My Lords, today's debate on growth draws on the impressive range of experience and knowledge in our Chamber. We have five maiden speeches to look forward to-from the noble Lords, Lord Kestenbaum, Lord Wood, Lord Collins, Lord Popat, and the noble Baroness, Lady Worthington.
One of the keys to growth is productivity, and in today's time-constrained debate, although gratefully somewhat extended, that means saying more in less time. I will do my best. I do not wish to rehash the debate about the pace of the fiscal consolidation adopted by the Chancellor. That was discussed at length last week. Putting the public finances on a sound and sustainable footing after the financial crisis is an essential first step towards recovery, but we cannot cut our way out of our economic problems. We also need a credible strategy for growth, because growth matters. Small changes in the growth rate over the next few years can undermine the Chancellor's deficit reduction plan, and if he chooses to stick to plan A that might well lead to even deeper and more damaging cuts. Low growth in the short term will make big differences to our standard of living in the long term.
A reduction in our long-term growth rate from 2.5 per cent to 1.5 per cent would reduce aggregate growth over the next 20 years by nearly 30 per cent. A prolonged period of low growth would inflict a decade of stagnation, a loss of international competitiveness, a sharp deterioration in public services and a generation of jobless young people. The Government now acknowledge this and have begun to turn their attention to growth. Growth in our economy is currently anaemic, and we still have the full impact of the cuts to come, with their inevitable blow to consumer and business demand and confidence. Food and fuel prices are rising, and the Japanese economy has been badly hit. Against that background, the risk to the OBR's forecast is very much on the downside.
The Plan for Growth, published with the Budget, is a welcome document, and so are many of the measures announced in the Budget to promote growth. The plan is the latest in a long line of efforts to improve our economic growth rate, stretching back to the work of Neddy in the 1960s. Indeed, my noble friend Lord Layard and I are veterans of the 1996 Commission on Public Policy and British Business report, entitled Promoting Prosperity. What is striking about this 50-year body of work is that, after allowing for the impact of greater globalisation and the emergence of new technologies, there is a remarkable consistency of analysis, findings and proposed remedies. Underinvestment, low productivity, inadequate skills, lack of availability of finance and over-burdensome regulation are ever-present themes. This consistency points to the deep-rooted nature of the problem and the sheer difficulty and complexity of raising the growth rate in a developed country in a highly competitive world economy.
Another lesson from past growth initiatives and plans is the overriding importance of excellent and consistent implementation and execution of policy measures. Too often, Governments chop and change, introducing new wheezes which have a short-term political impact but fail to provide the consistent and predictable environment that business needs. Much is promised, but little is delivered.
Improving productivity is a key driver of growth and has rightly been a priority in all plans. Yet, despite a good relative performance over the past 15 years, UK productivity per hour is some 17 per cent lower than the US and 10 per cent below that of Germany. Our services sector, the largest driver of jobs growth, responsible for 65 per cent of private sector output, accounts for much of that productivity gap. Improved skills, not least management capability, greater innovation and improved levels of investment are necessary preconditions to improving productivity.
The Budget brought some notable changes to planning and important clarity on tax treatment of overseas profits, but only limited deregulation. Some old friends reappeared. Enterprise zones, despite their very modest record and short-term impact, are back in fashion. Better, surely, to make the whole of the UK an enterprise zone with time-limited measures to promote enterprise, investment and business formation. If the Government really believe in localism, allow our cities to introduce their own set of policies to attract investment, to develop clusters and to meet local training needs. Business and investors partner with cities around the world, and would welcome the opportunity to do so in the UK.
While that deregulation is promised, other parts of the Government are busy undermining proven ingredients of our success. The creative sector, where I spent much of my career, accounts for more than 7 per cent of GDP, and relies on the steady supply of richly talented individuals. That does not happen as a course of nature. The likes of James Dyson, Paul Smith, Ridley Scott, Simon Rattle, Keith Richard and Alexander McQueen all went to art school, where the wild and the wacky creative talents can flourish. Art schools have had significantly to up their intake of overseas students to make ends meet. That, and the high level of fees, risks choking off the very supply of talent, often from disadvantaged backgrounds, that we need to remain a world leader.
Reductions in the level of taxation on profits and an increase in the level of tax incentives to invest are guaranteed a very warm welcome, but have they been targeted effectively? In the light of the need to boost investment, I would favour tax breaks on investment rather than a faster reduction in the overall rate of corporation tax. Why does investment in capital goods receive favourable tax allowance treatment, when intangible investment in process improvements, creative ideas, skills and IT, all of which drive innovation and productivity and in many businesses are the most important components of growth, are disadvantaged? In addition to their aim to achieve simplicity in tax matters, the Government should also adopt the principle of neutrality.
The UK has long been a laggard in capital investment. Last year, investment sank to 15 per cent of GDP, down from a 30-year average of 17 per cent, compared with 19 per cent in Germany and 21 per cent in France. Two particular areas of underinvestment stand out: infrastructure and energy. In its report last November on growth priorities, the McKinsey Global Institute estimated that the UK needs to spend £350 billion on transport over the next 20 years to renew our strategic network of roads, railways and airports to expand capacity and help to close the productivity gap. A further £170 billion is required over the same 20-year period to renew our energy infrastructure. It is therefore regrettable that the Government have gone for a quick political fix on fuel duty by clobbering the oil companies and thereby putting the oil companies' investment plans at risk.
The Government currently enjoy exceptionally low long-term borrowing costs and should and must be at the heart of this vast infrastructure investment programme. But here we come up against a persistent and wretched piece of Treasury dogma, which dictates that, unlike in most OECD countries and contrary to the rules operating in the European Union, all borrowing by the Government, even if it can be serviced from cash revenues, must be included in the PSBR. Of course, borrowing that has to be financed through future taxation must be included, but if the return exceeds the cost of borrowing, the borrowing should not count towards the PSBR. As my former colleague at the IPPR, Gerry Holtham has pointed out, a state infrastructure bank could turn the PFI model on its head and provide loan finance for the construction of a road which could then be leased to the private sector in return for a rental income which can service and repay the debt. Road usage forecasting is sufficiently robust to enable the risk to the taxpayer of default to be covered by an appropriate guarantee charge, which should be included in the PSBR.
The income to finance the renewal of our road network will flow from the long overdue introduction of road pricing, which can easily be deployed using the vehicle number plate recognition system that works very effectively in London. Charging consumers for the use of expensive public assets is a fact of life in most countries, but in the UK, the very threat of it leads to a serious outbreak of jitters in the Government. I have advocated its introduction to Ministers in this Government and their predecessor and have always been met with an enthusiastic response to the idea but a terror at having to take responsibility for its introduction. The very severe challenges we face require boldness and courage from the Government. Timidity simply will not do.
Road pricing is but one example of how Governments can open up new markets and foster demand without recourse to the Exchequer. This Government and their predecessors have been quietly and impressively working, using administrative and legal powers to create new markets in the energy sector. Feed-in tariffs and the upcoming Green Deal are two such examples. The costs of the solar panels installed under the feed-in tariff scheme are largely borne by the total population of electricity consumers. The Green Deal is likely to see a range of energy-saving technology installed in homes, paid for by loans from electricity suppliers, which will be paid out of fuel-cost savings. The green mortgage thus created will attach to the property until repaid, regardless of who the owner is. Both schemes will create many jobs quickly, boost the economy and encourage product innovation and manufacturing. Another more conventional idea floated by the Secretary of State at the Department of Energy and Climate Change just before the Budget, which sadly did not survive the Treasury cull, was to lower the rate of VAT to 5 per cent for a limited period for home refurbishment and repairs up to a limit of, say, £20,000. This would have created many new jobs quickly, improved the housing stock and brought some cash transactions that are currently not in the VAT net back into the VAT net-all at a modest cost to the Exchequer. Perhaps the Secretary of State's suggestion is being held back for next year's Budget.
Another opportunity to stimulate a market and create demand at no cost to the taxpayer is the provision of sophisticated healthcare technology to the home that can be monitored remotely and that will allow the elderly and infirm to remain safely and happily in their own home and to delay or avoid the expensive option of a care home. This could be financed out of existing local authority budgets.
Ready access to finance is the sine qua non of growth. SMEs complain about the lack of availability of loan finance and the steep cost of loan renewal. Project Merlin might help but needs to be very closely monitored. Many SMEs are held back by a lack not of loan finance but of capital, and while there are welcome increases in the EIS and VCT allowances for early-stage companies, the threshold levels are set far too low to help the one sector of our economy that can create the majority of new jobs that we so badly need. Again, timidity seems to have won out.
The Plan for Growth reminds me of my school report-"a worthy and promising start, but much, much more needs to be done". The OBR's judgment was more dismissive; it saw insufficient evidence that The Plan for Growth would do anything to raise long-term growth. I anticipate that your Lordships will identify today many ideas and opportunities that will help us to improve on that position.
My Lords, it is a pleasure to follow the noble Lord, Lord Hollick, and I congratulate him on obtaining this debate. He certainly made a very thoughtful speech. It is interesting that he presented no alternative to the Government's views; rather, he presented a series of ways in which the present policy could be enhanced. Each of the items that he mentioned deserves careful consideration.
As the noble Lord pointed out, we had an opportunity last week to consider cuts and the rate and extent of them. I remain firmly of the view that the Government are doing the absolute minimum required to get the economy back on an even keel, because, as the OBR report and the Red Book make very clear, even at the end of the five-year period, despite all the cuts and the tax increases, the actual amount of debt will have gone up rather than fallen. The longer one delays in taking action, the bigger the amount that you eventually have to pay off in total.
Perhaps I may make another point. As the noble Lord also rightly points out, the time available for debate today has been extended, but it is still down to four minutes per speaker. It is very difficult to deal with the points that he has made in a speech of four minutes. We should seriously consider whether a really extended debate in the Moses Room in which we could go into the OBR's report in depth, because it is a very good report indeed and raises a number of issues, would not be more to the advantage of the House than time-limited debates on the Floor of the House.
I distinguished last week between two ways in which the expression "growth" may be used. It may be used to represent the fact that existing spare capacity is being used up more and therefore there is growth, or it may be used to represent increasing the underlying productive potential, which the noble Lord largely concentrated on. The course which the OBR is setting in gradually mopping up that excessive capacity-it anticipates that the end of the cycle will come in about 2016-is the right way to go. That is very similar, I feel bound to say, to what was attempted back in the early 1970s, although unfortunately that was wrecked by a massive increase in import prices. We are faced with the same problem. It was stigmatised as a dash for growth. I do not think what we are now proposing is that, nor do I think that it was then. What we have to do is get a steady increase in the amount of demand in the economy.
As regards the underlying productive potential, certainly we need to have more investment but we also need more saving. The reality is that those who have saved prudently, particularly those on low fixed incomes such as my former constituents in Worthing, find that their savings have been seriously attacked. It is very difficult to think why anyone should save at the moment, given that it is virtually impossible to get a real rate of return on savings. Therefore, as far as the productive potential is concerned and the Keynesian relationship between saving and investment, I would very much hope that the Government will now take further steps to increase the level of saving and give some real incentive for savers in the sense of an actively positive rate of return.
I find that I am already out of time and I have a speech for about the next two hours. Alas, I shall resist that temptation. None the less, the noble Lord has got the debate off on a very sound footing and I look forward to hearing what follows.
My Lords, I thank the noble Lord, Lord Hollick, for introducing this debate and I very much look forward to all the speeches, not least the maiden speeches. In my short time, I should like to say something about manufacturing. It seems to me that we have a unique opportunity to see growth in this sector. In a sense, the bankers have done manufacturing a favour in that banking no longer has the kudos, nor appears to many young people, I suspect, to be quite the wonderful career that it did.
There is no doubt that within and among young people there is a huge interest in this sector. I have done some work with the F1 in Schools and Greenpower charities, both of which set engineering tests for schools to enable children to get a taste of engineering and to promote engineering as a rewarding career. There is no doubt that the enthusiasm with which these programmes are taken up demonstrates a very large interest. Demand for engineering as a career is not a problem.
The issue is how we should put the structures in place to enable young people to take it up easily. I should like to commend two initiatives in the Budget. The first is the university technical colleges, which will promote vocational training. This area has been consistently underplayed. Many educationalists say that children should not specialise at an early age but my work with organisations such as the Prince's Trust and SkillForce persuades me that for many children a vocational route is clearly what they want and is apparent at a relatively young age. Anyone who wants to see a case study should read the autobiography of Stuart Pearce, the under-21 England manager. He was hopeless academically but was a terrific electrician, which is what he did before he went into football. Many children know at a relatively early age that they do not want to study many academic subjects but that they are really interested in vocational subjects.
Secondly, this Government have increased the number of funded apprenticeships in the previous Budget and in this Budget by 125,000, which is very welcome. The challenge is on the private sector to take them up now that they are available. The manufacturing sector having been keen to ask the Government for additional support for apprenticeships, the ball now is in its court. I hope that the Government will press it hard to make sure that these apprenticeships are taken up.
Another issue promoted in the Budget which the sole voice of the noble Lord, Lord Bhattacharyya, has reminded us about over the years in your Lordships' House is the value of promoting high-value manufacturing via partnerships between the industry and universities. The decision to promote and to support high-value manufacturing, technology and innovation centres-surely that is the least elegant phrase among all the acronyms that the Government have come up with-is extremely welcome. The first, in Sheffield, on its own will generate 400 jobs and will enable the specialist engineering sector in that area, which Boeing and others have supported, to flourish further.
More generally, I have considerable sympathy with the proposals of the noble Lord, Lord Hollick, for investment. We support road pricing and I would support the proposal which I am sure the noble Lord, Lord Skidelsky, will be speaking on: a national investment bank. The Treasury will argue against many desirable things. That should not be a reason for our not doing them. The noble Lord, Lord Hollick, said that at this point we should be bold and that timidity will not do. We need to tell the Treasury that, as well as everybody else.
My Lords, I begin by expressing gratitude for the generosity and warmth with which I have been received into your Lordships' House. I have experienced kindness and consideration from everyone I have encountered. I have also discovered that the wisdom residing in this House is quite extraordinary. My sponsors, my noble friends Lord Sainsbury and Lord Puttnam, did much to ease my nerves, and the dedicated staff have been a remarkable source of guidance-in one case literally, as a distinguished doorkeeper gently stopped me from walking straight into a broom cupboard on my very first day here.
Perhaps this challenge of losing and then regaining one's bearings is an appropriate personal metaphor. As my family name, Kestenbaum, indicates, home until the traumas of the 20th century was Germany. Leipzig and Frankfurt were our origins. At the time when Europe turned dark, our family, together with millions of endangered others, fled. It was a circuitous route, first to the United States and then to Japan, where I was born, then back to the US, and finally, as a child, to Britain. It was here that our community learnt that this country did not expect you to make a choice between loyalty to one's faith and loyalty to the national interest while both are pursued with dignity.
But as I enter into this debate on economic growth, it is no coincidence that I should reflect on the two economies in which I grew up: Japan and the United States. My parents, while bringing up a young family in Japan, saw at first hand what has since been dubbed the Japanese economic miracle, a transformation in the standard of living powered by growth. But the lost decade of the 1990s, as it became known, is yet to be found. The United States, our family's pre-war refuge, became the world's largest economy not least by virtue of new technologies which saw GDP per head grow sevenfold in the 20th century. But despite this, more recently President Obama has said that the US economy, in order to grow, will need to reach a level of innovation not seen since the space race. So I am grateful to my noble friend Lord Hollick for calling urgent attention to this matter. We are now learning the same lesson as those other economies-that growth is not a national birthright, and the heady days when economic power was concentrated in the hands of a few are over.
In recent years my colleagues and I have been privileged to back some of Britain's brightest young entrepreneurs. During my time as CEO of NESTA, and now as chief executive of Lord Rothschild's family investment interests, we have scrutinised thousands of business plans and met hundreds of young high-tech innovators; and I have watched their concerns, particularly among a group of young entrepreneurs in Manchester with whom I worked closely. Those talented graduates did not just want to build new businesses, they wanted to feel that the embrace of new ideas and new technologies was central to our national purpose. The prize is great. Research published last week by NESTA entitled Vital growth shows that these fast-growing, innovative businesses continue to punch way above their weight, with just 7 per cent creating half of the new jobs. As your Lordships consider ways to increase this number, we might also consider the lessons of those Mancunian entrepreneurs. Innovation has to be embedded in our culture-it must be central to the national story.
This national culture of innovation so often provokes false choices, either a constant flurry of well-intentioned interventions or staying firmly out of the way. After all, say some, Thomas Edison did not need state aid to create the incandescent lamp-a lot of pluck and a little luck was all it took, so the argument goes. Yet an economic culture that produced innovators like Edison and others did not emerge by chance. Edison benefited from a postal service, new roads, public libraries and a stable banking system. All these were the public goods that made innovation flourish and showed how economic growth is built on a tapestry of skills, science, finance and regulation all working in tandem.
So often this interplay takes place where one might least expect it. Many of the high-tech entrepreneurs that I have worked with in recent years took their inspiration from Silicon Valley. The conventional wisdom is that, "There's an economy entirely sustained by individuals", and yet, subtle and intelligent public policy is everywhere in Silicon Valley. Defence spending funded a generation of microwave technology there that created the foundations for the semiconductor industry; the procurement strategies of DARPA kick-started hundreds of technology businesses. This combination of technological talent, supportive public policy and effective financing mechanisms is at the heart of great innovation economies.
This debate focuses quite rightly on the conditions for economic growth, but perhaps I may make one final, wider observation. Growth as a public policy imperative can do much: it can create jobs; it can reduce welfare dependency; it can over time help finance public services-it can do all these things at its best. But rapid economic growth simply for the relentless pursuit of wealth alone will do nothing for the long-term health of our nation. Economies never measured progress by the yardstick of growth in isolation, but, rather, how that growth made for a better society. So this debate, I suggest, is as much about the society that we wish to build as it is about the economy which will help build it.
I offer thanks to your Lordships' House for giving me the opportunity to make my maiden speech on a subject that I feel will underpin many of our concerns in the months ahead.
My Lords, what a privilege it is to follow the absolutely superb maiden speech of the noble Lord, Lord Kestenbaum. This is a debate tailor-made for his Lordship. He has hit the ground running, showing the invaluable input that he will bring to this House, particularly in the field of innovation and enterprise where he has had huge experience. He made his mark in this country as the former CEO of NESTA, the National Endowment for Science, Technology and the Arts, the largest endowment in the UK, fostering innovation, and the country's biggest source of seed finance for technology start-ups.
Our House is renowned for its wisdom, and, of course, it follows that there is a certain maturity of age among our distinguished Members. With Jonathan, we have someone so young and yet with so much varied global experience which he will bring to bear here, having worked as a venture capitalist, having been the chief executive of my noble friend Lord Sachs' Office of the Chief Rabbi and with his involvement in the arts and in higher education. He may very well have walked into one of our broom cupboards, but he has certainly made a grand entrance today and we look forward to many future contributions.
I thank the noble Lord, Lord Hollick, for securing this crucial debate. Last week's Budget had so much that was music to the ears of the entrepreneurial community: encouraging start-ups; increasing the entrepreneurs' relief limit; and the setting-up of enterprise zones-and, let us not forget, had it not been for enterprise zones, we would not have Canary Wharf today. The support for apprenticeships is tremendous, although I am yet to be convinced about the university technical colleges concept. StartUp Britain is terrific; however, we must remember that, as the noble Lord, Lord Kestenbaum, referred to, and as Professor Colin Mason has pointed out, 6 per cent of UK businesses with the highest growth rates generated half the new jobs created by existing businesses. Professor Mason tells us:
"The UK's problem is the lack of high-growth firms"- the gazelles-
"which go on to be 'companies of scale', rather than not enough start-ups. We need quality, not quantity".
The reduction in corporation taxes is great news, but as the Chancellor said:
"high tax rates can do real damage ... They crush enterprise, undermine aspiration and often undermine tax revenues".-[Official Report, 23/3/11; Commons, col. 957.]
Those were the Chancellor's words. The sooner the 50p tax rate is abolished, the more attractive Britain will be and, in fact, the tax take will go up. As for a property tax, this will take us back to the dark ages. I hope that this idea will be quashed before it can even get off the ground.
I am president of the UK India Business Council, supported by UKTI. At our annual summit in Manchester this month, the Indian High Commissioner, His Excellency Nalin Surie, said of India: "Our growth is your opportunity". Yet British business is scratching the surface. We need to do much more to encourage British business to go global, particularly to countries such as India.
I have voiced my concern about the drastic cuts that the Government are making. Of course, we need to make savings, but it is what you cut that matters, and you do not have to cut everything. For example, cutting so severely investment in higher education will really harm this country. This, combined with a crude immigration cap, is seriously hampering higher education and business. We need to encourage growth and to keep investing in our infrastructure.
I have just returned from a business delegation hosted by the Emirate of Dubai, and in spite of all the problems that that country has experienced recently in terms of debt and a huge property crash, it is continuing to benefit from the phenomenal investment in world-class infrastructure and becoming a world-class hub in the region as a result of that investment, attracting 10 million tourists a year as well as trillions of dollars investment into Dubai.
This year I graduated from my nine-year president's leadership programme at Harvard Business School- I suppose that I am a slow learner. My study group presented me with a wonderful book, TheRational Optimist. Of course, I hope that they were referring to me. With all Britain's problems today-high inflation, low growth, high unemployment, a giant deficit, huge debt and far too high public spending-we are still one of the most open economies in the world. We still have so much of the best of the best in the world, be it advanced engineering, higher education or science. Only this week it was announced that Britain is in the top three in the world in the publishing of science papers-ahead of France and Germany. I bet that by 2050, the giants of India and China will be the two largest economies in the world, but I also bet that this tiny country will still be in the top 10.
My Lords, it is with a great sense of honour and privilege that I speak for the first time in your Lordships' House.
I am grateful to all noble Lords, and to the staff of the House, who were particularly helpful in allowing my Guru Moran i Bapu to witness my introductory ceremony in the Chamber. It is his teachings of truth, love and compassion that are the guiding principles of my life. His presence was in itself an historic occasion, as no Indian spiritual leader had ever attended this House to witness such a ceremony, and for me it was a great honour.
As some of you may know, I was born in Uganda and came here at the age of 17 under very difficult circumstances. In January 1971, I accompanied my father to drop my sister at Entebbe Airport, from where she was flying to study in the UK. At the stroke of midnight, the army of Idi Amin, the then dictator of Uganda, took control of the airport and ordered all flights to be cancelled.
Our family knew that our time in Uganda was limited, and in May of that year I moved to Britain, working in a Wimpy bar. The following year, Idi Amin expelled 30,000 Ugandan Asians, ordering them to leave within 90 days. They left behind a prosperous past and walked towards an uncertain future. I would like to thank the Conservative Government then led by the late Sir Edward Heath, who, along with a number of voluntary organisations, helped my fellow Ugandan Asians in our hour of need. We have never forgotten this lifeline that we were given, and I am proud to say today, 39 years on, these very same people are some of the most hard-working and patriotic in the country.
The powerful emotions that I feel today are simply explained. This country can boast that here, in Britain, people in genuine need of refuge can find a safe home, live in peace and rebuild their lives. If that was not enough, we were given the same rights as those who were born here, including the right to vote, which is a gift that we particularly cherish, yet that right is superseded by the privilege of joining your Lordships' House. From what I have witnessed in your Lordships' House, and what I have learnt during the last 40 years, Britain's tolerance, decency, fairness and justice are its finest qualities. It is testimony to the tolerance and generosity of this country that the Hindu community is explicit in being proud to be British and proud to be Hindu, seeing no contradiction between the two. On the contrary, it is a mutual reinforcement.
I decided to take the title of Lord Popat, of Harrow, because for 30 years I have been a member and am now president of Harrow East Conservative Association. My parents lived in Harrow and I see this as a tribute to them, to whom I owe everything. My only regret is that they are no longer here to share this with me.
Over the past 40 years, the Ugandan Asians who came here as refugees have played a very successful role in Britain's economy and are now a central part of Britain's economic fabric. After training as an accountant, I myself have run my own business-and this brings me to the topic of today's debate. The past decade of government reminds me of President Reagan's pointed insight into the Government's view of the economy:
"If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidise it".
It is about time we broke this cycle.
Our difficulties are bank borrowing, a complicated tax system, endless employments regulations and a planning system recently described by the noble Lord, Lord Wolfson, as glacial. Small businesses are responsible for six out of 10 jobs in the UK. They are the engines of economic growth, and last week's Budget saw a series of welcome announcements, including the commitment of no new regulations on firms with fewer than 10 staff for three years, and the simplifications of the tax code. This will help to create new jobs, growth and prosperity, and I look forward to doing all I can to assist the Government in furthering this agenda.
My Lords, we have heard two maiden speeches, which have gone to remind us all of the richness and variety of the membership of your Lordships' House. We are very privileged to have with us the noble Lord, Lord Kestenbaum, with his experience of the Japanese and the US economy, which are two very different economies from our own. I think it is also true to say that he is extremely proud of his Jewish blood. We should pay tribute to the Jewish immigrants who come to our country, who have done so much to make it move forward and have shown so much enterprise, which has made us the country we are today. I declare an interest as I have a certain amount of Jewish blood myself on both sides-but unfortunately not enough.
I also pay tribute to my noble friend Lord Popat. I spent a certain amount of time in east Africa, in Kenya rather than Uganda, and I know the massive contribution that was made there by the Asian community. Of course, it was a tragedy for Uganda when Idi Amin decided to kick it out. There was a terrible moment here when we hesitated before actually agreeing to allow those Ugandan Asians to come to this country. What a good thing we did. Uganda's loss was certainly our gain. Once again, we benefited from incredibly entrepreneurial immigrants who played a very massive role in the growth of our economy and the movement of our enterprises. My noble friend is, indeed, very welcome in our House, and we are very lucky to have him here.
I congratulate the noble Lord, Lord Hollick, on launching this debate. I was extremely glad, as my noble friend Lord Newby was, that he raised the whole issue of road pricing. Road pricing is certainly something that should be embraced by our Government. It has the effect of actually getting motorists to contribute to the costs of the driving which they do, but I can understand why the Government are hesitant. The motoring community is certainly one that Governments rather hesitate before they antagonise them. But I think that this is the way forward, and I hope serious consideration will be given to road pricing. We have to be very brave if we are going to do it, and we have to price existing roads to pay for future roads. I totally accept the noble Lord's point that technology has now moved on and has made this possible.
I would like to address the question of what I would describe as the phoney war about the whole business of deficit reduction. There is a concept being put forward by the shadow Chancellor, Ed Balls, that somehow there is a rather easier way of addressing the deficit. There is a suggestion from the Labour Party that if by some extraordinary circumstance it had actually won the last election it would have stayed with the Budget of the former Chancellor, Alistair Darling. I do not think there is the slightest chance of that happening whatsoever. If we had a Labour Government today, in total or global terms their deficit reduction plan would be very similar to the one that this Government are putting forward. If they had been in power Labour, too, would have taken £6 billion-worth of savings in the current year. It is a complete load of nonsense to suggest that there is somehow an easier way of approaching deficit reduction when the problems that we have are so massive. The reason for that is that although Chancellors love to pretend that they are in total control of the economy, the bottom line is that they are not. The people who have massive influence on our economy are those in the markets.
If we had gone ahead with the Darling Budget and had done nothing to change it, we would now be paying much higher interest rates than we are on our debt. That would merely roll forward the problems that we now have of increasing debt. This is one of the sadnesses that I have with the Budget which we have just seen: we are watching the total amount of government debt climb, in the OBR's forecast, from £759 billion in 2009-10 to £1,359 billion at the end of the Parliament. I would like to see us repaying debt. It is very sad that we are going to inflict this enormous burden of debt on future generations.
My Lords, it is a privilege to be standing before you today. In particular, I am proud to be representing the cause and interests of redheads from across the political spectrum. I pledge to stand up for this minority in the years ahead. As an academic, my experience of public speaking has largely been limited to university lecture halls. I was given three tips by an academic colleague before my first lecture that I have obeyed religiously ever since. First, always insert a joke just after halfway through to wake your audience up if they are in danger of falling asleep. Secondly, never distribute your hand-out before you begin speaking or else your audience will pick it up, walk out and get a cup of coffee instead of listening to you. Thirdly, like Cicero, always make your points in groups of three. This advice has stood me in good stead and I pledge to repeat this formula during my contributions to the House in the years ahead.
I have felt not just a slight sense of awe but a great sense of humility since beginning my time on these famous red Benches. That is in part because, as a student and teacher of politics, I am acutely aware of the wisdom, distinction and contribution to Britain of generations of noble Lords who have come before me and served in this House, and in part because, at its best, I know that this House can provide an opportunity for scrutiny, reflection and collaboration in a political system otherwise short of such qualities and a place to speak up for those whose voices do not often get heard.
I am also humbled by the fact that I am surrounded by many of the people, on all sides of this House, who inspired me first to study, then teach and then practise politics. I had a sense as a teenager that politics was, as Tony Blair once said,
"the place for the pursuit of noble causes"-[Hansard, Commons, 27/6/07; col. 334.], and could offer the possibility for ideas and collective action to change our country for the better. I believed it strongly during my time working for the former Prime Minister, Gordon Brown, to whom I will always be indebted and whose dedication to public service is second to none. I still believe it passionately and I hope my time in this House fuels rather than dims that optimism. Lastly, I thank noble Lords from all sides of the House for their kindness, in particular my noble friends Lady Nye and Lord Kinnock for their encouragement, friendship, cups of tea and hand-holding.
Growth is of course the necessary condition for meeting the aspirations of the British people and funding the public services on which we all rely. My point today is that we should take this opportunity as a country, as we emerge from the international recession, to move beyond a simple concern with what Keynes called,
"the growth of the cake", as,
"the object of true religion".
In particular, we need to focus on three crucial aspects of economic growth. First, we need to aim not just for growth but for sustainable growth in which consumption is based on rising living standards, not excessively dependent on borrowing; where business profits rise as a result of investment and innovation, not simply through speculation; and where environmental sustainability is built in rather than bolted on to the business models of small and large firms alike. This is a long-term ambition. It cannot be achieved through a quick fix, and it requires thinking about how we reshape our economy in quite fundamental ways.
Secondly, we need to move on beyond the rather stale polarity of laissez-faire on the one hand and the demonisation of old-style corporatist industrial policy on the other, to work out not whether but how a Government can provide secure foundations for long-term growth and for raising productivity. Increasing the value of what we produce demands an intelligent role for government intervention: to stimulate greater innovation, modernise our infrastructure and ensure that our banks serve the investment and research needs of companies as well as they serve the short-term interests of their shareholders.
Thirdly, alongside our determination to restore growth, we must have equal determination to ensure that the proceeds of growth are enjoyed by the many, not the few. This is not the case at the moment and has not been for a while. In 1979, the top 1 per cent received under 6 per cent of Britain's personal income; in 2005 they received over 14 per cent. For the last 30 years, 22 per cent of every extra pound earned has gone into the pockets of the top 1 per cent. Since the global recovery from the financial crisis began, real wages in the USA have increased by $168 billion and in Germany by €36 billion, but in Britain real wages have actually fallen while profits have risen by £14 billion.
In the United States a debate is raging about how growth can raise living standards for all, and whether it is globalisation, technological change, the competition for talent or political choice that is behind the increasing polarisation of rewards. In Britain that debate is only starting now but is long overdue. I hope that noble Lords agree with me that it is a subject to which we should devote some time in this House in the coming months and years, because doing our utmost to ensure that economic growth is not only strong and secure but shared widely is surely among the first duties of those who govern Britain.
My Lords, I listened with great interest, as I am sure we all did, to the attractive maiden speech of the noble Lord, Lord Wood of Anfield. He comes to the House from a notable academic and policy-advising background-Magdalen College Oxford, then No. 10 Downing Street. He will bring to our deliberations a much needed blend of theoretical rigour, practical experience and social passion. We got a flavour of all three in his maiden speech and it is certain that they will give distinction to his future contributions to our debates. I join other noble Lords in thanking the noble Lord, Lord Hollick, for securing this debate.
My proposition is quite simple: there is too little demand in the economy for robust growth, and the Chancellor's policy of taking demand out of the economy is exactly the reverse of what is needed. The squeeze in public spending seems bound to stay, but there are two ways in which we can try to increase growth in the economy despite the cuts.
The first, referred to by the noble Lords, Lord Hollick and Lord Newby, is to set up a national investment bank with a mandate to invest in green projects, transport infrastructure, social housing and export-oriented SMEs. A limited fiscal commitment of, say, £10 billion over four years would allow the new bank to spend, say, £100 billion over that period with conservative gearing, provided that it was allowed to borrow. That is the key point. The Chancellor has taken a small step in that direction by giving the go-ahead to the green bank, but that will be allowed to spend only £3 billion and it cannot borrow until 2015, and even then only if the Government's debt reduction target is being met, which I doubt will be the case. The Chancellor has lost a big opportunity to scale up the original idea. A principal merit of my scheme is that a national investment bank could create a new class of bonds, long term but with a slightly higher yield than gilts, which would suit long-term investors. It would thus be a way of mobilising pension funds for investment in the long-term future of our economy.
My second point is that we need to rebalance the economy away from financial services towards high-value manufacturing and creative services, two things mentioned by previous speakers. The banks have a key role to play in this, but for that we need radical banking reform. That has scarcely been started. I therefore support Mervyn King's championing of a British Glass-Steagall Act to split the banking system into commercial and investment banks. We need to avoid like the plague repeating the situation when the core commercial banks were so riddled with bad bets foisted on them by their investment-banking masters that they ran out of money to lend to households and businesses-the very people requiring support in a recession. That is quite apart from the enormous loans and debts with which they have saddled the taxpayer.
This is not just a matter of rebalancing British banking to serve the needs of the economy; it is a matter of rebalancing power in the economy to serve the needs of the British people. As things stand, the banks are the permanent government of the country, whichever party is in power. Unless we can break their power, I fear that all that issues from our political processes and what we are saying in this House today will be a lot of,
"sound and fury, signifying nothing".
My Lords, the recent White Paper Trade and Investment for Growth contains one fleeting mention of the shortage of language skills. I declare an interest as chair of the All-Party Parliamentary Group on Modern Languages and urge the Government to strengthen their strategy by improving the UK's language competence. None of the overarching objectives can be fully achieved without it.
UK companies do not seem to understand that the lack of language skills is an important barrier to growth. A survey in 2010 found that, across Europe, 33 per cent of businesses regard foreign language skills as "very important" when recruiting graduates, but the figure for the UK was only 5 per cent, with three-quarters of UK companies saying that they were "not at all important". Can the Minister say what the Government can do to encourage businesses to invest in language training and to develop a better understanding of the benefits of language skills? We know that export businesses that proactively use language skills and the cultural knowledge that goes with them achieve on average 45 per cent more sales. Other research suggests that improving language skills could add up to £21 billion a year to the UK economy.
Another figure worth quoting, given the explosion in online sales, is that over 70 per cent of consumers require information in their native language in order to make an online purchase, while people who do not have good English are six times less likely to buy from an English-only site. It is self-defeating and inaccurate to think that English is enough. Only 6 per cent of the world's population are native English speakers and 75 per cent speak no English at all. The relative amount of internet content in English is declining but that in Chinese is rising and there are more blogs in Japanese than in English.
Neither is English enough in the world of scientific research, which will inform commercial innovation. In China, there are 4,600 scientific journals, only 186 of which are published in English. Employers in the UK who are ahead of the game know that they do not just need people who can speak French and German, although these remain the most sought-after languages. Mandarin or Cantonese come next. With markets opening up in central Asia, Latin America and the Far East, employers also need Spanish, Russian and Arabic. If our school leavers and graduates are not able to offer these skills, employers will recruit overseas.
Sadly, our young people have less and less to offer in the way of language skills. Urgent interdepartmental work is needed between the Treasury, BIS and the Department for Education to make sure that the review of the national curriculum results in a better outcome for languages. Most state school pupils study no languages after the age of 14 and an OECD survey put Britain joint bottom of a league table of 39 countries in the developed world for the amount of lesson time spent on languages. This really is an important barrier to our potential for growth.
I ask the Minister also to speak to his colleagues in BIS to ensure that a further barrier is not created by abolishing the fee waiver for students spending a year abroad as part of their degree. This really would be a real own goal. Market reports consistently say that employers prefer to recruit graduates who have spent time living abroad as part of their course, whether they are linguists, engineers, lawyers or anything else.
It is ironic that we should have such a problem with languages when we have a hugely multilingual population. We should make more of this. Companies considering where to locate regard the availability of language skills as absolutely essential. The message about London's linguistic diversity as an asset for attracting inward investment needs to be heard more loudly and proudly.
Finally, is the Minister aware of the EU report on the language industry itself, which is set to double in value to €16.5 billion by 2015? The report sets out ways for businesses, especially SMEs, to benefit from multilingual competence. Will the Minister encourage British businesses to take advantage of this potential for growth?
My Lords, I am left wishing that I spoke more languages than I do.
That politics and sustainable economic growth are uneasy partners comes out of this debate very strongly. They do not fit well together. As the noble Lord, Lord Hollick, who introduced this debate, said:
"Much is promised, but little is delivered".
As the noble Lord, Lord Kestenbaum, said, innovation has been and remains the key to the advance of science and technology. Of course, Governments are always behind the curve. They do not keep up with the front line of innovation. The noble Lord, Lord Hollick, took us back to Neddy, the late Lord George-Brown and 265 million tonnes of coal, if I remember rightly.
At the time, I was working for a medium-sized business that made pithead gear, mine car circuits, skip-winding plants and coal washery plants. We made a lot of them. I suspect that the average life of those plants as against the predicted and perfectly feasible life would not be better than half. They went out of commission one after another when they were still in totally good working order. As the noble Lord, Lord Sugar, reminded us in an interesting speech a week ago, Governments are really only good at scene setting. We need good technical education, as the noble Lord, Lord Newby, said, good roads, as the noble Lord, Lord Hamilton, said, and low taxes, but please keep out of the clockwork. Indeed, the noble Lord, Lord Sugar, said that Governments should always keep out of the clockwork because they do not understand the front line; they have never been in the front line, he said. That may be going a little bit far.
I was allegedly in command of a steel foundry in Stockton-on-Tees, where I was given good tips on which horse was going to win that afternoon. I was a part-time marriage counsellor. Steel foundries are quite dangerous. We used to take the factory inspector as close to the furnace as we could in order to minimise his visits. We did not have a serious hospital-type accident for the whole time I was there. The workforce kept me out of danger much more than I did them. As the noble Lord, Lord Sugar, said, we have arrived at a dependency culture, which means that we think that everybody else should solve our problems and perhaps we should not solve them ourselves.
That leads me, finally, to a health warning. The Government offer a lot of schemes. Governments always have. They say: "If you do this, you will get this grant at the end of the process". I have suffered from these schemes for many years, but they never include a health warning. The health warning should say: "Please remember that when you apply for a government-based grant it is coming out of public money. It has come from the taxpayer and must be handled very carefully. You should calculate the amount and cost of time that it will take you to apply. When you have done that, double it".
My Lords, first, I thank the officials and staff for such a warm introduction to this House. Not only did they make me feel extremely welcome, they made my husband, Rafael, feel extremely welcome to. Rafael has put up with me working very long hours for a very long time, first for the union Unite and then for the Labour Party. He thought that things would change when I took my seat here. Your Lordships can therefore imagine his surprise when I said that my Whip would require me to be here all night. Yes, it did take a lot of explaining.
Secondly, I thank your Lordships, not least for the fact that I am able to say "my husband". These Benches have helped transform my life and the lives of countless other lesbian and gay people in this country. I am immensely pleased that it is no longer just noble friends on one side of this House who applaud progress in this area but noble Lords on every side of the Chamber. That consensus is a sign of this House at its best.
I am greatly indebted to my sponsors, the noble Baronesses, Lady Jones and Lady Prosser. Like myself, my noble friends-the "Margarets"-are products of the trade union movement. It was the Transport and General Workers' Union-now Unite-which enabled me to leave its employment temporarily to attend university. My union provided me with many opportunities that I would not otherwise have had. I hope that noble Lords on the government Benches look to the trade unions when seeking inspiration for their big society.
It was my own experiences as a child that drew me to politics, as I imagine was the case with many of my noble friends. The death of my father meant that my mother was faced with the loss of her husband, her home and her livelihood in short succession. She was determined to provide for her children and her hard work and resolve secured our future. Yet my mother would have been the first to acknowledge that things might have turned out very differently had it not been for the progress achieved through politics. It was the Equal Pay Act that transformed my family's income and provided a level playing field for women like my mother. It was changes in the law that gave my mother protection from exploitation and it was changes in the law that enabled her to become an economically active individual rather than being dependent on the state. The politics is the personal and in the necessary task to reduce the deficit my fear is that this has been forgotten. I am further concerned that amid all the talk of rolling back red tape, we must be very careful that we do not also roll back those 30 years of progress through politics and forget that politics is the personal.
I know that my mother would have been very proud if she could have been here today to hear me speak. Her struggle then is the struggle of thousands of working women now who support their families and grow the economy. If we make it harder for them to work, and drive down the economy, we will only make it harder on ourselves. I hope that noble Lords will take these points on board.
Finally, I, too, thank my noble friend Lord Hollick for making this debate possible.
My Lords, it gives me great pleasure to welcome my noble friend Lord Collins of Highbury to this House on the day of his maiden speech. I am one of the "Margarets" to whom he referred. I first met my noble friend in the 1980s when I came to the Transport and General Workers' Union as a paid organiser-in retrospect, a naive newcomer-experienced in local politics, which I quickly learnt did not equip me well to deal with the internal macho politics of the trade union movement.
My noble friend helped me find the right path. He was junior to me but he was an operator who knew just what was going on both nationally and regionally, and certainly who was doing what in central office. He knew the union rule book inside out and backwards and he made himself indispensable to the then and subsequent general secretaries. We became firm friends and I learnt of his kindness, his commitment to what is right and his generosity of spirit. He supported me during my year as president of the TUC, travelling with me at home and abroad, making sure that I spoke to the right people and steering me clear of those deemed best avoided. Our close friendship and constant companionship at union events led to us being known in the T&G as "Victoria and Albert". Both my noble friend and I moved on up the union hierarchy, working closely with our then general secretary, Bill, now the noble Lord, Lord Morris of Handsworth. Our leadership of the T&G marked a particular high point in the union's recognition of its diverse membership with a black general secretary, a woman deputy general secretary and a gay assistant general secretary. I often thought that if the old GLC had still been in existence, we would have been given a grant. I was immensely proud when my noble friend was appointed general secretary of the Labour Party. He has devoted energy, commitment and political skill. I trust that he will be well remembered for it.
Turning to the subject matter at hand, I, too, thank my noble friend Lord Hollick for placing this debate on the agenda today. I want to concentrate my remarks on the positive impact on economic growth made by government investment in the training and upskilling of the workforce. In particular, I draw attention to the Women and Work Sector Pathways Initiative, a skills programme designed to help alleviate the estimated loss to the economy of between £15 billion and £23 billion per year through the underuse of women's skills and capacity. This is the figure quoted in the Women and Work Commission report launched in March 2006, which persuaded the then Chancellor of the Exchequer to allocate dedicated funds to help rectify the situation. The programme commenced in mid-2006 and continues to this very day-the last of the financial year 2011. During this time, more than 23,000 women have benefited from training, retraining or upskilling. Investment in the scheme by the Government up to the year end March 2010 has been just over £14 million, superseded by the employers' contribution over the same period of just over £20 million in cash and in kind.
The programme is under the umbrella of UKCES and delivered by participating sector skills councils. Over the past year, 13 sector skills councils ran 14 programmes, including land-based skills, textile and fashion, PSV driving, construction management, financial services, tourism, and so on. The aim of the scheme is to target women in sectors where they are underrepresented or where there are skills shortages. The UKCES has commissioned Leeds Met University to evaluate the programme and in its latest report, which covers April 2009 to March 2010, the writers expressed concern that the economic downturn may have had an adverse impact on employers' willingness to engage in training. This was not, however, the case and employers and participants alike have again expressed high levels of satisfaction. Some 92 per cent said that they would like the programme to continue and 85 per cent of participants said that they would like to continue with further training. Only 7 per cent of employers said that participation entailed too much paperwork or bureaucracy.
So here we have a successful training scheme, described in glowing terms by employers and participants alike, capturing more than 5,000 women per year, costing less than a measly £5 million per year-and what does the Minister do? He decides to merge the scheme into a general scheme entitled the Employer Investment Fund. The women's programme will continue until the autumn, while the other aspects of the new scheme get sorted out and organised. Of course I desperately hope that the new arrangements prove as successful as those of the past five years. Of course I desperately hope that women workers will not yet again be dropped to the bottom of the agenda-but I am not holding my breath. I thank noble Lords and emphasise that these are all essential ingredients to a financially healthy scheme.
My Lords, I congratulate the noble Lord, Lord Hollick, on initiating this debate, and the maiden speakers on their first speeches in the House. It is a gamble to deal with the structural deficit in one Parliament, and to do it primarily by public spending reductions. However, the strategy has already had one major success in reassuring the bond markets so that the UK can borrow more cheaply than countries with lower deficits. Tight fiscal policy, combined with easy monetary policy and a competitive exchange rate, provides the best choice for avoiding a sovereign debt crisis while ensuring acceptable increases in growth.
The problem is that the alternative is a bigger gamble still. It was right in 2008 to allow a rise in public borrowing to restore growth and avoid a calamitous rise in unemployment, but the second highest deficit in the OECD must now be corrected. No one yet knows how public spending cuts will affect them, and this is creating uncertainty in the economy. That is one of the principal reasons to get on with consolidating the public finances rather than dragging out the process over two Parliaments. People will always assume the worst until it is done. For some it will be painful, but for many it will not be as bad as they anticipated. Consumer spending will be weak in the coming year, but all attempts to promote growth on mounting consumer debt will end in tears. It is business investment and exports that must provide the impetus.
There are encouraging signs. The economy is already two-paced. Despite the understandable gloom in areas where public spending is strong, manufacturing and exports have prospects and growth that they have not experienced in a decade. We want to get other businesses out of the mentality of cost cutting to maintain profit margins and to now start planning for growth.
The actions of the banks are one of the keys to future growth. I think that we all have doubts about whether they will respond when the country needs them, but if we are to get the uplift in business investment that we need, they must lend more to business and particularly to SMEs, because they are their only source of capital and finance. The Government's dominant shareholdings in the banking sector must be used to set targets for the lending that the country can reasonably expect from the banks. The lack of borrowing capacity in the green bank was a principal disappointment in the Budget, as the noble Lord, Lord Skidelsky, highlighted.
The other key requirement is to achieve stability in the outlook for interest rates. Any move upwards must be avoided now, but at some later stage it will be better to have the certainty of a modest, gradual and inevitable move upwards, rather than to have consumers and businesses fearing the worst. The economy always takes longer to respond and policy-makers hope. It takes time to change direction. However, we must be patient and hold our course. As uncertainty lifts, the economy will start to pick up.
My Lords, it is a great privilege to stand before you today to give my maiden speech. I will begin by thanking my sponsors, my noble friends Lord Eatwell and Lord Bassam of Brighton, and my mentor, my noble friend Lord Puttnam. I also extend my gratitude to all the staff of the House who have made me and my baby son feel very welcome. My elevation coincided almost exactly with my becoming a mother-in effect, two life sentences in one week. I am most grateful for the tolerance and patience that everyone has shown towards me as I try to balance these two important new roles. I am grateful to my noble friend Lord Hollick for tabling an important debate as it allows me the opportunity to offer some thoughts on the issue I know most about: the need to tackle global climate change with sustainable economic policy.
Climate change is the political and moral challenge of our time. Each year brings fresh evidence of the consequences of gambling with our planet's atmosphere. Future generations will judge us on how we act on this issue more than on any other. To date, sadly, our progress has been too slow. In preparing this speech, I looked back through Hansard and was interested to see that in March 1991, a week after the Budget had been published, the House held a debate on global warming. A great deal has changed since then, but sadly some concerns expressed by noble Lords two decades ago are still very pertinent today.
The good news is that in 2011 our economy is less reliant than it once was on the burning of fossil fuels. The carbon intensity of our economy has steadily fallen. The bad news is that this has not necessarily been done deliberately: it is largely due to a decline in our heavy industries and manufacturing, and to the dash for gas. To consciously reduce emissions is a much harder thing to achieve, as we have discovered in a succession of well meaning but largely ineffectual climate change policies throughout the 1990s and 2000s. This is why, when I worked at Friends of the Earth, I felt that we needed a new legal framework to begin the process of decarbonising our economy.
Having set up the campaign for new climate laws, I left Friends of the Earth to join energy company Scottish and Southern-poacher turned gamekeeper, if you will. There I was fortunate to work closely with the CEO, Ian Marchant, who was a great inspiration. My recruitment was his idea and I think that his intention was to shake things up a bit-both his organisation and my own preconceptions. Until that point I had campaigned to shut down dirty, old, coal-fired power stations, two of which Scottish and Southern owned. I still believe that we need to shut down our old coal, but I now have a lot more respect for the men and women who work tirelessly to keep the lights on. Our task is to ensure that they can continue to do so without a negative impact on the environment.
While at Scottish and Southern, I was seconded to the Department for Environment, Food and Rural Affairs. There I was able to view life through yet another prism and came to better understand the process of government. I became part of the team tasked with drafting the Climate Change Bill. When the Act entered the statute book in 2008 it was a world first, committing the UK to delivering emissions cuts of 80 per cent by 2050 using a series of successive carbon budgets.
With a climate Act in place, what has changed since 1991? The only mention of the environment in the Budget Statement of the then Chancellor, now the noble Lord, Lord Lamont, was in relation to an increase in fuel duty; yet 20 years of high fuel taxation has proved only that it is very difficult to price people and goods off the roads unless there is an affordable alternative.
Last week's Budget at least contained a few more references to climate change, but it was still a long way from being a green Budget. Fuel duty was frozen, but with no clear plan for weaning us of our addiction to oil. The green investment bank, as previous speakers have said, has its hands tied. The carbon floor price is merely an expensive way to deliver no environmental impact, with no guarantees that anything will be built. Under the previous Government, an investment of just over £20 million secured jobs in an electric car manufacturing plant in Sunderland. I am sad to say that the scheme that enabled that investment no longer exists.
I am conscious that time today is limited. There are many issues relating to climate change and energy that I hope I can return to in subsequent debates. We need to have a deep debate about the role of nuclear power. The recent terrible events in Japan remind us of the risks inherent in a technology that was developed primarily for Cold War military application. A civilian nuclear programme based on inherently safer, thorium-fuelled reactors could engender a paradigm shift in how we view nuclear power.
Britain has a history of delivering industrial revolution. This revolution towards a sustainable, low-carbon economy will not be easy; it will involve countering a large number of powerful opposing forces and vested interests. However, as Archimedes once remarked, "Give me the right place to stand and I can move mountains". I hope that in this Chamber, I am standing in the right place and that, together, we can move mountains.
My Lords, we have had a series of outstanding maiden speeches in this debate, and it is my privilege and pleasure to thank the noble Baroness, Lady Worthington, and to congratulate her on a truly excellent maiden speech. She brings to this House a wealth of knowledge on climate change matters, as she has clearly demonstrated. She has worked on these crucial issues with the energy industry, advising Scottish and Southern Energy. She then brought her expertise to government, working on the Climate Change Act, and she helped the Government in their campaign to inform the public about the importance of these issues. Her contributions to public understanding have been noteworthy, and I know that we all look forward to her helping this House deal with, for example, the complexities of carbon trading and the EU Emissions Trading Scheme, not to mention the green investment bank. We welcome her warmly.
I was pleased to find in the Budget some real, if insufficient, attempts to tackle the major issues that confront us-those of low productivity, lack of spending on R&D by industry, out-of-date and inefficient infrastructure, and expensive financing. Many have said that we must restore our industrial base and our infrastructure.
I start with infrastructure. I regard banking as just another element of infrastructure. As with housing, energy and transport, it should be efficient and low cost, and I fail to see how this is consistent with banks seeking profits of the order of 20 per cent or more. Would we be happy if our rail operators made similar profits? Where our banks are operating overseas, it might be justified on the basis that their practices contribute to the current account, but here they should be taking professionally calculated risks on industrial initiatives rather than gambling on obscure hedging instruments. I totally support Mervyn King in his attempts to separate these issues but I do not find much in the Budget to assure me that they will do so.
I join others in pointing out that we need to increase our manufacturing output. Our deficit in manufactured goods remains at about £50 billion. It is encouraging that manufacturing is now growing at 12 per cent, but at this rate it will still take 15 to 20 years to recover what we have lost in the past 12 years. Coutts and Rowthorn have pointed out that an increase of only 10 per cent in manufactured exports, combined with a 10 per cent fall in manufactured imports, would generate a £45 billion improvement in the current account balance, which is equal to the total UK net earnings from financial services and insurance and more than one and a half times that contributed by all other services. To do this, we need more competitive products, and to create these we need a broad spectrum of creative engineering.
The good news is the Government's acceptance of Hermann Hauser's technology innovation centres but, if these are to succeed, industry must concentrate its R&D resources in them, as do the Germans. The enhancement of the enterprise investment schemes are also good news. They will stimulate the formation of new companies and appropriately reward our courageous and professional venture capitalists and angels.
The overall problem of course is much larger than can be resolved with the TICs and by new start-ups. Overall spending on R&D must be increased. At 1.8 per cent of GDP, our spend is 40 per cent lower than that of the US, 30 per cent lower than that of Germany and 20 per cent lower than that of France. Our situation is unbalanced. We have a science budget of £4.6 billion, which supports a science base that is second only to that of the US and is our greatest asset, but this is not matched by our spending on development, which should be several times higher. The TSB is doing a brave job with its budget of roughly half a billion but the rest must come from the private sector, which does not seem to be happening.
The reduction in corporation tax will help, as will the progressive increases in R&D tax credit, but why is the change in R&D tax credit restricted to SMEs? Only the large companies can mount the prime manufacturing projects that we desperately need, and it is the large companies that sustain the SMEs. I ask the Minister to explain the Government's thinking on this.
We have a great opportunity to increase manufacturing output by building our new energy and transport systems. However, sadly, much of this may come from overseas. There is hope that these foreign-owned companies will manufacture those systems in the UK, but surely it would be better if, to take the words of the Chancellor in concluding his Budget speech, more of it carried the labels:
"'Made in Britain', 'Created in Britain', 'Designed in Britain' and 'Invented in Britain'".-[Hansard, Commons, 23/3/11; col. 966.]
These are courageous words but it will take more than the changes in the Budget if we are to succeed in doing this. I ask the Minister to reassure us that there is more to come.
My Lords, I join those who have thanked my noble friend Lord Hollick for securing this debate. I also support the remarks about the excellent maiden speeches that we have heard.
As the director of Warwick Manufacturing Group, I declare an interest as a professor of engineering and as someone who has worked for 40 years in the field of manufacturing here and abroad. I am also a long-time student of the gap between speeches and the shop floor.
The Chancellor's Budget speech referred to a "march of the makers". Apprenticeships, the UTCs, extending the Enterprise Investment Scheme, the Manufacturing Advisory Service and the green investment bank are some worthwhile modifications of programmes set up under the Labour Government. They are welcome but the "makers" have heard fine words before and have been let down. The devil is in the detail and in how things are implemented. Sadly, we have never been good at that in the United Kingdom. We do not want a repeat of the "white heat of technology", which in the 1960s promised much but delivered little.
Today, manufacturing is enjoying a surge in exports and profits, driven by exchange rate gains, increased competitiveness and sticky wages. Quite a lot of that comes from inward investment, some of which I have been privileged to bring in myself. However, there are major issues to be addressed if this growth is to be sustained. In the 1950s, British gross capital formation was a little over half that of Germany and Japan. It stood at 16 per cent of GDP. Today, capital formation is 15 per cent of GDP-still significantly below our main competitors. In 2009, as the noble Lord, Lord Broers, said, UK investment in R&D shrank both in cash and real terms. Business R&D fell significantly. There was a recovery in 2010, but by the final quarter we were flat-lining again.
We need better incentives for the private sector to invest in developing improved products and systems. While the R&D tax credit changes are useful, the reductions to capital allowances work in the opposite direction. Further, the research funding system is so complex and distant from commercial reality that many small companies get little advantage from participating in R&D programmes. In this House, we have debated impact many times and, while I agree that evaluation based on commercial impact is not right for all subjects, in applied sciences and engineering it is surely essential.
Why do we need such commercial clarity? We need it because, although manufacturing is fashionable today, experience tells us that existing schemes and centres will stick a "manufacturing" badge on their projects to secure funds without delivering what we need. We need clarity on impact to prevent that. Indeed, we are already seeing the bizarre situation of projects trying to secure funding from government and talking about a 15-year strategy before being sustainable and delivering commercial impact. That is far too long. However, many good things have happened. I agree with the noble Lord, Lord Newby, about what the Technology Strategy Board does when it comes to technology and innovation strategy. However, it does not have much money. If it were doubled or tripled, it would still be a minuscule amount compared with what is needed-it is at the front end of all our approaches to the manufacturing industry. The perennial problem of underinvestment is exacerbated by the inability of business to obtain finance.
I do not want to repeat what the noble Lord, Lord Skidelsky, said regarding an investment bank, but it would be dishonest of me to say that the Budget was bad for manufacturing. However, if we are to succeed, we need more than a splash of fuel. We need to supercharge the engine. Time will tell whether this Government's deeds match their words.
My Lords, I thank the noble Lord, Lord Hollick, for securing such a vital debate today and congratulate all the maiden speakers on such excellent speeches. I wish them well in their journey in the House of Lords.
Growth is essential to reducing the public debt ratio. Cutting the deficit without that being accompanied by strong growth will end up in disaster. Let us remind ourselves of the Labour Government in 1997. From 1997 until 2002, the Labour Government stuck to the Conservative spending targets and the UK net debt fell from 42 per cent of GDP to 29 per cent of GDP. They did that precisely by growing the economy, not just by cutting spending alone. There are economic growth policies consistent with debt stabilisation but the problem for this Government is that they have scared the population witless with their austerity message. "Vote for us and death tomorrow" is not a good slogan, so they will need to change. They realise now that there has to be a different mantra. They have to give people some hope and something to look forward to.
The recent Budget, as people have indicated, is a big gamble because it is taking more than £100 billion out of the economy and, at the same time, there is an ambitious 3 per cent growth target by 2015. That can be done only by investment. We need investment in our communities, our infrastructure and most of all in our people. Let us remind ourselves of the lessons of the 1980s. If the slack in the economy persists for too long unemployment becomes structural. That is why we need investment today.
The Labour Government left some good legacies for this Government-some positives on which they should build. For example, the labour market performance is better than in previous recessions, although unemployment is now going up for both young people and the population in general. Company liquidations and home repossessions are fewer than they were in previous recessions and the large depreciation in the currency has most certainly helped drive the export market. We are in an environment of historically low interest rates and it would be folly to disturb that in the present climate. We need to exploit the relative price changes and complement these policies by making use of the low interest rate environment and by complementing behavioural changes induced by the increased oil prices to promote a low carbon economy. We must also ensure that we maximise the boost to tradables by the fall, or depreciation, in the currency.
These are extraordinary times and the crisis is not yet finished, as we can see in the Republic of Ireland today. It has had its bailout but almost all Irish banks will be nationalised today as a result of it. The crisis is still working its way out in Europe-in Greece and Portugal. Given the crucial importance of the European market for our exports, the Government need to be careful in their attitude to possible future bailouts. If they do not engage in this process, that will further risk reinforcing the divisions with those both within and without the currency. There is no doubt that there will be implications for our foreign policy, which is very sensitive to the Government as we stand today.
Extraordinary times demand extraordinary measures. I would not be advocating, as others have done, an investment bank had it not been for extraordinary times. I called for the very same in a Guardian article, "Britain needs a state bank", on
Today the Government are offering cheap finance. If we ensure that the debt is indexed, finance can be done at 1 per cent and we need only get money back to service the debt. Mention has already been made about the attitude of the Treasury to public investment. The HMT approach to public investment needs revisiting. Given the big gamble, the Government need to show boldness, as my noble friend Lord Hollick said, and not timidity. We need policies that are consistent with these ambitious targets and I suggest that one beneficial step would be to change the slogan from "Cuts, cuts, cuts" to "Investment, investment, investment".
I thank the noble Lord, Lord Hollick, for the opportunity to discuss this wide-ranging topic. As a neuroscientist at Oxford and Chancellor of Heriot-Watt, I shall focus on innovation in universities by considering four bottlenecks along with some examples of how we might deal with them.
Bottleneck one is the limited talent pool of young scientists forming the next generation of researchers. Currently only 16 per cent of A-level candidates opt for one or more science subjects, so how can we sell science effectively to bright sixth formers? Just one idea could be a twinning scheme where graduate students sign up for an ongoing relationship with a local school, thereby themselves gaining invaluable experience. The continuing mentoring that could ensue, as well as work experience in the twinned lab, might completely transform the career plans of a 16 year-old.
Bottleneck two is the diminishing talent pool resulting from the sub-optimal retention of women in science. One crucial issue here is the conflict of pregnancy and its aftermath with the demands of a highly competitive research career. Returner schemes, such as those pioneered by the Daphne Jackson Trust, would ring-fence funds for fellowships for anyone who had taken time off from research for primary childcare responsibilities. However, only the Government could have the resources to roll out a returner fellowship competition to an extent that would make a real national impact.
Bottleneck three is the lack of a cohesive strategy for optimising translational research. Universities generally have limited patent budgets, which can force technology transfer offices to form spin-out companies too early so that a very high proportion fail and patent applications may be dropped before any value can be realised through licensing. Meanwhile, investors are often wary of a technology that the scientists are unable to explain to them in terms that they can understand. Such investors may also view the work as: too high risk; at too early a stage; too little, given the funding required, to give a good return; or having a burn rate that is too high and exits that are not obvious.
One possibility around these cultural minefields could be to set up venture capital syndicates that do not invest as such but give some private sector grants. Modest but highly timely amounts of money could be awarded, with the financial burden diluted by the collective membership. In return, however, each individual member of the syndicate would have privileged access to the research as it was developed and therefore first refusal to purchase the IP and perhaps develop the spin-out as and when the work matured and as and when people felt personally that the time was right. The notion of private sector grants is not in the national culture of either academics or, indeed a venture capitalist, so the Government could be perfectly positioned not to contribute financially but rather to act as a kind of co-ordinating broker.
Bottleneck four lies in the current attitudes of non-translational but potentially highly innovative basic research. Surely for originality to flourish we first need to let a thousand flowers bloom, but the current peer review process is open to criticism-especially and typically when money is tight-of being risk averse. In addition, currently only 10 to 15 per cent of research council grants are successful. Let us assume that that does not mean that some 90 per cent of British academics are simply poor scientists. A very heretical, yet perhaps effective, change might be to abolish the peer review system and research councils altogether and divide the available funds along with the vast sums saved from the bureaucracy equally between eligible scientists. Of course, there would need to be careful thought as to where the boundary conditions of eligibility were set, along with potential penalty measures.
It would be a fascinating paper exercise at least, to see how much money would be immediately available to each scientist to explore their particular scientific challenge, unencumbered by insecurity or lengthy futile applications. Given breathing space, scientists could once again truly maximise original thinking and regain the confidence for developing innovative theories that challenge existing dogma. Why would such an intellectual nirvana help the more practical issues that we are debating today? Bear in mind the fact that quantum theory concerning the inseparable nature of waves and particles, when it was developed at the beginning of last century, seemed to be a highly abstract notion. Now, however, this improbable theorising has led to lasers, transistors and modern computers, as well as an understanding of molecular bonds and X-ray crystallography without which modern molecular biology would not be possible. To those four bottlenecks, there are no easy answers, but those are at least some suggestions for unblocking them.
My Lords, I echo the congratulations to the noble Lord, Lord Hollick, on securing this wide-ranging debate, and welcome the excellent maiden speeches, which are a good indication for the future of this House.
I want to focus my very limited time on the importance of aerospace and aviation policy. I have a straight request to the Government: please get an aviation policy. I do not accept what the Secretary of State said in his letter published in the Times yesterday, in response to wide-ranging comments in the Times from many businessmen and from the City of London that if we do not attempt to protect our premier hub airport we will diminish in importance.
I should say at this stage that I no longer have an interest to declare, because I am no longer campaign director of Future Heathrow. Believe me, everyone in this country has an interest in preserving a premier hub airport for Britain. We are the only country in continental Europe and among the emerging nations of Brazil, India, China and others which has not either already expanded or is expanding its airports, particularly hub airports. Hub airports are the way the global economy interconnects. It is the way that the European economy is connected. It is the way that investment decisions are made about where you can meet.
In the limited time available, let me give one or two simple facts to the House. A few years back, Heathrow could fly you to 240 destinations worldwide. Now it is 180, and the airport is full. Frankfurt can fly you to 307. Frankfurt sits in the middle of the largest, richest market in the world and can fly you to 307 destinations. What is its pitch in China, India, Brazil and everywhere else? Come to Frankfurt for your investment decisions and we can fly you on to wherever else you need to go. This Minister, more than any other, will know that Frankfurt has a burgeoning financial sector. London does not have to have the only and premier financial sector in Europe, and we will not do if we continue to hand the business over to Frankfurt. When the chief executive of Schiphol Airport in Amsterdam heard about the British Government's recent decision not to have any expansion of airports anywhere in the south-east, the response was the same as before: "Good news for Schiphol; bad news for London". Schiphol will fly you to 21 British regional cities; Heathrow will fly you to seven.
This is not an argument about the environment. I yield to no one in my concern about climate change-I wrote my first article about it back in 1981-but I do not believe and never have believed that you can solve the problem of climate change by hairshirt policies such as telling people, as the Government recently did, that they want to decrease the demand for flying. We have to be cleverer about it. I have been telling the aviation industry for a considerable time that it needs to sharpen up its act in conveying the message. Frankfurt has reduced its CO2 emissions below its level in 2004, although it has doubled its expansion. If the Germans can do it, we can.
When Dubai's hub, rather immodestly called the world hub, comes on stream, it will also bypass Heathrow for many from the Middle East and the Indian subcontinent. Many big companies located around Heathrow have already moved. Where have they moved to? To Amsterdam, to Frankfurt-less so to Paris-but increasingly to Madrid. BA's tie-up with the Spanish airline means that many of the flights now coming in from Brazil and the rest of South America go not to Heathrow but to Madrid. I say to the Government: if you do not get an aviation policy, this country will marginalise itself in the global and European economy. We will pay an awfully high price for that and will not do anything to improve the climate.
My Lords, it is good that once again we are discussing matters that go to the very heart of our economic future. I, too, thank the noble Lord, Lord Hollick, for securing this debate. We have also had a banquet of maiden speeches in the House today, and it has been wonderful to hear them; they certainly enrich our proceedings.
Investment, innovation, technology, infrastructure, skills and job creation are the buzzwords we all use when talking about our nation's ability to regain economic momentum. Members may be aware that this autumn, WorldSkills 2011 will be held here in London. WorldSkills is a biannual event which was last held in Calgary in 2009. I had the privilege of attending that event as Skills Minister, along with members of the previous Government. We saw many of our young people competing with their peers from all over the world, and the UK did very well, obtaining many medals for excellence in a variety of disciplines. Even higher targets have been set for London this year. WorldSkills is a bit like the skills Olympics, although the association does not like to call it that. It gives young people, whether they are training to be tradespeople, beauticians, gardeners or workers in aerospace, the confidence to take on the best in the world.
However, my main point is that whatever training is provided or acquired by the state, the most important thing cannot be manufactured: the right attitude. I fear that the attitude towards work, especially manual and manufacturing work, is severely deficient in this country. There has been much criticism that thousands of people have come into this country, mostly from within the EU, and gained almost half of the new jobs created during the boom years up to 2008. Why did that happen? Many employers told me that the big difference between the indigenous and migrant workers was their attitude and work ethic. There were no duvet days for many of those migrant workers, no sick days, and they were always available for whatever overtime they were offered.
I know that such comparisons are dangerous. Many of those migrant workers did not have families so were freely available without other commitments. Also, many were highly skilled, so businesses did not need to pay to train them. Nevertheless, there is some truth in the anecdotal stories about their attitude to work that needs to be taken seriously. We are also in danger of leaving a pool of disillusioned indigenous workers, many of them in our inner cities.
The workforce of this country built up this nation's wealth for centuries, and many paid a heavy price with their health and often their lives. I have seen with my own eyes the skills that many of our people possess and which, under continuous upskilling of our existing workforce, they can acquire. However, there is a missing link. In many cases, people do not connect the acquisition of a skill with a rewarding lifestyle. Too many people have been sent to training schemes that have not led to a job. That has undermined the principle of work paying, as those schemes are frequently seen as a waste of time. We have much to do to break that cycle, particularly in concentrated geographical areas of our country.
I hope that the Minister can confirm that Her Majesty's Government will do all in their power to promote the type of work ethic that once made this country great. Without restoring a meaningful balance in our economy, particularly in manufacturing, we will never develop the ability once again to create the wealth that will pay for the public services that all of us so desperately want to be delivered. The information and ideas that have come from different parts of the Chamber today have demonstrated that we have the ideas that can lead us back to the greatness of our industry as it once was.
My Lords, I am delighted to be able to contribute to this debate, in which we have enjoyed some marvellous maiden speeches. I congratulate my noble friend Lord Hollick on securing this opportunity to follow up last week's wide-ranging and illuminating debate on rebalancing the economy.
I strongly believe that a strategy for economic recovery must prioritise our strengths in innovation and high-level skills. High-level skills are the currency of today's knowledge economy, and I want to concentrate my remarks on the critical role played by the UK's higher education sector in providing and developing those skills. This is a subject on which I have spoken previously in this House and elsewhere, and which I explored on many occasions during my time as chief executive of Universities UK.
Higher education has been called a global powerhouse for knowledge economies. That is certainly the case in the UK. Our universities and higher education colleges have an unparalleled record in fostering innovation, enterprise and skills and in helping to create wealth and job opportunities. I know our Government understand this. Indeed, the coalition Government acknowledge that universities are essential for building a strong and innovative economy. This reflects a widespread political recognition of the importance of higher education to the UK achieved over the past decade and the unprecedented political and financial commitment given to this highly successful sector by the previous Government. This was achieved in part because the universities themselves were able to produce the evidence to convince government that higher education was a worthwhile investment, not a cost.
As we consider a growth strategy and await the higher education White Paper, I urge the Government not to lose sight of this essential point: if we are not to fall behind competitor nations, many of which are investing heavily in universities, we cannot afford to row back on our investment in knowledge and knowledge transfer. Despite the years of additional investment, we still spend less on higher education than the OECD average. Meanwhile China and India are already turning out more engineers and more university graduates than the whole of Europe and American combined. Of course the public funding climate has changed. Universities understand that they have to shoulder their share of the cuts, so last week's Budget's encouragement to our research base in the form of changes to R&D tax credits and an additional £100 million in capital expenditure for science was very welcome. The spending review also gave some protection to the science budget in cash terms. However, these chinks of light should not blind us to the scale of the cuts being applied to higher education. Universities are by their very nature long-term organisations. World-class research, the creation of new ideas, products and industries and the development of a highly skilled workforce are all long-term benefits. Like other noble Lords, I refer to the OECD 2010 innovation report which concluded that Governments must continue to invest in future sources of growth, such as education, infrastructure and research. Cutting back public investment in support of innovation may provide short-term fiscal relief but will damage the foundations of long-term growth.
I wish to make two further short points about how we can best nurture our high-level skills. We must continue to support ways of transforming research into innovation, build stronger links between the UK's science and research base and industry, create more spin-out companies and attract overseas investment to the UK. We must provide an environment in which international collaboration can flourish. That means a student visa system that is understood to be welcoming to international scholars. Of course abuse must be tackled, but the Government must also ensure that our ability to attract the best students is not harmed as a consequence. As Vince Cable has acknowledged in another place, we cannot measure where our investment should be in monetary terms alone. If we are to be players in the global knowledge economy, we cannot afford to lose momentum in our investment in higher education. To stand still in this regard is to fall behind.
My Lords, the prime requirement for growth is a stable economic environment. That is the golden rule. Noble Lords will recall that the previous Government had a different rule. In his first Budget, Chancellor George Osborne had to report that Gordon Brown's golden rule about restricting the country's borrowing had not quite been met. In fact, the target had been missed by £485 billion. Rules may be made to be broken, but surely not by £485 billion. Restoring the nation's finances is the prerequisite for a thriving business economy. There are other things that a Government can do to foster business, and last week we saw some welcome steps in that direction, particularly with the reduction in corporation tax, and a firm commitment to reduce the 50 per cent rate of income tax is also something that will encourage the business community. There is plenty of evidence to demonstrate that punitive tax rates do not enhance a nation's wealth.
What is truly important for businesses is the degree of certainty and clarity about the regime in which they operate and the taxes and regulations that apply. The Government have indicated that they understand that tax is unduly complicated and that there is a need to simplify it. The noble Lord, Lord Wood, in his admirable maiden speech, suggested that a joke half way through a speech would be welcome. I do not really have one, but I refer noble Lords to Tolley's Tax Guide. It now runs to 1,897 pages, which is an increase of 185 per cent since 1999. That is not really funny. Businesses need a break from too many rules and too much regulation. Although the Government are moving in that direction, there is still plenty of scope for a scythe to be wielded.
The animal spirit of true entrepreneurism will win through if we do not put too many obstacles in its way. Britain has some great businesses, but we need more. We are in the forefront in the services sector, but despite the understandable talk of the financial world needing to slow down a bit, manufacturing is actually already a greater contributor to our economy than financial services. There are some great success stories. We cannot compete with the low-cost economies of the world on price, but we can on quality and design. I was cheered yesterday to hear of a business in Lancashire that weaves its own fabrics and turns them into high-quality furnishings. It is called Herbert Parkinson, and it is owned by the John Lewis Partnership. It employs 300 people, and last year its sales exceeded £47 million. This year it will top £50 million. It succeeds because it produces the quality and design that customers want. British companies will not undercut the prices of Sri Lanka or Turkey, but we can compete with the world's best when it comes to quality and design.
We hear repeatedly that smaller companies and entrepreneurs find it hard to raise the finance they need to foster this sort of quality. If that is the case, I have one potential solution. Our larger companies are currently sitting on huge amounts of cash. I fear that the investment bankers will be knocking on their doors, trying to persuade them to buy their rivals and spend their money that way. That would generate welcome fees for the bankers, but we know that rarely do such takeovers bolster the nation's wealth. It would be better by far that those big companies back smaller entrepreneurial outfits, providing them not just with cash but with confidence and contacts. Tax breaks for such investments have been mooted. Xavier Rolet, the chief executive of the London Stock Exchange, has suggested it. I do not think tax breaks should be the reason. I think that companies need to invest and nurture smaller businesses, and I encourage the Government's business council, which is doing some wonderful work, to encourage just this idea.
My Lords, 11 years in your Lordships' House and for the first time, I have lost my speech. Actually, it was left on the Northern line, so while somebody was having a lot of fun reading it, I was having a quiet panic in the Bishops' Bar, trying to reconstruct it. Anyhow, here goes.
First, I thank my noble friend Lord Hollick for securing this debate. He started as an entrepreneur, he ran a major media group and now he is with one of the premier private equity companies in the world. He is the quintessential businessman. I, too, am an entrepreneur. I have started three companies from scratch, built them up and eventually sold them. It is great. I have loved being an entrepreneur and I would recommend it to anybody. Seeing companies grow and develop and seeing your staff grow is fantastic. However, there is a dark side to being an entrepreneur as well. It is terrifying not being sure that you can meet the payroll, there are problems with the banks, all sorts of things wake you up in a cold sweat at two in the morning and the stress is enormous. So when I hear the Government say that 300,000 public sector employees will, as a result of all the cuts, somehow find another job because of private sector growth and the entrepreneurial society that we are going to form, I simply do not believe it. I cannot conceive that somebody who has been working in the public sector for 10 or 20 years is somehow suddenly going to come out and become an entrepreneur. It absolutely does not make sense to me.
The tone of today's debate has been, "What is wrong with the UK economy?". I want to devote the two minutes and 15 seconds that I have left to what is right. It is a very exciting story. The noble Lord, Lord Kestenbaum, in his excellent speech, talked about Silicon Valley. We now have a Silicon Valley in this country. It is not in Cambridge; it is three miles from here and it is a revolution. It has the most wonderful title of "Silicon Roundabout". It is to be seen around Old Street and Brick Lane-indeed, that whole area. It is the east London cluster development and it is better than anything else in Europe. It is fabulously exciting and it needs an awful lot more publicity.
I suppose that one of the things that people always said about Silicon Valley was that it was clusters of people with similar ideas in life getting together after work. I recommend to any noble Lord taking a drive around Silicon Roundabout to see the bars, the restaurants and the unbelievable enthusiasm around there. It is full of young people all working in small businesses in creative industries such as applications for iPhones, music, advertising, fashion and movies, in all of which London is to the forefront. As I said, young people are doing all this. There is something about that area that Cambridge would never have and the City and the West End never have. It is edgy and cool and it attracts these sorts of people.
How did this area come about? It did not come about under this Government or the previous one either. It was spontaneous. It just happened. It has just grown like Topsy. Why? First, low rents were available. Secondly, it was close to the centres of finance, fashion, theatre and advertising companies. It has produced these raw entrepreneurs, to the extent that today American companies such as Cisco and Google have decided to invest in these areas and in these companies. It is very exciting.
These companies are now running out of space. Where will they go to? After the Olympics in 2012, many of them will work in the Olympic park and, for the first time anywhere in the world, an Olympic Games will have a true legacy made up of high-tech and creative industries.
My Lords, in this debate I have noted a broad measure of agreement right across your Lordships' House-agreement on the fundamental requirements for sustained economic growth, many of which were so ably set out in the introduction by my noble friend Lord Hollick. I associate myself with his comments.
We all believe in a stable economy that is underpinned by sound monetary and fiscal policies, we are all committed to the pursuit of excellence at every level of our education system and we all support an economic model that is based on investment, research and innovation. We all want to see Britain leading the world in its exports, supported by a robust and transparent finance sector. Of course, with my background I am proud to say that in Britain we have the most flexible labour market in the European Union. Therefore, if I am right about the fundamental requirements for economic growth I am bound to ask what is holding us back; why the German economy is growing in a recession throughout Europe; why the US, China and India are growing world exporters while growth forecast in our country is being revised down and down; and why investment is being reduced time after time in sector after sector.
However, investment is not just about investment in plants and machinery; it is also about people. That is why I use the term "socially responsible", because that is one of the requirements for economic success. The well-being of this or indeed any nation directly correlates with the economic performance of the country. The society in which we live expects certain norms to be part and parcel of social and economic policy. That is why it is so important that we start right at the beginning in the early years.
Of course, what we have experienced recently are cuts in the social infrastructure. That will not deliver growth. There is no growth to be had in cutting swimming pools or indeed closing parks and libraries. In the long term, some of the policies that we are following will in themselves retard growth. The increase in university tuition fees will probably deter some of our young people from taking those vital steps towards higher education. One of the engines of economic growth, particularly in the venture capital sector, is our pension funds. The recent decision to change the contribution rates will mean that less and less is available for that important sector. To conclude, we have run out of options by following cuts. The only option left to us is to go for growth.
My Lords, noble Lords might have read about the winners of the 2010 Nobel physics prize, Andre Geim and Kostya Novoselov. They are both Russians who came to the UK in 1999, to Manchester University, where they were given freedom and support for a speculative request, which paid off massively. They discovered that carbon atoms could form a sheet just one atom thick-a new material called graphene with astonishing strength and novel electric properties. They needed time but no costly equipment. The clinching experiments involved strips of Sellotape. Graphene might be the basis for transformative technologies, but its development will not be so cheap and it will be fully as intellectually challenging. Engineers like the noble Lord, Lord Broers, would endorse the message of the old cartoon showing two beavers looking up at a hydroelectric dam. One is saying to the other, "I didn't actually build it, but it's based on my idea". Will the UK deploy the resources and expertise to benefit from discoveries such as graphene?
This episode prompts other concerns. Would younger counterparts of these two Russians today make the UK their preferred destination? Would they even get entry visas? Do our brightest and best young people perceive a spirit of enterprise in a country in which science and engineering offer good career prospects? Even in the privileged environment of Cambridge-I declare an interest as a professor there-my younger colleagues seem ever more preoccupied with grant cuts, job security and so on, and prospects of breakthroughs will plummet if such concerns pray unduly on the minds of even the brightest.
In research, international excellence is all. The difference in pay-off between the very best and the merely good is by any measure thousands of per cent. Therefore, most crucial in enhancing value for money for taxpayers is not scraping a few per cent in efficiency savings; it is maximising the chance of big breakthroughs by attracting and supporting top mobile talent and sending positive signals to the young.
In his state of the union address in January, President Obama asserted that his nation faced another Sputnik moment due to the rise of the Far East as a competitor. He argued against cuts in R&D investment with a neat metaphor. He said that you cannot make an overweight aircraft more airworthy by removing an engine. That message is even more vital for the UK. Science and innovation are essential engines if we are to rebalance our economy away from an overdependence on the financial sector. What is needed is a 10-year or 15-year road map, which offers hope that, after four years of declining real-terms funding, science can share the fruits of the recovery that it should help to generate. We can surely afford it. The total UK science budget is now less than the bonus pool for London bankers.
We do not know what will be the 21st-century counterparts of the electron, the double helix and the computer. Nor do we know where the great future innovators will get their formative training and their inspiration. But the UK will decline unless it can sustain its edge in discovery and innovation, get its share of these key people and ensure that some of the key ideas of the 21st century are generated and, even more important, exploited here.
My Lords, it is a pleasure to follow my noble friend Lord Rees and I will continue the theme that he started. First, I declare an interest as chancellor of the University of Dundee, where I also worked for nearly 40 years. The university's College of Life Sciences and Division of Signal Transduction Therapy is a model of the largest collaboration of academia and pharma in the United Kingdom. It is about such collaboration that I wish to speak today.
The Academy of Medical Sciences report, Academia, Industry and the NHS: Collaborationand Innovation, and the NESTA report, All Together Now: Improving Cross-sector Collaboration in the UK Biomedical Industry, highlight the opportunity that the UK has, with its world-leading pharma industry, biomedical science and National Health Service, to produce innovations and economic growth. The pharmaceutical industry is changing its model of R&D investment to that of more extramural funding, which I believe provides opportunities for the United Kingdom.
An ageing population and the increasing use of healthcare in the BRIC countries means that the industry has huge growth potential. Countries such as the USA, Singapore and France have recognised this by increasing their investment in research capabilities. We have strong research universities in life sciences, as evidenced by the high citation impact, which beat even the United States of America. But we underexploit the resources that we have-the NHS, universities, and large and small pharma.
While strong institutions, enabling regulations, funding and people with research skills are important, what is lacking across the country is collaborative mechanisms, and the fora, incentives and metrics that promote and encourage interactions between the players. Collaboration allows a better use of resources, avoids duplication and improves access to specialist facilities and expertise, which importantly improves the capacity for innovation. Big pharma is increasingly looking for external partners for drug development. Industry currently funds around 10 per cent of biomedical research in UK universities. If universities were to increase this to 15 per cent, it would mean an extra £100 million, which still would be only 8.5 per cent of extramural R&D funding of pharma companies.
There is a risk that the UK will remain static while other countries grow. One indicator of the extent of such collaboration could be an analysis of the levels of clinical trials activity in each hospital trust. Currently, the number of patients enrolled in clinical trials is low and falling. Collaboration would produce company growth in the private sector and increase income in the public sector. As pharma grows, R&D spend will grow. By 2015, there could be an additional £3 billion in external R&D funding. We need the right infrastructure, an electronic patient record system to support research and reform of the VAT system to encourage collaboration, and to develop more specialist support services.
The UK should accelerate the development of electronic patient records to support medical research and aim to become the world leader. Scotland has made a success of this and provides a valuable research resource. Industry can help by providing more industry placements and secondments. The intellectual property model of universities, NHS and pharma needs to change from getting income to developing research further. There needs to be more sharing of research facilities to reduce costs. Similar arguments could also be made to pricing policies for research that involves risk sharing.
I hope the Minister agrees that in our world-leading pharma, leading research universities and the NHS, we have fantastic opportunities to bring about innovation and treatment of disease. The Government should examine ways to see how best to bring this about.
My Lords, first, I congratulate my noble friend on this debate. I should also like to commend the Minister for his perseverance. This is the third Thursday on which he has been on that Bench. I am very pleased that this debate has moved on and that we have not heard a lot of speeches which continuously tell us that all our troubles have been down to the previous Government.
I agree with my noble friend Lord Hollick that the Government's paper, The Plan for Growth, has many hopes and aspirations. Who of us does not support balance in the economy and growth in manufacturing, investment, skills and science and technology? We all share, and have shared, these aspirations for many years. When I talk to people in business today and ask them what they consider to be the most important factor for their future prospects, the answer is not tax, regulation, or the five things that the Government list in their paper. It is people such as those who my noble friend Lord Hollick listed and the noble Lord, Lord Hamilton, spoke about; as a Jewish immigrant, I thank him for his words. It is not people who are anxious to avoid tax. As my noble friend Lord Kestenbaum said, it is people who want to be part of a national effort to build our economy. But this topic is entirely absent from this paper. It is the modern style of outward-looking, entrepreneurial people-based management which seems to be the hallmark of most new successful businesses, about which my noble friend Lord Mitchell spoke.
The noble Viscount, Lord Eccles, spoke about government grants. Yes, the Government do try but their finance is available in small packets for specific purposes. Schemes are announced all the time. One such scheme, announced in May 2010, was a tax break for the first 10 employees of a new business set up in Britain's poorer regions This scheme received special mention in the Economist on
My Lords, the UK economy in London and the south-east is measurably as productive as any in Europe, not just because of the City's world-leading financial services-something that we threaten at our peril-but, just as importantly, because of the vibrancy of London's creative and business service sectors. However, overall, UK productivity persistently lags behind our leading competitors, as many noble Lords have pointed out. What can the Government do about this? Economic value is not created by Governments but by individuals who have insight and ability, and access to capital to realise that insight. Yet many individuals and businesses in recent years have been experiencing something akin to a cataclysm. The economy has taken a veritable body blow. Thus Government can most help business by engendering a stable economic framework, something that Governments the world over, along with regulators and financial institutions, have all too conspicuously failed to do over the past few years. Learning and applying the lessons of this widespread policy failure is the first priority both globally and nationally, and none of us can be certain we are there yet, as the chastening news from Ireland today reminds us.
In the UK, we look increasingly to the global labour market for rare and valuable skills. Overall, our own education system focuses insufficiently on the need to arm individuals and to provide the UK economy with the skills needed at every level to power modern business. For decades, our high-level educational outcomes have lagged behind our competitors, and that needs to change. Moreover, overly rigid immigration rules will block the entry of vital skills and talent, and thus threaten our productivity even further. So too, amid the realities of the global economy which I daily live and breathe, will internationally uncompetitive tax regimes for individuals and corporations. High tax rates will not prompt an immediate exodus, but I have seen at the margin the impact they have, and it is adverse to our true national interests. I should declare my own interests as a director or shareholder of several companies operating both nationally and globally; these are listed in the register.
Other factors are reducing our productivity. The principles that underpin the UK's planning regime are admirable, but the interminable length of many of our planning processes and the fact that there is no economic penalty for all those who can cause delay-often very considerable delay, and many of them from the public sector-is enormously value-destructive. Our economy is also handicapped by the worst transport infrastructure by far in the developed world. The individual who wrote in a recent business department paper that the UK has a "well developed infrastructure network" should be sent immediately to Holland, where I was last week, to compare, for instance, the superb Dutch road and airport infrastructure with the UK's own. Perhaps the Chancellor, when next contemplating his admirable aims for promoting UK productivity might reflect, when travelling to his own constituency in the north-west on the M6, that it is Europe's worst and most congested strategic route, and then remind himself of the trivial investment in current spending plans for improving our national road infrastructure.
In conclusion, if we are ever to bring productivity in the UK up to world standards, the Government will need to roll up their sleeves and focus on getting the big things right, on addressing the stubborn, difficult and often politically unappealing challenges that have long held back and still hold back the UK economy from fulfilling its true potential.
My Lords, long-term growth depends on the accumulation of capital. I want to make just one point about each type of capital: human capital, physical capital and social capital. Human capital is of course much the most important as it accounts for over half of the value-added in our economy. As a country we do quite well at the production of human capital in our universities and sixth forms. We have a good and well understood system. But we have absolutely no well understood system for producing skills for the other half of the population. It is an area of scandalous neglect which has persisted for many decades.
Eventually, the previous Government produced what I consider to be the central solution, which is to ensure that everyone who wants it can have access to an apprenticeship. This was established as an entitlement in the Act passed in 2009. Anyone with five passes of any kind at GCSE would be entitled to an apprenticeship place. As a result, every 14 year-old would be just as likely to see a way forward if he wanted to go down the apprenticeship route as he would if he took the sixth form route. This was to happen by 2013 and in my view it was the single most important policy for growth that was introduced in the previous Parliament. But, incredibly, the present Government's Education Bill, if it is passed, will cancel this reform. Instead, the Government are offering 12,500 extra places a year for unemployed youngsters. One wonders at their thinking. How can it make sense to wait for a person to become unemployed before they can get a proper education? We have got into an extraordinary frame of mind in this country. For that group of people we have stop-gap measures and programmes. We want a proper system for the half of our population whose talents we have failed to develop to enable them to become skilled and have a proper stake in our community. Will the Government please let the reform in the 2009 Act stand? They did not oppose it before, and surely the need is even more obvious now.
I turn to physical capital. What we need are incentives to invest, which means good prospects for growth and financial inducements for the creation of new capital. But instead the Government are spending money on cutting corporation tax, which mainly provides a windfall gain for existing capital. If we had time-limited tax allowances for new capital creation, that would be of benefit in the long term and bring forward the recovery.
Finally, social capital is a much neglected asset of ours, but it is crucial to the mobilisation of our human potential. Social capital is what the big society is all about, so I find it difficult to understand why we are seeing the destruction of so much social capital at this time. Every day we hear of people in the third sector being laid off. They are often people who have been mobilising the assets of dozens of volunteers. We learn from the National Council for Voluntary Organisations that the charitable sector is annually going to be losing at least £3 billion of state funding. If the Government do not want to shoot their big society programme in the foot, these cuts should surely be the first ones to reverse.
My Lords, first, I congratulate the noble Lord, Lord Hollick, on initiating what I think has been a very constructive debate. I also congratulate all the maiden speakers on their excellent contributions. I feel passionately that this country should do better. I am a lover of its history and I observe what has happened in the past: how self-help, a strong work ethic and a dissenting culture got industry and commerce going in this country. We have had interesting contributions today from the noble Lords, Lord Kestenbaum and Lord Popat, on the importance of the entrepreneurs from the immigrant communities. In the past, it would have been Huguenots and others.
I do not think that there is perhaps such agreement on the conditions that are likely to see us doing much better and that saw us doing so well in the past. I am no apologist for it, but I think that they are essentially to be found in capitalism. I have lived and worked in Hong Kong and I have been a great follower and lover of India. I observe how both of them, India latterly, have done so incredibly well. Living standards in Hong Kong are now much higher than here as the result of a much more open capitalist economy where entrepreneurs can prosper. In my textbook, if the public sector is much more than 40 per cent, you are heading for trouble, and in my textbook, if small businesses are tied down by too many regulations, they will not prosper. I was particularly interested in the speech made by the noble Lord, Lord Mitchell, about Brick Lane. Indeed, that is exactly the sort of entrepreneurial new area colony we want to see. I am glad it has happened, but I think it has more to do with good luck than a perfect environment.
I do not believe that any government-contrived go-for-growth policy will work. The Heath Government tried it and it ended in disaster. Governments can make the right environment for the economy to do better, and this Government are doing pretty well at it, but there are no government quick fixes.
Productivity growth in the past decade fell by 25 per cent, from 2 per cent to 1.5 per cent per annum. I regret to comment that it was very obviously the result of the overexpansion of, and negative growth in, the public sector. The poor old private sector was having to run faster and faster and was being squeezed by resources going to the public sector. The coalition Government have got things pretty well right. On the whole macro issue of keeping our credit-worthiness, they have succeeded. I would have liked there to have been no increases in tax-if anything, tax cuts-and more radical sorting-out and reform of the public sector. I return to my main point: you will not get the economy going if you go round putting up taxes too much.
However, the trends do not look too bad. Corporate profitability was up 37 per cent last year-admittedly, on a terrible previous year-and it was remarkable that 420 jobs were created in the private sector in a year that none of us thought was particularly encouraging. It is clear that we are set for exports and capital investment to lead growth and for, I hope, an economy that will have a higher savings and investment basis to support it.
I want particularly to rebut what I am afraid I view as rather Luddite and misguided economic attacks on the financial services sector. The main criticism is of two individuals whose reckless behaviour led two major banks into bankruptcy and to a failure of monetary policy-for which the Bank of England was responsible -and of regulatory policy. But banks are not the whole financial services sector by miles. It is surely appropriate that a mature economy such as the UK should have a large amount of activity in that sector-I might add that it is a great deal larger in Hong Kong. The biggest bank in the world, HSBC, came through it all without any trouble and any need for public sector or taxpayer support.
Let us remember that that industry generates some £100 billion of exports, some 1 million jobs and £55-odd million of tax revenues, and that London contributes something like £50 billion a year to the rest of the economy. London has been the great success of this country.
My Lords, I shall not surprise the House by saying that the analysis of the noble Lord, Lord Flight, is totally the opposite of mine. His is the ideological analysis that lies behind the present Government, a Government who are driving the economy to the wall. Perhaps he and I could have a bet on it.
The noble Lord compared us to Hong Kong. Hong Kong's logic is effectively to be understood as part of China. It is an enterprise zone for the Chinese economy to some extent and it has a degree of inequality that even the noble Lord, Lord Flight, I assume, would not advocate for this country. The model set by our country with its history, as a northern European country playing a successful part, along with Germany, Holland, Sweden and others, in European society, is not one I hear spoken of as part of the ideology coming from the other side. In fact, the noble Lord's speech could be summed up as: private sector productive; public sector unproductive. Are people in education not productive? Are people in health not productive? These are caricatures.
I recognise that a question has to be put to the Labour Party and people such as me: what is the alternative? To the wonderful march on Saturday, in which 500,000 people took part, the Government's response was that we did not put forward an alternative. I do not think that putting a sticking plaster on the present arrangements is the solution, whether it be the operation of the auditors-a mutual admiration society as analysed in our own Economic Affairs Select Committee report published yesterday-or typical boards of directors or the merchant banks. As was pointed out by my noble friend Lord Eatwell the other day, boards of directors in this country do not represent anybody apart from themselves. The churning of shares means that the idea that shareholders are in some meaningful sense the people to whom the board is accountable is fanciful. That the boards' remuneration committees have pushed up directors' salaries such that the gap between their pay and that of the average worker is 10 times greater than it was 20 years ago is a scandal. In my view, it is based on fraud in some cases and a lot of these people ought to be locked up. So mine is not exactly the same line of thought as that of the noble Lord, Lord Flight.
In the middle of all this, what is it that Britain is lacking in the four cylinders of its motor car engine firing at the moment? Let us look at the way in which the German economy operates, with its supervisory boards-which I advocate for this country. Let us take a fundamental look at the Victorian company law which we operate even now, more than 150 years since it was written; it is essentially the same. I offer an anecdote. A CEO of a company in this country went to Sweden and the first question put to him was: "How is this takeover, if it goes through, going to help our world market share?" That is not the experience of board members in this country. They are part of a cabal, answerable only to themselves.
My Lords, the sector that is always neglected when politicians and civil servants look at growth strategies is the faith community. On
There are many church assets and resources in communities across this country that do not receive the recognition they deserve. At Trinity United Reformed Church in Gosforth, Newcastle, the congregation is leading a business improvement district bid built on the back of the work that has been done during the past decade reconfiguring three church buildings and establishing an enterprise hub which is now redefining the centre of the town. Today, this church is a major local employer.
Gorton Monastery, the conference venue, is today run as an enterprise specialising in banqueting, conferences, weddings and business bookings. Yet a decade ago, this was a cathedral-like building that stood derelict and desecrated. Following a £6.5 million restoration scheme, led by the social entrepreneur Elaine Griffiths and her team, the Monastery Trust, this formerly unused asset now sits alongside the Taj Mahal and the ancient ruins of Pompeii in having being listed among the 100 most endangered heritage sites in the world.
Another national example is the Bromley by Bow Centre in east London, which I founded-I must therefore declare an interest. It grew out of a local church congregation of 12 elderly people. It now has 31 established businesses and has an active business partnership with the multinational company G4S and other leading corporates. Together, they create innovative solutions, based on business principles, for some of our most challenging social issues. Is not the big society about businesses and social entrepreneurs working together?
However, while I am delighted that many churches are embracing the idea of the big society, there are significant problems that will hinder their existence. We all know that the macro growth of the British economy depends on the success of thousands of small businesses like those I mentioned. These entrepreneurial cultures take time to build. To undermine them when they are starting to fly is not wise in the long term. The present financial cuts, made irrespective of local context, are threatening the additional unpublicised services that are deeply embedded in thriving entrepreneurial centres.
In East London, at the Bromley by Bow Centre, the CEO, a businessman by background with considerable financial skill, is struggling to shave more than £1 million from his budget because of the scale of the cuts that the organisation faces. He is losing vital services. Despite the rhetoric from the Government, social enterprises are often being disproportionately disadvantaged by the cuts when resources are allocated from central pots and from local authorities.
I suggest that the big society depends on micro businesses as exemplars to lead the way.I therefore request that the Minister actively explores practical ways to identify, promote and foster economic growth within this emerging entrepreneurial sector across the UK. Much of it is based in some of our most challenging communities. The social sector is formed from many shoots and distinctions need to be drawn to protect these young entrepreneurial flowers. Will the Minister please inform the House how the Government plan to empower social enterprises in some of our most challenged communities?
My Lords, it is a delight to follow that constructive contribution from the noble Lord, Lord Mawson. It was partially trailed by my noble friend Lord Layard, who indicated this aspect of social capital is something to which the Government should pay attention with the concept of the big society. I hope that the Minister will address himself to that point. Of course, these contributions are a reflection of the fact that we all owe an enormous debt to my noble friend Lord Hollick for choosing this as a subject for debate today. It has given the House an opportunity to be constructive and thoughtful about positions for the future in circumstances where we all appreciate that the country faces tough times ahead. It is important that we are able to chart the routes to the future which promote the well-being of our society. Typically, my noble friend Lord Hollick indicated in his speech potential areas of entrepreneurial growth to which I hope the Minister will respond.
Also in the debate, we had five maiden speeches in which all noble Lords rose to a significant challenge today. They had to express, as we all feel, the privilege of being Members of this House and of having the opportunity to address your Lordships. They wanted to make sure that they made their constructive contributions to this serious and important today, and they had to do all that in four minutes. I hope that the House will be more generous to all those noble Lords in future when they make their contributions, but I congratulate them all today on the way in which they presented themselves to the House. We all look forward to hearing from them in the very near future; at greater length, I hope.
As my noble friend Lord Haskel indicated, this is the third economic debate we have had on successive Thursdays. In past weeks, we have somewhat aired our differences of perspective on economic policy. An element of that inevitably underpinned this debate. It was brought to the fore by the noble Lord, Lord Skidelsky, and supported by my noble friend Lord McFall who indicated another perspective that is different from the Government's-a perspective showing that the Government are taking great risks with the economy and the welfare of our society. Her Majesty's Opposition have been articulate in identifying an alternative route, of which the outstanding feature is that the Government are bent on reducing the deficit within the minimum period of time-a single Parliament. In doing so, they are asking the country to be subjected to cuts that will affect the well-being of large sections of the community. But those cuts also affect the growth potential of the economy.
In this debate, noble Lords have identified where these cuts may do harm to the important, long-term economic development aspects of public investment. I know that the Government stress only the private at the present time. None of us doubts the importance of the private sector in terms of growth, but one cannot set at nought the public sector. Nor can one cut it without engaging on a strategy of some risk.
As a number of noble Lords identified, our education sector will be under great pressure. Our universities will be significantly starved of public resources and will have to depend on the free market in terms of the response of students. We do not know whether that will lead to a reduction in resources for the universities because students are unable or unwilling to pay, and we do not know the impact on recruitment. However, we do know that when these reductions take place the impact on research in our country, and on the development of a great deal of the fundamental basis on which creative activities can take place in the economy, may be seriously hurt.
In particular, it seems that we are the only country engaged on cutting the science budget, while all other countries regard it as an essential investment. We have a significant contribution to make in science and have a prime position in terms of our world role. However, we must be careful about the danger of losing that position as a result of the Government's strategy.
It was indicated in the debate that we should not underestimate the creative sector, which is an important growth area of our economy. It was referred to by my noble friend Lord Kestenbaum. Creative activity and the genius of British people, which is translated into effective and constructive activity in the media and the whole world of the creative arts, is a growing part of our economy not to be underestimated. It is now approaching 10 per cent of the economy. It depends on training, essential skills and the colleges providing skilled manpower.
As my noble friend Lord Layard emphasised, whatever the difficulties with regard to higher education, we should be extremely concerned that this continues to be a society that undertrains and undereducates a substantial section of the population. That is why the Government's contribution with regard to the modest number of places in apprenticeships and training schemes is a minute dimension of the need that is required to ensure that we have a population sufficiently skilled to make a contribution to our society and earn their living in this world. Cutbacks in that sector-and colleges are suffering very substantial cutbacks-and the loss of the guarantee to which my noble friend Lord Layard made reference is a very serious blow.
Another dimension of this, our transport infrastructure, was introduced by my noble friend Lord Soley and the noble Lord, Lord Birt. I give due credit to the Government with regard to rail investment and the fact that crucial areas of it are being sustained. But my noble friend Lord Soley is absolutely right when he says that there does not appear to be a concept of an aviation policy when aviation is bound to play a very significant role in the economy. The noble Lord, Lord Birt, also, identified our difficulties with regard to road.
Another dimension on which I give the Government credit is the aspect with regard to the Green Deal. They are continuing policies which the previous Government adumbrated, but we are looking forward to the whole development of house insulation and improvement with regard to conservation of energy in the home. The Government deserve credit for their commitment in that area. But as my noble friend Lady Worthington indicated, it is not so certain that the commitment to the green bank and the whole environment development is so secure.
There are tough times ahead. We all recognise that the nation has got to identify areas of potential growth. But I emphasise this one other dimension, which my noble friend Lord Wood introduced into his all-too-brief speech, when he reflected on the concept of fairness. If we are all in this together, there must be some concept of fairness across society. It will not do that the Government rely upon the failed project Merlin for their temporising with regard to the banks and their pathetic gestures towards seeing the banks make some reparation and take some responsibility for the disasters of the past, while pursuing policies with regard to social cutbacks which hit so adversely the least-well-off in our society.
I am grateful that today we have moved from a position of significant division to one in which there have been some very constructive proposals on growth. I hope the Minister will be able to give us encouragement that he intends to pursue the majority of them.
My Lords, we have had a tremendously interesting and wide-ranging debate today. I thank all noble Lords who have contributed, particularly the noble Lord, Lord Hollick, for securing what is in effect, I suppose, part two of our growth/Budget debate. I recognise what the noble Lord, Lord Haskel, kindly said about the endurance of the Minister who has to sit here, but I note that many other noble Lords have sat here throughout. I am only grateful to at least have a week between the two debates rather than have it on two consecutive days.
I completely agree with the noble Lord, Lord Davies of Oldham. It has been an overwhelmingly constructive debate, in which many positive ideas have come from all round the House, and this presents me with an additional challenge today. Last week I attempted, maybe foolhardily, to make some mention of all noble Lords' contributions to that debate. But I know my limitations. Today, with even more speakers and an even shorter time to respond, I apologise in advance but I am not going to be able to make mention of everyone who spoke. There were lots of good ideas, not all of them workable, but it is right that you should push the envelope in imaginative ways, whether in the use of faith buildings or encouraging science in schools. There are all sorts of great ideas coming from around the House, and I will make sure that those are considered by the Treasury or the other departments responsible.
In general, the message I take away is very welcome, because I know that the temptation is for us all, or for a lot of us, to be making political points. The message that I take away is that there are many good things in the Budget and in the growth document that went with it, but that we have to work harder-I understand that-and consider lots more of the ideas that are coming up. In the phrase of the noble Lord, Lord Hollick, it is a worthy and promising start. I appreciate that. I take to heart the big challenges for us-that we must be bold and not timid as a Government. I agree, and I will come back to that. We must always remember the big picture. I agree with that. We have to live up to the challenge of the Government's part of the bargain of delivering and not just making promises. I will come back to each of those themes in a minute.
I start by acknowledging the five excellent maiden speeches that we have heard today-from the noble Lords, Lord Kestenbaum, Lord Wood of Anfield and Lord Collins of Highbury, my noble friend Lord Popat, and of course the noble Baroness, Lady Worthington, who has confused me by moving seat. I am glad to see that she is back in the Chamber. There was a common and very important theme in those speeches, some of it put very movingly, about what this country and this House have done to foster diversity, whether of ethnicity, faith, gender or sexual orientation. Of course, we must not forget that diversity in hair colour is also a feature of life. The maiden speakers also, by their diverse backgrounds in business, academia, the unions and the environment, and by the quality of the individual speeches, could make no better case for this making a genuinely value-adding House that we are all part of. That was a great addition to what was, in any case, a very important debate.
I remind noble Lords of the context of this year's Budget and growth plan. The Budget is about reforming the nation's economy so that we have sustainable growth and jobs in the future. "Sustainable" is a word that has been used by a number of noble Lords. It is worth very briefly reminding ourselves, as a number of speakers have done, that this will not be possible without sticking to our deficit reduction plan. My noble friend Lord Higgins was the first to point out the constraints within which we live. It is that plan that has secured the economic stability, the international credit rating and the low interest rates that are the platform from which we must go forward with sustainable growth.
Last week's Budget was built on clear economic principles of sound public finances-and no wavering on that-but support for private sector growth, reward for work, help with the pressure of high fuel prices in the short term and a new vision for growth. That vision for growth has four key ambitions at its heart: that Britain should have the most competitive tax system in the G20; that Britain should be the best place in Europe to start, finance and grow a business; that Britain should be a more balanced economy by encouraging exports and investment; and that Britain should have a more educated workforce that is the most flexible in Europe. Those noble Lords who had the stamina to be here during last week's debate as well will know that I went through each of these four areas thematically. But let me today take a slightly different cut through the issues, prompted very much by the challenge of the noble Lord, Lord Hollick, that we must be bold and that timidity is not enough. That is linked to the challenge from a number of noble Lords that we must attend to the big picture.
Let me suggest to your Lordships a number of areas in which I believe we are being bold and addressing the big-picture issues. Take corporation tax: the fact that we are heading, in three years from now, down to a corporation tax headline rate of 23 per cent, which will take us to the lowest rate in the G7 and one of the lowest in the G20. I suggest that that sends the clearest signal possible around the world that this country is again open and welcoming to all businesses to come and base significant global operations here.
Deregulation is a difficult, challenging topic which the previous Government worked hard on but we have to find new ways of tackling it credibly. Again, we will be bold so we are starting right now with a new initiative to put tens of thousands of individual regulations on to a public website. Two weeks at a time, chunks of regulation related to a specific part of the economy will be open to challenge. At the end of the period of public challenge, it will be up to the departments concerned to argue why any regulations which have been challenged by the public must stay in place. The presumption of the committee led by my right honourable friend the Business Secretary will be that if people identify a regulation that has to go, it has to go unless there is an overriding reason for it to stay. I suggest that is bold.
Planning is a critical issue for growth in this country, and we will bring out some draft new planning guidelines within the next few months. They will have in them a fundamental new approach which has, at its heart, a presumption in favour of sustainable development. In addition, the new planning rules must have a process in place where the entirety of planning, including appeals, has to be finished in no more than 12 months. For those of your Lordships who have businesses stuck in planning processes that go on for three or four years, I suggest that is a bold approach.
A number of speakers brought up the field of energy and the question of setting a carbon floor price was raised. I suggest that setting a carbon floor price is a bold, difficult but necessary part of underpinning the huge amount of new energy investment which this country needs, so we will not shy away from taking the difficult decisions.
We have heard a lot about education-
Will the Minister not acknowledge that although setting a carbon price might be very desirable if it was based on international agreement, if it is based on a purely unilateral or national move we shall be handicapping our industry and our growth, and contributing nothing at all to the reduction of global warming?
My Lords, I do not wish to be discourteous to the noble Lord, Lord Davies of Stamford, but if I am to do justice to at least some of the points that have been raised in the debate so far, he will perhaps forgive me if I do not answer his question in intervention. I would rather do justice to some of the points made in the debate.
On education and bringing people into the workforce, I could mention a number of initiatives but let me just draw attention to the apprenticeships. Those are one key plank of what has to be a bold transformation of young people's appreciation of the different and valuable routes into work. The total number of apprenticeships that will be available over the next four years is 1.1 million, so the Government are playing their part in making the apprenticeships available. I hope that, as my noble friend Lord Newby has said, business will rise to the challenge of taking up those places. Again, these are big-picture issues and this is, I suggest, a bold approach.
Lastly, there has been mention from a number of angles of the challenge to get finance into our corporate sector, whether SMEs or the whole of industry. We have set the banks the challenge now, through the deal that we have done with them, whereby they have agreed to make up to £190 billion of credit available for new loans, and more if it is necessary. That very significant amount of money should meet the reasonable demands of growing businesses in this country. When the banks are under considerable pressure to manage their balance sheets more prudently under new capital and liquidity rules, I suggest again that getting financing through to businesses is one of the big-picture challenges and that we as a Government are rising to that challenge in a suitably bold way.
Another big-picture theme that has come up a number of times and which deserves particular recognition is that of infrastructure because, again, the size of the challenge is enormous. A number of speakers raised this, the noble Lord, Lord Hollick, first, with the noble Lord, Lord Bilimoria, and others following after. We have identified £200 billion of infrastructure investment as being required over the next five years in economic infrastructure alone: in energy, water, broadband, transport and so on. The reason that this is so important is clear. We have an ageing infrastructure which needs considerable refreshment and rebuilding and because of that, at the very start of the Government's work on our growth plans last autumn, we put out the first ever National Infrastructure Plan. That is starting to identify, sector by sector, the vision that we have for the infrastructure that is necessary for this country over the next 25 years and more.
We committed in the growth programme and the Budget to coming up with a rolling forward programme of infrastructure projects, so that we can start to give much greater certainty than there has been to the construction and financing industry in this country. If we expect businesses and financiers to take the strain, which they will do on 60 to 70 per cent of that £200 billion of infrastructure, we need to give them some clarity about where these programmes will be directed, so that is what we will do.
In answer to the specific challenge from the noble Lord, Lord Soley-although he knows this well-it is worth restating that, yes, aviation policy is very important. That is why my right honourable friend the Transport Secretary took time to work up a consultation paper that was published yesterday. I acknowledge that it may not meet the aspirations of all interests in the aviation sector but it is the start of a critical debate. I acknowledge that that debate must be had: that is why the consultation paper has gone out on aviation policy, which is one critical component. Alongside that, I acknowledge the references that were made to our commitment as a Government to high-speed rail. We must look at transport within a holistic and complete picture.
In this general area, there were also a number of references to the desirability of a green investment bank, a national investment bank or an infrastructure bank; your Lordships expressed it in a number of ways. I entirely understand the ambitions of the noble Lord, Lord Skidelsky-the noble Lord, Lord McFall of Alcluith, made this point as well-but without going into the technical details of PSBRs and how government accounting works, the first thing to say is that having a very large national investment or infrastructure bank is simply not possible given the constraints that we have on the Government's balance sheet. However one looks at it, this would score against the national borrowing. Even if the case were made, and there are strong proponents on both sides of the argument about how big a green or a national investment bank is required, we have to be realistic about the constraints of the public balance sheet.
Within that, we announced last week in the Budget that we have brought forward by one year the starting date for the operation of the green investment bank to 2012-13. I do not want to make political points, but this Government for the first time have committed the money-£3 billion. That is a good start. We have committed money to this project in a way that there was previously a lot of talk about over the past few years. The bank will be able to leverage in private sector money so, even though in the first couple of years of its operation it will not be able to have its own borrowing, the leveraging effect of the green investment bank, by working with private sector investors, will be materially important to the more challenging investment schemes that must be introduced in the areas of new energy and new technology.
That is to address a few of the specific points made. I end by drawing attention to one or two of the reasons to be positive, which are very welcome. Yes, there are huge challenges, but the noble Lord, Lord Rees of Ludlow, reminded us about the latest Nobel prize-winning team, working with graphene, that has been based in this country and the need to exploit that; the noble Lord, Lord Mitchell, talked about Silicon Roundabout with great passion and the way that that will translate through the Olympic legacy and Tech City into something that is really lasting; my noble friend Lord Flight talked about the 428,000 jobs that were created in the private sector last year; the noble Lord, Lord Bhattacharyya, talked about our great strengths growing again in manufacturing and exports; and my noble friend Lady Wheatcroft gave us a specific example in the design and textile world of what we can do.
This has been a wide-ranging debate. I take from it a great challenge to Government, which I assure noble Lords the Government are committed to driving through. I also take away some great strengths that we have to work on. The Government are putting our economy back on the right path. We are supporting and will support enterprise, and we are driving innovation. We are doing our part as a Government to invest in skills, jobs and infrastructure. The Budget stands firm on our plan for the recovery; it is a plan that is good for business and good for growth and will help to create the prosperous economy that the people of Britain deserve.
My Lords, this has been an excellent debate. I thank every speaker for the informed and constructive way in which it was conducted. There were many excellent ideas and there have been five outstanding maiden speeches, which give us a glimpse of the formidable contribution that our new colleagues are going to bring to our debates.
The Minister has not had the opportunity or the time to go through each and every one of the suggestions that was made. Perhaps he will find an opportunity in future to do that, and perhaps he will take up the suggestion of the noble Lord, Lord Higgins, of having a meeting in the Moses Room to discuss some of these things. The contribution that has been made today is worthy of continuing discussion and serious consideration by the Government. With that, I beg leave to withdraw the Motion.