Queen's Speech — Debate (3rd Day)

– in the House of Lords at 3:09 pm on 13th May 2013.

Alert me about debates like this

Moved on Wednesday 8 May by Lord Lang of Monkton

That an humble Address be presented to Her Majesty as follows:

"Most Gracious Sovereign-We, Your Majesty's most dutiful and loyal subjects, the Lords Spiritual and Temporal in Parliament assembled, beg leave to thank Your Majesty for the most gracious Speech which Your Majesty has addressed to both Houses of Parliament".

Photo of Lord Deighton Lord Deighton The Commercial Secretary to the Treasury 3:10 pm, 13th May 2013

My Lords, it is a privilege to open this debate. We will be considering the Government's priorities for business, the economy, local government and transport for the year ahead. I am particularly looking forward to the maiden speech of the noble Baroness, Lady Lane-Fox of Soho. She brings valuable business expertise, inspiration to our entrepreneurs and a deep knowledge of how to make the most of technology to revolutionise business and our daily lives. She is a most welcome addition to this House.

The measures in Her Majesty's gracious Speech advance the Government's strategy to position this country for success in the global economy. This strategy and its component parts are clear and have been consistently articulated and pursued. Our priority now must be the effective implementation of the policies which have been introduced, delivering meaningful improvements to our economic performance. The foundation of this strategy remains the steady restoration of our public finances from their precarious state in 2010. Although slower than anticipated growth, caused principally by problems in the eurozone, has necessarily extended the period of fiscal consolidation, the deficit has already been cut by a third. This has established credibility in the financial markets and keeps our borrowing costs at record low levels. This commitment to fiscal responsibility, reinforced by an activist monetary policy and the reform of the banking system, is the base on which we are building the supply side measures, such as establishing the lowest corporation tax rate in the G20, aimed at making the UK a great place to do business.

Last Thursday, we hosted a conference in London which attracted senior business people and investors from around the world. The positive attitude to the UK's business environment was overwhelming and represents a significant advantage to us in the global race, which we can exploit but cannot take for granted. Our economy faces many challenges, but progress is promising in a number of areas: more than a million and a quarter private sector jobs have been created since 2010, with the OBR projecting employment to rise in every year of its forecast. We have also seen our exports to some of the large emerging markets increasing strongly, a trend that we must accelerate to reduce our relative exposure to a slower growing Europe.

I turn to some of the specific initiatives driving this agenda forward. Following the Financial Services Act, the Banking Reform Bill, which was introduced in the previous Session, will enter this House for consideration before the Summer Recess. This Bill is fundamental to the Government's commitment to pass the necessary legislation before the end of this Parliament to restore the financial system to stability. Only then can it effectively support growth in the economy. The Bill implements the recommendations of the Independent Commission on Banking, ring-fencing retail banking services on which households depend from more volatile wholesale activities.

In addition to strengthening our financial infrastructure, first-class economic infrastructure is a necessary condition for UK business to achieve global competitiveness. Our intention is to improve our approach to planning for, financing and delivering this critical infrastructure as we go through a significant period of renewal. This is very well illustrated by our ambitious programme to deliver transport infrastructure. We all know that good transport is essential to drive sustainable economic growth and prosperity. Efficient transport systems help UK businesses to be more productive by making journeys quicker and more reliable, supporting UK exports, enabling a flexible workforce, attracting inward investment and rebalancing our economy by generating development opportunities throughout the country.

In many cases, crucial transport investments are needed now to unlock growth and support the supply chain. That is why we are pioneering new ways to deliver infrastructure projects faster in all parts of the country, from essential highway maintenance that keeps traffic moving, to targeted improvements to our networks, to transformational investments for future generations. We will reduce the time it takes to plan and deliver new roads by up to a half and we are piloting a new delivery model for upgrades to the M1, M3 and M6. We have also focused our short-term investment plans on projects that will deliver benefits quickly, such as addressing pinch points and extending managed motorways.

Her Majesty's gracious Speech announced the paving Bill and High Speed 2 hybrid Bill. High-speed rail is an engine for growth that will help drive regional regeneration, secure economic prosperity across Britain and support tens of thousands of jobs. We should not underestimate the scale of transformation that rail infrastructure is providing. Crossrail is the largest infrastructure project of its kind in Europe-it is going on at the moment-and is one of the largest single infrastructure investments undertaken in the UK. The high-speed rail link will be the first new line that we have built north of London for over 120 years -that is why we need it-and will boost our rail capacity, benefiting many throughout the country. Network Rail's current investment in our railway infrastructure is the biggest since Victorian times. Introducing a paving Bill will allow Parliament to make a clear commitment to high speed rail. Crucially, the Bill will also give us the spending powers to progress the detailed design work for the scheme. We want to get this project moving and delivered at the earliest opportunity and this Bill will help us do just that.

It is not only railway lines that are being transformed but a concerted regeneration of major stations is currently under way. Two examples of this are, the £550 million part-privately funded redevelopment of Birmingham New Street that will stimulate the physical regeneration of the surrounding area, and the £850 million reconstruction of Reading station, due for completion in 2015, which will add five new platforms.

As to local government, we believe there is a significant opportunity to deliver our growth agenda more effectively by supporting the initiatives, capabilities and energy that exist in our regions and cities. Local government has a key role to play in local economic development. By implementing many of the recommendations in the review by my noble friend Lord Heseltine, the Government are handing power to the regions. We are committed to creating a single local growth fund for the key areas of skills, housing and transport. The final size of the fund will be set out at the spending round next month.

We have brought in local enterprise partnerships, with public and private participation, to co-ordinate regional development and enabled cities to take control of their own local economies through City Deals. Thus far, City Deals have been implemented in eight major cities, with 20 more to be agreed this year. Now we are going further by continuing the process of devolving resources away from Whitehall towards local leaders who know what is best for their areas. We are introducing a localism Bill and the general power of competence. The Bill will increase local accountability by empowering local people to hold councils and local bodies to account for local spending decisions and ensure that they deliver effective value for money. This is the final step in a programme of reforms to local audit arrangements that will close the audit commission and deliver an estimated £1.2 billion of savings over 10 years.

We are also committed to reforming the planning system to help achieve sustainable development. We have simplified planning and provided incentives for communities to support development through neighbourhood plans and the community infrastructure levy. The primary legislation required to enact this programme is in place, and we are now streamlining the planning application process, including by broadening permitted development rights by exploring opportunities to create new housing from shops and agricultural buildings.

Housing is central to our plans for economic growth but, more importantly, it is essential to the hopes and dreams of people across the country. Our aim is to help people achieve their aspiration to live in a home that gives them security. The Government are committed to addressing housing shortages through a major increase in the supply of new homes where they are needed and wanted. This is why the Government have committed to invest over £11 billion in housing programmes during this spending review period. It is why, to date, the Government have sold enough surplus public sector land to deliver 45,000 new homes. With our new guarantees programme, we now aim to deliver 200,000 new affordable homes by 2016-17 with over £20 billion investment. It is also why we are providing a package of support for councils and developers to help accelerate and unblock locally led large housing sites. In addition, we are of course making it easier to obtain a mortgage through our Help to Buy scheme.

Direct support for business is a key part of our plan to improve the UK's competitive performance: this takes the form of tax incentives, progressive legislation, access to finance and other forms of intervention with a particular focus on nurturing smaller businesses. The National Insurance Contributions Bill will entitle businesses and charities to a £2,000 employment allowance each year. By reducing the costs of employment, this will support small businesses aspiring to grow. More than 90% of this benefit will go to small businesses with fewer than 50 employees. This Bill also builds on the robust stance that this Government are taking in tackling all forms of tax and NICs avoidance. Our approach is very simple: in return for offering a highly competitive tax system, we expect everyone to pay their taxes. The general anti-abuse rule reinforces this principle and will deter those who market and participate in artificial schemes. In addition, we continue to lead international efforts to develop a more effective cross-border tax framework.

The Government are also working hard to help UK businesses to increase their exports. We have supported 32,000 UK exporters in 2012-13, up from 25,000 the previous year. This has helped UK exporters to win billions of pounds of high-value export contracts, such as £150 million for an oil industry project in Brazil and over £78 million of new business for UK rail companies in Singapore. However, we want to do more, which is why we have committed to increase total annual UK exports from £488 billion in 2011 to a £1 trillion target by 2020. We plan to deliver this partly through increasing the number of UK SMEs that export from one in five to one in four.

If those SMEs are to grow, they need better access to finance. That is why we have set up the business bank with £1 billion of funding. Of the £1 billion, the Government will invest £300 million alongside private investors over the next two years in new channels, such as non-bank lenders.

We have also set up the Green Investment Bank to stimulate the additional investment required to finance the UK's transition to a greener economy. In its first six months of operation, the bank has committed more than £635 million, including investments in each of its four priority sectors: waste, offshore wind, non-domestic energy efficiency and the Green Deal.

Beyond these schemes, we have implemented a package of credit-easing measures to improve the supply of affordable credit to SMEs across the country. For example, the Funding for Lending scheme was recently extended with incentives heavily skewed towards SME lending support. The £1.2 billion Business Finance Partnership was established to stimulate the development of alternatives to bank finance.

The Government are also supporting SMEs which lack a sufficient track record or collateral to access bank finance by providing government loan guarantees. Since May 2010, more than 10,500 SMEs have been offered enterprise finance guarantee loans with a total value in excess of £1 billion.

Her Majesty's gracious Speech announced legislation that will further support SMEs in the design sector to drive growth through innovation by facilitating the protection of their intellectual property. The Intellectual Property Bill will implement the recommendations of the Hargreaves review. One of its key elements is the unified patent court agreement, which will make it possible for British businesses to protect their inventions across 25 countries in a single application. That could bring direct savings to UK businesses of up to £40 million per annum in translation costs alone.

The Department for Business, Innovation and Skills also plans to modernise and simplify our consumer rights framework through introducing a consumer rights Bill during this Session. In particular, this Bill will include important new protections for consumers buying digital content such as music downloads or software where legal protection is currently unclear. Clarity in this area should also reduce the regulatory burdens for business, with the aim of improving market performance.

In summary, I believe that our future prosperity depends on our ability to be competitive in a fast-changing world. That means competitive in terms of hosting businesses that can take on the world and win, and competitive in terms of attracting highly mobile capital and investment. This Government are determined to create the best possible financial and economic conditions for the UK to succeed in this race. First, we have to demonstrate that we can deal with the deficit-it is impossible to produce sustained growth if the public finances are not under control. Secondly, we need to complete our work in fixing the financial system so that it is able to sustain growth in the economy. Thirdly, we must implement the reforms necessary to improve our competitiveness. These range from the support we are providing for SMEs to investments in infrastructure and housing and to the devolution of important local spending responsibilities. I believe that this is the right recipe to convert from our current phase of economic healing to one of sustained recovery and the right recipe to unlock the aspirations of our nation by backing people who want to work and get on.

Photo of Lord Eatwell Lord Eatwell Shadow Spokesperson (Treasury) 3:24 pm, 13th May 2013

My Lords, I am most grateful to the noble Lord, Lord Deighton, for introducing this part of the debate on the gracious Speech. If only all the good news that he spoke of had some connection with economic reality.

Like all noble Lords, I look forward to the maiden speech of the noble Baroness, Lady Lane-Fox. Many noble Lords may not know that she is an accomplished actress. It was surely no accident that one of her most successful roles was as Miranda in "The Tempest", since Miranda famously hails:

"O brave new world, That has such people in't!".

The noble Baroness has been a major force in guiding this country into that brave new world of information technology and is one of the most remarkable people in it. We are all delighted to see her in this House.

The whole House is keenly aware that the central issue facing Britain today is economic failure: no growth for two years, output still 2.5% below the level of four years ago, 1 million young people unemployed, productivity well below the level of 2008, the banking system still unreformed, and a government deficit that has not fallen significantly for two years-the worst economic performance of any G7 economy other than Italy.

Given the seriousness of our economic problems, it has been widely remarked upon that there are no Treasury measures in the gracious Speech other than the welcome national insurance contributions Bill and the banking Bill carried over from the previous Session. However, there should be no surprise at this inaction. It is the very essence of the Government's strategy that the Treasury has a very limited role other than the maintenance of austerity. Activism is to be left to others. That is made abundantly clear in the recent most valuable outline of the Government's economic policy that accompanied the Chancellor's letter defining the remit of the Financial Policy Committee. It was echoed by the noble Lord, Lord Deighton, today, but he left out one bit. The letter declares:

"The Government's economic strategy consists of four key pillars: monetary activism and credit easing, stimulating demand, maintaining price stability and supporting the flow of credit in the economy".

All that is the responsibility of the Bank of England. The letter continues with,

"deficit reduction, returning the public finances to a sustainable position and ensuring ... fiscal credibility"- austerity-

"reform of the financial system, improving the regulatory framework to reduce risks to the taxpayer and build the resilience of the system", which refers to the banking Bill, of which there will be more later,

"and a comprehensive package of structural reforms, rebalancing and strengthening the economy for the future, including an ambitious housing package and programme of infrastructure investment".

All this is predominantly farmed out to other departments.

Those are the pillars on which the Government's entire strategy is built. It is worth considering just how sound these pillars really are. First, on monetary activism, there certainly has been plenty of activity-from quantitative easing and Merlin to the Funding for Lending scheme and now Funding for Lending mark 2. The difficulty with all that activism is that when there is a lack of demand, it is very difficult for monetary policy to achieve any traction, so QE2 follows QE1 and there is no noticeable effect on lending. Funding for lending offers banks cheap funds to lend at highly profitable rates, but there is no noticeable increase in lending. Now we have Funding for Lending 2, and without any prospect of sustained growth of demand the result will be the same-no noticeable increase in lending. It is no wonder that in his letter defining its remit, the Chancellor appeals rather plaintively that the FPC,

"takes into account, and gives due weight to, the impact of its actions on the near-term economic recovery".

In other words, "give me financial stability, but not yet".

What all that activism has achieved is a serious distortion of the monetary system. The rock-bottom interest rates of which the Chancellor is so proud have put pension funds under severe strain, and pensioners have no chance of buying a worthwhile annuity. The excess liquidity, unused for real investment, is funding a bubble in the stock market that bears no relation to Britain's real economic condition. The conclusion is that monetary activism may help growth a little bit but fundamentally does not work. That is one pillar gone.

Of the next pillar, reform of the banking system, the key reform is of course the banking Bill. But which banking Bill, the watered-down version of the Vickers proposals favoured by the Treasury or the beefed-up banking Bill proposed by the Parliamentary Commission on Banking Standards? The banking Bill has already passed through Committee in another place, where any amendments related to the serious criticisms of the Bill in the Parliamentary Commission on Banking Standards' report, published on 11 March, were resolutely voted down by the Government.

A further report by the commission is due at some time in the next four weeks or so. Will the Minister tell the House how the Government intend to deal with the arguments of these two reports? Will the Government recommit the Bill in another place? If not, how are the commission's proposals to be dealt with in this House, or has the lobbying by the banks secured the Government's commitment to ignore the commission's arguments? Conclusion: the banking reform Bill is decidedly shaky.

I turn to the,

"ambitious housing package and programme of infrastructure investment", which the Chancellor claims are at the heart of his comprehensive package of structural reforms. These were referred to by the noble Lord, Lord Deighton. We certainly need an ambitious housing package. No peacetime Government since the 1920s have presided over fewer housing completions than this Government have in the past two years. The situation is getting worse. Housing starts fell by 11% last year to below 100,000, while house prices, particularly in London and the south-east, spiralled out of the reach of young people attempting to buy a first home.

So what do the Government do? Unbelievably, they increase the affordable homes guarantee programme that applies to the existing housing stock as well as new build, giving their own special twist to the housing price spiral. This British version of Fannie Mae should be focused on new build. That is what is needed. Even this bit of economic activism on housing is a bit too much for the Treasury's do-nothing sensibilities. The decision whether the guarantee scheme is to continue in three years' time is to be handed over to unelected officials at the Bank of England.

What of the programme of infrastructure investment? We were told in the Budget that the Government are planning a £3 billion boost in two years' time. I ask the Minister why, when infrastructure projects are notoriously slow to get started, work cannot begin now. The Government are committed to borrowing the money in two years' time, so why not borrow it today? Is the postponement not entirely due to the Government's attempt to massage a falling trend in the deficit, however slight?

As to the railways, the welcome paving legislation for HS2 proposed in the gracious Speech heralds a change of heart from the more than £1.25 billion cut in railway investment in the last spending review. The planned increased of £9.2 billion for five years from next year is clearly needed and welcome, but will the Minister tell us how it is to be funded? How much of it is to be paid for by an increase in Network Rail's debt and how much by yet more inflation-busting increases in rail fares? Conclusion: the infrastructure pillar may be in place at some time or other in the future but certainly not today.

Finally, I turn to the fourth pillar of the Government's economic strategy: austerity, to ensure that,

"fiscal credibility underpins low long-term interest rates".

As all noble Lords will be well aware, there is a growing international consensus among all serious commentators on economic policy that austerity strategies have failed. The academic work purported to validate the austerity policy has been demonstrated to be seriously flawed. As for Britain, Olivier Blanchard, the chief economist of the IMF, has said that the country is "playing with fire" if it allows stagnation to continue.

As your Lordships are well aware, in 2010 the coalition's austerity transformed Britain's growth rate from a steady 2% a year into an equally steady 0% a year, with little prospect of returning to 2% in the near future. The level of output remains stubbornly below the level of output obtained in 2008, while other countries have at least recovered from the worst ravages of the global financial crisis. What is the Government's justification for clinging to this failed doctrine? The Treasury argues over and over again that any change to the strategy it has followed for the past three years will damage the Government's credibility in the financial markets, and that the subsequent increase in long-term interest rates would outweigh any benefits from cutting taxes or increasing spending. Since this is the only shred of justification for sticking to the failed austerity policy, it is worth examining for a moment.

First, with whom are the Government seeking credibility? The answer is: the markets. Who are they? What they are not is some single malevolent force tying George Osborne's hands behind his back as he pleads to be set free to stimulate growth. In fact, the markets comprise millions of individual traders who pore over their computer screens trying to guess how the markets will move in the next month, week or even the next few seconds, and trying to make a secure return. In other words, they are trying to guess what everyone else in the market will do in response, for example, to announcements by firms or Governments, to the release of economic data or to research reports. This is not easy, but it is made much easier if an authoritative source makes statements that every trader believes all the other traders will accept. We have had a striking example of this in the eurozone, where Mario Draghi's statement that the ECB would do everything necessary to defend the euro convinced each trader that all the other traders would take Draghi at his word. Accordingly, the markets all moved together in exactly the way in which Mr Draghi wanted. Authoritative statements can move markets, so if all the traders are convinced that any relaxation of austerity will result in higher interest rates in the UK, it will.

Credibility is potentially a vice tightening its grip around the heart of the British economy, but what do the clowns at the Treasury do about it? They do everything they can to reinforce those traders' beliefs. They turn potential into reality and they cry from the rooftops that the markets will tighten the austerity vice because it is the only justification they have left of a failed policy, and the danger for Britain is that anyone will believe them. At the same time, they falsify the arguments for abandoning austerity. No one is expecting George Osborne to take himself off to the Tower of London, crying out to the world, "I was wrong"-although when thinking about it, that is not quite such a bad idea. What we all hope for is a steady and carefully staged change of emphasis. Bring forward that increase in infrastructure spending; why postpone it for two years? A British investment added to a strengthened banking Bill, a jobs guarantee for the long-term unemployed, a real new-build housing programme, and, to improve the existing housing stock, a reduction in VAT on home repairs, maintenance and improvements-none of these requires a fanfare announcement; all they need is real activism from a do-nothing Treasury.

What is left of the four pillars?

Photo of Lord Forsyth of Drumlean Lord Forsyth of Drumlean Conservative

My Lords, I have much sympathy with what the noble Lord says about clarity. Can he tell us by how much the Opposition would wish to increase borrowing in order to deliver the programme he has just outlined?

Photo of Lord Eatwell Lord Eatwell Shadow Spokesperson (Treasury)

Gross borrowing could be increased so that net borrowing would fall. That is our strategy.

Again, what is left of these four pillars is something that the Opposition perhaps do not understand. The noble Lord, Lord Deighton, who has a good economics degree, understands it very well. What is left of the four pillars of the Government's strategy? Monetary activism that does not work, a banking Bill that fails to reform the banks in the way that Britain needs, an infrastructure policy that recedes into the distant future, and a housing policy that does precious little for the new build that homebuyers and the construction industry desperately need. Last, but by no means least, there is an austerity policy that fails to cut the deficit but is very successful in cutting real incomes. Those are the four pillars, but what this Queen's Speech reveals is that the Government's economic policy does not have a leg to stand on.

Photo of Lord Empey Lord Empey UUP 3:40 pm, 13th May 2013

My Lords, every time the economy and public spending are mentioned, the word "growth" usually accompanies them. Today is no exception. People say that what we need are policies for growth, as this is the only way to close the deficit and reduce our borrowing. It is easy to see why this is a popular idea. When one looks at the graph of spending to borrowing, a rise in tax revenues brought about by an increase in economic activity would, over time, solve our problems-or would it? When we were enjoying economic growth, we increased our spending. We did not use the increased tax revenues to pay down our debt, so when the crisis of 2007-08 occurred, we were caught in a trap from which we have not escaped. Who said we are entitled to expect ongoing growth in our economy? Growth will occur only if we remain competitive. We no longer provide sufficient goods and services at prices that the world wants to pay. This is not surprising, for a number of reasons.

There is a deep-seated culture in this country that has not given a parity of esteem to those in business who have led the way in innovation and exports. In competitor countries such as Germany, those who decide to become engineers, for example, are highly regarded and respected. Vocational education in Germany is also regarded with higher esteem than it is in this country and not seen as what a student does if they have failed in the academic pathway, as is often the case here. This is unfortunate, because it permeates our education and governmental apparatus from top to bottom. There is a form of snobbery which perversely values those professions and skill sets that spend taxpayers' money over those professions and skill sets that create it.

I had the privilege of being a member of the ad hoc Select Committee of your Lordships' House which looked at SMEs and exports. We found a large number of potentially highly successful small businesses out there which are really trying-some are succeeding-to grow the export potential of this country. There is no lack of potential but there are failings which frustrated those of us on the committee and which we want to air when the report is debated later in this Session.

However, it is clear that businesses in this country are having to pass on to customers the overwhelming cost burden of a welfare state that we simply cannot sustain at present levels unless we have a larger economy. I come from a region which benefits greatly from the welfare state and the financial transfers from Westminster. As an elected representative there for more than 25 years, I know something of the plight and the dependence of many constituents who rely on having access to various benefits. To be blunt, this situation cannot go on as it is. When we were discussing the Welfare Reform Bill and the health legislation, many of your Lordships pointed to the hardship some of these changes would cause for individuals in the community. There is no doubt that this is true. What was lacking from these sincere expressions of concern was any apparent grasp of the dire long-term consequences of the UK's continuing economic weakness for the future of the welfare state. Little emphasis was placed on how the wealth is to be created to produce the revenues to spend on so many deserving cases.

I will suggest a few steps we might take, to which the Minister, in winding up, will perhaps respond. I feel that the time has come to place a general duty on all departments to have regard to the economic well-being of this country. I also feel that all civil servants, irrespective of which department they currently serve in, should, as part of their terms and conditions, be required to have a general duty to look at the consequences of their actions on the economy. We need to review the priority given to wealth creation in our education system, which needs to run right through from primary to tertiary education. It is simply not happening on a large enough scale.

Turning to the Treasury estimates, there seems to be a muddled message in some of these decisions. In recent years, Governments of all parties have recognised the valuable role of our foreign service in promoting exports and trade abroad. With a meagre budget of £2 billion, the FCO is expected to promote our diplomatic and commercial interests around the world, yet the Department for International Development will have £10.7 billion to spend next year. Given recent diplomatic fallout from the decision to cut £19 million of aid to South Africa and a similar row last year over aid to India, who looks at the downstream commercial consequences of these decisions? Is there no way of handling things to avoid such bad publicity and possible damage to our long-term commercial interests?

This is one reason why I repeat my call for all departments to have to look at the economic fallout of their decisions. Perhaps there needs to be a form of economic proofing of departmental decisions. It will not be lost on many that with the international development budget growing while the defence budget is falling, there is a need for a review of how best to ensure that priority is given to the UK's long-term national interests in these spending areas.

Since I came to your Lordships' House, I have been struck by the division that still exists between those of your Lordships who can be regarded as Europhiles and many who are seen as Eurosceptics. Perhaps I will add another category: Eurorealists. The arguments of the 1970s are over. The UK took a decision to join the then EEC and we have seen that economic community change into a rival to nation states. I have no doubt that this was always the intention of the EU founding fathers, but it was most certainly not the intention of the British people. Ironically, many of those who are now sounding alarm bells about the growing appetite of Brussels for its own statehood supported the necessary legislative and treaty changes that have brought about the present situation.

As we are talking about the g-word-growth-today, it is obvious that significant business growth is currently available outside the EU. Indeed, parts of the EU face years of contraction and not a small risk of political instability as a result of the politics-rather than the economics-of Europe. The euro has been a disaster for southern Europe: there is 64% youth unemployment in Greece and 57% in Spain. For how long can this go on?

The EU is still a huge consumer market, to which the UK sends 40% of its exports, but it is not sufficient to generate the growth that we need. While there is no incompatibility between trading with the EU and with the rest of the world-including, I hope, a growth in our trade with the Commonwealth-the fact remains that Europe is making itself progressively less competitive with the rest of the world and we are powerless to stop this on our own.

I do not relish another four years-or maybe more-of these pro- and anti-European arguments. While at all times acting in our own interests, we must strive to shorten this period of uncertainty. I am not sure that a referendum or referenda can wait until 2017. I support the concept of a last-ditch attempt to renegotiate the terms of our membership of the EU. But we must remember that Brussels has only done and is only doing what we, as an independent nation state, through this Parliament, agreed that it should do. There is no point is blaming Brussels or the Commission for their actions; the blame lies in this House and the other place. We agreed to the free movement of labour within and between member states; that means that we agreed that the workforce in a country such as Bulgaria, with a minimum wage of 83p per hour, was free to seek work in this country. While it was never envisaged that the diversity of economies in Europe would be so wide, we had the opportunity to negotiate at the time of the various treaties, but we failed to do so.

We are in a pickle of our own making and it is in the interests of our future economic well-being to ensure as speedy a resolution to the Europe question as possible. No good will come of endless delay and procrastination.

Photo of The Bishop of Birmingham The Bishop of Birmingham Bishop 3:49 pm, 13th May 2013

My Lords, I am grateful for what we have heard today of Her Majesty's Government's aspirations for a stronger economy and a fairer society, because those two are held together at the head of the gracious Speech. We aspire to them ourselves, even as far north as Birmingham.

It is on the holding-together of these two laudable elements and the outworking of their detail that we must focus in the local economy day by day, person by person, job by job. There are, as we have heard, murmurs of good news. Foreign direct investment in greater Birmingham in 2012 rose by 52%, bringing in 2,200 new jobs and more than £174 million of new investment, four-fifths of which was within the sectors targeted by Business Birmingham-they are in some of the exciting areas about which we may hear later: IT, food and drink, life sciences, digital media, professional and financial services and advanced engineering. It was also good to hear about infrastructure developments. I recommend that any of your Lordships who visit Birmingham should do so via New Street station, which is already much improved. The airport runway is also being extended so that we can travel further. In real economics, we need to persuade air carriers to use our regional airports. Connecting up the macro and the micro is significant. High Speed 2 is welcome, particularly when the right compensation deals are agreed. Of course-to bring culture into the argument-Birmingham has one of the finest new libraries in the whole of Europe, to be opened in September this year. Universities are investing and so are hospitals.

Building on this apparent success in the regions is based on a recognition that well resourced employment is at the heart of a stronger economy and a fairer society. I was glad to hear the Minister mention local enterprise partnerships, inspired by the No Stone Unturned report, but I urge clarity on how much money is going to be attached to the now-published strategic growth plans that our region and, I am sure, other regions have, and when it will be forthcoming. It is in the further connecting-up of the macroeconomic and the day-by-day experience of ordinary people that we need to persuade ourselves here in Westminster that it is possible to delegate power and responsibility to talented and enthusiastic workers, businesses and institutions in our regions.

We will see a steady rise in the economy when we see a steady rise in the active participation in the economy of ordinary workers, people who want to use their skills and talents and to engage them in any way that is on offer to them. These macroeconomic policies will be tested on whether people have hope and changed lives in their local areas.

Perhaps I may drill down a little into practical matters. Those of us on this Bench are supposed to stick to principles, but I find that principles are best illustrated by hard decisions, particularly where money is concerned. In the wide-ranging Birmingham social inclusion White Paper, published in March this year and accepted by local businesses and politicians alike, economic policies are seen as being at the heart of changing society, particularly for those who are excluded at the moment. Let me mention just four areas which are of economic interest, and I would be very grateful for a response from the Government.

The first is removing the corrosion of youth unemployment. Birmingham has published, as I am sure have many other regions, commissions and strategies to deal with the appalling waste of young talent coming out from school through their not being able to engage in the economy. I encourage the Government to have even more flexibility in apprenticeship schemes and enabling businesses to take on more than just one person at a time. I recommend proper devolution of the implementation of those schemes through youth contracts to regions such as ours.

The second is the abolition of the spectre of unmanageable debt. That connects with what we have heard already this afternoon to do with banking. I focus on asking the Government to support credit unions even more strongly. That quieter, softer area of the financial world may not produce huge profits but can be profitable and can enable the 9 million people in this country who do not have access to bank accounts to manage their affairs in a way which will enable them to be contributors rather than dependants. But the Government must deal face-to-face with the appalling business of the poverty premium, which means that the poorest people in the country pay the most for the ordinary goods that we take for granted in our houses because they do not have access to finance and have not been able to save.

Thirdly, we have heard and will hear more in this Parliament about the banking system. I am delighted that my noble and most reverend friend the Archbishop is here, but I speak in your Lordships' House today because he cannot be here tonight, he has church duties to perform. We have heard about the support for small and medium-sized enterprises and the £300 million that has been offered. I urge that to happen quickly in a trustworthy manner so that those employers, who form the majority of the business employers in the country, can have confidence in their ability to take on new workers and to develop their businesses.

Finally, I address local government more directly and the more widespread and long-distance issue, which is fundamentally economic but also social. That is continuing to promote cross-cultural friendship. I hope that your Lordships will forgive me for mentioning this in an economic debate, but it is economic because the Government have been supporting it through a Near Neighbours programme. Although modest in money terms, it has already reached out in our area to 120 projects, spending just under £400,000. The basic requirement is that people of different cultures and faiths meet together to engage in community activity. That underlies a successful and healthy economy-a strong economy, but also a fairer society. I trust that all those commitments will be given forensic attention in the next period.

The phrase that holds together a stronger economy and a fairer society that has been used lately in our debates is social cohesion. Your Lordships will know from your deep knowledge that it was first used by a former Archbishop of Canterbury, William Temple, in his Scott Holland lecture of 1928. In it, he said that all can flourish when, by the exercise of principles of freedom, fellowship and service, faith, family, church, trade and professional associations, businesses and voluntary movements working together can achieve what any nation wants: peace and prosperity. I urge the Government to attend to those details of ordinary lives so that people can immediately participate in a country that may again be one of the greatest in the world. In the words of someone whom William Temple heard just before he died, "Give us the tools in the regions and we will finish the job".

Photo of Lord Forsyth of Drumlean Lord Forsyth of Drumlean Conservative 3:59 pm, 13th May 2013

My Lords, it is a great pleasure to follow the right reverend Prelate, who is absolutely right to warn us of the considerable dangers of unmanageable debt both in households-private debt-and in government. We are heading for a doubling of our national debt by the end of this Parliament to about £1.5 trillion to £1.6 trillion. For the life of me, I do not know how it is possible to pay back that kind of money. We are passing on to the next generation a terrific burden, one that is tough enough already with interest rates that are well below historical norms. They will certainly go up, and with them will go the cost and burden of servicing the debt. I have considerable respect for the noble Lord, Lord Eatwell, but when I asked him by how much the Opposition wish to increase that debt still further, he did not really give me an answer. He told me that the Opposition did not understand this. I think that he meant the Government, but he may have been listening to the interview that his leader gave on the "Today" programme, which certainly gave the impression that the Opposition did not understand it.

Photo of Lord Eatwell Lord Eatwell Shadow Spokesperson (Treasury)

I am grateful to the noble Lord for correcting any verbal infelicities that may have occurred. I wonder if he has noticed that the significant government cuts in expenditure have not resulted in a falling deficit for the past two years. In the same way, an expenditure programme targeted on worthwhile activities that stimulated a flow of tax returns would result in a reduction in the deficit. One other small point: when he says that there is a burden on our children from this debt, I wonder if he ever thinks about who we owe the debt to. The answer is that one group of our children owes it to another group of our children. Collectively, there is no burden.

Photo of Lord Forsyth of Drumlean Lord Forsyth of Drumlean Conservative

That is all right, then; we will just write it off, there will be no problem and the world will continue to treat the pound in the same way. One of the extraordinary things is that although the pound has sunk significantly on the markets relative to other currencies, we are still not able to increase our exports and improve our productivity. As the noble Lord, Lord Empey, said, the key to this is being able to sell goods and services to a global marketplace competitively. Unless we can increase our revenue, we will not pay back the debt or, more importantly, provide the public services that the right reverend Prelate rightly emphasised as being of importance. The issue for us is how we do that.

The gracious Speech is a bit disappointing in the vision stakes. It is a list of Bills. One of the things that I have learnt in almost 30 years of being associated with Parliament is that legislation is seldom the answer to any problem, and usually creates considerably more. The idea that we should address every problem by thinking of a Bill or a new regulation comes out of this gracious Speech. To be fair, many people have said that they thought that the Speech was a bit thin, and in some regards it was. Perhaps it was modesty on the part of my noble friend, but I do not know why Her Majesty did not refer in the gracious Speech to the fantastic success that we had last summer with the Olympics, when Britain was advertised across the world as a competitive, successful and enterprising nation that was proud of its young people. My noble friend Lord Deighton played his part in ensuring that the Games were an enormous success, along with my noble friends Lord Coe and Lord Moynihan. Perhaps we could have done with a touch of levity in the Speech: I was itching to know whether Her Majesty had any further plans for appearing in Bond movies, for example.

I think that we have to go back to 1946 for the last time that there was a proposal to amend a Motion on the gracious Speech, which is happening in the other place. That amendment arises, again, because of the issues that the noble Lord, Lord Empey, pointed to-because Banquo's ghost continues to haunt us. I cannot believe that it is now so many years since we discussed the Maastricht treaty yet I find myself mouthing the same arguments now to colleagues as appeared then.

I want to touch on the central themes of the gracious Speech. We have to improve Britain's economic competitiveness and get Britain working and our economy growing again by investment in infrastructure.

I have to say to my noble friend Lord Deighton, who is a very clever chap, that whatever one's views on the high-speed train-I have views that I had better not repeat because I want to be supportive of the Government-the immediate need is for jobs now. In roads and transport, we want people out fixing the holes in the road that are there today. We need more activity now in order to create employment. It is no good dreaming up fantastic, high-profile, wonderful schemes that will take place in 25 years' time. We may not be around to see the benefits of those projects.

Similarly, there is talk of wanting another Bill to reduce regulation. Why do you need legislation to get rid of legislation? I should declare an interest as chairman of a small business that my daughter runs selling handbags-which are very good, by the way. Small businesses are not allowed any rates relief while they are setting up and before they start trading. Rates are a huge burden, particularly on the retail sector. They are competing with companies, such as Amazon, that pay no corporation tax or rates because, thanks to the splendid efforts of many entrepreneurs-not least the noble Baroness, Lady Lane-Fox, whose speech we very much look forward to hearing this afternoon-they are using cyberspace and are therefore able to escape taxation. Their competitors on the high street in bricks and mortar are faced with a burden of rates that they must pay regardless of whether they are profitable. It is no good saying that we are reducing the burden of corporation tax because you pay corporation tax only if you are making a profit, and our high streets are bleeding. We need to look at the burden of business rates and shift it in a direction that takes account of the needs of entrepreneurs and people starting up, particularly in retail.

The gracious Speech also refers to our commitment to encourage people to save for their pensions, but why do my noble friend and his colleagues in the Treasury continue to interfere and change the rules that apply to pension schemes? Raids started with Mr Gordon Brown's on dividend tax relief. Then we had A-day; rules were going to be set in stone and people could rely on them, but in every Budget and finance Bill we have another nibble at the rules on pension saving. Why does that matter? People might say that it affects only the very wealthy who have built up very large pension pots. It matters because it undermines confidence in a long-term saving vehicle in a country that needs more long-term saving. Then you have the Government, who say that they are holding down interest rates because of their control on public expenditure-which, incidentally, is going up in cash terms-and who are funding their own borrowing by quantitative easing and creating, through quantitative easing, an artificially low interest rate. You then have the contributions that employers and companies must make to company pension schemes determined by the gilt yield. The result is that billions of pounds that would otherwise be going into growth and investment to create jobs for the future are going into pension funds, from whence they will never come out because the assessed liabilities of those pension funds have been exaggerated by the Government's quantitative easing policy. Far from quantitative easing helping, it is causing enormous damage and sucking productive funds out of the economy, from the private sector, which would otherwise be invested in job creation.

There is also the commitment to supporting the union, which, of course, I very much endorse, but if people are being asked to vote in a national referendum about Scotland's continued place in the United Kingdom, which is in the interests of Scotland and the rest of the United Kingdom, we need to sort out the issues that remain unresolved from devolution and, in particular, the role of Scottish MPs voting at Westminster on devolved matters: the so-called West Lothian question. People voting in the referendum need to know what they are voting for. The Government simply cannot continue to run away from the West Lothian question. They need to say what the arrangements will be in future.

Similarly, if we are to continue with a devolved Parliament, we need a system of funding that is fair to Wales, England and the rest. Barnett is certainly not that. Repeated reports, including one from the House's own committee that was set up for the purpose, have drawn attention to the unfairness of Barnett. The Government simply cannot say that they are concentrating on reducing the deficit and are therefore not doing anything about Barnett. That is a non-sequitur. There is no relationship between these two arguments.

On what is going on at the other end of the Building in respect of Europe, it seems that the central theme of the gracious Speech is our country being competitive and creating those jobs and opportunities that the noble Lord, Lord Empey, talked about. That depends on our looking outwards and recognising what is going on in Europe. It is not a matter of our leaving Europe; the rest of Europe is leaving us. It is going off on this madcap scheme to have a single currency. There seems to be no price that it is not prepared to pay in terms of the misery being created, particularly in the southern European states. They have unemployment among young people of 60%-more than half their youngsters unemployed. That is not only an outrage but simply unsustainable. The rest of Europe is determined that no sacrifice is too great for the sake of this project.

Photo of Lord Spicer Lord Spicer Conservative

Can my noble friend confirm that one of the reasons why it will be so difficult to renegotiate the repatriation of powers that he has implied already is the acquis communautaire? The acquis insists on all movement, all the changes in the treaty, going in one way: towards a federal state. It is endemic in the treaty and is always supported by the court.

Photo of Lord Forsyth of Drumlean Lord Forsyth of Drumlean Conservative

My noble friend is absolutely right. I remember, when I was an Employment Minister, spending hours trying to prevent the working time directive coming into being, which ended with our challenging it in the courts and being advised that we would lose because the court has a duty to promote the acquis, which is about integration. We are involved in a club that has a particular direction. That direction is to create a country called Europe with one Finance Minister, one currency and one set of interest rates, which will take no account of the relative competitiveness of the member states. We can see what is happening. The result will be years of economic decline. It is our marketplace. It is a big marketplace, of course, but the rest of Europe actually sells more to us than we sell to it. We have a Commonwealth. We have relationships around the globe. We need to get out there and sell to those parts of the world that are growing. That is where our future lies. It does not lie in being tied up in sclerotic bureaucracy created by this organisation called Europe.

As to the referendum, all the political parties are split to one degree or another on our membership of the European Union. We should have a referendum as soon as possible. Just as it was argued in Scotland that we should have a referendum in order to end the uncertainty as quickly as possible, so we should have a referendum to end the uncertainty about our continuing membership of the European Union. Some of my colleagues who are of the same view as me say, "We might lose. Perhaps we should delay it. Perhaps we should put the arguments for longer". Others, who are in favour of us maintaining our current relationship, take the same view. Let us trust the people and let them decide.

I say to my noble friends that the most disgraceful thing has been the behaviour of the Deputy Prime Minister and the Liberals on this matter. I took part in the general election campaign. I saw the leaflets that were produced asking us to sign a petition to send to Liberal headquarters, with a picture of the Deputy Prime Minister saying that the people of Britain must be given an in/out vote. That is what the Liberals fought the general election on. Indeed, the former Prime Minister, Gordon Brown, was attacked by Nick Clegg at Prime Minister's Questions for not giving the people an in/out vote. Nick Clegg says that he wants to restore trust in British politics. Holding the Prime Minister hostage and preventing him giving the people a say on this crucial matter is a very funny way of doing that. Let us have a referendum, get it out of the way and then concentrate on building our prosperity by selling our goods and services to the rest of the globe, and using those relationships-our soft power-to make Britain produce the resources and revenues that we need to fulfil our obligations to our fellow citizens.

Photo of Baroness Kramer Baroness Kramer Liberal Democrat 4:15 pm, 13th May 2013

My Lords, I do not flatter myself that so many noble Lords have remained in this Chamber for my speech, but rather for the speech of the noble Baroness, Lady Lane-Fox, who will follow me-and quite right, too. I very much hope that she will address the issues of entrepreneurship in such a cutting-edge industry. That will be fascinating, not just on a personal level, but because it lends itself so much to the issues of economic growth that we are talking about today.

The opening phrases of the gracious Speech indicated that the Government's purpose is to focus on building a stronger economy and promoting a fairer society. Let me wholeheartedly endorse those two principles, which must go hand in hand. This country has, at times in its history, pursued one but not the other, and that has damaged us as an economy and a society.

Much of the work of rebuilding the economy is already under way. I will pick up on the latest measure that was in the Queen's Speech, which is extremely positive, namely the commitment to introduce a new employment allowance of £2,000, not least because its simplicity should make it very attractive to small businesses. We have heard again today, from the right reverend Prelate the Bishop of Birmingham, and others, that small businesses are key to the future of this country's economy. This should be a spur to new hirers.

I commend the Government on resisting the temptation to constantly think up more legislation in the finance area, where we already have crucial banking reform legislation to deal with. I am on the Parliamentary Commission on Banking Standards, and our report will come out in the next few weeks. The Government slightly surprised me today by saying that that Bill will come to this House before the Summer Recess. It is very important that the issues raised in our final report have the opportunity to be properly considered, and, on many fronts, incorporated into that legislation. I therefore ask the Government to take a serious look at the timing.

I agree with one part of the speech made today by the noble Lord, Lord Forsyth: it is sometimes a relief that we have a Government who do not constantly try to address every problem by producing yet another piece of legislation. When we heard the noble Lord, Lord Eatwell, essentially complaining that there were not enough new laws in the Treasury field for this section, I thought, "Labour's continuing with its old habits of legislation". I am glad that he finally agrees that implementation and governance are the right answers, but those are not the words that his colleagues have used.

In these uncertain times in which we live, it is unwise to overestimate green shoots in the economy. However, I have been struck by the very positive tone that I now hear from a wide range of those working in small businesses, in business accountancy, and even in the commercial sector of the banking industry. Help to buy is having a very big impact on the housing market; Barratts has reported the highest demand for five years, and now warns of a possible skills shortage in construction, which it is combating by planning for 600 new apprentices and graduates over the next three years. The CBI report also reinforces the sense that there is momentum.

We have seen these signs before. In 2011 confidence began to grow, but was knocked back with the problems in Greece, and in 2012 we began again to see gathering confidence, which was then shaken by concerns over Italy and Spain. This time, however, there is a broader base, with a pickup in the service sector, non-EU exports, manufacturing output and retail sales. I would love to hear from the Government about retail sales, but I understand that much of the pickup comes from the over-45 age group, which, frankly, was much less impacted by unemployment and by wage compression. That group has the capacity to spend, and if it is starting to again, that is a very important message for the economy.

Of course, any return to recovery has its own risks. A few months ago it was fashionable to suggest that many companies in the UK were essentially zombie companies-the walking dead that would collapse in an economic revival. Thank goodness that theory has largely been discarded because it does not fit the facts. However, it is true that as the economy improves many companies will quickly chew through their cash reserves, and it will be absolutely critical that we have a banking sector able to meet the demands especially of small and medium-sized businesses. I confess that this worries me.

The Government's decision in the Budget to continue and expand Funding for Lending, with much more emphasis on small business lending, was significant and welcome. The big banks have been clearing their balance sheets and trying to retrain their staff to look at the sector, and they should have enhanced lending capacity-although I remain sceptical about the low levels of demand that they insist exist in the economy. However, as the economy recovers we will definitely see a very significant pickup in demand for credit. It will come not in steady increments but in waves of expansion. We cannot afford for the banks to fail us again. If they are correct that only lack of demand has been holding back the flow of credit, we should see that change. In case they do not, I hope very much that the Government are looking at additional contingencies. It would be terrible to lose the opportunity of a rising economy because our banking sector, which has never focused very much on the real economy in the UK, failed to live up to expectations.

In the long run, new banking players and non-banking players will enter the credit market. We must never again depend on just four institutions, as essentially we do today. I am very pleased that we are close to achieving a proper regulatory framework for peer-to-peer lenders, and that they are getting support from the business bank. I congratulate the regulators, the FCA and the PRA, on a complete about-face in historical strategy. They are now setting out to remove barriers to the entry of new banks. Measures such as seven-day account switching will finally let ordinary people change their banks to get a better service, and will open the opportunity for new players to thrive. The Chancellor has proposed that the regulator should take on the payment system-the plumbing of financial services and banking-which has been in a sclerotic state and made it almost impossible for any new players to enter the market. We are moving towards an environment where competition is encouraged.

I am still concerned that waiting for banking and credit markets to grow organically and provide us with new players of any size will take longer than we can wait, and longer than one economic cycle. For that reason, I urge the Government to look closely at RBS, and possibly Lloyds, and consider splitting them up. People talked about splitting RBS into a good bank and a bad bank. That would have made sense five years ago but we are past that point now. Much more interesting would be a split into a number of regional banks that could identify and focus on the needs of each regional business base. For decades we have let the market shape our banking industry. It has been a disaster; we have seen nothing but consolidation and homogenisation. We now need the Government to tackle the failings in the structure of the industry, not just the failings of individual banks, which they are tackling with capital requirements, ring-fencing and other measures, so that it is fit for purpose, and the purpose is serving the real economy.

I know that Lloyds and RBS have had trouble selling off the pieces of their own banks that they have been forced to sell by European law. Two points are relevant here. One is the appalling legacy technology that the institutions are burdened with, which has not been brought up to date. The other is a general expectation that they will simply consolidate into another new big bank rather than remain sustainable as regional organisations. Economies of scale have dropped sharply and dramatically with modern technology. Highly competitive regional banks have proved viable across the globe. If national banks cannot serve our businesses and regional banks can, we should seize the once-in-a-generation opportunity of returning two major banks to the private sector to build the banking structure that best supports our economy.

Photo of Baroness Lane-Fox of Soho Baroness Lane-Fox of Soho Crossbench 4:24 pm, 13th May 2013

My Lords, I am not the first Lane-Fox to make a maiden speech, but I think I may be the first Baroness to have a survived a virtual and a real-world crash. In 2000, the company I cofounded, lastminute.com, was navigating the choppy waters of the dot com boom and bust. Frankly, it was difficult-but she survived and thrived, as I was extremely fortunate to do when I was flung from a car in 2004.

The friendliness of this House is legendary, but I have been overwhelmed by the support and kindness of everybody, most recently in the past two minutes those who came to find me to tell me that I was coming up right now-but also the security staff, attendants, and catering and administrative staff. My two supporters, the noble Lord, Lord Chadlington, and the noble Baroness, Lady King, have given invaluable advice and were endlessly jolly on the day of my introduction, which banished nearly all my nerves.

My great aunt, Felicity Lane-Fox, gave her maiden speech in 1981, talking about disability rights, so I feel that it is particularly poignant that I can stand up and make a speech now and try to follow her great example. I would like to reassure any noble Lords who might remember Felicity that I do not intend to career down corridors towards my detractors, as she was given to doing in her newly electrified wheelchair-a weapon of persuasion.

When we started in 1998, we spent most of the time at lastminute.com convincing investors, suppliers and customers that the internet would be a force for good in the economy and was not about to blow up. It was surprising to me that well over 10 years later, when I was asked to become UK digital champion, I again spent my time convincing two successive Governments and millions of people in the country that the internet has much to offer. Shockingly, there are still 16 million people in the UK who do not have basic digital skills, and 7 million who have never been online. But we do have strong digital foundations: the internet accounts for 8% of our GDP, the highest of any G20 country, and recent forecasts suggest that 25% of our economic growth will come from the internet sector in future. We have competitively priced access and the highest number of online shoppers in the world. But I would like to argue that we should go much further and build on those foundations. I see usage of, and access to, the internet as a basic right that all citizens should be able to enjoy.

Why does it matter that so many people have never used the internet or do not have those basic digital skills? Partly, it is because we know that the majority come from the most disadvantaged communities-yet we also know that, if you are online, you are 40% more likely to be able to get work and will achieve 25% better results in education. Even the lowest income families will save up to £170 a year from online deals. In addition, the data show that feelings of loneliness and isolation are dramatically reduced when you get online. Some 1.5 million of the unskilled live alone and see nobody in a whole week.

British businesses also need support, as has been mentioned here already, and small and medium-sized business in particular. We know that only 30% of them are able effectively to use online tools, and that there is a potential £18 billion in the economy if we are able to give them more advanced skills to sell and buy online.

I have been fortunate enough to meet many people who have told me of the transformative power of the internet on their lives, but one young man I met in Leeds I think of often. He told me that the internet had saved his life. Saved his life-really? Even I was amazed. But he described how, homeless and addicted to drugs, he had ended up at a drop-in centre in Leeds, where they had encouraged him to learn some new skills, and now he was making music and selling it all over the world as well as teaching other people in his community-a budding entrepreneur and giving something back.

We must not create a two-tier society but aspire to a universality of digital skills. We must make sure that the potential of all our citizens is unlocked. I believe that this will help the UK prosper and grow at a national level and at an individual one. Only when we focus on all aspects of digital growth, both infrastructure and skills, will we be a truly digital Britain. In this tough economic climate, the internet is such a powerful tool to help people manage the trickiest circumstances of their lives, whatever their age and whatever their location.

This is not an impossible challenge. The charity I founded, Go On UK, managed to reduce the offline population by 50% in just six months in Liverpool last year by bringing together interesting partnerships in that one area. However, we know that all the data show that by far and away the most effective method of spreading skills is through peer-to-peer support, so, naturally, as I look around here, I see a room full of potential.

The internet has had a profound effect on my life. It has enabled me to start businesses and to work with charities and has helped me to endure long periods in hospital as well as deepening my cultural life in a way that I would never have thought possible. I am honoured to join this House and hope that from here I can continue to encourage and champion a truly digital Britain.

Photo of Baroness Wheatcroft Baroness Wheatcroft Conservative 4:31 pm, 13th May 2013

My Lords, it gives me great pleasure to follow the noble Baroness, Lady Lane-Fox, and I congratulate her on such an insightful maiden speech. As others have said, she is a very welcome addition to this House, bringing to it a remarkable business background and a determination to help everyone make the most of digital technology. She is now working with the Cabinet Office to that end, but I first met her when she was running lastminute.com, the business she started with Brent Hoberman. Unlike so many digital businesses, lastminute.com is still going strong. However, the noble Baroness, Lady Lane-Fox, has moved on and now sits on several boards, including that of Marks & Spencer. She has also launched a chain of karaoke clubs. I like to think that many of your Lordships are members and enjoy their facilities.

In February, "Woman's Hour", that most influential of programmes, anointed her as one of the 100 most powerful women in the UK. From what we have heard today, I am certain that she will make a very powerful contribution to your Lordships' House. Britain needs more people to build businesses and create wealth. The gracious Speech spelt out that the Government's first priority is to strengthen Britain's economic competitiveness, but we have a long way to go. I am delighted that by 2015, this Government will have cut the rate of corporation tax to a level which makes the UK the joint lowest in the G20, but a low rate of corporation tax will not ensure our competitiveness. The UK suffers from a dire level of productivity. Figures released in February by the Office for National Statistics showed that output per British worker trailed the G7 average by 21% in 2011. Output per hour was some 16% worse than across the other major industrialised economies, the worst figure for 18 years. Economists expect that the picture will be even bleaker in the current year. According to Spencer Dale, the Bank of England's chief economist, the level of private sector productivity is around 15% below the level that would be implied by a continuation of the trend before the economic crisis hit. My noble friend Lord Deighton pointed to the new investment in infrastructure and transport being made and that will help, but it will not cure the problem.

Today, in his inimitable style, the Mayor of London gave his own explanation for why UK productivity may be low. He referred to classic,

"British short-termism, inadequate management, sloth, low skills, a culture of easy gratification and underinvestment in both human and physical capital and infrastructure".

No doubt London's business leaders will wish to respond to his considered view. I do not completely share it. However, it is clear that low productivity disadvantages the country and we need to find a way to improve it. The gracious Speech heralded some welcome measures for business-in particular, the promise of further deregulation. Red tape remains a major hindrance to business efficiency and undoubtedly puts UK firms at a disadvantage when competing particularly with those from outside Europe. Europe, of course, is where much of the red tape begins.

I also applaud the move cited by my noble friend Lady Kramer to exempt companies from the first £2,000 of their national insurance bills. That should encourage businesses to recruit, but the Mayor is right when he cites low skills and a lack of investment as the key to Britain's productivity problems. The Government are doing their best to enhance the skills of those currently in the education system and are committed to trying to ensure that school leavers not going on to university move into training or apprenticeships. However, we have far too many unskilled workers. According to the Chartered Institute of Personnel and Development, there are on average 45 people applying for every low-skilled job. Improving the skills of the older unemployed is essential-and so is investment.

Britain's companies are sitting on an unprecedented cash pile. Non-financial businesses had a total of £672 billion in the bank last year. The Government have tried to encourage them to invest. Generous capital allowances are available but that policy has not been noticeably successful. There seems to be a risk aversion in business and the key may be to address the chronic short-termism that the Mayor cites. The owners of big businesses, the shareholders in public companies, do not encourage investment for the long term, because they are too interested in short-term gains. We need to find a way of encouraging investors to think long term and to foster an attitude that does not view stocks as mere gambling chips. There have been many investigations and reports into this but, so far, nobody has found a solution. If the Government were to find some means of encouraging and rewarding institutional investors for taking a long-term view, it would result in an improvement in productivity.

The other aspect of the economy on which I should like to focus is the dominance of London. Even allowing for the importance of financial services to the capital and the hammering that the sector has taken in recent years, London's economy has outperformed that of other regions since 2007. Between 2007 and 2011, it grew by a nominal 12.4%, compared to just 2.3% in some parts of the country and no more than 6.8% anywhere else. This led to London's share of output increasing from 20.7% to 21.9% over that period. The right reverend Prelate the Bishop of Birmingham spoke eloquently of the needs of the regions.

Whether the statistics say that we have escaped a double-dip recession or not, there are many parts of the country where the views of economists count for little. If it looks like a recession, if it feels like a recession and if it hurts like a recession, it is a recession. The Government are pledged to push a greater proportion of growth-related spending to local areas from 2015, and we have heard how that will be of benefit. However, more can be done. The numbers employed in the public sector are decreasing but will remain substantial. Wherever possible, those jobs should be pushed out of London-not just the clerical jobs but the jobs at the top. In the digital age, with Skype available to all, there is no need for everyone to be in the capital. The savings in property costs would be beneficial, as would the boost that would be delivered to the regions. I am sure that plenty of civil servants would hesitate even to contemplate this and might talk about the huge transport bills that they would incur when coming to London for meetings. Forget it; they can just go online. I am sure that the noble Baroness, Lady Lane-Fox, can advise on how that could be done. There is much talk of rebalancing the economy away from financial services to manufacturing, but a bit of rebalancing away from London would also be a good idea.

Photo of Lord Lea of Crondall Lord Lea of Crondall Labour 4:39 pm, 13th May 2013

My Lords, as the first speaker from these Benches following the outstanding maiden speech of the noble Baroness, Lady Lane-Fox of Soho, I add that, as someone who has always been in difficulty in working my computer, let alone shopping online, I stand in awe of anyone in that line of business. Perhaps I can get some private tuition.

I welcome the role that the Bishops are taking on as the only territorial representatives in this House, as well as now having the financial expertise of the most reverend Primate the Archbishop of Canterbury, in both cases indicating a relationship to real people in real communities.

I wish also to refer to the highly political 16-minute speech of the noble Lord, Lord Forsyth. No attempt was made by the Whips on the government Benches to remind him that eight minutes had been advised. It was a 16-minute speech, and I trust that the government Chief Whip will now confirm that we can all have 16 minutes, especially in our case, as my noble friend Lord Bhattacharyya seems to have disappeared.

Photo of Lord Forsyth of Drumlean Lord Forsyth of Drumlean Conservative

My Lords, I am most grateful to the noble Lord. I think that I was interrupted, and also no time limit has been specified for this debate.

Photo of Lord Lea of Crondall Lord Lea of Crondall Labour

There is an advisory limit of eight minutes. I inquired and that was stated. I do not know whether anyone would like to confirm that that is the case.

Photo of Lord Wallace of Saltaire Lord Wallace of Saltaire Lords Spokesperson (Cabinet Office), Lord in Waiting (HM Household) (Whip)

My Lords, as the question has been raised, the Chief Whip gave the advice that if Members were to keep their remarks to eight minutes we would finish at 10 o'clock. I am advised that it is traditional in debates on the Queen's Speech not to enforce the advisory rule, so it is entirely open to noble Lords still to be here at one o'clock in the morning if they so wish. However, if anyone were to go on for a very long period, I dare say that noble Lords would have ways of making their feelings on this known.

Photo of Lord Lea of Crondall Lord Lea of Crondall Labour

My Lords, I have no wish to produce the result whereby people are here at one o'clock in the morning. I simply say that I hope no one thinks that there is any discourtesy if, in the light of what has been said, one does not stick to eight minutes.

As my noble friend Lord Eatwell pointed out in his magisterial analysis of the short term, austerity will not improve our tax revenues, nor will it reduce our tax expenditures. There are perhaps three timescales over which one can analyse economic prospects: short, medium and long, by which I mean for the short term possibly three to four years, for the medium term 10 to 15 years, and for the longer term perhaps 20 to 30 years. The post-war architecture of the world economy-Bretton Woods and so on-goes back no less than 70 years. The IMF and the World Bank were the main institutions created at that time. Surprisingly-it is hard to think that it is true-the European Union in all its manifestations now goes back for the best part of 50 years. It is partly in view of the extraordinarily peremptory and dismissive speeches made by the noble Lords, Lord Forsyth and Lord Lawson, in recent days that I will concentrate on the second and third of those timescales.

Their recipe for leaving the European Union and indeed for the future of the nation as a whole is, in my view, catastrophic. It is going down an ideological road and is far from an objective analysis of our economy and our place in the world. It is also as far removed from pragmatism and empiricism as something that went on in the Labour Party in the 1980s, and that is where the Conservative Party will wind up if they follow that line. In the short term, it will be, as I said, catastrophic. Figures published today by the TUC, which has done some analysis of the statistics of the International Monetary Fund, suggest that by 2017 our per capita income in Britain will have increased by precisely 0.0%. I know it sounds extraordinary that a figure should be as precise as that but it works out that our living standards, our per capita income, in Britain will have risen by precisely 0.0% since 2008. Given the vast increase in the quantum of the top 1% and, indeed, 10%, that explains the deep cut in living standards for the median and the vast majority of the British people who, not surprisingly, are angry and disorientated as a result, and are prepared more readily to listen to sophists such as Mr Farage and others nearer to home.

I acknowledge that the EU as a whole has not had a very much better record, although perhaps I may draw attention to the fact that per capita incomes in the same series in Germany and Sweden-two examples of northern Europe-will both be projected to have risen by 10% in this period, a point to which I will return. In passing, I will also mention that on a couple of occasions I have asked my noble friend Lord Eatwell a rhetorical question about how we will pay for this, that and the other without increasing the deficit. The noble Lord, Lord Forsyth, says that we have to get on urgently with filling up the potholes. Perhaps he will pay for it himself but I assume that it will come out of public expenditure.

What is the bigger economic picture that we face in this country? Just to put the numbers another way, the loss of output in these 10 years below our earlier potential of roughly 2% growth per annum comes out at some extraordinary numbers. If you look at the cumulative loss against that trend, by the year 2017 it will work out at some £3 trillion-£3,000 billion. It will not be £30 billion or £300 billion but £3,000 billion. People can work it out for themselves. The noble Lord, Lord Forsyth, is looking puzzled but if he does a bit of mental arithmetic he will find that that is in the right ball park. I know he does not have time to work all that out in the time of my speech but perhaps later he will realise that my figures are accurate. We are talking about figures that are worse than the slump in the 1930s after the parallel banking crisis of 1929, from which we only recovered the full scale of our potential during the late 1930s and the Second World War, as, of course, did Germany and the United States.

As to my own prescription or views regarding these matters, I do not begin by wanting to be orthodox in terms of Labour Party policy. I do not think that that is the role that one is necessarily here to play. I am generally orthodox but I just should like to draw attention to one or two features of the trade deficit. It is not that we cannot grow our economy in the European Union. If the EU per se is the reason for some incompatibility because of so-called red tape, how is it that Germany, despite absorbing a very weak East German economy over the past 20 years, has a GDP per head of 121-if we put EU equals 100-while ours is 109?

Germany, of course, which relies much more than we do on something as old fashioned as manufacturing, is rarely mentioned by the new ideologues. They seem to think that there is something magic about the City of London. For every £2-worth of goods or services-in the statistics they come to the same thing-we now export, we import £5-worth. This is, in part, to do with our exchange rate. Of course we cannot go on devaluing the pound without our living standards falling. However, if we want to regain our competitiveness, I could argue at the same level of abstraction as the noble Lords, Lord Forsyth and Lord Lawson, who think they are brilliant economists-I do not think that I am a brilliant economist but at least I can see the fallacies in what they are saying-but what is wrong with saying that although we are now stable at 85p to a euro we would be more competitive at parity with the euro? That is a devaluation of 15%. With the growth of our educational system and our whole industrial policy, perhaps that would ensure that we stay, for once, at parity with the euro.

I do not anticipate great enthusiasm for what I have just said but is it not a fact that our trade deficit is a fundamental issue both within the European Union and outside it? Simply asserting that we have got to trade with the rest of the world in no way addresses that fundamental question. As for the European side of growth, that, too, goes back to Lehman Brothers five years ago. It is not as if the whole of the European slow growth was created within the European Union.

The other point which needs to be put to these new iconoclasts is whether they would stay in the European Economic Area along with Switzerland, Norway and Iceland. There is plenty of red tape in the European Economic Area. We signed the EFTA treaty in Stockholm leading up to its creation in 1960 and there have been rules on state aid and so on. The noble Lord who referred to the acquis, the noble Lord, Lord Spicer, who is not in his place, is correct in that if we were a member only of EFTA we would be following all of the acquis without having a seat or a vote at the decision-making table. Would he be happy to be in that position? He has given no clue as to the scenario we would be expected to vote for if he had his way.

The third and final fallacy-I am still three minutes off my 16 minutes-concerns relying on the City of London. The noble Lord seems to want to have it both ways. Either it is the centre of Europe's financial system and dependent on our being part of the EU for its strength, or it will somehow have a comparative advantage in its own right without our being part of the European Union. The noble Lord must have missed the speeches by leading officials in China, the United States and elsewhere, who have said that of course our share of world investment would be considerably at risk if we were to leave the European Union.

In conclusion, "Stop the world, I want to get off" is a policy which I am sure the British people, when they are told the truth-we are told that we have to get them to understand the truth, but that is a bit difficult when the Murdochs, the Daily Telegraph, Daily Mail and so on do not allow them to know it because for the most part they censor it-will reject. On the state of British public opinion, I shall read out three or four statistics taken from a new survey produced by YouGov/The Fabian Society looking at the attitudes of the younger generation, those aged between 18 and 34. They were asked:

"How convincing or unconvincing do you find the following statements in favour of the European Union? ... It has given people the freedom to travel, work and live in other EU countries".

Some 60% found it "fairly convincing". Perhaps I should send an e-mail to the noble Lord, Lord Lawson, in France saying that I hope he is happy that that has enabled him to live there.

"The EU has agreed common standards of workers' rights, consumer protection and played an important role in guaranteeing the social rights of individual citizens".

The response showed that 48% found that statement "fairly" or "very" convincing against 15% who did not.

"Co-operation between EU countries is the best way to tackle the big issues of our time, like climate change, the global financial crisis and international terrorism".

Some 49% said yes, while 18% said no.

"The EU has helped keep peace in western Europe since the second world war".

Some 47% agreed and 17% did not.

Perhaps I may say in my final sentence that, so far as peace in the world is concerned, it is essential that Germany, France and ourselves are in the same Europe with a common defence approach vis-à-vis the rest of the world. That point will become clearer and clearer as this debate continues.

Photo of Lord Razzall Lord Razzall Liberal Democrat 4:56 pm, 13th May 2013

My Lords, first, from these Benches I congratulate the noble Baroness, Lady Lane-Fox of Soho, on her brilliant maiden speech. Like other noble Lords, I look forward very much to her contributions to the deliberations of this House and her contribution to driving growth in the economy, which she touched on so ably in her remarks.

There has been much criticism of the gracious Speech, particularly from those on the Benches opposite, who suggest that it is slight and insubstantial. I do not share that view. The criticism suggests that the role of government is to legislate. I do not believe that that is right; the role of government is to govern. Do we really believe that the 30 or so crime Bills in 13 years of Labour Government caused the recent drop in crime rates? I certainly do not. I come from the school which believes that we have too much legislation, and I have often thought that occasionally a one-line Queen's Speech saying, "My Government propose no legislation this year", would be appropriate. Whether your Lordships agree that the primary role of government is to govern, all must agree that the Government now face two major challenges, both of which have been touched on by other noble Lords: what to do about the economy and what to do about Europe.

On the economy, there is common ground that economic growth will not be forthcoming without a correction in aggregate demand. Unlike in the 1930s when Keynes was a lone voice against the austerity measures of the Bank of England, there is also now common ground that an economic slump is not self-correcting, that there are limits to monetary policy alone in dealing with a deficiency in aggregate demand, and that fiscal policy plays a significant role in stimulating demand. But then policy advocates part company. On the one hand, Keynes is prayed in aid, particularly on the Benches opposite, to dignify any proposal to spend more money and oppose cuts, while on the other hand, the right wing-not represented quite so strongly here-sees its authority in Hayek rather than Keynes to justify supply-side arguments-namely, that we need more deregulation, to scrap employment legislation, and that growth will come from the private sector always filling the space left by a retreating state. I have always leant towards the Keynesian side of the argument, but I have to accept that the UK crisis since 2008 is different from that in the 1930s.

In the 1930s, we did not see the difficulties in the banking sector that we have had since 2008. Indeed, in his classic work, Keynes hardly mentioned the problems of the banking sector. If we take banking assets relative to GDP, the UK has the biggest banking sector of any major industrial country. The banking crisis and the measures taken to avoid future crises have, as my noble friend Lady Kramer said, seriously impeded credit flows, particularly to SMEs and to individuals. As the Minister indicated, the Green Investment Bank and the business bank represent an attempt to start to deal with this problem. However, progressing from millions to billions being available for investment through those two institutions will not be easy.

To understand the other difference with the 1930s, I need to be a bit technical. In the 1930s, Keynes assumed that private sector multipliers of two to three times for every £1 of public sector spending would apply. However, the Office for Budget Responsibility now estimates that there is an income multiplier of only 0.4 for tax cuts and revenue spending and a multiplier of one for capital projects. Tax cuts, or an increase in current spending as advocated by certain members of the Opposition, would have significantly less effect on the creation of demand and carry a much greater risk of damage to our credibility in world markets and our ability to finance the deficit. When the coalition Government were formed in 2010, it was clear that the UK would lose the confidence of our creditors without a credible plan for deficit reduction. However, the issue for the Government now is whether the balance of risks has changed. In May 2012, the IMF said that the risk of losing confidence as a result of a more relaxed fiscal policy, particularly the financing of more capital investment by borrowing, may have diminished relative to the risk of deterioration of public finances through lack of growth. I believe that there is now a case for a significant increase in public investment where there are impediments to growth, particularly capital spending on housing and infrastructure spending on the so-called "shovel-ready" projects.

On Europe, the noble Lords, Lord Lawson and Lord Lamont, as well as television star Michael Portillo, have now weighed in on the side of the "come out" camp. I am slightly reluctant to intrude on Tory grief over this issue but will make three points against them. First, the noble Lord, Lord Lawson, disagrees with the common assumption that leaving Europe would cost 3 million jobs. Indeed, he said that the Deputy Prime Minister was talking "poppycock" in using that argument and knew nothing about economics. As Alistair Darling said in the Times last week, although any assessment is theoretical, even if only 1.5 million jobs would be lost, that is a lot of jobs. Secondly, the main thesis of the noble Lord, Lord Lawson, was that our presence in Europe distracts our industry from competing in the growth markets of Asia, India and South America. However, it does not seem to stop the Germans in those markets-and they do not want to come out of Europe. The third argument against those advocating coming out seems to be the potential loss of international investment. The motor car industry is a classic example of an industry that has seen major overseas investment, primarily because of our presence in the European Union. The motor vehicle industry is a huge success story-last year, for the first time ever since the creation of the motor car, we exported more motor cars from the UK than we imported. Why should Tata, the Japanese and the Americans locate a new plant in the United Kingdom if we are outside the European Union? It is a highly risky strategy to assume that the European Union would allow us free trade in motor vehicles if we were outside it.

I have a suspicion that the arguments to come out, certainly from members of the Tory party in another place, have much more to do with fears of UKIP than economics. However, those Members of another place who are in fear of UKIP are in danger of misreading why people have been voting for UKIP.

Photo of Lord Forsyth of Drumlean Lord Forsyth of Drumlean Conservative

I am most grateful to the noble Lord, who obviously feels very strongly about this and feels that he has very strong arguments. But if they are so strong, why is the Liberal party in the coalition preventing the Government from committing themselves to having a referendum, so that we can have this debate and people can decide, given that the Liberals campaigned for an in/out vote during the general election campaign?

Photo of Lord Razzall Lord Razzall Liberal Democrat

I am grateful to the noble Lord, Lord Forsyth, for his intervention. As in so much of life, the question is timing. We are not in favour of having a referendum now. We might well have been in favour of having a referendum in 2010. Bearing in mind the policy of the Prime Minister to renegotiate our arrangement with the European Union, it seems sensible to have that referendum once that renegotiation has been completed.

Going back to my argument, I do not believe that people are voting UKIP because they want to come out of Europe. That is demonstrated by the detailed research that the noble Lord, Lord Ashcroft, has done. I commend his polling information to all noble Lords. It is very informative. People are voting UKIP because of a desire to go back to a perceived past world of Englishness, with no foreigners, with grammar schools and smoking in pubs, and where people knew their place.

John Major spotted this trend 20 years ago when he glorified a world of,

"long shadows on county grounds, warm beer, invincible green suburbs, dog lovers ... old maids bicycling to Holy Communion through the morning mist".

Unfortunately for his point, John Major quoted Orwell out of context. In criticising the past, Orwell had also talked about:

"The clatter of clogs in Lancashire mill towns, the to-and-fro of the lorries on the Great North Road, the queues outside the Labour Exchanges".

I fear that this is the world to which UKIP wishes us to return. When I think of UKIP, I also think of 80 year-old Wyn Florey, on my ward committee, who said to me in the 1980s: "Don't let them tell you about the 'good old days'; they weren't". On the same point, my Tory colleagues might be better persuaded by William Whitelaw, who said in 1972:

"I do not intend to prejudge the past".

I hope that, in deciding about Europe, Tory colleagues are not seduced by UKIP, and follow the Whitelaw advice. I hope and pray that they will not sacrifice the interests of our children and grandchildren to a misplaced nostalgia.

Photo of Lord McFall of Alcluith Lord McFall of Alcluith Labour 5:07 pm, 13th May 2013

My Lords, today UK businesses have about £700 billion in cash on their balance sheets-money that is looking for places to invest but companies are lacking the confidence to do so. In addressing the growth strategy-which currently seems to be absent-the biggest task facing the Government is to instil confidence in people and companies. We have to recognise that there is a demand problem facing the country. That is why the austerity approach taken by the Government in the past few years has been wrong.

However, we need to ensure that confidence is based on reality. As a member of the Parliamentary Commission on Banking Standards, I am very much aware of the reality that in banking and finance the architecture has crumbled. We need not just to reform but to rebuild that from the floor up. We cannot afford to apply a sticking plaster to a system. Just how much the system has disintegrated was admitted by Adair Turner, the former chairman of the Financial Services Authority, in a remarkable interview a few weeks ago in the Sunday Telegraph. He said:

"I think we-as the authorities, central banks, regulators, those involved today-are the inheritors of a 50-year-long, large intellectual and policy mistake. We allowed the banking system to run with much too high levels of leverage, inadequate levels of capital, and we ignored the development of leverage in the financial system and in the real economy. And not only did we ignore it but we had a pretty overt intellectual philosophy that we could ignore it, because we knew the financial system was just a market like any other and whatever it did was bound to be for the good because that's what markets are ... I was surprised at the supervisory approach. I'd been on the board of a bank, I'd been involved in banks, I'd dealt with banks back in the 1980s and 1990s, and I, throughout that, had accepted the existing capital regime as a given, right? I had never gone back to basics and said, 'Why do we allow banks to run with 30, 40, 50 times leverage?'. And neither had anybody else, funnily".

That includes Larry Summers, former Treasury Secretary of the United States, adviser to President Clinton and president of Harvard University-he is presently the Charles Eliot professor of economics at Harvard-who has said that everything that he has taught in economics has been called into question by the crisis. When the respected John Kay and Professor Charles Goodhart came to the Treasury Select Committee a few years ago, I asked them whether they understood risk, to which Charles Goodhart succinctly answered no. John Kay said, "I've been teaching risk for the past 25 years at Oxford University and what I did was throw my notes away, because nobody understands risk at the present time".

Therefore, the situation in which we find ourselves is fragile. I suggest that if we do not go back to basics we will not solve the long-term problems that affect the financial services industry. The Prime Minister last week admitted in response to a question from the chief executive of Santander that the Government were confused and had mixed messages for the sector. As for briefings from the Treasury and the Chancellor, I have been taken aback to read in newspapers over the past few weeks that the Treasury is paving the way to sell the Government's bailed-out bank stakes at a loss. The Times commentators, Sam Coates and Patrick Hosking, both of whom I know and are very respected, wrote recently that the Treasury wants to,

"lower public expectations over the amount that will be recovered from the sale".

It hopes that the Parliamentary Commission on Banking Standards will conclude that the Labour Government paid too much for Royal Bank of Scotland and Lloyds in 2008.

From my point of view, there is not a chance of that happening, and it is simply not true. Alistair Darling made it clear in an article in the Financial Times last week that, on the eve the general election in 2010, the economy was growing and the Royal Bank of Scotland's share price was 504p, which meant that the taxpayer was up £500 million on the deal. Three years later, with no growth, the taxpayer is down almost £20 billion. It is vital that we do not turn a paper loss into a real one with a hasty sell-off. The Business Secretary, Vince Cable, agrees with us on that very point. He said:

"I don't see the need for any haste", as he called for the break-up of the Royal Bank of Scotland to boost competition. That is perhaps as a result of his membership of the Future of Banking Commission-on which he sat along with me and David Davis MP, who chaired it excellently-when we called for increased competition, maximum transparency and a new culture and ethos in the system where customers' interests come first.

Three years into the life of this coalition, meaningful competition is a more distant prospect than it was in 2010. The events at Lloyds with Project Verde and the RBS sell-off to Santander, which has hit the dust, illustrate that the Government have neither leadership nor control of this situation despite being the dominant shareholder in these entities. We cannot leave the structure of the banking system to the vagaries of the market. Perhaps the time has come for us to abandon the pretence that UKFI is in control of events, in a situation where Lloyds has already spent more than £1 billion on Project Verde and Santander has withdrawn from the agreement with Royal Bank of Scotland after years of negotiation. We have seen everything turn to dust.

The Government need to demonstrate leadership by producing a blueprint of their own for a changed financial service. Perhaps, as the noble Baroness, Lady Kramer, who is an excellent member of the Parliamentary Commission on Banking Standards, mentioned earlier, that could be in conjunction with the regional partnership initiative of the noble Lord, Lord Heseltine. We have heard calls today for decentralisation from Westminster, for a rebalancing of the economy and for other parts of the country to share in prosperity.

However, if we do it in a hurry, it will be messed up. I suggest that the date of the next general election should not be the deciding factor in reforming the architecture of the banking system. This is a one-off opportunity. Mention has been made of the situation in Germany, where the privately owned Mittlestand companies are thriving because of their close regional relationship with the 3,000-plus independent banks, whose managers understand their businesses. Handelsbanken in the UK had a favourable press because of the same style of engagement at local level.

If we are serious about rebalancing the economy, developing SMEs and revitalising manufacture, this is the time. There has never been a better opportunity to use the leverage that we have. The politically myopic reactions to the situation from the spinners at the Treasury do no service whatever. Although the Parliamentary Commission on Banking Standards is doing excellent work, it is not the forum to produce a blueprint for the Royal Bank of Scotland and Lloyds. It can point the way forward, but the blueprint is for the Government. That is not our main focus. Our focus when we were established was clearly to look at culture and standards in the banking and financial services industry. RBS should not be a big element of our report, but we should recognise that there is an opportunity to do something there for the manufacturing and regional banking sector.

Also, we do not at present know what is on the banks' balance sheets. Less than two weeks ago, the Financial Policy Committee said that British banks have a £25 billion shortfall in capital overall. The other day, the Local Authority Pension Fund Forum, representing 55 public pension funds, stated that the Royal Bank of Scotland has £10 billion of undisclosed loan losses on its balance sheet because it is using accounting standards that allow loss to be booked only after it is incurred, however likely a default may be, thereby underplaying the likely losses. We have been here before with accounting standards, when the banks, in their heyday, booked options and their own bonuses and expenses based on expected profits. A year of two later, however, the profits did not materialise. It is a sensitive and shaky situation.

Only the other week, I had discussions with HMRC after the noble Lord, Lord Lawson, and I, in a sub-committee of the Parliamentary Commission on Banking Standards, examined Barclays and the structured capital management vehicle, which the noble Lord accurately referred to as tax avoidance on an industrial scale. It is a black box. Following my discussions with HMRC, the head of the business unit wrote to me to say that HMRC has 92 issues with the big banks at the moment and £3.2 billion is under consideration in relation to tax avoidance schemes. Those matters have still to be determined. They will not be determined tomorrow or next month; it could take between seven and 10 years. The sum of £3.2 billion could have considerable impact on the prudential stability and health of banks. The banks have set aside £16 billion already for PPI mis-selling-perhaps that is a euphemism for fraud-and that figure is not final. The situation is fragile and illustrates the folly of making definitive judgment calls before a general election. We are presently clawing our way in the dark. Incentives are at the heart of the matter in banking.

At the end of the day, we need that leadership from the Government. A quick disposal of shares on political grounds will negate the golden opportunity for the Government to effect real change. I submit that the customers' interest, both personal and economic, requires a responsible, mature approach to the disposal. When I was chairman, the Treasury Select Committee was clear that we wanted the taxpayers' interest to be paramount. The Public Accounts Committee has followed that up and said in its report of 2012:

"The taxpayer has invested £66 billion in RBS and Lloyds shares and it seems that their 'temporary public ownership' will last for some time if getting value for our investment remains the most important objective for Government ... We are concerned that a short-term decision to sell might undermine long-term realisation of value for the taxpayer. The Treasury, with UK Financial Investments Ltd, should set out a strategy for its share sales, and how it will prioritise the government's various objectives so that the taxpayer's interests are protected in any eventual sale".

Hope and confidence are at the centre of that. If we expect to take taxpayers along with us, we need to have that mature and fundamental look at the system.

Photo of Lord Bilimoria Lord Bilimoria Crossbench 5:20 pm, 13th May 2013

My Lords, the gracious Speech said a lot of really good things: build a stronger economy so that the United Kingdom could compete and succeed in the world; strengthen Britain's economic competitiveness; ensure that interest rates are kept low and that people who work hard are properly rewarded; invest in infrastructure-I could go on. It is terrific.

However, when I was making my maiden speech, as the noble Baroness, Lady Lane-Fox, did today, in the same debate on the economy, I was advised: "Don't worry about what's in the gracious Speech; you can speak about things that are not in the gracious Speech". I congratulate the noble Baroness on an excellent maiden speech. I am delighted to have a fellow entrepreneur in the House, and on the Cross Benches too. She spoke passionately about online inclusiveness, and I am sure that from now on all Peers will be online. Of course, we already are.

What is missing? What has been picked up in a huge way is Europe. The noble Lord, Lord Forsyth, said that to him this was like Groundhog Day-déjà vu. I am not going to go into that topic. Europe is going to go on for a long time. The eurozone crisis has not gone away. There are regular lulls before the storm, but that storm is still about to come and it will be a perfect storm. I believe that we need to start with a clean sheet of paper and renegotiate our position in Europe. I say every day, "Thank God we are not in the euro".

As an economy, we may have lost our triple-A rating but our interest rates are low and our inflation is relatively low. However, although we have avoided a triple dip, we are bumping along the bottom. We need to generate growth. What worries me is the Government's priorities in achieving this. Why did we waste so much time pushing through employees giving up their rights for shares? This was against the will of business. It was twice sent back by the House of Lords to the House of Commons. It has gone through in a watered-down way. The lesson that I have learnt from this is that I could see very clearly that the Government had not consulted business properly first or listened to it. One of my favourite sayings in business is that good judgment comes from experience and experience comes from bad judgment. Will the Minister confirm that the Government have learnt from this mistake?

Photo of Lord Lea of Crondall Lord Lea of Crondall Labour

If the noble Lord will forgive me-this is a slightly sensitive subject-in regretting that noble Lords did not press their amendment, he may just be reminded that it was a Cross-Bencher, the noble Lord, Lord Pannick, who had put up an excellent performance on the first two occasions, who withdrew the amendment.

Photo of Lord Bilimoria Lord Bilimoria Crossbench

The noble Lord, Lord Pannick, did an excellent job, and the noble Lord is absolutely right. Will the Government accept, learn and consult business more in future?

The spending review is about to come along. Are the Government on target, given that, as the noble Lord, Lord Forsyth, said, our borrowings are increasing and will double to £1.5 trillion? We have to bring government expenditure as a proportion of GDP down. Is there a target of 40% of GDP for government spending? Could the Minister confirm that?

With regard to priorities, immigration has reared its head again. I am really worried about this. The gracious Speech mentions dealing with illegal immigration, the bad immigration that harms our country, and yes, we need to deal with that. Unfortunately, though, the signals that are being sent out, reinforced by highlighting immigration in the gracious Speech, are about discouraging and deterring the immigration that we benefit from. The number of Indian students has gone down by more than 40,000. In fact, recently we had a former head of immigration from Australia in the UK, and he said that every day in Australia they pray and thank God for the existence of the UK Border Agency. It has been proven unfit for purpose; that is why it is being dismantled. We are harming our competitiveness. If students do not come here, they go to Australia, Canada and the United States. It is one of our biggest strengths. We need to send out a very clear signal that we want immigration to benefit this country and that we appreciate the good immigration that has benefited it.

On infrastructure and High Speed 2, the noble Lord, Lord Forsyth, hesitated, but in his fantastic speech moving the Motion for an humble Address, the noble Lord, Lord Lang, spoke about High Speed 2 being a good investment in infrastructure from which our grandchildren will benefit. It is high speed being delivered at slow speed. Will the Minister confirm exactly when this project will be completed? It is an example of long-term thinking, which is great. The Minister spoke about Crossrail. I congratulate the Government on Crossrail. It is a fantastic initiative, started by the previous Government, which will benefit our economy, but nobody has spoken about Heathrow and the desperate need to improve our air services. We need that third runway at Heathrow. Why are the Government just postponing it?

What about a balanced economy? There is nothing in the gracious Speech about a balanced economy. When I am asked about my business, I say with pride that first and foremost we are manufacturers. Are the Government keen on promoting manufacturing? What are they going to do about that? We should be maximising our competitive strengths.

The tourism industry brings more than £115 billion to this economy. Expanding Heathrow would help tourism, but the most photographed building in the world is the Eiffel Tower. The second most photographed building in the world is our wonderful Palace of Westminster. The reason it is second is because we are not in the Schengen scheme for visas. There are so many people, particularly from China, who come to Europe, come as far as the channel, but do not come to the UK because a Schengen via for 25 countries is cheaper than a UK and Ireland visa. We should join Schengen. Anyone who has a Schengen visa should be able to come into this country. The reason we do not join Schengen is that we are worried about our border security. I have just spoken about the UK Border Agency. Why are the Government continually postponing imposing exit checks at our borders? They need to be brought in soon. We know who is coming into our country, but we do not know who is leaving. We need to have those exit checks. Will the Minister inform us of when they are going to be introduced?

Another of our competitive strengths is higher education, but there was not one mention of it in the gracious Speech. Earlier this month it was mentioned in this House that the University of Cambridge has achieved more Nobel Prizes than any other university. That is something of which we should be proud. That is in spite of the fact that we spend less as a proportion of GDP on R&D and innovation than the OECD or the European Union. We spend half the proportion of GDP on R&D that South Korea spends. When it comes to higher education funding, overall we spend less as a proportion of GDP than the EU average or the OECD average and way below countries such as the United States. Why is it that the United States always bounces back quickly? Why is it so competitive? Why is it so productive? Why it is so innovative? It is because it invests more than we do as a proportion of GDP in innovation and higher education. Why do the Government not do more of this?

Will the Minister confirm that we are going to be promoting clusters? There are three big clusters in the world: Silicon Valley, Boston-Cambridge in Massachusetts and Cambridge in the UK. We need to promote more clusters. Birmingham, for example, is a prime location for a manufacturing cluster. Will the Government promote clusters more proactively?

The noble Lord, Lord McFall, spoke about the financial sector. I remember speaking in the debates about Northern Rock. That was six years ago. The nationalisation of Northern Rock was rushed through in six months. It has taken us six years to get to reforming our banking system. That is scary. I am very hopeful, and I congratulate the Government on appointing Mark Carney, a Canadian, to come in and head our Bank of England. Can the Government confirm that, apart from inflation targeting, they will now encourage the Bank of England to also have nominal GDP growth targeting as well? On SMEs, which other noble Lords have spoken about, I keep hearing that they cannot raise finance. In fact, I have heard that the enterprise finance guarantee scheme loans are falling. Can the Minister confirm that? They should be increasing at times like this, when businesses desperately need finance.

On a positive note, I am delighted with the efforts that the Government are putting in through UK Trade and Investment to promote British businesses doing business abroad. I am delighted to hear that the UK India Business Council, which is funded by UK Trade and Investment and of which I am the founding chair, is now to be opening up within India. The British high commission in India has opened up two new deputy high commissions in Hyderabad and Chandigarh and will increase the number of people on the ground helping to promote British business in India. This is fantastic. As the noble Lord, Lord Forsyth, concluded, we must promote and encourage our businesses not just in doing business with Europe, but in doing business with the emerging markets such as India-the BRIC nations.

The Government are doing a fantastic job through their marketing campaign, "Great Britain". The "Great Britain" campaign tries to promote Britain with confidence aboard. I suggest that we need a "Great Britain" campaign to promote Britain within Britain. We do not appreciate enough the amazing strengths that we have as a country. We have the best of the best in the world in just about every field you could imagine, whether it is the creative industries or the legal and accounting professions, and manufacturing including beer, automobiles and aerospace, as well as sport, film and theatre. Our universities are, along with America's, the best in the world. London is the greatest of the world's great cities. I could go on.

We may be bumping along the bottom as an economy, but we should never take for granted the amazing strengths that I wish the Government would get behind-strengths which we should spread with confidence throughout our country. Then we will be able to generate growth with confidence.

Photo of Viscount Simon Viscount Simon Deputy Chairman of Committees, Deputy Speaker (Lords) 5:32 pm, 13th May 2013

My Lords, we have heard noble Lords give interesting speeches on business and the economy. This reminds me that I never know on which days to speak, because I will not be talking about these matters. I intend to address various matters of concern to road safety experts and the police and on road policing.

There was a programme on BBC Three recently called "Barely Legal Drivers" where, at the beginning, three interesting statements were shown:

"1 in every 3 drivers who die on UK roads is 25 or under ... 1 in 10 young people have been in a crash that resulted in death or serious injury ... 1 in 5 young drivers has a crash within 6 months of passing their test".

Things do not change very much, I have to admit, because I had a crash within six months of my passing the driving test. This led to my commencing a long attachment, as a civilian, to the traffic police with whom, over the years, I have taken lots of advanced driving courses.

Keeping inexperienced drivers in mind, it has been suggested that graduated licences could be introduced, putting in place certain requirements as to when they are allowed to drive, the number of passengers carried and probably various other bits and pieces. The insurance industry may require recording devices to be fitted to the cars of inexperienced drivers to see how they are driving. They may well adjust the premiums accordingly; I understand that this is already happening with young lady drivers. However, enforcement could well be a problem as there are some difficult issues and logistical considerations to be made in terms of how much time the police would have to enforce any legislation introduced. With the reduction of fully trained roads-policing officers over quite a number of years, this would not be a priority.

At the end of April, six terrorists were found guilty of serious offences against the mainland with the intention of blowing up towns and causing havoc. It was a roads-policing officer who instinctively decided to stop the vehicle they were driving. In view of his expertise, and that of all roads-policing officers, I wonder what plans the Government have to ensure that adequate funding and support is given to chief constables so that roads-policing receives higher priority, and greater investment in technology to ensure more criminals are caught while on the roads. With better vehicle-mounted technology and investment in skills and officers, criminals on the road will fear the risks and know that they will be caught.

The Royal Society for the Prevention of Accidents deduced that the currently used method of defining certain priorities is out of date and that the causes of premature deaths that can be prevented should be an area on which to focus. At all ages, cancers and other preventable diseases eclipse accidents. To put another area of premature death into the arena, accidents kill around 14,000 people in this country every year but only about 2,000 of these deaths occur on the road or in the workplace. So, home and leisure accidents now account for the majority of deaths, but this does not detract from reducing death and injury on our roads. After all, the total cost of each road death is now about £1.6 million, which means that every reduction can be calculated on a financial basis.

On costs, it has been suggested that the purchase of more battery-operated vehicles should be encouraged to reduce emissions. While this is an admirable idea, I wonder how long a battery will last and what it would cost to replace one. I may be wrong, but I have heard that they are very expensive.

In the past two or three years a number of reforms to the police have taken place: the introduction of police and crime commissioners along with pay and pension reforms. Somebody joining the police gets £19,000 a year, yet a new PCSO gets £25,000 a year. What message does this send out? Then there is the potential for the introduction of direct entry at the rank of superintendent, with no experience of policing anticipated. How many people would go to their surgery to be seen by a doctor whose only experience is as a helicopter pilot? These changes, and others that have taken place over the past decade or so, are completely counter to those who label the police as "the last unreformed public service". In addition, police have to deal with the impact of reforms on other services, particularly in the area of mental health. There are too few areas where places of safety are available on a 24-hour basis to assess individuals who are suffering from mental illness and in need of immediate support. This means that far too many people have to be taken to police cells following their detention under Section 136 of the Mental Health Act due to the lack of an available place of safety.

The next comprehensive spending review is on 26 June. I hope that no further cuts will be made to the police. If there are, there could well be disastrous effects in dealing with the requirements of the public. In order to reduce costs, a few constabularies are working closely together but there are still the same number of chief constables, deputy chief constables and police and crime commissioners within each constabulary. This has led to there being little consistency in approach, with little evidence to demonstrate savings or benefits to the public once these changes have been made.

The Crime and Policing Bill will enable the creation of the police remuneration review body. Police officers are officeholders, independent of state and answerable for their actions to the law. This onerous responsibility brings many restrictions on an officer, not least of which is the fact that they are forbidden in law to take industrial action. The transition from the current national Police Negotiating Board must take into account an officer's inability to directly influence policy concerning police pay and conditions of service. Mechanisms must be put in place to ensure that officers feel that they will be treated fairly by the Government of the day. A system of appeal that can be influenced by the Police Federation is essential so that the relationship between state and officeholder continues with a common understanding. I would also urge caution with the current proposals to introduce compulsory severance, which could change the independence of the constable. There should be a pause to ascertain the necessity for something drastic, particularly as many no longer see it as necessary. It is the first duty of government to protect its citizens and it is the duty of the Government to be fair to those discharged with this responsibility, the British police service.

Photo of Lord Tugendhat Lord Tugendhat Conservative 5:39 pm, 13th May 2013

My Lords, I will focus on one of the biggest disappointments of our economic reforms over the past few years. I refer to our failure to expand our exports as rapidly as had been hoped, and in particular to expand them outside the eurozone, despite the 20% devaluation of sterling on a trade-weighted basis since 2007. Ministers invariably place the blame for this on the sluggish performance of the eurozone. Certainly the eurozone's sluggish performance has played a significant part, but as an article on UK export performance in the February issue of the Bank of England's Inflation Report points out, UK exports have increased by much less than those of several eurozone members, including Spain, Italy and Portugal, for whom the eurozone is also their major export market.

The Bank of England suggests that part of the reason for this is the weakness in demand, since 2007, for financial services provided by banks and other financial institutions. Devaluation cannot do much about that-which, given the composition of UK exports, shows the limitations of devaluation as a means of boosting British exports. However, devaluation should have given a boost to British manufactured exports beyond the eurozone, and our failure to make progress on that front is particularly disappointing.

The contrast with Germany is particularly striking. Against the background of rising trade with both eurozone and non-eurozone countries, the balance of Germany's trade has shifted in favour of the latter. In 1999, when the euro began, some 45% of Germany's trade was with other eurozone countries-now it is 37%. The fastest-growing partners for German foreign trade include China, India, Korea, Indonesia and Brazil. Within the next few years China is expected to become Germany's biggest trading partner.

I accept that the quality and composition of German manufactured goods are such that overall they are always likely to outperform ours in that sphere. This is a sad fact, but, I fear, true. None the less, why are we so stuck in the eurozone, as Ministers keep pointing out, while they are so much more successful at breaking out into markets in other parts of the world? The single market is meant to be a launch pad for selling to the rest of the world, not a contemporary equivalent of imperial preference. Germany and other countries have achieved that break-out, and I wonder why we appear to have so much difficulty in doing so.

This is a complex subject, and there are many reasons for this situation, but I ask the Government-if they cannot reply tonight, perhaps they will do so later-whether they feel that ownership has anything to do with it. The great bulk of German industry is German-owned, and free to seek markets wherever its management sees fit. By contrast, Sir Alan Rudge has recently pointed out:

"The UK is home to 228 large manufacturing companies ... and only 93 are UK-owned".

I have always been a great supporter of inward foreign direct investment. Many foreign companies have made a huge contribution to modernising the British economy, improving the quality of its management and introducing new ideas. The spectacular revival of the British motor industry, thanks to Japanese and German investment, illustrates this point very vividly. Where British ownership failed, Japanese and German ownership has succeeded and the United Kingdom has benefited enormously.

However, it cannot be gainsaid that much of foreign direct investment into Britain has been made to supply European markets rather than markets outside Europe. The companies that have made those investments see their UK plants as part of a worldwide network in which plants in different geographical locations are aimed primarily at different markets. The same would be equally true of FDI in, for example, Spain or other European locations against which we compete to attract investment.

I do not mean to be absolutely black and white about this. Corporate trade patterns shift in response to changing circumstances. As I have said already, this is a complex matter in which many factors come into play. None the less, it would be helpful if the Government launched a review to determine to what extent the subsidiaries of foreign-owned companies in this country have the flexibility to take full advantage of opportunities opening up in markets beyond Europe, and what can be done to encourage them.

I know that many people will say that I have focused on the largest manufacturing companies, and that is true. However, the supply chains depend on those companies and, generally, in this country the largest manufacturing companies account for the greatest proportion of exports. Therefore, if the largest manufacturing companies are concentrated in one part of the world, it will follow that the supply chains that service them will equally be concentrated on that part of the world. Rather than look to the red tape and the other things people talk about that supposedly hold us back in the eurozone, we should see why it is that Germany and other eurozone countries appear to be so much more successful.

I will refer to the remarks of the Mayor of London, who has pointed out that if we were to leave the European Union, which I personally would deeply regret and regard as very counter to British interests, we would find that many of our problems arise from inadequacies within our own economy.

Photo of Lord Monks Lord Monks Labour 5:46 pm, 13th May 2013

My Lords, I, too, will address the long-term prospects for the economy, as well as the relationship with the European Union. I am pleased to be able to follow the noble Lord, Lord Tugendhat, who has expressed some very wise words from the Conservative Benches, words that I hope will be heard loudly in that party as the frenzied debate seems to be kicking off again in such a vigorous way.

Before the crash of 2008, only a few of us warned of the excesses of what we termed "casino capitalism" in the financial services industry. These excesses, as we now know, were not even properly understood by many of those in the financial services sector themselves, including many at the top of our greatest banks. We know the consequences: the bank problem became the problem of the nation states, and the consequences of austerity which have resulted need not have been as severe as they have been, as was well spelt out by my noble friend Lord Eatwell. However, the consequences are plain. As Francis O'Grady, the new general secretary of the TUC, said recently:

"The victims continue to be those who did least to cause it".

Spending cuts are weakening vital services. Austerity rolls back gains in equality, and real pay levels, for most, are falling. Our performance on exports, as the noble Lord, Lord Tugendhat, just spelt out, continues to be unimpressive, and contrasts with our neighbours-not just Germany but our neighbours on the other side of the North Sea.

Apart from the noble Lord, Lord Heseltine, and, on a good day, the Business Secretary, no one on the Government side seems to show the urgency and energy that is necessary to tackle the mess we are in and to rebalance our economy more in the direction of the other side of the North Sea. As the Business Secretary said in the equivalent debate in the other place last Friday, there are no easy answers. However, there are some wrong answers, and these include a slavish belief in deregulation and in scapegoating the European Union for our difficulties. I ask, as my noble friend Lord Glasman did recently in an article in the New Statesman, why Germany is doing comparatively well. It has the highest level of workforce participation in its governance; it has the greatest degree of regulation of labour market entry through insistence on high-class vocational qualifications; and it has the most severe constraints on capital in its banking system. How can that be? The orthodoxy practised on the other side of the House is that you grow by deregulating, reducing workers' rights and cutting some standards. The Queen's Speech mentioned extra proposals in that direction. The German example is not being followed. We should go for the high road and not seek some kind of low road to growth. I looked in vain in the gracious Speech for evidence that the noble Lord, Lord Heseltine, or the Business Secretary had had a decisive influence on the Government's programme, but I found little trace of anything other than the deregulation of employment tribunals and a further weakening of health and safety standards.

If there is a distressing lack of energy and application to the problem of rebalancing the British economy, there is no lack of energy in the debate in the Conservative Party about our relationship with the European Union. I note with great concern that scepticism is rapidly turning to phobia. Our problems are being presented as the EU's fault-not just by eccentrics but by people who are much respected in the affairs of this nation. The call for divorce from the EU risks becoming a Tory stampede for the exit. I was pleased to see, as the noble Lord, Lord Tugendhat, mentioned, Boris Johnson partially taking on this case in today's Telegraph and-rather bravely given the current mood-arguing that the UK will have to recognise that most of our problems are not caused by the European Union. For once, I find myself in agreement with him.

It is not the EU's fault that we do not have a better record of export to the rest of the world, or to the EU itself. They are not alternatives. To compare the single market with a comfort zone akin to pre-war imperial preference is surely wrong. I wish that there had been a fixation among more British businesses on exports to the EU, or indeed to anywhere else. However, too many of our businesses did not have sufficient motivation, expertise or whatever to do the job. We cannot blame others for that; we must look inside ourselves. Neither is it the EU's fault that much of what remains of the UK's manufacturing is overseas owned, with the car industry the prime but far from the only example. Many of those owners are here only because of our EU membership. Ignoring this would be a huge national risk that certain metropolitans, or even expatriates, seem to be ignoring at present. Those of us from the weaker regions know exactly what is at stake.

Why would we want to loosen our ties with our neighbours, especially when we rely so much on inward investment and overseas ownership? A very dangerous vision is developing of a Britain that is somehow offshore, with low tax, low regulation, low benefits and low standards, but able with impunity to go around the world undercutting the standards of the best and thinking that we will get access to their markets. If you think that occasionally there are problems with the single market, which there are, and that occasionally there are obstructions to the way trade operates in Europe, as there can be, you should listen to the stories of people who trade with the rest of the world. There, protection is the norm and not the exception. Businesses that export all say that the difficulties of breaking into markets, including the Commonwealth and the United States, are on a pretty large scale.

We on this side of the House, and many elsewhere, will do our utmost to keep us from becoming a sort of Greater Monaco, seeking that low road to the future. Presenting the EU as the enemy, which the noble Lord, Lord Forsyth, seemed to do, is ridiculous and over the top. There are many problems to iron out in future, but that is not the way to do it. It is not in Britain's interests to follow that route even a little way, and I hope that the Conservative Party will come to its senses as quickly as possible.

Photo of Lord Bradshaw Lord Bradshaw Liberal Democrat 5:55 pm, 13th May 2013

My Lords, Members of your Lordships' House who were involved in the local elections might forgive us for doing something that the electorate certainly did not want. They wanted attention paid to local things. Most candidates who were successful had concentrated on local things. The first item on my list is the maintenance condition of our road network. It is absolutely disgraceful and if people are talking about emulating low standards, certainly the roads of this country are a disgrace. What is more, as water gets into the foundations of the roads, they will rapidly deteriorate further. I would like to hear from the Government that they will do something immediately to make use of shovel-ready schemes to give us a decent distributive road network. The problem is infecting even the main A-class roads and motorways of this country.

The second thing to which I will draw attention is the apparent failure of the M6 toll road. This has very serious implications for the Government's ambitions to attract private sector capital into financing the road network. There have already been calls for the nationalisation of the M6 toll in order to relieve Macquarie, which was behind the scheme, of the liability that it openly accepted. One lesson that you are supposed to learn in a capitalist economy is that if you back a loser, you will lose money. That has applied to the banks but applies to other things as well. I would very much like to know how the Government intend to introduce private capital into this sector of the economy, which has been mentioned as being an important part of the recovery process.

Thirdly, in view of the possibility of Scotland somehow separating from England, I raise the case of the A1 in Northumbria. It is a key route between England and Scotland. It is a dreadful route with a dreadful safety reputation-and the diversionary routes are even worse. I believe that all the preparations have been done and that there is a shovel-ready scheme. This would be a step towards underlining our unity with Scotland rather than allowing the relationship to deteriorate into some sort of cul-de-sac.

The railways are desperately short of rolling stock. I advise the Government that the best thing they can do is get out of the way of investment, which they have inhibited for years by indicating within the franchise agreement a presumption that there will be a carry-over of rolling stock from one franchise to the next. This is very similar to the TUPE arrangements whereby staff from one franchise can automatically expect to move forward to the next. It does not seem that the Department for Transport is in any way equipped to work out a rolling-stock strategy for the railway. That should be done by the private sector. This was the original intention of privatisation. There were supposed to be asset-light franchises, and Railtrack was supposed to maintain the network. We know what happened there. The rolling stock companies are anxious to invest money and have large sums of money to invest, but they need the Government to get out of the way and allow commercial relations to take root between train operators and the railway.

Photo of Lord Mitchell Lord Mitchell Shadow Spokesperson (Business, Innovation and Skills) 6:00 pm, 13th May 2013

My Lords, in my reply to the gracious Speech, I will address two issues. The first is the special concern of small business growth, and the second the consequences and opportunities of the digital revolution.

Despite the fact that my job definition as Shadow Business Minister includes responsibility for SMEs, I have vowed to myself to refrain as best I can from using the expression SME. It is so engrained in our vocabulary, but it is such a misnomer. The fact is that small businesses and medium-sized businesses are not the same and should not be grouped together; their requirements are so different that combining them is an error. Those who do so, in my opinion, demonstrate that they have no understanding of the particular needs of each sector.

As I have mentioned on many occasions in your Lordships' House, nearly 40 years of my business career were spent in the small business environment. Well, that is not quite true, because the three small businesses I founded each grew to become medium-sized international companies. But in the beginning each business started with a few of us sitting around a small table, or at the bar in a pub, where we said, "Wouldn't it be a good idea if?". It is very hard to convey what it is that motivates one to become an entrepreneur. When I think back, I sometimes think that I must have been crazy; the incidence of failure in start-up businesses is heavily stacked against the entrepreneur. What few people outside the entrepreneurial circle understand is just how stressful it all is. There is the perennial stress that the money might run out, that an important customer might go somewhere else, or that a key employee might be recruited elsewhere. You need the constitution of an ox. Put simply, it is not for everyone, but if you succeed it is truly wonderful.

When I created my companies I never thought about the rates of income tax, corporation tax or capital gains tax, and I certainly did not have the vaguest notion what inheritance tax was, nor did I care. Indeed, when I started my first business in 1972, I seem to recall that the top rate of income tax was 83%, plus unearned income tax of 15%-not what one might call an entrepreneurial incentive. To me it was all irrelevant. I wanted to be my own boss. I had worked for big companies, and I simply knew that I could do it better; it was the arrogance of youth. I loved the freedom, I loved building teams of well motivated and excited people, and I revelled in the joys of customer satisfaction. So when I hear politicians somehow thinking that a tweak here and an incentive there will suddenly turn us into an entrepreneurial society, I know that they have got it wrong. It is not how it works. Nothing illustrates this better than the shares-for-rights issue that we debated at length in the previous Session. No businessman would have dreamt up such lunacy as this.

What does matter is creating a climate where the entrepreneur feels comfortable-and for them, as for all business people, the one ingredient that gives comfort is confidence. Success in any field comes from confidence. Just see what happens to a football team when a great new manager arrives; the same players are revitalised. As the Minister will know better than anyone, we saw it in the Olympics. When people believe in themselves, they can move mountains. As it is with sport, so it is with business. Confidence comes from leadership, and leadership, of course, comes from the very top. When I look at the grim face of George Osborne, all I see is dour despondency. What he needs to do is to lighten up and provide strong, positive leadership. He needs to change the atmosphere, be upbeat and introduce a strategy for growth. He could have done it in the gracious Speech, but he chose not to.

Goldman Sachs, for which I know the Minister has a special attachment, has run an interesting study in business growth, and I would like to bring it to your Lordships' attention. Several years ago, Goldman Sachs introduced a project called 10,000 Small Businesses, which is a target that it set for itself. In conjunction with five UK universities and based on its American experience, it set its goal to supercharge ambitious small businesses, seeking to generate small business growth that otherwise would not have happened. The results have been extraordinary.

Small businesses are the major source of job creation and also drive economic growth through innovation and market expansion. It is true that the overwhelming majority of small businesses do not grow and are static; they are important, but they do not produce economic growth. But there is a small percentage of small companies that are ambitious, growth hungry and well run. What the Goldman Sachs programme seeks to do is to locate such high-growth companies and propel them to achieve significantly greater returns. So what does Goldman Sachs do? It selects high-growth potential companies that have more than 10 employees and a turnover of just over £1 million and screens them carefully to determine their ambition and their management competence. Each CEO commits to undertake 100 hours of involvement over a four-month period. As Goldman Sachs puts it, they are companies that have dreams and talent which they wish to translate into advanced action. They learn about money and metrics, leadership, marketing, strategy, financing, and putting it all together. At the end, they produce a business growth plan-not so much a business plan, more a commitment to growth. The most exciting aspect of the programme is the dependence on peer-to-peer learning and engagement, which comes from the entrepreneurs themselves, from different backgrounds and different industries, sitting down together, challenging, querying and providing support from each other to each other.

The results are staggering. Employment growth is up 23% compared with 1% for small businesses as a whole, and there is revenue growth of 16% compared with minus 9% for the small business area as a whole. Equally impressive are the following qualitative statistics: 92% became more confident of their ability to grow their businesses; 83% introduced new internal processes; 81% used financial data to derive business decisions; and 84% had an understanding of external finance options that they did not have before. The programme has so far created around 2,000 new jobs. This type of programme is not exclusive to Goldman Sachs and variants are practised by others, but there is no denying that these are impressive results and an indicator that selecting high-growth small companies with big ambitions and helping them to accelerate their growth is an important way to stimulate the economy.

I cannot let the opportunity go by without welcoming the noble Baroness, Lady Lane-Fox of Soho. Her maiden speech was outstanding; for me, as an IT entrepreneur, it touched many key points. The noble Baroness is not in her place, but perhaps I can relate to fellow Members of the House of Lords how I first met her. I had to see her to do with a charity that I was involved in, and I was given an address in Soho. I went along this street and that street and, eventually, was standing outside what I would probably describe as a massage parlour. It was a tanning salon-noble Lords get my drift. I was pretty concerned about this, but I went in through the aforementioned massage parlour and into the noble Baroness's office, where lots of exciting people were doing amazing things in the IT sector.

Soho has played a major part in my own life. As a misbegotten youth, I used to spend much time there going to jazz clubs and generally hanging around. But perhaps I should move swiftly on. When I met my wife, she was a film director working in Soho, and we had our wedding reception there. In a moment of complete madness I opened a mega-restaurant just off Dean Street, which failed dismally and cost me a fortune. I put it down to a learning experience. So one way or another, Soho is part of my life. My only regret is that, unlike the noble Baroness, I did not have the foresight to include Soho as part of my title.

To those of us in the IT sector, Martha Lane-Fox, as she then was, is a legend. Lastminute.com was one of the triumphs of the dotcom boom and one of the survivors, as was I, when all around us collapsed. Indeed, the noble Baroness is a born survivor. No matter what slings and arrows have been flung her way, she just brushes herself off and gets on with it. She has been a champion for our industry and has helped government understand the challenges of the digital revolution. Through her chairmanship of Go On UK, she has sought to make Britain the most digitally skilled nation in the world. That is a tough challenge in that, as she said, 7 million people have never used the internet. I am delighted to have a fellow IT entrepreneur in your Lordships' House and I look forward to working with her.

There is a digital train crash about to happen. In the past few months, we have seen some dramatic failures on our high streets. Jessops, HMV and Blockbuster video have all gone bust but not as a result of the financial crisis, the Government's policies or the boom in out-of-town shopping centres. They have failed because they were unable to anticipate the tsunami of the digital revolution. Cameras are on their way out, music is streamed, DVDs are downloaded over the internet. This is just the beginning and we had better get used to it. The internet is changing everything. It is Schumpeter's creative destruction being condensed into months rather than decades.

This digital revolution is exciting and challenging. It will continue to revolutionise our lives. We must not be afraid of it. We must grasp it and make sure that all our people are equipped to participate in its benefits. Most of all, we must make sure that no one is left behind.

Photo of Lord Higgins Lord Higgins Conservative 6:11 pm, 13th May 2013

My Lords, I certainly agree with the noble Lord who has just spoken-we have heard an outstanding maiden speech from the noble Baroness, Lady Lane-Fox of Soho. However, I should also add a word of warning: competition is increasing from the younger generation. I discovered last weekend that my eight year-old grandson has created his own fully operational website. An interesting section at the end states that no harm has been caused to animals in the creation of the website, which indicates a correct order of priorities.

I welcome various aspects of the gracious Speech, particularly the action that is proposed to be taken on asbestos-related cancer. That matter has been raised previously in your Lordships' House but without success. I am glad that proposals are now in place to deal with it. Other than that, I think that the gracious Speech is regarded as being somewhat thin, and there is a tendency to concentrate on what has been left out rather than what has been put in, particularly at the other end of the building. None the less, there is no doubt that the central part, as far as economic management is concerned, is embodied in the paragraph that states:

"My Ministers will continue to prioritise measures that reduce the deficit, ensuring interest rates are kept low for home owners and businesses".

I strongly support the line that the Chancellor of the Exchequer has taken on this. However, I am somewhat concerned by the assertion, which was repeated by my noble friend on the Front Bench this afternoon, that we have reduced the deficit by a third. I do not think that that is the right way to put it. One should say that we are still increasing borrowing at two-thirds the appalling rate set by the previous Government. I do not believe that this can go on. It is crucial that we find a means of reducing that deficit, as stated in the gracious Speech. I said right at the beginning of the formation of the coalition how difficult that would be. We are still not the least bit clear where the Opposition stand. Mr Balls still seems to be saying that the deficit has been cut too soon and too much. I do not believe that either of those assertions is valid.

However, the policy is now being reappraised. An IMF team is making its usual annual visit to the UK. The press seems to be indicating that the IMF's support for the Chancellor's policy is weakening. I believe that that is wrong. I very much hope that the IMF will continue to sustain his efforts to reduce the deficit and ensure that our position is sustained internationally. Various people have argued against the stance adopted by the Chancellor, as we have heard from the opposition Front Bench today. However, one thing is absolutely clear: the rating agencies are not reducing our rating because we are cutting the deficit too much but because we are not cutting it enough. That is an important point to take into account.

At the same time, we have to relate this overall problem to economic management. Demand management seems to have disappeared totally from discussion. It is very important, however, because if we find ourselves in a situation-as we are-where fiscal stimulus is not possible, we must rely on monetary measures. To that extent, I very much welcome the action that has been taken on quantitative easing. It is, of course, true that this is having a serious effect on pension funds, as was pointed out by the opposition Front Bench. The time has probably come to reappraise whether achieving quantitative easing by working through the gilts market is the right way to do it-that is, the rather ludicrous situation whereby the Bank of England purchases the gilts and then pays interest to the Chancellor. That is rather silly. We should consider other ways of doing this as we will never want to reissue the debt which has been purchased. If we need to do that to control inflationary pressures later on, that can be done by issuing new gilts, which are likely to be of a better form and duration than those which have been purchased. I suggest to my noble friend on the Front Bench that we need to do some serious work on that matter.

The article by my noble friend Lord Lawson was very helpful in as much as it made one think afresh about Europe. I have to confess that for many years I have said to people that there is no question whatever of our withdrawing from Europe. I believe that the time has come when we need to reassess that. Indeed, the Prime Minister has indicated that that is the case. The timetable that he has set out is right. In television interviews he is asked whether he would vote to stay in or to go out of Europe if there were a referendum tomorrow. However, that is a totally false question. People come down on one side or the other but usually state their reservations, which are then totally disregarded in subsequent headlines. That is the situation we happen to be in but, as I say, the Prime Minister's proposed timetable is right and we should follow it.

My noble friend Lord Lawson and others are too pessimistic about negotiations. At all events, we should take the opportunity to negotiate. It would be absurd simply to say that we will pull out without any negotiation whatever. That would not be the right way to approach the problem. However, irrespective of whether the negotiations are likely to be successful, the touchstone is the financial transaction tax. If we fail to resist that being applied to the City of London, the possibility of successfully negotiating other issues may be less than one would hope. None the less, overall, it is worth entering into negotiations and it is worth while to have a referendum in due course, as is proposed.

Meanwhile, those who are in my party need to be very careful. There is not to be a referendum, as I understand it, unless the Conservative Party wins the next general election. If there is one thing that I learnt from some 18 years on the executive of the 1922 Committee in another place it is that the electorate are far more concerned about whether a party standing for election is united than they are about any individual policy. I lived through that in 1997. My only consolation was that the people on the 1922 executive who were being such a pain were the ones who lost their seats. We really must deal with this issue with a little more sensitivity. The press is bound to blow up enormously the matter of a referendum as a great event, which it may be, but we have to keep a sense of perspective on this issue.

Photo of Baroness Hayter of Kentish Town Baroness Hayter of Kentish Town Shadow Spokesperson (Business, Innovation and Skills), Opposition Whip (Lords), Shadow Spokesperson (Cabinet Office) 6:20 pm, 13th May 2013

My Lords, I shall speak about consumer rights, on which a number of things are to be welcomed. First, I welcomed the opportunity of hearing the maiden speech of the noble Baroness, Lady Lane-Fox of Soho. We look forward to her continued activity on behalf of consumers, particularly in disadvantaged communities. Secondly, I welcome the proposed consumer rights Bill and everything in it. Anything which can be done to make markets work better for consumers is good for the economy, as well for consumers. I also pay tribute to the role played by the Minister, the noble Baroness, Lady Hanham, in accepting our amendment on requiring letting and managing agents to belong to an ombudsman scheme. That is going to make a real difference to tenants and landlords, and help clean up the sector, which can only be good for the provision of much-needed homes. She should be proud of the results of her arm-twisting. Thirdly, I welcome the opportunity that will be provided through pre-legislative scrutiny of a draft Bill. This will ensure that we end up with a Bill that will make a real difference to consumers. That is probably enough of the good side.

I now turn to what is not in the Bill and where the Government have failed to help consumers. We on this side have tried to amend various Bills to help consumers. We sought to have the Prudential Regulatory Authority and Competition and Markets Authority set up consumer panels. The Government resisted. We sought to amend the Financial Services Bill and the Enterprise and Regulatory Reform Bill whereby service providers should have to exercise a fiduciary duty towards their retail savers or beneficiaries. The Government resisted. We asked for the Competition and Markets Authority to include members drawn from a consumer background. We failed. We sought to prevent the closure of Consumer Focus. Sadly, we failed.

Furthermore, funding of trading standards has been slashed, thereby making the identification and prosecution of scams and rip-offs even less likely. The Government also failed to introduce a register of lobbyists. Yet who has the money to pay for fancy public affairs companies? It is not consumers. Whether it is the tobacco industry, drinks manufacturers, the insurance industry, food producers or newspaper proprietors, their bought access is never in the interests of their customers but of those industries' bottom line. We need to know who is paying for such access. Sadly, the Government omitted from the gracious Speech proposals in this area. When tested, the Government have shown themselves to be lacking in resolve to help consumers negotiate complicated or unfair markets. The Government have failed to put consumers' interests centre stage. Other measures in the Queen's Speech, such as requiring landlords to check the immigration status of tenants, are likely to lead to more unofficial letting or to fewer available lets, both of which disadvantage potential tenants.

I turn to the proposals, which, although welcome, do not go far enough and miss the opportunity to ensure that consumers always get a fair deal or, failing that, easy access to redress or restitution. We welcome the enabling of "opt-out" collective redress in competition cases, whereby firms found guilty of competition law breaches will be more likely to pay damages to all affected consumers. However, the proposals are limited to competition and do not cover breaches of consumer law. Why is there no provision for claims to be brought by representative bodies, which could cover product liability, mis-selling or unfair terms such as over bank charges? We welcome the proposal to clarify the law on unfair terms in consumer contracts, which will enable, for example, bank charges to be assessable for fairness by the OFT or its equivalent body. We welcome the introduction of redress for a breach of consumer protection regulations, which will clarify the law and extend consumers' ability to claim for losses from misleading advertisements or aggressive sales practice. We welcome the remedy for consumers when they have not received what they expected from a service, although we would like this to be extended to where the service was substandard, even though the provider used skill and care.

We welcome the provisions to clarify consumer rights for purchases with digital content. However, it is not clear whether a consumer can get a refund for faulty digital content. We will return to this matter in due course. As with our letting agents amendment, we support consumers having access to redress but would like to go further, with better enforcement and the possibility of a single portal to assist such access. We will seek to ensure that the Bill provides for a strong, accessible, collective redress mechanism, similar to those in Portugal and Australia.

Finally, where are the measures to respond to constant consumer problems? These include cold calling; energy bills increasing by £300 a year since the Government came to office; ever-increasing rail fares, up 9% a year after the Government allowed train operators to increase some fares by 5% above the cap; and extortionate charges on some pension savings such that on retirement some pensioners find that nearly half their pension fund has been wiped out by charges. We need a tough energy watchdog to force suppliers to pass price cuts on to the consumer and to ensure that the over-75s automatically get the cheapest tariff. We need intervention on rail fares and rights for passengers to get the cheapest ticket available, without having to be a whizz-kid on the computer-be they my noble friend Lord Mitchell or our latest noble Baroness.

We need transparent charges on pensions and savings, and to tackle the worst offenders by capping charges at 1%. In addition, we should have had a communications Bill to help consumers, involving greater protection for children and action to tackle the industry's concentration and monopolistic nature. We need to strengthen people's rights in a digital consumer's charter that should cover privacy and online theft, price transparency, greater ease in switching providers, help for parents to protect their children online, improved access to decent broadband, consumer protection for digital payments, and effective action to tackle nuisance calls, texts and spam e-mail.

In short, we need action to create a culture that respects consumers and helps them to obtain a fair deal across all markets. We need to tackle rip-offs and sharp practice, and we need a Government to be on the side of users and consumers, not a voice for the producer or service provider over the less powerful consumer. We will welcome the consumer Bill but work to improve it to make it the best that it can be.

Photo of Lord Mawson Lord Mawson Crossbench 6:28 pm, 13th May 2013

My Lords, the first words of the gracious Speech tell us that the Government will continue to focus on building a stronger economy so that the United Kingdom can compete and succeed in the world. That is exactly right.

At a recent meeting with a large construction company that is playing a major role in rebuilding some of our public infrastructure, I was told how the company longed to build developments that were more "joined up". The present silo approach to regeneration did not make business or social sense with the limited funds now available. In recent years, there has been much talk and some action from successive Governments in seeking to join up public sector budgets because they get more bang for their buck, but the living examples of success are still rare. The silos that exist between education, health, housing and business funding remain stubbornly in place, and successful partnerships between the business, public and voluntary sectors are still hard to do because our procurement systems are broken. When times get hard, the tendency is for us all to retreat back into our familiar silos precisely at the time when the financial squeeze presents us with a real opportunity to address this enduring impasse. I fear that this is happening now, and without clear leadership centrally it will get worse.

When you have worked in a local community for 30 years, you gain the long-term view. You have seen government programmes come and go, and you have gained some measure of what works and what does not. There has been a whole host of attempts in recent years by successive Governments to join up local delivery. Everyone-particularly the business community-knows that that is really important and that it is the only way to make smaller budgets stretch further. As a result, there has been a whole host of initiatives. To name just a few, there have been local integrated services, Total Place, small area budgets, participatory budgeting, Total Neighbourhoods and the Neighbourhood Community Budgets programme. These government programmes had one thing in common: they were short-term initiatives promoted by one Minister. What seems to have happened is that as some have encountered the difficulty of making change happen, interest towards them has waned and the pilots have not been sustained or the Minister has changed. Another Minister has then decided that they want to tackle the problem and so they start again.

These initiatives seem to fall into two types. There are the Total Place-type initiatives, which are about bringing together local public services-for example, health and social care-and then there are the small area budgets and Neighbourhood Community Budgets programme, which seem increasingly to have taken the direction of consulting local people about local service delivery. However, it is far from clear why the process of consulting local people necessarily has an impact on the quality of local services or enables services to be delivered in a more joined-up way. Again, in our experience the private sector was excluded.

It may be helpful at this point to share with noble Lords some recent practical experience. This is not a criticism of government but it illustrates what can happen to those of us in local communities who are serious about this agenda. On the Department for Communities and Local Government website we are told that in October 2011 the Communities Secretary announced details of how areas can bid to trial two local approaches to integrated services: Whole Place Community Budgets and Neighbourhood Community Budgets. The website describes this dramatic new shift as,

"an opportunity to change the future of the way public services are funded and be the thumping heart of your community".

We are told that 24 areas out of 45 had been shortlisted to put their name forward to work with Whitehall and develop neighbourhood-level community budgets to explore how different public sector funding streams could be brought together to both save money and create more integrated public services. The website says that the applications demonstrated a drive across the country to explore new ways to give local people more control over services.

Our partners in Tower Hamlets working in education, housing and health thought that this was a very good idea and timely, because we had been developing integrated services together for many years with some success and often against the odds. Here was an opportunity seriously to extend our work and create more joined-up solutions that focus on the individual and the family.

As partners, we applied for and won pathfinder status, and here I must declare an interest. I was asked to speak at a meeting of civil servants new to this field of work and to share our experience early in the process. I was also invited, with an excellent local authority CEO, to meet 15 directors-general from across government, who said that they were all keen to co-operate and learn from our experience of what works on the ground. We were encouraged by the offer of support and involvement from government. Although we did not want government to hold our hand, we did want understanding of the practical issues involved and a little oil in the wheels.

In Tower Hamlets we began to get practical, bringing local people and partners together. We developed a pilot programme and explored how we could bring budgets together and thus use the limited moneys that were available in health, education and housing more efficiently. Crucially, we wanted to involve local people in the delivery process and not in talking shops, thus creating buy-in, new skills and community ownership. We began to talk to major business partners to bring them on board; there was some interest.

There is real concern from politicians across the House about a lack of engagement with local communities, particularly at a time when people feel increasingly disengaged from the political process. We have had a taste of this in recent weeks. In my experience, people do not want to be just the recipients of the state and its services or to be consulted to death about what the state is going to do to them. No-our experience over many years is that many local people also desire to be involved and practically engaged in the delivery of services. New jobs and skills and innovation can come through this process, as we have discovered, and very poor people's lives and those of their families have been changed for ever as a result.

After some consultation and research, our team decided to focus its efforts during the first year on the diabetes epidemic that is rife in Tower Hamlets. This epidemic needs to be tackled through a joined-up approach in the local community. The lead consultant at the local hospital told me that his caseload was overwhelming him. He agreed that the solution lay in people's lifestyles and diet, and that it could be tackled only through a joined-up programme run in the community connecting health, education and lifestyle. We created a business plan and began to commit individual budgets as a sign of good faith and to build the project around well established work we had already been doing in this area.

What we then experienced from government was what one of our very experienced CEOs described as a "journey in retreat". Promises were made to work with us to "enable" the process, but when we asked the Minister to write two letters to the chairman of a supermarket chain and the chairman of the local hospital-both of whom were coming towards the project anyway-to help to oil the wheels, we were told that the officials advised against it. The more we sought to create integrated solutions, bring funding together, innovate and to take seriously what the Secretary of State had said about empowering communities, the more we experienced a process which encouraged consultation and talking shops and not delivery.

Given the health crisis we faced, this about-turn was serious. We were being pushed back into thinking we had explored 20 years earlier and had moved on from precisely because in our experience it delivered little change in practice and often led to increased apathy among local people, along with more talk and reports. My colleagues and I began to ask: are government under the leadership of any party capable of being a learning organisation? Very little, as far as we could see, was being learnt. I never saw the directors-general again and, as far as we can tell, we will now have to move forward on our own with, we suspect, little learning taking place at the centre. This we will of course do; we do not want wet-nursing by central government but we worry about the cost of this process and another wasted opportunity.

I suspect that this experience is not unique and that it has something to do with why the electorate, many of whom have become involved in this project, are increasingly sceptical about the ability of any Government to follow through and deliver. This is one policy initiative that was actually a very good idea: it could have led to deeper community engagement, joined-up innovation and a streamlining of public funding. We had created a project that we could all together learn from by acting both centrally and locally, but, as far as we can tell to date, there has been little follow-through.

So how do we move integrated working forward and deepen practical partnerships between the various sectors? First, we need to recognise the importance of long-term leadership. In my experience, real change happens in a community where there is clear, committed leadership that remains involved for the long term. Secondly, we need to resolve the confusion between democracy and delivery. The reason local services are not joined up is not that local people are not consulted. While it is good to understand the priorities and concerns of local people, joining up delivery is hard work and, if at every turn the partners feel they need to check via some amorphous consultation process, it is likely to run into the sand. Instead, we need to enable and encourage local organisations to deliver services together, and to use the Government's procurement muscle to deepen partnership working between the sectors. Business is now up for this but it needs encouragement and not signals that point to a retreat.

Thirdly, what is the role of government? Everyone knows that we have to make this work. One of the reasons why there is such a loss of trust in the political process is the frequent failure of successive Governments to deliver on all their many promises. My colleagues and I suggest that the Government identify a figure who everyone respects and who will take long-term responsibility for this process in government. Then they should find an organisation outside central government to run the programme and agree a sensible budget with a 10-year contract.

To be frank, if the will or desire to do this is not there, my advice is to stop wasting everyone's time with talk of joined-up thinking and action. The electorate know spin when they hear it. If the present Government want to distinguish themselves from previous Governments and distance themselves from broken political promises, I suggest our politicians focus on three words: delivery, delivery, delivery. My colleagues and I have found that trust is created and local people participate when you deliver in practice on what you say.

Is not an integrated, in-the-round community what politicians past and present are struggling to define when they use phrases such as the third way, big society and one nation? This is how you put flesh on the bones of what these terms might mean in practice and make them come alive for people.

I have an awful feeling that I could be making this same speech in response to many future gracious Speeches: I just hope that someone will prove me wrong. We can hope. I certainly will continue to worry about this issue like a dog with a bone because I know what a difference integrated working can make when you get it right and, of course, what moneys can be saved if you do it.

Photo of Lord Faulkner of Worcester Lord Faulkner of Worcester Deputy Chairman of Committees, Deputy Speaker (Lords) 6:41 pm, 13th May 2013

My Lords, in my speech this afternoon I intend to concentrate on transport, with particular reference to the gracious Speech's very welcome confirmation that the Government are proceeding with a paving Bill to allow work to proceed on plans for the construction of High Speed 2. I wish them well with that and with the hybrid Bill, which I hope may pass before the end of this Parliament.

I should remind the House of my relevant interests. I serve as an unpaid member of First Great Western's stakeholder advisory board. I am president of the Cotswold Line Promotion Group and the Heritage Railway Association. I am also the co-author of a recently published book called Holding The Line: How Britain's Railways Were Saved, which contains a political and social history of the railways, particularly since the publication of the Beeching report 50 years ago.

Perhaps I may start by picking up a theme that runs through that book. It is sometimes hard to recall how massive the turnaround in the public's attitude to rail travel and the fortunes of the industry has been. In the 1970s, 1980s and early 1990s, the railways appeared to be in terminal decline. The process of retrenchment and cost-cutting, which had started at the time of Beeching, appeared remorseless and inexorable. Numerous plans were hatched to reduce the size of the network further by line closures, cuts in services and fare increases.

Governments of both parties encouraged plans to substitute buses for rail services, particularly in rural areas. Weird enthusiasts for the Railway Conversion League were listened to as they put forward plans to concrete over the railways and turn them into busways. Thirty years ago, it looked as though the lobbyists for the road industry, road haulage and motorway construction might achieve their final victory. Back in 1960, the Road Haulage Association felt able to say in its journal, The World's Carriers:

"We should build more roads, and we should have fewer railways ... We must exchange the 'permanent way' of life for the 'motorway' of life ... road transport is the future, the railways are the past".

Happily, it did not get its way because the public decided that they liked their railways and did not want them closed. By 2001, the distinguished City correspondent, Christopher Fildes, who served on the Railway Heritage Committee with me and was a journalistic colleague of the noble Baroness, Lady Wheatcroft, was able to write in the Spectator:

"Railways are a growth industry. Their most sustained attempts to drive away their customers have not succeeded".

Twelve years on, the growth continues. In 2012, the total number of rail passengers exceeded 1.5 billion, compared with 630 million in 1982. Numbers grew by 5.5% in 2012, 7.2% in 2011 and 7.9% in 2010. The number of those travelling in the last quarter of 2012 was the highest for any quarter since the 1920s. It will not have escaped the attention of your Lordships that much of this has been achieved at a time of recession and in the face of fare increases above the rate of inflation, as my noble friend Lady Hayter pointed out. On 11 March, Sir David Higgins, chief executive of Network Rail, said in a speech at the Campaign for Better Transport conference in the Science Museum that,

"utilities such as airports and power have seen annual compound growth rates of no more than 1 per cent on average, yet rail has grown by 5 per cent compound every year".

As people's experiences of travelling by rail and the reliability of services improve, this growth is likely to continue. The West Midlands Regional Rail Forum says that Network Rail's growth forecast for 2021-22 has already been achieved eight years early and it is a similar story elsewhere. Both the west coast main line and the east coast main line will reach capacity before the end of this decade. In the case of the west coast main line, that will be less than 15 years after the completion of one of the most disruptive and expensive upgrades of all time.

I do not understand how anyone can seriously argue that spending another £20 billion-plus on upgrading these two Victorian railways and disrupting services for years at a time, and in the end producing infrastructure that cannot support line speeds that are commonplace throughout Europe and the Far East, stands any sort of comparison with the benefits that will flow from building High Speed 2. To argue, as the HS2 opponents do, that the new line is only about reductions in journey time between London and Birmingham is completely wrong and misses the point. It is about revitalising the economies of towns and cities in the Midlands and the north of England, and narrowing the north-south divide. It is about giving the railway the opportunity to satisfy the ever-growing demand for passenger travel. It is about reducing the number of car journeys and short-haul air passenger flights, both of which will have significant environmental benefits.

Perhaps equally important, High Speed 2 will-according to the WSP engineering consultancy-lead to 500,000 fewer heavy goods vehicle journeys on the M1, the M40 and the M6, which is the equivalent of 65,000 tonnes of CO2. The new railway will produce environmental benefits worth £1.3 billion over 60 years. For all those reasons, I am happy to reaffirm my unqualified support for High Speed 2, which is a rare example of a brilliant idea conceived by one Administration-thanks to my noble friend Lord Adonis-and then picked up and developed by their successor.

Before I conclude, there is one other matter that I wish to bring to the attention of the Minister. I have already given her notice of my intention to raise it in this debate. This is also a non-party issue in the sense that the previous Government took the initial decision and this one are sticking with it. I am talking about the western terminus of Crossrail, which is a hugely important and valuable project capable of transforming the travel-to-work experience of hundreds of thousands of commuters, as the noble Lord, Lord Deighton, said in his opening speech.

On 5 March, a number of Members of the other place and of this House, including the noble Earl, Lord Attlee-who I am very pleased to see him in his place-and I visited the site of the new Crossrail station at Bond Street. The following week, I was taken by First Great Western on a tour of the new station at Reading. I was particularly interested to see included in the new arrangements a platform designed to accommodate four Crossrail trains an hour, should it be decided at some stage that Reading should be the western terminus, rather than Maidenhead. To me, and to almost everyone in the industry and outside it who understands these issues, it is intuitively self-evident that, following the Government's welcome decision to authorise electrification of the Great Western main line, it is to Reading that the Crossrail trains should run.

I also learnt that we are within days of starting work in Maidenhead to construct the turnback facilities, taking around 18 months and costing as much as £35 million. I wrote to the noble Earl, Lord Attlee, on 18 March, making the point that if the decision was to be taken later to extend Crossrail to Reading, much of the new infrastructure at Maidenhead would not be needed and the Government and Transport for London would be criticised for wasting money. The Minister replied to me last week and I thank him for his letter. It contained the sentence:

"Officials will continue to work with Network Rail and the train operators on the timetabling issues presented by the introduction of Crossrail services on the Great Western Mainline".

It did not, unfortunately, state that there would be any pause in the work at Maidenhead.

I raise this issue today because we are at the point where a decision must be made to prevent money being wasted at Maidenhead and to deliver a far better arrangement in its place. I understand that various discussions are going on behind the scenes involving Transport for London, Network Rail, the train operators and the Crossrail team. I ask that DfT Ministers get directly involved and help deliver a solution that makes best sense all round. I hope the noble Baroness will have an answer to that when she replies.

Photo of Baroness Byford Baroness Byford Conservative 6:51 pm, 13th May 2013

My Lords, the Government are committed to building up the economy, supporting growth in the private sector and the creation of more jobs and opportunities. This is welcome. I also very much welcome the maiden speech of the noble Baroness, Lady Lane-Fox of Soho, because she spoke on the important topic of digital online and the growth of online services. Increasing the coverage of broadband and improving broadband speeds is but one way of achieving this goal. A survey of the Institute of Directors in January 2013 found that fixed-line broadband for urban businesses is generally good but that in rural areas growth was unsatisfactory. Its conclusions state that,

"broadband in rural areas is an urgent priority".

The CLA estimates that 18% to 20% of rural areas cannot get broadband. This affects around 100,000 businesses, with a turnover of up to £60 billion, many of which are obviously farming or farm-related businesses. Rural broadband influences diversification and has enormous potential for on-farm increases. The noble Baroness stressed the importance of digital growth and online services. She commented that there should be a universal UK system and that it was a basic right for everyone.

I am grateful to the NFU for its briefing on broadband services. Defra's whole-farm approach involves moving most or all of the farming-related services online and is run through Business Link. Without adequate broadband services many businesses are unable to progress and grow. The House of Lords Communications Committee report of July 2012 criticised the Government's broadband strategy for failing to create a future- proof national network, concluding that the current programme risks leaving people and businesses in certain areas of the UK behind.

In his introduction to the debate on the report, my noble friend Lord Inglewood highlighted three key elements. First, broadband policy should be driven by the need to arrest and ultimately eliminate the digital divide. Secondly, it should be driven by a long-term but flexible view of the infrastructure's future; the report referred to fibre-optic hubs that could bring open access into or within reach of every community. Thirdly, it should strive to reinforce the robustness and the resilience of the network as a whole.

I should have spoken in tomorrow's debate, which obviously covers agriculture, but I cannot and so I have tried to pick three issues that are common to the debate today-namely, regulatory reform, broadband and local government. I move swiftly to regulatory reform.

My noble friend Lord Forsyth, who has just left his seat, said that he felt that there was no need to have in the gracious Speech a Bill to look at the effectiveness of the regulation of business. I am not sure that I agree with him but I share some of his thoughts. Within the agricultural sector, a farming regulation task force was set up in July 2010. It was asked to carry out an independent review of ways to reduce the regulatory burden on farming businesses. The report brought forward some 200 recommendations.

Defra responded in February 2012 and followed up with an implementation group chaired by Richard Macdonald. One year on, it has identified five priority issues. First, there should be a culture change, focusing on outcomes rather than on processes. Secondly, there should be a system of inspection and earned recognition allowing farmers to demonstrate best practice and earn recognition, which would reduce the number of inspections made on-farm. Thirdly, data-sharing and paperwork across Defra and its agencies should be improved. Fourthly, a system for overseeing government projects and developing ways to deliver simplified and integrated environmental regulatory messages should be followed. Fifthly, the electronic reporting of animal movements should be extended.

I have gone into some detail as the evidence reflects that change comes slowly. In its briefings, the NFU recognises that progress has been made but that it is slow, which results in frustration. Its plea is that the recommendations should be driven forward urgently, with the impact on the ground being the real test for delivery. I suspect that other noble Lords will have had similar experiences within their own range of businesses.

Finally, I turn to local government and particularly to planning. In a Written Statement last week from the Department for Communities and Local Government, it was stated that the secondary legislation will, among other things, allow underused and old-fashioned offices to be revamped as dwellings and existing unused agricultural buildings of 500 square metres or less to be used for new businesses, all without recourse to the planning system. As the Written Statement points out, the rural economy will be given a boost,

"while protecting the open countryside from development".-[Hansard, Commons, 9/5/13; col. 5WS.]

The simplification of planning guidance and a careful relaxation of planning law will benefit both town and country-provided, that is, that the remaining rules are observed, and strictly enforced by local government where they are not.

It is known that in some areas the flouting of planning laws leads to both a marked decrease in community spirit and, in too many cases, to an increased risk for local inhabitants. An obvious risk is where a business is established in premises with poor access to a main road and where planning permission would have been turned down by the Highway Authority if it had known about it. Figures on serious road accidents have already shown a rising trend in rural areas.

A less obvious problem is that businesses without planning permission tend not to advertise their presence. Visitors in vehicles of all kinds use postcodes. Google focuses each postcode on one particular building and satellite navigation systems take drivers to what might be a private dwelling. I know of one dwelling occupied by a single, elderly lady which receives unwanted callers several times a day, from 7.30 am until 9.30 pm. The drivers are looking for second-hand car offers, for sale over the internet, from premises on the other side of the road. Clearly, that site should not have been approved, and it was not.

On 24 April, permission was granted in another place for a Bill requiring local authorities to impose substantial fines for the flouting of planning regulations. Such a move would not affect legitimate development. However, it would support the National Planning Policy Framework, which explicitly recognises that effective enforcement by local government is necessary for maintaining public confidence. Is the Minister confident that local authorities have the planning officers and the finance to make sure that this happens?

Finally, I turn briefly to direct farming issues. Farms and the farming industries provide a variety of different businesses within the whole. They produce food, look after the countryside, care for biodiversity and are involved and engaged in energy projects. One thing makes the farming community different from all other businesses: it is subject to the vagaries of the weather. Over the past year, snow, sunshine and drought followed by floods have obviously had a big impact. Farm incomes for 2012 show a bottom-line decrease of some 14%. UK agriculture is but part of the food industry, but it is an enormously important one that wants to play its part. It needs people with vocational training and appropriate skills. Science and technology are hugely important, while innovation is key to making our businesses grow. Farmers are responding to these issues and they are willing to take calculated risks. They look to diversity and growing new ideas outside their businesses.

I welcome many of the proposals in the gracious Speech, but the Government are supporting many other things beyond the Bills set out in it.

Photo of Baroness Warwick of Undercliffe Baroness Warwick of Undercliffe Labour 7:01 pm, 13th May 2013

My Lords, I join with other noble Lords in congratulating the noble Baroness, Lady Lane-Fox of Soho, on a splendid maiden speech that was delivered with grace and feeling. I look forward very much to hearing more such contributions from her.

There was one piece of very good news in the gracious Speech. The Intellectual Property Bill will provide a new exemption within the Freedom of Information Act for pre-publication research. This is an amendment which I, together with several other noble Lords, notably the noble Baroness, Lady Brinton, argued for during the passage of the Protection of Freedoms Bill. It is true to say that the Government took some persuading. The Justice Committee of another place took up the argument, and the Government finally accepted that some real harm could flow from the premature exposure of ongoing research material. I want to congratulate the Government on taking this step and I shall certainly support the measures as the Bill progresses.

I am far less certain that we should wholly welcome the promised immigration Bill. In announcing the Bill in the Queen's Speech, the Government made it clear that the purpose was to,

"ensure that this country attracts people who will contribute, and deters those who will not".

I think that there is a danger in this description. It seems to play to popular notions of "good" and "bad" immigration. It also suggests that we can know absolutely what a migrant will bring to this country in the future. I can think of many examples of people who came to this country as refugees who have made enormous contributions, not least in academic fields. However, in framing the introduction of the Bill in this way, the Government have sought to emphasise the value of many migrants to the UK. We should welcome and not deter them.

I am sure that the Prime Minister and many of those close to him understand and share my view that international students are an enormous asset to the UK and make both an immediate and a long-term contribution to this country. Where I think we differ is in believing that the UK is doing the best it can to attract such people. Although the Prime Minister has gone some way to explaining that the UK welcomes international students, that has not been enough to counter the effect of recent policy restrictions and, perhaps more significantly, hostile rhetoric. If the Prime Minister wants to see growth in this important area of university activity, he is going to have to do more. Removing international students from the net migration target would send an important signal that the Government do not intend to meet that target by means of steadily tightening the rules for students. In that context, can the Minister explain how the measures in this Bill will affect students? Will they be affected by new restrictions on access to the NHS? Which appeal rights will be lost? What calculations have the Government made on the impact of requirements to check immigration status in regard to the supply of private rental accommodation?

If the Government's aim is to achieve a balance in policy which ensures that the UK attracts migrants who contribute to the country, what plans are in place to increase our attractiveness, given the evidence that we are losing ground? The Minister may say that applications for visas to study in universities are up, and that UCAS figures are also up. There are a good many people in this House who understand these figures and know that the really important measure is the number of new enrolments. These figures, as the Minister will no doubt be aware, have shown a decrease recently, particularly for post-graduate taught students. In the context of a rapidly growing market, this should be a cause for concern. While the Government are clearly doing what they feel they can to put off those who, in their view, are unlikely to contribute, where are the measures to attract those who clearly do make an unequivocal contribution?

Finally, I want to speak briefly about something which was absent from the gracious Speech. Last year, we were led to expect a higher education Bill. We now know that we will not see one this side of an election. However, even without a Bill, the Government will be taking decisions that will have a major impact on the future of our universities. The spending decisions that the Chancellor will make in the next couple of months for the years 2015-16 will be very challenging indeed, and I certainly do not envy him the task. But the biggest priority facing this Government is the return to growth. It would be economically short-sighted in the extreme to cut funding for teaching and research at this time. NESTA has shown that 54% of jobs growth between 2000 and 2005 was produced by innovative companies. It also showed that innovative companies employ more than double the share of graduates than non-innovative businesses. The UK now ranks second in the world for university-business collaboration. It amazes me that we still spend substantially below the OECD average on tertiary education in the UK, and we spend substantially less on research than many of our competitors. This would be precisely the wrong time to make that disparity even worse. The industries which are going to help us re-establish growth need graduates and they need a strong research base. I hope that the Government will not prioritise one at the expense of the other. Yes, we need to maintain expenditure on research, but not at the expense of student numbers or efforts to widen participation.

In that context, we know that part-time undergraduate numbers in England have decreased considerably, with a 40% drop in part-time enrolments compared with 2010. We really cannot afford to ignore this. I am pleased that the Government have asked Universities UK to lead a review into the reasons for this decrease. The fact is that although many in higher education have been aware of the issue, little public or political attention has been devoted to it. A recent meeting of the All-Party Parliamentary University Group heard some of the possible reasons for the fall, but we were all struck by the fact that if something like this happened to the full-time population, there would be an enormous reaction and great concern; there should be concern about part-time provision too. The changing demands of employers mean that we have to provide routes back into education for people long past their early twenties. I would like to ask the Minister what assessment has been made of the impact of the drop in part-time enrolments on the economy.

I hope that the Government will look carefully at the recommendations of the Universities UK review when they are published in the autumn. I hope, too, that in the difficult spending round ahead, we will see that the Government are committed to investing in both teaching and research. I know that many others in this House will join me in making that case over the next few months.

Photo of Baroness Bonham-Carter of Yarnbury Baroness Bonham-Carter of Yarnbury Liberal Democrat 7:08 pm, 13th May 2013

My Lords, like the noble Baroness, Lady Byford, I should really be taking part in tomorrow's debate, in my case concentrating on culture and education. Today, I will talk about the creative industries, so there is quite a nice overlap. However, perhaps I may start by offering my congratulations to the noble Baroness, Lady Lane-Fox, who I know a little. She made the most fantastic maiden speech. Her father, the distinguished historian, was sitting next to me and said that he was far more nervous than she was, and I suspect that that was probably true. Perhaps he will give the noble Baroness hints for her speeches on horticultural and historical matters.

I will concentrate on the creative industries and the contribution they make to our economy, our shared identity as communities and as a nation, and our reputation in the world. Matthew Parris has referred to the culture of a country as its heartbeat. It is a fitting image, as considerable economic benefits flow into the body politic from cultural activities. The UK's creative industries are a significant contributor to our economy and can, if properly nurtured, play a key role in the nation's financial recovery and be part of the solution to the problem of our young people facing unemployment, to which the right reverend Prelate the Bishop of Birmingham referred. They are a result of innovation, ideas, imagination and spontaneity, inspired by the rich tapestry of British arts and culture. As a country, we have always been blessed with a wealth of creative talents which have shaped and illuminated our history and national identity.

We have a global reputation for creativity and innovation, even more so since last year's Cultural Olympiad. Who can forget that opening ceremony? It was a beautiful and brilliant spectacular; complex and humorous. In celebrating the entity that is the United Kingdom, it was a showcase for our great creative industries. We saw our pre-eminent conductor, Sir Simon Rattle, performing with Mr Bean. There was James Bond, first the product of a writer, Ian Fleming, and then of film-makers, actors, special-effects creators, costume and set designers, and those who make the costumes and sets. It celebrated our children's literature, music, television and art, and how art and design can come together in such a wonderful creation as Thomas Heatherwick's "The Cauldron". And centre stage of course-literally-was Tim Berners-Lee, British creator of the world wide web. The ceremony was shot through with our creative accomplishments, and was a huge one in its very self.

Aware as I am that this is a debate partly about the economy, I have some statistics. The UK's creative industries are worth more than £36 billion a year, generating about £70,000 every minute for the UK economy. Employment in the sector has grown at double the rate of the economy as a whole. At least £856 million per annum of spending by tourists who visit here can be attributed directly to arts and culture. The economic contribution of the arts and cultural sector has grown since 2008, despite the UK economy as a whole remaining below its output level before the global financial crisis. The UK has the largest cultural economy in the world as a proportion of GDP. That is all according to a report brought out by the Arts Council last week. That last point is crucial, because in today's global economy, where capital and labour are so mobile and goods and services can be produced almost anywhere, it is the power of ideas and innovation, and of creativity and design adding value, that will bring growth, economic success and prosperity. The world's creative industries make up around 7% of global GDP and are rightly being recognised as crucial to economic success. While ours are a driver for economic growth in the UK, they are also helping our country compete effectively on the world stage.

I am lucky enough to be the Prime Minister's trade envoy to Mexico. On a recent trip, I was impressed by the opportunities that this one country potentially offers the UK in terms of trade and by the reputation that goes before us there in the area of the creative industries. Guadalajara, the second largest city in Mexico, was designated last year by the new Government as a digital creative city. Developing that is a priority for the Government and for the governor of that area. It will focus on attracting technology companies that produce video games, movies, multimedia and mobile applications-all areas in which we excel-and offers a clear opportunity to achieve our Government's target of doubling bilateral trade with Mexico by 2015.

Then there is the contribution that creative industries make to the vitality of our own society. Here, like my noble friend Lord Razzall, I will quote John Maynard Keynes, although in my case it will be with his Arts Council hat on. He said that government must recognise,

"the support and encouragement of the civilising arts of life as part of their duty".

An area of great concern is the cuts being inflicted at local government level on arts and culture, despite LGA and Arts Council research that shows the benefits council investment in these areas brings-revitalising local economies and regenerating neighbourhoods that have seen traditional industries decline. Sheffield is an old example of this: an economy that was based on the manufacturing of steel, cutlery, engineering and tool-making. Its city council was the first to recognise that investing in cultural industries was an alternative as a source of employment creation and urban regeneration. It discovered that putting money into culture became investment rather than simply subsidy.

As I mentioned at the start of this speech, I sit on the board of the Lowry in Salford. The idea behind it was to build a major arts complex as a trigger for the regeneration of the area. In 1996, £64 million of National Lottery money was allocated. Central to the Lowry's ethos is interaction with the local population through a community and education programme. An example is the "Walkabout" project, in which a member of the Lowry team and a range of artists spend 14 months within a specified community-recently the Yemeni and Orthodox Jewish communities. The primary aim is to help them turn their own ideas into creative projects that articulate local issues. A recent report showed that 71% of, I think, the 2,340 people involved in it said that it helped them develop skills which would be useful in future jobs while 81% said participation made them feel more part of their local community. The establishment of the Lowry has been a resounding success in encouraging social cohesion but also as a catalyst for the regeneration of the local economy. The BBC's decision to relocate some of its key departments to Salford Quays and the subsequent development of MediaCity are clear evidence of this. They brought with them employment, traineeships and new floor space for business and residential property.

In conclusion, the creative industries punch above their weight, providing a significant return on what government invests. The UK is fortunate to have a powerful creative industries sector, but we must maintain it. This creative economy needs creative innovators and employees-we must continue to create the creators. Interestingly, this is an area where we do not have a jobs problem but a skills problem, so it is excellent that the coalition Government have listened to the industry and included computer science in the science strand of the EBacc; and excellent that, last October, the Secretary of State for Education announced bursaries of £20,000 for 50 top graduates to train as computer science teachers.

However, the creative economy needs people who are not just skilled in computer science but also art and other creative subjects. My noble friend Lady Hanham will not have heard this but many other noble Lords have heard me ask about Darren Henley's review into cultural education, which was published 18 months ago and greeted with great enthusiasm by the Secretary of State for Education. We were told that a national plan for cultural education would follow immediately. When I asked last autumn, I was told we would be getting it this year; when I asked at the beginning of this year, I was told it would be in the spring. We may or may not have had a spring but we certainly have not had a national plan for cultural education, so I am asking again when this might happen. We should listen to such successful and highly respected individuals as Sir James Dyson and Sir John Sorrell, who argue that we should invest more in creative education and design.

The other area in which the creative industries struggle is in getting access to finance. It is a two-way problem. The banks and the regional development funds do not understand the creative industries and the creative industries are not aware of the various support schemes that exist. I commend the coalition Government on setting up the Creative Industries Council, the remit of which includes addressing this problem. But I draw to the attention of my noble friend the Minister the CIC's Access to Finance Working Group Report, which says:

"In order to grasp the opportunity, investors must learn to understand creative innovators, and creative innovators must learn to make themselves investor-ready ... The challenge for public policy is to address the shortage of risk capital in creative content companies and the dire consequences if ignored".

The creative industries are worth more than £36 billion a year and employ 1.5 million people in the UK. With the right support, they have the potential to bring even more benefits to our communities and our economy.

Photo of Lord Borrie Lord Borrie Labour 7:21 pm, 13th May 2013

My Lords, the great German Chancellor Otto von Bismarck once said:

"Laws are like sausages, it is better not to see them being made".

Of course, we in this House see laws being made all the time. It is what we do. We use words such as "scrutiny" and "amendments" and so on, but what we do is watch laws being made. Sometimes it is not a very edifying sight. Since naturally I will choose examples of recent times, it is not really a blame that I can attach to a Government of any particular colour.

We are very familiar with Bills that have been through all stages in the other place and yet we find they have been inadequately discussed or whole chunks of them have not been discussed at all. Sometimes we get Bills in this House where Ministers have to produce all sorts of amendments because they have only recently thought of things or because of points made by Back-Benchers in the other place or this House. Sometimes, as in recent Sessions, we get Bills such as the Public Bodies Bill or the Enterprise and Regulatory Reform Bill, which range over an unrelated mix of topics so it is quite difficult for us to understand what the specific aims of the legislation are. Sometimes the aim of the Bill may be clear but the solution that the Government propose to us is not at all clear. Sometimes new institutions are created that are not really necessary.

For example, in the previous Session, the purpose of the Groceries Code Adjudicator Bill was perfectly clear and the Government had a perfectly good answer to the question: what is the purpose of the Bill? The Competition Commission had recommended that because of the overweening powers of supermarkets, suppliers such as farmers and others deserved some sort of protection and dispute machinery. Why on earth did the Government not simply give this role to the Office of Fair Trading, which was about to be amalgamated-under another Bill of the Government's-to form a powerful competition body called the Competition and Markets Authority? Instead, a new institution was set up, a charming lady has been appointed; nobody knows how many cases it will receive, but a whole new institution has been set up with a back office and all the rest of it. I do not know how much work it is going to do. It must be very difficult to estimate because "groceries" is very narrowly defined. Nobody knows quite how many different anti-competitive practices may emerge that deserve to be looked at by this adjudicator. It may take some time to know what the result is. It does not even cover all supermarkets; only the biggest ones are specified.

Time and again, the Government tell us that there is a great need to protect small and medium-sized enterprises. I apologise to those who think that there is a real difference between small and medium-sized. Of course there is, but they are classed together for many purposes and that seems quite reasonable. One of the troubles that SMEs-as I will continue to call them-suffer from is late payment of debts. Larger companies deprive SMEs of their cash flow because the cash flow does not proceed in accordance with the dates that the contract has set out. Payments are delayed and small companies have to put up with that. This is a very real problem. I have not seen the full report yet but I am glad to note that the special adviser to the Government on matters of enterprise, the noble Lord, Lord Young of Graffham, has pointed specifically to this problem as something the Government ought to deal with. Of course, I entirely agree.

To my mind, instead of creating some new body, one should look at the Financial Conduct Authority, which was set up recently by the Government; it is a perfectly good, existing body that could be given the task of assisting the creditors among the small enterprises which really need assistance. It is unreasonable to leave it to consumers or small businesses to fight their own case. If they start fighting their own case, they may find that that supplier does not wish to deal with them again.

I note the very worthy sentence in the gracious Speech that:

"A draft Bill will be published establishing a simple set of consumer rights to promote competitive markets and growth".

It will be very important to see how far the ordinary consumers will be assisted-because they will need assistance-in getting advice or pursuing their case, by citizens advice bureaux, trading standards officers and the like. They will need that help. How far will the resources be provided?

"A simple set of consumer rights" sounds like some kind of holy grail, and people have been using that phrase for quite a long time. I have been involved with the reform of consumer law one way or another for about 50 years. In the 1960s and 1970s Governments of different political colours set about making a number of changes; for example, making illegal any contract terms that sought to exempt a seller from his normal liability to supply goods that are fit for their purpose and of satisfactory quality. Incidentally, it used to be "merchantable quality" but it was reasonable for the Houses of Parliament to accept that "merchantable quality" was not a phrase that would appeal particularly to the ordinary consumer and something else was needed, and so one has "satisfactory quality", bearing in mind the price and description of the goods. That was an excellent change, but I wonder whether the setting out of consumer rights more simply can be achieved, because it may be very difficult. It may be asking the impossible to set out rights in such a way that they are self-explanatory and the consumer needs no help, but I am delighted, as others are, to see the Bill, and to see how it might be achieved.

Photo of Lord Sutherland of Houndwood Lord Sutherland of Houndwood Crossbench 7:30 pm, 13th May 2013

My Lords, there is much that has been excellent in the rich tapestry of speeches which we have already heard, but I am tempted to say, "And now for something completely different", which I hope is not too Pythonesque.

I wish to talk about greed. I will not be surprised if this produces a frisson of embarrassment. It is perhaps to be expected that a right reverend Prelate should use this word from time to time, because that is partly what they are for. It is perhaps not unexpected if an ex-trade union official does likewise, because in the days before sharp suits replaced cloth caps talking about greed was fairly regular practice. It is perhaps not unexpected if a "leftie" academic does this, for, after all, we do not pay them particularly well and they probably have not got over being a student at the LSE in the 1970s. And so on we could go, but it is still unsettling to hear the word in polite company. It is a bit like using the word "fornication" at a Mothers' Union meeting, or confessing to preferring football in the directors' box at Twickenham. However, I have to tell your Lordships that the world has changed. The Prime Minister has been reported in the press using the word, as has the Chancellor of the Exchequer. It has appeared in a Times leader and even in a report in the Financial Times. So, thus encouraged, I continue.

Perhaps I may offer you two different interpretations of the word. The first is from Gordon Gekko in the film "Wall Street". "Greed", he said, "is good". There is a remarkable scene in the film where he persuades unwitting customers to buy useless products. Contrast that with David Hume, who wrote in his Treatise that greed-he used the 18th-century term "avidity"-is the most destructive of all the vices. That is strong stuff.

Which of these is right? And what does it have to do with the gracious Speech? The first clause in the speech states that,

"my Government's legislative programme will continue to focus on building a stronger economy".

The second sentence reads:

"It will also work to promote a fairer society that rewards people who work hard".

These themes are reiterated and re-emphasised:

"My Government is committed to a fairer society where aspiration and responsibility are rewarded".

These themes, of the economy and fairness and justice, are tied together in the Queen's Speech. It is difficult to talk about things such as greed in the various debates on the Queen's Speech-there is no particular section that deals with it, so I am taking today.

Two questions arise. The first is whether Gordon Gekko was right about the driving force of capitalism-if he was, it is a very serious matter, and it is claimed by some that that is the case-or whether David Hume was right and has given us fair warning.

The second question is: what is the relationship between a stronger economy and fairness? That relationship is posed in the gracious Speech. I am with Hume in the voting lobby on both these questions. Hume's case is pretty straightforward. He argued that one of the two major responsibilities of the state was to enshrine in law the rules concerning property-who owns what, what are the grounds of legitimacy of ownership and what are the rules governing the transfer of property and wealth, because societies, until well into west European history, used other means of transferring property and other means of claiming legitimacy of ownership. This covers much of what is important to all the members of our society. It covers ownership of property, payment of wages and salaries, payment of taxes in life and death, inheritance and financial gain or loss.

Hume argues that in a society where everyone understands these rules and sees them enshrined in law, we find them broadly acceptable. In such a society, there will be stability, continuity and sustainability, which are essential in many ways-not least in "building a stronger economy", because without these civic virtues enshrined in our society the strength of the economy will begin to fray. It would also help in "strengthening Britain's economic competitiveness"-another phrase from the gracious Speech.

However, connoisseur as David Hume was of the ways of men and women and the contortions of civil society, he saw that the needs of society went beyond the simple definition, simple acquiescence and enforcement of law. A just society goes beyond simple acquiescence in words of the law; it goes beyond the capacity of the state simply to enforce the requirements of the law. A just society requires the acceptance of a shared concept of fairness within that society.

Acquiescence in the law is fine, and indeed necessary up to a point, but it is not a sufficient condition of health in a society, whether economic health or civic health. If one's sole criterion of acceptable behaviour, commercial and financial, is whether that behaviour is in accord with the law, Gordon Gekko becomes the relevant guru-"Greed is good", if you can get away with it. If the definitions of law are inadequate or, even more, the enforcement of law is weak, then "grab all you can" is the order of the day. Forget flaccid words such as "fairness" and "justice" even if they feature in the gracious Speech. Tax evasion is, after all, not the same as tax avoidance, especially if you are an international company with international tax arrangements. Tax avoidance is okay, provided your overseas bank account is sufficiently shielded from the gaze of HMRC.

Greed in those circumstances, Gekko would claim, is actually good-it is good policy; it is the right technique to use. After all, as both Amazon and Starbucks argue in these circumstances, it provides jobs and satisfies customers. There is some good in it. "Well, what is wrong," some would ask, "with the going rate of £4 million as an average perhaps annual bonus in certain areas of the financial services? Four million pounds is not big by comparison with some of the bonuses paid, but it is the equivalent of 40 years' earnings for a university professor, a junior consultant and all sorts of people who are considered reasonably comfortable. There is something odd; there is a distortion that we have drifted into when £40 million-and that is at the lower end of the scale-is seen as acceptable.

"All very well", you might say. "You're wearing your conscience on your sleeve. What is to be done about it? It is not so easy to deal with". I have to declare an interest here, lest your Lordships get the wrong impression: I am actually a capitalist. I chair an SME that employs 130 people, most of whom are software engineers, in the town of Halifax. It makes a major contribution to the employment of talented young people. We have a strong overseas sales portfolio; we know what this is about; but just conforming to the letter of the law is not enough-the company is called Frog, by the way, if you want to check it out.

What do we do about it? That is hard. It is not easy to change a culture, but that is what is required. There has to be a change in culture. This is not the politics of envy; I am reasonably comfortable, as many Members of this House are, but it has to do with the way in which we see the future of our society.

Hume has two suggestions for us to turn our minds to. He says that the capacity to be a mature moral agent with mature moral opinions has two sources in society. One is the family and the other is education. In the family, the two year-old learns that it is not just, "Me, me, me; mine, mine, mine". That begins in the family. In education, virtue has to be learnt, it has to be taught, it is part of how we see the future development of young people, but that is a story for another evening.

Photo of Lord Sheikh Lord Sheikh Conservative 7:40 pm, 13th May 2013

My Lords, I am very pleased to speak in this debate. Last week's gracious Speech was rightfully centred above all else on the economy. It was a reminder to us all that although we have made some progress, there is still much to be done and our Government are committed to staying the course and maintaining our disciplined approach of austerity. Even more than that, it was about managing our economy in a way that is fairer for people and rewards those who work hard.

As a businessman myself, I was particularly heartened to see that central theme running through the very heart of our plans for the next 12 months. I am sure that everyone will agree that the way to strengthen our economic competitiveness is by growing our economy back to the health that it once enjoyed. That will be achieved only through more companies doing more business and offering more job opportunities.

I believe that the twin engines behind achieving that will be those of increasing our level of international trade and attracting higher inward investment from overseas. Last week, the Prime Minister spoke passionately to financial leaders at the global investment conference, when he rightly said that we face a sink or swim moment in the global economic race. Indeed, two of several key points that the Prime Minister outlined were focusing on trade deals and ensuring that the UK remains as internationally connected as possible.

Encouraging figures were also released last week which showed that our successful management of the 2012 Olympic Games brought the UK an extra £2.5 billion of direct foreign investment, increasing our productivity and, ultimately, our competitiveness. It created 58,000 new jobs, and 105,000 jobs were safeguarded as a result, firmly retaining our position as the leading destination for foreign investment in Europe. UK Trade and Investment was involved in helping to deliver the majority of those projects and should be applauded for its efforts.

Our focus must now turn to maintaining the momentum. We need to prove to the rest of the world why the UK remains an ideal place to do business. Specifically in terms of trade, I believe that we must begin to look much more seriously at developing our trade relationships in Africa. We have historic ties with some African countries and we can build on those connections further. Strong growth over the past decade has already helped to reduce poverty, and the International Monetary Fund recently forecast that sub-Saharan Africa will grow by 6% over the next four years. In fact, Ghana, Mozambique, the Congo, Liberia and six other African economies are expected to grow by 7% or more this year. To put that into perspective, the only other emerging economies in that 7% growth club are China, India and Vietnam.

It is therefore a very good time for British companies to get more involved with and invest in Africa. We must capitalise on that rapidly expanding economy simultaneously to grow British business and to help to drive further development and job creation across the African continent.

Here at home, as specifically mentioned in the Queen's Speech, we must also continue to grow our private sector. Well over 1 million new jobs have been created since 2010, which has played a key role in the reduction of our deficit by one-third. I am very confident in our Government's commitment to increase that further by a number of encouraging policies.

The £2,000 allowance on national insurance contributions has been welcomed with open arms by businesses across the board. It will particularly help those smaller firms which currently find that a substantial financial burden and means that one-third of all employers will not have to make any further national insurance payments. Research has shown that employers favour that measure, and it will be a business-boosting initiative. The Federation of Small Businesses has even stated that it went beyond what it was asking for.

The continued cutting of corporation tax is also helping private businesses to keep more of their cash to invest in expansions and employ more people, while promoting the UK as an attractive place for overseas companies to set up businesses here. Our Government have also promised to reduce the burden of excessive regulation on business. Again, that will make a considerable difference to small and medium-sized businesses, which find themselves bogged down with health and safety laws and restrictive red tape.

If there was ever a time to do away with the over-bureaucratic legislation that holds some businesses back, it is now. In particular, I look forward to seeing progress on the scaling back of consultations, audits and judicial reviews, as well as the elimination of equality impact assessments.

The latest figures show that we now have 4.8 million companies; 75% of them are sole traders; and 96% of all firms in the United Kingdom employ fewer than 10 people. It is therefore safe to say that small businesses will continue to drive us out of the economic downturn. The SMEs should, however, utilise digital technology as much as possible. That will be essential for their survival and growth.

I have always supported SMEs in my business life. In that regard, I declare the interest that I am chairman and chief executive of an insurance organisation which helps smaller organisations to place the insurance covers. I add that I was previously the chairman and chief executive of an organisation which had connections with more than 1,000 smaller insurance organisations.

In addition to cutting and reforming where necessary, it is also the job of government to invest in infrastructure to help to nurture growth and provide extra jobs. I was glad to see that explicitly referenced in the gracious Speech, with a specific focus on the development of the High Speed 2 railway line. I appreciate some of the controversy that inevitably comes with such a large-scale project, particularly on the acquisition of land, but the long-term benefits that it will provide to businesses across the country cannot be underestimated. It also takes a significant step in addressing two economic policies that I feel most strongly about-that of rebalancing our economy towards a manufacturing sector, which made our country so great; and promoting the redistribution of growth to many of our cities and regions nationwide.

Through such turbulent times, I believe that it is crucial that the Government are seen to be acting not just in the interests of economic health per se but in a way that also promotes economic fairness. That was another key pillar of the Queen's Speech and one that goes hand-in-hand with our disciplinary approach to finances. It is heartening for me to see a government pledge on,

"building an economy where people who work hard are properly rewarded".

I have always believed strongly in the notion of individual responsibility and reaping rewards from one's own commitment and perseverance, and have spoken to that effect in your Lordships' House in my support for reform of the benefit system.

Let us make no mistake: this Government's welfare reforms are about making sure that the right people are helped back in to work while allowing for increased levels of support to those genuinely in need. Simplifying and rebalancing the ways in which benefits are considered and awarded can be seen only as progressive, particularly in the current climate.

I also welcome the inclusion of a Bill to help businesses protect their intellectual property. I have already declared my interest in the insurance business. I add that I have arranged insurance schemes for the protection of patents and copyrights. I therefore fully appreciate the value of a Bill to protect the intellectual property rights of businesses across the country. This is essential if we are to be seen as a centre for innovative ideas and products.

Before concluding, I wanted to mention my appreciation for the inclusion in the Queen's Speech of the Government's focus on preventing sexual violence in conflict worldwide. I have spoken on this subject both in your Lordships' House and at several meetings elsewhere, and I am very grateful to the Government for placing a focus on it. The victims of these heinous crimes deserve justice, and it is up to countries like ours to provide the support that they need and to take effective action to deal with this dreadful problem. I have made clear my appreciation of the Government's £1 million funding to the Office of the UN Secretary-General's Special Representative on this matter, and I look forward to further progress in this regard.

Photo of Baroness Turner of Camden Baroness Turner of Camden Labour 7:51 pm, 13th May 2013

My Lords, I have decided to speak in this debate because I feel that many of the problems that we all face stem from the policies on the economy. We all know what the problems are-unemployment, declining living standards, public sector cuts and general feelings of dissatisfaction that became manifest during the recent elections. It is now generally accepted that we need growth and that the economy needs to be rebalanced. The lack of balance is obvious in the growth of the south-east compared with the decline in the Midlands and the north. Areas where once mining, steel and shipbuilding provided often highly skilled employment to the local population are instead now areas of high and continuous unemployment.

My own union, Unite, has frequently drawn attention to the need for government policies to do more to support manufacturing industries. It says that while Britain remains an engineering powerhouse, it is suffering from a crumbling infrastructure, a growing skills shortage and years of neglect from successive Governments, particularly that of the Thatcher Administration. There is concern that manufacturing is not now showing the growth that is required. Unite believes that this is because of subdued domestic demand, particularly in the construction industry. The cutbacks in public expenditure have also had an impact on manufacturing.

The union calls for an active industrial strategy to be developed, similar to that already existing in Germany. There is now apparently an increased interest in the German strategy, with the New Statesman devoting its recent issue to the subject, while today we have had well informed contributions on the same subject from the noble Lord, Lord Tugendhat, and my noble friend Lord Monks.

Unite also draws attention to the relative success of the automotive industry in the UK, where the Automotive Council, which involves the union, works extensively to promote the industry. It also believes that there should be a strategic investment bank. The Government have of course committed themselves to the establishment of a Green Bank, but a strategic investment bank could provide access to funding for innovative companies, including small businesses. The contribution that unions make to the training of their members is often overlooked. The TUC has always had a skills training programme called Unionlearn, and refers to this in its current statement on the economic situation.

During the previous Session of Parliament we considered two pieces of legislation that one might have thought would have addressed some of these problems: the Growth and Infrastructure Bill and the Enterprise and Regulatory Reform Bill. Both have now been accepted by both Houses, but both contained provisions weakening employment rights, making it more complicated and costly to sue for unfair dismissal, changing legal requirements relative to accidents and illnesses through work and making it more difficult for workers to obtain compensation. Then there was the peculiar provision whereby workers surrender employment rights, fought for by previous generations, in return for shares. I and a number of noble Lords opposed those provisions-unfortunately, without success. The Government appear to believe that a system in which workers are regarded as disposable-hired when needed and sacked without rights when no longer required-will improve the economic situation. I think that they are wrong. The support of the workforce is necessary if companies are to succeed. Will Hutton, the director of the Work Foundation, put it very well when he said that,

"it is only through workforce engagement and commitment that successful innovation can be achieved. Care must be taken to ensure that procedures and processes embody fairness-in performance management, in promotion, in setting bonus targets, and in resolving disputes. In this respect trade unions can be important custodians of good faith processes, and as communication routes that uphold the authenticity and integrity of management actions".

Of course, trade unions insist on good pay and conditions. One of the problems about the private sector, where union organisation is low, is that the pay is too low as well. The benefits system is actually subsidising employers who pay low wages. That has an effect on the housing market too, where housing benefit has to be provided to ensure that families are not rendered homeless. We have discussed these issues in the House in the past, when I and other noble Lords have said that rents are too high and pay is too low. The TUC is calling for the introduction of the living wage, in the hope that this will lift families out of poverty.

These are all important aspects of the economic situation that we have been experiencing. The austerity measures that have been introduced and are continuing have not helped-indeed, quite the contrary. A determined effort by the Government is needed to introduce measures to stimulate the economy, particularly by assisting the financing of innovative companies in manufacturing and other industries that can contribute to growth.

The measures already taken in regard to apprenticeship training are welcome. These are necessary in light of the unacceptable level of youth unemployment. However, we probably need to go much further, particularly for vulnerable and poorer disadvantaged children. The role of unions in developing such schemes should not be underestimated.

We need to rebalance the economy. We cannot rely on financial services, important as they are, to produce the growth we need. The Government should reconsider their current policies. They need to change direction.

Photo of Lord Shipley Lord Shipley Liberal Democrat 7:57 pm, 13th May 2013

My Lords, I declare my interest as a vice-president of the Local Government Association. I welcome the comments of my noble friend the Minister, reflecting his and the Government's support for faster growth by devolving greater financial powers to local government and local enterprise partnerships, particularly from 2015 with the proposals for the single pot. They are hugely welcome.

In the gracious Speech itself, I welcome in particular the proposals on national insurance, which will cut NI for small businesses through the £2,000 employment allowance, thus generating new jobs. I welcome High Speed 2, which will increase passenger capacity, freight capacity and speed in linking the north of England, Scotland and the Midlands together and linking them in turn with London and the south. Better connectivity will drive faster growth.

I welcome the Energy Bill, or its continuation, which will create green jobs and growth, with up to 250,000 jobs in the private sector following an estimated £110 billion of investment. However, in terms of energy, that growth needs to be achieved without ever-spiralling costs to consumers. Today it is reported that almost one-third of UK households say that the cost of gas, electricity and water has become their biggest worry, and the Government will need to pay very close attention to that trend.

I thank my noble friend Lord Bradshaw for his comments on the A1 in Northumberland and the need for it to be dualled throughout its length. On grounds of safety, volume of traffic and access to east coast ports, particularly from Scotland, and to grow the local and regional economy of the north-east, the case is unanswerable, and I hope progress will be made soon. I thank my noble friend Lady Kramer for her constructive and timely suggestions around regional banking, which could be a major catalyst in driving regional growth.

I shall refer to three strategic issues relevant to the gracious Speech that could help the Treasury: first, reducing public spending where it is higher than it need be by investing more in prevention; secondly, reducing overhead costs caused by duplication in public service provision; and thirdly investing further in social rented housing.

In terms of prevention, I am very disappointed that no Bill is yet proposed on the minimum pricing of alcohol. Recent research from Canada has shown that a 10% increase in average minimum price would result in a 9% reduction in hospital admissions and a 32% reduction in wholly alcohol-caused deaths. The costs to the NHS, the police and local councils in dealing with the consequences of alcohol abuse and excess are substantial. It is in the interests of the public purse that minimum pricing is introduced. The same is true of smoking, where good work has been done to reduce it. Reducing it further through plain packaging would save the NHS yet more.

As a third example of how investing in prevention can help to cut costs, I shall mention concessionary fares for pensioners. I declare that I am a holder of a concessionary bus pass. I raise this in the context of the forthcoming Care Bill and proposals for the support of children. There has been some discussion recently about the justification for such passes, but too often it is considered only in terms of its immediate cost. Concessionary bus fares should be seen as part of the support system for carers. They enable older people to travel to give help to families and friends. Demands on the public purse for care could rise without the availability of those bus passes. In addition, without the income from bus passes to bus companies, many bus routes could close down or else would require higher public subsidies to keep them running, which would be of no help to those trying to get to and from work. There are no plans, of course, to change the policy on concessionary passes, but could we look again at levels of reimbursement to local authorities and make them reflect actual usage of buses rather than simply a population split? As a national scheme with national funding, the distribution of the budget needs to reflect the higher costs in those areas with lower car ownership, more bus routes and hence more passengers.

Next I shall speak about the potential for reducing public spending through reducing the overhead costs of public sector organisations that we now know can be achieved through whole community budgeting. There have been whole place pilots in Greater Manchester, west Cheshire, Essex and the London boroughs of Hammersmith and Fulham, Westminster, and Kensington and Chelsea. This latter tri-borough community budget pilot concluded that it could within five years deliver savings of approximately £80 million per annum across all public services through initiatives to drive growth, build homes, create jobs, reduce dependency and rehabilitate offenders. That report was published in October last year. Essex has estimated £127 million cashable savings. West Cheshire and Greater Manchester also forecast substantial savings. The evidence from the Local Government Association is that savings of between £2 billion and £5 billion a year across England can be generated, depending on implementation. In the context of a forecast £16.5 billion funding gap for local government by 2019, it has become clear that some of it could be made up for by community budgeting. It has become vital that this process is progressed speedily.

I agree substantially with the noble Lord, Lord Eatwell, on housing and social rented housing in particular. It is not enough to try to stimulate new housing simply by subsidising mortgages, which is likely in any event to lead to higher prices. The priority has to be increasing the housing supply at levels of affordability, which is why relaxing the housing borrowing cap for the local government rented sector matters. More properties for social rent could reduce significantly the Government's housing benefit bill in the more expensive private sector. Local authorities have further headroom to borrow without it being counted as public sector borrowing since their local housing accounts are now trading accounts.

There are two Bills in which I shall take a close interest. The first is the local audit Bill. A key role of the Audit Commission was to assess good practice and value for money, and I do not want to see it lost as new audit arrangements are introduced. The second is the water Bill which will reform the water industry in England and Wales. I welcome, in particular, the proposal to ensure that flood insurance remains affordable in areas of high flood risk. When we debated the Growth and Infrastructure Bill, I raised concerns that the duties on Ofwat might be insufficiently strong to drive economic growth strongly enough by guaranteeing an adequate water and sewerage system deliverable to all premises. The Minister indicated then that my amendment was probably unnecessary, and that may indeed be so. However, there might be an opportunity during the passage of the water Bill to make Ofwat's obligations even more explicit, and I hope we can look at this further.

Finally, making the economy stronger is central to this gracious Speech. The role of our universities will be central to that process. Universities working with their regions and with regional banks will help to underpin the work of LEPs and local authorities. But in repairing our economy, can we put youth unemployment at the top of list of priorities? The Government have done good work with apprenticeships, but the current scale of youth unemployment is deeply worrying. All proposals for investing in growth, of which there are many, should be tested for the number of long-term jobs that they can generate for young people because we cannot permit a lost generation, as seems to be happening in some other parts of Europe.

Photo of Lord Berkeley Lord Berkeley Labour 8:07 pm, 13th May 2013

I welcome two parts of the Queen's speech. The first is:

"My Government will continue to invest in infrastructure to deliver jobs and growth for the economy".

The second is:

"My Government will continue with legislation to update energy infrastructure and to improve the water industry".

I shall speak to these two issues with two examples, one large and one small.

The large one is the Thames tunnel, the £4.3 billion tunnel to remove the inflow of sewage-flavoured rainwater into the Thames when it floods. I believe that it is the wrong project, that the wrong company is doing it and, equally bad, that the regulator does not appear to be regulating. That is to the detriment of customers and the environment. There is no point in the Government investing in infrastructure if the private sector can or should do it or if there is a cheaper or better alternative, especially if that will create more and local jobs, as I believe this one will.

The tunnel has been discussed for many years and Thames Water is now starting the process of obtaining planning permissions. However, in the past five years, there has been increasing evidence from around the world that the scheme is out of date. The best example is probably in Pittsburgh in the US, where it has been demonstrated that preventing the volume of storm water entering the sewage system in the first place is a much more effective solution. It is easier to achieve, there is much less risk than building a big tunnel, it will use lower-skilled and therefore local labour and it will start the clean-up of the river much sooner, which could mitigate the effects of the potential fine from the European Commission of up to about £1 billion because the Government have failed to clean up the Thames. The problem is that neither the Government nor Thames Water have examined this new option properly. I wrote to Ministers about a month ago, asking them to set up an independent inquiry to look at the alternatives; I have not had an answer yet.

Another reason for such an inquiry is Thames Water itself and whether it is a fit and proper company to undertake such a project, especially when it has reduced its asset base over the years to the extent that it says that it cannot fund the tunnel-it needs government help, which the Government have kindly given it through legislation last year-but still suggests that this project will add £80 to the bills of every Thames Water drainage customer for the next 125 years. Thames Water customers go well past Reading to Oxford and places such as that-that is a lot of customers.

Since the Minister said in his opening remarks that the Government intend to tackle all forms of tax avoidance, and the Treasury indicated a few weeks ago that the Government intend to stop companies bidding for major contracts if they have used aggressive tax structures in recent years, perhaps this particular company and project should be looked at. Other examples include Wales & West Utilities, which was recently sold to Cheung Kong Infrastructure Holdings, where the shareholder equity was largely represented by a shareholder loan at 15% to 21%-not bad for a boring utility-and Arqiva, where the equity is represented by shareholder loans at 13% and no corporation tax has been paid from 2007 to 2011. It is difficult to find much information about Thames Water. One thinks that Macquarie Bank is involved, but it is almost certain that it has followed the same route, which is the kind of route that many of these utilities have followed.

It is surprising that the regulator, Ofwat, has not investigated whether Thames Water complies with condition P of its licence, which is that Ofwat has to,

"be satisfied, in each particular case, that the prospective owner has the probity and the operational and financial capacity to assume that role".

The CEO of Thames Water, Mr Baggs, said in a letter of 8 March that shareholders should not be required to pay for enhancements of the network. That seems to contravene the duties of the regulator to,

"secure that the functions of each undertaker"- in this case Thames Water-

"are properly carried out and that they are able to finance their functions".

It appears that the Government are already asleep in failing to apply their Treasury ruling that those companies applying aggressive financial structures should not be involved in constructing government-funded infrastructure projects. Ofwat is also in a long-term sleep, failing not only to apply the probity test on Thames Water but to ensure that the company has the financial resources and capability to pay for enhancements.

The noble Lord, Lord Shipley, mentioned these water issues. I have not read the proposed water industry Bill that was mentioned in the gracious Speech. I certainly hope that it will put right some of the wrongs that I have outlined. In the mean time, I ask the Minister whether the Government will agree to an independent inquiry into this Thames tunnel project before any more taxpayers' money is wasted.

My second issue is much smaller and a long way away: the Isles of Scilly transport. It should fit in with this statement in the Queen's Speech:

"My Government will continue to invest in infrastructure to deliver jobs and growth for the economy".

This is where it is needed. It is a small project in an outlying part of the UK, which is just as deserving of better infrastructure and services. If the island community of 2,000 is to survive, its economy, now based largely on tourism, needs to be maintained and to prosper. At present, the decline in visitor numbers is more rapid than that in mainland Cornwall, which can only be due to the high cost of travel there. Islanders need a year-round service, tourists in the summer need a range of services and all need to receive these at affordable prices.

Noble Lords will know that the helicopter service stopped on 1 November last year, probably for good. There remains a fixed-wing air service of eight-seater or 19-seater planes, which operate all year round but are frequently delayed or cancelled by wind, fog or waterlogged runways at Land's End. These planes-as anybody who is an expert in them, which I am not, will tell you-are much more vulnerable to bad weather than helicopters. The "Scillonian" operates March to October and has just had a good refit for a five-year life extension. As noble Lords will know, the original build of the ferry was funded with support from Harold Wilson when he was Prime Minister. However, that was some time ago and one ought to be looking forward to a replacement.

The loss of the helicopter has brought into focus the dire service that remains. Between November and March, Land's End was closed due to waterlogging for more than half the days. Immediately before Christmas, 177 people were queueing, unable to travel between the islands and the mainland for over three days; they finally got there on Christmas Eve. Some islanders have in desperation travelled in a RIB, a high-speed motor boat, from the Scillies across 20 or 30 miles of very rough sea, costing 12 people £1,200. That shows the desperation; it is not as if there are a lot of rich people there.

What can be done? A year ago, the Council of the Isles of Scilly produced a report comparing the transport available there to that for the Scottish islands: charges, frequencies and the lifeline service concept, which ensures an affordable service to all islands-some provided privately, some subsidised, but guaranteeing a service so that people can go for work, business, pleasure or hospital appointments at a cost that approximates to that of using an equivalent road distance. In the case of the Scillies, it would be £20 to £30 return, compared with the current fare of £84 on the ship and £160 by air. The islanders get a concession on the ship but not in the air, as the noble Earl, Lord Attlee, pointed out to me some time ago.

These are the kind of journeys that everyone else takes for granted, so there is general support for short-term measures for the airport and harbour improvements to be expedited. I ask the Minister whether the Government are planning to accept the applications from Cornwall Council and the Council of the Isles of Scilly for the ERDF-funded harbour improvements, because time is running out for some of these grants.

The affordability and reliability of a year-round service needs attention. The answer for next winter would be a trial winter sea service, which the Isles of Scilly Steamship Company is prepared to operate; it operates the air service as well. However, it will not say how much subsidy it would need, because it fears that the service will be tendered out. I have written to the Minister responsible, Norman Baker MP, asking whether the department would consider this. We have to reflect that there are very few other places, however remote and vulnerable they are to snowdrifts, floods, gales and so on, that have only one unreliable means of travel throughout the winter. It is not as if people can walk or cycle if it is difficult-it is a bit wet and you cannot do it.

I am very pleased that the new Cornwall and Isles of Scilly Local Enterprise Partnership, which the Minister also referred to, is keen to help and follow up the recommendations of the Scottish report, by offering to lead a detailed economic transport study to identify the best means of providing for the long-term needs of the islanders and visitors. Sadly, however, the Council of the Isles of Scilly has indicated that it is not interested in taking part. I find that very depressing. However, I hope that the new councils in the Isles of Scilly and Cornwall will be able to work much more closely together to further the interests of the islanders and visitors. I hope that they will start a joint campaign to persuade the Government that the Scillies need a trial winter service for next winter and to agree to a policy of developing a public service obligation with a new ship to give these islanders the long-term comfort that they need to enable their economy to grow on a firm basis. I hope that they will support the LEP in accepting its offer.

In summary, my questions for the Government are: what is the status of the application for the funding for harbour improvements that I mentioned and will the Government consider a trial subsidy for a ferry next winter? With that ferry and the air service, there would be a very good chance that at least one of them would get you to and from the mainland, when you want to go, without having to spend too many nights in hotels in Penzance.

Photo of Lord Hodgson of Astley Abbotts Lord Hodgson of Astley Abbotts Conservative 8:20 pm, 13th May 2013

My Lords, it is perhaps inevitable that all defeated Governments engage in a period of introspection during which there is a tendency to rewrite history. It appears that the previous Labour Government are no exception to this rule. The narrative that we have heard this afternoon focuses on two things: first, that the economic crash of 2008 was the result of factors entirely outside their control; and secondly, that by May 2010 their actions were bringing economic recovery. I am afraid that neither of these assertions withstand close examination. It is true, and absolutely fair, that the trigger for the economic cataclysm of 2008 was the collapse of the sub-prime mortgage market in the United States. However, the economic policies of the Labour Government left this country uniquely ill prepared to withstand the consequent shocks. Profligate government spending without any associated requirements for economic performance, linked to low interest rates, which inflated asset prices-particularly house prices-were policies that could have only one ending, and it was not the promised ending of "boom and bust".

Tullett Prebon, the money broker, has produced an interesting study of debt levels. Between 1997 and 2010, in constant prices, public debt increased by 250%, and private debt by 275%. Such levels of indebtedness, with their associated asset price inflation, will inevitably take a long time to unwind, and it will be a painful process. It does not seem wise for the Opposition now to propose, as I understand they do, that the Government should go out and borrow more money. I was therefore reassured by the commitment in the gracious Speech that the Government will stick to their broad strategic economic approach. In my commercial life outside the House I see some good signs of a pick-up in economic activity generally.

However, one area that continues to concern me is the persistence of, and perhaps increase in, regional disparities, a matter which the right reverend Prelate the Bishop of Birmingham referred to earlier. It is hard to find many signs of recession in London and, to a greater or lesser extent, in the south-east. However, in the review of the Charities Act which I carried out for the Government I travelled and met representatives from the voluntary sector all over England and Wales, and the economic outlook, as well as the level of social capital, were all too often not encouraging. My noble friend Lord Heseltine made some interesting suggestions about how to narrow these gaps in his report No Stone Unturned: In Pursuit of Growth, and I was very glad to hear in my noble friend's opening remarks that the implementation of these proposals is now under way.

For the rest of my remarks I wish to go off on a riff of my own. It is not an issue which was raised in the Queen's Speech, but it is an important issue, and one which particularly concerns the Treasury and local government-namely the implications of population growth in the world and in this country. This is a sensitive issue that is easily capable of being hijacked, so I make it clear that my remarks are not about immigration under another name; they are not about relative population sizes and whether there are more white people or black people; they are not about the relative sizes of faiths and whether there are more Christians, Jews or Muslims; they are not about the relative sizes of social classes and whether there are more rich or poor people; and, finally and most importantly, they are not about preaching or personal example, because I need to put on record that I have four children. My remarks are about the staggering absolute increase in the population of the world and in that of the UK.

It is worth while every Member of your Lordships' House bearing in mind that each morning when he or she looks in the shaving mirror or the make-up mirror, there are 200,000 more people in the world than there were when that exercise was undertaken 24 hours earlier. We are creating a city the size of Wolverhampton every day, 365 days a year: 70 million people a year. According to UN population projections, this will continue, albeit at a slightly slower rate of 40 million people a year by 2050: 120,000 people a day. By then the world population will have increased by one-third, from 7 billion to 9.2 billion.

It needs no great imagination to see the stresses and strains that the arrival of an additional 2 billion people will likely cause on land, resources and, above all, water. We would be foolish to believe that the issue will not touch us in this country. Desperate people do desperate things. We may be sitting here tonight feeling slightly sorry for ourselves because of our economic fortunes, but if you are sitting impoverished in a huge family in a war-torn, unstable country, the United Kingdom looks like nirvana. Somehow, however unpleasant, dangerous and difficult the road may be, people are going to get here.

What can be done? All research suggests that the best way to reduce population growth is to give women control over their fertility. A woman's quality of life is not enhanced by repeated pregnancies. It is believed that there are more than 200 million women in the world with no access to family planning. The Government's overseas aid programme rightly places a high focus on providing family planning and advice. We all know that economic times are hard. I hear voices suggesting that cuts should be made to our overseas aid budget. Of course we must be careful to ensure that our overseas aid is properly spent, but I urge my noble friend, wearing his Treasury hat, to resist any cut in that part of the aid that is devoted to family planning. It is in all our interests that it should be continued.

Finally, I turn to the no less challenging position of the United Kingdom. Our population is now just over 63 million. The Office for National Statistics' mid-range projections suggest that the UK's population will reach 70 million by 2027, 15 years from now. What do 7 million people look like? The city of Manchester has 500,000 people: think 14 Manchesters. The larger Manchester conurbation, including Bolton, Bury, Oldham, Rochdale, Salford, Stockport, Tameside, Trafford and Wigan has a population of just over 2 million, so we will have to build three Greater Manchesters by 2027.

There is a further complication. Not only is England the sixth most densely populated country in the world, after Bangladesh, Taiwan, South Korea, Lebanon and Rwanda, but the population is not spread evenly across the country. The bulk of the population increase will surely take place in the south-east, where we will probably have to build two of the three Greater Manchesters. It will certainly be a challenge for future government planning Ministers to explain all this, not least to those who live in the shires and the leafy suburbs.

What can be done? "Stop immigration" is a popular cry. That would make some difference, but perhaps not as much as people think. The Migration Observatory at Oxford University has pointed out that with 100,000 migrants per annum-the Government's target-the population would reach 70 million by 2035. With zero migration the figure would be 66 million, a difference of 4 million. On the other hand, there are those who say that unless we have more young people, we cannot afford to look after our existing old people. They appear to have forgotten the implications of compound interest. We would be engaging in what Sir David Attenborough calls a gigantic population Ponzi scheme. We have to recognise that at some point we will have to achieve a stable, balanced population in this country. There will be considerable strains during the transition phase, but at some point, someone, somewhere has to be brave enough to state this fact and withstand the misinterpretation, misconstruction, misreporting and misquotation that will surely follow.

Finally, it is worthwhile reflecting on how much more serious this problem is for the UK, and especially for England, than it is for our continental European neighbours. At present, with a population of 63 million, England has a population density of 383 people per square kilometre. We have just overtaken the Netherlands and we are now more densely populated than that country. By contrast, France has 102 people-about 25% of our density-and Germany 226, which is about two-thirds. No less importantly, both those countries and Italy have falling populations. Germany's population today is 83 million compared to our 63 million but, on present trends, it will fall to between 70 million and 74 million by mid-century. Sometime in the 2030s, the UK's population will overtake Germany, and we will become the most populous country in Europe.

None of this is to say that we cannot fit the people in. I have referred to our present population density of 383 people per square kilometre. Bangladesh has about 1,400 people per square kilometre, so we can certainly fit the people in-but at what cost to the quality of life? Sir John Sulston, who recently chaired an inquiry by the Royal Society on people and the planet, said that our target should not be to cram as many people as possible on to the planet. He went on to say:

"We have to look at what will allow humankind to flourish. We want to aim for a high quality of life and not just to scrape along".

I conclude by addressing why I am raising this topic particularly today, as some noble Lords may be wondering. The answer is that the issue concerns every government department but is the responsibility of none. No doubt, my noble friend on the Front Bench is thinking that this is at least one speech to which she does not have to reply when she comes to stand up-that she can pass gracefully on. That lacuna is part of the problem. No one anywhere in government has responsibility for looking at this problem, looking at the big picture and the long-term trends, and explaining the implications for us all. A Minister with responsibility for considering the issue and drawing the attention of the public to what lies ahead would be a good first step.

Dean Acheson, the US Secretary of State, once said that policies did not trickle down but welled up. This is an issue that is rapidly going to well up.

Photo of Viscount Hanworth Viscount Hanworth Labour 8:31 pm, 13th May 2013

My Lords, I concur with much of what the previous speaker said in the second part of his speech and nothing of what he said in his first part.

On Wednesday 10 April, the House of Lords met to pay tribute to Baroness Thatcher. Most of the tributes were the anecdotes of those who had participated in Thatcher's Governments, and we should not begrudge them the opportunity to reminisce. However, some of the tributes expounded the methodology of the Conservative Party as it relates to those years. Perhaps now is the time to call into question some of the things that were said on that day.

It was said that Margaret Thatcher had helped to pick Britain up off its knees, changed our place in the world, and made Britain great again. It was asserted that her programme of deregulation and denationalisation, and of defeating the trades unions, had made Britain again into a global economic competitor. Finally, it was said that Margaret Thatcher transformed the very nature of our political debate. In common with most of my colleagues on these Benches, I disagree with all of this, save, perhaps, the assertion that Mrs Thatcher transformed the nature of our political debate. For this, I believe that she and her acolytes deserve discredit.

Under Margaret Thatcher, political warfare reached a level of intensity that had not been seen for several generations. It was in this respect that she transformed the nature of our political debate. Her unbridled aggression toward her political opponents eventually led to her downfall. By exalting the motives of personal economic gain at the expense of the principle of social cohesion, Mrs Thatcher subverted the growing egalitarianism of British society. At the same time, she protected and reinforced the traditional privileges of the wealthy classes. These persons, and the party that she served, expressed their gratitude by adopting her own social and economic philosophies. The economic philosophy in question was a resurrected version of the moral philosophy of the commercial classes of the 18th century that is associated with the name of the Scottish economist Adam Smith. Smith's nostrums are manifestly unsuited to the modern world, and their adoption by politicians has done untold damage to Britain's economy. How has this damage arisen? It has been multifarious, but I should like to focus on two areas. The first area concerns the Conservatives' flagship policy for the denationalisation of Britain's strategic industries and utilities. The second area concerns financial deregulation.

One of the major Acts of privatisation, of which we will be facing the consequences in this Session of Parliament, concerned the electricity supply industry. This was enacted in 1990, at the end of Thatcher's period as Prime Minister. She must have regarded it as her crowning achievement. The national electricity grid was one of the great technical achievements of the interwar period. Its origins date back to the Electricity (Supply) Act 1926, which created the Central Electricity Generating Board-CEGB-that set up the UK's first synchronised, nationwide AC network. The grid provided a prototype and an inspiration for electricity networks throughout the world.

Our national electricity industry was serviced by some world-famous British engineering companies, which it also sustained. Foremost of these was BTH (British Thomson-Houston), later incarnated as AEI (Associated Electrical Industries) and as GEC (General Electric Company). This company provided generators, transformers, switchgear and turbines. Over the years, it absorbed several companies of foreign origin, including Siemens Brothers and Company, which was an offshoot of the German company. Another famous company which was sustained by orders from the CEGB was C A Parsons and Company, famous for the invention of the steam turbine.

The ultimate effect of the denationalisation of the electricity industry was to place it in foreign hands. Powergen now bears the name of its owner, the German utility company E.ON. National Power split into a UK business, which is now owned by the German utility company RWE, and an international business, which is now fully owned by the French company GDF Suez. Britain's nuclear power stations are now in the hands of EDF Energy, which has 5.7 million customer accounts in the UK. EDF is wholly owned by the French state.

Another effect of the denationalisation, which began immediately, was the crippling of the companies that had served the industry. This was the consequence of the so-called dash for gas, whereby the newly privatised electricity-generating companies, many of which were on a small scale, opted for combined cycle gas turbine generators. The British engineering companies, which had been crippled by the loss of their primary market, were unable to compete. The outcome has been that virtually all the modern equipment in our power stations is of foreign origin. The major suppliers of this equipment are the Japanese companies Toshiba and Mitsubishi, the American company Raytheon, the French company Alstom, which absorbed a large part of GEC on the eve of the privatisation, and the German company Siemens. The strength of these various companies derives from the fact that they are sustained by the electricity-generating utilities of their native countries, which, for the most part, are nationally owned industries. The failure of our national Governments to support our strategic industries in the way that has been common in the countries that are our competitors is both remarkable and hard to explain. However, part of the explanation lies in the insouciant free-market and laissez faire ideology that was espoused by the Conservatives during Thatcher's Administrations and that continues to dominate the policies of the present Government. We have seen its devastating effect on several occasions recently.

The story of our electricity network has been paralleled by the story of our rail network. A recent episode concerned the proposal to award the contract for supplying Thameslink rolling stock to the German company Siemens in preference to Bombardier, which is a Canadian-owned enterprise that runs the last remaining manufacturer of rolling stock in Britain. Siemens is also the company that has provided most of the equipment for our wind-powered electricity-generating facilities.

Another respect in which the policies of Margaret Thatcher have done great damage to the British economy has been in the promotion of the interests of the City of London via the programme of deregulation which began in 1986 during the time of Thatcher's second Administration. Here, there is a sharp division of opinion between the Conservatives and us on these Benches. A week ago, a senior Conservative politician proposed that we should leave the European Union for the reason that the Parliament in Brussels seems to be intent on placing restraints on the activities of the City. He pointed to the success of the City and its importance to all of us through the fact that it accounts for a large proportion of the British national economic product. Far from being an asset that benefits the nation as a whole, the City serves the interests of a very restricted class of people at the expense of the rest. The very size of the City is a symptom of the morbid hypertrophy of an organ of the economy that threatens the health of the body as a whole. Until recently, the City has been responsible for sustaining an overvalued rate of exchange that has made it difficult and sometimes impossible for our industries to export their products. The City has been largely responsible for the way in which our industries have fallen into the hands of foreign owners. It also bears responsibility for one of the longest periods of economic recession on record, which we are currently undergoing. The detrimental effects of the City have been monstrous.

Photo of Viscount Waverley Viscount Waverley Crossbench 8:40 pm, 13th May 2013

My Lords, the gracious Speech emphasised the focus on building a stronger economy and that the first priority is to strengthen Britain's economic competitiveness; this following recent remarks calling for greater productivity in the United Kingdom by, among others, the noble Lord, Lord Heseltine, who is not in his place.

There is, however, a substantial success story by UK companies in the oil and gas supply chain. According to trade information, exports related to that sector have grown for the 14th year in a row and are now worth £17.2 billion. Certainly, I can confirm in relation to activities in which I am engaged that UK supply chain-based companies have the highest number of individual companies supplying a high-priority export market-that of Kazakhstan.

However, we cannot afford to relax. Kazakhstan has been determined to be a priority export market by the United Kingdom and cannot be ignored. Leaders from other supply-chain countries are knocking on Kazakhstan's doorstep. The German Chancellor has visited and now the French presidency has confirmed another state visit. I am in no doubt that to underpin the UK's position requires a visit by the Prime Minister in helping to retain our position. No Prime Minister has visited Kazakhstan since independence in 1991, and yet it is where British interests, notably BG and Shell, are excelling.

I should declare that I chair the British Kazakhstan Parliamentary Group and the regional Central Asia Parliamentary Group and, for the record, have signed a co-operation agreement with opposite numbers in Astana that includes, among other initiatives, encouraging emphasis on increasing two-way investment and trade.

What can be done to consolidate our position as a lead player? Measures and mechanisms that increase co-operation agreements between those with the necessary technology to partner those in Kazakhstan, indeed in all new energy economies, is a process that stakeholders should embrace in a new world order. There is good pragmatic reason to do so, beyond economic. The importance of social and corporate responsibility by investors and suppliers is paramount, and they have a moral and legal imperative to put this into practice. Foreign legislation is more increasingly demanding it.

Helping to create a culture of legacy beyond investment, development and profits should be embraced as a norm that would protect the UK's position, and for which recipient countries should encourage and reward. Employment creation creates an environment for stability. This enhances the confidence that protects the very investments necessary for the development of those national assets. The underlying challenge is to contribute to the strengthening of professional skills and the industrial base by maximising opportunities for local companies and citizens to benefit directly.

This developing of indigenous capabilities, in partnership with the United Kingdom's professionalism and experience, would become a winning formula.

In my capacity advising the national oil company, KazMunaiGas, I was given the task by the chairman, Mr Kiinov, to unify the fragmented approach towards local content development endeavours of the lead oil and gas operators, Kashagan, KPO, NCOC and Tengizchevroil, which include such partners as BG, Shell, Chevron, ExxonMobil and Total. I invited them to London to determine common ground and agree necessity in what we labelled the "London Process", and which culminated after complex discussions in the signing of the Aktau Declaration a year later. Operators agreed a strategy and the content of a forward engagement plan with ministries, regulatory authorities and industry bodies concerned with local content development.

Delivery by stakeholders contains six key components: first, training and skills development with fast-track programmes to address critical skill shortages and longer-term skills capacity building; secondly, an industrial capacity register as a source of reference to identify current and potential capacity in the oil and gas sector and, importantly, the non-oil and gas sector; thirdly, harmonisation of standards, specification and code of practice; fourthly, enterprise development to stimulate the promotion, growth and new development of local companies, including access to management expertise and funding; fifthly, an inward investment programme to contribute to the commercial environment and identify opportunities to accelerate and expand domestic manufacturing and supply; and, sixthly and lastly, research and development to anchor specific technology development programmes to create new high-value business opportunities within domestic and regional markets.

The technical, commercial and socioeconomic challenges will take time, investment and commitment to develop, with huge challenges ahead. These priorities can be delivered in the United Kingdom's national interest within existing contractual arrangements and international treaties with foresight, willingness, respect and innovation. The programme I have outlined can be developed further into a bilateral win-win.

Photo of Lord Warner Lord Warner Labour 8:47 pm, 13th May 2013

My Lords, nearly six hours into this debate I thought I would give us a change of subject. I was reliably informed by the Chief Whip's Office that if I wanted to talk about the Care Bill and its implications for local government, I should speak today. In doing so, I declare my interests both as a member of the Commission on Funding of Care and Support, whose recommendations the Bill largely implements, and as a member of the Joint Select Committee that considered the draft Bill. However, before turning to that Bill I want to make a few observations on youth unemployment.

It is rare for me to quote approvingly remarks made by the late Lady Thatcher. However, nearly 30 years ago she said something that was true then and remains true today. She said:

"Young people ought not to be idle. It is very bad for them".

She might have added that it is also bad for society, but that was not a word that easily passed her lips.

As the founding chair of the Youth Justice Board, set up after the 1997 election, I dealt with some of the consequences of unemployed, untrained and uneducated young men ending up in the criminal justice system. I am not going to lay all the blame on the current Government, because youth unemployment is a global problem. OECD figures suggest that 26 million 15 to 24 year-olds in developed countries are not in employment, education or training. Our performance in the UK is better than some but it is certainly not as good as it ought to be, with 1 million young people unemployed. Unless we improve the way that we tackle this problem, we will be storing up trouble not just for those young people but for ourselves.

Much current social policy is preoccupied with the demography of an ageing society. This is understandable and my noble friend Lord Filkin chaired a committee of your Lordships' House which produced an excellent report on our lack of preparedness for the service demands of an ageing society. However, one of the social requirements of that ageing society is a well trained and educated workforce that is generating wealth-not a growing number of sullen, unemployed malcontents.

As we grapple with the needs of an ageing society through worthwhile measures such as the Care Bill, we also must ensure that we set aside sufficient resources to educate, train and employ our young people, and not waste their talents. That means striking a better balance than we have now in our priorities for public expenditure between the young and the elderly. That may be an unfashionable thing to say but, as one of the elderly, I think I am entitled to say it.

All the parties need to stop oversubsidising the well-off elderly with winter fuel allowances, free travel passes and free TV licences. I am sorry but on this I disagree with the noble Lord, Lord Shipley, who is not in his place. If tough decision-making is the political mantra of today, why not start by at least taxing those entitlements or partially withdrawing them, and removing exemption from national insurance contributions for those who work after retirement age? Will the Minister comment on those issues in her response, even if it gets her into a bit of trouble with No. 10?

Let me turn now to the Care Bill. The coalition Government are to be congratulated on grasping the nettle of both reforming social care law, as recommended by the Law Commission, and on accepting the thrust of the proposals in the Dilnot commission's report. Here, I pay tribute to Paul Burstow and Norman Lamb for tenaciously pursuing reform despite Treasury obstacles. I do not intend today to comment on the detail of the Bill and will save those comments for the Bill's Second Reading next week.

However, I want to comment on social care funding and the problems that it presents in implementing the Bill's good intentions, particularly on some of the implications of that parlous state of funding for the NHS. Adult social care is now consuming more and more of local government's budgets and is set on a course to consume virtually all of it in a couple of decades. Yet, strangely, the latest survey from the Association of Directors of Adult Social Services shows that by next April local councils will have stripped out £2.7 billion-I repeat, billion, not million-from adult social care services since 2010. That is equivalent to 20% of their budget for care at a time when demand for their services is rising considerably. Domiciliary care is being paid for at below the minimum wage by some councils and some care homes are relying on subsidies from self-funders because councils simply are not paying the true cost of providing decent care.

The transfer of £850 million to councils from the NHS this year does no more than cover the budget reductions that councils are making. One-third of the directors of ADASS consider that many people who in the past would have qualified for help will no longer get it as a result of the existing tightening of eligibility criteria. On present plans, that rises to half of directors in two years' time when the Care Bill will be implemented. The idea that this Care Bill can be implemented without a significant increase in the service and administrative budgets for adult social care is pure fantasy. However, let me emphasise that I am not suggesting an increase in public expenditure, as I shall explain.

The Dilnot commission made clear that its proposals would do nothing to bring up to speed the existing shortfall in funding of adult social care. On the most conservative estimate I suggest that the shortfall is somewhere in excess of £1.2 billion a year. Demography is worsening these matters by about 3% a year-another half a billion pounds a year. The consequences of this social care funding crisis for the NHS are already clear to see in the overcrowded medical wards of acute hospitals. Experts acknowledge that those wards have around a quarter to a third of patients who simply should not be there. The great majority of those people are aged 80 and older. This is both bad for the patients and extremely costly for the taxpayer. The present way in which we are caring for elderly patients in some of our hospitals and care homes is simply another Mid Staffordshire waiting to happen.

What we need now is a much clearer policy across the political parties of resource transfer from the £110 billion a year NHS budget to fund adult social care properly, where the taxpayers' money would be better spent. Can the Minister tell the House what further plans the Government have to transfer resources from the NHS to social care this year and next to make good the budget shortfall before implementation of the Care Bill starts?

We have heard a lot today about Europe. Whether we leave or stay in Europe, we will still have to tackle these and the many other domestic problems that have been identified today. Endless banging on about EU membership seems to many of us a self-indulgent political diversion from resolving some of the difficult problems in our own back yard.

Photo of Viscount Trenchard Viscount Trenchard Conservative 8:56 pm, 13th May 2013

My Lords, it is always a privilege and a pleasure to speak in the debate on the gracious Speech. I, too, pay tribute to the noble Baroness, Lady Lane-Fox of Soho, on her excellent maiden speech. Given how important IT is to all of us, it is very good to have her in your Lordships' House and I look forward to many contributions from her. Like many noble Lords, I congratulate my noble friend Lord Lang on the entertaining and skilfully constructed speech he made in proposing the Motion for an humble Address.

In preparing for this debate today I was struck by the fact that much of the work that your Lordships' House will undertake in this Session on business, the economy, local government and transport was not mentioned in the gracious Speech. The carrying over of Bills which have substantially completed their progress through another place has resulted in a growing disconnect between the gracious Speech and the agenda set for this House over the coming months.

On transport, the High Speed 2 Bills were announced. However, does it make sense to decide to go ahead with HS2 before deciding on the location of London's main hub airport? The airport question should surely be determined first. After that it will be clear what enhancements to our railway network will be needed. I am sceptical about the value of shaving a few minutes off the journey from London to Manchester. Certainly I do not believe the figures produced in an attempt to monetise the value of HS2 in terms of enhancement to GDP.

If Heathrow is to remain our principal airport hub and expansion is to take place there, surely HS2 should be routed via Heathrow. If, as I believe should be urgently considered, a new airport in the Thames estuary were to be built, then there might well be a case for a new high-speed railway to be built as a part of the new airport's links with Birmingham, Manchester and the north.

Among the measures announced in the gracious Speech was the deregulation Bill. We have only just seen Royal Assent given to the Enterprise and Regulatory Reform Act which paved the way for the merger of the Office of Fair Trading and the Competition Commission and some assorted minor tinkering. I fear that the new deregulation Bill, which is not yet published, will bring us more of the same. The Government's website informs us that the Bill forms part of their agenda to reduce the burden of excessive or unnecessary regulation where primary legislation is required. I ask the Minister to explain exactly what that means. What about reducing the burden of excessive or unnecessary regulation where primary legislation is not required?

The Institute of Directors has commented that the gracious Speech shows a "poverty of ambition" about reducing the regulation of businesses.

The Government's Fifth statement of new regulation states that:

"A substantial proportion of the burden of red tape and bureaucracy emanates from Europe. The Government is working with our allies in Europe to encourage the EU institutions to reduce the EU regulatory burden".

I fear that the Government's encouragement of their allies will not achieve a great deal. European regulations in areas where we have lost our national competencies bind directly, without parliamentary ratification, and the transposition of European directives into British law continues to produce a vast volume of cumbersome red tape. I fear that it will be largely a waste of time to debate the deregulation Bill, which will be of such limited effect against the massive tide of new regulation engulfing us.

It is not fashionable to defend our banks and financial institutions which continue, six years on from the financial crisis, to be bullied and abused by Governments and politicians not only here but in many other countries. Although not mentioned in the gracious Speech, soon the Financial Services (Banking Reform) Bill will come here from another place. Your Lordships' House will have a duty to ensure that this Bill does not negatively affect the prosperity of our financial services sector and the competitiveness of our financial markets compared with their global competitors. British and foreign banks alike are grappling with the burdens of the new regulatory structure; around 2,000 institutions will be regulated both by the FCA and the PRA. The fastest growing departments in many City institutions are compliance and IT-all power to the noble Baroness-rather than the business departments that promote lending to SMEs. No wonder the executive committees of City institutions spend 90% of their time discussing ICAAP and ILAA rather than talking about how to do more to support and lend to new and growing businesses.

Unlike my noble friend Lord Lawson, with whom I agree on most things, I am not really convinced that the strict ring-fencing of retail banks is either necessary or desirable. I do not think that if ring-fencing had been in place, it would have made any difference to any of the banks which failed. Besides, banks now enjoy greatly improved capital and liquidity ratios, which I believe is more important. However, ring-fencing is going to happen. The Government want it, the banks have accepted it, and your Lordships' House should concentrate on implementing it with as little collateral damage as possible.

As noble Lords are well aware, our new regulatory system is being introduced at the same time that the three equivalent bodies at the European level have been reorganised as fully fledged regulators. I have heard from some continental bankers that they are surprised that we have undertaken such a far-reaching reform of our national regulatory system because, "Everyone knows that it is intended that eventually the European regulators will do the job for the whole of the EU". The soaring costs and the continuing uncertainty about the regulation of our financial services markets have undoubtedly already lost us many jobs and business operations to other centres.

I do not know whether it will be possible to repatriate significant powers such as financial regulation, but if the European Union is to consist principally of one very large country-the eurozone. one medium-sized country-the United Kingdom, and perhaps one or two small countries, then I think that it will be neither comfortable nor advantageous for us to remain a member, and I congratulate my noble friend Lord Lawson on his decision to articulate his view at this time. As my noble friend Lord Forsyth so eloquently argued, our future lies in developing our global trading relationships with the Commonwealth and the growing economies of Asia, South America and elsewhere. Of course we would need to negotiate a free trade agreement with the EU, but if South Korea can have one, why can we not have the same? Why would the EU not agree? After all, we buy more from the EU than it does from us.

I have spent a third of my working life resident in Japan, which is at last enjoying its day in the sun after a very long economic winter. I was naturally delighted that the Prime Minister and the former Japanese Prime Minister Mr Noda signed two important collaboration agreements in April last year: one on military equipment procurement and one on civil nuclear power. Hitachi's acquisition of Horizon, rescuing our new nuclear power industry, is an example of the second. I believe that our excellent trading and investment relationship with Japan can make an increasing contribution to our growth and urge the Government to include Japanese alongside Mandarin Chinese as one of the languages that may be offered in primary school at key stage 2. Given the deep economic ties with Japan, and the fact that the Chinese and Japanese economies are nearly the same size, it is strange and upsetting to our Japanese friends that Japanese is excluded from the list.

The Government deserve congratulations for sticking to their pledge progressively to reduce corporation tax. By April 2015, we should enjoy, at 20%, the joint lowest rate in the G20. That should help the Government's first priority, to strengthen Britain's economic competitiveness. Although I keenly support the Government's economic policy, I would ask my noble friend to explain what the Treasury means by its statement following the gracious Speech that there would be a crackdown on tax avoidance and evasion, with a £4.6 billion package, including a new information exchange agreement between the Isle of Man, Jersey and Guernsey. Can my noble friend confirm that, in spite of the Treasury's statement, the Government still distinguish between tax avoidance and tax evasion? Can she explain whether the UK is also a party to the information exchange agreement between the three territories? What is meant by a £4.6 billion package: will it yield £4.6 billion and, if so, over what period, or will it cost £4.6 billion to implement? The language is not clear.

In common with some other noble Lords, I confess that I, too, did not really feel inspired by the gracious Speech. I regret that it felt somewhat lacking in enthusiasm and vision. Nevertheless, there are some sensible measures, already referred to by other noble Lords, such as the Local Audit and Accountability Bill, which abolishes the Audit Commission and outsources and delegates its powers to local communities. The National Insurance Contributions Bill will also, in a modest way, encourage small businesses to take on more employees. I look forward to hearing the rest of the debate and the Minister's reply.

Photo of Baroness Wall of New Barnet Baroness Wall of New Barnet Labour 9:08 pm, 13th May 2013

My Lords, I, too, will quote from Her Majesty's gracious Speech, even though when you are almost 40th on the list, I guess there is nothing new that one can say. I quote in particular the statement:

"My Government's first priority is to strengthen Britain's economic competitiveness. To this end, it will support the growth of the private sector and the creation of more jobs and opportunities".

I want to focus on what that really means for businesses operating in a global economy, be they large companies or small and medium-sized enterprises.

Manufacturing is still the third-largest sector of our economy and generated £126 billion in gross value added in 2012. The United Kingdom is still the world's ninth-largest manufacturer and, despite some popular misconceptions, still makes things that the world wishes to buy. However, I suggest that not only will any amount of expansion in manufacturing depend on the success of British manufacturing in designing new products and continuing to increase productivity-both of which are hugely important-but that there is a role for government to play in creating the environment for manufacturing to grow and prosper.

Like other noble Lords, I am going to quote from the interesting report of the noble Lord, Lord Heseltine, No Stone Unturned: In Pursuit of Growth, in particular the chapter in which he refers to his vision for a new business support infrastructure. He says:

"Each country provides support in its own way, but what is striking is how unusual the UK is amongst advanced industrial countries in not having a strong and stable business support infrastructure. We should address this deficiency".

I understand that the Government have welcomed this report, to which many other noble Lords have referred, so I would be interested to know, in addition to what the noble Lord, Lord Deighton, said at the beginning of this debate-many hours ago-just what the Government are intending to do to address the deficiency referred to by the noble Lord, Lord Heseltine.

This is still work in progress but the Government should aim to address the concerns of the businesses that I visit and support. One is that all government departments should have the same focus on "Made in Britain" that BIS does, and should have a culture of checking every policy they work with by asking: will this support businesses to grow and prosper? The UK cannot and indeed should not hide from international competition. What manufacturing businesses want is a levelling of the playing field, an understanding of the challenges that UK manufacturers face, policies to ensure that, wherever possible, manufacturing is supported in government policy, and for policymakers to heed the Hippocratic oath-which exists in my other interest, the health service-"First, do no harm".

Many businesses are striving to sustain their market share in a still-fragile economy, but those businesses that have really grasped the well quoted saying that the workforce is the most important component in a successful business are those that despite-or perhaps because of-these difficult times have focused on skilling and re-skilling their valued employees. They realise that doing this ensures that they have the talent and skilled workforce to seek out opportunities-as few as they are in some sectors-and to be in a fit state to take on challenging contracts in pursuit of growing their businesses.

The understanding of the need to keep manufacturers competitive has also been recognised by the British trade unions. My noble friend Lady Turner, who I worked with for many years in the trade union movement, referred to this. Many trade unions have worked closely with employers to support business competitiveness, by achieving flexible working patterns, encouraging and supporting the apprenticeship programmes and by constructive resolution to any disputes between business and their employees.

I am sad that my noble friend Lord Hanworth is not in his place. He bemoans the privatisation of many companies but I can give him examples of companies -BAE Systems, part of the aerospace industry he referred to, Jaguar Land Rover, Siemens and others-that have had this successful relationship, employing many thousands of people in the UK and further afield, all of whom are getting great skills and advancing their own individual opportunities.

I congratulate the Government on continuing and re-emphasising the focus on skills, in particular apprenticeships. This was started by the Labour Government, who put several millions of pounds into getting this off the ground. I was employed for many years in a major chemical company in the north-west where having apprentices was a way of life and the whole business was surrounded by young men, very often carrying the can for tradespeople. Nevertheless, apprenticeships were a way of life. We are now getting back to what I think is the best of all worlds by having apprenticeships revived. The evolution of apprenticeships is exciting and necessary for business services.

The level of skills required by UK manufacturing businesses has increased. According to the UK Commission for Employment and Skills, by 2017 the percentage of manufacturing jobs that will be in the employers' "high end"-mostly degree-level employment -will rise from 27% today to 37%, meaning that there will be about as many people in high-end occupations in manufacturing as in low-end occupations. That is aspirational; it is wonderful; and we should all aim to support those who want to rise from the low end to that high end in all their businesses.

The recent focus on higher apprenticeships is making a huge difference to large businesses. As well as recruiting graduates to their management training programmes to carry forward talent and leadership skills, as they have in the past, they are focusing on expanding this talent pipeline by offering existing skilled employees the opportunity to gain additional leadership and management skills, thereby bringing them along that same route to senior management and senior supervision positions. Many businesses doing this say that those employees who have already served skilled apprenticeships will have the added bonus of knowing the business from the shop floor to the boardroom.

It was feared that SMEs would not see that higher apprenticeships were for them. However, many of them-when supported, for example, by Semta, the sector skills council for science, engineering, manufacturing and technology with which I work-are realising that they add huge value to their business opportunities, particularly in the supply chains within which they operate. Having people with skills, vision and leadership gained through the higher apprenticeships ensures that they stay competitive and, very often, punch above their weight.

Government must not let this visionary and sustainable policy be just another flavour of the month. They should continue to support employers to recruit more so as to retain the true value of the whole apprenticeship programme and not allow it to be diluted, leading to the devaluation of these important levers. Although the increase in the number of apprenticeships and the money that is brought with it are welcome, I ask the Minister to reassure us that the quality of apprenticeships is hugely valued.

The funding allocation from government via the Higher Apprenticeship Fund, which was created to develop a range of higher-level apprenticeships and fund 10,000 apprenticeships, was enthusiastically received. However, as I have identified the pressing need for advanced skills in our economy, the Government need to consider doubling or trebling this level of support so that the quality of our apprenticeships increases as numbers rise. Employers need to support that by providing matched funding in many cases.

There is a growing momentum and ambition across the manufacturing business world to get out of this recession. Government must capitalise on this moment and on the consensus among political parties about the importance of manufacturing. The consensus, too, around the importance of apprenticeships must not be wasted. We must take this opportunity to reshape our economy and put it on a more sustainable footing.

Photo of The Earl of Glasgow The Earl of Glasgow Liberal Democrat 9:18 pm, 13th May 2013

My Lords, it seems that all parties regard transport as a minor, even expendable, department of government. In the past three years of this Parliament, we have already had three Ministers of Transport. The job has become a staging post for Ministers moving on to what are generally regarded as more important ministerial roles. As someone who cares a lot about our public transport, I find this department's continual relegation to the class of a lesser ministry quite depressing.

On the other hand, I have to accept that there is one aspect of the transport brief that must make it less attractive to ambitious career politicians: nearly all important transport policies and decisions have already been made before you take up the job, often-in fact, usually-by an earlier Government. Any major decision that you may make in office is likely to come to fruition only long after you have moved on, and there is little satisfaction when someone else takes the credit for the hard work that you did 15 years earlier. All the big planning decisions are made at least 10 years before they are implemented.

That, of course, is the situation in the case of HS2. It has been on the cards for at least five years and now at last we learn that the first phase of the controversial high-speed rail line from London to Birmingham is expected to be completed in about 15 years' time, with the further extension to Manchester and Leeds seven years beyond that. Work, however, is not expected to start before 2017, so HS2 and other long-term projects, such as extra airport runways around London, can be safely planned only with the aid of a crystal ball. What sort of world will we be living in 20 years' time? Will we really need more airport capacity? Will we be driving electric cars? Will the threat of global warming finally be taken seriously and carbon emissions substantially and forcibly reduced? Will we still be in Europe? When will we be seeing those flying cars that feature in so many science fiction films nowadays?

I am convinced of one thing. Our middle to long-distance journeys within the United Kingdom will increasingly be taken by train. Apart from anything else, it is the only civilised and potentially pleasant method of travelling long distances. Flying is always a hassle and uncomfortable if you are squashed up to a particularly large man-and unhealthy, too, if he has a streaming cold, as happened to me recently. Driving long distances in a car is always stressful. Cars should be used primarily for shopping at your local market town, visiting neighbours and driving to the station to catch a train. Incidentally, we need more safe parking at our suburban and country stations.

I believe that the train is the only long-term answer to our national transport problems and will continue to be so for at least the next 30 years. I am therefore very supportive of the HS2 plans announced in the Queen's Speech. I would like the Minister's assurance that the Government will not be diverted by a number of powerful anti-HS2 bodies who believe that they can persuade them to change their mind. Its opponents are against it on the grounds of cost, that the money would be better spent elsewhere, that the Government have got their projections and figures wrong, that it is not a good use of taxpayers' money and that it will pollute the English countryside, particularly the Chilterns. I believe, however, that HS2 is a crucial element in Britain's overall policy for improving our railway network and should, if anything, go ahead with more urgency and, if necessary, at even greater expense to ensure that it achieves the objectives to which it aspires.

One of the objectors' arguments is that the money could be spent on improving the existing rail network, but I am under the impression that the existing network is to be upgraded at the same time. I would like the Minister's assurance that that is indeed the case and that it is not an either/or option. After all, one of the justifications for high-speed rail is that it will free up capacity for the existing network and enable other lines to operate more efficiently.

Beside the country's overall need for a faster and more efficient train service, another of HS2's purposes is to bring London and the south-east closer to the north and the Midlands. It has been calculated that if London and the Home Counties formed a separate country, it would be by far the most prosperous in Europe, but when included within the rest of the United Kingdom we stand only about half way in the pecking order. Surely anything that helps to widen Britain's areas of prosperity can only be a good thing, although it will be up to the Government to ensure that the new rail line is used more to encourage southerners and southern companies to go north, rather than seducing more northerners to come down south to London. The BBC's move to Salford shows that major relocations can and do work.

The argument that high-speed rail will ruin beautiful countryside seems completely fatuous. If you live nearer than a quarter of a mile from a proposed route, you may well have reason to object, but I understand that those adversely affected will be amply compensated-and so they should be. Who nowadays objects to any of our existing railways passing through areas of outstanding natural beauty? In some cases, the railway actually enhances the countryside. No one has ever made a convincing case that wildlife has been more than temporarily disturbed by new railway lines. A railway is not like a motorway, particularly a motorway interchange or, worse still, an extended runway to an existing airport, which really can have an adverse effect on the surroundings and everyone living near it.

HS2 is a bold project and needs bold measures to ensure that it realises its potential. One of its detractors, the HS2 Action Alliance, calls it,

"arguably the single largest ever project ever contemplated in peace time by a British Government".

It then goes on to list what it considers to be the project's flaws. My fear is that compromise and elements of cold feet may infiltrate the Government's future thinking. In the present plans, the project is to be completed in two main phases, followed rather vaguely by a contemplated further phase. However, these contemplated further phases are essential to the success of the whole project. For instance, there surely must be a direct connection to Heathrow Airport, and from there to Gatwick Airport. However, this is not intended in either of the first two phases. There must surely be a direct connection with High Speed 1 so that passengers from Manchester or Leeds can go straight through to Paris without having to change in London, yet this, too, is not included in the first two phases. HS2 needs to go north at least as far as Preston in order to make the time saving significant enough for passengers travelling to and from Scotland, ultimately making internal flights in the United Kingdom unnecessary. In the present two-phase plan, only three-quarters of an hour will be knocked off the journey time from Glasgow to London, which is not enough to deter many of us from taking the plane.

Phase 1 takes us only as far as Birmingham. If for any reason the line were to stop there, I would agree with the objectors that the whole thing had been a disgraceful waste of government money. When in phase 2 it reaches Manchester and Leeds, the project begins to make sense, but the real benefits come only when the distance travelled is considerably longer and when these other essential connections are made. The Government must therefore commit to phase 3 before even starting on phase 1. Delay the start if the financial situation demands it but, once started, all three phases must go ahead as quickly as possible, one after the other. The project cannot afford long gaps between phases, when the fares will be high and the benefits strictly limited.

The Government, supported by all three parties, are taking an expensive gamble on High Speed 2, a gamble that in my view will pay off handsomely in the end. However, the Government must be bold and buy wholeheartedly into the whole package, not progress slowly in small, hesitant steps. I would like the Minister's assurance that this is indeed the Government's intention and that they recognise the danger of progressing too slowly.

Photo of Lord Patten Lord Patten Conservative 9:27 pm, 13th May 2013

My Lords, I warmly congratulate my noble friend Lord Glasgow on what he has just said about high-speed rail, and not only on what he said but on the way that he said it, which was lucid and clear, so unlike many speeches that the political classes tend to unleash on the innocent electorate. They say all that stuff about how we are about to be nudged by the nudge unit, the need for a national conversation-what is a national conversation?-about this, that or the other and the need for us all to go out into the street and celebrate something as stakeholders, probably slipping into a paradigm shift as we do so. I greatly regret the way in which the political classes tend to address themselves and not the electorate, thus widening the gap between the two. The next thing that we will be told is that we need a political narrative about HS2. What is a political narrative? I cannot tell the difference between a political narrative and the back end of a number 11 bus.

I say this respectfully, but in the gracious Speech we have another prime example of meaningless guff, drafted for Her Majesty about a policy that I happen to support very strongly, saying that it is to be "world-class"-that dread phrase that public relations experts wheel out in company reports. I regret that the gracious Speech had those words for Her Majesty.

In the three areas that I intend to address, which are the economy, housing and transport and HS2-I regret to say that my noble friend has largely shot my fox, so the third section will be short-I wish to talk about the need for clarity and, above all else, for honesty, because if we are honest we will get a proper payback from the electorate.

I turn first to the realities of the economic situation that we are in. I am a strong supporter of our policy on deficit reduction. Doubtless the Treasury is pleased to hear that. There may not be all that many of us left, but those of us who are mostly think that the naysayers to our policy can "IMF off".

I think the electorate will accept what is being done to achieve this deficit reduction if it is explained in an open and transparent way, so we should explain to our electorate that the UK's debt, just as in the aftermath of World War 2, has ballooned to a level that will never be paid off by economic growth alone, probably in our lifetimes. Therefore, not wanting, at one extreme, to default our way out of the debt problems that face us or, at the other end, to impose impossible levels of austerity, what we are doing is very sensible. It is reducing the real value of debt by keeping interest rates below inflation. After 1945, this policy of negative real interest rates, sustained for many years-indeed into the 1970s-was a bipartisan and very effective approach to reducing the debt pile, with savers then as savers now being asked slowly to absorb the pain. They were a captive audience buying government debt at below market interest rates. That is certainly happening today with inflation fast approaching 3%.

Against the background of a more or less flatlining economy likely to obtain for some while-a long period of low growth-there is nowhere else for us to go. The banks already know, with greater regulation, which I again support, concerning demands on them to hold more capital, that the Government know that there is a set of captive buyers for their debt out there. I am not quite so sure that the rank and file of retail savers have woken up to the fact that government policy is indeed to erode the real value of their capital in order to reduce the country's debt. This is a highly inconvenient truth, but truth it is, and both parties have conspired to cover up that truth in earlier years. It is better explained than not, better understood than glossed over. We should be honest.

Incidentally, there are those who want to persecute entirely innocent baby boomers for having had it too good over the years and force them to make recompense by passing some of their wealth down to generations X and Y. We should recognise that this blameless group is already doing quite a lot of that by taking part in the process that I have just outlined. Also, from January 2014, we will see more such transfers between the generations as the help to buy scheme, following the new buy scheme and then the fresh buy scheme, begins to be rolled out, paid for in part by savers and taxpayers, many of them in the baby boomer generation.

My second point is that, needless to say, I hope, I support anything that will enable more people to buy their own homes in a proper and orderly way. I also support anything that helps the building industry because it employs people and gets more jobs created more quickly. I also support anything that enhances the environment. However, there are three risks involved. First, there is the risk that under the new scheme, from some date in January 2014 onwards, people who should not be borrowing money may be brought into borrowing it and, as in the run-up to 2007, we may have a higher risk of people taking on debts that they should not be taking on. At no point in the excellent speech by my noble friend Lord Deighton that introduced this debate did I hear any assessment of the risk of this or, indeed, of the parallel risk that the scheme may incite house price inflation again in a way that we have not seen in recent years.

I am told that my noble friend was an investment banker in the old days. Doubtless he was pretty used to assessing risk and to mitigating it. I do not know whether he took a few risks as a young banker, but I do not wish to take risks with taxpayers' funds that may leave more people in debt who should not be in debt and lead to house price inflation coming back again. If my noble friend Lady Hanham, who always speaks very clearly and never uses jargon, any more than my noble friend Lord Glasgow does, is tempted to say in her wind-up speech-if she chooses to address the point that I am making-that there is no risk at all in those schemes, I promise her I shall not barrack from my spot high up on the Back Benches by shouting "Bunkum!", but I shall certainly be thinking it very fiercely. It is terribly important that we stress that risks are being introduced in this new housing policy.

The third risk, of course, is that it will lead to more rapid development on greenfield sites. I support housebuilding on greenfield sites. I prefer it to be on brownfield sites, but I support it because it is necessary and the only way that we can provide houses and flats for those with the ability to buy them.

However, I hear disturbing stories about the landscape effect and the quality of new buildings on greenfield sites being rolled out by housebuilding companies. I therefore took an interest this weekend and went to look at a housing scheme being run by Bovis Homes, a publicly listed company, on the edge of Wincanton, a small market town in the boondocks of Somerset. I found what I saw there disturbing. Much of the pre-existing landscaping that had been demanded by the local Liberal Democrat-controlled council had been eaten into, tree shelterbelts interfered with and taken into part of the development sites, and hedges planted by Messrs Bovis now ripped up and replaced by metal- grilled fencing, giving a terrible look to the development itself. It is just the kind of thing that discourages those who might be tempted to support, as I do, the building of high-quality houses on greenfield sites and gives it a bad name.

Incidentally, if it were not so sad it would be funny also to be told that in one or two of the new houses, which have been on sale only for about six months, there are the sort of issues that none of us who wish to promote the welfare of the housebuilding industry wish to see. One poor lady putting her three-pin plug into a socket in the wall found that it would not power up her appliances, so she asked an electrician to come; I have checked these facts, and they are facts. When the electrician came, he-for it was a male electrician-found that there was indeed no electrical supply of any sort running up the walls to the sockets. My noble friend Lady Hanham needs to do all she can to encourage local government to be strict on the maintenance of landscaping around greenfield site new buildings, and all she can to encourage the building industry to be right first time, just as we hope all manufacturers will be right first time.

Thirdly and lastly, I turn to infrastructure. Just as bad housing developments can be a blot on the landscape, as my noble friend Lord Glasgow said, we undoubtedly face blots on the landscape from the development of HS2. There is no point in messing about and saying that they are not there. We should be absolutely honest and say that HS2 will be damaging to some parts of the environment, at least for a while, through noise and the destruction of landscape and views. It is therefore absolutely right that we must persuade people to accept HS2 in its various manifestations as something that we will be prepared to pay large sums of compensation for in order to make it bearable for people who live nearby. I hope that we will say transparently that we recognise the environmental risk and intend to do something about it, including, maybe, the introduction of environmental offsets of one sort or another.

That sort of transparency is also vital for those who wish to come alongside the Government. My noble friend Lord Deighton wishes to attract investment from abroad, which I entirely support. Only last week, we had one of the big Canadian pension funds, the Ontario teachers' pension fund, saying that it felt that too many schemes were seeking public funding from entities like it, and that it was important that we reduced the number of schemes and concentrated on those that were deliverable-and, as my noble friend Lord Glasgow said, get going on it very quickly.

Photo of Lord Whitty Lord Whitty Labour 9:39 pm, 13th May 2013

My Lords, some have said that this Queen's Speech is too thin. I do not have a problem with that. Frankly, it is an issue of quality rather than width. If the legislation proposed was going to do something about the economy and improve our economic and societal prospects, I would welcome it, however thin it was and however many Bills were involved. As it is, I welcome some of what is there, and welcome the opportunity to debate the rest. I am very glad that we are about to debate the Energy Bill and the water Bill; both will probably be discussed more tomorrow, but both are vital for issues of living standards and cost of living, and for our investment programme. The Energy Bill seems deeply flawed, and I am sure that we will have some serious debates on that. I agree with what is in the water Bill, broadly speaking, but there are great gaps in it-in particular any reform of the abstraction sector, which will be vital for the economic and environmental future of that sector.

I am glad, although it was not mentioned in the gracious Speech, that we will also get banking reform back before the House. However, I am pretty dubious about the present proposal's ability to reform a sector which both caused the financial crisis by its recklessness and which is failing and holding back the recovery by its caution. It is a sector in this country which, despite the dramatic changes since 2007, has somehow retained, broadly speaking, the same structure. Some institutions are under different ownership, including state ownership but, basically, we have not tackled the problem of the structure of the banking sector in particular. I was hoping that we would see a more decentralised and more segregated banking system, both horizontally and vertically, and an absence of organisations which, for the future, would be "too big to fail". I regret that we are not yet in that position, and I cannot see that this proposition on banking reform will get us to it.

On other legislation in the gracious Speech, I think I welcome the Mesothilioma Bill, which should-although it requires some detailed scrutiny-right a serious, long-standing and distressing situation. On the deregulation Bill, I hope that it will raise burdens on small and medium-sized firms, but I suspect that it is largely another rehearsal of saloon bar prejudices, and so I cannot give it an unequivocal welcome.

I hope I will be able to welcome the proposed consideration of the draft consumer protection Bill. As my noble friend Lady Hayter has said, the Government's record on consumer issues in legislation has not been particularly good. They not only abolished my own organisation, Consumer Focus, but resisted proposals from noble Lords on all sides of the House during the previous Session to improve the protection of consumers in Acts that were passed in that Session. I hope that we will see some real proposals for improvements for consumers this time round.

In particular, I hope the Government will return to the issue that was mentioned by my noble friend Lady Hayter: that of collective redress, which I have been banging on about on every possible occasion over the past few years. It was to be included in one of the last pieces of legislation of the last Government, but unfortunately it was lost during the wash-up when it was objected to by the then Opposition. Collective redress would have avoided a lot of the hassle which consumers face, for example with PPI, where they are exploited first by financial institutions and then by claims companies. To have a proper system of collective redress for consumers would be a major step forward, and I hope that the Government have that in their sights in the production of the draft consumer protection Bill.

Excluded from the gracious Speech are some serious proposals on how to get out of the current economic recession. I follow the noble Lord, Lord Patten, in this, although I have seen the same bad example in Wincanton to which he refers. We need a massive housebuilding programme. The Government, after cutting back even on the rather inadequate programme they inherited from the previous Government, have finally realised this, and they are providing some significant support for the purchase of housing. However, as the noble Lord, Lord Shipley, said, that is not enough. In default of increasing the supply of housing-in other words, acting on the provision and capital side as well as supporting potential buyers and landlords-the net effect of underwriting and providing mortgages under Help to Buy and other schemes will be to raise house prices and increase housing costs, aggravating rather than resolving the problems of dysfunctional housing markets. Help on the capital side for building houses, by raising the limit on borrowing for local authorities and housing associations, by joint ventures and by supporting the private sector in housebuilding, is one way out.

Investment in housing ought to be accompanied by investment in infrastructure. The only serious mention of infrastructure in the gracious Speech was the reference to HS2. I broadly support it, but I will not enter into that controversy now. HS2 will bring jobs and serious investment only in several years' time. We need investment in ready-to-roll projects now. There is an absence of that both in the Queen's Speech and in the Government's thinking.

Of course, behind all this is the problem of the economy, which manifests itself in a number of ways. The political obsessions at the moment with the EU and with immigration are a reflection of the failure of the economy. It is probably too late at night and I have too small an audience-actually, the audience is distinguished enough for me to go into a bit of a rant about the economy. Brussels, Frankfurt and Great George Street are all in thrall to a dangerous economic ideology, and they must get out of it if we are to see any economic progress in this country and in Europe.

The effect of the eurozone and the ECB's view on how they should impose austerity on the rest of Europe is pretty clear. A single currency requires the transfer of resources and credit from the richer part of the EU to the poorer part. The fact that the Deutsche Bundesbank, German politicians and the ECB do not see that sufficiently clearly will, if they are not careful, ruin the eurozone. I speak as a passionate pro-European. I was even broadly in favour of the single currency at some point. However, they are failing to manage it properly because they are in thrall to an ideology that says that the only way out of economic recession and a public finance crisis is to impose austerity in a way that impacts most detrimentally on the poorest part of the eurozone.

Having been critical of the eurozone, I say in a less dramatic way that we are pursuing the same policy here. The Chancellor likewise is locked in the same ideology. The one great success of the Treasury in the past three years has been to convince the bulk of the press and a large proportion of the British public that the current difficulties in the economy and the public finances are entirely the fault of the previous Labour Government. The noble Lord, Lord Hodgson, who is no longer in its place, said that the Labour Party was in denial about this. My assertion tonight is that it is the Government who are in danger of believing their own propaganda. The financial crisis was started by private debt in America and in Europe. It was compounded by the failure of the banks, and compounded further by the fact that Governments throughout Europe and North America decided that they were going to bail out the banks. That is what caused the crisis in public finances.

The UK was more impacted than others because we are more dependent than other countries on the financial sector. The long-run record of the Labour Government was that before 2007-08 we had a debt-to-GDP ratio that was roughly the average of the OECD countries. It got worse because of our dependence on the financial sector. That is something that this Government have to pick up. However, they should not try to do so by imposing a form of austerity on the whole of the country in a way that minimises our chances of getting out of the recession. In particular, they should not focus on the social security budget and misrepresent the way in which it has increased over recent years. The vast majority of that, of course, has been because of the increase in the part of the population of pensionable age. The other two elements include the increase in housing benefit, which has got seriously out of control. But that is due to a failure of the housing market, not of social security policies, and housing benefit should not be included within the universal credit system until we have resolved the problems of the housing market in a way that does not lead to huge increases in housing benefit for those dependent on ever-decreasing opportunities within the housing sector.

If you look at the Government's credibility in international markets and their inability to stimulate investment within this country, despite the fact, as somebody said, that significant money is available in corporate accounts and pension funds, you can see that people are not investing in the UK because they do not have confidence in this Government's ability to get growth going in the UK.

Photo of Lord Phillips of Sudbury Lord Phillips of Sudbury Liberal Democrat

I am grateful to the noble Lord for giving way. I cannot resist asking him, on his second reference to our position in the international markets-he talked about our credibility-whether the most vivid example of where we stand in the eyes of would-be speculators against sterling is not the fact that the rate at which we have to pay on our admittedly massive international debt is little if any more than the Germans pay. Had we not adopted a programme of some austerity, the cost of our borrowing would have been enormously greater.

Photo of Lord Whitty Lord Whitty Labour

No, my Lords, I do not accept that. I accept the first part of what the noble Lord, Lord Phillips, says, but not the second. The ability to borrow in international markets, as with borrowing in almost any context, depends on a number of things. It depends on your ability to have a low rate of interest and low cost of borrowing; a reasonable term of borrowing; and an ability to service that borrowing and to repay the borrowing. On all those counts, throughout the desperate period of 2007 to 2011, the UK retained credibility and could borrow at relatively low rates over relatively long periods. The final qualification is that the markets have to be confident that the Government can raise enough money to repay those debts over the medium to long term. What has lost credibility in this Government is the slow growth and flat-lining of the economy, as well as the downturn of financial income for the Government as a direct result of that economic failure, which has reduced the markets' confidence in the ability of the UK to repay loans. That is why the credit rating has gone. It was not Gordon Brown who lost the credit rating-it is actually George Osborne and his failure to get economic growth within this country. Unless the Government recognise that and start changing course by investing in infrastructure and housing and getting us out of this economic recession, they will be going down the wrong road. I think that they have already gone too far down that road, but there is still time even for this Government to change their direction.

Photo of Lord Flight Lord Flight Conservative 9:53 pm, 13th May 2013

My Lords, as the noble Lord, Lord Deighton, pointed out, there are some useful, detailed provisions in the gracious Speech for the economy, but it seems to me that there is really nothing of great substance. The national insurance allowance is welcome for small businesses. The help to buy scheme is extremely unwise in that it applies to existing property and not just to new builds and is in danger of feeding yet another housing bubble. It is perhaps inevitable, with two years before an election and with a coalition Government, that this is not a time for radical change. However, both the Labour Party and the IMF are by mistake or wantonly misreading the situation. The reality is that this Government are still running a deficit of £120 billion and they have financed most of the spending of £380 billion by printing money. They could not be much more Keynesian than that, in truth, whatever may be being said. In my book, we are erring on the rather incautious side in that territory and telling a slightly different story from the underlying reality.

I repeat that it is a question of what is politically practical at this stage of the cycle but, in principle at least, I would like to see radical supply side measures. Taxes are still too high, the state is too large, the incentives to work, invest and save are too low, regulations are too burdensome and increasing and the lack of planning reform is still the key delay to new housebuilding. The energy reforms will do nothing to reduce prices. Energy policy needs radical change to encourage fracking, given what is happening to the US economy as a result of that. There is plenty of potential here in that regard. We have a crackpot policy of massively subsidising unreliable and expensive wind power, which will result in ridiculously high tariffs for manufacturing industry and impoverish consumers. I am greatly disappointed that the Government have not yet got round to reviewing what is clearly a mistaken policy. The childcare scheme discriminates unjustly against single-earner families. Although I am absolutely convinced that the noble Lord, Lord Deighton, is doing his best, infrastructure investment needs to be released to a far greater extent than is the case. It is still hugely delayed by planning and environmental red tape. It is pathetic to continue to put off a decision on the airports serving London, which is clearly a very pressing decision relevant to overseas investment in this country.

However, my particular concerns are what I call "kicking the can down the road" measures, things being done today which do not attract much opposition from the Opposition or the media but will be the source of major cost in the future. It seems to me that care for the elderly will saddle the taxpayer with huge future liabilities, is a regressive extension of the welfare state and does not really solve the fundamental problems. Shifting the burden of identifying illegal immigrants onto landlords just adds to their costs and is unlikely to be successful. We have spent time in this House debating the Public Service Pensions Bill. Nobody seems to be concerned that by 2017 there will be an annual cash flow deficit of somewhere between £20 billion and £25 billion per annum. I question whether the government of the day will be able to afford that, whichever party is in power.

The House of Lords Library recently presented a most interesting report which forecasts that the proportion of students who do not repay their student loans will rise from 28% to 40%. Forty per cent of a total of £80 billion is £32 billion to write off on the student loan book. There are two problems here. One is that a lot of students simply do not earn enough because their degrees have no commercial value. A second category of students either go overseas or return to Europe and do not repay their loans. The whole machinery needs to be tightened up. I have been told by students in Europe that they would be happy to repay their loans but do not how to do so because it involves getting a standing order from a bank account in Europe, which is in euros, translated into a sterling order over here and finding a representative bank to pay it. However, behind that there is a much more serious problem of the establishment still not attaching sufficient value to vocational training. The figures show that people doing proper vocational training get jobs more easily and earn more than those doing a lot of liberal arts degrees. Their debts are much lower because it takes much less time to complete vocational training. The truth is that the policy of trying to send 50% of the population to university, and then saddling them with massive debt, is wholly mistaken. What we need in this country is much more vocational training and for it to have the status it deserves given its economic value.

I now want to switch to a much more positive angle because it seems to me that few people realise that the UK economy is recovering extremely well. That is not just according to the latest figures, which I will come on to. What is happening is that the impact of the depreciation of sterling is finally working its way through. The second quarter showed 0.8% growth, strong factory output and particularly strong advertising spend, which is always a pretty reliable precursor to wider economic recovery. The true picture in relation to what has been happening for the past four years has also emerged. There has been a major reduction in North Sea oil production, and if you take that out of the equation the private sector has been growing by an average of 1.3% annually-more than 5%, which I said was the case when we debated the budget. That is where all the new jobs have come from. In comparison to much of continental Europe, the UK economy, as a matter of fact, has been doing surprisingly well. That is extremely good news and is not adequately recognised. In that context, it would be mistaken for government policy to overegg what is already happening of its own accord. In Birmingham South, you have an economic region in Europe that is among the most successful.

I want to close by picking up on the odd comment on the eurozone. In the 1930s it was the gold standard and reparations which caused chronic unemployment, particularly in Germany, and which, bluntly, let directly to the rise of Hitler. It is horrific that people are standing by and seeing some 50% youth unemployment in Spain and some 30% youth unemployment in Italy. This risks causing dangerous political reactions. It is a crackpot policy, all in the name of keeping the euro together. It is absolutely clear that the characteristics of southern and northern Europe mean that they cannot comfortably share a currency. The reality of that needs to be addressed. The German policy of getting away with doing as little as possible and temporarily financing it through the ECB ignores completely the political risks that are staring us in the face. The fact that Germany of all countries, having lived through what happened in the 1930s, cannot see that is completely extraordinary. Whether it is Italy or perhaps, eventually, Germany, I hope that they wake up to the dangers and realise that there has to be currency adjustment within Europe if they are to avoid severe political dangers. I hope that it is going to happen sooner rather than later.

Photo of Baroness Crawley Baroness Crawley Labour 10:02 pm, 13th May 2013

My Lords, at this point in the evening, one wag in the House will say, "Surely everything has been said", and his fellow wag will respond, "Ah, but not everyone has said it". Despite that, I congratulate our new colleague, the noble Baroness, Lady Lane-Fox of Soho, on her maiden speech. I believe that we all feel that her contribution was a master class in riveting, resourceful and modern rhetoric. I look forward to her further interventions in your Lordships' House.

Those colleagues who say that the gracious Speech was a bit thin this year may have a point because when I held it up to the light I could just see the letters "U-K-I-P" in the watermark. However, I was perhaps mistaken because most noble Lords will know that chasing UKIP on immigration or European policy will not turn our country's economy around-and turn it around we must if 1 million unemployed young people are to enter work; if real wages, which have fallen rapidly since the election, are ever to recover; if the downward trajectory of bank lending to SMEs is to be reversed; and if growth is to be put back on track.

The only thing that seems to be growing in Britain today is the Prime Minister's bewilderment at the antics of his own party on the issue of Europe. When asked by our leading polling organisations what their main concerns are, the British public continue to put the state of the economy first. Only one in 10 respondents, when asked, will put Europe as their main concern.

Therefore, the unseemly spectacle of Conservative MPs disagreeing with their own Queen's Speech is indeed "strange" and "extraordinary", to quote the Prime Minister today. However much we may all wish to see reform in the European Union and work towards it, the idea that we can just vote to leave Europe, putting at risk the British jobs that depend on our 40%-plus trade with the rest of the EU and putting at risk the inward investment that comes to us because we are part of the largest trading bloc in the world, is bizarre. The idea that we can just start over with the BRIC countries, which make up a fraction of the trade that we have with Europe, is indeed strange and extraordinary. The PM and I are at one on this, as I am sure he will be thrilled to know.

My specific interest in the gracious Speech, as president of the Trading Standards Institute, is the draft consumer rights Bill, which sets out to establish, as the speech says,

"a simple set of consumer rights to promote competitive markets and growth".

So far, so good. The main elements of the Bill are to consolidate legislation in one place, bringing together eight separate pieces of legislation on consumer rights, and it will cover goods, services, digital content and unfair contract terms. Again, we would all welcome such a consolidation.

The main benefits of the Bill, being to give consumers greater confidence when buying, to introduce new protections for consumers and businesses, to update the law to take account, finally, of the purchases of digital content and to reduce burdens on business are all to be welcomed, as my noble friend Lady Hayter made clear. So where is the catch?

I hope that it is not the Government's intention in this draft Bill to dilute the powers of the enforcement agencies-of trading standards officers in particular-to enter suspect premises unannounced. If that were the case, a vital aspect of consumer protection would be done away with and those Members of your Lordships' House who champion consumer rights would oppose such a move strongly.

In this very difficult economic climate, it is more important than ever to boost markets by boosting consumer confidence, yet the regulatory services in local government, including trading standards, have lost a substantial number of key posts in the budget cuts of the past three years, and that policy continues. This has not left us, for instance, in a strong position to deal with the horsemeat scandal or whatever is next to come round the corner, and consumer confidence has taken a knock as a result. If the Government's Bill were to damage further the enforcement role of the regulatory services, carried out in the interests of both consumers and businesses, then I am certain that many noble Lords would find that unacceptable.

The gracious Speech needs to be part of a toolbox for building growth and prosperity back into our country. I am not confident, with the exception of High Speed 2, as made clear by my noble friend Lord Faulkner of Worcester, that this gracious Speech will do that job.

Photo of Lord Tope Lord Tope Liberal Democrat 10:08 pm, 13th May 2013

My Lords, I must start, as always, by declaring my interest. I have just started my 40th and last year as a London borough councillor.

Photo of Lord Tope Lord Tope Liberal Democrat

I am not sure whether my noble friend, who started his local government career on the same day as I did, although it did not last nearly so long, was saying "shame" because it has gone on for so long or because it is coming to an end. However, it is too late at night for us to indulge in our familiar repartee.

It is customary at this stage of the debate to say that it has been wide-ranging, and indeed it has been. However, all the subjects covered today-business, the economy, transport, and, dare I say, standing immediately behind the noble Lord, Lord Forsyth, even the European Union-are matters that are crucial to local government. Indeed, good local government is crucial to the success of each of them. Long gone are the days when business and local government viewed each other from a distance with mutual suspicion and distrust, at a time when the only contact that most businesses had with their local council was with its regulatory services, and not always very positive contact at that.

Local growth is now top of the agenda for pretty well all local authorities of all sizes throughout the country, and it can be achieved only with a positive and dynamic partnership between the business community and the local authority. When that happens, it is a powerful driver for growth in the local economy. The roles of local enterprise partnerships are crucial to that, although I have to say that I think they are rather a mixed bag and it may be time to review the effectiveness of some of them.

A good transport infrastructure, both locally and nationally, is vital to the local economy everywhere. I say to my noble friend Lord Glasgow that I have waited nearly all my adult life for Crossrail in London. Now, at last, it is happening. So, in respect of HS2, I say to him to hang in there because I am sure that it will happen and that it will reach Glasgow one day.

On Europe, I tread carefully. It is calculated in the European Union generally that something like 70% of EU regulation has to be implemented by local or regional government as appropriate. That is crucial to local government. The say that local government should have in the preparation of that regulation and in getting rid of unnecessary regulation is extremely important and very often overlooked. I am conscious that the Minister who will reply to this debate was, like me, for many years a member of the EU Committee of the Regions, the voice of regional and local government in the European Union. Indeed, I recall that our third speaker today, the noble Lord, Lord Empey, joined me in the first term of the Committee of the Regions.

Turning now to the gracious Speech, I am quite sure that if local government had been asked what it wanted to hear in the Queen's Speech, it would generally have echoed the words of my noble friend Lord Razzall earlier in this debate. The words it would most have wanted to hear are, "My Government propose no legislation". The world would really have changed if that had been accompanied by a commitment from the Secretary of State and some of his Ministers to a prolonged period of silence on matters that should properly be the sole concern of local authorities and their electors in a true spirit of localism. But that is fantasy world and it will not happen. The Government will continue to legislate and regulate because that is what they do, and some Ministers inevitably will continue to make unnecessary and often ill-informed comments on matters that should not be their concern, although I exempt from that totally our Minister in this House, who has long since known better than to do so.

My noble friend Lord Shipley has already referred to a number of the Bills of significance to local government. Next week, we will debate two Bills of considerable significance-the Local Audit and Accountability Bill, and the Care Bill, which is not a subject for today's debate but which has great significance to local government and, particularly, to its residents. We will have ample opportunity to consider them both in detail in the weeks to come, so I will save my comments on both of them until then.

However, of even greater significance to local government will be the spending review to be announced next month. The past three years have been a period of unprecedented challenge and opportunity for local government. The challenge has been implementing 33% budget cuts in only two years. The fact that they were front-loaded in the four-year review was a very unwelcome and unexpected surprise. Some Ministers, although never the noble Baroness who will reply shortly, have sometimes given the impression that that was easy-that all that was needed was to get rid of a few chief executives, cut the pay of the rest, share a few services and the job would be done. At the other extreme, local government representatives gave the impression that the world was going to collapse. Both of these, of course, were considerable exaggerations.

On the whole, local government has managed these major budget cuts very well. However, they have been just that-cuts-and the threat of more cuts in the next spending round is an even greater challenge. They will not be achieved just by reducing back-office costs and a few more salami slices. They will need real transformation in the delivery of local services and the expectations of local residents of what they should receive from their local authorities-a real behavioural change. Behavioural change and transforming services and the way in which they are delivered takes time and needs a climate that encourages creativity and innovation. That is very difficult to achieve when all jobs are under threat and the future is far from clear. It needs good, strong local leadership.

That is the challenge, and it is a big one-but what of the opportunities? Despite the rhetoric of some Ministers to which I have already referred, this Government have made some welcome changes to reverse the trend towards more and more centralisation which has gone on throughout my time in local government. It is not enough and is not fast enough for my liking but it is nevertheless real movement which has sometimes been overshadowed by some of the other measures and some of the other comments.

In his opening address the Minister referred to city deals. These provide real opportunities for the cities concerned and involve real power being devolved to them, together with the requirement, quite rightly, for those cities to take much greater responsibility. So far the two rounds of city deals have been confined to cities. I hope that the Minister can reassure us when she responds that the next round will be targeted largely at rural areas. No doubt it will have a different title but one hopes that it will have the same intentions and the same effect. However, we still need to move faster. We need more devolution of that power and responsibility.

My noble friend Lord Shipley also referred to whole-place community budgeting. I echo what he said. I would also add something that is even more exciting and interesting-namely neighbourhood community budgets as distinct from whole-place community budgets. As my noble friend said, huge savings have been suggested by the implementation of community budgets. Whether those estimates are accurate we will know only if and when we do it. However, even if they are only half-accurate they will achieve huge savings. Even more importantly, that will be done not by reducing services but by targeting those services more effectively on the people who are receiving them and worrying less about who or which organisation is delivering them.

Two Sessions ago we spent a long time on what is now the Localism Act, but that legislation will not implement itself. It gives local authorities the opportunity to do things differently, to innovate and, above all, to devolve power and responsibility to their own local communities. Local government faces a period of continuing challenge but also of great opportunity. My plea to Ministers is to trust local government and to let it get on with it. My plea to my colleagues in local government is to stop moaning and demanding more from central government. Rise to the challenge and make the most of the opportunities.

Photo of Lord Stevenson of Balmacara Lord Stevenson of Balmacara Shadow Spokesperson (Business, Innovation and Skills), Opposition Whip (Lords), Shadow Spokesperson (Culture, Media and Sport) 10:18 pm, 13th May 2013

My Lords, I thank the noble Lord, Lord Deighton, for introducing the debate on the humble Address and for making a fair fist of it, despite the relatively sparse material he had to work with. I am sure that he will not mind my saying that he had to rely on more than a few previously announced policies-housing, infrastructure, training and planning come to mind. Of course, there is always a case for limiting the amount of legislation, provided, as my noble friend Lord Whitty said, it is of high enough quality. However, the problem he had and that the Government have in general is in matching their rhetoric to the reality of their programme. You cannot trumpet your wish to focus on building a stronger economy if all you do is bring forward a programme that fails to deliver the growth and jobs required while attacking people's rights and economic security and perpetuating a failed austerity policy.

I should like to congratulate the noble Baroness, Lady Lane-Fox, on her excellent maiden speech, which managed the difficult trick of making a substantial contribution to the debate, to which I should like to return, while leaving us all wanting a little more. I hope that she will intervene regularly in our work over the succeeding period.

I thank all other noble Lords for their contributions. It was a pity, although, I confess, quite amusing for us on this side of the Chamber, that the crisis du jour-how or whether we should continue our membership of the European Union-boiled over into the debate. However, I suppose we had better get used to it. It is invidious to single out contributions, but I hope that when the Minister responds she will pick up some or all of the interesting points made by the noble Lord, Lord Forsyth, on the Scottish dimensions to many of our debates and the Barnett consequences of that, which are very important. UK productivity problems were raised by the noble Baroness, Lady Wheatcroft, who also touched on regional recession concerns, a subject also raised by the right reverend Prelate the Bishop of Birmingham.

Our poor export performance and questions about why that arises were raised in a powerful intervention by the noble Lord, Lord Tugendhat, and I should like to hear the response to that. We were also advised that we need a more effective consumer regime than seems to be promised by the draft Bill. That was picked up initially by my noble friend Lady Hayter, and then by my noble friends Lord Whitty and Lady Crawley. Mention was made of the needs of small and medium-sized companies, particularly small companies that want to grow. My noble friend Lord Mitchell, late of Soho, picked up points that are worth taking forward. We had a reference to higher education by my noble friend Lady Warwick. I endorse that; it has been far too long since a major statement on higher education has been made and we have not had a chance in this Parliament to debate at any length the very radical changes that are being pushed through by the Government.

Finally, but not exclusively, my noble friend Lord Berkeley raised in a wide-ranging speech, not all of which I was able to follow, particularly geographically, a number of important points about the water industry, to which I am sure the Minister will want to respond. I could have referred to the points raised by the noble Lord, Lord Flight, but there were so many and they were so sharply focused on the Government, rather than on any general points, I did not think it was worth encouraging him; we will pass over that quickly. I am sorry about the listing but, by implication, the point I am making is that a number of issues have been raised all around the Chamber about the focus of the gracious Speech and why it does not match up to the rhetoric of the title of "building a stronger economy". Why do so few of the Bills we have talked about and will be debating over the next few months focus on the question of how to build our economy?

When we debated Her Majesty's gracious Speech last year, unemployment had soared beyond 2.6 million, we were in a double-dip recession, and the Government were borrowing £150 billion more than forecast to pay for the costs of their failed economic plan. What has happened to the economy since then? Since October 2010, the UK economy has grown by just 1.1% compared with 3% in Germany and 4.3% in the United States. Unemployment has stuck at around 2.5 million. A large number of those in work are working part-time when they want full-time work, and most people face difficulties in maintaining their standard of living, let alone improving their lot.

According to this year's gracious Speech, and quoting it in full,

"my Government's legislative programme will continue to focus on building a stronger economy so that the United Kingdom can compete and succeed in the world".

You would have thought that an aspiration on that scale would have presaged Bills that created the conditions for businesses to grow and for wealth to be created, to enhance productivity and to propose a restructuring of our economy, ensuring diversification towards those sectors that would contribute to GDP in the future. Instead, what do we have? In finance, we have the carryover banking Bill and the welcome but very modest national insurance Bill. In business, we have a modest set of amendments to the intellectual property regime; a promise of more regulatory reform, but led from the Cabinet Office; and a welcome but very limited consumer Bill that plays around with structures and responsibilities but does not introduce the sort of regime that will protect hard-pressed consumers and empower them as drivers in making markets work effectively for them and for producers, thus helping to provide the foundation for UK businesses to succeed here and in other markets abroad. Surely what we needed to make this speech's laudable aspiration a reality was a set of Bills that would establish a modern industrial strategy-an agenda where the role of Government is not to step back but to work with business to create better outcomes at home and to ensure that we can pay our way in the world, to ensure that growth is more broadly based across sectors and the regions, and to reduce imports and to grow exports. So, to add to the list of gaps identified by other noble Lords, I want to mention four areas where there are still points to be picked up, and to which we will return as we move forward through the programme.

As my noble friend Lord Eatwell said, we must reform our banking sector, not only so that banks are made safe but so that the sector better serves the economy. Under this Government, lending to businesses is falling month on month, including a fall of £4.8 billion in the three months to February according to the latest Bank of England figures. We know that the rash of government schemes, from Project Merlin to the national loan guarantee scheme, and now the Funding for Lending scheme too, have simply failed to get credit to the businesses that need them. The problems are exacerbated in the regions and nations of this country. Every other country in the G8 has a state-backed investment institution to tackle this problem and to ensure that their small businesses can access the finance they need. That is why we have been arguing for the establishment of a proper British investment bank and for the creation of a network of regional banks, perhaps, following on from my noble friend Lord McFall, using one of the nationalised banks to operate alongside that institution to transmit the investment bank schemes to small businesses.

Weaknesses in vocational skills are a concern of every business that we talk to and a source of competitive disadvantage for the UK as compared to our neighbours. With almost 1 million young people out of work, we must ensure we have a system that delivers people with the education and skills our businesses need. Ministers boast that they have created more than a million apprenticeships, but the number of 16 to 18 year-olds starting an apprenticeship in the first half of this academic year has dropped by 12%. We urgently need to improve a situation in which two-thirds of large companies in this country do not offer apprenticeships. Why will the Government not legislate to require those large firms getting government contracts to have active apprenticeship schemes, ensuring opportunities to work for the next generation?

The only direct mention of infrastructure in the gracious Speech is the two HS2 Bills. I declare an interest, as the current route for HS2 goes close to my home-not, as I may have mentioned to the noble Earl, Lord Glasgow, close enough to qualify for compensation, although I have my hopes. I have made clear before that I support my party's approach to the scheme although, like the noble Viscount, Lord Trenchard, and, I think, the noble Earl, Lord Glasgow, we do not yet understand the rationale for the introduction of a paving Bill before decisions have been made on our airports, for example. We have made clear that we will look to ensure that HS2 is fully integrated into the existing rail network, with services running directly to a wide range of towns and cities in addition to those already placed on the new line, which amount to a very small number; affordable to use, rather than a premium-priced service aimed at business passengers; not at the expense of investment in the existing network, including the rolling programme of electrification, upgrades and new rolling stock; and required to generate at least 1,000 apprenticeship opportunities for every £1 billion of public investment.

However, surely we need to look beyond HS2 and its 30-year payback. As the noble Lord, Lord Forsyth, said, we need jobs now. With our economy flatlining, the country is crying out for investment in infrastructure to create jobs, boost confidence and strengthen our productivity and competitiveness, particularly in the regions. Both the CBI and the EEF criticised the Government for their failure to get on and deliver on infrastructure. The last infrastructure pipeline update given by the Government shows that of their 576 projects, less than 5% were completed or operational. Why was there not more in the Queen's Speech to take that forward? Where are the practical measures on housebuilding, which would kick start the economy with jobs in the construction industry while providing much needed homes?

Finally, what on earth is happening on communications? Communications are vital to every aspect of our lives today-from business to leisure and accessing public services. Everyone should be able to access a decent level of communication, including phone and internet. Our content and broadcast industries need copyright protection and certainty. The communications sector was worth £50 billion, employing 530,000 people, in 2011, and of course it supports the wider economy. The internet contributed 8.3%, or £121 billion, of the British economy in 2010-a bigger share than in any other G20 major country, and is predicted to grow at 11% a year over the next five years. In her excellent maiden speech, the noble Baroness, Lady Lane-Fox, argued that the Government should develop a strategy and a programme that would get as many people online as possible. We agree. A communications Bill is desperately needed, focused on helping people to get broadband in rural areas, a point picked up by the noble Baroness, Lady Byford; helping people improve their digital skills through training and education for both business and personal reasons, as more public services will be delivered online; ensuring that those who do not have a computer or broadband at home can access those facilities from a public library; and making sure that older people, disabled people and people with learning difficulties have access through the appropriate design of services and equipment.

This debate has been primarily about the economy, business and transport but it has also dealt with local government, and the main Bill in that section is the Local Audit and Accountability Bill. Having announced the abolition of the Audit Commission three years ago, the Government have finally come forward with a proposal to try to fill the vacuum they have created. However, we must ensure that taxpayers get value for money and we maintain high standards of audit. We have concerns about whether the plans will produce an open and competitive market-contracts may well be awarded to a small number of firms-and there are real uncertainties about the level of future audit fees.

The draft Bill was heavily criticised in pre-legislative scrutiny. The committee questioned the estimated savings claimed by the Government. It also called for a new financial impact assessment, stronger safeguards for whistleblowers, and better value for money compressions to enable more informed judgements about the effectiveness of local expenditure. I hope that the Minister will be able to reassure us on these points.

Twelve months ago, we warned that the Bills in last year's programme would not do much to get the economy going again. Today, the economy is flatlining and there is little, if any, hope that the legislative programme announced so far will bring the growth and jobs that we so desperately need. For me, the saddest thing is that the Government who legislated for a fixed-term Parliament of five years seem to have run out of steam after three-what a waste.

Photo of Baroness Hanham Baroness Hanham The Parliamentary Under-Secretary of State for Communities and Local Government 10:31 pm, 13th May 2013

My Lords, I am probably the only person in the Chamber who sat and listened to every single one of the speeches made today. It is with some lack of confidence that I say I will be able to respond to all the points that were made. I will do my best. It may require me gabbling a bit but I will provide as many responses as I can. This has been an important and good debate. I always enjoy the Queen's Speech debate because it is very wide-ranging-I apologise to the noble Lord, Lord Patten-and we get a whole lot of views.

In his opening speech-many, many hours ago-my noble friend Lord Deighton laid out the Government's programme for the next Session. Since then, we have had more than 40 commendable speeches, to which I will endeavour to do justice in the short time available to me. Where I have been asked direct questions, if I do not answer them I will see that a letter sent is to the noble Lord concerned.

I, too, congratulate our new noble friend, the noble Baroness, Lady Lane-Fox. Many others have complimented her on her speech, very justifiably, and I, too, would like to say how fortunate this House is to have her in our midst. She will not know this but I knew the previous Baroness Lane-Fox very well and respected her very much as a great supporter of the disabled. She was one of the first people to really put the needs of disabled people on the map, of course being disabled herself. She was a great person and I am sure that the noble Baroness will follow adequately in her shoes.

The comments started off with a sort of mish-mash of disagreement about what has happened with the economy. I found rather rich the suggestion that the Government were not doing the right thing to put it right. On a number of occasions in this House, I have gently reminded noble Lords on the other side that this deficit was not of our making. We inherited it after 13 years and now to suggest that we should borrow our way out of this situation, when we were borrowed into it, is something that will require more time for debate than I have today.

Despite the considerable efforts that have been and are being made by the Government, the country is still facing difficult economic challenges. The departments represented in today's debate-my department, the Department for Communities and Local Government; BIS; the Department for Transport; and the Treasury-are the most involved in providing the essential measures that can assist recovery and stimulate growth.

The Government have been consistent in basing their policy on an unwavering commitment to fiscal responsibility and introducing measures aimed at ensuring that this country is one of the best places in the world to do business.

We have had many speeches on the economy, both on its strengths and its weaknesses. The Government's key objective is to reduce the deficit, and spending consolidation is a vital part of this. Interesting speeches on this were made by the noble Lords, Lord Eatwell and Lord Empey, and the noble Baroness, Lady Wheatcroft. The Government have consistently looked to prioritise growth and enhance spending. The Chancellor announced in the Budget that the Government would increase their infrastructure spending plans by £3 billion per annum, paid for through permanent reductions in current spending. This will mean £18 billion additional investment by the end of the next Parliament.

The noble Lord, Lord Empey, suggested that individual departments and civil servants should have a duty to make savings and to understand what they were doing-I think that that is more or less what I would interpret it as. We are currently engaged with departments to identify more savings from their budgets ahead of the spending review on 26 June. There will be a zero-based review of capital to identify the highest-value-for-money growth schemes. As noble Lords have said and understand, capital growth is essential to support the growth strategy.

Public investment as a share of national income, thus GDP, will be higher on average between 2010-11 and 2020-21 than under the whole period of the previous Government despite much greater constraints on the public finances. This means that the Government will never cut capital spending to the levels planned by the previous Government, who intended to cut it by 7% more than in our plans. This would have meant £3.4 billion less investment by 2014-15.

We have made good progress on coalition agreement commitments and business plan delivery. Our focus now is on maximising the impact of our policies, particularly to achieve growth at a local and national level. That means devolving powers and responsibilities and giving business as much freedom and support as possible so that it can flourish. As my noble friend Lord Tope has pointed out, my department has been instrumental in passing funding and responsibilities to local government to help to promote business activity.

A final part of this localisation is covered by the measures announced in the gracious Speech of the local audit Bill. I shall not go into the details tonight because it looks as though we are going to have a lively time with it, but I know that we will be starting consideration of that in the next few weeks. The legislation will enable local authorities to be more independent of central government in selecting their auditors and managing their finances.

We have had a number of contributions today on transport and transport infrastructure. It is correct that we are investing more on major transport projects such as HS2 and Crossrail. Despite the strictures of my noble friend Lord Forsyth, we are investing also in local roads, rail and transport schemes. I am pleased that, in general, speeches today have supported that investment.

I was asked specific questions by the noble Lords, Lord Faulkner and Lord Bradshaw, and the noble Viscount, Lord Simon. They were all kind enough to give me advance warning of these so I shall briefly respond to them now. The noble Lord, Lord Faulkner, asked about Crossrail having a station at Reading or Maidenhead. I know that he has recently had a written response from my noble friend Lord Attlee and that my noble friend is happy to speak to him again on this subject if he wishes. Network Rail's Crossrail works on the Great Western main line are already under way in a number of places. However, the works at Maidenhead that might not be needed if the route was extended to Reading are not due to commence until 2016, so there is plenty of time to deal with that.

The noble Lord, Lord Bradshaw, asked about the acute shortage of railway rolling stock and whether Her Majesty's Government would get out of the way of investment by indicating in franchise agreements a presumption of the carry-over of such stock.

The Government's rail Command Paper stated that bidders should not be fettered in their future use of rolling stock and should have more market freedom. That was endorsed by the industry's rolling stock strategy, published in February 2013. The Government already make use, where appropriate, of Section 54 of the Railways Act, under which we can require a new operator to take on the previous operator's rolling stock.

Finally, the noble Viscount, Lord Simon, was concerned about young drivers' road safety. We are intent on reducing the number of accidents involving young drivers. That is a top priority and we have already taken steps to make the driving test more realistic by introducing independent driving and stopping the publication of test routes. A Green Paper considering a range of options for improving the safety of newly qualified drivers will be published later in the spring.

My noble friend Lord Forsyth asked about the modernisation of transport, to which I have just referred. We are undertaking the biggest modernisation programme for the railways since the Victorian era. We are working with local authorities and businesses to target investment where it is most needed, and we have established the independent Airports Commission to make recommendations on how to safeguard future international aviation capacity. The noble Lord, Lord Bilimoria, asked about that. Sir Howard Davies will be delivering a shortlist of credible proposals by the end of this year. He will also identify ways in which we can make better use of existing capacity and, as part of his final report in summer 2015, the commission will provide materials to support the Government in preparing a national policy statement.

We have of course made a commitment to HS2, which I am glad was largely supported by speakers from around the House. We believe that that will change the economic geography of the nation. The noble Lord, Lord Bilimoria, also asked us about timescales. I can tell him that we aim to produce a paving Bill this year. The target for Royal Assent to the paving Bill is November this year. The hybrid Bill for phase 1 will be introduced by the end of 2013, with 2015 the target for Royal Assent. We expect that the hybrid Bill for phase 2 will be introduced in 2018. Construction of phase 1 will start in 2017 and construction of phase 2 will start in the mid-2020s. We hope to have the first line open in 2026.

The general support for HS2 is a great help. The noble Lord, Lord Faulkner, gave stirring support for it. I agree with him that it is not just about high speed. It will unlock the enormous potential opportunities that cities including Birmingham, Manchester and Leeds have to offer, making them more attractive places to locate and do business. HS2 will bring jobs on the railway to the cities that it will serve. HS2 Ltd estimates that about 9,000 jobs will be created to construct the new London-Birmingham route, with a further 1,500 permanent jobs created in operations and maintenance. All in all, it is something to look forward to and support. However, we have not just been working on HS2. We have also been investing in other railway and road structures in an ongoing programme to ensure that it is not just new lines that are supported but current ones.

We know that at least 90% of businesses are small and medium-sized enterprises and that they have not found it easy to access finance in the past few years, so we have created a business bank, which will deploy £1 billion of additional capital to address gaps in the supply of finance to small and medium-sized enterprises. That will enable them to access loans and give them certainty to bid for contracts both within this country and beyond. We are providing further help by reducing corporation tax from 28% to 20% by April 2015. In addition, we will be providing a £2,000 contribution towards employers' national insurance contributions if they take on extra staff and so help the unemployment situation, which my noble friend Lord Sheikh welcomed.

My own department has been at the forefront of promoting infrastructure support, which, as other noble Lords have said, is important to the future of the economy. Creating the right conditions for increasing infrastructure projects is essential to stimulate growth, particularly through the construction industry, so we are building on an existing commitment to an £11 billion housing investment in this spending review. In this year's Budget, a further housing package totalling £5.4 billion was announced. The noble Lord, Lord Eatwell, suggested that there should be more concentration on new housing. I remind him that we have recently launched an equity loan scheme for help to buy, and that will provide £3.5 billion of investment, focusing on new-build home ownership. It will also boost construction. That has been well received and well taken up.

We have introduced a mortgage guarantee scheme from January 2014 to provide guarantees to support £130 billion of high loan-to-value mortgages. We are undertaking a build-to-rent scheme, the funding for which has expanded from £200 million to £1 billion, to support the development of more new homes. The affordable homes guarantee programme doubled the support for a further 15,000 new affordable homes in England by 2015, and we have the right to buy.

The noble Lord, Lord Shipley, and I disagree that none of this will generate more housing and boost construction. It will, and that is what we are aiming for. However, it involves a huge investment of money in both housing and construction.

The Government published our full response to the Heseltine review in March 2013, confirming that 81 out of 89 recommendations had been accepted in full or in part, including the creation of a single local growth fund. The size of the pot has not yet been agreed but it will encompass quite a lot of other pots.

The Government have also established 24 enterprise zones, and those are creating jobs as we speak. The right reverend Prelate the Bishop of Birmingham rightly pointed out how Birmingham was doing, particularly with the city deals. Birmingham clearly has a good future and is working extremely hard to ensure that it is at the top of the tree and ready to take on any responsibilities to come its way. It is estimated that the first wave of city deals will create 175,000 jobs over the next 20 years and 37,000 new apprenticeships.

In addition to the Autumn Statement, 2012 saw the announcement of government investment of an additional £980 million in schools in England by the end of the Parliament, the funding for 100 new academies and free schools. All these promote growth and investment.

The noble Lord, Lord Bilimoria, made a passionate plea for more pressure on trade, including selling the UK in the UK. The Government are encouraging investment in exports as a route to a more balanced economy, and we have set out our ambitions to increase total annual UK exports from £488 billion in 2011 to £1 trillion by 2020.

My noble friend Lord Sheikh and the noble Lord, Lord Bilimoria, promoted the need to pursue trade with Africa as well as with India and China. We understand the need to extend that, and I know that my noble friend Lord Deighton will be taking notice of that.

Photo of Lord Lea of Crondall Lord Lea of Crondall Labour

The Minister has mentioned Africa and China. Does she recall that a number of noble Lords have mentioned Europe? Does she think that it makes no difference to the prospects for investment in Britain if we have one hand on the door handle to exit from the European Union?

Photo of Baroness Hanham Baroness Hanham The Parliamentary Under-Secretary of State for Communities and Local Government

I was not ignoring Europe. I was speaking directly to the points that were made about India and Africa. Of course our trade with Europe is extremely important, both imports and exports. I do not think anybody is going to want to unbalance that. The noble Lord's point is well made and I was not trying to underestimate its importance. Trade with the rest of the world is also extremely important.

In January 2013, the Government introduced a one-in, two-out system of deregulation whereby no new regulation is introduced unless it is offset by deregulation of twice the equivalent value. That will be part of the discussions we will be having later when the deregulation Bill comes forward.

I have a sheaf of papers here and about two minutes to deal with them. The noble Lord, Lord Eatwell, spoke about the banking reform Bill. The Government are going to give careful consideration to the recommendations made by the Parliamentary Commission on Banking Standards, including those it makes in its final report. We will consider tabling amendments to the Bill when and if appropriate. The Government have committed to ensure that both Houses will have enough opportunity to consider and debate any amendments tabled.

The noble Lord, Lord Bilimoria, asked about promoting trade beyond Europe. UKTI is working with the Foreign Office and applying a range of criteria to prioritise its focus on emerging and high-growth markets.

The noble Lord, Lord McFall, and the noble Baroness, Lady Kramer, asked about the break-up and sale of RBS and other banks. The government shareholding in RBS and Lloyds Banking Group are managed on a commercial and arm's-length basis. UKFI works closely with those banks to assure itself of their approach to strategy. Its objectives are to create value for money for the taxpayer and to devise and execute a strategy for realising it in an orderly and active way over time.

My noble friend Lord Forsyth suggested that quantitative easing has exaggerated the liabilities of pension funds because of low interest rates. We recognise that quantitative easing is a major tool designed to affect the economy as a whole to meet the 2% inflation target over the medium term. Over 2011-12, companies with defined pension schemes have seen their scheme deficits more than double from around £100 billion to £250 billion, but the recent fall in gilt yields cannot be ascribed to quantitative easing alone. Factors such as flight to safety from the eurozone also have an impact.

Photo of Lord Forsyth of Drumlean Lord Forsyth of Drumlean Conservative

I realise it is rather late, but the point that I was making was that the assessed deficit is based on gilt yields, not corporate bond yields. If the Pensions Regulator were to change that view, huge sums of money that are not required but appear to be required because of the fall in gilt yields would not be put into pension funds.

Photo of Baroness Hanham Baroness Hanham The Parliamentary Under-Secretary of State for Communities and Local Government

I thank my noble friend for that extra explanation. I shall carry straight on because I might just get a few more of these done.

The noble Baroness, Lady Hayter, asked whether private landlords will be required to check the immigration status of tenants. Many landlords already carry out some identity checks. An additional requirement, such as taking a copy of a passport, should not be too burdensome.

My noble friend Lord Tugendhat asked a number of questions, as did the noble Lord, Lord Monks. They are all quite technical, so I hope they will forgive me if I reply in writing.

There were questions about the consumer Bill that will come before us in the not-too-distant future, and there will be a great deal of debate and discussion on it.

My noble friend Lady Byford raised the question of rural broadband. I am sure she will appreciate that, during the passage of the Growth and Infrastructure Bill a few months ago, there was considerable discussion of rural broadband and the necessity for it including the permitted development rights and the limitation of those. The Government absolutely recognise that rural broadband is essential, not only to promote industry and its facilities but also for individuals.

My noble friend also asked whether local authorities have sufficient resources for planning, based on the new permission for agricultural buildings to be converted. We are giving all authorities a 15% inflation-linked increase in fees. Some have managed to deliver significant improvements in their services despite other reductions.

The noble Lord, Lord Mawson, speaks with great experience and he and I have discussed issues like this before. I note with concern what he was saying about neighbourhood budgets and communities. Perhaps we might discuss that further some other time.

I will probably run out of your Lordships' patience as time goes on. I will deal with two more points and then answer the others in writing.

The noble Lord, Lord Warner, spoke about youth unemployment as well as other important matters. The 16-17 year-old unemployment level fell by 5,000 to 192,000, down 21,000 from the same time last year. The 18-24 year-old level rose by 25,000, but that is down 25,000 from the same time last year. The proportion of 16-24 year-olds not in employment, education or training has fallen over the year and is currently at 15%. That is too high and needs to come down. I accept entirely what noble Lords say: youth employment is one of the real problems that we need to address. The noble Lord also asked about the resource transfer from the National Health Service to social care. As he will know, all government spending is being reviewed as part of the spending review, including social care funding.

Finally, my noble friend Lord Trenchard asked what we are doing about excessive regulations where primary legislation is not required. The deregulation Bill is not all we are doing to reduce regulation. We are also making changes through secondary legislation, but this Bill will help us meet our target to repeal and reform at least 3,000 regulations in this Parliament.

I must just respond to my noble friend Lord Tope on city deals because he was so nice about me. At the moment there is no plan for rural deals. Of course, some rural areas are caught up within the city deals and are helped by that. The Government plan to devolve to all local enterprise partnerships, rural and urban, the single local growth fund.

I apologise for gabbling and being rather short. Where I have not answered, correctly and in appropriate detail, points that have been made, I will do so in writing.

The debate adjourned until Tuesday 14 May.