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House of Lords

Thursday, 5 July 2012.

11 am

Prayers—read by the Lord Bishop of Lichfield.

Media Oversight: Transfer of Responsibilities


11.06 am

Asked By Lord Whitty

To ask Her Majesty’s Government whether they will reconsider their decision to transfer responsibility for media, broadcasting, digital, telecommunications and oversight of Ofcom from the Department for Business, Innovation and Skills to the Department for Culture, Media and Sport.

Baroness Garden of Frognal: My Lords, there are currently no plans to do so.

Lord Whitty: My Lords, I thank the Minister for that rather disappointing reply. I think the House and the world understand why, in the BSkyB case, the Prime Minister had to remove responsibility from a Minister who appeared to be prejudiced in one direction and give it to a Minister in a different department who we now know to be prejudiced in another direction. However, that is not my point. At the same time, and with no logic, the Government transferred whole swathes of responsibility not just for BSkyB and broadcasting but for media as a whole—digital, telecommunications and oversight of the key regulator, Ofcom. Why was that done and who has benefited? It is not clear to me that consumers, small businesses hoping to compete, or the public interest have benefitted. Surely competition and consumer protection should be paramount.

Baroness Garden of Frognal: My Lords, the noble Lord makes some valid points and I acknowledge his expertise in consumer matters, which will of course inform his views. However, he will appreciate that there are many aspects of government in which more than one department has an interest. The Department for Culture, Media and Sport is an economic-focused department, so it makes a great deal of sense to bring together for the first time the full value chain of the technology industries—the infrastructure, content regulation and the creative industries—in one place. It is, after all, the department for media.

Lord Fowler: My Lords, perhaps I may remind the noble Lord that it was the last Government who deliberately changed the law in 2003 to allow foreign takeovers of British television companies and thus enabled BSkyB to make its bid. I put it to my noble friend that in future it would be better if, irrespective

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of whichever party is in power, politicians were removed altogether from taking the final decision in media takeovers.

Baroness Garden of Frognal: My noble friend makes a powerful point, which I know he has made before. This is being treated extremely seriously by the Government. We are currently looking at various reviews, not the least of which is the Leveson inquiry, which will focus on this. I am sure that decisions will be taken in due course.

Lord Sugar: My Lords, first, I declare an interest as the chairman of YouView, a non profit-making organisation that was announced yesterday. It provides a new system of broadcasting television for the UK made up of all the publicly funded broadcasters. The point I would like to bring to the noble Baroness’s attention—

Noble Lords: Question!

Lord Sugar: I will get there if noble Lords give me a moment. Is it not irrelevant where the responsibility lies for looking after this sector? What is perhaps more relevant is ensuring that the people who work in the department are qualified and understand what this business is all about. It is a dynamic and fast-moving sector. The company that I have just referred to will provide individuals with opportunities to start their own television channels. We do not need bureaucrats who do not understand this dynamic industry.

Baroness Garden of Frognal: My Lords, the noble Lord has of course a great deal of experience and expertise in these fields, which is why I come back to the answer that I gave to the noble Lord, Lord Whitty: that it makes a lot of sense to deal with all these issues within one department, which is called the department for media and where expertise from officials resides. That is more likely to be helpful to all the creative industries.

Lord Northbourne: My Lords, can the Minister give us any encouragement to believe that an element of social responsibility will be part of the work of the Department for Culture, Media and Sport in being responsible for the media?

Baroness Garden of Frognal: I would sincerely hope so, my Lords. Social responsibility is written into all government policies across all departments, and DCMS is certainly involved in that.

Baroness Bonham-Carter of Yarnbury: My Lords, DCMS is a small department that punches way above its weight. Indeed, the creative industries are the fastest growing sector in the economy. Does the Minister agree that, as broadcasting is a key factor in this part of the economy, it and all things pertaining to it should remain within the DCMS?

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Baroness Garden of Frognal: I entirely agree with my noble friend that DCMS supports and encourages the creative industries, and I join her in celebrating all that those industries bring to this country. They make an enormously important contribution, not just to the economy but to the cultural richness of the country and, indeed, to the UK’s standing on the international stage, where we are world leaders in many areas of the arts and media.

Baroness Jones of Whitchurch: Does the Minister recognise that the events of recent weeks mean that Jeremy Hunt no longer commands the confidence of the media or the public in dealing with media regulation? How much longer will the department be expected to limp along with a Secretary of State in limbo waiting for a reshuffle? Do not the arts, culture and sports organisations in this country need better leadership?

Baroness Garden of Frognal: Harsh words indeed from the noble Baroness. I cannot possibly agree with her that Jeremy Hunt is a lame duck Secretary of State. He continues to run a department with important and high profile responsibilities. He is highly regarded within the fields that he covers. Nor can we forget that one of his responsibilities is for the Olympics and Paralympics, which are about to be of major significance in this country.

Lord Hughes of Woodside: Does the Minister share, at least in part, my rather old fashioned view? One of the reasons why we are in such a mess, not just in the broadcasting industry but in many other things, is that years ago Parliament abrogated responsibility for taking decisions and passed it on to so-called independent quangos.

Baroness Garden of Frognal: I am not entirely sure that I agree with the noble Lord. Parliament still has the ultimate responsibility for what goes on in the country in these different areas, particularly in the field of media, which we are discussing today.

Lord Foster of Bishop Auckland: My noble friend’s words were not harsh enough. We have a weak Prime Minister. He should have called for Jeremy Hunt’s resignation immediately he discovered there was a problem. That is the problem; we have a weak Prime Minister who does not have the courage to do the right thing.

Baroness Garden of Frognal: Once again, I am afraid that I cannot agree with the noble Lord, which will not surprise your Lordships. Jeremy Hunt has actually held himself accountable to Parliament. He has also given evidence to the Leveson inquiry. A whole deal of evidence is coming out on this and we have to wait until the Leveson inquiry is finished before we can pass any sort of judgment.

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Women’s National Commission


11.14 am

Asked By Baroness Greengross

To ask Her Majesty’s Government whether they have any plans to create a representative body to replace the Women’s National Commission, which was abolished in 2010.

Baroness Verma: My Lords, let me start by recognising the many achievements of the Women’s National Commission over 40 years of service. However, the Government feel that it is now both important and appropriate to engage with women more directly and much more widely. It is for that reason that we decided to close the WNC in 2010 and bring its functions into government. I am very pleased to report that our new approach is working well and that the feedback that we have had is very positive.

Baroness Greengross: I thank the Minister for that reply, and I know about her personal commitment to hearing the voices of women, particularly the more marginalised groups of women. However, does she not think that we need some sort of central hub, some replacement organisation, that can bring together the voices of those who tend not to be heard and who are marginalised? Also, could the Government not be in breach of their obligations under the Beijing platform for action, which requires them to have in place a mechanism that will enable women’s organisations to communicate effectively with government at a national level?

Baroness Verma: My Lords, I thank the noble Baroness for her initial kind words, but perhaps I may reassure her and the House that we are, first of all, meeting the obligations under the Beijing platform because, through the Government Equalities Office, which is part of the Home Office, we are able to deliver all the requirements placed on this country to ensure that all voices are heard. However, we took on this programme on the basis of listening to people’s voices through a large consultation called Strengthening Women’s Voices. We found from the feedback that our approach is what women actually want.

Baroness Browning: My Lords, I declare an interest as a former government co-chairman of the Women’s National Commission. Does my noble friend accept that the strength of having a government Minister as co-chairman was that the commission set its own agenda—in other words, its priorities were at the top of the list and were not set by other people or government? Having a government Minister as co-chairman meant that those concerns went directly to the heart of government. That was the WNC’s strength—a strength that is no longer there.

Baroness Verma: My Lords, I am afraid that I have to disagree with my noble friend because, having spoken to many women through consultation, we found that a lot of women were not being talked to or involved in

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the sort of decisions that my noble friend would want. Also, because of social media and the internet, we are able to reach out far more to a greater number of women and women’s organisations. The fact that the Government are at the heart of this is the key to addressing those issues.

Lord Rooker: What is the gender of the head of the Government Equalities Office?

Baroness Verma: My Lords, I am not quite sure that I can understand the noble Lord’s question, but I should say that we have a Home Secretary and a Minister, Lynne Featherstone, who lead on this area in the departments.

Lord Rooker: My question was simple.

Noble Lords: No!

The Lord Bishop of Blackburn: My Lords, an LSE study calculated the public cost of carers leaving work to be £1.3 billion a year in lost tax revenues. It is well understood that women bear the heavier responsibility than men in this regard. What steps are the Government contemplating to ensure that the voices of women carers are heard, as they would have been through the Women’s National Commission before its demise?

Baroness Verma: My Lords, the right reverend Prelate talks about a group within society who perform an incredibly important role. However, perhaps I may also say to him that when taking on board what carers do, whether they are paid or unpaid, we have looked at flexible working, which will have a greater impact on their lives. We have also taken 2 million people out of tax altogether to ensure that they do not bear the great brunt of the effects of our economy going into a downward spiral because of our previous Administration. We are working very hard to ensure that our tax credits will be utilised for those with the most disadvantage in our society.

Baroness Trumpington: My Lords, who is representing this country in the United Nations? I speak having had an interest as being a member of the Women’s National Commission when the United Nations Decade for Women conference was held. It was important that we were represented properly then. I represented many English organisations, including the trade union for English prostitutes.

Baroness Verma: My Lords, we have an excellent UN ambassador in New York. We also have our own Minister, Lynne Featherstone, who leads on all our international issues overseas, so we have really good representation. In fact, we had the largest contingent at the last CSW session.

Baroness Gould of Potternewton: My Lords, one of the strengths of the Women’s National Commission as a representative body of over 670 organisations was that it was able to deal with specific issues. As the

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Olympics are almost upon us, what action have the Government taken to follow up the extremely valuable work done by the Women’s National Commission, along with the Metropolitan Police and the London boroughs, to reduce the level of trafficking in order to reduce the level of prostitution during the Olympics? Will the Minister tell us what action was taken and the outcome of that action?

Baroness Verma: My Lords, the noble Baroness raises concerns that we also have about the trafficking of women, but I reassure her that all these considerations have been taken into account. We are working across government on these issues. Would the noble Baroness allow me to give her and the House a fuller answer by writing to her? There are a number of areas that we are looking at and working on and it would be helpful to the House.

Universities: VAT on Alterations to Listed Buildings


11.22 am

Asked By Baroness Deech

To ask Her Majesty’s Government what evaluation they have made of the impact on universities of the removal of the zero rate of VAT for alterations to protected buildings.

The Commercial Secretary to the Treasury (Lord Sassoon): My Lords, removing the zero rate of VAT from alterations to listed buildings, including those belonging to universities, removes a perverse incentive to change rather than repair them and ensures that all alteration works receive the same tax treatment. The change makes the VAT rules simpler for businesses to understand and reduces the scope for error and non-compliance. In the Government’s assessment of the impact of the measure included in the consultation response published on 28 June, no separate assessment was made of the impact on particular categories of listed building.

Baroness Deech: Does the Minister fully appreciate that the proposed removal of zero-rated VAT for much needed university alterations to listed buildings will have a severe impact on those universities? Not just Oxbridge, but nearly every university old and new has listed buildings and the sector as a whole will have to find an additional £150 million over the next five years. It is like an extra tax which will reduce the amount that universities have for bursaries. Will the Minister accept that the situation could be rescued without a U-turn if the Government were to limit zero-rating to buildings owned and occupied by charities?

Lord Sassoon: My Lords, I fully accept that universities will be affected, but that is not a reason not to go ahead with this measure. It is for sound and principled reasons, which I have summarised. There has been an extensive consultation process, including my honourable friend the Exchequer Secretary meeting representatives

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from a number of Oxbridge colleges, including the noble Baroness’s successor as principal of St Anne’s College, Oxford. There have been various numbers, including numbers coming from Oxford, which seem to vary considerably, meeting by meeting. I do not therefore recognise the £150 million figure, but I accept that there is a cost. As a result of the consultation, there have been significant changes to extend the transitional period and some of the details of the transition, but the change will go ahead.

Baroness Brinton: My Lords, does the Minister believe that the additional cost to universities resulting from the removal of the zero rate should be met from their teaching and research resources, or by an additional Higher Education Funding Council grant, or should it be passed on to the occupants of student housing?

Lord Sassoon: My Lords, it will be for the universities and colleges affected to decide what they do. We have made generous transitional arrangements which give the affected institutions time to plan. Of course, the total of higher education institutions’ funding will rise during the next two to three years, so there is time for those institutions to make the necessary decisions.

Lord Howarth of Newport: My Lords, if the Government are to continue with the Listed Places of Worship Grant Scheme, why do they not introduce a listed places of learning grant scheme? Better still, why do they not abandon their defeatist attitude towards the European Union and reopen vigorous negotiations with the European Commission to secure a unified zero rate of VAT for both alterations and repairs to heritage buildings?

Lord Sassoon: My Lords, on the noble Lord’s first question, he makes the point that I would make: that the Listed Places of Worship Grant Scheme is a continuation of an existing scheme and not a new scheme that has been introduced. As regards his question on Europe, we need to abide by the VAT rules that Europe sets. Those rules very seriously constrain us, and the noble Lord makes the important point that we have to work within those constraints.

Lord Cormack: My Lords, does my noble friend the Minister accept that the Listed Places of Worship Grant Scheme, while it is welcome, does not address the issue satisfactorily? All buildings in the ownership of cathedrals, for instance, are not eligible for it; it is just the place of worship itself. All the heritage organisations, headed by the Heritage Alliance, have submitted evidence to his department which shows that all those who truly know and care about the future of our built heritage in this country believe that the Government have got it wrong. Can we please have a rethink on this?

Lord Sassoon: My Lords, there has been a consultation; there have been extensive discussions; and the response to the consultation was published on 28 June. Concessions

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have been made that will significantly help university listed buildings; for example, certain transitional repairs will be allowed to carry on for four summers. I shall not be drawn again into a discussion of listed places of worship, save to say that some of the same considerations apply. For example, anomalies in the arrangements affecting universities include the fact that those listed buildings which are used for business purposes such as teaching are already subject to VAT as are alterations to all non-listed university buildings, so there are very considerable anomalies here which we are clearing up.

Lord Eatwell: My Lords, I declare an interest as the president of Queens’ College, Cambridge, which contains some of the most beautiful grade 1 listed buildings in the country. The Minister did not accept the figure of £150 million put forward by the noble Baroness, Lady Deech, so I can perhaps help him by giving him a precise figure for the impact on my institution. My senior bursar tells me that the impact of this change on my institution will be up to 5% of the teaching, research and student support budget. Was that the Government’s intention?

Lord Sassoon: My Lords, the intention was to reduce a number of VAT anomalies, of which this was one, and to introduce generous transitional provisions relating to those measures.

Ulster Bank


11.29 am

Asked By Lord McAvoy

To ask Her Majesty’s Government what steps they are taking to ensure benefits and allowances are being paid to recipients with Ulster Bank accounts.

The Commercial Secretary to the Treasury (Lord Sassoon): My Lords, my honourable friend the Financial Secretary has spoken to Stephen Hester, chief executive of the Royal Bank of Scotland, about the technical difficulties affecting both NatWest and Ulster Bank to ensure that RBS is doing everything it can to resolve these issues as quickly as possible. Social security is a devolved matter in Northern Ireland but the Social Security Agency in Northern Ireland is advising benefit customers to go directly to their local branch where funds should be available to them.

Lord McAvoy: My Lords, I thank the Minister for his Answer but the fact remains that 100,000 customers of Ulster Bank are suffering chaos in their accounts affecting direct debits, benefits and pensions. This also has an effect on small businesses and suppliers. Vernon Coaker called for the Secretary of State for Northern Ireland to intervene but Owen Paterson says it is not his problem and he refuses to help. He holds the important position of Secretary of State for Northern Ireland. Does the Minister accept that this is a disgraceful situation where 100,000 customers and small businesses

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in Northern Ireland are facing financial disaster but receive no help from a do-nothing Secretary of State for Northern Ireland who is not fit for the job?

Lord Sassoon: My Lords, I do not accept that for one minute. This is a very serious issue affecting, as the noble Lord says, 100,000 individuals in Northern Ireland and the Republic of Ireland. My right honourable friend the Secretary of State for Northern Ireland has been actively on the case. He has discussed the Ulster Bank issue with my right honourable friends the Chancellor and the Secretary of State for Business. The Minister of State for Northern Ireland has spoken to the Northern Ireland Minister of Finance and Personnel and to Sir Philip Hampton, chair of RBS, who has made commitments about the fair and proper treatment of Ulster Bank’s customers with full compensation for financial loss. Ulster Bank itself is putting out daily updates and extending branch opening hours and has a freephone number. These are very serious issues. Once the dust has settled, the FSA will be requiring a full explanation from RBS and NatWest to make sure that any necessary steps are taken so that this does not happen again.

Lord Rogan: My Lords, this morning a spokesman for Ulster Bank stated that this technical failure will not now be fixed until 16 July. This further delay, now to be some three weeks, will compound the already serious cash-flow problems businesses are encountering. Some companies are inevitably going to suffer losses. Does the Minister agree that this raises the question of compensation for consequential losses caused by the IT breakdown?

Lord Sassoon: My Lords, I agree that the difficulties clearly are continuing. I looked at the Ulster Bank website. I see that it is giving daily updates of the situation and it has been completely clear that it is unlikely that it is going to be fully resolved until around 16 July. I repeat that RBS has made a commitment that no business or individual will be left permanently out of pocket as a result of this. The interpretation of that will no doubt raise the issues which the noble Lord raises.

Lord Alderdice: My Lords, the situation for people in Northern Ireland is extremely serious, as my noble friend has said. The noble Lord, Lord McAvoy, has raised the question of those who get benefits, but this nationalised bank run by the Government is also failing to address the needs of those whose salaries and wages are paid in, including from the Government. A number of private sector employers are helping out their employees who find themselves in immediate financial embarrassment during this holiday season. Is there any possibility that the Government, whose own employees are failing to have their salaries and wages paid in, can help in any way in the short term?

Lord Sassoon: My Lords, my noble friend makes a very good point. I do not know what arrangements are being made because, again, it is going to be principally

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affecting employees of the devolved Administration. But I will take that issue back. I am sure it is being thought about by my colleagues in Government but I will remind them of it.

Baroness Kingsmill: My Lords, does not the chaos and total mess in the RBS-owned banks at the moment, which is affecting so many retail customers, just emphasise a lack of investment in back-office systems and computers in these retail banks, disadvantaging a large number of customers, at a time when we have been focusing far too much attention on what has been going on in the casino banks?

Lord Sassoon: My Lords, I do not know the cause of this significant failure. The noble Baroness may be right but, as I said, the FSA expects RBS to provide it with a complete account of the issues. I welcome the fact that the chief executive of RBS, Stephen Hester, has made a commitment to a full and detailed investigation overseen by independent experts and publication of those findings. In due course, we will know what the explanation is.

Lord Forsyth of Drumlean: My Lords, is my noble friend satisfied with the role of the FSA? Surely it is not enough for the FSA to say, “We want a report”. The FSA is supposed to satisfy itself that people with banking licences have back-up systems to prevent what has happened, which is causing not only distress to families but real damage to commerce in our country. Surely the FSA should be far more active and should be giving an explanation to the Minister for why it has allowed this to happen.

Lord Sassoon: My Lords, we delude ourselves if we think that there will ever be a no-failure regime in financial regulation. Regrettably, issues will arise. We want the FSA to do what it is doing: not getting in the way but doing whatever it can to ensure that RBS solves the immediate problems. Then it will get the full explanation and, on the back of that, the lessons for all concerned, including, I am sure, the FSA, will be learnt.

Lord Browne of Belmont: My Lords, as normal banking facilities will not be available at branches of the Ulster Bank until 16 July at the earliest, and given that there are public holidays in Northern Ireland on 12 and 13 July, will the Government take steps to ensure that Ulster Bank branches remain open on those dates to enable customers to receive advice and to access banking services? I declare that I am a client of the Ulster Bank—one, I hope, of good standing.

Lord Sassoon: My Lords, I am aware that 42 Ulster Bank branches have extended their opening hours until 7 pm. I am aware, because I have checked, that the availability of the freephone number, which is available until 10 o’clock at night, has been widely publicised. I am not aware of what the bank intends to do on those bank holidays, but it will have heard the question.

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Business of the House

Timing of Debates

11.37 am

Moved by Lord Strathclyde

That the debate on the Motion in the name of Lord Jenkin of Roding set down for today shall be limited to three and a half hours and that in the name of Lord Higgins to one and a half hours.

Motion agreed.

Public Service Provision Committee

Membership Motion

11.37 am

Moved by The Chairman of Committees

That Lord Griffiths of Fforestfach be appointed a member of the Select Committee in place of Viscount Younger of Leckie, resigned.

Motion agreed.

Further Education Institutions and 16 to 19 Academies (Specification and Disposal of Articles) Regulations 2012

Motion to Refer to Grand Committee

11.37 am

Moved by Lord Strathclyde

That the draft regulations be referred to a Grand Committee.

Motion agreed.

UK Industry: International Competitiveness

Motion to Take Note

11.38 am

Moved by Lord Jenkin of Roding

That this House takes note of the international competitiveness of UK industry, of its success in attracting inward investment and exporting to global markets, and of its role in strengthening the United Kingdom’s economy and in job creation.

Lord Jenkin of Roding: My Lords, we have had two recent debates in this House that I would like to mention, one introduced by the noble Lord, Lord Adonis, about youth unemployment on 14 June, and one introduced by my noble friend Lady Kramer on economic growth on 21 June. One key to solving both those problems is achieving the success of UK

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industry—by that I mean all industries—for the nation in earning its living, and that is what this debate is about.

I immediately welcome my noble friend Lord Green of Hurstpierpoint to the Dispatch Box. He has spent so much time abroad over recent months that we do not see him often enough in this House, so it is absolutely splendid that he should be here today. He has made a notable contribution to supporting both exports and inward investment and, if I may put it this way, banging the drum for Britain.

I should declare an interest in that I am an honorary president—I stress “honorary”—of the Energy Industries Council, which has an important role in representing over 600 companies in the supply chain of all energy supplies and in securing business round the world. If I may, I will draw on its experience a little later.

I start with a proposition with which I hope that the whole House can agree:

“There is a growing consensus across UK Government and business that growth in manufacturing and industry is vital for the UK’s sustainable economic recovery, and that technology and innovation will be key drivers of that growth”.

That will come through later in my speech and is as true for exports as for everything else. The proposition comes from a valuable report by the PA Consulting Group, which draws on a survey of over 100 business leaders from the UK’s fastest-growing technology and innovation centres. The report is very well worth reading. It has proposals for a constructive and realistic industrial policy, and I draw it to my noble friend’s attention. It is one of a whole raft of recent policy papers addressing the problem of how we are actually to achieve what that report sets out.

The UK is still one of the world’s major exporting countries. In its most recent inflation report, the Bank of England said that the deficit,

“alongside other factors such as low national saving, indicates a need for the UK economy to rebalance away from domestic demand towards net exports”.

Both parts of that are important. I have been exploring how we can better achieve this objective with a few of the major bodies that aim to help in this process. I mention first that admirable body, the British Chambers of Commerce. In a letter to me about the quarter 1 results for this year, it said:

“This quarter’s Index shows that export orders and sales have increased over the last three months. Trade documentation data for UK goods exports in Q1 2012 shows an almost eight percent increase”—

7.7%, put accurately—

“on the same quarter last year, demonstrating that growth in export goods continued”.

The chambers have of course gone on to identify a number of challenges. I have no doubt that other noble Lords will draw attention to these during the debate, but they draw particular attention to the problem of smaller companies seeking to export for the first time. Among those, they stress the very great importance of trade missions and trade shows, which really are an effective means for new exporters to get started. However, it seems that the use by smaller firms of the state-backed finance products from UK Export Finance, which should go hand in hand with that, is mainly due to low

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awareness on the part of small firms of what is available. These are specialised services and it seems sad if firms are not aware of what is on offer. I applaud my noble friend for his role in restoring funding for the trade shows programme to UKTI’s budget, but what more can the Government do to overcome this handicap of lack of awareness? If it really is a problem, it ought to be tackled.

The chambers of commerce also mentioned the importance of training people in the mysteries of international trade. It is hugely complex and one must remember that it is always its people who do the actual exporting. The BCC itself does quite a lot of training but too many firms simply do not understand the need for expertise in this area. In this connection I also met a remarkable lady, Mrs Lesley Batchelor, who is the director-general of the Institute of Export. She entirely supported that. Indeed, the institute’s primary purpose in life is its education programme: it runs a variety of courses on international trade. She made the point that too few companies undertake any internal training in exporting—so that, as she put it, any success becomes a matter of happenstance and not a matter of strategy. The institute’s philosophy can be summed up as, “professional qualifications bring competence, and competence engenders confidence”. That is at the heart of this. She went on to say that the UK has an almost psychological disadvantage. As she put it:

“Compared with, say, Italy or the Netherlands, international trade is less embedded in the psyche of many UK firms”.

I recognise that; many years ago, I used to work for the Distillers Company, which exported almost its entire production. However, it is not true of a lot of other companies. My noble friend may well recognise that. Lesley Batchelor mentioned another problem with which we are all familiar—that the media much prefer to report problems and failures rather than successes.

I will mention one success. So far this year 140 companies have won Queen’s Awards for enterprise in international trade. Have we read anything about that? It is there; it has happened; the firms themselves are, no doubt, very proud of it. One can add to that the question, “Why do so many people spend their time talking down manufacturing in this country?”. This does no service at all to industry; manufacturing is hugely important.

In my discussions in preparing for this debate I have heard a great many praises for UKTI, the United Kingdom Trade and Investment body, which operates under BIS. There is no doubt that it does a great deal of sterling work in running trade shows, running missions overseas and encouraging foreign direct investment into the UK. I shall cite one or two examples of this; that often helps to make the point. I come back to what I mentioned earlier, in declaring my interest in the Energy Industries Council. This body, which works very closely with UKTI, has offices in Dubai, Singapore, Beijing, Rio de Janeiro and Houston, Texas. Over the three years since 2009, with UKTI’s help, the EIC has managed the UK pavilion at 26 exhibitions, with 648 UK exhibitors. It has run 25 trade missions for 290 delegates. Between them these have produced millions of dollars of new business for the firms concerned.

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Then again, one can look at its activities in overseas investment projects. There is a project known as the Sadara project in Saudi Arabia; it is a $20-billion world-scale chemicals complex. The EIC ran what it called a “share fair” event in this country, and was able to build valuable contacts between the firms that could supply products and services—not just products—for the contractors for the project. Again, it is confident that millions of dollars of business will be won.

We hear a lot about the need to break into developing markets. Here again, the EIC has a very good record. I will mention just two recent successes. They are small firms, and I am willing to bet that there is nobody in this House who has heard of either of them. I may be wrong, and I shall stand corrected. There is a small company called WMT Oil and Gas which has just been awarded a $500,000 contract to produce operations procedures for a deep-water offshore oil field in Brazil. It will be the first tension-leg well platform in Brazil, which will be connected to a floating production, storage and offloading vessel. The company produces its instructions in two languages—English and Portuguese. This is a huge success for that small firm.

Another company, which has been breaking into the Chinese market, is called SafeHouse Habitats Scotland Ltd. Again, it was the EIC that helped it to break into that market. The company produces products such as pressurised welding enclosures and hot-work management solutions. It identified opportunities in China such as offshore oil and gas exploration products, and the EIC helped SafeHouse Habitats to make the market breakthrough. The EIC formula clearly works. It is hugely successful, and I know that my noble friend is aware of that. Can it not be imitated in other sectors of the economy? It seems to be a way to get extra business.

I have extolled the virtues of UKTI but I have also heard criticism of it, and perhaps I should mention that. It is not always quick enough to respond to the accelerating changes in the global market. Here again I cite one example, although it may not be UKTI’s fault—I think it goes deeper than that. A few weeks ago my honourable friend George Freeman, MP for Mid Norfolk, who advises my right honourable friend David Willetts at BIS, spoke to a science and innovation conference in Boston, Massachusetts, where he described the UK’s life science strategy, an initiative that was launched with much publicity by the Prime Minister last year. As many noble Lords will remember, this attracted much applause from the specialist press and indeed has been warmly welcomed by many scientists and businesses that are likely to be involved. It is a very good example of this country backing a sector in which we have a world-leading position, which is what we should be doing.

My honourable friend found that his US audience was completely unaware of the strategy—they knew nothing about it at all—even though it includes a number of measures that are directly aimed at foreign direct investment. Perhaps that is not the fault of UKTI. There seems to have been precious little publicity for the initiative since the Prime Minister’s launch, and that is something that I heard echoed only last night at the Royal Society’s soirée. Who is leading the initiative?

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Where are the industrialists who are backing it? Why has there been so little publicity since the launch? The strategy has huge promise for the UK. It is an area of high technology where we excel. We have a proud record in that: I shall mention only the UK Biobank. Now, of course, we are espousing the ground-breaking policy of open access to scientific information and network access, and when my honourable friend started talking about that to his American audience, he saw them getting out their pencils and notebooks. That should have been done before. What we need on this issue is a series of international ambassadors to sell this important initiative abroad and across the world. It has a lot to offer this country and could bring billions of pounds of inward investment.

Contrary to the doom and gloom that is so readily purveyed by the media, we have a great deal to be proud of. Our role in international trade is widely welcomed. We have many manufacturing companies selling high-tech products and services around the world. We can attract top-quality companies to invest in this country. Of course we could do better and I made one or two suggestions as to how we might, but let us build on our undoubted successes in this area. I beg to move.

11.54 am

Lord Liddle: My Lords, it is a great pleasure to follow the noble Lord, Lord Jenkin of Roding, in his introduction to this debate. He brings to the subject much ministerial and business expertise, and it is greatly to his credit that he has shown a sustained interest in these questions throughout his public life. He said a lot about export promotion with which I agree. We probably share an analysis of the British competitiveness problem, which is that it is a complete myth that we are a post-industrial nation. We have many highly competitive businesses; the challenge we face is that we do not have enough of them. We need far more and the question is how we get far more. I shall focus my remarks on how the public policy framework can help, and also talk briefly about the questions of the exchange rate and our commitment to Europe and the single market, which is of central importance to this area.

On the kind of supply-side policies needed, again, I suspect that there is a wide measure of consensus in this House. I picked up on some remarks of my great and noble friend Lord Mandelson, based on his ministerial experience in the previous Government. Speaking to one of the excellent meetings of the All-Party Parliamentary Group on Rebalancing the British Economy, interestingly, he praised some of the record of Conservative Governments in the 1980s in promoting aerospace, biotech, pharma and Japanese inward investment in the car industry, which we often forget. He then talked about our increasing love affair, as a nation, with financial services. He said nothing against financial services, but noted that this love affair became a mindless infatuation, since when all we have seen are what he described as “peashooter initiatives” to deal with the need for rebalancing our economy back to production. The question is how we can transform

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this succession of peashooter initiatives into what the Prime Minister would doubtless describe as a big bazooka.

There is a range of things that the Government could do, building on what the Labour Government tried to do towards the end of their term, particularly in 2010. There is the expansion of technology transfer institutions, the Hauser report, and the need to improve our record in Britain in transforming our excellent, world-class research into commercially successful innovation, which we are not nearly so good at. There is a need for public intervention to provide finance for growing small and medium-sized firms. This is an imperative in today’s environment, in which the banking system is not able to fulfil its proper function: we need a British investment bank. We need a proper infrastructure plan. The Government have made nods in this direction, but they are having difficulty in mobilising the pension funds and private finance that they had hoped for. The truth is that, unless the Government offer guarantees that limit the risks for such investors, we are not likely to get private money into public infrastructure in a big way.

We need to do more on skills. We know that employers, of their own initiative, will not raise skill levels: there is a market failure here. The Government are trying to expand apprenticeships, but their record is very mixed and there is great debate about whether the expansion is a genuine expansion of real apprenticeships that lead to opportunities for technician training going right up the skill ladder. That is what we need and I wonder whether we are getting it. We need action to improve the quality of management. Here is a tremendous role for the post-1992 universities—of one of which, the University of Cumbria, I am director. We need the universities to engage with businesses in raising the quality of management and their workforces. We need to build on our public strengths, which have important competition advantages and where the public role is absolutely crucial, such as the universities in attracting students from overseas, our medicine and our culture.

I am not arguing for big government in order to address these questions, but you must have active government. You particularly have to have an active Government with a strategic sense of how they will develop the sectors where we have the best chance of being competitive. This is particularly important in public procurement. You cannot just have centralised government. You must have effective machinery for action at regional and local level. This is where the decision to abolish the regional development agencies was destructive. In my own area, Cumbria, there is now no effective machinery for promoting regional economic development.

I, for one, look forward to the review by the noble Lord, Lord Heseltine, of the growth agenda. At the moment, for all the talk, I see little sign of the Government upgrading their efforts beyond what my noble friend Lord Mandelson described as these “pea-shooter initiatives”. Indeed, to make a slightly political point, I am bemused about the debate in the other place on growth, which all seems to be about deregulation and tax cuts. No one wants regulation for its own sake. No one believes in taxes for their own

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sake. But the problems of the British economy do not lie in a lack of flexibility in the labour markets, or in taxation being too high. We have a more flexible labour market, in many respects, than the United States. I find all this talk about the Beecroft report totally bemusing. It is a sub-Thatcherite agenda of deregulation, which is the wrong strategy for the British economy. We have to compete on the basis of skill. We cannot compete on the basis of deregulation. We need a national consensus on the kind of industrial policy we are going to need. It is depressing that we are still a long way from that.

I have just a few remarks to make on the exchange rate and Europe. On the exchange rate, the Government should be thinking about why the devaluation that we saw in 2008 has done so little to improve our trade balance and industrial performance. What conclusions do we draw from this? One conclusion is that the exchange rate does not matter very much in the modern world, with the integration of global supply chains and all the rest. That would be an error. One of the mistakes that we made over the past 20 years was treating the exchange rate as a residual. The exchange rate went up a great deal at the end of the 1990s. The pressure of a high exchange rate was one of the reasons why our manufacturing had problems over the past decade. Although this was good for productivity—the productivity numbers went up a lot—it squeezed the size of the sector more than it should have been squeezed. So the post-1992 framework of our economic policy will have to be rethought anyway in the light of the crisis. We should be thinking about whether we can give a more central role to exchange rate stability in the management of the economy, and how we would go about that. Are the Government thinking on these lines?

On Europe, all this chatter about an in/out referendum might well have serious economic consequences, which no one seems to take into account in the rather heated political debate. How would British business feel, including the people who have invested in Britain, if we were no longer part of the EU, or if we remained in the European Economic Area with no say in shaping the rules of EU governance? Do we seriously think that if there was a prospect of Britain coming out of an active and central role in the European Union that inward investors would continue to look at investment in the UK?

Lord De Mauley: My Lords—

Lord Liddle: I have 12 minutes.

I am not trying to make a political point. However, the question of Britain’s role in Europe cannot be decided on the basis of party-political positioning, or of populism and ignorance. We need business to take an active role in this debate. What I would like to hear from the Government is what they are doing to consult business about its view about Britain’s role in the European Union in future, and what the real costs of playing around with our economic future might be. This raises very serious issues for the future of growth and jobs in Britain.

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12.06 pm

Baroness Nicholson of Winterbourne: My Lords, the noble Lord, Lord Liddle, in his wide-ranging remarks, commented that he wished the Government could be more active. In my support for the splendid Motion put forward by the noble Lord, Lord Jenkin of Roding, on which I warmly congratulate him, I am not seeking for the Government to be more active, because most businesses would request that government stand back. I am putting forward comments which I hope the Minister will take into full account and maybe even action some of them. I hope this will strengthen the Government’s position in supporting British industry internationally.

It is an absolute fact that, given that the House of Commons is omnipotent and omnicompetent, the international competitiveness of UK industry abroad is in some way restricted by our own democratic system. It places us at a disadvantage with our competitors, for example. Today, we must be looking at the competition while praising industry. We are trying to see who we are up against, and how we can do better than the competition. Our particular democratic political system inevitably pins the Prime Minister, the Deputy Prime Minister and other Ministers to the Benches; as does the system here, with our parliamentary Questions, constant debates and Statements. The democratic accountability of Ministers means that they must very often be here. Inevitably that can be seen to place UK businesses at a disadvantage with nations such as France, which is regularly led by prime ministerial and presidential delegations all over the globe. I know that the coalition Government are working to improve this. However, it is a simple fact that our system, in that sense, cannot provide that same spear-headed support that some other member states of the European Union and the USA can do. Therefore, I suggest that it is even more crucial that the UK Government provide a coherent and cohesive service to UK industry, particularly in-country. The steps this Government have already taken to raise British trade and investment interest abroad, which give a new and highly welcome pre-eminence to commercial diplomacy, are excellent; but there are significant concerns and gaps that still remain. I will be highlighting some of the most serious concerns, and inviting the Government rigorously to address them.

For a Government who have made significant and considerable progress with their welcome stress on value for money, results, outcomes and impact, it is noticeable that such language and structures are not readily mentioned in the Government's commercial diplomacy, such as in the FCO’s charter for business. I wonder whether that might be considered when the new edition, which I am sure is on the way, emerges.

The House of Commons business committee, for example, has previously reported that UK embassy and UKTI staff do not readily identify whether the country in which they are serving is a priority country and what the difference means. That is not helped, in my view, by the lack of transparency and accountability in the process for deciding priority countries or in how and where ministerial-led trade missions are sent. For example, the various sector and advisory groups supported

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by UKTI are appointed directly by Ministers without any parliamentary scrutiny. That provides a democratic deficit in what are essentially government and thus taxpayer-funded bodies influencing UK policy. It also causes potential conflicts of interest and a lack of trust in the capabilities of those bodies. Perhaps the Minister would be willing to reconsider that point.

I have previously asked a Written Question to this effect and received a somewhat summary rejection by the Government, but I believe it would be more than helpful to shine a light on the practices of the Government in supporting UK industry abroad, perhaps by introducing an independent evaluation body. That could be similar in make-up to the Independent Commission for Aid Impact, specifically for trade impact or at least to offer in some way a more formal, thorough and transparent process than the current largely questionnaire-based process. This revamped evaluation mechanism and transparency would much more effectively highlight results, provided those results have been identified and the objectives achieved; and thus our knowledge, value for money and serious impact, on which the Government, in all other sectors, are so keen, would become available. I think that would immensely heighten the Government’s capability in supporting industry.

I turn to priority countries. UKTI has a series of priority countries and UK Export Finance—the old ECGD—focuses on certain countries, not necessarily the same ones, depending on UK Export Finance’s own criteria of how effective and able it will be to receive its funding back in the long term. The FCO has its own geopolitical and strategic priorities which do not reflect consistently UKTI's priorities. Again, DfID has its own 28 priority countries and works in many more. Is it not unsurprising that with this array of different prioritisations the UK struggles—and I believe that it fails—to put forward a single face, in country and internationally?

Have the Government thought how to co-ordinate these different priority countries and even priority sectors within those countries? A possible example of how the UK does not enable itself to bring its full impact to bear in a country would be the disconnect between UKTI and DfID priority countries. As the Government are already providing significant expenditure to DfID's priority countries, as well as to the other countries in which DfID works, would it not make sense for UK Export Finance to provide preferential export credits to those countries to ensure that the UK is gaining the fullest possible impact and value for money for its investments in its stated priority countries? Are we not now aware that the long-term effectiveness for what is called development aid is, in fact, through the development of business and industry on the ground? That is surely one of the key reasons why, quite properly, this Government, as opposed to the previous Government, have placed commercial diplomacy and the strength of British business and industry at the absolute heart of their overall international policy.

With that in mind, I turn to the knotty problem of UKBA, the UK Border Agency. I declare here that I am honorary chairman of the Iraq Britain Business Council, which is working not just in Iraq but in other countries in the Middle East and North Africa region.

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In that role, I have the privilege to work with some of Britain’s most competitive and powerful companies in the oil and gas, construction and infrastructure, finance and professional services, education and training, telecommunications, and other sectors.

My remarks do not necessarily reflect the views of any of those companies. Nor have I put these comments in front of any of those companies to gain their agreement or otherwise. These are my own comments. Iraq is one of the great potential sources of trade and development—for international companies as well as the UK’s—which is relatively untapped, and as chairman of the Iraq-British Business Council, I foresee the difficulties that our companies face.

Given our historic legacy and our strong presence in the region of the Middle East and North Africa, UK companies and UK-based companies, or those trading through the United Kingdom—particularly those using the English language, which is now the business language of the globe—are relatively well represented in Iraq. However, there are key issues which diminish UK competitiveness towards both western and eastern countries. I have mentioned several.

The policies and priorities of UKBA for countries and for sectors of populations do not match up with any other British Government policy. It is almost impossible to get UK visas, not only for Iraqi business men and women, but for other nations with which I work in the region. It is difficult, onerous and, I would suggest, humiliating. I take the case in front of me at the moment of an outstandingly large company in the region: one of the main board directors wants to come here for business, and to bring his wife and a couple of children with him. It is Ramadan soon, and it is a good time for him to come as there is space at home and less work going on. Is it really essential for him to wait 15 days at least, maybe 20 or more, in Lebanon, for a visa? Is this a way in which British industry can be helped? Is this the way for us to make friends and influence people, or in the modern phraseology, win hearts and minds, as well as win business?

Of course, it makes the training of staff from host countries, at all levels in the UK, almost an impossible matter. Business meetings in the UK are extremely difficult to set up because of this. I would suggest that UKBA must be brought into the fold of the wider umbrella of the heartland of British policy internationally. I do not yet see that happening.

British business is repeatedly urged by the British Government to invest. In Iraq, the Iraqi Government are also urging us to invest. The Government of Basra delivered this message in a BBC Radio 4 programme. Prime Minister Maliki and President Barzani both say that the door is wide open for Britain. I believe that the British Government are inadvertently not pulling their weight in this overridingly important matter. I urge the Minister to take note of the points that I have made, and perhaps to carry them out.

12.18 pm

Lord Kakkar: My Lords, I, too, congratulate the noble Lord, Lord Jenkin of Roding, on having secured this important debate. I would like to focus my comments on something that he said in his introductory remarks

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around the issue of the life sciences industry. In doing so, I remind noble Lords of my entry in the register of interests as professor of surgery at University College London; as chair of quality at University College London Partners, one of the five designated academic health science centres in our country; and of my collaborative activities with the life sciences industry, focused on the area of thrombosis research, my own particular science interest.

The life sciences industry—pharmaceuticals, medical technology and medical and industrial biotechnology—is described as being exceedingly important to our country, and second only to financial services in the contribution that it makes to our economy. The industry generates in excess of £50 billion a year in revenue and employs some 166,000 people. In the pharmaceutical industry, the export of medicines in 2009 generated £7 billion in excess revenues compared to our importation of medicines. Over the past 30 years the pharmaceutical industry, through sales of medicines and medicinal products, has been a net contributor to our economy.

The pharmaceutical industry employs some 72,000 of our fellow citizens in this country. The medical technology industry has a turnover of some £15 billion a year and employs in excess of 60,000 of our fellow citizens. As to the value of public expenditure in medical research, every pound spent brings a contribution of 39p in extra economic activity in perpetuity. To a simple surgeon that suggests that when we invest in biomedical research we get a 39% return on our investment for ever—which is very impressive. Conversely, it is also well noted that if we were to remove from research council funding £1 billion of annual investment in the sciences and medical research, we would lose some £10 billion of gross domestic product. It is hugely important that public investment should continue to drive this important area of economic activity.

On the broader contributions beyond public expenditure, one-third of all the investment in biomedical research comes from charities. That is really quite impressive. Some 40% of investment in research and development in this area of activity comes from foreign multinational companies. Of all the G8 countries, we receive the largest proportion of investment in our R and D from foreign multinationals, which is tremendously impressive. It is something on which we should focus and that we should bring to the heart of any policy-making.

The Government are to be congratulated on having recognised this and on having made this a particular area of focus and attention over the past two years, not only because there is huge opportunity for economic growth and development associated with investment in the life sciences industry, but because investing in this area has the important benefit of improving our ability to deliver healthcare, improving the technologies and innovations that we can provide to patients and our fellow citizens and therefore improving clinical outcomes. It is striking to see how contributions from research in the United Kingdom play across the world. Our population represents less than 1% of the global population, but 12% of all citations in biomedical sciences around the world are citations of research undertaken in our country. This demonstrates that our impact across the world remains hugely important.

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The noble Lord, Lord Jenkin of Roding, mentioned the life sciences strategy that was announced by the Prime Minister on 5 December 2011. It is an important strategy that has the capacity to do a huge amount to drive forward the development of the life sciences industry in our country and also to ensure that biomedical research in the academic arena, in our universities and in the NHS, continues to grow and prosper for the benefit of patients.

A number of important initiatives are described in the life sciences strategy, one of the most interesting of which is the commitment to the development of telemedicine to ensure that we can better manage patients with chronic diseases in their own homes, along with a commitment to ensure that 3 million patients with chronic diseases will be provided with the opportunity to access telemedicine so that their condition can be monitored at home rather than needing to avail hospital facilities for the management of their care. There is also the commitment to a £180-million catalyst fund to help identify and provide early investment into the potential breakthroughs of the future, those that will have the greatest clinical impact and thus encourage investment into our country.

We also have what at the time was a somewhat controversial commitment to ensure that across the National Health Service as a whole, the great store of data on clinical conditions that we hold is better aligned to research opportunities and therefore able to attract greater investment into the health service for research. There is, too, the important commitment to ensure early access into the NHS and therefore early access for patients to innovations and new drugs. This will be particularly attractive to the biopharmaceutical industry in terms of ensuring that it targets its research activities in the United Kingdom because it will be better able to access rapidly the potential markets for its innovations.

In addition to the life sciences strategy, we recently saw the publication of the innovation review by the chief executive of the NHS which looks specifically at how the health service can better adopt innovation, diffuse it widely across the entire NHS and, what is particularly important, ensure that the health service is outward-looking in terms of its relationship with the life sciences industry so that in addition to achieving its primary objective of providing the best healthcare for the people of our country, it is able to contribute to the broader generation of wealth creation, thus promoting the interests of UK plc, as the chief executive puts it in this document.

However, there are also some problems. Although investment in our life sciences industry by foreign multinational companies remains substantial, over the past 10 to 12 years there has been a considerable reduction in the contribution we make to global clinical trials, the important phase 2 and phase 3 research studies that allow us to evaluate novel interventions and new drug therapies. Before the introduction of the European clinical trials directive in 2003, some 6% of all patients going into clinical research globally came from our country. By 2006 the percentage had fallen to just 2%, and by 2010 to 1.4%. That is a very worrying

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trend. The European Commission has recognised that this is a problem not only for our own country but throughout Europe, and is now looking at how the directive might be revised. What position have Her Majesty’s Government taken in these negotiations, in particular to ensure that, when the directive is re-presented, it is much more flexible in allowing for recognition of the national standards that apply to clinical research, which are particularly high in our country, and that any competitive edge which had inadvertently been lost in the past can be regained once again?

Some 23% of those who work in the sciences and biomedical sciences departments in our academic institutions come from outside the United Kingdom. One of the great concerns is the potential impact of the changes made to visa requirements on the ability to attract top-rate clinical and basic scientists to come and work in our country. Is the Minister able to confirm that Her Majesty’s Government remain sympathetic to the need to attract top basic and clinical scientists so as to ensure that our life sciences, and particularly our academic research institutions, are able to compete at the highest levels globally?

Finally, there is the broader question of how we can build on the initiatives of Her Majesty’s Government to drive forward the life sciences industry. There is concern that the generous settlements which have been provided in the current spending round for the research councils and for medical research in particular may not be sustainable in the next spending round. However, it is vitally important that they are maintained. As I have said, investment in medical research provides remarkable long-term returns to the wider economy. Is the Minister able to confirm that Her Majesty’s Government remain sympathetic to investment in research and innovation?

There is also a need to look at tax incentives to better ensure that this country encourages venture capital investment at the very early stage in translational medical research. We need to develop a system of adaptive licensing, combined with the advances we are going to see in genomic medicine and stratified medicine, to ensure that new innovations can come to the market quickly and benefit patients. We also need to look at the way that the National Institute for Clinical Excellence judges value in terms of innovation, looking not only at the quality of life improvement but also at the economic and broader social impact of innovation.

Finally, there must always be a careful, measured approach towards regulation of research, ensuring that patients are always protected but also that the environment for research in our country remains competitive and attractive.

12.30 pm

Lord Brooke of Sutton Mandeville: My Lords, it is a privilege to follow the noble Lord, Lord Kakkar, a professor who brings great professional distinction to your Lordships’ House and conspicuous relevance to this debate. I declare an interest as president of the British Art Market Federation, though I am not going to allude to that international market in my speech.

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My noble friend Lord Jenkin of Roding, with whom I have made common cause from time to time on behalf of the City of London, deserves all the conventional plaudits for securing this debate and for opening it so characteristically comprehensively. He deserves unconventional ones too for the letter with which he summoned some of us to his cause. It was a model of its kind and spellbinding in its irresistibility, just as he has today added yet another string to his bow and to a repertoire which embraces expert knowledge of the sciences, especially in the energy field, of local government and of what our forebears would have called political economy. He has, moreover, in the first week of July, given us a whiff of the sense of holiday—even of romance—that lies ahead of us at the end of this month when the long Recess beckons.

Trade has its own mystical aromas. This year is the bicentenary of Burckhardt’s rediscovery, after six centuries, of Petra:

“A rose-red city—‘half as old as time’”,

standing at the great Nabatean crossroads of two major trade routes amid the mountains in the Jordanian desert. Across the centuries, those spices of Araby and silks of the East mingle with John Masefield’s:

“Dirty British coaster with a salt-caked smoke stack,

Butting through the Channel in the mad March days,With a cargo of Tyne coal, Road-rails, pig-lead,Firewood, iron-ware and cheap tin trays”.

Heady though those romantic scents are, there is a different sense in which they are profoundly serious, for unless we can steer our national barque—a Scrabble word I spell for the Hansard writers with a “q” and a “u”—we are not going to evade or escape the slough of despond which is the world’s current economic and financial lot. In the challenging agenda of today’s debate lie the real prospects of recovery from an otherwise intractable fate. In the middle of page 5 of your Lordships’ Library’s admirable note prepared for this debate, there are parentheses from the Office for Budget Responsibility containing the magical words “excluding oils and erratics”. As an undergraduate, I played village cricket for my college in a side called the Erratics, which catches the double sidedness of joy and duty of this voyage. Until today, I had not appreciated that we had then been in philological descent from a trade category.

Since the nature of our predicament makes starting blocks difficult to discern, let me pick out some encouraging—if random—travel brochures. First is the coincidence that in the European Union—which is at this time, saving the grace of many, one or our beds of nails—the complement of overall unemployed is 23 million which, give or take the population of a medium-sized city, exactly coincides with the number of SMEs the Union contains, so that one extra employee in each SME would solve the conundrum of unemployment. It is, of course, a fantasy worthy of the Odyssey because the precise distribution of the unemployed and the national SMEs are not so perfectly aligned, but I cannot conceive of any time in my 18-year private sector career of continuous profit accountability when I could not have constructively added at least one single person to every unit in our business, so it does carry seeds of hope. Moreover, it

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underlines the virtue of the EU in seeking specially to reduce regulations in units employing fewer than 10 people.

Secondly, the very initials “SME” bring the medium-sized businesses into focus. The lure of the small business as the key to employment growth has been around since Shell promulgated it a third of a century ago, but its now conventional centrality may have taken our eye off the medium-sized ball which, in engineering for instance, provides growth points of great promise. Next, the World Economic Forum’s league tables of international competitiveness show us beginning—even if only patchily—to pick ourselves up off the floor, though I shall return later to one paradox of institutional verdicts which needs attention. Next, it is a truism of success in the world of tourism that a good holiday is made up of dozens of component elements but if one or two go wrong they sully the total recollection. I am struck, in the run-up to this summer’s Games, by how the Olympic totems Wenlock and Mandeville—I take personal pride in the exploits of the latter—have been both imaginative and comprehensive in their management of detail, which is a good augury to be cherished.

Finally, I have sat at the feet of my noble friend Lord Green on the subject of Africa since he took on his present portfolio. We know from the Latin of Pliny the Elder that there is always something new coming out of Africa. I shall be interested in my noble friend’s view on whether he feels Africa collectively is one of the next mega-BRICs—though perhaps one should say mega-BRICAs.

I move from travel brochures to headlines. Despite the contemporary aridity of EU prospects, I find profoundly encouraging the twin facts that, though our manufacturing base has latterly shrunk by almost 50%, our exports of manufactured goods outside the EU have grown by nearly 25% since 2010. That is not merely evidence of a main chance but also of it being seized. Secondly, the virtue that the Library briefing has drawn on so many sources brings home a much greater intellectual coherence to our global trade planning than I would have appreciated prior to preparing for this debate. I find wholly convincing the argument in the research report entitled “Understanding Recent Developments in UK External Trade” in the Bank of England Quarterly Bulletin in the fourth quarter of last year because services exports are less sensitive to movements in the exchange rate, even when I am also aware of how much of our growth in services has been due to the expansion of professional services as against purely financial ones. Trust in us in this area remains globally high.

I am not going to get into the vicissitudes of foreign direct investment—though I realise how we have been currently losing out to the Germans from the Chinese—save to commend the House of Commons Library for its regularly updated Standard Note 1828 on this subject, and to emphasise how much we gain indirectly through technology transfer and management techniques from inward direct investment. Ministers have recently used the car industry as an example. When I started out in business 50 or so years ago, there were already 1,600 American subsidiaries here and it was very

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noticeable, in sectors like pharmaceuticals, advertising and branded consumer goods, that American participation raised competitiveness to an extent that indigenously there was a substantial economic return in moving suitably flexible British managers from competitive sectors into ones that were notably uncompetitive.

My noble friend responding to the debate will have more than enough to answer when he winds up so, before adding to his agenda, let me utter words of praise. I am profoundly impressed by the way that the Foreign Office under Mr Hague’s leadership is expanding its global commercial and diplomatic coverage, even in these hard times, by reopening embassies and in expanding the consular network, just as my noble and learned friend Lord Howe of Aberavon urged in opposition.

I am full of praise for the growing imaginativeness of UK export finance, as well as that which is helping to secure office space for new UK exporters in effervescent markets. I am delighted by the application of the theory of comparative advantage to the Darwinian evolution of successful exporters through sensitive and sophisticated product choice, especially in emerging markets. However, I have some bits of grit in my shoe, on which I should be happy for the Minister to reply later than today.

The Government have made announcements on enterprise zones, both in the Plan for Growth and the Treasury Press Notice entitled Autumn Statement: Growth of 29 November last year, covering the second phase of the Government’s growth review. However, there are some notable mismatches in the details between the two references. A composite progress report on each of the original choices of zones might be productive.

I return to an earlier comment. The OECD said in its UK economic survey of March 2011 that faster-rising labour costs in UK manufacturing had robbed us of some of the benefit of a 20% appreciation of sterling, whereas the IMF in May 2012 said:

“Encouragingly, labor market performance has been better, with falling unemployment in recent months and fewer employment losses than in the aftermath of previous major UK recessions”.

I realise that there is at least a year between those two comments and that the Government are responsible for neither, but a reconciliation of the paradox would be interesting.

Finally, I hope that the Chancellor’s confession in March 2011 that our tax code had become so complex that it recently overtook India’s to become the longest in the world is not the last word on the subject, even while allowing for his immediate efforts at repair, for unnecessary complexity is not conducive to a good climate in which to do business.

More generally, I hope that we can recover some of what Keynes called “animal spirits”. Paul Claudel, the French poet who was his country’s ambassador in Washington in 1929, could not have known what was in store for the world when he hosted a soirée at the embassy on the first day of the Wall Street crash, and gave a toast to the effect that:

“Between the crisis and the catastrophe there is always time for a glass of champagne”.

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However, there is one interesting echo between 1932 and 2012. In 1932, De La Rue was almost bust when a new chairman arrived and decided to take a gamble by throwing a massive dinner for the diplomatic corps, which was so effective in persuading the latter that the company’s future must be secure that security printing orders poured in from across the world. The De La Rue dinner is still with us today, while Greek membership of the eurozone still hovers on the brink.

Let me end as I began. Last month saw the centenary of the poem, “The Old Vicarage, Grantchester”, by my namesake, Rupert. Given when this debate will end, if we can move the church clock from 10 to three on today’s issues between now and the Summer Recess, we shall have been doing our duty and there may, indeed, be honey still for tea.

12.42 pm

Baroness OCathain: My Lords, I thank my noble friend Lord Jenkin for proposing this debate. I totally support his emphasis on exports as being of fundamental importance to our future economic health. It is rather daunting to follow the exceptional, erudite, literary, humorous and informative contributions to this debate. Now is the time to run for a quick cup of coffee.

Listening to the daily cut and thrust of Questions in this House, there is much repetition of statistics, which are not as great as one would wish. The problem, as always, is the presentation of statistics; their updating and revision deflect attention from the main picture. Serious economic conditions, of course, persist in this country and in all the countries to which we export. We have to concentrate on improving every area of our activity, leading to advances in all sectors involved in exports.

Less than two weeks ago, I took part in a discussion in Ireland with some 25 businessmen about future developments in the Irish economy and the economy of the whole EU. It was a good experience. We all know the sad saga of the monumental boom and bust that left Ireland as the first bailout candidate. Some time ago, the economic situation in that country was described to me as, “the greatest party of all time in the 1990s and the noughties, which led to the biggest hangover of all time”.

The Irish have woken up and taken the medicine, and although they are not yet out of the wood they are well on the way back. Even today, I am told, there was an auction of three-month Treasury bills for the first time since September 2010. The Irish realisation is that they have to work exceptionally hard, search the world for opportunities for export, get their financial house in order and talk the country up. For “Ireland”, say “Britain. Above all, the realisation is that we have to work exceptionally hard, search the world for opportunities for export, get our financial house in order and talk the UK up.

As my noble friend Lord Jenkin has said, we do not give our manufacturing industry enough credit. There are so many moaners and bleaters around that we are actually beginning to think that we are not good at very much. Recently, I was discussing with a friend the subject of UK trading relationships, and it was explained

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to me that as a trading nation we trade in three distinct groups: the allies, the US; our friends, the EU—not that the allies are not our friends; and our family, the Commonwealth. The message that I took from this is that we need to focus more strategically, not just adopt the line that everything that we produce we can export, market and sell anywhere, or that the methods of developing long-term trading relationships are ubiquitous.

Many of our businesses do not truly take on board that there are developing stars out there. We have been reminded of that today. The analogy with the celestial is not as crackpot as one might think. Through astronomy we are constantly learning about new planets and new stars. There are fascinating revelations that are a long way removed from the situation in my childhood when only eight planets were marked on our celestial globe. Taking us back to earth, yes there are more and more stars in terms of developing countries with growth rates that we can only dream about and where markets are opening up monthly. Many of these are in our own family: namely, the Commonwealth.

I do not want to put the Minister on the spot but I wonder whether he could or would be prepared to arrange a session where we can be enlightened further about the huge potential in the Commonwealth and suggest ways in which parliamentarians might be able to focus on this, rather than bleating about the awful situation that we are in. Yes, sections of world trading are suffering, including, to name but two, the eurozone and banking. However, I remind noble Lords of Oscar Wilde’s great saying:

“We are all in the gutter but some of us are looking at the stars”.

We must look forward, onwards and upwards, building on our undoubted skills, highly developed inbuilt initiative, educated workforce, record of success in many areas, not least in high-tech state of the art engineering, in world-class pharmaceuticals, in food processing, in design skills and, yes, in manufacturing. The motor industry, as I have said previously in the House, is in a better state than it has been for the past 15 years. The noble Lord, Lord Kakkar, has given us a brilliant exposition of UK skills and success in the life sciences industry. Our heads must be kept high. Our rating agency status is, after all, triple A. Remember that France and Italy have been downgraded.

Encouragement should be the buzzword, not dismay. It is particularly important to encourage the young—this has already been alluded to—to ignore despondency and to renew enthusiasm for the UK and its prospects. The UK accounts for about 1% of the world’s population, and we certainly punch above our weight even now. The EU accounts for about 8% of the world’s population, but the Commonwealth accounts for some 30%. What an opportunity.

The Commonwealth contains at least seven of the fastest growing highest-tech and richest world economies: India, Canada, Australia, Malaysia, South Africa, Nigeria and Singapore; and several more fast growers are coming up alongside—Mozambique, Tanzania, Ghana and Bangladesh. All are growing consumer markets with demands for our products and sources of wealth for investment here in this country. The OECD estimates that over the next 20 years almost all the

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growth in world trade will lie outside Europe. We have to renew our efforts now, focus on policy measures—the noble Lord, Lord Liddle, made this point—and look outside Europe to ensure that we will be ready, willing and very able to participate in the growth and in helping in other ways. We can export items such as education—in training and in our wonderful technical skills, mentioned so ably by the noble Lord, Lord Kakkar.

I am not for one moment suggesting that we should ignore our friends in Europe. From time to time some of us get exasperated with overregulation and snail-pace action to remove the barriers to completing the single market. The EU is and will remain important to us, as the noble Lord, Lord Liddle, has explained. He also made a valid point about recognising serious repercussions if we unilaterally decided to leave the EU. It is important that both sides of this argument are analysed and that all the likely repercussions are aired and understood. The EU market is still the largest single market in the world and over half our exports end up there. One in 10 jobs in the UK depends on trade with the EU, which is equivalent to 3.5 million jobs.

One of the other things I learnt recently is that half of all European business headquarters are based in the UK. All this is proof positive that the EU is important. We just must work harder at it. My noble friend Lord Jenkin gave us a magnificent and specific tour d’horizon and encouraged us all. Now all of us must act.

12.52 pm

Lord Haskel: My Lords, I start with a confession. I have a problem with the concept of international competitiveness. The factors affecting a nation’s competitiveness are different from those affecting the competitiveness of, say, a business sector. For instance, my country’s life sciences can be better than your country’s life sciences, as the noble Lord, Lord Kakkar, explained. The competitiveness of individual businesses is much more obvious—“My cars are better than your cars”. So I am grateful to the noble Lord, Lord Jenkin, for this debate about international competitiveness, but while international comparisons may be important to economists, politicians and bond salesmen, to most of us the competitiveness of our place of work is what is important. This is because competitiveness means productivity. That is where we earn our living, as the noble Lord, Lord Jenkin, pointed out; the two go hand in hand.

In 2003, the then Labour Government asked Professor Porter and others to say how we could become more competitive by raising our productivity. Their response was practical and direct: improve and modernise skills and skills training; stimulate innovation through science and product development; supplement manufacturing with services; encourage a faster take-up of new technologies in the public and the private sector, much of this done through clusters; and encourage people to win the race to the top, not enter the race to the bottom. In the five years up to the financial crash, these principles worked pretty well. Our productivity or competitiveness improved by 2% or 3% a year. Many of the policies of the coalition Government still

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reinforce and bring up to date these principles. I think they still remain true. Yet since the financial crash our productivity or competitiveness has hardly moved. If anything it has gone down. Can we find the answer in the international competitiveness league table? The noble Lord, Lord Brooke, mentioned the World Economic Forum’s global competitiveness index. This year we rank 10th, and two years ago we were 12th. This index is based on 12 pillars that provide a checklist of factors affecting our competitiveness. Some are relevant, others less so, and some are completely absent. On some of them we do very well. We have some strong institutions; we have a respect for law and an honest and uncorrupted public service. In health and higher education we perform pretty well. We have an effective, efficient and competitive market of a size which allows us to be productive. We also have a market which is conducive to innovation. Thanks to our science base, research organisations and organisations such as the Technology Strategy Board and our fascination with digitalisation we have recently developed a large number of clever, lively, innovative and enterprising companies that specialise in selling their products, ideas and services into what at first seem special markets. However, these markets often turn out to be large because we live in an era of global markets. This is the innovation and marketing that the noble Lord, Lord Jenkin, and the noble Lord, Lord Kakkar, spoke about. The Minister works hard at this and I join other noble Lords in giving him our thanks.

In other areas, we do less well. The noble Lord, Lord Liddle, pointed out that our infrastructure lets us down. The World Economic Forum ranks us 28th for infrastructure, just behind Malaysia. I agree with the noble Lord: our skills training has not kept up with demand, nor has it moved with the time—and, yes, this includes management. The conflict between the longer-term needs of industry and the short-term outlook of our financial sector is legendary. The financial sector may be competitive in its own terms, but in terms of UK competitiveness as a whole it could be a distinct disadvantage. No pillar includes intangible investment. In Britain this is certainly now equal to tangible investment and crucial to our competitiveness because of the nature of the businesses which are growing in this country. I am sure that the Minister of all people would agree that money spent on branding or market development is an important investment. All this illustrates the problem I have with international competitiveness.

However, economic data are not everything. It is always a mistake to separate the economics of business and industry from the needs of society. A fair society and a strong economy go together. This is why both social and economic considerations have to be taken into account when judging our nation's competitiveness. The noble Lord, Lord Jenkin, spoke about inward investment. The noble Lord, Lord Kakkar, pointed out that this means people coming here, as well as money. All of us get the feeling that we are less welcoming to foreigners than we used to be. We have benefited greatly from them in the past—are we having second thoughts? I think we are, and this will not help our competitiveness, nor our productivity. Ministers talk about having competitive regulation. This usually

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means less, but we are slowly learning that we need better regulation not just less, and we need to explain why it is required. Sadly, we are learning the hard way about regulating the banking industry. Our competitiveness does not increase as we reduce regulation. No, our competitiveness goes up as we introduce better regulation. It will be regulation which is enforced. It will be light regulation which encourages a feeling of freedom but not a feeling of impunity. It will be regulation which properly deals with market failure. In sectors such as the environmental industry, good regulation actually stimulates the innovation and investment, which adds to our competitiveness.

Working conditions, too, have become a factor in competitiveness. Social considerations mean that cheap, sweat-shop clothing has not been competitive for some years. The competitiveness of our tax regime has become a social consideration, too. Yes, the generous arrangements whereby companies and individuals can reduce their tax bills may have been a competitive advantage at one time but, now that it is all out in the open, this will change. Social considerations of fairness have to be taken into account in the competitiveness of our tax regime.

We certainly need a policy boost. At national level, we can encourage the national stewardship code for our enterprises, as the noble Baroness, Lady O’Cathain, implied. We must develop a national long-term vision as to where our economy is going, and we must certainly continue with the productivity work of the 2003 paper. This has served us well.

At a more local level, we must concentrate on raising our performance, our presence and our productivity in those sectors where we are strong. The noble Lord, Lord Liddle, explained why. It will inspire people to make where they live and where they work more competitive. At the same time, we must work towards a more equal society, because all these efforts are much more likely to flourish and succeed in an equal society than in a divided society.

1.02 pm

Lord Flight: My Lords, I congratulate the noble Lord, Lord Jenkin, on introducing this debate and on raising a mixture of extremely important issues. I am particularly pleased that the noble Lord, Lord Green, will respond and I look forward to hearing what he has to say on the excellent work that he has been doing globetrotting and promoting Britain. His was a very important appointment by the coalition Government.

My interests are those declared in the register. Some of those companies are significant exporters of services. To me, services and manufactured goods are all the same pot. Quite where the division lies, I am not quite sure. Is software a manufactured item or a service?

It is clear that we are doing okay and have more to offer in the life sciences—as the noble Lord, Lord Kakkar, pointed out—in the software industries, in business services, in quality goods and services, and in education both in this country and about the world.

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We have not done too badly in continuing to attract inward investment. It is particularly interesting that we are one of the most successful car manufacturers in the EU—I believe that car exports have risen to their highest ever level quite recently. We can make good cars here at competitive prices if the management is up to managing it properly.

It is true that sterling was overvalued for too long and that devaluation has made it more competitive, but it has arguably not made it competitive enough. Unlike Germany, I think that, broadly, the exchange rate should be used to adjust for differences in competitiveness rather to than to put countries through the agony of internal devaluations that wreck their economies.

The noble Lord, Lord Jenkin, mentioned one of the Bank of England’s usual understatements. To me, the economic facts of life are very simple: if this economy is going to pick up and grow, it can do it only through rising exports and capital investment. There is little or no scope for growth to continue to come from rising consumption. We had nearly 20 years of living above our means and of growth based on rising consumption and financed by debt and selling the family silver. We had a massive cumulative balance of payments deficit—to use old-fashioned language. That has come to an end. If we are going to grow, we have to export more. No range of government measures will achieve higher growth unless they achieve higher exports. While I remain a strong supporter of the Anglo-Saxon model, its one weakness is that it leads to the savings rate being far too low, with investment being far too low as a result. It is clear that Germany’s success, apart from its organisational brilliance, has been the amount of its capital investment in modern industry.

However, there is huge opportunity, as I and others have variously described it. The fast-growing economies, the BRICs, are the ones that have the potential to import more. As others have mentioned, we have the blessing of our own particular club in the form of the Commonwealth, which is now, collectively, a fast-growing part of the world and one that has language, culture and businesses practices in common with us. In my experience, it is only too happy to do business with us as far as there is scope. It has been a mistake to concentrate on the EU as our main export market. Our exports to the EU are shrinking as a percentage of our overall exports and, sadly, it is clear that EU is going to be a very flat, depressed economic area for several years to come as it sorts out the currency problem one way or the other. It is crucial, therefore, that we go for the new economies.

I met an individual who runs the Azerbaijan society in the UK. He mentioned that it was unfortunate that Germany had sent its President there but that we had not sent anyone. I needless to say wrote to the noble Lord, Lord Green. Even in Azerbaijan, there is considerable scope to add to our involvement in the oil industry. There is also interest in our education institutions and in our quality goods. What Azerbaijan really wants is a lift in its relationships with the UK.

I shall focus briefly on what I will call our quality goods and services. I am very interested to see that Hamleys is going to go international. It is a fantastic

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brand name; it is the best toy shop in the country. There are masses of scope for internationalising that. Even Fortnum and Mason is going to do the same thing. I sat back and thought, “Well, Burberry started it. Think of all the fantastic British brands for which there is much greater potential now that there are parts of the world that can afford these things, potentially more than we can ourselves”.

I broadly praise the Government’s efforts. I was very pleased that the Prime Minister shot off to India. India is my pet project. The scope to export to it and to do a great deal more business with it is huge. India, as the Prime Minister of India keeps saying whenever he comes back to Cambridge, would like a special relationship with this country. Well, I would like a special relationship with India.

However you call it, “City” is now a bad word—even worse than “politicians”. I use the phrase “business services”. Our overall business service exports run at £60 billion to £70 billion a year. They are not just financial products and services; they are lawyers and consultants. There is substantial scope about the world, as the rest of the world grows faster and advances, for our business services.

Some negative issues were raised by the noble Baroness, Lady Nicholson. The London Chamber of Commerce has raised the problems of visas and passports. I have had letters from friends in Hong Kong and Sri Lanka complaining that they now have to send their applications back to London. As a result of a rather foolish economy being made by the Foreign Office, the places where they had them processed locally are being closed down, which is causing them a nightmare—others have referred to that. We have to make it easy for businessmen around the world who want to come here to do some business to get their visas or, if they are Hong Kong passport-holders, to get their passports renewed. We simply have to sort out the ridiculous situation of the excessive queues that people have to face after landing at our airports. I am not going to cast blame, but it seems ridiculous that that should have been allowed to happen. It is depressing to note that the destinations served out of Heathrow have reduced by about 50 over the past decade. We clearly need to have the best European hub available as fast as possible. UK passenger duty is far too high. It makes it uncompetitive from a holiday perspective.

There are issues to be addressed, but we should look to British history. We were the first great exporters. What was the East India Company about? It was about trading with the whole of Asia. What did it do? It stimulated manufacturing here. Britons went about the world when it was often highly dangerous and the ship they were on might have found itself embarking on warfare with the Portuguese, but we went about and built a commercial empire that became a physical empire. We have it in our history and in our national character to be about the world doing things. I see a lot of that now reviving. At least half of my son’s generation is somewhere else in the world—maybe in Shanghai or America—busily doing things that ultimately involve British exports increasing.

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Towards that end I am very keen on the new technical colleges. A friend of mine has a business that has a unique niche in producing aircraft safety devices down in the depths of Hereford. With 95% exports, it is a hugely successful business. It has grown because Hereford has always had a good technical college and he could get the people he needed trained there in a way that was required for the business. I greatly welcome the expansion of all that.

I congratulate the Foreign Office, as others have, on its much improved services on the ground. However, 18 months ago I went to the Expo in Shanghai. There was a fantastic Italian exhibition of goods and services. You wanted to buy the lot. And what did we have? We had some clever cut-glass work of art and no mention of our goods and services. I wrote to the Foreign Secretary William Hague after he had just arrived to say that this seemed daft and I got a letter back saying that it had won some award as a work of modern art. I thought it was a classic example of how not to be promoting this country’s exports.

We have a great history and we have great potential. We want more young people to get into their planes and to go about the world and do things. I have always thought that in today’s world JCB is a wonderful model of what this country can be about successfully. Let us have many more of those.

1.13 pm

Lord Campbell of Alloway: My Lords, I also thank my noble friend Lord Jenkin for spreading a breath of fresh air and confidence about our domestic arrangements. This debate also enables objective consideration to be given to how to resolve the eurozone crisis which inhibits growth of the economy, inward investment and exports to global markets. Last week there was a meeting at Brussels where something was proposed to be done, but it appears that nothing much was explained save in the Sunday Telegraph,where it said that the first step had been taken and there were others to be taken. It did not explain, and no one knows, the nature of these steps, how many there are or what form of delay they might put on implementation of a resolution of the crisis. No one seems to know. Indeed, on Monday the Leader of this House repeated a Statement on the EU Council but there was not a word about this. He did not know. It is impossible to consider that if he had known he would not have told the House. There is no reference to this in the Library notes and looking through the press I have found no other reference to it.

It cannot be assumed, certainly as yet, that this crisis will be resolved, because all other means of implementation to resolve this crisis introduced in the past by the Council of Ministers have failed and created a very unfortunate position. We are in that position now; we have come to a state of affairs where we have unpredictable improbables. All that can be done is for the Council of Ministers to take emergency action immediately and not leave things lying in the hope that something will happen, because nothing will happen. At the moment we are somewhat reliant on what can be done with the improbables. I shall not take much time because we cannot really resolve that.

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Even the Government do not seem to know what the substance of the situation is. I suggest that the Council of Ministers must negotiate and in their negotiations construct an acceptable system. And an acceptable system is not necessarily one which involves state payments to be under federalist control within the remit of the Lisbon treaty.

What should be done in this state of affairs to which nobody else has referred but which warrants consideration? There is the idea that we shall have a new relationship treaty with the Common Market. That has been suggested by my noble friend Lord Howell of Guildford, who opposed the Lisbon treaty. He opposed it to forestall the drift towards federalisation and to produce an acceptable commercial Common Market. With that on the books, whatever the Council of Ministers does—and it must do it at once—must be temporary, emergency action. It should then be reconsidered at another conference about another system and another relationship.

To conclude, there is also the question of the referendum. At this stage, in this situation, it is premature. It is impossible to say what there will or will not be or even to construct the words that should be used. This will be a matter for further consideration in future on the question of a new treaty. Personally, if one is allowed to say it, I am not very keen on referendums. I think it is better that the views of the people are dealt with at a general election by the parties. I hope that that will be the case.

1.22 pm

Lord Sheikh: My Lords, I thank my noble friend Lord Jenkin for securing this important debate and congratulate him on his excellent speech. The Motion covers many areas vital to the UK economy. My contribution will focus mainly on the importance of trade.

I have visited a number of countries in the past two years where I have been privileged to meet various senior figures from politics and business and to speak at various meetings and conferences. Engaging with our overseas partners has reasserted my long-held belief that one of the best ways that we can improve our financial position, both globally and domestically, is to place much greater emphasis on international trade.

Our trade surplus and global market share in key industries such as aerospace and pharmaceuticals provides us with a solid base in manufacturing and research. The City of London maintains its position as the leading venue in Europe for financial services. To maintain and develop our economic promise, we must ensure that more of our goods and services are exported. I share the view held by the Chancellor that trade is vital to our economic prosperity. In addition to continuing cuts to the rate of corporation tax, the Chancellor stated that we must help British businesses to expand and innovate and that we should aim to double British exports to £1 trillion by the end of this decade. I believe that that will play an important role in helping our immediate economic recovery and ensuring that Britain remains a strong economic force for the foreseeable future.

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I strongly support the efforts of UK Trade and Investment in encouraging small and medium-sized businesses to focus on exports, with a particular emphasis on the emerging markets. It is important that we maintain our strong trade links with America and our largest trading partner, the European Union. However, it is vital that we capitalise on the growing opportunities in Brazil, Russia, India and China. Many opportunities are presented by improvement in the standard of living in countries such as India and China. Russia must not be overlooked, especially with its new-found status as a member of the World Trade Organisation. We should be increasing our exports of high-value goods and financial services to millions of potential new customers.

The success of the so-called BRICs nations is worthy of praise, but I should like to mention the 7% club. Members of that club have achieved growth of at least 7% per annum since 1998. Research suggests that economies that achieve 7% annual growth will double in size every decade and more than quadruple in a generation. It is thought that after three decades, an economy that consistently grows at the rate of 7% per annum will be twice as large as one of achieving 5% annual growth. The 7% club includes Vietnam, Ethiopia, Uganda, Mozambique, Azerbaijan, Turkmenistan, Kazakhstan, Tajikistan, Angola, Chad, Sierra Leone, Rwanda and Cambodia.

Last month, I led a delegation of British parliamentarians to Azerbaijan, where we met President Ilham Aliyev and leading figures in commerce. We also discussed the relationship between the United Kingdom and Azerbaijan, and stressed that the UK is very interested in expanding business links between the two countries. The Middle East is a region that also holds many opportunities for enhanced trade. I know the area well and frequently visit the Middle East countries.

We could do more to increase trade with Commonwealth countries. Our historic connection should serve as an advantage. However, I would add that the membership of Mozambique and Rwanda speaks volumes about the influence and prestige of the Commonwealth as a unique association in welcoming countries that do not have links with the British Empire. As I mentioned earlier, those two nations also belong to the 7% club.

What plans do Her Majesty’s Government have to enhance trade with members of the 7% club? Greater co-operation among key government departments is vital to realise our potential to identify key markets and develop and promote British products overseas. That is why I wholeheartedly support the Government’s effort to strengthen dialogue among the Foreign Office, the Department for Business and the Department for International Development. International trade missions have a great role to play in achieving those goals. We should organise more trade missions to overseas countries. I am pleased to say that I was recently able to assist in arranging a trade mission to a foreign country.

We give generously to many countries through international aid, but we must consider giving more financial assistance through properly organised trade

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missions. Aid and trade can go hand-in-hand. Our ambassadors and high commissioners could play a more significant role in that respect.

I have spoken about Turkey and its strategic and economic importance on a number of occasions in your Lordships’ House. The Turkish economy has been growing approximately five times faster than the eurozone average. It is identified as one of the 20 high-growth priority markets in the UK Trade and Investment strategy. The UK-Turkey strategic partnership agreement has significantly helped to boost trade with this rising regional power. UK exports to Turkey in 2011 increased by 20% compared with 2010.

On domestic affairs, I must say a few words on youth unemployment. The level of youth unemployment in Britain is one of the highest in Europe. Young people have the potential to make a vital contribution to our economy and society. It is the responsibility of those in government and commerce to work together to develop the strategy that will help our young people to weather the economic storm. I am pleased that, as from today, the Government have given powers to cities such as Leeds to regenerate their areas, which will help to create more jobs. It is important that our future economic strategy recognises the importance of small businesses, entrepreneurs and innovation to our recovery. Small and medium-sized companies play a vital role in job creation. It is therefore essential that these enterprises are not burdened by excessive bureaucracy. Cutting this and reducing the layers of bureaucracy in our public services is vital to increasing efficiency in our industries.

I declare an interest: I am the chairman of an insurance broking and financial services organisation which also specialises in Islamic finance. I am also a vice-chairman of an associate parliamentary group on Islamic finance. We need to maintain and strengthen our role in promoting Islamic finance, which is based on mutuality, ethical behaviour, transparency and the acquisition of assets, which gives it more stability. Islamic finance is worth $1 trillion globally, and in the UK we have assets worth over $18 billion. Growth in the Islamic banking sector globally is nearly 20% per annum. In the United Kingdom we have a great deal of expertise which we can offer to the world. There are therefore opportunities for our country’s involvement globally. One can argue that if financial institutions had undertaken a greater volume of Islamic products, the financial problems we are facing would probably have been less severe.

We must of course promote our financial services industry but it is also imperative that we manufacture and export specialist products, such as precision machinery and pharmaceuticals. We have the expertise and resources to produce and export such goods. We need to have a balanced economy and encourage ideas that will further promote our manufacturing sector. I believe that we need a multifaceted approach to reviving our economic fortunes. Any overarching strategy must have a greater emphasis on international trade, which I am confident we can achieve.

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1.33 pm

Lord Bates: My Lords, it is a privilege to take part in this debate and I, too, pay tribute to my noble friend Lord Jenkin for securing it and for the compelling way in which he introduced it by making the case for Britain. In listening to the debate, not least in following my noble friend Lord Sheikh, I have been struck by the deep level of expertise that exists in this Chamber to conduct such a debate. There is wide expertise at a very high level of serving on the boards of international companies and in international trade, none more so than that of my noble friend Lord Green on the Front Bench, who will respond to this debate.

I want to pick up on one point made by my noble friend Lord Sheikh in talking about making greater use of the resources within this House in trade missions. This is not a job application for me. I have spent most of my life in small and medium-sized enterprises, with a very strong emphasis on small, but I recognise that there are people with great expertise in this Chamber who really ought to be sent out there to bat for Britain. I am aware that there is sometimes just a little hesitation in diplomatic circles about having people who have rolled their sleeves up, and who have commercial expertise, engaging in this task.

I recently had occasion to walk across Europe, during which time I visited some 15 different embassies and consulates. I saw the fantastic diplomatic teams who we have there and the wonderful people working for UKTI. One of the most impressive people I met was the new consul-general in Milan, Vic Annells, who is doing a tremendous job there in securing investment. He came straight out of the private sector, having worked in trade in the Middle East, and was knocking doors out of windows, as they would say in the north-east. Sometimes we look a little sneeringly on people if they do not learn the language of the country they are in and we ask, “How can they communicate?”, but we have to remember that there is a universal language of business. People who are competent in that language are also required to make the case for Britain.

I want to divide my comments into three sections: first, on the competitiveness of UK plc and its finance, with a particular emphasis on its balance sheet and cash flow; secondly, on HR and R and D; and, finally, in terms of sales and marketing. In commenting on this debate, many colleagues have referenced the world competitiveness rankings. It is worth reading on a bit into the assessment that the World Economic Forum made:

“The United Kingdom (10th) continues to make up lost ground in the rankings … rising by two … places and … moving back to the top 10 for the first time since 2007. The country improves its performance across the board, benefitting from clear strengths such as the efficiency of its labor market … in sharp contrast to … many other European countries”.

The assessment went on to say that the UK has,

“sophisticated … and innovative … businesses that are highly adept at harnessing the latest technologies for productivity improvements … On the other hand”—

and I emphasise this point—

“the country’s macroeconomic environment”—

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it is ranked 85th—

“represents the greatest drag on its competitiveness, with a double-digit … deficit in 2010 (placing the country 138th)”,

in the international league tables.

I mention that report because it is sometimes unfashionable to mention things such as controlling the deficit, which in this case is plan A, in strengthening our competitiveness but it is fundamental because unless we get the public finances under control, our AAA rating is at risk. France has already been downgraded and the only way that we are clinging on to that rating is by virtue of the fact that the Government are committed to getting that deficit down—and they have made progress on that. The deficit has reduced by about 25%, going down from £13.9 billion to £10.8 billion and is set to go down to £5 billion by 2014. That is fundamental to our success. As much as we want to herald the sales and marketing side and get excited about that, we sometimes need to remember that there is a real job of work to be done in keeping that deficit under control.

As managing director of the IMF, Christina Lagarde was absolutely right when she said that she shivers when she looks back to 2010 and considers what could have happened without fiscal consolidation in the UK. If we lost that AAA rating, the cost of our borrowing on the international markets would rise, not only for government but for corporations. The rise in those interest rates would force many firms out of business, and reduce our competitiveness on the international market. Repairing the balance sheet is obviously critical, but there is a second set of measures that need to be taken which come under the broad heading of supply-side measures. We cannot simply say, “We want to repair the balance sheet”. We need to make ourselves more competitive in the process. I believe that that is happening, most notably by reducing corporation tax rates, which now give us the lowest rate in the G7—and by the end of the Parliament we will have the lowest corporation tax in the G20; by raising the threshold of personal income tax to £10,000; placing a cap on benefits to ensure that people are always better off when they are in work; reducing taxes on jobs; reducing regulations; investing in infrastructure projects, such as £16 billion in Crossrail; the Green Investment Bank; the regional growth fund; public service reform; and by rebalancing the economy away from a dependence on financial services to manufacturing. Mention has been made of how manufacturing declined dramatically as a share of our international trade; that trend is now reversing. In my native north-east, we are celebrating the fact that we have had record exports for the second quarter in a row, and this is in the midst of a recession. It is quite phenomenal that this is happening. It is a reason to be encouraged; however, we need to reform public services and rebalance the economy. We also need to introduce rigour into the education system, enhance skills through expansion of apprenticeships and bear down on excessive regulation, despite the current legitimate outrage about LIBOR. We must remember that excessive regulation destroys jobs, and we want to be in the business of creating jobs.

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On the banking crisis, there needs to be an honest conversation with the electorate. It will rightly join everybody in “banker-bashing”, as it is affectionately known in the press. The banks may well be—I am sure that they are—part of the problem and the reason why we are in this mess. However, it is only by the banks lending to small and medium-sized enterprises that we can get out of this. So we need to have a way forward. I would like to suggest that, rather than pillorying the banks, looking for fines, changing the regulations and so on—though I am sure that all that is right—it would be better for the banks themselves to come forward and say, “We realise that we have let this country down; we have let down small and medium-sized enterprises; we have not been lending as we should have been, despite our balances improving. We are going to engage in some restorative justice, by looking in the eyes of the people whose loans we have turned down and whose businesses have closed as a result, and apologising for that. We will go that extra mile to see how we can help British business export and compete in this market”.

I come to my final point, which is this. We must recognise that we have a bit of a confidence problem in this country at the present time. It is very much doom and gloom; a number of colleagues have referred to this. However, it is worth looking at the facts. The eurozone is undoubtedly in a mess; we are not doing particularly well. America is only doing slightly better. But that is not the true picture. The Office for Budget Responsibility points out that this year the economy will grow by 4.1% and next year it will grow by 6.4%. If we take world GDP as being roughly $70 trillion, 4.1% growth means that added to the world economy we will see a market for our business the size of France. Next year we will see added to the world economy, or a market for our business, an economy the size of Germany. Sure, exports to the EU may be down by 2.9% but exports to non-EU destinations have increased by 13.3%.

We will be welcoming the Olympics in a few weeks’ time and the world’s eyes will be upon this country. It is fantastic that the Government are tapping into that with their GREAT campaign, highlighting the great place that Britain is. More than 4 billion people will watch the opening ceremony. The GREAT campaign is tapping into the fact that this is still an outstanding country, despite its problems. It is a world financial centre; it is a world transport hub; it is the legal basis of international trade; it has the language of international trade; it is home to the top university, Cambridge; it has the winners of 76 Nobel prizes in science and technology—and we remember that in the week that we acknowledge the contribution of Peter Higgs, the theoretical physicist, to that list. It is the centre for the creative industries: Adele, Coldplay and Jay Sean accounted for 12% of global music sales and 23 Grammy awards. On sport, we are the home to Formula One, Wembley, Wimbledon, Lord’s for cricket, Newmarket for horse-racing, St Andrews and, of course, the birthplace of the Paralympic Games, in which we take immense pride. This is a great country and we have a lot to celebrate about the way we are going.

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1.45 pm

Lord Selsdon: My Lords, I am grateful to my noble friend Lord Jenkin of Roding, who has an ability to set the scene; it makes it very difficult for those who follow. What I have just heard from my noble friend is almost a layout of what the immigrants should learn if they are to come to the United Kingdom.

I shall take as a theme, “We have been there before. It has already happened, so why are we repeating ourselves?”. When I have nothing better to do, I write White Papers about things that I think should happen. The noble Lord, Lord Stevenson of Balmacara, a fellow Scot, will remember what we were taught in early days: if a man had no estate, there were only three things that he could do. First, he could help other people to do it, in which case he joined the professions. Now, though, for all the professions—accountancy, law—there is doom and gloom, because they find reasons why you should not do something. Or he could take the credit for those who did it, in which case he went into politics. However, if you were a real man, you went out and did it. The noble Lord was sitting as a lone ranger on his Benches. I am not saying that there is no interest on his side—I used the past tense.

I will go back and say, “We’ve been there before”. I take as my theme today, “Yesterday’s story”. If we go back into the past, this was the sort of phrase that was given as an instruction to government—in this case, a guide for the Board of Trade, saying that it should,

“take into their consideration, the true causes of the decay of trade and scarcity of coyne … and to consult the means for the removing of these inconveniences”.

That was in 1621. I can give you one for every year; there is a wonderful book on the history of the Board of Trade. It has gone out of print and I have just rewritten it. I hope that I can give you others.

What successive Governments did was to forget the past. They went and got rid of the Board of Trade and put in place something called BIS—the sort of thing that dogs do before breakfast. No one understood, and the word “business” was divisive. I chaired various trade bodies and went on trade missions, always to places where no one else wanted to go. That was usually at the instigation of two great Leaders of this House, Lord Jellicoe and Lord Shackleton.

Lord Jellicoe said one day, “My dear chap, you ought to do a bit more to help the House. I’m going to put you on Sub-Committee B on the European Union”. I said, “What’s that?” He said, “Liven it up a bit—it’s meant to do something about trade”. There were only three members of that committee: Lord Dennis, myself, and I have forgotten the other one. We went to a series of meetings and we were not sure what we were talking about. We really thought that it ought to be about trade. Then one day we had a visit from the Chancellor of the Exchequer, the noble Lord, Lord Lawson. He sat with these distinguished people; the committee was called the Aldington Committee. We asked him a few questions, although I personally was never able to ask a question because I did not like to intervene among my elders and betters. When we were having discussions about money supply, which seemed to be more important than trade, Lord Amery asked

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for an explanation. The Chancellor at that time said, “I’m not quite sure if I can get up to your level”. He made an explanation that led to the famous remark from Lord Amery, “I am very grateful, Chancellor, for your explanation. I am most confused but very happy to be more confused at a much higher level”.

Today we are talking about the same sorts of problems: money or trading finance. We have forgotten some of the basic principles. You see, we have a trade deficit in visibles, or in manufactures, of £100 billion, rising at 10% per annum. I always take everything back to when my great-uncle Stafford Cripps devalued the pound in 1948; I have a schedule that runs through that. We have a deficit, and we finance it in part with what I call “invisibles”. Your Lordships may remember that Sir Cyril Kleinwort created the Committee on Invisible Exports that used to wander down from the City to try to lobby their Lordships and others in order to get us to do something to support trade. That soon disappeared, but the invisible surplus is not enough to offset the deficit, and it is getting worse.

We then went into the EU, your Lordships may remember. I was treasurer of the Conservative Europe Group because no one else would take the job, and together with the noble Lord, Lord MacGregor, we had to raise money because the Labour Party did not want to go into Europe at all; they were totally against it. We had a vote in favour here in your Lordships’ House—very nearly a greater vote than for the abolition of hanging—and we went into Europe, as though that would be the be-all and end-all.

I do not believe in exports and imports; I just call it trade. You have a good trade or a bad one, but you trade with anyone who is willing or able to pay, provided that you like them. As soon as you would use the word “business”, the Foreign Office runs away and says that it cannot be seen with a businessman, a box-wallah. The same went for Ministers at home because it seemed wrong to be looking at trade in this sort of way.

When we look around the world today, we find that our biggest single deficit is with the EU. The phrase that we adopted in those early days was, “Britain in Europe: it’s our business to be there”. It was not about a political wish or the controls that would come later, it was simply about business and trade. So we have a thumping great deficit with all the EU countries except Ireland, where we have a surplus. However, some of that surplus comes from containers that arrive in England and then are shipped across to Ireland where the added value goes, because the Irish would not have the money to pay for the amount of trade that we do with them.

That is all just to set a bit of background. I feel that we should go back into the past and look at what the Board of Trade was established for, along with some of the roles played by your Lordships, a subject that has been raised already. One of the key elements of trade—good trade rather than bad—is relationships. This has often been a difficult problem for those who go on all-party group visits, missions and so on, when you wish to discuss the concept of business. Your Lordships’ House, with its 800 Members, has a relationship with every single quarter of the world, and we are still

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respected. My noble friend Lord Green knows that well. For some time I was president of the British Exporters Association, although that now consists almost entirely of financial institutions—there are hardly any manufacturers left.

If we are looking at where we end up in future—we have raised both the Commonwealth and new markets—the financing of trade has always been one of our skills and it was one of my own responsibilities. At one time it was not necessary to get government guarantees for anything if you had reciprocal trade. We would often go out and sign individual reciprocal trade agreements with any country where you could buy something and then finance it by selling. I will use the simple example of Cuba. We did not have a good relationship with Cuba, but Lord Walston did. He was a Labour Peer and a very good friend of mine; he was not allowed to go to Cuba officially but was allowed by the Foreign Office to visit it on his way to his plantations in another part of the Caribbean. He knew Castro well and we had a few discussions. We said, “What can you sell?”. Naturally, we were all thinking of cigars or rum, and had forgotten that Bacardi was originally a Cuban product. They said, “We do very good grapefruits”. I sighed, “Oh God”. Anyway, I was lucky enough to know someone at Marks and Spencer, so I picked up the phone to them and said, “The Cubans do a rather funny sort of pink grapefruit. Will you buy some?”. They said, “Yes, why not? Tell them to send a shipload”. I turned to the Minister and said, “Could we send a shipload of pink grapefruit?”. That all started with a simple trade.

In those days it was quite difficult when we did not have good diplomatic relations. I found this when I chaired the Middle East trade committee. I could go to Iran, Iraq or any one of the Arab or Middle Eastern countries totally free and unencumbered, because I would be invited. You did not need security; indeed, often it was dangerous if you got together with your own embassy. You would be told, “No, diplomatic relations are not good enough at the moment to be able to prosecute trade”. I never understood that word “prosecution”; it has something to do with following on, but it always seemed a rather negative phrase.

What I am saying quietly here is that we within your Lordships’ House should give consideration again to all those bodies—the British Overseas Trade Board, which was chaired by Lord Jellicoe, the East European Trade Council, which was chaired by Lord Shackleton, and all the others—where individuals and their friends had relationships, often historic, with all these countries, and that could run across the Francophone territories and all the Commonwealth. As my noble friend Lord Sheikh has said, the Commonwealth is a great opportunity.

I have no fears. I just feel that we have subsumed ourselves in the most complex bureaucracy around. Ministers are not really allowed to do business or to sell, although they can come and promote and talk. If your Lordships’ House can identify those people who might be willing to help, then I feel that we have a great sales force.

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1.55 pm

Lord Paul: My Lords, it is an honour to follow the noble Lord, Lord Selsdon. For the 16 years that I have been in this House, I have always been afraid to follow him, because how would I keep the House amused?

I thank the noble Lord, Lord Jenkin, for sponsoring this important and timely debate. He has great experience both in industry and in government. The noble Lord might recollect that as a very young entrepreneur I came to see him when he was Secretary of State, and he was most helpful.

As chairman of the Caparo Group, an industrial manufacturing company, I declare an interest. Competitiveness is vital for the future of our country’s economy, and nowhere is that more significant than in manufacturing. Having been intimately engaged in that activity all my life, your Lordships will appreciate why I will focus largely on that sector. After a long while, the manufacturing segment of our GDP has shown an appreciable increase in the past three years. That is intrinsically commendable, but it is not enough. Britain is now the ninth largest manufacturer in the world, although that is a far cry from our ranking in the past. My own experience and evaluation tells me that, given the appropriate encouragement, we can substantially enhance that position.

Our manufacturers are doing almost everything they can and, encouraged by the progress made in recent years, are keen to do more. However, for Britain to get the fullest benefit of their endeavours there must be a much more supportive environment. Today, many manufacturers feel that a more positive and creative approach by the Government would help to engender the conditions that would enable them to maximise their potential.

There is considerably more that the Government can do to structure the context in which manufacturers can achieve a higher level of competitiveness, a condition that would be of great benefit to the country as a whole. We live in a world of globalised interaction, a world in which many Governments encourage and support their manufacturing industries. We need to do this, and fast, otherwise others will gobble up the gains that we have so resolutely made.

Here are a few suggestions for consideration that can be implemented in short order. Above all, there is the question of inadequate access to finance. It is now almost four years since the onset of the banking crisis, with its crippling impact on credit availability, particularly to small and medium-sized manufacturing enterprises. Despite government initiatives such as Project Merlin, the money is just not flowing, even from the institutions within its control such as Lloyds and RBS. In view of this, it is now imperative to create a new corporate institution dedicated to industrial finance, a high-powered, well-endowed industrial bank of a kind that I have been advocating in this House and elsewhere since this financial crisis began in 2008.

I have two other concerns in this financial domain. The first is the cost and time-consuming effect of red tape. Despite occasional reassurances, the bureaucratic tangles of regulatory consent and like procedures continue to escalate. Of course we must have protection,

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but our excessive foot binding is making it easier, cheaper and less risky to establish projects in countries where these burdens are less onerous. My second concern is the consequence of the current exceptionally low interest rates on the overhanging pension burdens on business. Two weeks ago in our debate on the economic growth strategy, I drew the House’s attention to the serious impact of this looming thunder-cloud over the competitiveness of industry. This needs to be addressed and addressed fast.

If our competitiveness is to be sustained, we must rethink energy pricing policy. While I strongly endorse environmental efforts to prevent the destruction of our ecological heritage, we need a sense of balance. The competitive struggle is a tough, international battle that is hard to fight with one hand tied behind our back. There are industries in which energy is a major component of production. Try as one might, it is simply not possible to avoid or reduce this. Our energy pricing is such that our production languishes while our industrial competitors’ energy costs are considerably below UK costs. Our present system of carbon taxes is basic to this problem. It is just not working. Up and down the supply chain of many remaining heavy-process industries, jobs are being lost and businesses are in trouble.

Innovation is the lifeblood of competitiveness. It can be achieved only through better skills and training and the enhancement of industrial education and research environments. There are two ways in which we can accelerate this process. Large companies already maintain their own facilities to supplement public sector education. Through appropriate tax and other incentives, we can encourage these larger corporates to mentor less well endowed mid-sized businesses to establish jointly the type of technical institutions in which innovation and creativity will flourish.

In my distant youth I was a student at the Massachusetts Institute of Technology. There I saw how the Government and the corporate sector worked with the universities to carry out industrial research for which the universities were paid. This strengthened the financial position of the universities while providing innovative ideas and product design to the corporates and to the Government. Ever since, as your Lordships know, I have strongly endorsed these synergies. We have made some progress in this but I suggest consideration of a crash programme in which government resources anchor such interconnections. With other countries increasing their research budgets, perhaps we can offset our own financial limitations through such a pooling of resources and expertise.

Industrial investment is a long-term process and industry needs a clearer sense of economic direction in order to help that investment. The biggest issue for industry at the moment is the banking crisis. This is so fundamental to our national economy that it must be investigated intensively and resolved. A resolution must avoid any political point scoring, as the whole country needs to have its faith in the financial sector restored. The LIBOR fixing has adversely affected everyone. It has hurt the reputation not only of UK financial services but the country as a whole. We cannot afford that. The Minister is, in my view, one of the best

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people to give advice on this subject, and I hope that the Government will seek his wise counsel, despite his being in a different department.

2.05 pm

Lord Cavendish of Furness: My Lords, I am pleased to join others in thanking my noble friend Lord Jenkin of Roding for introducing this debate with such skill and clarity. His reputation brings an enormous amount to this House.

My purpose in intervening today is to draw attention to the obstacles that prevent SMEs, in particular, from being competitive. Since those obstacles are real, in my view, I see no merit in being mealy-mouthed about them. It should be recognised that during the years of financial services hubris, those of us who do things, make things or grow things became highly unfashionable and only slowly are we emerging from those dark days and those perceptions. It appears to me that Governments used to ask bankers how the economy worked. When their fallibility became apparent, advice was sought from the owners of supermarkets and big business. It is my contention that the people that Governments should have been talking to are those who work in the sector of small and medium-sized businesses that make up such a very high proportion of this country’s productive capacity. It is they, and perhaps only they, in the short term, who can deliver growth and investment and they stand ready to do so if only this coalition Government have the will and the courage to unshackle them and let them take flight.

I know that the Minister will point to measures he has implemented and plans to implement in the future. Of course, there are improvements and they are appreciated. I do not mean to underestimate the challenge that this coalition faces or ignore the real achievements in the face of these challenges. It has brought onto the statute book three very major reforms, the main benefits of which, as with many reforms, lie in the future.

I operate, as I have done for the past 40 years, in that very sector which I so passionately believe is crucial to national recovery, investment and growth, and that brings me to declaring an interest. I have beneficial interests in a landed estate based mainly in south Cumbria. The estate’s activities include farming, forestry, property management, leisure, tourism, minerals and housebuilding. We also own and run a racecourse and have 250 people on the full-time payroll, 150 of whom are engaged in extracting, processing and selling slate, a significant proportion of which goes to markets around the world. On the question of exporting, I believe that a successful exporter has a mindset, more than anything else. If I can dig stone out of the Cumbrian hills and send it to the other side of the world, it ought to give encouragement to other exporters.

Let me remind your Lordships what the SME sector comprises. There are 4.5 million small businesses in the UK. They account for 58.8% of the private sector and nearly half of all private sector turnover. In 2010, family businesses contributed £81.7 billion in tax receipts to the UK Exchequer, or 14% of total government revenues. The barriers to growth and investment under generic headings are well known to the Government; perhaps less well understood is the disproportionate

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impact they have on the sector where I have some experience. The burden of reporting to government departments on such things as PAYE, VAT and national insurance not only grows remorselessly, but those departments do not work to the same standards and timescales as is the norm in the private sector. All entrepreneurs in this sector will rightly point to employment and health and safety laws and their implementation; a lack of credit, widely rehearsed in this debate; and planning delays and regulation as being among the main factors that inhibit growth and job creation. I shall say a word on each and address some other considerations that are sometimes overlooked. I was hoping that other noble Lords would cover the importance of broadband, which I know is a very important aspect of this.

Decent people believing in the rule of law have always defended the principle that justice is worthless unless it is accessible to all. People need and deserve protection from unscrupulous employers and I suspect that the reputation of tribunals for being one-sided in favour of claimants is sometimes exaggerated. However, something is very wrong—I suspect that it is the law itself—when I consider how attractive the system seems to be to vexatious claimants. It is also cumbersome and pitifully slow and therefore costly in terms of time and money.

Charities are particularly vulnerable, made worse perhaps by the Charity Commissioners’ understandable but strong guidance that claims should be settled rather than defended. I have personal experience of this through my local hospice, which I co-founded and was involved with for nearly 20 years, which was nearly ruined by a vexatious claim. I especially ask my noble friend Lord Green to take note of this. Charities play an ever-increasing role in society and I emphasise that they are significant employers and, as such, are very much part of the national economy.

It is above my pay grade to suggest how the law might be changed, but it is plainly true that the impact of employment laws on a small enterprise is different, and by magnitudes greater, from what it is on a large one—a point made eloquently by my noble friend Lord Brooke. In the matter of planning, authorities have apparently cut back on resources; that is something which they had to do and it seems right to me. However, they have done this without changing their methodology. I ask myself this: when all of us have found ourselves forced to do things more smartly and efficiently, why has so little been done in the public sector to do likewise? The effect is plain enough. Nearly 70% of those seeking planning decisions are having to wait longer than the legally required eight weeks. What makes this so scandalous is that about a quarter of such applications are for change of use and a quarter for minor improvements. Every planning permission generates economic activity and all delays costs jobs.

Across my own business, as I speak, 20 jobs are being withheld pending delayed permissions that have been agreed to in principle. Only today I heard that the retirement of a person in the highways department was given as the reason for a local housing development being delayed for six months. Just imagine the effect that that has on employment. My family business is at

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an advanced stage of considering installing an anaerobic digestion plant to generate green energy. As a consequence of government prevarication on several fronts, together with an estimated two-year delay in securing permission to connect, this project is now on hold. Again, although we can all applaud the intentions of the national planning policy framework, I am bound to say that I reserve my position until I see how it is interpreted at the local level and by the planning inspectorate.

In reaching a view as to the impact of regulation, I have relied on my own experience and that of my neighbours in Cumbria. By the time someone employing three people has completed all regulatory compliance, by my estimation he or she has lost in a working week the best part of a full day. On top of that, there will be the direct cash costs of compliance to be earned. I will cite two examples. I know a brilliant self-employed precision engineer who does work building submarines in the shipyards at Barrow and also in the nuclear industry. He is the sort of person this country really needs. He has an order book that would merit his taking on two or three additional people. He would be willing to train young people. He cannot and will not employ anyone until he sees at least some of the burdens removed and the high personal risk of employing people reduced.

My second example, moving from the sublime to the ridiculous, goes down to the farm. Under Defra’s electronic tagging system, if a sheep tears a tag out, as frequently happens—there is an animal welfare issue there—the farmer is obliged to identify it by reading the tags of every animal in the flock. Did anyone think to consult a farmer before such a crass regulation was introduced?

Another, largely ignored, casualty of all this suffocating red tape is civic involvement. I notice this especially among the farming community who, in my part of the world, have a strong instinct to participate in local affairs. I harbour the suspicion that among the official class the squeezing out of such people who possess a deep understanding of their communities is not entirely unwelcome. I can almost hear Sir Humphrey saying, “Intelligent and experienced people interfering in local government, Prime Minister? That is the very last thing we need”.

One other factor playing an increasing part in eroding our competitive edge is the utilities. I cannot imagine what possessed our predecessors when they created these powerful private monopolies. As one neighbour says, “You have to pay them a huge cheque before they get out of bed”. They are more statist than the state; more statist even than the BBC. In the countryside, all of us have no option but to engage with them. They are completely unresponsive to customers, ruthless in their financial dealings and the services they offer are often exorbitantly expensive. I will go so far as to say that unless the worst offenders are compelled to change their ways, they will continue to exercise a baneful effect on the British economy.

With some honourable exceptions, the utilities culture actually pervades all the agencies of the state to some degree or other. I sit on these Benches basically because I believe in a small state. I hold to the view that I have always held: whatever the state does, it does badly and

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expensively. As an example, the famous NHS IT system budgeted at £2.3 billion was abandoned when it passed, according to some figures, the £20 billion mark. I do not remember anyone being shot at dawn. All I heard was some tut-tutting and talk about lessons being learnt and lines drawn.

It was therefore slightly offensive for those who are law-abiding to be told by Ministers that there was no distinction between tax evasion and tax avoidance and that both were equally reprehensible. One is legal and the other is not. With the record all Governments have of husbanding our hard-earned money, one might reasonably conclude that the more I keep for reinvestment and the less the Treasury gets its hands on, the better for everyone and the better for the country. Besides which, most of us are willing to pay taxes for the public services we value.

I finish with an experience from last week. My company is considering the purchase of a struggling business in a remote part of Spain that might add to the diversity of our operations. Negotiations are at a very early stage and I cannot even guess at what might be the outcome. Despite that, at all levels, Spanish public officials are going to enormous lengths to facilitate these negotiations with the unambiguous purpose of saving a Spanish business and the Spanish jobs that go with it. Compare and contrast that with the culture of our own public sector. We simply do not have the right culture.