at the beginning of a speech such as this, it is good to congratulate the Government on something that they have done. I am pleased to do that. Their decision, after a long gestation period, to build new nuclear power stations is extremely responsible. They have faced down criticism of nuclear power, which I happen to believe is essential for keeping the lights of the United Kingdom burning and the factories with enough power to exist.

However, given that I come from north of the border, I am dismayed that the Government have not looked at the terms of the Scotland Act, which transferred to the Scottish Parliament powers over planning on matters such as power stations. This means that instead of being an exporter of power through the interconnector from Scotland to England, which is the case now, the reverse will happen, because apparently no new nuclear power stations are scheduled to be built in Scotland as a result of the Scottish nationalist Government’s views on nuclear power. This is wrong, and both the present Government and any future one should consider amending the Scotland Act to allow strategic industries such as nuclear power to come under the control of Westminster as opposed to a regional, devolved Parliament. The decision of the Scottish Government to remove any chance of nuclear power stations being built in Scotland, particularly to replace ageing ones like Torness in East Lothian, which has been very successful, is wrong. I do not see why those of us who live north of the border should be disadvantaged in this way, particularly when one considers how Scotland led the way on nuclear power at Dounreay and other places.

Have the Government any plans to reconsider the terms of the Scotland Act regarding strategic planning for nuclear power stations north of the border? It may be helpful to remind the House of a recent report from the respected Fraser of Allander Institute, which warned that Scotland was facing a deeper recession than the rest of the United Kingdom and will take longer to recover. It predicts that unemployment will be significantly higher than previously forecast and that the Scottish economy will grow by just 0.1 per cent next year. It is not too late—surely Westminster understands the need to encourage the building of a successful nuclear industry in Scotland. After all, jobs are scarce. New jobs and employment in Scotland would give the flagging economy a welcome boost.

I declare an interest as a director of a medium-sized firm manufacturing in Scotland. I welcome my party’s commitment to helping us to survive and flourish, hopefully by reducing corporation tax and certainly by not increasing national insurance contributions. Increasing taxes on small business stifles enterprise and employment. Fraser of Allander points to the fact that it will be another three years before Scottish economic output reaches pre-recession levels, partly because Scotland is more reliant than other parts of the United Kingdom on the public sector. Against that background, I maintain that those of us involved in the private sector must drive the recovery. The Scottish National Party Government must stop wasting time and money on a referendum Bill to break up the United Kingdom, thoughts of which destroy confidence—which, as my noble friend Lord Wakeham said, is so important at this time.

On the subject of Scotland, another issue has already been mentioned in this debate. An extremely good, unanimous report from your Lordships’ House on the Barnett formula was published on 17 July. It is a weighty document, and to have a unanimous report on this subject is a very good thing. In the run-up to a general election, something should be said by the Government and the Opposition about the Barnett formula. It is totally outdated. It was good at one time, but with changes in population and need these matters must be reviewed urgently.

I turn to my second subject, which no doubt the Government will not welcome me talking about—I got a pretty dusty answer on pensions last time I spoke in one of these debates. Offering final-salary benefits means serious cash commitments for a pension scheme. In a recession this means that companies feel that they are running into grave trouble because of the enormous burden that they have to face. The schemes were set up to provide members with a pension based on final salary, as opposed to the defined-contribution schemes that rely on the performance of the stock market. The threat of closure is a blow to private sector workers, many of whom are having to delay their retirement to earn the extra money needed to top up poorly performing schemes. I ask the Government: if this is happening in the private sector—and it is—what are they prepared to do about workers in the public sector who continue to enjoy gold-plated pensions? Recent figures suggest that town hall pensions cost council tax payers £300 each per year. I believe that local councils paid out £5.4 billion in pensions to retired council workers in the tax year ending 2009—almost double the £3.5 billion paid four years ago. Do the Government think that this is fair and reasonable to all workers? I do not and I would like to see action taken.

My Lords, I take this opportunity to champion our fifth largest industry, tourism. First, I declare a number of interests. I chair the Association of Leading Visitor Attractions, which has 42 members representing attractions that all have more than 1 million visitors per year: from the Blackpool pleasure beach to Westminster Abbey, from the Eden Project to the Tyne and Wear Museums, from the National Portrait Gallery to Chester Zoo and from Historic Scotland to the National Museums and Galleries of Wales. In my capacity as chairman of ALVA, I hosted the noble Lord, Lord Mandelson, when he was in another role some years ago. I am also the chairman of Wellington Market Company, a quoted company operating 25 traditional markets across the UK that have a substantial tourist footfall. I have a number of shareholdings in a range of companies, some of which have tourism involvements. I am also secretary of the Lighter Evenings All-Party Parliamentary Group and was delighted to hear my fine chairwoman, the noble Baroness, Lady Billingham, earlier. I shall refer to her speech and the lighter evenings group later. I am also a former Tourism Minister.

Richard Lambert, director-general of the CBI, said some time ago:

“Tourism matters. It is a major source of jobs and wealth creation across Great Britain—but in many ways it is a forgotten industry, and one that features all too seldom in the political or economic debate”.

Yet tourism must be the number one constituency industry for more MPs than any other. Tourism is the dominant industry in the West Country and the number one industry in Yorkshire. We think of our seaside and historic towns—Bath, Oxford, Chester, York. We think of the Norfolk Broads. We think of our industrial towns, so many regenerated by tourism. My friend and opposition Front-Bench spokesperson, the noble Lord, Lord Hunt, knows the Wirral Country Park. We know of tourism in the Lake District and the sad problems that people there are having at the present time. In Scotland tourism is probably the equal number one industry with whisky and in London it is massively important.

Sadly, successive Governments have treated tourism like a Cinderella industry. This Government’s record is equally poor. We have no tourism in the title of DCMS. The chairmanship of Visit Britain, our national tourism body, is a six-days-per-month job. There has been a steady reduction in funding for our national tourist board. There is little evidence of any tourism co-ordination across government. On visa charges, air passenger duty and taxation changes on holiday lettings, all the evidence is that virtually no consultation took place with DCMS. The new Secretary of State, Ben Bradshaw, seems to be obsessed with the BBC. In the five months that he has been in post, he has not met the chairman or chief executive of Visit Britain, despite repeated requests. This is an insult to the tourism industry and I hope that noble Lords on the government Front Bench will draw this to his attention.

It is a great pity—I say this in all sincerity—that the noble Lord, Lord Mandelson, is opening the debate in what is probably the twilight of this Administration. Had he held his present office in the early years of this Government, with his influence, all could have been very different. He could have led and co-ordinated a true national tourism strategy.

In the 1980s, with unemployment the dominant concern for many young and unskilled people, the noble Lord, Lord Young of Graffham, brought tourism with him from the DTI to the Department of Employment. The noble Lord, Lord Cope, will remember this because he was a fellow Minister at that time. I was Minister for Tourism in the latter 1980s. I am not claiming any personal credit for this at all but, at that stage, the tourism and hospitality industry was generating in the region of 1,000 net new jobs a week.

This year, domestic holiday tourism has seen something like a 20 per cent increase. We have had a very good year in self-catering, caravanning and visits to attractions. We have also seen significant new investment in the industry. Some 11,000 new hotel rooms opened in 2009 and 40,000 are planned between 2010 and 2015. The single most important measure that would boost domestic tourism would be, as the noble Baroness, Lady Billingham, said, the introduction of double summer time. She also listed all the other benefits that there would be.

Heritage tourism is also a major visitor attraction. There is some suggestion that heritage and tourism could be separated into different government departments, but this is overwhelmingly rejected by the majority of the industry.

British Waterways, a member of ALVA, has done much in restoring many of our canals and waterways and is extremely concerned that the Government may well sell off its property portfolio, which generates something like £45 million a year, without fully replacing the income. Can we have a ministerial assurance that British Waterways will be treated properly if those assets are sold off?

The United Nations World Tourism Organisation looked at how some 70 countries have responded to the economic downturn in terms of tourism. Of 18 European countries that responded, 11 have reduced tourism-related taxes, 13 have set up tourism-related credit facilities for businesses, 11 have increased national marketing expenditure and 11 have established public and private marketing partnerships to boost tourism. All we have done in this country is change Tourism Ministers.

Our tourism industry does not ask for a great deal. Yes, perhaps there should be somewhat greater funding for Visit Britain, but primarily the industry wants to be allowed to develop without taxation and legislative burdens. Above all, it wants to be granted the recognition that it deserves. I say to the Government once again: take tourism seriously.

My Lords, I believe that there are reasons to be optimistic about economic affairs, at home and abroad. I am optimistic, first, because the past decade has been remarkably successful economically. For the first time in modern history, despite large increases in population, the number of people around the world living in absolute poverty fell below 1 billion. This was possible because the world economy grew at a rate of almost 4 per cent a year, with developing countries expanding at twice the rate of developed countries. It can be done.

This successful decade was, of course, brought to a potentially catastrophic end by the financial crisis. Yet even here there is a second reason for optimism. A year ago, the world stood on the edge of a financial precipice, facing the prospect of a great depression. But Keynesian measures in monetary and fiscal policy, and the practical steps taken to recapitalise the banks, have worked. A year ago it would have been impossible to believe that the world would be in the relatively good shape that it is in today. Of course, there is still a lot to do, as was made clear in the gracious Speech.

There is a third reason for optimism. The crisis induced a remarkable level of international co-operation. The G20, an organisation thrown together by necessity rather than design, has, so far, developed an unprecedented commonality of analysis and action.

But, of course, all these sources of optimism have a darker side. The growth in demand that secured the expansion of real income was fuelled by a financial bubble, originating in global imbalances and driven by financial innovation that piled systemic risk upon systemic risk until the fragile edifice collapsed.

Then there are still those who, in spite of the evidence to the contrary, deny the success of the Keynesian measures. Notable among these are the leaders of the party opposite, still trapped by the Neanderthal economics of omniscient, self-stabilising markets. Just this Monday, Mr Cameron reiterated his commitment to an age of austerity by declaring that he would cut the fiscal deficit, starting “now”, he said, regardless of the state of the economy. It was heartening for those of us sitting yesterday on the Economic Affairs Committee of your Lordships’ House to hear the Governor of the Bank of England join the managing director of the IMF and the German Chancellor in rejecting that dangerous position.

Finally on the darker side, once immediate threats recede, will co-ordinated international action be maintained? Will real steps be taken to address the international imbalances that have been a recurring threat to growth ever since the emergence of the persistent German surplus in the 1960s? Will the common commitment to regulatory reform be maintained in the face of protests that regulation “undermines competitiveness” and of threats to quit any country that dares to propose effective reform? These questions are particularly important for Britain. It has the largest and most successful international financial sector in the world, so it was inevitable that it would suffer disproportionately in an international financial crisis.

For the future, two broad areas of action are required: first, to learn and apply the lessons of the crisis by restructuring the financial sector; and, secondly, to rebalance the economy to reduce its dependence on finance and increase overall resilience to financial shocks.

On the first—restructuring finance—the City of London is essentially an offshore financial centre, providing first-rate service to the world. An important element of that first-rate service is sound regulation. However, most of this activity has very little to do with the rest of the British economy and it is unforgivable that contagion from international finance has so damaged domestic production. The regulatory authorities are committed to identifying the linkages that propagate systemic risk. It would serve Britain well if some of those linkages were severed and domestic banking insulated, as far as it may be, from international storms.

The second area of action is rebalancing the economy. British industry desperately needs a reliable flow of capital to fund new investment. In its current state, much of British banking is incapable of playing that vital role and is unlikely to do so even in the medium term. Not only have the wholesale money markets that funded so much lending contracted but the emergency measures have resulted in an excessively concentrated banking industry with no obvious competitive urge to lend.

Major restructuring of domestic banking is necessary to enhance competition and reduce the pernicious influence of “too big to fail”. More radical steps are also necessary. Instead of just hoping that lending to industry increases, direct action should be taken to ensure that it does. A national investment bank should be established, funded by the issuance of bonds. At the very least, the existence of a dedicated competitor might stimulate the commercial banks into action.

Finally, are there no ways of sustaining the demand that the world economy needs other than by fuelling recurrent credit bubbles? Indeed there are. Addressing international imbalances by increasing the spending of surplus countries will enable worldwide demand to be sustained without erecting a fragile tower of household debt. It is time that policy-makers took on board the fact that countries that run a persistent surplus are beggaring their neighbours and ensured that they are suitably penalised for doing so.

However, there is an even more certain method of sustaining demand: redistributing income towards the poor, who possess the macroeconomic virtue of spending everything that they receive. That is exactly the process that is happening internationally as the world relies increasingly on rising incomes in India and China to maintain demand. But it must also happen domestically. The savage 30-year trend towards greater inequality in western countries should be reversed to the benefit of aggregate demand and hence the benefit of all.

I had three reasons for optimism, but there is also a fourth. The British Government led the way in devising the means of alleviating financial distress. We are fortunate to have in the Treasury team, in the chairman of the FSA and in the Governor of the Bank of England some of the most creative yet practical policy-makers in the world today. It is their responsibility to think and act radically to create enduring structures that will enable us to emulate the successful, real economic performance of the past decade.

My Lords, we may not agree, but I believe that the Government are fortunate to have the skills and experience of the noble Lords, Lord Mandelson and Lord Myners, at their disposal. This House is lucky that they are here, although I must add that it does not reflect too well on the quality of their colleagues in the other place.

After the crash, I supported quantitative easing as designed by Bernard Bernanke, the chairman of the Federal Reserve. We were lucky that his scholarly knowledge of the great depression could be put to such practical use. The latest G20 meeting reconfirmed easy money for central banks and higher government spending. Anxieties about deflation reflected the conventional wisdom, partly on the apparent grounds that the size of spare capacity in the world required the further rattle of the printing presses. We are approaching the time when this conventional wisdom must be placed under scrutiny. An exit strategy from quantitative easing will be required before long. We must also deal with our public finances without risking inflation.

Price stability used to be an aim, if not here then in Germany and the USA. Now that objective rejoices in the euphemism “stable inflation expectations”. Key members of the G20, including the United Kingdom, may continue to portray the risk of deflation as an alibi for dodging essential fiscal and monetary action. This excuse cannot last much longer. Politicians and bankers must confront the gravity of their obligations.

Alan Greenspan, as chairman of the Federal Reserve, erred by pegging interest rates at 1 per cent for three years after the dotcom boom. This encouraged the housing bubble and subprime fiasco. Yet in a Financial Times article in June, he sought repentance, highlighting inflation as the real threat to a sustained recovery. Greenspan warned that the pending avalanche of government debt to be unloaded on to the global markets made inflation a special concern.

Nearer home, Spencer Dale, the Bank of England’s chief economist, has counselled against an increase in money-creation through the purchase of government bonds. He has also warned about the dangers of injecting further liquidity for fear of it igniting inflation; whereas the governor himself seems relaxed, regarding inflation as a temporary surge. Alas, the Bank’s forecasts often rival the Treasury’s for laxity. Let us hope that the governor is no longer influenced by his Cambridge mentors, Lord Kahn and Joan Robinson. Kahn preached the neo-Keynesian orthodoxy of the 1960s and 1970s that,

“the right aim of monetary policy is not to secure a stable price level”.

His disciples still hover in the ante-rooms of influence, and their preferred drug is always demand.

It is possible that the RPI will reach 4 per cent next year. Inflationary pressures are more evident here than in the USA and the eurozone. They should not be shrugged off as a passing apparition. They must be staunched at source. The case is clear. Oil costs are rising. The VAT reversal and stamp duty holiday will reach an end. Bond yields on two-year gilts are at a record low. Asset bubbles, such as property in the Far East, spell potential trouble and could multiply. The asset price index has risen by 60 per cent over eight months. The gold price seldom lies, while commodity brokers in the Chicago pits are licking their lips. And, of course, sterling is weaker. This will swell inflation as consumers pay higher prices for imported goods. As for stronger exports, look no further than the enormity of our trade deficit—1997 was the last year when the UK registered a surplus.

The British are prone to inflation as a genetic disease. To those of us involved with inflation battles 30 and 40 years ago—it took time to win the war—an undimmed principle stands out. Inflation cannot maintain high levels of employment in any but the shortest term. In the longer run, to keep up employment, larger doses of the drug are needed, accelerating inflation still further. The outcome is high unemployment, misery and potential social unrest. We recover without inflation, or we do not recover at all. The UK Government must tackle the fiscal deficit, the worst of any major nation within a credible framework. Otherwise, inflation becomes a higher risk, with unsettled bond markets.

The leadership of the Government which carries out these duties will need to make hard choices and display courage seldom shown by contemporary politicians. The task ahead is not about the management of tonight’s news and tomorrow’s headlines, or about pacifying the unions or the CBI, or about massaging pressure groups and vested interests. It is about a clear and unyielding sense of direction underpinned by conviction and fortitude, which were qualities required and found 30 years ago and now called for once more in the national interest.

My Lords, I will be referring to the culture part of today’s debate as I talk about matters to do primarily with sport. I hope that those noble Lords who have come to talk about economics will lend me an ear for a moment or two.

There are two issues on which I wish to comment. First, how will the Government react to what I think everyone will regard as good news about the Paralympics? Learning-disabled athletes will be back in the games after being left out following the appalling and unfortunate cheating by members of the Spanish basketball team who were non-learning-disabled athletes and who secured a gold medal. It may just be my sense of romance about sport, but I think that that was a violation of the spirit of sport greater than any drugs abuses.

I have a connection, which is now largely historical, with some of the organisations through the UK Sports Association for People with Learning Disability. We campaigned to get people with learning disabilities into the Paralympics. Now that the harsh punishment for those who were not guilty has been removed, will the Government ensure that that group receives access to funding and support to enable them to take a full and active part in the games? This time, as it is our games they are coming back to, we have a particular responsibility. Will we ensure that our teams at least are prepared properly to do justice to their being a part of the Paralympics? That is a big question for one of the biggest projects and one of the biggest parts of effectively reflating that region of the economy, and I hope that in the near future we will receive a good reply. I appreciate that the noble Lord, Lord Myners, may not be totally on top of that area.

Secondly, I draw attention to a commitment that the Government made in one of their Bills, the Flood and Water Management Bill. The people of Cumbria may have other ideas about its importance, but Clause 42 concerns concessionary charges for community sport and community groups. This is something of a saga in which, once again, I had a peripheral part, pointing out the way in which water charges, primarily, had been changed—that is, that flood water charges and drainage were to reflect the area of ground, not the rateable value within band width. That meant that we had some rather stunning hikes in price. I will do something that I never feel comfortable with: reading out a list of figures. A bowling club in Carlisle had a 1,300 per cent increase in its water charges. A Scout hut in Cheshire had a 1,407 per cent increase. A small Baptist church faced a 2,000 per cent increase. There was an increase of 4,770 per cent for a village hall in Cheshire from £54 to £2,580.

Think what that would do to a small group that uses that facility. Local sports clubs were finding themselves threatened with something that could totally destroy their financial base. Whether we like it or not, sports clubs are an important part of delivering huge parts of the Government’s social agenda—volunteering, activity, et cetera.

The Government are doing something about that; I applaud them for that. Will the Government indicate the level of commitment in the inevitable series of trading in the wash-up period that is coming? Will we get the Bill through? Will we get this bit of the Bill through?

I have been asked to pose a series of other questions to the Government. Can we ensure that there is no great diversity between water company areas? I do not know whether the Government can answer that, but if there is great diversity across local leagues, we will effectively destroy the leagues, because clubs will have only so many resources with which to compete on even terms. The idea is to have even contests within sport—or at least as even as you can—to allow the marginal differences to come through. Will we do that? Will we try to ensure that that is kept?

It is also worthwhile that Parliament pays tribute to the people who led that charge home. It was an unusual group. It included the Scouting Association, not one that we had originally associated with militant attacks on Parliament, but it did it this time—beware those wearing woggles. The supporting cast were, predominantly, the Rugby Union and the Church of England. There is a triumvirate that I have not put together before. Others were involved, of course, but those were the three biggest groups.

Will the Minister say a word or two about how efficient lobbying of Parliament can point out where things have gone wrong within the system and encourage others to do so? Surely those who did that did Parliament and, indeed, society a service by getting involved to point out unintended consequences of something that Ofwat, in this case, thought was a good idea. It thought that it was fairer to charge for what people were doing, forgetting that you need a peripheral vision that takes into account what is going on outside your immediate area of concern. I hope that the Government will encourage all such groups to develop that peripheral vision to make sure that we do not damage the good.

My Lords, as often, I am going to talk about what was not in the gracious Speech but which I wish had been. I am going to talk about rubbish—at least about what too many people think is rubbish and throw away. I have just read a book called Waste by Tristram Stuart. I recommend it to your Lordships; it costs less than £10. What I have learnt from it is that the amount of perfectly good food that is wasted in this country, in the United States and in other large food-producing countries, such as Pakistan, is more than enough to feed all the hungry people in all the countries in the world and leave enough over for any likely increase in the population. No need to cut down more rainforest for agricultural land. No need to panic about starvation staring our grandchildren in the face. There is plenty, if only we did not waste it.

There is in this country a government-funded, not-for-profit company called the Waste and Resources Action Programme, known as WRAP—and that is what I shall call it. It estimates that the total mass of food waste from farms, factories and shops down to people’s homes is approximately 18 to 20 million tonnes. WRAP and other organisations commissioned by the British Government have undertaken further research to determine more exactly the amount of waste through the supply chain and hope to publish the results this year, but an accurate estimate of the total amount of waste would cost more than the Government, strapped for cash, are prepared to pay.

It is not unfair to say that the supermarkets are the biggest culprits. Every day, they throw away all food that has reached its “use by” and “best before” dates. Some supermarkets give some of the waste to charities. Some do not. Some send it to be anaerobically digested to make energy. Some do not. Some is rescued and taken home by poor people who are clued up enough to go to help themselves to it. Some just goes to landfill. How does that come about? Mainly by overstocking, which is bad management arising from the idea that it is more profitable to throw away unsold food than to be sold out of a product that a customer wants. Could they not promote the idea that, if you want to be sure of getting what you want, you should shop early or order in advance? I think that they could, because they are very powerful.

Supermarkets also use their power to promote a great deal of waste at producer level in three ways. First, there is waste caused by supermarkets that order a certain number of their own brand-named product and then say that they require only a smaller number. The producer cannot sell the remainder and, if it is perishable, it goes to waste. Then there is their insistence that, for example, every pie should be exactly the same shape and weigh exactly the same amount, so that every pie that does not conform to the rules gets thrown out. Thirdly, there is their insistence that all fruit and vegetables should conform to completely artificial and entirely cosmetic standards of size and shape. Apples must be smooth, not knobbly. Carrots must be dead straight. Any that are not are either ploughed back into the ground or used for animal feed. The consumer pays for that, instead of being offered cheaper carrots, some of which may be a bit bent or even forked, or cheaper apples, some of which may be a bit knobbly.

We all know that the Government are short of money—all Governments are always short of money, but they are particularly short of money at the moment and would like to raise taxes. What about a tax on waste food put out by supermarkets and manufacturers? The money could go to finance WRAP. I would prefer an incentive, such as a tax break, for reducing waste, but I suppose that this is not the best time.

Another wicked source of waste is the practice of discarding over-quota and undersized fish. Those who run the common fisheries policy have a lot to answer for. They are still procrastinating about getting rid of the quota system and banning discarding.

I hate waste. I grew up during the Second World War, when food was rationed and some things were in very short supply or unobtainable. We wasted nothing. Most leftovers were put to use in some other dish. Anything that we could not use or eat went into the hens or the pig bucket and anything that they would not eat went on to the compost heap. Nowadays, many people not only throw out leftovers such as half-eaten chickens and joints of meat but do a huge shop once a week without a shopping list, buying whatever they fancy or is a BOGOF—“Buy one, get one free”. When the next shopping day comes round, out goes everything that they have not used or that has reached its “best before” date and the whole merry-go-round starts again.

The reason for this is that these people have never been taught to shop, plan meals, cook or use leftovers. Once upon a time, girls learnt that from their mothers, but now their mothers are the culprits. The only answer that I can see is that cookery and what we used to call domestic economy—I think that it is now called home economics—should be a compulsory subject in all schools from a very young age. One period a week would be sufficient. Surely a Government who love dictating what is taught in school could see to that. It would take time to work, but I think that it would work. Therefore, there are two things that the Government can do: tax waste to fund WRAP and teach children domestic economy.

My Lords, I shall focus my remarks on the world of work and, in particular, on skills and training. However, I shall preface my comments with a couple of general points. Noble Lords will not need reminding that we operate in a fast-changing world. Technologies improve and develop week by week, continuing a journey that began many years ago and which, among other exciting things, exchanges people for machines. This is often the world of the sharp, the smart and the fleet of foot; it is a world of clicks, not bricks. The people needed, albeit in smaller numbers, must have refined skills and knowledge. They must be thoroughly literate and numerate and they must be flexible.

Running alongside these developments is the rapidly changing age profile of the UK’s population. It shows more people wanting or needing to remain in paid employment after they have reached the normal retirement age. For the sake of the economy of the country and the budgets and finances of individuals, policies will need to be developed to accommodate working lives of 50 or 60 years. Therefore, on the one hand, we have a reduced need for numbers of people in many sectors of the economy and, on the other hand, we have a growing demand from parts of the population for paid employment.

Many of the technological skills mentioned earlier, which are highly regarded and therefore highly rewarded, are more naturally attached to the younger population. In part, this will change with time as younger workers take their technological dexterity into their middle and old age. However, as a country, we have to pit our abilities on this front against the increasing strength of economies worldwide. We cannot be complacent or tardy when faced with such urgent competition.

While we undoubtedly need to be ahead of the game in the very highly skilled sectors of the labour market, we also need to enable people at many levels to reach their potential and achieve the skills that the country needs to keep the economy going round. Trades unions can, and do, play a major role here. Figures from the TUC show that in the past year almost 250,000 workers have been helped into learning via the union learning fund, including 33,000 workers with significant literacy and numeracy needs.

The UK Commission for Employment and Skills produced a paper, Ambition 2020: World Class Skills and Jobs for the UK, which estimates that increasing by 5 percentage points the proportion of workers trained could result in 4 percentage points being added to the value of the worker by reason of increased commitment and improved productivity. Such a productivity rise would amount to an additional £40 billion on GDP. Trades unions also play a useful role in encouraging training and upskilling through the process of collective bargaining—for example, by negotiating skills and development plans for the workforce, often via joint union and management training committees.

Much has been done in recent years to address the skills needs of the UK economy. However, the picture can be patchy. Over 60 per cent of skills shortages are found in companies employing fewer than 25 people, even though those companies account for less than 30 per cent of the workforce. Ambition 2020: World Class Skills and Jobs for the UK also points out that the big problem is the mismatch between the number of highly skilled people and the availability of highly skilled jobs. In this country, we have a slower rate of growth in highly skilled jobs than many of our competitors. The report notes the need to raise employer ambitions and to stimulate demand as well as supply.

This will become more urgent as the demographic changes mentioned earlier work their way to the centre of the policy stage. There remains a need to press for more training across the labour market. Within the past 13 weeks, only 28 per cent of employees received job-related training. The figures break down in a worryingly old-fashioned way. Training was given to 43 per cent of professionals but only to 14 per cent of process and plant operatives, to 32 per cent of 20 to 24 year-olds but only to 24 per cent of 50 to 64 year-olds, and to 42 per cent of education and health workers but to a measly 19 per cent of manufacturing workers. How are we to be top of the global class with such a short-sighted approach to investment in our people?

Finally, I must mention the programme run through the sector skills councils snappily entitled the Women and Work Sector Pathways Initiative. Arising from the Women and Work Commission report of 2006 and funded almost entirely by government, the programme currently engages 11 sector skills councils. Since 2006, it has upskilled and/or trained well over 12,000 women, enabling them to move up within their employment or to move into areas where women are underrepresented. By any measure, this programme has been a success and I hope that the Department for Business, Innovation and Skills will continue to invest the required £5 million per year as part of the overall effort to make better use of the skills and abilities of our women workers.

My Lords, the UK economy is mired in the longest recession since quarterly GDP records started in 1955. The third quarter GDP figures, revised today, were far worse than expected. Since these records began, there have never been six quarters of contraction in a row. The Chancellor’s forecast for 2009 of minus 3.5 per cent at Budget time looks distinctly optimistic. Nick Parsons of National Australia Bank stated that,

“if we are to hit the forecast, we would need growth of more than 4% in the fourth quarter”.

The document Forecasts for the UK Economy, issued by HM Treasury, now predicts an average independent forecast of minus 4.3 per cent, which is nearly a percentage point weaker. We may be getting over the worst of the GDP decline—there are some signs of recovery—but the economist David Blanchflower sums up matters well in the latest New Statesman. He says that the MPC prediction of a rapid V-shaped recovery to 4 per cent growth in 2010 and beyond looks improbable.

The Government’s finances are no better. There has been no budget surplus since 2001. Now the debt figures are totally horrifying. We are faced with an appalling £175 billion deficit this year and the next, or £220 billion according to the most pessimistic independent forecast that I have seen. To blame all this on the global economic recession is being sparing with the truth. The Government must take their share of the blame. While other countries were reducing taxes and building reserves in the good times, the UK was still running a 3 per cent deficit. Other decisions have also had a major impact. Selling off a major part of our gold reserves at rock bottom prices has cost the Exchequer an estimated £4 billion.

What are the Government prepared to do about the deficit? The Prime Minister’s recent reaction is to want to spend more money—this time on free social care for the elderly at a time when this cannot be afforded. Do not just take my word for it. According to the Guardian on 19 November, the noble Lord, Lord Lipsey, a former member of the Commission on Long Term Care, said that the Government’s plans amounted to,

“a demolition job on the national budget”.

He also said that the Prime Minister’s announcement was like,

“an admiral firing an Exocet into his own warship”.

The former Health Minister, the noble Lord, Lord Warner, also criticised the plans. He said there had been no proper impact assessment and no data to show how this would work.

The Queen’s Speech promises a Bill to halve the budget deficit over the next four years. Will the Minister enlighten us on how this will be achieved? The Government could start by monitoring key public capital contracts more carefully. According to a TaxPayers’ Alliance survey of 20 November, the TPA calculates that there has been a net overrun of no less than £19 billion on 240 key government projects, a sum equivalent to £750 per family.

Overall, it is better to cut back government spending earlier rather than later. The think tank, Policy Exchange, has looked at six periods in the UK and six other countries that have experienced major financial-sector crises in recent years. In all the examples chosen, fiscal corrections promoted recovery rather than created additional recession. Policy Exchange believes that fiscal policy should be focused on spending cuts rather than on tax rises, and that the balance should be in the region of 80 per cent on spending cuts and 20 per cent on tax rises.

Then there are the Government’s stimulus measures by way of assistance schemes. The Vehicle Scrappage Scheme seems to have been the biggest success, and I welcome its extension by £100 million. The Business Payment Support Service also seems to have helped a lot of businesses with their cash flow. The Enterprise Finance Guarantee Scheme seems to have gone quite well, with a near 50 per cent take-up. I do not have figures for the Working Capital Scheme, apart from the £2 billion that was taken up by the RBS and Lloyds, and I would be grateful if the Minister could provide these. I am also not clear how much of the Capital Enterprise Scheme of £75 million has been invested and in what. The Automotive Assistance Programme also seems to have been a bit of a mystery. Will the Minister say how much money has actually reached firms? The Trade Credit Insurance Top-up Scheme promised £5 billion. The take-up by mid-October was only £13 million. Does the Minister agree that the scheme had too tight conditions and too high charges?

Finally, I shall discuss the Financial Services Bill and make a few comments about the banking industry. The Government’s decision to set up the tripartite system of regulation has proved to be disastrous. As I understand it, the new Bill proposes that the FSA will be able to void contracts signed by bankers and their employers if it believes that the pay structures encourage the individual to take too much risk. While this would probably be an ultimate sanction, I can see even as a non-lawyer that this interference with contract law could give a lot of scope for legal challenge and bankers who would be prepared to challenge it. I am sure that we will examine this part of the Bill carefully in this House.

I await more details of the Council for Financial Stability, and wonder whether it will achieve anything new or whether it is necessary at all. The Treasury Select Committee described it in July as totally underwhelming, or like rearranging three deckchairs on the “Titanic”. The same thoughts apply to the consumer protection agency. Is there not enough protection already for the financial consumer?

Clause 13 extends the time the regulator has to investigate wrongdoing from two to four years. This means that a defendant could be tied up for five to six years if they challenge the FSA's decision and refer the matter to the Financial Services and Markets Tribunal. That is too long. The legislation on City pay, linked in with the change in non-domicile rules and the 50p tax rate, has already meant that a considerable number of financiers have moved abroad. Switzerland in particular, I hear, has been successful in encouraging businesses and individuals from our financial sector. This may not worry the Government or the Opposition until they realise how much of an effect it will have on the tax-take from financial services. Of course it would be ideal to have a stronger manufacturing sector, but in reality how can we compete on the commodity side of manufacturing with the cheaper labour costs of the Far East? Like it or not, we are a service economy, and I cannot see that changing in the near future.

My Lords, there was little in the Queen’s Speech on legislation for business, but perhaps this is a good thing in one way as we do not want any more regulatory burdens to be placed on business, as has been said this afternoon. I hope that things will change but, in my 11 years in politics at the parliamentary level, I have come up against a brick wall. In what respect, you may ask?

My working life has been in small business, latterly in manufacturing. Whenever I said that I thought that the City should look to invest more in production, specifically manufacturing, I was told, “No, we need to create wealth in the financial sector”. One of the lessons to be learnt from the credit crunch is that we need to diversify. The Government need to intensify their actions to support business, in particular small business. We need a business-friendly approach.

I congratulate the noble Lord, Lord Sugar, on his maiden speech, which was to the point. He spoke about being an apprentice, which I accept; we all need to be apprentices and to learn. I am a great supporter of small businesses and business generally, but the noble Lord made the point that not all businesses are set to succeed automatically. I agree. That is why I very much believe that it is extremely important that the skills agenda should concentrate on training, management and management skills, which are often severely lacking in the business community. I also welcome what the noble Lord, Lord Martin, said, quite rightly, about apprenticeships.

Returning to the issue of small business, in 2008 I introduced a Private Member’s Bill, the Retail Development Bill, which passed through this House. This Bill was designed to help local communities and local shops. I would have welcomed some acknowledgement in the Queen’s Speech of the importance of the small shops sector. As the Association of Convenience Stores said:

“more than 19,000 high street shops closed last year … what high streets need are policies on planning and business rates”.

Those are just the points that my Bill addressed.

Both the Association of Convenience Stores and the Federation of Small Businesses have identified business rates as a big area of concern. There is a need to address the disproportionate difference between the amount that small shops pay and the amount paid by the supermarkets. Why should small shops pay twice or more than supermarkets as a proportion of their turnover? We on these Benches have firm proposals to address inequity and I hope that the Government will consider doing the same.

The Retail Development Bill which I introduced put an emphasis on enabling local communities to have a voice and a significant influence when supermarkets wished to expand. As most noble Lords will have noticed, great concern has recently been expressed in the press that various supermarket chains are expanding on the high street and elsewhere by means of their “metro” versions. That will to a great extent destroy the right of communities to choice, diversity and convenience, while also destroying the future of independent retailers on the high street and hitting local communities.

A further concern of small businesses is the problems caused by late payment, an issued addressed by the Secretary of State some time ago. A recent FSB survey showed that one-third of small businesses are suffering from that problem. In that connection, I hope that the Government will continue to lead by example with prompt payment. Perhaps the Minister can update us on the matter of payments by government and by local government to ensure that they are paying on the nail.

Concern has been expressed by the Federation of Small Businesses and many shopkeepers about the suggested change in VAT—it may just be newspaper talk—on 1 January. If the Government intend to pursue this change in VAT, I should just like to make a point on behalf of the FSB and others that this is the busiest retail period for shops. There are the January sales as well as the accumulation of people and staff who have been on holiday during the Christmas period. If—it is a big if—the Government intend to change the VAT rate then, from the point of view of small shops it would be much better for it to happen in February or even later in the year.

The problem of unemployment is deeply affecting small businesses and there is great concern about the ineffectiveness of Jobcentre Plus. According to the FSB, less then 20 per cent of jobs for SMEs are advertised at Jobcentre Plus. It is key that small businesses are able to use this free advertising service, and it should be made user friendly. As the FSB and others have suggested, there should be a small business manager or someone with expertise in the small business sector to encourage that.

I was interested in the contribution made by the noble Lord, Lord Cope, who is not in his place, on small businesses. He drew attention to the great proliferation of enforcement agencies dealing with the small business sector. He made the case for the idea of having a single business inspectorate rather than so many people following up on issues.

Finally, some time has been spent today on the approach of the opposition Benches to the economy. I am glad to say that we on these Benches subscribe to a positive view in relation to getting out of the recession. The somewhat negative approach of the Tory Benches is being roundly rejected. Perhaps I may also respectfully remind the noble Lord, Lord Hunt, that Mrs Thatcher was very good at unemployment as well.

My Lords, I shall make some observations around the Financial Services Bill. I shall focus on customer rights and protection, particularly customer engagement. I support the Government’s general approach to improving things for customers through the FSA and regulation. It is credible to believe that improved regulation will lead to more appropriate behaviour towards customers by the banks. Within the FSA, that is led by the “treating customers fairly” initiative. However, the weakness is that this initiative offers little in terms of customer service or bank-to-customer relationships, an issue to which I shall return.

A heavy reliance on the FSA can prevent the Government and others from thinking and acting more widely to support customers, and from taking initiatives to promote diversity in the sector. I accept and welcome some of the more positive statements that have been made by the Government regarding the mutual sector, but there is a strong case for promoting existing mutual provision and a more vigorous and thorough exploration of how new mutuals could be encouraged and created. In the context of the billions of pounds of taxpayers’ money spent on propping up failing banks, there would be taxpayer support for how alternatives could be provided by mutuals and how those alternatives could be taken forward.

There are three reasons for that. First, there is considerable evidence that a more diverse financial system and wide range of different types of financial institution is likely to be stronger than one in which almost every institution is influenced by the same management philosophy, the same corporate structure, the same reliance on global capital markets and the same concentration on pursuing growth of return to ordinary shareholders—in other words, the banking herding instinct.

My second reason concerns building societies in particular. Their risk appetite, despite one or two well known exceptions which we have heard of before, has been much lower than that of the banks. Building societies have proportionately less than two-thirds of the arrears cases of the mortgage market as a whole, which is because they lend more carefully. Furthermore, building societies cannot fund themselves from the wholesale market in the risky way that banks such as Northern Rock were able to do.

Finally, building societies have a natural advantage over plcs in that they do not pay dividends to shareholders and can use those funds to pay higher savings rates or lower mortgage rates. The best buy tables published by Moneyfacts, for example, show that 83 per cent of the savings accounts most consistently paying high rates are from building societies. A deeper and more comprehensive case could be put for that.

Customer involvement and customer engagement is the hallmark of the mutual sector. Customers, or members of mutuals, can attend annual general meetings. They can vote on the boards of directors and on directors’ remuneration, and can take part in a whole range of ongoing participatory activities. I am arguing strongly that these practices need to be listened to and carefully scrutinised by the banks, which might learn a lot more about how to involve their customers.

I realise that customers do not own the banks, that shareholders do, and that shareholders can attend AGMs and the board, but more stakeholders should be considered. I am confident that the trade unions have basic rights to put the views and opinions of staff to the executives who run the banks. But the customers, many of whom are longstanding and consistently have considerable financial stakes, have hardly any means of engaging meaningfully with the boards of banks. I should like that to be remedied and for the Government to stand up for customers much more strongly than they have in the past and to think carefully about being the champion of three things. First, I should like to see the equivalent of an AGM for the customers of banks. Obviously, it cannot be the same as an AGM, but there should be the opportunity for a group of members to engage with the chief executive and the directors to discuss how the bank is performing and what exactly is happening at the bank of which they are important stakeholders.

Secondly, I should like to see annual customer meetings in each region where a bank has more than 10 branches. Those meetings could easily be organised by volunteer or selected members who would not meet directors, but would meet managers for the same kind of dialogue. Thirdly, I should like every bank over a certain size to have a consultative council of customers of the bank that would meet at least four times a year with the chief executive and other principal directors. These measures would bring the executives of banks into meaningful and direct relationship with their customers in a way that does not happen at the present time. It would mark a huge improvement in the way that banks treat their customers. I hope that my noble friends will think carefully about taking some of these ideas forward.

These proposals are not exceptional or unusual in the mutual sector; they are used widely and easily. I believe that, in the present climate, it is time that the banks started to think in a different way, using a new view and a different paradigm, about how they actually engage with their customers. Marketing, advertising and focus groups are all very well and have their place, but in the future people are going to want a lot more than that out of organisations that have done what the banks have done over the past 12 months.

My Lords, once again I shall start by reminding your Lordships of my primary career years having been spent with Lloyds Bank and the Ford Motor Company, both of which I shall mention. Martin Johnson, in his great days as the England rugby captain, would say that you cannot do rugby without the ball. I should like to say particularly to the noble Lord, Lord Myners, that you cannot do economic recovery without the GDP. The debate today began with an exchange about the merits of growth, but growth comes in several different forms, and not only through the expensive creation of new business and a long, slow attritional rebuild. It also comes from reactivating those businesses that have worked successfully in the past and generated the fiscal streams on which we have depended but which are now in a state of limbo. It is still a matter of great concern as to how they are to be reactivated.

Where are we on this today? My noble friend Lord Northbrook said how unachievable four percentage points of growth will be next year. I can suggest to the noble Lord, Lord Myners, where he might find that two of those percentage points are quite easily accessible. They are sitting in piles of files in the Blackfriars Bridge Road. I am mandated by Lloyds Bank to extend an invitation to the noble Lord to spend some time looking at those cases and talking about what is involved in getting them back into mainstream revenue generation for the fiscal economy. I think that he would find it extremely interesting to spend a morning down there, and the invitation comes without any obligation. He is not expected to negotiate better pensions for these people because that is not on their agenda. They are not highly paid, but individuals at the lower end of the management scale and not part of the bonus culture of the bank. At present, however, they are hugely demotivated and extremely depressed. They feel that they are getting all the odium of being bank employees at a time when banks are hated while they are bearing the entire burden of trying to put right the 2,400 cases that are festering away in the files in the Blackfriars Bridge Road.

The noble Lord would find surprises among those files, some of them good and some bad. First, however, I should like to establish a clear understanding from the noble Lord. Has he restored the London rules? Lloyds Bank thinks he has. It says that the Bank of England is now fully set up and effectively operating London rules again. That would be very good news indeed, but can we please have it confirmed? If, as I suspect, it is an unofficial initiative by the Bank of England, while it is still to be welcomed, could it please now be put formally in place so that it can go forward to the benefit of all banks because it is doing a great deal of good? Thank goodness it has not been put with the Fallen Soundly Asleep agency, otherwise known as the FSA, which is where I feared it was going to go in the first place. It should stay with the Bank of England because it knows what to do with it.

Let me explain what is happening with the actions that have been taken in the belief that the London rules are back. First, we are beginning to see an orderly flow and continuity of bank facilities to supply the working capital necessary to reactivate businesses, and that is good. Let us take the example of the present position of the Ford Motor Company. Recently it announced a 10 per cent reduction in the Ford of Europe output of motor cars for this year, which is substantially dependent on Britain, and that it represents a shortfall of 1.5 million units. Imagine how much GDP could be generated by paying employees for their production and bringing them back into profitable sale. At present there is a shortage of vehicles in the marketplace, not a surplus. Why is there a shortage? It is because the five key component suppliers dependent on the aluminium world were not given the loans with which they would have been able to buy the £1,200 per ingot aluminium on which they depend. Now that the loans have begun to come through, Ford is able to get the engines that match the fact that the market is moving massively towards diesel. The supply is therefore beginning to unlock. All this is part of the recovery programme and should be regarded as good news.

On the other hand, bad things are going on at the moment, but first, another good point. Bearing in mind that the businesses in the Lloyds recovery unit are separated into generic groups of activity, the Minister will be surprised at the robust survivability of the house building community. The reason for this is interesting and perhaps teaches a lesson for the future. The community had a contingency plan to cope with a major slump that effectively involved a mutualisation of land banks and financing operations under single overall control. That has allowed the community to survive, ultimately to the benefit of house prices in the UK. Indeed, it is excellent and it should be so.

Beyond that, however, we have to look at what is happening in the retail market, where there is a serious problem. If you look at an empty shop on the high street, you see a shuttered shop front. But it should be seen as being the young people who worked there now unemployed, the people who made the products sold in the shop now unemployed, and the people who bought the shop in the first place now unable to service their debt. Everyone has lost. If we have empty high streets, we will be in a completely disastrous situation because that will drain the vitality of communities that depend on their shopping centres. I suggest that the Government should be looking to reactivate something along the old lines of 3i as an in-house investment programme that would be able to fund some of these businesses so that they can be reborn and contribute to positive trading activity. It should not be above the pride of the Government to go to one of our superstar retail operators, one of the big names, and invite them to cherry pick what they need from the vast portfolio of fragments of bust retail businesses sitting in the Blackfriars Bridge Road. There are the brands, the shops, the prime locations and the production behind them. Nothing would put more back at a single stroke into the economy. We cannot come out of this crisis with empty high streets. There will be no vitality in society if we do so. This is the most urgent problem that the Government should be looking to solve at the present time. I hope that the noble Lord will come down because there is so much to see and to learn about what needs to be done.

The other good news from Lloyds is that it has listened to a piece of advice that originated on these Benches. It has taken the entire Scottish loan book and sent it to Edinburgh, and very good that is too. Again, the Minister should be going to the Charlotte Square investment community and saying to its members, “Look, you funded these businesses into the problems they are in, now you fund them out again”. This would be of huge benefit to the Scottish community, and it would be a Scottish solution to a Scottish problem. It should be done.

My Lords, I hope that the promise of further financial regulation will prove effective. This would be welcome in view of the continuing public anger over the role of the banks in causing the economic recession that is still afflicting the UK economy. The justified outrage is exacerbated by the bankers’ failure to apologise for the havoc they have wreaked, for the absurdly high levels of remuneration they persist in paying themselves while enjoying hefty subsidies from the taxpayer, and for having the nerve to claim that they are “doing God’s work”. All this is happening at a time when in the UK the gap between the poor and the rich continues to widen, unemployment is rising and wages are being frozen for the second year running. This creates a threat to social cohesion. As recently as last Friday, Dr Gillian Tett in her regular column in the Financial Times indicated the factors that provoke much more public anger and an even greater backlash against the bankers.

The problem is worse than it appears and is much more profound. The issue, no less, is the deep fault that has arisen between polity and economy in the United Kingdom. That is grievous and highly dysfunctional and needs to be urgently addressed.

Between the two world wars of the last century the problem of the relations between state and the economy and the consequences for public accountability were much better perceived than they are today. In the 1920s, the Webbs proposed a bicameral Parliament, consisting of a political chamber and a social chamber, whereby the latter would deal specifically with economic and welfare matters. Ten years later, Winston Churchill, in his Romanes lecture at Oxford, plagiarised the Webbs with a diluted version of their scheme, advocating the creation of a corporatist industrial sub-parliament to advise on economic policy. Nothing, of course, came of these ideas because they were impractical and not properly worked out, but that is not the point. The point is that these authors were seized of the potential problems inherent in the tension between government and business.

However, the dilemma disappeared from public discourse until it re-emerged in General Eisenhower’s valedictory speech as President of the United States, when he warned of the dangers of the coming “military-industrial conflicts”. But, as the current recession has revealed, it is by no means confined to defence: the banks have proven themselves to be just as capable of distorting the public agenda to their own ends, as, indeed, have other institutions in the financial sector.

In the past decade and a half, there was a growing realisation that business had to be regulated and not left to the unfettered workings of the market. While, on the one hand, privatisation continued apace under succeeding Governments, there was, on the other, a corresponding nurturing of the notion of corporate governance. We witnessed successive reports on aspects of the subject: Cadbury in 1992; Greenbury in 1995; Hampel in 1998; Turnbull in 1999; a Myners report, no less, in 2001; two in 2003, Higgs and Smith; with a final report from Sir David Walker expected tomorrow. That, too, risks being sidelined. The upshot has been a lot of huffing and puffing that has done little to improve things.

It has been said of the parliamentary expenses scandal that MPs “just don’t get it”. In fact, they do rather more than the bankers. Collectively, UK bankers, along with their counterparts in the US and elsewhere in Europe, have wriggled and screamed to fend off any new regulation. They are never proactive in suggesting how they might reform themselves; they just want a return to the status quo. Ms Angela Knight, the former Tory MP, as spokesperson for the British Bankers’ Association, has laboured indefatigably to defend the indefensible and lobbied hard to leave the banks untouched. It is rumoured that David Cameron intends to give her a peerage in the near future, and that will confirm that the Conservatives have shifted from being the erstwhile brewers’ party to becoming the bankers’ party.

Governments of whatever persuasion must tackle the coincidence of political and economic crisis head on. The latest revelations of the looting by the Phoenix Four of MG Rover’s assets provide further evidence of how bad the situation is.

In my view and that of my honourable friend Dr Vince Cable, the Minister, the noble Lord, Lord Myners, has come nearest to recognising the magnitude of the problems that confront us. He has worked tirelessly and imaginatively to deal with some of the worst excesses and he has not shirked in his criticism of malpractices. We should all recognise the important contribution he is making. However, it will require even more to get the country out of the mess.

Before elaborating on what I would propose, I ask the Minister whether in winding up he can say why, in marked contrast to the US, so few, if any, prosecutions have been brought regarding major skulduggery.

Two things now need to be done. First, as the Wright report said yesterday, we need to radically revamp the system of Select Committees in another place. The Treasury Select Committee under John McFall has worked very well in the circumstances, but how much more effective could it have been given greater powers and resources? We need the constitutional imagination that fired an earlier generation of the political elite, which the Webbs and Churchill exemplified.

Secondly, we need a total transformation in the culture of corporate life. The rise of the so-called “ownerless corporation” cries out for this. I recently had the privilege of hearing Mr Pravin Gordhan, the South African Finance Minister, speaking at a parliamentary seminar organised by ActionAid. Looking at the minimisation of tax liability that is practised by so many conglomerates, he acknowledged the exercise of legitimate prudence but seriously questioned the widespread practice of “loophole planning” that relies on the ingenuity of legions of highly skilled lawyers, accountants and other financial engineers and depends on the existence of tax havens. He said that these days tax avoidance is seen as an acceptable form of tax evasion. What is needed is a mindset change away from the “catch me if you can” tactic, as my noble friend Lord Oakeshott so aptly put it, to one of the good corporate citizen that conforms to the spirit as well as to the letter of the tax regime of a country. In Mr Gordhan’s view, this would require a “philosophical revolution” within the big business community. The noble Lord, Lord Plant, may have cynical views about this, but nothing less will do.

We need a royal commission. They have been rather out of favour but there is now a strong case to appoint one to take stock of the plethora of previous proposals and to devise new, radical provisions for the deliverance of good corporate governance. This should include changes in the kind of parliamentary oversight that needs to be implemented, and I ask the Minister whether such a suggestion commends itself to the Government. Failing that, this House should set up a Select Committee to undertake this vital task.

Nothing short of a fundamental review of the interaction between our polity and economy in order to secure a better operational match between the two will enable the fault to be repaired. We must not shrink from rising to that intellectual challenge.

My Lords, this afternoon, Alistair Darling, the Chancellor of the Exchequer, said in the House of Commons that there were secret bank loans to the Royal Bank of Scotland and HBOS amounting to £61.6 billion, an enormous amount of money. This money, hardly ever previously imagined, was given in October last year to keep those banks afloat. It was repaid in January of this year. As the noble Lord, Lord Skidelsky, said in his important speech today, the success of the Government has been to avoid the Conservative policy of choking off recovery. He pointed out that, quite rightly, the Government did not cut the deficit.

For many years, pensions have been fixed with a general age of 60 and 65. Given that so many lives ended not far from 70, the relationship between life expectancy and retirement age was fairly close. However, with medical and behavioural activity, the ages of 60, 65 and even 70 have become very modest expectations. I remember when I was a boy visiting a woman who was 82, which seemed quite an exceptional age. Now, one’s expectancy of at least 80 or 90 years is not unusual. I have a couple of aunts in their mid-90s. There has been a big change. Given such expectancy, the age for accepting pension needs to take account of the improvements in health and their effect on one’s life.

What I find so surprising is the small increase in life expectancy which obviously relates to one’s pension. However, much more is to come. The number of doctors dealing with age-related illnesses has increased greatly and many more medical treatments will be on their way even in the next 10 years or so. As a result of this, the limited change in the pension age has not dealt with this problem in the way in which it should have been dealt with. There needs to be a relationship between the increase in longevity and the pension. I find it absurd that the definition of the pension age is set for 68 in the 2040s. To think that there will be only a three-year increase in life expectancy over the next 30-odd years is absurd. Given the amount of medical progress that is being made through a considerable increase in specialist doctors, we cannot assess life expectancy so far in advance. We have a problem in dealing with this matter; it will be a difficulty. However, there should be also a general acceptance that one’s age could lead to a new, more moderately demanding role, with less time spent working.

Population increases outside Europe have accelerated greatly. The populations of modern India, Pakistan and Bangladesh add up to just over 1.5 billion—they used to be one country—and China now has 1.33 billion people. There has been an enormous increase in population. In the past 50 or 60 years, there has been a growth in both the population and the economy of so much of the world. The rate of increase there has been so much greater than in Europe. In this period, the world population has increased from 2.5 billion to 6.6 billion. As this continues, so Europe will not have the economic dominance it has had since the Middle Ages. Then, it became a prominent part of the world, with its productivity, expertise and trading, as well as its control over so much of the world’s development. We now see the growth of trading, which, apart from in Africa, has increased greatly. Europe has an important role, but during this century it will be met with the increasing powers of the rest of the world, which we shall need to consider.

I congratulate the noble Lord, Lord Sugar, on his maiden speech. I am an enthusiastic follower of “The Apprentice” and anything he can do to champion apprenticeships in the current economic climate will be welcome.

I should declare that I am chief executive of London First, a non-profit-making business membership organisation. I shall focus on financial regulation and fiscal responsibility, and on public trust in banks and business trust in government.

According to the most recent surveys, London remains the world’s leading financial centre. While there are several hundred thousand jobs in the capital, there are a million jobs across the UK—in Edinburgh, Manchester, Leeds, Birmingham and Liverpool—with several million more jobs indirectly supported.

A few people in this sector bear some responsibility for the credit crisis, but all in the sector, including blameless tellers at your local Halifax branch, have a blighted reputation. The priority for regulation in the Financial Services Bill, therefore, is that it supports a journey towards people trusting our financial community again. It must also provide the foundations for London and the UK to compete successfully internationally. A new body, TheCityUK, has been established to promote the UK’s financial services, as well as to represent practitioners’ views on international regulation, and I wish it well.

The public anger over bankers’ remuneration is understandable, but scrapping in the media over whether £10, £1 million or £10 million is the appropriate bonus for a banker is incidental. Government have a strategic and international leadership role to perform, and the banking community needs to demonstrate that it has understood the lessons of the past few years and will of its own volition change its ways.

Instead of the current adversarial approach, Government and bank leaders in the UK should jointly agree the objectives of a new regulatory framework and provide the international guidance one rightly expects of the market leader. So let me offer some suggestions: first, financial services regulation should help to restore the reputation of the sector; secondly, it should seek to build best practice among practitioners rather than second-guess their every action; thirdly, there needs to be a form of insurance against future meltdown, and those profiting from the implied public guarantee should in some way contribute to it; and, fourthly, new financial regulation across the world should in so far as possible provide an even playing field.

What of the style of regulation? Some would say that principles-based regulation has failed us, but the alternative, detailed micromanagement, with an army of regulators and lawyers feeding from it, could be characterised as the US model. Lest we forget, that is where the crisis began. One thing is for sure: the next crisis will not be the same as the last.

We need a strong and trusted regulator who is alert to the big-picture threats, with a relatively free hand and a set of broad, commonly understood principles backed up by hefty penalties for failure to abide by them. Of course, the regulator should have the ability to adjust the rules to stay in tune with emerging international regulation.

Then there is fiscal responsibility. Recently, the organisation which I run published a report called, Supporting UK growth while balancing the budget. An underlying theme is that business needs to be able to trust that government will take economically rational, rather than politically easy, decisions. So let me make some proposals for the medium term.

First, the public sector needs to increase efficiency. The ONS estimates that, in the past 10 years, services in the private sector increased productivity by over 20 per cent compared with a 3 per cent decline in the public sector. The experience of both private sector and the best of local government should be applied to central government.

However, efficiency savings alone will not solve the deficit—incidentally, nor, despite the efforts of the Daily Telegraph, will chopping parliamentarians’ expenses. The Government need to be hard-headed about culling low-value economic and social programmes. At the moment, evaluation across government departments varies. A forceful Cabinet Committee should rigorously analyse every spending programme and transparently balance economic and political criteria.

In such a cost-benefit analysis, infrastructure investment will score well. However, the OECD recently commented that in Britain infrastructure projects,

“are typically the first victim of fiscal consolidation efforts, while other less productive but politically sensitive projects survive”.

The Loyal Address made a welcome commitment to strengthening national infrastructure. Both Crossrail and the modernisation of the Tube are indispensable to future economic growth.

Finally, we may well, unfortunately, need to raise taxes, but, if we must, we should do so from a broad base. We need an honest evaluation of the merits of business, employment or consumption taxes. In each case, the least well off must be protected and we must maintain the UK’s international competitiveness. Taxes which threaten the internationally mobile will harm London and the UK and ultimately reduce the Treasury’s tax take.

We need business to trust the Government; we need people to trust the Government; and—reverting to my original theme—we need the public to trust our banks.

My Lords, it is always good to hear contributions from the noble Baroness, Lady Valentine, and wonderful to speak in the same debate as that in which the noble Lords, Lord Sugar and Lord Martin, made such splendid maiden speeches. I understand from a friend of his that the noble Lord, Lord Sugar, generously donates all his fees for speeches and public appearances to Great Ormond Street Hospital. Perhaps this is an example that more parliamentarians should follow. As for the noble Lord, Lord Martin, he will always be Mr Speaker to me; he was very kind to me personally when we both served in another place. I welcome them both to this House.

We have already heard of some of the views of Professor David Blanchflower, a former member of the Monetary Policy Committee. In one of his articles, he revealed that the Bank of England has 12 agents, producing monthly scores of how the economy is performing based on intelligence that they receive from walking around the country talking to businesses. These agents were given 10 minutes to give their findings at the end of each of the MPC's monthly meetings, and they were almost universally ignored—wrongly as it turned out. Their scores picked up the onset of recession very early. Scores on capacity constraints within firms in both manufacturing and services started to turn down in mid-2007, and scores for turnover, output, investment and recruitment difficulties all started to drop off a cliff around the spring of 2007. The MPC ignored these data and, as late as August 2008, the majority of members argued that a recession would not happen. As Professor Blanchflower summarises, economics of walking about, one; macroeconomists, nil.

On a lighter note, as we wait for recovery, I am happy to report one sign. It may not be a green shoot of recovery, but it is a red and white striped one. Last evening, Cheltenham Town Football Club won its first match for a very long time with a 5-1 demolition of Barnet. I hope there is no one from Barnet here.

I am very much in favour of going walkabout. I draw noble Lords' attention to the lack of walking about, which has caused real problems in the British overseas territories—what Harry Ritchie refers to in the title of his fascinating book, The Last Pink Bits. These difficulties have the potential to cost the UK Treasury, the taxpayer, large sums of money. The situation in the Turks & Caicos Islands is particularly serious. The British Government must take some responsibility for the problems which have developed there over some considerable time. I wonder whether a Minister went walkabout to the Islands to find out. Not often enough, I suspect. It is unacceptable to wait until the crisis there has reached such proportions that direct rule from Britain was considered to be the only remaining option. Earlier, less drastic, action was possible and certainly preferable.

Direct Rule, apart from being expensive, has gone down like a lead balloon. What is relevant to this debate is that potential investors in the formerly economically self-sustaining islands have pulled out and the territory's budget is likely to have a big hole in it, which will need to be plugged by our Treasury. The Turks & Caicos Islanders are not alone among residents of overseas territories to lack confidence in the British Government, to suspect their motives and suffer the friction that this causes.

Ascension Islanders feel very much let down by the British Government because grand plans for the Island's democratisation were terminated. The plans that the islanders had for improving their standard of living and quality of life, on the basis of what was originally proposed, were destroyed at a stroke. I know the British Government will claim, unconvincingly in my view, that there was a massive misunderstanding somewhere in all this and that the aspirations of Ascension Islanders were misplaced. Quite simply, how can everyone resident on Ascension and others beyond misunderstand to such a great degree what was being proposed by the British Government? Why did no Minister go walkabout to explain to the Ascension Islanders what was and what was not in the plan?

The first part of the plan did get completed—the introduction of direct and personal taxation. This new taxation regime is currently in great disarray because of a dispute over tax between the MoD and Ascension's administrators. As a result, the island is currently on course to descend into debt by the middle of next year and because of it—another cost to the British taxpayer—I understand that redundancy notices are being prepared, or may have been issued, to those providing vital services on the island.

This desperate state of affairs continues a little further south from Ascension on St Helena. In May, we had a constructive debate about the need for an airport on this remote island, and I make no apology for banging on about it again because of the potential economic dangers to Britain. In 2005, after several consultations, a decision was made by this Government to build an airport on the island. After lengthy and costly tendering processes and the selection of a preferred construction partner, the Government announced a pause, followed by, unbelievably, yet another consultation. Last month, the Government published the results of this consultation.

I know for a fact that a Minister has never ever visited St Helena. It takes a long time to get there—five days by ship from Cape Town. I know, because I have done it, as has my noble friend Lord Shutt, who mentioned St Helena in this debate yesterday. There is no real economy on the island; parents go elsewhere to earn their living, leaving their children as island orphans, to be looked after by grandparents, relatives or friends.

The Government’s consultation report says that,

“St Helena’s economy is so weak and its population declining so much that it needs a major impetus now to halt this decline”.

The only possible impetus that could do this is an airport. We know that St Helena can develop a sustainable high-value, low-volume tourist industry, which would inject cash into the community while minimising negative impacts. The Atkins feasibility study commissioned by the UK Government in 2005 estimated that annual revenues of up to £33 million could be generated from tourism if the island had an airport.

Not only would an airport save St Helena’s economy, it would also save British taxpayers millions of pounds each year. This year St Helena will receive around £18 million in subsidies from the UK; next year it is likely to be £25 million. During the past 20 years, the UK taxpayer has spent more than £330 million at today’s prices in subsidies to St Helena. That is more than the cost of building the airport. Seventy per cent of respondents to the consultation and every business on the island support going ahead with the airport now.

The report talks of how morale on the island is low, how islanders feel a sense of disillusionment, disbelief, distrust and betrayal, and how there is a tangible fear among St Helenians for the future. If there were any remaining doubt as to whether St Helena needs an airport, the Government’s report has removed it. The arguments for the airport are simple and overwhelming: it would save St Helena and save the British taxpayer money in the long term.

It is rare for us to be able to live up to both our moral and fiscal responsibilities with such ease. Let us not waste this opportunity—let us build St Helena an airport now. I do not expect the Minister to announce that tonight, but in two weeks’ time the annual Overseas Territories Consultative Council meets in London. I know that many noble Lords will be meeting delegates to that forum. What better time for the Government to confirm that St Helena’s airport will be built than at that meeting?

I hope that going walkabout will be the norm in future for Ministers and for members of the MPC. In the interests of good governance, let us make decisions based on facts researched on the ground, not on theories dreamt up in ivory towers.

My Lords, I begin, as other noble Lords have done, by congratulating the noble Lords, Lord Sugar and Lord Martin of Springburn, on their maiden speeches. I have only once ever addressed the noble Lord, Lord Sugar, before. It was 11 years ago, in the improbable surroundings of St James’s Palace. He was there in his capacity as chairman of a well-known football club, and I was there as a representative of the Prince’s Trust, trying to persuade football chairmen to get involved in a programme with young people, working with the trust. At the end of my lecture, the noble Lord, Lord Sugar, advanced on me in a rather ferocious manner and said, “You’ll be hearing from me in the morning”. I spent a sleepless night, but at 9.30 the next morning the secretary of Tottenham Hotspur did indeed ring me up. I went to see him, and Spurs now has a community foundation that employs more than 100 people. I hope that the noble Lord can bring the same energy and effectiveness to his work promoting small businesses across the UK.

Today’s debate has concentrated on the state of the economy and on three big issues: the role which the state should play in preventing recession and promoting growth; the need to rebuild the public finances; and how we ensure that the financial services sector does not threaten the stability of the economy as a whole again in the way that it has over the past year.

As a prefatory remark, I share the optimism of the noble Lord, Lord Eatwell, about the future path of the economy. I do not, in this singular respect, agree with the noble Lord, Lord Skidelsky, that one should look to the 1930s to see what is likely to happen next. The analogy with the 1930s does not seem particularly apt, if only for two reasons. First, motors of growth across the world do not depend just on America and Europe in the way that they did in the 1930s. If we look at what is happening in China, India, Brazil, and in much of the east, there are robust levels of growth which will continue and grow. A long period of slow growth is much less likely in both America and Europe than if we ourselves had to be the motors of growth for the world as a whole.

Secondly, the role of the G20, hastily cobbled together though it may be, means that instead of countries operating in a protectionist spirit, we now have the world’s 20 most important global leaders at the very least paying lip service to working together to promote growth, and in many respects actually doing something about it.

On the role of the state in preventing the recession and promoting growth, we on these Benches agree with the principle of the fiscal stimulus, if not necessarily with all the details. We share the Government’s view that it has had some beneficial effect. We also agree that it would be foolish to move too aggressively at this point to cut the budget deficit, and that one needs to be sure that growth is under way before any rebalancing takes place. Here I agree with both the noble Lords, Lord Skidelsky and Lord Desai. We do, however, think that we now need additional measures to promote growth for the medium to long term while at the same time moving towards rebalancing the economy. I shall refer to just one of those measures this evening.

We need to find a new mechanism to channel more funds into infrastructure investment, not least to fund the growth of the green economy. That is not only necessary for our long-term competitiveness; it also creates many jobs in the short term. We have therefore called today for the establishment of a national investment bank along the lines mentioned by the noble Lord, Lord Eatwell, earlier on. We would hope that such a bank might receive wholesale and retail funding. We are not quite suggesting that we revert to the concept of war bonds, because we are not in a war, but the concept of recovery bonds, which might be attractive to individuals and wholesale funders, has merit. We hope very much that this option will be pursued as a way of bringing together a number of initiatives that the Government currently have under way to extend the scope of infrastructure investment.

The noble Lord, Lord Sanderson, talked about nuclear investment in Scotland. Scotland has the potential to generate more electricity from wind and wave power than virtually anywhere else in the world. But it will not do that without much more investment than anybody is currently proposing. We believe that an investment bank could play a large part in generating funds for such an initiative.

We heard a number of other suggestions for rebalancing the economy, concentrating on sectors beyond the financial services. I support the comments made by my noble friend Lord Lee about the importance of the tourist industry. It is a Cinderella industry that employs many people in some of the poorest, lowest-income parts of the country, and it needs to succeed if those economies are to succeed.

Finally, the noble Lord, Lord Eatwell, again stole my words in terms of redirecting funding from rich to poor. He pointed out the value, in terms of growth, of a stimulus to people on low incomes. That is one of the reasons why we have been in favour of a tax switch which would involve higher taxation by raising the capital gains tax level, reducing tax relief on higher income earners’ pensions and redirecting that to people at the bottom end, to bring millions of people out of tax.

The second issue that we discussed this evening is the need to rebuild public finances—a point on which everyone is agreed in principle. In the Queen’s Speech the Government are proposing a fiscal responsibility Bill—the successor to the fiscal rules, the golden rule and the sustainable investment rule. Unfortunately the rules were not sustainable when pressure arose, and the fiscal responsibility Bill is not worth the paper it is written on unless we know how the Government will meet it. Where is the sanction if the Government miss the targets in the fiscal responsibility Bill? It is the most threadbare of proposals and, without some beef behind it, has no real credibility.

We are looking forward to the Pre-Budget Report to hear how the Government intend to begin to move towards their self-imposed target. It is an arbitrary target—why 50 per cent rather than 40 per cent or 60 per cent or any other figure on either side of those? But we accept, and we hope that both the Government and the Conservatives accept, that if we are to meet that kind of target, we will have to take lots of decisions that will be relatively if not absolutely unpalatable. My noble friend Lord Oakeshott talked about public service pensions. That is one area that any Government will have to look at. But there are others. We will be discussing the Pre-Budget Report in another month.

The final big issue relates to how we make the financial services sector less reckless in excessive risk-taking, if we can; or, if it is to be reckless, reduce the impact of the consequences of that risk-taking on the state if things go wrong. The Financial Services Bill proposes to strengthen the regulatory structure in a number of ways. It proposes to make the tripartite structure a Council for Financial Stability. This is a completely vacuous change. It is almost totally meaningless and does nothing to change responsibility; it just gives a new title to the same people, meeting and discussing the same things. The Bill also gives the FSA a financial stability objective, which in itself seems sensible. The key issue is how the tripartite structure—although it is no longer called that—responds in difficulty. We discussed this when the Banking Bill was going though and strongly supported proposals to have the Bank of England’s Financial Stability Committee be a joint committee of both the Bank and the FSA. We thought that was how financial stability could best be safeguarded under stress.

All that, though, is largely irrelevant to the way in which the banks work and the changes that are needed. We need to look at capital ratios, levels of borrowing, international co-ordination, breaking up the banks between the casino and utility functions and paying for government insurance. Most of these issues are not covered at all in the legislation. The two which are—namely remuneration and living wills—leave a lot of the details unanswered. The noble Lord, Lord Plant, said, “Do not expect any change on the part of the bankers”. One of the lessons from the experiences of recent months is that the bankers certainly have not changed and are putting up ferocious resistance to any single change. Over the last few days we have had the spectre of Mr Tiner saying that it would be bad for banking if capital ratios were increased. There has been a concerted attempt to stop the Government doing anything about disclosing remuneration levels at a time when we now know that the two nationalised banks received over £60 billion in support from the Government. It is probably too much to expect people to be grateful in life but, certainly, if any class has cause to be, it is the bankers, and if any class is not, it is the bankers. We wish the noble Lord, Lord Myners, all strength in his continuing battles in that area.

I refer quickly to a couple of other points that were made. I strongly agree with everything that the noble Lord, Lord Sawyer, said about the new mutuals. I hope we can find a mechanism to strengthen that sector. So far we have failed. There has been a lot of talk about it, but we have not succeeded. I hope very much that the comments of the noble Lord, Lord Addington, about the Flood and Water Management Bill will be taken on board and that we get that Bill through the House before the election.

Finally on legislation, we have heard very good speeches about the Digital Economy Bill from the noble Baroness, Lady McIntosh of Hudnall, and the noble Lord, Lord Puttnam. We support much of what they said. I particularly underline what the noble Lord, Lord Puttnam, said about the need to explore ways in which our traditional commitment to impartiality in news gathering can be further safeguarded in legislation. That will obviously come up when the Digital Economy Bill is being discussed.

At least that Bill has some possibility of being enacted before the election. I fear that both the financial Bills that we have discussed will fall by the wayside and that, instead, we will be looking at some rather different financial bills after the next general election.

My Lords, it is a pleasure to wind up in this debate for these Benches. We were privileged that two noble Lords chose to make their maiden speeches today. I, too, congratulate the noble Lords, Lord Martin of Springburn and Lord Sugar, on their excellent speeches. We look forward to their future contributions in your Lordships’ House.

We have had a good debate. I pay tribute particularly to my noble friends for their accurate attack on the Government’s economic and business policies. It was a pleasure to hear my noble friend Lord Patten of Barnes speak in a debate on the economy. He uttered wise words on the importance of higher education and research. It was also a pleasure to have the noble Lady, Lady Saltoun, join our debate. Her reminders about waste have great resonance across a wide range of aspects germane to this debate. I welcome her contribution.

The gracious Speech was extremely short, as befits the short legislative window before the people of our country are allowed to choose their next Government. One of the biggest issues facing the people of this country is a broken economy, but voters will find nothing in the gracious Speech to deliver a healthy economy. My noble friend Lord Hunt mapped out a compelling case against this Government’s performance on business and the economy. I make no apology for repeating the charges against the Government; we need to be absolutely clear about their failures.

The first charge is that the Government have mismanaged our economy and our public finances. The UK is experiencing the longest and deepest recession on record. The OECD says that we will have the largest deficit in the G20 this year, next year and the year after that. The Budget forecast is that next year the Government will borrow 14 per cent of GDP—double the level which forced the Labour Government of the 1970s into the arms of the IMF. The Government spin this as the UK being swept along by a global phenomenon, but the truth is that the Prime Minister’s dangerous economic policies created a massive debt-fuelled boom which led to the bust that we are now in. Can the Government explain why the UK is still in recession when the majority of Europe, Japan and the US are now out of recession? Which bit of the global economy can the Government blame for our continuing recession? The answer lies not abroad but in No. 10 Downing Street.

The crucial issue now is how health can be restored to our economy and our public finances. The Government’s answer appears to be a Fiscal Responsibility Bill, which, according to the gracious Speech, will “halve the deficit”, as if that could be done by legislative fiat. In our view any self-respecting Government would seek to reduce the deficit by more than that by 2014. But that aside, a Bill is simply not the right answer. As Professor Willem Buiter so aptly put it last week:

“Fiscal responsibility acts are instruments of the fiscally irresponsible to con the public”.

I wager the Government will find that the public are not easily conned. This is a pointless Bill. Only firm action will reduce the deficit.

A number of noble Lords, including the noble Lord, Lord Mandelson, distanced themselves from, and, indeed, criticised, our policy of cutting the deficit with courage and purpose, to use the words of my noble friend Lady O’Cathain. There is no settled view on when and how fast to cut the deficit. I shall not weary the House with supportive quotations from the OECD, the CBI or the ECB. My noble friend Lord Northbrook has already outlined the recent supportive Policy Exchange report. Our path will support faster economic recovery and growth, and will do much to restore the confidence which my noble friend Lord Wakeham reminded us is so important. We will be happy to ask the British public who they trust to restore our economy to health.

The second charge is that the Government created a financial regulatory system which failed and thus allowed a systemic financial problem to overwhelm us. The Government usually blame everyone else for this. But it was our Financial Services Authority and the tripartite arrangements which failed to spot or deal with the issues building up in the UK. Yesterday’s revelations that the Bank of England had to put £62 billion into RBS and HBOS to keep them afloat show how far the regulatory system, personally designed by the Prime Minister, let our country down.

The Financial Services Bill preserves the discredited tripartite arrangements, renamed as the Financial Stability Council. I agree with the noble Lord, Lord Newby, that this represents a vacuous change designed merely to change the nameplate without fixing any of the structure’s failings. I say to the noble Lord, Lord Mandelson, that it would be “reckless and foolish”—his words—to preserve this failed structure.

We are clear that a completely different approach is needed. We would place the supervision of systemically important institutions with the Bank of England, which is best placed to link macroprudential and microprudential supervision. Our country cannot afford another regulatory failure of the scale facilitated by this Government’s policies. The Financial Services Bill fails to provide the correct response.

There are aspects of the Financial Services Bill which we will support—particularly those relating to consumer protection and consumer understanding of financial matters. I have one question for the Minister, if he is listening. Do the Government regard the Bill’s provisions as sufficient to deal with the impact of today’s Supreme Court judgment on bank charges? Will the Government be open to amendments to the Bill on that? I also have a promise for the Minister: the whole Bill will receive our most careful scrutiny.

The third charge is that the Government have failed to support business. My noble friend Lord James had some interesting ideas for the noble Lord, Lord Myners, and we will listen carefully to his response on the London rules. We on these Benches have long complained about the burdens on business from the relentless tide of regulation and from a complex and near-impenetrable tax system. My noble friend Lord Cope spoke about the problems for small businesses. The Government talk a good story on regulation, but I have yet to meet a businessman who says that the burdens have been lifted to any serious degree at any time over the past decade.

My noble friend Lord Hunt set out clearly the failure of the Government’s myriad of support schemes for the economy. Crucially, they have failed to restore credit to the economy. The noble Lords, Lord Bilimoria and Lord Rowe-Beddoe, underlined this as regards small and medium-sized enterprises. If only the Government had followed our policy of a big, but simple, national loan guarantee scheme, businesses might by now be receiving the credit they need, and we might be seeing a more promising return to growth.

Under this Government, manufacturing has been hard hit, with employment falling by nearly 60 per cent. Today’s revised GDP figures confirm that the productive industries went against the trend and fell further in Q3 than in Q2. When the Government fail to support businesses, they also fail people. Unemployment continues to rise above 2.5 million and employment is falling. There are now approximately 8 million economically inactive people, and the real tragedy is that 1 million young people under 25 are not in employment, education or training. These people need jobs; jobs need growing businesses; businesses need the support of the Government. They are not getting it.

The last Budget forecast £175 billion of borrowing this year. We will find out in next week’s Pre-Budget Report whether the estimate holds or whether, as many suspect, the figure will have risen in the past six months. The deficit is being financed in the short term by the convenient quantitative easing programme, under which the Bank of England prints money in order to allow banks to buy gilts. My noble friend Lord Ryder reminded us of the inflation dangers in quantitative easing, and that it has to come to an end. This will then put pressure on the gilts market and on sterling. The UK has already been marked out as the country most likely to lose its triple-A rating. Our ability to fund our deficit, and the cost of that, hang in the balance.

We should be in no doubt that markets are placing little reliance on the economic policies of the Government. They are already looking towards the policies of the Government after the next election, and they see some hope that a victory for my party will restore common sense and purpose to economic management in the UK. We do not relish spending the next few months playing around with legislation that has been cobbled together in order to draw dividing lines between the party of the Prime Minister and First Minister and my own party in a general election campaign. We believe that the country deserves better and that the sooner the people give their verdict the better.

My Lords, this has been a very good debate. The speeches have covered a breadth of topics with much insight. I have been invited to Blackfriars Bridge Road by the noble Lord, Lord James of Blackheath; and the noble Lord, Lord Jones of Cheltenham, has suggested that I go walkabout in the British Overseas Territories. Subject to Lloyds Bank being in agreement, I suggest to the noble Lord, Lord James, that we go this Friday morning. On the subject of the overseas territories, I shall pass on the message to my colleagues in the FCO, but I would remind the noble Lord, Lord Jones, that we have recently published the Foot report, which includes a rigorous review of the sustainability of the economies of the Crown dependencies and overseas territories.

I will touch on as many of the points that were raised as I can, but I beg lenience in advance of inevitable oversights. As the noble Lord, Lord Addington, said, I need peripheral vision to cover the full range of subjects that have been raised. I start by congratulating the noble Lords, Lord Martin of Springburn and Lord Sugar, on their excellent maiden speeches, about which I will say more in a moment.

Two issues have been very much in the news today. First, I will say a few words about the emergency liquidity assistance and the Chancellor’s Statement earlier today in the other place. Then I will touch on the subject of bank charges, raised by the noble Baroness, Lady Noakes.

As the Chancellor set out, one function of central banks is to provide emergency liquidity to banks when it is necessary to do so. Lender of last resort facilities have been a feature of the banking system for centuries. It is therefore essential that the Bank of England has the power to lend to individual banks facing temporary liquidity problems. The Bank must be able to do so effectively, and on occasion this will inevitably mean that it has to do so covertly. The noble Lord, Lord Hunt, reminded me that I used that term as he was eating his cornflakes this morning. Disclosure of individual operations could lead to a loss of confidence and exacerbate short-term liquidity problems.

The governor was clear in his advice to the Chancellor that the support provided at the end of last year should be covert. The absence of a covert mechanism was one problem that we experienced in September 2007 when we addressed the issues at Northern Rock. The problem was recognised by the House and by the Treasury Select Committee in its report on Northern Rock. Early in 2008, we consulted on proposals to facilitate covert operations, and following the Banking Act 2009 we brought to an end the automatic disclosure of liquidity assistance by the Bank of England. This enabled the Bank to decide the most appropriate way to make disclosures to the market. The FSA, too, has said that there must be good reasons for delaying disclosure of emergency liquidity operations.

No one should underestimate the gravity of the situation that we faced 12 months ago. I have said that repeatedly to this House and publicly. We came very, very close to a complete collapse of the banking system, and I think that the facts as disclosed yesterday by the governor give further evidence that what I have been saying to the House has been a correct depiction of the situation. Protecting retail depositors and maintaining financial stability was essential, and we achieved those goals. In his Statement to the other place on 6 October 2008, the Chancellor said that the governor had made it clear that,

“in these extraordinary market conditions, the Bank of England will take all actions necessary to ensure that the banking system has access to sufficient liquidity”.—[Official Report, Commons, 6/10/08, col. 21.]

Yesterday, the Governor of the Bank of England told the Treasury Select Committee that the Bank had extended such emergency liquidity assistance to RBS and HBOS in the autumn of 2008. It is the policy of the Bank that such assistance should be disclosed once the Bank considers that the need for confidentiality has ceased. It is quite monstrous for representatives of the party opposite to suggest that in some way the Bank of England failed in producing an accurate and complete set of audited accounts to share with the nation. The accounts produced by the Bank of England correctly reflected the consequences of the support that it had provided, and I think it was rather poor form for Mr Fallon to suggest that there was something in some way wrong with the Bank’s accounts.

Now that RBS has signed up to the asset protection scheme and Lloyds Banking Group has embarked on its alternative strategy for capital-raising, the governor’s judgment is that there is no reason for the assistance provided to remain secret. The Chancellor and I agree with this judgment. The support was provided with good security—well over 100 per cent additional security. The funds were repaid at the turn of the year and a penal rate of interest was charged by the Bank of England. There has been no cost to the taxpayer; indeed, the taxpayer has secured a gain from this essential action.

It is important that the Bank has the opportunity to provide emergency liquidity assistance when it judges it necessary—a power conferred on it by Parliament. The noble Lord, Lord Hunt, referred to the fact that this was covert. The last time that the Bank of England used covert support operations was in 1991, when Norman Lamont, now the noble Lord, Lord Lamont, was Chancellor of the Exchequer. That was not reported until 1994. In case the noble Lord, Lord Oakeshott, was intending to make a similar point, I checked when special liquidity support was last provided by the Bank of England when we had a Liberal Chancellor of the Exchequer. That took me right back to Asquith in 1911, but I do not believe that the Bank of England ever publicly disclosed it. Therefore, we have now moved on to a more transparent and accountable system, but no doubt the Liberal Democrat Party, if ever elected, would support additional transparency.

I share the admiration expressed by my noble friend Lord Eatwell for the governor and the chairman of the FSA. The governor, in particular, is a man of exceptional intellect and integrity, and we are very fortunate to have him in place.

The second issue in the news today is the Supreme Court’s decision on bank charges. Consumers will be extremely disappointed with this outcome. It is clear that in the past banks did not think enough about their customers, and that needs to change in the future. We have made it clear that banks need to agree a fairer and more transparent system of charges for the future, and this is something that the OFT is discussing with them. We would prefer to see a voluntary agreement but we do not rule out further measures, possibly including legislation if a voluntary approach does not deliver the kind of behavioural changes that are required. We are looking into this in tandem with the ongoing discussions between the OFT and the banks.

In a competitive market, banks need to respond to their customers or risk losing their business. We have made it easier for people to move their accounts if they are not happy with their bank. My noble friend Lord Sawyer spoke eloquently about the attractions of mutuals and the need for banks to engage more openly and constructively with their customers. The new Financial Services Bill, on which I shall say more in a minute, will provide greater power and protection for customers in the future.

Let me set out the economic context of the debate. I listened with great interest to the opening speech of the noble Lord, Lord Hunt of Wirral. On economics, I heard no analysis; I heard no policies. But I heard what the noble Lord, Lord Razzall, described, as a rumble. In eurospeak, that is nul points for constructive ideas about the economy. I assumed that the noble Lord, Lord Hunt, was probably waiting for the noble Baroness, Lady Noakes, and was saving the better points for his noble friend. Regrettably there were no constructive proposals on the economy and no real insights into Conservative thinking. Once again, nul points for the Conservatives on having anything useful to say about the economy.

The global economy is forecast to shrink by 1.25 per cent in 2009—the first time it has shrunk in more than 60 years. Every country is being affected by this global recession and every country has been hit in different ways. The recession was triggered by a financial crisis that was global in origin and unprecedented in scale. There are many views on the cause of the financial crisis. I believe that at its heart it was a failure of governance and an abdication by many in the financial sector of their fiduciary and moral obligations to shareholders, employees and society. There was also a failure by institutional shareholders to protect the interests of their clients by acting as engaged owners, a point made by the noble Lord, Lord Plant, in his insightful comments. The noble Lord, Lord Oakeshott, also mentioned that, and reminded us that the Government—the taxpayer—is a significant shareholder in the Royal Bank of Scotland and in Lloyds Banking Group.

I refer to the comments of the previous chairman of UKFI, Mr Glen Moreno, who described the governance of the UKFI as “fidelity with nuclear weapons”. UKFI will be an exemplar of corporate governance and will, I hope, achieve the very high standards that the noble Lord, Lord Smith of Clifton, would expect from an informed and engaged shareholder.

In Her Majesty’s gracious Speech, we brought forward legislation to enhance the governance of the financial sector and to control the system of rewards. The noble Baroness, Lady Noakes, assured me that the Bill would receive meticulous scrutiny. That, I expect, is because the Conservative Front Bench is extremely good at meticulous scrutiny, but not quite as good at seeing the big picture of financial architecture and economic challenge. I know that the noble Baroness specialises in meticulous scrutiny.

The Financial Services Bill will ensure that the financial system that emerges from the crisis is not only rebuilt on a stronger and sounder footing but is fairer and works for consumers. The FSA will be given greater powers to consider systemic risk when supervising individual firms. The FSA’s powers to implement internationally agreed standards on remuneration practice will be strengthened to ensure that bonuses are awarded for long-term performance and calibrated inversely to risk. The Bill will place a duty on the FSA to require firms to establish living wills or recovery and resolution plans, as referred to in the legislation.

The question of how best to strengthen financial regulation to prevent future crises is complex and there is clearly a wide range of views on the subject both in this Chamber and outside. The Government lead the international debate on issues of resolution and strengthening the financial system. I note here the speech of my right honourable friend the Prime Minister to the G20 Finance Ministers recently in St Andrews when he spoke of the need to ensure that banks internalise and self-insure for risk in the future. That was also referred to by the noble Baroness, Lady Valentine. The Prime Minister in that speech also spoke about transaction taxes—referred to by my noble friend Lord Haskel—as being another measure to ensure that society no longer has to underwrite the banking system.

On the question of the institutional framework, the Government do not believe that altering the internal boundaries, as proposed by the Opposition Front Bench, will of itself solve anything at all. Rather, strength and regulation are needed, as well as enhanced co-operation between the authorities. The FSA’s new powers and the council for financial stability will do just that.

We are taking action to address the problem of systemically important firms. The measures in the Bill to require firms to produce recovery and resolution plans will address the issue of systemic risk posed by firms by reducing the probability of firm failure and the impact of such failure, should it occur. Firms will no longer be too complex, too interconnected or too big to fail. Banks may have to institute a measure of restructuring to facilitate the development of acceptable recovery plans. The noble Lord, Lord Razzall, referred to recent comments in the Sunday Telegraph from Mr Varley of Barclays Bank in reference to proprietary trading. I think that that was in itself a thinking process in preparation for having to provide for living wills, the de-risking of the bank and, possibly, a more significant strategic restructuring.

The noble Lords, Lord Wakeham and Lord Newby, both spoke about the issue of casino banks and Glass-Steagall. We believe that many of the objectives that those who propose those structures have in mind can be achieved by the combination of stronger capital, more liquidity and the need for recovery and resolution plans. I agree with the noble Lord, Lord Newby, that many in banking still have tin ears. They do not understand the reality of what they have done or how annoyed people are by their excesses and their continued sense of entitlement to extraordinary reward.

My noble friend Lord Haskel referred to the need to rebuild trust. The report from Sir David Walker tomorrow will, I think, provide some valuable steps forward to strengthen governance and rebuild trust. My noble friend Lord Haskel also referred to the activities of investment banks. He referred to the term “market colour”, high-frequency trading and the high profitability of investment banks. There are questions here about the extraordinarily high rent that investment banks appear to be taking from capital providers and capital users. It defies rational analysis that they should be as profitable as they are unless there is some advantage there, which may lie in the area of market colour or elsewhere, which is being exploited. I am alert to and constantly probing that.

The noble Baroness, Lady O’Cathain, asked whether anyone had suffered being banned from acting as a director. The Prime Minister, in his speech at the Labour Party conference in Brighton—a truly wonderful speech—said that he was absolutely committed to ensure that people who had been up to mischief and wrongdoing should not be able to serve as directors of public companies. The noble Baroness will no doubt be aware that the Lloyds Bank circular issued to its shareholders recently referred to the fact that the FSA is carrying out an investigation into certain issues relating to HBOS, and Bradford & Bingley has also announced that investigations are continuing. I fear that we will have to watch for and await announcements. I say the same in response to question on a similar subject from the noble Lord, Lord Smith of Clifton.

The Government took rapid and decisive action to combat the worst effects of the global financial crisis. We provided real help to people and businesses by putting a £20 billion stimulus into the economy. The noble Lord, Lord Razzall, referred to non-standard monetary policies and quantitative easing. He referred to standing outside Parliament waiting for the helicopters to shower pound notes on him. I fear that in front of Parliament is not the right place to stand. He needs to stand in those constituencies on which the noble Lord, Lord Ashcroft, is pouring huge amounts of money from his offshore helicopter—on those constituencies where he thinks that it is possible to buy your way to electoral success.

It is a shame; that is absolutely right. It is a chronic shame that a person is able to spend that much money—that quantitative easing is being used in that way.

In response to the noble Lords, Lord Bilimoria and Lord Rowe-Beddoe, we have ensured that businesses have access to the finance that they need to prosper and invest, both in supporting the financial system, enhancing cash flow through targeted schemes such as the enterprise finance guarantee, which has provided guarantees of £1.3 billion, and through the working capital scheme, which is offering up to £10 billion to SMEs. The noble Lord, Lord Sugar, in a well received speech, spoke about the advice that he intends to give to small businesses. We welcome that, and we look forward to his continuing contributions to debate in the House.

A stable and efficient financial market is critical for the UK’s recovery and future growth, but we must not forget that the UK is the world’s sixth largest manufacturer, as the noble Lord, Lord Bhattacharyya, reminded us. The Government acted quickly to support the auto industry through the scrappage scheme and the automotive assistance programme. In addition to taking these temporary support measures, the Government are determined to ensure that the UK has a strong platform for future growth. The OECD ranks the UK’s labour market regulation as the second most flexible in the world, and the World Bank rates the UK fifth in the world for ease of doing business. We will ensure that we have a world-class competition regime to drive productivity in UK businesses. We will create a skills system that is responsive to the needs of business, such as by creating flexibilities for SMEs in Train to Gain. The noble Lord, Lord Martin of Springburn, spoke about the vital importance of apprentices. We reflected that in our recent White Paper, Skills for Growth, which announced not only 35,000 additional apprenticeship places, but 20,000 public sector apprenticeships to be delivered through procurement. The noble Lord, Lord Martin, is a welcome new Member of our House. He is a grand parliamentarian and a wise voice, and we will welcome his contribution to many debates.

We will drive innovation. The measures will include the £150 million a year Higher Education Innovation Fund to support knowledge transfer in universities and additional support for the Technology Strategy Board. I echo the wise words of the noble Lord, Lord Bilimoria, about the importance of education, enterprise and responsibility and the observation by the noble Lord, Lord Patten of Barnes, about the importance of investment in higher education. Innovation is a key driver of productivity, and we are significantly increasing the investment in science and education. We will meet the infrastructure changes through measures including the foundation of Infrastructure UK and the implementation of the Digital Britain programme. We have heard many considered and knowledgeable interventions on the Digital Economy Bill, including from the right reverend Prelate the Bishop of Manchester and my noble friends Lord Puttnam and Lady McIntosh of Hudnall. They made technical points, and I shall reply to them in writing. The Bill supports a competitive communications infrastructure and our creative industries, enhances public service broadcasting and protects children through new age ratings for computer games.

Throughout these measures that we have laid before Parliament there is the central aim of fairness and equality in the workplace, to which my noble friend Lady Prosser referred. We will work with unions to raise employer investment in and ambition for the workforce. Equal treatment for agency workers marks another important step forward.

The IMF and G20 Governments agree that prematurely withdrawing support from our economies would undermine recovery. The noble Lord, Lord Eatwell, reminded us of the remark by Mr David Cameron that he would withdraw support now. I thought it was chilling. The noble Lord, Lord Skidelsky, was devastating in his analysis of and commentary on the Conservative policy. The noble Baroness, Lady Billingham, talked about turning the clock back. As I listened to the Conservatives talk about economic policy, I heard remarks that made me think that they are planning to turn the clock back.

I am delighted to see the noble Lord, Lord Northbrook, in his place. I imagine that the Whips are also delighted to see him there because he is clearly struggling. He tells us that he reads the New Statesman and the Guardian and also referred to the National Australia Bank. I am not familiar with that organisation, but I will take out a subscription immediately. The noble Lord said that it would be scandalous at this time to help the elderly in their homes because it is not affordable. He went on to ask whether we do not already have enough consumer protection for people in the financial services sector. This is the vision of what a Conservative Government would do. A Conservative Government would care little for those who are denied opportunity or who are poor, disadvantaged or who look to the state for support. Contrary to the suggestion made by my noble friend Lord Eatwell that the Government should redistribute to the poor as part of a fiscal stimulus—

He is not in his place—clearly the Conservative policy is to redistribute to the rich.

In any recession, government spending goes up. It would be irresponsible for the Government to constrain spending artificially. At the Budget, we forecast growth to return around the turn of the year. That judgment remains unchanged. The majority of City forecasters, including the IMF, the NIESR, the European Commission and, more recently, the OECD, agree with that judgment. The Government will bring forward legislation that requires the budget deficit to be reduced year on year, ensuring that the national debt remains sustainable in the medium term. We will take into consideration the wise words of the noble Lady, Lady Saltoun, about the need to avoid waste, and the observation by the noble Baroness, Lady Valentine, about the need to press for efficiency in the post-Gershon environment.

The noble Lord, Lord Ryder of Wensum, made a number of comments, not all of which I agreed with, but it was a very wise and thoughtful contribution to the debate. I shall read it in Hansard with great interest and reflect on it. I do, however, think that he misdirects himself on the immediate risks of quantitative easing. I am at a complete loss to understand how the noble Baroness, Lady Noakes, believes that the withdrawal of quantitative easing will lead to pressure on sterling. Surely economic analysis suggests quite the opposite, but once again perhaps the big picture is being missed.

Legislation on fiscal responsibility demonstrates our commitment to the sustainability of public finances and adds focus to our plans. It is important that business investors have certainty about the Government’s fiscal plans, and the Fiscal Responsibility Bill provides for this.

I look forward to debating these important measures and many other legislative proposals set out in the gracious Address as they enter the legislative process. I know that I have not been able to answer all the points that have been made in the time available. In particular, I am conscious that I have not responded to the noble Lord, Lord Sanderson of Bowden, on nuclear investment in Scotland, to the noble Lord, Lord Lee of Trafford, on tourism, to the noble Lord, Lord Cope, on regulation and quangos, or to the noble Lord, Lord Addington, on sporting matters and surface water, but I or the relevant departmental Minister will ensure that noble Lords receive replies in writing on those matters.

I thank all noble Lords for their valuable contributions to this debate. I apologise that my winding-up speech has slightly overrun, but it has been a long debate and there have been many contributions and a substantial number of questions from noble Lords. I have endeavoured to answer as many as I can. I will ensure that others are covered in writing, as I have said.

Debate adjourned until tomorrow.

House adjourned at 9.49 pm.