House of Lords
Thursday, 10 September 2015.
Prayers—read by the Lord Bishop of Peterborough.
Oaths and Affirmations
Lord Wolfson of Sunningdale made the solemn affirmation, and signed an undertaking to abide by the Code of Conduct.
Iraq and Syria: Religious and Cultural Heritage
My Lords, our strategy is to prevent the illegal importation of Iraqi and Syrian antiquities through UK customs and border controls. Border Force officers, supported by HMRC intelligence officers and investigators, enforce the comprehensive sanctions legislation that is in place. Our current assessment is that ISIL’s revenue stream from the illegal trade in oil is far more significant than that raised from trade in Iraqi and Syrian antiquities.
I thank my noble friend the Minister for her response. She will join me in noting how sad it was to learn of the death of the archaeologist Khaled al-Asaad, killed by IS for bravely refusing to reveal where artefacts from Palmyra were stored. This overall global trade is worth millions and is a means of funding terrorist operations. Britain is seen as a key nation because of our world-renowned universities, archaeologists, museums and auction houses. Will the Minister please outline whether it is still the Government’s commitment, as outlined in the previous Parliament, that we should now ratify the 1954 convention for the protection of cultural property in the event of armed conflict and outline when parliamentary time will be found for this?
My Lords, I agree with everything that my noble friend said. I pay tribute in particular to the dedication of heritage professionals in dangerous regions such as this, including the late Khaled al-Asaad, who gave his life to protect the treasures of Palmyra. We will bring forward legislation to ratify the Hague convention at the first opportunity. This is a new Government. The Secretary of State regards it as a priority. We are committed to protecting cultural property during armed conflict. Noble Lords will be glad to hear that our Armed Forces already act in the spirit of the convention and its protocols.
My Lords, there was a much wider debate earlier in the week following the repeat of the Statement by the Prime Minister on the many things that we are trying to do to help in this terrible conflict. That obviously includes trying to find a better outcome in these areas and to tackle the difficulties of oil and other issues.
My Lords, what my noble friend said about ratification is extremely welcome to everyone who cares about these things, but can she please ensure that this is really given proper priority? Can she also assure the House that the British Museum and other British museums will give safe refuge to such items as come their way, pending restitution when peace has been restored?
My Lords, as I have already said, we regard this as a priority. Parliamentary time will have to be found for it. I have been amazed by what the museums have already done in recent years, such as the British Museum’s work in Iraq and the good relations that they have. Looking after artefacts and working with the other institutions is very much part of their core culture. The museums decide on these things themselves, but it is part of the work that the Government are developing, including the new cultural protection fund that we have announced, which we will talk about further in the coming weeks.
Is the Minister aware that the cultural heritage of the Federal Republic of Iraq contains a religion that is fast disappearing? What is she able to offer noble Lords from Her Majesty’s Government to save the heritage of the Yazidi faith, which is a living faith, not a dead faith like the one she is discussing? What is she going to do to save not just the Yazidi artefacts relating to their faith, cultural heritage and particular way of worship but the Yazidi people themselves, who face extinction?
I have much sympathy with the point the noble Baroness makes. The Government are obviously developing a number of programmes. We give priority to the human cost of these horrific conflicts, and much of that has been articulated. I have talked about the cultural work that we are doing, which also includes some very interesting and innovative things such as deploying digital archaeology in conflict zones. The religious angle that the noble Baroness articulated is a new one on me, I have to say. I will take it away and perhaps have a further word with her.
My Lords, noting my interests in the register, will the Minister comment on what moves the Government have made to clear this issue with the British insurance industry, with its world leadership position in the insurance of art and artefacts such as this and its associated loss registers?
My Lords, I will look into the insurance issue and come back to the noble Earl. We have worked very hard to ensure that appropriate guidelines are available for the art and antiques trade and have very good links with the Border Force and the Metropolitan Police. However, the insurance point is a good one and I thank him for it.
My Lords, I am sure many noble Lords will welcome the Minister’s commitment to the ratification of the convention for the protection of cultural property. However, the problem for many in this House is that on 14 May 2014, we heard exactly that response, so 18 months later we are still hearing the same commitment. Will she give a very clear assurance to this House that we will see the commitment acted on in this Session of Parliament?
This is a commitment the Government have made. It is for the parliamentary managers to decide exactly what is done when. All I can say is that we regard it as a priority. The Secretary of State regards it as a priority. The circumstances around the world today make it all the more important. I look forward to debating it in due course with colleagues on all sides of the House.
My Lords, is it really the view of Her Majesty’s Government that the principal source of revenue for ISIL is illegal trade in oil? Do they have an estimate of how much is paid in protection money by Gulf states and other rich Arabs to ensure that none of the refugees lands in Muslim states but that they are all pushed into western Europe?
My noble friend makes a strong point, which goes beyond the cultural area that we are mainly discussing today. I stand by what I said: the assessment I have had is that the revenue stream from illegal oil is a much more serious source of money for ISIL than the cultural items that we are talking about, important though they are.
My Lords, giving every child the best start in life is central to the Government’s approach to reducing health inequalities. This ambition is supported by action across government and the health system at local and national level.
I thank the Minister for his reply. Is he aware of the report published this week by the National Children’s Bureau—I declare an interest as its president—called Poor Beginnings, which shows very vividly how the place where young children live can dramatically affect their health? In particular, it highlights really dramatic differences in areas such as obesity, tooth decay and getting injured, and shows very significant variations in child health outcomes between deprived local authorities. As local authorities take up responsibility for young children’s public health from this October, what steps are the Government taking to support them in their work to narrow the gap in outcomes?
I have indeed read the report by the NCB, although it came out only on Monday so I have not fully digested its conclusions. I think that it very much echoes the work done by Michael Marmot four or five years ago. He said that the first two years, and certainly the first five years, of a child’s life are crucial in determining their subsequent standard of living and health. The variation that the NCB’s report has identified is extremely important. It is a variation not just between rich areas and poor areas but within deprived areas. That level of variation is best tackled at local level by local authorities. The decision to push the commissioning process down to local authorities is probably the right one, but they will be heavily supported by Public Health England.
My Lords, all the evidence suggests that there is a direct link between poverty and poor health outcomes. In view of that—and I accept that the Minister’s department has noble aims—what is his response to the work of the Child Poverty Action Group, which estimated very recently that by 2020, 4.7 million children will live in poverty? What representations has his department made to the DWP about its disastrous welfare policies?
My Lords, the causes of childhood poverty are profound. They are to do with employment, family relationships and education. The work that the DWP is doing with its troubled families programme and the work that the Department for Education is doing in improving educational standards will have a much greater impact on childhood poverty than, for example, focusing solely on things such as tax credits.
My Lords, I do not have the numbers for paediatricians—whether or not there is a shortage. Certainly, there are shortages in some specialties, particularly in A&E and other emergency specialties. I cannot give the noble Baroness a definitive answer on the shortage of paediatricians but perhaps she will allow me to go back, look at the figures and write to her.
My Lords, one of the most significant aspects of child health is to do with access to health services, which is a particular problem in rural areas. The phenomenon of distance decay, the further away you are from where the service is provided, is well documented. Will the Minister tell us what Her Majesty’s Government are doing to increase access to health services for those 900,000 rural households living in income poverty?
My Lords, access to health services is not just a rural issue; it relates also to deprivation, be it urban or rural. I would point out to the House the increase in the number of health visitors, which has gone up from 8,000 to nearly 12,000 over the past five years, and also to the Family Nurse Partnership scheme, which now has 16,000 places on it for younger and teenage mothers. So the Government are doing a lot to improve access. I guess they could always do more.
My Lords, is the Minister aware that in some areas fewer than half the five year-olds reach a good level of development? Given how important this is for their health, education and future employment prospects, why have the Government decided that from next year, the collection of early years foundation stage profile data is no longer to be statutory? How are the Government going to monitor how well children are developing across the piece, and how individual nursery settings are doing?
I am not sure that I can give that question a full answer. I am aware of the early years programme and I think that it is largely up to schools to monitor the development performance of children when they come into reception classes, which they are doing. I have seen the figures that the noble Baroness refers to—the 40% figure of children who have not reached the right development age by the time they come into reception class. It is a serious issue and I will take her words on board.
My Lords, what is the Government’s response to the recent concerns expressed by the Royal College of Nursing about the reduction in the number of school nurses in recent years, and what assurance can the Minister give that the reduction in the public health budget will not lead to a still further reduction in the number of school nurses?
Do the Government accept that intrauterine exposure to environmental toxins, psychological stress and nutritional deficiencies in the mother have long-term health effects on the child, as well as problems that arise in the immediate postnatal period? Will the Government therefore undertake to support epidemiological research in these areas, linked to their reviews of maternity services?
I am well aware of the impact on the health of children before as well as after they are born. I cannot give the undertaking that the noble Baroness would like me to give here today but I am very happy to pick it up with her outside the Chamber.
We have made a number of improvements to the sanctions systems and are implementing further changes following recommendations made by the Oakley review. We are now focusing on embedding those changes and improvements. We will keep the operation of the sanctions system under review to ensure that it continues to function effectively and fairly.
I wonder if the Minister has read the leaflet that his department published for disabled people, which featured Zac and Sarah. Sarah had been sanctioned for failing to produce a CV, but it ended happily. Sarah said:
“My benefit is back to normal now and I’m really pleased with how my CV looks. It’s going to help me when I’m ready to go back to work”.
An FOI request established that Sarah does not exist. The picture was a model and DWP invented the quotes. Real people’s experience of sanctions is very different. Food banks repeatedly see desperate people sanctioned for trivial or, frankly, mystifying reasons, and the scale of sanctions is now such that a fifth—no, almost a quarter—of all JSA claimants were sanctioned in the last five years. Will the Minister please now do what the DWP Select Committee asked: respond to its report and conduct a major review of sanctions before the whole system is discredited?
Let me clarify this. The sanctions level runs at around 5% on a monthly basis. That level is the running rate of sanctions and other figures are simply wrong. On the first point that the noble Baroness made, we do use illustrative examples where they are real, and we make it clear where they are not. In this case, it was wrong—and we have said it was wrong—to have made illustrative examples look as if they were real.
My Lords, I was involved in an inquiry earlier this year on behalf of the Fawcett Society into the effects of the welfare reforms. One of the greatest problems for clients seems to be the errors on the part of staff, as a result of which a woman can go to a post office for some money at the end of the week and be told, “Sorry, you are sanctioned”, because the message had not been passed on that her child was ill so she could not attend an interview—that sort of thing. Can the Minister tell the House what action his staff are taking to stamp out these errors in communications with clients?
Clearly, one error is one error too many. We work to try to eliminate the error rate, and we have layers of safeguards, for both JSA and ESA, to make sure that we review these cases at each level so that we get it right. Some, of course, will creep through.
We have done surveys on this and found that people say that the sanctions regime encourages positive behaviour. According to the figures we have, which have been published, 72% of JSA claimants and 61% of ESA claimants say that it impacts on their behaviour.
My Lords, I think it is the turn of the Bishops’ Benches, and then perhaps we can hear from the Benches opposite.
My Lords, the Feeding Britain report showed that some people have been sanctioned for missing or being late for appointments when it is not their own fault. Is it not possible for the staff at Jobcentre Plus to be given some discretion in whether or not to apply sanctions? Along the same lines, is it fair that some people in rural communities have to spend £7 or more on bus fares to get to routine appointments when the likes of me, who can well afford bus fares, are entitled to a free bus pass?
Jobcentre Plus people do have discretion. There is some, although less, discretion for Work Programme providers. We layer up that discretion with decisions from our decision-makers. It can then go to mandatory reconsideration and on to appeal, so there is a system to allow these things to be reviewed very flexibly. On the other point, the decision that older people should get free travel is one which was made by several Governments in the past.
My noble friend Lady Sherlock’s figures on the number of appeals are absolutely right: they are based on the annual figures. The DWP is sheltering behind monthly figures, which will not do. We know—as I am sure the Minister will agree—that over 50% of those who appeal after being sanctioned have their sanctions overturned, having lived for many weeks, sometimes months, without their benefit. Can the Minister tell the House how many of those sanctioned have mental health problems?
Rugby World Cup 2015
My Lords, the Government are working closely with the Rugby Football Union to ensure a lasting legacy from the Rugby World Cup. It is working to spread the game’s popularity—notably, by improving clubs’ capacity and by offering more young people the opportunity to play rugby, especially in state schools.
My Lords, I am grateful to the noble Baroness for her reply. Many of us are very much looking forward to the forthcoming Rugby World Cup, which will be the first major international sporting event in England since the Olympic Games. Is the Minister aware that way back in January 2012, before the Olympic Games, the then Minister for Culture, Media and Sport declared that the Government would promote at least 1,300 partnerships between schools and rugby clubs, making it easier for young people to play sport after their education? Can she elaborate on what has been done with those initiatives?
My Lords, the Rugby Football Union is well on its way to meeting that target by 2017. It has 960 new links between clubs, schools and colleges in its targeted work. In addition, it has 104 women and girls’ club sections with a new school/college link. The RFU is taking the game into state schools, reaching 130,000 state school pupils in the past school year. I do not know whether noble Lords have seen today’s Financial Times, which describes the Rugby World Cup as:
“A tonic for rugby’s grassroots”,
and highlights the extra £15 million likely to become available for grass-roots rugby.
My Lords, will the Minister give some thought to those at the other end of the grass-roots spectrum—that is, the veterans? Is she aware that a veterans’ tournament for parliamentarians who are involved in the Rugby World Cup is taking place next week, starting in Rugby? If any care to come down to watch, we are also playing at the Richmond athletics ground on Tuesdays and Thursdays.
The parliamentary rugby match is an excellent example of grass-roots rugby, demonstrating over the past 20 years that rugby can be enjoyed by people of all ages. I understand that the noble Lord has regularly distinguished himself in those matches, and I wish him and the team well—and every success for England as well.
My Lords, does my noble friend agree that it is a joy to know that the Rugby World Cup is on terrestrial television—unlike the cricket, which suffers from the fact that a whole generation of young people, unless they have Sky, never gets the opportunity to see it on television?
My Lords, I am sure the noble Baroness made a mistake when she simply referred to supporting England in those matches. The Scots among us, the Welsh and even the Irish will also want her congratulations; I am sure that she will want to give them.
Also, do the excellent plans that the RFU has for those legacy activities extend to women players? The participation figures for young women in rugby are still very poor and they need to be supported.
Of course, I wish Scotland, Wales and Ireland very well as well. When Scotland do extremely well, I will think of the noble Lord, Lord Stevenson, with his fashionable new beard. As noble Lords can imagine, I feel some passion on the subject of women in rugby, as of course does the Minister for Sport, who herself plays football. England women won the 2014 World Cup, and the RFU’s women and girls strategy, launched in September 2014, has built on that. Participation is up by a third, demonstrating a track record of success. Of course there is more to be done, but the RFU is focused on that and it is part of their excellent lead-up and legacy plan.
My Lords, declaring my interest as a co-chair of the All-Party Group on Ticket Abuse, will my noble friend agree that apart from a home nation—preferably England—winning the World Cup, a good way of maximising the grass-roots impact is to back the RFU and England 2015 in their campaign to stop online operators of secondary markets illegally fleecing supporters of the game? I hope my noble friend will also congratulate the RFU on its patience in waiting on the touchline for the Government to launch their statutory review, which was in the Consumer Rights Act, and has to report by May of next year. When will that inquiry be launched?
I thank my noble friend for his comments about the RFU. Certainly a lot of professional work has been done, which has focused also on fraud, which is important. As I explained to him earlier this week in another part of the House, we are very much on track to start this review, and we hope to make an announcement very soon about the chair and the terms of reference. It will be an important review, which will be able to take into account the successes and the problems that are found with ticketing for this very important Rugby World Cup.
My Lords, this is an important point. I do not know the answer, but I do know that in our consultation on the strategy for sport we have a theme that is all about safety and well-being. We are looking at that area and of course have debated it in the context of the noble Lord’s Private Member’s Bill. My impression is that the RFU is very alert to this problem, and I will certainly pass on his comments.
Northern Ireland Assembly
Private Notice Question
My Lords, the question of an adjournment of the Northern Ireland Assembly is a matter for the Northern Ireland Assembly. I understand that the Assembly Business Committee is meeting this afternoon to consider this proposal.
I thank the Minister for that Answer, which of course did not refer to suspension of the Assembly, which is not within the remit of the Northern Ireland Business Committee but within the powers of the British Government. Only two days ago, the Government said that they had no intention to suspend the Assembly. Yesterday, in what is effectively an ultimatum, the First Minister of Northern Ireland said that unless the Assembly was adjourned by the Northern Ireland Business Committee, which is meeting today, or suspended by the British Government, he and the DUP members of the Executive would resign, effectively bringing down power-sharing in Northern Ireland.
I understand the difficulties the Government have, since one of the options does not take place until 2 o’clock this afternoon, and they will not know the outcome of whether there is to be an adjournment within the power of the Northern Ireland Business Committee until that stage. I do not wish to add to the Minister’s difficulties, and I understand that the Government will not wish to say anything prematurely. However, this is a very grave issue indeed.
I will ask the Minister two simple questions. The first refers to the Government themselves. Will they assure us that, at the earliest possible moment after the Northern Ireland Business Committee has met this afternoon, they will bring this issue back to the British Parliament? Secondly, as regards the talks being convened by the Northern Ireland Secretary, which may be under way at present, will the Government give us an assurance that these will be time-limited? If they are not, I can assure him from experience that they will drift on indefinitely, and this crisis will just get worse.
The noble Lord brings vast experience of Northern Ireland to these matters. Indeed, when he was Secretary of State for Northern Ireland, he went through a period of suspension, and he will appreciate the seriousness of any step to suspend. As the Secretary of State for Northern Ireland has already set out, the Government do not think that the time is right to suspend devolved institutions. If circumstances change, the Government will review their options. Clearly, this is a fast-moving situation, and I am sure that the Government would want to keep Parliament informed, and will certainly do so. We had exchanges on this yesterday, and I very much agree that any talks need to be focused, intensive and urgent and, therefore, time limited.
My Lords, I am sure that the whole House is grateful to the noble Lord, Lord Reid of Cardowan, for bringing this PNQ forward and to the Government for responding to it. We are also grateful for the assurance from the Minister that Parliament will be kept informed of the situation as it develops because, as has been agreed, it is so important that that happens. As the Minister also rightly said, this is and will be a fast-moving situation, and we welcome his assurance that they will report back to Parliament as soon as possible. I am sure that all noble Lords are aware of the deep concern across Northern Ireland and the whole of the United Kingdom about this situation, which is a dangerous one. We place on record that we are fully behind the Government in their efforts to resolve this very serious situation.
Just to reiterate, this is an ongoing situation, and the parties will consider the issue of adjournment this afternoon in the Business Committee. While we want to keep Parliament informed as appropriate, it is also worth saying that, in a fast-moving situation, it would not be helpful for the UK Government to give a running commentary on what are very sensitive and serious matters.
My Lords, is my noble friend aware that, when the then Secretary of State for Northern Ireland, my noble friend Lord Brooke, and I conducted the very first set of round-table talks, the end-point of which many years later was the agreement, we made it clear that those talks were time-limited? Both of us believed that the fact that they were time-limited and that we kept to the limit was a significant factor in moving the talks forward. Bearing in mind the well-established allegations that Northern Ireland may run out of money at the end of October, would he not strengthen his original Answer and agree that time-limiting the talks is of itself an important factor?
My noble friend is absolutely right—the budgetary situation in Northern Ireland is acute, which is why the Secretary of State has made it clear that these talks need to be focused, urgent and intensive. The expectation is that they would last between three to four weeks.
I welcome the PNQ from the noble Lord, Lord Reid, the former Secretary of State for Northern Ireland. There is no doubt that the situation in Northern Ireland is extremely serious and it is vital that important and constructive discussions on the future of devolved government and on the Stormont House agreement take place. Surely, this is the time for all Northern Ireland parties to consider the welfare of the whole community, rather than seeking short-term political advantage. Does the Minister agree that it would be useful to have a short adjournment of the Assembly, as that would facilitate positive discussions, free from the wrangling that inevitably accompanies everyday parliamentary business?
I very much agree with the noble Lord that there is support for devolution across the community in Northern Ireland. Our priority remains keeping the devolved institutions functioning. As I said earlier, the adjournment of the Northern Ireland Assembly is a matter for the Assembly, and we await the outcome of the Business Committee’s considerations this afternoon.
My Lords, on the one hand, we hear of suspension; on the other, there is the threat of abdication. I am absolutely certain that talks are the most important thing. First, will the Minister assure us that the Government will go to every length to ensure that talks take place and that they keep going? Secondly, will he assure us that, if there is failure, alternatives are in place for the good governance of Northern Ireland?
My Lords, first, can the Minister confirm that the present crisis is due to some members of the IRA being involved in terrorist activity and killing people? That has brought about the crisis. Secondly, can the Minister confirm that adjournment is far preferable to suspension? Adjournment means that devolution continues in Northern Ireland; suspension means that it is abolished and will later have to be restored. Will he therefore confirm that adjournment is the preferable option? Thirdly, does he agree that something similar to the Independent Monitoring Commission, which was abolished, would be helpful in the present security situation? Finally, does he agree that one of the weaknesses of the cross-party Executive at Stormont was the fact that there was no cross-party Opposition? Will he bear that in mind?
Paramilitary activity is clearly a very serious matter. The scope of the talks is one of two aspects, the other being the implementation of the Stormont House agreement, which is very much the focus of the talks. The IMC is one option for consideration. As we discussed yesterday when these matters were brought up, the current situation is very different from the one that existed in 2004, when the IMC was originally set up. Clearly, we would have to ask such a body very different questions today.
Business of the House
Timing of Debates
My Lords, in the absence of my noble friend the Lord Privy Seal, the Leader of the House, and on her behalf, I beg to move the Motion standing in her name on the Order Paper.
That Lord Goodlad be appointed a member of the Select Committee in place of Lord Dobbs, resigned.
That Baroness Garden of Frognal be appointed a member of the Select Committee.
Motion to Take Note
My Lords, I am delighted to move this Motion this morning. In fact, I rather feel like somebody waiting for the No. 59 bus and then two come along. Having two debates on productivity and the economy this week is most exceptional. Some of us were unable to get on the first bus, as it was slipped in during the summer, so I welcome noble Lords to this rather full second bus.
Now that the new Government may at last be thinking beyond austerity, I feel that it is very important to explore this, and I am grateful to all noble Lords and the Front Benchers for their participation. Perhaps debating this issue twice this week is an indication of its importance.
Let me start with the Government’s recent paper on productivity. Much was repeated in Tuesday’s debate. It certainly pressed most of the right buttons but, like many previous efforts, it is destined to achieve little. Why? It is because there is no strategy. It mentions everything; it prioritises nothing. It remembers everything; it learns nothing. If we want to move from an age of austerity into an age of productivity, it is management and leadership that should be prioritised, and then things will get done. That is because the first task is to encourage a culture of productivity, both in business and in government. Without this, much of the work that the Government do on infrastructure, housing, science and education will all be wasted. This is urgent because in the next 12 months, productivity has to make up for the gap between the recently announced withdrawal of in-work benefits and the rise in the minimum wage. Otherwise, it will lead to job losses. Quite rightly, one does not encourage productivity by driving down wages and making people poorer; that is what happens in an age of austerity.
This is especially true in local government, which has suffered twice the cuts that UK public spending has suffered as a whole. Over the past five years, the cuts in local government have not been so obvious because they are hidden: prisons or roads not being built, or reduced welfare for people whom we do not see outside of their homes. The public sector, which the Government are in charge of, is hardly mentioned in their paper. In an age of productivity, this kind of management is not good enough. If there has to be budget cuts, there must also be management and leadership to help cope with them.
After the age of austerity, the strength of our economy will rely on our ability to adapt to all the new changes coming from many directions. Our ability to manage things will be crucial. The old tools will not solve these new problems. I say this because technology is transforming everything. To start with, business markets and government services can be transformed in months as new apps and ideas reach millions of people in days. This means that it is the younger, digitally knowledgeable employees who will detect the coming change or indeed suggest one. This means that companies, particularly large companies, are going to have to change the way they manage their staff. Employees at all levels have to be free to come up with new ideas and exploit digital platforms. This kind of creativity is stifled by the more traditional forms of management.
Many jobs are now not jobs in the way they used to be defined. Many people are employed part-time or over the internet; it is called transactional employment. Many now work in an online market for casual labour, which is rapidly expanding. This is for not only on-demand or sharing services such as accommodation or taxis but, for example, computer programming. In Europe alone, there are some 20,000 freelancers registered with Upwork, which does this kind of business. The scale of this new world of work is only just emerging. Its impact on the age of productivity will be twofold. First, the Department for Work and Pensions will have to be creative and find a new form of employment arrangement that suits these changing circumstances, so that it does not just become old-style casual labour, with people losing out on training, pensions, holidays and sick pay. Secondly, as people become their own managers, so the economy becomes more productive, and the tax system will have to acknowledge and understand this.
Many noble Lords are concerned about skills shortages. By introducing a training levy, do we presume that the direction of travel is that business and industry will deal with the skills themselves? Is this why larger government contractors must now have apprenticeships?
The Government are obviously unsure about this policy because they have announced that they are going to create seven new national colleges for particular industries, such as nuclear and high-speed rail, with employers expected to contribute towards the capital costs. Meanwhile, resources are being put into university technology colleges, yet FE colleges, which offer the more expensive training and vocational qualifications, have had their funding cut. This kind of muddle confuses parents, and confuses students looking for a technical education and training for a career. To find out whether this is yet another example of the Government remembering everything but learning nothing, I have put down a Written Question asking who will pay the running costs of these seven new colleges. The crucial point is that the right technical education has to be available to those adapting to the technical change.
The age of productivity calls for a more progressive style of management, which ironically often means less management as people work with more autonomy. The Chancellor has asked Sir Charlie Mayfield to look into all this to see how corporate governance can look to the long term instead of the short term, and I am sure that his proposals will be very helpful. However, we cannot wait for yet one more report without getting the impression that Ministers are having reviews until they get the recommendations that they want, especially as there are signs that the change is already happening. The CEO of Unilever has stopped quarterly reporting. At its recent London conference, the Coalition for Inclusive Capitalism called for a more broadly based prosperity and is enlisting our major asset management groups in the City towards this end. Incidentally, Mrs Clinton is pursuing this in her nomination campaign in America.
Some companies have reviewed their governance in terms of stewardship—the kind of stewardship proposed by Tomorrow’s Company. The Bank of England is prodding banking in this direction. Some may say that these ideas have been around for a long time, but in an age of productivity, their time has come. This has to be the direction of travel. Ignoring this will once again be a sign that the Government are remembering everything but learning nothing.
The Government’s leadership on sustainability and the green environment is another important aspect of leadership in an age of productivity. The Government’s words indicate a green direction of travel, but recent actions indicate the opposite. For example, the Energy Bill will produce abrupt changes. Also, cancelling the requirement to build zero-carbon homes from 2016 adds to the feeling that we are not going to achieve the legally required targets for carbon emissions by 2020. This must be managed better. In an age of productivity, you have to carry people with you and have a purpose with which people can identify; otherwise, the very objective you are trying to achieve becomes discredited.
The Minister’s regional policy of more independence is absolutely right for an age of productivity. But in an age of productivity regionalisation must be seen not as devolving the cuts to local government, as happened in the age of austerity, but as revitalising areas of Britain away from London.
The age of productivity requires this kind of management and leadership because of the growing impact of computers and technology on work and business. In an age of productivity, products and services have to be lighter, smarter and greener. Services in particular will become yet more data-driven, using algorithms that self-improve.
Would my noble friend mind if I asked him a question that has puzzled me for a long time on exactly the point that he has just made? How is it that we never see any sign of these vast increases on paper of productivity through technology —10 times, 100 times—in the aggregate productivity statistics?
The Minister has asked Sir Charles Bean—Charlie Bean—to look into this whole question, so I will leave it to him to answer. It is called delegation.
At present, we have a growing system where public administration, business and trading, shopping and entertainment, travel and leisure, and running our offices, our homes and our health depend more and more on computers dealing with each other. Sometimes, we are the only human in the loop. This is what the age of productivity will eventually look like.
The danger lies in our ability to control this complexity and interdependence. The complexity defeated us in the financial sector and helped cause the crash in 2008. This is why we need management and leadership that will remember everything and learn from it.
There is also a need for government to understand that much of this investment is intangible—difficult to see, so hard to finance. It is confusing to accountants, statisticians and apparently to the Government, too—so they set up a committee to look into it. But it is crucial to the stronger policies needed to support innovation. This is why the age of productivity needs arm’s-length organisations such as Innovate UK and the alternative forms of funding which are arising.
So what are the implications for the age of productivity? Since productivity has become disconnected from pay, pay rates have hardly gone up in the past five years. The proceeds of this have accrued mainly to investors and managers. In an age of productivity, the benefits must balance out and both must prosper equally. If they do not, the age of productivity, pursued to its logical conclusion, will create an unequal society the like of which we have not seen for generations. Are we just going to allow this economic process to continue unopposed? Surely not.
The Government claim that austerity is necessary so as not to impose on future generations. I say that we have to move to an age of productivity so as not to penalise future generations. In this way, we will learn something as well as remember everything. I beg to move.
My Lords, that was perfect timing from the noble Lord, but I remind other noble Lords that we have a very tight timetable if we are going get through this debate in two-and-a-half hours. There is absolutely no spare time, so, when the clock turns to five minutes, it means that your time is up.
My Lords, I welcome this debate promoted by the noble Lord, Lord Haskel, who made several points with which I agreed. I want to focus on the austerity aspect of the debate—we are looking at the concept of “beyond austerity”—and examine some of the myths that surround it.
Austerity may have become a loaded word in some quarters, but the truth is—and this is difficult to accept but essential—that there has to be a permanent downward pressure on public spending at all times. That is essential if we want a balanced economy. Those who want to end austerity and make speeches about it at the moment really want more spending. More spending means more borrowing, which means more taxes to meet the ever-bigger interest payments. That taxation inevitably comes from workers’ wages and salaries, however much you try to squeeze the rich. So ending austerity and calling for a clear anti-austerity agenda—as I believe the fashionable phrase is—are just weasel words for shifting the burden onto working people and the poor to pay for the ever-swelling state. I find it difficult to see why people cannot understand that very obvious point, but those who cannot see it should to my mind follow the advice on the Underground ticket gate, which tells you to “Seek Assistance”. Poor Scotland under Mrs Sturgeon’s economic policy, which is declared to be against austerity, and poor British workers if ever Labour take charge.
To maintain the essential downward pressure on public expenditure, which is needed at all times and not just over the next little while, I welcome the Chancellor’s new fiscal responsibility charter. But will that be enough? I will give a little history. Back in 1970, my colleague Mark Schreiber, who is now my noble friend Lord Marlesford, who I see is in his place, believed that we should import into Whitehall three powerful new tools: PPBS, which is policy and programme budgeting systems; PAR, which is programme analysis and review; and a central capability, subsequently called the central policy review staff, to drive the questioning of every government activity.
The art of questioning is of course to ask the right questions. This was the genesis of the original CPRS idea. We wanted a central capability with colossal and persistent questioning power to ask, and repeatedly ask, the right questions of every part and function of government—every division and every agency. “What are your objectives? Could you achieve them better? Do they need to be achieved in the public sector or could they be contracted out? Could they be achieved better by the private sector? Are they worthwhile and necessary at all?”.
To mount such questioning centrally of course requires massive intellectual power, and that is what we wanted to see centred in the CPRS. We wanted it to drill down into every public sector department, division, agency and state-owned industry systematically and penetratingly, insisting on constant rejustification for every organisation’s or group’s existence in the public sector, with privatisation or abolition as the alternatives if public sector operation and public expenditure could no longer be justified. We saw this as the only way to place a firm and disciplined hand on the whole public sector and on the constant tendency, which is always underestimated, of public activity and public bureaucracy to swell and grow at all levels, which it always otherwise does.
This is not an ideological impulse: it is a practical and managerial one. Government is mushroom-like. If left in the dark and out of the light of challenge and questioning, it always grows. That is inevitable. Pressures good and bad are pushing for expansion all the time. How often one hears the cry “There should be a law about it”, or “We need a new agency”— in a trice we have a new set of regulations, more committees and more spending. That is why we wanted then and still need a really powerful and well-informed inside mechanism to assist Parliament and the national interest, as we did in 1970.
There was support then from the very top, but Civil Service chiefs were very suspicious of too much power in No. 10. Finding the right people to ask really penetrating questions was extremely difficult. One person whom we approached said, “I’m not going around Whitehall asking awkward questions. Socrates did that, and look what happened to him”. So in practice, the CPRS began the right way but it really lost its direction after the 1970s and ceased being a powerful questioning and challenging agency. Instead, it started generalising about the broad direction of government and of macroeconomic policy, so it was abolished. Today we need central spending tightly controlled at all times, and not just in the short period ahead. We could call it austerity. I am afraid that the word “prudence” has been discredited. But whatever others call it, I call it common sense.
My Lords, it is a pleasure to participate in this debate and to congratulate my noble friend Lord Haskel on it, particularly as it comes on top of the debate in the name of my noble friend Lord Monks earlier this year.
As has been mentioned, productivity has collapsed in the United Kingdom and, by the way, that is why employment is buoyant. The Economist had it right on 14 March when it said that if Britain,
“cannot get more from its legion of cheap workers, the recovery will stall”.
Output per worker is still 2% below the pre-crisis peak, while in the rest of the G7 it is 5% higher. The French could take Friday off and still produce more than Britons do in a full week, while, confounding stereotypes, the Italians’ output is 9% higher. When people are cheap, rather than invest in machines and technology, firms will hire them, so productivity is held down. While the Government’s report, Fixing the Foundations, is admirable in its rhetoric, we are still to find out what flesh there is on that issue.
On the austerity agenda, I welcome the debate because there is a need to highlight the nonsense that is spoken about it. We have to strip away the hype and expose the reality. What has happened with the Chancellor’s policy is that there has been a prolonged recession that has produced a lopsided and unbalanced recovery. Millions of people in Europe and elsewhere rightly feel that the current economic order is not serving their interests, hence Syriza in Greece, Podemos in Spain, Le Pen in France, Beppe Grillo in Italy, Trump in America and, dare I say it, the SNP in Scotland. The key is to challenge the nonsense on deficits and perpetual balanced budgets that the Chancellor comes out with. We need to give serious consideration to the development of a positive narrative on why running a deficit now holds the key to future growth.
In 2009, the United States was running a 10% deficit, yet today its economy is growing more than that of any European country which is running a surplus. We do not need to go back too far, just to the Second World War, when we had debts worth 250%, but at the time we had the National Health Service, a debate on welfare and a Conservative Government who, in the early 1950s, built 300,000 houses a year, a record that still stands. That has to be recognised.
I have been calling in Parliament for a state bank since 2009. We can see the example of the Nordic banks, while when the European Investment Bank gets up, it is set to finance more than £220 billion of investments by 2017 with a fiscal outlay of less than £20 billion. There is a lesson in that. Despite this Government failing to meet their fiscal targets, interest rates on UK public debt are still astonishingly low: 30-year and 50-year gilts yield 2.4% while the yields on comparable index-linked gilts are close to minus 1%. If anything comes near being a free loan, that is it, so there is a need to invest and for growth-promoting borrowing. That is what is required.
We also need to expand our thinking. Yes, businesses are wealth creators, but it is more than that. We need a fusion of business, the state and the working population to create wealth. I remind noble Lords of Google and Apple. Google was given a grant by the US National Science Foundation which allowed it to discover its own algorithm. Without that state funding, it would not have happened to Google. If one side of the triangle of business, the state and the working population is missing, we will not realise our aims. We have to reject the Chancellor’s narrow and woefully misleading view that the sole economic problem is the budget deficit. The main obstacles are pitiful productivity levels, the poor performance of manufacturing industry, a lack of capital investment and the resulting balance of payments deficit. We need new policies, but above all we need a new mindset. If my noble friend Lord Haskel’s debate today has introduced a chink of light for that, it will have done the House a great service.
My Lords, the Chancellor’s declared aim is to shrink the state—to turn Britain into a country with a strictly limited role for the public sector and low taxation. In fact, the Government have even gone so far—incredibly—as to commit themselves to a legislative ban on certain tax increases.
The result of this policy in the next few years will mean, as has been pointed out by the noble Lord, Lord Haskel, major cuts which will have to be borne by local authorities; welfare budgets will be seriously affected, as will public services such as the police. It is probable that we will find that even education and the National Health Service will not prove to be exempt. The Government, in effect, plan the withering of the welfare state. They rely on the free market and deficit reduction to produce growth.
Free markets are not efficient; reckless deregulation and the failure of financial institutions, not profligacy and borrowing by Governments, were the main causes of the crash in 2008. Spain and Ireland, for example, were running budget surpluses before the crash. What could be more convincing evidence of market failure than the emergence of banks which were able to take huge, unjustified and disastrous risks, and had to be rescued because they were too big to fail? The best way to reduce deficit, as history shows, is by growth, not austerity. As the noble Lord, Lord McFall, pointed out, Britain’s record between 1945 and 1970 and that of the United States during the Clinton presidency are only two of many examples.
In fact, contrary to the mantra propagated by market fundamentalists, public investment is generally not less productive than private. Not only does it promote essential public goods but, as the noble Lord, Lord Haskel, pointed out, it promotes innovation through basic research which the private sector regards as too risky or unprofitable. That has been essential in the United States, for example, to the success of private IT and technology companies. In Britain, the National Health Service is far more efficient than private health provision in the United States. Of course, public investment must be paid for by taxation, but as the famous American judge Oliver Wendell Holmes pointed out:
“Taxes are the price we pay for civilisation”.
Further, contrary to the mantra of market fundamentalists, high taxation has not historically proved incompatible with economic growth. Indeed, periods of high and progressive taxes in the United States as well as Europe after the war were, as Piketty has shown, times of unusually fast growth, particularly in high-tax Scandinavian countries. In fact, it is inequality that can seriously hold back productivity and growth; it destroys good will and a sense of fairness about relative incomes, which are essential to trust and effective teamwork, which, in turn, enhance productivity.
A shrinking state is the creed of the Tea Party. It is the path to a dysfunctional society. We should not travel one more miserable inch along such a fearsome road.
My Lords, I declare my interest as chairman of WMG at the University of Warwick. I thank my noble friend Lord Haskel for this opportunity to look beyond austerity.
In politics, current issues can obscure future opportunities. Ministers must have sweated over their deadline to offer 40% budget cuts last Friday. We have had a few pressing issues to absorb us on these Benches too. So it is a pleasure to be able to think of the future.
In the search for growth beyond austerity, we must look beyond our own borders. This may not feel comforting; we know the problems of the eurozone and now fast-growing economies appear unstable as well. Yet for all the headlines, China is still growing. Domestic retail is up 10%, innovation spending is surging and infrastructure spending is a quarter of a trillion dollars. Yet our exports to China are just 1/20th of our total. So why, as the EEF says, are half of our manufacturers and the Government concerned about China? It is not simply exchange rates—Chinese firms now produce quality products and are stronger competition, as we have seen in the automotive sector. Western growth depends on partnerships with economies with expanding domestic demand and quality exports, so we gain from trade and investment.
The latter is crucial for us. British capital formation is behind that of our competitors—just 17% of GDP. Our infrastructure spend has lagged the G7 for three decades. Our science base is excellent but business R&D is well below the EU average. Where will we get the resources to change this? Trade is welcome but British goods exports will be only a small part of our economy in the medium term. We do better on services, despite handicapping ourselves with restrictions on our premier education exports—or degree courses, as we usually call them.
The best strategy is to attract inward investment. A good parallel is Japanese firms in the 1980s. They wanted to expand into Europe, so there was a real commitment to securing that investment for Britain. At WMG, we worked with Ministers and unions to offer what Japanese companies needed. As a result, Britain secured one-third of all European FDI. That did not happen just in the 1980s. Foreign firms created more than 1.5 million jobs in the last decade.
Today, we need to commit to getting investment again. Hitachi in Durham shows what can be done. It seems that we are to spend two years discussing leaving Europe. This is a real risk to growth. We must resolve that quickly. If securing investment is our external priority, our internal need is to improve productivity. The CBI and the TUC are not soulmates but both endorse Krugman’s view:
“Productivity isn’t everything, but in the long run it is almost everything”.
The Government agree. On high-speed rail, skills, science, the northern powerhouse and the Midlands engine, their agenda is attractive.
There is consensus across politics. Last week, Chuka Umunna and Vince Cable gave support to policies such as the apprenticeship levy, protecting research funding and the Business Bank. But, as in the 1980s, delivery is what counts. Increasing innovation spend requires more work than a tax cut. On infrastructure, it is easier to review than to decide. We need an infrastructure commission to get projects agreed, as Sir John Armitt has proposed. While we must demand business investment in skills, it would be a mistake to cut FE spending before they do.
The summer Budget had good strategies. There are rumours that the spending review will show slow progress in the winter. I hope that the details of November will match the ambitions of July. If they do, we will all be more confident in our economy beyond austerity.
My Lords, I congratulate the noble Lord, Lord Haskel, on his introduction of this subject for debate. I welcome the wording that he chose about economies after austerity. I will follow his lead. He did not try to define austerity or when “after austerity” might happen. Unlike others who are better qualified than me, I will not involve myself in deep economic theory. I will simply highlight two issues that have plagued this country for a very long time. I have chosen them in part because they have plagued Governments on all sides of this House, so they are not in any sense party political.
The first issue is the present level of inequality in our society. I commend the Government because they have recognised that; at least, that is the interpretation I put on the fact that the Prime Minister has repeatedly said that he will govern as one nation. He has also made it clear that, in his view, we are now the party of working people. The House will know that one-nation Toryism has a resonance within the Tory party as well as outside it, but I take my right honourable friend at his word: he will govern as a one-nation Tory and on behalf of working people.
If that is the case, there flows from it an inevitable focus on inequality. The Government have done well. They have addressed inequality at the low end through taxation measures and through commitments to living wages. Tackling it at the upper end is much more difficult because it immediately runs into fundamental questions about the role of government alongside the role of the private sector and the market. I am a good enough Tory to believe that you tread in those areas at fairly considerable risk. Yet, if we are to be serious about being one nation, the inexorable rise of inequality under all Governments—I stress again that this is not a party-political point—needs to be addressed. That is likely to be the test in the future of one nation for working people.
The second point that I have heard discussed in the 36 years that I have been privileged to be in this building—26 at that end, 10 at this—is that manufacturing in this country has not prospered. It has gone down. That fact sometimes gets masked by the success of service industries, but manufacturing is fundamental. It is affected by issues outside the Government’s control: the economies of other countries; the exchange rates of currencies; the tendency of other countries to help their economies by dumping in the world market.
My introduction to the Conservative Party was in part that I was taught that what we made and sold was an integral and fundamental part of our national wealth. I am old-fashioned enough still to believe that. If we are a one-nation Government, strengthening and addressing that long-standing manufacturing problem—which was true under all Governments; I am not making a party-political point—needs to be addressed. The future will tell us whether and how effectively those two issues prospered after austerity.
My Lords, I thank the noble Lord, Lord Haskel, for introducing this important debate on a subject that must be on all our minds: what kind of state the economy will be in once we get beyond this damaging austerity—not that the prospect seems all that imminent.
I say “damaging austerity”, but not everybody seems to see it that way. Some people—let us not be mealy-mouthed about this: the Chancellor and his acolytes—far from seeing austerity as a bad thing, or at best a regrettable necessity, seem to see it as a good thing. As the noble Lord, Lord Turnbull, said the other day, they seem to relish the opportunity to shrink the state back to levels not seen since the 1950s, except perhaps for a time at the end of the last period of Conservative government in the 1990s, with public expenditure set to fall to just over 36% of GDP by the end of this Parliament.
In contrast with the noble Lord, Lord Howell, I wish to take issue with this perspective and maintain that public expenditure, properly managed and controlled, is a good thing. It has been responsible for the vast improvement in the welfare of our citizens over the last 100 to 150 years. It has made major inroads into Beveridge’s giant evils of squalor, ignorance, want, idleness and disease. To take just a few examples at random, it has given us old age pensions, compensation for industrial injury, great improvements in access and provision for disabled people, a flourishing of the arts and much more besides.
One good thing to have come out of the Labour leadership election is that it has brought discussion of an economic policy aimed at combating austerity, rather than imposing it, into the mainstream. More than 40 economists wrote to the Observer in support of Corbynomics and 55 to the Financial Times against, which I suppose just goes to confirm that, however many economists you put end to end, they would never reach a conclusion. But the important point is that there is a discussion. In passing, one thing economists do seem to agree about is the wrong-headedness of the Chancellor’s plans for permanent Budget surpluses. To me, as a non-economist, it seems that the Corbynistas are getting the best of the argument.
The charge against Corbyn was summed up in a New Statesman editorial in the issue of 20 August to 27 August, as,
“the policy of a ‘people’s quantitative easing’ would risk rampant inflation and is not a sustainable means of financing infrastructure programmes”.
Let us take that in bite-sized chunks. “People’s QE” is rather disparagingly referred to as “printing money”. It is, but that is no different from what the Bank of England has been doing for the last few years. As regards rampant inflation, this policy might contribute to inflation in the longer term but that is not a risk at the moment with interest rates still at record lows in a very lukewarm recovery.
As regards this policy not being,
“a sustainable means of financing infrastructure programmes”,
the operative word here is “sustainable”. QE is probably not a sustainable means of financing infrastructure programmes in the longer term for the reason just stated, as well as Bank of England independence, but it might kick-start the process. However, this would probably not be necessary as Corbyn has other proposals for funding infrastructure investment—namely, a national investment bank.
There is discussion among Corbyn supporters on whether conventional borrowing would not be a more appropriate way of capitalising a national investment bank. These are matters of emphasis which can probably be resolved. The important point is that even the 55 economists critical of Corbynomics agree that, at this time of very low interest rates, much-needed public investment can be financed by conventional borrowing.
The time limits have not left much time to talk about the key question posed by this debate—namely, what awaits us post austerity. I fear that the answer is not very encouraging. This is one of the most fragile recoveries in history. Fuelled by ballooning household debt, it contains the seeds of its own destruction. What happens when interest rates rise? Another crash, but that is likely to be only a staging post in a self-reinforcing downward spiral, and the Chinese slow-down is not going to help either.
The demise of capitalism has oft been predicted, but it has shown itself to be remarkably resilient. The future of capitalism is a subject for another debate, but there must be a question about how long we can continue to rely on this resilience.
My Lords, I thank the noble Lord, Lord Haskel, for initiating this debate and for the passionate and comprehensive way in which he did so. It is a positive move to encourage us to look and plan ahead. I intend to say something about good employment relations.
First, I congratulate the Minister on emphasising the importance of productivity. If I were his public relations adviser, I would caution against setting himself up as such an easy target. In planning for the future we do not know what the state of the economy will be by the time of the next general election. It is clear that thousands of jobs will be lost in local government, which will decrease its capacity and capability at a time when it is being given more responsibility for both local entrepreneurial development and picking up the pieces of the human cost of our unequal society. The future must include better financial settlements for local government, as well as for capacity building in what will be a much diminished area.
There is also huge uncertainty about the future of pensions, which will impact on a generation and on our economy. I believe that the abolition of annuities was foolish and that reform, which was of course overdue, would have been more sensible. The rush to swap pension pots for buy-to-let properties might look good at present but there is great risk. Pensions are so complicated that the state has a duty of care to protect its citizens from the market. I do not believe the Government are doing this.
On higher education, if the Government do not take action on the unsustainable student debt levels, that will also impact on our economy. Inflexible restrictions on foreign students going to British universities will mean that vital courses in STEM subjects and languages will close. Engineering firms are crying out for well-qualified postgraduates—who, unfortunately, are primarily from overseas—but they are not being allowed to stay. They are needed for those jobs now.
On skills shortages, particularly in the construction industry, there needs to be a step change in government action. The suggestion of a compulsory levy on the larger employers is welcome but further government intervention is vital if we are to tackle what I accept is a systemic problem.
Turning to good employment relations and their link to a successful economy, the general secretary of the TUC, Frances O’Grady, has said:
“When workers are engaged and getting a fair share from growth, they deliver better results”.
The Minister referred to the excellent work by ACAS in his speech on productivity earlier this week. His praise of ACAS is very welcome and I am pleased that he indicated that he would continue that dialogue. I had the privilege to chair ACAS for seven years. It has produced some excellent policy papers on UK productivity and the link with good management and good employment relations. One of the publications, Closing the Gap: Workplace Innovation and UK Productivity, suggests that,
“we need to rediscover the importance of how people are managed and deployed in the workplace if we are to make inroads into the productivity problem … Well under 30 per cent of UK workers are involved in decisions about how work is organised and the number has been declining steadily since 2001 … The UK compares unfavourably with several other Northern European countries against many comparable indicators. Unlike these countries, the UK also lacks a coherent policy framework to stimulate the adoption of better ways of working”.
Ineffective management is estimated to be costing UK businesses more than £19 billion a year in lost working hours, and 43% of UK managers rate their own line managers as ineffective. Yet how many line managers are given sufficient training and support to manage change effectively, to have that difficult conversation and to motivate? These workers are key to the solution but too often they are the weakest link because they are unsupported.
ACAS has also produced a paper giving seven practical solutions to improve workplace productivity. As my noble friend Lord Monks said on Tuesday, I hope the Minister will continue his welcome approach to good employment relations and his dialogue with ACAS. It makes a pleasant change from his Government’s ghastly Trade Union Bill and its shopping list of shoddy measures.
My Lords, I regret that I do not have time to make my intended comments on the wider economy as I wish to focus on the importance of entrepreneurship and the problems now presented by the new EU state aid rules for the provision of risk equity finance for SMEs. It is vital to maintain and encourage the growth of entrepreneurship and new businesses, much of which is based on new technology. That is what provides for a dynamic economy. I declare my interest as chairman of the Enterprise Investment Scheme Association.
By way of background, Britain has been easily the best country in which to start new businesses. It is much easier here than in many other EU countries, and there has been great success, with 1.5 million new companies over the last two and a half years. Universities are collaborating with business to exploit inventions and developments. But SMEs need risk capital as well as bank finance, and the EIS scheme here has been a great success. It has raised £13 billion since it started and the amounts raised over the last three years have virtually trebled. This has been largely the result of the reforms which the Government brought in in 2011, widening the parameters for companies to qualify for both EIS and VCT finance. The crucial thing here was that it meant that small businesses which were starting to expand and cut their teeth could thus get the necessary equity finance.
I was therefore horrified by the changes to the state aid rules that the EU Commission is forcing on the UK. These changes will reduce and, in some cases, cut off the flow of risk equity funding. So far the Government are seeking to make the best of things and argue that the changes have gone beyond the state aid rules. However, I do not think that the Commission is listening to the widespread complaints and concerns of the venture capital industry. The changes discriminate against UK private sector incentives for providing risk equity under state aid. Many continental European companies are substantially financed by state aid—for example, biotech in Germany. However, that happens in the form of grants, which have no restrictions on companies acquiring other companies or being acquired. Such restrictions are now being imposed on the UK. The brief of the noble Lord, Lord Hill, to increase capital market funding for SMEs will be made much more difficult. Indeed, I had urged him to promote the EIS scheme across the EU, as France has done extremely successfully in the last two years.
A major objection is that there is no apparent economic or commercial logic to the new rules. There are several problems. The rules will disqualify companies that have existed for more than seven years, cutting out for no reason the ability to redevelop and drive forward such businesses with necessary equity funding. We have had a limit of £10 million per annum for combined EIS and VCT investment, and it has worked satisfactorily. The limit is now to be reduced to £12 million over the life of the company, and on a retrospective basis, which will cut off funding particularly for SMEs that are expanding. It will also not always be easy to check all the historic state aid funding that has been received, which brings with it the danger of disqualification. The new rules relating to subsidiaries and the seven-year rule are unclear. When a qualifying company has a subsidiary that is over seven years old but is not old itself, and when the EIS funding it has raised is not for its subsidiary, will the seven-year rule disqualify it because its subsidiary is over seven years old?
The new rules maintain the requirement for major monitoring and record-keeping, especially in relation to any subsidiary. The requirements to monitor staff composition in knowledge-based companies is unrealistic, if not impossible. The bias against investment in intangibles is wrong in today’s world, where much capital investment is in the form of intangible knowledge-based assets rather than old-fashioned physical capital. The rules banning the use of EIS and VCT finance for buying companies or acquiring a business by way of purchasing their plant, machinery and good will have no economic logic and stop the valuable economic benefits of such businesses being rescued, keeping their skills and keeping the jobs. The rules are not clear, as they permit purchases of assets such as plant and machinery as required. Where is the line drawn between buying a trade and buying its plant and machinery?
The Commission has also made it clear that it will monitor the UK closely and if it believes that UK law for VCT and EIS investment is outside its interpretation of the new state aid rules, it will override UK law and demand recovery of the tax incentives. Should that happen, it will be a major turn-off. The Commission is overstepping its reach here and is unfairly discriminating against the UK. The new rules will slow the flow of this funding to equity businesses, and there is considerable resentment in the industry.
My Lords, I thank my noble friend Lord Haskel for bringing to our attention the need to face some serious, ongoing problems with the British economy and to face some of the truths about our position, which, as the noble Lord, Lord Low, and other noble Lords have said, is fragile in some important respects.
First, I will just mention a truth about our position from economic history. The crisis of 2007-08 did not result from lax public spending; it was caused by banks acting irresponsibly and by the failure of too-light-touch regulation. My view is supported by a recent House of Commons briefing, which points out that the average public deficit from 1997 to 2007—the year of the subprime problems and the crash—was 1.4%, half the average public deficit under Margaret Thatcher and John Major. Even after the crash, yields on 10-year bonds rose only marginally up to the 2010 election. The idea that public spending bust the British economy is completely wrong. I know that there was success in standing up that view at the general election and more generally, but it is important that, after the election, we face up frankly to what the real position was.
In the short time that I have available, I will talk about two current matters. One is the manufacturing sector, which, let us face it, is too small in Britain now. There is not enough of it, and when we talk about rebalancing the economy, we are looking round for areas to promote the growth of manufacturing. I was a member of the advisory panel for the regional growth fund under the last Government, and we struggled to find suitable places to put public money behind manufacturing. I was struck too, as many are, by the preponderance of foreign-owned companies in many of the key sectors—not just the car sector but many others. The leading companies are not British. There is welcome inward investment, which sets a good example to others, but none the less they are not British-owned. It puzzles me why Eurosceptics are so touchy about any infringement of national sovereignty that might squeak out of Brussels but are totally relaxed as soon as it comes to takeovers and deals from abroad. I do not know whether this is about the fees they are earning from the deals being cut, but I would ask the other side why there is this difference in their approach to our national assets.
That brings me on to a quick word on the City, which still seems largely disengaged from attempts to inject dynamism—or balance, as the Government call it now—into the British economy. The City seems to remain short-termist. It is wedded to the deal and financial engineering and to trying to generate fees from as many rearrangements of companies as it can find, rather than being interested in the organic growth of the British economy. It is a paradox that we are in the middle of a city that is perhaps the most dynamic in the world for financial services, yet we are dependent, for example, if there is a third runway at Heathrow, on Chinese and Middle Eastern investors. It will not be British investors behind what I would think would be a sure-fire return.
My final point is about business schools. Does the Treasury take an interest in what they teach? Those of us who have some experience in business schools know that the demand from students is to learn more about financial services and financial engineering and how to arrange money in the most lucrative ways. It is not about training people to be cadres in manufacturing and to lead organic growth in great businesses over the next period.
So there are questions for the Minister on the City and business schools, in particular, and on foreign ownership. We debated productivity the other day, so I will not run over those points again.
My Lords, in his excellent introduction, the noble Lord, Lord Haskel, spoke of a green direction of travel for the economy. We must think of that direction of travel when reviewing the form that the future economy may take. When does the Minister think that the green economy and the economy will merge? Surely the economy of the 21st century must be one that respects the fact that low carbon is a given. It needs to create jobs and value, but also respect the environment and recognise that resource extraction is finite. Many smart companies already vastly reduce their use of virgin materials—for example, they reduce and recycle the water they use—thereby reducing their costs and their impact on the planet. A 21st-century economy should bring together industry and ecosystems. In fact, it is a completely new paradigm from that of the 20th century economy.
When the Prime Minister, David Cameron, signed the climate pledge in February, he talked of the need to accelerate the transition to a competitive, energy-efficient, low-carbon economy. However, since the election, we have seen no measures to grow that low-carbon economy—quite the reverse. As the noble Lord, Lord Haskel, mentioned, we have seen the cancellation of the zero-carbon homes policy six months before its full implementation, despite significant investment from house builders and their supply chain. The zero-carbon building commitment, due to be implemented in 2019, has also been cancelled, despite huge support from the construction sector.
Investment in renewables has faltered, given the Government’s decision to end subsidies for onshore wind and further free up the oil and gas sectors. In transport, new rules for vehicle tax will result in owners of the most polluting and most efficient cars paying the same after the first year, despite the UK car industry investing in design and technology to make it one of the world leaders in fuel-efficient vehicles. The car industry expects that tax change to reduce UK sales of those efficient vehicles.
I turn to agriculture. Bees, pollinators worth more than £650 million to the economy, remain under threat, with no real action on the national pollinator strategy. Indeed, the Government have given permission to restart the use of neonicotinoids—the pesticides implicated in pollinator decline.
All of that flies in the face of the data that demonstrate that money spent on protecting the natural environment is a wise investment. The Government’s national ecosystem assessment states that if the UK’s ecosystems were properly protected, they could add an extra £30 billion to the UK economy, whereas neglect and loss of the free services that nature gives us may well cost as much as £20 billion to the economy every year. The Natural Capital Committee has shown that spending on biodiversity protection provides a real and significant return on investment: £10 billion is spent by tourists in England’s rural areas each year. That is in large part due to the quality of the natural environment.
The Exchequer must provide co-funding to draw down England’s European agricultural fund for rural development. Any cuts to that funding would mean sending money back to Europe, losing a further £3 for every £1 that the Government might consider to be saved. Cutting that co-funding will render quite impossible the Conservative manifesto commitment to spend £3 billion on the environment through the CAP and to plant 11 million trees.
When you talk of the economy, you need to think of the green economy, because that is the 21st-century economy. At the rate the Government are going, we risk being left far behind those countries that are really implementing the green economy.
My Lords, we are struggling to recover from one of the greatest economic crises in modern history. Anyone who offers simple nostrums about how this can be achieved needs his or her head examined. The crisis is structural, not just cyclical, and a great deal of innovative thinking will be needed to get the world economy back on track.
I do not see where this innovative thinking is coming from at the moment, but the group of doctrines that has become known as “austerity” is certainly not it. I am not sure that current Keynesian doctrines can supply more than part of the answer either. The idea of austerity is intuitively attractive, and would even seem to comply with common sense: when in debt, cut back on spending. Yet what applies at the level of an individual or a household manifestly does not apply at the level of the economy. I always respect what the noble Lord, Lord Howell, has to say, but on this matter I fundamentally disagree with him. The principles of austerity have failed wherever they have been applied. Not only that, they have acted against the very outcomes they are supposed to achieve.
Although halting and beset with problems, the US has made the best recovery among the advanced economies, which is the result of dynamic policies of an activist central bank coupled with a range of large-scale government interventions. The $800 billion stimulus Bill introduced by the US Government increased GDP by two percentage points from late 2009 to 2011, avoiding a double-dip recession. The contributions the Bill made to helping the less well-off were very substantial. Some 5.3 million people were prevented from slipping below the poverty line—a very considerable accomplishment.
Progress that has been achieved in the UK is in spite of the austerity measures adopted or, to put it more accurately, because at certain points they were relaxed. Employment has held up well, but that is largely because of depressed conditions at the lower end of the labour market. GDP capita as of 2014 was fully 16% below what it would have been if trends before the crisis had continued.
Among the extraordinary features of the aftermath of the crisis, which have been referred to by my noble friend Lord Monks, is that private irresponsibility has become redefined as public debt, and that the poor are being held accountable for the fecklessness of the rich. The former Governor of the Bank of England, the noble Lord, Lord King, put this quite well:
“The price of this financial crisis is being borne by people who absolutely did not cause it”.
The huge further cuts planned to welfare will have damaging consequences for those working on low incomes, the unemployed, young people and the disabled. The raiding of Labour’s cupboard to provide a veneer of social justice will not stop this becoming a toxic mix. In the mean time, disparities of wealth and income between the top 1% and the rest continue to soar. The structural causes of the crisis are to date at best only partly addressed, and remain dangerous.
I have one major question for the Minister, who will forgive me for losing my voice through this speech. RBS is being sold back to the private sector. Does that mean that it is no longer too big to fail? I would like a yes or no answer to that question.
My Lords, I am a little confused. I am not sure what austerity is. I do not see abject poverty around. Therefore I will use what the Financial Times says as an introduction: austerity marks a period of adverse economic conditions where the Government cut their spending or increases taxes in order to reduce their budget deficit.
The factors that I considered when I was in the banking world are rather favourable. The pound is strong and stable. Our balance of payments is reasonable because of services, but we have always had a balance of payments deficit on manufactures and that is agreed year after year. But when you look at that balance of payments deficit on manufactures, you realise that many components are already imported. So if you try to search through the pattern, you want to look and see what is wrong, or whether you can prove what is wrong.
At the other end of the scale, we have vast sources of wealth in other parts of the world looking for investment. I know that my noble friend Lord Howell has visited some of the major funds around the world. They have visited me, too, and they have asked what opportunities there are for investment. Well, there are not many requirements from the United Kingdom other than new infrastructure. Our balance of payments deficit has not caused us any problem, the universities are doing well, technology is in the forefront of activities, and it is a question of where and what direct investment we should be encouraging more of into the United Kingdom and in what sectors. I am asked regularly during my international trips, “What would you invest in?”. In the early days, suggestions were made to me that they should invest in the automotive industry, which I thought would be a complete waste of time. I never realised that the automotive industry in the United Kingdom had virtually fallen into foreign ownership.
So what is foreign ownership and where are the problems at the moment? I detect that those economic minds I see around me—for whom I have great respect; I used to study some of their papers—are perhaps at a loss to find any reasonable conclusions as to what the Government or Governments should do next. Our balance of payments is not a difficult one: we have, as I say, the surplus on services and that surplus will continue.
So I ask the Minister: what is wrong? I spend most of my life internationally and find great respect for the United Kingdom these days. Probably one of the weaknesses is that everybody wants to come and live here. One factor that comes up is the element of personal taxation, which is unfair if it is levied upon the British and not upon foreigners, but this is more of a social issue. Therefore we find that the investment that comes in is not necessarily direct, but comes through all sorts of corridors. There is no pressure on the pound sterling, there is no pressure on inflation. There is pressure for a slightly better bus service and fewer strikes in London. But when you are confronted by some of the sovereign wealth funds who say they would like to invest in our country and ask what our future plans are and what major exciting projects they could invest in, the answers are not necessarily there. So I have no concern at all. In fact, I am worried that I cannot find a worry—and maybe some noble Lords could demonstrate what is wrong. It is not a party-political issue. In general, those who come out of university are finding jobs. The training schemes are getting better and better. The arguments seem to be only about major jumbo projects about where we should put an airport, which international people cannot understand. I would like someone to say, “What do we need money for?”—because I am not sure.
My Lords, I congratulate my noble friend Lord Haskel on securing this debate in our first week after the Recess. He focused on productivity and that word resonates with the debate we had on Tuesday on the Government’s plans to boost productivity. Indeed, much of what I want to deal with underpins productivity.
In his Budget speech, the Chancellor said that,
“our weak productivity shows that we do not train enough, build enough or invest enough”.—[Official Report, Commons, 8/7/15; col. 321.]
I will focus on the second leg of his argument: building enough. He talked about the confidence that comes from getting our house in order. I will talk literally about getting our houses in order and to rise to his challenge that one key to raising productivity is building more homes.
In doing so I declare an interest as the soon-to-be chair of the National Housing Federation. The NHF represent England’s housing associations, which provide homes for the most vulnerable and help so many people to get into home ownership and get on the housing ladder for the first time. They should be welcomed as a key player in driving Britain out of austerity and into a prosperous future, both as an economy and as a society. It is generally accepted that, for most people, having a stable place to live improves life chances and employment.
The Government have said that housing is a national priority. We are in the middle of a housing crisis. We need 250,000 new homes each year and the country is not building even half that number. Housing associations are a secret weapon in building a better Britain. I say “secret” because few people seem to realise what housing associations are and how much they do. I wonder how many members of this House, like me only a few months ago, do not realise that last year housing associations built one in three of all new homes.
They are the UK’s most successful social enterprises; they are independent of local authorities and government but work closely with both. They build houses for rent, for shared ownership and for outright sale. They are ambitious, they want to do so much more across every tenure, and they could do so if government would work with them—and indeed, to reassure the noble Lord, Lord Selsdon, if private investors would work with them as well.
In their plan for productivity, the Government complained that expenditure on physical investment had been persistently low. Yes, that is generally true, but housing associations are doing something about it. They have secured £75 billion in private investment for new homes over 30 years. Their efficiency and ability to create surpluses have persuaded the money markets to invest. So they have delivered desperately needed affordable homes in every part of the country. They are a great boost for the Treasury, too. For every £1 invested by government, associations put in £6. They add an extraordinary £14 billion to Britain’s economy every year.
In my new role, I have seen for myself some of the amazing developments they have made possible across the country. Time does not allow me to talk about how inspiring they are because I do want to ask some urgent questions of the Minister. I would add only that in areas where deprivation remains a huge problem, housing associations offer exciting developments and give local communities optimism and hope.
That is because they do more than build houses; they invest to build resilient communities. In partnership with the NHS, GPs and local authorities, they provide outreach health care and redesign local care services; they deliver government programmes for helping people back into work—which is, of course, the most effective way of cutting the overall benefits bill—and last year they supported 12,000 apprenticeships. They could do so much more with greater flexibility, so I will ask the Minister some specific practical questions in the new and tougher environment set by the Chancellor’s Budget.
Will he encourage the Government to invest to deliver homes that meet locally defined needs and customer choice, not inflexible national housing programmes? Will he undertake to look at extending the Affordable Homes Guarantees Programme beyond 2017, given its boost to long-term competitively priced finance and the fact that, because of the sector’s no-default record, it comes at no cost to the taxpayer?
Will he look at empowering local public bodies, which have shown that they are effective in using their assets, to take more control over mapping public land and property locally and setting out how much can be released to deliver the homes and infrastructure needed to make communities thrive?
I conclude by saying that housing associations stand ready to work with government to end the housing crisis and, with the right conditions, can help drive us out of austerity to economic growth.
My Lords, today we are considering the economy. Growth is generated through businesses, of course, but the Government, as ever, have a role to play. SMEs are crucial, so the Government’s commitment in the Queen’s Speech to cut red tape for business by £10 billion is very important. So often business has been held back by unnecessary red tape and bureaucracy—I have experienced that myself in another life. Many Governments before have said that they will cut red tape, but this time I look to our Government to give us feedback and indicate how the cut-back is being achieved.
It was interesting that the Government said they would create a small business conciliation service to help settle disputes between small and large businesses. That initially brings to mind a continuing problem for SMEs—namely, the late payment of debt, which is a frequent problem that arises between small and large businesses. The larger-capacity businesses have the money but they often do not pay their debts promptly, and I look to the conciliation service as perhaps a way forward. Business Ministers have in recent times addressed FTSE companies, urging the many which have not done so to sign up to and implement the Prompt Payment Code. I ask the Minister how successful their request to FTSE companies has been and whether they will carry on pressurising those big companies to pay their debts on time.
There is much to say on the economy but I shall touch on just one or two other points. The need for exports to increase is key, as is enabling, helping and encouraging the business sector to get finance specifically for exports. I know that many smaller companies are discouraged from exporting for lots of different reasons, among which is the need to get finance to expand their exports. I ran a small business and at the time we were fairly fortunate in being able to export for various reasons. Therefore, there is a need for UK export finance to be brought on to a par with the world’s best export financial agencies.
Productivity has been debated already. At this stage, I thank the noble Lord, Lord Haskel, very much for initiating this debate and for the points that he made on productivity. I agree very much with him that lack of productivity can sometimes be the result of poor workplace relations. I had experience of that some years ago when I was asked to take on, as managing director, a small manufacturing company which for decades had been run poorly by management on a “them and us” basis. The approach from the top was very poor and the workforce naturally felt disengaged and uninspired to work hard. In a short time, having been asked to take on the company as managing director, I changed all that, establishing a very different culture of working as a team. Within a very short time, the company lifted off, and I was able to achieve that through my long-standing commitment—in thought anyway—to a team approach, not a “them and us” approach, when it came to business. Therefore, I hope that management training nowadays emphasises, among other issues, how important it is to have good workplace and management relations.
My Lords, I have heard it said by a member of the party opposite that austerity is now at an end. This is a false perception. Our economic misery will not cease until our manufacturing industries and our foreign trade have been revived. This will require a technological revival and a macroeconomic policy very different from the one that the Government are pursuing. I have no confidence that this Government are capable of delivering such a revival.
At the end of the Second World War, Britain was one of the world’s leading technological and industrial nations. Besides being a leader in aviation, Britain was also a pioneer in nuclear technology, in electronics and in digital computing. Our automotive industries were also world leaders. These are the industries that have received the support of the Governments of the nations that are our economic competitors.
In Britain, our technological industries have been damaged by their relationship with successive Governments. Over the years, much of our former technical and scientific competence has been destroyed. The demise of British industry has been accompanied by perennial balance of payments problems that have been due to the overvaluation of the pound.
This problem also dates back to the early post-war years. In 1949, when Stafford Cripps was Chancellor of the Exchequer, the pound was devalued by 30% in order to stimulate our exports. The beneficial effects were quickly eroded by our high levels of domestic inflation. Another devaluation of our currency was needed in the early 1960s. However, the Wilson Government, which had been strongly influenced by British and foreign financiers, were unwilling to take the necessary steps. When it took place in 1967, the devaluation was by an inadequate 14%. In spite of the fact that we now have a floating exchange rate, our currency continues to be overvalued. This persistent overvaluation threatens our future prosperity.
The attitudes of successive Governments to our technological industries were strongly influenced by the problems of our aviation industry. The post-war industry was populated by numerous small and highly innovative enterprises, all of which sought government support. The situation was unsustainable. In 1957, a defence White Paper, sponsored by Duncan Sandys, proposed to solve the problem at a stroke. All projects for manned military aircraft were to be cancelled in favour of anti-aircraft missiles and intercontinental ballistic missiles. Although Sandys did not achieve the complete elimination of manned aircraft, he did establish a precedent for dealing with the technological industries.
The Civil Service, with the Treasury in its vanguard, developed a methodology of cancellation that was applied to many other industries by succeeding Governments. The Government of Harold Wilson did as much as their predecessor in cancelling the high-tech projects that threatened to make inroads into the Government’s budget at a time when they were severely constrained by a balance of payments crisis. This process of curtailment was vigorously pursued by the succeeding Conservative Governments of Margaret Thatcher. The consequence for Britain today and for the foreseeable future is that we have to rely heavily on our economic competitors to provide the technological skills that are so severely lacking. Unless we can amend this situation, our economic prospects will be bleak.
Throughout the post-war period, Britain’s financial sector has survived and prospered, which has been in spite of the weakening of the rest of the economy. The financial sector nowadays profits from an open economy that allows the free inflow of financial capital. A consequence of this inflow is that the balance of payments crisis that would otherwise have been occasioned by the failure of our export industries has been overcome by the sale of our assets to foreign buyers. The inflow of capital is largely responsible for the overvaluation of our currency, and it has greatly enriched those who earn their living in the financial sector. It is notable that, when they have taken trips abroad, ostensibly for the purpose of promoting our export trade, the Prime Minister and the Chancellor of the Exchequer have succeeded not so much in selling our manufactured goods as in selling large stakes in our native enterprises and our utilities.
It should be clear where the current trajectory of the economy is carrying us. We are heading towards economic misery if not towards an economic crisis. The process will not be averted unless we can restore our manufacturing industries and the technical skills on which they must depend. If we do not do so then our society will become increasingly divided between the rich few and the impoverished majority.
My Lords, I am grateful to the noble Lord, Lord Haskel, for securing this debate and introducing it so passionately. However, unlike him and many other noble Lords, I saw this as an opportunity to gaze at the sunlit uplands that will be our reward for the years of austerity. The Government have been determined to rebuild the nation’s finances and the results are that we can look towards a high-wage, low-tax economy and a society in which those who can enjoy the dignity of work do so and those who cannot are supported by a sensible welfare system.
I commend the brave move of the Chancellor of the Exchequer in the summer Budget to raise the minimum wage. There are those who have said that this will cost jobs. I cite the case of Andy Harrison, the chief executive of Whitbread. He estimates that the increase will cost his company around £20 million. However, having mused about passing on that cost to those who favour his coffee, he actually said that the company made a profit of £550 million last year. Perhaps the shareholders in that business would not mind sharing a little of that profit with the workers. Those are not his words but mine.
My noble friend Lord Mawhinney talked about the need to address inequalities in society. I agree with him and hope that companies and investors will take note of the fact that, if they do not move, then the Government may have to. For too long we have had a system in which the taxpayer subsidised low-paid workers, to the benefit of shareholders and often, I am afraid, highly rewarded chief executives. That has to change. Their rewards for work are preferable to state handouts.
Of course it takes time to change a benefits culture that has taken root in this country, but it is gradually happening. With improvements in education and skills under way, we are moving towards an economy in which, for many, work will not be a chore but a pleasure. The creative industries are on a roll and constitute the fastest growing sector in the UK, contributing about £77 billion to the economy last year. The New York Times recently referred to London as,
“the design capital of the world”.
When it comes to film, we are booming. There are plans for a new studio as part of a massive redevelopment scheme in Greenwich alongside the O2. The latest Bond film, the new instalment of “Game of Thrones” and the latest “Star Wars” movie are all made in the UK. The Government have done their bit to foster these successes with tax breaks. Despite some of the gloom that we have heard today, the Government are also encouraging other exciting industries to thrive and create high-value jobs.
Many have bemoaned the lack of manufacturing in this country, but Innovate UK is proving highly effective in stimulating business in science and technology. Since its creation in 2007, Innovate UK has invested £1.5 billion and, with what does not sound a huge amount of money, created around £7.5 billion in added value for the economy and 35,000 extra jobs. There are catapults around the country, which are not as dangerous as they sound but are promoting nine different sectors in highly technical areas in which we could build world beaters.
That is not to say that we are out of the woods. Household debt remains a huge issue; we have to turn a borrowing nation into a saving nation; and we are not immune from what is going around the world, and the problems in Europe and further afield. As my noble friend Lord Howell pointed out, the need to continue to be careful with the country’s finances remains intense, and there is still room for improvement. When it comes to procurement, the Government are not anywhere near as effective as they should be. We recently heard about the cost of police truncheons being purchased; they were four times higher in one police force than another. Unless the cheap one is inflatable, I should have thought that we could go for the lower-cost truncheon.
That finally brings me to my question for the Minister, concerning Hinkley Point. It does not look like a good example of government procurement. Today it looks like a means by which to lock in high costs for consumers, at a time when energy costs and demand seem to be going in the other direction. Will the Minister reassure the House that the Government will re-examine the economics of Hinkley Point?
One of the great pleasures in taking part in a debate of my noble friend Lord Haskell is that he always comes to them with solutions, not just problems. He is absolutely right to focus on the issue of productivity. I have often argued for growth, but growth and productivity are very much part and parcel of the same thing. I do not agree with the noble Lord, Lord Howell, on the need just to put constant downward pressure on public expenditure, almost for the sake of it, which is the implication of what he was saying. The reality is that the problems we got into in the great banking and financial crash were not about public sector spending being too high in the previous years. In fact, under the Labour Government, there had been a lower public sector borrowing requirement to GDP ratio than there had been throughout the Thatcher years. That is an important factor. What blew the economy was the collapse of the banks and financial industries. At the time, anyone who would have argued against bailing out the banks would have been laughed out of the Chamber. The issue was bailing them out with public money, and that of course sent debt through the roof.
There are two ways in which to deal with debt: one is the austerity argument and the other is to get growth. Austerity, in a sense, is more of a political argument than an economic one. I know of no sensible economic policy with austerity at its heart. It is obviously a problem if there is too much debt compared with income, but the issue of growth is more important. My noble friend Lord McFall pointed out that there have been a number of occasions when the GDP-to-debt ratio in this country has been much higher than it was even after we bailed out the banks. That was particularly true, incidentally, in the 19th century. It did not matter because growth was increasing so fast that the debt level became sustainable.
That does not provide an easy answer to today’s problems, and I am certainly not in the camp that says, “We do not need to cut back public expenditure during the present time”. One needs to do that, but making it the centre of one’s policy and presenting austerity as a political issue says to the public, “I am afraid that you have got to suffer in order to do better”. That is a dangerous message because it also devalues the political process. Noble Lords should ask themselves why people are getting fed up with the political process. It is partly because they have been told, “You’ve got to suffer”. That is not necessarily true.
Britain can and will do very well. There are a lot of examples of that but we can get things wrong, and the Government are not in a good position to complain. I am bound to follow the comments of my noble friend Lord Monks: when the last Labour Government left office we had given the green light for Heathrow to expand. Since then, we have had another five years spending literally millions of pounds producing a report explaining why we cannot carry out a major infrastructure project. Similarly, the noble Baroness, Lady Wheatcroft, was right about the enormous growth of the arts and its importance to the British economy. I hope she will remember that when it comes to dealing with the BBC, which is the big economic driver in that regard. If it is cut back on the grounds that its empire is too big, there will be a knock-on effect on the rest of the economy. I could go through a whole range of areas where that argument applies, not least in the aviation and aerospace industry generally.
I welcome the Chancellor’s announcement of an increase in the minimum wage. It is significant that he will apply it from the age of 25. He recognises the difficult balance that needs to be struck—it applies to all these arguments—between increasing productivity by making labour more expensive, and the danger of increasing unemployment. This is where we need creative thinking, particularly in the Labour Party. I would far rather pay less in benefits to young people but give them instead an ordinary pay rate in order to train. I do not care too much what that training or education is. I am impressed by the way young people use modern technology to set up their own companies and do things that make money. At times I think, “That won’t work”—and the next thing I know, I am buying it. Science and technology, along with education, should be the drivers. We should focus on our young people and start paying them to train for almost anything. Then, we might have a future workforce that will meet my noble friend Lord Haskel’s demand for greater productivity.
My Lords, I am going to be the 20th person to congratulate my noble friend Lord Haskel on the superb subject that he has raised. I echo what my noble friend Lord Soley said. The passion and resolution in my noble friend Lord Haskel’s speeches are always inspiring. This debate is closely linked with the debate in this House on Tuesday on productivity. I am not the first person to say this, but when one is 20th on the list it is difficult to say unique things, but I will do my best.
For me, some elements of productivity in the UK are absolutely tied in with British growth. I want to concentrate on the difference that well-led and well-trained staff, at all levels in businesses, make to the success of those businesses and how they consequently make a difference to the British economy. This is even more important following the period of austerity. Indeed, some of us would say that this period still pertains.
The Labour Government set rigorous goals for apprenticeships. I am delighted that the Conservative Government, like the coalition Government, are carrying on with this vision and, in fact, starting to deliver. The Labour Government worked closely with employers and trade unions, and I was delighted at the time to be heavily involved in the setting up of what was really the kernel of all this: the sector skills councils. Many of those councils, including SEMTA, led the way in working with employers to understand and value the difference that trained staff could make to their bottom line. Many of these businesses contribute hugely to the GDP.
In my view, the British economy still struggles in many ways to benefit fully from the contributions of small and medium-sized enterprises. The Government struggle with how to support these businesses and recognise the contribution they make to growth. Many issues still prevent SMEs growing as they would want to.
Some noble Lords who spoke today also spoke in Tuesday’s debate on productivity. They may well think that what I am talking about should have been said in Tuesday’s debate. However, I make no apology for focusing on it. As my noble friend Lord Soley and other contributors today have said, without good productivity, British growth will not happen and certainly will not be increased. Higher apprenticeships and apprenticeships really belong in the productivity area but, as I have already said, make the difference between a business being very successful or mediocre—and mediocre businesses sometimes fail, and certainly do not contribute for employers or the UK economy.
I am not worried at all about focusing on the overlap between a productive United Kingdom workforce and the British economy beyond austerity. That is the link I am making in this debate. Will the Minister assure us that the apprenticeship numbers the Government have suggested they are going to achieve will be achieved? The emphasis the Government have put on the employer paying towards this is absolutely superb. It was not what the Labour Government did, but the ownership of apprenticeships has become much more valuable because the employer feels that they are in charge and will benefit from recognising what that skilled workforce brings to their bottom line.
Finally, I want to talk about the gains that such a workforce makes through its contribution not only to business and the economy but to the overall nature and culture of our country. I echo what a number of my colleagues have said already: when people are in work that gives them satisfaction and they feel that they can make a difference; the whole culture of the business, and consequently the whole culture of the UK economy, changes.
My Lords, as the first of those making a winding-up speech, I thank and congratulate not just the noble Lord, Lord Haskel, but everyone who has contributed today. I do not think that I have ever sat through a debate in the House where every single speech has opened my mind in a different way and provided me with such extraordinary food for thought. Really, a very exceptional conversation has gone on with all sides of the House.
We have had, in effect, almost two different debates today: one, if I could turn it around, on austerity—I am going to make a few comments on that—and the other on the challenge that the noble Lord, Lord Haskel, has put before us of the extraordinarily disruptive new technologies that are changing the world in which we live. Such technologies will be the basis of the economy going forward and offer us extraordinary opportunities, as well as present us with real risks. I think the beginning of that debate is absolutely crucial.
Let me go back very briefly to austerity. I say again to the Labour Party and the Conservative Party that I completely agree that the crash was caused by the finance industry. There is no question about that. But the problem was that the ability to respond to that required cutting the deficit because public spending by the Labour Government was predicated on the assumption that we had done away with bust and were into a permanent era of boom. When that disappeared, it was simply unsustainable to continue public spending at those levels. But I also say to the noble Lord, Lord Howell of Guildford, that I believe we are no longer following the coalition’s trajectory, which, by the way, when it realised it was moving too harshly, had the common sense to tack its sails and reduce the deficit more slowly. There has been an ideological decision to try to rapidly move to a surplus situation and abandon the underlying principle of the coalition, which was that the burden should always be shared. In the Budget, we saw people who were prosperous and propertied getting very significant advantages and the cuts falling on the poorest of the working poor, children, young people and those with mental illnesses. That is the key change that I would fundamentally dispute, and it worries me going into the spending review.
My Lords, the noble Baroness mentioned my name, but I think she is slightly attributing to me views that I do not hold. All I was saying was that the concept of “beyond austerity” seems to imply a sort of nirvana where public expenditure can be completely relaxed. That is a delusion. If that line is pursued, it will hurt many working people very seriously. That is all that I am saying.
My Lords, I like the word “prudence”; it is a sensible one to use. As my noble friend Lord Taverne said, in a civilised society taxation plays a key role and there is always a balance between the investment provided by the public sector, support for the vulnerable and the potential that can be brought about by constraining the amount of the economy that the public sector captures.
Let me move on to the more exciting part of this discussion, which will, I hope, be the first of many. During the coalition years, we had a very interventionist Government and an industrial strategy, to which the noble Baroness, Lady Wheatcroft, referred. It was not a free market solution of bringing back R&D investment and rebuilding the technological skills base in this country. It was a working partnership between the Government and business, often through the catapult centres, with a big focus on and support for research, especially the development end of research, and with that a development of the skills base.
Several people have made a key point: apprenticeships are wonderful and every one of us here would support high-quality apprenticeships. I hope the Government will look at how they work, not just in large companies but in small companies, which have been rather neglected. However, the work of the further education colleges in developing skilled people who have the flexibility not just to fill the immediate jobs but the potential to develop new industries and fill the opportunities of the future is absolutely key. I hope the Government keep that very much in mind.
These disruptive technologies are incredibly exciting; to me, that is, in part, because they are so consumer and user-driven. Amazon has become a powerhouse, not because it has been imposed from the top but because people want to change the way they buy. I hate the fact that it does not pay taxes, but we have to solve that problem because it will be a characteristic of so many of the firms of the future. Look at Uber. No matter how we feel about the black cab company, it seems that younger people have found Uber to be effective. However, as people in this House have said, it is a company that does not own a single taxi. I suspect that rather than going to a conventional hotel, many in this House are now looking at Airbnb as a way of booking their summer holiday. In the finance sector, which is rarely discussed in this context, the disintermediation of the big players is phenomenal. Peer-to-peer lending, crowdfunding and small, specialised banks are filling the gap that the financial institutions have allowed to develop, partly because they have hung on to ancient legacy technology—nearly all of them are dinosaurs. One sadness about the return of RBS was that it could have been reshaped into something that matched the new world of alternate finance. Instead, frankly, it has been left as a dinosaur of the old world.
I am concerned about access to financing for SMEs, because the traditional banks are not doing it any better than they were during recession—that is absolutely key; it is being picked up by the alternate world. That world will carry them through the very early days of development with relatively small amounts of finance, but we still have in this country the famous valley of death for companies that are beginning to grow and then cannot get access either to the risk capital or to the lending that they need to make that transition. We live with two consequences that worry me enormously. So many of our brilliant entrepreneurs who start companies have no ambition to grow them to global entities. In the US, their counterparts would do it without question, but they look to sell out. It is partly a cultural attitude, but it is also because that financing to go to a global structure is not available in this country, and it is something that has to be tackled rapidly.
A number of people—my noble friend Lady Miller in particular—talked about the importance of the green economy. It is one of the key economic sectors of the future. I am extraordinarily worried because any conversation now with investors in the green energy sector will tell you that they are holding back because they have been so discouraged by the actions that the Government have taken. Zero-carbon homes were mentioned, as was the withdrawal of support for onshore wind—there is now complete mistrust and suspicion across that sector. Those green jobs are critical to our future.
No one discussed the transport industry, where I have spent the past two years of my life. Ultra-low-emission vehicles together with driverless cars and huge manufacturing change—for example, 3D printing of car parts—revolutionised that industry. The old-legacy companies are scrambling and cannot see a path to the future. We have an extraordinary opportunity to become a leader if we build the market for ultra-low-emission vehicles and driverless vehicles in this country, and allow in the R&D and the jobs that can come with the related manufacturing. I hope that the Government will continue their commitment to that sector which was almost solely driven by Danny Alexander. I know that Oliver Letwin is also a big proponent of it. It is crucial that it continues to thrive because of the opportunities that it presents.
I see that my time is virtually up. I just want to say what an exciting time this, but let me add one very small caveat. It is the European Union. It is critical to us that we remain part of that single market if we are to have this exciting future that potentially sits in front of us. We are seriously at risk of talking this country out of the EU. I direct my comments particularly at the Conservative Benches and ask them, please, to stop the indulgence of the right wing, which is inward-looking and does not understand the dynamics of the market and the new opportunities, and to make sure that Britain is properly positioned as a world and European player with skills and investment and able to welcome and take advantage of those new disruptive technologies.
My Lords, I wish to draw attention to my business interests as recorded in the register.
I congratulate my noble friend Lord Haskel on securing this interesting and useful debate—it has been excellent, and my noble friend gave us an outstanding contribution to start it off. My noble friend is well regarded for his business acumen, but in this House has been a dogged investigator and advocate looking at economic and business matters. His interest in the problems of productivity has led him correctly to highlight one of the great challenges: the central importance of management and leadership.
This has been a fascinating debate that has covered many important issues, but let me take up the invitation from the Minister in Tuesday’s debate to think a little more boldly and see whether we have the right mix of political courage and consensus, and where we might be able to tackle some of the larger issues.
Long-standing government policy has been to pursue growth, fiscal consolidation, employment, skills development, competitiveness, innovation and improvements in productivity—the ingredients of economic motherhood and apple pie. But each Government of different shades pursue the same objectives with different emphases and with different consequences. A long-term fault of all Governments has been an unwillingness to address some of the consequences and to understand that if something is working it might need to change to continue working.
It was frequently argued that one reason that France and Germany were able to develop high performance in productivity was the managerial response to inflexible labour markets. Being able to maximise the use of flexible labour markets in the UK led to less attention being paid to effective maximisation of capital, investment and management.
The optimistic explanation for the UK’s productivity puzzle and long-term underperformance was that after the financial crisis high unemployment both in the UK and the eurozone pushed down UK wages and led firms to put on ice investment that would have led to labour productivity growth and to employ more people instead on flexible terms and low wages. Low capital investment with some growth in demand—even if generated by leverage or an asset bubble—would generate rapid employment growth, cutting the unemployment that helped stall productivity.
But we have not seen an investment-led recovery in the way that we would have expected. There are still some fluctuating weaknesses in demand and uneven performance, and all this before you take into account in more recent times the impact of commodity prices, asset bubbles, and Chinese currency changes and economic performance. I suggest that we are far too reliant on the benefits of flexible labour markets.
It was overly optimistic to dream that as unemployment fell and labour shortages became common, the process would stop and the scale of investment would resume, but it has not yet become a reality. Let us be frank: productivity innovations do not take seven-year holidays.
While the Government’s policy document on productivity assembles much of what is already being done, combined with a few useful incremental initiatives, perhaps their most impactful policy to deal with the productivity challenge has been to transfer the costs of low pay from the state to the private sector with the Chancellor’s living wage proposal. This will certainly mean that businesses will have to respond with more creativity and capability than they have shown to date.
I hope that the Government take into real consideration the impact on people of the changes to the welfare arrangements as well as making sure that they develop the right levers to assist small businesses during this change. More aggressive policy on late payments and payment terms should be part of this.
From these Benches, we are very keen to encourage a broader look at what we need to change, addressing stewardship, ownership, governance, leadership and long-termism and ensuring the effective and proper functioning of markets. It was the Bank of England’s chief economist who expressed concern that shareholder power is leading to slower growth and that business investment has been slower than desirable because too high a proportion of profits has been paid out to shareholders rather than being reinvested. In 1970, £10 out of every £100 of profits were typically paid to shareholders through dividends, but today that figure is between £60 and £70, including the current desire for share buy-backs. Too little cash was available for growth investment and firms risked “eating themselves”, he said.
Mr Haldane’s argument is that UK company law needs re-examination. Too much decision-making power is with shareholders, and the evolution of traders in the public markets means that shareholdings are traded so frequently that they have less interest in the long-term health of the companies than in the trade itself.
Remuneration of senior executives is a matter of some concern. In 1998, the average CEO of a FTSE 100 company earned 47 times the pay of their average worker. Now I believe that we are close to 140 times. All too often, there is a limited alignment of interests. Remuneration packages are devoid of any long-term performance measures or claw-back. I find it amazing to be briefed by new managements on how the previous management undertook some short-term jiggery-pokery and then retired on comfortable terms with a generous pension to be paid in the long term when the costs of the damage done in the short term rest with the company and its shareholders and stakeholders. There is a huge misalignment of where the risks lie and where the upside is. But we must not give the board of directors a free pass. There is some startling evidence that suggests that the place where the short-term culture is more pervasive is on the main board of a company rather than among the executive directors or even the shareholders.
We have no issues with high rewards. We are strongly supportive of proper executive rewards for performance, as we have been for entrepreneurs and business owners, but it is important that all these matters deal with performance—and long-term performance. I strongly endorse the view that productivity improvements are present when there are excellent labour relations and where management’s ability to innovate is part of a joint exercise with staff—where companies, like any good functioning institution, have a sense of purpose and common values. One of my great teachers in business used to remind me that once in the 1960s when an American President was visiting NASA, he met one of the cleaning team. “What do you do?”, he asked. They replied, “I’m helping to put a man on the moon”. This notion of common endeavour is found in our best-performing companies. I feel that sometimes our management skills deployed in the public sector could do well to galvanise the public service ethos across the workforce to achieve more.
There is also a growing weight of evidence that not only is there a link between high levels of employee ownership and superior share price performance, but that it is a long-term trend. The UK Employee Ownership Index tracks UK-listed stocks where staff own more than 3% of the company. If one had invested £100 in the EOI when it launched in 2003, it would be worth £749 now. That compares with £277 from the FTSE All-Share Index—a 472% outperformance, and it has been consistent. High employee ownership produces a positive culture.
Perhaps it is time to set auditors free. In 2007, all 180 European banks that needed government rescues had clean audit reports. Auditors are meant to take a sceptical look at management, but all the recent failures, even since that period, also had clean reports. Audit terms should have a maximum period and once appointed it should be clear what is expected. A separate shareholder council should be established to make the recommendation at the annual meeting to make sure that there is genuine shareholder control of auditors. That would be a major advance in corporate governance.
We also need the policy framework that does not just address market failure but ensures the proper functioning of markets; that encourages competition; that is muscular in its approach to anti-competitive practices; that is tough on business misconduct and fraud; that encourages capital investment and positive corporate cultures; that prioritises leadership, management, science and technology; and that fundamentally addresses the terrible inequalities emerging in our society and the need to establish a more inclusive and sustainable capitalism.
We need and must be a place for disruptors, disaggregators and innovators to thrive, but it must be a place where efficiency, progress and new ways of working and satisfying the needs and requirements of today’s citizens and customers can be addressed. But we need to address the social and regulatory challenges at speed and, thus far, democratic systems do not seem able to meet the social and regulatory challenges in such a way that incentivises change, ensures fairness and manages the consequences and risks of innovation. The market alone cannot manage such transformations.
I assure the Minister that there is a strong appetite for more than the polite ripple of applause that greets most of the Government’s measures. In his speech on Tuesday, the Minister said that many of the decisions to make a step change need further boldness, political courage and close monitoring to ensure that the policies announced are implemented. Growth and productivity rely on the ability to make long-term decisions on framework and infrastructure and, whether it be energy policy or the Heathrow decision, we hold ourselves back with the time we take to make these important decisions. There are always consequences for all choices. Sometimes, right and wrong are more about timing and context. Sometimes, government policy decisions are far more political than economic. The Minister’s undoubted record on these matters offers some hope that we may witness a greater willingness to consider the more fundamental and required changes that our country needs, and I hope that in his comments to follow, we will be encouraged by how his influence may be starting to bear fruit.
My Lords, as the noble Baroness, Lady Kramer, suggested, yet again we have had a very interesting debate this afternoon. For myself, it is particularly helpful that it is on many topics very specifically close to my role as a Minister. As was pointed out by a number of noble Lords, it is the second debate on closely related matters that we have had in two days. Whether the greater participation of noble Lords present here today than the one two days ago is a sign of the growing appetite for such discussions or the hour at which the earlier one took place—or some sporting event of that particular evening, or what is about to follow this debate—I shall leave others to ponder.
I was somewhat unsure as to quite what the noble Lord, Lord Haskel, might have had in mind with his very specific reference in the title of the debate to,
“the British economy beyond austerity”.
Like others, I congratulate him on the content that he chose to focus on—on productivity. I heard the noble Lord describing what we are entering into as the age of productivity. Linked to the tone of what I have already said, I cannot resist the temptation to say that we must hope that the amount of discussion now taking place in this Chamber and the attention that we are giving the topic of productivity is itself a leading indicator of what may happen to productivity performance. I do not need to further remind the House that we had a specific discussion about productivity on Tuesday, and I encourage noble Lords, if they have time, to read the documents that are now available in the very likely event that I miss referring to all of those matters in my subsequent comments. I am conscious of the fact that our time is under intense pressure.
From what I have heard from noble Lords, there appears to be general recognition that some degree of deficit reduction and a focus on maintaining a lower level of debt has in the past been generally the right thing to do, even if not everybody signs up to exactly the same path. Coincidentally, I encourage noble Lords also to read, if they have the time, Chris Giles in today’s Financial Times. He has written a very topical piece linked to the comments made by many noble Lords about the ongoing performance of the fiscal accounts in view of policy and the economic recovery. In my judgment, the tone of that piece supports the general view that it has been correct and appropriate for fiscal policy to have been focused on deficit reduction. I was somewhat fearful before I listened to the noble Lord, Lord Haskel, that we would yet again end up having primarily a discussion about the appropriate stance of fiscal policy. While a number of noble Lords made some useful comments on that topic, the debate has been very rich and much broader.
Before I try to address the number of specific points raised and add some comments myself, I would also like to focus on the issue of austerity. Several noble Lords, notably my noble friends Lord Howell and Lord Selsdon, the noble Viscount, Lord Hanworth, the noble Lords, Lord Soley and Lord McFall, and the noble Baronesses, Lady Wall and Lady Kramer—I apologise if I have missed anyone out—tried to focus on the conceptual environment that we are in in the context of austerity. At the risk of sounding too much like I did in much of my previous life as an economist, it is important to remind noble Lords that, while our deficit is now less than half what it was at the peak of around 10% of GDP in 2010, and our debt to GDP ratio appears to be stabilising, it is at a very high level of 80% of GDP. In most standard economic textbooks, usually irrelevant of one’s political bias, it is generally expected and desirable to run fiscal surpluses in times of economic performance beyond what is generally regarded as the trend rate of economic growth. That is not least because it would mean that, for the inevitable moments when life becomes somewhat less favourable and economies turn down, there is an opportunity for fiscal policy to provide the additional help that one would hope would be there for monetary policy and other forms of intervention to try to ensure a recovery.
In that regard, let me highlight for noble Lords the fact that last year the UK economy grew by 3%, and I think I am right in saying that five of the past six consecutive quarters have experienced what would typically be regarded as above trend growth. Most independent estimates congregate around a figure of 2.4% of GDP in terms of our long-term trend, so I would encourage future discussions and debates about many of these topics to think about the stance of fiscal policy and the use of the word “austerity” in that context. That is because, as has been pointed out by a number of noble Lords and in the piece in the Financial Times that I referred to, it is not clear that the stance of fiscal policy either has stopped or is stopping the economy currently from growing above trend, and certainly there appears to be growing evidence, as the economy continues to expand, on whether the past stance, where fiscal policy was very definitively tightened, ultimately stopped the kind of recovery that we are now apparently enjoying.
But linked to the welcome introduction by the noble Lord, Lord Haskel, in my judgment it is important that the discussion should move on and focus on other things which are in themselves part of the productivity issue, as a number of noble Lords have already pointed out in welcome comments, but separately from the productivity issue are important in themselves to our economic future. I shall briefly summarise my thoughts on what are generally four areas: the performance of our external trade; investment; the so-called rebalancing of the economy; and, connecting back to the issue I shall start with, the topic of productivity. Before I do so, I must apologise because the sheer number of questions that were put in my direction means that of course I have no chance of answering them all, especially those that were particularly complicated, but I choose to answer two that I regard as being direct and simple.
The noble Lord, Lord Giddens, put to me a yes or no question on whether RBS is no longer too big to fail. I am going to be an economist and say that I will not give him a yes or no answer. What I will do is repeat what I think the Governor of the Bank of England has said, which is that the bank is now in a position where it can begin its return to the private sector. I think that that is what most observers, particularly those with expertise, have believed throughout the unfortunate years of the past is where it ultimately belongs.
In view of the sensitivity surrounding this topic and the fact that there are to be further discussions, I do not intend to pursue it at length. I have given the short answer which I thought I should give. However, we can follow this up in a written format.
My noble friend Lady Wheatcroft put a very pointed question to me about Hinkley Point. I shall say two things. I along with many others am spending a considerable amount of my time on the said topic, and decisions will be made in due course on many important factors, including the issue of value.
In the remaining half of my speaking time, I shall turn to the four areas I have already mentioned which I believe are particularly important to the economy beyond austerity, the first of which is of course the issue of productivity. I do not want to overelaborate or spend too much time going yet again into the details of the productivity plan. I am grateful that a number of noble Lords made reference to it in the debate, albeit that some of those references were not as favourable as I would have hoped. The important point I want to emphasise is that, as I mentioned in the debate on Tuesday, a senior Treasury official has been appointed to lead a cross-departmental group holding regular meetings to ensure that what is announced in our implementation plan is being implemented. That senior official will report back to me, thus allowing me to get directly involved as and when the need arises. I should add that I have encouraged this official, as part of her reporting back, to keep challenging me and the Government on any areas which officials believe, from their objective point of view, are being neglected or not being given sufficient attention. They should not feel shy about suggesting that we might perhaps want to reconsider them. I will not reveal the name of the person to avoid them being bombarded with the wisdom of noble Lords.
The second area on which a number of noble Lords commented briefly is international trade, which is of course highly important to our economic future. It is in itself part of the productivity story, but it is of sufficient importance that we need to focus on it in and of itself. It is right to recognise that the previous Government had already put a renewed focus on exports. The further support and encouragement given to UKTI has resulted in a more than doubling of the number of businesses receiving direct help on an annual basis since 2010. However, how we perform as an exporting nation is only partially determined by what we can do ourselves. It is a reality that the biggest driver of a nation’s exports is the level of domestic demand in its export markets. Over recent weeks, our friends in the media have only too willingly highlighted with their seemingly never-ending gloom that there are considerable challenges on an ongoing basis in many parts of the world, and there is not a great deal that we can do to control those developments. However, what we can do is work harder in the specific areas we have highlighted and spend more time trying to ensure that our trade performance improves in those places where domestic demand is likely—none of us ever knows—to perform most strongly.
I apologise that I cannot recall the noble Lord who specifically mentioned it, but China was briefly touched on. I am sure that many Members of the House are aware that, the week after next, the Chancellor will be leading a group of senior businesspeople and a number of Ministers, myself included, on an economic and financial dialogue visit to China. Given my own past and my now ministerial hat, I think that it is a particularly important trip. I should like also to point out in the context of the current excitable discussions about what is going on in China that, even in the event of the Chinese economy slowing to growth of 5% a year instead of the remarkable levels it has enjoyed for the past 30-plus years—and which, I should add, was much less than is currently believed by the consensus—that growth would equate, before the end of this decade, to the equivalent of another United Kingdom economy being created. It is a hugely important opportunity for us.
I am sure that a number of noble Lords are excited about and looking forward to the visit from the leadership of India later this year. Right at this moment, the country’s economy appears to be one of the few in the world that might be growing more quickly than that of China. These are the places in which, using my ministerial position, I am encouraging many different parts of government to make sustained efforts to boost our trade performance.
Closely related to that, a third area of great importance is, of course, investment, and, in particular, related to the international trade picture, international investment into the UK. As has been noted by a number of noble Lords, the fact that we have significant investment coming into this country, despite our shared views of the considerable challenges from many parts of the world, should not be ignored. I find it quite intriguing analytically—I noted it in the context of the interesting comments of the noble Viscount, Lord Hanworth, on the level of the pound—that, if things are as bad as many of us focus on, why the pound seems to do so well relative to a number of other currencies. That is perhaps a discussion for another day. It is certainly a consequence of a considerable number of investors around the world wanting to invest in the UK, including investing in our infrastructure and benefiting from what they perceive to be reasonably stable and attractive economic policies, including our taxation policies. As can be seen in the Budget, and as I have discussed, there remains, and will continue to remain, considerable focus on ensuring that that environment remains friendly.
The fourth and final area that is crucial, in the spirit of the excitement that the noble Baroness, Lady Kramer, talked about and which reflects my own focus, is the rebalancing of the economy. I say this towards the end of a week when we have received—we will hear a lot more about this, I am sure, in the coming days and weeks—a considerable number of bids from different parts of the United Kingdom, not just England, for devolution deals so that local areas can have a greater say and control over their own economic affairs, including specific asks that, one would imagine, may do something to boost their productivity and that of the nation. I have spent a considerable amount of time in the past few weeks travelling around the country, particularly to the northern powerhouse area, ahead of these bids. The number of anecdotes I have heard are highly encouraging that there may be some signs, probably not yet evident in our data, that our economic performance is becoming more diverse.
I repeat something that I said on Tuesday night: in the context of the ongoing debate about the appropriate stance on fiscal policy and public spending, it was frequently suggested a number of years ago that some regions of the UK would be especially vulnerable because of their dependence on government spending and would therefore suffer particularly as a result of the fiscal policy. My travels around the country, particularly the north-east, have shown me—this is quite interesting and very encouraging—that the growth in private sector job creation has more than compensated for any loss of public sector jobs. It is one of the regions that has seen the biggest rise in employment relative to its base in the past few years, and long may this continue. It will remain an area of intense focus with regard to government policy.
In conclusion, we have had an excellent debate; in some ways it is a shame that it could not go on for longer. I congratulate the noble Lord, Lord Haskel, on securing the debate. We all want to see the country reaping the rewards of a strong economy, and we are all committed to having in place the right policies to achieve that. Fiscal responsibility will, however, need to continue. As has been recognised, rather than simply focusing on fiscal policy, it is appropriate for more attention to focus on trying to do the right thing in order to improve our productivity performance, which will enable all our citizens to enjoy greater wealth.
My Lords, in the three minutes left for this debate, I thank all noble Lords and members of the Front Benches for their words, their work, their wisdom and their contributions. I thank the Minister in particular for his response and for telling us about the work that he is doing; we should learn more about that.
There has been a diversity of opinion about the role of the state. The answer is not that the state is just an interested spectator but that it has a role to help with trade, science, technology, inward investment and skills. The state has to be part of the answer, not part of the problem.
Many noble Lords were concerned about inequality. Inequality goes with bad productivity, and many speakers drew attention to the fact that, where relations were good, so was productivity. This seems both socially sensible and desirable.
Most noble Lords agreed that we need to keep our finances under control. As for how to do it—well, there is a dispute about fiscal policy, but we will have to agree to disagree.
I was glad that the Minister referred to rebalancing the economy. Separating the economy into manufacturing and services is an old tool which will not solve new problems. So much of manufacturing includes providing services; indeed, some manufacturing companies employ more people to provide services than to make the products.
I hope that this debate will see talk turn into action. Before I finish, I would like to say that, in all the years I have served in your Lordships’ House, I have never known such a negative attitude towards us from the press and other media. Those of us who are engaged in outreach activities or who travel around as members of the Government or of the House of Lords will have noticed this. We must not let this drown out our contribution to the creation of policy, or our expert deliberations, our scrutiny of the Government and holding the Government and others to account. This debate will help counter that attitude.
BBC: Finance and Independence
Motion to Take Note
My Lords, I am delighted to see here so many people who have a share in the television industry generally and an interest from a board viewpoint. This is a matter that concerns us all and will go on concerning us for some time.
This debate follows one held in early July introduced by the noble Lord, Lord Fowler. Two days afterwards, on 16 July, the public consultation on the BBC’s charter review opened. That consultation runs for just another four weeks from today. The Government have reiterated that there will be an 18-month window of consultation; for the public it appears that it is a mere three summer months, far from enough time for them to consider the uniquely important changes to what I believe is a pillar of our civic society, an institution of global reach and reputation that belongs not to the Government or the state but to the licence fee-paying public who use it.
Let me begin by asking if the Government would please extend the period of public consultation about this important institution. I address the future of the BBC in a mood not of confrontation but of commitment, but it is proving to be a rocky road. Both Jeremy Hunt and Sajid Javid, as Culture Secretaries, said quite openly, “Yes, the licence fee might well be reduced”. John Whittingdale, the current Secretary, has compared it to the poll tax. Reports from the election campaign bus reported David Cameron as saying, jokily, that he would close the BBC down after the election. Impromptu jokes can often reveal the inner man. The Daily Telegraph headlined: “Tories Go to War with the BBC”. So, we have been well warned.
After the election, the Government moved fast and on several fronts. Their proposal to decriminalise the non-payment of the licence fee could, if it goes ahead, cost the BBC some £200 million. George Osborne corralled the BBC into paying for the free television licence for the over-75s. That was without consultation. It will be at a cost to BBC funding of some £725 million. George Osborne frequently claims that the BBC,
“like much of the rest of the public sector”,
must contribute to the Government’s austerity campaign. The BBC is not part of the public sector like any other: it is an independent body set up and guaranteed by charter. It is wholly wrong for the Government to refer to it in those terms and to load such an institution with what are cuts to their social services budget. The new settlement must outlaw any such smash-and-grab raids in the future.
This calls into question the whole matter of charter renewal and the future funding of the BBC. There is talk of a groundswell of feeling that changes in viewing patterns and technology make the licence fee outdated and in need, if not of outright abolition, of severe control. That feeling comes not from the public at all. There is no popular outcry against paying for the BBC. The BBC commissioned independent research into the matter. A series of families around the country—families who said that they were completely indifferent as to whether the licence fee went or not—went without the BBC’s availability in their homes for nine consecutive days. At the end, two-thirds of them had changed their minds. One among them said that living without the BBC was “absolutely dreadful, just awful”. They found that the BBC’s cost, at £12 a month, was remarkable value compared with, say, Sky’s £70 a month. And the BBC’s service has, uniquely, no commercials—no intrusive interruption to the narrative and creative flow of individual programmes. The BBC is under attack not from the public but from two other sources: namely, the Government of the day and vested media interests—which, of course, command the headlines and thus distort the scale of wider public interest and concern. I refer to the Daily Telegraph’s headline, among others.
It is in the nature of the BBC to be attacked by Governments; it has been so since its earliest days. Churchill wanted to take over the studios during the war. Eden was furious over Suez. Mrs Thatcher complained about coverage of the Falklands War. Tony Blair was enraged by coverage of the Iraq war and the death of David Kelly. It is a testimony to the fact that the BBC, unlike other non-commercial national broadcasters, is not in the pocket of government or required to do their bidding. The BBC’s coverage aims to be fair and balanced. Its training schemes for journalists endorse such values. That is not to say that the BBC does not make mistakes. Recently, it has made some really big ones; for example, over the reporting of the Savile scandal and the aborted digital media initiative.
The renewal or revision of the BBC’s licence fee is the one place where the Government can exercise a direct, profound and unqualified influence. Thus, finding the balance at this point between the BBC and government is at the heart of our democratic process and, I hope, of today’s debate. To date, there have been eight charters, varying in length between five years and 15 years. For the first time, however, a significant option is included in the current charter review, asking simply whether the existing charter and agreement should continue at all.
The charter was created to guarantee the BBC’s independence from Parliament and from government. Any new framework dreamed up by either side of government is, I insist, likely to bring the BBC more effectively within their control. One can be sure that matters of bias, censorship, political neutrality and the scope and scale of its activities will all be drawn closer within any Government’s oversight and jurisdiction—that control being effected by the ongoing financial manipulation of the BBC’s income by the Treasury as directed by the Government of the day. Who is to say where it might end? This is to be resisted on the widest possible front as bad for broadcasting, bad for creative initiatives, bad for the freedom to try daring new formats to encourage experiment and change, and, more fundamentally, bad for the democratic values of fair reporting that underpin our civic society.
The BBC has many faults that need addressing—I work for it, I should know. It is still overmanaged and has too many layers of managers telling the creative classes what to do. It overrewards its headline stars and its pension settlements for managers have been extravagantly high. There is lack of clarity around its governance structures. There needs to be change—change from within. Indeed, the current director-general, Tony Hall—the noble Lord, Lord Hall—is embarked on an extensive programme of just such change. The BBC needs to be more flexible and more responsive to the fast-changing world of global television. Its governance needs to be examined to see whether the BBC Trust has outlived its usefulness. Its own chairman seems to think so. I hope that this debate will address many of these topics.
The BBC faces suggestions of a more fundamental change than we have ever seen. The Government seek to instruct it on the type of programmes that it should make. The scope and scale of programmes should, they suggest, be of a narrower and more targeted range, possibly giving up its most popular formats. In other words, it should be cut down to size. They insist that that is to be done because the landscape of broadcasting is changing and growing, as newspapers—particularly local newspapers—languish and decline. It is also done at the siren call of vested interests—interests which are well represented in the 12 men and women whom the Government have appointed to advise on it.
It is a healthy media landscape when rival organisations succeed and flourish, and many are doing so. Sky News and ITN win as many awards, and sometimes more awards, than BBC News. In July, ITV reported a 23% increase in half-yearly profits. Sky announced a record turnover and full-year profits of £1.4 billion, and nearing an audience of 12 million in the UK and Ireland. The idea hinted at in the Government’s Green Paper that the BBC’s operation is “crowding out” its commercial rivals does not match the facts.
Meanwhile, BBC formats are popular around the world. Outside the US’s main studios, BBC Worldwide, the BBC’s commercial arm, is the largest distributor of programmes in the world. It has a turnover of £1 billion, with headline profits of £168 million. Such is the nature of the television industry that for any media enterprise to succeed it must cover a whole range of platforms and, of course, have a thriving website. The BBC does this well. Its website ranks in the top 100 in the world. Its channels have increased from two in 1994 to nine in 2014. Yet, over the same period, channels available in the UK have grown from 61 to 536. Clearly the BBC is not crowding them out. The BBC’s commercial rivals have spent more on the rights to Premiership football alone than the BBC spends on all its content, yet the Government expect the BBC to make severe cuts. Why would any Government want to cut down such a success?
As Armando Iannucci declared in this year’s MacTaggart lecture at the Edinburgh Festival,
“if the BBC were a weapons system, half the cabinet would be on a plane to Saudi Arabia”,
to say how brilliant it is. Let us celebrate and support this major British institution and not cut it down to size.
I hope that that has not come out of my four minutes.
My Lords, I congratulate the noble Baroness, Lady Bakewell, who has a distinguished broadcasting career, on that speech. I do not agree with all of it, but I agree with much of what she has to say.
Given the time, I have two points to make. The first is basically this. The Government, in their consultation on the BBC royal charter, skirt around the most basic question, the 20th question: do we need a royal charter at all? The noble Baroness touched on that. It all sounds very grand. It sounds as if it is a defensive mechanism against political interference—the kind of recognition that should be given to an organisation as important and venerable as the BBC. In fact, the royal charter means that the BBC is the plaything of any Government who happen to be in power as the 10-year renewal comes around. It is not just Conservative Governments, but Labour Governments as well. Last time it was Mr Blair, spluttering with indignation over the reporting of the Iraq war, who gave us the BBC Trust, in spite of all the arguments in the consultation at the time that that was the wrong way to go and that it would provide a divided structure at the top of the BBC, which is precisely what has taken place.
The Privy Council guidance makes crystal-clear the position. Once a body is incorporated by a royal charter it automatically means,
“a significant degree of government regulation”.
The royal charter gives to the Government an absolute power that is totally out of place in a democratic society—the kind of power that any self-respecting United Nations committee would condemn. If noble Lords compare it with the Freedom of Information Act—also being examined, and there are similar criticisms of the advice going to the review—they will see that the difference is this: if the Government decide to propose changes to the Freedom of Information Act, they need a Bill to go before Parliament. With the charter and the agreement that goes with it, the Government rule. That is the position. Obviously time does not allow me in four minutes to go into what I propose instead, but what it means today—as we have the charter today and we are not going to change it in this debate—is that the BBC is operating in a cold climate. Any argument that we put forward needs to be strong in principle and in practice.
That brings me rapidly to my second point. I hope we can all agree that, with so many parts of the world in crisis, there is an urgent need for us in Britain to be fully informed by trusted and independent media companies. That is why the BBC has never been more important. Of course there are other excellent news organisations, such as ITN and Sky, but no other British broadcaster has the range and depth of the BBC. No other broadcaster has the number of overseas bureaux or the number of foreign correspondents. I applaud the domestic decision to put more resources into local reporting, in co-operation with the regional press, but it would be a terrible mistake if there were to be sweeping cuts in the other BBC news services, radio or television at home or overseas.
I have never understood why some in this country refuse to take pride in a world-leading broadcasting organisation that is both British-run and British-owned. If you cross the Atlantic you find many American broadcasters who would give their hind teeth to have a system like this. I hope that the Government recognise that the legacy they have is a very proud and great one that they must maintain.
My Lords, I thank the noble Baroness for raising this debate. I also refer noble Lords to the Register of Lords’ Interests, where I have detailed a range of media interests that I have. Some of the companies of which I am a director, shareholder and majority owner provide programmes to the BBC, particularly in the children’s field, of which I am very proud.
The enemy of a Government, of whatever complexion, is change for change’s sake. It is the thing that most threatens success. We must be very careful not to change a successful institution so that we say, “We have changed it”. I am not a slavish or dogmatic defender of the BBC. Like other noble Lords, there are many things that I would like to change. For example, I do not agree with the noble Lord, Lord Hall, in his analysis that the BBC should be smaller in five years’ time. I say this to the Government: it is easy to make things smaller, to cut budgets, to stifle ambition, to retreat from the big challenges. My vision for the BBC is a bigger, stronger BBC that advocates our national interests and values at home and, more than ever, abroad too. It is one of Britain’s best-known institutions: 97% of adults tune in to the BBC every single week, as do 300 million people worldwide. It brings £8 billion per annum directly to the British economy. It is our window on the world and their window on us. Once destroyed, it can never be rebuilt.
Charter renewal is a chance to build the BBC for the future, but the danger is that it will become the beginning of the end of the BBC that we know and love. I want the Government to bear in mind six red lines at the beginning of charter renewal. First, it is in the interest of the UK and all its citizens that the BBC remains a top global broadcaster, promoting British culture and values throughout the world. Secondly, the core principles of public service broadcasting and the mission of the BBC to inform, educate and, yes, entertain must stay. Thirdly, the BBC gives us much more than it takes. The licence fee system, where we as citizens jointly pay for the BBC, should remain in place. It is right that the licence fee should be increased in line with inflation through the charter review period. I believe that there is a strong case for more money to be invested in the BBC.
Fourthly, the BBC must remain independent and free of political and, more importantly these days, commercial influence. Fifthly, the BBC should continue to support greater cultural understanding across our nations and regions by incorporating the talents of all. Sixthly, the BBC should be able to use new technologies and platforms to ensure that its content reaches young and global audiences in a cost-effective way.
The mistake is to believe that the BBC is in competition with local newspapers, ITV or indeed Channel 5 or Sky. The BBC faces a competitive battle with global media giants—Google, Apple, the US networks, CCTV in China and Netflix. It is only by being great at what it does and unapologetic for its size that we stand a chance of passing on a BBC fit for generations to come. I ask the Minister to be bold because out of boldness comes greatness.
My Lords, I am very grateful to the noble Baroness for initiating this debate as, I believe, is the whole House. The time available for Back-Bench speeches is very limited. Consequently, I shall focus principally on one issue—the BBC World Service. The Government appear to value the World Service much less than do others outside this country. The ending of BBC funding by the Foreign and Commonwealth Office is an indication of that.
The BBC’s proposal to invest significantly in new parts of the world such as North Korea and to increase broadcasting in the Russian language, and in north Africa and the Middle East, where there is a democratic deficit in impartial news, will not necessarily come about unless the Government are prepared to increase the funding. The BBC said on Monday of this week that the new services will be dependent on increased government funding. There is no indication from the Minister, Mr Whittingdale, whether or not extra money will be available, despite the fact that he has proclaimed his support for the World Service. The Minister was surrounded by people from his department, which indicated earlier this week that it welcomed the proposal to launch a Russian language service. However, there was no commitment on behalf of the Government to make extra funding available. The World Service’s effectiveness is unequalled in any other country and it expresses the British values of democracy, justice and human rights. That is something government should be prepared to back.
The total income of the BBC in the last five years has reduced by 10.1% and grant income has also reduced. The grant in aid from the Foreign and Commonwealth Office has ended, as I said. The Government’s statements on how they wish to see these matters dealt with have been highly equivocal. They have said that the licence fee will rise in line with inflation, following the charter renewal. However, they have said that that is subject to the purposes and scope of the BBC, which have not been clearly defined, and that the BBC must undertake efficiency savings equivalent to those in other parts of the public sector. I agree with what the noble Baroness, Lady Bakewell, said about the public sector.
The Minister has stated that the funding of the World Service was transferred to the BBC but is nevertheless protected. What does that mean? It is absolutely ambivalent. On 9 September—yesterday—the Minister told the House of Commons Select Committee that,
“‘all things being equal’ the licence fee would rise in line with inflation”.
What certainty does that give? There is no indication of what “all things being equal” means.
My Lords, I thank the noble Baroness, Lady Bakewell, for instigating the debate, and the noble Baroness, Lady Neville-Rolfe, who will reply to it. I declare an interest as I work as an independent contributor on Radio 4 and BBC2 and am director of a small independent arts company.
A few weeks ago, on a Sunday afternoon, as authorised by the Chancellor of the Exchequer and approved by the Prime Minister, the director-general of the BBC, the noble Lord, Lord Hall, was cold-called, rather in Mafia style. It was a demand he was not allowed to refuse. I had the impression that we were trying to outlaw cold calls but I suppose that privilege has its perks. The demand was that the Treasury wanted more than £700 million, and rising, from the BBC to pay for the over-75s licence fee. As we understand it, there was no discussion or debate. In my view it could be the most damaging thing that has happened to the BBC in decades. Your Lordships discussed the BBC twice recently but this was never mentioned. I make no apology for backing up the brilliant speech made by my noble friend Lady Bakewell. This is not collusion but repetition, and this deserves repetition.
The licence fee payer, whose money is targeted to pay for BBC radio and television programmes, has been forced to bankroll an eye-catching Conservative social policy which ought to come out of general taxes and has no connection with the making of programmes for the BBC. How can this be right? Why was this not discussed beforehand? Is it legal? Why was the director-general forced into it and given no time for consultation? Where was the voice of the BBC Trust, which is supposed to represent licence fee payers?
The Government have attempted to nobble the BBC a few times before with the digital switchover, broadband rollout, S4C and monitoring at Caversham, but there has been nothing on this scale which shows such contempt for the licence fee payer. That fee is still the democratic basis of the BBC’s universal service and it has just been ignored and trampled over.
The noble Lord, Lord Hall, has already markedly reduced costs at the BBC, as we have heard, and made a good fist of retrieving something in return for this raid on its coffers, but it is not enough, it seems, to fill the gap with any short or long-term certainty. Even the current level of licence fee is not guaranteed by this Government. This cut could precipitate a radically deep reduction in the BBC’s production arm. The noble Lord, Lord Birt, successfully managed to reduce resources a few years ago, which, unpopular though it was, was necessary. However, to do this in the production arm would damage and change the character of the BBC for ever, as has been mentioned already. It is an amazing programme-making organisation which stretches worldwide, but this measure goes to its jugular.
Given the floods of new channels and torrents of cash being pumped worldwide into non-BBC channels, the BBC is currently fighting for its life and to maintain its special place and integrity in the UK and the world. I agree with the noble Lord, Lord Alli, that it needs more funds. Yet this is the very time that the Government choose to rob it of licence fee payers’ money, which is not the Government’s own.
Most of all, the BBC deserves independence. Can we still explain to those who have always rather doubted the link between the Government and the BBC that it was an arm’s-length link? Can we say that that is as strong and effective as it has always been? I do not think that we can say that confidently, and perhaps not at all. To make the BBC smaller at a time like this, without reason, passes understanding. It could be called, without exaggeration, cultural vandalism.
I hope that this is only the beginning of this discussion. To be cavalier about the future of the BBC is to be responsible for endangering one of our greatest and most admired institutions—culturally, educationally, politically and in terms of news values. Dishonourably, in my view, the Government have slid their retaliation in first. I wish I could think that they had the generosity and vision to realise that they have made a mistake and to withdraw and correctly ask the taxpayer to pay for what is the taxpayer’s business. If not, the least we can ask is that in future they are transparent and show some guts and respect for the values that make the BBC so necessary, respected and admired in this country and abroad—often rather more so than our politicians.
My Lords, I, too, thank the noble Baroness, Lady Bakewell, for securing this debate, which she introduced with her unique authority. Of course, it is always a particular pleasure to follow the noble Lord, Lord Bragg.
This debate could not be more critical at a time when, as the noble Lord said, the BBC is fighting for its life. I feel particularly keenly about this because the BBC occupies a central place in the fabric of my daily life and plays a major part in mediating my interaction with the world. This may touch me, as a blind person, particularly closely but I am quite certain that I am far from unique in this.
I have had some difficulty in preparing for the debate because it has been virtually impossible to get hold of an accessible copy of the DCMS’s consultation document, but I do not really need to read it to know what it says. It will be redolent with the kind of bland assurances we are accustomed to hearing from the Dispatch Box, to the effect that the Government are committed to a thorough and open process, where all aspects of the BBC will be up for discussion. But the drumbeat of hostile briefing and publicity puts it beyond doubt that there is a hidden agenda to clip the wings of the BBC, and the Minister will have a hard job persuading the House otherwise.
As Armando Iannucci, who has already been referred to, said while giving the MacTaggart lecture in Edinburgh this summer:
“The question shouldn’t be, how do we cut it down to size, but why should we?”.
If it ain’t broke, don’t fix it, I say. There is no evidence that it is broke and no call for it to be fixed. For instance, why should we stunt the development of the only British-owned website in the top 100 in the world? That seems like cutting off your nose to spite your face. There have been issues about Savile and the number and remuneration of managers but, pace the noble Baroness, Lady Bakewell, thanks to the resolute action of the noble Lords, Lord Patten and Lord Hall, I think these are largely a thing of the past.
Four minutes is not much time to say very much so I want to concentrate on just one thing: the BBC’s role in entertainment, which seems to be particularly in the firing line. Audience research published by the BBC Trust earlier this year showed that not only do the public back the current mission to entertain as well as to inform and educate, but when asked to choose from some words describing what the BBC’s mission should be, over six in 10 people chose “entertain” more than any other. Two per cent of the licence fee spent on TV entertainment provides 4% of all the time audiences spend with the BBC, so the public get plenty of bang for their buck there.
Unlike other providers, the BBC acknowledges a truly national commitment, investing in a broad range of programmes and services for all audiences. Series such as “The Voice UK” draw audiences that are otherwise underserved, such as black, Asian and minority ethnic people and young people. “The Voice UK” had an average audience of 8.5 million across the series this year, with the peak episode reaching 10.1 million. “The Great British Bake Off” attracts average audiences of close to 10 million every week. To quote Armando Iannucci again:
“This is what the BBC is there for, connecting, connecting highbrow and mainstream, knowledge and entertainment, connecting you with the world, the whole country with its culture”.
The BBC is part of the fabric of British society.
I could go on about the World Service, the BBC’s contribution to Britain’s soft power and influence in the world, and so on, but I realise that this does not cut much ice and that these things are not decided by rational argument. So I have decided to try a different tack. Do the Government really want to go down in history as the Government who got rid of “The Archers”, “Desert Island Discs”, “Just a Minute”, “I’m Sorry I Haven’t a Clue”, “Strictly Come Dancing” and “Yes Minister”—sorry, that is probably more a documentary than entertainment? Do not tell me someone else can do them because I have checked the copyrights. The Government would be a laughing stock and it is when Governments become a laughing stock that they begin to lose their authority. Remember “That Was the Week That Was”?
My Lords, I declare an interest as chairman of the CN Group, the Cumbrian local media group. I thank the noble Baroness, Lady Bakewell, for initiating this timely debate.
If one was starting from scratch, I dare say one would not, in a digital age, create a BBC of the kind we have today, which is not now and never has been merely a UK broadcaster. Its other attributes must not be forgotten, not least its important role in training and its hugely important diplomatic impact. But just because it is not what we would do now if you had a tabula rasa, we must not overlook today’s reality. While everything must be allowed to evolve and reform constructively, we must not permit the proverbial baby to be thrown out with the bathwater at the behest of obsessives and cranks.
I will focus my remarks on independence. If we have a publicly funded broadcaster, it must at all times be kept at arm’s length from politicians, the Government and the Administration. Of course, the framework, structure and terms of reference of the broadcaster have to be set politically but its day-to-day activities must be regulated—rigorously—at arm’s length. A combination of the regulators, the courts and independent systems of audit must, in a judicial and independent manner, without reference to politicians, carry out that function. Again, I put on record my view that the experiment of the BBC Trust model of governance has not worked properly and needs reform.
It is also important that everyone understands that the BBC does not belong to the Government or even to the licence fee payer—although obviously they have a very real interest—it belongs to everyone. Furthermore, it is right and proper that it should be scrutinised by this House and the other place and have to explain itself. Ultimately, though, it is for the regulators at the time—whoever they might be—including the NAO, to hold it to account according to the terms of reference they have been given by Parliament. The BBC should have to explain itself to Parliament, even if Parliament and the Government are in no position to give it instructions in reply.
Self-evidently, the question of funding is important because he who pays the piper calls the tune. It is a matter of great regret, as has already been mentioned, that over the past 15 years we have seen political manoeuvring around the licence fee. In my view, the amount the BBC gets should be set at the outset of the period for which the arrangement runs and it should be hypothecated exclusively for the corporation. Successive Governments have raided that money and since—whether as a threat or as a reality—that exercise has influence, changes in this respect should not occur except at regular, clearly defined, well-advertised points of time.
There has been a lot of debate about whether a royal charter is the best legal basis for setting up the BBC. I am not convinced but I recognise its important psychological impact, although everyone has to recognise that the shenanigans surrounding events after Lord Justice Leveson’s inquiry have materially eroded its mystique. It is my assessment that it is likely that the Government intend to proceed with another charter and agreement. That being the case, in parallel with the charter and the agreement, legislation should be put in place making it unlawful for the Government to withdraw or amend the charter for the duration of that charter without express parliamentary approval through a statutory instrument subject to the affirmative resolution procedure. I would be interested to hear the Minister’s views about this as it would give Parliament a lock on the whole process.
Thinking back to the time when I was responsible for taking a previous charter and agreement through this House in the mid-1990s, I say quite simply that there is insufficient debate in Parliament. It is a very important matter that is not given sufficient parliamentary scrutiny in either House. I am very sorry that my noble friend the Minister did not respond to my suggestion echoing the remarks of the noble Lord, Lord Birt, in the debate of 14 July that we should be told the kind of process that it is anticipated this will go through. The topic should be debated several times before it is finally resolved, as is the case with ordinary legislation, and the Government should undertake at the Dispatch Box that they will not bring forward a new charter and agreement via the Privy Council until each House has approved final drafts of both documents, and that in the event of time running out because that has not been achieved, they will extend temporarily the existing arrangements to ensure a seamless transition.
My Lords, I will be brief. First, I declare my interest as a rights holder and participant in BBC programmes stretching back four decades, most of them thankfully rarely shown now. I commend my noble friend Lady Bakewell for initiating this extremely important debate and for her opening contribution. I also pay thanks to the noble Lord, Lord Fowler, for the debate that he initiated in July.
I have to tell your Lordships that there is a real and deep concern within creative communities that the BBC is under attack—an attack that it will not survive. If the BBC were a failure or failing to deliver, one could understand why the Government had undertaken this approach, but the BBC is a world leader in all that it undertakes. As my noble friend Lady Bakewell said, there have been problems, yes, but if you look at the problems that the institution of the BBC has in comparison to some of the multinationals and financial institutions of this country, you will see that they pale into insignificance. There is also a real concern that this “review” is there to do the work of News International and the BBC’s other competitors.
When the Green Paper was announced, a press release said that the BBC Trust would play its part in an,
“open and democratic Charter Review process”.
Might I suggest that the Government too have to be part of that two-way, accountable and transparent process? I therefore endorse what my noble friend Lady Bakewell asked for: an extension of the public consultation period beyond 8 October. More importantly —and I want the Government to respond directly to this—will the Government publish all submissions during this review process on a public website? It is vital that we know all the views and arguments for and against the review being undertaken.
It is therefore vital that we do not rush this. I endorse the recommendation from the committee in the other House that, if necessary, there should be a two-year extension of the charter to get this absolutely right and for there to be no question of the motives of those involved. Let me also restate and thereby endorse a position taken by the BBC Trust in its initial response to the Green Paper, where it observed:
“The BBC is neither owned by the Government, nor by its management. It belongs to the public, who pay for it directly through the licence fee. Because every home in the United Kingdom pays for the BBC it has always been … Universal”.
It goes on to explain that universality; it is reprinted in the Library document. The BBC is also independent. Those two elements are vital if the BBC is to continue in the campaigning and brilliant way that it has.
Finally, let me again report observations made by the BBC Trust in relation to scale and scope. It said:
“Individual decisions about the future of individual services must continue to be taken independently of Government in order to protect the BBC’s independence from political interference. While reductions in scope have been possible in the current Charter period … they have also been controversial. The Trust’s experience has been that it is difficult to put a complete stop to any significant parts of BBC activity, such is the support and loyalty shown by audiences to the services that they use every day or every week”.
My Lords, I thank the noble Baroness, Lady Bakewell, for introducing this important debate. What is independence? It is independence from commercial and political bias, including the influence of government, to achieve a broadcasting output accessible here and abroad that has a unique value unattainable in any other way. My argument is that the BBC’s independence, and the output that allows, is not only a combination that the public appreciate but one essential to our democratic culture.
On the influence of government, on the face of it the current Government are passive-aggressive towards the BBC. On the one hand, they say that there is no conspiracy. On the other, they want to interfere with the BBC’s coherence. They give what is surely inappropriate editorial advice and there are huge cuts—this is where you can take the passive bit out.
It might be argued that Ofcom or an “OfBeeb” may do a good job, but would that be the start of making the BBC less integral and less able to maintain its independence? In criticising coverage of the EU referendum, the Culture Secretary is doing in a sense no more than we do as individual private citizens, but we do so through the prism of our own views. It is said that the BBC is too left-wing or too right-wing. The point is that because the BBC is both ours and independent, it is a privilege for us to criticise it in a way that we do not feel we can with any other media organisation—certainly not the national newspapers, which we know to be biased and which therefore offer something quite different from the BBC, including online. The reality is that polls comparing public perceptions of impartiality put the BBC significantly higher than anyone else. The Evening Standard’s editor, Sarah Sands, suggested this week in an article hugely supportive of the BBC that it had approval ratings much higher than those of any political party.
The noble Lord, Lord Hall, cites as a fourth objective, on top of the three original Reithian ones, that of enabling. He is right to do so, even as a modern reaffirmation of something that the BBC has already done for a long time, particularly in the arts. New writers, musicians and composers, popular and classical, are all presented within a context of expertise without parallel. Where else would you find the greatest classical music festival in the world—the Proms—but on the BBC? That is because of its breadth and depth, inconceivable under a subscription service. It is a partnership, to use the current term, of live and broadcast music. All this is a platform for external and in-house artists and creatives which is the envy of the world. This is what the BBC already does so brilliantly because it is publicly funded and belongs to us.
The complexity of ways in which broadcasting by the BBC is now accessed should not be underestimated in terms of its appeal to the public. This has a bearing on financing. People who do not listen to Radio 4 when they are 20 may do so when they are 30. Linear programming is still popular. Some who wish to pay the licence fee might access programming only through iPlayer. The recent study mentioned by the noble Baroness, Lady Bakewell, which the BBC carried out of households deprived of access to radio, television and online services is telling. Thirty-three out of 48 households so deprived which initially did not want to pay the licence fee changed their minds.
If the BBC is ours and an essential aspect of our culture then why not properly formalise this relationship by having a universal broadcast contribution, as has been successfully introduced in Germany and which the Government are now considering? As a country we should be proud not only of the BBC as an organisation but of all those who make the BBC what it is: not just researchers, producers and editors but engineers and technologists, as well as the public themselves. This is an organisation which is the most respected broadcaster in the world. To run it down would be madness.
My Lords, I, too, thank the noble Baroness, Lady Bakewell, for initiating this debate.
A challenge of the BBC’s charter review is in predicting how quickly technology and viewing preferences will change between now and 2027. Remarkably, the BBC iPlayer recently had 343 million downloads by on-demand viewers in just one month. The BBC was, of course, an early investor in the digital revolution, funded by a generous licence fee settlement in the mid-1990s. Today, as we have heard, of the world’s top 100 websites only one is British: BBC Online. George Osborne criticised the BBC for being “imperial” in its online expansion but surely it is also our national champion in the internet age.
The BBC, as we have heard, declared recently that since it is owned by the public—the licence fee payers—their voice should be heard the loudest. I agree and, echoing my noble friend Lord Bragg, say that in the developing debate about the charter review, viewers should be made aware of how much of the annual fee that they pay for public service television is now diverted away from on-screen programming. The recent deal imposed on the BBC by the Government means that the cost of free television licences for the over-75s—some £650 million a year—must now be paid out of licence fee money. Similarly, in this charter period, licence fee money is being diverted to fund digital switchover, the rollout of broadband and, now, to fund local commercial television stations. These are all perhaps worthy causes, but why should it be to the detriment of what viewers are offered on-screen or on the radio as programme budgets are cut?
This is not to excuse any past profligacy or inefficiency at the BBC. The noble Lord, Lord Hall, has pledged to reduce the many layers of management; executive salaries and payments to presenters and performers are being squeezed. Much of the cost and complexity of the BBC bureaucracy comes from it trying to do too much in-house, thus creating uniquely demanding roles for its senior executives. Later this month, proposals will be set out on whether BBC Worldwide and BBC production should be kept in-house or outsourced, with production most likely to change its status.
There are other important questions. Will the present licence fee be replaced with a household levy, which is certainly worth serious consideration? Should the BBC Trust be abolished and its key responsibilities transferred to Ofcom, leaving the BBC controlled by a board of appointed, independent directors and senior BBC executives? I think that likely. What kind of BBC would this board preside over after the charter review? In his most recent contribution to the ongoing debate, the noble Lord, Lord Hall, proposed an,
“open BBC for the internet age”.
The Ideas Service would be an online partnership for collaboration with arts bodies, institutions, universities et cetera. A partnership with local newspapers is also proposed, with the BBC funding a pool of 100 public service reporters across the UK. That is certainly imaginative, but there is an urgent need for practical examples of how such partnerships will work, to persuade the many sceptics.
I hope we can encourage greater public involvement in a wide-ranging debate on the BBC charter review; to be followed in 2017 by an era of conspicuous austerity off-screen, better-funded programming on-screen and less interference from top-slicing Ministers.
My Lords, I thank the noble Baroness, Lady Bakewell, for this debate. The BBC is credited with inventing the term “national region” within a UK context. With the financial cuts facing the BBC, it is that aspect on which I want to concentrate in these few minutes.
If the BBC is regarded in London as a UK national institution, it is also regarded in Wales as a Welsh national institution. Over the past 70 years, it has done an immense amount to help Wales to better understand itself and to interpret our national and diverse local life for the people of Wales, in both languages, and indeed to a wider world. At this time, when the relationships between the nations of these islands are in the melting pot, we need that facility in Wales. This is the worst possible moment to erode the BBC’s capacity. The key theme of devolution over the past five years has been the need to hold the devolved Governments to account by insisting that they raise their own taxes and are accountable for what they spend. For this to work, there has to be adequate scrutiny of government; and for this to reach the voting public in Wales—where we have only a limited press media, where the capacity of ITV has shrunk and where Sky has totally failed to engage—the central responsibility falls on to the BBC, which is having to shoulder a disproportionate share of this work.
The take-up of the BBC in Wales is proportionately higher than anywhere else in the UK: the average daily use is over six and a half hours per household. However, only half the adults of Wales are reached by BBC Wales’s news services. The other BBC news services, originating outside Wales, do not even start to address the question of scrutiny of Wales’s Government. For half the people of Wales, the performance of the Welsh Government in vital matters such as health and education is literally beyond scrutiny. The democratic deficit that existed in Wales before devolution has now turned into a transparency deficit, which is rapidly becoming an accountability deficit.
Securing an urgent solution does not lie only, or even primarily, in the hands of BBC Wales, but it must involve fundamental rethinking by the BBC on a UK level. The BBC centrally must come to realise that much of its news coverage on flagship programmes such as the BBC television “News at Six”, Radio 4’s “World at One” and Radio 1 and 2’s news bulletins are totally irrelevant to Wales and Scotland. In key domestic matters such as health and education, even worse, they can be positively misleading, with viewers and listeners in Wales and Scotland thinking that the policy analysis presented applies to them when it does not. In the context of these cuts, what do we have to do to safeguard the current performance—or indeed to secure new, augmented performance—as far as Wales is concerned?
First, we need news programmes that reflect reality in and for Wales. That may mean creating a new 6 pm TV news programme for Wales, bringing a better balance between Welsh, UK and world news; likewise, possibly news opt-outs for Wales on Radio 1 and Radio 2. Secondly, BBC Wales must be funded adequately to provide a much wider range of English-language television programmes emanating from Wales. Thirdly, if the UK is to survive, the people of England need to acquire a better understanding of Wales, Scotland and Northern Ireland, and the BBC must play a leading role in that. The BBC, more than any other organisation, has a key responsibility in helping to mould a new Britain. To cut its resources at such a critical time may be seen by future generations as one of the most stupid acts by government in the modern era.
My Lords, I declare my interest as the executive director of the Telegraph Media Group, which I fear damns me in the eyes of the noble Baroness, Lady Bakewell, but I am none the less very grateful to her for introducing this debate.
Our reverence for the BBC’s role as a content provider—about which we have heard a great deal, and which I share—must not be allowed to obscure the realities of its commercial impact on the rest of the media; in particular, the private sector news media publishers, which face an extremely tough time as they transit from print-based operations to global digital news suppliers. If we are to have a vibrant democracy in which government is held effectively to account, then we need plural provision of news, with a commercially successful private sector news market, providing a range of partial and campaigning journalism, operating alongside licensed and impartial TV news provision. How these two parts of the media ecosystem develop over the next 10 years and relate to each other is the crucial issue at the heart of the charter review, especially with regard to the BBC’s digital operations, on which I wish to concentrate.
The reality of the media world is that traditional news media silos are disintegrating and all those seeking to provide news are now competing for audience in a single, global online market. That is a tremendous opportunity for innovative companies, as it provides a route to global audiences, but it is also fraught with danger where the playing field is uneven. In this period of rapid transition, the impact of a continually expanding and licence fee-funded online news operation, using the BBC’s network of overseas journalists to underpin those commercial news operations and producing ever more local UK news and magazine-style content, will, if not tackled, be highly damaging for the development of commercial news brands—if not lethal for many. The sums of money the BBC invests in BBC Online are huge. The headline figure alone is £201 million, but that masks the huge advantage from the £l billion spent on the World Service and BBC Radio. I say to the noble Baroness, Lady Bakewell, that that is how the BBC is crowding out its commercial rivals. It provides a competitive advantage which is unsustainable if we are to maintain a plural media market.
Rather than seeking continually to expand online content at a time when resources are stretched, surely the time is now right to subject it to far tighter control in terms of its market impact, something particularly important in the local market—which is particularly important in the local market. I welcome the recognition from the noble Lord, Lord Hall, in his speech earlier this week that there is a problem in this area and, particularly, the belated commitment to partnership with the local press. However, his proposals go about it in the wrong way by foreshadowing a network of 100 local journalists “run by the BBC” and potentially supplied by them. That, I fear, would simply be a further attempt by the BBC to colonise local news. If it is serious, the BBC should tap into the pool of local news that is already provided by thousands of fantastic journalists working in the local press, rather than replicating it.
In general, the proposals on offer, although they go some way, are too timid and ignore the cultural and oversight change that will be essential to make partnership a reality. They certainly do not go far enough in terms of scrutiny and control of the BBC’s online services.
In my view, the new royal charter must: contain specific proposals for the scope and purpose of the BBC online as it relates to news provision and content; introduce a much more effective process for triggering market impact assessments of pre-existing and future initiatives; establish a binding commitment to source and pay for news content from existing news providers; and set up a system of accountability that ensures that its promises are adhered to. Regrettably, in the past, we have seen far too many promises that were not fulfilled. I must say to the noble Baroness, Lady Bakewell, that change from within is a very good thing, but change from within never seems to happen.
This charter review is the last opportunity to achieve durable reform that protects a plural media market. Either the BBC can play a genuine partnership role, focus its resources on what it does best and help nurture the transition now going on within the commercially funded news market, or it can continue to colonise the online space in a way that erodes the wider news market and undermines the plurality on which democracy depends, leading to a news landscape dominated by social media and global news providers. I may be a lone voice in this debate, but I do not believe that anyone in this House would want that.
My Lords, first, I thank my noble friend Lady Bakewell for obtaining this debate and congratulate her on the excellent manner in which she introduced it. I did not agree with everything she said—in fact, I agree with the noble Lord opposite who has on occasion raised the issue of legislation for the BBC. I agree with him wholeheartedly on that matter. Yes, the BBC belongs to the licence fee payer, but the only people who represent the licence fee payer are those who are elected to the other House down the Corridor. Equally, in this House, there is an expertise that we ought to be tapping into, amending a Bill to put the BBC on a statutory basis, rather than as it is at present. I have served on the same committee as the noble Lord, and we agree that that is the way forward. The present management is wrong as well, and that is also something that ought to be changed in the charter. The fact is that the charter does not give political freedom to the BBC; in fact, every 10 years it imposes a political will on it if those who can are determined to do so.
However, my major concern, as people may not be that surprised to learn, is that the world of the media is changing. I do not agree with the noble Lord, Lord Black. I do not care—I am personally in favour of the BBC, but I increasingly use it online, not watching it as a broadcaster. In fact, it is my view that in 10 years’ time, people will wonder exactly what we mean by the term “broadcaster”; the new term is “narrowcasting”. People will increasingly watch what they want, where they want, when they want and how they want. It might be on an iPad, a mobile phone or a television. It might be listening to a radio, which may very well be wi-fi, it may be in their car or anywhere. The BBC has to become a narrowcaster; it already is. It is a very good narrowcaster, and we should not attack it accordingly. We should support its online activities.
My noble friend Lord Birt, who unfortunately is not present, but who I know took part in previous debates, is to be congratulated on the way in which, when he was director-general of the BBC, he ensured that the BBC produced online services. I listen to “Good Morning Scotland” in my flat in London on my iPad. That way I can keep up with the news that is happening in Scotland. It is much easier than trying to find the Herald, the Scotsman, or whatever, which I have to pay for; I can get it for nothing and I can keep up with the news. On my iPad, I use the BBC News app all the time. That is where I go if I want to catch up with the latest news. I do not go to Sky, the Guardian app, the Times or wherever; I go to the BBC News app, because there I know that I can get what I want quickly for nothing. I can look at what is happening in Scotland, in Wales and worldwide.
The BBC will become an online provider and a producer of good, high-quality programmes rather than a broadcaster in the linear sense.
My Lords, I declare an interest as a former governor.
The recent BBC report on its future had nothing to say about governance and complaints. I propose to address the issue of complaints handling today, because I believe that the crux of the BBC’s independence, impartiality and accountability to the licence fee payers lies in the way in which complaints about its service are responded to. I am focusing on accuracy and impartiality, not taste and decency complaints—for example, about Russell Brand, Jeremy Clarkson and the like—because accuracy and impartiality are what make the BBC a world and national influence. Its impartiality needs to be guaranteed by a complaints process that matches the significance of the issues complained about. For example, was the Iraqi intelligence dossier sexed up? Should it refer to ISIL or Daesh? There are the issues of climate change science, Europe and so on. The BBC forms national opinion on those matters, and if complaints about them were transparently and fairly handled and more were upheld, there would be even more confidence in the BBC and more audience satisfaction.
At the moment, only the tiniest proportion of complaints is upheld, and the BBC complaints procedure is far from simple. There is overlapping jurisdiction with Ofcom; some complaints get passed from one organisation to the other. There are three layers of complaints handling at the BBC, with the final stage being the editorial standards committee of the trust itself—five trustees closeted with staff and an adviser whom they selected. The findings are made entirely inside the organisation with no outside oversight.
Best practice today is that there should be an independent arbiter who is not associated with the organisation being complained against. Both the Commons and Lords Select Committees on the BBC explored the alternative of Ofcom. The difficulty is that Ofcom is not recognisably superior to the BBC in the way that an appeal body should be, but is on a level. One expects difficult issues to move upwards to more and more expert bodies. Moreover, the BBC’s independence and its reputation for impartiality might be compromised in the eyes of the public if just another quango—namely, Ofcom—could overrule the BBC. Ofcom’s members are appointed by the DCMS, and many of them are too steeped in the BBC and its culture from their past careers to be perceived as sufficiently detached.
Externality in complaints handling is essential. My suggestion is an ombudsman, who would report his or her findings to the trust, or whatever replaces it, which would have to have an exceptionally strong reason for rejecting the ombudsman’s findings. This system would preserve the appearance—indeed, the reality—of the BBC retaining the final say and retaining independence.
Adverse findings are naturally hard for the BBC to accept. They are slightly more palatable coming from an outside expert, and the BBC has itself resorted to the use of distinguished external figures occasionally in examining its own output. An ombudsman could be trusted to make decisions about the balance to be struck between public interest, journalistic freedom, impartiality and accuracy. It is hard to see Ofcom, as currently constituted, making better decisions than the trust. This is editorial and political territory and can only fairly be considered by an outsider with a track record of experience and judgment.
My Lords, in this expert debate, admirably led by my noble friend Lady Bakewell, I speak only as a citizen but as a fairly widely travelled one in almost all the comparable democracies in western Europe, the transatlantic and Antipodean ones, and elsewhere in many other countries that are struggling to emerge as democracies or emerging as different kinds of democracies. Nowhere have I seen comparable broadcasting services to the BBC. I am not thinking just of speaking truth to power, although that is priceless and rarer than noble Lords might think, but of the refusal to segregate audiences via subscription into “quality” or “elite” fee-payers and a wide popular audience.
Like the noble Lord, Lord Low, I applaud the resolute focus of the BBC on entertaining as well as informing or educating, to quote the still not bettered Reithian formula. The BBC gains the status of a truly national institution by it. It creates shared experiences which bond the nation. If we can laugh at the same jokes or watch the same preposterous dancers, hot-tempered cooks, or soap operas, or listen to “The Archers”—how much do urban folk learn about countryside issues from it? Although to my taste that programme is not quite gritty enough—we become more at home with each other. We need these shared moments in our lives more than ever.
We are a diverse nation, no longer homogeneous in faith and belief and, as ever, very segregated by class. If we compound that by cultural segregation, we shall be committing an act of great folly indeed. BBC programmes unite the nation, and unite it with consistent quality. Of course all institutions need to evolve, but to oblige change in such a way as to undermine their real benefit would be irreparably stupid.
My Lords, the noble Baroness, in her brilliant opening speech for this debate, rightly placed much emphasis on the crucial issue of the independence of the BBC.
I remember when I was Secretary of State some 15 years ago and went on an official visit to China. I took a number of creative business figures with me, and a representative of the BBC. Every time I met with any official or Minister from any of the relevant Chinese ministries, I had to listen to half an hour of disquisition on the evils of the BBC, which had very recently run a candid and fascinating programme about Tibet. The best way I found to respond to the criticism of the BBC was to say, “I know. I am responsible for oversight of the BBC in the Government and for taking BBC matters through our Parliament. Yet every week the BBC carries criticism of me and the Government of which I am part”. So it should be, and we value that it should be so. The BBC is not a state broadcaster but the nation’s broadcaster, and the Government would do very well to remember that.
I will make just two other brief points. First, the BBC is in business not just to provide wonderful programmes, create fantastic content and train people in the business of being creative. It is also there to be a benchmark of quality for the whole broadcasting environment. Because the BBC does programmes of incredible quality, that helps the whole of broadcasting to be good. If the Government wish to clip the BBC’s wings, have a go at what they call its “imperial ambitions” or remove its precious funding, whether the result is not being able to have BBC4 or the children’s channels, or a diminution in the entertainment the BBC can put on—whatever the result, it will be a diminution of that “benchmark of quality” role the BBC has to play.
Secondly, there are relatively few things that we as a nation do fantastically well and in a way that beats the rest of the world. I would say that that applies to our greatest museums, our theatre, music and literature at its best, and to our greatest universities. Above all, it applies to the BBC. This is something incredibly precious for us as a nation. The Government should be nurturing and sustaining it, not seeking to tamper with it or undermine it.
My Lords, I rise with some trepidation, as I am a trustee of the BBC, a body much-criticised these days, a post I have held since December 2011. I also declare that in the distant past, in the 1980s, I was a reporter and correspondent for the World Service for some seven years. My responsibilities on the trust cover international issues, and especially the World Service. It is a responsibility I take seriously, as I regard it as an incontestable fact that the World Service is at the forefront of the United Kingdom’s most widely admired institutions globally. While the United States, as other noble Lords have said, has fine universities and great newspapers such as the New York Times, it is striking that 180 US public radio stations broadcast the World Service. There are not many areas now where this country truly has global leads, but the World Service is undeniably one.
I also worked for the UN for several years, and was proud to work for Kofi Annan, the Secretary-General, who famously described the World Service as Britain’s greatest gift to the world in the 20th century. When I worked for the UN in places as different as Cambodia, Bosnia, and the Middle East, I was struck time and again by how important the World Service was to me, but more critically to the peoples of those countries, so often caught in turmoil and conflict. I recall accompanying Jack Straw when, as Foreign Secretary, he visited Iran. During a meeting with President Khatami, the Foreign Secretary’s views were challenged by his host, who pointedly said that his analysis was based on what he had heard on the Farsi service of the BBC that very morning. In Iran, as in the Arabic-speaking Middle East, south Asia and the heart of central Africa, the World Service’s influence is enormous, humbling, and something this country can be very proud of.
The noble Lord, Lord Hall, the BBC’s director-general, made an important speech on Monday of this week. What is the Government’s reaction to that speech, and in particular to the bold and ambitious ideas he put forward for the World Service? In doing so, he has heeded opinions, including in this House, on the future direction of the World Service. I will highlight three of those.
The first is an idea most ably addressed by the noble Lord, Lord Alton, who is not in his place today, regarding the severity of repression and absence of any meaningful freedom of expression in North Korea. We have looked at this issue and despite formidable obstacles, we are proposing launching a news service in the Korean language on short wave.
Secondly, concerns have been expressed repeatedly in this House and the other place about the absence of free discussion and limitations on the press in contemporary Russia. It is important that we move on this issue too, and the BBC has in mind the establishment of a satellite television service in the Russian language. Finally, we are proposing a new service for two of the poorest African countries, Ethiopia and Eritrea, in their indigenous languages, Amharic and Oromo.
This envisaged expansion underlines the principles of the Government’s own foreign and development policies and will be an important plank of the BBC’s plans for discussion during the forthcoming spending review. The BBC will seek to match any increase in funding for the World Service with the external income it can generate from its other global news services. I invite the Minister to comment on these ambitious proposals, which I believe are testimony to the soft power in which Britain excels, and of which the BBC is perhaps the strongest exponent.
My Lords, I refer to my interests in the register and I am grateful, as I so often am, to the noble Baroness, Lady Bakewell, for this debate. The BBC: how do we pay for it? How much do we pay for it? Should we be paying for it at all in a broadcasting world where all the rules seem to be changing?
Some of what the BBC has done in recent years has been inept and, in some cases, appalling. Jimmy Savile. The grotesque attack on our late colleague, Lord McAlpine. Financial mismanagement. Scandal. The BBC, that great custodian of all that was supposed to be best in British broadcasting, has at times lost its way. It has shown unremitting arrogance and has been in danger of being cut to pieces by a hundred headlines, a thousand expenses claims, and millions that have been spent on redundancies and failures—and do not get me going on some of its political coverage. And yet we in Westminster know what a bumpy playing field public service can prove to be. As we have come to learn to our cost, sex and financial scandals are not the exclusive preserve of the BBC.
While we concentrate on its governance and financing, we must not lose sight of what the BBC is fundamentally about, which is output. And the BBC’s output, in the round and over the balance of time, is often superb. Almost daily in this House we discuss Britain’s influence around the world—its soft power—and a good chunk of that soft power is delivered through the BBC. Not just through its news services, but through its fine dramas, its compelling sport, its inspiring music, its celebrations of our culture, its coverage of the London Olympics—who could forget that?—the royal wedding and the Queen’s golden jubilee. And we should never forget, of course, the huge role of the BBC’s World Service.
The BBC is at the heart of British culture and creativity, and raises the bar for all other broadcasters. We as a nation are stunningly creative. We have a special talent for it. Television alone earns more than £12 billion a year for Britain and employs more than 130,000 people. And television primes other creative industries, too, which together contribute almost £80 billion a year to our economy, wins us Emmys and Oscars and accolades and exports. And in our colleague, the noble Lord, Lord Hall of Birkenhead, I believe that the BBC has a leader who understands the very special responsibilities of a public service broadcaster. He really gets it.
This brings us back once more to the perpetual dance around the flame that is the licence fee. Public service broadcasting can never be the cheapest television. It should be cost-effective, of course, but never cheap. Always high value. And sometimes high risk. In the creative world, the world of new ideas, it is crucial to have the ability to take risks, and sometimes that means the freedom to fail.
So, as an unapologetic Tory, let me say: we still need the BBC. Independent. Error-strewn. Sometimes inexcusably arrogant—an organisation that would not recognise an apology if it tripped over it. And still one of our great national institutions.
My Lords, I thank my noble friend Lady Bakewell for introducing this important debate. Much has been said about the threat to the BBC from many members of the party opposite—threats from the Rupert Murdochs of this world. We heard the noble Lord, Lord Dobbs, referring to perceptions of bias.
There is another political party that does not much like the BBC for reasons of bias, and that is the Scottish National Party. It does not like the BBC because it does not bend the knee enough, or is perceived not to bend the knee enough, to their leaders or to their policies. They would like the BBC in Scotland to be devolved; they would like it, as their former leader, Alex Salmond, said, to be under Scottish Government control.
I am not sure what a Scottish broadcasting corporation would be like under their control. Perhaps—as some of the wilder shores of nationalism suggest—a hybrid of Russia Today with influence from Rupert Murdoch. I dread to think what that could be like. Fortunately that party is not in a position to do too much damage to the BBC at the minute, but the present Government are, and they appear to be intent on doing so.
I will concentrate for a moment on minority-language broadcasting. No commercial broadcaster committed to its shareholders can properly cater for a minority language in this country, whether it is Scottish, Gaelic or Welsh. Gaelic is a living language and if it is to have a future then Radio nan Gàidheal and BBC Alba must not be damaged as a consequence of this review.
It certainly seems from the Green Paper that minority-interest broadcasting is firmly in the sights of the Government and perhaps, too, of the Culture Secretary. To have “culture” in the title of the office and not support minority languages is, I respectfully suggest, a contradiction.
Of course, it costs more per listener or viewer per hour to broadcast in Gaelic compared with mainstream English language channels, but the differences are not so material as is suggested in the Green Paper—not least if we can drag our eyes away from the bottom line and use a cross-subsidy approach, having some regard for the culture and safeguarding of these beautiful languages.
Where is the Scottish National Party in this? As I said, it wants the BBC to be devolved but, sadly, far too many Anglophone Scots have no time for Gaelic or its future. To put a Gaelic name even on a road sign elicits howls of protest. The SNP Government are busily centralising everything away from the Highlands and Islands. Historically—I can well remember my father saying it and many people are now coming to believe it again—many Highlanders and Islanders thought that we got far more out of Westminster than we ever got out of Edinburgh. So, in the forthcoming charter review, I have no trust whatever that the SNP Members down the corridor will do anything to help the BBC or to help minority languages. Their perceived grievances, blaming the BBC for their losing the referendum, are like a running sore and, although I hope I am wrong, I think that they are unlikely to rally to the cause of keeping an integrated broadcaster which is unique in this world.
I hope that the Minister will tell the House what the policy of the Government is in relation to minority language broadcasting. Can she reassure the House that in the BBC charter review the Government will not be a slave to the bottom line when considering the future of Gaelic broadcasting? Finally, I understand that it is government policy not to devolve broadcasting to Edinburgh. I hope that the Minister can give us a guarantee that that will not be dropped in at the last minute as a gift to the Scottish Government in the present negotiations on devolution matters.
My Lords, I make no apology for concentrating the whole of my remarks today on the BBC’s World Service and its vernacular services, which, since the coalition Government’s decision, are now fully funded from the resources available to the BBC. I pay tribute to the noble Baroness, Lady Bakewell, for having introduced such a timely debate and for giving me an opportunity to speak about this.
This House’s point of departure, I suggest, must surely be our own relatively recent report on the UK’s soft power, which found that the BBC’s overseas work was a crucial and immensely valuable soft-power asset. I doubt whether anyone disputes that conclusion; indeed, the Government seemed to share it when they responded to the report. However, the time has now come to move from warm words to specifics, and I hope that the Minister will do just that.
To rate the BBC’s overseas work so highly is not, I suggest, to fall into the trap of suggesting that soft-power assets can be a substitute for hard power but, as this country’s hard-power capability is constrained by the rise of others and by financial limits, it is all the more important to make the best use of and promote our principal soft-power assets, which were recently recognised in a private analysis as putting Britain at the head of a global league table. The BBC was a key part of that conclusion.
First, on the issue of wider consultation about the BBC’s future, I wonder whether the Minister has anything more to add to the cautiously positive response that she gave to my Question on 16 July about the desirability of finding a way of assessing the BBC’s worldwide audience’s attitudes, which, after all, represent a rather larger number of people than our domestic audience, and to bring them into some kind of consultative process. The evidence of the importance of the World Service and the BBC’s vernacular services, particularly in countries that do not have press freedom or access to unbiased reporting on world events, is scattered through innumerable historical accounts of the last century’s troubled history. Those views of the UK’s overseas audience need to be heard and to be taken fully account of before any decisions are taken.
When the responsibility for financing the World Service and the vernacular services was switched from the FCO to the BBC, many of us argued that the safeguards available to the Government to protect those services were entirely inadequate, particularly in the event of the BBC’s overall resources being further squeezed, as is now the case. I am not suggesting that that decision should be reversed or reopened but this review surely provides an opportunity which needs to be seized to give the Government as a whole a greater say in the oversight of these resources for the BBC’s work, its scope and its basic direction—but not of course of its content. The Foreign Secretary’s current powers to approve any major shift in the vernacular programmes, either to increase or to reduce them, is, I suggest, far short of what is needed and far too limited for the period ahead. So will the Minister tell the House that consideration of the strengthening of these safeguards will be a central part of the review?
While much of this debate no doubt will be, and has been, about the BBC’s domestic services and their financing—and rightly so—I hope that we are not going to lose sight of the significance for our future role in world affairs of the overseas services. Throughout my diplomatic career, I benefited enormously from the BBC’s overseas work and the esteem in which it was held. It is something of which we should be proud and it is something which we should spare no effort to sustain and promote.
My Lords, the current roaring debate about the BBC is not entirely edifying. However, thanks to my noble friend Lady Bakewell, we have done a great deal better this afternoon in your Lordships’ House. I will focus on funding.
There is no right sum to give the BBC. How much cash it should get depends on two factors: what you want the BBC to do and whether it is using the resources you give it efficiently and well. With this year’s settlement, we move into a new era: what the Davies committee, on which I sat nearly 20 years ago, described as:
“The BBC on a diet”.
We will still have a BBC at the end of the process; it will probably still be a full-service BBC; but its scope will be limited and its market share will decline. That is sad.
For an economist, and I sort of am one, there is much to be said for a broadcasting service that is free at the point of use. This is because of the nature of broadcasting output. Essentially, once you have made your programme, the cost does not increase no matter how many people watch it. In economists’ jargon, the marginal cost is zero. If the good is free, more people watch it, they all get something out of it, and the total value created is greater. Anything that cuts the number of viewers—such as pay-per-view or subscription—cuts the net value to consumers. From that point of view, the licence fee has strengths.
You tamper with the licence fee at your peril. I have read the latest proposal for a household levy rather than the licence fee. I can see that it has obvious advantages, particularly for the BBC, so I am instinctively sympathetic towards it. However, there is a real, if political, difference between an existing fee and a new one. Remember the poll tax. Whatever the logic for it, it was a completely new tax that came out of nowhere and was therefore unacceptable to everyone. The licence fee has an estimable, though low-profile, advantage: it has been around for a long time. People pay it mostly without cavil, from habit. One does not even need to send in the bailiffs, knock down doors or do much generally to collect it. That is something that you put at risk greatly to your peril.
My final point is perhaps utopian beyond feasibility but it is simply this: the politicisation of arguments about the funding of the BBC is unfortunate. More objectivity would help. There should have been an objective assessment before any announcement was made this year. The bully-boy handling of this year’s negotiations by Messrs Osborne and Whittingdale was, frankly, a scandal. I wonder if there is not scope for an independent body, perhaps a standing body, to be charged with advising on how much revenue the BBC should be given. Might there even be an agreement among politicians that they would, save in conditions of national emergency, adhere to the body’s recommendations? I dare say that if your Lordships’ House ruled the country, some such arrangement would be readily agreed, though in the real world in which we live, I am not so naive as to hold my breath waiting.
My Lords, I apologise to the House for coming in at the wrong time. I was too captivated by my noble friend Lord Smith’s contribution, which distracted me.
I, too, congratulate my noble friend Lady Bakewell on creating this opportunity and on her superb opening speech. I declare interests as an ex-governor of the BBC and a long-time viewer and listener. As an East End kid, I can remember playing in the street in the 1940s, when there were very few cars, and the cry would go out: “Can’t stay—I’m going in to listen to ‘Dick Barton, Special Agent’ or ‘Journey into Space’”. A few years later, it was the “Goon Show”. They are unforgettable childhood memories. But 65 years later, the world has changed in a way that we would never have envisaged. I am still listening, mainly to Radio 4. My noble friend Lord Bragg, the creator of “In Our Time” continues to enlighten me.
I want to reflect on what I think is the superb mission statement by the first director-general, Lord Reith. It is shorter, briefer and better than any other, creating the concept that the BBC is to “inform, educate and entertain”. More recently, that was added to by our colleague the noble Lord, Lord Hall, who suggested that “enable” should go on the end of it. I am not sure whether that is a particularly good idea, but the spirit behind it is certainly the right one.
Undoubtedly, the BBC has changed—it needed to. Like any large institution, it has its strengths and weaknesses. It is a shame that the noble Lord, Lord Birt, is not here to remind us how he dragged the BBC kicking and screaming into the 21st century when he created the very controversial approach of the internal market and also BBC Online. Our esteemed colleague the noble Lord, Lord Hall, is continuing that process. That rather goes against the view expressed by the noble Lord, Lord Black of Brentwood, who said that change is promised but never actually undertaken. That really does fly in the face of the facts.
I want to give a few key facts about the BBC. For £2.80 a week, it is really great value. The BBC offers far more channels and services than it did 20 years ago. It has a good record on efficiency—among the best in the public sector—although it could still be improved. By 2016, it will be saving £1.5 billion a year. The licence fee is simple, accountable and a means by which we can better deliver cheaper programmes for everyone than other systems; everyone pays and everyone benefits. Support for the licence fee has grown over the last 10 years: 48% of the public think it is the best way to fund the BBC, up from 31% in 2004. Compare its income of £5.1 billion to that of the huge digital players, such as Sky’s £7.2 billion, Google’s $59.8 billion and Apple’s $170.9 billion.
Quite rightly, executive pay and expenses have been the subject of criticism, and the noble Lord, Lord Hall, has taken action in that area. People are paid significantly less and the focus is on making great programmes.
I am not going to comment on the World Service because so many people have already covered that better than I could hope to.
The latest proposals made by the noble Lord, Lord Hall, are for a partnership, a commitment to high-quality original British drama, an ideas service, a new children’s service, more investment in the World Service, opening up the BBC iPlayer, and—dismissed far too quickly by the noble Lord, Lord Black of Brentwood—trying to work out a new partnership with local newspapers. I would welcome hearing the Minister’s response to those suggestions. Of course, for them to work, we need effective funding for the BBC.
I want to make a couple of final points. The BBC has shown its commitment to not just graduate intake but also, I am pleased to say, non-graduate intake. It has already beaten its target, with 178 graduate-level trainees and 177 non-graduate apprentices, and not before time.
As charter renewal draws nearer, there will be many more debates. I am sure that the Minister will reflect on today’s contribution. We need to remind ourselves that it is not easy to build a successful, global, trusted brand. As one of my favourite singer-songwriters, Joni Mitchell, said,
“you don’t know what you’ve got ‘till it’s gone”.
My Lords, I add to that of others my gratitude to the noble Baroness, Lady Bakewell, for this debate. I hope she does not mind me saying that she is such a distinguished example of one of the many things that we have gained from the BBC. This is another case of the Secretary of State John Whittingdale’s lack of grasp: he should have added her name to that of David Attenborough’s as something that “arguably” the BBC should be allowed to keep.
As the noble Lord, Lord Cashman, mentioned, before the Summer Recess we had an excellent debate on the future of the BBC, thanks to my noble friend— I hope that I can still call him that—Lord Fowler. The future of the BBC is, of course, its financing and its independence. As many noble Lords have mentioned, Armando Iannucci put the obvious question at the MacTaggart lecture: in what other area of national life is doing well so frowned on by government?
So what does the BBC do so well? It only provides a massive creative and financial investment in original British programming and content. It develops and invests in talent; the noble Baroness and others around this Chamber gave examples of that. It plays a hugely important role in promoting the UK around the world, as the noble Lord, Lord Hannay, mentioned; a study on soft power published in July and commissioned by Professor Joseph Nye, who coined the phrase, stated that the UK was the global leader and the BBC central to this. The BBC is also a cornerstone of the UK’s creative industries, the fastest-growing sector of the economy, and it provides an independent and impartial source of news and information which in the digital age is more important than ever—here, I part company with the noble Lord, Lord Black; I think that in a digital world we need, even more than ever, a digital BBC providing impartial news and information online.
Independence and impartiality are so important—and, again, under attack. Here I ask the Iannucci question: why? I worked at the BBC for 10 years and in news and current affairs for most of that period. Bias was the last thing that I ever experienced. We were taught to bend over backwards to ensure that everything was factually correct, and that all sides to an argument were heard. My colleague at “Newsnight”, Jeremy Paxman, came out after leaving the BBC as a one-nation Tory. Nick Robinson, until recently political editor, was president of the Oxford University Conservative Association. I often look across the Chamber at my old boss, the noble Lord, Lord Grade, controller of BBC1 and director of programmes et cetera. The noble Baroness, Lady Stowell, now Leader of the House, was deputy secretary of the corporation, head of comms for the trust and head of corporate affairs. I think that we all know these are not people who do not speak their mind. They do not and did not put up with bias. As I have mentioned so often before, when I sat on the Select Committee of the noble Lord, Lord Fowler, we had Rupert Murdoch as a witness and he told us that he wished that Sky News was more like Fox News. Implicit was the fact that the existence of the BBC made this impossible.
The BBC’s independence is crucial and it belongs to the licence fee payer, the public, not to politicians. Can the Minister assure us that this Government will listen to the public consultation that the BBC Trust is carrying out, to the licence fee payer, and not just to the advisers handpicked by the Secretary of State and memorably described in this Chamber by the noble Lord, Lord Patten, as,
“a team of assistant gravediggers”?—[Official Report, 14/7/15; col. 527.]
This leads me on to funding. I am as unapologetic about being a Liberal Democrat as is the noble Lord, Lord Dobbs, about being a Conservative, but we agree with him in our support for the licence fee. We condemn placing responsibility for covering the costs of the licence fee for the over-75s on the BBC, mentioned by so many noble Lords today, as it effectively makes the BBC the vehicle to deliver elements of the welfare state. As mentioned by the noble Lord, Lord Bragg, can the Minister explain why the BBC Trust, which represents the licence fee payer, was not involved in that decision?
With the BBC being asked to take this financial hit, it is important, if it is to continue to fulfil its remit, that other sources of income are not undermined. BBC Worldwide is the largest distributor of TV programmes in the world outside the US studios. Over the last charter period, it has increased total returns to the BBC by 6.2%. Does the Minister not agree that BBC Worldwide is a crucial element to the BBC’s ability to continue to fund UK content, while taking pressure off the licence fee?
The BBC generates for the UK economy the equivalent of £2 of economic value for every £1 licence fee that it receives. In other words, it doubles its money. The effect of initial BBC spending is multiplied, as it ripples through the economy from region to region and sector to sector. As well as showcasing British culture and creativity, the BBC functions as a catalyst for the creative industries as a whole and as such a major contributor to the creative economy.
As Sir Peter Bazalgette, chair of Arts Council England told the House of Lords Communication Committee,
“one of the justifications for the intervention in the marketplace that is the BBC is the value of the creative industries democratically, culturally, socially and economically”.
Have any noble Lords noticed the lack of criticism of the licence fee from other broadcasters? That is because the UK broadcast market works, delivering better, more varied programmes because of the licence fee. There is competition for quality rather than for funding.
Finally, the BBC is a great institution, as so many of us have been saying, but it is obviously not perfect. There are indeed things that need to be addressed during the charter renewal process. Does the Minister agree with what the noble Lord, Lord Young, said about training, that there needs to be a cast-iron commitment to training? This is a crucial part of justifying the licence fee. There must also be a continued emphasis on partnerships. Historically, as I know from my time in the independent sector, that is not something that the BBC has been terribly good at. We on these Benches welcome the director-general Tony Hall’s announcement earlier this week of the “ideas service”.
The noble Baroness, Lady Bakewell, and the noble Lord, Lord Macdonald, drew attention to a continued reduction in the layers of management—or officer class, as Tony Hall referred to them. Something that has not been mentioned today is that, if the BBC is to properly reflect the country, it has to address the issue of diversity. We need diversity at producer, researcher and management level as well as on screen.
I end as I almost started, with Sir David Attenborough. He describes the BBC as,
“that miraculous advance, still not a century old, that allows a whole society, a whole nation, to see itself and to talk to itself ... to share insights and illuminations, to become aware of problems and collectively to consider solutions”.
As the noble Lord, Lord Fowler, said right at the beginning of this debate, we live in troubled times. Does the Minister not agree that we do not need to go to war with a uniquely British institution that is the envy of the world?
My Lords, we all owe my noble friend Lady Bakewell a vote of thanks for agreeing to lead this debate today, and for the excellent speech with which she started us off a couple of hours ago. I also thank all speakers for their contributions. This has been a very high-level debate—a very full and important one. I hope that the Minister will reflect not only on what was said and the near unanimity of those who have spoken, but the impressive number and wide range of speakers from all sides of the House who contributed. We have had Secretaries of State, Ministers, governors and practitioners. It would be invidious to select the best of those, although my vote would go to the noble Lord, Lord Smith, who for the first time in my experience here managed to silence my noble friend Lord Young, although not for long. In fact, I really wanted to put a plug in for the noble Lord, Lord Low. Noble Lords may not know that he was in the earlier debate that lasted two and a half hours and also made a stonkingly good speech during that. I congratulate him. At least I went out for a cup of tea in the middle, but he did not.
From the general tenor of the comments made today, most speakers in the debate believe that the Government have the BBC in their sights, if not, to use the words of my noble friend Lord Bragg, their teeth already in the BBC’s jugular. Only a few years ago, in a smash-and-grab raid, the BBC was forced to pick up about £500 million per annum in its budget, including the cost of the BBC World Service, city TV, the Caversham monitoring service and S4C and some other elements. In July 2015, the Government announced that the BBC will additionally become part of the social services by taking on the cost of providing free television licences for the over-75s. This second smash-and-grab—sorry, I am supposed to call it the “framework for licence fee funding after 2017”—looks increasingly like a very bad deal indeed.
It is good that the licence fee is to be modernised to cover public service broadcasting video-on-demand services, that ring-fencing is to be phased out and that the licence fee will increase with CPI. But as the BBC announced earlier in the week, this means a total saving of around £700 million a year by 2021-22, or an annual average savings target of around 3.5% a year over the next five years. That is not a good start, particularly as the BBC has, according to the NAO, been very successful in bringing in efficiency savings already and delivering asset sales, although that trick cannot be repeated. As my noble friend Lord Lipsey said, we already have a BBC on a diet.
We are at the beginning of what looks like a quick and dirty charter review process, one that is just not worthy of the sort of care, concern and interest that every Government should have in one of their principal public institutions. And of course our concern is fuelled by a continuing uncertainty about whether the Government really understand, or want to understand, what the BBC is for. In the Green Paper the Secretary of State merely states that:
“The BBC is at the very heart of Britain It is one of this nation’s most treasured institutions—playing a role in almost all of our lives”.
Then it stops; talk about damning with faint praise.
In the recent debate in your Lordships’ House, I asked the Minister if she agreed with me that the BBC is the cornerstone of the sort of open and accountable society that we want in this country, the gold standard for other broadcasters, the fulcrum of a competition for quality in broadcasting, the centre for training and development in broadcasting, the guarantee of impartiality and fair coverage of news and current affairs throughout the United Kingdom and a beacon for democracy and the rule of law. As the noble Lord, Lord Wigley, said, to attack one of the few British institutions which is contributing to holding the country together seems perverse beyond belief. I ask her again to put on record her support for this vision of the BBC.
As we have learnt, we are now less than a month away from the end of the public consultation on 8 October, so I want to use the rest of my time to focus on what might be our only opportunity to respond to some of the 19 questions that were in the Green Paper. We have no information about where the Government got these questions. No research has been published and apparently no expert advice was sought, and while some of the questions are sensible and appropriate for any Government to ask about a body which is supported by public funds, there are others that are laden with bias and dodgy assertions and which raise deep concerns about the direction the Government seem to be signalling as wanting to take. As my noble friend Lord Alli said, the real enemy is the huge international media companies, not the domestic broadcasting companies. Why is the default position to cut and constrain rather than to invest and grow?
The first group of questions are about the mission, purpose and values of the BBC, and the key question is really about universality. The current consensus position is that the BBC,
“should be big enough to deliver the services audiences demand, but as small as its mission allows”.
Are the Government intending to change that, or suggesting that we move away from the Reithian values which have stood the test of time—to inform, educate and entertain? As we have learnt, the BBC is the cornerstone of the creative industries in this country, and the creative industries are the powerhouse of our future prosperity. They represent one in 11 jobs, they bring in £76 billion a year, they enhance our reputation overseas, they are intrinsic to our whole added-value economy, and they have seen growth year on year well ahead of the rest of the economy. But the truth is that the British creative industries cohere as a balanced ecology and the BBC is at its heart. The BBC does not harm the wider industry; rather, it fosters it. It creates a competition for quality programming and the £3.7 billion from the licence fee is the largest investment we make in the arts.
The second group of questions—there are 10 of them—deal with what the BBC does; its scale and scope. The key question here, although it is not made explicit, is whether the BBC should be constrained simply to provide what the market does not. But far from crowding out commercial operators, since 1985 the BBC has taken a smaller and smaller share of the market, and soon it will be less than a fifth. In the past, it has been broadly accepted that the BBC should remain a cultural institution of real size and scope, and should not simply be a broadcaster of minority interest programming. It should provide a wide range of different programmes to a wide range of different audiences. There is no evidence to show that, if the BBC were not to exist, other broadcasters would invest in more production. They are shareholder driven, and the short-term needs of the market will require higher returns well before it allows more public service broadcasting expenditure. Indeed, Ofcom’s recent review of PSB shows that there has been a £400 million fall in investment in new content. So the very idea that the BBC should be cut down to size is madness.
The third group of questions deals with funding; the key question is obviously whether the licence fee should be retained. It may well be that in the future we need to reconsider the licence fee, and the idea of a household levy, as the noble Lord, Lord Macdonald, said, has its attractions, although, as the noble Lord, Lord Lipsey, reminded us, there are reservations. For the present charter period, however, it is clear that if we want the BBC to be an independent, universal broadcaster, committed to serving everyone and to investing in British creativity, the licence fee remains the best way of paying for BBC services. It is simple and accountable; we all pay it and we all benefit. Overall, the market delivers better, more varied programmes as the competition is for quality in programmes rather than funding. The TV Licence Fee Enforcement Review by David Perry QC has recommended that, while the current licence fee collection system is in operation, the current system of criminal deterrence and prosecution should be maintained. Can the Minister confirm that this issue is now settled?
The fourth group of questions asked how the current model of governance and regulation of the BBC should be reformed. These are serious issues, and ones for which there is probably more agreement on the need for change. The last charter introduced the BBC Trust, and while there have been some positive changes, including the introduction of some new elements such as public value tests, this structure has come under sustained criticism throughout the period. Of the three options, the one that seems to offer the most benefit would create a unitary board for the BBC with regulation moving wholly to Ofcom. However, I agree with the Green Paper that it is important that, in any change, the progress that has been made to date under the trust is not lost. But there is a wider question, raised by the noble Lord, Lord Fowler, and others, about whether the royal charter is the right basis under which the BBC should be established and whether the current periodicity reflects properly the role that Parliament should play in that process. These are very important issues, and I look forward to hearing the Minister’s thoughts.
We welcome the opportunity to contribute to the debate about what should happen to the BBC over the next period, albeit at the same time worrying that most of the decisions have, in effect, already been taken. We are concerned about the general approach being taken, the tone of the public consultation document and the sense that, taken along with the recent Budget decisions, the Government have already decided to cut the BBC down to size.
My biggest regret will be that, if at the end of this process we find that the Government have not been able to respond to the very good ideas proposed by the BBC in its new paper An Open, More Distinctive BBC, we will be the losers. It would be a tragedy not to have more original high-quality British drama; an ideas service providing the public with the best of British ideas and culture; a new children’s service—desperately needed—providing more content for children across more platforms and making it safe and trusted; and investment in the World Service, which as the noble Lord, Lord Williams, reminded us, was once described by Kofi Annan as Britain’s gift to the world. Where there is a democratic deficit in impartial news, we will be able to uphold better Britain’s place in the world and the promotion of British values. The idea of a new partnership with local newspapers and local reporting may, as the noble Lord, Lord Black, said, not be the right formulation, but it is a good idea; we should pursue it and make sure that something comes from it.
The BBC says that it must adapt and change and that it believes that these proposals will have a positive impact on the creative industries. I think that the Government are lucky to find themselves being offered this at all from a body under such attack. The BBC has already slimmed itself down; it is one of the most efficient bodies in the public sector. I just hope that the Government have the wit to recognise what a good deal they are being offered, and that they will do the deal needed to secure this for the nation for the long term. As the noble Lords, Lord Fowler and Lord Smith, across the political boundaries said, we should be cherishing this very British broadcasting corporation —the envy of the world.
My Lords, I am extremely grateful to the noble Baroness, Lady Bakewell, for introducing this timely debate and for bringing her own experience to it in a brilliant introduction.
It is abundantly clear that this House cares deeply about the BBC and the BBC World Service, and that it considers the BBC to be an integral part of our national fabric, along with, as the noble Lord, Lord Smith, said, music, theatre, universities and other great British things—for me, those include the countryside and the monarchy. The noble Lord, Lord Young, mentioned the BBC’s track record on apprenticeships, while the noble Baroness, Lady Bonham-Carter, referred to talent, training, soft power, the fast-growing nature of the digital world and the catalyst that the BBC has provided for the creative industries, including BBC Worldwide.
I will not seek to go through everything that was said by the noble Lord, Lord Stevenson, but I will read his contribution with great interest. I agree with a number of the points that he made in relation to vision, although not all. I am also very grateful for the responses that have been given on the Floor of the House to our consultation. It is a great tribute to all noble Lords that we have been able to have this debate relatively early on in the consultation process. It comes on top of the short debate in July, which has already been referenced, led by my noble friend Lord Fowler, and the debate we had when I repeated the charter Statement. We should also mention the diversity debate earlier this week on women in the media, during which a number of points were made about the BBC.
I will not try to comment on everything that everyone has said because I will not get through it all: one of the problems with the BBC is the scale of interest and importance of the subject. However, the Government share the view that the BBC is an integral part of our national fabric and is incredibly important. But, as the noble Baroness, Lady Bakewell, said in her wide-ranging speech, all things can be improved. She acknowledged that with her correct references to Savile, digital failure, layers of management, remuneration and so on. I agree with the sense that she had that the BBC can emerge from the charter review stronger and better as a result of the debates we are having.
The charter review is a national conversation about the BBC and everyone is encouraged to take part. Today is part of that process. No charter review could fail to consider the size and scope of the BBC in the modern era. It is absolutely right to look at how well the BBC serves licence fee payers and its impact on other broadcasters. The consultation has already received thousands of responses. Over the coming months, there will be further opportunities for people across the UK to contribute their views—both directly to the Government and to the BBC Trust, which is working with the public. Our plan is to publish a White Paper in the spring and our ambition is to complete the charter review by the end of December 2016 and, if we can, to avoid the need for an extension.
Perhaps I may pick up an important point on accessibility made by the noble Lord, Lord Low. An accessible version is available for text-to-audio services and I will make sure that that is made available to the noble Lord. Also on accessibility, as a result of the points made by the noble Lord, Lord Hannay, about input from other countries around the world into this important debate, the consultation is available on GOV.UK and I am assured that it is accessible from overseas. I will have a think about whether there is anything more we can do on that in the next few weeks.
The noble Baroness, Lady Bakewell, my noble friends Lord Fowler and Lord Inglewood, and the noble Lord, Lord Lipsey, talked about the charter and its parliamentary role. It is fair to say that we have heard a wide range of views today about whether a royal charter is right for the BBC, the role of Parliament—both this House and the other place—and whether there should be any statutory controls. These are important questions for the charter review consultation, which asks about the proper relationship between Parliament, government, the NAO and the BBC. We are consulting on these questions, so noble Lords would not expect me to pre-judge the outcome but the Government are committed to making sure that governance and regulatory structures are appropriate. I welcome the views expressed today and subsequent views on this issue.
The noble Lord, Lord Bragg, expressed concern about what I would call the over-75s deal. The noble Lord, Lord Stevenson, and other noble Lords also mentioned that. One vital point has not been made. The deal that the Government reached with the BBC over free television licences for households with over-75s is not happening overnight. It will be phased in from 2018-19 and the BBC will not take on the full costs until 2020-21. In the mean time, the licence fee will be modernised to cover public service broadcast catch-up TV, which is very welcome to the BBC, and licence fee funding currently allocated for broadband rollout will be phased out, giving the BBC access to that money.
I thank the noble Lord. Obviously I was not involved in it. Whether it was a demand or a deal, it is important that we try to explain our thinking and how that will affect the players concerned, which I continue to try to do.
The over-75s concession is, of course, a grant from a government department, the DWP, to the BBC. We have agreed to phase that out. To respond to a question that was asked, following the agreement with the BBC, the trust accepted that decision. On the positive side, the fact that the BBC has agreed to play its part in common with most of the public sector in reducing spending does not mean that it has become an arm of the Government. After this Parliament, the BBC will become responsible for policy relating to the over-75s concession. That will be very important.
I am keen that, as part of charter review, we take a broad look at efficiency at the BBC. Work has been done before, but it is not just overheads: it is how the BBC delivers its public services as well. What is being asked of the BBC in terms of savings is not out of line with what is being asked of most government departments—it is possibly rather less. The licence fee is expected to rise in line with the consumer prices index over the next charter review period, dependent on the BBC keeping pace with efficiency savings elsewhere in the public sector and subject to the conclusions drawn from the charter review about the BBC’s scope and purpose. The noble Lord, Lord Hall, described this as,
“a strong deal for the BBC”.
As the Secretary of State made clear to a committee yesterday in the other place, in the consultation paper we are looking at three options for future funding. We tend to bring to bear new expertise on this issue because all the options have pluses and minuses. It is important that we look at those.
I should comment on the BBC charter review advisory group, because there has recently been rather a lot of nonsense written and spoken about it. It is a group of unpaid volunteers with huge and varying expertise and experience, including of the BBC, public service broadcasting, technology, journalism, governance and regulation. It would be impossible to find a group with significant insight or current knowledge if anyone who worked in the industry had been ruled out. It would be eccentric at best and a dereliction of duty not to seek counsel from experts. The group has met once thus far and will meet approximately every two months. It is only one source of expert advice. I emphasise that, as I did in July. It is not a forum for decision-making. We have our consultation; it is well under way. We have had 25,000 responses already and we have nearly a month to go. The trust is soon to embark on its complementary process. I hope that that will go some way to reassuring those who have expressed concern about the period of consultation.
I am sure that the whole House agrees that the editorial independence of the BBC is sacrosanct. Government does, however, have a legitimate and important role in ensuring that the BBC spends money responsibly and is regulated and governed effectively. The BBC’s governance structure will affect complaints handling, strategic direction, the setting of high-level budgets and changes to BBC services.
I very much agree with what the noble Baroness, Lady Deech, said about the importance of having good independent complaints systems, and, indeed, the value that complaints can bring to an organisation. When I worked in consumer goods, I always felt that complaints were a way of improving an organisation.
The BBC Trust has been widely criticised. As the noble Baroness, Lady Bakewell, said, its own chair—Rona Fairhead—has said that,
“a fault line continues to lie in the blurred accountabilities between the Trust and the Executive board”.
There are three broad options here: reforming the trust model, which I think many noble Lords have reservations about, and I have heard some today; the creation of a unitary board and a new stand-alone oversight body; or moving external regulation wholesale to Ofcom.
The BBC has a duty to exercise total input impartiality. Its reputation at home and abroad depends on it meeting the very highest standards in this regard. There has sometimes been rather widespread disappointment in the BBC’s ability to achieve balance. Indeed, even BBC insiders have acknowledged as much, although generally only retrospectively. I was struck by the recollection of the noble Lord, Lord Smith, that the Chinese sometimes complained about this—along with UKIP, the SNP and others. I do not entirely agree with the conclusion of the noble Baroness, Lady Bonham-Carter, that there is never an issue. I wish that I had dealt with her when she worked at the BBC. On a related point, the BBC must respond swiftly and comprehensively to complaints. As I said in relation to the comments made by the noble Baroness, Lady Deech, this is another issue we will be looking at.
The 2006 agreement between the BBC and the Culture Secretary reached at the last charter review states:
“The content of the BBC’s UK Public Services”—
taken as a whole—
“must be high quality, challenging, original, innovative and engaging”.
There is a feeling that this is rather too broad brush. Meanwhile, the BBC’s latest annual report helpfully set “Quality and distinctiveness” as one of its four strategic objectives. The BBC executive has recently proposed to invest more in original British drama and comedy and to take a more distinctive approach across all of the BBC’s services, including a new children’s service called iPlay. We look forward to seeing further details of these proposals.
Contrary to what noble Lords may have read in the press, the Government do not want to abandon popular programmes. “Public service” does not simply mean “minority interest” or providing only for those audiences which will not be served by the market. I agree with a great deal of what the noble Lord, Lord Low, said about the success of every sort of programme from “The Archers” to “Yes Minister”.
The Government will never decide or dictate BBC content—these are editorial decisions for the BBC. As I think the noble Lord, Lord Cashman, emphasised, that is very important. However, as part of an open, thorough and consultative charter review, it is proper that we should look at whether every BBC intervention in the market is justified. Concerns that need to be explored include whether the BBC is too dominant online, especially in terms of its effect on local news. Commercial radio companies have claimed that some of the BBC’s radio output is not sufficiently distinctive. On the other hand, BBC Radio 1 is rightly celebrated for its diverse playlist and breaking new acts.
The noble Baroness, Lady Bakewell, expressed her view that the BBC’s activities do not have a negative impact on the market, and that there is no crowding out. The noble Lord, Lord Stevenson, took us through some of the positive impacts that the BBC has had, which I agree with. However, through the consultation we are seeking evidence about this. The House will be glad to know that we will commission more research on these impacts.
The BBC executive has made proposals for local news coverage that include: investment in a local news service that will report on councils, courts and public services, and making regional video and local audio content available for immediate use on the internet services of local and regional news organisations. These are interesting and timely suggestions but we will want to make sure that they genuinely benefit UK plc and the wider sector. I take the point made by my noble friend Lord Black about whether we should be controlling the BBC’s online offer in some way to ensure that the creative industries continue to flourish. We are awaiting further detail on these proposals and will be listening to industry and the public through the review process.
The noble Lords, Lord Wigley, Lord Williams and Lord MacKenzie, talked about Wales and Scotland and the importance of content focused for the local audience. I agree. Indeed, in July I had the pleasure of visiting Cardiff and meeting S4C’s chairman and other staff. I was struck by their dedication to quality and value for money. S4C is going to relocate to Carmarthen and co-locate its broadcasting with the BBC in Cardiff—an example of efficiency savings. I can reiterate, as I was asked to, the Government’s commitment to minority-language broadcasting across the UK, including Gaelic. To respond to the noble Lord, Lord MacKenzie, this will be a key thread in the charter review and, indeed, the BBC presence in Edinburgh is an important part of it being a British Broadcasting Corporation. The BBC has identified a growing demand for programming that better serves the distinctive needs of Scotland and reflects Scottish life, and is also reflecting on whether it has the right balance across the home nations in its news services.
Charter review is not an unprecedented process. This is a consultation. Many noble Lords who have spoken today are well versed in the fact that a charter review always draws out strong and sometimes polarised views on the future of the BBC. I very much welcome the views of noble Lords on everything—from purpose and funding to scale and scope, and, of course, governance, all of which are central.
The BBC—British-owned and British-run—is vital on the international stage, as was so well explained by my noble friend Lord Fowler and the noble Lord, Lord Williams, who spoke with such passion. It does spectacularly well. BBC services reach more than 300 million people throughout the world each week. The BBC’s recent decision to prioritise parts of the world that urgently need reliable news, such as Russia, North Korea, north Africa and the Middle East, is most welcome, as the noble Lord, Lord Maclennan, made clear in his moving speech. The overseas services are important and I will feed in the point that the noble Lord, Lord Hannay, made about the vernacular services.
The media landscape has changed beyond all recognition in just a few years. We have seen dramatic changes as a result of technology, as the noble Lord, Lord Maxton, articulated so well. It is impossible to predict precisely how the media landscape will look in the years to come, and all these changes will be important inputs into the charter process. The conclusions of the Perry review are also very relevant to this part of the debate and we will make sure that the points made on that today are considered.
As some have said, the noble Lord, Lord Hall, said that he wants,
“the BBC to be Britain’s creative partner”—
the “Ideas Service” he mentioned in the paper he published on Monday—when he announced plans involving, for example, the best content from museums, festivals, galleries and other cultural institutions. This is an exciting development. I am sure that the noble Earl, Lord Clancarty, is also pleased to see the proposals on music.
The BBC is the most celebrated broadcaster in the world. That is, as everybody agrees, worth protecting. But no institution will be as good as it could be if it is seen to be untouchable. In a multimedia age, the BBC has to find its place. It has to improve. It has to build on the excellent strengths it has. We are having a national conversation about our brilliant national broadcaster, and everyone is invited.
I thank the Minister for her valiant attempt to cover the horizon, broad as it has been, of the debate here today. She said that the outcome of the negotiations over the licence fee would be the BBC emerging stronger. I say that if the Minister took the advice of this Chamber, it would indeed be so. I have been delighted by the contributions made by everyone, many of them broadcasters themselves but everyone an expert as a consumer of the BBC. My heart sank when my friend the noble Lord, Lord Dobbs, began to enumerate with such passion the failings of the BBC, but even he went on to say “And yet”, and to enumerate its virtues.
This is a universally admired institution and we do not want it to be tampered out of existence, away from its great virtues. Slightly too often for my taste, the Minister said that of course its independence was important and that of course the Government would not intervene with policy or programmes; she then went on to use the word “However”. I press upon her the feeling in this House that the public consultation should be extended. The public would enjoy that and have plenty to say. Thank you very much.
UN: Senior Appointments
Question for Short Debate
My Lords, I am delighted to have obtained this debate and I am enormously grateful to the United Nations Association for the help that it has given—to us all, I think—and to other organisations and individuals for providing useful briefings. I am grateful to the many Members of this House who put down their names to speak in this debate. I did try to get a sessional Select Committee on this topic and I failed, so this debate is really instead of having that. There have been relatively few debates in Parliament on the United Nations although my noble friend Lord Judd, who regrets that he cannot be here today, has asked one or two Questions in the recent past.
As one of the permanent members of the United Nations Security Council, Britain has a key role in working for UN reform. I could go through all the important things that the UN does but I will touch on just one or two of them. There are 193 member states; the UN’s expenditure is £30 billion a year; it provides food for 90 million people in 80 countries; it assists 40 million refugees and people fleeing from war, famine and persecution; it is involved in tackling climate change; and there are 125,000 peacekeepers involved in 16 operations in four continents. The UN also mobilises humanitarian aid for emergencies and uses diplomacy to prevent and resolve conflict.
The United Nations is important to this country’s national security and prosperity and, as one of the permanent members of the Security Council, it is important that we show consistent leadership at the UN. There should be a clear strategy for British action to strengthen the organisation. This involves: improving the appointment processes for senior UN officials, about which I shall say more later; increasing the practical support to areas such as UN peace operations; setting a positive example in implementing international laws and norms; and ensuring that there are regular parliamentary debates in Britain on our engagement with the UN system. In a wider sense, we should of course raise awareness of the UN in this country.
I want to talk about the importance of the selection process for the Secretary- General. We know of the range of important responsibilities that Secretaries-General all have and the successes that they have had. Peacekeeping was developed by the first Secretary-General, Trygve Lie. Dag Hammarskjöld secured the release of 11 US airmen imprisoned in China, among many other things. U Thant de-escalated the Cuban missile crisis. More recently, Kofi Annan did pioneering work in widening access to HIV/AIDS treatment. Ban Ki-moon, the present postholder, has championed LGBT rights and action on climate change. Generally, Secretaries-General have been able to play a pivotal role in preventing conflict. The charter enables them to bring to the Security Council any matter that may threaten peace and security. Clearly, if the process of appointing the Secretary-General was more legitimate, this would enhance their authority.
There is no job description, timetable or public scrutiny for the appointments process, and there is a troubling history of backroom deals. No woman has ever been seriously considered for the post. The five permanent members of the Security Council dominate the process and present the rest of the UN’s membership with a single candidate to rubber-stamp. It would not be acceptable for any British public body to behave in this way; if it did, it would be before an employment tribunal pretty sharply.
To give more detail, the charter says:
“The Secretary-General shall be appointed by the General Assembly upon the recommendation of the Security Council”.
To be nominated, a candidate must receive at least nine affirmative votes in the Security Council—all subject to veto by any of the permanent five. The charter provisions are supplemented by a range of General Assembly resolutions. One, in 1946, says:
“It would be desirable for the Security Council to proffer one candidate only for the consideration of the General Assembly”,
and that the assembly would make its decision through a vote by a “simple majority”. It also set the term limit for the first postholder at five years, with the option of a further five. In addition, a number of informal practices developed, such as regional rotation among postholders, so that a Secretary-General would be selected successively from different world regions. At present, many eastern European states are claiming that they have had not had an appointment yet, but given current big-power tensions in the Security Council about eastern Europe and eastern states generally, that may be difficult to achieve. The General Assembly acknowledged the need to have regard to regional rotation and gender equality, but said that the,
“appointment of the best candidate”,
should come first. Postholders are normally from small or middle-ranking powers, and P5 nationals are not nominated.
I will indicate how I think the selection process should be improved. There should be formal selection criteria, with a clear focus on merit, and with gender and regional diversity listed as important but secondary factors. There should be deadlines and a public shortlist of highly qualified women and men. There should be a presentation of vision statements by the candidates. There should be chances for all states and civil society to engage with candidates. There should be a clear commitment from candidates and states not to seek or make promises in return for support, including on senior appointments. There should be a single, non-renewable term, to free candidates from the political and time constraints of re-election campaigning, if they had a second term. There should be a real choice for the UN membership, with more than one candidate presented by the Security Council to the General Assembly. None of these proposals would require amendment of the UN charter: they could happen just like that if it was decided by the member states.
Before moving on to other senior appointments, I will just say that the British Government do not have a clean sheet in all these things either. Just recently, there was a vacancy in the UN department of humanitarian affairs. The Government proposed one individual for that post, and when the Secretary-General resisted that, the Government put forward three Conservative MPs, one of whom got it. I make no comment on their qualities—they may have been the best, but there was no evidence that they were the best. Stephen O’Brien, who got the post, did it without any proper selection process and without any real competition. We surely need a commitment to merit-based senior appointments, irrespective of nationality.
What could the British Government do about these other appointments? We should ensure that we set a good example by nominating and supporting candidates of the highest quality for all senior appointments, with due consideration to gender equality and regional diversity. We should commit publicly to upholding this principle and encourage other states to do so, including by speaking out when standards are not upheld by the Secretary- General. We should encourage UN funds, programmes and agencies, particularly those of which we are members, to meet the highest standards for best practice in international organisations. As part of this process, we should consider the merits of a single term for a range of posts, if perhaps a slightly longer one. We should also reaffirm the General Assembly resolution, which states that,
“no post should be considered the exclusive preserve of any Member State or group of States”,
by calling for a general rule that no nationality should immediately succeed the same nationality in the same post. That would stop Brits reappointing Brits, the French reappointing French people and so on. I think those changes would make the UN a more effective world organisation.
I conclude by giving one example of something that happened a few years ago. I refer to Kurt Waldheim, who became Secretary-General. As I understand it, six names were put forward. The Soviet Union, as it then was, vetoed the other five, so Waldheim got it, although I do not think that his record as Secretary-General, nor his previous record, was particularly praiseworthy. That could be done by the great powers.
I appreciate that it will not be easy for Britain to win the day, even if the Government accept all those arguments—which I hope they will—but let us at least try. Let us see whether we can make the United Nations a better organisation than it is now.
My Lords, I thank the noble Lord, Lord Dubs, for introducing this important debate today. This year, the United Nations marks its 70th anniversary, and its three founding pillars of peace and security, human rights and development are as relevant today as they were in 1945. The UN provides an irreplaceable forum for its 193 member states to tackle important global issues collectively and has succeeded in its objective of avoiding another world war of the kind seen in 1914 and 1939.
Today, however, spiralling levels of conflict are resulting in vast numbers of displaced people; climate change is causing damaging effects; and natural disasters continue to inflict widespread destruction. The UN finds itself overstretched and, even with a budget of $30 billion, underfunded. There has not been a serious debate about the system for many decades. It is crucial that a modern United Nations is seen to be adapting to address today’s challenges. Strong leadership is therefore vital to enhance the impact of the UN and to bring about change. Thus, the appointment of the next Secretary-General is paramount.
In today’s dangerous and unstable world, one of the great challenges is that of international compromise and collective solutions conflicting with agendas of national interest. In recent years, the threat and use of the veto in the Security Council has frustrated efforts to address humanitarian catastrophes and political crises. In 2013, Secretary-General Ban Ki-moon stated that the UN was responsible for a “collective failure” to tackle the Syrian civil war, which would “remain a heavy burden” on the organisation’s standing.
ISIL is in part a result of that lack of effective co-ordination and response by the international community. When one sees the resulting catastrophic regional effect, it is imperative that the Security Council becomes more effective at conflict prevention. Proposals have in fact been made to restrain the use of the veto in cases of atrocity crimes—most notably by France and the ACT group of 21 UN member states. Will the Minister clarify the Government’s position on those proposals?
There are other areas where the UN desperately needs to reform—in particular, its development system. This undertakes operational activities that account for about 60%—about $13 billion—of annual UN spending and employs about 50,000 people. It includes more than 30 organisations, with funds, programmes, offices and agencies headquartered in 14 different countries and with 1,000 offices around the world.
Without doubt, the system has delivered substantial improvements on the ground, especially in areas such as infant mortality, school enrolment and access to sanitation, but at times there is duplication and a lack of coherence. For example, I have been told that 31 different UN bodies consider water and sanitation issues to be part of their brief. There are also 21 UN developmental bodies working in Iraq, alongside other political and human rights bodies. Given that some of the front-line agencies, such as the UN Refugee Agency and the World Food Programme, have serious funding shortfalls, surely a process of streamlining must be considered very seriously.
The launch of UN Women in 2010, bringing together the four agencies that previously worked on women’s issues, was enormously welcomed and has already done much good work at addressing gender inequality across the world. However, UN Women has also struggled for funding. It is often one of many actors on the ground working on similar projects. Perhaps it would be better placed focusing on where it can really add unique value as a UN body—for example, providing an in-country forum bringing together women’s voices to ensure that they are heard. Providing such wider advocacy and co-ordination is exactly where the UN can play an invaluable role, rather than competing with NGOs on the ground.
Peacekeeping plays a critical role in preventing conflict, bringing stability and mitigating humanitarian crises. I understand that today the UN has 16 peacekeeping operations on four continents, with 125,000 peacekeepers. Last December, I visited Mali, where the peacekeeping mission has come under attack and is suffering heavy losses. However, UN peacekeeping has had its challenges too, with reports in some places of UN peacekeepers committing sexual violence. Most of the peacekeeping troops come from developing countries, which may not have a high standard of military training, respect for human rights or the right equipment. Only the UN can carry out these peacekeeping roles, so it is crucial that the training and deployment of troops is fully scrutinised.
This debate takes place during what is a global crackdown on human rights. Over the past three years, more than 60 countries have passed or drafted laws that curtail the activity of NGOs, using methods such as forbidding foreign funding and creating anti-protest and gagging laws. This is having the effect of undermining human rights and human rights defenders. Such crises are the very reason why we need the UN. Yet I am aware that the UN’s Committee on NGOs has itself been accused of denying vulnerable people representation. Thus, again, the system needs to be looked at.
Ultimately, the UN is effective only if member states are willing to work together to strengthen it. However, this can be helped by the right leadership from the top. Thus, the appointment of the next Secretary-General remains crucial to the future effectiveness of the UN. As the noble Lord said, to engage the best candidate requires a robust selection process, with the candidate setting out their vision and priorities for the organisation. If all member states were involved, not just the small number that are at present, it would give a much broader base of support. An ideal process would also engage civil society and consider women candidates. Above all, the process should refrain from seeking promises on other senior positions in exchange for support.
The United Nations has had a remarkable impact on the world over the past 70 years and can continue to do so with the right reforms and leadership. A UN without proper clarity, authority and accountability will be a failure for us all. I conclude with the words of Norman Cousins, the American journalist, professor and peace advocate:
“If the United Nations is to survive, those who represent it must bolster it; those who advocate it must submit to it; and those who believe in it must fight for it”.
My Lords, I, too, congratulate my noble friend Lord Dubs on having secured this debate and introduced it so ably.
It is a central paradox of international relations that we live in the most interdependent world ever, yet global institutions seem to be at their weakest. An anecdote about this is going the rounds and might amuse noble Lords—or it might not; I do not know, but I will give it a try. Three world leaders get together and have an audience with God. Bill Clinton is the first up. He asks, “When will there be agreement to limit climate change?”. God says, “Not this year—not even in my lifetime”, and Clinton walks away in tears. David Cameron is next up. He asks, “When will we get recovery in global growth?”. God answers, “Not this year—not even in your lifetime”, and David Cameron walks away in tears. The UN Secretary-General is the last one up. He asks, “When will our international institutions really work?”, and God walks away in tears.
Consider climate change, a field in which I happen to work, and which has been mentioned. Climate change poses a huge set of risks for the world. Some say that these risks are lower than the majority of climatologists think, but they could just as easily be much greater. Moreover, climate change is irreversible. This year, COP21 will take place in Paris. There have been 21 years of meetings organised under the auspices of the UN to try to get agreement to reduce carbon emissions. The results, I am afraid to say, are almost negligible as regards the huge scale of the problem. The volume of CO2 in the atmosphere continues to mount each year. Will the Paris meetings be more effective than those in the past, or a replay of the notorious ones in Copenhagen in 2009, which were invested with massive hopes but turned out to be so shambolic? We have to hope so; but even if some sort of formal agreement is reached, there is no effective system of international law to back them up.
The reasons for the fractured nature of global society are quite easy to find. The first is the decline of US dominance and growing multi-polarity. The second is the historically unprecedented nature of the problems we face; no other civilisation has had to cope with human-induced climate change, off-the-scale population growth or the existence of nuclear weapons. These are almost wholly new threats, which can be confronted only globally. The third influence is the frozen nature, as we all know, of some of the core institutions on a global level. Thus the permanent members of the UN Security Council famously reflect the world of 1945 rather than that of 2015. Yet we are living in a kind of runaway world which has a dangerous and disturbing feel to it.
All these factors are reflected in the inchoate way in which appointments to the post of UN Secretary-General are made—and the consequent lack of legitimacy it has. Of course, some Secretary-Generals, as has been said, have been very influential, and deservedly so, but it is widely acknowledged that the post is more about prestige than power, which remains largely in the hands of nations and groups of nations, especially the five permanent members of the Security Council. Each of them has de facto veto power, sharply reducing the chances that a strong leader could be chosen. The process might be even more convoluted this time given the divisions between Russia and the western members and between the US and China. The UN has carried out its own review of appointments procedures to executive positions, including that of Secretary-General, but it has become mired in the very processes it was supposed to help overcome.
A group of NGOs has also launched a worldwide campaign for reform with a list of proposals, so has Equality Now, which is pressing hard for there to be a female leader for the first time. There could, indeed, be a female leader. But otherwise, so far as I can see, there is unlikely to be much real change without reform of the Security Council, where the UK drags its feet as much as anyone. The situation would be comic were it not tragic in its consequences for world order and world security. I have two questions for the Minister. Is there serious hope that the situation can be otherwise? The Government have their own proposals, I believe. And is not the UK just a little bit complicit in this situation, which has been so difficult in the past and will probably prove difficult in the present too?
My Lords, I join other noble Lords in thanking the noble Lord, Lord Dubs, for securing this debate, and indeed for couching it in sufficiently wide terms to enable us to cover extensive ground, looking at the effectiveness as well as the appointments. Those two certainly go hand in hand.
Let me deal with the most important issue to do with the UN’s effectiveness: the perception—widely held across both the global north and south—that the UN is again ineffective in dealing with international peace and security. Whether you are a Rohingya in Myanmar fleeing for your life, or an Iraqi or Syrian citizen living under years of war, what is clear to you is that the UN has been pretty much absent in terms of resolving the crisis that afflicts you. I do not mean absent in terms of providing humanitarian assistance, but ineffective in resolving or ending the conflict. It is not even capable of providing a safe haven, which it was able to do in the mid-1990s.
Likewise Ukraine, where we have seen the most egregious threat to the country’s territorial integrity, yet the UN is deadlocked. The public out there are not really interested in the endless discussions of reform, the composition of the United Nations Security Council or the way that the veto is used. Rather, they want the UN to apply its heft to stop conflicts or, better still, to prevent them happening in the first place. However, this debate affords us the opportunity to discuss effectiveness, so I will say one or two things about Security Council reform.
We have the French proposals from 2013, which suggest that the five permanent members of the Security Council—China, France, Russia, Britain and the United States—themselves could voluntarily agree a code of conduct which would call for them not to exercise their veto in circumstances where severe levels of loss of life and atrocity had taken place. Under the Fabius proposals, as they are referred to, at least 50 member states would be required to request the Secretary-General to,
“determine the nature of the crime”.
On delivery of the Secretary-General’s report, the code of conduct would apply and the permanent members would desist from using their veto.
This French plan is pragmatic and does not call for the code of conduct to apply where the “vital national interests” of a P5 member are at stake. It gives the Secretary-General the power to assess what that vital national interest might be. I want to use one or two examples. Would the existence of the Russian naval base at Tartus exempt Russia from the code of conduct? One could plausibly argue that it would not. The existence of the base is itself now imperilled with the rise of ISIL and potentially by the collapse of the Assad regime in any event. It is a counterfactual and we cannot know for sure, but Russian interests may well have been better served through an intervention in 2013 and a negotiated settlement at that time. That could have resulted in a viable transitional Government and averted the break-up of Syria.
Another example, using Russia again, would be the invasion of Crimea. Here, needless to say, as Russia was the aggressor in any event, clearly no code of conduct would have held it back and we would have continued with deadlock. One can move on to another example using China and the Senkaku/Diaoyu islands dispute. They are clearly seen in China as a “vital national interest” and therefore one would presume that the veto suspension would not apply in that case. However, China has myriad other disputes with its neighbours which could potentially be resolved through the offices of the Secretary-General and the use of the United Nations Security Council were a veto not an automatic right that China had.
In order to make the code more appealing to the permanent five, it may well prove necessary for a further escape clause to be inserted, and here I propose a concession that the French plan does not. It is that if the P5 member believes strongly that the Secretary-General’s analysis does not take into account its vital national interest vis-à-vis a particular situation, it can still employ a veto. However, this should be an exceptional measure and there should be a requirement for it to publish a written explanation of why it felt it important to deviate from the code. In responding, will the Minister be able to touch on those French proposals? They are not new and they will not come as a surprise to him. It will be very interesting to know the UK’s position on them.
I turn now to the other arrow in the bow of UN reform—that of reform of the appointment of the Secretary-General. In the last two years we have had several goes in this House at fleshing out the Government’s willingness to lead on reform. In the mean time, we have seen an acceleration of civil society groups lobbying for reform as well. My party’s position on this is well known. There should be a more transparent process of appointment; regional pre-emption, whereby the region which considers it is “its turn” prevents others even being nominated, should be abandoned; and the putative postholders should be evaluated against clear and transparent criteria, irrespective of the region they come from. Moreover, there should be an extended single term so that the energies of the Secretary-General can be focused on the job in hand rather than on lobbying for a reappointment.
The House will also be well aware of my view that, after 70 years, it is time for a woman to lead the UN. The job is far too important to be left to less than half the world’s population. But I recognise that I cannot both argue for the best candidate and unequivocally state that it has to be a woman. One cannot let the best be the enemy of the good, so I have a compromise in that regard. In order for a suitably qualified female candidate to be considered for 2016, I suggest that the five permanent members agree not to veto a suitably qualified woman candidate on the basis of regional representation. In other words, they should make a bold public pledge this September, when the session commences next week, that they have agreed to set aside the veto in order for the best women worldwide to be considered for the post. It is a very limited ask, after eight men of varying competence have held the job in the past, that finally a group of women should get a serious look-in. When I last looked there were some 40 women who had served as heads of state and government, and others in other senior positions, past and present, who might have qualified—not to mention a host of others from within other international organisations.
If the UN can at least demonstrate a modicum of competence, fairness and representativeness, then there is some hope for its relevance in the world. I look forward to the Minister’s views on these proposals, and indeed to action on them.
My Lords, I, too, thank my noble friend for initiating this debate and for his excellent introduction to the issues that we are discussing. This is a timely debate as we mark the 70th birthday of the United Nations in the autumn. There are certainly debates that need to be had on the global challenges that the UN faces on delivering security, on the record of peacekeepers, on the refugee agency and on the perception that the UN is too bureaucratic. Indeed, it is often accused of being incompetent.
We are told that there is evidence at the UN of waste, fraud and abuse by UN staff, and there is a growing consensus that there needs to be improved accountability and comprehensive institutional reform. There are serious questions, too, about a Security Council that frequently seems unable to provide security, and peacekeepers who frequently seem unable to keep the peace. In addition, the Ebola crisis has shone a light on the UN’s failures to deliver on critical health priorities. Also, we are all aware of the challenges that are not being met, as record numbers of men and women and children flee from conflict and persecution.
After 70 years of the work of the United Nations, and $0.5 trillion later, it is time to ask the questions, but we should not neglect to value what has been achieved. Dag Hammarskjöld famously said:
“The UN was created not to lead mankind to heaven, but to save humanity from hell”.
Millions of people have benefited from this remarkable organisation, and when issues of cost are raised it is worth noting what a recent newspaper article said, which was that,
“total UN spending this year is still only about half of New York City’s $75bn budget”.
That comparison puts things into perspective. The conclusion that surely has to be reached is that what existed 70 years ago after the war is very different from what is needed now. Reform is essential, and the UN member states must facilitate that reform since all too often they are seen as providing major obstacles to progress.
Another demand has to be for the proper representation of people from developing countries. I know, from visits to New York, that representatives of the G77 group of developing countries regularly point out that that they are seeing a reduction, not an increase, in the roles that they are offered and feel excluded from decision-making. For a global organisation, this is unacceptable. It will also be unacceptable to maintain and perpetuate the status quo when it comes to the selection of the Secretary-General. Surely we need a Secretary-General who is independent and not beholden, as is currently the case, to the interests of individual member states.
My final point is to draw attention to the fact that in the past 70 years, not a single woman has been at the head of the Security Council. There have been eight general secretaries, all men. They have been selected by back-room dealing dominated by the five world powers, including the UK, that hold the Security Council permanent seats. Does the Minister agree that this has to change and that we surely are right in demanding more transparency about these issues? Does she agree that it would send a powerful message if a woman were at last to be at the helm of the United Nations? After all, the UN talks a lot about equal rights for women; it is time it got behind making sure that this claim is realised. Does the Minister agree that the selection process urgently needs to be revised because it is unacceptable that, since 1995, about only one-quarter of senior posts have been held by women? We must focus on what is needed for the job, but it is time that women were seriously considered for the job of Secretary-General in a way that they have not been before.
A number of countries, led by Colombia, are now promoting the view that it is time a woman led the UN, and there are calls for women to nominate women. We know that now a number of countries have women leaders who are urging that women should be promoted at the UN—and some of us here should be joining those pressures. For instance, I am convinced that if Helen Clark, the head of the UNDP, were interested, she would make an excellent candidate. She is undoubtedly well qualified to be Secretary-General and would bring her great skills, talent and experience to the job.
Finally, will the Minister clarify what was meant in a very interesting Answer I had to a Written Question? I asked how HMG proposed to ensure that suitable women candidates for Secretary-General are given serious consideration. Interestingly, the Answer I was given said that the Government would be encouraging the promotion of more applications from women. I would very much like an assessment of the progress on that initiative.
My Lords, the United Nations seems to have an inbuilt capacity to examine its administrative and structural problems and come up with solutions but then never quite implement them. A few years later, it then goes round roughly the same course all over again. I hope that this time, in relation to senior appointments, Her Majesty’s Government will be motivated to intervene and give the necessary leadership to prevent the usual recycling of problems and, instead, insist on real change in everyone’s interests.
I pay tribute to UNA-UK and its 1 for 7 Billion campaign, which is gathering global support for a better selection process for the Secretary-General. I know that the Government have declared their support for some of the campaign’s objectives and I hope that today’s debate will persuade the Minister to go further.
I also pay tribute to and express my deep gratitude to Dame Margaret Anstee, the British woman who became the first female Under-Secretary-General of the UN in 1987. Her long career at the UN included roles on every continent, spanning development, peacekeeping, technical assistance and operational delivery. Her wisdom and experience are second to none and I am most grateful for her insights.
Over the years, Dame Margaret’s has been one of the voices most often and most incisively raised on the process of the appointment of the Secretary-General. Process should not eclipse purpose, but on this issue, getting the process right is vital for the very purpose and role of the Secretary-General to be effectively fulfilled. A more transparent, inclusive and accountable process would be more likely to produce a Secretary-General as envisaged by the UN Preparatory Commission in 1945: someone who,
“more than anyone else, will stand for the United Nations as a whole”,
“embody the principles and ideals of the Charter”.
In other words, someone who will rise above narrow national interests and be the kind of leader for an age of ever-more rapid globalisation.
It has been observed by experts such as the British Association of Former United Nations Civil Servants that the authority of the Secretary-General is currently undermined by the fact that member states really do not want a strong incumbent, and that a “tortuous horse-trading process” can lead to the lowest common denominator being chosen.
This has been fuelled by the assumption, mentioned by others, that there must be some sort of geographical rotation. This is one point on which I would urge Her Majesty’s Government to intervene most strongly. Yes, regional diversity is important, but more important still are the ability and willingness to rise above regional or national interests and enhance the UN’s impact across the board. What is needed is a mindset which can challenge the attitudes of member states, leading to a more collective understanding of the role of the UN and shifting the definition of national interest. Surely when we look at the UN through the lens of the 21st century rather than that of 1945, we can see that issues such as terrorism, climate change and massive, unprecedented population movements should now trigger an end to the dominance of narrow member statism, characterised by a secretive, undemocratic way of choosing the Secretary-General, and instead open the way to a more modern, effective process.
No large multinational company would recruit its chief executive without a job description, a systematic global search and a recommended shortlist. The UK Government should support and insist on these changes, and oppose old-school resistance from member states which falsely believe that the process relies on the Security Council coming up with a single name which the General Assembly then rubber-stamps. It does not have to be like that.
Another reform for the greater effectiveness of the Secretary-General would be a single term of office—five or seven years has been suggested. As others have said, this would do away with the time-wasting process of seeking re-election, increase the incumbent’s authority and protect him or her from undue pressure from member states. It is regrettable that the UK has not thus far thrown its weight behind this proposal, and I hope that will change.
I am glad that the Government have expressed their support in principle for a female candidate for Secretary-General. But are we following that up by nominating suitable women? Certainly one who comes to mind is the noble Baroness, Lady Amos, who seems to me eminently qualified and experienced. I have no idea whether she is interested, but I would like to know that someone has proactively tried to find out.
There are other reforms which I have not had time to mention, but the point I want to finish on is the importance of our doing more to encourage and promote UK nationals working at all levels within the UN and its agencies. The UN needs to be a more attractive proposition for talented people seeking challenging jobs, and the Government have a responsibility to communicate more positively to the public the detailed work and importance of the UN. Can the Minister tell the House today—if not, perhaps he can write to me—what progress is being made towards fulfilling the pledge to triple the size of the International Citizen Service, and how many individuals the UK now has engaged with the UN’s Junior Professional Officer scheme?
The 1 for 7 Billion campaign points out that a more open, inclusive way of appointing the Secretary-General could have,
“a transformative multiplier effect across the UN system”,
giving the whole world, not just the big powers, an interest in and stake in the outcome. I hope that Her Majesty’s Government will have the confidence to display the kind of innovative leadership needed to champion this change. As the first G8 country to meet the 0.7% aid target, surely we are in a position of credible leadership and must exercise it constructively.