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Lord Burnham: My Lords, I thank the noble Viscount for giving way. The specific point I sought to make was about the effect of the minimum wage on inflation. No workman at the current level would accept an enormous increase paid to someone who was coming up to the minimum wage without taking the same increase plus a differential for himself.
Viscount Thurso: My Lords, I thank the noble Lord for making that point, but I disagree. I put in place in my own company a minimum wage of £4 per hour just over a year ago. I told my workforce that I believed that it was a just thing to do and that I was not increasing the wages of anyone else. My workforce fully understood the justice of the argument. I am confident that other workforces throughout the country will also understand it. There is absolutely no moral defence for the management of an economy whose legacy, however good the figures, is one of poverty and division such as we have in this country on an almost unprecedented scale. That is the true legacy of 18 years of Conservative management of the economy.
When I decided to intervene in this debate I asked one of my colleagues if we had a particular policy on competitiveness. His light-hearted answer was, "We are all in favour of it, but not too much." That light-hearted
Noble Lords will, I am sure, recall the excellent report by the commission chaired by my noble friend Lord Dahrendorf entitled Wealth Creation and Social Cohesion in a Free Society which was debated last year. The noble Lord, Lord Borrie, touched on the very point in his opening remarks. I know that my noble friend would have liked to be in his place today; he was prevented from doing so by a long standing engagement. I am sorry that he is not with us as he would have made the point far better than I can. When we seek to increase our competitiveness and to become more efficient at wealth generation, it is essential that that is for the benefit of all our citizens and that we do not fall into the trap of either jobless growth or the creation of the working poor.
There is a huge range of factors that can impinge on the nation's industrial competitiveness. My noble friend Lord Ezra spoke about macro-economics. A number of other noble Lords have touched on other points. For example, the noble Lord, Lord Borrie, mentioned the transport infrastructure. I believe that there are three key areas that, more than any others, determine the wealth-creating ability of the nation: first, the economic environment; secondly, the availability and cost of capital; and, finally and probably most importantly, the quality and abilities of the human resource. I should like to touch on each of them.
It is generally accepted that stable economic conditions are a pre-requisite for successful long-term industrial growth. I believe that all three parties in their manifestos made that point. We on these Benches had long advocated that a main plank of achieving that stability was the creation of an independent central bank, as my noble friend said. It was with pleasure, a sense of flattery, and some amusement that we observed that virtually the first act of the Chancellor was to enact our policy. However, as already mentioned, monetary policy is but one part of the control of the economy. It is equally important to use fiscal policy to ensure the correct balance in the economy and a sustainable level of economic growth.
There is no doubt that the current strength of sterling, as pointed out by the noble Lord, Lord Vinson, in the past six months, has caused real problems for our exporters. I urge the Government therefore to look closely at fiscal policy. I have no doubt they will do so. I confidently expect an increase in taxation in the Budget.
I turn to the subject of capital. The second major plank to which I referred relates to the cost and availability of capital. In a speech, referred to by the noble Lord, Lord Graham of Edmonton, the President of the Board of Trade, on 4th June, used one phrase which caught my ear. She said:
In terms of contribution to employment, small and medium enterprises are key to our future. In a Bow Group research paper published in March, the author clearly highlights the difficulties that SMEs have in raising finance, being so much dependent on overdraft finance. As a result, SMEs in the UK have often paid much higher interest rates than their main competitors and have been particularly vulnerable to recession.
Finally, I turn to the subject of people. I have kept this point to the end because I believe it to be the most important. By far the most effective way of improving competitiveness in British industry is through the development and training of the human resource. There is no quick fix, and nothing can be achieved overnight. It is of course essential that we invest in and improve our education system so that when our young citizens leave school they are properly educated and equipped. No one pretends that that objective can be achieved overnight by waving a magic wand. It will be a long haul. We on these Benches believe that it can be achieved only by a considerable increase in resources. The Government should look at the possibility of putting a penny on income tax to fund education. Were they to say openly and honestly to the people that the problem in education is greater than they supposed and that they intend to put another penny on income tax, I have no doubt that they would receive the full support of the vast majority of our citizens. Furthermore, that would have a beneficial effect on our fiscal policy.
The point upon which I should really like to touch concerns those already in work and what we can do to improve the quality of our current workforce. The noble Lord, Lord Currie of Marylebone, mentioned management education. I am currently chairman of the Master Innholders, a trade body of hoteliers which operates under the patronage of the Worshipful Company of Innholders. Last year I suggested to the worshipful company that a worthwhile way of supporting the industry would be to put together a series of bursaries to send middle and senior managers to management colleges before they were promoted to general managers. That idea was accepted and we had four bursaries for Ashridge and Cranfield. That was a great success. My point in telling your Lordships about that is not to blow my own trumpet but rather to draw attention to the excellent management colleges we have in this country, and, more important, to the rather sad
Cranfield recently sent me a fascinating paper entitled Developing Businesses Through Developing Individuals. Because I am running out of time I cannot tell noble Lords a great deal about it. I would recommend anyone interested in management education to get hold of that paper. It deals with wonderful things called "meta abilities", which are the cognitive skills of managers. It is well worth reading.
I congratulate the noble Lord, Lord Borrie, on having brought this matter before your Lordships. These are incredibly important challenges. I return to my main point of departure, which is that competitiveness must be within a framework of social cohesion. The wealth-generating process must be the servant, not the master. Above all, we must be clear that the objective which we are seeking to fulfil is to give all our citizens an inclusive, socially just life of dignity.
Baroness Denton of Wakefield: My Lords, I, too, thank the noble Lord, Lord Borrie, for initiating this debate and those noble Lords who have participated in it, proving once again that this House is an unequalled depository of knowledge and experience which always brings added value to any subject. I, too, share noble Lords' pleasure in the speech of my new colleague at the Dispatch Box.
I hope that industry will read the debate and that someone will ensure that the Treasury reads it, because the Treasury will set the climate in which British industry is competitive and flourishes or wilts. It is not an easy task, but one thing is certain: it is on a global scale. Being the best in Britain is not to be sufficiently competitive. To achieve its objective of winning, British industry must be the best in the world. It must also be of size. Competition policy must be based on global not national standards.
Holding inflation is important, but not while letting the pound run away, as my noble friend Lord Vinson said. The noble Lord, Lord Borrie, said that giving the Bank of England control of interest rates would give business the stability that it wants. I agree that that is what business wants, but I fail to see that handing over decision-making gives stability. If you are to be competitive you learn never to say "never". The noble Lord, Lord Desai, might bring some of his flexibility aims to the attention of the Chancellor.
The noble Lord, Lord Borrie, said also that inward investors were put off by the xenophobic speeches at Conservative Party conferences. I have never met an inward investor so naive as not to understand the nature of party conferences. I wonder how they will regard the noble Lord's statement this afternoon that it is wrong for skills to come from other countries.
The noble Lord, Lord Currie, drew attention to the weakness of British management. We need to benefit from competitiveness in all skills and we require openness in the exchange of skills. Much skill training is in place, but I hope that we will not say to those who
I always recall that on the day I stood up to make my maiden speech, sheet of paper trembling in my hand, words honed and polished over several hours, the noble Lord, Lord Desai, stood up subsequently and made a brilliant maiden speech with his hands behind his back. Today he fluently said much of what I believe: competitiveness must be based on innovation.
The great news is that we are good at it. We used to struggle with the subsequent processes, and we gave away the opportunities because of that. Now, much too slowly, but steadily, design is valued. In Northern Ireland I saw unique creativity in software--the skills which had brought forward music and poetry in that island showed by the production of software a whole new medium in which innovation and creativity flourished. I share the admiration for retailing of the noble Lord, Lord Graham. That is an industry which skills people who often failed to benefit from their earlier education. It is sharp edged and globally competitive. I believe that it grows because it lets its young people through--it grows talent based on pure skill and not on age.
Manufacturing has suffered because it has not always done that. It has believed that somehow age and not ability brings skills. The attitude is slowly changing, but for the sake of competitiveness I should like to see it change more quickly. It will be valuable to encourage schemes such as Young Enterprise which share with children the excitement of industry. I still think that too many parents believe that the professions and the Civil Service, not the creation of wealth, hold the future.
If we are to be competitive we must accept that there will be winners and losers. I fear that we are close to the development of a culture of envy. As was said by the noble Viscount, Lord Thurso, it is important that in creating wealth we create a safety net. We must allow people to create wealth. I believe that Camelot and the windfall tax bring severe challenges to management. I wonder whether the noble Lord, Lord Currie, believes that a windfall tax is downsizing by legislation. I certainly share his fears of downsizing and believe that the tide has swung in recognising that that is not the way to grow. I believe that the Government could afford to carry out their programmes by encouraging the creation of wealth and not its restriction. One certainly needs every management skill one has in facing retrospective taxes of an unknown size.
Returning to competitiveness, when IBM and General Motors lost their way they invested in garden-shed operations. It worked. Companies must be left with resources to invest in research in partnership with academia. I heard some not so subtle pleas for increases in university salaries, but I am sure that I did not hear the requirement to be fat cats in ivory towers. As was said by the noble Baroness, Lady Lockwood, research is best done in partnership with business. The noble Viscount, Lord Hanworth, confirmed that competitiveness comes from working together; from
It would be wrong of me to stand here today without mentioning the area of my affections where I spent the past three years; indeed, it would be impossible. In many ways, Northern Ireland ideally shows the importance of competitiveness because politics work against growth. Yet Northern Ireland continues to grow. I was pleased to leave the Province with more people in work than ever before and with exports up 50 per cent. on 1992-93. It has benefited not only from the Government targeting assistance to companies capable of improving their international competitiveness but also from business taking up the challenge, rejecting a dependency culture and forming the Northern Ireland Growth Challenge in order to plan strategies in sectors in which Northern Ireland is competitive. It works in many areas, including, my noble friend Lord Astor will be pleased to learn, exercises to reduce the cost of industrial injuries. There can be nothing better than industry recognising its needs and then organising itself to meet them.
Perhaps I may move to another favourite topic, which is the role that women can play in industrial competitiveness. If a nation uses only half of its resources there is no way it can be competitive. At the recent CBI dinner there were about 1,200 men and 50 women. We must change that. It means more encouragement in the education system, in training and in flexibility in the work place and more opportunities for women as their families grow up to return to a career, not just to a job. It is important that their skills are harnessed if we are to be globally competitive. However, I cannot resist asking noble Lords opposite how they reconcile their minimum wage policy with the appointment of a Minister for Women who is not paid.
I believe that there is a whole debate to be held on the competitiveness of small firms. The noble Viscount, Lord Thurso, drew attention to the part those companies play in industry. There is a need to recognise what will work for them in terms of the size and timing of their programme. My definition of a small firm is not the number of its employees but a company in which at the end of the day work comes first and no one else does the work tomorrow. It is where there is great pressure on resources and there is a need to concentrate on programmes for that sector. I pay tribute to the DTI regional supply network which helps the local sourcing of materials, parts and components and encourages the linking of small and large companies to the benefit of both.
The noble Lord, Lord Borrie, explained that we cannot build competitiveness for industry with only one government department. I hope that the Deputy Prime Minister will recognise the fact that, if he does not give industry the roads and the airports that it needs and does not contain the fuel costs, if he does not ensure environmental changes are brought in at a speed which industry can absorb, and if the planning process is too long and expensive, we shall never encourage competitiveness, whatever the skilling levels. If the Prime Minister cheerfully accepts all the demands of the social chapter without close and regular consultation with industry, I fear that we may lose competitiveness.
Lord Haskel: My Lords, this is a subject in which I have been passionately interested for many years. Therefore, I too am most grateful to the noble Lord, Lord Borrie, for tabling the Motion on competitiveness. I congratulate him on his role in the Competition Policy Advisory Group as one of the three wise men. He knows that a strong competition policy is vital for the competitiveness of our economy. I also welcome the noble Lord, Lord Burnham, to the Opposition Front Bench.
In our Manifesto for Business, we indicated that there is no issue more fundamental to the prosperity of this nation than the competitiveness of our firms. Not only does it enable us to sell our goods and services on world markets, raise living standards and improve our public services, but competitiveness is essential to create a fairer society in which opportunities are available for all.
This Government recognise the importance of competitiveness for commercial and social reasons. We shall work in a new partnership with business--employers and employees--to improve our competitive position. We have brought the competitiveness unit back where it belongs: to the DTI to reflect our commitment to working with business to achieve improved competitiveness in Britain.
Some noble Lords may say that there is nothing new about that commitment to competitiveness. After all, the previous government published three competitiveness White Papers. Those, however, were based on a partial view of our economic circumstances, and offered a narrow set of solutions.
Our approach to competitiveness will start from an honest appraisal of Britain's strengths and weaknesses. Not that everything the last government did was wrong. They got some things right and we shall not make changes where that is the case. But their competitiveness White Papers tended to gloss over some of our
By not properly acknowledging those weaknesses, the previous government's efforts to improve competitiveness, while welcome, did not go far enough. In addition, they failed to build common ground with all those involved in industry, seeming to forget that employees are just as vital a part of business as employers. They often talked as if improving workers' pay and conditions was always bad for competitiveness. Perhaps with the notable exception of the noble Lord, Lord Vinson, they forgot that to be competitive productivity is as important as hourly wage rates. And, as the noble Lord, Lord Wedgwood, reminded us, quality is even more important. They forgot that a competitive economy needs to provide opportunity for all people to use their talent in the economy. The noble Viscount, Lord Thurso, remembered that.
The noble Lord, Lord Burnham, says that all is well, but clearly there is an ongoing challenge. The extent of competition accelerates every year. As we improve so do our competitors: in Europe, in south-east Asia, in the Americas and elsewhere. We must run to stand still. The challenge is all the greater because we cannot compete with countries like China on wages but we can on quality, service and innovation. That is the way forward. We must build an innovative, high skilled, high technology economy.
Many noble Lords have spoken of flexibility. We need what the Government call flexibility plus--flexibility plus investing for the long term: in people as well as in equipment. We must have flexibility plus innovation and flexibility plus creating a culture in which we face up to weaknesses and maximise our strengths. Flexibility is not just easy hire and fire in the absence of regulation but the ability of people to be flexible at work.
Unlike the Opposition, the Government recognise that the economy is both social and commercial. Our vision is of one nation sharing our increasing prosperity, of opportunity for all, not just the few. We simply cannot afford to waste any of our workforce. After 18 years of widening income equality and marginalisation this is indeed a radical vision. Through measures such as welfare to work and initiatives to improve the skills of the workforce we will ensure that all our people contribute towards Britain's improved competitiveness and have a stake in it.
So that is the task. The Government cannot do it alone. We must pursue it in partnership--Government, business, the workforce together. To be a government for business we must also be a government for all our people. And Britain works best when we work together.
I assure the noble Baroness, Lady Denton, that it certainly is not the job of government to tell people how to run industry. We will not try to do the job of industry. Where we are different from the previous Government is that we will not fail to do our own job. This Government will listen, then act. The President of the Board of Trade has invited a range of businesses to take part in an advisory group on competitiveness. She will host a competitiveness summit in July, where a new competitiveness audit will be launched. This will be the benchmark for our competitive position. Where progress has been made, this Government will be pleased to report it. But we shall also face up to current and potential problems. Future achievements will be judged against this audit.
Various aspects of our competitiveness will be examined by a working party, some sessions of which will be chaired by DTI Ministers. Their task will be to produce advice which will be taken into account in a new competitiveness White Paper to be launched early next year.
The noble Lord, Lord Ezra, spoke about the relationship between government and industry. He spoke of stimulation, and I agree with him. As I said, the Government cannot and should not tell industry what to do, but it can provide the right market incentives and the right institutional structures to produce competition and growth. I agree with the noble Lord that the most important contribution that the Government can make to business is economic stability with low inflation.
The noble Lord, Lord Burnham, told us how well the economy is doing now, but business has experienced enough boom and bust under the previous government. I assure my noble friend Lord Ponsonby and the noble Viscount, Lord Thurso, that we are committed to long-term stability which contributes to lower inflation, higher investment and an improvement in most other economic indicators, including the containment of public expenditure. My right honourable friend the Chancellor of the Exchequer has already laid the foundations for that and many noble Lords have congratulated him on his actions.
As well as stability, there are many other facets to competitiveness. The noble Lord, Lord Borrie, mentioned integrity and many noble Lords have mentioned the long-term view. To build the innovative, high skilled, high technology economy that I have described, we need to improve the performance of individual firms and individual workers. We have excellent firms, but too many firms do not live up to their potential. Noble Lords will recall that while in Opposition, I praised the DTI's work with sectors of industry to promote best practice, including more effective use of technology. Much good work has been done here and I am the first to say so. This Government
We shall work with all sectors of manufacturing and service industries, including retailing, to build on their strengths and to tackle their weaknesses. As my right honourable friend the President of the Board of Trade said in her speech on 4th June, there will be precisely targeted support and small firms will be a priority for us.
On education and training, we shall lay foundations for the long term. I agree with my noble friend Lady Lockwood and others that the demands on those in the workforce increase all the time as layers of management are removed and the concept of empowerment takes root. We shall equip our workforce to cope with that by making the raising of standards in schools a key priority. We shall set new targets in relation to the three Rs. I assure the noble Lord, Lord Wedgwood, and my noble friend Lord Ponsonby that we shall address the variability mentioned in the recent report about NVQ and GNVQ standards by improving quality assurance and assessment.
Many noble Lords mentioned management as the key element in competitiveness. I agree with them. A commitment to innovation, a willingness to invest resources in the long-term, the vision to unlock the potential of the workforce--these are all aspects of management which can make the crucial difference between mediocre performance and excellence by companies. Many British companies have world-class management. One sure sign of that is their recognition that they need to improve continuously. However, as my noble friend Lord Currie told us, many more, particularly among the smaller firms, are weak in this area. Many firms of all sizes are complacent and underestimate how much they need to raise their game.
This Government will continue to help business to help itself by spreading best practice, creating standards and providing bench-marking measures. We must ensure that people have the opportunity continuously to upgrade their skills. The University of Industry will make a vital contribution to lifetime learning. Our overall approach to education and training can be summed up in one word--improvement.
Many noble Lords spoke about the need for competition policy. My noble friend Lord Borrie reminded us of the previous government's poor record in that regard. There is a need to bring forward long overdue legislation to introduce prohibitions on anti-competitive agreements and abuse of power. This Government will introduce a competition Bill in its first parliamentary Session. My right honourable friend the President of the Board of Trade has made it clear that competition will be the primary consideration in her reference decisions on merger cases.
I agree with noble Lords that competitiveness must apply to all aspects of our economy to complete the jigsaw, as my noble friend Lord Ponsonby put it. Certainly we need economic strength, design, innovation and health and safety. I congratulate the noble Lord, Lord Astor, on his work with RoSPA. I also agree that there is a need for management education and for links between
My noble friend Lord Monkswell and the noble Lord, Lord Ezra, spoke about the need for investment. Our manifesto made clear our commitment to consider how the tax system could promote longer term investment. My right honourable friend the President of the Board of Trade has invited the new Advisory Group on Competitiveness to report on the most effective way to stimulate and promote investment, including investment in manufacturing, in the present economic climate. I have in mind investment in design, in innovation, in training and in new equipment. I agree with noble Lords who spoke about the need for no investment in down-sizing.
My noble friend Lord Currie, and others, spoke about the need for skills. We recognise that the economies of countries that have higher skills levels grow faster than those of other countries at the same level of income. Indeed, several noble Lords reminded us that some firms are looking overseas for the skills that they need. If we harness the vitality, dynamism and the many talents of the British people, I have no doubt that our economy will move from strength to strength. I should tell the noble Baroness, Lady Denton, that we are not concerned about people taking their skills and training abroad. Training and skills belong to the individuals concerned and they can take them anywhere they like. That is an important part of a free economy.
I agree with my noble friend Lord Hanworth that good companies have undertaken training and broader education to enable staff to be more flexible and to demonstrate that they value people as individuals and as employees. Indeed, I take careful note of his cautionary tale.
My noble friend Lady Lockwood, and other speakers, emphasised the importance of school and industry links. There is a mutual benefit involved which we will encourage. We shall continue the work of the previous government. I welcome the remarks made by my noble friend Lord Ponsonby about research and I heed his wariness about NVQs and GNVQs and the need to upgrade vocational qualifications.
Several speakers mentioned the social chapter. By signing up to the chapter we are playing our full part in Europe and ensuring fairness for our workers. I do not agree with the noble Lord, Lord Burnham, that by doing so we are merely transferring decisions to
Competitiveness is part of our policy of inclusion and fairness. It matters because only by being competitive can we ensure that there is the opportunity for everyone to participate fully in our economy. It is also the only way to ensure that all consumers get the best value-for-money products and services. That is the real "trickle-down".
There are no easy answers and no quick fixes. It is a long-term issue that requires serious analysis and an ongoing consensus. It involves all sectors of the economy, including services and manufacturing. There is also an international dimension. Like the noble Baroness, Lady Denton, I welcome the appointment of my noble friend Lord Simon as Minister for Trade and Competitiveness in Europe. It shows our commitment to the need for constructive policies at the European Union level, as well as at the national level. We will work in partnership with business to identify what needs to be changed and the best way of making those changes. Decisions will be based on what works, rather than on dogma. We shall certainly be open to ideas from all.
If there are any points to which I have not responded this evening, I shall write to noble Lords within the course of the next day or two. In conclusion, I should stress that everyone has a role to play in this effort and everyone will be able to share in the prosperity that will result.
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