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.