Queen's Speech — Debate (3rd Day)

Part of the debate – in the House of Lords at 9:16 pm on 8th December 2008.

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Photo of Lord de Mauley Lord de Mauley Shadow Minister, Cabinet Office 9:16 pm, 8th December 2008

My Lords, this has been a very interesting and deeply sobering debate, and I am most grateful to all noble Lords who have taken part. My noble friends Lady Noakes and Lord Higgins, among several others, have given a thorough and informed analysis of the economic situation. The liquidity crisis, to which my noble friend Lord Patten among others referred, over which the Government have presided and of which the Banking Bill will, we all hope, play its part in preventing a recurrence, is but one half of the wider economic disaster facing our country, our businesses and our people.

My noble friend Lady Noakes, who will undoubtedly ensure that the Banking Bill receives rigorous scrutiny as it passes through this House, spoke primarily on the broader economy, as did several noble Lords, including my noble friends Lord Marlesford and Lord Caithness. Other noble Lords focused on specific areas. My noble friend Lord Bates focused on home owners. In the time I have available, I will concentrate on the effect that the recession into which we find ourselves plunging will have on the business sector, and raise some questions for the Minister about how the Government's programme, set out in the gracious Speech, is intended to address the problems of business in the difficult times that we are entering.

The Secretary of State, who opened this debate, is reported to have undertaken a last-minute campaign to rid the Government's programme of anti-business measures—for which, at least, we should all be grateful. We look forward to seeing whether he has had any success in inserting anything that is pro-business. The equality Bill, for example, represents an opportunity to simplify the sort of regulation that has cost businesses dear over the past 10 years. We will study the details now that it has finally been published, to see whether it achieves that. Unfortunately, I am not optimistic, given this Government's history on regulation. My noble friend Lady Noakes also touched on this. I remind your Lordships of the Regulatory Reform Act 2001 and the Legislative and Regulatory Reform Act 2006, the second introduced because the first simply did not work. Both were potentially powerful Acts that promised great things, but so far have achieved so little. Let us hope that, by now, the Government have realised that despite their continuing love of box-ticking and form-filling, businesses have better things to do.

However, I must give credit where credit is due. In one department, the Government have learned to listen to Conservative suggestions. For several years now, the Department for Work and Pensions appears to have been reading Conservative policy papers with flattering attention. Both the welfare reform Bill and the previous Welfare Reform Act 2007 contain provisions ensuring the use of incentives to seek employment, the use of private and voluntary sector delivery on a payment-by-results basis and the reassessment of incapacity benefit claimants to ensure that the system is not consigning 2.5 million people unnecessarily to lifelong unemployment. They are all Conservative recommendations. One can only imagine how much the taxpayer could have saved during the golden opportunity presented by the past 10 years if these Conservative policies had been accepted earlier.

As it is, the reform of incapacity benefit will not be completed until 2013, according to the DWP. In many areas it is almost too late. The Government appear to have waited until an OECD prediction that we will suffer the worst rise in unemployment of any G7 country before coming to the conclusion that giving people access to information about new jobs might be helpful. However, a recent moratorium on closing jobcentres is not much use when 492 centres have been closed since 2002, and only three will apparently be saved by this policy.

Of course, information about available jobs will not be enough to help the thousands of people facing unemployment. Improving the skills base of the UK workforce is critical but, as the 2006 Leitch review made clear, a recession was not necessary for Labour failure in this area to be obvious to most. With the children, skills and learning Bill, Labour are once again planning to rely on quangos to deliver what needs to be genuinely rooted in the business environment. After two major reorganisations of the Learning and Skills Council, the Government have decided that multiplying it by three is the best use of taxpayer funds. They have also decided that a statutory entitlement to apprenticeships is enough to counteract the regulatory hassle and inappropriately targeted funding and dumbing-down of standards that have already resulted in their missing every apprenticeship target they have set themselves.

Of course, excessive bureaucracy and endless reorganisations are not confined to skills and training. One need only look at the 3,000 business support schemes run by over 2,000 public bodies and their contractors to see how public finances have been run into the red with so little return. Even the Government appear to have realised that the £10 billion to £12 billion they have sunk into these schemes might not have been entirely well spent. Two years ago, they thought that a reduction by 2010 to 100 schemes might result in a little more efficiency. I think that they have so far managed to scrap 10—the Minister will correct me if I am wrong—so there are 2,890 to go.

Regional development agencies, of which my noble friend Lady O'Cathain spoke with some force and which are to be given more powers in the Local Democracy, Economic Development and Construction Bill, might have been thought by a Government less devoted to quangos a good place to start. After all, they spend more than a third of their funding on administration costs and are widely considered to be completely disconnected from the very businesses that they are meant to be supporting. Apparently not, however. Can the Minister give us an indication of how many of the remaining 2,890 superfluous schemes are likely to have been abolished by the target date?

The Government have a lot of convincing to do on each of the Bills I have mentioned so far. One Bill has unequivocally been drafted with business in mind: the Business Rates Supplements Bill, to which my noble friend Lady Noakes and the noble Lord, Lord Cotter, referred. It gives councils the power to raise business rates for local economic development. I would be most interested to hear the Minister's view on this Bill, and specifically whether he considered the introduction of a mechanism that would allow the raising of business rates to replace central funding, an innovation carefully calculated to enhance the confidence and survival prospects of businesses at what is clearly such a difficult time for them. Local councils are certainly better placed to promote economic development than regional development agencies, but I very much doubt that they are better placed than the businesses that make up the economy and which will be expected to bear that cost. We will be looking at this Bill very carefully indeed when it arrives in your Lordships' House.

We on these Benches, by contrast, would step much more carefully when raising taxes on business. It is clear that we are not in agreement with the Government on this, as in so many other areas. Rather than fiddling in the margins and implementing expensive schemes with no guarantee of success, we would concentrate on maintaining the smooth running of the engine of our economy—the small businesses to which my noble friend Lord Courtown referred, which provide the majority of private sector jobs and more than 50 per cent of private sector turnover.

My noble friend Lady Noakes explained that, despite the Government's banking package, they have failed to remove the blockage on lending to businesses. My noble friend Lord Wakeham underlined how vital the availability of finance is to businesses. My noble friends Lord MacGregor of Pulham Market and Lord Trenchard also underlined that point. My noble friend Lady Noakes explained Conservative policy which would address this blockage on lending, to which my noble friend Lord Tugendhat also referred. Rather than increasing national insurance contributions at a time when many companies are already realising—as the noble Lord, Lord Bilimoria, said—that they cannot afford to maintain their headcounts, a Conservative Government would seek to make employment cheaper, not more expensive. We would cut national insurance contributions by 1p for very small companies and introduce financial incentives for private sector employers taking on the unemployed. We would cut small business taxes too by reducing the small companies' rate of corporation tax from 22p to 20p. Rather than imposing a costly, inflation-busting reduction in VAT—to which my noble friend Lord Marlesford, among others, referred—at a time when the Bank of England, which is responsible for responding to inflationary pressures, has cut interest rates to a historic low, we would give small businesses help with their cash flow by allowing VAT bills to be deferred for up to six months.

My noble friends Lord Patten, Lord Sanderson and Lord Eccles, among others, spoke about the importance of pensions and savers and raised some important points. My noble friend Lord Patten suggested abolishing the requirement to buy an annuity at 75, which is, indeed, Conservative policy.

In conclusion, the Government are insistent that the problems the UK economy is facing are all due to the global economy. They see no inconsistency between claiming the credit for 10 golden years, when every other comparable country also had low inflation and high growth, and denying responsibility when the OECD predicts that our country will suffer a deeper recession than those exact same countries.

Government Ministers are very keen on quoting an IMF report issued in May which comments on strong policies and policy frameworks over the past 10 years—so keen, in fact, that the same quotation has been used nine times in Parliament over the past six months. It is extraordinary that no one appears to have read to the end of the page. The statement is not in fact limited to the three paragraphs published on the Treasury website but goes on to give the strongest warnings about breaching the 40 per cent public debt ceiling. Does the Minister agree with the IMF's assessment of the best way forward, and if he does, how can he justify the extraordinary fiscal loosening the Government have just undertaken? As my noble friend Lord Higgins said, how will it be funded?

As my noble friend Lady Noakes said, this Government have presided over the creation of the longest tax code in the world. It is chock full of reliefs and credits and, more recently, postponements and deferrals, which the Government hope will postpone the full effect of a Labour Government until after the next general election. Let me assure the Minister that nobody is fooled.