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Economy: Growth — Question for Short Debate

– in the House of Lords at 4:15 pm on 6th December 2012.

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Photo of Lord Heseltine Lord Heseltine Conservative 4:15 pm, 6th December 2012

To ask Her Majesty's Government what is their response to the Report No Stone Unturned in Pursuit of Growth.

Photo of Lord Gardiner of Kimble Lord Gardiner of Kimble Lord in Waiting (HM Household) (Whip)

My Lords, this is a time-limited debate and the limit for Back-Benchers is three minutes. I respectfully remind the House that this means that when the clock shows three minutes the speaker has already reached their permitted limit.

Photo of Lord Heseltine Lord Heseltine Conservative

My Lords, it is eight months since I set out my remit from the Government to comment on their national agenda for growth. A team of officials across Whitehall provided unlimited access to any department. No attempt was made to constrain or censure my comments. I thank the Government for that unique privilege. I am greatly indebted to the talented and dedicated team of officials who enabled me to produce a report regarded, even by those who disagree with its conclusions, as professional and well presented.

It has been suggested to me that my report should have been more focused on a limited number of targets. I do not accept that. The challenge we face is too immediate and too comprehensive. Any adequate response must involve the broad range of our institutions and our people. That is why I stress the leadership of the Prime Minister, the need for a comprehensive growth agenda, the involvement of every government department as appropriate and, critically, a central capability to ensure the delivery of the promises involved in such a strategy.

Yesterday, the Chancellor of the Exchequer directed most of his response to my central theme of localism. I am most encouraged by this and by his promise of a full response in the spring.

Uniquely, of all advanced economies, this country relies on central government and its bureaucracies to initiate, determine and administer economic policy. I believe there are consequences from this: the minimum of local initiative, the almost total absence of incentive for localities to add to government funding from their own or from outside resources, and a conformity of practice that ignores the diversity of local economies.

My report outlines an alternative concept. I argue that our local economies should be more driven by local factors. They should engage a wider involvement of local leaders and use competition to attract additional, non-governmental funding. As envisaged, most of the localist agenda should be led by the local enterprise partnerships. The Government have now made available sufficient funding to ensure their ability to do this. If any local authorities are still uncertain about this partnership with the private sector, I believe that the need to bid from a single fund will persuade them to participate, although my own view is that most of them will need no such encouragement. Against that background, their local people would not be impressed by the failure to seize such an opportunity; and, of course, such a failure would strengthen the case of those who, at every turn, argue that only central quangos or departments can be relied on to deliver quality of service.

I had, then, to consider the response of the private sector to a localist initiative. We talked to each of the groups that represent the private sector. We also looked overseas at the support available in competing economies. Our findings were published in an annexe to the main report and our conclusions were as bleak as those first reached by Lord Devlin, who conducted a similar exercise in 1972. At home and abroad, other countries have developed different but comprehensive support for their small and medium enterprises. This Government have set out an ambitious target to increase our exports to £1 trillion by the year 2020. The Prime Minister, on recent visits to Brazil and India, two of our target markets, found that there were no British chambers of commerce there at all. Led by my noble friend Lord Green, this Government have moved swiftly to remedy this problem. In the first instance he is working on 20 key markets, and he has appointed a number of new trade envoys. I think that is excellent, and I am very much in agreement with the remarks of my noble friend Lord Howell of Guildford and of my noble friend Lord Green himself in an earlier debate in this House today.

However, we need the same sense of urgency at home. Chambers of commerce, as they are now constituted, represent only a fraction of our companies. Let me give just two examples: Birmingham has fewer than 3,000 members; Milan has 350,000 members. As the noble Lord, Lord Haskins, knows, as he was present at the meeting in Humberside, where I discovered these figures, the chamber there has 1,000 members. The Federation of Small Businesses has 1,000 members. There are 70 entrepreneurs who have formed a breakaway group; that is 2,070 firms. There are 40,000 firms on Humberside.

An important route to the export market is to reach out to the overwhelming majority of companies that actually do not export. The British Chambers of Commerce's own analysis revealed that 58% of exporting companies did so because overseas customers approached them in the first place. This is not exactly what we might call entrepreneurial salesmanship.

It is my belief that we need to provide more sophisticated services to support our small and medium enterprises across the range. They need to be private sector-led. Membership of chambers should remain voluntary, but it should be sufficiently attractive to draw more members. They should signpost advisory services, they should be involved in the provision of mentoring opportunities, they should encourage local procurement and they should provide a vehicle for the delivery of central departments' services.

The simple test is to ensure that our companies are supported by the same quality of services that our competitors enjoy overseas, whether it be the Small Business Administration in the United States of America or the more state-orientated proposals on the continent of Europe. The British Chambers of Commerce and its associated member chambers have now communicated to the Government their enthusiastic endorsement of such an approach in this country. I very much hope that this will be reflected in the Government's response in the spring.

The Chancellor was good enough to say that the report has attracted wide support, and much work was already under way in the localist agenda. Greater Manchester has pioneered the concept of a combined authority. Liverpool negotiated the first city deal. The noble Lord, Lord Adonis, is working in the north-east on how to make progress there. More specifically, Andy Street, the managing director of John Lewis and chairman of the West Midlands and Solihull LEP, and Sir Albert Bore, leader of Birmingham City Council, have asked the Prime Minister whether I can work with them to develop proposals along the lines of my report, which the Government could consider as they reach conclusions. Such work would obviously include and involve the Birmingham chamber of commerce in exploring a wider role. I hope very much that the Prime Minister will agree to this suggestion and I fully recognise that it would involve no commitment to accept any proposals that arose from such an initiative.

The Chancellor's response yesterday seems to have one novel feature. Most government reports are targeted at specific policies, activities and groups. It is easy for most people to feel that it is someone else's responsibility and has little to do with them. The announcement of the single fund for local economic development and competitive bidding changes that. There are now 39 teams-the LEPs- of talented, motivated local people with the opportunity to attract public money in a way that serves their places, encourages them to raise additional resources and binds the public and private sectors together in a common cause. If I may borrow a phrase, we are all in this together.

Photo of Lord Mandelson Lord Mandelson Labour 4:26 pm, 6th December 2012

My Lords, I warmly congratulate the noble Lord on securing this debate and on his report as a whole. It will not surprise him that I strongly agree with the bulk of it. When I returned to the Government when the financial crisis struck in 2008, my eyes had been opened by my continental experience to what most other sensible Governments do in placing their weight behind the growth of new markets, sectors and technologies in their economies.

This is not, or need not be, dirigisme of the clumsy and counterproductive kind. It is about identifying an economy's comparative advantages and then maximising the public and private investment in those advantages; removing unnecessary barriers to new and growing businesses; making sure that all the available national and local instruments or interventions of government are acting, as far as possible, in harmony; pump-priming with additional government resource where the market is failing to provide adequate finance; doing some of the heavy lifting in attracting foreign investment in R&D and building domestic supply chains based on this activity; or helping British manufacturers and service providers to enter global supply chains.

The kinds of frustration that the noble Lord will experience in achieving his report's implementation are, I suspect, the same that I faced. I want to comment briefly on them. Broadly, they are of three kinds. First, there is lethal short-termism-the bane of British government and corporate life, neither of which have a sufficiently long-termist view inculcated into their perspective and working methods. When I embarked on my own policies of industrial activism, I am afraid that the policy horizon of many in government seemed to stretch from the day of policy announcement to around a couple of months before interest was lost. The hope of those who never signed up to the policies in the first place seemed to be that the policies would die through indifference. It therefore requires strong political will in government to counter this. I regret that such stop/go short-termism kicked in again when the change of government came. The coalition, rather than building on what I started, decried Labour's growth policies and pinned all its hopes on deficit reduction instead.

The second obstruction lies with the Treasury. Its long-held attitude is that smart, strategic, interventionist policies do not work because, in principle, Ministers and markets do not mix. This is coupled with deep scepticism about public borrowing for extra investment which, in its view, simply adds to the country's borrowing requirement without delivering anything of very much value. Its approach, I am afraid, is to kill the policies at birth when it can. Then, if this fails, it severely cash-limits the measures and makes access to them by businesses so difficult that they are soon shown to have failed. This inbred Treasury attitude simply has to be conquered in order to make any progress.

The third source of obstruction is more latent than malign, and possibly the most difficult to overcome. It is the sheer lack of experience and capability inside government to design and implement the sort of market-based interventionist policies and instruments we need, especially in the financial area. We need to prioritise this capability and recruit it with government-by which I do not mean, incidentally, collecting further centrally based Whitehall officials.

In conclusion, we can and should learn from others, so if I had one piece of advice for my own party, it would be to spend its time while it can looking at others' experience internationally and, at home, be inventive; build on what exists rather than returning to ground zero and be prepared to take a major leap in ambition, intervention and organisation in government. Nothing short of that will be needed in the huge economic battle we have to continue to take on.

Photo of Lord Shipley Lord Shipley Liberal Democrat 4:31 pm, 6th December 2012

Every time I cross the Gateshead Millennium Bridge I think back 25 years to a polluted River Tyne with little economic activity. The transformation has been inspirational. It is the result of public sector intervention through urban development corporations, led largely by local people triggering private sector investment. Those corporations were, of course, the creation of my noble friend Lord Heseltine, who had a compelling vision of what could be achieved in our cities.

That vision is here again in this report: England is too centralised and faster growth cannot be delivered by Whitehall. The Government have taken several steps to address this: city deals, the Localism Act, and enabling local authorities to share in business rate growth. They now need to go a step further so that local enterprise partnerships, the private sector and local authorities working together and empowered by central government can drive growth in their localities.

Most of Whitehall operates in silos and my noble friend Lord Heseltine is right to say that the Government need to think more in terms of places outside London and how to build on their unique strengths. The abolition of government offices in England was a mistake. I do not advocate government offices which centralise public service delivery in their regions, but I do want government offices which bring key Whitehall departments into a single place with a duty to drive growth and unlock barriers to growth.

Such a government office would work as a partner of the private sector, local authorities and LEPs. I agree entirely with my noble friend Lord Heseltine that LEPs must become engines of growth and I welcome the Chancellor signalling yesterday that a greater proportion of growth-related spending would be devolved to LEPs from April 2015 in transport, skills and employment.

Central to this are enhanced roles for FE colleges and the private sector. Recently I was at an event in the new creative quarter in Nottingham. The event was held in New College, Nottingham, a founder member of the Gazelle Colleges Group formed last year by five leading FE colleges in England: New College, North Hertfordshire, Gateshead, City College Norwich and Warwickshire College. There are now 20 of them, all seeking to reshape FE colleges by putting entrepreneurs in a more strategic position and focusing on self-employment and new business development. They are working to align local growth clusters to support business formation and the delivery of appropriate skills. They should be commended for this.

This report has attracted strong support from the private sector, but there was a hint, initially from the British Chambers of Commerce, that the report focused too much on institutions. I do not think that is valid because institutions matter. We need our chambers of commerce to be delivery partners of the LEPs in business support and training, and if the chambers maintain a voluntary membership structure, as they seem to prefer to do, we should create a one-stop shop through the chambers which businesses positively want to join.

A local structure is now emerging composed LEPs with authority and resources, enhanced private sector support for business, as outlined by my noble friend Lord Heseltine, and local government leading the growth agenda, with all three partners being supported by central government,

Eleven words in this report are vital, although every word is important; that,

"there are some things only government can do to drive growth".

This report shows us how.

Photo of Lord Skidelsky Lord Skidelsky Crossbench 4:36 pm, 6th December 2012

My Lords, the best thing about the report by the noble Lord, Lord Heseltine, is that it reflects a broad agreement that something more than deficit reduction is needed to get the economy growing again. The noble Lord's enthusiasm to get things done is the thing I have most admired about him over the years. There is a good cartoon on the front of his report, No Stone Unturned. Noble Lords have probably all seen it, but the rock the noble Lord needs to push away ought to have the image of the Chancellor graven on it. The noble Lord proposes a Whitehall pot of £50 billion to be bid for by voluntary partnerships between local authorities and businesses over five years but, as far as I understand it, and I stand to be corrected, the Government are making no extra resources available. Rather, this is a way of getting local responsibility for the spending of money already available to local authorities so there is no assurance of any additional simulative effect. That is an important defect.

The noble Lord has been anxious not to breach the Chancellor's deficit reduction programme. In fact, the report explicit states:

"I believe the Government's economic strategy is right", but it is precisely this that needs to be questioned. We are in an extraordinary position. The main international organisations now all agree that austerity is having a chilling effect on the economies of Europe, yet they also say that there is no alternative. That seems much too passive. The Chancellor alone denies that his deficit reduction policy has any responsibility for the weak performance of the economy. It is all blamed on head winds. I regret to say that the OBR has helped him massage his figures to show that the deficit is coming down and therefore that he is on track, even through the track is five years longer than he thought it would be in 2010. As Chris Giles notes in today's Financial Times,

"had the OBR shown teeth, Mr Osborne would have failed on all his fiscal targets".

The only thing worth talking about today is the validity of the targets themselves and the theory of the economy on which they are based, but that is the last thing this House seems to be willing to discuss. I hope we will soon be given more than three minutes per speaker to address the larger issue.

Photo of Lord Baker of Dorking Lord Baker of Dorking Conservative 4:38 pm, 6th December 2012

My Lords, the essence of the Heseltine report is the growth and wealth of the economy over the next 50 years. We all know that it will not come from banking services and real estate but from technological innovation, inventions and the capacity to make goods and services that the rest of the world wants to buy, but there is a massive skills shortage. The Royal Academy of Engineering and the Engineering Employers' Federation have recently forecast that by 2020 there will be a shortage of 1.25 million professional scientists, engineers and technicians in this economy. If we have that, we cannot meet any of the targets that the Chancellor set yesterday.

The only educational institutions that are trying to meet that demand are the colleges that I have been pioneering for four years, which started under Labour, as the noble Lord, Lord Mandelson, will remember: university technical colleges. They are for 14 to 18 year- olds. There are 600 students. They are employer-led, university supported, and the youngsters do up to two days per week practical work.

The first one, which has operated for two years in December, was the most successful school in the country. Every youngster at 16 or 18 got a job, an apprenticeship or a place at college or university. We have five colleges open; 33 approved and 21 applied for. We need masses more of these colleges-seriously a large number. They accord very much with the spirit of the Heseltine report as they are employer led. Hitachi wants one in Durham because it is building a factory for 700 staff to build rolling stock and there are simply not enough skilled technicians in that area to fill the factory.

In Salisbury the LEP, the agency my noble friend is quite rightly using, came to us and said there was a skills shortage there because of the redeployment of the Army from Germany and the building of new maintenance depots, so together with the local employers, the University of Southampton and local people it was going to apply for one.

My point is that if we do not fill this skills shortage, you can forget all the targets because we will simply stagnate. This is the single most important thing we have to do. Matthew Hancock, the Minister for Skills in my noble friend's department today issued a statement setting out the policy for the next two years. In particular, he said that the LEPs should be given a strategic policy for skills policy. That is going to be very important. I hope that they will bid for some of the money that has been suggested and have some money of their own. This is singly one of the most things we can do. Without those skilled people, unless we import from overseas, we will meet none of our targets.

Photo of Lord Haskel Lord Haskel Deputy Chairman of Committees, Deputy Speaker (Lords) 4:41 pm, 6th December 2012

My Lords, the noble Lord, Lord Heseltine, has form on industrial policy and I am delighted to see that he has carried it with him into this report. Instead of just market forces, he speaks about all aspects of industrial strategy and what it should look like. I particularly welcome his emphasis on co-operation-Government, business, technology, education, finance and society all working together and all interrelated, aligned in a trajectory directed towards growth, leaving no stone unturned. At least I think that is what the cover says.

He calls for all government departments to develop a growth agenda. He wants the Government to help industry to create winners. He wants the Government to tilt business towards British industry. I absolutely agree. He wants the financial sector to play its part in this to serve business and industry rather than itself. I agree.

He wants to help the education system to create the STEM graduates the noble Lord, Lord Baker, has just told us about. He wants to do something about the one in four adults who are functionally innumerate. Who could not agree? We are again reminded that we enjoy the fruits of investment in science and technology and research planted by earlier generations. Of course, we have a similar obligation to the generations that come after us.

The noble Lord speaks of localism. He wants to bring back the importance of place and the Government have responded with money for the LEPs. It is a pity they did away with the RDAs because then it would have happened a lot more quickly.

He explained why he wants to strengthen the local chambers of commerce but society now plays an even more important part in industrial strategy. It plays an important part in getting people to work together. During the past 20 years, we have developed clusters where we can stimulate and support each other and speed things up. We have developed knowledge transfer networks. Publicly funded science is becoming open source. The minimum wage is developing into a local living wage.

Some employers have kept people in work by reducing working hours to see them through the hard times instead of sacking everybody. We have some highly productive factories, not only because of investment, but also because employers and workers see themselves as one instead of two sides of industry.

Business now has to be socially responsible because society rejects clothing from sweat shops, it prefers products and services that are environmentally friendly and fair trade, and it rejects those firms whose tax arrangements are seen to be unfair. Marks & Spencer wins prizes for its Plan A.

We probably have to shine more light under this stone better to understand how society has to play its part in our industrial strategy. I think that goes beyond localism.

Photo of Lord Bilimoria Lord Bilimoria Crossbench 4:45 pm, 6th December 2012

My Lords, the noble Lord, Lord Heseltine, has always been known as a man of action. From the day of his long-awaited maiden speech-after more than 10 years' patience on behalf of your Lordships, to be precise, and when I had the privilege of paying the tributes to him-he has hit the ground running. Within barely seven months, he has produced his No Stone Unturned-In Pursuit of Growth report. The Economist teasingly referred to it as "Tarzanomics".

To his credit, the noble Lord is absolutely right to conclude that:

"There are no easy or short term ways to beat the world's most competitive economies".

The suggestion to create a huge pool of money, endorsed by the Autumn Statement yesterday, to be devolved locally is, in theory, very good. The promotion of public-private partnerships is excellent. I am proud to be the founding chairman of the UK-India Business Council, which is funded by UK Trade & Investment and the private sector. I know that the strength of the UKIBC is that, as a public sector organisation alone it would not be effective, and as a private sector organisation alone it would not be effective. It is effective only because of the collective efforts of the public and private sectors-from British and Indian business to UKTI and Foreign and Commonwealth Office teams in the UK and across India.

My worry is that, in spite of what the noble Lord, Lord Haskel, has said, the RDAs created by the previous Government were not considered to be that effective. The Learning and Skills Council, which was created at great expense, was disbanded. These were great ideas in theory but difficult to implement in practice. They simply resulted in the creation of another layer of bureaucracy and another opportunity to waste money.

In building a business from scratch, I have seen that ideas are one thing but execution is what makes it happen. Will the Government confirm whether LEPs are local enterprise partnerships or, as the report refers to them, local economic partnerships? I hope it means both.

I was very worried about the report's approach to foreign investment. Just look at what Tata has done since 2006. It has invested more than £10 billion and has performed a miracle in turning around Jaguar Land Rover, which now has made a profit of more than £1.5 billion. This is in spite of the previous Government turning it down for the funding that it so desperately needed in the depths of the recession. I hope that the Government will not take up the insinuations in the report. We have always been one of the most open economies in the world and we need constantly and desperately to attract foreign investment.

In the report, I was delighted to see the Government being asked to deal with illegal immigration, which they have failed to do so far. UKBA has been absolutely failing. However, will the Government also rethink their immigration policy, which is damaging British business and higher education?

In conclusion, I congratulate the noble Lord, Lord Heseltine, on his report but will it really get this Government creating institutions that are as effective as the American Small Business Administration, to which the noble Lord referred? It has been instrumental in supporting small businesses, not just with advice but by providing finance to the tune of billions of dollars a year in a sustained manner for decades. Will it be as effective as the German chambers of commerce, to which every business in Germany belongs? If not, I fear that this report will be another well intentioned, half-way step when what we as a nation desperately need is a giant step forward.

Photo of Lord Wolfson of Aspley Guise Lord Wolfson of Aspley Guise Conservative 4:48 pm, 6th December 2012

My Lords, I congratulate the noble Lord, Lord Heseltine, on his excellent and energetic report. However, I should like to add a different perspective. In doing so, I declare an interest: I am the serving CEO of a FTSE 100 retailer that employs around 46,000 people. Our problem is not cash or the availability of funds; we generate £240 million more than we need to invest in the business or to pay our dividends. Our problem is not finance. Along with many large companies, we are able to raise finance on the bond markets at prices that we have never seen before-4% for 10-year money. Nor is the problem a lack of opportunity for investment; we have identified 1.2 million square feet of shops that we would like to open and we would like to employ 5,000 more people.

The problem is that all too often the Government are getting in the way. Next year, of that 1.2 million square feet, we will open barely 250,000 square feet. In the vast majority of cases, the problem is the planning system. The issue is not just that it says no but the time that it takes to say yes. In one shop, it took nine months just to get planning permission to build storage for stock. We then had to wait three months to see if we were going to be judicially reviewed. That is one year in which 100 people did not have jobs because of our planning system.

The problem, it seems to me, is that, while we have some great councils in this country, there are far too many people involved in our planning system who simply do not understand wealth creation. They do not understand that building new shops and creating new jobs and new services for local communities actually creates wealth. Far too often they say to me what one council official I was talking to said. We have a £2 million shop in the town centre and we wanted to put an additional shop outside the town. He said, "Surely you'll just spread the same amount of trade over the two shops". The shop outside the town centre will take, conservatively, £20 million. He did not understand the potential. Oddly, he did understand the inverse. He understood that to close shops is to destroy wealth and deprive people of local services.

That imbalance of perception courses through the veins of our planning system. It means that we have a planning system driven by people who are profoundly pessimistic about the ability to create wealth. Their belief that one cannot create new wealth by opening new shops, for example, means that they stop us opening new shops. It is a self-fulfilling prophecy and extremely dangerous. In particular, it has lead to a hugely damaging zoning system that puts houses in places where people do not want to live and shops in places where they do not want to shop.

Noble Lords will all see an example of that if they drive down a motorway over the next week; if they look to the side they will see, at some point on their journey, a brand new housing estate; neat new-build houses, built where the planners have put them. The planners cannot see, because they do not understand wealth creation, that by building houses in horrible places they destroy wealth.

If we are to have a thriving economy, my belief is that there is enormous pent-up energy in the private sector that can be released. All the planning system needs to do is let us build homes where people want to live, and of the type they want to live in, and build shops where they want to shop and offices where they want to work. If the planning system were driven by those principles, we would have a far more vibrant and effective economy.

Photo of Lord Hollick Lord Hollick Labour 4:52 pm, 6th December 2012

My Lords, on page 17 of his excellent report, the noble Lord, Lord Heseltine, sets out in graphic detail the persistently poor level of UK productivity compared with our main competitors. His response is, characteristically, to lead from the front. He has demonstrated that one energetic and open-minded person who believes that the state has a key role to play in promoting economic growth can, in six months, come up with a telling analysis of our growth crisis-and it is a crisis-and recommend 89 generally sensible and practical proposals to address that crisis, a task that has eluded a platoon of business Ministers for two and a half years.

Investment in infrastructure, plant, equipment and skills are, as the noble Lord, Lord Heseltine, points out, essential to improving our productivity. Yesterday the Chancellor made welcome moves in that direction, but far more ambitious measures are required in order to meet the estimated £350 billion infrastructure investment needed over the next 30 years, according to McKinsey. Such measures include an infrastructure bank which can benefit from record low long-term borrowing rates. Road pricing, long advocated across this House, would spur large-scale investment in our aging motorway networks. These measures as well as the proposal of the noble Lord, Lord Heseltine, to help public and private pension funds, insurers and banks to finance infrastructure instead of buying gilts must all be energetically pursued.

The noble Lord is surprisingly reticent about additional measures to stimulate demand, which is the key to growth and investment. The failed efforts to promote lending will continue to fail unless and until businesses can see increased demand to justify taking on more debt or, preferably, raising more equity. There are fiscally neutral ways of stimulating demand. Is using the proceeds of the 4G auction to pay down debt the best strategic use of this windfall during the worst economic crisis of modern times? Why are the Government still taxing houses on the basis of 1991 valuation when the proceeds arising from a modest revaluation at the top level would finance the reduction of VAT on home refurbishment or a further £200 on the income tax threshold?

The noble Lord's call for empowered localism to replace the inefficient and bureaucratic Whitehall is welcome and was warmly embraced by the Chancellor. The history of local versus regional versus central delivery is littered with disappointment and failure, all too often driven by political fashion rather than by proven performance. Recommendation 7 hits the nail on the head when it calls for LEP boards to have,

"the necessary skills and expertise to deliver their expanded functions".

The recent excoriating report by the Public Accounts Committee into the competence of the Regional Growth Fund provides a stark and timely warning of what can go awry.

The noble Lord rightly highlights stability as an essential precondition to economic transformation and goes on to cite our relationship with Europe as a prime example of the need for stability. Now that the noble Lord enjoys the warm embrace of both the Prime Minister and the Chancellor, we can be more confident that a rational voice in support of developing a sustainable relationship with the European Union, our major economic and trade partner, will be heard and, hopefully, heeded.

Photo of Lord Hodgson of Astley Abbotts Lord Hodgson of Astley Abbotts Conservative 4:55 pm, 6th December 2012

My Lords, in the three minutes available to me, I begin by congratulating my noble friend on his remarkable tour d'horizon and its 89 recommendations. I want to focus on just two issues: the malign impact of regulatory overlap, in his recommendation 44, and the role of the Government as a commissioner and purchaser in recommendations 36 and 37.

First, on regulatory overlap, during the two reports that I have done for the Government, in particular Unshackling Good Neighbours, which focused on the regulatory burdens on smaller firms, charities and voluntary groups, it became clear that there is a great tendency for regulators to take in each others' dirty washing. Ofsted asks about the frequency of testing electrical appliances, the Charity Commission about CRB checks. Both those issues are very important, but they are the subject of separate statute law and have their own enforcement procedures and authorities. Firms, especially smaller ones, are vulnerable to repeated questions about whether they have checked this or that-questions that very often are not set in context, do not need to be asked and are not accurate. They leave the firm feeling that, to be on the safe side, everything should be checked. As a result, the default option becomes, "If in doubt, check everything". Per contra, if my noble friend's ambitions are to be realised, we need more judgment and less process.

On commissioning and purchasing, of course we have to ensure value for money for taxpayers, but purchasers and commissioners need to consider how many tenderers need to be invited against the size of the contract. There can be only one winner, and the economic frictional costs of many losers are considerable. Purchasers and commissioners also need to consider the cost of tendering in relation to the value of the contract. In Unshackling Good Neighbours, we suggested 2% of the value of the contract up to £500,000 and 1% thereafter. When a service is being provided, commissioners also need to consider the annual cost to the provider of the monitoring. Again, we suggested 4% up to £500,000 and 2% thereafter.

Further, commissioners should not change their methods of measurement midstream. To do so adds exponentially to the costs of SMEs. All this may appear very nitty-gritty but, unless the Government are able to agree centrally and locally and stick to some performance yardsticks, much of the potential benefit of their purchasing power will be dissipated.

Photo of Lord Giddens Lord Giddens Labour 4:57 pm, 6th December 2012

My Lords, there was quite an amusing headline in the satirical magazine Private Eye recently, which touches on the point made by the noble Lord, Lord Skidelsky. It went something like, "After four years of intensive study, the IMF has concluded that austerity leads to austerity". We can all agree that we now need to focus on growth, but not just any old growth-it has to be environmentally sustainable and evenly spread. There is no point if it benefits only the top 0.1% of income earners.

There is much to agree with in the outstanding report from the noble Lord, Lord Heseltine. We should think in a radical and adventurous way about our economic future. Something utterly dramatic is happening at the cutting edge of manufacture, perhaps equivalent to or much more than Arkwright's spinning Jenny all those years ago: computers have crossed the line from the digital world and are intervening in the world of reality itself. This is perhaps one of the most momentous changes ever to happen in human productive activity. Although it is in its early stages, 3D printing can already make an enormous range of items, from engineering parts to dental crowns. At MIT, Neil Gershenfeld is working on computers that will be able to fabricate not just single items but complete functional systems. For example, his aim is to make a plane that can fly right out of the computer, as he says-and he does not regard this as a Utopian project.

This might be thought to be fanciful but much of it is already here. It is documented in a very detailed book by Chris Anderson called Makers: The New Industrial Revolution. Crucially, it reverses the assumption that manufacture will inevitably be outsourced to low-cost countries.

In Barcelona, where youth unemployment is more than 50%, the city is setting up digital fabrication workshops across different neighbourhoods, encouraging young people to train in them. The aim, in Gershenfeld's words, is for the city to be,

"globally connected for knowledge but self-sufficient for what it consumes".

This, to me, is the cutting edge of what could be a tremendous global revolution. Why should we not think along the same lines for Manchester, Birmingham and Liverpool, which brook so large in the noble Lord's report?

Photo of The Earl of Lytton The Earl of Lytton Crossbench 5:00 pm, 6th December 2012

My Lords, this is an enormously important report. It sets sheer practicality in a philosophical context, and I hang my hat on that.

By virtue of my professional business and chamber of commerce interests, I have spent much of my life, like Voltaire's antihero, Candide, noting both cause and effect while observing that current times are not the best of all possible worlds. The elephant in the room is the unnecessarily adversarial nature of much of our national politics, legal system and regulation. This creates risks and, in public administration terms, the response often seems to be inward-looking and protectionist, sometimes as turf wars but primarily in defence of systems rather than outcomes for growth. This has consequences. The Federation of Small Businesses surveys support my own long-held view that small businesses in particular still bear disproportionate burdens in terms of regulation, employment and tax treatment. For example, nobody wins by turning employment rights into a legal battlefield and the general costs to small businesses are, I believe, unsustainable.

The informer network of HMRC has been likened in this week's press to the Stasi. The taxman's reputation for aggressive treatment of small businesses is well known. While this department formally accepts some tax avoidance schemes-it has a box for it on its forms-it is an avid player in a game of catching out the ignorant, weak and unwary, even if honest, while apparently shrinking from bigger issues and slipperier customers. Similar generic shortcomings, dual standards and ignorance occur downstream in every aspect of business life.

On the plus side, though, is the growth in microbusinesses. Many are home-based and rural-based, outsourcing much of what they need and requiring little direct employment, and thus avoiding workplace pitfalls. Many are not VAT-registered or incorporated. The internet facilitates this virtual world of micro-commerce. West Sussex, where I live, apparently has 27,000 of them, but no one knows quite how many make up this major element of local GDP. Is this simply opting out in favour of lifestyle choices? Is it a consequence of obstructive and ephemeral laws and regulations? Is it a desire to keep beneath the radar? Or is it a new economic dawn? What might it mean for national economic policy?

I applaud the efforts that the Government are already making to cut red tape. The UK remains a great place to start a business. It also needs to be a great place to grow one on. This splendid report shows that we need a revolution in regulatory attitudes and I hope that the Government are listening.

Photo of Lord Sheikh Lord Sheikh Conservative 5:03 pm, 6th December 2012

My Lords, the United Kingdom finds itself at an economic crossroads. This is due not just to the current financial crisis but also to the fact that changes need to be taken in our business and industrial landscape. I congratulate my noble friend Lord Heseltine on the submission of his excellent report. A renewed focus on overseas trade is severely overdue as we cannot continue to buy so much more than we sell. Our industries must be world leading and globally competitive, thus attracting inward investment and potential for us to increase exports.

I was pleased that this report placed an emphasis on the long-term stability of our science and research sector, and how we market it. We need to better support and stimulate the creativity we hold within, and ensure that this is better promoted to the rest of the world.

I would also draw attention to the report's focus on the need for our government departments to build better relationships with the private sector and with each other. So much can be gained from government embracing private sector business in a way that works with it rather than alongside it. We must give businesses confidence that the Government understand their concerns and share their aims. I agree with my noble friend Lord Heseltine that wealth creation should be the business of all government departments. BIS and the Treasury cannot capitalise on every opportunity for growth and wealth creation without the help of those in other fields. I am therefore in favour of departments contributing to a wider growth strategy through which they could join up their thinking and complement each other.

The notion of localism is also extremely important and we must capitalise on the progress that the Government are already making on this. I was pleased to hear the Chancellor accept the recommendation that more of the funding for locally tailored schemes will go into a general pot for which local enterprise partnerships can bid. True innovation is released when it is free from central constraints, and it is the job of central government to promote and support this. Competitive bidding for such funds will encourage local communities to raise their game, give the successful bidders freedom to spend in ways that better support their local areas and, ultimately, build a nation of more ambitious and creative communities. There needs to be a greater level of co-ordination between government and the private sector, and indeed within the Government themselves. There also needs to be full recognition of the benefits of allowing strong, independent and dynamic local economies to flourish, supported but not controlled by national government.

In conclusion, I agree that we should think hard about our industrial approach, with a fresh examination of a wider economic landscape and a reshaping of our education system. We also need to take a creative look at the skills agenda.

Photo of Lord Monks Lord Monks Labour 5:07 pm, 6th December 2012

My Lords, as the noble Lord, Lord Heseltine, rightly says in chapter 7 of his report:

"If there is an upside to the worst ... crisis of modern times, it is the emergence of an audience for deep seated and radical proposals".

Indeed, we cannot just go back to business as usual, pre-2007. We know that we must rebalance our economy towards innovation, manufacturing, infrastructure and the weaker regions. We must save more and invest more. We should not continue to treat the City of London with exaggerated reverence, adopting an almost protectionist zeal that we do not apply to any other sector. The City can be an asset but the banks can be near-lethal to the country, as they were in 2007-08.

The noble Lord, Lord Heseltine, details measures that aim to get the UK economy match fit. For starters, this has to be done up to the level of our neighbours on the other side of the North Sea-Germany, the Netherlands, Flanders and the Nordic states. They have high productivity, positive balances of payments, strong social states, excellent training systems, scope for local and regional initiative, and influential trade unions. Those neighbours are savers and investors.

We have covered our lack of match-fitness in the past, sometimes with North Sea oil revenues and then with the boom in the financial services sector. There are no further windfalls in view and no more short-term fixes except, perhaps, devaluation, of which we have had seven against the deutschmark or the euro since the end of the war. We must surely not rely on devaluation for our future strategy. By the way, the last thing we need is a self-imposed exile from the EU unless it bends to our model. That would be, in effect, a sort of voluntary Dunkirk-and that was a defeat.

Many of the recommendations of the noble Lord, Lord Heseltine, nod in the direction of Germany and the lessons that that country provides for the UK. I add one more: the advantage of codetermination over adversarial relations at work. These codetermination principles seem outlandish to many in the UK, but they keep managements more long-termist and less inclined to help themselves to a disproportionate share of company profits. They guide unions in the right direction, too.

The nation owes much to the long period of public service of the noble Lord, Lord Heseltine. I think of Docklands in the 1980s, Manchester in the 1990s after the bomb, and especially Liverpool over a long period, as well as many other matters, some of which have been mentioned. With this report, we are in his debt once again, and I urge the Government to act on its central recommendations.

Photo of Lord Haskins Lord Haskins Crossbench 5:10 pm, 6th December 2012

My Lords, as the chair of the Humber local enterprise partnership, it would be remiss of me not to say that I entirely support this proposal from the noble Lord, Lord Heseltine, and I congratulate him on it. It was a very interesting symbolic moment when he chose to launch it in Birmingham Town Hall, which many noble Lords will recall was where Joe Chamberlain made all his speeches. While the noble Lord, Lord Heseltine, was giving his speech, the figure of Joe Chamberlain was standing over him, reminding us of the past.

The talk of the erosion of local government and the move towards central government is one aspect that I should like to mention. I can also point to the talk of the erosion of corporate Britain away from the provinces and towards the centre, into London. In 1906, some 85% of the headquarters of the top 100 companies were outside London. Today, I guess that there are less than 10. We have seen over a period great companies such as Rowntree's being devoured by Nestlé, an old international company, and the local identity of Rowntree's has gone. Aviva thought that Norwich Union was not a great name, so it chose something else. Above all else, the banks have devolved local power to the centre. In the job that I do, it is difficult to make sense of all that. Contrast that with BMW in Munich, Volkswagen in Saxony, Microsoft in Seattle, Coca-Cola in Atlanta and McDonald's in Chicago. Corporate Britain must learn to let go.

There is a huge attraction in localism. There is better accountability-a case of Whitehall versus City Hall, and I have no doubt where the accountability lies-as well as local knowledge and local experience. The noble Lord, Lord Baker, mentioned the skills problem. It is very important that that is dealt with at a local level and that local needs are met. Localism also means a speedy response, ownership and civic pride. I believe that the LEPs will develop into something called city regions, which will probably have more credibility than the regional development agencies because people identify with cities. If people identify with cities, there is a chance. Apart from in Yorkshire, people have never identified with regional development agencies.

However, the LEPs have to demonstrate that they are competent to take greater responsibility, getting talented people into public life once again and getting local authorities to pool their resources-something that is not very easy in my part of the world. Getting local business associations and local authorities to work together is, again, not very easy. Big businesses must devolve much more authority to the local level so that people such as me can get answers on big economic decisions at the local level, rather than having to go back to daddy.

Photo of Lord Northbrook Lord Northbrook Conservative 5:12 pm, 6th December 2012

My Lords, I welcome this opportunity to debate the important report produced by my noble friend Lord Heseltine but I regret that the usual channels have not allowed the opportunity of a full three or four-hour debate. To limit contributions to three minutes makes each contribution only a speed-dating effort in addressing such an important publication.

The Government gave only the briefest of initial responses to the report until yesterday, so I look forward to hearing what the Minister has to say. The Government are planning to strip Whitehall of about £58 billion of business support funding and place it in the hands of local enterprise partnerships, LEPs, in the biggest act of financial devolution ever seen. The CBI has commented:

"LEPs have so far lacked the power and resources to impact local growth".

Given that this review highlights a number of key areas in which LEPs can support private sector activities, it is pleasing to hear that they have been given appropriate resources to help them to meet this challenge. Does the Minister believe that they have the powers and the skills?

The British Chambers of Commerce generally welcomes the report:

"Lord Heseltine's analysis of the state of the UK economy is compelling", it says, yet his report for action,

"focuses too much on institutions, rather than on the fundamental barriers to business growth. Ministers should think carefully before committing to a restructuring of government, and focus first on the key restraints facing the real economy: the availability of growth finance, practical help for our exporters, our creaking physical infrastructure, and an education ... system that responds to businesses needs. Government can best support enterprise by collaborating with business to get the basics right".

Does the Minister agree with its observations?

The Federation of Small Businesses also welcomes the report by the noble Lord, Lord Heseltine. It suggests, however:

"The boards of LEPs must represent all sizes and sectors of local businesses. Otherwise they will fail. The FSB does not believe that the chambers should be legislated as they do not represent all businesses, particularly self-employed and micro firms".

It concludes:

"To create a stable environment for businesses to thrive, the Government should look to the success of the US Small Business Administration-SBA-to coordinate small business policy, such as lending, procurement and exporting".

I will end by congratulating the Government on three measures in the Pre-Budget Report that I believe will encourage growth. First, the increase in capital allowances from £50,000 to £250,000 is an excellent signal to manufacturers and has rightly been praised by key industrialists such as Sir Anthony Bamford of JCB. Secondly, the cut in corporation tax of 1% is equally welcome to increase UK competitiveness. Finally, the extension of the empty property rate relief is a measure to be much welcomed.

Photo of Lord Desai Lord Desai Labour 5:15 pm, 6th December 2012

My Lords, the Heseltine report is not just for Christmas and not just for austerity; it is for a much longer period than that. Some of the things that the noble Lord has pointed out have been constant and I have been hearing about them ever since I arrived here 45 years ago. We are too centralised and there is too little power in the regions and local authorities. There is too much regional inequality and London is too powerful compared to the regions. You can see that in the noble Lord's diagrams.

The noble Lord is a paradox. He is a centralist who wants to decentralise by using central power and he is strongly in favour of state intervention to encourage private business. It is an interesting model. If we are serious about decentralisation the first thing to do is to decentralise Whitehall. There is no reason why all the ministries should be in London. There is no reason why Local Government, Transport or Business, Innovation and Skills should be in London. Once upon a time the technology was such that they needed to be near each other. Now with cyber technology none of them needs to be near the others. We can completely decentralise government and delocate it. That would be a great step forward in making the regions more powerful and generating more employment in the regions.

As my noble friend Lord Hollick said, if we are serious about local government, we have to give local government income which is independent of central government. The best way to do it would be to do what has been long delayed and revalue property. Property values have not really been revised since the early 1990s. We got into the whole poll tax/council tax dilemma because of the reluctance to revalue properties quinquennially or periodically. If we could do that, given council tax rates, we would generate buoyant incomes for local authorities. They would not need to come to central government for their income and that would allow central government to cut central taxes. If we are serious about localism, we should break up Whitehall into the regions.

Lastly, this is a wonderful opportunity. As we are considering the refurbishment and repair of the Palace of Westminster, let us move Parliament out of London.

Photo of Lord Paul Lord Paul Non-affiliated 5:18 pm, 6th December 2012

My Lords, I declare an interest as chairman of Caparo Group, an industrial manufacturing company. I thank the noble Lord, Lord Heseltine, for initiating this debate and add my voice to the plaudits he has received for his report. I have been actively involved in UK industry for more than 40 years. In this time dozens of reports, documents, policy briefs and plans have come and gone. No Stone Unturned in Pursuit of Growth is an outstanding and comprehensive report that reflects the noble Lord's rare depth of experience in both commerce and public life.

I am glad that the Chancellor has announced that the Government are taking action on the report, although he will respond formally in April. It is a happy coincidence that today's debate is timed to follow the Autumn Statement. I am glad that the Chancellor is to take some immediate action. Speed is of the essence and I urge the Government to implement the report quickly in its entirety because decentralisation of power to the regions is long overdue. However, we must be careful not to create more layers of bureaucracy, more quangos and more consultants which will produce more inertia, of which there is too much already.

We need to bring together the education and business sectors. Education has been a lifelong interest of mine and I have been active in several institutions of higher education. When I was a student at MIT, I was most impressed by the strong collaboration between business, government-sponsored projects and universities in the United States. Universities get their funding while government projects and industry benefit from first rate research and technology. We in the UK have first-class universities and we need to encourage more collaboration along those lines. I have spoken on this subject many times. Innovative technology will help to build a more dynamic economy that will attract more foreign investment than public relations exercises or cash incentives.

This report has the potential for a dramatic impact on the economic crisis so I strongly endorse it. I hope that the Government act today to pursue its implementation with the same energy, commitment and determination that has been shown by the noble Lord in producing it. I was planning to ask for this debate in my name but, true to his reputation, the noble Lord beat me to it.

Photo of Lord Lea of Crondall Lord Lea of Crondall Labour 5:21 pm, 6th December 2012

My Lords, we are living through a period of the worst economic situation since well before the recession of the 1930s, if one looks at the loss of potential output. We need a massive kick-start. I am 100% in favour of what the noble Lord has done, particularly as he challenges us all in our cultural assumptions. Where will this massive kick-start come from?

We have a catastrophic imbalance and there are so many ways of looking at that imbalance: north-south divide, the City of London versus the sticks, and even the plebs versus the 0.1%. Indeed, someone has described it as a Wimbledon economy. As long as the multinationals have their headquarters here and their wives and husbands-they are gender neutral these days-they can be within spitting distance of Wimbledon, that is fine. Transfer pricing and taxation all comes within that package. So the political radicalism that one wishes to bring to this is a matter of taste.

I start from the position that we need a national investment bank. The City of London has some of the best brains in the country. According to the Office for National Statistics, if value-added equals wages and salaries, then the City of London must be hugely productive and have high value-added because it pays itself a lot. There is something wrong with the measure of the economy in that sense of value added. They are not laying golden eggs; they are laying hand grenades and that is not value added in anyone's book.

My thought is that the City of London ought to provide the best brains, if that is what they are, to make the national investment bank transfer a lot of our savings. Every time you open a newspaper, they are trying to pump £50 billion into long-term loans which do not get spent, but that should make the kick-start. They should work for national or regional investment banks. After all they cannot all wind up as the Archbishop of Canterbury. The heart of the classic Keynesian paradox is that we are spending too little and yet are told every day that we are spending too much. The noble Lord, Lord Skidelsky, rightly continues to remind us of that.

My final point is on Europe. I will set another challenge to the noble Lord, Lord Heseltine. I would like him to look at how much truth there may be in the notion that Europe is getting in the way of industrial policy. I think that there are a lot of myths about this. There are many things that you can do within the rules of the European Community on industrial interventionism, finance and so on. We ought to nail once and for all the idea that we cannot co-operate in Europe and also have an active industrial policy, including a national investment bank. Everyone else is doing it; why cannot we? I echo what my noble friend Lord Mandelson said in that regard.

Photo of Baroness Wilcox Baroness Wilcox Conservative 5:25 pm, 6th December 2012

My Lords, I thank the Minister for allowing me to speak for a moment from personal experience in support of the call from my noble friend Lord Heseltine for empowering the chambers of commerce. In the 1990s, I went to France to take over the largest fish-canning factory in France, on the docks of the port of Boulogne. I took a new landing and processing method from Britain, and some of our people to work with us. I also took a small fleet to add to the very large fleet that there was already in Boulogne-sur-Mer.

As many noble Lords will know, it is a very busy port for ferries. I was catching pelagic fish that had to be processed within hours. In docks such as those there is a high-pressure atmosphere. When I got there, I was amazed to see that the most important building in the docks was the chamber of commerce, because the chamber there has statutory power. It ran-and runs-the docks. It made an enormous difference. It meant that we could go somewhere to fight our cause. The smallest voices tended to get the biggest listen, because the port was always looking for new businesses to come forward in case it lost control of the movement of any of the cargo that it was dealing with.

When I came back to London, Plymouth and Cornwall, I saw our chambers of commerce struggling with volunteer members in that lovely amateur way in which we like to run the world. It made me realise that we cannot do this any longer. Our chambers of commerce must be empowered to promote British business. We must be able to take our place in continental Europe. It would love us to do so. It cannot believe that our chambers of commerce have no power-and neither should we.

Photo of Lord Wood of Anfield Lord Wood of Anfield Shadow Minister without Portfolio (Cabinet Office) 5:27 pm, 6th December 2012

My Lords, the excellent report of the noble Lord, Lord Heseltine, paints a vivid picture of some of the problems that have characterised our economy for decades, such as low productivity, poor translation of basic research into goods and services, and technical skills gaps. However, for me the issue that his report brings most to light is the staggering scale of regional inequalities in growth and income. Britain has bigger disparities between regions than any of our major competitors. It is the most regionally unequal country in the EU. GDP per head in the richest region is nine times greater than that in the poorest region-and the regional gap is widening, not shrinking. Since the 2008 recession began, poorer areas have seen income per head fall twice as quickly as in the wealthiest areas. In London alone, the richest 10% have 273 times the wealth of the poorest 10%. This is not just unfair and corrosive of social solidarity; it is holding our economy back. The impact affects us all.

What can be done about this? There are 89 recommendations in the report, but at their heart are three central principles that the noble Lord, Lord Heseltine, is urging on us all. The first is the indispensable need for a growth strategy. The noble Lord says that this strategy,

"must send a loud and unequivocal message to the country that the Government takes growth seriously and has a credible strategy".

I think that it is fair to say that so far the coalition has sent not so much a loud and unequivocal message as something that has oscillated between a mumble and total silence.

The noble Lord's second principle is the importance of devolving policy responsibility to the regions and localities. His report details a familiar story of excessive centralism and Whitehall silos. Some imagination on getting funding streams both rationalised and decentralised is clearly needed and we are keen to work collaboratively on any proposals with that aim. But what a shame that the bodies that would have been best suited to bear the weight of this agenda, the Regional Development Agencies, were hastily scrapped two years ago in a move that the noble Lord, Lord Heseltine, himself said was a mistake last year.

Yesterday, we heard that the Government are minded to make some progress towards single-pot funding for LEPs, which could be promising. But as the noble Lord, Lord Northbrook, said, for devolved funding to work, the bodies that power is devolved to must have the capacity to do the job properly. I am not convinced that LEPs have this capacity and I am not alone, because concerns about their governance, their ability to leverage funding, whether they have procurement contract management skills, under-representation of SME's and other worries are widespread and feature in the noble Lord's report. Building up this capacity is a crucial precondition for any serious attempt to have a regional growth policy. Will the Minister say what the Government intend to do about that?

Concerns about LEPs seem positively minor compared with the concerns about the Regional Growth Fund. This fund aimed to create 330,000 jobs in its first year. It created 40,000. Two years into its life, only £60 million of the £1.4 billion allocated has reached the front line. The PAC said that its value for money was scandalous. Again, I would like the Minister to tell us how the Government intend to respond to those criticisms.

The final principle, which is at the heart of this report, is the belief that active government, far from being the enemy of enterprise and growth, is indispensable to it. The noble Lord, Lord Heseltine, had the intellectual and political courage to stand up for this idea when it was deeply unfashionable under a Tory Government in the 1980s. My noble friend Lord Mandelson stood up for it in the last few years of the Labour Government, when it was also unfashionable. If there is one legacy of this excellent report for us all, I hope that it is that we rid ourselves of the prejudice that an active industrial strategy is bad economics, and rid ourselves of the error of believing that a laissez-faire approach is good economics.

Photo of Lord Marland Lord Marland The Parliamentary Under-Secretary of State for Business, Innovation and Skills 5:31 pm, 6th December 2012

My Lords, this has been a magnificent debate and I am very grateful to the noble Lord, Lord Heseltine, for initiating it. It must have been wonderful for his grandchildren to witness this great debate.

When the thud of this arrived on my desk and the noble Lord gave us a briefing on it, the words of Caesar came to mind: "Veni, Vidi, Vici". He came, he saw and he conquered, as he produced this excellent document. It is a capable landscape of the issues and problems that we all face. The most important thing is that it has answers. So often we criticise in society today but we do not have answers.

I will restrict my remarks in this very short time to a response to his document on behalf of the Government. I hope that noble Lords will forgive me for not dealing with their individual questions. I am sure that we can deal with those later. It is fair to say that the Government do not agree with everything the noble Lord said-it would be a rare world if we did-but I was much heartened when he said that the Chancellor's words yesterday were as much as he could have hoped for on the report.

Of course, a great deal of what the noble Lord wrote in this report is also happening within government. In particular, he wants to put in a test case in Birmingham where he is looking for a response for the Prime Minister. I have no intention of shooting the Prime Minister's fox on this one because the noble Lord is waiting for him to reply, but I have a slight indication that he may be disposed to that as the right thing to do.

The noble Lord talked about a national growth strategy in this fine document, as did the noble Lords, Lord Wood and Lord Mandelson. It is absolutely fundamental that out of all of this we have a national growth strategy. That is what the Government are working to at the moment. Part of that strategy relies on the chambers. The report says that we should enhance the legal status of the chambers. The chambers are indeed at the heart of a British-led recovery. However, as the noble Lord, Lord Heseltine, remarks, the chambers themselves are in, at best, a pretty feeble state. They need boosting up. We will return in the spring to his comments on that with an official response, but clearly the direction of travel in boosting the chambers, which we are doing abroad at the moment, needs to happen very extensively in this country, because we have a serious breakdown at the moment.

Strategic relationship management was referred to. We have established 38 strategic relationship partnerships with big companies to lead ourselves out of the mess that we are in. Our ambition is to have 150 relationships by 2015. Rationalisation of trade associations is another issue. Having been the Minister for Intellectual Property and been on the receiving end as some 100 associations bombarded me with information in relation to intellectual property, I cannot help but agree with the noble Lord. That has of course to be led by the industry, but this gives a very helpful nudge.

The noble Lord refers to procurement strategy and procurement specialists within government. He is absolutely right. I was one of the five Ministers who were responsible, under Francis Maude, for renegotiating all government contracts and establishing strategic relationships and partnerships with government suppliers. That will be critical, not only for saving costs but in terms of building relationships. The Government's commitment to 25% of government contracts going to small and medium-sized enterprises is absolutely key to helping the SMEs forward.

I am on the Civil Service reform board so am much taken by the reference the noble Lord makes to improving management information within government. We have to improve management information, which has not changed since the noble Lord, Lord Mandelson, was in government. We are still deluged by paper, which, in a modern world, should not be the case. There are communication issues within the Civil Service, but it is working hard to find a way forward with that, as indeed it is in commercialising the Civil Service, which is going to be critical to any reform.

A lot of the meat of what the noble Lord says relates to LEPs. I am glad that he feels that LEPs, working alongside stakeholders, are absolutely key to development through our regions. I do not think there is much argument in this House about that. The Government have committed £1.5 billion of funds which LEPs can apply to borrow. We have established 35 LEPs and a wave of city deals-28 already-which should increase employment by 175,000. A lot of work is going on there.

A number of noble Lords have referenced local government, while the noble Lord, Lord Wolfson, referred to planning and getting a much clearer path in that respect. That is very important, especially coming from a top entrepreneur like the noble Lord, who understands it as well as anybody. It is absolutely fundamental that we simplify some of the methods of local government.

On skills, I am a great fan of the UTCs, and we all pay huge tribute to the noble Lord, Lord Baker, for his part in devising them. I have had the privilege of working with him on a few things to do with UTCs and where they could be. They will be part of the regeneration in various areas. In addition to that, the Government have set up a number of skills training programmes and mentoring programmes, such as Get Mentoring, which has 15,000 mentors throughout the country supplying help to businesses starting up. It is all part of reducing that skills gap, as my noble friend Lord Heseltine suggested.

The noble Earl, Lord Lytton, referred to red tape. The one-in, one-out regulation reduction that we have has already saved £850 million of regulation costs to businesses. We must build on that, and we support the recommendations that the noble Lord has made.

In addition, the Government have adopted several key initiatives. We have set up the Green Investment Bank with £3 billion of funding. We have announced a business bank with £1 billion of new funding. We have set up catapults with an investment of £200 million to transform some of the new advanced technologies. We have set up the Business Finance Partnership. We have the Enterprise Capital Funds and the Funding for Lending scheme, as well as a whole raft of infrastructure projects that the Chancellor has announced not only recently but in the past two years. So the Government are trying their very best to force business and industry to respond to the challenges that the economy now faces.

Strategically, we have identified some of the economies that we want to back, such as advanced manufacturing in aerospace, motor and science. The Chancellor announced great support for science and technology yesterday in the Autumn Statement. We also want to support knowledge-intensive industries such as education, IT and business services-all key things in which we have tremendous skills. In addition, we want to enable some of the construction and energy companies to start rebuilding infrastructure.

At the heart of this is trade. Unless we start to trade as a nation, we will not have growth. Our initiatives for trade include investing more funds in UKTI, a department that I am proud to be involved with. We have reformed UKTI as a much more outward-facing unit than it has been. The Prime Minister has led several big trade delegations; there have been more than 280 missions this year alone through UKTI. We have had Export Week, we have had ExploreExport, and as of late I am pleased to have taken on the chairmanship of the Prime Minister's trade envoys.

If there is one thing that I think sums up this debate and the admirable concerns of all noble Lords in this Chamber, which were echoed by the noble Lord, it is the notion that we are definitely all in this together. Through the trade envoys-which involve Labour, Liberal Democrat and Conservative Peers-and through our business ambassadors, we will be able to take the trade out to the world as UK plc. That is how we will get out of this mess-by all being in it together. I admire the words that the noble Lord used, because they are the icing on the cake on what I think is an excellent document and a good reference point for our Government.

House adjourned at 5.42 pm.