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Lord Freeman: My Lords, I am grateful to the noble Lord for giving way; time is still with him. He helpfully referred to scrutiny of European legislation. Does he agree that we have an anomaly? Your Lordships'
House scrutinises European legislation upstream, as it were—before detailed directives and regulations are drafted—while the other place carefully scrutinises legislation when it is issued as directives and regulations; but the left and right hand do not appear to grasp each other.
Lord Razzall: My Lords, I agree entirely with what the noble Lord, Lord Freeman, says, except for one word that he used. He said that the other place looked "carefully" at what comes out of Europe. I agree entirely that the left and right hands are not in tune in monitoring changes.
The problem starts with us. Noble Lords stand up to ask what the Government are going to do about different issues. The noble Lord, Lord Dormand, very often asks what the Government will do about excessive pay. He is right: what will the Government do about it?
Lord Dormand of Easington: My Lords, I am glad that the noble Lord is adding to my case. But he has probably noticed that recently, in the papers, the Government have specifically mentioned doing something. Not before time, if I may say so.
Lord Razzall: My Lords, the point that I was making is that, if you have succeeded in your campaign to get the Government to do something about excessive pay, it will add to the regulatory burden on business in complying with what you want. The problem always starts with us.
4.21 p.m.
Lord Saatchi: My Lords, I, too, thank my noble friend Lady Hogg for allowing us the opportunity for this timely debate in your Lordships' House. As always, it is a pleasure and a privilege to make the winding-up speech for our Benches in a debate to which so many distinguished noble Lords have contributed. It is often said that there is a special merit in the composition of your Lordships' House through its ability to bring into play in debates such as this one people with real experience and specialist knowledge of economic affairs. That has been clearly evident again today.
My noble friend Lady Hogg, who, I assure noble Lords, knows as much about the subject as anyone I know, set the scene in a typically pointed and robust introduction. Let me try to sum up in the same spirit. It is a striking fact that the debate coincides with the report today from the manufacturing industry which says that government policies are doing it more harm than good. Apparently, new measures such as the climate change levy, higher national insurance contributions and employment law red tape make matters worse for it, while so-called DTI assistance policies suffer from extreme bureaucracy and therefore fail to make things better.
It is certainly a grim fact that, despite the Prime Minister's Better Regulation Task Force, the new Regulatory Impact Unit in the Cabinet Office and the Regulatory Reform Act 2001, it is a losing battle, as my noble friend Lord Freeman said. New regulation affecting business has been introduced every 26 minutes of the working day since the Government came into office, a rate exceeded only by government press releases, the emission of which occurs every four minutes. In the mean time, as my noble friend Lord Freeman said, and my noble friend Lady Noakes underlined, while taxes on business have increased in the past six years so have the cost and complexity of compliance.
The question is whether anyone actually cares. Imagine the journey of a missive from industry to the splendid desk of the Chancellor in the new glittering palace of the Treasury. Consider, for example, the sort of submissions that my noble friend Lord Freeman read out to us from the British Chambers of Commerce or the CBI. That would constitute the sort of "carping and exaggerated complaints" that the noble Lord, Lord Haskel—I think that they were his words—read out. Picture the scene when those weighty tomes from the CBI, the IoD or the British Chambers of Commerce pass across the desks of the Chancellor's staff. Imagine the reaction from those who learned their economics at the knee of the noble Lord, Lord Haskel. "What do the fat cats want today?" one of them would ask. "What are they complaining about now?" another would groan.
Why do they say such things? Why are the Government so profoundly anti-business? Doctors say that our faults today are often explained by genetic defects inherited from a previous generation. That certainly seems to apply to the Benches opposite, whose birth defects in relation to business arose at the first meeting of the International Working Men's Association at St Martin's Hall in London in September 1864. Then, a group of long-forgotten individuals—except that one of them was Karl Marx—published the resolutions of their new party. The first was:
- "The economical emancipation of the working classes".
- "Some people fall in love with their chauffeur. I fell in love with Soviet Communism".
The descendants of that famous gathering in 1864, now comfortably seated on the Front Bench opposite—yes, you two—believe that "unbridled capitalism", usually associated with America, should be reined in, controlled, or, as the noble Lord, Lord Haskel, put it, balanced. Hence, the anti-globalisation, anti-multinational corporation agenda that drives the EU, to which our own Government have succumbed.
Like the EU, our Government present themselves as the quintessence of caring, overlooking the fact that labour laws that they enact to protect employees end up costing them their jobs. Those are the unintended
and accidental consequences of which my noble friend Lord Brooke spoke. It is, perhaps, why a German consultant told Die Welt last week:
- "I would not recommend any investment in manufacturing in Germany".
Do I exaggerate? I shall trace a direct line from that meeting in 1864 to another meeting that took place a few years ago in Brussels. Again, this story will particularly appeal to the noble Lord, Lord Razzall. At that time, my right honourable friend Michael Howard was the Secretary of State for Employment. There was the threat of a new EU directive concerning employment law that he thought would be likely to lead to a loss of jobs, lower profits, higher costs and more unemployment. Michael Howard gathered from an article that a finance Minister of one of the EU states had some sympathy with that view, so he got on a plane and went to see him. He told the Minister that he was against the new directive because he was worried that it would put up costs, lead to job losses, lower pay and higher unemployment, and asked him whether he would support his opposition to it. The Minister looked at him in an uncomprehending way and asked, "But if we all do the same, what is the problem?"
That brings me to the basic problem. I shall suggest to noble Lords a test of this Government's approach to business. I know that in a few moments the Minister will contest the basis of the tests and, I am sure, will offer his own marking system. The test concerns the type of leadership that the Government give to business by the example that they themselves set for businessmen. I shall take some headings from the coursework at Harvard Business School. Perhaps we can consider what a hard-pressed businessman would make of what the Government do with them.
I shall start with the heading "Cost control". Some 154,000 people have been laid off in manufacturing industry in the past 12 months. Who hires them? The Government. Some 124,000 people were hired in the same period in what is called public administration. What is the result? The most accurate gauge of public sector inflation—known, for some reason, as the GDP deflator for government consumption—rose by 2.2 per cent a year in the five years to 1998. By the end of 1999, it was running at 4 per cent. It rose to 5.75 per cent in 2000. In the financial year to the end of last March, the figure was 6.5 per cent—three times the economy's overall inflation rate of 1.8 per cent.
The number of pages of recruitment advertisements in the "Society" section of the Guardian has trebled from an average of 50, in 1997, to an average of 150
today. Like my noble friend Lady Hogg, I carried out a weight test. I can confirm that, at 327 grammes, the "Society" section of the Guardian, where the Government do their hiring, now weighs more than the Financial Times, The Times and the Daily Mirror put together. Meantime, head office costs—I am talking about No. 10—which are a good and telling measure of the mindset at the top of an organisation, have doubled from £6.9 million in 1997 to £13 million today, partly because of a doubling of the number of PR men.Any savvy business school student could work out the result. Output per worker in the public sector rose by 0.3 per cent in the past year, versus 3.5 per cent for the private sector. That is why 70 per cent of the public are right to say that the new national insurance contributions money will be wasted. Seventy per cent of it is wasted in higher costs.
I shall take a second heading from Harvard: "Debt management". Every businessman knows how crucial it is. What would your Lordships do with a finance director who said that he needed to borrow £32 billion in the next financial year, then said that he needed £54 billion, then said that he wanted £72 billion of new debt, then, last November, said that he needed £100 billion, before, two weeks ago, saying that he made it £118 billion—all in the space of 18 months? Care with debt, as any good business school teaches, is always vital for the good business manager. What example do the Government give? Income is up 1.5 per cent and spending up 7.5 per cent. The Government's response is, "Don't worry, we'll borrow the money to fill the black hole".
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