Economy: Growth — Motion to Take Note

Part of the debate – in the House of Lords at 6:23 pm on 21st June 2012.

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Photo of Baroness Royall of Blaisdon Baroness Royall of Blaisdon Shadow Spokesperson (Equalities and Women's Issues), Shadow Leader of the House of Lords, Shadow Spokesperson (Cabinet Office) 6:23 pm, 21st June 2012

My Lords, I, too, am grateful to the noble Baroness, Lady Kramer, for allowing us to debate the vital issue of growth this afternoon. There is a link between growth and democracy, about which Aung Sang Suu Kyi spoke so powerfully this afternoon. Democracy is frail and it is best nourished by participation in our democratic system, but that requires people to have hope and confidence in the future, including their own economic future. Where hope is lost, where confidence in our system is undermined, fear and extremism take hold. I know that all noble Lords in the Chamber this afternoon will strive to ensure that that does not happen.

The noble Baroness has always given great importance to growth. Indeed, in her maiden speech as Member for Richmond Park, she spoke powerfully about the need,

"to reconcile the importance of environment and sustainability with economic development, prosperity and growth".-[Hansard, Commons, 23/5/05; col. 473.]

From these Benches, despite what has been said this afternoon, it would appear difficult to reconcile this view with being a member of a coalition Government who are responsible for an economy that has not grown in the year and half since the spending review. One might say that it is a case of "Kramer vs. Kramer".

From outside government, it is rather difficult to detect any co-ordinated growth strategy. To outside observers, including the CBI, there was little or nothing in the Queen's Speech. It represents a waste of a parliamentary Session when industry and businesses large and small are crying out for a strategy which will return our country to a healthy rate of economic growth as soon as possible. Despite what has been said, I remind noble Lords that when my Government left power after a tumultuous global financial crisis, George Osborne inherited an economy that was growing. Unemployment was falling. Borrowing was below expectations-£20 billion lower in our last year of government than forecast. Yes, the deficit did, and does, have to be dealt with, but not with such speed. It is thanks to wrong decisions that focused on austerity rather than growth that we have ended up in a double-dip recession.

Growth is the necessary condition for meeting the aspirations of our citizens, providing employment as well as hope, and for funding the public services on which we all rely. Rather than pursing a growth strategy, this coalition Government have chosen fear over hope. They have focused on a policy of austerity that is not working here and is not working in the rest of Europe. In the very short time since his election, President Hollande has brought about a change in discussions in the European Union so that even the Prime Minister is now talking with his European colleagues, although he is not translating words into action. These Benches certainly agreed with President Hollande when he recently said that growth was a condition to meet deficit targets and that it was important to have policies that stimulate growth. I hope that at the European summit next week his influence will be strong.

It is true that there is growth in some sectors-for example, the automotive industry, which is thriving-and I celebrate that, especially when they invest in skills, training and R&D. They are providing sustainable growth in which their profits rise as a result of investment and innovation, not through speculation. My noble friend Lord Bhattacharyya was right to focus on manufacturing and to say that so much more could be done if there were an integrated approach. My party believes that there is a role for intelligent government intervention to stimulate greater innovation, maintain infrastructure and ensure that R&D is strengthened.

The success of major industries is vital also for the SMEs which make up their supply chain. I am told that 99.7% of all businesses in the EU are SMEs, which seems a staggering figure. Our own 4.5 million SMEs employ about 14 million people, accounting for almost half of private sector turnover. SMEs are the foundations of our economy, our community and our country, but, at the moment, those foundations must feel a bit shaky. Some are in danger of crumbling, desperate for an injection of confidence and hope, perhaps crying out for an industrial strategy which would deliver for SMEs as well as for large enterprises. They are worried that UK plc is getting left behind in the global race for the future. It is no surprise that, according to the SME Finance Monitor, the main barrier to future borrowing by SMEs is the economic climate, with 43% of would-be seekers saying that the effect of the economic climate will hold them back from seeking the finance to expand and grow.

I met representatives from the Genesis Initiative just yesterday and was bowled over by the expertise, experience and ideas around the table-these are huge strengths that must be exploited-but I was also acutely conscious of frustrations about missed opportunities. They need a supportive Government with vision and a long-term growth strategy that takes into account the long-term needs of industry and businesses large and small.

The noble Lord, Lord Popat, mentioned red tape, but no one yesterday mentioned it. I was interested to read in the Economist that a recent GE Capital study found that four of the top 10 challenges facing German and French firms are related to regulation, compared with just one in Britain-that is not to say that it does not have to be dealt with, but it is an interesting finding. The same study says that the main challenge for British firms is getting workers with the right skills. It also mentions the high cost of housing when companies try to attract skilled workers. On skills, I would ask the Minister how he thinks that Mr Gove's curriculum changes, which have a total focus on academic subjects rather than any focus on vocational subjects, are going to help. They will force children into a narrow education when we should be nurturing young entrepreneurial flair.

Many noble Lords, especially Liberal Democrats, have suggested that the Government are not putting enough money into building new homes. The noble Lord, Lord Storey, had some interesting ideas. As he mentioned, every house built represents two and a half years of work for one person, yet jobs in our construction sector are still contracting. An excellent IPPR report said today that Britain is in the midst of the biggest housing crisis in a generation. Taking action now to deal with the problem, which afflicts the lives of millions, would indeed stimulate growth. I agree that my own Government did not build enough houses, but there are certainly not enough houses being built at the moment.

I also ask the Minister why more is not being done in these difficult times to enable SMEs to take advantage of the bidding for contracts inside and outside the European Union. German, French and Italian SMEs have much more exposure to markets outside the EU than their British counterparts and I suspect that they have more government support.

We also have the benefit of the Commonwealth, whose potential we should assist SMEs in exploiting. The green investment bank is a fine initiative, with which I agree, but why is there no real discussion or action relating to a national infrastructure bank? Like many noble Lords, I wonder why more is not being done to promote investment in infrastructure, which is a key component for successful business and industry, and is a motor for growth; not to mention the employment that it provides. Unemployment remains a scourge in this country and the wider world, which is why the G20 summit was so important. However, the leadership needed to provide a global plan for jobs and growth appears to have been lacking.

I welcome the fall in unemployment figures announced this week, but even the FT is today talking of future increases, along with the chambers of commerce. Many of the people who are now taking part-time jobs are doing so because they could not get a full-time job. Of course, the increase in the number of manufacturing jobs is good news, but so much more needs to be done. Unemployment for 2.6 million people, including over 1 million young people, and fear of unemployment for millions more means that not only do people not pay tax and government borrowings consequently rise but consumers do not have the confidence to spend. The few are still spending; the many are not. I was horrified to learn that two new food banks open every week and that we have children who are in such poverty that nearly half of teachers have taken food in for their pupils. I am not critical of food banks-far from it, they fulfil a desperate need-but I am ashamed that in the 21st century there is a need for food banks in our country.

The Government clearly have a responsibility to implement policies that stimulate growth in the short term. As my noble friend Lord Wood of Anfield said in an earlier debate,

"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".-[Hansard, 31/3/11; col. 1359.]

That is why Sir George Cox, as noble Lords will know, has agreed to carry out an independent review, commissioned by my right honourable friend Ed Miliband, into the impact of short-termism on business. Businesses need to be able to take a more long-term view if we are to develop an economy that works for working people and competes with countries where longer-term planning is taken for granted. Sir George is issuing a call for evidence and, in view of the expertise in this Chamber, I very much hope that noble Lords will respond.

Having said that, what we need is action now. Many noble Lords have mentioned the fact that last week the Governor of the Bank of England, understanding the need for urgent action to sustain our economy, announced the funding-for-lending initiative. Of course, this is both welcome and necessary but will only work if the demand is there and small businesses have the confidence in our economy and the growth of our economy to borrow. At the moment, I do not think that confidence is there.

Confidence demands action and unless action is taken that enables businesses to grow and stimulate the economy, thereby giving people hope and jobs, we will not succeed in getting the deficit down. For the present and future well-being of our country, it is imperative to restore confidence and growth but at the same time to ensure that the proceeds of growth are shared by the many not the few. That is the challenge. To date, the coalition-the Liberal Democrats as well as the Conservatives-has failed to meet that challenge and it is therefore failing the hard-working people of this country.