Economy: International Competitiveness

– in the House of Lords at 11:07 am on 29th November 2007.

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Photo of Lord Roberts of Conwy Lord Roberts of Conwy Conservative 11:07 am, 29th November 2007

asked Her Majesty's Government:

What steps they are taking to improve the United Kingdom's international competitiveness in the light of the fall from second to ninth place in the World Economic Forum's annual league table.

Photo of Lord Jones of Birmingham Lord Jones of Birmingham Minister of State (also in the Department of Business, Enterprise and Regulatory Reform), Foreign & Commonwealth Office, Minister of State (also in the Department of Business, Enterprise and Regulatory Reform), Department for Business, Enterprise & Regulatory Reform, Minister of State (Foreign and Commonwealth Office) (also in the Department of Business, Enterprise and Regulatory Reform), Minister of State (Department for Business, Enterprise and Regulatory Reform) (Business and Regulatory Reform)

My Lords, the UK continues to perform well on a wide variety of measures of competitiveness. Recent data suggest improvements in productivity performance over the economic cycle and in relation to key international competitors such as France and Germany. Nevertheless, the Government are committed to achieving continued long-term improvements in UK competitiveness through raising long-term productivity. The recent CSR illustrates this with policies aimed at improving performance through the key drivers of productivity, which include increased investment in higher education and skills, continued development of a world-class science base and simplifications to the tax system. This is underpinned by the Government's commitment to maintaining macroeconomic stability, which provides firms and individuals with the certainty needed to invest for our future.

Photo of Lord Roberts of Conwy Lord Roberts of Conwy Conservative

My Lords, I am grateful to the noble Lord for that reassuring and optimistic reply. Is he aware that the reasons given by the World Economic Forum and others for Britain's falling competitiveness include the heavy burden of complex taxes and red tape? They also rate Britain fairly low in the economic stability league—46th position among 131 countries—because of persistently high government borrowing and low levels of household saving. Should not these weaknesses be firmly addressed by the Government to avoid the lower growth anticipated for next year being even lower than expected?

Photo of Lord Jones of Birmingham Lord Jones of Birmingham Minister of State (also in the Department of Business, Enterprise and Regulatory Reform), Foreign & Commonwealth Office, Minister of State (also in the Department of Business, Enterprise and Regulatory Reform), Department for Business, Enterprise & Regulatory Reform, Minister of State (Foreign and Commonwealth Office) (also in the Department of Business, Enterprise and Regulatory Reform), Minister of State (Department for Business, Enterprise and Regulatory Reform) (Business and Regulatory Reform)

My Lords, the noble Lord, Lord Roberts, is right to assess simplification of the tax system and lessening the regulatory burden as key to enhancing productivity. Only yesterday we had the Second Reading of the Regulatory Enforcement and Sanctions Bill and, in the Pre-Budget Report, the Chancellor of the Exchequer launched the simplification of the tax system. I would caution against league tables. I can show that the league table to which the noble Lord referred, which says that the UK is coming down, also shows that, for employing workers, Germany is 137th in the world while Georgia is fourth.

Photo of Lord Bilimoria Lord Bilimoria Crossbench

My Lords, the Minister has talked about the fall in competitiveness. Yesterday we heard that some countries have more presence worldwide in diplomatic posts than Britain does and the Minister said that we are snapping at their heels. What is happening? Are we reduced from top dog to whippersnappers? Are we running behind when we should be running ahead? Can the Minister reassure us that things are actually not that bad?

Photo of Lord Jones of Birmingham Lord Jones of Birmingham Minister of State (also in the Department of Business, Enterprise and Regulatory Reform), Foreign & Commonwealth Office, Minister of State (also in the Department of Business, Enterprise and Regulatory Reform), Department for Business, Enterprise & Regulatory Reform, Minister of State (Foreign and Commonwealth Office) (also in the Department of Business, Enterprise and Regulatory Reform), Minister of State (Department for Business, Enterprise and Regulatory Reform) (Business and Regulatory Reform)

My Lords, I can assure the noble Lord that I have never snapped at anyone's heels in my life. We spend every day at UK Trade & Investment getting round 137 countries, making sure that British companies, or overseas companies using Britain as the launch pad for global competitiveness, have the strength of the Union Jack behind them. That is key; business is the presence that can make the difference. Productivity comes in many different ways—for example, through investment in skills and higher education. Businesses around the world will succeed in the 21st century only if we cluster around knowledge—and our universities are among the best in the world.

Photo of Lord Peston Lord Peston Labour

My Lords, I have no idea what the World Economic Forum is but, judging from what it appears to have said, it talks a load of nonsense. The notion that the British economy is not one of the most stable in the world is ridiculous; we are one of the most stable and successful economies in the world and what that organisation needs is a lesson in economics. The last time I looked at the figures for the service industries, Britain was among the most productive and efficient economies in the world, if not the most productive and efficient—and that includes financial services despite the fiasco of Northern Rock. Is it not the case that a large part of the problem for the production industries is an overvalued pound sterling, which is due to an excessively restrictive monetary policy?

Photo of Lord Jones of Birmingham Lord Jones of Birmingham Minister of State (also in the Department of Business, Enterprise and Regulatory Reform), Foreign & Commonwealth Office, Minister of State (also in the Department of Business, Enterprise and Regulatory Reform), Department for Business, Enterprise & Regulatory Reform, Minister of State (Foreign and Commonwealth Office) (also in the Department of Business, Enterprise and Regulatory Reform), Minister of State (Department for Business, Enterprise and Regulatory Reform) (Business and Regulatory Reform)

My Lords, I am grateful to my noble friend for showing how important world macroeconomic stability is. Our service economy, to which he referred, is one of the reasons why we have one of the lowest unemployment rates in the developed world—5.4 per cent compared with 8.1 per cent in France and 8.7 per cent in Germany; indeed, it is nearly 5 per cent in America. That is because of our diverse economy.

Photo of Lord Hurd of Westwell Lord Hurd of Westwell Conservative

My Lords, when the Minister has finished waving his flag, could he find time to read a rather perceptive article in today's Herald Tribune? It points out that our businessmen and government support are, compared to those of France and Germany, rather slow in China. We are lagging behind because we do not spend enough time in the big cities other than Shanghai, Tianjin and Hong Kong.

Photo of Lord Jones of Birmingham Lord Jones of Birmingham Minister of State (also in the Department of Business, Enterprise and Regulatory Reform), Foreign & Commonwealth Office, Minister of State (also in the Department of Business, Enterprise and Regulatory Reform), Department for Business, Enterprise & Regulatory Reform, Minister of State (Foreign and Commonwealth Office) (also in the Department of Business, Enterprise and Regulatory Reform), Minister of State (Department for Business, Enterprise and Regulatory Reform) (Business and Regulatory Reform)

My Lords, I am grateful to the noble Lord for raising this point. I was in China only last week visiting cities such as Wuhan which are not Beijing or Shanghai. We are always berated for our trade with China being about a third of that of France, but every Airbus that is sold to China is booked as a 100 per cent export from France whereas 60 per cent of it comes from the United Kingdom. We book our 60 per cent as an export to France; France books its Airbus as a 100 per cent export to China. If you look behind the figures, you will find that we export more to China than people realise.

Photo of Lord Razzall Lord Razzall Spokesperson in the Lords, Department for Business, Enterprise and Regulatory Reform

My Lords, is the Minister prepared to accept that if he gave an honest answer to the question asked by the noble Lord, Lord Roberts of Conwy, he would say that there is not a lot that the Government can do? Is not his problem that the Prime Minister, when he was Chancellor of the Exchequer, put himself at the head of a drive to improve Britain's productivity and that drive has so far not proved very successful?

Photo of Lord Jones of Birmingham Lord Jones of Birmingham Minister of State (also in the Department of Business, Enterprise and Regulatory Reform), Foreign & Commonwealth Office, Minister of State (also in the Department of Business, Enterprise and Regulatory Reform), Department for Business, Enterprise & Regulatory Reform, Minister of State (Foreign and Commonwealth Office) (also in the Department of Business, Enterprise and Regulatory Reform), Minister of State (Department for Business, Enterprise and Regulatory Reform) (Business and Regulatory Reform)

My Lords, I think that in his observation about league tables the noble Lord meant that we should not always take them as gospel. Ahead of us in the current one are Iceland, Denmark and Singapore. Of the major economies, only the United States is substantially ahead of us. France is below us, Germany is on a par and Japan is just ahead of us. There are many different ways of calculating these league tables. If we keep concentrating on universities and skills, on simplification of tax and on better regulation, we will succeed.

Photo of Lord Davies of Coity Lord Davies of Coity Labour

My Lords, I wonder—