Business and Society — Question for Short Debate

– in the House of Lords at 7:37 pm on 12th June 2013.

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Photo of Lord Sacks Lord Sacks Crossbench 7:37 pm, 12th June 2013

To ask Her Majesty’s Government what is their assessment of the relationship between business and society.

Photo of Lord Sacks Lord Sacks Crossbench

My Lords, I am grateful for this opportunity to discuss the relationship between business and society. I welcome in particular the opportunity short debates such as this provide to step back from the specifics of policy to take a wider and longer view of the moral dimensions of economic policy. This is a very large subject indeed, and I will hazard just a few words about it in general and then turn to one aspect, confident that other speakers will touch on others.

In the light of the G8 protests and so much else that has been said in recent years, it is often assumed that when a religious leader speaks about business, it is to be critical of capitalism and all its works. That is not the case in the tradition from which I speak. The Hebrew Bible, after all, records perhaps the world’s first economist, Joseph, who invented the theory of trade cycles, seven years of plenty followed by seven lean years, which has thus far proved to be a more accurate guide to the 21st century than most other economic forecasts.

We believe that business and the market economy generally play a moral role in society. Business is the greatest stimulus we know to human creativity and increases the common wealth. It reduces poverty, and poverty is profoundly humiliating. Economic liberty has a deep association with political liberty. Trade, as Montesquieu pointed out in the 18th century, is a deep alternative to war. Throughout history, trading centres, such as the city of London, have been at the forefront of tolerance and respect for difference. However, economics is always subject to an overarching moral law. According to the Talmud, the first question we are asked in heaven is: were we honest in business? It does not say what happens if the answer is no, but in my mind’s eye I see an angelic figure like the noble Lord, Lord Sugar, with wings, saying, “You’re fired”.

However, I wish to express my concern at one specific aspect of our current situation, namely youth unemployment. Today, unemployment is high throughout Europe, and youth unemployment far higher still. In Britain, the current figure is 20.7%. This is by no means the worst. In Greece, the figure is 58%, in Spain, 55%, in Italy, 37%, and in France, 25%. These are all disturbing figures. The real question hovering in the background is: is this a mere temporary feature of a low point in the economic cycle or is it likely to become a permanent feature of economies in the West, as virtually everything to do with business becomes increasingly globalised as we continue to outsource manufacturing and service industries to low-wage economies elsewhere in the world?

It used to be thought that high unemployment was the price we paid for low interest and inflation rates. Is it now to be the price we pay for global free trade? Are we condemning a significant proportion of young people to a future in which they will never find work? If so, the price we pay is likely to be very high indeed. There is the economic danger of an increasingly small working population supporting an ever larger non-working population, something that is already happening because we are living so much longer. There is a political danger. Historically, and in many parts of the world today, youth unemployment is a prime cause of political instability. Above all, however, we should be mindful of the moral, psychological and—dare I say it?—spiritual hazards at stake.

In Judaism, we believe that work is fundamental to human dignity. We believe that everyone should be able to say, “I made a contribution to the common good. I gave; I did not just receive. I earned my daily bread. I did not depend on the generosity of others”. Our ancient sages said, “Do even the most menial work rather than be dependent on others”. Maimonides, our most eminent medieval scholar, held that the highest form of charity was job creation because it enabled the recipient to become independent of charity. These remain compelling ideas.

A Jewish economist, David Ricardo, formulated one of the most morally beautiful of all economic theories, the law of comparative advantage, which states that even if you are better than me at everything, if you are still better at some things than others, and I am also better at some things than others, then if we both concentrate on what we are best at, and trade, we are both better off. That means that every one of us has a contribution to make to the common wealth. We all have something to give.

In a very moving article a few months ago, the columnist Matthew Parris wrote about the experience of life on welfare benefit that he had once undertaken for a television documentary. He discovered that the real issue was not so much material as psychological. Without minimising the deep financial hardship, he wrote that,

“what I'll never forget was the slow, quiet, killing quality of a life without purpose, a life where you depend, but nobody depends on you; a life where all the people around you, too, are without occupation”.

He spoke of the “shame” and “indignity” of worklessness. That is precisely what drives Jewish economic ethics.

There is an inescapable moral dimension to economic policy because it is, in the end, not about abstractions, such as GDP, but about people. There could be no more dispiriting prospect than the thought that a significant proportion of young people in this country will grow up without prospect of employment, without contributing to the nation’s economy and without having the chance to say, “I made this, I contributed, I helped this to happen”.

I therefore ask the Government to explain how they are exploring ways in which business, education, local and regional groups and civic and voluntary organisations can work together to increase the skills of and job opportunities for young people. Employment is a moral issue because dignity comes from what we do to enhance the lives of others.

Photo of Lord Patten Lord Patten Conservative 7:44 pm, 12th June 2013

My Lords, I shall make three points about where business and society meet from an ethical point of view. First, there is surely no iron curtain between business and society because, after all, the shared values of business people and people in society are the same. They try to help and look after each other, doing good not bad, being supportive and helping people in ways that they can. That is at least the best reading of that shared value. Equally, most businesspeople such as my wife and me go back at the end of our business day into society. We are not some other class. Most people in business look to society as a haven and a home, just as most people in society look to business to supply their needs. There is no iron curtain of any sort there.

Secondly, all of us should be extremely cautious when things go wrong in business, such as giving in to the sound bite delights of, say, bad banks and the rest, because I fear that that will discourage a lot of those who are not bad but good bankers. There are a great many of them, and that is why I very much welcome what the noble Lord, Lord Sacks, said about the ethics that drive his religion. They are sometimes very different from those that drive mine but, with due respect to some of the cassock-wearing classes—I entirely exonerate the right reverend Prelate the Bishop of Chester—there has sometimes been a bit too much bad bankery around, which distresses a lot of people. One has to be careful, moderate and modest in what one says.

Thirdly and lastly, society has a lot to learn from business and big business. I recently looked at the ethical code of an extremely successful global corporation, which has got away without having any ethical problems in the past two or three decades because of the high levels of ethical training that everyone in that business has to go through. They have to sign up each year to a final question: “Would I be pleased where conscience meets ambition? Would I be pleased to see what I am going to do today in the media tomorrow to be seen by my loved ones?”.

Photo of Lord Glasman Lord Glasman Labour 7:47 pm, 12th June 2013

My Lords, it is always an honour to participate in a debate introduced by the noble Lord, Lord Sacks, the Chief Rabbi, who has led my community, the Jewish community, in an exemplary way. He has renewed our most important tradition, modern orthodoxy, and made it relevant for the modern world. As ever, he has it completely right by bringing our attention to the relationship between business and society. There has been a rupture in that relationship, and it is extremely important to reconceptualise it.

I want to concentrate on the issue that the noble Lord brought up regarding youth unemployment and the way that faith can cast light on it. He has a unique voice, but he is not alone in what he said. Two weeks ago, I was invited to Rome, where I received a medal from the Vatican. One must understand that, as someone who grew up in Jewish north London, receiving medals was not something that I ever expected to happen. They would normally have been for sporting or military activities, neither of which, according to the comparative division of labour, was a speciality of Palmers Green and Southgate Synagogue.

However, the Pope also has a very pro-business and pro-worker agenda. Issues regarding usury and interest rates are extremely important to that. Above all, what faith brings, and what we neglect, is the realisation that there is no solution to youth unemployment without bringing older people into the equation. There needs to be intergenerational solidarity. Traditionally, we have always put a strong emphasis on our elders. It is essential that we retrieve the idea of vocation and bring in older people, who should not be abandoned and whose wisdom and experience are so important in generating the values that will be essential to earning a living in the world and generating employment. We need to find ways to allow older people to relate to younger people, who should hear their stories and learn their skills. I commend the Chief Rabbi for this debate.

Photo of Baroness Scott of Needham Market Baroness Scott of Needham Market Chair, EU Sub Committee D - Agriculture, Fisheries, Environment and Energy 7:49 pm, 12th June 2013

My Lords, perhaps oddly in a debate on business, I am going to focus on the topic of volunteering. I am going to do so because the good news is that more and more people of working age are volunteering, but they are able to do so through the good offices of the businesses and people who employ them and give them time off to do so. Many organisations are going further than this, and are participating in bespoke schemes which enable their staff at all levels to become involved with volunteering. This is perhaps with chosen charities through team activities, fundraising or joining in the work of the charity, or in other cases, giving professional advice such as legal, IT or financial.

The Westminster volunteer centre has a very good track record of working with large organisations and corporations to enable this to happen. I recently met a lady called Nikki King. She is the managing director of Isuzu trucks, and she decided to tackle the lack of aspiration that she sees so often in young people by giving them mentors from the world of business and industry. She started just doing this by herself, but she now works with the Freight Transport Association, DHL, Asda, William Hill and many others to provide mentoring to 14 to 18 year-olds. In my own area, AXA insurance and Willis have both worked with local volunteer organisations.

Academic studies from around the world have shown that creating an employer supported volunteering scheme is a cost-efficient way for business to increase staff job satisfaction, build internal and external networks, contribute to high-quality personnel recruitment, teach new skills to their employees, improve customer relationships and increase shareholder value.

What do we, as parliamentarians, need to do to encourage this trend? First, we need to keep our house in order. I think that it is rather a pity that, as one of the largest employers in Westminster, we do not have a corporate volunteering scheme here. I have raised this with the House, and perhaps other noble Lords will support me in this endeavour.

Secondly, the Civil Service has a very good track record of volunteering and I hope that the Government will remain committed to it. Finally, the Government need to take a look at the funding for volunteer centres. Volunteering does not come free; there is no substitute for the face-to-face expertise and bespoke service provided by good volunteer centres.

Photo of Lord Mawson Lord Mawson Crossbench 7:51 pm, 12th June 2013

My Lords, when I began my work as a social entrepreneur in the East End of London 30 years ago, there was a clear perception that the public sector and charities were the good guys who do good to people and that business was for, and I quote, “greedy capitalist pigs”. Of course, many of us at that time had little, if any, real practical experience of working with business people. However, we read the Guardian and completed our university degrees and so we were experts.

As a clergyman, I am in the religion business, and the religion at that time was very clear and of a fundamentalist nature. Religion had moved out of the churches and on to the street, and its belief systems were firmly established in the public and charitable sectors. Over the past three decades, our understanding has changed. We have been led through the Common Purpose programmes of the 1990s into practical working relationships with the business community. We have come to know and respect many business people because they often know how to run things well. Many of us have formed business partnerships to deliver our programmes in local communities.

Today only 6% of the funding at the Bromley by Bow Centre, which I founded, comes through the state. The majority of our success stories are because we work in partnership with business. This week a £1.5 billion development programme has been announced in Silvertown Quays in the Royal Docks. With a good wind behind it, this programme could change the lives of one of the poorest communities in east London. I was invited to join the team and I am proud to be a member of this business consortium which I hope will transform this piece of London over the next decade and create hundreds of jobs. Here, of course, I must declare my two interests.

What does the future look like? I think we need to use the present financial crisis to create a new alignment. The state needs to create the conditions within which the business, social enterprise, and charitable sectors can work together. As a practitioner, I have to grapple every day with the insensitive bureaucracies and silos of government systems, and it is not getting any easier despite years of rhetoric from Ministers of every political persuasion. The real moral challenge to all our parties is not with business per se but with the state and its seeming inability to deliver at ground level.

We must have a more intelligent discussion about the size of these state institutions and how we enable each of them to work more easily with small and medium-sized enterprises. This is the real moral issue: size matters.

Photo of The Bishop of Chester The Bishop of Chester Bishop 7:54 pm, 12th June 2013

My Lords, I want to risk the wrath of the noble Lord, Lord Patten, by suggesting that society as a whole would be better off if more businesses and organisations were to pay the living wage. The aim is to pay enough to sustain a basic but adequate standard of living. The current rates, as determined by the Living Wage Foundation, are £8.55 an hour in London and £7.45 an hour elsewhere.

Over the past 30 or so years, there has been a general move towards more liberalised markets. Whether this is a move back to the Hebrew Bible or not we can perhaps discuss at greater length, but no doubt it is. It has produced many benefits, but the problem is that any society based upon freedom tends to produce more winners than losers and exaggerates the differences, and indeed, an underclass very easily emerges.

While low pay is a feature of most advanced economies, the UK has a particularly high, and rising, share of low-paid workers. If we use the living wage as a guide, in 2011 nearly 5 million UK employees were paid less than the living wage. This included 25% of all female employees, and 41% of all part-time employees.

I travel regularly in Scandinavia for family reasons, and the benefits of having a minimum in excess of our living wage in relation to dignity at work as well as the wider and broader features of society, are pretty obvious to me. Surveys in the UK suggest that paying the living wage has led to improved productivity by reducing the staff turnover, and raising morale.

I remember all the predictions of economic damage when the minimum wage was introduced in this country. They were mistaken. Is it not time for businesses across the UK—and for that matter, the Government—to work towards a greater implementation of the living wage? Church bodies are resolved to do this as they are able to, and I am glad to say that real progress is being made. Very recently the Church Commissioners, with their extensive property holdings in London, have agreed to pay the living wage to all employees, including cleaners and everyone else.

In this spirit, I ask the Minister whether all those who work in these buildings, including contract workers, are themselves paid at least the London living wage. If not, why not?

Photo of Baroness Bottomley of Nettlestone Baroness Bottomley of Nettlestone Conservative 7:56 pm, 12th June 2013

My Lords, I warmly congratulate the noble Lord on introducing this debate. I became a Conservative when working for the Child Poverty Action Group, influenced by a distinguished Jewish politician who had a profound on Margaret Thatcher, the late Lord Keith Joseph. I had written a wonderful paper about family benefit, or child benefit, and how critical it was. He read my paper when I was aged 23 or 24, and he said, “Virginia, you only have to understand one thing; it is much easier to divide the cake up than it is to bake it in the first place”.

Wealth creation matters. If we want schools, hospitals, roads and infrastructure, and if we want to do good and change the world, wealth creation is a critical element. I am pleased that the recent UN millennium development goals particularly emphasise the need for a much greater role for business in any new global framework. Only recently the

Economist

—of which I am a trustee—wrote an article about the number of people coming out of poverty. They are coming out of poverty because of wealth creation.

Of course there have been examples of the unacceptable face of capitalism, but there has been much more of a profound move to corporate social responsibility, of which one of the greatest champions and pioneers has been the Prince of Wales. His work with the Prince’s Trust, Business in the Community and International Business Leaders Forum has all been about recreating the principles that I suppose surrounded the 19th century businesses of the Cadburys and many others, of serving your community. By serving and strengthening your community you also strengthen your business at the same time.

Business now also informs much of the philanthropic sector and the noble Lord, Lord Mawson, was beginning to touch on this. I am fascinated by the work of social impact bonds, Big Society Capital, social incubators and social enterprises. We used to have different rules of engagement for the philanthropic side than for the commercial side. Now there are far more people saying, “No, philanthropic organisations should use their money wisely and well”.

The gap has been universities. Universities are a catalyst between business and society. With great pride, I am chancellor of the University of Hull—which is an area of high unemployment. The university makes a profound difference working with industry and enterprise to create the conditions where external business wants to invest and wants to create employment. A recent example is the Humber port project, leading to the investment of Siemens, and there are many other examples where the local workforce is being trained to be fit for purpose and global businesses are being encouraged to invest in a needy but thrilling part of the country—Kingston upon Hull.

Photo of Baroness Warwick of Undercliffe Baroness Warwick of Undercliffe Labour 7:59 pm, 12th June 2013

My Lords, I was prompted to speak by a meeting with the impressive Ethical Trading Initiative, an alliance of companies, trade unions and voluntary organisations, which sets out principles on which international trade should be founded and to which companies and their supply chains have signed up.

Businesses alone cannot take the blame for the pressure for cheap-as-chips products. We, as consumers, are helping to drive their business decisions, yet when a disaster occurs, such as the collapse of the garment factory in Dhaka, we are outraged at the loss of life and the conditions of the garment workers. An event such as that makes the ETI principles all the more valid and emphasises the need for them to be underpinned by the UN guiding principles. Therefore, I ask the Minister: when will the Government publish their strategy for implementing the UN principles?

Sound corporate governance is integral to sustainable economic growth and to the delivery of a better society. It helps us to discharge our duty to the disadvantaged, such as the clothing workers in Bangladesh. That is why I hope that the current review of non-financial reporting requirements will produce strengthened social, environmental and human rights commitments.

I also welcome the proposed amendment to the EU accounting directive, which would require companies to account for their impact on society more generally. Can the Minister confirm that the Government will support that amendment?

Finally, closer to home is the CAF/NCVO Back Britain’s Charities campaign, launched in response to a 20% drop in donations when charities face a 67% increase in demand for their services. Businesses are as much a part of their local communities as local government or charities. They have a significant role to play in addressing difficult social issues. Next week, the CAF/all-party parliamentary inquiry on growing giving, chaired by the right honourable David Blunkett MP, starts taking evidence. Can the Minister tell us the Government’s views about encouraging both employers and employees to work together to give more time and money to good causes?

Photo of Lord Phillips of Sudbury Lord Phillips of Sudbury Liberal Democrat 8:02 pm, 12th June 2013

My Lords, I have a sober view of where we now stand as a nation and, in my two minutes, I intend to concentrate on the relationship between business and local communities. I do that from a comparative basis. I am lucky enough still to live in the small town that I was bred in—Sudbury in Suffolk—and the contrast between my first 20 or 25 years and now could not be more stark in terms of business engagement with civic and public life. I do not think that the town is any different from any other in the country.

In my youth, there was strong community cohesion. Most businesses—professional businesses, factories and shops—were locally owned, and there was a happy elision between self-interest and public interest in that, if you did nothing by way of public service, people would notice. They would say, “That miserable so and so, Phillips. He sits in his office coining the money and does”—I must not use the Saxon expression—“very little”.

Today, it is tragically noticeable how few lawyers, doctors, accountants, factory owners, shopkeepers and bank managers—we do not even have those—engage with the community. The disconnect between business and civic life is astonishing and is, I think, at the root of so much that is damaging in our public and national life. It is not because people are bad; it is because of the values by which this society of ours is currently driven. Commercialisation and individualisation have done grave damage to the contribution that business people of all types should and could make, to their great advantage. One irony is that public service has huge come-back and rewards. It brings status, self-satisfaction and so on.

There is no point in pretending that we, here in Parliament, can deal with these matters. We can add a bit of help and a bit of a push but, by and large, this is a deep cultural problem for all of us—individually, collectively and communally. I just want to make that point because, unless we have a reformation and we reconnect, remoralise and re-relate business, I think that our next 20 years could be the worst of the past 200.

Photo of Lord Bilimoria Lord Bilimoria Crossbench 8:04 pm, 12th June 2013

My Lords, when I came to this country from India in the early 1980s, entrepreneurship had the image of Del Boy and second-hand car salesmen. There was a glass ceiling. Today, everything has changed. Entrepreneurship is cool, and I believe that we have a society where anyone can get anywhere, regardless of race, religion or background. Yet business still has such a bad image. We have executive pay. The noble Lord, Lord Sacks, spoke about the noble Lord, Lord Sugar. We have the “Apprentice” image of “You’re fired”. We also have the financial crisis and bankers. I thank the noble Lord, Lord Sacks, for initiating this debate.

At an Industry and Parliament Trust event last week, I chaired a dinner where the theme was trust in business and government. I was shocked when statistics were quoted: only 17% of the public trust business. Even worse, a poll was taken after the Olympics in which the question was, “Are you proud of Britain?”. Overwhelmingly the public were proud of Britain. However, when asked, “Are you proud of British business?”, 4% said that they were. That is shocking.

The Zoroastrian community, of which I am proud to be a member, is based on three tenets: good thoughts, good words and good deeds. When Jaguar Land Rover was taken over by Tata, the company headed and founded by Parsis, the workforce was happy because of Tata’s reputation for welfare in the workforce. The motto of the World Zoroastrian Chamber of Commerce is “Industry and Integrity”—industry as in hard work, of course. The noble and right reverend Lord, Lord Williams, the former Archbishop of Canterbury, explained that “integrity” comes from the Latin word “integrum”, which means “wholeness”. You cannot practise integrity unless you are whole.

Can the Minister explain what more the Government can do to make sure that our people and the country appreciate business and are proud of business? Regardless of everything, British business is still in every sector one can imagine the best of the best in the world. Therefore, why do people not appreciate that it is business that, on the whole, pays the taxes, creates the jobs and pays for all the public services that we all benefit from?

Photo of Lord Griffiths of Fforestfach Lord Griffiths of Fforestfach Conservative 8:06 pm, 12th June 2013

My Lords, I am delighted to take part in this debate for two reasons. The first is that the subject is hugely important. As we have just been reminded, business is the source of jobs, of wealth creation, of innovation and of tax revenue. The second reason is my regard for the noble Lord, Lord Sacks. As a religious leader in this country, he has been unrivalled in his support for business—but not just any kind of business. He has consistently championed business which serves society, business which has an ethical core and business which has a purpose larger than just profit.

Profit is essential to any business—without profit, a business will cease to exist—but the noble Lord, Lord Sacks, has repeatedly asked what I think are the fundamental questions. What is the purpose of business? What is a business really for? Why does it exist? His answer, with which I totally agree, is that business is not an end in itself. Business has to be seen within a larger framework which puts the human person—or, as he said today, the young unemployed—at the centre of economic life, emphasising creativity, work, integrity in the product, sustainability of the environment and so on. That is why, as he said, business plays a moral role in our society. I also greatly value the theological underpinning—the Hebrew Bible—of what he said, which is not just the basis of Jewish economic ethics but is also the fundamental basis of Christian ethics.

In asking the Government to assess the relationship between business and society, I believe that the paramount issue, as was mentioned by the noble Lord, Lord Bilimoria, is trust. People instinctively know what is good and what is bad, and what is right and what is wrong in business. It is because of this that they are dismayed by the constant stream of bad news from business: mis-selling, price-fixing, money-laundering, tax avoidance and bribery.

I think that government can help by ensuring greater transparency and rebuilding trust, but the greater challenge, which is what I think the noble Lord, Lord Phillips, talked about, is the moral leadership which comes from business itself and which has to emphasise honesty, integrity and openness as the way forward. That is why I really applaud what the noble Lord, Lord Sacks, said.

Photo of Lord Parekh Lord Parekh Labour 8:09 pm, 12th June 2013

My Lords, it is a pleasure to be participating in a debate initiated so eloquently by the noble Lord, Lord Sacks, and in which my good friend the noble Baroness, Lady Bottomley, spoke so wisely. I want to concentrate in the next two minutes that I have on the paradoxical relationship between business and society. Business simply cannot survive without three conditions. One is an educated workforce and skilled personnel, which society provides. Another is a well regulated market with a civic morality, which only society can cultivate and nurture through its institutions. It also requires a well regulated state, which only a good society can sustain.

Those three conditions constitute the invisible capital that business requires in order to survive. Business depends not just on the financial capital that businessmen produce, but on the moral, cultural and political capital that society at large provides. Business, therefore, is vitally dependent on society, and yet it has the constant tendency to undermine all those three conditions on which it depends for its survival. It is used to counting the money and therefore does not see the value of the invisible capital that society’s moral and political institutions provide. It takes a short-term view of things, and institutions, moral institutions in particular, are built over generations. It also takes an instrumental approach to life and turns almost everything into business so that in a society such as ours, medicine, law and even the priesthood might become a business.

Given business’s hegemonic and expansionist tendency to turn everything into its own mirror image, it inevitably undermines the capital on which it depends. Therefore, it desperately requires a regulatory framework, which is provided by the state. The state therefore is not the enemy of business let alone of the market: the state provides the sole preconditions that business requires in order to flourish. That was the big mistake made by Mrs Thatcher and the neoliberals. They thought that they could deregulate the economy and remove the state. In the process, they released forces that caused the havoc that we are still experiencing. Unless we properly grasp the relationship between business and society and the way in which business depends vitally on the moral capital that society provides, we are in grave danger of repeating the mistakes that were made only a few years ago.

Photo of Lord Kalms Lord Kalms Non-affiliated 8:12 pm, 12th June 2013

My Lords, the noble Lord, Lord Sacks, the Chief Rabbi, has covered the ground well, and I thank him for inaugurating this short but valuable debate. Regretfully, the market economy is both hero and villain. Our task and our duty is to deal with its flaws. It will be fatal if we do not find the cure. The market is selfish, greedy and inward looking. Its thinking can be short term and it is corruptible. The bankers’ poisoned products leave an indelible mark on our memory. The search for gold temporarily blinds the market to its consequences. It deliberately confuses charity with its tax efficiency against a wider social responsibility. Its wealth is for internal consumption—and fat do they all grow.

Today, the market looks to globalisation, particularly in Africa and Asia, to create new wealth. It employs young labour, tax avoidance, subsistence wages, unacceptable working conditions and the corruption of local bureaucracies. Investment often becomes exploitation. Its sole raison d’être is the creation of wealth. The white T-shirt sold for a few pounds with a high margin must not be allowed to hide an invisible sheen of blood and tears.

We all recognise that these defects are part of all of us. The weaknesses are of a human nature. Few are totally innocent, and we must exercise self-criticism. To know the problem is how to solve the problem. Wealth creation must become remodelled. It must include the community and the world, and it can no longer be a golden island. It must embed into its character and soul the concept of ethics. It must ensure that wealth has to be transformed into spreading prosperity.

This concept is not in the stars; it is within our own hands. There are many companies and great philanthropists who pursue this model. They see the City as their responsibility. We must insist that all wealth creators have a duty of care to the society that creates their opportunity.

Photo of Lord Mitchell Lord Mitchell Shadow Spokesperson (Business, Innovation and Skills) 8:14 pm, 12th June 2013

My Lords, even with a two-minute deadline, I cannot let the moment pass without paying a few words of tribute to the noble Lord, Lord Sacks. This coming September, and after 22 years, he will retire as Chief Rabbi. He has been an inspirational leader and teacher in his own community, but also an exceptional ambassador for Judaism in the public arena. Through his writings and radio broadcasts, he has become an unparalleled moral voice for the nation.

I have always been personally grateful for his wisdom and support, and I know many other noble Lords are too. I am sure I speak for all noble Lords here this evening in thanking him for his service to our country and wishing him well for the future.

Noble Lords:

Hear, Hear!

Photo of Lord Mitchell Lord Mitchell Shadow Spokesperson (Business, Innovation and Skills)

If the BBC is listening, we must all hope that the noble Lord’s slot on “Thought for the Day” will continue.

The Jewish Association for Business Ethics was partially set up by the noble Lord, Lord Sacks. On two quite separate occasions, we had two leading lights from the UK advertising industry as keynote speakers. I asked both of them the same question: “In view of the UK’s recent actions to ban tobacco advertising, would your agency run advertisements in countries where cigarette advertising is still permitted?”. Both of them gave me the same answer: “If it’s legal, we will do it”. I was shocked.

The issue of strict legality came up again when I attended the Google Big Tent event last month. Not surprisingly, keynote speaker Ed Miliband criticised Google for avoiding UK tax. Eric Schmidt, Google’s worldwide CEO, gave a reply that was a tad disingenuous: “Google pays the tax it is legally due to pay. If you don’t like it, then change the law”. I was shocked again.

Codes of conduct, voluntary tax payments and exhortation are all very well, but seldom enough. Governments around the world need to work harder to ensure that the laws are in place and that the rules are clear. That way, both the spirit of the law and the letter of the law will come closer together, giving business the certainty that it needs to fulfil its vital role in our society.

Photo of Viscount Younger of Leckie Viscount Younger of Leckie The Parliamentary Under-Secretary of State for Business, Innovation and Skills 8:17 pm, 12th June 2013

My Lords, I am grateful to the noble Lord, Lord Sacks, for initiating this important debate. I had the pleasure of meeting him for the first time when I happened to sit beside him during the gracious Speech. I am grateful to Her Majesty the Queen for unwittingly engineering this. I echo the words of the noble Lord, Lord Mitchell, in thanking the noble Lord, Lord Sacks, and wishing him well for the future.

In considering one of the key raisons d’êtres for business, the fundamental question is whether the pursuit of profit can ever be good for society. In the 1980s, the answer would have been, for most, a resounding yes. For others, especially those who were wary of privatisation, the answer might have been a firm no.

Through the boom years, when house prices were rising, unemployment was low, when gadgets were readily purchased by all and frequent and exotic holidays seemed commonplace, many people might have agreed that the pursuit of profit was not a bad idea. During recent times, people have begun to question the pursuit of profit as a greater emphasis is placed on the benefit of business to society.

This Government are clear that business, and the pursuit of profit, can be a force for good in society by strengthening our economy and bringing together local communities. The noble Lord, Lord Sacks, acknowledged that earlier in his speech. At a fundamental level, businesses contribute significantly to society by creating jobs and improving the skills of the workforce. Many noble Lords made that point today. The noble Lord, Lord Sacks, in particular spoke about the importance of the value of work, the benefit of doing business and the satisfaction that many employees and employers gain from simply trading, which in itself is good for society.

I am pleased to report that figures from the Office for National Statistics published earlier today show that 1.3 million new private sector jobs have been created over the past three years. Some 24,000 more people are in work since the previous quarter, which is a fantastic figure. Figures relating to the period between February and April 2013 show that youth unemployment was down by 43,000. The noble Lord, Lord Glasman, concentrated on youth employment in his speech. It is an extremely important issue on which the Government are focusing in their aim of growing the economy. The noble Lord also made the point that, at the opposite end of the spectrum, older workers have a valuable role to play in the workplace. Further, since 2010, over 1 million apprenticeship starts have been created, and provisional data show that there were 245,000 apprenticeship starts during the first six months of the 2012-13 academic year. Of those, 69,600 were in the 16 to 18 year-old bracket. These figures are very encouraging, but there is a long way to go and we will keep working hard on this issue.

Businesses provide much more than just employment. They can improve the quality of life and well-being of employees, protect the environment and invest in a wide range of community activities. My noble friend Lord Griffiths emphasised that the purpose of business is more than just profits and stressed that employment has a moral purpose. In adding to that point, the noble Lord, Lord Parekh, defined it as a civil morality. Many businesses actively seek to improve opportunities for young people through apprenticeships and by supporting schools and charities.

The Government are showcasing schemes that encourage businesses across the country to support their local communities through corporate responsibility activity. There are many examples of this. In 1999, Greggs, the high street bakers, established its Breakfast Club programme within primary schools in disadvantaged areas. I am happy to say that this now provides a healthy start to the day for more than 10,000 children. In 2011, Greggs donated £250,000 to support existing clubs and open additional ones in areas of need. Lloyds Banking Group’s community investment similarly focuses on community sponsorship and funding local charities, supporting colleagues with their local community engagement and improving levels of financial inclusion and financial literacy in the United Kingdom. This includes building the financial capabilities of people with learning disabilities, thereby enabling access to financial services. Marks & Spencer’s Marks & Start work experience programme for disadvantaged groups has helped more than 800 people in the United Kingdom to get back into work. One might perhaps say, “It’s not just altruism, it’s Marks & Spencer altruism”.

It is not just big business that can make a difference. The Voice of Local Shops Survey polled more than 1,100 independent retailers across the country and found that 80% of store owners are involved in their community in some way, with 71% collecting for a local or national charity and 25% providing sponsorship for local schools and sports teams. The UK should be rightly proud of the many companies that go beyond their own self-interest and undertake activities that are of benefit to business, the environment and, indeed, society. The Government are taking steps to encourage this. At the end of the month, my honourable friend in the other place, Jo Swinson, will be launching a three-month consultation on corporate responsibility with business and other stakeholders. The Government are also committed to supporting and promoting an economy that is comprised of a diverse range of business and organisational models that includes the private sector, the public sector, co-ops, voluntary groups and charities with the aim of achieving a stronger society. This was a point that the noble Lord, Lord Mawson, emphasised in his speech.

Additionally, the coalition agreement in 2010 stated that the Government would take action to support the growth of the social enterprise sector. This sector is more important than ever to achieve an economy where a responsible approach is taken to growth, risk, the business environment and society with the aim of achieving long-term, sustained economic prosperity alongside the responsible use of resources. Its focus on responsible social business practices not only drives its profitability, it improves the well-being of local communities. These businesses are often concentrated in the UK’s most deprived communities, addressing social problems and building economic resilience.

For example, an organisation called Blue Sky is a social enterprise that focuses on reintegrating ex-offenders into society by offering employment and training opportunities. It exemplifies the economic and social good catalysed by social enterprises. To date, it has provided more than 700 jobs to ex-offenders. Some 51% of them leave with formal training qualifications, 48% move into permanent employment and, on average, only 15% have reoffended, which is a quarter of the national average. Blue Sky is also a growing profitable business whose commercial income has increased sixfold since 2007. It is helping to break the cycle of reoffending and is challenging society’s negative perception of offenders. Another example is Cockpit Arts, an award-winning social enterprise based in London, which is the UK’s only creative business incubator for designer-makers. It works with hundreds of businesses to help them conceive, develop and deliver innovative products to take to market. Moreover, in 2012, Cockpit Arts reinvested its profits into its Creative Careers for NEETS programme, providing jobs and work experience placements for local unemployed people with raw creative talent.

My right honourable friend in the other place, Dr Vince Cable, has already established quarterly bilateral meetings with Social Enterprise UK, the leading trade organisation for the sector. These productive and positive meetings help us to identify the acute challenges facing the social enterprise sector and look at what the Government can do to help. We are introducing new tax relief to encourage successful business people to invest in social enterprise, and it is good to have support in this area from my noble friend Lady Bottomley. Social enterprises are also challenging the glass ceiling, with 86% of their leadership teams boasting at least one female director and 27% with directors from the black and minority ethnic communities.

The relationship between arts and business is extremely important to enable a thriving and resilient arts and cultural sector which enriches society. Businesses provide a vital funding source that is essential to maintaining our high-quality arts culture. For example, for many years BP has supported the BP Portrait Award for the National Portrait Gallery, which encourages young artists to develop their portrait technique. Last year, more than 2,000 artists from 75 countries took part in the competition and almost 250,000 visitors attended the event. The Frieze London art fair, sponsored by Deutsche Bank, is one of the world’s most influential contemporary art fairs and brings an international audience to London every October. These sponsorships are vital for a greater number of people to experience and be inspired by the arts, irrespective of their background.

I turn now to a number of points that were raised by noble Lords in the debate. I should say to the noble Lord, Lord Bilimoria, that I greatly enjoyed the television programme this week in which he featured so strongly. He made the point that instilling the words “industry” and “integrity” into the workforce is important because, in turn, they create a certain wholesomeness that leads to better well-being in society. That is a point which is very well made. The right reverend Prelate the Bishop of Chester brought up the subject of the living wage. It is an important issue, and I thank him for raising it. I will write to him with some details on the living wage in relation to this particular building, which I think was the point that he made.

The noble Baroness, Lady Warwick of Undercliffe, asked whether the Government would publish the UN guiding principles on business and human rights. As I mentioned earlier in my speech, on 27 June we are launching a consultation on a UK framework for action on corporate responsibility, and we will take full account of the UN guiding principles. The final document setting out government and business corporate responsibility commitments will be published in December this year. I believe that it was my noble friend Lady Bottomley who raised the issue of ethical supply chains, as did my noble friend Lord Kalms. The Bangladeshi factory crisis and the horsemeat scandal illustrate the importance of promoting ethical and responsible supply chains. The Government are encouraging businesses to value and develop responsible supply chains. My noble friend Lord Kalms also referred to transparency, and indeed he is correct to say that we need to be more transparent in the supply chain. That will lead to better information being made available to consumers, thus allowing them to make a choice as to whether a £2 T-shirt is actually worth all the blood, sweat and tears.

The initiatives discussed today provide just a few examples of the Government’s engagement with business, a relationship that this Government seek to improve and strengthen.

House resumed. Committee not to begin again before 8.38 pm.