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If we have learnt anything it is that capitalism and markets have to be properly regulated if we are to live in a decent, civilised society where the gap between rich and poor is not obscene. Markets are without morality and it is for government to inject the moral component into them. We should look at not just a decent minimum wage but a decent living wage for people. At the other end of the scale, we should be talking about the creation of a high pay commission. There was something wrong when in 1990 a review of salaries found that chief executives in companies were earning 55 times more than the average worker in those same companies. In just 10 years, by the year 2000, CEOs were earning 600 times more than the average workers in their companies. The Spirit Level, a book that has been invoked so often in this House, says that a country where the gap between rich and poor is high is inevitably a less happy place to live in.
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What do we do about the banks? The Glass-Steagall Act was introduced in 1933 and was designed to control speculation, preventing commercial banks, which took the deposits of ordinary customers, from embarking on risky trading activities. We, too, should separate out high street retail banking from the risky casino banking activities of the investment banking sector. The large banks should also be broken up into smaller entities, as Nouriel Roubini, the economist, who foretold this crisis, is now recommending.
There are many things that this Government could be doing. The noble Lord, Lord Low, spoke of the way in which, if care is not taken, we are going to drive many more people into poverty and the divisions in our society will become greater. This new Government came into existence speaking of a "broken society". It was not a view I shared; I happen to believe that Britain is a society rich in social capital. But the divisions will be great if we do not deal with this crisis in a humane way, where the pain is shared by all.
7.15 pm
Lord Bradshaw: My Lords, I am going to speak about the bus and rail industries, in which I have no financial interest, although I have spent my whole professional career there. I want to talk about the financial problems facing the Government. First, I utter a word of caution about fares. The elasticity of demand in both transport industries is such that if you put up fares by 10 per cent you lose on average 13 per cent of the passengers, so you have less money in the till and fewer passengers-hardly a recipe for success.
Costs must be cut. I ask the Minister to say something about Network Rail, which is spending huge sums of taxpayers' money and is inefficient, complacent and expensive. I believe that legislation is necessary to bring this organisation, which was created by the party opposite, under some sort of control. It is essential that it spends less money. Secondly, the train operating companies and rolling stock companies are quite ready to review straightaway the timetable and deployment of rolling stock, in the interests of greater efficiency and getting much more into the kitty.
It is necessary to delay the refranchising of three franchises-CTC, Greater Anglia and the East Coast. They are due to be refranchised soon, yet the Government have said, and we have supported the view of the Conservative Party, that we need a new franchising model, which will bring a lot more investment into the industry, because I cannot see that coming from the Government. I believe that the train operating companies and the rolling stock companies are quite capable of managing the fleet and the cascading of rolling stock within the fleet and might embark on a programme of life extension and refurbishment, which would create a lot of jobs in this country, rather than buying new trains from Japan, a process which the previous Government set up. They are unnecessary and unwanted and very expensive. We could make do with what we have, because it has a lot of life in it.
We should review the Thameslink and Crossrail service patterns. We need both, but do we need to run 12-coach trains through Thameslink at 24 trains an
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I welcome, of course, the work being done on high-speed trains. I believe that the electrification programme from the railways needs to be thoroughly reappraised. Although I live in the region of the Great Western and obviously speak in an audience of Cornishmen, I would say that say that electrifying the line west of Oxford is unnecessary, at least at the moment. We should concentrate our electrification on those lines where the cash flow is best, so that we buy the things that would give a return quickly, not spend money on things on which the return is problematic in future. We need to purge the rail division of the Department for Transport and almost forbid it to employ consultants. We should stop using the new approach to transport appraisal as a means of assessing transport schemes. It is inordinately expensive and complicated and, as an economist, I gave up reading the thing after page three. It gets so complicated that it is not an efficient guide as to where we should spend the money.
I agonised quite a lot over the question of buses. The concessionary fares scheme was never properly funded by the Labour Party and has been a constant source of trouble to both operators and local authorities. The age at which concession is available needs reviewing, and we might have to do the very unpopular thing of charging concessionaires 25 per cent of their fare in order to bring the system back into balance. Of course I would make exceptions for the disabled, the over-80s and various others, but the vast bulk of people would rather pay something towards the cost of their travel. A recent survey asked people how the scheme had affected their lives and one of the prime answers was, "We walk less". I am sure that that was never in the minds of the people who designed the scheme.
Lastly, there is the issue of heavy lorries. Foreign lorries are using our roads and not paying, and we should do something about lorry-user charging to get more money in the kitty.
I hope that I have given the Minister a few ideas about how to save money in the areas that I know about. I am sure that other noble Lords could do the same.
7.22 pm
Lord Broers: My Lords, I, too, take great pleasure in congratulating the noble Baroness, Lady Wilcox, and the noble Lord, Lord Henley, on their new appointments.
I shall speak to the first priority of the Government as set out in the second paragraph of the gracious Speech: the reduction of the deficit and the restoration of economic growth. As an engineer, I certainly do not have overall solutions to these immense problems, but I feel strongly that there are actions that we must take if there is to be any chance that we are to resolve them, and there are things that we should not do.
I shall start with one of the latter. We must not go on being afraid to face the magnitude of the problem, perhaps on the assumption that we will frighten people
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Faced with these apparently insurmountable debts, what do we do? It is unlikely that we can find the sum needed in savings, no matter how savage the spending round, and only a limited amount can be raised by increasing taxes if the nation is not to revolt. We are going to have to get the economy growing again. I agree with the Prime Minister that there is no other course but to place much more emphasis on manufacturing. The question is: how do we do this? We could risk generating runaway inflation and further devalue the pound. After all, in 2008, on the previous Government's watch, the pound was devalued by a staggering 25 per cent, much to the relief of industry, even if it demonstrated the weakness of our economy compared to others. Further devaluation might increase the competitiveness of industry and improve the balance of trade, but naturally it would make funding our deficit prohibitively expensive. Short of providing an unrealistically weak pound, we will have to find incentives that encourage investment in new ideas, and lower cost and more efficient funding for industry than is being provided by our banks. After all, banks that hugely reward their employees and at the same time aim to make large profits have to make all that money out of someone, and of course it is generally their customers.
To improve our industrial performance we must first develop a rational and competitively priced energy strategy, as mentioned by the noble Lords, Lord Lawson, Lord Oxburgh and Lord Jenkin. We must also make better use of our educational system and our science and engineering research base. Mike Lynch, one of our most successful entrepreneurs, recently said in the Times:
"If you look at the calibre of our students and the competitive advantage they bring, we should have a raft of internationally successful technology companies. Instead, there are only two software companies ... in the FTSE 100-Autonomy",
- "and Sage. Our ambition should be to have ... ten. Without technology companies the UK economy will be in massive trouble".
A proposal that should help create high-technology companies has been made by Dr Hermann Hauser in his recent report to the former Secretary of State at the Department for Business, Innovation and Skills, The Current and Future Role of Technology and Innovation Centres in the UK. Dr Hauser proposes that the UK develops a translational infrastructure similar to that
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We have to do all that we can to encourage and support our manufacturing industry. After all, despite neglect, it still adds more than £l50 billion a year to the UK economy, accounts for half of exports and represents 13 per cent of gross domestic product. However, as Dick Olver, chairman of BAE Systems, has pointed out recently in the Financial Times, these statistics mask disturbing trends. Since 1970 the UK has suffered the sharpest decline in manufacturing as a proportion of employment of any advanced industrial economy. Olver goes on to say:
"Without action, that trend is likely to continue and, in a global environment, big companies will have fewer reasons to favour the UK when deciding where to invest".
Other data produced by the ERA Foundation show that over the past decade our trade balance in finished manufactured goods has declined, at an average rate of 20 per cent a year, from a position of rough balance to a deficit of £55 billion. We need to reverse these trends if we are to recover our economy.
7.28 pm
The Lord Bishop of Liverpool: My Lords, thanks to the Benches opposite, the United Kingdom has established its reputation on the world stage as a leading voice on climate change. It is the hope of many on these Benches that the new coalition Government will continue to show strong international leadership by what the United Kingdom says on the global stage as well as by the way it rebuilds a green economic recovery.
In the run-up to the election the Green Alliance's report, The Last Parliament, made a powerful argument that now is the time for action. The report reminds us that over the next five years Parliament has the last opportunity to take action on the national and international stage and prevent runaway climate change. Failure to stabilise emissions in that timeframe will dramatically reduce our chances of keeping global warming below the predicted 2-degree rise in global temperature. The Government have declared that they want to be the greenest Government. This is not simply a desirable ambition; it is an essential requirement for a secure future.
I am interested to see how the Government's plans will impact on the north-west of England. The region is the most renewable-energy-rich region in the United Kingdom, offering opportunities for its continued economic development, especially with the creation of green jobs and green economic growth, as well as contributing to the national economic recovery. We
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The UK faces challenging targets for carbon emissions. We cannot achieve these without the close integration of infrastructure planning, economic growth and energy generation. The proposed abolition of the regional spatial strategies seems to remove the mechanism to align infrastructure priorities with economic potential. We have a national requirement to develop a sustainable, reliable, renewable energy supply. The development of the national infrastructure must contribute to this. It is important that the Government replace the Infrastructure Planning Commission with a system that is not just, as they say, efficient and accountable, but that counts the carbon of new infrastructure planning. I have argued for this in previous debates and will continue to make the point that planning permission must take account of the carbon footprint; otherwise, it drives a coach and horses through any strategy for reducing our carbon emissions.
There is no mention of nuclear power in the gracious Speech. We must avoid falling into the trap of believing that nuclear is our primary and easiest energy solution. I share the concerns expressed about nuclear energy by the Secretary of State. I question the development of nuclear energy on the grounds of proportionality. The energy consumption of one generation burdens 100 generations with the problem of dealing with the waste. I urge the Government to strive for a rich energy mix, including the abundant-and as yet almost entirely untapped-renewable energy sources around our country. For example, up to 20 per cent of the electricity required by the United Kingdom could be provided by the waters and tides of our coast, predominantly on the west of the UK.
At home, the Government have an important role to provide the initiative for changes in lifestyle. I hope the government policies, such as establishing a full system of feed-in tariffs and encouraging home energy efficiency improvements, will encourage people to change their lifestyle. Without a change of lifestyle, the policies themselves will not deliver. The climate of political opinion on climate change has changed radically over the past five years. Through the new Government's legislative programme, the momentum must be sustained if the climate of opinion and action is to change more quickly than the climate itself.
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7.35pm
Lord Reay: My Lords, although they are not present, I pay tribute and express my thanks to the Ministers with whom I had to deal in the previous Government on energy, environmental and planning matters-the noble Lord, Lord Davies of Oldham, and, in particular, the noble Lord, Lord Hunt of Kings Heath. They were models of what Lords Ministers should be: immensely skilled in debate, extremely conscientious, and-possessing perfect manners-they ensured that the debates they led were always a pleasure for those who took part in them. I hope that we can produce Ministers worthy to tread in their footsteps; I am sure we will. Looking further ahead, I hope that we will never introduce a reform to this House that will make the achievement of their high parliamentary standards less likely.
I have no problem with being in a coalition. I once sat on the Liberal Benches. A coalition, of course, has differences of opinion within it. However, in one area, unanimity unfortunately reigns, with dangerous possible consequences. I refer to the policies on energy and climate change. Indeed, the coalition policies in that area differ little, if at all, from those of the previous Government. If anything, they aim to go further in the same direction. For example, the coalition's programme promises support for an increase in the EU carbon emission reduction target from 20 per cent to 30 per cent over 1990 levels by 2020. Last week the European Commission pushed this proposal until, under pressure from France and Germany, it was forced to retreat, despite the support for the Commission from our own Secretary of State. The Commission was apparently attracted by the funds that it would be able to raise by selling additional carbon emission certificates. In other words, it was seen as a revenue-raising tax on industry. How can that possibly be sensible in the present circumstances?
The fact is that in our present economic predicament, the private sector, including our manufacturing industry, needs to be given every encouragement to restore growth to our economy. The whole point of being out of the eurozone is surely to be able to take advantage of our lower costs in world markets. No cost is more significant to industry in determining its international competitiveness than that of energy. How, then, can we afford an energy policy that promises extravagant additional costs for private customers and business alike, the effect of which can only be an increase in fuel poverty; the destruction or emigration of industry, with consequent further job losses; and the threat that the lights will go out as we persist in promoting inefficient means of producing electricity?
Governments are fond of claiming how many jobs they will create through their various schemes to promote green energy. They do not speak about the fear of the far greater number of jobs that will be lost in other sectors as a result of the increase in costs imposed on the rest of industry by the expense of the subsidies. Moreover, jobs in industrial sectors which depend for their very survival in all countries on government subsidies are exceedingly vulnerable, as we are beginning to see. Not surprisingly, across the developed world, those subsidies are now having to be reined in, with
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The next example will very likely be solar power. Here we should be warned by what has happened in Germany. Germany, like this country, does not have a notably sunny climate. Nevertheless, thanks to feed-in tariffs, it has more solar power capacity than Spain. According to a study published last year by Ruhr University, which I have quoted before in this House, by the end of this year it is expected that more than €50 billion will have been spent on subsidising solar power in Germany, yet in 2008 solar power produced a paltry 0.6 per cent of Germany's electricity. Sadly, however, we seem to be setting off down the same road. The coalition programme promises to introduce a full system of feed-in tariffs. However, the Prime Minister stunned everyone with the leadership he showed in establishing the coalition following the election result. In other respects also he has showed pragmatism and an ability to free himself from dogma. Let us hope that in the field of energy too he will eventually embrace reality and abandon childish dreams, and do so before disaster is brought down on this Government and this country.
7.41 pm
Lord Desai: My Lords, I shall miss my noble friend Lord Myners and the noble Baroness, Lady Noakes, but I welcome the new team, whom I have known for a long time and shall have fun attacking.
Unlike many of my noble friends, I have always taken the view that the deficit has to be tackled and, along with 19 other economists, signed a letter to the Sunday Times to that effect. The noble Lord, Lord Skidelsky, then found an army of many more economists to demolish my case, but we shall see. The important point is that we should debate the timing of deficit reduction, not the need for it. Even on timing, the choice is not as wide as people think. We are in the midst of a recovery. Growth in the last quarter of last year and the first quarter of this year was fragile, but the figures have been revised upwards. We will most likely have a growth rate of around 1.5 per cent to 2 per cent this year. When the right honourable gentleman the Chancellor of the Exchequer announces his emergency Budget, it is important that he ensures that the path of deficit reduction is properly laid down without any confusion and that he makes it contingent on a certain growth trajectory. When the Office for Budget
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I produced a paper before the election with Peter Kenway of the New Policy Institute in which we calculated the rate at which the deficit would have to be reduced to bring down the share of spending from its present high figure of 44 per cent of GDP to, say, 40 per cent, which is what it was in 2002. The most important element in that calculation is that just keeping real current spending constant-zero growth-and relying on growth to bring in revenue may be a good and cautious strategy to begin with. If even that much is done, it will be good. What people historically call cuts in government spending in the UK are not actual cuts but occur when the growth of current spending is less than the growth of GDP. The growth of GDP will have to be watched carefully; at the minimum, to have constant real spending would be a good strategy.
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