House of Lords
Thursday, 22 October 2015.
11 am
Prayers—read by the Lord Bishop of Rochester.
Introduction: Lord O’Shaughnessy
11.08 am
James Richard O’Shaughnessy, Esquire, having been created Baron O’Shaughnessy, of Maidenhead in the Royal County of Berkshire, was introduced and took the oath, supported by Lord Nash and Baroness Evans of Bowes Park, and signed an undertaking to abide by the Code of Conduct.
Introduction: Baroness Stroud
11.14 am
Philippa Claire Stroud, having been created Baroness Stroud, of Fulham in the London Borough of Hammersmith and Fulham, was introduced and took the oath, supported by Lord Freud and Lord Farmer, and signed an undertaking to abide by the Code of Conduct.
HS2
Question
11.18 am
To ask Her Majesty’s Government what assessment they have made of the effect of the construction of HS2 on the running of existing rail services.
The Parliamentary Under-Secretary of State, Department for Transport and Home Office (Lord Ahmad of Wimbledon) (Con): My Lords, as part of the hybrid Bill and subsequent additional provisions, HS2 Ltd is required to assess the impact of the construction works on the operational railway. These assessments have been undertaken and are documented in the environmental statement and supplementary environmental statements. Our assessment also includes close working with the relevant train operators, and we will continue to work with them to minimise disruption throughout the development of the overall project.
Baroness Seccombe (Con): My Lords, on Monday of this week I travelled by train from Banbury to London and was dismayed to see that some people were unable to get a seat and stood for the whole of the journey, which is around 60 minutes. HS2 will cost tens of billions of pounds and the cost is obviously still rising. Surely it would be better, and provide greater benefit to the comfort and well-being of thousands of people, if the money were spent instead on other lines up and down the country and, indeed, across the country. That would mean that we could have longer trains, longer carriages and, if necessary, longer platforms, but the important thing is that people should travel in comfort.
Lord Ahmad of Wimbledon: My Lords, I assure my noble friend that, as I am sure she is aware, HS2 will be getting underway, and we look forward to it beginning in 2017. I give her the added assurance that HS2 will
also give the potential to deliver much better train services to large numbers of towns and cities. I am acutely aware of the challenges she has raised about not there not being enough capacity for people, but part of what HS2 will do is deliver extra capacity to places such as Coventry, Rugby and Milton Keynes.
Lord Berkeley (Lab): My Lords, I have read AP3—the latest additional provision from HS2, which he mentioned to the noble Baroness—and I can see nothing in it about the effects of construction, particularly the disruption which will be caused, around Euston and many other sites up the line, by construction lorries. I understand that, for three years during construction, there will be about 720 trucks a day leaving the Camden area with spoil. I declare an interest as chairman of the Rail Freight Group, but surely HS2 should look at moving as many materials as possible by rail.
Lord Ahmad of Wimbledon: The noble Lord raises a quite valid point. We are looking at the issue of disruption from HS2. Again, there are lessons to be learned from places such as London Bridge, Blackfriars, Reading and Birmingham and they are being applied in the development of Euston to ensure that we mitigate whatever disruption there may be, not just to the rail and Tube networks, but to the surrounding local communities as well.
Viscount Ridley (Con): My Lords, could my noble friend confirm that the economic case for HS2, as published by HS2 Ltd in 2013, includes £8.3 billion of benefits that are actually cuts to existing services, under the phrase “released capacity”?
Lord Ahmad of Wimbledon: I think the economic case for HS2 is well made.
Baroness Randerson (LD): My Lords, undoubtedly the work on Euston station will be disruptive for existing passengers and, in my view, unnecessarily expensive. Will the Minister agree at least to investigate the alternative proposals put forward by the Euston Express group and to look at a more intensive use of Old Oak Common, which would act as a useful route into London, on a large scale, once Crossrail has links with it?
Lord Ahmad of Wimbledon: The noble Baroness raises the issue of Old Oak Common, which has been part of the consideration for HS2. Let me assure her, and indeed the whole House, that once we have completed the works for HS2 at Euston its capacity, as I am sure she is aware, will go from 18 platforms to 22. These enhancements will help not only with access into London but also across London.
Lord Grocott (Lab): Can the Minister confirm the uncanny resemblance of the objections to HS2 being voiced in this House now to the objections voiced in the 1830s to the building of the original London to Birmingham railway? Does he rejoice, as I do, that the objectors lost that battle eventually? I commend the Government for their persistence in building what is a hugely important infrastructure project for Britain today. Will the Minister also confirm that, should it not be built, the effect on the existing west coast main line of continued and growing overcapacity would be
endless delays, weekend occupation of the line and all the problems associated with the construction of a railway while it is still attempting to run?
Lord Ahmad of Wimbledon: I do agree with the noble Lord, although I am a bit perturbed by his suggestion that I was around in the 1830s—perhaps he is suggesting I have aged at the Dispatch Box. Nevertheless, there is a valid case to be made here. The primary case for HS2 is establishing links throughout the whole country but it is also important, as the noble Lord said, to address the capacity challenges we currently face on our rail network.
Lord Foulkes of Cumnock (Lab): Does the Minister agree that the real economic case for HS2 depends on its extension to Edinburgh and Glasgow? Since there are no objections it in the north of England and Scotland, would it not be sensible to start building now, as quickly as possible, in the north of England and Scotland? That would also provide a market for British steel.
Lord Ahmad of Wimbledon: I commend the noble Lord—he is a great champion for Scotland and for the United Kingdom. The investment we are making in our rail network across the board, not just in HS2, underlines our commitment to ensuring that the whole country is connected. As the noble Lord will be aware, we have laid plans: we are moving forward with the first stage of HS2 in 2017, and great investment is being made in transport for the north and connectivity across Scotland. He makes a very valid point about connectivity across the country, and it is certainly a principle that I support.
Lord Mawhinney (Con): My Lords, my noble friend just talked about enhancing HS2 links across the country—links which are much needed, and the sooner the better. Can he tell your Lordships’ House how he intends to strengthen the links between HS2 and HS1?
Lord Ahmad of Wimbledon: Across the network, with HS1 and HS2 and, as my noble friend will be aware, the plans we have for transport for the north, overall we are investing more than £38 billion in the rail network, which will strengthen links not only with the existing network but with HS2, HS1 and, through Transport for the North, HS3.
House of Lords: Appointments
Question
11.26 am
Asked by Lord Forsyth of Drumlean
To ask Her Majesty’s Government whether they will require the appointments commission to vet political nominations to the House of Lords using the same criteria as currently applied to crossbench Peers and thus consider suitability as well as propriety.
The Lord Privy Seal (Baroness Stowell of Beeston) (Con): My Lords, the House of Lords Appointments Commission was established to make recommendations for non-party peerages, using an established set of criteria, and to vet all those nominated as life Peers for propriety. It remains for the leaders of political parties to account for their nominations.
Lord Forsyth of Drumlean (Con): Why?
Baroness Stowell of Beeston: I like my noble friend’s style this morning. Because it is for the leaders of political parties to come forward with their own nominations, mindful of the needs of this House, and to ensure that the people they put forward will make a contribution to this House and that this House will perform its responsibilities effectively. But it is not appropriate for the House of Lords Appointments Commission to look at the suitability of those nominations. We should not underestimate the role of the House of Lords Appointments Commission in looking at propriety. One of the things it considers is past conduct of nominees and it would certainly look at whether there was anything there that might bring the House of Lords into disrepute. So its role in this matter is actually quite extensive.
Baroness Boothroyd (CB): Is the noble Baroness aware that the Prime Minister has created more Peers in five years than Margaret Thatcher did in 11, and that the escalating size of this House has rightly shocked public opinion? Will she urge Mr Cameron to stem this inflow before we enter the Guinness book of records as the largest assembly in the world? Will she advise the Prime Minister to concentrate on the expertise and proven commitment to public service of his appointments? Finally, will she assure him that we shall continue to scrutinise the legislation before us as closely as ever, despite his evident disregard for the efficient workings of our bicameral Parliament?
Baroness Stowell of Beeston: The noble Baroness is absolutely right to highlight the importance of all Members of your Lordships’ House conducting themselves in a way that contributes to the very serious role we all have. I know that all noble Lords in this House take their responsibilities very seriously, and all those new Peers joining us at this time are very mindful of those responsibilities—as is the Prime Minister, in terms of the role of this House in scrutinising legislation. That is something that we feel very strongly about.
Baroness Smith of Basildon (Lab): My Lords, if the press reports are to be believed, the House of Commons Appointments Commission will be very busy. As the Minister knows, we have totally opposed the Government’s plans on tax credits and the noble Baroness, Lady Hollis, will be asking this House not to support government proposals until they include changes that address the concerns that have been raised across this House, including by members of her own party. As the Minister also knows, the amendment tabled by the noble Baroness, Lady Hollis, is entirely reasonable and—as confirmed by the House authorities—is in accordance with the conventions and role of our House. The Government are now threatening to either suspend your Lordships’ House or to create 150 new Conservative Peers to ensure that they never lose again. Does she consider this to be an appropriate, statesmanlike response or a gross and irresponsible overreaction, particularly since government estimates indicate the cost to the public purse will be around half a billion pounds? Would that money not be better spent on mitigating these awful cuts?
Baroness Stowell of Beeston: My Lords, I know that all noble Lords are always sceptical about what they read in the newspapers. I refer the House to what my right honourable friend the Prime Minister said yesterday when he was in the other place. He was very clear then about the role of this House. About Monday, the primacy of the House of Commons on financial matters has been respected by this House for over 400 years, as my right honourable friend the Prime Minister alluded to yesterday when he was responding to a question. The noble Baroness makes reference to one of the amendments that have been tabled for Monday. If any of those amendments is passed on Monday, the statutory instrument will not have been approved and that will be in direct contrast to the House of Commons already approving that statutory instrument and reaffirming its view only this week when asked to consider it again.
Lord Tyler (LD): My Lords, the exchanges have already touched on the constitutional role of your Lordships’ House. Has the noble Baroness read the article which appeared in the Huffington Poston Tuesday, which is clearly the result of a briefing from the Treasury, headed “Tories Threaten To Suspend House of Lords” and which says that:
“One option is to simply suspend the Lords’ entire business, and process bills purely through the Commons”?
Maybe she would care to explain how that could be achieved. Could she take the opportunity to have a quiet word with the Chancellor of the Exchequer, say that perhaps he is spending too much time with the Chinese, and remind him that the last person who attempted to shut down a House of Parliament was King Charles I? What happened to him?
Baroness Stowell of Beeston: My Lords, as far as the Government are concerned, this House has a very important role in scrutinising the Government’s legislation and I am very confident that all Members of this House want to do that effectively. I want to provide the opportunity for this House to discharge its very important responsibilities in a way which is consistent with its role and which respects the primacy of the House of Commons on matters financial, and I am confident that on Monday that is what Members of your Lordships’ House will want to do.
Financial Services: Competition
Question
11.34 am
Asked by Lord Holmes of Richmond
To ask Her Majesty’s Government, in the light of the Competition and Markets Authority’s investigation into personal current accounts and banking services for small and medium-sized enterprises, whether they intend to support further the financial technology sector in providing greater competition across financial services.
Lord Ashton of Hyde (Con): My Lords, the Government are committed to improving competition in financial services and welcome technological innovation that incentivises firms to provide the best products
and services to customers. The UK is already a global hub for financial technology—fin-tech—and our ambition is to make the UK the global hub for fin-tech. We have already taken a number of steps to achieve this and we continue to look at ways to support this exciting sector.
Lord Holmes of Richmond (Con): My Lords, alternative finance is, indeed, a great British success story. We have a real opportunity to close the finance gap which has held back small and medium-sized enterprises for decades. I congratulate the Government on what they have done so far in this area, and ask my noble friend what more they will do to ensure that small and medium-sized enterprises are aware of the full breadth of finance options available to them.
Lord Ashton of Hyde: My Lords, to support the development of diverse finance markets for smaller businesses, the Government have established the British Business Bank, which brings together new and existing schemes into a single, commercially minded institution. The Chancellor also announced the launch of the Business Banking Insight survey. This will help the UK’s SMEs to understand their options, make decisions about who they should bank with and plan how they will finance their growth. Lastly, the Federation of Small Businesses survey found that more SMEs reported that credit was affordable and available than at any time since 2012.
Baroness Kramer (LD): My Lords, the phenomenal and brilliant success of peer-to-peer lending is a vindication of this House, which in 2012 effectively strong-armed the Treasury into recognising that the industry both wanted and needed regulation in order to grow. Now, with UK-based peer-to-peers expanding across the European Union and new peer-to-peers springing up there, will the Government commit to work with Governments of other EU countries and the Commission to avoid what is turning into regulatory chaos, so that this is a single market from the beginning?
Lord Ashton of Hyde: My Lords, the Government are certainly anxious to have a proper regulatory system and will of course do whatever they can to make sure that we do not have regulatory chaos.
Lord Davies of Oldham (Lab): But, my Lords, the Government’s efforts to improve competition in the banking industry are lamentable. Two years ago, they introduced measures to encourage banks to offer more information to account customers, and the result is that only 3% of customers change their accounts in any year. It is quite clear that something more significant needs to be done and the Government need to take action to improve competition against a background where 77% of current accounts and 85% of SMEs are with the big four banks. I remind the House that two of those banks were bailed out only a few years ago.
Lord Ashton of Hyde: My Lords, the switching service which the Government introduced has enabled 2.1 million customers to switch. We agree that that should be increased, but the noble Lord omitted to mention that the CMA report out this morning stated that the switching service is functioning reasonably
well. Of course, we understand that switching accounts can only improve competition. We fully support the CMA’s provisional report and await its final report next spring, when we hope that it will have some sensible and useful recommendations.
Lord Cashman (Lab): My Lords, will the Minister ask the department to investigate the current barriers placed in the way of new charities trying to open bank accounts with the major banks? They face difficulties and refusals based primarily on money-laundering directives. This is inhibiting the charitable sector, particularly the small charities.
Lord Ashton of Hyde: I agree that anything that inhibits charities’ proper functioning is to be deprecated. On the other hand, we have to ensure that money-laundering regulations are applied; they are very important. Of course, money laundering hurts the beneficiaries of charities as well and must be taken seriously, but we are trying to make a more proportionate regulatory response, and the FCA and the PRA are working on that at the moment.
Syria and Iraq: Airspace
Question
11.39 am
Asked by Lord West of Spithead
To ask Her Majesty’s Government what discussions they have had with Russia about co-ordinating the use of airspace over Syria and Iraq.
The Minister of State, Ministry of Defence (Earl Howe) (Con): My Lords, before I respond to the noble Lord, I am sure that the whole House would wish to join me in paying tribute to Flight Lieutenant Alan Scott of 33 Squadron and Flight Lieutenant Geraint Roberts of 230 Squadron, of RAF Benson in Oxfordshire, whose Puma helicopter crashed on approach to land at NATO’s Resolute Support mission headquarters in Kabul, Afghanistan, on 11 October. Our thoughts are with their families and friends at this very difficult time. Our thoughts are also with the families of the two US service personnel and one French civilian who lost their lives, and with the five other NATO personnel who were injured.
The UK has had no conversations with Russia about this issue. The United States, on behalf of the global coalition to counter ISIL, of which the UK is a member, has had discussions with Russia on the safe separation of aircraft and air safety, resulting in a memorandum of understanding on the prevention of flight safety incidents.
Lord West of Spithead (Lab): My Lords, I thank the Minister for his response and I am delighted to see that he is wearing a red poppy. I am slightly disappointed by his Answer, because I would have liked to have thought that the UK was involved in these discussions. It goes more broadly: I think that there is a lack of willingness to understand the truth of what is happening on the ground, and that is a recipe for losing wars. Unless we start to discuss and talk with Russia, Iran and—I am afraid—the butcher Assad, and all the
coalition, we are not going to be able to put together a package that will enable us to destroy ISIL, which is the group that we have to destroy because it is the greatest threat. I urge the noble Earl to encourage the Foreign Office and our Government to get involved in these discussions and perhaps to get some form of contact group going so that we can move forward and destroy this very real threat.
Earl Howe: The noble Lord makes a series of important points. There are two issues here: one is air safety over Syria and the other is the end to the conflict. On air safety, the memorandum of understanding provides a considerable degree of assurance on the matter of Syrian airspace. He is quite right, however, that ultimately, the only way that we can end the conflict satisfactorily is to have a political solution, which will demand the buy-in of the major powers and regional states.
Lord Elton (Con): My Lords, will these discussions include one on the separation of pilotless guided missiles, which at present intersect horizontally with the civilian flight paths that lie between the point of launch and the point of intended contact?
Earl Howe: My Lords, the United States is not making the MoU public, so I cannot go into a huge amount of detail on its content, other than what the US has publicly released, which is that the MoU is aimed at minimising the risk of in-flight incidents between coalition and Russian aircraft and includes specific safety protocols for aircrews to follow. The US and Russia will be forming a working group to discuss any implementation issues, which will no doubt include those raised by my noble friend.
Baroness Jolly (LD): My Lords, what evidence do the Government have to allow them to be confident about the safety of our missions into Syria and Iraq, given the proliferation of armed and surveillance drones over these territories? Will the Minister also tell the House what discussions the coalition has had about this particular issue?
Earl Howe: I have already referred to the memorandum of understanding, which, as I have said, is a major step forward in terms of avoiding unwanted incidents over Syrian airspace. The protocols to which I referred include maintaining professional airmanship at all times, the use of specific communication frequencies, and the establishment of a communication line on the ground. But it is worth noting that, by and large, the reconnaissance effort that the coalition is putting in is directed to the east of Syria, whereas the Russian action is largely in the west of that country.
Lord Reid of Cardowan (Lab): My Lords, I join with the condolences that the Minister extended to the families and the loved ones of those who have died in our services and others.
Some three months ago, when I asked the Minister whether the Government considered ISIL or Assad the greatest threat, he unhesitatingly responded that the greatest threat was ISIL—a view with which I agree. Does it not make sense to shoot the wolf nearest the
sledge first? In other words, whatever the controversy of wider discussions with Russia and Iran and whatever our differences with them, will he bear in mind when considering this question the wise words of Winston Churchill when criticised for a working alliance with Josef Stalin and the Soviet Union: “I dare say that if Herr Hitler invaded hell, I would have a good word to say for the devil”? In other words, can we maximise those forces that share our view about the greatest threat being ISIL?
Earl Howe: My Lords, in considering that question we need to remember that Assad is a man who has barrel-bombed his own civilians and caused untold suffering among the Syrian population. He cannot form part of any eventual permanent solution to the conflict, and for that reason we cannot countenance taking any action which might serve to strengthen the current Syrian regime.
Lord Howell of Guildford (Con): My Lords, following the comments of the noble Lord, Lord West, which I broadly support, can my noble friend say what steps we or the coalition are taking to reinforce the efforts of Jordan to establish two buffer zones north of Jordan in areas presently held by ISIL and establish a safe haven area or two? Is this not a very important first step towards meeting the challenge of the source of the problem: namely, the poisonous ISIL movement itself, from which all our problems stem?
Earl Howe: My Lords, this idea has obvious immediate appeal. But when one drills down into the practicalities one soon realises that there are serious obstacles to creating so-called safe havens or buffer zones in any part of Syria. Those zones would need to be policed and reinforced. If they were not, we would see a repeat of what we had in Bosnia with the Srebrenica massacre, and the sheer effort of putting men on the ground to ensure that those safe areas really were safe would be enormous.
Lord Dannatt (CB): My Lords, I agree wholeheartedly with what the noble Lord, Lord Reid, just said about shooting the wolf closest to the sledge, and I have heard that the memorandum is beginning to increase co-operation between air forces operating in the Iraq-Syria airspace. Can the noble Earl say when this House and the other House will be consulted on the extension of Royal Air Force operations of an offensive nature over Syrian airspace so that we can slay that wolf that is nearest to the sledge as soon as possible?
Earl Howe: My Lords, my right honourable friend the Prime Minister has made very clear that ISIL needs to be destroyed in Syria as well as Iraq. He was clear when he said that that there is a strong case for us to do more in Syria. But, as he also said, it would be better if there were a consensus supporting such action in the House of Commons. His views on that have not changed, but what has changed is the growing evidence that ISIL poses an increasing threat to us here in this country. I cannot give the noble Lord a date on which such a vote might take place, but before that we would clearly need to be sure that that political consensus was there.
Enterprise Bill [HL]
Order of Consideration Motion
11.48 am
Moved by Lord Gardiner of Kimble
That it be an instruction to the Grand Committee to which the Enterprise Bill [HL] has been committed that they consider the bill in the following order:
Clause 1, Schedule 1, Clauses 2 to 13, Schedule 2, Clauses 14 to 17, Schedule 3, Clauses 18 to 26, Schedule 4, Clauses 27 to 31, Title.
Private Ownership
Motion to Take Note
11.50 am
Moved by Lord Howell of Guildford
That this House takes note of the case for private ownership of industries and institutions in the United Kingdom.
Lord Howell of Guildford (Con): My Lords, as this is my first proper opportunity, I wish at the outset to pay my personal tribute to the late Lord Howe of Aberavon, who was my friend, mentor and inspiration for many years. His role in our nation is not unrelated to the subject that we are debating in this Motion, since he brought sense and moderation to the great issue of unravelling Britain’s overcentralised and socialised industrial structure and saw the future in strictly practical, rather than ideological, terms. Speaking of balance and moderation, I very greatly look forward to the maiden speech of my noble friend Lord Young, whose almost proverbial balance of common sense and moderation will undoubtedly be a great asset to this House in dealing with this kind of subject and many others.
I suppose that, if I was a die-hard, last-ditch, put-the-clock-back, old-school Tory I would be on the side of Mr Corbyn, the leader of the Labour Party, who clearly wants to return to the past and is, I understand, firmly committed to the renationalisation of the railways and, as far as I know, maybe much else as well—I am not quite sure about that. However, as I belong to neither that wing of the Tory Party nor, needless to say, Mr Corbyn’s circle either, I will be taking a different view, and one that I hope that, in this House at least, is fairly uncontroversial. After all, at about the last dinner and discussion I had with the late Baroness Thatcher while she was still well, she repeatedly warned me that life would be difficult for us as Conservatives because Mr Blair had pinched all her best policies, notably her commitment to privatisation of large swathes of British industry. She thought he had carried on with and taken one of her best ideas.
Of course, the seeds of privatisation go back long before that, and were really planted back in 1970 under the Heath Government, when we attempted to bring in for the first time systematic questioning of whether every programme and function of central government should be in the public sector at all or organised in different ways. However, 1997 was one of the defining
moments in the privatisation story, because it was the recognition that a modern social-democratic, forward-looking party, as Labour then was, could live with, and actually carry forward and develop, the privatisation programme idea. My theme in my comments will be that the continuing privatisation trend of the last 30 years or so, both here and around the world, including incidentally in Russia and China, has been basically technological and the inseparable child of the digital age and the information revolution, rather than ideological.
There may have been instances where it has gone too far and too fast, or where the results have been disappointing. I do not disguise that I wanted a different pattern of railway privatisation from the one that was actually adopted, and if I am told once more on the telephone when trying to contact a privatised energy utility that my call is important to them and to hang on for 20 minutes and then be told I have five choices, none of which works, I shall go berserk. None the less, I believe that going back to the alternative of state ownership of the main utility industries would be a much bigger disaster, if indeed it could nowadays be done at all.
For me, the apogee of the old lumbering, non-innovative, hopelessly overcentralised state ownership—so called public ownership, but of course the public and the customer had virtually no say at all—came when I assumed responsibility for the then Department of Energy in 1979. There I realised that I was entering a colossal and overloaded ministry, the department at the centre of just about everything, covering more than 20% of British industry and the most vital parts at that. It was the department of oil shocks, the Shah having just fallen; the department of militant miners, with Arthur Scargill itching to have a go at the new Tory Government; the department of colossal investment programmes in mammoth nationalised industries; the department of booming North Sea oil, with a state oil company owning and trading one of the largest volumes of oil on the planet; the department that had to keep alongside rising OPEC power; the department of nuclear energy; the department of the vast British Gas empire, under its formidable boss, Sir Denis Rooke; the department of the Central Electricity Generating Board and all its 12 or 13 area electricity companies; the department of the National Coal Board; the department that had relations with all the international oil companies; the department that owned 51% of BP; the department of global energy turmoil, soaring oil and gas prices, and threatened oil shortages, which were rocking the whole world’s economy. In short, it was a department of Soviet proportions, supposedly presiding over a huge socialised sector employing millions of people, a consumer of billions of pounds, in a world that was, in fact, coming to the end of its time.
Looking back, I can see that we were poised on the pivoting moment of the 20th century, as state mega-ownership and centralisation was finally choking itself to death and the digital era of decentralisation, denationalisation, privatisation and the rising market state was about to begin. Nothing like that immense departmental empire, with the fate of the whole government and economy on its plate and almost with
its own foreign policy, would or should ever exist again. It was unmanageable, uncontrollable, impossible and fascinating.
That brings me to my first point, about why and how privatisation took off: it was the realisation that state ownership was not only hopelessly overcentralised but was not even a good means of control. On the contrary, private ownership with proper regulation stood a far better chance. Nationalised industries had their own empires, far removed from the accountability that the world wanted, the pressures of the market and, indeed, the pressures of the customer. That was our first motive.
Our second motive was embodied by the word “innovation”. We could see that, because no competition with nationalised industries was allowed—that was by law, and so we had to change the law—the incentive to innovate was minimal. That was the case for a whole chunk of British industry, and that had to change.
Our third motive was that the public sector just could not deliver the capital that these industries needed to modernise. The investment needs of these vast industries was constantly being undermined by short-term budget needs, which were eating away at their programmes.
Finally, and in my case primarily, some of us wanted a bit of genuine public ownership—not the bogus sort, where a few Whitehall bosses ruled the roost, but the truly public and widespread ownership of a capital-owning democracy turning earners into owners. We thought that privatisation was the road to that. That is what the Chancellor was talking about the other day, with his plans to build a share-owning democracy and sell Lloyds Bank shares to retail investors. Actually, in those days, we were going to go even further, and I still think we should, and build a society in which as many as possible, at all levels, have some form of ownership of capital or property or other form of savings—a really widespread stake in the capitalist process, giving security and dignity to as many people as possible rather than total wage dependence.
Employee share ownership was also part of that story. In fact, one of the most successful privatisations of the early days, which I personally presided over and which was initiated by my noble friend Lord Fowler with great foresight when he was Transport Secretary before me, was the National Freight Corporation sale, which enormously benefited all its staff and employees.
So what are the lessons for today from this initial wave of privatisation and its continuation through the whole decade under a Labour Government, as well as in many countries around the world, regardless of their types of government?
First, as I have suggested, the public interest, in the sense of defeating monopoly tendencies and protecting the customer and consumer, often stands a better chance through the good regulation of private industry rather than old-style state ownership and control. I could not help laughing when, the other day, I heard a union leader saying that the nationalised industries would be run,
“in the interests of passengers and the taxpayers”.
He clearly had a very short memory.
Secondly, there was that famous phrase about privatisation from Harold Macmillan—that we were selling off “the family silver”. It always seemed a funny kind of silver if it was costing £2.5 billion a year, as it was in 1979, to hold on to and upkeep. Yet, 10 years later, it was paying back £60 billion to the Exchequer in taxes alone. That does not make sense of the silver analogy; I think the great Harold Macmillan was wrong there.
Thirdly, one ought not to be too dogmatic about different types of privatisation, including models where the state retains a degree of ownership. There have been some very interesting post-privatisation models around the world. When I was working as a banker, I was asked to advise a country, which will remain nameless, on privatising its gas industry. I thought I had got the message over to Ministers in that country but, when I went back a month later to see how they were getting on, the Minister told me proudly that he had put his brother in charge of the industry. So it was privatised and that was all right, was it not? I did not succeed there. On another occasion, when I was visiting Václav Havel at Hradcany Castle, the lady who took the coats called me aside urgently. She said she had heard that I was an expert on privatisation, and could I get her father’s pub back from the communists who had stolen it? She was dissatisfied when I said that I could not do much more than mention it to Mr Havel. I do not know whether she ever got it back or not.
I also declare an interest as an adviser to by far the most efficient, safest and advanced railway system in the world—the Central Japan Railway Company’s Shinkansen system. This is a private company with a large, residual government shareholding. Incidentally, its safety record is much better than the more recent Chinese high-speed system. Japan seems to be a country which, with their current Chinese enthusiasm, our Government have temporarily forgotten. We depend just as much on Japan for our economic strength, especially for a successful nuclear future, as ever we will on China.
It has to be accepted as well that a privatised electricity industry, which we now have, was never going to be able to build nuclear power stations on the scale of the giants being constructed 30 years ago in the 1970s and 1980s. We are still, of course, constructing one of these giants—at Hinkley Point C. It should come as no surprise that it needs a French state company, a Chinese state-owned company and the British Government, plus eye-watering price penalties on all industries and households for years to come, as well as endless government guarantees of risk-free returns to the investors, to keep a project of this size and design going forward. I suspect that this will be the last of its kind in the line.
Although the debate about privatisation has regrettably now become polarised, I have concluded that the benefits have definitely outweighed the failures. More importantly, forces were at work from about two-thirds of the way through the 20th century which made privatisation inevitable. Asking whether privatisation is good or bad is rather like asking whether evolution is a good thing. It happened and was bound to happen.
Technology is marching on. The digital age is on the march. The nature and role of the state are changing. With immense people empowerment, a huge impulse to localisation and entirely new relations in many
industries between the consumer and the producer, I believe that the modern information revolution will take this process forward far faster than most people realise, breaking down whole monopolies, both public and private. If we are going to see the transformation of the world’s energy mix, as many desire, this will depend on the flexibility and openness of our former energy and utility companies. Freezing them back into state monoliths is the very last way to help that process.
We need not a return to ideology—on the railways or anywhere else—but an advance to continuing innovation of every kind. That is what privatisation has enabled and it is what the market and the private sector, harnessed by skilled regulation, can and will provide. Nationalisation belongs to yesterday. I fear, too, although it will be resisted, that the great Labour Party in its present state belongs to yesterday. It is all rather sad and not a little dangerous. I beg to move.
12.05 pm
Lord Wrigglesworth (LD): My Lords, the noble Lord has done the House a service in raising this issue at the present time, although I hope that we shall not see the polarisation and ideological nature of the debate that we had in decades gone by. I take a very pragmatic approach to this issue and will rehearse the arguments for it in a moment, but before doing so I want to join the noble Lord in welcoming the maiden speech of the noble Lord, Lord Young. He and I worked in the Post Office together before we were both elected to the other place in 1974. Just as when I was making my maiden speech here I looked back to see what I had said in my maiden speech in the other place, I looked at the noble Lord’s maiden speech, which was made seven days before mine. I see that he spoke on this very issue of nationalised industries, and we look forward to the contribution he will make to this debate and those he will undoubtedly make to the benefit of the House in the future.
Having had a vote of no confidence from my constituents in the other place after nearly 14 years, I have had the benefit of some experience in different types of business. As I mentioned, I worked in the Post Office when it was a nationalised public corporation before going into the other place. I was director of a major consumer co-op for a number of years and the research officer for the then quite substantial Co-operative Party, which was the political arm of the co-operative movement, so I had a lot of experience of different types of co-operatives in that capacity.
When I came out of the other place, I joined a partner in establishing a commercial and industrial property development company which became the biggest investment and development company in the north-east and is still doing that work today, probably creating more jobs than I ever did as a Member of Parliament in the other place or indeed probably here. That was a great success and I still have an interest in industrial and commercial property in the north-east. In addition, before coming here I was on a number of PLC boards and chairman of the Port of Tyne, one of our biggest deep sea ports, for seven years. That ran in a very commercial way as a statutory corporation. So I hope that I can bring those experiences to the House in discussing the Motion before us.
It is unhelpful to business and to industry to have the uncertainty of a raging public debate, as we did in decades gone by, on an ideological basis over the issue of privatisation or nationalisation. As the noble Lord, Lord Howell, said, we should take a technical, not an ideological, view of this. There are very good examples of public sector organisations that prosper and serve the country well and do not suffer the maladies that the noble Lord outlined, but I regret that the Pandora’s box of this debate has been opened again by the new leader of the Labour Party. As a frequent user of the rail services up to the north-east, the idea of them going back into state ownership fills me with horror. I do not know why the privatised railway companies have not sold the success that they have had over the past decade and more to much better effect. Those who want to go back to the old British Rail must be looking at our stations with rose-tinted spectacles. The stations, and the services on our trains, are infinitely better than they were in those days. Memories seem to be very short. There has been a long-standing campaign, funded and organised by the trade unions from that sector, to try to get them nationalised again and the new leader of the Labour Party has obviously bought that.
In the Library’s briefing for this debate there is a piece by the Professor of Political Economy at Glasgow University. I can see where he is coming from ideologically. He talks about public ownership serving,
“social needs and environmental concerns over private gain”.
“democratic accountability and public engagement in the economy”.
What does he mean? He should remember some of the things the noble Lord mentioned. The nationalised industries used to be run with constant interference by civil servants and government departments, making it impossible for them to manage their businesses as they would if they were proper commercial organisations, or serve the consumers as they were supposed to. The idea of going back to that sort of arrangement fills me with horror.
No matter who the owners are, the trick is getting the relationship right between the shareholders, or stakeholders, and the management. Then management can manage on a proper commercial basis, to achieve the objectives that have been laid down by the shareholders or stakeholders. I think not only of our Port of Tyne, but of the very successful port of Dover, which is a statutory corporation. When it was suggested that it be privatised, the campaign against this was led by the Conservative Member for Dover because it is a perfectly good organisation, doing a good job. As was said many years ago, “If it ain’t broke, don’t fix it”. The Port of Tyne is the same: it made over £10 million last year being run on a commercial basis and there is no reason to disturb an arrangement like that. Channel 4 is in public ownership, and it does a good job but it has not been constantly interfered with by government. The noble Lord made a fundamental point: if a public sector organisation like that needs capital, one may have to go to the market and privatise to enable the business to succeed. If you do not, any debt that it builds up will, inevitably, be on the PSBR and the Treasury will take an interest in everything it is doing, and that leads to stop-go investment in the business.
There are cases where it is right for a body in the public sector to be moved into the private sector, but there are also cases for doing the opposite. The Conservative Government to which the noble Lord referred nationalised Rolls-Royce in the public interest. At the moment there is a case for the Government paying the costs of mothballing the steel plant in Redcar which is being closed. That plant is as big as St Paul’s Cathedral and has the second biggest blast furnace in Europe. The furnace, the coke ovens that go with it and all the surrounding deep berths for importing iron ore and taking the steel out, would need a massive investment of billions of pounds. The chances of that facility being revived are very slim indeed but, strategically, the Government should seriously consider having it available, for the relatively cheap cost of mothballing it for some years. However, I have not seen any serious consideration of that. That is what I mean about taking a pragmatic approach. Do not take an ideological approach, but ask what is best in the circumstances and behave in accordance with that.
The French seem to be much better at getting this right with the public sector. French Governments manage to sustain businesses right across the board in the public sector—or those with considerable public sector interests in them—without the sort of interference the noble Lord talked about. That is why the relationship between the ownership, the shareholders and the management is fundamental. If that is wrong, everything goes wrong. One can see plenty of examples of the dangers of the way it has been done in this country at any time. Look at the demands from Members of the other place, and even some in this place, regarding the way the Government should run the banks in which they have a shareholding. You cannot run an organisation if people externally are telling you what salaries should be paid to the management, what organisation they should have or what services they should provide. You cannot chop and change from time to time according to a political timetable and political demands, rather than taking a strategic, long-term approach, and be giving the management the job of doing it. Frankly, if the management does not do the job, it may have to be removed, which I have had to do at times, in order to ensure that the objectives that have been laid down are achieved.
I hope the ideological debate that raged in the past does not come back—I think the noble Lord would agree on this point—and that the settled position we have reached as a country is maintained. The blind doctrinal faith and ideology of a minority, which thinks that by putting things in public ownership you are somehow serving the consumer and the public interest, is completely wrong. It need not look in the crystal ball; it can look to history to find the truth of that case. From these Benches, I am advocating a pragmatic and non-ideological approach. If we do that, consumers, the people working in those businesses and the whole country will benefit.
12.17 pm
Lord Young of Cookham (Con) (Maiden Speech): My Lords, it is a particular pleasure to follow the noble Lord, Lord Wrigglesworth, because, as he said, we both worked for the same nationalised industry
over 40 years ago before we embarked on our respective political careers. I am delighted that our paths have converged once again in your Lordships’ House. I am grateful to him and to my noble friend for their very kind words about me. It is an honour and a privilege to make one’s maiden speech in your Lordships’ House. My arrival here has obliged the tabloid press to rebrand me from the “bicycling Baronet” to the “pedalling Peer”, but there are worse things to be called by today’s media.
Having read your Lordships’ debate about the size of this House last month, I was worried about the welcome I might receive because reference was made to an article describing the new intake, of which I am part, as the,
“extraordinary ennoblement of failed and discredited politicians”.
But there has been no trace of that ungenerous remark in my welcome to this House. Your Lordships could not have been kinder to the new boy. My sponsors, Black Rod, the Whips and the staff of the House have so far kept me out of serious trouble. As a bonus, the induction tour took me to a part of the building I had never been to in 41 years—the Sports and Social Club.
I understand all the sensitivities in this House about those who arrive here from down the corridor. But given that this House has as its mission the scrutinising of legislation and holding Ministers to account, I hope that those who have served an apprenticeship elsewhere might be able to add value to the proceedings in your Lordships’ House. It is also helpful to include those who have held office and can from first-hand experience spot the Achilles heel in a ministerial defence.
For my part, I think that I have the unique record of having been sacked by two Prime Ministers and then brought back by both of them, leaving unresolved the question of my ministerial merits. I have joined the Government more often than the noble Lord, Lord Mandelson. I think that I am the 8th former Government Chief Whip to join your Lordships’ House. In that capacity, I noticed that the Government lost more votes in one day last week than I did in two years. However, that is in part because the residents here are free range, as opposed to battery farmed.
I have always taken an interest in your Lordships’ House. With the noble Baroness, Lady Hayman, I co-piloted the House of Lords (Expulsion and Suspension) Bill in the last days of the last Parliament, which landed safely before dissolution. It enables your Lordships’ House to deal appropriately with,
“noblemen who have gone wrong”,
in the words of Sir William Gilbert in “The Pirates of Penzance”. It has a part to play in upholding the reputation of this House, and I hope I never activate its provisions.
I also understand the fear that the rarefied atmosphere of your Lordships’ House might be contaminated if we bring with us the emissions from the other place. I will not be doing that, having been equipped with the appropriate software. However, as one of the less partisan Members of the Commons, I welcome the calmer atmosphere here. What would be acrimonious exchanges on the green carpet become civilised discussions on the red one. I was only rebuked once for my behaviour in the House of Commons, and that was
in the 1970s, with George Thomas—later the Viscount Tonypandy—in the Chair. We were debating the state retirement pension; I opened my remarks by congratulating the Speaker on his 65th birthday and expressing the view that he might like to take a particular interest in the debate. I was rebuked for my insolence, but he then excised the exchange from
Hansard
.
I would like to make a brief contribution to this debate, so ably introduced by my noble friend. Before joining the other place, I was economic adviser to a nationalised industry—the Post Office Corporation, which embraced both BT and Royal Mail. As with other nationalised industries at the time—the noble Lord made this point—there was political temptation to freeze the prices before an election and then increase them afterwards, which played havoc with demand. The investment programmes were constrained by and caught up with the fluctuating fortunes of the government finances and were sometimes directed towards marginal seats. That was no way to plan for and run major infrastructure companies where stable, long-term investment was crucial.
To pick up on a point made by my noble friend who introduced this debate, after BT was privatised, I went back to the staff canteen to meet my former colleagues. On the notice board was one piece of paper: a chart of the BT share price. To me that symbolised one of the benefits of privatisation: the identification by the employees of a company with its success, in a way that was simply never possible under public ownership. Privatisation of BT brought choice in handsets and providers and got rid of the waiting lists; it would be absurd to renationalise it.
Twenty years ago, when I followed in the footsteps of my noble friend who introduced this debate and became Secretary of State for Transport, I completed the privatisation of the railways. Some noble Lords may regard that as a spent conviction, but I am unrepentant. Instead of a British Rail monopoly, we have now created a vibrant railway operating industry, using the skills of the airlines, the bus companies and overseas operators. They bid competitively for the franchises in the interests of both taxpayers and passengers. If British Rail failed, no one else could run the railways, but now we have a range of competent providers. Instead of an industry which looked inwards towards the Minister for funds, we have train operating companies looking outwards to the market—to their customers—to generate more revenue.
I remember the public expenditure rounds in the last Conservative Government. I would appear before the Star Chamber, which was populated with colleagues with whom I have now been reunited, and tell them of my requirements. They would say, “George, we are really excited by your new train set, but health, education, defence and the police have got the money”, and so not enough was left for the railways. Now, however, the train operators and the roscos—the rolling stock companies—are not inhibited in the same way and investment has soared. We may not have got absolutely everything right—it was done against the clock, at times without a majority in the other place and with an Opposition threatening to renationalise—but the basic structure has remained unchanged and passenger numbers have doubled.
At the moment, the Treasury is conducting probably one of the most difficult public expenditure rounds since the war, with the outcome due to be announced next month. I ask your Lordships how much more difficult that exercise would be if in addition to the demands of health, education, the police and defence were added the investment requirements of the nationalised industries. In my view, freeing these companies from the constraints of the PSBR was the most significant and welcome consequence of privatisation.
Over the last 20 years, a broad consensus has emerged that the wealth-creating infrastructure companies are best located in the private sector. There is a legitimate debate about the process, the price and the appropriate method of regulation, but I hope that we have left behind the arguments of the 1970s and 1980s. There are grave risks in breaking that consensus, such as a threat to the investment programmes of the industries concerned. Why should they risk capital if they are about to be taken over? It would be a serious diversion of management effort to see off the threat of nationalisation. That is the last thing that these important industries need at this stage of our recovery. I very much hope that the debate, so ably introduced by my noble friend, will help to ensure that common sense will prevail and that the consensus holds.
12.25 pm
Lord Cavendish of Furness (Con): My Lords, what a tremendous pleasure it is to follow my noble friend Lord Young of Cookham and to hear his outstanding maiden speech, on which I congratulate him. As has been said, he had a distinguished career in another place. I have seen the way he has been greeted in your Lordships’ House by former colleagues. He is obviously incredibly well respected and incredibly well liked.
Not having served in another place myself, I always find myself speculating how those distinguished people from another place will fare in your Lordships’ House. It is uneven, to say the least. Some fare better than others. Some sulk and say that it is not the same; others really get into it and make a career in your Lordships’ House. My noble friend is a true parliamentarian. We can look forward to a very distinguished contribution and we welcome him warmly.
I thank my noble friend Lord Howell and congratulate him on introducing this important debate. His speech was a reminder of his long and distinguished career, full of wisdom. It was also timely, as old arguments are resurfacing.
I declare an interest. In all my adult life I have been engaged with industry and commerce. I refer noble Lords to the register of interests. A debate on the possible merits of public ownership is once more possible only because the present generation of young adults cannot remember what the nationalised industries were really like, as the noble Lord, Lord Wrigglesworth, described. They cannot remember how it took more than six months to get a telephone connection, or the endless industrial action generated by a powerful and politically driven trade union movement. They cannot remember the general feeling of squalor that usually surrounded public sector enterprises.
I remember also a sentimental attachment even to the worst of these nationalised services. I remember sensing that people felt that the state, having brought us through horrible, damaging and tragic conflicts to victory, could also contribute to the peace that ensued. In the British mind there was and probably still exists a strong feeling as to what should and should not be done for profit. I do not dismiss those perceptions, but I do not think that that feeling stands up to argument. When a doctor or a social worker goes home with a pay packet and then deducts the expenses of living, what is left is surely, by some description, profit. Sometimes I think of the argument in reverse. Imagine if by tradition the undertaking business had, since the dawn of time, been the preserve of the state. Think of the outrage when somebody suggested it should suddenly become privatised—making money out of death.
While I conclude that the case for private ownership of industry is overwhelming, it does not follow that I am uncritical of some aspects. We in the private sector do ourselves no service by ignoring the shortcomings we see around us.
My starting point is that 95% of the British economy is driven by small and medium-sized businesses. The head of affairs of such an enterprise experiences things that no head of a tier 1 company, a multinational or a quango experiences. He or she is at personal risk every hour of every day. There is the commercial risk of the market changing unexpectedly, or commodities changing; there is the financial risk, including the strangely capricious attitude of banking nowadays; and there is the regulatory risk. Imagine being in charge of a small business, and the reams of paper that come at you every week. There is also the legal risk: employment law is complex, and although it has improved, all of us in the private sector know what it is to deal with vexatious claims. There are also the huge decisions we all have to make on capital investment.
That exposure to the harshness of the real world shapes the character and mettle of these people. They are the real heroes of the British economy, and it always saddens me to think how little their voice is heard. The CBI always claims to speak for all of us—but it certainly does not speak for me. How could it? It has never asked me what I think.
Public ownership, by contrast, is unavoidably inefficient, as I think has been pointed out already. I am not attempting to disparage those who attempt to manage it, but everything is stacked against them. Government is simply not designed to run business. The story of PFIs surely provides the best example: again and again we have seen how all the rewards go to private sector investors and all the risks are borne by the taxpayer.
All of us in manufacturing industry understand the importance of capital investment: it is the lifeblood of our business. My own experience of many years is that when properly equipped, a business produces happy surprises, but if we have had to stall investment—for cash-flow reasons, say—it is full of unhappy surprises. Yet even in this year of grace the Treasury is still, I feel, unable to distinguish between revenue and capital.
When I was in local government, in Cumbria County Council, we had very sharp political divides but we came together to save money to build a new school.
The old school was bad for education, expensive to maintain and bad for morale. It really had had its day, and all of us in local government joined forces to get a new one. The Treasury told us that we could not have a new school because it was “inflationary”—a bizarre idea, which revealed a completely different understanding of the workings of capital. I regard the Treasury as being innumerate from the point of view of a private sector business.
I also regard the public mechanism for controlling expenditure as bizarre, to put it mildly. Parliament decrees that something should be done, or bought, or a service provided, and then the Treasury does its damnedest either to stop it or to delay it. No one in the private sector would survive a week with that sort of system of control. When a Government sit there buying and spending, as Governments have to do, their power and financial muscle are such that what they do will have a strong gravitational effect. To avoid centralisation, the Government have to be proactive in preventing it. It is a credit to the present Government that they do just that.
It was a tragic historical set of circumstances that allowed our local government structure to be undermined and become a shadow of what it once was. In effect, it fell prey to centralising forces. The extremely sophisticated local government finance teams that used to be found up and down the country were one particular casualty of that development. We need to recover the financial skill that characterised the best of our local authorities. They really did understand the distinction between revenue and capital.
I shall now touch on something that I spoke about in last week’s debate on the Second Reading of the European Union Referendum Bill; I make no apology for repeating it. You will find no greater admirer of the free market than me, but I seriously worry about the fast-growing phenomenon of corporatism. It leads to greed, to a failure of accountability and transparency, to a diminution of competition, and, in the end, as we have seen internationally, to corruption.
The effect of corporatism can be illustrated thus—I am thinking of a particular set of circumstances with which I am familiar. The Government wish to place a contract. Understandably, they like to deal with a tier 1 company. They ask for, and probably receive, assurances that the local supply chain will receive a share, and a framework agreement is set in place. The business is shared out among other tier 1 companies. The supply chain issues then become rather vaguer and at one remove, and are finally often ignored.
There are two reasons why tier 1 companies like dealing with companies of similar size. The first is cultural. I well understand that. It is very easy for a tier 1 company to deal with its opposite number of similar size, and, often, with its links to Whitehall. The second is more sinister. Many of these companies are fat and monopolistic and often not as efficient as they should be. The inefficiencies are sometimes disguised by making up ground through screwing down their suppliers. The approach of some supermarkets to dairy farmers is a case in point. I see in Cumbria the tragic results of that and the suffering of some dairy farmers. The one thing that terrifies these companies
is that fleet-of-foot small companies will muscle into their territory. A timber contractor operating nationwide regularly approaches the regulator to try to toughen up the regulatory framework for his business. This is not because he is interested in health and safety but because he cannot bear the idea of the numerous two-man operations operating successfully, and he wants to put them out of business.
We have also seen how great infrastructure projects come and go without local companies enjoying any benefit whatever. At least the Government set out with honourable intentions; I would be less confident saying that about many of their quangos. Worse even than the quangos are the private monopolies, especially exemplified by some of the utility companies which become so utterly remote from the customers they should be there to serve. One of the best antidotes to this is the growing number of LEPs we are seeing developing around the country. When they are good, they really help the SME sector.
This is also the age of partnership. Given the huge investment coming into my local town of Barrow-in-Furness, a number of us are trying to get together with very small operators who normally would not be able to compete so that we can come together and add a little muscle to our operation. Huge size tends to lead to corporatism. Might not the public be served by fiscal incentives either to split up large companies or not grow them beyond what is in the public interest?
The question of institutions raised by my noble friend is more subtle—but, again, gravitational force is at work. I carried out some local research into why individuals were not being attracted to school governorship, local government or parish councils, or leaving early. In the case of school governors, the story was always the same: they said that they were always being sent for retraining, so time burdens were continually being added. So you are getting committee-type persons going for these things and independent-minded persons staying away. Similarly, parish councillors are being made less and less welcome because of the regulations coming down. The modern world has discouraged local leadership; somehow it has to be retrieved.
I have always thought that about half of my own working life ought to be devoted to public service. I realise that that is too much for many people. It is said that Cumbria is overgoverned and underled. I think that government has a role in making public service more attractive—or at least less unattractive. A happy nation needs leadership and the participation of all if it is to prosper.
12.38 pm
Lord Stoneham of Droxford (LD): My Lords, I, too, congratulate the noble Lord, Lord Young, on his maiden speech and welcome him to the House. I was not aware of his role in the final throes of rail privatisation but, as somebody who always prioritises rail in my business travel, I thank him and congratulate him on at least making my life more amenable over the years since that time.
When I first noted that this debate had been tabled, I was not sure whether it would be a trip down memory lane to highlight the merits of privatisation
or a partisan clarion call to try to highlight the “back to the 1970s” views of the new Labour leader. Inevitably, it has turned out to be a combination of both. But I hope we can, as I will try to do in this speech, learn the lessons of the past to improve on what we do in the future.
I remind the House of the huge damage done to the British economy by the ideological debates of the 1950s, 1960s and 1970s over the issue of private and state ownership. I happened to walk into the House this morning with the noble Lord, Lord Brookman, who has spent a lifetime in the steel industry. I reflected that I thought it was a sad time for him, with the current problems in that industry. He reminded me that when he started work in in the 1950s there were 270,000 people working in the steel sector; that was when he started at Richard Thomas and Baldwins in Ebbw Vale. When I started as a graduate management trainee in the Coal Board in 1974, there were 250,000 working in the mining industry. One of the consequences of the last few decades is that whole communities have been turned upside down. It is sad to reflect that nothing has really replaced the optimism, confidence, prosperity, spirit and skills of those communities.
I am not sure whether those industries were going to survive, but I am absolutely convinced that the lack of investment over the years has destroyed steel-making. We might be talking about the liquefaction of coal, rather than putting all our hopes into fracking, if we still had some remnants of a coal industry. I am absolutely convinced that lack of investment in rail and nuclear energy has seriously retarded services in those sectors. It has also retarded our capacity to ourselves improve and invest in them.
The consequences of that lack of investment are now being felt. We can see huge problems in the rail sector huge because of the lack of experience in building new capacity; there is just no knowledge or skills. There is poor project management because there is no experience of actually doing it. It is not surprising that the Great Western electrification in the course of the last two years has spiralled out of controlled. This is before we start HS2, which is so essential to improving our rail capacity.
Today, of all days, it is slightly ironic that the decline of our nuclear energy industry has left us resorting to a French, state-controlled company, EDF, in partnership with the Chinese state’s China General Nuclear Power Corporation, to build a design which is already massively delayed in other countries at an astronomic energy price. I noted in the Guardian today a quote from the noble Lord, Lord Howell, saying this is,
“one of the worst deals ever”.
I hope that he might take the opportunity when summing up either to deny that quote, or to explain himself to his son-in-law. Managing and project-managing this sort of investment—which will not be completed until everyone who has signed it is long gone—has to be a problem. You have to be a great optimist not to believe that this complex deal is a recipe for contractual disaster.
There were both successes and problems with privatisation and we are still experiencing some of its consequences. Three things need to be said about it. Often, deals were hurried to get political payback, meaning that initially in some sectors there was inadequate competition or faulty structures which were not sustainable —too often, quick wins rather than sustainable futures were achieved. There was not enough experience in franchising or regulation to manage these in the first instance. We are still having problems with that and in making sure that the consumer gets the best deal. We need to ensure, over time, that franchise deals are longer term, so that they encourage more investment.
The third problem is that too many of our infrastructure utilities have drifted into foreign ownership, in areas such as power generation, airports and water. That inevitably means that we will end up with very complex deals for investment, requiring expensive government guarantees, and contracts that are likely to be fraught with difficulty. We want an open economy but I cannot believe that the French, Germans or Americans would have allowed to happen what has happened here.
There have been successes. The debate has emphasised that British Rail is not something that we would want to go back to, unless we were acting simply out of emotional nostalgia. Franchising has had its problems but, happily, investment is happening; customers are more centre-stage; reliability has risen, certainly on all the lines that I use; and monopolies are being challenged. There are also the great success stories of privatisation: Rolls-Royce rescued and then privatised, a company at the pinnacle of our engineering skills in this country; I talk also of Airbus and British Aerospace, where now in civil aviation we challenge the Americans, which was undreamed of 20 or 30 years ago. But there have also been some disasters and that was often because those industries and sectors were denuded of skills and investment before privatisation.
I am a social democrat and less concerned about ownership than about the best means to improve the country’s competitiveness and prosperity. I am sure that is better done through ensuring that there is always choice and competition because they are the main drivers of change; otherwise, monopoly breeds complacency and uncompetitive practices. I have worked in the state sector and the private sector and for social enterprises so I have seen all forms of ownership.
I will make a few comments about how private enterprise now has to deliver in the economic situation that we face. There are some shortcomings that the Government need to address. One is that there is still too much emphasis in our stock market and our companies on short-term profit maximisation and results to get the share price up. We have also allowed too much of our talent in this country not to go into real industry but to drift into the City and the finance sector as a whole. One of the disadvantages of the affinity that we have with the City is that it encourages a trading mentality, which encourages too many acquisitions and mergers rather than the development of real businesses. We should always seek to improve competition and should be very wary of allowing companies to be taken over by overseas owners. The UK has been seen
as a bit of an easy touch and we underestimate the consequences for our industry if we allow too much ownership to be in overseas hands.
One of the most significant problems in industry is that there has been simply too little business investment, particularly in R&D. I have said before in this House that Volkswagen commits €12 billion to R&D research each year. I know it has problems but I suspect that, because it has made that investment in its products and in its customer loyalty, despite all its problems it will see through the current crisis because basically people like its products. In this country our management incentives are aimed too much at the short term and not at the long-term achievements that companies need to make.
During the coalition Vince Cable commissioned a report from John Kay to review UK equity markets and encourage long-term decision-making. Action has been delayed while the Law Commission considers the whole legal concept of fiduciary duties, but will the Minister confirm that the Government remain a strong supporter of the stewardship code, that they want to see investor forums in companies to facilitate collective engagement by investors in UK companies, and that they want management incentive schemes to focus much more on the longer-term results rather than the short term? I also hope that the Government remain sceptical of excessive merger activity and are keeping under review the power of regulators and the competitive authorities to counter this.
The Government are right to get the economy in balance and they are right to promote a climate to encourage business investment in all its forms, but I do not believe we should concentrate simply on the issue of ownership. We must emphasise that managers need to improve their sectors and concentrate on the long term. There remain major problems in our balance of payments, productivity and skills and those major challenges can be resolved so that we can compete globally and raise companies’ prosperity only if we give attention to the long term.
12.50 pm
Lord Stevenson of Balmacara (Lab): My Lords, I would like to thank the noble Lord, Lord Howell, for securing this debate. Like a number of other speakers, when I saw the title I felt slightly at a disadvantage, as I was not quite sure where he was going to come from. Your Lordships will not need me to remind them that I am in a slightly trickier situation in responding to this debate since, to take a cricketing metaphor, the pitch is rather sticky and I am not entirely sure that I have got all the messages that are coming out from the other end in the right order, but I will certainly try to do justice to where the party that he criticised so strongly in his comments believes it stands on the matters that he raised.
I would also like to congratulate the pedalling Peer on his maiden speech. I think everybody who heard that and those who will read about it will recognise that we have a rare talent joining us here. He is steeped in the traditions of Parliament and has quickly understood the way in which we operate, so he will fit in very well. I am sure I am more of a battery rather than free-range
person myself, but if he is going to find the Achilles heel in Ministerial Statements, well done—I like this; this is going to be fun. I look forward to many of those occasions.
In preparing for this debate, I looked at the interesting brief prepared by the Library which was good to have, although somewhat gnomic, possibly because the Library was also not quite clear where we were going to go on this topic, which meant that you had to read quite a lot of stuff in order to understand where one might go with it. I am going to take one or two points from that, because my response here is going to be partly theoretical and partly practical. I am not going to be quite as pragmatic as one of our earlier speakers but I am hoping to see where the intellectual case lies and then perhaps articulate what that means in terms of policy. I will also be drawing on a speech given by the then Chancellor of the Exchequer, Gordon Brown, in 2003 to the Social Market Foundation which dealt extensively with what a modern, progressive democratic party should do in relation to ownership questions about strategic industries.
My first point is a slight criticism of where the noble Lord, Lord Howell, came from on his journey. I thought his reflections on his experiences were interesting but there was an underlying teleological approach that there is a march of progress and it is inevitable that anything that starts off in state ownership will eventually end up in private ownership and that, really, those who call for nationalisation are misguided bigots—all would be perfect if Mrs Thatcher’s founding themes were taken forward and allowed to flourish, because then the state could withdraw from most things and everything would be right as roses. I am not sure about that. I think the problem with this argument is that it is mainly based around cost issues and ignores value. The issues are much wider than that. Government will always have a role in every aspect of human endeavour and must not lose that role because it is an expression of the will of the people, and it needs to be in all aspects of our society.
After all, this starts with Adam Smith. I am a bit surprised that nobody has quoted the great thinker, but every modern generation since Adam Smith put the question about the relationship between the invisible hand of the market and the helping hand of government has had to think about how to interpret that tension for their times. What are the respective spheres of individuals, markets and communities in achieving opportunity and security for their citizens? If you address the problem from that perspective, you cannot ignore the role of the state. It is true that direct state involvement in industry was pretty much a rarity in the 18th and 19th centuries following Adam Smith, but the experiences that we have been talking about today are not the only ones that one can draw on. We ignore at our peril the New Deal of the 1930s in America and the way in which that combination of state intervention, state borrowing and state investment enabled the world to come out of a recession which could otherwise have been much, much worse.
There are obvious resonances with the situation in 2006 to 2008, brought on by the behaviour of the banks. At that time, public ownership was one tool used by
the UK Government, nationalising three of the UK’s largest high street banks: Northern Rock, HBOS and the Royal Bank of Scotland and Lloyds. At the height of that crisis, a sum of what I understand to be £1.162 trillion of public money had been committed to provide loans, share purchases and guarantees to the banking sector. At that stage, I think that all sides in Parliament were on the same page: we were all saying that that had to happen in order to secure the economic future of our country. We did not say, “Oh no, we don’t invest in private assets”. We took those steps because they were the right thing to do, although it is fair to say that the then Chancellor of the Exchequer, Alistair Darling, said at the time:
“It is better for the Government to hold on to Northern Rock for a temporary period and as and when market conditions improve the value of Northern Rock will grow and therefore the taxpayer will gain. … The long-term ownership of this bank must lie in the private sector”.
So my first point is to recognise that, although there is a long and complex story involving ownership of assets which are now in private hands, there are occasions when this will still be an issue, and the fundamental questions behind that, raised originally by Adam Smith, still need to be addressed. There must be a debate about whether an economy can be left in private vested interests, except when it is necessary to instigate a short-term palliative for market failure of that type.
Let us not forget that three decades of privatisation and marketisation in the UK have not only increased social inequality but resulted in economic decision-making being captured and concentrated in far fewer hands. The opening up of very large parts of the public sector to private capital has created a situation in which the UK is shifting towards a rentier economy, dominated by financial interests and shareholder values, as was mentioned by the noble Lord, Lord Stoneham. There is obviously a good and a bad side to that, but the assumption one makes is that the economy, although it is working for private vested interests, might also have a conception of public good, and I think that that is a bit of a stretch at times. Although it is true that the private sector has brought in investment, we are still an economy dogged by bad productivity. Although there are hot spots and the economy is beginning to grow again, it is still not the balanced, wider-ranging economy that I think that all sides want. My point here is that, if possible, we should avoid a simplistic approach to questions of who owns the assets that we are talking about.
I take it, and will argue, that a sound macroeconomic framework is a necessary but not sufficient condition to achieve for Britain a society dominated by opportunity and security for all, but I shall mention three areas of this debate where there are questions to which we will want to return. The first, the health service, which, since it was first introduced after the Second World War, has always been in public ownership, is dogged by expense, new technology and rising expectations. The question has to be whether patients will benefit through a public healthcare system or whether, by bringing the market in, you could get a better route to advancing the public interest. Higher education is another example. Universities are very much operating
in the global marketplace, with their excellence depending on drawing in a wide pool of talent. The question, again, is whether universities should really become sellers setting a price for their services and prospective graduates becoming buyers of higher education at the going rate. What does that mean in practice for the economy and how growth will be supported? Then there is industrial policy. When global competition is challenging every industry, the state has options to replace market forces when they fail—the example of the steel industry was mentioned today—but is it right always to have an ideological assumption that the state will refuse to intervene at any stage? Those are complicated questions. They are really about whether or not the public interest is best served by a particular model or approach to that thinking.
The noble Lord, Lord Howell, in introducing his remarks, tried to pitch himself as a one-nation Tory—I think that that would be an appropriate way of explaining it; certainly not, he says. He certainly had some very harsh words to say about those with views on the matter on the very far right of his party. I think that he would accept that there has been a divide over the years about whether the market solution or a public ownership solution was the right one, and I do not dissent from him. Within that divide, there has also been an agreement that there are certain areas of public activity and the economy in particular where we have accepted, without going into it in any great detail, that things like family, faith and civic society are not transactions that could be marketised.
In his book The Dignity of Difference,the former Chief Rabbi, the noble Lord, Lord Sacks, says that he accepts—as I do, too—that there are areas where the market is legitimate and there are areas where to impose market transactions in human relations is to go beyond the bounds of what is acceptable and corrodes the very virtues that markets rely upon for success. He says that markets may be the best way of constructing exchanges and providing many goods and services efficiently, but they are not good ways of structuring human relationships. This point was picked up by Michael Sandel in his Reith lectures a few years ago, when he talked about something he called “the moral limits of markets”.
Therefore, we need to be a bit nuanced about how we talk about the economy in terms of markets. The debate about left and right need no longer be a debate about whether there should be a market-based economy, because it is absolutely right to say that markets work very well for the distribution of services, and for most of the time we want to make sure that they continue. I do not accept that the public interest requires us to regulate the impact and scope of the market by having greater public ownership, regulation or state intervention. On the other hand, I hope that those who are on the right of this argument would agree that it is not always the case that the markets are going to provide that combination of liberty, equality, efficiency and prosperity that every state would wish to look for.
Given those points about the areas where the market is not appropriate, we can only agree that, on some occasions, the market is the right approach, and on some occasions there are areas where it is not. We need to get beyond the constant debate about that. I recognise
that progressive democratic governments seeking strong economies should not only support, but possibly enhance, markets and make sure that they are working effectively and efficiently. We accept, however, that there are limits to the markets, and that there are some areas—particularly in moral matters—where there should not be markets, but we should always have a concern for productivity and efficiency in these areas.
That is the theory behind my views, but I would like to make a couple of points about how it might apply in practice. First, we need to look much wider than we have in this debate so far about what the Government are responsible for and what they can contribute. The economy is supposed to be British based; it is supposed to create jobs, invest, innovate and export. It should have high productivity, and be highly skilled and should have innovation. These are all points made by various speakers. We need a balanced, resilient economy, succeeding in the world, creating good jobs and opportunities, and offering people a ladder up and the chance to make the most of their potential. In that, there are things we need to accept would be done better by, or initiated by, the state.
The first of these would be to make sure that we can, as a Government and as a country, liberate the talents of all. We cannot hope to succeed as a nation if we are not giving everyone in every part of Britain a platform to succeed as individuals. The economy has to be built on the contribution of all, and we must extend opportunity and remove barriers to success. This is about good primary and secondary schooling; training and higher educational opportunities on a lifelong basis; fixing broken markets, intensifying competition and reducing barriers to market entry for new businesses, and supporting entrepreneurship. That is the area where the Government have a legitimate and important role and most people involved in industry would accept that, in partnership with what their interests are.
The second pillar to consider is innovation. We have to recognise that, in a previous period, there was a lot of blue-sky research funded and operated through the Government and the nationalised industries. The noble Lord, Lord Stoneham, might remember that. Even the Post Office or GPO had its research branch areas as well. That has all gone in the wake of privatisation, which is to be regretted, but we have other ways that that could be taken forward. In particular, the role of the research council system, which is under threat because of possible further cuts to public spending, must be looked at. The science budget, which was given a 10-year focus under the last Labour Government and was supported during the coalition Government, needs to be protected as we go forward.
An active Government should invest in the long term; the short-termism has already been mentioned. What does that mean in practice? It means issues like infrastructure on a long-term, consistent basis. We look forward to the emerging thinking of the present Government on what I take to be an extension of Sir John Armitt’s recommendation of a National Infrastructure Commission under the noble Lord, Lord Adonis. We also need an industry strategy: not in the sense of direction, but making sure that all the facilities that are available in many other countries for their successful winners get the chance to come forward.
Thirdly, the Government have a role to secure an open approach to the world, and we should not be isolated, either as an economy or as a country. This means international engagement and an open, outward-looking approach to the world. It also involves, of course, the big question before us that will be coming up in the next year or so: the question of whether we stay in Europe. In my view—and I am sure it is shared widely around this House—it would be disastrous if Britain were to leave the EU. Shutting ourselves off would pose a huge threat to our future prosperity.
I have tried to give a theoretical basis as to why the party that I represent regards the sort of market economy that we now have as the one that is appropriate for us. I worry about the concerns that I have expressed in regard to whether the market will go far enough to ensure a proper public-interest concern for people and their aspirations. I think there are practical implications that this Government should take ahead.
1.06 pm
The Earl of Courtown (Con): My Lords, I thank my noble friend, Lord Howell, for moving this debate and I am grateful for this opportunity to speak. It was fascinating to hear his journey through his old department and the extent of the work he carried out. I also join other noble Lords in welcoming my noble friend Lord Young of Cookham, particularly as just over 20 years ago, as he may remember, I, as a very junior member of the Government, worked with him as a Whip in this House.
It is always wise to remind ourselves from time to time of the benefits to our economy of markets that operate efficiently and effectively and the important role the private sector plays in achieving this. We have spent considerable time over recent decades debating all sides of these issues. It is fair to say—as was also said by my noble friend Lord Young—that the arguments in favour of the market economy and of private ownership of industries and, indeed, some institutions, have been won and are now generally accepted by most across the political spectrum.
As my noble friend Lord Howell said, since the 1980s all serving Governments have committed to privatisation to a greater or lesser extent. Depending on the nature of the business an organisation is involved in, privatisation can come in a variety of shapes and sizes. There are, for example, the large utilities that provide consumers with critical services, which were privatised in the mid-1980s. During the period from the 1980s to the mid-1990s, both British Telecom and Cable & Wireless were wholly or partly privatised. Combined with the introduction of economic regulation, these privatisations resulted in strong competition in the telecoms market place and significant gains for consumers.
Other utilities such as water, gas, electricity and airports have also been privatised successfully. Some people may argue that these privatisations have created privatised monopolies. However, privatisation has proved very successful in reducing costs to the consumer. By 1995, telecoms prices had fallen by 40% since privatisation while gas prices had fallen by 25%.
The regulation of the sector, which has gone hand in hand with privatisation, has also helped to drive investment to ensure that the system can cope with the demands placed on it by industry and the population.
These privatisations brought with them an end to ministerial control and led to the creation of independent economic regulators such as Ofcom to monitor the market and regulate the behaviour of newly privatised industries in the interests of consumers. Over the years, these and other sectors which saw significant privatisation have matured and developed and in most cases have delivered good performance and positive consumer benefits. More recently we have seen the successful privatisations of the Tote and Royal Mail, as well as the continued divestment of the taxpayers’ stake in UK financial institutions back to private investors. Why, however, is privatisation seen as necessary, and what are the benefits? What is the case for private ownership of industries and institutions in the UK?
The more cynical among us may emphasise the raising of income for the Exchequer as the very objective of privatisation. This has certainly been the case in the past and is still a useful tool for Governments to deploy in support of other important initiatives. An interesting example of this, cited in a House of Commons research paper, is the sale in 1977 of 17% of the Government’s shares in BP, which raised £560 million to help them meet the terms required to secure a loan from the IMF, including the reduction of the UK budget deficit. Indeed, the Government have recently announced their intention to bring forward sales of land, buildings and other assets the Government bought or built, which will raise up to £5 billion over the course of this Parliament. The proceeds from these sales will be recycled to help fund new infrastructure projects and capital investment.
However, we know that there are more long-term benefits from the private ownership of industries. Where there is no longer a strong policy reason for continued public ownership or where the asset would clearly operate more effectively in the private sector, there is clearly no argument for retaining it within the public sector and at a cost to the taxpayer. Privatisation is a step on the road towards competition, and many of the privatised monopolies are now competing in competitive markets. Where competition is not possible, economic regulation has created the incentives for efficiency gains and investment. Energy network costs have halved in the 15 years post-privatisation, while the water sector has received £116 billion of investment since 1989.
The “political interference” from all angles experienced by nationalised industries in the past led to some perverse strategic decisions that did not make any kind of commercial sense. The businesses did not become more innovative or competitive; in fact, just the opposite happened, and many, such as British Leyland, were sold off. Both Jaguar and Land Rover, which split up when British Leyland was sold in 1984, are now major British multinational brands, albeit foreign-owned. Without the private foreign investment we have seen in our car industry over recent decades, it is unlikely that we would have the strong, internationally competitive industry we now have in the United Kingdom
or the highly skilled workforce and good-quality jobs in regions such as the West Midlands and Northumberland.
Removing the burden of national ownership from Governments and Ministers, as many noble Lords have said, has allowed industries to seek critical investment from elsewhere and has enabled Governments to focus their attention and limited resources on more strategic cross-cutting issues that will have the most impact on our industries and the economy, such as apprenticeships, and on encouraging a more entrepreneurial spirit that will help our industries succeed in global markets. However, of course we need to ensure that the other ingredients are in place to allow business to operate free from unnecessary constraints or unfair practices of other firms, so that it can compete and innovate. At the same time, Governments must also look after the interests of consumers and the workforce, and protect the integrity of the market.
We are fortunate in this country to have one of the most effective competition regimes in the world. The Government have worked hard, both during the last coalition Government, as mentioned by noble Lords on the Liberal Democrat Benches, and since May to make the system more efficient. Last year we created the Competition and Markets Authority by bringing together the Office of Fair Trading and the Competition Commission into a single unitary authority.
Competition, as my noble friend Lord Howell said, is a key driver of growth and one of the pillars of a vibrant economy. A strong competition regime ensures that the most efficient and innovative businesses can thrive, allowing the best to grow and enter new markets. It also gives confidence to businesses wanting to set up in the UK. It drives investment in new and better products and pushes prices down and quality up. This is good for growth, for consumers and for the economy.
Competition and productivity go hand in hand. In July this year the Government published their “productivity plan”, which was jointly developed and signed off by the Chancellor of the Exchequer and the Secretary of State for Business, Innovation and Skills. The Government’s plan for improving our productivity performance is built around two key drivers or principles: encouraging long-term investment in economic capital, including infrastructure, skills and knowledge; and promoting a dynamic economy that encourages innovation and helps resources flow to their most productive use. The plan includes 15 action points which set out the Government’s objectives to establish and enable a long-term investment culture in this country, and which help address the structural challenges in areas such as pay, finance, regulation, infrastructure and rebalancing the economy.
Given the focus of this debate, I will direct my next comments to investment rather than the other aspects of the plan. As highlighted by the noble Lord, Lord Stoneham, and other noble Lords, traditionally, United Kingdom investment levels as a share of GDP have been lower than those of competitors such as France, Germany and Japan. In the run-up to the financial crisis, the growth in investment spending was focused on property rather than capital spend on equipment and machinery. We need to change this. Investment in
new ideas and equipment is crucial to growing our economy. Access to finance to support investment enables companies to compete globally. Companies need to be able to anticipate fluctuations in markets and identify and respond quickly to opportunities.
How can we make the UK an even more attractive investment option? Among other things, the plan proposes reductions over time to corporation tax; increases the annual investment allowance to £200,000, its highest-ever permanent level; welcomes proposals to encourage and incentivise longer-term investment put forward by business leaders; and addresses issues around skills and education at school level, university and beyond, as highlighted by the noble Lord, Lord Stoneham. It is also ambitious in its plan to address a number of existing transport and infrastructure challenges, including long-term access to reliable, low-carbon energy at an affordable price, and establishing world-class digital infrastructure across the whole country.
However, crucially, on top of these very tangible and welcome initiatives, we need to create a long-term attitude to investment in companies and innovation and end short-termism. Financiers often focus on short-term investments and the quick return. This can have a clear and noticeably negative impact on funding for research and development innovation, which can be a risky pursuit and may also have a fairly long payback period.
A number of initiatives are included in the productivity plan which focus on creating financial services in the UK that lead the world in investing for growth. Our financial services sector has suffered since the financial crisis and we can do more to promote the most productive forms of investment. To this end, the Government have highlighted the importance of ensuring the supply of finance to support productive investment in setting the Financial Policy Committee’s 2015 remit; directed the Prudential Regulation Authority and the Financial Conduct Authority to create a joint new bank unit to promote competition; championed the development of new and innovative technologies and ideas, including through the appointment of a special envoy for FinTech; and are implementing a long-term plan for the taxation of banks, giving stability and sustainability and securing competitiveness.
I also draw attention to the speech of the noble Lord, Lord Wrigglesworth, and his pragmatic approach. I particularly agree with what he and many other noble Lords had to say about the pink-tinted specs the railways are sometimes viewed with. As a regular user of the railways I find it a great service. My noble friend Lord Cavendish emphasised the importance of small and medium-sized enterprises, and I could not agree more with what he said; they are often described as the backbone of our economy. The noble Lord, Lord Stoneham, mentioned training. I draw his attention to the debate I took part in last week, which emphasised the great successes of the apprenticeship system we have put in place. The noble Lord also asked whether the Government would support the Stewardship Code, which aims to support the quality of engagement between asset managers and companies to help improve long-term risk-adjusted returns for shareholders. The FRC is reviewing the code to ensure it works as effectively as possible. The Government support this voluntary code.
Private ownership with suitable safeguards seems constantly to have been shown to be the best approach to running the economy. It has encouraged the best performance from the vast majority of industries over the years. I should draw attention to the fascinating speech of the noble Lord, Lord Stevenson—even though it might be on a slightly sticky wicket. Private ownership and the competitive markets which follow lead to more efficient firms, owing to the profit motive and the need to be, or to become, a commercially viable proposition, whether at home or globally. There tend to be better outcomes because of the desire, or perhaps the need, to please consumers and to keep and develop their businesses, facilitated by the competition regime. Of course, competition provides companies with incentives to improve the quality of products or services, and to reduce prices as far as possible, all of which are of huge benefit to consumers.
Finally, competition and private ownership provide strong incentives for companies to innovate and develop their offerings so that they meet consumer needs more closely. It is the companies that can do this effectively that will grow and survive and provide the much-needed employment and sustainable wealth creation for our economy. A flexible, open marketplace that supports and encourages such private endeavour is also attractive for investors, including foreign direct investment, as the UK experience has proved so effectively over recent decades. All of these contribute to productivity and growth.
1.23 pm
Lord Howell of Guildford: My Lords, it remains for me to thank very warmly all noble Lords who have taken part in this debate. In a way I am quite gladdened that it has been a low-key debate and your Lordships’ House has not been infected with too much of the frenzy from outside and nobody has made blood-curdling speeches about returning to the commanding heights of the economy and all that, or blood-curdling speeches about the need for unbridled capitalism. In fact, in my view, all capitalism should be, and always will be, bridled and that is really the answer to the ideological battles of the past. The market has to be regulated and work in a framework of control; if the framework is right the market works and if it does not then the Government begin to carry the can.
I am grateful for the support of the noble Lord, Lord Wrigglesworth, who broadly supported my view that technology and the technical wonders of the past 30 years have driven us away from the idea of the great state industries of the past or the state industries of other countries such as Russia as they simply became undesirable, unnecessary and unworkable. Some 30 years ago in the Department of Energy I was told by engineers, scientists and civil servants that it was impossible to privatise the utility industries because it was absurd to imagine there could ever be two telephone wires to a house or two electric cables or two gas pipes. It could not be done so we might as well forget the whole idea. Indeed, I remember that in India people said it was impossible to privatise the telephone industry because there were 9 million villages that had to get a cable to them. Well, we know what happened. Technology simply leaped all over that and transferred the argument
into a completely different world in which, particularly with digitalisation and the computer, it became possible to operate a vast variety of diverse services within an overall organised framework.
I am very grateful to my noble friend Lord Young—he lived entirely up to my personal, and all our, expectations in that he spoke a lot of common sense and I think he will add to the common-sense resource of this Chamber, which is more and more difficult to maintain sometimes in a very tumultuous world. As he said, our job is to scrutinise legislation. We will go on doing that thoroughly. In addition, through debates such as this one we have a stabilising role in the frenzy outside. Although, I just put in a slight reminder that in our present condition where the Government keep losing the vote in the end they must be allowed to get their business. If that common-sense view about this Chamber is thrown away then we are heading for a really disastrous period in which the basis on which the House of Lords is able to contribute will be undermined.
I am very grateful to my noble friend Lord Cavendish with his wisdom on localism and the need for strong local authorities with expertise. We want to see more of that. If we are going to go for northern powerhouses we need northern powerful and intelligent regulation and administration in local government, and that must come back in a way we have not seen before.
I thank the noble Lord, Lord Stoneham, who made interesting points about ownership. I am not sure I agree with him about it not mattering. It was Anthony Crosland’s idea that it did not matter. He told the old Socialist Party that you should not have to nationalise everything. In the end it does matter. If you do not think about who owns and organises and competes in the great resources of this economy, disasters follow. I thank the noble Lord, Lord Stevenson, for pointing out that, of course, in the end the Government always do have a role, particularly in all the vital services and where the investor will not invest. Where it is too long-term, as we have seen—we mentioned nuclear power—Governments have to step in. It is as simple as that. They become political decisions. The taxpayer and the consumer will have to be ordered to pay up if an investor is not willing to do so.
My only disappointment, if I may end on this note, is that there was no further comment on wider ownership and some attempt to calm down and overcome the eternal alleged ideological battle between capital and labour which has gone on for most of my lifetime. I believed in the 1970s and I believe even more strongly today that, where wealth is being created, resources must be spread so that everyone in the community who wishes to be involved—there are always some who reject participating—benefits from the growth of wealth and resources in the economy. To put it in crude terms, where there is butter it must be spread to all corners of the toast. I think that is the answer to past battles. If all share in prosperity then all will feel that they have a stake and will contribute. That must be the ideal not only of one-nation Conservatives but of the social democrat Labour Party as I have worked with it and understood it in the past and, indeed, the Liberal Democrats as well.
I thank again your Lordships for a very interesting passing comment, in a way, on the storms outside. Let us hope that we continue to be an oasis of stability, quietness, calmness and common sense in a very difficult and chaotic world.
Zhang Kai
Statement
1.29 pm
The Minister of State, Foreign and Commonwealth Office (Baroness Anelay of St Johns) (Con): My Lords, with the leave of the House, I will repeat a Statement made earlier today in another place by my right honourable friend Hugo Swire. The Statement is as follows.
“We are in the middle of a hugely positive state visit, which the Prime Minister has said will benefit not just our nations and our peoples but also the wider world. Yesterday, the Prime Minister and Foreign Secretary had extensive discussions with President Xi Jinping and his delegation. Those discussions continue today, including when the Prime Minister will host President Xi at Chequers.
As we have made very clear, the strong relationship which we are building allows us to discuss all issues. No issue, including human rights, is off the table. The UK-China joint statement, which we have agreed, commits both sides to continue our dialogue on human rights and the rule of law.
Turning to the case of Zhang Kai, we are aware that Zhang Kai has been accused of “endangering state security” and “assembling a crowd to disrupt social order”, apparently in relation to his work with churches in Zhejiang province. We are concerned that his whereabouts are undisclosed, and he has been reportedly denied access to legal representation.
At the UK-China Human Rights Dialogue, which was held in Beijing in April this year, we raised issues relating to religious freedom in China, including the destruction of churches and religious symbols in Zhejiang province. We raised a number of related individual cases.
A transparent legal system is a vital component of the rule of law, and we urge the Chinese authorities to ensure that proper judicial standards are upheld”.
1.31 pm
Lord Collins of Highbury (Lab): My Lords, I thank the Minister for repeating that Statement. In July, the Minister expressed deep concern over the detention of Chinese Christian lawyers arrested that month as part of a major crackdown. She fully supported the subsequent EU statement calling for the release of those detained, who had sought to protect rights under the Chinese constitution. Now, we have the case of Zhang Kai, who was taken into custody by the police on 25 August. On 31 August, China Aid reported that he had been sentenced to six months’ imprisonment for gathering a crowd to disturb public order and charges relating to stealing, spying, and buying and illegally providing state secrets and intelligence to entities outside China. The Minister referred to some information that she had. Could she go into more detail about what is
available to the British Government in terms of this case, and in particular whether further charges have been made and whether there will be a further hearing?
I understand what the Minister said about raising this and other cases. However, will she confirm that she or other Ministers have had the opportunity to raise this further case with their Chinese counterparts, either before the current state visit or during it?
Baroness Anelay of St Johns: My Lords, I am grateful to the noble Lord for making reference to the fact that the Government are being consistent in their relationship with China and to the fact that we have pressed the importance of human rights upon our interlocutors there, because human rights underpin a stable and prosperous society.
On the noble Lord’s first question, with regard to the case, I am not in a position to give further information at the moment. What I can say is that it is the usual occurrence for diplomats in post in Beijing to keep a very close watch on any cases that are under way, to make attempts to visit people in detention and, when they are brought to trial, to ensure that they make every attempt to attend those trials. I am advised that, if denied access, they will remain in place in the court during the day to make the point that we are trying to see that there is proper judicial process. We have assistance in that from our EU colleagues.
In his second question, the noble Lord asked about the matter of imprisonment and the details of whether or not this issue has been raised, either before or during the course of the state visit. I cannot say further than I have at present because, as I mentioned very briefly in the Statement, there are continuing discussions this afternoon at Chequers and I would not wish to try to pre-empt what they may cover.
Lord Wallace of Saltaire (LD): My Lords, first, will the Minister reassure us on one point? The other day, we heard worrying comments from the new Permanent Secretary to a Commons committee that the issue of human rights is now a lower priority in the FCO than the prosperity agenda. It would be very good, in the context of issues such as this, to have some reassurance. Secondly, could she explain how we have got into such a contradiction about our approach to countries such as China? We are extremely relaxed about sovereignty and Chinese foreign investment and anything else coming in, although human rights is, nevertheless, something that we talk about. However, in our relations with our European partners we are totally neuralgic, even sometimes hysterical, about invasions of sovereignty, and do not think that they should have the right to talk about human rights at all. How do we handle that sort of intense contradiction between our approach to democratic countries such as our European partners and authoritarian countries such as China?
Baroness Anelay of St Johns: My Lords, we are consistent throughout in our approach to human rights and in discussing these matters with countries around the world. Fortunately, I do not have neuralgia, either mental or physical, and have not detected any sign of it yet among my colleagues—I will keep watching, though.
I am grateful to the noble Lord, Lord Wallace, for giving me the opportunity to set out clearly the position of the Foreign and Commonwealth Office with regard to human rights. What the Permanent Under-Secretary made clear in his exchange in the Select Committee is that the issue of human rights underpins everything that we do at the Foreign Office. It is embedded across the Foreign Office. I was concerned that the previous way, in which we set out a list of priorities, meant that there were categories of people in this country who could look at those priorities and think, “I am not there; they don’t care about me”. There were people on that list who might think, “Why am I fourth on the list?”—freedom of religion and belief or of no religion was fourth. So in seeking to redraft the way in which we present our commitment to human rights, I was driven by the belief that those in the LGBT community or those who are disabled should realise that we are for all people. As I mentioned at the PinkNews event last night at the Foreign Office, no one person is more valuable than another; we are all valuable. That is what our redrafted approach to human rights makes clear, and it is embedded across all departments in the Foreign Office.
Lord Alton of Liverpool (CB): My Lords, will the Minister confirm that Zhang Kai has been at the forefront of the fight in the Zhejiang province in speaking out for both the registered and unregistered churches, more than 1,500 of which have had their crosses removed and been subjected to intimidation and the kind of discrimination that she has just referred to? Will she further confirm that over 280 rights lawyers have been detained or disappeared in China since 9 July, including Zhang Kai? Rights lawyers in China are at the forefront of the defence of Article 18 freedoms: the right to believe, to not believe or to change your belief. As a result, their own human rights and freedoms are subject to heavy restrictions. Perhaps the most well-known rights lawyer, Gao Zhisheng, remains under house arrest after years of imprisonment, torture and enforced disappearance. I hope that the Minister will assure us that she will pursue that case. Would she be willing to meet, during his present visit to London, Chen Guangcheng, the barefoot, blind human rights lawyer who was imprisoned for four years after exposing the coercive one-child policy in China?
Baroness Anelay of St Johns: My Lords, I always do my very best to meet those who seek to meet me. I have to say that my attention has been somewhat diverted at the moment by the European Union Referendum Bill. However, I will certainly see what I can do with regard to his request. I am very glad that the noble Lord, Lord Alton, has put on record the work of Zhang Kai, which is significant. He is one of those people whose bravery can only be admired by those of us who see the importance of human rights defenders around the world.
The noble Lord is right: we are extremely concerned about the activity of crosses being removed. We are told that, sometimes, the rationale behind that is that there are planning restrictions, but it seems odd to us. Certainly, detention and disappearance should not be part and parcel of a normal judicial system. Perhaps we will
have the opportunity to look at this further when the noble Lord has a Question for Short Debate in the Moses Room about Article 18.
It is important that we continue our discussions on these matters. Last week at the FCO, my right honourable friend Hugo Swire, who has country-specific responsibility for China, met 14 people from the China NGO Network, representing those who have a particular interest in fighting for human rights in China.
Lord Lea of Crondall (Lab): My Lords, does the Minister think that one way of responding to the disconnect alluded to by the noble Lord, Lord Wallace of Saltaire, is to say that the deepening of our relations on industrial and such matters reinforces the need and the moral duty to raise human rights issues?
Baroness Anelay of St Johns: My Lords, I certainly believe that a constructive economic relationship with another country gives one the opportunity to have a stronger voice on why human rights should underpin a stable and responsible government. That voice does not have to be a clarion call; it can be more modest. I am reminded that Tony Blair made the point that,
“ persuasion and dialogue achieve more than confrontation and empty rhetoric”.
I cannot often agree with him, but I do there.
Education and Employment Opportunities
Motion to Take Note
1.41 pm
Moved by Baroness Stedman-Scott
That this House takes note of the case for creating the right education and employment opportunities in the United Kingdom.
Baroness Stedman-Scott (Con): My Lords, I must first declare my interests, in that I am a governor of Bexhill Academy, patron of Rye Studio School and an ambassador for the charity Tomorrow’s People. I speak not arrogantly but having had 30 years in this field, and it has consumed me, so it is in my DNA. I shall give some practical examples of the effect of there not being strong education and employment support for many of our young people.
I want to start by giving one example. About 15 years ago, a company asked Tomorrow’s People to help it recruit, induct and integrate 12 unemployed young people into its workforce. One young lady, by her own merit, got the job of booking all the executives’ travel which, for her, was very exciting. She turned up for work on Monday, Tuesday, Wednesday and Thursday, but on Friday she was missing. A member of our team went to her house and knocked on her door. It was about 10.30 am and she came downstairs in her pyjamas. When asked why she was not at work, she said that she never went to school on Fridays, so she did not think that she would be missed. The next week exactly the same thing happened. Somebody went to her house and told her to get dressed. She came and the next week she turned up—Monday, Tuesday, Wednesday, Thursday and Friday.
Quite rightly, in your Lordships’ House we often speak about great, intricate things, but some of the things our young people face are very basic. That is why we need strong education and employment support opportunities for youngsters in the UK. We must be driven when we see what happens when we do not have it. Please do not get me wrong; there is an awful lot of excellent work and progress taking place. It just seems to me that we have been presented with a window of opportunity to build and improve on what we have in place, and we have to grasp it.
During preparation for this debate, I sought to ascertain the data and statistics on those for whom the right opportunities have been in place but who have not been able to take advantage of them—those who are NEET. Obtaining those statistics has not been as straightforward as I would have hoped. However, I am happy to present to your Lordships’ House consistently reported figures from ONS. From April to June this year, there were 922,000 young people aged 16 to 24 in the UK who were not in education, training or employment. That was a welcome decrease of 21,000 from January to March 2015. Some 788,000, or 85%, of these young people were in England. The figures have remained stubbornly high during a number of strong economic periods and some difficult periods. From April to June, 370,000 NEET young people who were looking for work were classified as unemployed. The remainder were either not looking for or not available for work and were therefore classified as “economically inactive”. I will leave noble Lords to try to make sense of that.
The Impetus-PEF 2014 annual review for the ThinkForward programme states that,
“For every young person who goes on to become NEET, … £56,000 is lost to the public purse”.
When I looked at the maths—and, believe you me, I had to do it three or four times to make sure I had got it right—those 370,000 young people equated to £21 billion of lost money to the public purse. If there were ever a case for getting this right, it is now.
Those are just the fiscal costs. What about the other costs to those who are affected? There are people with special educational needs; those with dyslexia; those on the autistic spectrum; those with mental health issues; those involved in crime; those with addictions; and those suffering family breakdown. To me, family breakdown is one of the biggest generators of people not being able to achieve their potential. People talk of fiscal poverty; in my book, in this country there is a poverty of hope, a poverty of self-belief and a poverty of aspiration for the young people we are talking about.
The case for a step change has never been greater, but we must not forget the times in which we find ourselves. The employment rate is at a record high of 73.6%, with 31.1 million people in work. Unemployment is down to 1.77 million, or 5.4%. Long-term unemployment has fallen to its lowest level since 2009, down 526,000—a fall of a quarter compared to the same period in 2014. Vacancies are at a record high of 783,000. It is easy to make various comparisons, but it does not seem right that we have so many young people without employment. All this stands against
the gloom and doom predictions of some that the opposite would happen—that unemployment would be up, vacancies down and the numbers of people in work would fall. We must recognise this success.
So let us concentrate on those who, thus far, have not fulfilled their destiny and ensure that what is in place will help them to do so. Prevention is better than cure and, if early intervention is genuinely accepted as being the right thing to do, it is seen by most as an investment rather than a cost. The benefits are seen as a saving of both social and fiscal capital, rather than as a cost of putting something right that had not worked in the way we had hoped.
The case for creating the right education and employment opportunities needs a little more articulation. From my experience, this means that we need to take young people on a journey, starting at school and arriving at a destination of a successful transition from school to work. We should be under no illusion that, once this destination has been arrived at, it is not the terminus. The journey does not end. There will be other phases along the way, but let us hope that we will have given them the confidence and skills to embark on that next phase with a much less heavy touch of the support that they will need.
I am grateful to all noble Lords who will speak in this debate—all of whom have areas of expertise on which their contributions will be made. I have no intention of trying to duplicate these, but I do want to talk about the journey path, about what I have seen work and about what the key components might be. I would also like to thank Gideon Levitt for his help in putting this speech together.
The journey definitely starts at school. Some say it does not start early enough—that it should be at primary school—but it should start in the education system. How can we build on the excellent progress made in our schools? There are a few things. Having focused predominantly on the academic path, can we now make sure that credible and meaningful vocational routes are bedded down into the school system and curriculum? These routes must be credible to employers. When they are considered, vocational opportunities are targeted at the most disadvantaged. Might they, too, not be more appropriate for others who enter the academic journey only to fall out too quickly?
I want to make a plea for core life and employability skills to be part of the curriculum. Perhaps the Minister could let us know the department’s position on this. This element of support is left to individual schools whose pressing priorities mean that, where they are included, they are done inconsistently and are very much dependent on volunteering with limited resources available. Employers need a well-prepared, highly motivated and energised workforce. Employers, too, are a critical component to the journey of a young person. Again, depending on resources and other priorities, employer involvement is not consistently embraced. Please can it be considered, so that all young people are able to have a good experience of the world of work?
By institutionalising the idea of a “career journey” for young people, we can break this vicious cycle of unfulfilled potential. This will in turn create the right conditions for the country to fulfil the economic potential
which remains dormant within a significant portion of its population. The social benefits will be exponential, as we create motivated, focused employees where previously we sought just to shoe-horn young people into work by any means necessary. By creating an integrated, seamless system where employers have a permanent presence in the national curriculum, the truth of this interdependence can be realised. No longer should business involvement be artificially divorced from the classroom environment.
Much has been said about careers guidance. The setting up of the Careers & Enterprise Company is very welcome. The Leeds pilot has significantly improved business involvement in the enterprise network and enabled 3,500 young people to access new employer-led opportunities. We need an employment model which nurtures the career aspirations of our young people and we must shift our focus to schools. A careers guidance process which starts early and is tailored to individual needs creates a virtuous cycle of employability, rather than a reactive, costly cycle of long-term unemployment. A targeted investment in life employment and career readiness will create both a dynamic workforce over the coming decades and reduce the financial strains incumbent on long-term unemployment.
I want to introduce to your Lordships an initiative called ThinkForward, a partnership of Impetus-PEF and Tomorrow’s People, which has achieved great success: 85% of 14 to 16 year-olds have shown substantial improvements in their school attendance and behaviour; 60% of the school leavers achieved at least five GCSEs at grades A to C; and 96% of the 17 to 18 year-olds were in employment, education or training. If you remember the early figures quoted to you on NEET levels, you will see the difference this could make. Can the Minister give us the department’s view on the ThinkForward programme and any indication whether this could be offered to all young people, or at the very least those most excluded and vulnerable? Let us think about those in care who need this help, those in the criminal justice system and many others. It would be a good investment to enable them to achieve results and would negate the need for so many costly rectification programmes. It would enable young people to transition from school to work and be independent, aspirational and not dependent on welfare. I will leave it there on that for now.
I want to conclude by telling your Lordships about a young lady whom we helped. She was a bit of a handful. She got into so much trouble that she was not allowed to get on the bus to go through her high street to go to school, so her coach got on the bus with her at the beginning of the high street and got off at the end of it. The young lady went to college; the coach met her on the way back; and she never missed a day at college. And she got a job, which was great. When that coach was no longer able to support her, or it was deemed that she did not need the help, it was not too long before she came back to us and said, “I’m in big trouble”—the language was a bit more colourful than that, but the essence was that she was in big trouble. I was asked whether I could write a letter to the court to say that she really was a very good girl and that she should not go to Her Majesty’s pleasure. I said, “Well, I couldn’t possibly to do that, because if you’ve done
something you’ve got to stand by it”. But I did write to the judge to say, “This young lady’s had humongous problems and when she’s had her personal coach with her she has proved what she can do. The minute the coach wasn’t there, obviously, things went wrong. Whilst I don’t condone for one minute what she’s done, when she’s got somebody with her, things are very different”. I would like to see every young person—I have said this before—with a personal coach, even if it is, to start with, for the most disadvantaged, to help them on their journey to prevent rather than cure.
I know that there is an elephant in the room—no disrespect to anybody here, I might say. Your Lordships will tell me, “It’ll cost a lot of money”. Well, it probably will, but it will not cost as much as if we do not do something. I know that social investors and big society capital are ready with finance to inject to pay for such coaches so that we can do something about this and prevent it. I know that the request to the Government for a local outcomes fund to pay only when a young person has reached a successful destiny in their journey is pure common sense and good for the public purse. So I say to the Minister that it is the curriculum; it is the coaches; and it is a financial model where the computer says yes. I beg to move.
1.56 pm
Lord Blencathra (Con): My Lords, I congratulate my noble friend on initiating this important debate. It is not the sexiest subject to debate, but it is vital for the continuing extraordinary success of our economy and equally important because good jobs and work are the surest means of lifting people out of poverty, however that may be defined.
So I want to begin by congratulating my right honourable friend the Chancellor on his extraordinary success over the past five years, which has been hard won. He inherited an economy with a record deficit and government spending was out of control. The deficit has now been halved to 5% of GDP and we are on track to be the fastest growing major advanced economy for the third year in a row.
Our economy is now 11.8% larger than at the 2010 election. Statistically, we were then about as bad a Greece, but whereas Greece decided to do nothing to grasp the nettle of government overspending, George Osborne decided that we had to take steps to balance the books as soon as possible. It was certainly optimistic to reduce the deficit as much as he hoped in the last Parliament, but if we did not send a signal that we were serious about austerity and living within our means, we would have had a run on the pound and interest rates out of control. Despite that really awful starting position left by Gordon Brown, we have got economic credibility because of the action taken by George Osborne.
Therefore, in looking at education and employment opportunities in the UK today, we can see a completely different scenario than if that disastrous, overspending programme of the last Labour Government had continued. Let us just look at employment and unemployment figures. The employment rate is at a new record high, 73.6%. The employment level is at a record high, 31.1 million—up by more than 2 million since 2010. Full-time employment
made up 81% of the annual rise in employment, up 291,000 on the year. The female employment rate has maintained a record high of 68.8%. There is close to a record number of women in work, 14.55 million. The number of people working part time because they could not find a full-time job is down 85,000 on the year. The number of disabled people in work is up by 226,000 on the year. More than 3.2 million disabled people are now in employment. On average, 1,000 more people are in work each day since 2010. There are a million fewer people on the main out-of-work benefits since 2010. The claimant count rate is at its lowest level since 1975. Unemployment is down to 1.77 million, or 5.4%. The claimant count is down 796,000, down almost 160,000 on the year. Long-term unemployment has fallen to its lowest level since 2009: that is down 526,000, a fall of a quarter compared with this time last year. Finally, vacancies are at a near record level of 738,000. So we should recognise that the Government have been doing something right somewhere when we look at what else we should do in the future.
By any measure, that is an outstanding achievement which we now take for granted. It has been achieved because we have the strongest growing economy in Europe. As the EU falls further behind the rest of the world in competitiveness and its economy is in relative decline, the UK has been powering ahead. Some 2.3 million apprenticeships have been started. There are 760,000 more new businesses than five years ago. Corporation tax has been cut from 28% to 20% and will go down to 18% in the next few years.
We now need to concentrate on two areas. The first is getting more of those 1.7 million unemployed into those 738,000 vacancies, and second is making sure that work pays more than being on benefits. I support the work of the Department for Work and Pensions in trying to transform lives by supporting people to find and keep work. I do not know how many of those 1.7 million would be regarded as unemployable by employers. That is not a term I like, but it possibly describes the attitudes of some people rather than their abilities. Did some Opposition spokespeople say that my right honourable friend Iain Duncan Smith’s reforms would not work and we were doomed to an unmovable number of workless households and permanent long-term unemployment for many people? Those messages seem to be wrong. His welfare reform and work incentives have resulted in tens of thousands of people moving from benefits into work, so that the workless household rate is the lowest since records began and our long-term unemployment rate is less than half that of the EU.
For many years, Governments of all persuasions have said that work must pay more than being on benefits. Indeed, Tony Blair commissioned the excellent Frank Field MP to deliver such a scheme. Frank did so but it was kyboshed by the then Chancellor, Gordon Brown, who wanted everyone on his tax credit scheme. That is why universal credit is so important: it reduces poverty by making work pay. It provides a new, single system of means-tested support for working-age people and does away with half a dozen other benefits. I am led to believe that early results show that universal credit claimants do more to look for work, enter work
quicker and earn more than jobseeker’s allowance claimants, and that is the way it should be.
I will say a few words about the minimum wage and the tax credits issue without straying too much into a debate we may be having next week. When Gordon Brown introduced tax credits, they cost £4 billion. This year they will cost £30 billion. Something has gone terribly wrong with his system so that, by 2010, nine out of 10 families with children were eligible. That is not what Gordon Brown initially intended. It was barking, and coalition Government changes brought the figure down to six out of 10 households. I understand that the changes, which are currently controversial, would bring it down to five out of 10 families. It is patently obvious what we should do to close the gap between pay and benefits, and it is not increase benefits.
It was inspired of the Chancellor to push up the minimum wage and aim for a living wage, but I urge him to go further and faster. We get the usual misguided whingeing from the CBI that it will reduce company profits and increase unemployment. Enhanced company profits earned on the back of poverty wages is not moral capitalism. As for unemployment, is it seriously being suggested that the major supermarkets, Amazon, Starbucks and Pret A Manger—every 10 yards on the pavement—are employing additional staff because they are cheap and that if they had to pay more they would lay staff off and drive for more efficiency? What nonsense: the big supermarkets and others are employing the barest number of staff they can get away with and paying them the lowest wages they can get away with. However, the Chancellor’s announcement of the national living wage in the summer Budget has changed the conversation about low pay and we have seen pay increases announced to meet it early, before the increase to £7.20 comes into effect in April.
This dynamic effect on wages has not been taken into account in any analysis of the Government’s changes to date. Nearly 200 firms have agreed to pay the national living wage in recent months. Morrisons has pledged to increase hourly pay to £8.20 from March; Costa Coffee is increasing it; Sainsbury’s has put up pay to £7.36; Lidl is now paying £8.20 an hour; British Gas is now paying the living wage and IKEA has said it will put pay up. This has to be the way to go. If those companies can do it then so can every other business. I said this in the Budget debate and I make no apology for saying it again: it is morally indefensible for companies to pay poverty wages, the taxpayer then having to pay up so that a family can live. The salaries of chief executive officers and executives of the FTSE 100 rose by 15% in 2014 and the gap between the highest paid executives and their lowest paid employees has never been wider. In 1998 chief executive officers’ salaries were 57 times larger than the average worker’s. Now they are 178 times larger, and there is no correlation between huge salary increases for executives and company worth, growth or profits. The Chancellor’s increase in the minimum wage is 6% per annum. Since many companies seem to have had no difficulty paying their directors 15%, I want to see the minimum wage pushed up to that level as soon as possible. Everyone should share in a company’s success. Being in work, with proper
pay, is the route out of poverty for all and it will make Britain the most successful entrepreneurial country in the world.
There have been some excellent changes to vocational training but my instinct is that it is still regarded as inferior to a university degree. That is so wrong: just look at those brilliant A-level students who turned down a place at Oxbridge so that they could become apprentices at Rolls-Royce. These people should, as in Germany, be entitled to be called Herr Doktor, or at least the English version. Germany regards their engineering skills as being like a doctorate, but we see them just as car mechanics or grease monkeys. My noble friend Lord Baker has done a marvellous job enhancing the reputation of vocational training and building city technology colleges, but we need to do more to encourage young people to go down these routes, rather than some worthless degrees.
When the battery in my laptop died recently, I could not easily replace it. Being a MacBook Pro, it had to be dismantled, have half the guts removed and a new battery ordered—one of about 30 possible alternatives—and be repaired by an expert. For anyone with a broken Mac or iPhone, I recommend Honeylight Computers in Pimlico, which is an Apple repair agent. I am not on any commission. I do not know whether the guy who fixed my computer had a degree or a technical qualification, but without him I would have had to buy a new one at £2,000 instead of paying the £150 it cost. His contribution to our, and my personal, economy was worth £1,850 for that one little job and I could not have done it without him. I contrast that with the contribution of those graduate social workers who destroyed families in the Orkney Islands because they thought they were performing naked, outdoor witch dancing in February. Your Lordships may remember the case in 1991: it was dismissed immediately by the judge as utterly incompetent. These two radically different examples are simply two of millions showing that a degree is no guarantee of competence, common sense or worth, and the ability to fix things and make things which make our everyday lives infinitely better is no guarantee of good pay or status.
In conclusion, I congratulate my noble friend again on securing this debate. There is, of course, always more to be done. We need to make all schools free schools; we need even more apprenticeships; we need far better career guidance in schools; we need to ensure that no one teaches a subject at secondary level unless they have a degree in it. I was appalled when I came to England and found teachers with only some teacher training certificate who were not qualified in their subject. We need to get into teaching, at all levels, people who have retired early and are experts—and, more importantly enthusiasts—in their subject and who can enthuse young people. We need to let our best universities grow and expand to rival the Ivy League in the USA. We have some absolutely rubbish universities and we should let them die, as students voluntarily switch to better ones.
Above all, we need Britain to get back its freedom to be a world trading nation again, taking control of its own destiny and economy and not shackled to a dying and declining European political union. However, that may be a debate for another day.
2.09 pm
Lord Young of Norwood Green (Lab): My Lords, I too congratulate the noble Baroness, Lady Stedman-Scott, on introducing this debate. She gave a very interesting and practical analysis, on which I agree with many areas. I wish I could say the same about the following contribution. I will resist responding to a number of provocative statements but it was a bit of a Panglossian analysis of this Government’s record and perhaps the reverse as regards the track record of the previous Government.
The subject of this debate is of supreme importance. I was not necessarily planning to start with these comments but, on looking at today’s papers, I saw a large headline in the Times stating, “Apprenticeships are ‘a waste of money’”. In the past, I have declared an interest in that subject and I found it somewhat painful to look at that headline. When I found that no less than Sir Michael Wilshaw, the head of Ofsted, said that, it cannot just be dismissed. I notice the article went on to say that:
“Kirstie Donnelly, managing director of City & Guilds, which gives vocational training, accused Sir Michael of seeking to undermine apprenticeships”.
That is probably an unwise statement to make. It would be far better to look at why Ofsted has come to that conclusion.
I am one of the people who applauds this Government for their focus on apprenticeships. On many occasions, I have said I wish that they would get away from announcing large figures, such as 2 million or 3 million, without disaggregating them. I do not think that that helps the situation. I am not against a target as such but, if we are talking about apprenticeships, we should be focusing on 16 to 19 year-olds. The noble Baroness reminded us of the number of NEETs. The economy may be flourishing in all sorts of ways but we still have far too many NEETs and significant areas of youth unemployment in parts of the country. That is not to discount the progress made.
“Sir Michael Wilshaw will accuse some employers today of wasting public funds on low-quality schemes that undermine the value of apprenticeships”.
We should be worried and concerned about that. I agree with a few of the points made by the noble Lord, Lord Blencathra, including the need to enhance the view of apprenticeships so that they are on a par and so that there is not a distinction between a vocational route or an academic route. As I have said on many occasions, young people should not be told that it is an either/or option. A vocational route can often lead to an academic route. It really is worrying when one sees a report like this on poor-quality apprenticeships.
The Government were aware of the problem that some apprenticeships were as short as six months. We knew that they were not really apprenticeships. The Government responded by making the minimum period one year. I am not sure whether that is sufficient. The way we monitor apprenticeships and check what employers are providing is not sufficient. What are training providers doing? If we do not have a kitemark or a badge of quality on that, we are going to undermine people’s
views of apprenticeships. Worse still, we will not get value for public money. We should be worried on both those counts.
Referring to an Ofsted report, the article states:
“Poor-quality apprenticeships were particularly prevalent in retail, healthcare, customer service and administration”,
which account for a very large number of apprenticeships. We should be worried about that and I would be very interested to hear the response of the Minister. It continues:
“About 140,000 people started apprenticeships in business administration last year and 130,000 began healthcare apprenticeships. Standards were much higher in the motor vehicle, construction and engineering industries, where numbers were much smaller”.
Therefore it can be done but, unfortunately, it is not being done in too many cases.
“Today’s report attacks many employers for failing to invest in and supervise apprenticeships”—
“as well as some of the colleges and training companies that provide them and schools for failing to give informed and impartial advice to young people who can benefit”.
I want to spend a little time on that issue as well. As I have said, I will welcome the Minister’s response.