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Changes in manufacturing are not restricted to the UK. The fall in the share of GDP produced by manufacturing has been across the board in all the advanced nations. Why is this? It is not simply because of lower labour costs. It is because manufacturing companies want access to the markets of developing nations. China and India represent a market of 2.5 billion people with growth rates of between 8 and 10 per cent. What a massive purchasing power. As a result, even when buying the most advanced capital goods from western countries, they can demand huge offsets.

Even with those pressures, and after much restructuring, manufacturing still represents 16 per cent of UK GDP and substantially more if we include manufacturing-dependant industries. Because the UK market is important and we are a stepping stone for inward investment in Europe, manufacturing will remain a vital part of the UK economy. We can ensure its future by continually improving its competitiveness and by seeing ourselves as partners with businesses in rapidly expanding economies, not as rivals.

The same global understanding must inform our approach to climate change. We have known for a while the environmental risks of climate change; the Stern report now outlines the economic risks. It is not only a risk but a catastrophic risk, and it needs to be tackled. I agree with the noble Lord, Lord Newby, that climate change can be dealt with effectively only at a global level. That is not an argument for inaction, but it is clear that the solutions to climate change cannot be found simply in a Bill or a target but in international persuasion and compromise. The Foreign Secretary’s expertise in this area will be of great benefit to the Government.

There is a lot of debate about the impact of Chinese and Indian growth on climate change. With high growth rates, there is increased energy demand and, as we see, increased demand for fossil-fuel plants and a surge in hydroelectric power projects. That is good. We should also be aware that, although China and India are both building nuclear power capacity, that option is not available to other countries in south-east Asia, all of which are growing strongly and will require energy to fuel that growth. As it was in the UK in the 1960s, the impact of those developments on the local environment will lead to regulation of environmental controls. Although the cities are polluted, there is already a huge amount of pressure in Beijing, Shanghai, New Delhi and Mumbai for environmental control. I am glad that a Bill is to be presented on climate change. Although we can lead by example, we need to persuade others to go with us; a holier-than-thou approach will only do tremendous damage.



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Since the publication of the Stern report, there has been a lot of debate about penalising the owners of SUVs and 4x4s, whether through taxation or congestion charges. When we consider these issues, we must remember that Britain produces the best 4x4 in the world. It is an export success and the industry is a major employer. We should make sure that we set a level playing field. For example, will our regulation levels match those of other advanced nations? If not, the economic consequences will be very negative. Companies should not be forced to produce different models for different markets.

We also need to be aware of the risks of globalisation when we develop tax policy. We cannot risk being outbid in that regard. There has recently been a great media debate on capital gains tax, inheritance tax and corporation tax. I am sure that the Chancellor and the Treasury are fully aware of that debate, and their decisions will be based on a proper analysis of the impact on the economy. This issue will be decided on the economic case, not by news headlines.

Managing risk is also the foundation of the debate over regulation. Every business can tell a story of crazy regulation and of staff time focused only on filling out forms, and the temptation to demand another bonfire of the regulations is never far away. I welcome the pressure from the top of government to reduce unnecessary regulation, as I do today’s announcement by the Prime Minister. Yet, we can see why consumers welcome regulation when businesses such as Farepak go bust.

We need to trust businesses which show that they can handle a light touch but we need to look more carefully at those which have real risks. I welcome the draft Bill that embraces risk-based regulation for local businesses, and I welcome the Consumers, Estate Agents and Redress Bill, which will help to create more trust in business.

Today, the CBI conference is taking place. Despite the rather predictable headlines that this event generates, Britain is a great place to do business. What better proof of that could there be than the number of bids for British companies and the number of non-UK companies looking to start British operations here?

It is true that the Chancellor inherited a growing economy a decade ago but, even if one grants the maximum possible credit to his predecessors, a decade of steady, stable economic growth is an achievement that every post-war Chancellor would give their right arm for. That record of growth is as good an indicator as any target, any annual measure or any statistic could be. I am familiar with advising business, and I would tell any company that a record that good means that the manager responsible is ready for even greater responsibilities.

4.14 pm

Lord Jenkin of Roding: My Lords, as foreshadowed by my noble friend Lady Noakes, I want to talk briefly about the sentence in Her Majesty's Speech:



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I was not able to be present because I was attending a conference on statistics, convened by the Statistics Commission. I, too, have been told of the ripple of mocking laughter that greeted that sentence. That is a measure of the gravity of the problem that we face.

The legislation was introduced into another place last week and the temptation is to use my speech today as a kind of Second Reading speech, but I shall resist it because we do not know in what state the Bill will be when it eventually reaches us. With the record of the Legislative and Regulatory Reform Bill in the previous Session, we would be very wise to wait to see what happens. However, there are two general points, neither of which will expressly be in the Bill, which it would be appropriate to make at this stage. I look forward to the speech of the noble Lord, Lord Moser, with whom I have discussed these matters. I suspect that he knows 10 times more about statistics than the rest us put together, as for a very long time he was the chief statistician.

It is a couple of years since the chairman of the Statistics Commission, David Rhind, asked to see me as part of his wide-ranging inquiry into how the Office for National Statistics and the service were perceived by its different audiences. He may have asked to see me because I was responsible for the census of 1981 as Secretary of State at the Department of Health and Social Security. The census was run by the registrar-general who was a Mr Thatcher—I hasten to add a Mr Arthur Roger Thatcher. The Prime Minister had taken a very close interest in that census. She regarded many of the questions as deeply intrusive. I took Mr Thatcher to see the then Mrs Thatcher. Together we went through every question in the census, punctuated, as I am sure my noble friends will recognise—I hope I do not dramatise it too much—with the words “intrusive”, “unnecessary” and “impertinent”. As all my colleagues found from time to time, my noble friend could be persuaded of the sense of our proposals and, with one exception, we were given the green light. My recollection is that subsequently all went well and the results of the census were, in due course, published with no more than the usual level of interest.

However, events have now moved on. The concern is not now about the intrusiveness of the statistics but the public's mistrust of almost all statistics published by the Government. That was my message to David Rhind when he came to see me, and everything that I have read since then confirms that mistrust. I have queried the phrase in the gracious Speech, “to enhance confidence”—I would have preferred, “to restore confidence”. In fact, the Statistics Commission went further in its press release earlier this month when it said that the legislation,

I do not disagree. If anyone doubts the need for that, I suggest they take a little time to read the substantial report of the Treasury Select Committee in another place, headed “Independence for statistics”, published in July this year. I shall quote only one brief passage which tells the story with stark clarity. Under the heading “Public confidence in statistics in the UK”, it states:



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The Government are aware of this. They have consulted widely, although I must add the criticism that they only published the results a few days ago. We have now been allowed to see their proposals. Of course, the House will wish to debate them in detail when the Statistics and Registration Service Bill reaches us, I imagine, early in the new year. I raise this as a preliminary to arguing wider issues.

It is clear that, whatever emerges as the role and composition of the new statistics board—which I welcome—Parliament must have a considerably enhanced role as the ultimate watchdog. This has been recognised by the Government in proposals in their response to the select committee’s report, which is worth reading. In paragraph 2.26, it says:

Of course, as the report goes on to say,

If it is going to be the Treasury Select Committee or the Public Accounts Committee, this will be exclusively the preserve of another place. Why should that be so? There is much expertise on these matters in this House. A Joint Select Committee would be a proper forum for the hugely important role of holding the statistics system to account. A number of people said in the consultation that a new statistical committee should be created. Why should it not be a joint committee of both Houses? That is not a novelty. We have a joint committee of both Houses on human rights legislation, and there are also joint prelegislative committees of both Houses. It will not be for the Bill to prescribe that; it is a matter for Parliament. I hope that the usual channels will listen to argument on this. I am seeking support from this House for that.

Secondly, which government department ought to act as the spokesman in Parliament for what is to be a new, non-ministerial department? Somebody must report to Parliament; some department must answer questions. The noble Lord, Lord Moser, can confirm that, in his day, this was the role of the Cabinet Office. As chief statistician, he had direct access to the Prime Minister. Why does this now have to be the exclusive preserve of the Treasury? Of course Treasury statistics are a hugely important element of the range of official statistics, but not so important that other departments should have a subordinate role in the process of accountability. I shall quote two recent examples illustrating this point.

Earlier this month a report of the review of crime statistics chaired by Professor Adrian Smith was published. In that document, which I got last week

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from the admirable people who help us in the Library, I read the terms of reference:

In the executive summary, one can read:

What has that got to do with the Treasury? Is there not some other part of government that would better exercise an oversight on that?

My second example is, perhaps, even more striking. It comes from a recent report by the Royal Society. It looked into future supply and demand for science, technology and mathematics graduates. The figures for that usually come from the Higher Education Statistics Agency. Ministers have taken comfort because the figures apparently show a large rise in student numbers in mathematics and biology, but there were major changes in the way that students were counted and classified from 2002-03 onwards. The summary of the Royal Society report states:

How is the Treasury supposed to be answerable for that? Does it not need some more central oversight from a body, such as the Cabinet Office, with the chief statistician having direct access to the Prime Minister?

I would like to see two crucial decisions come out of this new legislation: the new board should be answerable to Parliament through the Cabinet Office, not the Treasury, and Parliament should hold the board accountable through a Joint Select Committee of both Houses.

I end with some wise words that I heard at that seminar a few days ago from a member of the Statistics Commission, Sir Kenneth Calman:

4.29 pm

Lord Vallance of Tummel: My Lords, I add my congratulations to the noble Lord, Lord Bilimoria, on his highly refreshing, entrepreneurial maiden speech. For my own part, I shall take up the theme introduced by my noble friend Lord Newby in his excellent speech and address the business end of climate change, following the Stern review and the Climate Change Bill. I should mention my interests as a member of the supervisory board of Siemens AG and of the president’s committee of the CBI.

The Stern review is an excellent ground-clearing exercise, which has allowed us to put behind us the scientific and economic cases for early and purposeful

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action on global warming. We are now free to concentrate on the difficult part; that is, the action that needs to be taken. The Government are to be commended for bringing forward a Climate Change Bill. It is right that the UK, in its inevitably small way, should set an example. Yet, the UK apart, we are still left with the real and substantive issue of what is to be done on the wider stage to address the global challenge of climate change on a meaningful scale.

The Stern review recommends action to mitigate global warning on three fronts: first, the establishment of a carbon price through taxation, trading or regulation; secondly, the development of a range of low carbon and high efficiency technologies on an urgent timescale; and, thirdly, the removal of barriers to behavioural change.

We might usefully ask ourselves where a betting man might put his money between these three broad approaches. They are not mutually exclusive, but reinforce each other. In deciding where to allocate our resources, we would do well to have a clear idea of which of them offered the best chances of success.

My guess is that our betting man would take the view that useful behavioural changes might be induced in some sections of society in some enlightened parts of the world over an uncertain timescale. Taken as a whole, this would be a worthwhile contribution, but the track record of self-denying ordinance across the globe is less than encouraging. While useful progress can be made, this runner has not shown encouraging form, and a modest flutter would be the most our punter would chance. He could well raise more enthusiasm over the prospects of carbon taxation or the emissions cap and trade schemes—taxes are more amenable than people.

Our betting man might, like me, favour an upstream carbon tax as potentially the most effective and comprehensive instrument available. But, there again, he would observe that, as such, a tax bears directly on electorates—and the odds on Governments across the world having the courage to promote it are less than overwhelming. So he might prefer to bet on cap and trade schemes for industry, which have had a modest run in the European stakes and in some parts of America. But no one seems too keen to put the permits up for auction, which is the way to make them bite. He might also feel that, as we have repeatedly failed to bring a relatively simple WTO trade round to a conclusion within an established negotiating framework, the odds are stacked against introducing a comprehensive raft of carbon trading schemes that extend beyond Europe, across the entire USA and to those parts of the world that really count—China and India. He might wager a slightly larger sum here. He would not want to give the race a miss altogether, but neither would he bet his savings on the outcome, let alone the future of our planet.

It is on the development of a range of low carbon and high efficiency technologies that I can picture the truly discerning punter feeling for his wallet. Then he has a real track record to go on. He will have noted that industry and technology tend to come up with the goods in short order when three basic conditions

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are met. First, sufficient financial resources and incentives are made available; secondly, that Governments and regulators establish a suitable competitive framework; and, thirdly, those same Governments stand back and let science and business get on with the job. He will also have noted that when industry and technology solve the problems of carbon emissions, the solutions are enduring and not dependent on a permanent enforcement regime of taxation and regulation.

My first plea is that we place our bets wisely and spend at least as much time, effort and resource on the boiler plate of technology and industry and on creating the conditions for success that I have just outlined, as we do on our natural inclination to legislate tax and regulate.

What does that mean in practice? I would like to look briefly at the resources and competitive frameworks. The Stern review has something interesting to say on both. On the resources front, what leaps out from the pages of the review is a massive market failure. We are faced with an incredible paradox. As the threat of global warming has become increasingly significant over the past 20 years or more, so have both public and private investment in energy, research and development gone into steep decline. This is madness and something that simply must be addressed.

In what I found one of the less convincing sections of the review, Stern suggests a doubling of investments in this area to $20 billion per annum globally, on the grounds that this would get us back to the levels of the 1980s. It is always incredibly difficult to determine how much to invest in research and development. There is never a right answer. But there is a right question here: why is the proposed investment in technologies, which could save the future of our world, less than we currently spend on research and development in defence? It makes no sense to be so lacking in ambition. Let us face it: if we get this one wrong, we may have nothing left to defend.

On frameworks for investment in a portfolio of new technologies, Stern makes a sound point in concluding that individual nations’ efforts will not have the direction or scale to come up with the answers we need across the globe. In other words, a series of initiatives such as the UK’s Energy Technologies Institute, although on the right track, cannot cut the mustard.

At the other end of the spectrum, we have the recent announcement of a $10 billion international investment in the development of the world’s first nuclear fusion reactor. This is excellent news, as it gets closer to the scale of resources we need. An internationally co-operative venture into a long-term, long-shot technology is entirely appropriate. But we should recognise that there is no competitive edge in this structure and that, at some point, that spur will need to be provided if real progress is to be made on implementation and rapid dissemination. What is missing between the two extremes of sub-scale national endeavour and non-competitive international co-operation is a competitive framework on a scale sufficient to bring about rapid acceleration in the development of medium-term technologies such as carbon sequestration and

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photovoltaics—something commanding the resources to make a major difference in advancing practical, cost-effective solutions that can compete with the traditional means of generating power through burning oil and coal.

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