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Grand Committee

Thursday, 20 June 2013.

Social Mobility

Question for Short Debate

2 pm

Asked by Baroness Tyler of Enfield

To ask Her Majesty’s Government what action they are taking to promote social mobility, and what assessment they have made of the impact of factors such as character and resilience on individuals’ prospects.

Baroness Tyler of Enfield: My Lords, social mobility is part of a fair and just society. The belief that children from poorer families should have the same opportunity to succeed in life as children from wealthy families is something that rightly unites politicians across the political spectrum. Yet social mobility in this country is at least flat-lining and, although statistics in this area are always open to interpretation, many commentators believe that it has gone into reverse.

To illustrate this point, the first politician I am going to quote—and this may surprise your Lordships—is Michael Gove, who said recently:

“More than any other developed nation, ours is a country in which your parentage dictates your progress … those who are born poor are more likely to stay poor and those who inherit privilege are more likely to pass on privilege. For those of us who believe in social justice this stratification and segregation are morally indefensible”.

For me, nothing demonstrates this more starkly than the fact that although just 7% of pupils are privately educated, they account for 59% of our Cabinet Ministers, 45% of our senior civil servants, 15 out of 17 of our Supreme Court judges and heads of Division, and 54% of our country’s leading journalists. While one in five children is on free school meals, this can be said of just one in 100 Oxbridge entrants.

Since what has been called the golden age of social mobility, starting in the post-war years until the 1970s, things have fallen into decline. As the recent report by the Social Mobility and Child Poverty Commission shows, our leading universities may be some of the best in the world but over the past 10 years they have become less, not more, socially inclusive and increasingly the preserve of the elite. I am sure that other noble Lords will want to comment on this point.

The gap between the rich and the poor does matter. The influence of parental income on the income of children in Britain is among the strongest in the OECD. Parental income has more than one and a half times the impact on male incomes in Britain compared with Canada, Sweden and Norway. We also know that income inequality in Australia and Canada is similar to the UK, but they have significantly higher levels of social mobility, on a par with Sweden and Norway.

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So what is going wrong? It is to the credit of this coalition Government that they have made social mobility a central plank of their social policy, and I welcome the efforts already made to tackle the barriers of disadvantage. I strongly welcome the Deputy Prime Minister’s announcement of the social mobility business compact to help ensure that all young people have fair access to job opportunities; the recent increase to the pupil premium budget to provide extra support to the most disadvantaged children; the extended access to early years education for disadvantaged two year-olds; and the additional help to get young unemployed people back into work or learning through the youth contract.

What more could and should be done? The All-Party Parliamentary Group on Social Mobility, of which I am vice-chair, has sought to shine a spotlight on some critical areas of debate that are all too often overlooked. The APPG report, 7 Key Truths about Social Mobility, set out the key issues on which policy should focus, looking at the unequal opportunities that start in the earliest years of life and too often persist and widen in later life. These truths cover the importance of the early years in the home; the critical importance of education, including both the quality of teaching and extracurricular activities; the pivotal role of access to universities, including part-time study; and the need for other pathways to mobility, such as apprenticeships.

The final truth, which I want to focus on, is that of character and resilience, something the All-Party Parliamentary Group saw as the missing link in the chain. Character and resilience are somewhat amorphous terms, which some might choose to dismiss as fluffy or cosmetic soft skills. In fact, the very term “soft skills” strikes me as something of a misnomer. Far from being fluffy, developing character and resilience is about developing the fundamental drive, tenacity and perseverance needed to make the most of opportunities and to succeed in life, whatever the obstacles. It is about self-esteem, self-discipline, aspiration and expectation. In everyday language, it is about believing you can achieve, understanding the relationship between effort and reward, sticking with the task at hand and bouncing back from the knocks that life inevitably involves.

Recent survey evidence from the Prince’s Trust tells us that young people from affluent backgrounds are more likely to be told by their family that they can achieve anything, and that one in four young people from poorer backgrounds felt that people like them do not succeed in life; if they have, for example, failed an exam or been turned down for a job, they are more likely to feel that they have already failed. There is also a growing body of evidence showing the link between developing the social and emotional skills and doing well academically and in the workplace. Research by the IPPR indicates that personal and social skills have become 33 times more important in determining life chances, while soft skills have become 10 times more important in determining future incomes in a single generation. Paul Tough’s recent book, How Children Succeed, also illustrates the ways in which character skills contribute to cognitive ability along with the American Nobel prize-winning economist James Heckman, who found that character traits are just as

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predictive of academic or job success as more traditional cognitive skills and, indeed, that the two are very much linked.

The really good news from all this research is the evidence that these character or personality traits are not innate. They can be taught and developed through life. Heckman has shown that investing early in these skills, particularly with disadvantaged children, generates strong economic returns. Looking exclusively at earning gains, returns to cash invested can be seen to be as high as 15% to 17%. These so-called “soft skills” can lead to hard results.

In the light of this evidence, the All-Party Parliamentary Group, with generous support from the Open University, hosted a character and resilience summit earlier this year. Whether hearing from Tony Little, the headmaster of Eton, on how he teaches his pupils about dealing with failure, or Camila Batmanghelidjh, the founder of Kids Company, about working with some of the most deeply traumatised children in the country to rebuild their basic self-worth and faith in life, the summit confirmed to me that, for those who care about social justice, developing character and resilience is essential. As Alan Milburn, chair of the Social Mobility Commission, who was present on the day, emphasised, it is not ability that is unevenly distributed, it is opportunity. In order to overcome this disparity, what he describes as the “Berlin Wall” between state and private sector schools needs to be broken down.

We heard about some great work going on in state schools, too, with examples of volunteering in the local community, outdoor activities which put pupils outside their comfort zone to develop their resilience and a really wide range of imaginative extracurricular activities. Indeed, we heard schools saying that developing such traits is now their core business and that, for employers, these less tangible skills of sticking at it, not giving up, empathy and teamwork are precisely what they are looking for in potential recruits. Overall, the message that we heard from academics, head teachers, employers and charity leaders alike is that, whatever qualifications you might have, where you are on the character scale will have a big impact on what you achieve in life.

Successive Governments’ efforts to narrow the gaps between the rich and the poor have largely focused on exam results. However, as the stark trends I outlined earlier show, just more of the same will not be enough. It is necessary, but it is not sufficient. That is why I call on the Government today to take more account of this growing evidence surrounding the role of character and resilience in improving social mobility and to start putting it into practice.

I have a few ideas to offer. More could be done in early years, working with health visitors and children’s centres, linked to the expansion of free early years education. To break down that so-called “Berlin Wall” between the state and independent sector schools, practical incentives are needed to encourage sharing of approaches and good practice. I would like to see schools being able to allocate greater space in the state curriculum for volunteering, sports, drama and music to help to bridge the gap, as well as using PSHE and

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citizenship to the full. I would particularly like to see the pupil premium being used directly to develop character and resilience and the identification and spread of good practice. Teacher training should include models for effective teaching of character and resilience. Because we all know what really drives behaviour in schools, I would like to see the Ofsted framework developed to include the importance of character and resilience to learning outcomes, and that reports and inspections say how effectively this is being addressed. These are just ideas, but I would welcome an assurance from the Minister that these and other ideas will be taken seriously as policy is developed.

I conclude by asking why this matters so much when in economic terms the case is clear. Studies suggest that reaching international benchmarks on social mobility could be worth around £150 billion a year in the UK, or the equivalent of a one-off increase in GDP of 4%. However, socially and morally the case is overwhelming. Someone who has overcome disadvantage, persevered in the face of adversity, and shown real strength of character is surely the one who deserves the opportunity to succeed and share in the rewards that society has to offer. Surely that is what a just society is all about.

2.10 pm

Baroness Perry of Southwark: My Lords, I welcome this debate and I congratulate my noble friend on her excellent speech. Most particularly, I welcome her emphasis on character and resilience as factors in any individual’s prospects. Although Governments have a role in ensuring that any barriers to mobility are removed and that opportunity is open to all, no Government can determine how any individual will live his or her life. Upward mobility comes from individuals grasping opportunities, working hard against the odds, leaping over barriers, setting themselves high goals, and often swimming against the stream of their own community and background. These things are done through character and resilience.

Although I rarely speak in personal terms, today I want to illustrate why I believe so strongly in the response of individuals to opportunity by telling a personal story. I am immensely proud of the women of my family across three generations before me. My great-grandmother, the first of the three, was a working-class girl from Sunderland. She was widowed while still a young woman and was left, as I understand it, almost destitute. Too proud to seek charity, she turned her hand to taking in washing to support her family.

Despite this, she was determined that her daughter, my grandmother, would have an education. Each week she would put a penny of her hard-earned income into a tin on the mantelpiece to pay the fees for the Dame School her daughter attended. My grandmother proudly told my sister and me that although she was only a little girl, she realised both that her mother could ill afford the weekly fee and that she was needed at home to help with the huge barrels of washing, which were the family’s business. Therefore, she told us, she worked really hard to complete the work for her school leaving examination and graduated, as they say, at the age of 10 instead of 11. Incidentally, despite the short spell of

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her education with an unqualified teacher, my grandmother wrote beautifully in an elegant script with perfect grammar and spelling, and read newspapers and books voraciously until her death at the age of 87.

The second of these women, my grandmother, had clearly inherited the character and resilience of her mother and was determined that her daughter, my mother, would have an even better education. Facing up to the prejudices of her husband, who said, “What’s the point of education for a girl? She’s going to get married, isn’t she?”, my grandmother’s fight was with him to ensure that my musically gifted mother won a scholarship to grammar school, stayed on for the sixth form, and gained both her teacher’s certificate and musical qualification from the Royal College of Music.

So we come to my gifted, passionate about education, aspirational mother, the rightful heir to her two female forebears. My earliest memories are of her 12-hour days spent teaching, marking, preparing lessons, cooking, cleaning and caring for her husband and two daughters. She coached us in our schoolwork and cheered us on to succeed at whatever we chose to do. I am for ever grateful to her.

These splendid women had strong characters and enormous resilience. They had little help from the state, but grasped every opportunity that came their way. They are, I believe, a paradigm for the determinants of social mobility. Governments of course have a duty to ensure that opportunities are there to be grasped and that the barriers of prejudice, injustice and low aspiration are removed. This Government are working to do just that, but ultimately it is people, women and men of determination who take their destiny into their hands and move from deprivation to aspiration. Such individuals shape not only their own destiny, but in so doing they move the whole of society forward.

2.14 pm

Lord Knight of Weymouth: My Lords, it is a pleasure to follow the noble Baroness. Listening to her stories, I commend to her Alan Johnson’s memoir of his childhood, which tells a similar and brilliant story. I say at the outset that I have just started working for Brent Council, chairing a commission on social mobility, which reflects on the achievement in their schools, which are now outperforming the national average but with no impact on social mobility or poverty. The council wants to understand that. That reflects my interest in community social mobility as much as individual social mobility. I very much welcome the debate and the way in which it was introduced by the noble Baroness, Lady Tyler.

By happy coincidence, today is also marked by Ofsted publishing its excellent report, Unseen Children: Access and Achievement 20 Years On. It is a welcome return by the Chief Inspector of Schools, Sir Michael Wilshaw, to focus on outcomes for disadvantaged pupils in England. Ofsted has found that underperformance is no longer dominated by areas with concentrations of deprivation. There is an explicit acknowledgement of the success of Labour’s London Challenge, set up by Stephen Twigg MP and then taken over by the noble Lord, Lord Adonis, the subsequent Manchester Challenge, overseen by the noble Baroness, Lady Hughes, and the Black Country Challenge, which I looked after. Those

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challenges used data to shine a light on underperformance and to identify top-performing leaders who could then support and challenge those schools and leaders who needed it most. The report therefore points to the importance of collaboration and to Governments taking a strategic approach to focus attention where improvement is needed.

I very much welcome the message from Ofsted that the rest of the country can learn from London. If Hackney, Newham and Tower Hamlets can raise results for free school meal pupils by 20% over five years and be 15% to 20% better than the national average, then anyone can. In the same period, my home county of Dorset managed only a 2% improvement for free school meals children, remaining 10% below the national average for those poorer pupils. It is high time that we shook schools in rural and coastal areas out of any complacency and used data to expose the underachievement of those who need good education more than most.

If we solve those problems in school, would we solve the problems of social mobility? Sadly, we need to do more. As the noble Baroness, Lady Tyler, said, we need to build resilience, to build the capability of all of us to deal with mistakes, to take risks and to learn from failure, to celebrate that failure, to have the traditional stiff upper lip but with empathy. That resilience is being strategically built in London boroughs such as Newham and Islington at both community and individual level. Alongside Every Child a Reader and Every Child Counts, Newham has Every Child a Musician as a programme and, as a council, has a huge volunteering programme for 7,000 elderly people. Elsewhere, organisations such as the Transformation Trust and Future First are doing a great job in offering after-school activity and state school alumni programmes which mirror some of the success of the private sector.

If we build resilience, will that do the trick? Another great obstacle remains. That is the poverty trap. I cannot see how children can get the support that they need at home, working with schools, or a richness of aspiration when they are burdened by acute poverty. Growing numbers of families, in Devon as much as Durham, are dependent on food banks to feed their families. The shortage of affordable housing to rent or own is common across rural and coastal areas and leads to overcrowding and very difficult study environments for children. Free-school-meal children need free school meals, but they are being cut. Rising debt leads to relationship breakdown. All of those features of poverty are getting worse. We need a welfare state that is not about managing poverty but more about helping people get out of poverty.

The Government are making life very uncomfortable for people dependent on welfare, but lack of time prevents me giving your Lordships anecdotes of the stories I have heard by those affected by the single-room rate and the benefit cap in Brent. The poverty trap is deepening, and increased homelessness, criminality and child poverty is the natural consequence. That in turn will further damage the social mobility and our country will continue to pay the price in a tragic waste of talent.

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2.18 pm

Baroness Sharp of Guildford: My Lords, I thank my noble friend Lady Tyler for introducing the debate and apologise to her and other Members in the Chamber for my being a few moments late. It was one of those annoying times when the first train was cancelled and the second got stuck outside Waterloo. I do apologise.

I very much appreciate the degree to which, by having this debate, my noble friend has focused our minds on the work of the APPG and, in particular, the report, with its seven key truths about social mobility. I was particularly struck by the commonsense definition of social mobility: the extent to which where you end up in terms of social class is different from where you started. It pointed out that that means that sometimes, people go down as well as up. It is also linked with a sense of happiness and well-being. You need to have aspirations—this comes out in character and resilience—and to have aspirations you need to be able to see a better future for yourself.

I want to concentrate my remarks on the universities as a key determinant of later opportunities. Great strides have been made in widening participation over the last two decades. For those in the socio-economic bracket of the lowest 20%, the difference in participation has gone from 9% in 2004 to 14% in 2011-12, which is very significant. For the bottom two quintiles it is now up to almost 20%, but that compares to 45% for the top quintile. It is therefore interesting that whereas the introduction of tuition fees has seen a 2% to 3% fall-off in application rates from the top quintile, this is not true of the bottom quintile. Those in the lower socio-economic brackets have actually maintained their participation rates rather than falling off. Equally, it is still three times more likely that if you come from the top economic group, you will go to university—and disproportionately so if you go to a private rather than a state school.

The publication earlier this week of the Social Mobility and Child Poverty Commission’s Fair Access Challenge in relation to universities, which reprised a report that it published last year, reminds us that while the general feeling in relation to universities is positive from the lower socio-economic groups, in the top Russell group universities the participation from those bottom groups is far lower, and fell during that same period of 2004 to 2012. Much of this, as the Seven Key Truths report makes clear, is because state school pupils do not achieve the required entry grades. This is why it is so important to improve the quality of teaching and teachers in state schools. As the noble Lord, Lord Knight, indicated, this is possible. The position of the London boroughs shows so well what can be achieved.

However, the conundrum is that there are still something like 3,700 or so young people who achieve the required grades but do not apply. This suggests that the widening participation message is not reaching them or, perhaps more significantly, their teachers. The message to the Government from this is that we most not relax the widening participation agenda, whether it is through pressure from OFFA or HEFCE’s funding towards widening participation.

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I should like to flag up two very important issues. First, on information, advice and guidance, there has been an almost complete collapse of careers education in schools and it is absolutely vital that young people get good and relevant advice. Secondly, the national scholarship programme needs reform. Most of the funding for this comes from the universities themselves, some of which use it for fee remission and fee waivers. Research has shown that this is much less effective than such things as supporting summer schools and outreach programmes. We need to be much smarter in using this money.

2.23 pm

Lord Northbourne: My Lords, in the time available I shall attempt to make only one point. There is no doubt in my mind that upward social mobility in our society—funnily, nobody ever speaks about downward social mobility—can be unfair to individuals and a lack of it can impoverish society. In spite of the withering critique by Civitas in the report that was published for this debate, I still believe that there is an extraordinarily strong case for encouraging upward social mobility. Like other noble Lords who have spoken, the Sutton Trust focused on the link between poverty and lack of social mobility. I recognise that that is extremely important, but we should by no means be perceiving it as the only cause or problem. There are other causes. The Government have done a lot to intervene and to support parents when their relationships break down or when their family falls apart. In my view, however, I question whether they are doing nearly enough to prevent these things happening in the first place. There is a real opportunity for prevention by doing more in schools to prepare young people for the challenges, responsibilities and opportunities of adult life.

There is a particular window of opportunity during adolescence around key stage 3, when most young people are eager to know more about the adult world they see looming ahead of them. In the best schools they get well trained teachers helping them to discuss and work out their hopes and problems—to think about and discuss the opportunities, challenges and responsibilities they will meet in the adult life that lies ahead of them.

Sadly, in the vast majority of schools, little or nothing is being done today to give pupils the help they need, while all the time commercial pressure and the media are doing their best to mislead them. Why are we not helping young people more?

There is a nominal entitlement to PSHE at key stage 3, but the recent Ofsted reports make it perfectly clear that in most secondary schools today, if PSHE is on the agenda at all it is delivered by teachers who have no specialist training in this subject. This is a seriously missed opportunity.

Help at that stage could bring two things. It could help the young people themselves to live better and fuller lives throughout their life. And it could also lead to their future children to have more stable and supportive environments in their families as they grown up.

I beg the Government to do more to help and lead young people to think more about the adult lives which lie ahead of them and to learn how to cope with

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the inevitable problems they will have to face from time to time. I beg the Government to set aside a little money—at least just a little money—to fund some of the teacher-training universities, so that they can research and develop programmes for that kind of teacher training. I know one that would be interested.

2.27 pm

The Lord Bishop of Derby: My Lords, I want to remind us of the context that a number of us have mentioned. Since the mid-1970s, there has been an increasing gap between those at the top and those at the bottom. That is the pole that we are talking about in terms of social mobility. We have three big groups now: those who are doing well; those who are surviving; and those who are dropping below the radar—that is the point made by the noble Lord, Lord Knight, about the poverty trap.

As other noble Lords have mentioned, social mobility between those poles implies the reality that some people are going down. I want to focus on that briefly, alongside the proper aspiration to help people go up. People will always be going down as well as up. If the measure is an economic and occupational one, we will struggle. We need other measures really to go for what I would call social inclusion. We should not talk about social mobility without talking about social inclusion, so that we reach out to those who are going down.

We know how easy it is for people to fall out of being included. There are emphases on particular skills or educational models which some people cannot access. We have a winner-take-all mentality, so we discard people quite easily. Sadly, the media and public attitudes are quite harsh towards those who are poor and in the poverty trap. There is a great deficit of compassion in our society. That is why the linking of this with character and resilience is so important. That is where we can be inclusive socially, whatever is happening economically or occupationally.

It was very inspiring to hear the family story of the noble Baroness, Lady Perry because resilience and character are not individual things; they are relational. One of the things that must be part of this mix is government doing all it can with others to support resilient families—like that of the noble Baroness—so that that can be a base for character and resilience in individual lives.

I want to give two brief examples from my own context. I am the Bishop of Derby, and Derby College works with the Prince’s Trust Team Programme. I have had contact with and heard the stories of people with Asperger’s syndrome, dyslexia, impaired vision or family breakdown—all the factors that get someone down and put them out of the loop. Through simple mentoring programmes and plenty of encouragement, character and resilience is built up, and there are many inspiring stories of people getting back into the game.

The charity JET is situated right in the middle of Derby. It is all about jobs, education and training. It brings together youngsters from testing environments and their schools recommend the programme for them. Through the mentoring and work experience that is available through engaging with this scheme, on average

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these youngsters’ exam grades go up fourfold. Simple things being done by small organisations can complement the family and give people character and resilience.

The point I really want to make is that character and resilience are not important simply so that someone can be more economically active; more important, they are the stuff of citizenship. We need the FE sector and charities like JET in Derby to build up the character and resilience of citizens so that when they are going down, as will happen, they have the qualities and resources to engage and get back up again.

I want to end with a number of questions for the Minister. Will he comment on the issue of social inclusion for those who are pushed downwards by the fact of social mobility? Could he also comment on the role of FE colleges and voluntary sector organisations in this? How can the Government support the formation of resilient families? Lastly, as young people build character, how can they develop a portfolio that they can carry around with them to show employers in the same way they show their exam results? How can we help young people to demonstrate that they are team players and are willing to turn up regularly? How can they show that they are characterful and resilient citizens? We need some kind of award, which would be a way of accepting and applauding the development of those skills.

2.31 pm

Baroness Miller of Chilthorne Domer: My Lords, I warmly thank my noble friend for enabling us to discuss this important issue. I think I subscribe more to the idea of equality than to that of social mobility for the reasons that the right reverend Prelate has just set out so well. It is gone into in depth in the book, The Spirit Level: Why Equality is Better for Everyone, and pursued by the work of the Equality Trust. Nevertheless, I recognise that character and resilience are very important, but perhaps noble Lords will dwell for a moment on how much character and resilience a child can have if they come to school without having had any breakfast and with perhaps just a Mars bar for lunch. Obviously, it does not mean that a child will not have any character, but the fact is that the child’s body will be in a much less good state for learning.

I have the privilege of chairing the All-Party Parliamentary Group on Food and Health. We have heard from a number of academics over the years about the impact that diet has on children’s ability to learn and on their life chances. Many noble Lords have spoken in this debate about the importance of education, and indeed my noble friend in her excellent introduction said that it is critical. If children are not able to learn because their diet is too poor, they are crucially disadvantaged for their entire life.

I can give some specific examples of this, one from Professor Andrew Scholey, the director of the Human Cognitive Neuroscience unit based at Northumbria University. The study he presented to our group compared the cognitive effects in children of two different breakfasts. One had a high glycaemic load—Coco Pops—and the other a low glycaemic load—All-Bran, but it could have been porridge. He found that the low GI breakfast is much more effective in protecting against a decline

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in performance. Other work on this has been done jointly by Nuffield College and the University of Essex showing effects on memory and attention span. Indeed, a survey by the Local Authority Catering Association found that snack foods that are high in sugar and fat produce problem behaviour. We can definitely say that a healthy diet improves children’s behaviour and academic performance. Of course, if you are badly behaved in school to enough of a degree, you end up being excluded, at the worst end of the spectrum, or possibly on Ritalin, because your diet means that you are on a permanent sugar high. There has also been much national and international research into the effect of vitamins, minerals and other compounds, such as amino-acids, on brain chemistry. Among the nutrients known to affect mood and behaviour are zinc, essential fatty acids, vitamins B5 and B6, calcium and magnesium.

I am sure that when the family of the noble Baroness, Lady Perry of Southwark, was going through that tremendous educational attainment, the diet may have been more basic but would have been more likely to contain the nutrients I have mentioned than the diet of today’s children. So the first problem is diet. The second problem is the lack of breakfast clubs. My final question to the Minister is: will he encourage Sir Michael Wilshaw at Ofsted to address this issue and not belittle the role of food in attainment?

2.36 pm

Lord Bilimoria: My Lords, the claim that social mobility in Britain has been falling is made regularly. On the other hand, a lot of the research on class mobility does not support this. Lots of studies have found that, if anything, relative class mobility—the probability of a working-class child getting into the middle class and a middle-class child ending up working class—has been rising since the 1950s. There is no question about it, however, there is a relationship between inequality and earnings elasticity. The Gini coefficient—a measure of inequality—has been rising over the last 20 to 30 years, particularly in countries like the United Kingdom and the United States, but also in Australia and Canada.

There is no question that there is a relationship between earnings and the benefit of going to university. On the other hand, there is a correlation between higher spending on higher education and higher levels of mobility. The reality is that we underinvest in higher education compared to the United States, compared to the EU average and compared to the OECD average. We do not invest as much in higher education as we should.

Despite this, however, our universities are doing a good job. Universities UK has shown that there has been a 30% increase in the proportion of young people from our most disadvantaged backgrounds entering universities since 2004. Progress is therefore being made. Are the Government are aware of a fabulous programme called GEEMA, the Group to Encourage Ethnic Minority Applications, at the University of Cambridge started in 1989 and in which I have taken part? It is a wonderful programme whereby the ethnic minority undergraduates at Cambridge take a week off during the summer and state school children from

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ethnic minority backgrounds, whose families invariably have never had a background of education in their history, come to spend a week in Cambridge and experience a week in the life of Cambridge University. This programme has a phenomenal effect on creating aspiration among these children, many of whom end up going to Cambridge itself. The programme has helped increase the number of BME undergraduates from 5.5% to 15%. Could the Government roll out this sort of programme in more universities around the country?

Our academies are doing a great job, but as somebody born and brought up in India who came over here to be educated like others in my family for three generations, I believe that the biggest mistake this country made was getting rid of the grammar schools. We have deprived so many of our bright children of their ability to progress. I know that this is a controversial subject, but I strongly believe this.

I thank the noble Baroness, Lady Tyler, for leading this debate. She spoke about character and resilience. The headmaster of Eton College, Tony Little—and I declare an interest; my older son is there—has noted that boarding schools are the nation’s untapped asset. He has said that children learn more from each other than from adults. They learn more from outside the classroom than from within. There are so many ways in which we can learn from schools in the private sector—as the noble Baroness said they make up 7% of the total and they produce so much excellence—but unfortunately they are not available to everybody.

I conclude by saying that I have seen with my own eyes the change in this country from when I came as a student in the early 1980s, when there was no aspiration but there was a glass ceiling. That glass ceiling has now been shattered and there is the ability in this country for anyone to get anywhere, regardless of race, religion or background. That culture is so important because those people’s success creates inspiration; inspiration creates aspiration; aspiration creates achievement; achievement creates inspiration. It is a virtuous circle.

2.40 pm

Baroness Sherlock: My Lords, this has been a great but very short debate. I am so sorry that I have only four minutes in which to respond, so I cannot possibly comment on the many wonderful speeches. However, there was some clear consensus around the Committee today. First, we all think that social mobility is good. We must also acknowledge that if we allow inequality to continue at the current level, it is inevitable that social mobility will require some people to go down as well as up, and perhaps go down quite a long way. Perhaps I can tempt the Minister to depart from his brief briefly and look at the way that someone like John Rawls might have encouraged us to think about the circumstances in which, given a choice of an equal or an unequal society, but with no way of knowing where we might end up in the distribution, most of us would come down firmly in favour of a more equal society. What might that tell us here?

With the possible exception of the noble Lord, Lord Bilimoria, there was also a recognition that social mobility is in trouble in Britain. After my first

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visit to the United States, I came away both impressed and shocked, feeling that I had come across a country which had very low social mobility but believed passionately in very high social mobility—hence the American dream. As my right honourable friend Ed Miliband said in a speech last year on this subject, the reality is that if you want the American dream, go to Finland. One of the challenges we have in Britain is that our social mobility is pretty poor by OECD standards, and slowing. We therefore have a problem; so what do we do?

I think we have all agreed that education is crucial. I will not repeat the many interesting ideas that have been put forward there. Most of us would agree that early intervention is also crucial. The previous Labour Government were very committed to this, as I am sure noble Lords will accept. We created Sure Start and invested in thousands of children’s centres. We also provided support for early years education and for disadvantaged pupils, and the attainment gap narrowed as a result. I worry about some of the changes in recent years. I am concerned at moves such as the scrapping of education maintenance allowance and the closure of children’s centres, and what that might mean down the track for opportunity.

I was pleased to hear both my noble friend Lord Knight of Weymouth and the right reverend Prelate the Bishop of Derby draw attention to some of the really severe barriers at the bottom where, with the best will in the world and even with lots of character, there are some pretty huge hurdles to overcome if one does not even get enough to eat, never mind having the kind of support that comes in other homes. That point was also made by the noble Baroness, Lady Miller. I, too, was hugely impressed at the great lineage that has produced the noble Baroness, Lady Perry. That clearly explains why we see such a force of nature here among us today.

I was also very interested to hear about the question of character because, aside from all the other questions, character and resilience are clearly important. I did a stint on the Riots, Communities and Victims Panel, which was set up to look into the 2011 riots. One thing we found was clear evidence that as well as enabling young people to take advantage of opportunities, character and resilience could mean that when a split-second moment of crisis came and someone had to make a choice that could be life changing, they would be enabled to make a good choice at that moment and not a bad one. It has real benefits both ways round. Given the comments made by the noble Baroness, Lady Tyler, to whose work and that of her All-Party Parliamentary Group I pay tribute, about the formation of character being as important—if not more important—than the acquisition of knowledge or other things, do the Government feel that that is reflected in their approach to the curriculum? I would be interested in the Minister's response on that.

I am with the right reverend prelate the Bishop of Derby on this: we need to be quite careful of being overly utilitarian. If we want to invest in character in order to get certain results, there is a slight danger that that is like trying to become happy, when it is by doing other things that one becomes happy. In that respect,

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in preparing for this debate I looked at various sources, including the Lexmond and Reeves 2009 report for Demos. I was childishly thrilled to find that they began with Aristotelian ethics. It was a fascinating notion. When Aristotle wrote about ethics, he was trying to set out the ways in which people could become better or pursue the good. However, they also told us that the closest translation of ta ethika was not, in fact, “ethics” but “matters to do with character”. In other words, character represents a set of life skills, not a moral disposition.

That tells us something quite exciting, I would suggest. It takes us to a view of character as a shorthand for a set of personal capabilities that research shows to be linked to a range of interesting positive outcomes. The report describes it as well-being. As the right reverend Prelate the Bishop of Derby said, that needs to be understood as well-being in its broadest and deepest sense of human flourishing. If we have people who are flourishing, we will find people who are more likely to succeed, make the right decisions at crisis points, do better in exams and get more fulfilling jobs, but they would also be better people and would build a better society. That is the prize really worth having.

2.45 pm

Lord Wallace of Saltaire: My Lords, we have had a really good Moses Room debate. As I have experienced on several occasions, it is something like an academic seminar, from which one learns a good deal. I thank the noble Baroness, Lady Tyler, partly because I should have been reading a lot of this stuff before and she made me read it. We have had a very interesting and informative debate in which I have to say that the speech of the noble Baroness, Lady Sherlock, was one of the most interesting and inspiring. I hope that we will now go away and start arguing about this more actively in our parties and groups to take it forward.

I have a speech with a whole range of statistics on what the Government are doing about social mobility, but I want to concentrate on character and resilience, which is the bit that has not been as emphasised in dealing with social mobility as it should have been.

I was originally a bit of a cynic about the big society, the national citizen service and community organisers, until I went to see a national citizen service scheme in Bradford last summer and spent a long afternoon with children from what I know to be some of the roughest schools in Bradford, when I was asked to teach them how to give a speech. It was fascinating, because I realised that I was dealing with people who thought that they could not do things, that they could never stand up in front of others and perform. I managed to persuade three of them to do so. I began to see that that course gives you that much more confidence to believe that you can do things which before you thought that you could not. I am now a strong proponent of national citizen service. We are expanding its coverage this summer. Of course, it is only one of the many elements that we need, but it is giving children at different levels more opportunity to realise: “I can do that”. It teaches them how to volunteer and to take part in community activities. That is exactly the sort of thing that helps.

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Similarly with the community organisers’ scheme. In Yorkshire, I see the problems of social mobility most of all in the big, almost entirely white estates in Bradford and Leeds—and occasionally in Sheffield and Hull. There is very high unemployment, a lot of intergenerational unemployment and a deep sense of grievance that the local authority does not look after them, but they do not actually look after themselves very much. There is a high incidence of Staffordshire bull terriers. There is a sense that nothing much is being done for them. The community organisers’ scheme tries to get them back into the habit of thinking that they could do some things for themselves with themselves, the local authority and local voluntary organisations. That is how you start to rebuild a community, because, as the right reverend Prelate said, the collapse of local community is part of the problem here. Your nonconformist church, your established church or whatever gave you a lot of those skills as you grew up within it. Sunday schools were not just about learning the number of books in the Old Testament, there were a lot of other things as well. That part of what the Government are doing is useful.

I declare an interest. For the past seven years, I have been chair of a musical charity. I was bounced into it by some young men who have been choristers at Westminster Abbey a long time after me, who decided that they were going to set up not only a choir but something that would bring music into primary schools. Two weeks ago, as they took over a church in the City of London, the right reverend Prelate the Bishop of London and I watched the Hackney Youth Children’s Choir performing. Evidently from their clothing, they were children from deprived backgrounds, standing up and performing in front of us and really enjoying themselves and therefore getting a sense that they can do things.

I believe that music in schools, as well as sport and getting people out learning to volunteer, is a very important part of building self-confidence. One of the reasons why the Parliament Choir is so good is that music teaches you two of the basic political skills: one, standing up in front of other people; and two, projecting your voice. Of course, that suggests that not everything we do on character and resilience needs to be done by government, let alone central government. A lot of this can be done by volunteers, by non-governmental organisations and by government—locally and centrally—and civil society working together.

A number of people have talked about early years and talking to small children. I have another personal interest in that I watch my two-and-a-half year-old grandson and am deeply conscious that the amount you talk to a small child comes right back at you over the months, and that those whose parents do not talk to them are a long way behind by the time they are three. In spite of the attacks in the Daily Mail, I am strongly in favour of local authorities and voluntary organisations providing parenting class incentives, explaining to young parents in particular what they can do for their children before they go to school, such as breakfast clubs and children’s centres. My figures suggest that actually the reduction in the number of children’s centres has been extremely small in the past

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two or three years. There has been a certain amount of merging and so on. We all recognise that this is a very important part of the mix of things that we need to do.

Moving on to what one does in the later years, I find it very depressing as I go around Yorkshire and ask people in pubs, restaurants and hotels why they employ so many Poles, Slovaks, Lithuanians and so on, and the answer is almost always, “Because they turn up for work on time, they do not take sick leave, they dress smartly and they want to get on”. Unfortunately, the children from these big inner-city estates tend to take a lot of sickies and often do not really want to work the hours that they would have to. We should be motivating them to think, “Actually, this is quite fun” and that living in Upper Wharfedale or wherever it may be for a bit might be also quite fun. It is not just a matter of forcing people to work and showing them what they can do but showing them that they can follow their own careers and that work cheers you up.

The noble Lord, Lord Knight, asked how we get people out of poverty. The best way to get people out of poverty is to get them into work—I think we all agree—and that is partly where character and resilience are needed to motivate all these people who are growing up, sitting around and complaining. I am conscious that I am caricaturing a little—but not very much. I have a vivid memory of an afternoon in Armley jail in Leeds talking to the “popos”—the persistent and prolific offenders—and thinking that these people actually had the talent to do things if they had only been directed and encouraged in the right way.

A number of other points have been made about state schools and public schools. The question of public benefit is clearly one that we need to revisit. I know that a number of public schools are sharing their excellent facilities with local state schools. That needs to be encouraged. It is something that they should be doing on their own anyway. They can certainly help with volunteering and getting out in local communities, and that is something that we should be taking a good deal further.

Universities and access were mentioned. Again, I have an interest to declare. When I taught at the University of Oxford, every year I used to take children from sixth forms in Wandsworth around Oxford. It was a disillusioning experience, I have to say. I did it because my children were at state schools in Wandsworth. The culture clash between many of the working-class children from Wandsworth and the admissions tutors at Oxford colleges was sometimes far too wide to be able to bridge. It is excellent that the Sutton Trust and others are doing a great deal with summer schools and access programmes. Partly re-educating the admissions tutors is a road we need to go down.

Apprenticeships help a great deal, particularly as we move towards keeping people in school until 17 and 18 and discouraging people from dropping out of education altogether. Giving people practical and directed work experience with apprenticeships is highly desirable. The number of apprenticeships has been rising over the past two years and we wish to take it a good deal further. Volunteering of all sorts—the Girl Guides, the Woodcraft Folk and all those other things—used

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to provide opportunities for this. We have to build that back in. As has also been said, this is all part of citizenship. It is not an accident that those big, working-class estates only provide a 15% turnout at local elections and about 25% at general elections. They feel completely disengaged, so we need to rebuild the local community for all these activities.

We have heard about a wider range of issues from my noble friend Lady Miller, the noble Baroness, Lady Sherlock, and the right reverend Prelate the Bishop of Derby on a more equal society and moral climate, which go wider than we can go on this occasion. We recognise that part of what went wrong over the past 25 years has been that we have become a much more atomised society, which valued wealth for its own sake and in which inequality has risen. Part of the argument that we all need to be making about taxation, personal reward and what companies and banks pay is that a society which is too unequal becomes a society which is very difficult to hold together. One loses a sense of common interest and community, locally, regionally and nationally. The banking commission hints at that in one or two places, but does not quite get sufficiently explicit on it; that sounds to me like a good role for the Church of England to take further in its contribution to the public debate.

Having made those comments as a wind-up to this seminar, I thank again my noble friend Lady Tyler for introducing this subject and for encouraging me to read a number of things which her All-Party Parliamentary Group has produced; I very much look forward to seeing what it produces from now on. I know that the Deputy Prime Minister and others are actively interested in the work of this group. We recognise that social mobility and inclusion are extremely complex areas. There is no single factor but a whole host of factors that come into play. I hope that we are all committed to building a more socially inclusive and coherent society.

2.57 pm

The Deputy Chairman of Committees (Baroness Gibson of Market Rasen): My Lords, we will now have a short break. The Committee stands adjourned until 3 pm.

Sitting suspended.

Financial Services

Question for Short Debate

3 pm

Asked by Lord Dykes

To ask Her Majesty’s Government what measures they are taking to support the contribution of the United Kingdom financial services sector to the economy.

Lord Dykes: My Lords, I very much welcome this debate and thank the Minister for being in attendance to answer the important points that I hope will be aired. Inevitably, I must deliberately leave out some items. There is so much to cover. The Minister and

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others in the debate will be delighted to learn, I am sure, that I am not going to try to cover everything. It would be a great mistake to do so.

I begin by congratulating the Minister and his colleagues on the agreement on the markets in financial instruments directive that was reached in the EU the day before yesterday. As the FT said yesterday, this was a good day for Britain in Europe,

“protecting the City of London against discrimination—proof that Britain’s interests are best served when the government sits at Europe’s top table rather than outside the room”.

That is an important lesson for the future.

The Parnassian beauty of this debate is that everybody more or less has the same time—nine minutes for every speaker, I think—as a result of our modest but high-quality list, including my old friend from the City, the noble Lord, Lord Flight. We changed the phraseology of the Question because I did not want the old Question concerning the City of London to obscure the obvious reality that there are many financial institutions elsewhere in the UK, from the West End of London to Edinburgh and other great cities. That is a fact of decentralisation, which is also a good thing.

The overall background is also the vital factor of our membership of the European Union, and I am inevitably going to cover some points about Europe. Membership of the EU is crucial for Britain and I think that the madness of leaving is dawning more and more on sensible people, even some of the more old-fashioned of our colleagues represented by an uncomfortably large group of rather right-wing Tory MPs in the other place. The latest House of Commons Foreign Affairs Select Committee report spells it out loud and clear, although it wisely steers clear of the immaturities implicit in hysterical referendumitis. I welcome the elegant but firm rap on the knuckles for inexperienced British Ministers set out in paragraphs 26, 27 and 28 of the committee’s conclusions and recommendations. I also welcome the bulk, but not all, of the evidence given to the committee by Business for New Europe, which sets out a solid enthusiasm for our continuing membership of the EU for practical reasons.

I declare an interest as a former member of the Stock Exchange and of a large institutional stockbroking firm in the City for many years, and other City interests. Those of us who are proud of the good side of the City of London and its immense contribution to Britain over the years, including assisting the general public in myriad ways with practical financial instruments, were heartened by the flattering words in January of the Swedish Minister for Finance, Anders Borg, who said that for Sweden,

“keeping Britain in the EU is a very high priority. We have a big banking sector and a lot of work goes through the City of London. If the UK leaves the EU it could create a lot of problems”.

A balance is also needed between excessive adulation of the City, which is wrong, and unfair criticism. I hope that my own references to this in the debate that I opened in Grand Committee on 22 April on the dangers of UK isolation in Europe, at col. GC 290, in the last but two paragraphs at the end of my speech, caught that balance. We also need to grasp the fact

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that the other member states have some hesitations on the bad or toxic side of City financial activities, which came to their monstrous conclusion in 2007-08 and onwards.

Indeed, I detect that some of the right-wing comics that masquerade as newspapers in this country are less keen to say that brilliantly talented spivs who are good at fund management speculation and excessive risk-taking using other people’s money here will go abroad if we deny them lavish and unjustified bonuses or force them—horror of horrors—actually to pay conventional UK income taxes. If they insist, say I, let them go abroad.

Coming back to the positive aspects of our financial services sector, we can indeed be proud of what has been achieved here over the years on a secular growth basis. As we know all too vividly, this country usually has a large and uncomfortable physical trade deficit with most other advanced countries in the world with the possible exception, depending on the latest figures, of the United States, which is also a rather inefficient and heavy importer. Just as Germany is immensely proud of its industry—particularly its motor vehicle industry, which is one of the wonders of the world—we admire our own financial services sector for what it achieves in a non-visible surplus for us in direct and indirect investments, insurance, shipping and, of course, banking and fund management forms.

When government is called on to “protect” a valuable sector, I trust it will always be in the sense of upholding the single market rather than seeking artificial propping-up exercises, which would not be justified. Happily, our present coalition Government have always upheld the principles of transparency, free and open markets—with a genuine single market—and robust competition. The Prime Minister has moved away, thankfully, from calls for what seemed to be special unilateral privileges, as in the bizarre antics of December 2011 in Brussels, to asserting rightly the equality of conditions philosophy. I think that will now persist.

At this stage, I would particularly welcome it if my noble friend the Minister could bring us up to date on government thinking on the eurozone’s proposed financial transactions tax and our most recent responses, since it seems to have stalled somewhat as a formal proposal among some inner core member states. Even if talks resumed soon, I doubt whether it could commence before 2015-16 at the earliest. I assume meanwhile that the City of London Corporation is maintaining its strong opposition, although many foreigners are puzzled when, after all, we have a pretty onerous stamp duty system on quoted investments and property purchases in this country.

However, we remain highly integrated with financial markets within other EU members. I believe we account for three-quarters of foreign exchange trading in Europe, some 85% of all hedge fund assets and well over two-thirds of all interest rate derivatives, despite the fallout from the world crisis in the previous decade—a crisis which, we need to remember, started in the USA, apart from the Northern Rock debacle of the previous year. Just as official circles in the UK quite rightly hammer home the primordial need for the single market

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to develop more deeply in every sphere so that, EU- wide, consumers of goods and services can benefit from equal conditions in the theoretically perfect market set-up, so the other member states are justified in insisting that Britain remains a good member of the club and accepts freely agreed EU-wide legislation for market conformity in all spheres. The general public interest surely demands this in commonsense terms.

The mid-May ECOFIN meeting in Brussels highlighted some of these imperatives for, as usual, a raft of new Commission objectives in draft legislation were discussed to gain some progress in complex fields. I have already mentioned the markets in financial instruments provision; my thanks again to the Minister for what he has achieved there. There is the latest text of the market abuse directive, the mortgage credit directive, directive IV on capital requirements and the legislation drawn up to deal with money laundering. The amended text of the savings tax agreement with third countries and the Council draft for the EU savings directive were also discussed briefly at that meeting. If my noble friend the Minister has time today to refer to some of these, I will be grateful. I will understand if he is unable to cover them all.

In other large areas, does my noble friend have time to refer to the Government’s responses to the need to return RBS and the other taxpayers’ emergency stake in Lloyds Bank Group to the private sector and to shareholders, how the other leading banks are faring in returning to giving adequate support to UK industry and commerce and, if he has time, what position the Government take on the Co-op Bank crisis, which is a sad development? Finally, if he can deal even briefly with official attitudes to the latest developments in the attempts by the LSE and other leading bourses in Europe to achieve synergy and modernisation, I would be most grateful.

Perhaps it would be reasonable at the current state of play to ponder the future in a wider sense. I believe that the impact and success of the British financial services industry will continue, both as a great national asset and as a solid contributor to the overall strength and cohesion of the Union’s single market. What is disturbing, however, is the way in which subtle and sometimes not-so-subtle elements are creeping into this overall scenario which, particularly at times of severe socio-economic austerity in many parts of the EU, are in danger of increasing irredentism and fissiparous pulls among traditionally friendly allies within the 28, weakening the single market philosophy. We need to acknowledge that the others really and profoundly want us to stay as members, but seemingly not at the price of conceding to us anything other than the normative and steady moderations of the Union’s acquis, which for them is constant reform, and most definitely not the old-fashioned notion of reform that has been expressed in some parts of the other place in recent months.

It is never a weakness in framing sensible policies to appraise what the others think of us. They were not impressed at us being the odd man out so often in recent times. They were contemptuous when we failed to join them in the eurozone when it first started, and of course we were slow to offer them real support

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when their crisis over a smallish number of weak member states began in 2008. That is now water under the bridge and it is time for us to work together. We are taking the lead, I hope, in pursuing the tax evasion problem, particularly with France, Germany, Italy and Spain, which will also oblige us to deal at long last with our many island tax havens from the old Empire.

Finally, I would just add a reminder. Professor Pauline Schnapper, the leader in British studies at the Sorbonne Nouvelle University, reminded us recently that the EU has actually been evolving in a rather British direction over the past 15 years, showing greater pragmatism and empiricism alongside enlargement. That should help us even more to shun isolationism in the coming years. As I believe the euro will remain and in the future will be an even stronger international currency, I hope that one day we will regain our nerve and even join the eurozone.

3.11 pm

Lord Flight: My Lords, first, I declare my interests as set out in the register, but which amount to 43 years in the investment management industry. Although I want to talk specifically about the initiatives in this year’s Finance Bill, I should say that when I started my career, I remember someone older than me asking, “Why on earth are you coming into this? London is too big and it only services the UK economy. It has lost all its international business”. He could not have been more wrong. One of the things that I am proud of over my career has been to see London return to being the major financial capital of the world, earning somewhere between £60 billion and £70 billion a year in invisibles that help to pay for so many of those cheap Chinese imports. Although the City is certainly subject to criticism, to regulation, and even to a Government policy that led to the banking crisis, it is an incredibly valuable asset to this country. For those who say that it is too big, I would just point to Hong Kong where the financial services industry is a far larger proportion of the economy, but because it got its financial regulation and economic policy right, it has never been a major problem. Rather than contract the City, let us expand other areas and get its regulation correct.

I want to speak about the initiative in this year’s Finance Bill which will set up the UK investment management strategy, a Treasury paper published back in March. I greatly welcome this. It is there to try to get more foreign fund management businesses to come to this country. That might obviously benefit those who work for them, as well as the lawyers, accountants, regulators and even HMRC because they would provide another source of income. By the way, I think that the total fund management industry represents around 1% of GDP, some £12 billion per annum, so as a sub-section it is pretty significant.

Thirty years ago, when my noble friend Lord Lamont was the Financial Secretary to the Treasury, I tried to persuade him to remove taxation on funds, then unit trusts, and put it firmly on individual investors in order to stop Luxembourg taking masses of new business which could rightly have come to London. The Revenue would not accept the argument, and so Luxembourg emerged with its huge industry of today,

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but at the time it did not exist. At last HMRC has got the message that this is an industry worth having in this country.

There is a level of serious commitment within the Government’s measures. First, there is the commitment to abolish the stamp duty reserve tax, of which there has been criticism for many years. Secondly, there is a commitment to make sure that the tax status of non UK-domiciled funds will not be affected if they are obliged to appoint a UK AIFM. I look forward to working with TheCityUK and the new Financial Services Trade and Investment Board to come up with an agenda of what I would call constructive proposals which might be politically possible, and I am glad to see that the IMA is coming up with good initiatives aimed at creating greater cost transparency in terms of the amounts charged by various funds.

There are obviously two key factors. One is tax; the other is regulation. The tax regime needs to be attractive for funds. It also needs to be attractive for the staff who might work for them; it needs to be competitive. Regulation needs to be, first and above all, good; and, secondly, it must not be too expensive or over-bureaucratic. Otherwise people will want to go to other places.

On the tax front, I remember some 12 years ago when I was seeking to drum up support for the Conservative Party in the City, one of the major world banks said to me, “We are totally happy as long as income tax remains at 40%, as introduced by Prime Minister Blair, and, secondly, as long as the pension plan arrangements aren’t interfered with”. Well, sadly, both of those have been lost. They were then boasting to me about the numbers of staff they transferred from Paris and Frankfurt to London. Do not forget that individual tax matters as well as the tax on the operations themselves.

I know that the Government are concerned because probably the largest fund management group in London has recently started shipping staff and a lot of its new business off to Luxembourg. I have explored that and it is really not about the taxation of funds; it is about the taxation of individuals. In particular, it is about what I think was a very unwise and aggressive taxation of non-doms relating to their property ownership, which for many will involve a 7% per annum mansion tax. For funds and the fund management business, broadly the tax regime over here is fine; and as corporation tax comes down to 20% for fund managers it becomes an attractive tax regime.

Again there is some very interesting data here in the Government’s paper. The volume of funds managed has risen from £2.7 to £5 trillion in the past six years. Where this paper is slightly mistaken is that while it initially focuses on the volume of funds managed in the UK, which is what matters, it also focuses on the domicile of funds. In fact, managing the funds—irrespective of where they are domiciled—is where employment and revenues come. It is much more important to keep the UK an attractive place to manage funds that are not actually domiciled here. There is a slight error there.

The second mistake is that the paper suggests that the new AIFMD regime may be good for the UK as it will encourage funds to be domiciled here. I think it is

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serious bad news for the UK and will lead to a significant loss of business. It is very expensive and very hasslesome. Anyone who is managing funds which are not to be marketed to the EEA and EU are going to move elsewhere and, indeed, are starting to move elsewhere—predominantly to Singapore and Hong Kong.

I am no great liker of hedge funds and have never invested a penny in one, but there is a great misconception in Europe that hedge funds caused the financial crisis, whereas it was money being easy for too long, bad regulation and so forth. It was really the banks and not the fund management industry that led to the trouble. In terms of regulations, the FSA as it was had become unnecessarily hostile to the fund management industry. Many reputable businesses said to me that they did not want to raise their criticisms of certain regulatory initiatives because they were frightened of retribution. There was a breakdown in communication. However, in Luxembourg, again, they virtually embrace you with both arms and offer you all manner of inducement and attraction if you will come and bring your business to them. I am pleased that the Treasury is “in discussions” with the FCA on that territory.

London obviously has a huge amount to offer: lots of people with high skills, a wonderful place to live, wonderfully international and so forth. However, I think that there is one danger of undermining all these attractions by an increasing nightmare of regulation. It is not just an AIFMD; the threat of the transaction tax would be a disaster for London and the trickle-down effect means often that it would turn out to be at least 1%. I hope that the Government will go to extreme measures to stop it happening—although I am hopeful that Merkel wants to give it up once the election is over We will now have to put up with EMIR. The Government have done quite well on MiFID II but are still somewhat protectionist towards third country suppliers. We have ESMA wanting to take over regulation in this country. Candidly, I have never known a more exhausting time of masses of excess and useless regulation, particularly the AIFM report. No one will read it—it is so voluminous and completely unnecessary.

Contrary to my noble friend Lord Dykes’s extolling of the situation, the main threat to the UK fund-management industry is the regulation coming from the EU. I end by saying that it was a great mistake of the previous Government to surrender sovereignty on financial regulation to the EU. We are inevitably vulnerable because some 70% of all financial transactions for the entire EU are done in London. I do not particularly blame Paris and Germany for thinking that they would like to have a bit of the cake and to encourage measures which might lead to that. As someone in the industry, I see that as the biggest threat.

3.20 pm

Baroness Goudie: My Lords, I thank the noble Lord, Lord Dykes, for arranging for this debate. Like the noble Lord, I say that it would be a great mistake for Great Britain to leave Europe. We should not consider this at all. I hope that, in the long term, it will not happen.

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On the issue that Europe matters today, we have to move on from the disaster of 2008. We cannot look back at what it was; we can never go back so we have to move on. The key issue is that the prospects for the financial services industry are good. Last year’s Kay review on equality markets and the recent report of the Parliamentary Commission on Banking Standards demonstrate that the UK is leading Europe in the debate on the direction of domestic and international financial reforms. Negative perceptions of the industry remain largely based around the lack of diversity, both in terms of gender and ethnicity, as well as remuneration, on which the Government have published a report of the Commons committee. No doubt we will debate the whole question of diversity, women on boards and equal pay in the next year. I do not need to go down that road today, but economies cannot prosper if half of the population is behind. Research from the World Economic Forum in 2012 said that women now represent 40% of the global market force, which is a little higher in this country, and that more than half of the world’s university students are women—again, it is higher in this country. For a functioning economy, its full potential of women’s skills and talents is very important—including the export and import of those who are educated here and who then go back home. The GDP they bring to those countries is vital for a stable world.

Coming back to this country, across the domestic and international activities, financial and professional services have contributed more than £200 billion to the UK economy since 2012. In aggregate terms, the contribution of the financial services industry represents some 15% of UK GDP. Exports made up a substantial share of the contribution, of up to 40%, of the financial services to the GDP, arising from the sector’s exports and those services provided to overseas clients. We should also be aware that when people require something we sell, like law and education, our financial services are very much sought-after in the Middle East and other countries. That is one of our soft powers that we should be looking to.

The trade surpluses of the financial and professional service sectors are roughly the same as the combined services of all other net industries in the UK. Some of our specific contributions are that our insurance business is the best and largest in Europe. We have 251 or more different banks working in the UK, including those based here. The UK has the second-largest pensions industry in the world, with total investments of £1.9 trillion. That is a huge sum of money; it is inconceivable, but it is vital to Britain. In 2012, the UK private equity and venture capital sectors managed assets of £200 billion.

UK private equity funds invested in more than 800 companies. People talk about hedge funds and different instruments of finance, but they do not realise that without them and that investment, we would not have the companies we have, because no longer do the real banks want to invest. The real problem we are having is for SMEs, 40% of which are now run by women, employing men and women, which are having great difficulties. Although the banks have promised to lend to them, they have not been able to get funding. That is not because they do not have order books or money coming in, it is because they just need that

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extra couple of hundred thousand pounds to tide them over for a year, but there is no one to talk to, because you do not have banks any more. Metro Bank has started up locally in the high street, but we do not have our usual banks to go to.

I know that this is old-fashioned, but some people need to talk to someone, not a call centre but somebody to talk to. Standard Chartered, for example, which is working in Asia, has people in middle management there to meet you and to offer to look after you. It is the same in Hong Kong and Singapore: if you want to go to the bank, there is someone to meet you who wants to talk to you. Whatever deal we finally do with the Royal Bank of Scotland and Lloyds—we do not know what will happen with one or two others yet; I hope nothing—if they will not open places, which cost money, there should be the availability to talk to somebody, because talking to a call centre or an individual who does not know you or your industry and has never been to your factory is not the same. That is vital to today’s economy. Those of us who live in London or Scotland know that the back-office industry there is huge, but in the middle of the country, there is nothing. There are no banks, there is nowhere for people to go to talk to someone. We must encourage building societies and those other banks to open up, even if they are opening up in a mall, so that there is a place where people can make an appointment to see someone. They do not have to be there permanently, but people need to be able to make an appointment to come from wherever they are working.

For our economy to function, we need to use the full potential of women’s skills—coming back to SMEs—and they need someone to go to talk to. We do not want them going to get the money, not from payday loans, but from other companies which will lend money to SMEs at high interest rates. Those companies are too big to take microfinance. We know that microfinance, because it loans the money from the banks, is charging higher interest.

I hope that the Government will consider those ideas and what we have managed to tackle together since 2008, and move forward. We must move forward to take our place in the world, and enable the potential of people in university and in school and ensure that they are not left on the heap.

3.28 pm

Lord Bilimoria: My Lords, in 2011, the financial and insurance services sector contributed more than £125 billion to the GVA of the UK economy. That is more than 9% of our total GVA. London itself accounted for 46% of the total GVA of the finance and insurance sector in 2009. The contribution to jobs approaches 4%. The other point is that trade in financial services contributed huge amount to the trade surplus that the UK has in services. The banking sector alone contributed £21 billion to UK tax receipts in corporation tax, income tax and national insurance. The OBR has shown that in 2007-08, the effective tax burden from corporate and income tax as a share of the GVA was the highest for the financial intermediaries. That is partly because of the relatively high profits that the sector makes compared to its contribution to GVA.

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Again, according to the OBR, in 2010-11 the financial sector accounted for around 7% of government receipts once the bank payroll tax and bank levy were included.

It is a huge sector. As the noble Baroness, Lady Goudie, said, the financial services sector accounts for 9.6% of GDP, but if you add the professional services—a further 4.9%—it makes up almost 15%. Relative to other countries, the financial services sector is very important for Britain. It is much higher than in the United States, where it is just over 7% of the economy, and it is more than double a percentage of our GDP compared with countries such as Japan, France and Germany.

Of course, we then come on to the question of whether we have a balanced economy. I thank the noble Lord, Lord Dykes, for initiating this really important debate at this time. The noble Lord, Lord Flight, mentioned the importance of the City of London. The joke is that the Lord Mayor of London—and the City—makes the money and the Mayor of London, Boris Johnson, spends the money. I do not think that this bizarre situation exists anywhere else in the world, where you have power and finance in a square mile of a huge city. Do we have the balance right? Do we have the relationship right? Does it need to change? I am not suggesting for one moment that it needs to, but I would be very interested in the Government’s opinion on this very important relationship.

The noble Lord, Lord Dykes, spoke about the European Union. One of the UK’s great advantages, particularly when it comes to financial services, is that we are not only at the top table of the European Union but we are seen by countries such as India as a gateway to Europe. As a founding chairman of the UK-India Business Council, I know how important this is for Indian companies. It is crucial that we stay at the top table of Europe, although I completely agree with the noble Lord, Lord Dykes, that any talk of a tax on financial transactions would be a disaster. We need to keep the balance right and thank God we do not belong to the euro.

Another advantage that London has is AIM. The Alternative Investment Market started in 1995 and is coming up to its 20th anniversary. It is a huge success but to this day, AIM shares are not allowed to be included in ISAs. I declare my interest as the senior independent director of the Booker Group. When I joined the board nearly six years ago we were an AIM company. We then graduated to the main list and are now a FTSE-250 company. I find the situation so difficult to understand. I believe the Chancellor said in the Autumn Statement that this would be looked into and that consultations would start in 2013. They still have not started and AIM shares still cannot be included in ISAs. So we are not really encouraging investment in these shares as much as we could. AIM is a crucial market in encouraging entrepreneurship and growth companies, not just for the UK but I know how attractive an AIM listing is even to companies from India. Perhaps the Minister could talk about the importance of AIM, in particular AIM in ISAs.

When I used to promote Britain when doing business with India, I would always speak with pride of our light-touch regulation and of what Margaret Thatcher

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did in the 1980s in opening up Britain and the City of London with the big bang, and how this gentlemen’s club and closed shop opened up into being a meritocracy, and the world’s greatest financial institutions flocked to London, and London has flourished. But later, after the financial crisis, my colleagues abroad would say, “Ah, what happened to your light-touch regulation?”. I would speak with pride about the independence of the Monetary Policy Committee, one of the best things that Gordon Brown did when he was Chancellor.

However, in 2007, when this country was hit by the subprime crisis that became the credit crunch, that became the financial crisis, that became the great recession, that turned into the sovereign debt crisis, that turned into the eurozone crisis, we realised the mistakes that we had made. The Treasury, Bank of England and the FSA, which in all the good times leading up to this crisis were a happy merry-go-round, suddenly turned into this great blame-go-round. I remember taking part in the debates on the Bill to nationalise Northern Rock in early 2008. Northern Rock went bust in September 2007 and was nationalised within six months; it cost £26 billion to bail out a company—the biggest bailout of any one company in the history of the world. We are now talking about RBS and Lloyds. It has now taken six years to come up with our new financial supervision regulations which will be much more robust. Perhaps the Minister could talk about that.

We get into problems and are attacked because of our tax system and companies not paying enough tax. Well, the GAAR—the anti-abuse regulations—have been brought in, but will not stop the Starbucks and Googles from what they are doing. This brings me to the point of perception and reality. I chaired a meeting of the Industry and Parliament Trust. Sadly, the public’s trust in business is 16%, and in government it is 17%. Shockingly, in a poll after the Olympics which asked, “Are you proud of Britain?”, the vast majority of the public were. When asked, “Are you proud of British business?”, only 4% were.

Earlier this week, I spoke at Oxford University for the reputation executive leadership programme at the Centre for Corporate Reputation in the Saïd Business School. It is clear there that the finance sector, and bankers in particular, have a terrible reputation at the moment. There is a lack of trust. On brands, which I spoke about, the financial sector, London and the City are a brand. What is a brand? I know about brands from my own business, Cobra Beer. A brand is what a brand does. The Harvard Business Review recently published a survey of 25,000 companies over 40 years. It identified the companies that were successful over a sustained period and called them miracle makers. They followed three principles: first, they followed “better before price”; secondly, “revenue before costs”; and thirdly, only those first two principles mattered. “Better before price” is all about quality. The City has fantastic quality, our financial sector has amazing quality and our professional services have the best of the best in the world.

“Revenue before costs” is about whether we are growing enough. Are the Government committed to growing the financial sector? I hope that with the

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arrival of the new Governor of the Bank of England—a Canadian, of which I am proud; it shows our openness as a country and an economy—not only will we target inflation but GDP growth. Will the Minister confirm that? It would promote growth in our financial sector.

I conclude that, while we may not have an empire any more, one of the legacies of the biggest empire that the world has ever known is the City of London and our great financial sector. It is one of the jewels in the Crown of our great country.

3.37 pm

Lord Davies of Oldham: My Lords, it may well be one of the jewels in the Crown, but it is somewhat tarnished. I congratulate the noble Lord, Lord Dykes, on raising this issue at this time, which is of the most profound significance for the nation—wider, I think, than the agenda that he addressed. I agree with him about aspects of looking at the financial transaction tax. I have great reservations about that being proposed in Europe. If there is a possibility of such a tax, endorsed by the Americans, which would help to ensure that the finance capital, the City of London, and other centres across the world repaid the colossal debt they owe to wider society as a result of their mismanagement of the financial sector, that is only right and proper.

It is inconceivable that we return to the age of light regulation. Light regulation brought this country to its knees. We have more than 2 million people unemployed; we have 1 million young people unable to obtain jobs. We have a colossal problem with the cutbacks in public services, which are felt as a massive cost for all but particularly those who are very dependent on them for benefits and support. What is more, what does it amount to that each and every man, woman and child in this country has paid out £19,000 to the financial sector to create the bailouts to get out of the colossal mess that we are in?

Of course, I have no doubt that comments will be made about “the Government of light regulation”. The Conservative Party points the finger and says that Labour was in power at the time, as indeed we were, and was guilty of not having taken sufficient note of the impending crisis, but the Conservative Party was carrying down exactly the norms of light regulation that have been expressed today. What the country is demanding, however, is answerability. Of course we must create a base on which the financial services flourish, but it is demanding that they flourish within a framework where we never again see a crisis like the one we have had these past four years. Why not? Because we may well be in the greatest depression for a century and it may take us more than a decade to recover from it.

Already, current living standards are considerably below what they were in 2007. That is the price which the nation is paying and it ill behoves those who argue that the financial services need to be respected—of course they do. How could you do anything else with a sector of the economy which, as noble Lords have identified, amounts to such importance in it? The noble Lords, Lord Bilimoria, Lord Dykes and Lord

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Flight, all identified the importance of the City to the economy. Nobody is underestimating how significant that is, because we all know the figures.

However, the Prime Minister said that we must rebalance the economy. What does he mean by that? He must, at the very least, mean two things: first, that overdependence on the financial services industry makes the economy vulnerable, as it certainly did in 2007; secondly, that the vast majority of employment in the financial sector is within 20 miles of this Building. It is in London or the south-eastern counties, and if you talk about rebalancing the economy you have to look at areas where people are grossly underemployed at present and where capital is at low levels, such as the north of England, the north-west and elsewhere. A balanced economy will require those issues to be addressed. That is why it is necessary for the Government to spell out the position that they are going to adopt. They will have that opportunity on numerous imminent occasions.

It is important that the Government address themselves to the fundamental problems of our economy at present. I give them all credit for the way in which they have addressed the banking issue. I am not enamoured of the stance on banking but I congratulate the Government on recognising that we had to have banking legislation to clear up the mess of the past. Where I and my party have our reservations, which will be voiced as we consider the banking Bill, is that the question of sanctions seems to be rather marginal. For instance, the Government do not seem to think that there is much more to do than the Vickers fencing-off of the position of the banks, rather than the direct separation that may be necessary. After all, we have one instance before us at present in the Royal Bank of Scotland. What are the Government going to do about that? Should they not, at the very least, consider whether there should be a separation between the retail and investment arms of RBS as a solution to that position? Would that not also indicate that the legislation ought to consider that dimension?

I come briefly to the question of the financial transaction tax, which the noble Lord, Lord Dykes, raised. I agreed with his sentiments that there is much merit in it. The merit in it is quite straightforward: it potentially raises vastly more than stamp duty raises at present. It is also necessary that the financial services sector meets the obligations in terms of proper payment, particularly against a background where the country is scandalised that at the peak of the crisis, absolutely unjustifiable bonuses were being paid out to leading figures, and where not just incompetence but the depth to which finance had descended in terms of morality was being revealed. You cannot look at the LIBOR issue and the immorality of the terrible risk-taking with other people’s money without recognising the old adage of, “My word is my bond”. The morality of the City needs to be restored because what has been going on is untenable.

The financial transaction tax is an important concept. I recognise that Britain certainly could not go forward with it if the United States remained hostile to the position. We could not have New York not being a part of it. However, if the American Administration

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began to see the merits of the tax, and the European countries—11 at the moment and more to be added to the list—lend their support to the concept, it would be appalling if the British Government did not recognise those merits as well. That is not to endorse what is before the Government at present, and I acknowledge entirely their resistance to what is now on the table. However, I would argue that it is the concept that ought to be worked on, thought through and improved.

The Committee will be aware of the fact that I am grateful for this opportunity. It has come a little prematurely because I had expected it to be in response to a Statement in the House, which unfortunately we did not get yesterday. After all, the Commission on Banking Standards has pointed to a significant way forward. We are all desperately eager to get the Government’s definitive response to the crucial issues raised by the commission. We did not have a chance to consider a Statement yesterday, and I do not think that we will get to the banking Bill in real terms for some time. I am therefore grateful to the noble Lord, Lord Dykes, for giving us a chance at least to make some contribution today.

3.47 pm

The Commercial Secretary to the Treasury (Lord Deighton): My Lords, I thank my noble friend Lord Dykes for giving us an opportunity to discuss this important question. I think that some very interesting issues were raised. I am not sure that there is much disagreement over principle; on practice and implementation, there may be some more. Everyone gave their own measure of how important the financial services sector is to the UK economy, and the obvious implication of that is that we need to nourish and protect it, and to use it as an engine for our future growth; I think that everybody accepts that. My own numbers demonstrate that the financial services sector represents 10% of our gross domestic product, 12% of our tax revenue and half of our trade surplus, and employs over 1 million people—two-thirds of whom are outside London. It was very helpful to hear reference being made to the broader industries involved, such as the pensions industry. I was at a meeting recently with the Indian finance Minister, who asked us to help train India’s whole actuaries sector, such is the respect with which our pensions industry is regarded.

I am also very persuaded by the soft power arguments in support of our law and education expertise. Every time I travel with the aim of trying to bring money into the UK or help UK businesses overseas, there is a British law firm that is regarded as the leading light in virtually every territory. It is an extraordinarily good example of soft power. It is a similar case with our education system. The countries in which we are most effective are those where the current ruling elite were educated in the United Kingdom. What worries me is that when I look at the next generation, a smaller proportion have been educated here. However, it is a very powerful base from which to develop relationships that help us to win business.

As well as being a major employer, the role of the banking sector in particular as a provider of credit and financial services to businesses and consumers is

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critical. What we are really talking about in most of this discussion is how we can build a safe and secure system, repair the damage that was caused during the crisis, and put it on a sound footing in order to deal with all the issues.

I was slightly worried that the tone of the comments of the noble Lord, Lord Davies, meant that he was looking for a fight around regulation. I am not a fan of light regulation like my noble friend Lord Flight. I am a fan of very good regulation and this Government have been the leader in devising the architecture and the systems that are now being put in place to make this system better. We are absolutely in agreement. It is good regulation we want, not lots of bureaucracy, and that is a critical distinction to make. We all accept that the financial crisis was in part caused—certainly exacerbated—by certain practices within the banks and we have to get that corrected to ensure that it does not happen again and we do not leave taxpayers with the bill.

This is probably a good time to follow up on what my right honourable friend the Chancellor talked about in the Mansion House speech last night: the plan going forward for RBS and Lloyds in particular. There are three key objectives in the plan to restore them to good health: first, that they can play a strong role in their support of the economy; secondly, that any transactions that result in the sale of shares represent excellent value for money for the taxpayer; and, thirdly, that we will do whatever we can in restructuring and working with the banks to return them to private ownership. As the Chancellor announced, Lloyds is a lot closer so it is being prepared for a sale of shares to institutions; RBS is still some time away. With regard to the noble Lord’s suggestions, one of the restructuring options being looked at is the so-called good bank/bad bank split, which is pretty consistent with dividing it into a retail and wholesale bank. Certainly something that will be evaluated quite carefully is whether that is the better structural option.

My noble friend Lord Dykes referred to the Co-operative Bank and the surprising speed with which that problem was revealed. The bank is working very well with the regulators to ensure that its capital position is being addressed. It is being addressed without recourse to the public purse, which is a good step forward in terms of how these resolution processes take place. However, the Government continue to support mutual structures, building societies, et cetera, so that really is an important part of competition in the banking sector.

We have had quite a discussion about rebalancing, which is a very popular word that is applied to almost every aspect of our lives these days. In terms of making the banking sector less crucial to the UK economy, I am much more interested in growing other industries than in shrinking the banking sector just for the sake of it. It would be sensible to shrink it if it was too engaged in risky businesses, but I do not think our objective should be simply to reduce the scale of the banking business. The focus needs to be on ensuring that we have a healthy business. As was pointed out, Hong Kong has a bigger relative financial sector than we do. The focus needs to be on our broader economic

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strategy to help support other businesses, particularly those that can bring jobs and growth to the economy outside the south-east of England, where the financial services jobs are predominantly based.

One of the proactive things that we are trying to do as a Government to ensure that the financial services sector is protected is to ensure that the way in which we regulate and tax the market and all the infrastructure services we provide to the City of London continue to allow it to be the most effective, successful, dynamic financial sector in the world. That should be our objective. That is how we bring business in. That is why banks and other institutions want to come here. We should also support very clearly our own institutions as they develop their interests overseas; we have talked about insurance companies, for example, and how effective and successful they can be overseas. We have to get our financial regulation right. Finally, we have to incentivise banks to lend to the real economy, and other markets and forms of disintermediation have to work so that we can get key parts of the economy financed. I take on board the noble Lord’s comments about AIM. I accept that ISAs cannot be included for the time being. We will follow up with noble Lords when those proposals become clearer later in the year.

I note that the Government announced the creation of the Financial Services Trade and Investment Board—really as a promotion body to help push the City forward. Historically, we have generally left the City to its own devices because we thought it was so successful, but this is a body with some very good people from the Government involved to work through what we can do to support the industry and to make it successful around the world. My experience of working quite intensively with both the lord mayor and the mayor has been that this works quite well in tandem. We also, of course, have the Treasury as a third strand of the Government promoting the City. It had been suggested to me in the past that we should share the role by having both a day mayor and a night mayor—noble Lords can choose which one they would like to put in which category.

The board is up and running and it is doing very well. The kinds of things that are on its agenda are, for example, helping us to be the leading centre for the internationalisation of the renminbi and, talking of India, to help us to be well positioned as the rupee is eventually internationalised so that we can capture that business. My noble friend Lord Flight gave a very eloquent exposition of the UK investment management strategy, demonstrating that, in general, it is a good thing. We need, however, to be careful about how it is regulated—again, we are back to good regulation. The abolition of stamp duty reserve tax, which was a big step forward, was really aimed at making our industry the best one in the world. As an example of what followed, we have seen Santander choosing London as the base for its world-wide asset management business, which is a great step forward. In March, we also established an Islamic task force to try to establish the UK as the preferred choice for the Muslim world to invest in and do business with. These are the kind of new initiatives.

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We have talked a lot about the EU and the interesting challenge around being the major financial centre in Europe but not a euro country, and some of the issues and challenges which that throws up. The general sense I got from this debate—which I certainly share—is that noble Lords do not read very much in the papers about when the UK has pushed legislation so that it actually gets the right outcome, not just for this country’s interests but in the market’s interest—and MiFID was a wonderful example of that. Of course, the EU-US free trade agreement should be another example; financial services will be a very big part of that.

We talked a little bit about tax. I agree that the GAAR—the anti-avoidance measure—may be limited. As we saw in Northern Ireland, however, with the G8 meeting, the only real way to address these tax issues is through international collaboration. I am delighted that our Government are taking a lead on tax and transparency and really setting the pace to help to improve those things. We have talked enough about Vickers and what is coming there.

On the comments on diversity, I could not agree more that there would be nothing healthier for some of these financial institutions than to have a broader and more diverse group of people working in them, particularly at the senior level. My own example is that I joined a US investment bank when I left university because I did not feel comfortable in a merchant bank because I had not been to public school. I can only imagine how a woman feels on the trading floor of a US investment bank, because it is a distinct male environment. It would benefit from that diversity. I am an absolute supporter of that. All my experience in professional life has demonstrated the enormous power that comes from that diversity.

I should address the financial transaction tax. The noble Lord is absolutely right. If applied equally around the world, it is certainly a runner, but the way that it is structured now it just will not work. I think that our case is being very effective in persuading countries who were on the fence to see that perhaps it may not be in the market’s interest.

In closing, we have heard how important the sector is, how we are reforming it, how we are making sure that it addresses the problems of the real economy, but also what an important sector it is for the future of this country. I appreciate the comments of noble Lords in what was a very useful and interesting debate.

First World War: Commemorations

Question for Short Debate

4.02 pm

Asked by Baroness Young of Hornsey

To ask Her Majesty’s Government what steps they are taking to ensure that the contribution of people from Africa, Asia and the Caribbean to British efforts in the First World War is recognised in the forthcoming commemorations.

Baroness Young of Hornsey: With the announcement of a significant programme of activities and commemorative events next year, more than £50 million of government

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funding being made available—and many arguments about the scale, nature and purpose of marking this anniversary—historians, other scholars, politicians, culture commentators and members of the general public have all joined the fray, making for a fascinating and lively debate.

Of course, commemorative events are nearly always contested and throw up all sorts of unexpected and, indeed, unintended consequences. In 2007, many of us were involved in commemorating the abolition of the slave trade on British ships and there was certainly plenty of controversy there. But reasoned, vigorous discussion is a healthy sign and I welcome the public debate that continues to develop about how we mark—or not—the triumphs and tragedies represented by and flowing from World War I.

In 2007, one of the key issues to arise was how the stereotyping to which many of us are subjected today springs from assumptions and misrepresentations embedded in British history centuries ago: we have been defined by stifling categories, with our histories in this country and elsewhere all but ignored.

In the 1980s, when I first conducted sessions with school students on historical figures of African descent from Roman times through to the Second World War, a young boy of Caribbean ancestry told me that we were making it up. If what we said was true, he argued, then why were there not books and television programmes on the subject? I am pleased to say that over the past 40 years, certainly in terms of scholarly works, there has emerged an ever-growing body of books and learned essays that continue to add to the sum of our knowledge about our presence and agency in British history. The Black and Asian Studies Association has been one of the key organisations in this regard, with innovative research and website materials by the Runnymede Trust most welcome too.

We should bear in mind that it was only as recently as 2002 that the tremendous effort of colonial troops from African, Asian and Caribbean countries was finally officially recognised with the creation of the memorials on Hyde Park Corner. I am delighted to take this opportunity to salute the diligence of my noble friends Lady Flather and Lord Bilimoria for their unstinting hard work on that project, as well as the noble Lord, Lord Sheikh, and the noble Baroness, Lady Howells of St Davids, for contributing to debates and Questions and thus making sure that our place in history is not forgotten.

Although we have moved on from the 1980s, there is still so much ignorance. I have noticed recently how well educated, intellectually curious people react when I speak about the subject of our debate today. They are amazed and often want to know more, but even if they do not intend to follow up the matter, they usually say something like, “Why were we not taught about this at school?”. If we look for a moment at the scale, we must wonder why so little of this history is known. Some 1.5 million volunteers came forward from India and were in action on the Western Front within a month of the start of the war. India’s contribution was not confined to the army or to combat. The Royal Indian Marine and the Indian merchant services had equally crucial roles. From the African countries of

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Nigeria, Gambia, South Africa, Sierra Leone, Uganda, Kenya and what were then Rhodesia, Nyasaland and the Gold Coast came the 55,000 men who served in combat and the many hundreds of thousands more who served as carriers and auxiliary troops.

From the Caribbean islands came vocal and financial support for Britain’s war effort. Ambulances, maintenance costs and approximately £2 million—£60 million in today’s money—were given to the British Government. More than 15,500 men of the British West Indies Regiment served with the Allied Forces. We should remember that it is not just in terms of military and support services that sacrifices were made. Food and other forms of production were disrupted in those countries and the safety and security of their populations were jeopardised.

Thanks to their commitment to education in the broadest sense, museums, other cultural organisations and the voluntary sector are expert at examining these less well known histories through a variety of analytical prisms. For example, the Imperial War Museum is conducting a research project funded by the Arts & Humanities Research Council entitled “Whose Remembrance?”, which will investigate how local communities are addressing the colonial experience during the two world wars.

As a commissioner with English Heritage, I am pleased to say that English Heritage has grant-aided the repair of the grade 2 listed Muslim Burial Ground at Woking, where Indian troops who died in the Indian Military Hospital at the Brighton Pavilion were laid to rest. This complements the grade 2 listed Chattri memorial in Brighton, erected where Hindu and Sikh soldiers who died in the war hospital there were cremated. A further designated memorial to Indian troops is at Barton on Sea in the New Forest, where a grade 2 listed obelisk commemorates a convalescent depot for Indian troops. English Heritage has also funded investigative work on the SS “Mendi”, the troopship carrying more than 800 members of the South African Native Labour Corps that sank off the Isle of Wight in 1917 with the loss of more than 600 lives. A meeting of interested parties has recently been convened to discuss ways in which the “Mendi” dead might be remembered and the site appropriately managed. Research is also ongoing at Orford Ness in Suffolk regarding the sea defences constructed there by a Chinese labour battalion; again, it is worth noting that most of the 140,000 men who came from China to work for the French and British actually did so on the Western Front.

Now here is the difficult part: there are plenty of challenges as well as opportunities. Simply pointing out how heroic the combatants from what were then British colonies were is not, on its own, enough. To gloss over the racism and discrimination that manifested itself in a variety of ways, for example in the division of labour and the allocation of resources for fighting, would be to hide the truth. Although racism still permeates our society and there is still much work to do on this issue, to say that nothing has changed would equally be to deny reality. Relevant here is that the Armed Forces have been striving for many years to

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demonstrate in practical terms their positive approach to equality of opportunity and diversity in their institutions.

I believe that most, if not all, noble Lords present here today understand the need to ensure that our citizens, particularly the younger ones, from every cultural and ethnic background have a firm grasp of the complex ways in which our heritage and histories are interwoven. A sense of belonging must be predicated on the keen sense of how we and our ancestors have all contributed to the making of contemporary Britain.

I have noted that a number of government responses to questions about the commemorations have emphasised the educational dimension. There are aspects of the programme that suggest some exciting opportunities to engage young people with the human stories behind the historical headlines, which I welcome. There are several references to activities in partnership with a range of Commonwealth countries and the Commonwealth War Graves Commission, which I again welcome. However, while the concept of the Commonwealth may make sense to us here, that is not necessarily the case for many young people. I thank the Minister for our helpful conversation earlier this week. Will he tell us how the Government intend to ensure that the material that they will be generating resonates in a profound way, encouraging analysis, critique and, yes, perhaps some uncomfortable conversations with young people—especially, but not exclusively, those of African, Asian and Caribbean descent? Of course, the most obvious way of effecting this would be in some way to recognise this material in the national curriculum.

We are not talking here about what some insist on calling “political correctness”, a term which is particularly unhelpful in this context but which was used recently to justify the removal of Mary Seacole from the national curriculum. After a petition signed by more than 35,000 people, she was restored to her rightful place. I hope that sequence of events was a clear demonstration of the importance of this issue of the recognition of the role in British history played by African, Asian and Caribbean people.

Finally, one Indian soldier, doubting that he would survive the conflict, consoled himself in his writing with the thought that his name would be,

“written in letters of gold and inscribed in the list of the brave”.

I hope that, whether that man survived or not, at least symbolically we will acknowledge him and all those women and men from across the world who played their part in that most difficult, desperate and often tragic theatre of war.

4.11 pm

Lord Desai: My Lords, we are grateful to the noble Baroness, Lady Young, for proposing this topic for us to discuss. I agree with her that every such commemoration raises a lot of controversy, but it also exposes a lot of ignorance at the same time. Someone, perhaps to take a radical stance, has called it a “European civil war”. That may sound like brave talk, but it was not just a European civil war. A lot of the rest of the world was fighting on one side or the other in the war.

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We need to be reminded of the history, at the top as well as the bottom, of how the war was fought. One of the most unique aspects—certainly it was not repeated in the Second World War—was the formation of the Imperial War Cabinet. The fact that it was formed, including people such as Jan Smuts from South Africa and Satyendra Sinha—who later became Lord Sinha of Raipur, the only hereditary Peer of Asian origin—representing various parts of the empire and deciding about the war, is not very well known. We ought to be able to commemorate that as a constitutional innovation as well as an historical event.

It is true that this practice was not followed in the Second World War. Despite that, the empire as it then was—or the Commonwealth—contributed to the Second World War. As the noble Baroness said, on the Indian side perhaps up to 2 million people participated in the war. As noble Lords know, throughout the history of the British Empire in India, the Indian army was paid for by the Indian taxpayer; it was never paid for by the British taxpayer. In the First World War, not only was all the additional recruitment paid for by the Indian taxpayer, India alone raised £2 billion—I think. I will check; I have written it in my own book, The Rediscovery of India, so I can check that. I do not know whether India was ever repaid, but we will pass over that.

One really ought to recognise that when Britain was fighting the First World War, and indeed the Second World War, there was a tremendous contribution from the rest of the empire in terms of soldiers and resources. India was an especially big supplier of raw materials and resources for fighting the war, and that contribution was vital to that effort. I am really pressing for recognition of the efforts of the top as well as at the bottom, because one ought not to forget that the institution of the Imperial War Cabinet was a remarkable constitutional innovation and we ought to commemorate that.

That said, although the celebrations will not go on to what happened after the war, the First World War had a profound influence on the British Empire. The movements for national liberation got a great fillip from the soldiers who had come to Europe and fought the war. When the soldiers saw that their masters were just about as good as they were in fighting, and not a superior race, they realised that humanity is much more alike than not. That message was carried much more thoroughly by the war into the minds of ordinary soldiers who had come from agriculture or other industries. We ought to recognise that that was in some sense a creative contribution from what was a destructive war.

4.16 pm

The Lord Bishop of London: My Lords, I, too, am very grateful for this initiative on the part of the noble Baroness, Lady Young of Hornsey, because she has drawn attention to a really vital theme of the commemorations next year. It is particularly good that in the plans already announced by the Government, the Commonwealth element is very pronounced. The commemorations will begin just after the Commonwealth Games in Glasgow, and there is a firm emphasis there. I was with the Gurkha association just over a week ago and I was forcefully reminded of the fact, which has already been stated, that there was a huge contribution

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of people from the Indian subcontinent both at the top and right the way through the war effort. It was very large indeed.

The theme plays in very different ways in different places. The First World War was a vital element of nation-building in some parts of what is now the Commonwealth. In other places, it was an episode of colonial oppression; we had some very helpful lines from the noble Baroness, Lady Young, on that. I have had the privilege of conducting a service at the Memorial Gates, which she has already mentioned, every year for the past 10 years. The establishment of those gates is, as the noble Baroness said, down to the initiative of my noble friend Lord Bilimoria and, especially, the noble Baroness, Lady Flather. I am very sorry that she is not here to make a contribution because it has been an extraordinary experience, year after year, to be reminded of the huge contribution made by people from the Caribbean, especially, and from Africa as well as India. The annual observances at the Memorial Gates are on Commonwealth Day itself, somewhat before the August celebrations or commemorations. Can the Minister say whether there are any plans to use that location in August for acts of remembrance?

It is absolutely clear that, in contemporary Britain, we are now in the process of developing a truthful narrative that weaves in the contribution of many different communities to the history and flourishing of this country. This is a huge opportunity because, of course, so often we try to involve the young in the values and ethos of our society by mentioning the great universals such as tolerance, courage and respect, and all those things that we absolutely believe in. But unless they are embedded in convincing narratives and in communities, they do not have the power to transform lives. It is in that context that the remembrances and commemorations of next year will be very important as we develop the narratives and identify and celebrate the communities that play such an important part in the evolving story.

Churchill’s Britain no longer exists. There is an evolving story of these islands, and that will be an important part of developing that narrative. I declare an interest as a patron of Remember WWI, a consortium of community organisations seeking ways of stimulating grass-roots participation in the centenary. We cannot change the past, but it is a serious responsibility how we choose to remember it, because that remembering is itself extraordinarily creative and has an impact on the present. The theme of World War I is so large and the suffering involved so great that, as well as the proper emphasis of the noble Lord, Lord Desai, on life at the top, it is important to balance the great events with getting behind the columns of what Siegfried Sassoon memorably called “these intolerably nameless names” on thousands of war memorials. All sorts of resources are being developed to rescue those names from anonymity. We ought to look at that in relation to Commonwealth memorials as well. The faith communities internationally—because these are all international connections—are well placed to contribute to such an initiative.

In conclusion—I imagine that there is total unanimity among your Lordships on this—I hope that at no point in the commemorations will we seek to obscure

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the present urgent need to strengthen our links in a very new world with those who were fighting on the other side. It would be appalling if this was an occasion of ramping up any kind of animosity against, for example, Germany. In London, we have a special link with Berlin, and I have accepted an invitation to be there for some of the days in August 2014, as one tiny way to try to ensure that the commemoration does not turn in that adverse direction.

4.22 pm

Baroness Howells of St Davids: My Lords, I am delighted to take part in this debate, which was introduced so eloquently by the noble Baroness, Lady Young of Hornsey. I will concentrate on the Caribbean and introduce the subject of World War II. One cannot overstate the enthusiasm and willingness of individuals from across the Caribbean to play a key role in Britain’s two world wars. To them, Britain was their mother country; to them, it was part of their heritage. Their collective loyalty to Britain manifested itself in many, many ways. Thousands risked their lives in service, some so anxious to serve that they lied about their age, often undertaking the most demanding and dangerous jobs against the elements of a climate truly alien to them. This loyalty was unrelenting.

Donations, which came despite communities’ own severe hardships, included aeroplanes and ambulances. Villages across the islands took down the gates and railings that protected their homes and contributed them to what was then known as the war effort. Women’s groups and schoolchildren knitted caps, gloves and scarves to keep the service men and women warm. To date, the sacrifices of those men and women have never truly been recognised—not with any tangible acknowledgement of their contribution. They are not even allowed to march as a group to the Cenotaph on Remembrance Sunday, something for which they have been fighting for a very long time.

History has shown us how these people were treated with shameful hostility. It is not within the capacity of this debate to fully appreciate the extent of the racism they encountered. I am reminded of the front page of the People. It showed a black man, calypsonian, with a blonde on one arm and a brunette on the other, with a caption reading, “Would you like your daughter to marry one of these?”—an insult to those who risked their lives and are still risking their lives for Britain. We are talking about those who gave everything to protect the values that too often we take for granted, that we share as an intrinsic part of this country’s heritage. Today’s Question is important because when the UN declared 2011 the International Year for People of African Descent, the Minister’s response to my Oral Question showed that Britain was not prepared to make any effort to recognise their contribution. His answer said absolutely nothing.

During the Queen’s Diamond Jubilee celebrations, the Government completely ignored Caribbean nurses, the 16 to 20 year-olds who came to serve in the National Health Service. They were the pillars of the NHS. It was left to a voluntary organisation to make representations to Buckingham Palace directly.

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Her Majesty willingly gave her consent and medals have been struck for the best of the bunch. I declare an interest as a patron of that organisation.

Finally, I encourage people to take their children to the Museum of London in Canary Wharf. It tells the story of the marvellous contribution that was made. Some of your Lordships will remember that Mr Peel was responsible for setting up the police force. However, the Thames River Police was the first force, which was set up in the docks on the backs of the Caribbean enslaved. When the ships came in, the cargos were looted by the people of the East End. The magistrates set up the police force, and that is the foundation of today’s police force in England.

I look forward to the Minister’s response giving me some hope that the injustices suffered will be rectified by including those who are still alive and still hurting in the celebrations. I am sure that everyone here would like to participate in the plan.

4.27 pm

Lord Taylor of Warwick: My Lords, I add my thanks to the noble Baroness, Lady Young of Hornsey, for securing this timely debate. My grandfather was one of the 15,601 men and women of the British West Indies Regiment who served with the Allied Forces in the First World War. He was a Jamaican; indeed, Jamaica contributed two-thirds of those West Indian volunteers. Others came from Trinidad and Tobago, Barbados, the Bahamas, British Honduras, Grenada, Guyana, the Leeward Islands, St Lucia and St Vincent. More than 1,200 of those Caribbean servicemen were killed or died, while more than 2,500 were wounded. Eighty-one medals were won for bravery and 49 men were mentioned in dispatches. My grandfather said very little about his First World War experiences, describing them only as “horrific”.

My father was not deterred and joined the Jamaican Army. He was then transferred to the British Eighth Army, fighting in Italy in the Second World War. Again, my father was very reluctant to talk about what he saw of combat. But his medals, which he left to me after his death, spoke volumes. Ironically, although my father became experienced enough in the British Army to train white soldiers to become officers, because he was black he was not allowed to become an officer and attained only the rank of sergeant.

I pay tribute to the British and Caribbean Veterans Association, which tries to keep the memories of these brave men and women alive to this day. It has a simple mantra, but it is one that says it all: “We were there”. The King’s African Rifles were the largest force of African troops in British Africa. First formed in 1902, the force saw action throughout the continent during the war, especially in east Africa. The West African Frontier Force, formed in 1900 was comprised mainly of African troops and consisted of the Queen’s Own Nigeria Regiment, the Gold Coast Regiment, the Royal Sierra Leone Regiment and the Gambia Regiment. Much like the descendants of the West Indian Regiment, descendants of the African regiments who fought in both world wars today form the bedrock of membership of Britain’s black-majority churches.

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On 11 October last year, the Prime Minister said that the objectives of next year’s anniversary are as follows: to honour those who served; to remember those who died, and to ensure that the lessons learnt live with us not as a monument to military glory, but as a record of toil and sacrifice. After all, the good book does say, “Blessed are the peacemakers”. Ultimately it has to be discussion and diplomacy, not wars, that move our world forwards. I am glad to hear that the Government intend to use a variety of means to achieve these objectives next year, but I echo the noble Baroness, Lady Young, when she says that these issues need to be on the national curriculum.

Much has been said about Britain’s disaffected youth, and in particular black youth. It is my personal view that part of that disaffection is a feeling of not belonging to Britain, and I suspect that the majority of these young men do not know that their ancestors played a full part in the First World War and the Second World War. That is why young children need to know about their own heritage, and that those valiant soldiers were not only white. As the years pass by, it becomes increasingly important that the Government’s initiatives should ensure that the contribution of people from Africa, Asia and the Caribbean to British efforts in the First World War is recognised.

4.32 pm

Lord Parekh: My Lords, I begin by thanking the noble Baroness, Lady Young of Hornsey, for introducing this debate. I am sure that noble Lords have seen the mural in the Royal Gallery by Daniel Maclise. In the mural a black man is pointing to one of the marines who shot the great admiral. Only a few inches away is an Arab gentleman on Nelson’s ship. This is simply to point out that blacks, Asians and Caribbeans played an important role not only in the First World War and the Second World War, but in the Napoleonic wars. I cannot produce the facts and figures, not because they are not available, but because this is not the time. The history pre and post the Napoleonic wars shows that the role played by Africans and Indians was very considerable. This would seem to suggest that the liberty and democracy that this country rightly enjoys are things to which other communities have contributed.

During the two world wars, which is what we are here to discuss, some 5 million Indians, Caribbeans and Africans participated. More than 130,000 people died, and 42 of them fought so gallantly that they were awarded the Victoria Cross. As my good and noble friend Lord Desai pointed out, it was not just a question of people dying, it was a question of how money was raised and loans were made, as well as the ambulance corps and voluntary groups to which Indians contributed in large numbers, including Mahatma Gandhi. He was opposed to war, but because he had benefited from the British empire, he felt an obligation to help in any non-violent way he could. Let us not forget that.

In the light of all that, I want to raise three questions. What are we commemorating? Why are we commemorating, and how should we do it? I am not entirely sure that we are clear about our answers to any of these three questions either today or through the monuments that we have built. Let us take the

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First World War, whose centenary falls next year, and to which the right reverend Prelate the Bishop of London rightly referred. In my view and that of many historians, the First World War was unwise in its conception, incompetent in its conduct—ordinary soldiers said that it was like lions being led by donkeys—and the post-war settlement was brutal, leading to the Treaty of Versailles and what happened after that.

It shook the European consciousness so deeply that it discredited Europe in the eyes of lots of people, including those in India and elsewhere. They thought, “If Europeans can engage in that kind of brutality and that kind of war, they are not entitled to talk of European civilisation”. It also disillusioned large numbers of people within Europe about the kind of society that they had created and led to interwar movements that paved the way for the Second World War.

What are we commemorating? In my view, we should be commemorating the fact that war is not the answer to many of our intractable problems; that it should not be romanticised, because it involves an enormous amount of suffering; that, wherever possible, there has to be an alternative way than violence of dealing with conflicts; and, equally importantly, that our political leaders can be extremely incompetent and are not always to be trusted. A recent example is that it has taken them 10 years to realise that the Americans should be talking to the Taliban. Hundreds and thousands of lives could have been saved if something that many of us have been talking about had been realised earlier. Just because this happens to be a life on the other side of the world, they think that they can gamble, take things for granted and continue to make mistakes.

For me, the most important message of the First World War is that our leaders are not as bright as they think they are. They are capable of more stupidity than ordinary human beings. In fact, if any manager of a company had handled his affairs in the same way as some of our Prime Ministers and presidents have handled the great affairs of their countries, they would have been sacked a long time ago. That, to me, is one of the important lessons of the First World War, along with many others.

So why should we be commemorating those things? It is for three reasons. First, so that we can do justice to the victims; secondly, so that we do not repeat the mistake and so that these things are burnt into the consciousness of ordinary human beings; and, thirdly, that we recognise the solidarity of the Commonwealth because it has contributed substantially to the exercise.

How should we commemorate? I am not entirely keen on statues, monuments and memorials. We walk by statues. What do they tell us? Statues are mute and do not tell the story. The story has to be told. Therefore, I should have thought that the commemoration could take a form such as a national day of reflection on what happened and why, and which we should get our schoolchildren to recognise through the school syllabus. There could be an annual televised lecture which becomes a national event, where people talk about these things in their hearths and homes. There could be an essay competition in schools. As the right reverend Prelate rightly said, we should help to construct a new national narrative in which the Commonwealth contribution is

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fully appreciated. More importantly, for me, as we are talking about the Commonwealth contribution, how can we link up with other Commonwealth countries to commemorate this? It is not just about commemorating what they did for us but, rather, doing it jointly.

Finally, I recognise that six out of seven speakers so far this afternoon are from within the Commonwealth and only one is British, in the colour sense—that is, white. That tells us something. If we value the Commonwealth contribution, I should have thought that people in equal proportion across the colour boundaries would have joined in, but it is only one versus six. Therefore, it is important that we take the subject far more seriously than we seem to have done.

4.39 pm

Lord Bilimoria: My Lords, I am grateful to speak in the gap. As it happens, our elder daughter is on a school visit from Wellington College to Ypres in Belgium as we speak. I thank the noble Baroness, Lady Young, for initiating this debate and for her excellent speech. I emphasise one of the points that she and the noble Lord, Lord Parekh, made, which is that our students must learn and must know.

For six years, I was privileged to be the chair of the commemoration committee of the Memorial Gates, which were founded by the noble Baroness, Lady Flather. I am sorry that she is not here, because it was thanks to her that those gates were erected, and they are a memorial to the contribution of the 5 million volunteers from the Indian subcontinent, Africa and the Caribbean who served in World War I and World War II. In the First World War, 1.5 million men from the Indian subcontinent served, and 70,000 made the ultimate sacrifice. As the noble Lord, Lord Taylor, said, I do not think that our children realise that in the First World War, the Indians were not allowed to become officers.

The only Indian officers were the doctors. It was only after the First World War that people such as my grandfather, the late Brigadier Bilimoria, was allowed to be commissioned at Sandhurst. In the First World War, even my tiny community, the Zoroastrian-Parsee community, had doctors who served; doctors like Captain Baputi Chenoy and doctors like Major Ravenshaw Kapadia, who was given the Military Cross.

In the Second World War the contribution from the Indian subcontinent was even greater. It was 2.5 million volunteers—the largest voluntary army the world has ever known. My own late father, Lieutenant-General Faridoon Bilimoria, was from the 5 Gurkhas. The uncle of the right reverend Prelate the Bishop of London served in the 5 Gurkhas and made the ultimate sacrifice in the Second World War. My father’s battalion 2/5 Gurkhas was awarded three Victoria Crosses.

All I would request is that the Minister takes the message that our children must realise that we would not be enjoying the freedoms and all the benefits that we have today without the service—without the sacrifice—of the millions of volunteers from south Asia, the Indian subcontinent, Africa and the Caribbean. Our children must learn; they must remember; they must appreciate; they must be inspired; and they must never ever forget.

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4.41 pm

Lord Stevenson of Balmacara: My Lords, I thank the noble Baroness, Lady Young, of Hornsey, and all who have spoken in this debate for making it a very special moment. It has been a wonderful short debate, dealing with very important issues and it has been very moving to listen to all the points that have been made. I also thank the Library for a very good research note, which has obviously influenced a number of people’s contributions and indeed has worked into mine as well.

When the British Government declared war in 1914, they did so on behalf of the empire and not just of the UK. It is right that the forthcoming World War I celebrations recognise the voluntary participation of so many people then living in the empire and the considerable sacrifices that were made throughout the war. In the words of the noble Baroness, Lady Warsi, “Our boys weren’t just Tommies—they were Tariqs and Tajinders too”. Of course, they were not just boys either, although that is another story.

As many noble Lords have said, the figures are not well enough known. As my noble friend Lady Howells said, some contributions are still not being properly acknowledged. There were some 1.5 million men from the Indian subcontinent. It is worth pointing out, as has been mentioned, that participants from the Indian subcontinent won 13,000 medals, including 12 Victoria Crosses. The Caribbean supplied 15,000 soldiers who made up the British West Indies Regiment and there were around 55,000 soldiers from Africa who mainly fought in that continent. As the right reverend Prelate reminded us, there were Gurkhas, as always. When people go to the major war graves in the Low Countries, the lasting memory that we have in these endless fields, beautifully maintained as they should be, is the moving sight of the rows of crosses, but search harder and you can find the memorials to the 47,000 troops from the Indian subcontinent who died on the Western Front. There are Sikh memorials, Jewish and Muslim graves, as well as the grave markers of members of the Chinese Labour Corps.

The centenary that we are commemorating must engage with many national and international levels. It is hoped that—as the noble Lord, Lord Parekh, said—there will be activity in many places around the Commonwealth. In our own country, given the diversity and the challenges that exist in the moment, we should use this commemoration to bring every one of Britain’s communities into some form of discussion and knowledge about the event because so many of their forebears were involved in the First World War.

Having said that, it is important that the First World War be remembered for more than the industrialisation of death that it caused. I hope that the Minister will accept that it will be important to ensure that the commemoration of the centenary is respectful, thoughtful and reflective, without in any way glorifying the nature of the war and the appalling human sacrifice that took place; a commemoration, not a celebration.

There is a huge opportunity here if we can but grasp it. The Imperial War Museum will play a pivotal role; the National Army Museum and local museums

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will play their parts. In addition, the Heritage Lottery Fund will give £6 million to projects marking the centenary. So it would be really good if the majority of those funds could be reserved to help local areas and communities explore their history and heritage so as to better understand the war’s impact on their communities—to create a truthful narrative, as suggested by the right reverend Prelate the Bishop of London.

The Government have laid out three themes for the commemoration: remembrance, youth and education. That seems to be about right, but I hope there will also be an opportunity to reflect on why the war was waged and to recognise, as the noble Lord, Lord Bilimoria, said, that we would not have freedom today had it not been for the courageous sacrifice and service of those brave individuals then. It is important that we understand why so many Tariqs and Tajinders, as well as Tommies, were prepared to make the ultimate sacrifice for that ideal, and what the significance of that coming together of the empire means today and in the future.

As the noble Baroness, Lady Young, reminded us, much has been achieved in terms of knowledge and understanding of the contribution made by people from Africa, Asia and the Caribbean to the British effort in the First World War. As she also reminded us, there is much more to discover and understand about the impact of all this not only in the trenches and on the battlefields but in the outposts of empire. The human and political strands must be woven into the commemoration. I look forward to hearing how that will happen from the Minister.

4.46 pm

Lord Gardiner of Kimble: My Lords, first, I add my own thanks to the noble Baroness, Lady Young of Hornsey, for securing this debate and for giving us the opportunity again to discuss these important commemorations.

The First World War is integral to our history. The Government are committed to commemorating its centenary appropriately. The scale is overwhelming: over 16.5 million deaths, military and civilian, with 1.25 million from Britain and its then empire, colonies and dominions alone. Let us not forget, either, the many more who returned home physically and mentally wounded. More countries were involved in the war than not, from the vast Indian subcontinent to the small island of Nevis. All should be remembered for the part they played, and I assure your Lordships that they will.

Those contributions were as diverse as the countries involved. Many countries provided not only troops but porters, engineers and medics, among others. The noble Baroness, Lady Howells, particularly mentioned the Caribbean. I found out that men travelled from there at their own expense to enlist. In Africa, Asia and the Caribbean there were significant financial contributions both centrally and from citizens who raised large amounts, at a time when they were already feeling economic hardships at home. I think it was the noble Lord, Lord Desai, who referred to the Indian Army being paid by Indian taxpayers. He also mentioned the donations in kind, as did a number of other noble Lords, with each

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country giving what it could. Whether wood, fruit, sugar, rum, aeroplanes or whatever it was, those were great contributions.

Remembering these contributions is not new for us. I am particularly sad that the noble Baroness, Lady Flather, is not with us today and I wish her a speedy recovery. As the noble Lord, Lord Bilimoria, said, she had so much to do with the Memorial Gates, as did he. That inscription on the Memorial Gates on Constitution Hill is in memory of the 5 million volunteers from the Indian subcontinent, Africa and the Caribbean. It is as meaningful today as it ever was, while the nearby pavilion includes the names of 23 gallant men from those regions who were awarded the Victoria Cross in World War One, alongside those from the Second World War. I am sure that the gates will be used over the four years of commemorations. I rarely part company with the noble Lord, Lord Parekh, but these memorial places are not necessarily there for their stone but because they are a focal point for people to gather in a meaningful way.

The centenary gives us a new opportunity to mark these important contributions. Commonwealth representatives will be invited to stay after the closing ceremony of the Commonwealth Games to attend a service of commemoration at Glasgow Cathedral on 4 August next year. It was right that the right reverend Prelate the Bishop of London referred to this, because it will be followed by a wreath-laying service at the city’s cenotaph.

The nearly 230,000 deaths among military personnel from countries now within the Commonwealth are well documented. However, the speed with which some of them entered the battlefield was extraordinary, as the noble Baroness, Lady Young of Hornsey, mentioned, for the British Indian Army arrived in France on 26 September 1914 and was engaged in fierce fighting at Ypres the following month. Their heroic exploits are rightly commemorated at Neuve Chapelle, where a memorial stands as an enduring testament to the men from the modern-day sub-continent who also served with distinction at places like Gallipoli and Mesopotamia. Indeed, we heard from the noble Lords, Lord Bilimoria and Lord Taylor of Warwick, of their own families’ service. Men from across the African continent contributed, whether it was the Egyptians helping to guard the Suez Canal, then British Nigeria contributing to the German surrender at Duala, or the South Africans seizing Delville Wood with great loss. There were many more occasions such as this across the Commonwealth.

Turning to the Caribbean military contribution, the British West Indies Regiment’s actions in Palestine caused General Allenby to note that:

“All ranks behaved with great gallantry under heavy rifle and shell fire and contributed in no small measure to the success of the operations”.

The names of those from all parts of the Commonwealth who died at the Western Front and beyond are recorded in those immaculately tended cemeteries and memorials of the Commonwealth War Graves Commission, one of our invaluable partners in this programme of commemoration. Funded proportionately in relation to war casualties by its member nations, our Government provide some 78% of

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the commission’s funding. Many of its cemeteries will provide a poignant backdrop to centenary events around the world, and they are also providing wise counsel to us.

What the noble Lord, Lord Parekh, said about Commonwealth partners was important. It is essential that the entire Commonwealth plays a full part in the centenary commemorations. The Prime Minister’s special representative, Dr Andrew Murrison, has held a number of meetings with the Commonwealth high commissions in London to share our plans and invite their involvement. There are plans for a plenary session involving all high commissions in the autumn, and there have also been discussions with groups including the Commonwealth Secretariat.

It was absolutely right that the noble Lord, Lord Stevenson, referred to my noble friend Lady Warsi. As part of her energetic efforts to highlight the contributions of the Commonwealth, she visited the Grootebeek military cemetery and the First World War graves of soldiers from her parents’ home village in Pakistan. Similarly, we can all be inspired by the First World War centenary to gain a greater understanding of our roots. Indeed, one of the key aims of the battlefield visits project in England, and now in Scotland, is that pupils are given the opportunity to learn about the role of the Commonwealth and former empire countries which fought in the war.

The noble Baroness, Lady Young of Hornsey, made some particularly poignant comments about history and its teaching. It has also been said that education and youth are absolutely key to our efforts. What the noble Lord, Lord Bilimoria, said about that was equally moving. Even before the recent launch of the small community grants scheme, the Heritage Lottery Fund is playing a key role in connecting communities with their First World War past; the noble Lord, Lord Stevenson of Balmacara, mentioned this particularly. They have given early support towards a number of projects which highlight the role played by the African, Asian and Caribbean Commonwealth soldiers in this critical phase of British history. The right reverend Prelate mentioned nation building. This was important for that reason as well.

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Through measures like the battlefields visits programme and the HLF-supported projects, not only will we gain a better understanding of our past but, collectively, a strengthened feeling of national identity in today’s Britain, whatever our cultural or ethnic background. There is no doubt that this country could not have prevailed in the First World War without the support and sacrifice of the Commonwealth countries. As we came together then, so the centenary will give us an opportunity to come together again to reaffirm our shared values. The noble Baroness, Lady Howells of St Davids, spoke movingly about them. Those values have been forged through experiences that will not be forgotten and they should bind us together inseparably. Recognition of the important role that men and women from Africa, Asia and the Caribbean played is an integral part of the Government’s plans for an inclusive commemoration.

The commemoration will not gloss over the horror of the First World War or, indeed, who won. I think I would need an hour to digest and satisfy the noble Lord, Lord Parekh, in his questions around what, why and how, but they are particularly important as many people discover things about that war through listening to different historians—I have yet to meet historians who take the same line, and no doubt we will hear a lot from them. We will also want to come to our own judgments, and that is why the Government are not planning anything along one theme. It is for people to discover for themselves and it is why the battlefield visits are going to be so important. Over the next four or five years, two pupils and a teacher from every secondary school will go and see the Western Front for themselves. I would also like to reassure the right reverend Prelate the Bishop of London and all other noble Lords that the Government approach the commemoration in a spirit of reconciliation, acknowledging that loss and suffering recognise no national boundaries and that those who were once our adversaries are now our partners in building a better world.

Committee adjourned at 4.56 pm.