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Motion to Take Note (Continued)

Part of Comprehensive Spending Review – in the House of Lords at 10:42 pm on 1st November 2010.

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Photo of Lord James of Blackheath Lord James of Blackheath Conservative 10:42 pm, 1st November 2010

My Lords, I do not know what you have done to deserve me this late in the evening but I am afraid that is where it is. It has been a fascinating day. I particularly enjoyed the comments of the noble Baroness, Lady Browning, on the subject of "Brigadoon", which was the first play I ever saw in the West End. I do not think she delivered the punchline. The whole point about "Brigadoon" was that it came out of the mist for only day in every 100 years. That is a lovely idea for the Opposition.

We have heard today a great many tales of woe and dismay about the future, and some of optimism from this side. I am concerned about where the common ground is in that. One of the lessons of what is now quite a long life is that nothing is ever quite as bad or quite as good as you expect. It is probable that there will be a little more common ground between us than we might foresee at the moment. We might assist that process because growth will be what brings the two sides together. The more growth we can achieve, the more scope there will be to deal with some of the greater calamities that might occur unforeseen-since everything is unforeseen in politics.

I will talk a little about some of the growth opportunities that we might be able to harness and what we can do. As I have mentioned before, one of my great messages is a lesson from Sir Kenneth Cork, who taught me most of what I know about corporate rescue. It is that you cannot rescue a business that does not have a successful past. Anything that does not have a successful past is a failed start-up. Get rid of it and concentrate on the businesses that have a successful past. Where, today, are the businesses with a successful past? They are languishing in the intensive care units of the banks. They cannot get out because most of them have been the victims of expanding their capacity beyond the demands of the marketplace. That is a very expensive situation to get out of once you are in it. It was done with some dexterity and considerable success in the early 1970s through the initiatives that were forthcoming from three Is: investment in industry. One of the great tragedies of our economy at present is that we do not have three Is functioning in that form today. Boy, do we need them.

I am very much a believer in the principle of the collective collapse of generic groups of businesses as entities. Let me give some examples. At the present moment this year, we have probably lost half a million cars in our British export market. They would have been a very big additional factor to the economy, both in production-the wages that would have gone to the people who built them-and in the export value they would have had. Why? It is because the banks played their usual dirty trick a year or two ago: they saw that there were big markets outside-big back-orders-so they let the businesses have the money that they needed to fund the delivery of the order books that they had. The orders came in; they took the cash, reduced the facilities and the automotive component industry did not have the working capital to gear up for the massive turn to the diesel engines, which were demanded, and the British export market could not maintain the export requirement necessary to maintain its position on the international scene.

That has largely been corrected now but a similar problem may well happen. The next big crisis is going to come in the second week of February next year when the huge crisis that comes cyclically every year afflicts the retail sector worse than ever. It is already bereft on the high street-with shuttered shops and redundant staff, and a very dismal sight it is. What happens in the banking industry is that it knows that in the first two weeks of February every year, all the credit cards that have been used to buy goods going into Christmas pay, and the retail industry has the lowest borrowings of the year. The banks lie in wait and they grab them. Remember Woolworths? Who is coming next?

So we need someone who can take a grip on a general strategy to save the retail industry from another calamity. One of the great regrets I have at the moment is that the person who would best be able to do that is Sir Philip Green, and he is doing something else. I hope that the Government will hold on to him, and once he has actually finished his present task, he will be told to go and cherry pick the entire retail industry languishing in the hands of the banks, and put together the next version of British Home Stores as a government subsidiary which needs funding and which can be imposed on the banking industry by grabbing each bit, despite the fact that there will be minority bank interests that will not want to sell out for the benefit of the major bank interest, which will get the cream of the equity conversion. That is what three Is should exist to do, and what it did so brilliantly before, and that is why we need it back now.

Another element of the world out there at the moment which is potentially waiting for the pratfall of a massive collective bankruptcy is the food processing industry. The more the accent is moved from the small corner shop to the big grocers, the more production has been stepped up by the food producers to satisfy the ever-increasing demands of cheap food coming through the grocery chains. Of course, they have fallen into the trap again of funding themselves to too high a capacity for the market demand with the result that the grocers can rub their hands with glee and say, "We can screw the margins down so tight you won't be able to breathe" and the suppliers are going to go collectively "pop" at some point in the next few months, because they will not be able to keep up and there is a big social factor coming. We will have the present dependence on cheap food to keep some sort of society structure fed, but we will actually end up being forced up on prices as the industry goes out of business in terms of its ability to keep supply going and prices are forced up in the grocery chains. This is going to be another calamity coming, and we need to have a top-down view as to what to do with it.

I have given your Lordships three examples of why I think we need something, but the creation of the three Is along the lines that I have been talking about would be of the order of a £5 billion cheque required to do it. However, we do not have £5 billion; we do not have half of £5 billion to put in to the creation of this at the moment, so what do we do about it? At this point, I am going to have to make a very big apology to my noble friend Lord Sassoon, because I am about to raise a subject that I should not raise and which is going to be one which I think is now time to put on a higher awareness, and to explain to the House as a whole, as I do not think your Lordships have any knowledge of it. I am sorry my noble friend Lord Strathclyde is not with us at the moment, because this deeply concerns him also.

For the past 20 weeks I have been engaged in a very strange dialogue with the two noble Lords, in the course of which I have been trying to bring to their attention the willing availability of a strange organisation which wishes to make a great deal of money available to assist the recovery of the economy in this country. For want of a better name, I shall call it foundation X. That is not its real name, but it will do for the moment. Foundation X was introduced to me 20 weeks ago last week by an eminent City firm, which is FSA controlled. Its chairman came to me and said, "We have this extraordinary request to assist in a major financial reconstruction. It is megabucks, but we need your help to assist us in understanding whether this business is legitimate". I had the biggest put down of my life from my noble friend Lord Strathclyde when I told him this story. He said, "Why you? You're not important enough to have the answer to a question like that". He is quite right, I am not important enough, but the answer to the next question was, "You haven't got the experience for it". Yes I do. I have had one of the biggest experiences in the laundering of terrorist money and funny money that anyone has had in the City. I have handled billions of pounds of terrorist money.

Annotations

laur laur
Posted on 6 Jul 2011 4:13 am (Report this annotation)

Lord James, with regards to your statement which i read and listened.. is too good to be true.. but if it's true UK loses the development she must receive.. In my opinion I think they are negotiating to all G countries who will first respond.. The Chinese (are now responding), American(are now responding), and of course UK (not responding).. you are the Divine chosen one to tell your co-Lords that your time is running up to save the people from economic recession. In your argument in the Economic situation, like fund slashing, higher tax, and many others for payment of debt is too conflicting.. why go to BASIC.. talk to FOUNDATION X ( A DIVINE ORGANIZATION ) they simply negotiating in a BASIC way... just put the funds to its rightful development then its finish.. EVERY BODY WILL BENEFITED..