House of Lords
Thursday 27 October 2016
Prayers—read by the Lord Bishop of Portsmouth.
Creative Industries Exports: Publishing Industry
My Lords, the Department for International Trade holds regular discussions with the Publishers Association. Working in partnership, we are supporting this important sector to grow exports. This takes many forms, and includes enabling UK businesses to attend international trade fairs and hosting an international business lounge at the London Book Fair.
Does the Minister share my astonishment that publishing, the fastest-growing creative industry exporter—a sector that has doubled book export revenues from China alone in the past four years—has been completely left out of the Department for International Trade’s five-year campaign for creative industries? In a post-Brexit world, can we really afford to ignore this great British success?
DCMS is doing quite a lot in that area. We are ensuring that the level of support for the creative industries is maintained and enhanced, because part of our whole trade strategy is that we would like to have a unique, bespoke strategy for each of our trade sectors. We are talking and listening to the various sectors to make sure that we get the very best.
My Lords, in previous Questions on this matter, we have learnt that there have been substantial cuts in support for exporters, particularly those in the creative industries, in recent years. I would be grateful if the Minister could remind us what the current state of play is. Will there be more money to make sure that people can attend trade missions and other important areas where they can do business?
I think some positive news is that the Creative Industries Council’s Brexit report, which was commissioned by the Government to explore priorities within the UK creative industries following Brexit, will be launched this afternoon, and we will be looking at all the issues that the noble Lord has raised.
My Lords, we have not yet really heard from the Minister what evidence the Department for International Trade will require, and regard as sufficient, from the publishing industry to give it the support it needs. Is this another example of a government department not having the necessary post-Brexit skills required to do the necessary for the British economy?
No, I disagree. We are expanding our trade policy capability very rapidly. The department has recruited a new senior team on trade policy, and we will continue to hire the brightest and best talent from within the UK Civil Service and elsewhere, in order to deliver the very best outcomes for the UK—looking in particular, too, at the creative industries sector, which is very important.
My Lords, will the noble Baroness inform us how the Department for International Trade will organise itself? Will it have experts in particular fields who really understand how particular industries operate and what might be the scope for international trade, or will it simply rely on generic civil servants providing work in that area?
I agree with my noble friend. Publishing exports increased by 166% between 2009 and 2014 and total exports were worth £2.1 billion. All sorts of interesting things are happening with geographical shifts towards markets in the Middle East and Asia. This sector looks as if it will continue to grow. It definitely has the support of government behind it.
My Lords, one of the most promising creative industries in this country is the music industry, particularly our outstanding conservatoires, one of which I am proud to be chairman of. What is the Minister doing to encourage students from outside and inside the EU who make connections in this industry to continue to come here to ensure that our music is exported and these connections continue? At the moment, there is increasing nervousness about Brexit and the risk that students are turning away and thinking of conservatoires in other countries.
I assure the noble Lord that there has been no change to the rights and status of EU nationals in the UK or of British citizens in the EU since the referendum. As regards his very positive note about the music sector, the Department for International Trade has relaunched the Music Export Growth Scheme with £2.8 million of grant support being made available to music SMEs up to 2020.
Solar Panels: Business Rate Exemption
The Government are aware of the solar industry’s concerns regarding the application of business rates on microgeneration and changes that may affect businesses with solar more widely. We continue to engage with the affected parties. Following the business rates revaluation and this year’s Budget, nearly three-quarters of businesses will see no change or a fall in their bills next year, with 600,000 businesses set to pay no business rates at all.
I thank the Minister, but I have to say that if one parish council in Wokingham can find that its business rates are going from £7,000 to £14,000, this will be the death of non-domestic solar roof panels. I urge the Government to look at the impact on schools and parish councils, which will be devastating. Will she also address the unfair and unjust anomaly whereby schools with charitable status will be exempt from the new increased business rates, thus creating a two-tier system that penalises local authority schools?
The noble Baroness is right that there is in this area a curiosity, as I think I would describe it, which is that private schools and academies, being charities, as she said, get an 80% reduction, which is good. We have a system where the impact depends on the ownership, as she will know, of the affected solar project, so we have a situation in which there is a fall on new projects where the electricity generated is sold and an increase where the electricity is used directly by the owner—she mentioned the example of schools. It is not possible to estimate the impact of those changes because it depends on ownership but, as I said in my reply, we are considering the impact and any proposed changes will be made in due course.
My Lords, last year I visited a school in Croydon, which has had to cancel an expansion of its solar installation because of the Government’s cuts to the feed-in tariff. I invite the Minister, when she is sure about the impact of this particular measure, to go with me to that school in Croydon and explain why its solar installation is now going to be taxed and how much it will be taxed by.
As I have said, we are looking at the rate issue. There is also an issue relating to VAT, where HMRC issued a consultation—at the moment, domestic VAT continues to be 5%. The feed-in tariff deployment actually continues. Obviously, the subsidies of solar have come down because the costs have come down to such an extent. Solar has been a big success in this country and it is obviously right that the subsidy levels reflect that innovation and productivity.
I do not think that there are business rates on domestic solar panels—that falls under my right honourable friend Sajid Javid’s department. Businesses have been caught because the rateable values reflect the value of the business property, and there have been changes to the regime that have led to the situation that I have described to the noble Baroness. We are looking at that, but rates reflect, in the long term, the value of property. However, I can see that there is an issue in relation to solar panels.
My Lords, may I press the Minister a little further on the impact—perhaps, I am hoping, the unintended impact—of this decision on some small schools? Is it really intended that small schools should pay business rates, often after significant community fundraising to install solar panels to increase awareness among children and young people of climate-change issues?
We are looking at this, and, in particular, this change to microgeneration, which has had these anomalous effects. In the past, schools have been totally exempt; now, as I have said, the rate system is coming in and biting in a way that perhaps was not intended in the first place. We are looking seriously at the impacts against this background of some doing better out of the system than others. We look forward to making some progress in this area.
Can the noble Baroness tell the House how many more changes of policy impacting on renewable energy and carbon reduction will come from the Government? We seem to have had quite a string of them, all of them rather unexpected. Perhaps they are in response to the cheaper generation issue that the noble Baroness raised, but they have certainly reduced confidence both among domestic and commercial investors and in the renewables industry. Are there many more changes to come?
I think the noble Baroness should take comfort from the signing of the agreement in Paris, the statements we have made and the comments I have made about the carbon budgets that will be put forward in due course. This Government and the last one have made enormous investments in renewables, but nobody could fault us now for looking properly at affordability and at where things can be affordable. Innovation—for instance, on solar—is making things less expensive, and then the subsidy regimes should change. However, of course we understand the need for investor confidence.
My Lords, solar PV has taken the brunt of corrective measures taken by the Government, as in their analysis it is the key reason for the overspend on renewables. In fact, the National Audit Office report shows that solar accounted for only 6% of this overspend. The technology is so popular and affordable. What steps will the Minister and her department take to review this overcorrection, encourage further solar deployment and restore confidence to the sector?
The noble Lord is right that solar has been a success. We have over 11 gigawatts now installed, with 49% of EU investment in solar, so we have strength. We have had to bring down the subsidies for that, although feed-in tariffs and so on continue. My own view is that solar is an important part of the mix, particularly internationally, because there is more sun and less intermittency, which helps us with our climate change targets. However, the noble Lord can be reassured that we are looking carefully at solar, and a lot of our innovation budget is going toward solar and storage to see whether, going forward, we can take those two together and make the technology even more cost effective.
Brexit: Creative Industries
My Lords, the Chancellor announced that the Treasury will provide a guarantee for all new structural investment fund projects signed after the Autumn Statement and before we leave the EU where they provide value for money and support domestic strategic priorities. Leaving the EU means that we want to take our own decisions about how to deliver the policy objectives previously targeted by EU funding. Over the coming months, we will consult with stakeholders to review all EU funding schemes in the round to ensure that any ongoing funding commitments best serve the UK’s national interest while ensuring appropriate investor certainty.
I thank the Minister for his reply. I know he agrees that our creative industries are one of the great successes. Does he also agree that they have massively benefited from our being a member of the European Union? For example, the Creative Europe programme has a budget of £1.1 billion, for which funding UK applicants have a success rate double that of the EU average. Considering the contribution of the creative industries to our economy and our position as a soft-power superpower, can the Minister confirm that the creative industries will be at the top table when Brexit negotiations commence?
I am happy to agree with the noble Baroness that the creative industries are one of the great success stories of Britain. They have expanded by 34% since 2010 and now contribute 5.3% of GVA, so they are economically important, quite apart from the important cultural and aesthetic areas of promoting Britain abroad. They are at the top table—Ministers have had many meetings about the creative industries—and even if it was not for the cultural aspects, the fact that they are so important economically means that they are very much at the top table when Brexit is discussed. To show that in some way, the Secretary of State for DCMS is a member of the Cabinet’s economy and industrial strategy sub-committee, which met yesterday.
My Lords, does the Minister agree that the free movement of artists and performers on our continent is a cornerstone of the creative industries? This is not just because of an international labour market but because of an established co-operation, meaning movement in both directions. If the right to work, travel and study abroad freely is removed, it will be hugely damaging.
My Lords, is the Minister aware of the benefit that has come to Wales from the INTERREG programme, whereby the creative industries in Wales and Ireland have had many projects of mutual benefit? When we leave the EU and Ireland remains in, how on earth will it be possible for those projects to continue?
Would my noble friend accept that—aside from the people aspect, which is rightly being raised—while fully applauding the colossal success of our creative industries around the world, they are mostly in the form of services in digital information transmission and exports? This is a services area where, frankly, the single market has not been very encouraging over the last 30 or 40 years when we have been a member. Would he accept that, in fact, the real prizes and best opportunities for the service industries are going to lie increasingly outside the European Union? That is where, as we have already heard in earlier questions, we are going to make a major mark. The single market is fine but not the best deal for our service industries.
I agree that it is very important that we look at other countries outside of the EU, but the EU will remain important to us and we can still continue to trade there. As far as the digital market is concerned, it is obviously easier in some ways to trade with other countries because distance does not matter so much. To that extent, I agree with my noble friend.
My Lords, I return to the point made by the noble Earl, Lord Clancarty. Does the Minister agree that part of the reason why our creative industries—in particular, our performing arts—are so admired worldwide is that there is a very free interchange internationally of artists? Will he also agree that it is increasingly difficult for people who do not have the right to work here as EU citizens to get visas? It is a difficult, time-consuming and often demoralising process. Will he ask his colleagues in the Home Office please to note that, although we have not yet left the EU, the prospect of those rules applying to EU citizens in the future is liable to have a rather chilling effect on the international flow of talent?
As I said before, I completely agree that cultural interchange is important and, by its very nature, it requires people to move around. I can assure the noble Baroness that that is well understood and it will be taken into account—among a host of many other factors—by the appropriate departments.
My Lords, one other feature of the creative industries, which is important to bear in mind, is that they are a mixed economy. As well as the commercial and profit-seeking side, there is the publicly supported side—particularly the BBC and Channel 4. Does this not suggest that the Government should do more to support these national institutions?
No, that is not what I said. I gave a very careful reply, as the noble Lord mentioned. In fact, for the creative industries, the most important fund is the Creative Europe fund, which is applied for directly to the EU. Funds that are applied for directly to the EU have an unconditional guarantee from the Treasury until we leave.
European Union and Canada: Comprehensive Economic and Trade Agreement
To ask Her Majesty’s Government what assessment they have made of the current state of negotiations of the Comprehensive Economic Trade Agreement between the European Union and Canada; and what lessons they have drawn from these negotiations.
The UK remains fully supportive of CETA and of the EU’s wider trade agenda. We have been working closely with the Commission and other member states to enable signature of this agreement to take place, and negotiations are continuing in Brussels today. As noted by the Prime Minister, we are not looking to replicate a model that another country has; we want to ensure that we have the right deal for the United Kingdom.
I thank the noble Baroness for her reply. I wonder whether she recognises these words: Brexit,
“means immediately seeking Free Trade Agreements with the biggest prospective markets as fast as possible. There is no reason why many of these cannot be achieved within two years. We can pick up the almost complete agreement between the EU and Canada, and if anything liberalise it”.
In case she does not remember them, they were written on the website of Conservative Home by the current Secretary of State for Exiting the European Union, Mr David Davis. Do the Government still believe that their bespoke deal can be delivered in two years? What bilateral talks are they having with other EU member states to prevent the UK deal being a “mixed” agreement, needing ratification in over 30 assemblies and parliaments?
I thank the noble Baroness for that. I think that there were several questions there and I shall attempt to answer at least one of them. The UK is unique and the deal that we negotiate will be bespoke. The relationships that Canada and the UK have with the EU are very different. We are an EU member state, whereas Canada is not. The UK is an important market for the European Union and therefore an ongoing trading relationship is in the EU’s interests.
My Lords, is my noble friend not rather tired of these Moaning Minnies? Today we learned that the economy has grown by 0.5% and has not gone into recession. We also learned that Nissan is going to build its cars in the north-east. Should we not take a positive view looking forward, and is not the lesson of the disintegration of the Canada deal that it is extremely difficult to negotiate with and involve 28 countries and 28 interests? In the future, we will be able to decide for ourselves.
My Lords, will the Minister not accept that CETA was cooked up all too secretively between officials and corporate lobbyists; that it is no less objectionable than TTIP; that giving power to corporations to sue Governments in an international tribunal when they think that their anticipated profits might be jeopardised by new laws is not compatible with our parliamentary and judicial traditions; that this House ought to record its gratitude to the stout Walloons for blocking it; and that we should be extremely wary of the General Agreement on the Trade in Services, which is the next one looming?
In terms of scrutiny, we are not going against procedures; we followed the usual procedure and responded in detail to the concerns raised by the scrutiny committees in both Houses. There will be debates, such as this afternoon’s debate on global free trade, votes on the great repeal Bill and, very likely, votes on any new arrangements and consequential legislation. We want to offer maximum transparency and scrutiny as long as we do not compromise our negotiating strategy.
My Lords, does my noble friend not agree that what we have seen in the negotiations between the European Union and the Canadian Government is an example of totally dysfunctional, incompetent and blundering government in Brussels? There is no democratic way in which that can be altered. Does that not make a very strong case for getting out from that shambles as fast as we can?
We regret that agreement has not been possible by all member states at this stage. The UK hopes that agreement is reached swiftly in order for it to be signed. However, the UK continues to support the EU’s trade agenda, including CETA. It is an important trade agreement for the UK, with an economic benefit to UK business while we remain in the EU estimated at £1.3 billion.
My Lords, is not the point shown by the Canadian negotiations that seven years of work have been scuppered by a sub-state institution inside Europe? Do the Government recognise the difficulties of the path on which they have embarked, for there are sub-state entities in the United Kingdom, such as the Scottish Parliament, and in every other state in Europe? Can the Minister therefore assure us that in this complex, huge, interlocked series of negotiations there are no issues which require other than qualified majority voting? In other words, is every single aspect of this negotiation free from the prospect of a unanimous decision being scuppered by a sub-state institution, here or in Europe?
My Lords, time is up.
Business of the House
Timing of Debates
That Lord Stoneham of Droxford be appointed a member of the following committees: Finance (in place of Lord Newby) and Privileges and Conduct, Procedure and Selection (in place of Lord Wallace of Tankerness).
Brexit: Domestic and International
Motion to Take Note
My Lords, it is a great honour to lead off this take-note debate. I start by clearly stating my position. The debate title shows that opportunities abound if we can become an,
“outward looking champion of global free trade”.
We can do that only if we leave the EU customs union, and it is to that that I want to address my remarks.
In 2008, after seven grueling years of negotiation, the Doha round of trade talks collapsed as India, China and the US failed to agree on farm import rules. TTIP continues to founder as unions promulgate the barely even half-truth that it will lead to mass privatisation of the National Health Service. The raging US presidential debate piles myth on top of myth about the supposed damage caused by free trade, with startling implications for not only TTIP, but other trade agreements as well. Despite the UK having a trade commissioner present in the case of Doha during these events, the UK’s voice in trade was subsumed into that of the EU. Now, no longer. Now is the time to articulate our own vision of global free trade. I pay tribute to my noble friend Lord Maude, who began to do this with some alacrity, even before the referendum.
Leaving the European Union, which, for transparency, in case noble Lords had not guessed, I disclose that I voted to do, has undoubted risks. We have seen this with the slide in sterling and its possible implications for inflation. We may yet see it in business confidence and inward investment as the Article 50 negotiations proceed, with every summit, press conference and crossed word capable of moving markets. But, for all these threats, one such opportunity stands out. It is shown in the title of the debate—namely, for,
“this country to be an outward looking champion of global free trade”.
This is something for which the Conservatives have historical form. The Corn Laws were a great and terrible example of how protecting local producers at the expense of cheaper imports impoverished UK consumers. It was contentious enough to split the Conservative Party, but it seems to me, when we speak against global free trade today, that we are essentially making the same mistake, favouring narrow producer interest over the common good. Indeed, in 1904 we had not gone far enough for one Winston Churchill, leading him to join the Liberal Party in response to our ongoing fixation with tariffs. I look forward to hearing whether the modern incarnation of that party is similarly dedicated to free trade.
In the context of leaving the EU, how do we make this into an opportunity for the UK? There are many permutations for our future relationship with the EU, but I want to focus on what opportunities we might avail ourselves of by leaving the EU customs union. If we are to become a global trading nation once again, we must do so. While some UK businesses accustomed to the existing arrangements may cry foul, it is surely a price worth paying to be outside it. This is principally because, if we are, we can strike free trade deals of our own, and, indeed, grandfather into some free trade agreements.
We will not be bound by the protectionist whims of the EU. It is worth remembering that while tariffs have been eliminated between member states, they are most certainly imposed on countries outside the EU. It is worth bearing in mind that these tariffs were devised to protect certain EU industries in which the UK may not have any or significant interest. Once outside the customs union, we can reduce tariffs on non-EU countries, meaning low prices for British consumers.
Here I commend the excellent work of the Policy Exchange, in particular Dr Geoff Raby and his work on free trade. He tells us, for example, that the EU currently imposes tariffs of 165% on dairy products, 192% on livestock and 197% on horticulture. In addition, he cites the EU’s 97 anti-dumping measures, which were not designed with protecting British interests in mind. Once out of the EU, we will have a huge competitive advantage over EU countries. Yes, we will be bound by existing regulation, but we will not have to adopt future regulation. Achieving a mutually beneficial UK-EU trade treaty is viewed as a challenge by some, despite the fact that there is a deficit in both goods and services with the EU. In reality, all we have to do is merely to strive to maintain the status quo—an unusual objective, which so many EU businesses, despite pressure from EU leaders, are keen to see.
Notably, at worst, if no specific trading relationship were put in place, the UK would continue to trade with the EU using WTO most-favoured nation rates. For most manufactured goods, the EU’s most-favoured nation tariff rates are low, so UK exporters could certainly continue to trade profitably. To reiterate, this is the worst-case scenario, in that no alternative arrangement had been put in place. As Dr Raby said recently, “a EU-UK FTA”—free trade agreement—
“would be the most unusual trade negotiation in modern history. It would involve two highly integrated partners negotiating to introduce new trade barriers (such as tariffs, quotas, or non-tariff measures) which would make both parties worse off. This is the opposite of what trade negotiators are trained to do. The art of any trade negotiation is to produce win-win outcomes, not lose-lose”.
We should not underestimate how integrated the UK and EU markets are. Therefore, the barriers to signing a free trade agreement are much lower than with third parties. To those who recently referred in this House to the collapse in talks between the EU and Canada, this gives insufficient credence to the amount of existing alignment between the EU and the UK in both standards and regulations. This is a crucial point. I know others will go on to explain difficulties in doing business with the EU, but we have an enormous degree of alignment.
One obstacle that is often mentioned is the labour chapter, but the EU has many FT agreements where there are no labour chapters. I am thinking, in particular, of Turkey. Once outside the EU, we will automatically become a member of the WTO. Those saying we will have to re-join by negotiating with 163 countries are not right. As the WTO Director-General Roberto Azevedo has said, Britain would “remain” a member. He was not quite as helpful as in some of his comments in June, but he has now confirmed that we would remain a member and would then need to re-establish the defined terms in the WTO for trade in our goods and services. We could put ourselves on the fast track to do this by accepting higher commitments. This would involve opening up our economy significantly, but that is where the future should lie for our trading policy anyway. This would require real leadership from the Government.
This free trading approach is already gaining traction. At the recent G20 meeting in China, India, Mexico, South Korea and Singapore, all hugely dynamic economies, expressed an interest in freer trade with Britain. My recent trip to Israel with the APPG as a guest of the Israeli Government confirmed that this high-tech, fast-growth economy, is keen to sign a deal with us as soon as possible.
Your Lordships may have noticed that during the summer, UK politics seem to go a little quiet, so in mid-July I found myself at the Republican Convention in Cleveland, Ohio, as a guest—as an observer, I hasten to add. It was clear there that many in the States, and certainly in the Republicans, are very keen on a trade treaty with the UK at the earliest opportunity—and why should they not be? Britain is already second, behind only the US, for foreign direct investment. We can now showcase our own dynamism on a global stage. UK businesses may fear that renegotiating customs duties, and rules of origin will be fiddly in the extreme, but we need to look at this strategically. Our goal should be turning a European opportunity into a global one.
I am concerned that some are going in a different direction. The leader of the Opposition has already tumbled down the slippery slope of protectionism, claiming that free trade has,
“been pursued at the expense of the world's most fragile economies”.—[Official Report, Commons; 7/9/16; col. 338.]
I suggest he take a trip to Mexico, a country he should know well, where he could see first hand the benefits that NAFTA has brought to businesses and the economy there. It is a truism we should repeat daily: capitalism and free trade have eliminated more poverty than any aid programme. Despite their free trade policy’s once being of sufficient vim to entice Churchill to cross the Floor, the Liberal Democrats, I believe, remain wedded to the straitjacket of the customs union, failing to see the opportunities outside the EU for British consumers and businesses.
It is true that some 40% of our £500 billion of exports in goods and services currently go to the EU, but in 1991, that was more than 60%. Only £48 billion goes to the Commonwealth, for example. This surely shows us what potential for growth we have. Take China. We have doubled exports there in the past five years, and Chinese investment into the UK is growing at 85%. Imagine what we could do outside the customs union. I am delighted that our new Prime Minister has already been on a trade trip to China and is taking a plane load of SME businessmen and businesswomen to India next month.
I hope this is the optimistic and outward-looking approach that the Government ultimately adopt, and I hope they will be joined by noble Lords from all sides of the House. I look forward to contributions from some extremely distinguished experts and, more important, practitioners in international trade, far more so than would ever be possible in the other place. I particularly look forward to the maiden speech of my noble friend Lord Gadhia.
I began today by lamenting the loss of a distinct British voice in the global debate on trade from our position within the EU. Our re-entry into this most vital of debates is exactly what is needed to dull the voices of protectionism and get global free trade talks back on track. Since as far back as the Suez crisis, so many have questioned what Britain’s role in the world is and what it should be. I think that we may have found it again.
My Lords, I always welcome an economics debate, and I looked forward to hearing what the noble Lord had to say because of his long business experience. I look forward to hearing the Minister too. But I was a little confused by the noble Lord’s words, because I always thought that we were an outward-looking champion of global free trade. I know that we were there when China announced the open door policy in 1978. We have been active in Asia, North and South America and the Middle East—trade delegations have been going there for years, with government departments and trade organisations developing and promoting UK goods and services. The noble Lord implies that this was hindered by our membership of the European Union. My response is one word: Germany. We have been very open for global free-trade business at home. The proof lies in the large number of UK businesses owned from overseas and the success of inward investment. Certainly, much of this investment was influenced by our membership of the European Union. It must be important that we retain these trading links, links that must not be sacrificed for political ends.
After all, what is modern world trade? It is relationships that lead to investment, trade in goods and services and movement of people, which nowadays are interconnected and interdependent. Much of this is taking place in an intangible digital world. This is why it pays to belong to a single market: it facilitates this rather complicated structure. Yes, the alternative is protectionism, but it is the kind of protectionism and national control of business that we see in places such as Russia, Turkey or China and which is on the rise in the face of declining growth in trade.
The noble Lord spoke of activating our own individual membership of the WTO. This could be a hair shirt. The WTO rules are very unforgiving. For instance, until we make our new arrangements, we shall have to charge tariffs on goods coming into this country. The noble Lord spoke of tariffs, but they are only one part. More important in world trade are the rules and standards, not only the technical standards set by standards institutions but the myriad product and service rules on health and safety, animal welfare, tax avoidance, labelling, the environment and modern slavery—I could go on. So is it envisaged that we will simply adopt the arrangements that currently exist between the EU and the WTO, or does becoming more open to world trade mean that we will seek our own detailed arrangements? If we do not accept those standards, we just enter a race to the bottom.
So, internationally, I do not see any benefits; domestically, I can see only problems. For instance, our membership of the European Space Agency gives us access to satellites which touch many sectors of our domestic economy—transport, communications, security, farming, land use and weather. Healthcare is being revolutionised by gene editing and stem cell therapy, much of it funded by the EU Horizon 2020 programme and work at the Crick Institute. Yes, the Chancellor has guaranteed that, if withdrawn, this funding will be continued by the UK taxpayer, but it is well known that, on average, international collaboration leads to much higher quality research than national research. So should we pay our dues to remain in the Horizon programme and to be a member of the European Space Agency? These are just two of the possible domestic difficulties.
It seems to me that we first have to get our own house in order, to make our own economy more resilient to a world of free markets. We need to build back our currency; raise productivity; modernise by building the fourth industrial revolution into our economy; and redouble our efforts to encourage long-term investment. We need to become less dependent on low-cost labour and immigration and focus on employee engagement and real growth in wages through investment and productivity and raise the standard of our goods and services. This is what world trade is about.
What does this add up to? To get rid of uncertainty we should maintain our access to the EU single market through membership of the European Economic Area with generous movement of people; sign up to the same existing arrangements between the EU and the WTO; and get on with the real work of an industrial strategy to build our economy. The noble Lord seems to be saying that disruption brings opportunities. Sometimes it does, but uncertainty is always the enemy of growth.
My Lords, this is the second time in recent weeks that I have had the pleasure of speaking in a debate opened by my noble friend Lord Leigh and I am very grateful to him for initiating this one. I also look forward to my noble friend Lord Gadhia’s maiden speech.
Although I disagree with my noble friend Lord Leigh on a number of points, there are two on which I hope we do agree. One is that the decision to leave the European Union is a profoundly important one and the second is that, whichever side one was on in the referendum, one must strive to make it a success. To do that it is important to face facts. One of the biggest problems during the leave campaign was the extent to which those advocating leave tried to make everything sound so easy—epitomised by the remark of the now Foreign Secretary, Boris Johnson, that one can have one’s cake and eat it. That is something which he may be able to do but it is very difficult for the rest of us to achieve.
That error has been compounded since the referendum by the propensity of some Ministers to accuse those who point to difficulties of trying to undermine or reverse the referendum. That is a tone that has come through all too often in some ministerial statements. The reverse is true. We point out the difficulties in order to find ways of overcoming them and to avoid the pitfalls.
What is so extraordinary about the decision to leave the European Union is not that we have undertaken a profound change of policy—democracies do that. What is so extraordinary is that we are undertaking this immensely important change with absolutely no plan of campaign at all and having to make it up as we go along. That is why those of us on both sides of the argument have a duty to point to difficulties in order to find a way through.
Nothing is more important than ensuring continued access to EU markets on terms as close as possible to those that exist at present. This is partly for the obvious reason that just under half UK exports currently go to the EU and we must safeguard this very important bird in the hand, before we try to do anything else. It is also because membership of the EU in no way inhibits us from increasing our exports to other parts of the world. One only has to look at the great success achieved by Germany in China and India and also by other EU countries to see the truth of that.
In any case, it is quite clear that special deals with other countries cannot be signed before we have clarified and agreed our position with the EU. Even when that applies, the whole climate of opinion in so many countries, including the United States, to which my noble friend drew attention, is very hostile to trade agreements. Not only that, but trade agreements are extremely difficult to negotiate and even more difficult to get through domestic legislatures. That would perhaps particularly apply in some respects in our case, because the services which are so important to us give rise to such difficult political issues in many of the countries with which we would wish to reach agreement.
Apart from all that, I draw the House’s attention to one particular aspect of the British economy which is all too often overlooked, and that is the very high proportion of large British manufacturing companies that are foreign owned. The car industry is of course a particular example, but there are others. The UK has derived great benefit from foreign direct investment, but we must recognise that the companies that have bought, expanded and placed plants in this country have above all done so in order to serve the EU market. Those plants are part of a worldwide network. The companies concerned have plants in other parts of the world to serve markets in other parts of the world, so that if the plants in the UK become less competitive on the continent of Europe, those plants will not simply switch their products to other parts of the world, because the companies that own them have plants that already serve those other parts of the world. This is a problem that particularly applies in the case of the United Kingdom.
In making these points, I do not want to be thought pessimistic. If Britain, in accordance with the referendum result, takes over control of immigration from elsewhere in the EU, it cannot expect to remain in the single market on special terms. But that does not mean that a separate and distinct agreement, tailored to the new conditions, to the benefit of both sides, cannot be reached. What we must bear in mind, however, is that we have chosen to put non-economic self-interest factors at the top of our agenda. We have a right to do that, but so too do others, and when I read in today’s papers that Dr Fox is complaining that other people are putting politics ahead of prosperity, I feel he should look at the beam in his own eye.
My Lords, the House clearly owes a great debt of thanks to the noble Lord, Lord Leigh, for bringing forward this extremely important and topical debate. The topicality and importance of it are clearly indicated by the number of noble Lords who have put their name down to speak. We all look forward of course to the maiden speech of the noble Lord, Lord Gadhia, which will follow my remarks.
As other noble Lords have indicated, the political world is now obsessed by the negotiations to come out of the European Union. Will it be a hard Brexit or a soft Brexit? What will the trade-off be between our business relationship with Europe and the restrictions on European immigration? We have not really had any answers from the Government. We have been told by the Prime Minister that we have to accept that Brexit is Brexit—but I am not quite sure where that gets us. The Prime Minister had an opportunity yesterday at Questions, in response to a question from the Leader of the Opposition, to say whether, like Baldrick, she had a cunning plan. I am not sure that her reply—that Baldrick was a member of the Labour Party, which seemed to confuse the political views of the actor with the political views of the character—was terribly relevant. Of course, I do not think she appreciated that the whole point of Baldrick’s cunning plan was that ultimately there was no cunning plan. Some of us on this side of the House think that is where we are.
Apart from the creation of the Brexit ministry under David Davis, we also, as noble Lords know, have a new ministry under Liam Fox, who has been given responsibility for all our trading relationships outside the European Union. But until today, there has so far been very little debate about the issues that now face the Liam Fox ministry. Apparently he has two responsibilities. The first is to improve our trading relationship throughout the world. In this regard, he has inherited the policies of the previous Government and the team of trade envoys now led by Mark Price, the former chief executive of Waitrose. Sensibly, it seems that he is leaving this structure alone to continue its good work. I am glad that he has agreed that it should remain cross-party.
The other issue that has not really been discussed publicly is that apparently we are to negotiate trade deals with our most favoured partners—which, according to some government statements, will need to be concluded within the next two years. There are serious issues to be discussed here. First, how are we going to negotiate trade deals outside the European Union while we remain a member of it until the expiry of the two years following the triggering of Article 50—particularly when we do not and will not know the restrictions we will have to accept as part of any retention of access to the single market? Secondly, how can we put in place the trade negotiators to provide assistance in these negotiations? I suspect that most negotiators with this experience are still working in Europe, and we do not want to have to rely on law firms and firms of accountants to provide our negotiators. Do we seriously anticipate that we will be able to negotiate these deals within two years? The recent Canada experience demonstrates those difficulties.
There is a more fundamental point. We are all agreed that free trade is beneficial, as the noble Lord, Lord Leigh, indicated. Protectionism—either by tariffs or quotas—has costs, makes imports more expensive and depresses the incomes of consumers. By shielding domestic industries, protectionism diverts scarce resources to less efficient uses. This concept of free trade was advanced initially through the General Agreement on Tariffs and Trade after the Second World War and subsequently, as the noble Lord, Lord Leigh, indicated, through the World Trade Organization. But this is not what Liam Fox seems to be advocating. Bilateral trade agreements favour some countries over others and are, by definition, discriminatory and preferential. The danger is that we confuse bilateral trade deals with free trade. Basing policy on finding partners such as Australia or South Korea will secure preferential access for our exports there and may increase trade flows between us and them. But will it enhance efficiency and improve British living standards? That is the question that Liam Fox, the noble Lord, Lord Leigh, and their colleagues need to answer.
My Lords, I speak for the first time in this House with all humility and respect for an institution that has welcomed me so warmly to its fold. I have been here for only a few weeks, yet it feels like several years, and I mean that as a compliment to your Lordships. The officials, clerks, attendants and doorkeepers have all been exemplary in their professionalism and courtesy—so professional that on the day of my introduction I was prompted discreetly, with a firm tug of the ermine, not to forget my signature on the roll of Peers and the Code of Conduct.
All rites of passage require trusted guides to navigate the important journey ahead, and my entry to this House has benefited hugely from this tradition. I am indebted for the support and guidance of my two distinguished sponsors, my noble friends Lord Popat and Lord Fink. I also acknowledge, with much gratitude, the wise counsel of my mentors, my noble friends Lord Borwick and Lord Geddes. To top it all off, I have benefited from the spontaneous generosity of an honorary mentor in the form of my noble friend Lord Leigh of Hurley, who has so eloquently introduced today’s debate.
The topic of both debates in this House today, on championing global free trade and promoting social mobility, could not be more intertwined with my own journey to these Benches. Noble Lords will therefore get two maiden speeches for the patience of sitting through one. I am the very first generation of my family to be born outside India. My grandfather took the brave decision to travel 3,000 miles across the Indian Ocean from the state of Gujarat, in north-west India to Uganda, where I was born. Gujaratis are well known as a trading community, for their entrepreneurial flair and god-fearing modesty. We are often seen as pioneers—establishing ourselves in new countries, businesses or professions—and represent the majority of the 1.5 million British Indians in this country. I believe that globally connected communities will be of ever greater value as we forge new trading relationships with the rest of the world.
Had it not been for a twist of destiny, I would still have been in Uganda today, but the despot Idi Amin had different ideas. In 1972, he served notice on 60,000 Asians to leave the country. We were forced to flee overnight, leaving everything behind. To his eternal credit, the then Prime Minister Edward Heath fulfilled his moral and legal responsibility to provide a safe harbour to 30,000 of my fellow compatriots, and we started all over again.
For most of us arriving here, it was our third country and we had no choice but to get it right. Migrants, as a group, are people who are prepared to uproot themselves, who want to improve their lives. They are already highly motivated. Those forced to be migrants more than once are doubly driven. The story of the Ugandan Asian community and its settlement and contribution to Britain has been the subject of important debates in both Houses of Parliament—introduced on the same day, 6 December 2012, by my noble friend Lord Popat in this House and by my honourable friend Shailesh Vara in the other place. I would commend the respective Hansard entries as required reading.
Immigration has become an emotive topic following the EU referendum, but let us not forget that immigration is one of the things that has made Britain great. Britain is fundamentally an open, tolerant and welcoming nation. We look out to the world for trade, for skills, for friends. We are not a small country that closes itself off to the world. That has never been our outlook and must never be. So I wear the badge of an immigrant with pride. People want to come to this country because they see us as the land of opportunity—somewhere to build a new life and secure better prospects for their families. My parents worked long hours and made sacrifices so that their children could enjoy a better future. I am standing here today precisely because Britain offered me those opportunities and I seized them with both hands.
I also had luck on my side—luck in the form of an excellent British education and the fortune to work for a number of major global financial institutions over the last 25 years. I have survived that rollercoaster ride and learned the lessons, too. I have focused on cross-border mergers and acquisitions, raising capital and making investments, frequently connecting emerging markets with western economies. I came full circle by leading some of the largest investment flows between the UK and India, ranging from steel to pharmaceuticals. This experience led me to work closely with the former Prime Minister David Cameron, who I believe did more than any other holder of his position to build a modern partnership with India and also to engage proactively with the British Indian diaspora. I am pleased to say that our new Prime Minister Theresa May is building on this strong legacy, and it will be my privilege to accompany her in 10 days’ time to India on her first major planned official visit overseas, at the invitation of my fellow Gujarati, Prime Minister Narendra Modi.
I am also proud of my background in financial and professional services. It is our flagship export sector, generating a combined trade surplus of £72 billion, contributing £66 billion in tax revenues, which pays for essential public services and accounts for 2.2 million jobs, two-thirds of which are outside London. While the complex City ecosystem is difficult to replicate and usurp, we should not be complacent either. Our position is hard won over decades and should not be traded off lightly against misguided fears of immigration.
The City of London has also been one of the greatest engines of social mobility which our country has ever seen because it is rooted in meritocracy. So sacrificing a sector where we have a natural competitive advantage, which generates significant tax revenues to pay for public services and which underpins aspiration for so many, would be a triple travesty.
Whether it is selling services or goods, we are a trading nation first, last and always. Total trade as a share of GDP has increased from just over 50% in 2003 to over 60% today. However, in Germany it is almost 90%, and we should make that our long-term objective, too.
Our natural instincts are supported by hard logic. The Brexit imperative is also an economic imperative. At a time when fiscal policy is still constrained and the efficacy of monetary policy has long since been exhausted, liberalising trade offers a policy lever that can lift economic growth potential around the world against the centripetal forces of deflation.
I also believe that, with some deft footwork, we can get to the front of the queue on trade deals. While we cannot sign actual trade deals, there is nothing to stop us agreeing MoUs, as confirmed by my noble friend Lord Price in his recent evidence to the EU External Affairs Sub-Committee. I make this exhortation to EU leaders: liberalising trade is a positive sum game; you may want to teach the UK a lesson for leaving the EU, but do not betray your own self-interests by being protectionist.
In conclusion, I am deeply honoured to have been introduced to this House and given this opportunity to serve this great country. As a Hindu, the act of selfless service, or seva, combined with right conduct, or dharma, are among the noblest of Vedic traditions. I truly believe that our best times lie ahead if we can capture the full benefits of being an open, outward-looking country that embraces global free trade and welcomes new talent to our shores. Let us make that dream—a British dream—our destiny.
My Lords, I am sure that the House will agree with me that that was a powerful maiden speech by my long-standing and now noble friend Lord Gadhia. It drew on his displaced, almost nomadic, early life and on the debt which he palpably feels to this country, which took his family in. He is, however, too modest to highlight the notable success he has had in the London-based financial services industry, nor did he refer to his active and consistent track record of public service—either as a trustee of Guy’s and St Thomas’s hospitals, or as a board member of NESTA, UK Financial Investments or UK Government Investments—or his philanthropic activities. I am, therefore, pleased to speak after him, since I shall allow myself just a little reflected glory for spotting the talent and recruiting him as a fresh-faced graduate in 1991 to my former firm, perhaps creating the foundation for his future success. He will make an important, enlightened contribution to this House and I congratulate him on his maiden speech.
While I admire the conviction your Lordships bring to this debate on the opportunities and benefits that the UK can now reap post-referendum, it is still a little too early to be entirely confident about predicting a positive result—from whatever route we choose. Having said that, there are some pointers. We could use history as a guide; my noble friend Lord Leigh of Hurley has already referred to the corn laws. The economist James Wilson described them at the time as,
“laws passed by the seller to compel the buyer to give him more for his article than it is worth. They are laws enacted by the noble shopkeepers who rule us, to compel the nation to deal at their shop alone”.
Indeed, Wilson dismissed tariffs, saying they were unnecessary “swaddling” against an economy as mature as Britain’s in the 19th century.
On the other hand, we know that opening up our economies to global competition, as we would be doing outside the EU—which currently has significant external tariffs to protect EU industry—carries risks. For example, after China joined the WTO, the US lost 6 million manufacturing jobs between 1999 and 2011.
Another pointer is economic research. Consumers in closed countries have a lot less purchasing power, and the effect is progressive. Academics at Columbia University suggest that in an average country, if trade borders were closed, citizens on higher incomes would lose 28% of their purchasing power but the poorest 10% would lose a horrifying 63%—something the leader of the Opposition should note carefully. Free trade adds to growth. Trade with the EU, since we joined in 1973, has increased Britain’s GDP by 10%.
So at this stage we should be careful about what we wish for. There are conflicting economic and political forces at work, the latter pushing for immigration control of our borders outside a customs union, the former less clear-cut, although I lean towards leaving the EU customs union.
My second point is a simple one. Britain is a major economic force in the world. We are an inventive nation, we are pioneers. While it is sensible to allow history to inform our decisions, as I have already done in this speech, it concerns me that we hear in the debate about Brexit too much about this or that established model for leaving—there is no model for leaving, no country has ever done it. The rhetoric should embrace the concept of an innovative and, above all, bespoke solution being devised, which forges a new path for the UK while being acceptable to our European partners.
My final point echoes a speech I made in this Chamber a few weeks ago about the feeling of disfranchisement among the working poorly skilled and educated, who are of such concern to this Government. We must of course back British exporters more. We have world-leading capabilities in, for example, advanced manufacturing, pharmaceuticals, financial services, and emerging technologies such as artificial intelligence. A modern industrial strategy must support British business to reach beyond the EU to new markets, but we must be open to helping those who could suffer as a result of our economy being more open.
Academics at the LSE have found that areas of the country such as Northampton, Blackburn and Port Talbot, which are more exposed to Chinese imports, for example, have a higher rate of unemployment. The UK has something called the rapid response service, which is meant to help the economically displaced, but its activities are frankly unclear and in 2008, when the other place investigated it, it had a budget of a paltry £6 million. It is clear that we will need our own adjustment fund with a much bigger budget and much clearer strategic, industrial purpose.
It is not enough to say that the UK overall will benefit from more openness to trade. We will have to identify where people are not benefiting and support them to develop new economic activities, just as we did in the north-east of England a generation ago, when the closure of the coal mines left an industrial vacuum so successfully filled by our becoming a highly efficient car manufacturer, as again demonstrated by Nissan today.
My Lords, let me start by paying a tribute to the noble Lord, Lord Gadhia, who I thought delivered a particularly well-conceived and lucid maiden speech. I share his great admiration for Edward Heath and the Conservative Government in the 1970s; I was a political supporter of the Conservative Party and of that Government at that time. Their brave decision to let in the Ugandan east Asians was taken for the highest motives of humanitarianism and a sense of historical obligation for the movements of peoples that had taken place under the British Empire. If the motives were very pure, we have been rewarded many times in sheer economic terms by the extraordinary and quite exceptional enterprise and wealth creation of that community, which has now become such a valued part of our country. I cannot help saying what a sad thing it is that the Conservative Party which made that brave decision back in the 1970s should now be the hotbed of chauvinism and the source of so much agitation about freedom of movement—and indeed should have become so obsessed by its desire to oppose freedom of movement that it appears willing to pay almost any economic price to thwart it.
I pay tribute to the noble Lord, Lord Leigh, for having given the House the opportunity to discuss this matter, though I am afraid that may be the last compliment I deliver to him in the course of my remarks. I very much agreed with the noble Lord, Lord Tugendhat, about the dangers of wishful thinking in this world. He expressed himself perhaps a little more subtly than I will on the subject. I think that wishful thinking is a very dangerous thing in human affairs and, particularly when one contemplates a large, strategic decision of any kind, great effort should be made to clear one’s mind of wishful thinking. I do not think that the noble Lord has made that attempt. I have not heard for some time a more delusory speech than the one we just heard from the noble Lord, Lord Leigh. He seems to be one of those people who goes around the world and hears what he wants to hear rather than what people are saying. Here is a man who apparently went to the Republican convention, no less, and came away thinking that the Republicans were friends of free trade and very likely to want a free trade agreement with the United Kingdom. I have to tell him that the Republican Party now opposes TTIP, and some of its members even oppose NAFTA. The Republican candidate at the presidential election has said that he opposes NAFTA. So much for the Republican enthusiasm for free trade at present.
The noble Lord also mentioned India and China. India and China have indeed developed a very good relationship with this country and invested a lot here; we have done a lot of trade with both those countries—although the Germans have, of course, done far more trade with both. However, the noble Lord does not appear to have noticed that during the campaign those two countries made it very clear that that relationship had been greatly strengthened by the fact that we were members of the European Union, and they wanted us to remain part of the EU. Xi Jinping and Narendra Modi were both explicit on this point. If the noble Lord listened a bit more carefully to what people are telling him, he might not draw such very perverse conclusions from his running around the world and his global travels.
The noble Lord made another great mistake—indeed, a fundamental mistake: to suppose that there was some trade-off between developing international trade with the whole of the rest of the world outside the EU and our membership of the EU. There is no such trade-off; there is no evidence of that at all. In fact there is a negative trade-off. Our membership of the EU is a very positive asset in terms of our ability to trade with other people. I must tell the noble Lord, because he does not seem to know about this, that the single market was conceived for precisely that reason—so as to provide European economies with the strength of a domestic market comparable to that enjoyed by the United States and Japan, and to give us the longer production runs and economies of scale that enabled us to compete with those countries right around the world.
That has worked. That is why we have such an extraordinarily complex and sophisticated structure of supply chains throughout the European Union—and that is why it is so dangerous for us to leave the European Union. Immediately there is the threat not only of tariffs but of regulatory changes over time, and people will no longer be able to depend on our presence in one of those supply chains.
The noble Lord seems to think that we can go around the world signing free trade agreements with all kinds of people very easily. He is totally wrong about that. If we leave the European Union we shall leave, at the same time on the same day, 35 free trade agreements that the EU has with other countries or groups of countries throughout the world, involving about 45 nations in all. What a completely crazy thing to do, if we want to sign FTAs around the world—to walk away from 35 of them before we have even started. Then we will have to start negotiating new foreign trade agreements, and they take an average of five to 10 years. On this occasion things will be even more complicated, because we will not be able to complete one until we have completed another, as people will want to know what concessions we have made to their potential trade rivals. This is an extraordinarily complex area, and the noble Lord really needs to think about it a bit more clearly.
I leave the House with one final thought. We have two big important economic assets in this country. One is the fact that we have been the most favoured locus for corporate headquarters and manufacturing bases for international investors wanting to access the single market. Clearly, if we leave the European Union that will go overnight. Our second great asset is that we are the financial capital of the European Union. That is under direct threat. If we leave the single market we leave the banking and insurance passports, and that asset too will go by the board. It is pretty extraordinary that the Government of a country are planning to destroy, at a stroke, the two major economic assets that it has. That is a frightening thought and we should contemplate it, and try to clear our minds of any kind of wishful thinking about it, before we do that.
My Lords, I first thank my noble friend Lord Leigh for tabling this important debate. I also welcome my noble friend Lord Gadhia to this House. I have known him for a number of years, and I know that he will be a great addition to this Chamber. His powerful maiden speech highlighted his background, experience and expertise, and what he will bring to this House.
Often in these debates we tend to decry the UK’s export performance, and of course we do have a trade gap. But it must be remembered that the UK is one of the world’s leading exporters—not just in services, although we are the second largest exporter of services across a range of service industries. That includes not just financial services but creative industries—the publishing industry deserves a good mention—and sectors such as the car industry. We are now the second largest producer of motor cars in Europe. We are also the second largest exporter in the world in the aerospace industry. Therefore, our exporters do a good job but, of course, we would like to see more exports.
However, whichever side of the Brexit debate you are on, I think there is widespread agreement that the uncertainty of Brexit certainly does not help. The notion that we will exit the EU in 2019 with a range of trade agreements with a number of countries is appealing but, regrettably, I believe that it is unrealistic, even verging on the fanciful. It is not that there are no interested countries: there are plenty of countries interested in doing a deal with the fifth or sixth largest economy in the world. However, there are still legal issues regarding the ability to negotiate during Brexit. The Australian Trade Minister made that point very recently, and Australia was already starting to talk to us. Moreover, it is very difficult to have meaningful conversations with the UK until we sort out our position with the EU. Mike Froman, who heads the US trade commission, and who I knew very well during my time as Minister of Trade, made that point very clearly. He would be willing to talk to the UK but we have to work out what our relationships are going to be. We can, over time, reach trade agreements, and they can be comprehensive, good and quick. Unfortunately, they cannot be all three of those things. It is important that we do not sacrifice the quality and breadth of a trade agreement on the altar of time. That will not be in our country’s long-term interests. Therefore, we need to play for time.
I loudly supported staying in the EU and regret the decision that was made. However, we have made this decision and it is not helpful for us to go through the arguments for and against Brexit. I agree with my noble friend Lord Tugendhat that we must get on and make the best of it for the UK. I also think that a message was sent out about taking back control. In the long term we will need to exit the single market and the customs union. People talk about Norway and government by fax machine, but being in the single market would create new rules for us over which we had no say. I think that would be very difficult. When I visited Turkey, people always complained to me about its inability to participate in trade agreements when it was part of the customs union.
Therefore, we need to buy ourselves time. I suggest we do that by agreeing with the EU to establish beyond the two-year Brexit period a further period in which we will stay part of the single market but after that period—say, another three years—that will stop. We should use that period to negotiate a proper, deep free trade agreement with the EU. In addition, as we would know our end status, we could start negotiating with other partners. We can debate whether that involves having a CETA-plus deal or is something new but it must include deep free trade and tariff cuts; non-tariff barriers; availability, for instance, for local procurement; and, critically—most trade agreements do not have this in depth—it must include services. Services account for 80% of the UK’s economy and without them we will struggle to increase our overseas exports.
As we negotiate these agreements, we must look to certain countries. The US is our largest trading partner. We will see who the next President will be but the US will prioritise. As regards Canada, there is a basic agreement under CETA regarding what we should do. There is also Australia and New Zealand. But we are going to have to focus because we cannot address all countries together.
I would like to say a lot more about exporting but time will not allow me. Suffice it to say that I have been on both sides of this issue. I have been a Trade Minister and I have been responsible for companies that export around the globe. I know that in both cases exporting is not easy. It is government’s job to reduce these barriers, not increase them. The Government must look forward and try to give certainty to our exporters. They must also try to buy some time so that we can have a long-term deep trade agreement with many of the major trading countries around the world. In that way we can look forward to the future with some confidence and make the best of an otherwise bad decision regarding Brexit.
My Lords, I pay tribute to the maiden speech of the noble Lord, Lord Gadhia, and his very thoughtful contribution to this debate. I was also impressed by the contribution of the noble Lord, Lord Livingston of Parkhead, particularly in relation to his comments on the media, and his warning about the pace of exiting the EU and the need to buy some time.
We are debating the issue of global free trade, and we are grateful to the noble Lord, Lord Leigh of Hurley, for enabling us to have this debate. The Secretary of State for International Trade said in Manchester a few weeks ago that our departure from the EU would provide an opportunity for the UK to become a world leader in free trade. He said this, which I took directly from the Library briefing for this debate:
“I believe the UK is in a prime position to become a world leader in free trade because of the brave and historic decision of the British people to leave the European Union”.
We should note the words “because of”. They imply that it is our departure from the EU that will enable us to grow our trade across the rest of the world. But, as the noble Lord, Lord Tugendhat, reminded us, we can increase our trade with the rest of the world while being inside the European Union. Exporting to the rest of the world is not a problem for Germany, which exports very successfully—and Germany is not planning to leave the European Union.
I question the assertion that we promote global free trade by leaving the free trade area—the EU—that we are currently in. It will not make it easier for us to promote global free trade; it will reduce our global free trade because it will reduce our free trade access to the European Union and the 35 agreements to which the EU is party. It will stifle our businesses exporting to the EU, to which 44% of our exports go. We will face tariff barriers and customs delays as we comply with complex rules of origin that will increase the cost of exporting—and we will lose the ability to influence the harmonisation of non-tariff barriers.
The Government need to recognise that we are part of integrated European supply chains. Countries outside the EU—not least the USA and Commonwealth countries—invest here to gain access to the EU. Crucially, how can it be helpful to leave the EU in 2019 when securing global free trade could take many years to achieve—if we ever do?
It is undoubtedly the case that there is capacity for growth of exports worldwide, but to make sure that our exporters are making the most of worldwide opportunities, the support provided by the Department for International Trade is key. But I draw your Lordships’ attention to the fact that in the last year, the DIT’s nine English regions saw major cuts in their promotion and support of exporting, with more cuts thought to be pending, perhaps over the lifetime of this Parliament, amounting to some 20%. Will the Minister, in summing up, tell us how we can promote exporting globally if the Government insist on cutting the very budgets that can enable exporting to increase?
I turn now to inward investment. A recent report produced by Nathaniel Lichfield & Partners showed that the amount of foreign direct investment that the north-east of England—where I live—has received declined dramatically from 14.3% of national jobs in 2009 to the current low of 7.8% in 2015: a cut of nearly half. I can suggest one reason why this has happened: the absence of regional targets for inward investment, which were abolished a few years ago. National targets can be achieved by the DIT by promoting London and the south-east, to the disadvantage of other parts of the United Kingdom. Over the last five tax years, the DIT’s own website tells us that London and the south-east received half of all projects and 35% of all jobs. But promoting global trade means promoting all parts of the UK—and their products and their skills—to the world.
Briefly, on overseas students, to stop talented students from overseas coming to study in the UK because the Government insist on counting them as part of net migration fails to understand that overseas students become ambassadors for the UK. Reducing the number who can come undermines our universities and says that we are neither global nor open.
The noble Lord, Lord Leigh, in introducing this debate, said that leaving the EU to promote global free trade was a price worth paying. It is a huge price, which will have a huge impact on all parts of the United Kingdom. I fear that it is not a price worth paying, and I very much hope that those who believe that the noble Lord, Lord Leigh of Hurley, is correct will pay heed to the warnings that we have already heard in this debate from his own Benches.
My Lords, I too congratulate the noble Lord, Lord Gadhia, on his excellent maiden speech.
I am a businessman, in the business of manufacturing and selling construction and agricultural machinery to customers all over the world. You see, exporting is in my blood, and I have been doing it for over 50 years, since I started in our family business. We now export around 75% of everything we make in the UK. We export to customers in North America, South America, the Middle East, Africa, Asia, and, of course, to mainland Europe. We also import goods and services from around the world.
There is much speculation about the future terms of trade between the UK and the EU. We currently trade with each other on the basis of zero tariffs and no import duties. It would be helpful, of course, if this carried on after we leave the EU. It has indeed made exporting somewhat easier for us all. But is it the end of the world if tariffs and import duties re-emerge upon exit? For companies that export, tariffs and import duties are not alien concepts. They are simply part of how we do business each day. I remember trading with France, Germany and the Benelux long before we joined the common market. Tariffs and import duties were simply part and parcel of doing business with Europe back then. They were not a concern or a threat to British business, unlike currency fluctuations. A weakening deutschmark against the pound could do a lot more damage than any tariff or import duty.
Please do not think for one minute that zero tariffs across the EU today mean that we operate on a level playing field. For example, my company sells farm tractors into the single market, so there are zero tariffs, no import duties and, supposedly, no barriers to trade, in an EU without borders. Noble Lords may find this hard to believe, but farm tractors must comply with at least 10 individual—and different—pieces of national road legislation, at great cost to my business, in the likes of Germany, Italy, and certain other EU markets. So there are hidden barriers. This is just one example of many in my industry that proves that the single market has not created a level playing field.
I want British business to get behind the Government. We need the Government to secure an exit deal that is in Britain’s best interests—one that will allow us to become a truly global trading nation. If tariffs are the price we have to pay to leave the EU, so be it. I hope that common sense will prevail. But if, for example, WTO rules were to apply, the EU would lose out much more than the UK. That is what Civitas concluded this week in its analysis of potential tariff costs for EU-UK trade.
In my own industry, under WTO rules tariffs of 4% could apply to certain types of UK-built machinery. Of course, similar tariffs would be levied on equivalent products imported into the UK from EU countries. But British businesspeople are very adaptable. They adjust very quickly to changes in the trading environment, so rest assured they would take tariffs in their stride. If tariffs are the price that we have to pay to secure free trade agreements with the rest of the world, I think it is a price worth paying.
Please remember that, as a nation, over 54% of all UK exports go to non-EU countries. Of course, Europe will continue to be an important market, but the EU’s role in the world economy is shrinking and will continue to shrink further. That is why regaining control of how we trade with the rest of the world is so important.
British businesses must now work together to help create a truly global Britain. Free from the constraints of Brussels, British businesses are certainly up to the task of making Britain a global leader in free trade.
Two key cogs in the myriad of moving parts involved in these issues are the World Trade Organization and our own government machine.
I start with the WTO. This is, in its purposes, a non-political organisation. The UK has been there since it was first dreamt up at Bretton Woods in 1944. We were there at the foundation of its predecessor body, the General Agreement on Tariffs and Trade in 1948 and then at the start of the WTO itself. We are one of the founding fathers and mothers of the organisation and a driving force. As such, I wish to seek reaffirmation from the Minister that she has already had reassurances in straight terms from the WTO that, as a founder member, after we leave the European Union we will not have to go through any reaccession process whatsoever.
I think the world needs the WTO. The UK certainly needs the WTO, but the WTO also needs the UK, as a forceful member, promoting free trade, rooting out protectionism and standing firm against trade distortions. This was our historic role within that organisation in the past.
Only yesterday, by happy coincidence with the timing of my noble friend Lord Leigh of Hurley’s debate this morning, the World Trade Organization’s director-general Roberto Azevedo, whom we heard about earlier, told Sky News—the “truth station”, as I think of it—that he does not want to see the UK suffering “disruption” after we leave the UK. He wants, rather, to see a “fast and smooth” transition. I welcome that very much indeed. He goes on to say that,
“The global economy … is not in the best shape for us to be introducing turbulence”.
Mr Azevedo has changed his tune. I hope my noble friend Lord Leigh of Hurley welcomes that change of tune, because Mr Azevedo is going to be a dominant figure on the world stage—not just as far as the UK is concerned, but as far as the European Union is concerned. The UK can take the lead in helping him work towards offering reciprocal, tariff-free entry to all sorts of goods and services coming from third countries.
Consider, for example, countries such as Germany, which are facing economic headwinds at the moment. Germany has a considerable surplus with us. It is running a surplus not just in Mercedes and Volkswagens, but also in all professional and other services into the United Kingdom—to the surprise of many. In future, we may find that the thought of having tariff-free entry to the UK has its own particular charm, to put it mildly, for economies like those of Germany. However, we need to work much harder to export to Germany, and to Poland and other eastern European countries, in return.
My second point turns to the UK Government. It must be very exhilarating and challenging on the home front for those setting up new or reformed ministries and fettling up our export promotion machine. This is a matter not just of organisation charts and talent searches but of attitude at the centre. Such global promotion is multilayered and certainly not just a matter for the huge FTSE 100 companies and their often very corporatist representative bodies, such as the CBI. Such FTSE 100 companies may often have a welcome UK heritage but generally get a majority of their earnings abroad, so they should have the global structures and intelligence-gathering machines in place not to need much help from trade delegations and the rest.
No, it is the companies of the FTSE 250 size and below, having a much more UK-centric view, that arguably deserve the greatest attention, and even more so the entrepreneurial classes—footloose, high-tech and other developing start-ups—which are characteristically very uncorporate in their attitudes. So I am very glad to learn that the Prime Minister is taking a plane-load of representatives of SMEs to India to kick off what I hope is a totally new trend, rather than having the front of the plane clogged with the CEOs and chairmen of great FTSE 100 companies, who should be able to look after their shareholders’ interests without much help from Prime Ministers.
I also believe that the Government should welcome—I draw this in particular to the attention of my noble friend the Minister—what I am told is a queue of professionals in the legal and professional services who are stepping forward as volunteers, offering themselves on a continuing pro bono, part-time basis to help Her Majesty’s Government in what they are trying to do. We should welcome a “Government of all the talents” in trying to promote international trade, and particularly in helping what one might loosely call the Brexit Ministries as they set themselves up, upskill and get to grips with the new world of post-EU government. These volunteers are part of our national brain reservoir.
We must also welcome—I stress this—top-class immigrant brain power. We need to develop a discerning approach to high-tech, high-medical and high-finance open borders—in other words, a free market in the brain sphere. That is vital to the United Kingdom to help sustain old markets and win new ones, at the same time as we seek, quite rightly, to control our borders in relation to entry-level employment-seekers coming into this country.
My Lords, what surprises me is the complacency in the Government and in certain other circles about our trade prospects after Brexit. It is claimed that we are in a strong negotiating position but, when Article 50 is invoked, we have about a year and a half after the German elections to complete infinitely complex negotiations. We will be arguing against the clock—a very weak position.to be in.
The least bad deal after Brexit would be the Norwegian model, which would keep us in the single market—although it still has severe disadvantages, now well known, and will be unacceptable to Brexiteers. Alternative forms of access, or partial access, to the single market have even greater disadvantages. Negotiating a new free trade agreement with the EU will be much more complex than the Canadian agreement, which took ages and may never have effect. Any agreement, moreover, has to be approved by all 27 other members, each with different interests and a power of veto.
It is said that it benefits the European Union to give us a soft Brexit, but there is little good will towards Britain, especially after Mrs May’s speech at the Conservative conference, and several of the 27 have different reasons for not helping: they fear other separatists; Paris and Frankfurt would love to replace London’s financial services; Spain has offered a secure home within the EU for London banks; and, as the imposition of sanctions against Russia showed, the lobbying power of German industry, often invoked, does not outweigh Angela Merkel’s political concerns, which are mainly to keep the European Union together.
I fear the odds are that we will not reach an agreement before 2019. Can we negotiate an interim agreement, as many hope, to enable more negotiations after Brexit? That is very unlikely. The same obstacles have to be overcome and our partners know that temporary agreements often become permanent. So we will be left with a WTO solution which some advocate and which—as I understand from what has been written by Mr Peter Sutherland—involves having to submit new schedules of commitments to the WTO that will need approval by all its 164 members. That is not just a simple formality.
We will have to renegotiate, or rather negotiate, new bilateral free trade agreements with the 35 or 50—I am not sure exactly how many—countries that have them with the European Union, and with third countries with which the EU is currently negotiating. None of them will talk to us until they know what our relations with the European Union will be.
No agreement would be the hardest of hard Brexits. Our huge service industry will suffer most. As uncertainties grow, and as the prospects and implications of exclusion from the single market and the customs union become clearer, it is likely that domestic and foreign investment will decline; many companies will emigrate; the pound will fall further; and we would be in a severe Brexit recession. What price then the sunny uplands promised by the leave camp? As Donald Tusk, one of our friends in Europe warned, the choice will be between a hard Brexit and stay.
Anyone who challenges the June vote is immediately branded as anti-democratic. But why should a referendum vote be sacrosanct, unlike the result of a general election, especially when the choice of Brexit was not clear? Did it mean staying in the single market, which is what the Conservative manifesto pledged and what many leave voters thought it meant? It is the essence of a democracy that no decision is ever irreversible. Of course we cannot have a second referendum now, but with a major shift in public opinion it would be fully justified. To deny—before a final decision to leave—that there could be a new decision would be truly undemocratic.
Finally, will Article 50 allow us to withdraw? I quote the view of a former head of the Legal Service of the Council of the European Union, Jean-Claude Piris, who wrote that the article declares an “intention” to leave, which is a unilateral act that does not depend on the views of other EU members. He wrote that an “intention”,
“cannot be interpreted as a final and irreversible decision”,
and that nothing in the article prevents the UK from withdrawing its unilaterally declared “intention”.
My Lords, surely everyone realises the world will be better off the more it engages in free trade. As the Prime Minister recently said in Brussels:
“I am determined that as we leave the EU, Britain will be the most passionate, the most consistent and the most convincing advocate of free trade anywhere in the world”.
That was a powerful statement. Based on this, she made the point that as we look beyond our continent, we will seize the opportunities of Brexit to forge an ambitious and optimistic new role for Britain in the world. I am pleased the UK is already discussing its future trading relationships with third countries and wish all success to the forthcoming visit to India, where there is now major scope to increase our trading and financial relationships. I also congratulate my noble friend Lord Gadhia on a moving maiden speech and welcome what I believe will be the major ongoing contribution that he will make to our commercial relationships with India.
I commend to your Lordships Professor Patrick Minford’s IEA paper of this May, No Need to Queue: The Benefits of Free Trade without Trade Agreements. His argument is that for a country the size of the UK, which represents only some 3% of global trade, unilateral free trade is a better option than individual trade agreements which, inevitably, entail both bilateral and multilateral complications and costs. Some 70% of UK trade is already conducted under WTO rules with no involvement with EU trade deals. This includes the export of services where the EU has little or no commercial policy. Indeed the UK’s exports of services to the EU owe little or nothing to the single market. Rather, the obstruction to larger EU international trade in services arises from national barriers within the EU to protect domestic services.
Professor Minford’s practical point is that being a relatively small supplier, the UK benefits trade-wise from being of marginal importance. The UK’s share of world trade is sufficiently modest that there is little incentive to levy tariffs on UK exports. May I comment how much I agreed with my noble friend Lord Bamford’s speech, and with the point that enterprising British business has to get on with it and cope with whatever the ups and downs and issues are? My noble friend might well agree with Patrick Minford.
The fundamental point is that increased trade boosts output and raises living standards. China and India have demonstrated over the last three decades the huge gains to be made by opening up economies to world markets. This did not and does not need an expansion of trade agreements either regionally or via the WTO globally. China’s rapid growth owes little to trade agreements; it was not even a member of the WTO until 2001. Indeed, it has been the 165 non-EU states that have accounted for the majority of the world’s growth in recent years. I regret to comment that the UK in the single market is essentially part of a protectionist structure based on regulation and protecting domestic EU markets from competing international trade.
For trade in goods, a zero tariff regime with the EU would make the most sense, combined with an invitation to the EU to reciprocate, which is likely to be attractive to EU commercial organisations. This is the sort of regime that Hong Kong and Singapore have taken up, where both have a better network of free trade arrangements than the EU. Indeed, my vision for the UK post-Brexit is what I might call a super-Singapore or a super-Hong Kong. I add the point that this could equally well be organised under a WTO regime.
Of our total trade, our exports to the Commonwealth presently represent only 9%. We are the biggest exporter of services to Commonwealth countries. I believe there is huge scope to increase our trade with Commonwealth countries. As my noble friend Lord Howell of Guildford has pointed out, the Commonwealth is more suited than the EU to the expansion of trade and commerce in the digital age because of its growing emphasis on information and data exchange. The Commonwealth network could provide a gateway to the faster-growing economies of Asia, Africa and Latin America.
I would have liked to have spoken about the City, where I believe a lot of overpessimism is argued about the effect of Brexit, but alas, there is not time. I close by saying that the case for free trade is moral as well as economic. It is an instrument of poverty alleviation. Since 1990, the numbers living in poverty have fallen from 36% to 8%. I end by repeating a comment by the governor of Hong Kong in I think 1857:
“Free trade is Jesus Christ, and Jesus Christ is free trade”.
He meant by that that free trade is a hugely effective moral force in raising living standards for the less fortunate.
My Lords, I also begin by congratulating my noble friend Lord Gadhia on an excellent maiden speech. I also mention his great contribution in getting the Indian community engaged in the British political system.
Having started on the London Metal Exchange in 1963 I have been involved in metals trading for more than 50 years. At present, I have every intention of continuing. I am therefore grateful to my noble friend Lord Leigh for securing this debate on the impact of Brexit on trade and particularly the promotion of global free trade. We are in danger of reverting to an unattractive and counterproductive negativity, talking ourselves down and doing our great British brand a disservice. Of course Brexit has brought with it a new source of uncertainty, and business thrives on stability, but it is important to be clear-eyed about what lay behind and optimistic about what lies ahead.
Shortly before the referendum I wrote that as an island nation we have always depended on our trading and market skills and how continued membership of the European Union posed a direct risk to our unrivalled concentration of markets and trading expertise. The market in which I am most involved, the London Metal Exchange or LME, is the global pricing mechanism for base metals and has, since it was founded in 1870, provided substantial invisible exports for this country. I was concerned that European regulators were endangering the sophisticated systems and culture undergirding London markets’ success. Our international reputation for trading ethically and innovatively has made Britain very attractive for investors. Yet, regulators in Brussels, issuing ever more top-down directives, effectively sidelined personal responsibility, creativity and innovative flair.
The LME, which operated smoothly and without disruption during the financial crisis, is governed by rules designed and developed over the last 150 years that are, as a result, well suited to its markets. However, these were in danger of being swept away by EU laws such as the Markets in Financial Instruments Directive II. MiFID II, as it is known, actively deters people from taking on risk in markets and betrays the assumption of those at a remove from trading that risk should be avoided. Yet risk is what gives markets liquidity. It needs good controls, but risk is a good thing.
This trend towards overregulation made it increasingly likely that the now Hong Kong-owned LME would sooner or later have been forced to relocate to Hong Kong or to another major Chinese city. The irony is that as a global exchange the LME was not affected by the single market, yet was subject to the EU’s strictures, which were endangering its continued operation in London.
Now free to take back control of our regulation, we need to have a healthy dose of national confidence and self-belief on the grounds that other countries will want to trade freely with Britain, the world’s fifth-biggest economy, especially if, like the EU, they are already doing so. In this interconnected world, our trade with Europe, which has a surplus of nearly £70 billion with us, is an indispensable source of jobs and wealth for their economies.
However, I wish to make another point. We are also free to help other countries create wealth through free trade. Harvard Professor and author of The Wealth and Poverty of Nations, David Landes, emphasises that the task of rich countries like ours,
“in our own interest as well as theirs, is to help the poor become healthier and wealthier. If we do not”,
“they will seek to take what they cannot make; and if they cannot earn by exporting commodities, they will export people. In short, wealth is an irresistible magnet”.
Written nearly two decades ago, he is prophetically summing up what happens when trade is not free. The European Union has to ask itself to what extent its protectionism is responsible for so many economic migrants willing to take perilous journeys across the Mediterranean and turning up on her shores with no certainty of a good outcome even if they survive the passage.
Our exit from the European Union creates a vital opportunity to make arrangements with just-about emerging economies that would previously have been at the back of the queue for trade deals with nations such as ours. Surely this would enable them to hold on to more of those citizens who want to better themselves instead of losing them to uncertain tides, flimsy boats and people smugglers.
Will the Minister provide a little more detail of what my right honourable friend in the other place, the Secretary of State for International Development, is planning in terms of free trade with poorer countries as part of her welcome drive to ensure that every penny of the aid budget is well spent? We need to ensure that the rising tide of what I believe will be our post-Brexit prosperity lifts as many boats as possible.
My Lords, I welcome the noble Lord, Lord Gadhia, another brilliant Ugandan, to this House. I would like to hear him talk more about Uganda, which I visited when my father was in the embassy there.
We should thank the noble Lord, Lord Leigh, for this debate but also perhaps for exposing the questionable arguments for the UK’s prospective departure from the EU. This is a very important debate because the magnitude and extent of trade are essential for improving the livelihoods of people all over the world and for dealing with the massive challenges of global problems, whether they be climate change, the quality of the environment or security.
I am glad to say that the mainstream of the Labour Party has always recognised that a good society works with strong trade and with public bodies. I have worked in both sectors, and the small high-tech company I helped to set up benefits from free trade in the EU but, regrettably, is completely blocked from trade with the USA. Leaving the EU may lead to our being blocked by both the EU and the United States.
It is of course the founding principle of the European countries that, within and outside the EU, they believe in trade and public bodies as being the basis of a good society. It is partly because of the broad commonality of European societies that European trade has prospered. The proposal being moved in this debate is that international trade, especially for the UK, will expand as a result of the UK leaving the EU. One has to ask, however, what will be the real benefits to the British people of detaching our business from our European partner countries when major countries such as Germany are more successful on average than the UK in both trade and productivity, both within and outside Europe, as other noble Lords have pointed out.
Germany maintains its successful trade at the same time, of course, as maintaining much higher standards of living and a better environment, especially in housing, as I would see when I visited as a councillor in the UK. Surely the UK should be working even more closely with such successful countries, whose new industrial collaboration and technological methods have been recommended for this country, for example by the noble Lord, Lord Willetts, who explained his ideas to the House of Lords Science and Technology Committee.
Indeed, the success of this new methodology, which the noble Lord, Lord Haskel, also mentioned, is attracting new investments into those countries by leading UK industrial and high-tech companies. It was excellent to hear another engineer, the noble Lord, Lord Bamford, speaking in this debate, and to hear his comments about technical collaboration. There are excellent UK companies, but I think we have to see where the leadership and the new developments are coming from.
One of the important features is what is going to happen next. One of the interesting points that I have tried to discuss with civil servants in the UK and in Brussels is what they are thinking. I have heard some sphinx-like utterances that one of their ideas is that every effort should be made for the UK and other countries outside the EU to continue to participate in technological and scientific networks based in the EU. These have been very successfully developed. Indeed, I myself, with UK colleagues, helped to set up one in aerospace and other engineering which is very important.
These networks, based in Brussels, which I am sure will continue, will greatly help UK industries and research organisations to participate in and contribute to the latest technical advances and to trade, but I am afraid that will be a second best for the UK because there will no longer be the funding streams for UK research and industry that we have seen over the past 20 years. One hopes that UK industries will also receive funding from the UK Government to participate in industrial fairs. This point was made by the noble Lord, Lord Shipley.
Criticism of the lack of funding for UK businesses to export and explain themselves was made by the British Chambers of Commerce, and that point is made in the document from the Library. Representatives of British SMEs whom I have met in various parts of the world have also complained that funding is not available for them to participate. Meanwhile, the European Commission has technological representatives all around the world, many of whom are seen at these major trade fairs. I think, therefore, that it is very important that we continue to work in these EC networks; it is clear that the EC would welcome that.
One of the other features about the development of our industry and our trade and the connections to technology will be to question how UK international trade will make good use of the UK’s continued participation in these very large and technically successful intergovernmental European agencies such as the European Space Agency, the European Medicines Agency, the European Centre for Medium-Range Weather Forecasts, telecoms and so on. It is extremely important that negotiations dealing with these agencies are very successful.
Finally, one hopes that when the Prime Minister was talking about getting closer to Europe, she was not thinking of the kind of schoolboy abuse that we heard today about Europe and we hear sometimes from the Foreign Secretary.
My Lords, I do not always listen to the Whips, but I will endeavour to do so on this occasion.
I thank my noble friend Lord Leigh for this debate. As an economist, I certainly appreciate an economic debate, although I do not think “It’s the economy, stupid” all the time. None the less, I think we are glad to have an economic discussion. I also congratulate my noble friend Lord Gadhia on his maiden speech. We will be very glad to have his particular experience in the House of Lords over the coming years.
I agree with my noble friend Lord Leigh that free trade is indeed extremely important. As someone who has founded a company which exports more than 80% of its products—even more than the famous company of which the noble Lord, Lord Bamford, is managing director—I am certainly in favour of free trade and always advocate it when possible. However, I would point out to the House that there are losers as well as winners in the free trade argument. Although there can be a net gain from free trade, none the less some people lose. We saw that in the Brexit debate.
I am, like my noble friend, an optimist. That may be something that is just natural to our personality—I recognise that in him—but I also feel that we are right to be optimistic in the present situation. None the less, we are in a difficult situation, and I think the noble Lord, Lord Haskel, made the point in his opening speech that uncertainty is the enemy of business. It is, and we have already seen the Chancellor make the point, on a number of occasions, that the uncertainty of the present situation is deterring future investment. Present investment is going ahead, but there is a deterrent effect on business investment. That is why I hope that, in the coming Statement next month, we will have an increase in government investment to make up the gap in business investment. I certainly hope that that will happen because it is necessary.
We are now poorer. We are now poorer than we were before the referendum took place. We are poorer because sterling has gone down and food prices have gone up. I would make the point, which the Prime Minister has made at some length, quite well in my view, that it is the people at the margin who are suffering.
So what do we do in these circumstances? I believe the right approach in these circumstances is to remain a member of the European Economic Area and, if possible, rejoin the European Free Trade Association. That may not be possible—I fully understand that—but if we cannot do that, I would certainly want a bespoke agreement which is as similar as possible to the existing arrangement. Under the EFTA arrangements, we would have immediate clarity. If the Government said in their expected Green Paper that they would be pursuing a course of action whereby we would remain in the European Economic Area, that would give immediate clarity to all investment decisions. Immediately, people would say, “Well, there we are. We know where we stand. We can carrying on investing”.
The advantage of that is that, first, under the EEA agreement, you can action Article 112, which allows you to deal with immigration if there are societal problems with it. That could quite easily be invoked. Secondly, the European Economic Area agreements do not involve the European Court of Justice. Therefore, both those elements of the Prime Minister’s red lines are met. Finally, carrying on as a member of the European Economic Area would relieve us of the frankly crushing burden of having to renegotiate all our trade and tariff barriers in the WTO. There are some 160 members of the WTO. As the noble Lord, Lord Davies of Stamford, said, it would take at least five to 10 years, if not longer, to renegotiate all that.
Those who advocate a hard Brexit say, “We should take the risk, the risk is worth it”, but I would argue that it is not we who are fairly well-off—some of us are extremely well-off; I do not include myself in that—who will bear the burden the burden of that risk; it is the poor, the people at the margins of society. As the Chancellor rightly said, they did not vote for Brexit to get poorer.
My Lords, it is a pleasure to speak in this debate. I thank my noble friend Lord Leigh for giving us all the opportunity to do so today. I also congratulate the noble Lord, Lord Gadhia, on his extremely moving maiden speech. He struck a perfect chord by saying that Britain is a trading nation first, last and always. It is interesting that all of us who have spoken in this debate have agreed with that—every one of us has started from a premise that free trade is a good thing. As the chief executive of TalkTalk and a businesswoman all my life, I know that that is true: that unfettered, open and competitive markets at home and abroad bring out the best in people. They bring out the best in businesses and, in turn, give the best possible outcomes to customers and citizens.
It is not just physical trade that is a good thing in this modern world; digital trade is hugely powerful, too, as many other noble Lords have mentioned. For this country in particular, digital free trade should be something that we are brilliant at. We are already brilliant at consuming products online, and the UK’s reputation for the protection of intellectual property and the fair rule of law means that a Chinese citizen looking at a website of an unknown British business is more likely to click “buy” than they would on a website from many other countries. So we should be brilliant at global free trade.
I want therefore to focus my remarks not on whether free trade is a good idea or a bad idea but on how we bring everyone in the country with us. I voted to remain in the EU, but, as a businesswoman, I cannot but hear the fury, frustration and disaffection of a significant number of people who feel that the modern, global, digital world that I have just described is not working for them. While many of my noble friends have spoken eloquently about how leaving the EU will be brilliant for global trade, many people who voted with them to leave the EU would disagree. We have all to work out how we make the global trading nation of Britain work for everyone in this country and take to heart that that is not the case now. I want to offer a few suggestions for business and for government on how we might make the case for free trade genuinely working for everyone.
First, we need to focus on building skills. If you do not have skills to take advantage of free trade, you are understandably scared of it. You are more likely to be convinced that an open economy means that your living standards will be threatened rather than seeing it as an opportunity. We need to make sure that we upskill our nation to be the global free trade bastion that we all want it to be. I hugely welcome this Government’s commitment to build basic digital skills across the whole country, but we know that we all need to invest in engineering and R&D skills, at every stage of people’s career. That is not just about government money; all of us who run businesses need to take this much more seriously.
Secondly, we need fair and competitive markets, not just open ones. Competition drives out bad behaviour, provided that consumers have choice, so we need strong, independent competition regulation in every market. That is how you do the best possible job of ensuring that everyone in society benefits from global free trade. We also need to tackle the issue of fair working practices in a modern, global world. I welcome the Government’s appointment of Matthew Taylor to run an independent review of modern working practices. As the world changes, we need to make sure that business genuinely works for everyone. I have been a strong advocate in this House of zero-hours contracts, but I would be the first to admit that they can be horrendously abused if they are not properly regulated. It is incumbent on those of us who operate in a modern economy to work through what the rights to sick pay and holiday pay of those working in the flexible, gig economy should be. The Matthew Taylor review could be a hugely important component in setting Britain up to be a brilliant trading nation in the future global economy.
Finally, businesses have a responsibility for this, too. It is not enough today to do a brilliant job for your customers and to make money for your shareholders. Successful Great British companies also need to make sure that they know what contribution they are making to their community and country as a whole. It will not be enough just to look after where you are already driving employment, in the local community where your factory or office might be based. Those in this House today who really believe that free trade will drive economic growth for the whole country—I believe that is all of us—need to make sure that that is genuinely true. My noble friend Lord Lupton spoke eloquently about making sure that we really understand and identify those people who are not benefiting. That is as true of business leaders as it is of politicians, otherwise the global free trade world that we would all like to part of will be pulled back because, rightly, some citizens will feel that they are being left behind.
In conclusion, although I campaigned to remain in the EU, I am an entrepreneur and a businesswoman. The secret to successful business is to accept the world that you are in and to move on, rather than to fight yesterday’s battles. I am excited that Britain really can be a fabulous trading nation. As we exit the EU, I think that championing free trade at home and abroad that genuinely works for everyone is a prize that we can all agree we want to chase after.
My Lords, I am a committed free-trader, as are most of those who have spoken in this debate. The evidence is there for everybody to look at: since the end of the Cold War, the proportion of the world’s population living on less than $1.25 a day has dropped from 40% to 23%, and that is due to free trade. We should congratulate not only ourselves but the other free-traders in the world, such as America.
I pick up on what was said by my noble friend who spoke before me: there are major problems. When one looks at CETA, one asks what is stopping that free trade agreement. Ninety-eight per cent of the tariffs will be taken down; there will be annual savings of €500 million in duties. What is stopping that and why is free trade such an important issue in the American election? Why did Bernie Sanders, Clinton and Trump all highlight not free trade but protectionism? There is a worry. It reminded me a little of that old Scottish saying:
“Wha’s like us? Gey few, and they’re a’ deid. If they’re not deid, they’re dying”.
We are going down a route that is absolutely right, but we have to sell it. As my right honourable friend the Prime Minister said, there are those just managing in this country who do not like free trade. They do not see the benefits of it.
I want to take a slightly different road from that taken my noble friend and look at what are the problems with free trade. Free trade agreements have become far too complicated. They include matters that are not trade. If we are trying to win the argument, let us get back to a trade agreement that does not include things such as patents.
The problem areas are many, but the real difficulty, as highlighted by the Walloons, is the investor state dispute settlement. It is quite wrong that big corporate bodies should be able to sue Governments, which puts them in a powerful position, equating to government, overriding local sovereign democracy and being able to influence Governments in a way in which they never did before. That is one of the main reasons that CETA is failing at the moment. The Walloons want a lot of protectionist measures which I do not approve of, but I sympathise with them on that point. It is not good.
It is also very noticeable in America—which is, or has been, our biggest ally in this area—that these ISDSs are growing in number and causing increasing problems for the Americans. That is why TTIP is not going to happen and why the TTP and NAFTA are under threat—because of the threat of corporate bodies. If corporate bodies want to take a risk overseas, they must take the risk, not the people.
There must therefore be more transparency in our free trade agreements. The EU is good on this; America is lousy and needs to change. One of the things Britain can do, through its diplomacy, is get the USA and others to be much more open about this. A free trade agreement needs tighter definition on rules of origin. Those are being abused, and if they are abused, it leads to resentment. There need to be more enforceable and substantive labour and environmental rights. We need to be able to protect those, while continuing free trade.
My noble friend Lord Bamford said that changes in currency are a bigger threat than tariffs. He is absolutely right. That was why Mr Trump wanted to shove on a 45% tariff against the Chinese, because they have manipulated their currency. Our currency has just fallen and that is distorting our free trade agreements. We need to look at that.
I end with a point for free trade: it does boost productivity. Since the 2008 crash, there has been a levelling off and down-turn in productivity. It is trade that builds that up. That leads to prosperity, that leads to a better feeling and that will lead to a happier community.
My Lords, there has been considerable agreement this afternoon in that we all appear to support free trade. We lack the leader of the Official Opposition, Mr Corbyn, who perhaps does not agree with free trade in the same way. However, across your Lordships’ House there seems to be some agreement and a sense that there are opportunities from global free trade.
These opportunities are not cut off by our membership of the European Union. We are already able to trade globally. A set of questions needs to be considered in the current period before we leave the European Union in the transitional period and looking forward, about what the UK’s relations might look like after we leave.
During the referendum, it was entirely unclear what the leave campaign meant by “leaving the European Union”. Did it mean leaving the single market? Did it mean leaving the customs union? There has been a bit of rewriting of history. In the last week I have heard Matthew Elliott and Douglas Carswell of Vote Leave saying, “It was always entirely clear, we have to leave the single market”. It was not clear to me and I spent a lot of time listening to the leavers during the referendum.
There are real questions about where the UK is going and where we want to end up in trading relations with the EU. At the moment our trade with the EU is 44%. Some Ministers may feel that it is a price worth paying to walk away and trade simply on WTO terms, but have the Government undertaken any sort of review of the financial costs of increased tariffs?
Beyond that, the EU and the single market clearly offer far more than simply tariff-free trade. They allow us to get beyond non-tariff barriers to trade, to give a level playing field. That was precisely the reason why Margaret Thatcher pushed for it 30 years ago. To what extent have the Government begun to look at the implications for the UK if we walk away and then need access to the market, without being part of it? The EU is a rules-based system. If we seek to export to the European Union from the outside, we will still need to meet EU standards.
We have heard that somewhere between 6% and 11% of British companies currently export—a relatively small percentage. Some hard Brexiteers have suggested that we can take the opportunity of leaving the European Union to have a bonfire of red tape. But if some companies are going to export to the EU, they will still be bound by EU regulations. Are we going to have a two-tier system, where exporters have to abide by different rules for health and safety and environmental standards from those companies that do not export? Is that what the Government are thinking about? If not, are we going to leave the European Union and somehow create our own legal system? Or will we simply follow the European Union in its entirety but without any seat at the table? That would be true whether we were in the EEA, EFTA or entirely outside—we would have no say in those rules.
However, there are opportunities for trading now, for free trade and for expanding trade. We already trade significantly with the Commonwealth. We could do more. The old Commonwealth countries that have already suggested that they might be interested in free trade deals with us have relatively small economies, nothing like the size of the US or our European market.
There is one way in which the United Kingdom could demonstrate right now that it wants to go global—that it is open for business. That is in the area where I spend my time when I am not in your Lordships’ House. I declare my interest as an academic at Cambridge. Higher education and education more generally are massive global exports. The United Kingdom has a considerable competitive advantage in this area yet it links to an issue that the Brexiteers were not comfortable with—immigration. Here, I thank the noble Lord, Lord Gadhia, for a fantastic maiden speech and note the points he made about immigration and the importance of people coming to this country. They may be teachers or academics, but they may also be students. Will the Minister take back to her colleagues in the Home Office—across departments—the importance of looking again at visa restrictions? At the moment, the UK does not look as if it is open to business for Indian and other students who would happily come here. If we are going to go global we need to show we are open. We need to look again at our visa regimes for students.
My Lords, I thank my noble friend Lord Leigh of Hurley for introducing this important and timely debate. It is an honour to lend my voice to the incredible array of expertise in the Chamber today. I also congratulate my noble friend Lord Gadhia on his excellent and moving maiden speech. I wholeheartedly agree with the sentiments he so powerfully expressed.
Navigating through the noise, post-referendum but pre-Article 50, I say that one point of clarity in a Mexican wave of uncertainty is that we do not yet know what our relationship with the EU will ultimately look like. This is, after all, a negotiation. However, I am clear that Brexit cannot and must not mean Britain turning in on itself, so that we shut ourselves off from the world. It is not in our history, it is not in our culture and it is not in our nature. Nor is it in our short-term or long-term economic interest.
As expressed so eloquently by the rather magnificent butterfly on the cover of the Spectator magazine on the eve of the referendum, Britain must go:
“Out and into the world”.
This goes for immigration, where the goal must be control, not arbitrary reduction. It goes for diplomacy and foreign policy, where a more engaged Britain is a necessity in these uncertain and volatile times. It must certainly go for trade as we look to sign agreements with developed nations and emerging markets alike—places on our doorstep starting with the EU and the fastest-growing nations in Asia, Africa and elsewhere.
This is not ideological, it is economic, and the benefits for Britain and the world are clear. We have heard today that free trade increases the purchasing power of our consumers, putting more pounds in the proverbial pocket, just as it helps our exporters and goods go further and deeper into global markets. It is quite simply about the age-old principle of comparative advantage. We can import goods from where they can be manufactured cheapest to reduce prices for consumers. But where we in the UK do it best, be it advanced manufacturing, financial services or bioscience, we can export our expertise and sell it on the global market. It really is win-win.
However, free trade can be more even than this. Done well, it can be the final, decisive arbiter in the war on poverty. The World Bank looked at 30 African countries between 1981 and 2000 and concluded that trade liberalisation had materially reduced poverty. So not only is it good for us, the fifth-largest economy in the world with the second-highest level of foreign direct investment, it is good for those countries that are still on the up. There are many who say that this world order I have described is nothing more than a pleasant fiction: that countries are not clamouring to sign trade deals with us, that it will take for ever and that politics will trump economics. I say again though that our trump card is Britain—our skills, our capability and, now, our leadership on the world stage.
Other nations are responding. We have already seen Australia and New Zealand speak out in favour of a deal with the UK. Indeed, those two long-standing allies have gone a stage further, and have offered to plug the gap in our Civil Service where trade expertise should be and to lend us their own experts. If that is not enough for the sceptics then what of South Korea, a country quick to express an interest? What even of the USA? My noble friend Lord Leigh has already cited senior figures in the Republican Party who believe a deal can be done. I would like to add my own experience to that, so that I am not just hearing what I want to hear. At a dinner that I attended a few months ago in Washington DC when I was an adviser to the then Trade Minister, the noble Lord, Lord Maude, we asked some former presidential US trade representatives from both parties whether it was true that the UK would need to go to the back of the queue. With one voice, they answered in the negative. They were quick to cut through the prevailing scepticism to say that a US-UK free trade deal could be done. So there is hope yet.
To those who worry about what it means for the state of Britain if we are really to leave the EU—myself included—I say that we must make sure that we get the best deal with the EU we possibly can, yes, but the best deal with the rest of world too. This will show that Britain is still open: open for business, open to immigration and ready to lead the world in getting global free trade back on track.
My Lords, I, too, thank my noble friend Lord Leigh for initiating this important and timely debate and for his excellent opening remarks. It was also a pleasure to listen to my noble friend Lord Gadhia’s excellent maiden speech. A Hindu and a Ugandan like me, my noble friend has extensive experience in international trade. I am sure that that experience will be a great asset in your Lordships’ House and I look forward to many more contributions from him.
The truth is that, irrespective of how the nation voted on 23 June, we have needed a new approach to our trade policy for some time. Britain’s economy has been skewed for a long time. Our current account deficit is unsustainable, we export far too little, our productivity is too low, we are overly reliant on both the City and consumer spending, our manufacturing base is too small and our house prices are too high. Irrespective of Brexit, these problems have been in place for some time.
We have become complacent, both in government and in the private sector. We have some firms that do a tremendous amount of work to export, but nowhere near enough. Too many businesses avoid the risks. When I was in business in the 1970s and 1980s, exporting was seen as a great point of pride for companies. Now it is just seen as a risk. We have to change that mindset.
Part of that work falls to government. Our Government should be more proactive. The Department for International Trade—previously UKTI—works on the basis that companies will come to it. This is fine if you already export, or if you are a FTSE 100 global company with vast resources, but it does not help SMEs. Indeed, it is the wrong way round. The department should be identifying opportunities—a road project in Tanzania, for example—putting them straight up on their website and emailing the link to every infrastructure company in the UK. A bit of proactivity could get us a long way.
Before I move away from government, I will make two additional comments. The first is that the previous Prime Minister committed to making our diplomatic service more business orientated: to appoint business leaders to high commissioner and ambassador posts and to increase the commercial knowledge of those from a diplomatic background. Could the Minister give me an outline of what progress has been made in this area?
The final thing I will mention in relation to government—in this case, I have definitely saved the best for last—is UK Export Finance. For those who are not aware, UK Export Finance is the UK’s export credit agency and directly supports the export of British goods and services. Its work is invaluable. I highly recommend that any company thinking about exporting should look at its work. This is a vital service and one that we must do a lot more to promote.
In the time I have remaining, I would like to talk about Africa, which my noble friend Lady Finn covered very well, and the opportunities available on that continent. I was very fortunate to be given my dream job earlier this year, acting as the Prime Minister’s trade envoy to Rwanda and Uganda. Africa is home to a number of the fastest-growing economies in the world—exactly the type of markets we need British firms to be focusing on. Huge chunks of Africa are now prime markets for British firms. Yes, there are risks, but the rewards are also fantastic. With a developing middle class, 52 huge cities with populations of more than 1 million and some of the most innovative banking systems that I have seen, this is a continent that has come on leaps and bounds.
For too long Britain has seen Africa through the Band Aid lens and has missed its real potential. We have to change our mindset on Africa and on exporting. This is why we should focus more on trade and not aid. We should not have the situation, as we do in many African countries, of having dozens of DfID staff but no trade representatives—it is lunacy. Similarly, we cannot have an entire continent, especially one with the economic potential of Africa, constantly overlooked when it comes to visits by our Cabinet Ministers. These are little things, but they add up to our current exporting difficulties.
Our business leaders and the Government need to seize the opportunity that Brexit has offered to reset our path, to be more proactive in identifying and advertising opportunities, and to be less risk-averse and lazy. We have barely gone a day since the referendum without talk of free trade deals and of hard and soft Brexit, but this is a red herring. If we are not encouraging and supporting firms to export in the first place, additional tariffs are hardly a significant factor. I hope that we will see a new approach from this Government.
My Lords, I, too, take the opportunity to thank my noble friend Lord Leigh for securing this debate today and to congratulate my noble friend Lord Gadhia on his excellent maiden speech.
We have been members of the EU for the last 40 years, and it has played a hugely important role, whether in business, trade, science, technology, employment or human rights. But we must also not lose sight of the fact that EU countries now have some of the lowest economic growth rates in the world and some of the highest unemployment rates. Some EU countries are precariously close to bankruptcy. These can hardly be considered hallmarks of a vibrant or successful economic model.
Despite this, like many in your Lordships’ House, I supported the UK remaining a member of a reformed EU. But there is one simple and unavoidable fact: more than 1 million more people voted in the referendum to leave the EU than to stay. So that is what Britain must do. To do otherwise would be to defy the democratic will of the British people. Most people like me just want the Government to get on with it and remove the uncertainty that damages confidence in our businesses, deters investment in our economy and erodes public confidence.
Of course, we will need to negotiate new bilateral trade deals and non-tariff barriers. Nobody says that this will be easy, but is it achievable? Certainly I believe it is. Parliament must now unite to deliver what the British people have voted for. To do otherwise would be antidemocratic, illiberal and a dereliction of our duty. Indeed, on referendum night I was pleased to note that my noble friend—I hope he remains a friend—the noble Lord, Lord Ashdown of Norton-sub-Hamdon, said:
“I will forgive no-one who does not respect the sovereign voice of the British people once it has spoken. Whether it is a majority of 1% or 20%, when the British people have spoken, you do what they command. Either you believe in democracy or you don’t”.
I believe in democracy.
Despite all the challenges and complexities, there are also great opportunities for our forward-thinking, tolerant and outward-looking, great country as a global trading nation. Successful trade negotiations, not just with the EU but with the wider global economy, are key to exploiting these opportunities. Yet some politicians are trying to force open any door to remain in the EU, and are talking down or belittling our country’s outward and forward-thinking strategy. I am not one of them. It is in the interests of neither our economy nor our country at this crucial time in our history to do this. Independent countries can and do successfully trade with the EU single market without being a member of it.
If we are to compete on the global stage and remain a world leader among the developed economies, the Government must ensure that there is long-term investment in infrastructure, skills, science and innovation, as these are the key drivers of increased productivity and economic growth. I welcome the fact that a long-term industrial strategy is being developed, as this should help us identify how best to build our strengths, overcome our weaknesses and take full advantage of the opportunities that lie ahead.
During my recent visits to the Middle East, India, Azerbaijan, Pakistan and Turkey, I saw and heard at first hand how well respected the UK is in so many sectors. Some of these countries want to establish trade agreements with the UK as soon as possible. We are recognised as having a world-renowned higher education system and a world-class health service. We are one of the world’s leading scientific nations, and our life science sector contributes around £60 billion to the economy each year. We are considered world experts in financial services, agriculture and digital technology. We have much to be proud of and we offer fantastic opportunities for trade and investment.
However, to retain our global competiveness we must remain a magnet for the best of international talent. I urge the Government to rethink and consider taking international students out of the migration targets because they could be our future ambassadors for trade across the world. We are travelling in a brave new world. We need to make our economy more agile in order to respond more quickly to new opportunities such as solar power, robotics or biotechnology and react more successfully to competitive threats such as the dumping of cheap steel.
Yes, there are significant and complex challenges ahead but we can be a great global trading nation. We have all the hallmarks of one.
First, I thank noble Lords for allowing me to speak rather belatedly. I thank my noble friend Lord Leigh for outlining the global situation. It may not be everybody’s cup of tea but those are the facts. It goes without saying that my noble friend Lord Gadhia spoke not just emotionally but with huge experience and knowledge. I very much appreciated sitting behind him and listening to his speech.
I spent my working life in delivering international trade—driving international trade and tourism. The latter has not been talked about today. My company has operated for nearly 200 years in 110 countries. Everybody keeps talking about Brexit—a word I dislike intensely. I suggested recently to the Prime Minister that we should think of something different, because it is a toxic word. However, in practice, economic power and strength have been dominant in every country in the world that has ever made its name. That is what it is all about. If we do not retain and create further economic strength, everything means nothing. One cannot have hard power without economic strength.
People talk about protectionism. Does one honestly believe that the Germans, with their memory of the Weimar Republic, or America, given what happened in the 1920s and 1930s, want to go back to that form of protectionism? Never—because there is too much knowledge and experience around.
Big companies know their way around. In practice, we must remember that the SMEs and self-employed in this country comprise 58% of our workforce. They are the middle class and the real driving force. As time goes on, they will be key. It may not be widely realised, but those who get involved in exports usually achieve at least a 7% improvement in productivity. The day has to come, therefore, when the SMEs need and must have encouragement; this is one of the problems with the current uncertainty. Encouragement is key because we are dealing with people, not just institutions. When they get encouragement, there will be a moment, as happened in the 1980s, when they start to invest, including in R&D. That is when the country will start to move forward. We could do that in spades.
I ask the Minister to consider the following. One of the problems for SMEs is that the banking system does not help them—not deliberately, but it has not been created in a format that can help. Anyone who has worked with SMEs recently will know that the cost of money is horrendous for them, as against rates that are nearly zero for everybody else. I ask my noble friend to inquire about this, and for the Chancellor to consider, in advance of his Statement later this month, putting it right.
One can see that we are in a very strong position to take advantage of our leading technology in all areas. There is much talk of deals. Those of us in business are negotiating every day of the week. As Peter Lilley, who has been involved in major negotiations and trade talks, said only yesterday in the other place, one does not remember trade deals as history progresses. They are made out to be much more important than they really are. We are constantly talking about deals here and negotiations there, and what they will do to us. It does not matter.
I conclude by asking why entrepreneurs—there are many in this House; and I have been one all my life—here and elsewhere, who put their own money at stake, are not worried about the future. As far as they are concerned, there is a great future and in 10 years’ time we will look back and realise that we made the right decision.
My Lords, I join in welcoming the noble Lord, Lord Gadhia. I also echo what has been said around this Chamber that the welcome to immigrants is something that we need to keep living today and not just think of as a quaint achievement of the past. I am conscious that this debate is time-limited and we are well over the anticipated time for the beginning of the winding-up speeches, so I shall reconstruct what I had hoped to say—partly because so many people have said almost everything of importance—into a series of questions to the Government. I hope that the Government will feel that they have time to reply.
I come, as we know, from very much a free-trading party; that is one of the reasons why we backed Mrs Thatcher in developing the single market. That took the concept of removal of barriers even further, and I shall be astonishingly sad to lose it. Perhaps the Government can tell us what priority they give to non-tariff barriers. We hear constantly about tariffs but almost no comment on non-tariff barriers, until we talk with companies and discover that they are very often a larger part of the problem than the tariffs themselves.
Does the Minister agree with the noble Lord, Lord Bamford, who basically took the view that tariffs are simply something that we have to live with? Is that what our companies now need to expect? They are making decisions about their future and, if WTO tariffs are the future they are looking at, they need to know now so that they can make their adjustments. They may not all have the noble Lord’s view towards living with tariffs on that kind of scale.
There has been a lot of talk about free trade. As I say, I am inherently a free trader and so is my party, but what is the Government’s view on the general momentum across the globe on free trade? Many would say that the momentum has turned against free trade. The pace of increase has slowed and now we hear a strong language of protectionism. The United States, probably the most protectionist country on the globe, now speaks a protectionist language. The trade deal with the Pacific looks likely to die on the vine and it looks like there will be very little progress on TTIP, and NAFTA is at risk. We hear Hillary Clinton—it is not just the Republicans but the Democrats—criticise free trade extensively.
Part of the issue is that free trade and globalisation are linked together in both the mind and experience of many people, and it is the rising of the people who feel they have been hurt by globalisation that is creating a very fundamental problem. If we are relying on a free trade mood and say that we will lead free trade and it is the only and essential route to saving our economy post Brexit, we need to know the Government’s assessment of where the free trade movement is in countries today. I fear—some have said this, and I want to know whether the Government agree—that those most likely to enter trade agreements with us are relatively small countries such as New Zealand, Australia and Canada.
Also on that subject, I talk now with companies based in small Commonwealth countries—the Bahamas is one example. They are absolutely in a state of shock because their access to the EU market is, as I understand, through the agreements that we signed up to when we joined the European Union. They need to know that, if those agreements fall away and their access to that market disappears when we leave, whether that is being encompassed in the work that we are doing. As well as talking about them as free trade partners for us, it seems to me that we have to answer the question of where they will stand in their trading relationship with the European Union.
Does the Minister agree with Priti Patel that we should take the aid budget and use it largely to promote UK exports, or does she accept that, according to the 2002 Act, we are committed to using that DfID budget to support the poorest and the most vulnerable, not to promote ourselves? Those who want to go back and read the discussions around the creation of the 2002 Act will discover that that was a much-discussed issue. At that time, there was a real recognition of the importance of an approach to international aid that supported the poor but was not looking to create a benefit for us as an important part of its process.
I talked about the issues around tariff and non-tariff barriers. We are being told constantly that there can be no running commentary from the Government. I understand that, but the Government have been quite vocal in saying that they have agreed a deal with Nissan in order to immunise it completely from any negative effects of Brexit. Can we be told what the costs of that will be to the British taxpayer? It seems to me that, since that has been spoken of openly, it is not an issue that needs to be withheld in any kind of free trade discussions.
Will the Minister say what the Government will do with small businesses? I was on the Select Committee on small businesses and exports that was inspired by the noble Lord, Lord Popat. It was absolutely clear when we talked to small businesses that, first, exporting is difficult and, secondly, exporting to China is extremely difficult—the phrase often used is “one sale only” because of the risk of loss of intellectual property. Exporting to South America and Latin America was extremely difficult because obtaining letters of credit to ensure that payment was received was near impossible for any small company and non-payment was a very primary problem. Exporting to the US was exceedingly difficult because of its protectionist rules—most small businesses have to link up with and find a joint-venture partner in the United States, which then takes most of the upside of the revenues and profits that are generated. Perhaps the Minister can tell us much more.
Does the Minister accept that the structure of businesses in the UK is very different from that in many other countries? We have a few large major international exporters. I forget which noble Lord made the point that many of those do not necessarily export because they have an overseas base from which to sell into various markets. Many of our small businesses export and we want more of them to do so. That is a very different profile from somewhere like Germany, where most of the exporters are at the large end of medium-sized enterprises, or are large companies, that can overcome the various obstacles that have been described.
Lastly, will the Minister talk about the hiatus period that potentially will follow actual Brexit? Where do we stand with the WTO? It has been said that we retain our membership, but I understand that the effectiveness of that membership—the ability to make use of it—depends on our schedules being approved by 163 countries. That is a matter of fact, not opinion, and I hope that the Minister will clarify it.
Others have said that, if we do not have a deal, we can continue trading with the European Union just as we do today. I understand that, under European law, it would be a criminal offence for a company within the European Union to trade with a company in the UK on current terms unless an actual trade deal was in place. That again is a matter of fact, not opinion, and I wonder whether the Minister will clarify that, as well as tell us as much as she can beyond simply the words, “Brexit is Brexit”.
My Lords, I thank the noble Lord, Lord Leigh, and congratulate him on securing this debate, which has been very interesting. As ever, the noble Lord demonstrated his great commitment to this House with a very interesting exposition of his views. One illustration of the way in which the debate has changed matters is that, during the course of this debate, Belgium has backed the trade deal with Canada. Many things change quite slowly in life, but it seems that in the world of international trade things that might have taken years change very quickly. Perhaps it is the power of the conversation in this House.
I also congratulate the noble Lord, Lord Gadhia, on his maiden speech, which was a truly excellent speech. I was most impressed as he read out his list of mentors and sponsors. It started to appear that it was a new board of directors of a company. One could be mistaken for taking such a view, given his distinguished career—he is now with the great behemoth, the Blackstone Group. We look forward to his contributions in this House and wish him much enjoyment and strength here.
It is also a pleasure to have the noble Baroness, Lady Mobarik, here for the first time, I believe, in her role in the department—
This is her first time speaking in a debate. The noble Baroness is very well-known. She performed hugely effectively as the president of the Scottish CBI and is well-known as a champion of SMEs and family businesses. We wish her well in responding to the debate.
It has been a very useful and broad debate. We have had a number of very interesting contributions—started by the noble Lord, Lord Leigh, but there were others such as the noble Baroness, Lady Finn—that showed great enthusiasm for our prospects. Those were sensibly tempered by the wise words of my noble friends Lord Haskel, Lord Davies and Lord Hunt, who have raised a number of the issues that we have to demonstrate. The noble Lord, Lord Livingston, also made a very important point about how difficult it is to export and how difficult some of these issues really are.
The noble Lord, Lord Horam, made a very good point about the fact that there can be losers in free trade, which is important for us to recognise. I also want to associate myself with a number of questions that the noble Baroness, Lady Kramer, made in an outstanding summary speech. They are questions on which we are looking for the Government to give as much guidance as they can in the weeks ahead.
There is a new department in town. We on these Benches welcome the elevation of international trade to departmental level. It reaffirms our commitment to ensuring that Britain is seen as a great place to do business and that British products and services continue to be considered of world standard; this must be not just a means to usher in a new deregulatory agenda that is not so much about free trade as about rolling back standards on rights and protections. The department really needs to make sure that it adds power to trade promotion and works properly for the interests of SMEs as well as big business.
So the question at this stage is: what has the department been busy doing? Well, a tweet from the Department for International Trade requesting British jams has caused a major stir on social media. The department tweeted:
“France needs high quality, innovative British jams & marmalades #EXportingisGREAT #ExportOpps”.
It is linked to an advert saying:
“A fine food representative/agent, with good connections to gourmet distribution and fine food retailers on a national level, is looking for British food & drink brands which offer innovative and high quality jams/marmalades”.
It seems, however, that a few people did not take the appeal entirely seriously, with some suggesting it was straight out of “The Thick of It”, and others questioning whether the account was supposed to be a parody. I will read out some of the tweets and responses. One said:
“Tell me more about these innovative jams. Are they wi-fi enabled? Future-proof? Self-spreading? What's the future of jam?”.
“You do realise you’re a government department, don’t you? This is international trade, not an episode of Bake Off”.
I have some sympathy for the Government, whose overriding strategy has been defined by the result of a referendum that they neither wanted nor planned for—a referendum that was a rejection of the real and an affirmation of an aspiration. The Government will be respected for their desire to be honest on the size of the challenge and the breadth of the changes needed. They will set themselves up for failure if they do not.
Some will say that Brexit helps us focus on the world beyond Europe, as if this was a sudden or new revelation. The European Commission’s trade and investment strategy, written in 2015—in which we played a significant role—is explicit in saying that 90% of future global growth will take place outside Europe’s borders and a variety of tools will be needed to ensure that Europe continues to thrive. Indeed, it is not just about commerce but also the values that we ascribe to commercial activity: human rights, sustainable development, anti-corruption, high-quality regulation and effective investment in public services. While we may not have even triggered the first steps in leaving, let alone defined our trade relationship, it does seem obvious that Europe is likely to be our most important ally in what even its most ardent detractors describe as the UK returning to leadership in free trade, competition and property rights.
We are where we are, and I hope that the Government will not mind some constructive thoughts and reasonable questions. There is only one thing more painful than learning from experience, and that is not learning from experience.
First, we have to address some of the weaknesses in our trade performance. Published data show that the UK ranks almost at the bottom of OECD countries when it comes to export growth since 2010. In dollar value, in 2015—pre-Brexit—we were the fourth biggest exporter. I think that we are two places lower now, but irrespective of that we need to do more than just recover our position; we need to excel.
Our export growth depends on a variety of factors. One of the most significant is whether the markets we are looking to export to need the goods and services that we are offering. The markets in developing and fast-developing nations have a demand for raw materials and capital goods, which are not our strongest point. They will be harder to create significant trade with, and we must focus very carefully on where we prioritise.
But it is not just about the UK’s performance. Since the late 1990s, the UK and the G7 have been in decline, as competition from emerging markets has increased. Our performance, however, has not been as good as countries such as Sweden, the Netherlands and Austria, and a very few, such as Germany, have increased their share. We have to raise the number of exporters and exporting businesses. I think that the Government had a target of moving from 188,000 in 2010 to 288,000 by 2020. But actually we need to reach around half a million to have any possibility of increasing our capacity.
I would like to know whether the Government have a new strategy for developing trade, and whether the Minister can give us some idea of it. In particular, we need a real sense of what we are going to do about our performance on goods. The UK is, I think, the 10th largest, by dollar value, exporter of goods. Naturally, China, America, Germany, Japan and France are there; we are, I believe, behind Italy, the Netherlands, Hong Kong and South Korea.
The size of the manufacturing sector has declined, but we have a couple of lagging problems. For example, UK manufacturers import 60% of the final value of their production from overseas, which makes it very difficult for us to get the full value of the drop in sterling. In the US, 30% of the final value is from imports. In addition, UK manufacturers have contracted out their offshore manufacturing rather than buying or building factories. Between 2010 and 2014, German companies invested in 165 manufacturing and 54 logistics projects a year compared to the UK’s 29 and 10 respectively. For an effective trade strategy, we will need to support overseas investment and have more effective targeting of FDI. FDI has changed: net outflows exceed net inflows, and therefore too much of just asset purchasing is insufficient to help us.
We need to plan for how we can continue our world-class performance in services. We are the number-two global exporter, with China, Germany and Malaysia hot on our tail. To remain world-class, we will need to overcome some of the issues around the fact that a lot of our services are dependent on our expertise in Europe, and the problems of finding new markets. It is important that the Government devise a strategy for that.
The country has chosen a new and difficult challenge for us, which will require all our skill—and our agreement that our past differences should be set aside for the sake of our future. We cannot take our future success for granted. I am in business and I have learned that opportunity is usually disguised as hard work, so most people do not recognise it, and I am a strong believer that hard work beats talent when talent does not work hard. We have to be prepared to work hard, to make this situation work and at times to get it wrong—mistakes are proof that you are trying. But I caution the Government that, without direction, their mistake could be that they do not show that they are serious about trying.
My Lords, I am pleased to wind up for the Government in this debate. It is the first time I have done so for this department, as the noble Lord, Lord Mendelsohn, mentioned, and I thank him for his kind words of welcome.
First, I would like to say just how enjoyable I have found this debate. I thank my noble friend Lord Leigh for initiating it. The views that I have heard and the number of speakers at this debate have certainly emphasised the importance that noble Lords place on trade. I also congratulate my noble friend Lord Gadhia on making his inspiring and most moving maiden speech here today, and look forward to hearing more of his contributions. He was right to emphasise the benefits of free trade, as have many others during this debate.
Leaving the EU offers us an opportunity to forge a new role for ourselves in the world: to negotiate our own free trade agreements and to be a positive and powerful force for free trade. I thank noble Lords for their input in this debate, and will now address the points that have been raised.
As the Prime Minister has said, the UK will strike a unique agreement that gets the best deal for people at home and the right deal for Britain abroad. It is possible to be in a customs union and still strike trade deals. We will consider all options available to us. As we develop that position we will consider all the options, bearing in mind the issues that we have discussed here today: the need to regain more control of the numbers of people who come here from Europe, while allowing British companies to trade with the single market in goods and services. We recognise the need for a smooth transition which minimises disruption to our trading relationships, including those with developing countries. The Government have been engaging widely since the referendum and my noble friend Lord Price has met with more than 20 Trade Ministers, both inside and outside the EU. Everyone is keen to ensure a smooth transition for the UK.
Although we will work to avoid short-term disruption, there is one important change that we must make in the longer term: we need to change the terms of the debate around trade. As we leave the EU, we have an opportunity to be a global champion for free trade. We will develop our trading links and create opportunities for UK businesses across the world, including in developing nations. Trade with the UK will be a force for good. We will work with our missions overseas to promote the UK as a trading partner and a place to do business. We will drive inward investment and we will support our businesses and exporters. In time, we will also negotiate free trade agreements that will lower barriers to trade and create vital opportunities for UK businesses.
The UK is a full and founding member of the WTO. We are currently represented by the EU at the WTO—as my noble friend Lord Leigh notes, we are already a member. As my noble friend Lord Patten has said, the WTO director-general, Roberto Azevedo, said only yesterday:
“The UK is a member of the WTO today, it will continue to be a member tomorrow. There will be no discontinuity in membership”.
When we establish the UK’s position at the WTO as a post-EU member we will need to separate out our schedules of commitments, which are currently integrated into the schedule for the EU as a whole. We will do this in a way that causes the least disruption possible to our trading partners. In response to the noble Lord, Lord Haskel, while the simplest option would be to replicate the EU’s existing tariffs, we cannot set out our approach at this stage.
To deliver all this, the Government have been building our capability rapidly. The trade policy team has more than doubled in size since the referendum. We are looking at models from around the world to inform our resourcing requirements and the most effective way for us to pursue trade negotiations. The overseas visits that DfIT Ministers have been carrying out over recent months have given us great insight into the way that other countries structure their trade departments. We are ensuring that we have the expertise to deal with specific sectors, as well as the right in-country knowledge, to prepare us fully for the time when we will need trade negotiators. Over time, we will be putting trade negotiators in place. My noble friend Lord Patten raised the need for external help in our negotiations; we have already had more than 800 expressions of interest from external parties, which we will consider carefully. My noble friend Lord Popat mentioned appointing those with a business background to overseas posts and I thank him for raising this important point—the business ambassador network of key business and academic leaders acts as a powerful advocate of the UK abroad.
It is important to remember that UK companies are still exporting and doing deals abroad. The Department for International Trade is continuing to support them with advice, marketing support, trade missions, expertise on foreign markets, and more. Britain will continue to press for an ambitious EU trade agenda, including forging ambitious free trade agreements with major trading partners. We will continue to participate fully in these discussions for as long as we are members of the EU. In response to the noble Lord, Lord Davies, on his point that the UK is walking away from existing EU deals, the Department for International Trade is looking at a range of options for the transitional adoption of EU deals. The UK remains committed to pursuing free trade and continued access to existing EU free trade agreements. So this may be an option we wish to pursue—it would be assessed on a case-by-case basis.
However, as we leave the EU, we will also forge our own new trade deals. The UK is keen to seize the opportunities that leaving the EU presents, as are many of our international partners who recognise the attractiveness of doing business with the UK. We will have discussions with countries on the potential for future free trade agreements. There are limits in terms of concluding deals while we remain a member of the EU, however, and we recognise those constraints. The Government will be holding discussions and making progress in the period before we leave the EU. The noble Lord, Lord Razzall, asked how long it would take to negotiate trade deals with different countries. Trade agreements vary in shape, scope and form and, therefore, there is no average timeframe for a deal. For example, the Trans-Pacific Partnership Agreement—TPP—took eight years, but the US-Jordan FTA negotiations took only four months. The process is complex and it would be wrong to set out timelines before entering into negotiations. We want to get the best deal for Britain. We have already received positive signals from a number of other countries and the Government have already announced the establishment of a bilateral trade working group with Australia and a bilateral trade policy dialogue with New Zealand. In addition to this activity, the leaders of countries including Mexico, South Korea and Singapore have said that they would welcome talks on removing the barriers to trade between our countries.
As many noble Lords have recognised, one of the advantages of leaving the EU is the greater flexibility it offers us to trade more freely with the rest of the world. My noble friend Lord Flight spoke of the importance of increasing trade with the Commonwealth, an issue on which I too have spoken before. Shared systems and language mean that the cost of trade between Commonwealth countries is already estimated to be 19% lower than that with non-Commonwealth countries. There are enormous opportunities for increasing trade with the Commonwealth, which is a priority for the UK. We are committed to helping the Commonwealth unlock its vast potential in this area.
We also want to promote free trade by making sure that our regulatory environment helps businesses and workers. We are committed to reducing regulatory barriers to trade and will continue to give our strong support for further WTO action to reduce and eradicate non-tariff barriers. With a reduction in tariffs in many advanced economies, tackling non-tariff barriers is increasingly important. We will work with trade partners to minimise the regulatory burden placed on exporters, where appropriate, by developing mutual recognition agreements and economic partnership agreements. We will also work within the WTO to build on its successful work in taking an axe to red tape across borders, phasing out distortive export subsidies, and scrapping tariffs. My noble friend Lord Caithness mentioned investor state dispute settlement; the UK has a great record of creating the right environment for investors and treating them fairly. We have more than 90 such agreements in place with other countries and there has never been a successful investor state dispute settlement claim brought against the UK, nor has the threat of claims affected the Government’s legislative programme. But many UK investors overseas who have suffered discrimination, expropriation and lack of due legal process have relied on investor state dispute settlements.
Noble Lords will be aware that the Government are developing an industrial strategy that will put the United Kingdom in a strong position for the long-term future. This strategy will focus on improving productivity and rewarding hard-working people with higher wages. It will focus on creating more opportunities for young people and will ensure the benefits of growth are shared across cities and regions up and down the country. As my noble friends Lord Tugendhat and Lord Lupton highlighted, the industrial strategy must ensure that the economy delivers for all and not just the privileged few. The strategy will support and encourage companies to trade internationally, and create a business environment that will attract overseas investors to locate here for the long term. On top of all this, the strategy will identify and maximise the opportunities that we have from exiting the European Union, which we have discussed in such depth today.
The noble Lord, Lord Shipley, asked how we promote exports locally and whether the Department for International Trade is reducing funding to regions. The department supports all areas of the country. Support to the north and the Midlands has been up-weighted because overall economic indicators of prosperity are lower for those areas than for London and the south. Department for International Trade support continues to be available from international trade advisers in all English regions. This support is more sharply focused than ever on new exporters.
In response to the point made by the noble Lord, Lord Sterling, may I say that increasing opportunities is hugely important for SMEs. Small businesses account for more than 99% of private businesses in the UK, employ more than 15 million people, and generate nearly half of all private sector turnover. They play a vital role in the economy and in global trade. The Government will continue to support them, from working to reduce tariffs that hinder exports, to making sure that 95% of UK premises will have superfast broadband by 2017.
Another important question we must continue to consider as we leave the EU is how we can support developing countries. Countries to which we are providing aid today will be the markets that we can trade with tomorrow. The UK remains committed to ensuring that developing countries can reduce poverty through trading opportunities. Trade is an effective way of driving economic growth, and of helping to raise incomes and create jobs.
In answer to the question asked by my noble friend Lord Farmer about the role of DfID in terms of free trade with poorer countries, I can say that the UK’s aid programmes are tackling the domestic constraints in developing countries, reducing the costs of trade, integrating firms in poor countries into global value chains and improving the investment climate. DfID is committed to ensuring value for money and maximising the impact of UK aid on poorer people’s lives.
I thank noble Lords for their contributions over the course of this debate. Many valid points have been raised—for example, on international students’ ability to come to the UK; I think it was the noble Baroness, Lady Smith, who raised that point. I shall take those comments back to raise with the relevant departments and get back to her.
Noble Lords’ expertise will be invaluable to the Government on this most important of issues. I am sure that there will be many further opportunities to debate the subject of leaving the EU, and the trade opportunities which that brings to the UK. And I am sure that the House will continue to play an invaluable role in informing the Government on these issues.
My Lords, I thank the Minister for her comments, and for allowing this debate to take place. As she said, over the past three hours we have had a variety of contributions from people with an extraordinary amount of knowledge. We also welcomed a maiden speech from the noble Lord, Lord Gadhia—who I would advise not to get used to the outpouring of affection and love, or expect it every time he speaks. None the less, it was well deserved.
It is difficult to draw any conclusions of unanimity, although I will try to keep to the description of me by the noble Lord, Lord Mendelsohn, as “enthusiastic”. The first theme to come through was that we are all keen to see more free trade, and we need to find ways to ensure that it happens. Secondly, we are all aware of the huge uncertainty, which we all counsel the Government can be damaging to business. However, many businesses quite relish uncertainty and, as the noble Lord, Lord Farmer, said, they are used to it.
One worrying phrase I heard was that “politics trumps economics”. I do not know whether that is necessarily true; I hope it is not. It was reassuring to hear that in the privacy of certain conversations some politicians recognise that free trade is vital to this country, so perhaps I am not entirely living in the land of wishful thinking.
The current situation is not perfect, despite the fact that many people said that we might be losing something wonderful. As my noble friend Lord Bamford pointed out, there are imperfections. The Motion before us in this take-note debate mentions “opportunities”. One can only hope that we end up with a trading arrangement that allows all citizens of this country to benefit—and, more importantly, allows people from other parts of the world who are currently prohibited, or inhibited, from trading with us on effective terms, to do so.
Motion to Take Note
My Lords, it is a privilege and a pleasure to open this debate on social mobility. Despite the subject of the previous debate, I contend that there is no more significant subject than social mobility, not just at this time but at any time. As is usual when starting a debate, I declare my interests as set out in the register. I am very much looking forward to the contributions of all noble Lords from across the House—not least the maiden speech of the noble Baroness, Lady Couttie, who is incredibly welcome today.
I am pleased to be able to call the noble Baroness my noble friend. Before joining your Lordships’ House she had an extremely successful career in the City before joining Westminster City Council, becoming its extremely creative and wise leader. Words close to her heart are, “Local people know best”. Hear, hear. I am sure that we shall hear many wise contributions from her, not only in her maiden speech today but on many subsequent occasions—not least as your Lordships’ House falls within her manor.
I shall read a quotation:
“where every single person has the opportunity regardless of background or that of their parents to have the chance to achieve whatever they want”.
Those words were spoken by the Prime Minister in Birmingham at the Conservative conference last month. They are important words for anybody occupying the role at No. 10, but they are equally important for all of us if we are to ensure that everybody, whatever their background, their geography or their socioeconomic status may be, has the opportunity to succeed in modern Britain. If we cannot all put our hands on our hearts and say that everybody has that opportunity in Britain today—to rise, to achieve, to get out from under—what is the purpose of politics? How can we suggest that Britain is a civilised modern 21st-century democracy?
Many subjects will be covered this afternoon—early years, education, employment, housing and health, not least mental health. Those are some of the key enablers of social mobility. Even more significantly, what are the key characteristics, the underpinnings, that must be in place? They are stability, security, self-belief, self-worth, self-discipline, approach and attitude. All those and more are what enable that most powerful of forces, social mobility, to flourish right across the nation.
I shall focus my opening remarks on school and sport, digital and diversity, apprenticeships and aspiration, character and collaboration. It is pleasing to see that the schools budget has been protected: it has risen by 3% on 2014-15 and will be some £40 billion next year. What everybody should seek is quality aspirational education for all—and within that not just academic work, but those elements of the curriculum that inspire, and touch our souls and hearts: sport, music, debate, drama, literature, dance and more.
I have a specific question for my noble friend the Minister on the proposed sugar tax. How will this be deployed to ensure that sporting opportunities are increased right across the sporting life of our young people, not least to put right the appalling decimation of school sport that happened post-2010, and in the current environment to bolster the excellent sports strategy set out by my honourable friend Tracey Crouch last year? Similarly, how will we ensure that character education is such an integral part of people’s learning? Of course, it goes without saying that literacy and numeracy are important, but in an increasingly complex and fractured labour market, resilience, grit, determination and respect will get people through—all the stuff which I know from first-hand experience, and which is set out in the character education programme. Therefore, what are the new Government’s plans to champion character education? When I attended the character education awards earlier this year, I saw at first hand what tremendous work was being done in this area.
Surveys demonstrate that where people have the opportunity to engage in sport, their numeracy can rise by up to 29%, with similar increases in behaviours. This cannot be underestimated. It is not just about social mobility, although of course that is in the mix. If we can turn inactivity into activity—this goes wider than sport and encompasses recreation, leisure, young people getting involved in sport, games and having fun—it will not just positively impact social mobility, but there will be a boon for the economy of potentially £53.3 billion.
An example of this to which I have referred in earlier debates is the Hackney Boxing Academy. Its trained staff mentor groups of six young people and work on numeracy, behaviour and skills learned through the sport of boxing. You could barely put it in starker terms than one of the graduates of this programme, Dylan, who said, “As a result of being involved in this programme, I am a completely different person”. What more could one say about social mobility?
We also need effective careers advice to enable people to even know about some of the jobs available, never mind be able to aspire to them. I was lucky enough to be a member of the Lords Select Committee on Social Mobility that reported earlier this year. We found that the provision of careers services for young people was at best patchy. This needs to start not in the sixth form or in secondary education but right from the first moment that someone steps into the classroom. They need to be exposed to opportunities and possibilities. When I was young I did not have a clue about the full range of jobs and opportunities that existed.
Role models are incredibly important. Working parents are obviously the most significant role model but also people from different backgrounds going into schools and talking to pupils. The Primary Futures programme is an excellent initiative of the National Association of Head Teachers whereby people from different walks of life go into schools and talk to young people. They do not wait until the young people enter secondary education but talk to them when they are in primary schools to spark young minds to think, “I could do that. What do I have to get in place to achieve that?”.
In Birmingham last month, my right honourable friend the Secretary of State for Education announced opportunity areas to drive social mobility. Six have already been identified. Will my noble friend say when the next four will be released? What further information can he give the House on these opportunity areas? How exactly will they work to drive social mobility?
As I mentioned at the outset, collaboration is incredibly important. It is difficult enough to drive cross-Whitehall working but it is essential to collaborate with local authorities. If, for example, local authorities shared their data with schools, given the data that local authorities have, children could be auto-enrolled into free school meals and the pupil premium, thereby cutting out bureaucracy and any potential for those pupils to fall through the cracks in terms of opportunities.
What of life post-school? It seems extraordinary to me that in 21st-century Britain there is still such a disparity of esteem between higher education and other potential routes post-school. I believe that many people go to university who, with the benefit of better advice and greater foresight, could have chosen another route which might have afforded them greater opportunity and social mobility. Perhaps we should consider ending the national curriculum when pupils reach 14, and treat the years between the ages of 14 and 19 as a period of potential transition. At this point I give more than a positive nod towards my noble friend Lord Baker and all the work that he did on university technical colleges. That vocational opportunity is for many people not just a route but the right route that will deliver them a better life, better opportunities and, potentially, more income—not that that is a fundamental point.
We have heard much about apprenticeships. I fully support the ambition to have 3 million apprenticeships by 2020. That is not easy to achieve and there has been a lot of concern around maintaining the quality of those 3 million apprenticeships. I was delighted to see the announcement earlier this year on the appointment of a regulator to set standards and ensure that an apprenticeship does what it says on the tin. We and young people need to be assured that an apprenticeship is a badge of quality and that, if they put in the time to achieve an apprenticeship, it has real value. Will my noble friend tell us more about how the role of the regulator is unfolding? Some 2.3% of new entrants to the public service will be apprentices. This is a brilliant boon for young people but will also enable the public sector to truly benefit from what apprentices can bring to it. Payments for firms with fewer than 50 employees enable them to offer apprenticeships right across their operations. This is what 3 million apprenticeships can offer. However, none of us should doubt that to deliver that day in and day out through to 2020 is no easy task.
Probably the biggest threat and biggest opportunity facing our country is the digital revolution. It is already well under way and will make the Industrial Revolution look like a children’s tea party. The Industrial Revolution took place over more than 100 years but the digital revolution is happening sometimes in weeks. Why does this matter to social mobility? It matters because potentially 35% of existing jobs are in danger of being automated. Many of these jobs were previously guarantors of social mobility. What does this mean for people’s ability to climb up the social ranks? By the same token, 1.1 million new jobs in the digital economy need to be filled before the end of this decade. The report of the Select Committee on Digital Skills, Make or Break, which was published the year before last, recommended that in schools and through life digital literacy needs to be considered as important as literacy and numeracy. It is that significant if everybody is to be able to benefit from digital opportunities. Alongside that, superfast broadband needs to be available to all and everybody needs to be online. That is not just something that is nice to have; the internet and superfast broadband should be viewed as being as important as a utility because so much will depend on people’s digital skills and their ability to transact and interact online. When you look at the 7 million people currently offline, you see that lower socioeconomic groups and disabled people are highly overrepresented in that offline community. Talking of inclusion, I point out that 4,000 young people received an A-level qualification in computer studies in 2014 but that fewer than 100 were girls. If we are to ensure that everyone has the chance to benefit from digital opportunities, we need to ensure that they are fully inclusive for all.
I turn now to volunteering. I thank all the organisations that have sent in briefings across the various areas of interest in this debate. Volunteering can have such an important role when it comes to improving people’s opportunities to get on in life. Look at the debate earlier this week on Second Reading of the National Citizen Service Bill; I fully supported that initiative. Some 200,000 people have already benefited from it; more than seven out of 10 say that they believe that their involvement in the scheme has made them more confident in terms of gaining employment. It is significant, it is unique and it will have a profound effect on volunteering in this nation.
It is also crucial to recognise all the other organisations that do great stuff in this area, not least the Duke of Edinburgh’s Award, for which I am lucky enough to be an ambassador. It is chaired by my noble friend Lord Kirkham. If you were to look up “social mobility” in the Oxford English Dictionary, and it said “the life of Lord Kirkham”, you could get few better definitions.
In sum, we need to focus on early years education, employment, aspiration, attitudes, formal education, everything that happens outside the classroom, volunteering, and opening up every opportunity. All of us across the country need to think about what we can do as individuals to try to increase people’s ability to get on in life. Essentially, the fundamental truth remains the same: talent is everywhere; opportunity is not. Our business this afternoon is social mobility; our business all days needs to be social mobility—how to ensure that we are doing everything we can to enable everybody to achieve their potential in whatever field that might be. That could truly enable Britain to say, “We are on the right path”. That could truly enable Britain to be a fundamentally better place: open, with opportunity for all. I beg to move.
My Lords, I thank the noble Lord, Lord Holmes, for introducing this debate. I had the pleasure of serving with him on the Lords Select Committee on Social Mobility. I know of his passionate interest in this subject, and I congratulate him on the way that he has introduced it. He has given us an insight into the extent of this problem and its importance. I also add my welcome to his for the noble Baroness, Lady Couttie, and say that I look forward to her maiden speech and wish her well during her time in the House.
To some extent, social mobility is a challenge of our time. Perhaps for the first time, there is political agreement across the spectrum that it needs to be addressed and we need to do better than we have done in the past. In truth, whatever we think about our country, whatever our achievements, and however proud we are of what we do, the fact that our social mobility record does not compare well with our competitors overshadows those achievements and makes us not the sort of country that we would want to live in. That underpins our need and desire to try to improve in this area.
As the noble Lord, Lord Holmes, said, social mobility covers a wide area of issues. In the time that I have available, I am mainly going to concentrate on one, but I just wanted to acknowledge two other areas before I move on to that. First, we very often see social mobility as an issue for education and an issue about youth. It is not: we should live in a country where adults have the opportunity to be socially mobile as well, even if they did not have the opportunities during their youth. That falls to the area of skills and reskilling and giving people opportunities throughout their lives to achieve their potential and do as well as they can. Secondly, I am conscious that many children and young people achieve grades but find that they do not have the opportunities available to others because of their backgrounds. I acknowledge that that is a problem: it is about a change in culture throughout society, not just about what we can do in this House and through legislation.
I turn to my main area of concentration: those children who do not achieve in school and therefore do not experience the problem of having the grades but not getting the opportunities after that. If you look at the policies of both political parties for the last 20 years, you cannot say that there have not been attempts through the school system to try to increase and improve social mobility. Every policy that is launched now is introduced in the name of social mobility—in the name of giving those left behind a better chance and of closing the attainment gap. So it should be: that is a challenge that falls to education in schools. I acknowledge that success: today in schools throughout this country, there are young people who have been given opportunities through the school system, who are socially mobile and who will go to university and have the skills and opportunity to achieve what they want to achieve.
However, we are at risk of assuming that schools can solve the problem by themselves. I worry that, in answer to the question “What should we do about social mobility?”, too many people say, “We have to improve schools”. I know that we have to improve schools and that a failure to close the attainment gap in schools is a failure of the school system. I do not shy away from that, but I know that schools do not cause the problem in the first place. We should not shy away from that either. They are asked to address and remedy an endemic problem in our society: what they inherit with children at the age of five is a difference in attainment that is clear from the age of 18 months. Look at those geographical areas that underperform at GCSE and A-level, that we bemoan do not get as many children to university as we would like. When you look at what we call school readiness in that area, you find that that is low as well. We know that standards in schools are low in the north-east, but guess where school readiness is also low: in the north-east. We know that achievement is good in London boroughs, and—guess what—when you look at school readiness measures, they are actually far better in London than in other parts of the country. Let us be clear what we mean by school readiness. It is to be able to listen, to speak, to pay attention, to handle objects, to move confidently, to have self-confidence, and to have social skills. It is those basics that any person needs if they are to stand a chance of doing well throughout life and throughout school.
We know a lot about that group that does not have school readiness. We know that those children are more likely to be poor and more likely to come from families that have ill-health and low skills—not all lazy and dependent on benefits. We know that by the age of five, they will know fewer words than people from middle-class families; that their social and physical skills will be less developed; that their mothers are less likely to have attended antenatal classes; and that their parents are less likely to have accessed what we might call enrichment activities between the child’s age of nought and five. The Government have to ask themselves whether they are doing enough to address the needs of this age group. In truth, all Governments have a tendency to put their efforts, emphasis, money and resources on schools. As somebody who is passionate about schools—and I spent my ministerial time concentrating on schools—I am not inviting the Minister to stop focusing on schools. However, I invite him to consider that the way in which he could most help schools to close the attainment gap is to do more for the age of nought to five.
When I look at what the Government are doing on this, I acknowledge that they have put more money into childcare; I acknowledge the pupil premium, which was part of the coalition. However, the Commission on Social Mobility and Poverty says that the efforts to improve the school readiness of the poorest children are unco-ordinated, confused and patchy.
We know that despite the importance of this nought-to-five period, it is where our least-qualified and lowest-paid teachers are, and where there is less stability. Both the Minister and I could probably quote the floor targets for key stage 1 to GCSE and A-level. I also know by heart the underperforming local authorities or the type of school that is the most underachieving. I think I know what his targets are for every stage of school. I do not know what his targets are for the other years, what he is doing about children’s centres that are falling behind, or what the emergency intervention strategy of the Government is for nought-to-five provision that is not coming up to scratch. When I look through the DfE website, I cannot see a speech the present Secretary of State has made about early years, four or five months into her office. I will stand corrected if the Minister tells me that I am wrong.
Again, the best way to raise standards with some of our children in some of the most challenging schools from the most challenging backgrounds is to reduce the development gap between children when they start school. I very much hope that the Minister might consider adopting that as a target and working toward achieving it.
My Lords, when I saw that this debate was down in the name of the noble Lord, Lord Holmes, I immediately thought, “Yes, I’m going to say something about that”—and then I thought, “I have a lot to say about that, on numerous subjects”. It was restrained of the noble Lord in his 15-odd minutes to limit himself to a number of subjects, because everything affects social mobility. However, I will try to exercise a little restraint and will talk about only two areas. One is how we help those in the education system—I take on board the stricture of the noble Baroness, Lady Morris, on this. The first thing you should say is that your parents are your key educators, and doing anything that improves the status your parents give you is a difficult task. So we are setting ourselves a little mountain to climb at the beginning.
Also, your parents will usually tell you to be like them. I am afraid that when people tell you to be like them, it brings in a whole series of straitjackets. It is also worth reminding ourselves that occasionally people who are in one of the professions do not want their children to do anything else. So if you happen to be a potentially excellent cabinetmaker or artist, you may be restrained from doing that. But I agree that that is a smaller problem than many others. If there is this pressure on you to attain and jump over certain hurdles, usually educational ones which allow you to access the better opportunities and things, are we identifying properly all the things that might slow you down?
I hope that the Minister will not be terribly surprised—indeed, I hope that his office passed on my advance warning on this subject—that I think that when it comes to special educational needs or the “hidden disabilities”, as I like to call them, which you have to look for and know what you are looking for, we are not at present equipping our teachers and educators throughout the education system to identify these people, who have different learning patterns. Let us face it: this subject has been given a little frisson by the idea that grammar schools will come back in and make everybody more socially mobile.
The Minister made it slightly more difficult for me to have a go at him after I asked him a question about the age of entrants and the flat rate by saying, “No, we’re not going to do that—we’re going to do it differently”. If we are going to do this and think it is a good idea, and if we are going to have a different series of entrance requirements, how will we identify those people who need to be tested differently, to see that that they will benefit?
I do have a moment to reply—which is the advantage of not being tied to notes. Yes; there is a waste to society. To go back to my point, if the wrong people are getting there, if you are not getting others properly qualified and they are not going through, and you want to create a fast track—which preferably will get people to the right position in society, which will benefit society—you have to identify it. I hope that the Minister will be in a position to say whether we will make some movement on this. I know that there has been some contact between us, but it is probably a good idea to let the rest of the world know what we are thinking about here. If we do not, as has just been mentioned on what I will call my physical right, it is a great way of wasting resources and the benefit to our society.
Secondly, in the debate on the National Citizen Service Bill—which, oddly, I managed to listen to about half of on a monitor and in the Chamber—it struck me that in a small way this was quite a nice idea. But it then struck me that many of the social activities that people might be removing themselves from because their parents do not do them already do this. In many sports clubs—especially the bigger ones, which have a mix of people from different backgrounds who interact—and art, drama and music groups, you have a point of contact with people outside your immediate group on a subject that allows you to interact socially. If you can do that, you have the aspiration and the idea that it is worth while to undertake the extra effort in things such as education.
This is about bringing things together. The noble Lord, Lord Holmes, suggested that bringing bits of Whitehall together is a herculean task. The thing is that two Ministers come together and work until they are dripping with perspiration; they bring things together and then two Ministers come in who have new agendas, budgets and priorities. How do we integrate this across the board and not have people fighting with each other about their little patch of authority? It is a job that I am afraid we will always be going back to.
Can the Minister describe the practical educational terms used to identify those who will struggle—how much further progress have we made? When it comes to the use of outside bodies, what attempts are we making through things such as governing bodies of sports to say that part of their job, for which they get some support from government, is to make sure that people are aware—younger people and, as the noble Baroness, Lady Morris, said, people who are reskilling and retraining later on—that these things are out there and you can act on them. Nothing will work by itself; if you go into a silo, you will stay in a silo and that is where you will end up.
My Lords, I congratulate my noble friend Lord Holmes on securing this important and timely debate and I also very much look forward to my noble friend Lady Couttie’s maiden speech. One of the policy areas I will touch on today is the troubled families programme. Since 2008, Westminster Council, which my noble friend leads, has been helping families to restore order when they find themselves in chaos, through its family recovery team. It was an important trailblazer for this Government’s national programme. I am delighted that she will be on these Benches and I hope that she will join me in keeping the pressure on the Government, and indeed on all political parties, to develop an armamentarium of policies sufficient to tackle the epidemic of family and relationship breakdown.
Families are of fundamental importance to the whole process of social mobility, for good or for ill. When relationships between parents break down or when families cease to provide a safe, stable and nurturing environment for children and young people, it can make it far harder for them to thrive, especially when the family has other difficulties such as worklessness, serious personal debt, mental ill-health or addictions to drugs or alcohol.
Children from stable families tend to have better mental health, and preventing mental health problems from developing is incredibly important given their concerning prevalence among today’s young people. Such children also have greater access to social capital, more confidence, better-developed social networks and, therefore, more of the ingredients needed for them to experience upward social mobility.
Young people’s character and resilience have deep roots in the parenting they have received, as the noble Lord, Lord Addington, mentioned; important life skills are for not only the education system to impart. Yet, in efforts to improve social mobility, it is far too easy to ignore families’ influence, focus solely on other areas such as education and work and to be overly “economistic”. The noble Baroness, Lady Lister, cautioned us against this during the passage of the Welfare Reform and Work Bill.
Families are the neglected third pillar of the welfare state. That is why I, the Children’s Commissioner and the Centre for Social Justice keep bringing the concept of family hubs to the attention of Ministers and policymakers. Rather than letting their children’s centre stock wither on the vine, several local authorities have recognised that they need to make this infrastructure work even harder. They are integrating troubled families, early help and other budgets, including public health, in order to integrate and expand services within existing spending settlements. So help, including relationship support, is accessible for parents of children at any age through family hubs. They are somewhere to go where someone will have the answers.
The Children’s Commissioner has indeed issued a discussion paper on family hubs this month, which states:
“Family hubs would co-ordinate statutory and voluntary approaches to tackling the root causes of inter-generational poverty, family breakdown and poor outcomes for children. They have social mobility and family stability at their core”.
The Department for Education has a role to play in spreading such good practice and helping local authorities work through financially credible alternatives to simply closing children’s centres. Can my noble friend the Minister inform the House when the long-promised consultation on children’s centres will be launched?
The costs of family instability and failure are picked up by the health service, criminal justice and the courts, the benefits system, education and social care, businesses—the whole of society. This is why I have also been talking to many Ministers about the need for every government department to develop policies to strengthen families. I welcome the introduction of the Government’s family test and urge its strengthening. But this is reactive.
The test needs to be complemented in every government department by proactive policies to help create strong families, in the awareness that they are as essential to national success as employment and education. This join-up is happening locally; an important part of the rationale behind the troubled families programme was that getting truanting children back into school and long-term workless parents into employment required addressing the complex family issues holding everyone back. For example, it means integrating help and support so that specialist employment advisers work alongside family intervention key workers, and schools reinforce what these workers are seeking to achieve with families.
Could the Minster inform the House, what has been the impact of employment advisers from the troubled families programme on getting people into work? The great prize of this programme has always been its potential to drive systemic change, not just in the families whose problems are blighting their lives and draining local budgets but in how public services work. A similar systemic change in the structure of central government is also required if stronger families are to emerge and help drive much-needed improvements in social mobility.
My Lords. I thank the noble Lord, Lord Holmes, for securing this debate. I know he has great commitment to this issue, not least through his work on the Select Committee on Social Mobility.
I also join others in saying that I am looking forward to the maiden speech by the noble Baroness, Lady Couttie. The issue of social mobility was the subject of my maiden speech earlier this year.
When we make the case for improving social mobility in our country, there should be a moral, a political and an economic dimension to our argument. The moral case is surely unarguable: that everyone deserves the same opportunities in life, irrespective of the family they were born into, the place where they live, or the school they attend; and that no one should be condemned to a life of poverty and low expectations simply because they were born poor. Instead, we should strive to build a society where your progress in life is determined by your aptitude, ability, effort and aspiration. So it should be of great concern that there is currently a gulf between the Britain we are and the Britain we should strive to be.
Today, the UK is one of the least socially mobile countries in the developed world. A boy born into a middle-class family is 15 times more likely to become middle class himself than a boy born into a working class family—odds unchanged over the past 100 years. My noble friend Baroness Morris referred to the fact that, by the age of five, a child from the poorest 10% of families will already be 19 months behind a child from the richest 10%. On the current trajectory, it would take 30 years before the attainment gap in schools between poorer children and their better-off classmates even halved; and it would take 50 years to close the gap between those parts of the country that send the most children to university and those that send the least. Of course, none of this is to say that social mobility never happens; it does, and many succeed against the odds. But that is the whole point—they have to swim against the tide if they are to get on.
This divide in our country was brought into sharp relief by the vote to leave the European Union. The correlation between those who voted to leave and those areas with the lowest rates of social mobility is hard to deny. Of the 65 areas of the UK identified by the Social Mobility Commission as the worst for education and employment prospects, only three voted to remain—so the political case for improving social mobility has become acute.
The idea that each succeeding generation will do better than the last is fundamental to an aspirational society, and fundamental to the fabric of Britain. But if so many feel they are consistently excluded from this idea—that their ambitions are consistently thwarted, while they see the rest of the country forging ahead—we create the space for a dangerous politics of resentment.
It is in this context that the Prime Minister's commitment to heal these divisions and build a country that works for everyone is so welcome. But we must ask whether this desire for a different kind of society is matched by plans capable of delivering it. Initiatives such as the new opportunity areas and the youth investment fund are, of course, welcome. However, if the Government’s highest-profile policy for social mobility is a return to grammar schools, then the answer is surely no.
To genuinely promote social mobility, we need a comprehensive strategy that includes employment support, housing, early years provision, vocational education, public health and parenting skills. Our consistent failure to meet the moral obligation to improve social mobility contributed to the vote to leave the European Union, which in turn has the potential to create real economic challenges for our country.
A strong economic case for high rates of social mobility has always existed: that we should minimise the loss of productive potential from talent that is never deployed. Indeed, an economic analysis by the Boston Consulting Group for the Sutton Trust estimated that closing the educational attainment gap could add as much as 4% to GDP. But leaving the European Union makes this case even more important. Now, more than ever, we cannot afford to waste anyone’s potential. We must make use of all the talents in our country as we seek to remain internationally competitive.
The economic consequences of Brexit, when it happens, have the potential to create a perfect storm for social mobility: less inward investment would mean fewer career opportunities for young people. Businesses leaving the UK—or corporation tax cuts or subsidies to induce them to stay—would reduce our tax base and the money available for deprived communities. A shrinking of the financial services sector would remove a powerful engine of social mobility. Any recession would disproportionately impact young people at the beginning of their careers, and reduced opportunities to work and travel freely within the EU would risk curtailing their horizons and aspirations.
We know what happens to social mobility in these circumstances: those from privileged backgrounds jump to the front of the queue for scarce job opportunities, ahead of their more disadvantaged counterparts.
At this time of profound economic change, it is vital that we embed our commitment to social mobility in the development of new policy within government. As the noble Lord, Lord Farmer, said, the Government have done this successfully elsewhere, ensuring, through the family test, that a family perspective is considered in every new policy.
I end by asking the Minister whether the Government will consider a similar initiative for social mobility, issuing guidance to government departments in the form of a social mobility test, to ensure that the impact on social mobility is recognised explicitly in all that the Government do.
My Lords, in these few minutes I should like to set the concern and aspirations for social mobility—already so well introduced by the noble Lord, Lord Holmes, and other noble Lords—in the context of the challenges faced by many people, some in my own diocese, who face the daily grind and trial of simply getting by for the day or, at best, the week. The Prime Minister has referred to the need to focus on “just managing” families, and I agree with her, but surely the task is to help make it possible for them to do better than just manage, enabling their energy to be taken up not just in dealing with the everyday challenges but in improving life chances for themselves and their families, including social mobility.
The policies inherited by this Prime Minister and her new Government can be expected to have a significant impact on those towards the bottom of the income and privilege ladders, whom we surely want and ought—if I may introduce a note of morality—most to support and encourage. Those who are on benefits, and whom none of us wishes to keep reliant on them, will see income reductions in the years ahead. I am thinking most of those in work and on benefits. There will indeed be some modest compensation for cuts in working-age benefits from income tax changes and the introduction of what the last Chancellor styled the “national living wage”; nevertheless, the bottom 30% will see a reduction. The same suite of policies is expected to raise incomes for those of us in the top half of the distribution. If there is higher inflation, and even if just a temporary contraction of the economy follows Brexit, the poorest will be likely to be hit the hardest. All this has an impact by retarding social mobility. These people will need extra support to manage, not less.
It is against that background of existing policy that we engage in a debate about doing more than managing—that is, improving opportunity for social mobility. It is hard, and sometimes impossible, to seek a new or better job or to support your children in their education if your daily preoccupation has to be with getting by. As we enter a period when there will be difficulties for those on the lowest incomes, we need to ensure that economic inequality does not worsen the base from which mobility can come. Trapping people on a lower income undermines social mobility, making it more difficult to access other welcome initiatives to address intergenerational mobility.
I accept that social mobility is not only about income, but it is a major factor in, and influence on, people’s ability to access other opportunities. Having to struggle to get by and, for instance, working very long hours on low pay, reduce time and energy for parental engagement in their children’s development. An advantageous home environment is very important in a child’s early years development. Enough parental and adult time, energy and money are essential for children to access sport, non-statutory educational opportunities and community engagement, all of which should begin at an early age if mobility is to be possible.
A key finding from the Social Mobility Commission highlights areas of the country that have become social mobility cold spots, particularly coastal areas. Some are in the diocese that I serve, covering the mainland coastal areas of Gosport and Portsmouth, along with the Isle of Wight. Many of these areas perform badly on both educational measures and adulthood outcomes, giving people from less advantaged backgrounds limited opportunities to get on. Regional disparities require focused attention, and I trust that our grand aspirations lead to resourcing for hard-to-reach regions and communities and the people who live there.
I draw my comments to an end, delighted to make way for the much-anticipated maiden speech of the noble Baroness, Lady Couttie. In our ambition to enhance social mobility, we must recognise the reality—that those just managing are those who ought to be our special focus.
My Lords, it is with great humility and a deep sense of pride that I stand before your Lordships today as a Member of this noble House, as ready as I will ever be to give my maiden speech. I have to admit to feeling a little daunted, as I do so in front of such an august audience.
To a certain extent, the enormity of my entry to your Lordships’ House is still sinking in as I try to learn the great customs and traditions of this hallowed House, but your Lordships have all been so welcoming, for which I am very grateful.
I would like to take this opportunity to highlight my appreciation to my two supporters, my noble friends Lord Lamont and Lord Astor, for introducing me to the House. It was an incredible honour to have their patronage and it is something that I will always remember. I must also place on record my sincere thanks to the talented team of officials here; they have been a tremendous source of knowledge and orientation.
Now, I am giving my first speech to the House on a matter that was the driving force behind my entry into public service—how we promote social mobility. I feel privileged to speak in a debate led by my noble friend Lord Holmes, who is himself such a role model.
I was fortunate enough to be sent out into the world from a strong foundation and with support from my parents. I recognise how fortunate I was to have the opportunities afforded to me and, as a result, I have been driven from an early age to help others to reach their full potential.
On leaving St Andrews University, I began my career in public relations, where I became the managing director of a subsidiary of a publicly quoted company, and I founded, built up and sold two businesses. I then joined Schroders, where I headed its principal finance business, funding the redevelopment of schools and hospitals and building new ones. Schroders was taken over by Citigroup, where I became a director.
Most noble Lords will not see that investment banking has anything to do with social mobility, but in fact it was the ultimate meritocracy. I worked with individuals from every nation, creed and socioeconomic background, including those who had left school at 16 with few qualifications but who, by dint of their intellect, hard work and a bit of luck, had reached senior levels within the bank. I realised how important aspiration and all types of opportunity are in determining life chances.
Then, later in life and after some considerable struggle, I had twins, prompting me to leave the City. Politics has been part of my life since childhood, so, when a council seat became vacant in my own ward, I decided it was time to put something back into society and bring my experiences in the private sector to the world of the public sector. I had an ideal which inspired me—that to help individuals and communities succeed, we must facilitate the ladders of opportunity for people to make the kinds of steps forward that they want to make.
Government, both central and local, works best when it nurtures our human instincts to succeed and to build a better life for ourselves and our families. Government works best when it helps people to realise that potential and does not unwittingly stifle it, locking them in to a cycle of dependency and despair.
On being elected to Westminster City Council in 2006 and then, in particular, since serving as its leader, I have sought to weave the ladders of opportunity into my work. Despite the world-renowned tourist destinations and nationally significant economic dynamism of areas such as the West End, Westminster is a city of contrasts. Sitting cheek by jowl with some of the most desirable postcodes on the globe are pockets of severe deprivation, experiencing levels of poverty comparable with the highest in the country. In one of our wards, 50% of the residents are unemployed, and 50% of those have mental health issues. In another of our wards, 100% of the children are deemed as living in poverty.
In this day and age, in the very centre of our nation’s capital, no one should find themselves in that situation, and I have been determined to create the education, skills, housing and social support that Westminster residents need to succeed in their ambitions. I have committed the city council to tackling long-term unemployment as its number one priority. We have 10,000 long-term unemployed people in Westminster, many with complex issues, including mental and physical health problems. Tackling this worklessness is not easy, but we are succeeding. We are also supporting parents on low incomes to find better paid work to help tackle child poverty. Success can be achieved only with the local authority, employers and other partners working together to ensure that people can access jobs, training, apprenticeships and work placements. I am glad to see that the opportunity areas proposed by the Government suggest just such an approach.
As cabinet member for housing, I completely reinvented the way that we approached investing in our housing stock, not only to deliver over 1,000 new homes but to build an economic regeneration in our deprived areas. It was underpinned by my belief in building communities with the right infrastructure and jobs for local people, as well as homes.
In giving our children the best possible start in life, Westminster’s troubled families programme has gone from strength to strength, as my noble friend Lord Farmer has mentioned. I am aware that recent coverage of the scheme has not been positive, but that certainly does not reflect the experience in Westminster, as we have turned round the lives of more than 1,500 families.
In January this year, the Social Mobility Commission published an index setting out the differences between where children grow up and their chances of doing well in adult life. The City of Westminster was ranked first out of all local authorities in the country for providing social mobility. That was because 85% of children eligible for free school meals in Westminster attended a secondary school rated outstanding or good by Ofsted. Only 8% of young people eligible for free school meals are not in education, employment or training one year after completing their GCSEs—the seventh lowest rate in the country.
It is my strong belief that no child’s life should be defined by their circumstances, and I am convinced that as a country we must redouble our efforts to promote social mobility. I welcome the Government’s clear commitment to this and very much hope that, as a Member of this House, I can make a contribution to support this.
My Lords, it is a great pleasure and privilege to follow my noble friend Lady Couttie’s exceptional maiden speech. She comes to this House not only with a wealth of experience in business and at the top of local government but with expertise in a wide variety of other roles; for example, as governor of Imperial College and a member of the London LEP. As a Westminster councillor for 10 years, including, as we have heard, four years as leader, she has a reputation for listening and consulting, as well as for running what is widely regarded as one of the most efficient, competent and innovative local authorities in the country. I know that she will not mind me telling the House that she has also battled with cancer and has spoken out about it publicly because she feels, rightly, that not enough people talk about their experiences, which can be so helpful to those struggling with the disease.
My noble friend also comes with a significant heritage. I hope it is not inappropriate to pay tribute also to her mother, Dame Marion Roe, a Conservative MP elected in 1983 at a time when there were only 13 Conservative MPs—the same number as in 1931. Dame Marion has been a wonderful support to many new women MPs and I am delighted to welcome her very able daughter to our Benches today. With her 25 years in leadership roles we look forward to significant contributions from my noble friend in the future.
I start by thanking my noble friend Lord Holmes for introducing today’s debate in his usual inspirational way. His own story of social mobility, from a working class background in Kidderminster to becoming Britain’s most successful Paralympian—amassing nine gold, five silver and two bronze medals across four Games, including a haul of six golds at Barcelona in 1992, followed by an amazing, stellar career outside active competitive sport—is an inspiration to us all. If we could bottle my noble friend’s spirit, character, personality and resilience and parcel it out, we would have no further challenges with social mobility in this country. My noble friend talked about role models and there can be none greater than him. Like all noble Lords, I am totally in awe of his achievements.
Theresa May, from her first speech as Prime Minister, has been unwavering in her commitment to social mobility. The need to redouble efforts to target disadvantaged pupils is obvious and urgent. Recent research published by the Education Policy Institute shows that there is still significant work to do to create an education system that offers opportunity for all and not just those living in the most affluent postcode areas or from the most privileged social backgrounds. No one is in any doubt that social mobility means many different things to different people. It is complex and multifaceted and can include poor health. Obesity, especially, is a major contributor to social immobility. I welcome the recent launch of the Centre for Social Justice’s inquiry into childhood obesity. As noble Lords will know, although I would like to focus more on that aspect in my speech, there is not enough time to do so today.
What is also needed is an understanding of the fact that some of the things that hold children back are not just deficiencies of the state and its machinery. These obstacles cannot all be reduced or removed by ministerial instruction or legislation or even by additional funding. We need an acceptance that some obstacles are social, some cultural, and some have their roots in the families and communities where those children grow up. You cannot legislate for higher parental ambition or better social connections.
However, a great start has been made by reorganising government so that the levers which manage and control the life chances agenda are now firmly within the Department for Education and supervised by Justine Greening, who, with colleagues such as Stephen Crabb and Robert Halfon, had prepared much of the life chances and social mobility policy work in advance of her move to education.
Much has been made of the background of the Secretary of State. It is indeed remarkable that she is apparently the first person to hold the job who was educated at a comprehensive school—although that background is actually far more common in the other place than many realise or understand. However, attitude and understanding are more important than her education, and Justine Greening is now in a position to do something about it. Anyone who cares about making Britain a country where your place in life depends on your talents and efforts should support her ambitions and programme. She says that her own background as the comprehensive-educated daughter of a Rotherham steelworker has given her the inspiration to fight for social mobility from inside government. Talking about her vision of a levelled-up Britain, she says:
“When I was growing up in Rotherham I knew there were kids getting a better start than me, but it would never have helped me to have their opportunities taken away. That wouldn’t have suddenly improved my life; it would have made theirs worse, and it certainly wouldn’t have done Britain any good at all. So for me this levelling up is about us saying we need to have opportunity and potential for children who currently don’t have it. It goes beyond education to some of the work we’re doing on apprenticeships, and about businesses saying what can they do to find those rough diamonds that are coming through and fast-track them through the system, even if perhaps they don’t have that kind of network that some other people might have. It’s about us as a country deciding that social mobility, and people being able to get to the top wherever they start and whoever they are, is one of the defining features of Britain for the 21st century. It should be something that we’re recognised for. People talk about the American Dream, but what we’re talking about”,
“is how do you create the British Dream”.
My Lords, I thank the noble Lord, Lord Holmes, one of my heroes, for introducing this debate in such a wide-ranging way. I have also enjoyed the contributions from other Members of the House, including the excellent maiden speech of the noble Baroness, Lady Couttie.
This Government, like Governments before them, expressed the wish to improve the lot of children who do not achieve all that they might. I suggest that that success has been limited due to complex factors. Many of these factors in the UK mitigate against those children who are deprived in some way. Many parental options are limited to those in the upper and middle classes. A worrying fact pointed out by the OECD report last year and echoed by the Office for National Statistics said that the UK has the worst performance of intergenerational earnings mobility compared with other OECD countries.
I want to touch on what denies and what facilitates progress. To start at the beginning, the Early Intervention Foundation has provided much valuable research on the importance of brain development in the early years, the need for language stimulation, and for books and toys. This points to the need for positive parental care action, but parenting classes are thin on the ground and mainly absent in any school curriculum. We are neglecting the most important job of all: parenting. Early years education, discussed admirably by my noble friend Lady Morris of Yardley, is not about testing, as she said. It is about developing self-esteem, self-confidence, resilience and curiosity, as well as intellectual confidence. These are the bases for success, good relationships and mental health. I am sure the noble Lord, Lord Holmes, would agree with that.
Childcare is shown to have positive effects if it is of high quality. A Select Committee carried out an inquiry into affordable childcare last year. I was delighted to be involved in its work. We took valuable evidence from a number of sources. The Government’s extended childcare offer will provide more support for many working parents. However, local provision varies in quality. We found that, too frequently, the most deprived areas have the poorest quality of childcare. There is not enough flexibility in the system, which can be difficult to negotiate for parents. What are the Government doing about this?
The Select Committee on Social Mobility, chaired by my noble friend Lady Corston, produced an excellent report on social mobility in this Session. It states that factors that may influence social mobility include coming from a poorer background, low educational attainment, family background, gender, ethnicity, health, special educational needs, disability, and where a child grows up. Comparisons have been made between the north of England and London, where the excellent London Challenge, established by the Labour Government, transformed the lives of many children. This was a well-designed and targeted intervention. The Sure Start programme, sadly being dismantled by this Government, was another successful initiative. On the other hand, we have the troubled families initiative, mentioned by the noble Lord, Lord Farmer, costing over £1 billion with disappointing results. Why? I agree on the importance of families. I say yes to initiatives and innovation, but they need to be based on firm evidence, consultation, appropriate targets and good monitoring, and, as the noble Lord said, the need to integrate.
On secondary education and grammar schools, why the Government wish to return to a flawed, divisive system I cannot imagine. I went to a grammar school. I was a working-class girl there. At that grammar school, only a fraction of the top stream went on to higher education. I know that that was a long time ago.
There was a debate on grammar schools in your Lordships’ House on 13 October. Grammar schools do not work for everyone. Those not selected, or those in lower streams of grammar schools, may feel that they have failed. What a waste. As my noble friend Lady Andrews pointed out in her riveting speech in that debate, the idea that grammar schools promote social mobility is a nonsense. I quote her:
“The fact that the heyday of the grammar schools between 1950 and 1970 coincided with significant social mobility driven by economic and technological change is just that—a coincidence”.—[Official Report, 13/10/16; col. 2014.]
We must not go backwards. We should explore what positive models work in other countries and what progress has been made in our own country. The noble Lord, Lord Baker, who I see has disappeared in a puff of smoke, inspired the university technical colleges. He said that he could not be here today; he was, but he has gone. He told me yesterday that in July 2016, 1,292 students from these colleges left with excellent results and only five were not in education, employment or training. This is from a comprehensive intake.
Good schools promote holistic education and life skills: the arts, sport, programmes of social development and so on. I agree entirely with the words of the noble Lord, Lord Holmes. They are not full of stress in pupils and teachers, as well documented by many researchers. They are models of social mobility. Unfortunately, I see no coherent plan for the education and development of young people in this country. I have pleaded before for an overall strategy for youth in this country, embracing education, health, sport, the arts and social skills. What I see at the moment resembles a kaleidoscope, constantly being shaken to change the place of the pieces. The patterns, by chance, settle down into different formations, but they are fragile and confined. Attempts at improving social mobility need better planning, cross-disciplinary action involving parents and children, and a dedicated strategy. Does the Minister agree?
My Lords, I congratulate my noble friend Lord Holmes on the debate, which is very timely. I am also delighted to have been here for the maiden speech of my noble friend Lady Couttie. I served for 10 years on Westminster City Council and my husband served for 25 years, so I am particularly delighted that she comes from that background.
It was interesting listening to the speeches. The noble Baroness, Lady Morris, for example, stressed the need for more development and encouragement in the ages of nought to five. I absolutely agree, because I was chairman of social services. In some of the ethnic groups, their only idea of how to care for their child was to keep them sedated and sit them in a big cardboard box in the kitchen while they did other work. Those children made no progress because they had no stimulus or outside interest; whereas other families were very active in encouraging their children to take interest in things, and they were given incentive and encouragement. That is very important.
My family background is that my grandparents went to Australia and ended up in Parkes because that was the end of the bullock train. You could not go any further. Then, by chance, my father got an education. There was one rich family in this town, which still has only about 10,000 people, who came to my grandfather, who ran a small dairy farm and said, “The education at this college is all paid for, and my boy won’t go, so I would like you to send one of your children”. It was offered to the eldest son, and he said, “No, it’s too late for me. I think the next boy should go”. That was my father.
My family said, “No, we cannot really spare him because we have got to get round and sell the milk”. The eldest boy said, “Well, I will do a double round”. Through that, my father got to that college, and he went from there to Sydney University. It was the first ever graduating year of pharmacy from Sydney University. Later, he was the deputy premier of New South Wales, and apparently the world’s only Minister for Public Health and Motherhood, so he achieved quite a lot. There were nine children in our family, and I think, because of that, he realised how very hard it is, and he brought in child endowment, which here we call child benefit, to help families.
He met my mother at Sydney University. She was very keen on education, and she had had to come from Queensland because there was no university there. She graduated in 1912, and was determined that all her children would get an education. My father did very well financially, but after he died things went terribly wrong, and the last two children did not get a penny. That was probably good for me, because I had to turn around and do something for myself. My father had believed we should all be worthy of our place in society. We should not just be sitting back because someone had made a financial success of things. That proved to be very important.
I think it is very important for all children to have encouragement from their families. They can have that encouragement only if the families know what the opportunities are and have an interest in the child achieving something. It is not a straightforward situation.
I found, in dental practice in Old Street, which was never smart in my day, in the 35 years I was there, the real problem was that so many of the parents or grandparents had very little English. This is where we can see the relevance of the statement that has been made today, that adult education is important, not only child education. People would come in for treatment, and a child would have to accompany them to explain what the problem was and then to translate what the dentist said to the parent or grandparent. Those women were completely cut off from society. I remember that Keith Joseph always said, “You can’t teach your children how to wash clothes unless you know how to wash clothes”. I think this is true. This cycle of deprivation has to be broken if we are going to give people opportunities for social mobility.
I see that the report issued by the Library mentions that the OECD in 2010 said that it is easier to advance in Australia and Canada than it is here. I think that is only because those countries are so much less developed. What concerns me more is a statement that London is pulling way ahead of other parts of the country in terms of opportunities in education. That should not be. It is very important that all the other big cities do everything they can to help their people.
Things need to be done to encourage people, particularly the young. Opportunities, encouragement, and a feeling that one can achieve something are important. Two things that I speak on pretty regularly I will comment on briefly. One is housing. Social mobility is pretty closely linked to having somewhere decent to live, where you can make a success of life. Therefore, there should be more social housing and more housing to rent and we should make sure that these holiday people do not take over valuable accommodation.
Another thing is nursing. I think we went too far—I think it was the Blair Government that did it—in saying that you had to have a university degree to become a nurse. Some of the very best nurses I know could never have got five As to get in. They were in a different category of nurse, and they were very good indeed. We should bring back that second tier in nursing which still exists in Canada and Australia. They brought in the A-levels and the superb university degrees, but they maintained that middle level as well. That is such an opportunity and a way for people to get social mobility, to enter a profession of that type and feel proud to be a member of it.
My Lords, I thank the noble Lord, Lord Holmes of Richmond, for initiating this important debate. I was so pleased that he talked about effective careers advice and the need to start that in primary schools. He also mentioned the importance of the early years, a subject I will be coming to. On my behalf and that of my noble friend Lord Addington, I congratulate the noble Baroness, Lady Couttie, on her excellent maiden speech, a clarion call to redouble our efforts. She really is a glutton for punishment, because I notice that she is speaking at 5 pm in Grand Committee. I am very impressed. I do not think there are many people who would make another speech on the same day as their maiden speech.
As a number of speakers have said, our society must ensure through our policies that every person can have a quality of life and the opportunity to improve their circumstances, regardless of their background, where they live or who they are.
As we have heard from a number of your Lordships, the Prime Minister promised on taking office that she was committed to putting social reform and social justice at the heart of her Government. Promoting social mobility, particularly for the most vulnerable, will be crucial to creating a society that indeed works for everyone. A range of issues has to be tackled if the Prime Minister’s words are to become a reality—poverty, employment support, welfare, housing, public health, mental health and family support. Many of your Lordships have spoken eloquently on these issues. The excellent report of the Lords Select Committee on Social Mobility, mentioned by the noble Baroness, Lady Massey, makes a raft of recommendations. I was taken particularly by its focus on what it called the overlooked middle; that is, that group of 16 to 19 year-olds who are neither going on to do A-levels nor in the NEET group. The report talked about better mechanisms for co-ordination between FE and employers at a local level, plus better national-level support on things like tracking and data on this group, which are currently very poor. I was interested to read in Hansard the debate in another place on Merseyside schools and was delighted for the first time to see a Minister in this Government talk about how important was further education. I thought that that was a real sea change. Linked to the work that the noble Lord, Lord Baker, has been doing, there are real possibilities there. Perhaps the Minister will tell us when the House can expect to debate that report.
Members will no doubt have been sent a large number of detailed briefings ahead of this debate from a wide range of organisations—and I would like to thank them. As one reads through each briefing, it becomes apparent that one issue above all is seen as the way to tackle social mobility. That, of course, is through education. To paraphrase that American political slogan: it’s education, stupid—and crucially in the early years. As Action for Children says, significant evidence points to a child’s education in the earliest years as being central in shaping the rest of their lives. The NAHT points out that, by the age of 11, poor children lag on average nearly 10 points behind their peers in educational progress. That attainment gap grows ever wider as they progress through the rest of their schooling, affecting their life chances in the most dramatic—some may say, the most disturbing—way.
What is the proposal of our new Government in using education to help social mobility? Yes, it is the reintroduction of grammar schools. Where grammar schools exist, they do nothing to increase social mobility. Creaming off 20% of the brightest children does not help other local schools; it does not help that all important pupil-peer support; it has the potential of taking the best teachers away from other schools; and it does not help a local community. Every piece of independent research carried out confirms that grammar schools do nothing for social mobility. I suggest to the Minister that if a grammar school landed on the catchment area of his Pimlico Academy it would not help his school by creaming off the brightest, and it would do nothing to help social mobility. If the Government are intent on this policy—it is doubtful that they would get it through—then why not move away from the rhetoric and carry out some proper analysis and evaluation? Let them ask the NFER, for example, to do the research and then we can formulate policies based on proper research. As Russell Hobby of the NAHT wrote in the Times Educational Supplement, the Government’s grammar school plans are based on anecdote and not on evidence.
By the time children reach the age of 11, it is too late to tackle many of the disadvantages they face in relation to education and development. If the Government are truly focused on increasing social mobility, they should invest in early years. Research shows that children’s life chances are often determined before they even enter primary school. This means that if we are really to achieve change, it can happen only if there is a strong focus on families with pre-school-age children. Children’s centre provision must remain at the heart of policies to effect social mobility and they must remain flexible to fit local needs. Can the Minister update us on any plans the Government may have to evaluate children’s centres, and to see what creates a successful children’s centre and how we can learn from that?
Let us remind ourselves that 10,000 young people leave care every year. These children are some of the most vulnerable in our society. Research shows that young people leaving care are more likely than their peers to have poor outcomes in a whole range of areas. In recent years it is to be celebrated that governments have done much to formulate policies which will help these young people, but much more needs to be done.
A key factor influencing the social mobility of a young person is their ability to find full employment. Care leavers and young people with special educational needs often face particular challenges finding work, and more intensive help and support are needed. It is important that the Government’s recent commitment to provide support for employers to take on care leavers and those young people with special educational needs is fulfilled, particularly in the role of apprenticeships.
Career education is a key component of employment and skills provision, but the current offer is delivered through a range of initiatives and providers, making it patchy and fragmented. Can the Minister say when we are likely to see proposals come forward on careers education?
We have been trying to tackle the causes of the prevention of social mobility for a considerable time. I am absolutely sure about the sincerity of successive Ministers and governments. I have found myself agreeing with everything that has been said in this debate. I was particularly taken by the comments of the noble Baroness, Lady Morris, about the nought to five year-old group and the comments of the noble Lord, Lord Farmer, about the family hub. On many occasions I have seen how children have succeeded against all the odds. As parents, we would do everything for our children. That everything includes things that many families do not possess—family support and networks.
An interesting NFER report landed on my desk the other day on how parents choose the school their child goes to. Parents from low-income groups let the child decide, or select the school already attended by siblings. Those from higher-income groups undertake research on possible schools and attend open evenings.
There is not one single silver bullet that will achieve what we all want to happen, but if we are prepared to listen and learn from good practice and the research available we will continue to make good strides.
My Lords, this has been an interesting and wide-ranging debate and I join others in thanking the noble Lord, Lord Holmes, for placing the debate on the agenda and in congratulating the noble Baroness, Lady Couttie, on her maiden speech and in welcoming her to the House.
Many influences in society affect people’s lives and it is incumbent on Governments to devise and deliver policies and programmes that enable citizens to flourish and grow. Citizens and parents in particular must also take advantage of available opportunities. All that is in an ideal world, of course, but in the great mix of things there are folk who may be less able to move on and up. In the interests of the rest of us, the call goes back to government to intervene.
I absolutely agree that early years interventions are hugely important. But sometimes life is not quite so straightforward and pesky changes intervene. Let us take the world of work as an example. In the lifetime of most of us in this House, a person could leave school with zero qualifications and walk into a job, which may have been a bit boring but which—because it was a buyer’s market and because the trade union movement was on the case—might have paid quite well. If that job did not suit, there was always another one down the road.
For those who suddenly woke up and realised that they could and should have done better at school, there was always night school and employer-supported day release. Not so now, of course. Any halfway decent job that a person could walk into requires the applicant to have at least five good GCSEs, A levels and/or a university degree.
Aside from apprentices, about whom more later, applicants without any of the above find themselves in jobs paying the minimum wage or, worse still, part of the “gig economy”, delivering goods and packages as fast as is humanly possible and listed as self-employed: no security, no status and no stake in society.
I make these comments because I firmly believe that good employment opportunities are the key to upward mobility. But, of course, good employment opportunities stem from good education, and the ability to make the most of these chances goes back to a decent start in life. Take what used to be called the Sure Start programme: launched by Labour in 1998, it recognised this issue, targeting children and families in areas of high deprivation and aiming to boost their life chances. Changes have been made to the programme since then, with funding reductions and a transfer of responsibility to local authorities.
Criticism of these changes by Norman Glass, one of the founding architects of the scheme, points in particular to a shift from child development to childcare and towards getting mothers into work. Would the Minister care to comment on these changes? Such initiatives require considerable long-term intervention, and I would have thought that in the case of the Sure Start programme, where the parents’ behaviour was identified as being in need of attention, getting mothers into work would not have been a priority.
Obviously, the free pre-school policy is to be welcomed. It is available across areas so that children from a mix of backgrounds are involved, and we know that it gives children a good start when they then attend primary school. But what does the Social Mobility Commission say about how opportunities manifest themselves across educational areas in England? In producing the Social Mobility Index, it has assessed the best and worst-performing schools, largely using free school meals as the indicator. The results show that 20 of the 25 best-performing areas for schools are in London. Rural and coastal areas figure highly in the bottom 25—very similar results to the analysis carried out on youth mobility indicators. Labour’s London Challenge scheme has seemed to be pretty influential and successful here. However, when the Social Mobility Index moved on to look at which areas proved best for adult social mobility, the tables were turned. Using indicators including housing and pay, only one London borough came into the top 20 this time, while five London boroughs were in the bottom 20 areas.
Life in these times does not always follow a smooth path. Jobs for life are long gone. A person may get a good education and be doing quite well, but changes to the labour market, combined with high housing costs, can mark the beginning of a downward spiral so that any upward mobility can be forgotten, and geographic mobility is a non-starter. We need therefore to pay greater attention to the churn in the jobs market. People are living longer. Work is often short-term or otherwise insecure, and opportunities for retraining are few and far between.
This brings me neatly on to apprenticeships. I know that much work has been done on this subject and that the Government are keen to tighten up the definition of an apprenticeship—all that is welcome. Welcome also is the availability of adult apprenticeships, because that plays to my point above on the need for retraining. However, I am concerned about much of this programme.
First, the Government have committed to the provision of 3 million apprenticeships by 2020. That is 5,500 apprenticeships every week over the five-year period. Seriously, Minister? Perhaps the noble Lord will be able to tell the House how this is progressing, and at the same time assure us that the desired level of quality is also being achieved. This week, the House received a Written Statement in the name of the noble Lord, Lord Nash, entitled “Supporting Apprenticeships”. The second paragraph points out how an apprenticeship can unlock a brighter future for “those just about managing”. That is a really unfortunate phrase, which speaks volumes about the attitude in this country to vocational versus academic learning. Could the Minister explain the thinking behind this?
Secondly, the Statement comes from the Department for Education and yet contains no mention of the role of schools in helping young people to make choices, including a move, where appropriate, towards apprenticeships and vocational learning. Again, can the Minister tell the House how we can get over the conflict between schools being tick-boxed against academic achievement and, in part, funded via the numbers of students remaining in the sixth form as against recognising the tendencies of some young people towards a more vocational career? A number of employers have complained to me that schools will not allow them in to talk to the students about apprenticeship opportunities, yet this route can lead to satisfying and often lucrative jobs—the path to social mobility indeed.
One good course of education for later learners comes via the trade union movement. Always known for its commitment to education and learning, the union record is long and proud. The TUC acts as the umbrella for the Unionlearn programme, delivered in workplaces, often lifting up people’s literacy and numeracy skills, and consequently their chances of moving on and up in the workplace. I hope that the Minister will be able to reassure the House that funding for the programme, popular among employers as well as employees, will continue to be supported.
I cannot leave the area of education without saying something about grammar schools, which are not universally well received, to put it mildly. Toby Young, that stalwart supporter of free schools, has expressed reservations. Writing in the Spectator, he points out that grammars take in on average four times as many children from fee-paying prep schools as they do children on free school meals. He also quotes a 1959 report which showed that, even then, only 3% of grammar pupils came from unskilled manual backgrounds and that they were less likely to go to university. Indeed, I fell into that category myself.
Many other aspects of this subject have been covered, but a shortage of time means I must conclude my remarks.
My Lords, I thank my noble friend Lord Holmes for tabling this debate. I echo my noble friend Lady Jenkin’s comments about what a wonderful role model for social mobility he is. I thank all who contributed to this debate. It is clear that we all share the view that social mobility is essential to making our country one that works for everyone, not just the privileged few.
I congratulate my noble friend Lady Couttie on her maiden speech. Her role as leader of Westminster Council—the most socially mobile local authority, according to the Social Mobility Commission, as she said—means that she brings with her excellent insights into this issue. I pay tribute to her work on the troubled families programme. I have had the pleasure of dealing with her in my role as an academy sponsor in Westminster, and I therefore know that she will bring considerable intellect and clarity of thought to your Lordships’ House.
Children from many different types of families lack access to the opportunities they need to succeed, and this Government are determined to tackle that, not only for the most disadvantaged but for those parents who work but, as the right reverend Prelate the Bishop of Portsmouth said, struggle to get by—those who are “just managing”. There are social mobility cold spots up and down the country, as a number of noble Lords mentioned, where too many children start school behind, too many schools are not good enough, progress to the best universities is limited to the very few, and too many children go home to families where no one has worked or possibly ever worked. Gaps in cognitive skills by family background start off large, as early as age three, and get larger as children progress through education. Our recently launched opportunity areas will be at the forefront of tackling the causes of these gaps.
We agree that there is a need to level up the playing field to ensure that for all children, it is talent and hard work that determines success in life, not the lottery of one’s birth circumstances. When less able but better-off children are 35% more likely to become high earners than bright but poor children, we know there is a problem that we need to fix. This issue goes beyond the education system, and I welcome the steps taken by professional firms to recognise talent and not background, including changing A-level criteria and creating new apprenticeship routes into top jobs. This marks real progress but there is further to go. Education is a crucial part of the answer to reverse this problem. By prioritising knowledge and skills, the right advice at the right time and the need for challenging life-shaping experiences, the education system can support everyone. The Department for Education now has higher education, further education and skills back within its remit. I will not dwell on how we lost them in the first place.
The noble Lord, Lord Livermore, made a powerful speech on how socially immobile our society is, and asked about the need to consider the impact on the social mobility in policy development. Having all the educational levers in one place means that we can make sure that each part of the system leads fluently to the next and sets all children up for successful careers which play to their individual talents. This gives us an exciting opportunity to make education a driver of social mobility. He referred to the question of a social mobility factor. The social mobility impact is essential to our policies and we are testing our new policies in the department against this. I also echo the comments of my noble friend Lady Jenkin about the particular personal driver of the new Secretary of State for Education in relation to social mobility. I see this in evidence every day, and it is impressive.
As the noble Baronesses, Lady Morris and Lady Massey, and the noble Lord, Lord Storey, said, early years are so important. It all starts from the earliest days and weeks. High-quality early years education lays the foundation for a child’s education, opening the door to a future opportunity. Attendance at a preschool can result in an increase of seven GCSE grades or equivalent at key stage 4—the equivalent of getting seven B grades compared to seven Cs. Parents are their child’s first educators and need to know how best to support development and instil a love of learning, because we know that when children start behind, they stay behind. Our What to Expect, When? guide sets out the development expectations at each stage so parents can properly support their children to reach these milestones.
I reassure the noble Baronesses, Lady Massey and Lady Prosser, that the Government recognise the vital importance of early intervention and the crucial role played by education and children’s services in providing it effectively and promoting good outcomes for children and families. The Early Intervention Foundation has been funded for three years by the DfE and other government departments, and further funding has just been agreed for the 2016-17 period. As well as doubling free childcare for eligible parents of three and four year-olds, we have expanded the entitlement for two year-olds from our lowest income families.
The noble Baroness, Lady Prosser, asked about the decision to move from Sure Start local programmes to Sure Start children’s centres and the transfer of responsibilities for the programme to local authorities. This decision was taken by the previous Labour Government. The local authority duties in relation to children’s centres were set out in the Childcare Act 2006 and would have been debated at that time. The noble Baroness, Lady Morris, particularly stressed the importance of the years zero to five. It has been particularly encouraging, since we enabled free school applications for primaries to include nurseries, to see how many primary free schools have included applications for nurseries. The points she makes are powerful and I will discuss them with Minister Dinenage. The noble Baroness may be pleased to hear that the Secretary of State visited a children’s centre in Norwich last week.
My noble friend Lord Farmer asked about family hubs and children’s centres. The Prime Minister has been clear that tackling poverty and disadvantage and delivering real social reform will be a priority for this Government. The noble Lord, Lord Storey, also asked about our thinking and plans for children’s centres. We will provide further detail in due course and will make it clear how stakeholders and the public can contribute. I very much hope that my noble friend Lord Farmer will contribute to this, as I personally have considerable empathy for his family hubs concept.
My noble friend Lord Farmer talked about the troubled families programme. In June 2013, as part of the first troubled families programme, 150 employment advisers were seconded from Jobcentre Plus to work in local authorities and offer direct support to help troubled families into work. In total, more than 18,000 families in the first programme saw an adult come off out-of-work benefits and move into continuous employment. The noble Lord, Lord Storey, asked about the Select Committee on Social Mobility. The Government’s response was published in July and the debate in the Lords on that has not yet been tabled.
We want all pupils to have access to a good local school. Today, there are more than 1.4 million more children in a good or outstanding school than in 2010. We are doing more to bring in and support excellent teachers, leaders and school sponsors in all parts of the country to turn around schools that are not delivering for young people and which are all too often attended by the most disadvantaged. We believe that all good and outstanding schools that have the capacity to do so should be able to expand to meet the demands of parents in their local area.
The noble Lord, Lord Storey, and the noble Baronesses, Lady Prosser and Lady Massey, asked how grammar schools will help with social mobility. Selective schools have a track record of closing the attainment gap, adding value for all children, but even more for the most disadvantaged children who attend them. That is why we want more disadvantaged children to have the opportunity to attend selective schools, and we want a commitment from those schools to take steps to ensure that disadvantaged children get places. However, we accept that grammar schools as they currently operate admit too few disadvantaged pupils and that they could do more to raise standards for all pupils in the areas in which they are based. That is why our proposals will ask them to do more.
We have been clear that this is not about returning to the binary system of old, but about creating a system in which new and existing grammars contribute in a meaningful way: improving educational outcomes for all pupils and increasing access for disadvantaged pupils.
More high-quality teachers are essential to lift the horizons of children who are not currently fulfilling their potential. We are continuing our commitment to develop teacher and leadership capacity. We recently announced a £75 million investment fund for innovative professional development projects aimed at strengthening teaching and leadership in the areas of the country that need this most, including the opportunity areas.
The noble Lord, Lord Addington, asked about sports bodies getting involved. We are doing this under our free schools programme. We recently approved a free school involving Saracens rugby club. We have a number of football clubs involved in AP schools, and we hope shortly to bring other sports clubs into the free schools programme. He also asked about progress on emphasising SEN. Following the Carter review, we have much strengthened ITT teacher training standards in relation to SEN. The new framework published in July includes explicit content on SEND that will improve the quality of training for teachers entering the system. In order to be awarded qualified teacher status, teachers must demonstrate a clear understanding of the needs of all pupils, including those with SEND, and be able to use and evaluate distinctive teaching approaches to engage and support those with special educational needs and disabilities. Trainees must also recognise signs that may indicate SEND and support those pupils’ needs. Representative bodies in the sector are working on guidance to ensure—
On that point, which I almost made earlier, will the Minister pay special attention to the growing indications and evidence that some children who have “suffered”, as it has been put, from social and educational disadvantage—particularly those on the autism spectrum or with Asperger’s syndrome—are particularly well equipped, it seems, for tackling cyber and digital communications issues? This is important not only for them but for the nation: they seem to have a particular proclivity for contributing to the national development of cyberspace.
I will take that point back. I remember, many years ago, visiting a high-end SEN boarding facility where I was shown two satellite photographs of Iraq and asked if I could spot the difference between them. I could not. The teacher said that neither could the computer. But one of our former pupils could. Representative bodies in the sector are working on guidance to ensure that the new framework is properly embedded by providers.
The noble Baroness, Lady Prosser, asked about our expectations for apprenticeship starts. We are taking action to support the growth of apprenticeships to meet our 3 million commitment, working with large and small businesses to begin or expand their programmes, setting new expectations for public sector bodies and through public procurement.
Measures proposed in the Enterprise Act will also protect the term “apprenticeship” to prevent misuse by providers in England, ensuring it is associated with high quality. Investing in a high-quality technical offer is not only the right thing to do; it is also important because we know that at least half the population do not choose to go down the route to higher education. For this reason, we must ensure high-value alternatives that serve students from all backgrounds, but in particular those from lower income families who are most likely to choose these routes. My noble friend Lord Holmes asked about the Institute for Apprenticeships; it will be fully operational by April 2017. The noble Baroness, Lady Prosser, talked about some employers finding it difficult to get access to schools to talk about apprenticeships; we are aware of this issue and we are considering how best to address it. Under our skills plan, young people will be free to choose between the academic and technical options, and they will be able to switch between them at key points. We want them to make informed choices based on the career they want to enter, not their social background.
My noble friend Lord Holmes and the noble Lord, Lord Storey, asked about careers guidance. Good careers education and guidance should give people access to the information and data they need to make informed decisions on education, training and employment options, including the routes into technical education, apprenticeship and higher education. Young people should have a good understanding of the world of work and the skills needed to do well in the labour market. A planned careers programme can help all young people to make important decisions, especially those from disadvantaged backgrounds who are still all too often held back by a lack of support. We know that the more interactions that school children have with the world of work, the more likely they are to do better in their studies. The noble Lord, Lord Storey, also asked when we plan to announce our proposals on careers. We have already done so, in the sense that we are investing £90 million in careers education over this Parliament, including funding the Careers & Enterprise Company to continue its excellent work, under the guidance of the very able young woman Claudia Harris. This organisation has made an excellent start and it will be looking particularly at the opportunity areas. Since August 2016, the company has appointed more than 1,100 enterprise advisers and 78 enterprise co-ordinators in its enterprise adviser network, connecting more than 900 schools in 37 out of 38 local enterprise partnerships.
We are investing £20 million to increase the number of mentors from the world of work to support 25,000 young people at risk of underachieving by 2020. This year, we have introduced destinations data which provide clear and comparable information on the success of schools and colleges in helping all their students take qualifications that offer them the best opportunity to continue in education or training. Primary Futures was mentioned—I have visited it and agree that it is an excellent programme for primary schools.
We also know that young people need access to wider experience and extra-curricular activities as well as the workplace. A lack of these experiences can widen gaps. Business has made it clear that the right attitudes and attributes matter much more to employers when recruiting than academic results alone. Supporting schools to develop well-rounded and resilient pupils is a priority for this Government and we are continuing to work with a range of partners to ensure that this happens. We should draw on the experience of schools such as Kings Langley in Hertfordshire, which I visited recently. From being in the bottom 3% of schools in the country in 2002, it is now flourishing and attributes much of its academic success to its focus on developing the character of all its students, with a particular commitment to three core values: stickability, self-regulation and empathy. It also has a very impressive programme of engagement with parents.
My noble friend Lord Holmes and the noble Lord, Lord Addington, highlighted the role of the National Citizen Service. We are working with the service to expand it considerably. We have just announced that it will benefit from more than £1 billion over the next four years, so that by 2021 it will cover 60% of 16 year-olds. I have to say that having personally been slightly involved when it was first established, I am delighted about this and must pay tribute to my noble friend Lord Wei who was involved in designing this programme. When he first explained it to me I have to say that I was a little sceptical, but he knocked it into shape and it is wonderful to see it flourishing so well. The independent Ipsos MORI evaluation found that 82% of pupils who attended it considered it very satisfactory.
My noble friend Lord Holmes asked about the opportunity areas, and what exactly they would do. We launched the opportunity areas to provide £60 million of additional funding to support social mobility coldspots. In these areas, we will focus our ideas and resources on young people. We will work with the local areas to identify the priorities and the action that needs to be taken. We expect this to include an increase in high-quality teachers in schools, summer schools run by local universities, advice for young people on what subjects to study to get into a good university, and introductions to employers to help them understand the world of work. They will also be given priority in existing schemes—for example, Teach First—and we will incentivise our best academy sponsors to work in these areas. We shall announce other areas in the coming months.
I now turn to the final points made by my noble friends Lady Jenkin and Lord Holmes regarding health and sport. Childhood obesity is the great health challenge of this generation. We have one of the worst records on childhood obesity in the developed world—one in five children leaves primary school obese. The Government’s approach is to help children and families to recognise, and make, healthier choices and to be more active, supported by schools and the NHS. But we cannot do this alone, and everyone has a part to play to help children improve their diets, be more active and lead healthier lives.
As announced in the strategy, many new DfE policies are expected to make a direct contribution to reducing the incidence of childhood obesity, such as the doubling of the primary PE and sport premium to £320 million from September 2017. As well as this, there will be a review of school food standards to reduce sugar consumption, and from September next year there will be £10 million per year to expand breakfast clubs, so that children have a nutritious start to their school day.
My noble friend Lord Holmes asked about the sugar tax. In the 2016 Budget the Government committed to using money from the sugar levy to double the sports premium from £160 million to £320 million. This funding is committed to 2020, and will help drive up the quality and breadth of PE and sport provision, and increase participation so that all pupils develop healthy and active lifestyles.
The increased funding for the premium will play a key role in helping to tackle childhood obesity. We are working with DCMS, the Department of Health and the sector to agree how this funding will be allocated, and are exploring the options for strengthening accountability arrangements and guidance, to ensure value for money.
I conclude by thanking all noble Lords for their contributions to the debate. There is no quick fix for social mobility—but we are committed to addressing the challenges that exist, so that we can make Britain a country that truly works for everyone.
My Lords, I thank all noble Lords who have taken the time to participate in the debate, not least my noble friend Lady Couttie, who made an excellent maiden speech. It is clear that, at whatever age and whatever stage, social mobility matters—and there are precious few policy areas that do not have a role to play. Security and stability are the bedrock of mobility. A nation where every individual, regardless of background, has the opportunity to achieve their potential: I believe that is a mission that we can all completely get behind.
Question for Short Debate
My Lords, once again, after two years, I am pleased to have the opportunity to debate the Cyprus issue on the Floor of the House. Before I start, I have apologies from the noble Lords, Lord Hannay, Lord Sharkey and Lord Maginnis, and from the noble Baroness, Lady Hussein-Ece, for being unable to participate in the debate. The Minister, the noble Baroness, Lady Anelay, informed me that she had to be abroad in Paris, but I know that my noble friend Lady Goldie will be a more than capable replacement.
First, I draw your Lordships’ attention to my membership of the All-Party Parliamentary Group for the Turkish Republic of Northern Cyprus—TRNC. During my visit there in July, I met in particular the President, Prime Minister and Foreign Minister, so I had a good opportunity to form a judgment on how the peace talks are going. Sadly, I came away with the impression—I hope that I will be proved wrong—that major problems still remain which will prevent any settlement before the end of 2016, and may well make a settlement in 2017 speculative. The one important hope is that the good personal relationship between the two Presidents will finally achieve a result and prove me wrong.
I think it is useful to start with my July meetings. First, I saw President Akinci. He began with these opening remarks:
“I tell you very frankly that this is the last chance of our generation for a settlement”.
He then went on to discuss the major issues, which he set out as bizonality, political equality—although he did not say what this meant except in terms of a right to citizenship of essentially one Turkish Cypriot for four Greek Cypriots—and the need for security guarantees. Importantly, he said that the discussions had to be completed by the end of 2016 because, first, there will be a change of Secretary-General at the UN next year, which will cause delay as the new person will have to get to grips with the issue. Secondly, there will be a new US Administration with the same delay arising. Thirdly, there will be a new Greek Cypriot Administration in 2018, but the parties will start preparing for that in 2017. Fourthly, there will be the complications arising from the prospect of international companies drilling for natural gas in 2017 in the eastern Mediterranean, especially if Greek Cyprus starts doing separate deals with them.
In summing up, the President said, “But we have difficulties”. He cited, as a small example, the failure of two confidence-building measures: first, the reluctance of the Greek side to accept help without strings attached in the recent serious forest fire in the south; and, secondly, the unfriendly behaviour of the Greek Cypriot President Anastasiades in refusing to attend the Turkish President’s dinner, to which TRNC President Akinci had also been invited, on the outline of the UN humanitarian summit. To the outsider, these two examples may seem quite trivial but, as mood music, they are a good indicator of the suspicious atmosphere still prevailing on the Greek side in particular. At the end of the meeting the President took a sideswipe at the UK and said that, throughout the time from 1963, we as guarantor power “just watched”. I will come on to this area with questions to the Minister later.
The meeting with the TRNC Foreign Minister was different in tone and much more pessimistic. He essentially did not believe that there would be any solution, and when asked whether there was a plan B, said that five or six plans came to mind but he was not prepared to discuss them at this stage. He also had a swipe at the UK, saying that we did not wish to offend the Greek side due to our fear of losing our sovereign Army bases in the Greek part of the island. On that topic, will the Minister say whether we are planning to cede part or all our bases there if there is a successful settlement? On the plus side of the detail of the peace talks, the Foreign Minister said that there had been good progress in four areas—the economy, the EU, property and governance and power-sharing. The most sensitive issues of territorial adjustment and security guarantees were being left to the end.
Reflecting on my visit, there seems to have been little progress since then. Time has moved on and at the end of October the sensitive issues remain the same. When both sides met at the UN in September, it had been hoped that the UN would be able to announce a multiparty conference to discuss security guarantees. However, President Anastasiades refused to accept this. Furthermore, he refused to agree to any future timetable for the talks. All that could subsequently be agreed to, according to President Anastasiades, is that there could be talks away from the island, in Switzerland, to discuss territorial issues in the first half of November—another example of timetable slippage. The UN special adviser, Espen Eide, has today said that the talks would provide clarity on whether a peace accord can be reached this year.
I myself received a sharp reminder of hostility from the Greek side when I received a letter from the consul-general in London at the Cyprus High Commission, Ioannis Koukoularides. He strongly criticised my July visit to Northern Cyprus. I wrote back that if he had read my speech in the debate of July 2014, he would have understood that I am anxious to see a solution to the Cyprus issue without taking sides between the north and the south. I added that, in that spirit, I went there to see how the peace process was going, and to listen and try to offer advice where appropriate from a neutral basis. The noble Lord, Lord Sharkey, the chairman of our group, subsequently wrote a letter to the high commissioner in London and I quote one particularly relevant part of it:
“It is not normally helpful for diplomats to write to parliamentarians in such strident and intemperate terms. It is particularly unhelpful when negotiations for a settlement are at such an advanced and sensitive stage”.
Does the Minister agree with him on this?
I now move on to the question of the UK’s role in helping the peace talks. I know what the Minister will say: that the UK cannot get involved in any details of the talks; that it is up to the Turkish and Greek sides to make their own agreement; that as long as our two military bases are secure, we do not need to get involved until the very end stages. Having considered this attitude carefully, I believe that it is wrong. There is a great opportunity to demonstrate that we can have some impact on the world stage behind the scenes by encouraging the Greek side in particular to show some urgency to achieve a settlement through a timetable and by explaining to it the benefits of a settlement. Does the Minister agree with this? The FCO could use my speech of July 2014 to remind it of these benefits.
Before my last debate, the FCO was very helpful and telephoned me to ask me if I had any issues that I would like it to clarify. This time, alas, there was no such luck. Following the departure of the excellent Jill Morris, our party chairman had an unhelpful meeting with Lindsay Appleby, who kept asking us for ideas rather than giving any from the FCO. When I telephoned the FCO this week, no one would discuss the issue with me. Perhaps Caroline Wilson, the new FCO Europe director could take note.
I turn to an analysis that I sketched out in my July 2014 speech and make no apologies for repeating it. This explains a key missing factor in current and previous peace talks. According to a paper from the well-respected Cyprus expert Alexander Lordos, research director for Cyprus 2015, one of his key explanations for the failure of peace talks current and previous is that the Cypriot public are not involved in the peace process. Lordos states that there had been an opportunity to add public opinion analysis to the Annan negotiating process: specifically, Professor Colin Irwin from Ireland was asked in 1998 if he could assist with such a programme. I quote from his book:
“I was invited to attend a meeting of the Greek Turkish Forum in Istanbul in December 1998 ... I made a presentation of my Northern Ireland work to the Greek and Turkish Cypriots present and explained how it was used to help build a consensus around the Belfast agreement. They subsequently decided they would like to undertake a similar programme of research in Cyprus … although the Greek Cypriot negotiators wanted to go ahead with a poll the Turkish Cypriot Government did not ... in the end no polls were undertaken and without the benefits of an effective programme of public diplomacy both the negotiations and subsequent referendum failed”.
The danger of secret negotiations, as are going on now, is that when the results reach the public, there can be a huge hurdle to cross to get them accepted.
Overall, I hope that the Minister will be able to stir the FCO to give the same impetus to the peace talks that she gave to the Scottish Conservative Party in her maiden speech as their leader, where she said in a reference to Lady Thatcher,
“I think you may take it that matron’s handbag will be in hyper-action”.
Will she apply this also to the FCO Cyprus department, so that the UK can play its part in achieving a solution?
Before the noble Lord sits down, perhaps he could address what I am about to say. I have to declare a professional interest because as counsel I have appeared for the Government of the Republic of Cyprus against Turkey in various cases in the European Court of Human Rights and, for that matter, in the Committee of Ministers—so from that point of view I am one-sided. The noble Lord has not said a single word to indicate that he understands the Greek Cypriot point of view about the invasion, the failure of Turkey to honour judgments of the European Court of Human Rights, or the property issues and its failure to comply on those. Would it not be sensible for him, as an advocate on one side, to show some recognition that there are two sides to the story?
My Lords, I, too, declare an interest as a long-standing visitor to both sides of Cyprus, although probably I have been more frequently to the north than to the south. This has gone on for the last 25 years, during which I have increasingly despaired of any solution being found. None the less, like my noble friend Lord Northbrook—I was there slightly after him this summer—I, too, had the pleasure of a one-to-one meeting with the President, the Prime Minister, the Deputy Prime Minister and the Foreign Minister.
My noble friend outlined exactly the President’s attitude so I will not repeat it. I asked all four, “What is your plan B?”. The President said, “I have no plan B. This either has to work or the whole thing dissolves. There is no plan B”. It was interesting that two other broad plan Bs came out of conversations with the Prime Minister, in particular, and the Deputy Prime Minister and the Foreign Minister. One is that they have some sort of Channel Islands solution. In other words, the Turkish Republic of North Cyprus becomes a Channel Island to Turkey, which formally—it already does actually—takes over responsibility for defence and foreign affairs, and North Cyprus effectively has home rule. Of course, as the politicians pointed out to me, they have an English-based system of justice—quite a different legal system from that of the Republic of Turkey—so it would make quite good sense for them to have that status.
The other solution that was put forward, particularly by the Deputy Prime Minister, which is probably the most sensible in the long term, is that if the negotiations break down, they should just clearly state: “There will be no further talks for 10 years, and we will get on with making this northern part of the island work somehow or other”.
That will work. Having been in North Cyprus for the first time in the late 1980s and intermittently since then—probably six or seven times—I have noticed the way in which it has developed: the new building, the way in which they have solved the water problem, and the developments as they have moved forward. North Cyrus could survive and even prosper without the island being reunited. So it is not the end of the world if these talks fail—although I share the President’s hope that they succeed. However, I feel quite strongly that if they fail, that has to be it. We cannot go on, year after year, having abortive talks and not getting anywhere.
In the event of what I call the 10-year solution, groups such as the Organisation of Islamic Cooperation have to come much more firmly off the fence and give North Cyprus, if not complete recognition, at least more hope than they do at the moment. However, in fairness to Islamic states, there has been a reasonable input from them into North Cyprus—they are clearly friends of North Cyprus—as of course are the Israelis. There is quite a bit of Israeli investment in North Cyprus, particularly in the gambling industry. But if things do not work, we will need to build an alternative.
My noble friend Lord Northbrook has already mentioned the discussions on territory and property, which will take place in Switzerland during the course of the next month. These are quite crucial. It is no good pretending that North Cyprus can find millions and millions of euros to pay huge amounts of compensation. The money is not there. If we want compensation to be paid, let me ask the Minister: who is going to find the money? It can be found only by the European Union, the United States or the United Kingdom—but it does not exist in North Cyprus. It is no good sending them bills. It would be like sending bills to the debtors’ prison. There is no money in the bank. I believe a famous Labour politician left a note for a famous Tory politician to find when they came into office: “I’m sorry, there’s no money left”.
If a solution is wanted, I believe that it can be found. However, I am not sure that a solution is wanted. My noble friend Lord Northbrook was rather kind in quoting from his letter. I wonder if he would mind if I quote the opening sentence of a letter from a diplomat to a Member of this House:
“Dear Lord Northbrook, I am writing with regard to your recent visit to the occupied part of Cyprus. I understand you visited Cyprus on the despicable anniversary celebrations of the Turkish mass murdering invasion of 1974”.
I am sure the Minister will agree that, were a sentence like that to be found in a letter written by a British Foreign Office official, it would not be accepted as the norm for diplomatic discourse. It is way out of line. If we want to put it in perspective, let me quote yesterday’s Financial Times, which I think summed it up brilliantly and accurately:
“Cyprus has been split along ethnic lines since 1974, when Turkey invaded and occupied its northern third in response to an Athens-inspired coup aimed at uniting the island with Greece”.
I think that is very accurate—and it is what we are up against. In my view, many of the protagonists on both sides are not looking for a settlement. They are looking more for a propaganda coup. But they are talking to their own sides. The Greek side believes what it wants to believe about the Greek negotiating position and how good it is, and the Turks believe that their future lies in Turkey.
President Akinci is actually an extraordinarily brave person. There are a lot of people in the Turkish Republic of Northern Cyprus who agree more with the views of his Foreign Minister and Deputy Prime Minister: “let them get on with things; we are going to survive here; we do not need a settlement”. So the President is doing very well. However, both sides have to want a settlement for it to work—and, with letters like that from the Cyprus High Commission, I am not sure that all sides are on board.
Since I have got the Floor, I will also say that North Cyprus itself needs to do a bit of sorting out. For some time now, I have been following a case that has been 10 years in the Cyprus legal system. I had an assurance from the President in July that there would be a letter, but I have heard nothing. If North Cyprus wants to come in from the cold, it needs to sort out its legal system—and, frankly, it has got to learn to reply to letters. This is not an acceptable way of running things.
Finally, we have Brexit on the horizon. It is not something that I voted for, but I believe that it gives us an opportunity to reverse the situation caused by the ECJ judgment of 1994. North Cyprus needs freer access to trade and I hope that, as part of the Brexit negotiations, we will set aside that judgment and play our part in helping the Turkish Republic of Northern Cyprus to come in from the cold so that all its citizens do not have to live in Tottenham but can travel between the two.
I see that the noble Lord, Lord Deben, clearly does not agree with me. I am sure that he will make his feelings clear to me in private as he is not on the speakers list. As I said, this is a somewhat divisive subject and there are people on both sides. Let us hope it can be solved.
My Lords, it is sadly rare, late on a Thursday afternoon, to speak of potential good news in the eastern Mediterranean, and it is hard not to get excited, but others may say, as my noble friends have, that we have seen this before. However, as the invasion is not in the conscious memory of anyone of my age or generation, perhaps I may be forgiven for expressing some optimism. It is not an event studied by many British schoolchildren in their history classes.
Many people probably do not know that here within the EU is the longest UN peacekeeping mission in the world. When one meets refugees from Northern Cyprus and travels to the island, as I had the privilege of doing this year, seeing the checkpoints in the UN buffer zone and the sandbags still blocking the streets brings home for the first time the human cost of this divided island. The sight of the deserted, formerly glamorous, resort of Famagusta, the children who left their homes during the war and who now, as adults, want to return home to their birthplace before they die, and the ongoing significant economic effect for those living in the northern part of the island are important drivers for peace.
However, the current global security situation has also highlighted that in today’s world, having irregularly governed territory is a risk to everyone’s security. The TRNC, which is recognised only by Turkey, is not a nation state and is seen by many as an irregular back door to the European Union. More than 40 years since the invasion, it has periodically caused significant problems for other countries, including the UK, when it has been used by criminals to hide out. Ports within non-recognised international territory also present opportunities for illegal trading in drugs, art and people. Therefore, it is not only because of our role as the previous guarantor of this island that it is in our interests for there to be peace in Cyprus.
Although the UK has stepped aside from its role as guarantor and has given it to the EU, I would be interested to know Her Majesty’s Government’s view on Turkey’s continued insistence on remaining in such a role. Will our Brexit change of status in relation to the EU have any effect on the current position? I join my noble friend Lord Northbrook in also being interested in knowing the position of the British Overseas Territories during any negotiation.
However, if there is one thing that the previous attempts at peace have shown us, it is that a political agreement by the political leaders is not enough—not only because any peace deal will have to be put to the people in a referendum but because, for a sustainable situation and for peace to endure for communities, the people also have to make that peace. I think that here too there are grounds for optimism, as there have been many civil society projects over many decades bringing the young people of Cyprus together for ordinary human contact.
Also, an interesting piece of research in the early 2000s revealed that some of the leaders who needed to be persuaded to become more involved in the peace process were in fact Cyprus’s religious leaders. Although primarily a political issue, one must not forget that Cyprus, like Jerusalem, features in the earliest life of the world’s two major faiths: Christianity and Islam. The Republic of Cyprus is 90% Greek Orthodox and the TRNC is 98% Sunni Muslim. As the newly appointed EU Special Envoy for the promotion of freedom of religion or belief outside the EU recently said:
“Religious leaders often have a bigger say than political leaders”.
The UN special rapporteur on freedom of religion or belief relating to Cyprus said:
“While … Cyprus … is not per se a religious conflict, all cooperation between the religious leaders had stopped when the bi-communal conflict”,
was exacerbated 50 years ago. Research has shown that the Office of the Religious Track of the Cyprus Peace Process, which sits under the auspices of the Swedish embassy and the UN, has been highly successful in facilitating the repair of places of worship and enabling mosques in the south and churches in the north to be used for services for the first time in decades. On 18 October 2013, the Grand Mufti of Cyprus crossed the green line and conducted for the very first time a service in the Hala Sultan mosque, near Larnaca. His entry into the republic was personally facilitated by the Archbishop from the Republic of Cyprus.
Before 2009, 500 churches and monasteries in the north were derelict, looted or used for other purposes, and only eight out of the 110 mosques in the south were operating. However, between December 2013 and June 2014, the UN facilitated 48 religious services and commemorative events and 98 intercommunal harmony events across the border zones. On 16 September last year, a meeting was held at the Ledra Palace Hotel in the UN-controlled buffer zone, which was attended by the President of the Republic of Cyprus, the leader of the Turkish Cypriot community and the five religious leaders of the island as a whole.
As one of the key issues for the peace talks is property, it is very important that much progress has been made with regard to religious buildings. It could form a model for the restoration of property following any peace settlement.
Psychologically, people returning to the place of worship that they knew could form the first step in healing and preparing them—if one can ever be prepared—for walking back into their home to see where they left the cutlery in 1974. This is the reality for many thousands of people, and will never be easy.
It perhaps goes without saying that, at this time more than ever in recent history, the reunification of Cyprus is needed for the region. Again, as the UN special rapporteur has said, Cyprus could be a “model” for the Middle East. The involvement of religious leaders in peacebuilding that I have outlined is necessary for any lasting peace, and could be a model strategy for the FCO, UN, Commonwealth and others when peace does come. I mention the Commonwealth not only in passing. Currently, the Commonwealth Ministerial Action Group is chaired by the Foreign Minister of the Republic of Cyprus. It is hard to overestimate, both within the Commonwealth and in that region, the effect if peace could be achieved—particularly peace as I have outlined—involving leaders from the Christian and the Muslim community. As my noble friend has correctly mentioned, to have secret negotiations that you then have to take to the people can be problematic.
In light of what I have outlined, can the Minister request a place in these secret negotiations for the religious leaders who have been involved in this twin-track diplomacy? I do not expect the Minister to be able to disagree with the outline of the UK Government’s position as presented by my noble friend Lord Northbrook, but can she say what role the Commonwealth can play in these peace talks if the UK Government are unable to change their formal position?
I hope I have outlined that, even if there is no political agreement and settlement, all is not lost and we have a valuable model of engaging religious leaders in a peace process that can hopefully be used across the region where it is most desperately needed.
My Lords, following Cyprus’s independence from the UK and as a former guarantor of the 1963 treaty, we obviously have a close interest in the negotiations, as the noble Baroness, Lady Berridge, said. The Prime Minister, Theresa May, recently underlined the UK’s steadfast support for the process of negotiation and said that,
“the UK stood ready to help bring this to a successful conclusion”.
Apart from the Prime Minister’s recent meeting with President Anastasiades, will the Minister tell the House the extent of the UK’s practical involvement in the negotiations? What sort of advice and support have we been giving through this process?
As we heard in the debate from a number of noble Lords, with Mustafa Akinci’s election in April 2015, we have, for the first time since Greek Cypriots rejected the Annan 2004 reunification plan, two community leaders with the political will and commitment to reach a settlement and a solution. That is something we should not underestimate. As we have heard, in May 2015 the UN special adviser, Espen Eide, announced that the restarted negotiations had yielded their first tangible results, with decisions to open new crossings and interconnecting electricity grids on the island. Those are practical steps to reunification that again should not be underestimated.
The talks are based on an agreed formula of a unified state of Cyprus—a state, of course, which is a full member of the European Union—with a single sovereignty, single international personality and a single citizenship in a bicommunal, bizonal federation with political equality, as described in a series of United Nations resolutions. The problematic issues, which we have heard described in the debate, include power-sharing, with one side favouring more power with the federal Government and the other keeping as much as possible in the two constituent parts. There is also security, with the status of Turkish troops and the 1960 treaty of guarantee; residence and citizen rights of settlers from mainland Turkey; and the property issues that the noble Baroness outlined—there are thousands of claims to ownership of properties from people displaced during the events of 1974.
As we have read in the excellent briefing from our Library, this year both leaders completed an intensive phase of meetings, reiterating their determination of reaching a comprehensive settlement agreement in 2016. The noble Lord, Lord Northbrook, outlined why we have that timeframe and some of the conditions. I will return to the timeframe later.
After the 14 September meetings, both leaders then held a joint meeting with the UN Secretary-General on 25 September in New York, following which Ban Ki-moon welcomed their commitment to intensify efforts to reach the goal of a settlement in 2016. The fact that this meeting took place at all was a breakthrough. In the 16 months since this latest round of peace talks began, the two men have only ever met together with Ban Ki-moon on one other occasion. However, in press reports I read yesterday, President Anastasiades said that,
“it looks like many decisive convergences have been achieved that allow us to say that we can, under conditions, hope for an overall proposal for a settlement in the next few months”.
He went on to say, however, that he is not certain if developments will proceed the way everyone hopes. This, he said, does not depend on their commitment but on the determination and the implementation of a rhetoric that wants Turkey to pursue a solution. It is the sort of language that we have heard a lot of over the past 20 years. He said that this will depend and will become more evident at the forthcoming meeting on the territorial issue, which will take place possibly, as we have heard, in Switzerland.
I ask the Minister what assessment the Government have made of the likely success of these further talks, bearing in mind the comments of President Anastasiades. In the same report he spoke of creating a state that was based on the principles and values of the EU and will be functional and viable, allowing everyone to live wherever they want and to give, at last, the right to refugees to find their homes. He said he would not fail to knock on the door of anyone, especially the permanent members of the Security Council, to persuade them of the lawful right that no guarantee or the right of intervention is justified in a modern European country.
He expressed the belief that it would be inconceivable and a humiliation for Europe and for every European if a European state requires the guarantee of a third country, not that of Europe. Of course, in terms of the timeframe we are facing on these talks, we have the Cypriot presidential elections in early 2018. If there is a solution with potential referendums within that period, the UK will be preoccupied with Brexit. At Theresa May’s recent meeting with President Anastasiades, this issue was fully discussed, according to the subsequent Downing Street press release.
What is the Government’s assessment of the impact, if any, that Brexit will have on the negotiations over the Cyprus issue? Does the Minister believe that it will affect the 1963 treaty obligations? What assurances did the Prime Minister give to President Anastasiades on the legal rights of EU nationals already in the UK once we leave? On process the Prime Minister explained, according to the Downing Street press release, that we are currently preparing for the negotiations and therefore will not trigger Article 50 before the end of the year. Of course, we know that timetable has been revised. President Anastasiades extended an invitation to the Prime Minister to visit Cyprus. Will this be undertaken prior to Article 50 being triggered?
Some divergent views have been expressed in the Chamber today. The fact is, we can never undo the injustice that was done to the 200,000 people of Cyprus driven from their homes in 1974 and still living with that injustice today—seeing other people living in their homes, running their businesses or just leaving them to rot, as the noble Baroness indicated in terms of one of the once-prosperous seaside resorts. The injustice cannot be undone, but we can hope that the next generation of children will not have to live with the division and the injustice which their parents and grandparents had to face. We can hope that, given the leadership shown by both leaders—and it is no longer a vain hope—these children will grow up in peace and security in a united and democratic Cyprus.
My Lords, I am grateful to my noble friend Lord Northbrook for calling this debate and to other noble Lords for their contributions. I know that they maintain a close interest in, and reflect an extensive knowledge of, Cyprus—that was manifest in their contributions. I commend their continued support for efforts to bring lasting peace to the island.
A settlement is in the interest of all Cypriots. The contributions from your Lordships today have served to underline that it is in the UK’s interest, too. The Government are fully seized of this and are actively engaged in supporting both sides in their search for a solution, as I shall set out.
The Government believe that there has never been a better opportunity for peace in Cyprus. This is down to the unstinting efforts of the leaders of the two communities, President Anastasiades and Mr Akinci, who have given hope and wrestled with undeniably complex problems. I pay tribute to their courage, their commitment and their leadership. I feel that there is justification for a degree of optimism, having regard to the challenging difficulties that the island of Cyprus has faced.
The noble Lord, Lord Collins, sought clarification of the United Kingdom’s role in relation to these discussions and attempts to reach an agreement. I reassure him that my right honourable friends the Prime Minister, the Foreign Secretary and the Minister for Europe and the Americas are in touch with all the key players, not only on the island but in Turkey and Greece. We believe that they share the same ambition to reach a settlement.
The leaders recently reaffirmed their commitment to reach a solution by the end of 2016. No one should underestimate the scale of the challenge, but with courage and compromise we believe that reaching a deal in this timeframe is achievable. The United Kingdom will continue to support the leaders as they seek to make this aspiration a reality.
I say in response to the noble Lord, Lord Collins, that United Kingdom support includes practical measures. We have reiterated our offer, originally made in 2004, to cede almost half the land of the UK sovereign base areas to a reunited Cyprus. The Government have looked at this carefully. I can assure your Lordships that this offer will not adversely affect the ability of the bases to carry out their vital work to promote our security and that of the wider region. I hope that that answers the question posed also by my noble friend Lord Northbrook.
The United Kingdom also has a specific role to play as a guarantor power in the search for a settlement, alongside Turkey and Greece. The Government stand ready to play their part when asked to do so by the two sides. It is important to say that it is not for us to dictate what those arrangements should be. Rather, we will continue to support efforts to find a solution that allows both sides to feel safe.
The United Kingdom is also playing a role as one of the largest troop contributors to the United Nations peacekeeping force in Cyprus. I pay tribute to the dedication of the British troops and the more than 100,000 soldiers from 39 countries who have served in the mission to date. British troops have been there from the beginning, since 1964. The United Kingdom, together with Australia, is the only continuous contributor since the mission began. This demonstrates the UK’s long-term commitment to Cyprus, but more than half a century of peacekeeping also serves to highlight the pressing need to find a lasting solution.
The United Nations plays a key role in supporting the efforts of the two leaders in their search for peace. I pay tribute in particular to Special Adviser Eide, as well as to outgoing Secretary-General Ban Ki-moon for the personal attention that he has given to the Cyprus talks. I take this opportunity to congratulate his successor, António Guterres, on his recent appointment. I am confident that he will continue the good work of his predecessor.
The benefits of a Cyprus solution are clear, economically and politically. A united Cyprus would increase prosperity both for Cypriots and the wider region for three main reasons. First, a united Cyprus would have a larger and more efficient economy. Secondly, it would create a more stable investment climate and enable greater trading opportunities with Turkey and the wider Middle East. Thirdly, it would be able fully to exploit its natural resources for the benefit of all Cypriots.
According to analysis by PRIO Cyprus—an independent bi-communal research centre—the peace dividend for a united Cyprus could reach €20 billion over 20 years, and average annual incomes could rise by as much as €12,000 within the same period as a direct consequence of settlement.
The benefits go wider than the economy. A reunited Cyprus would not only provide greater stability and security for Cypriots but contribute to wider regional security. At a time when others are trying to sow discord and division, a peace settlement in Cyprus would stand out as a model of courage, tolerance and inter-communal cooperation—a country at peace with itself and its neighbours and a beacon of stability in a sometimes difficult region.
I turn to some of your Lordships’ specific contributions. My noble friend Lord Northbrook raised the role of the UK. I think I have partially covered that in my speech. The UK is sensitive to the need to recognise that only the Greek Cypriots and Turkish Cypriots can negotiate an agreement. The UK is supportive, but not intrusive. We want to encourage, but not to interfere. To my noble friend Lord Northbrook, I say that I shall have to be circumspect about the use of my handbag.
My noble friend Lord Balfe made a speech in which he balanced optimism with pessimism, but he rightly identified economic potential. In response to his speculation about the consequences of the talks failing I would say that we are in the business of wanting, for both sides, the talks to succeed. We are trying to support as best we can what we see as a positive development offering a better prospect for both communities in Cyprus and a more hopeful future. In fairness to my noble friend Lord Balfe, I thought that he ended with a more upbeat prognosis.
My noble friend Lady Berridge, in a very constructive and positive contribution, raised a number of issues. In particular, she asked what would be the role of the Commonwealth in relation to a reunited Cyprus. The Republic of Cyprus is currently in the Commonwealth, so the assumption is that a united Cyprus would also be in the Commonwealth. However, although Cyprus is a member of the Commonwealth, that organisation has not had any direct role in the talks, because, as I indicated, it is up to the two leaders to decide how best to conduct the negotiations and when and how to involve others.
My noble friend Lady Berridge also raised the issue of the military bases—the sovereign base areas. They will remain, although, as I indicated earlier, we have offered to cede almost half the territory of our sovereign base areas to a united Cyprus if an acceptable agreement can be reached by the two communities.
On the question of guarantor powers, which my noble friend also raised, security and guarantees will be discussed as part of the settlement negotiations. It is not for the UK to dictate what the outcome should be, but just to continue to support efforts to find a solution which allows both sides to feel safe. While no agreement exists, the guarantor powers system remains. I was also much encouraged by my noble friend’s comments on the activity of the faith communities on the island of Cyprus.
The noble Lord, Lord Collins, asked two questions. First, he asked what assessment the UK has made of off-island talks in the near future. I simply repeat our role: we wish to encourage, we do not want to interfere. We want to support, but we have no desire to intrude. He also asked whether Brexit will affect the UK’s role in settlement talks. The ongoing talks to reunite Cyprus are led by the leaders of the two on-island communities and facilitated by the United Nations. The UK’s role as a guarantor power under the 1960 Treaty of Guarantee and as a permanent member of the United Nations Security Council is unrelated to the UK’s membership of the European Union. This is an objective that we wish to see attained and which we think would be very good for both communities on the island.
I will finish by saying that the Government believe that a deal by the end of the year is achievable. The two sides, facilitated by the United Nations, are working tirelessly to make it happen. The UK commends their efforts, and we will do what we can to help. As I have said, the main beneficiaries of a deal will be the Cypriots themselves, but ultimately we all stand to gain.
We do not underestimate the difficulties. There will be tough choices to make. All parties will need to show courage and will have to be willing to compromise. But we firmly believe that the rewards will outweigh the sacrifices. I urge the leaders and the two communities to seize this opportunity for lasting peace. I assure your Lordships that the Government will remain steadfast in their support of both parties at this critical time.
House adjourned at 5.26 pm.