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What we are really debating today is how Britain thrives and prospers in a globalised economy, our immense strengths, the immense potential of our people and our companies and what we need to do to bring that strength and that potential to bear in a knowledge economy, in a low-carbon, digital age. In this Parliament we will present Bills that will reform the financial sector, putting it back at the service of consumers and the real economy; lock in the recovery, by committing the Government to halving the deficit by 2014, without stripping out vital support for growth, demand and front-line public services; and, finally, help us to invest in our future growth, specifically by upgrading and reforming the landscape of our digital economy and by new rules to balance flexibility and fairness for agency workers.
Britain has to concentrate on the fundamentals of industrial competitiveness, not just turning over a quick profit. We have to be flexible and innovative. We have to invest in people's skills and help people to invest in themselves. We have to continue to re-energise our regional economies with a new generation of public and private investment, so that they can drive the next industrial revolution in the same way as they drove the first.
Most important, we need a Government who play an active role in achieving these things, not a Government who get in the way or hold business back, but not one either who cling on to a 30 year-old dogma about the inexorable rightness of the judgments of free markets. There is a strategic role that government must play not just in guiding the economy out of recession and into recovery but in preparing our country for the competitive, low-carbon, high-tech global economy that will define our future. I have called this approach industrial activism.
First, and perhaps most fundamentally, we recognise that we must change the way in which we manage financial markets so that they can no longer put the wider economy at risk. We had no choice but to save the banking system. Our actions prevented a financial crisis from becoming a business and human catastrophe, but paying for that rescue has imposed costs on this country that will stretch into the future. The price that we can and must demand in return for that rescue is a sounder, more responsible banking industry. If some bankers end the year with less money in their pockets, well, so does the country that made sure that they are still in business at all.
The 2009 Banking Act gave the Treasury, the Financial Services Authority and the Bank of England new powers to intervene when a bank is failing and could endanger consumers or wider stability. The new Financial Services Bill contains measures that further renew, toughen and widen UK financial regulation and make it more intrusive where required. This includes establishing a new, more transparent Council for Financial Stability, made up of the Chancellor, the Governor of the Bank of England and the chair of the FSA.
For a decade we have built up the FSA into a regulator with knowledge and expertise that is now recognised around the world. It would be reckless and
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The Bill will also ban unsolicited credit card cheques, with their hidden costs and reduced consumer protection. This will end a practice that draws too many people, who may already be in financial distress, deeper into debt.
We also look forward to receiving Sir David Walker's recommendations on reform in bank boardrooms and governance, which we have made provision to implement. They will be a reminder that the best form of regulation in our banking system will always be managers who understand risk and fear failure.
It is clear that a new financial regulatory system must ultimately be global and it must provide a level playing field. It will remain a core aim of UK policy that New York and others follow us in taking action to reform financial markets so that we remove the risk of regulatory arbitrage. This is why we have made the G20 process the centre of this work. Our goal must be competitive financial markets, not competition between financial jurisdictions.
Since October 2008, we have implemented a package of support and stimulus measures that have helped millions of businesses and families through the worst of this recession. Through our enterprise finance guarantee scheme, 6,200 businesses have been offered loans totalling £648 million-lending that would otherwise not be there. Through the VAT cut, we have put an additional £1 billion each month into the pockets of families and retailers and enabled more than 150,000 businesses to defer more than £4 billion in tax to assist their cash flow during the recession. These essential measures, or the spending to fund them, were of course opposed from the Benches opposite.
The Government's £5 billion package to support the labour market, coupled with the flexibility volunteered by employers and employees, has helped to ensure that unemployment remains at around 200,000 lower than at the same point in the recession of the early 1990s. The housing repossession rate is also lower than it was then, as is the business insolvency rate. In other words, this recession could have been much worse in many respects, had its impact and duration not been blunted by the Government's actions. Indeed, the IMF said:
"These aggressive policies have successfully contained the crisis, and there are tentative signs that confidence is returning".
The head of the IMF went on to say to the CBI this week that,
"it is too early for a general exit ... We recommend erring on the side of caution, as exiting too early is costlier than exiting too late".
On this, the IMF, all the G20 Governments and the British Government agree. Prematurely withdrawing this support for demand in the economy would put at risk the very jobs, skills and capacity that we have worked so hard to protect during the recession. We need an exit strategy for the stimulus, not a rush for the exits.
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Only one party disagrees with that and it is sitting opposite. Its policy would risk choking off recovery before it is properly locked in. The Conservative Party got it wrong on the recession. It is now getting it seriously wrong on the recovery.
In the fiscal responsibility Bill, we have captured the balance that we need. It commits the Government to halve the deficit by 2014 and put debt on a sustainable path in the medium term. There is no escaping the fact that tough choices on cutting spending will need to be made and justified. We all know that Britain's credibility rests on a responsible approach to the national finances. None of us needs lectures on that point. But I should say just this: no credible definition of responsibility extends to cutting away vital demand or vital investment in growth just when they are needed most.
I will make some final points on the question of investing in growth. Growth is the biggest antidote to debt, which is why I was surprised to hear the shadow Chancellor, in his speech at his party conference, make literally no mention of the word "growth". I note that the Leader of the Opposition attempted to remedy this glaring hole in Conservative economic policy on Monday at the CBI, but unfortunately, and as so often with Mr Cameron, the soundbites on growth were not matched by substance. He has simply rebadged his existing policy of retrenchment and called it "growth". You cannot say that you want to go for growth while in the same breath committing to pull support from the economy prematurely and to make deep cuts in the very investment in future growth that business needs, yet that is what Mr Osborne proposes to do.
The problem that those in the Conservative Party have is their ideological conviction that government itself is the source of all our problems. This prejudice acts as a mental check that prevents them from even considering the active role that government needs to play in building up new sources of comparative advantage in today's global economy. The reality is that the global economy that emerges from this recession will be a fiercely competitive place. Competing effectively in that world will demand a smarter, more strategic approach from government that invests in the capacities that create our competitiveness. Our low-carbon infrastructure, our universities and adult skills system, our research and science base-
Lord Forsyth of Drumlean: My Lords, I am most grateful to the Secretary of State for giving way and wonder whether he can help me. He talks about the importance of not taking resources out of the economy when you have a strategy for growth. Will he tell me how increasing national insurance charges and marginal rates of tax is not taking resources out of the productive part of the economy against the interests of growth?
Lord Mandelson: My Lords, such decisions would be faced by any Government in current financial circumstances. My point relates to the resources and capabilities that we need in order to sustain growth. Building and sustaining growth in our economy will be the only way, in the medium and long term, to reduce our deficit and pay off the debt that we have inevitably taken on during the recession.
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Our low-carbon infrastructure, our universities, our adult skills systems, our research and science base and our capacity for high-tech innovation and company building are all vital keys to our future success. Over the past six months, the Government have announced major initiatives in every one of these areas: reshaping the skills system to create a new technician class; launching the UK Innovation Investment Fund and the Rowlands review to help to fill the structural finance gap for companies; creating a new framework for strengthening our world-class university system; and setting out plans for major rail electrification and nuclear and renewable energy generation. We have already committed more than £700 million through the Strategic Investment Fund set up in this year's Budget to strengthen Britain's capacities in key technologies and sectors such as industrial biotech, low-carbon cars and plastic electronics.
The Digital Economy Bill will deliver a critical further piece of this jigsaw. In the Digital Britain White Paper, we set out plans to create the legal frameworks and digital infrastructure in Britain that a knowledge economy will require and demand. These will be essential not just for our exceptional creative industries but for every industry that relies on digital communications. We are making important changes to our radio licensing regime and opening up the field for next-generation mobile broadband services through spectrum modernisation. We are bringing forward new measures to enable British businesses to build new commercial models that reflect the way in which we access and use content online without being undermined by online piracy. We will also secure the future of public service broadcasting content in a rapidly changing world through a commitment to diverse sources of news with the creation of new regional and local news providers.
One of the key strengths of the UK through this recession has been the flexibility of our workforce and our labour market. The model that we have pioneered over the past decade-the so-called Anglo-social model-has proved that it is possible to protect people at work without damaging the underlying strength of the labour market and without backing away from our duty to equip people to cope in times of economic change.
We will enact legislation that will put us in a position to implement the agency workers directive. This will enable us to ensure greater fairness for the 1.3 million agency workers employed across the UK. We will do so in line with the agreement reached between the CBI and the TUC that, following 12 weeks in a given job, an agency worker will be entitled to equal basic working and employment conditions as though they had been recruited directly to occupy the same job. Getting this acceptable agreement required positive engagement in Europe-something that this Government are committed to continuing but something that would be directly threatened by the Conservative Party's pledge to try to repatriate such social and employment legislation from Europe.
We are a year and a few months on from the Lehman collapse. The consequences of that extraordinary week and the events that led up to it can still be seen everywhere. However, the freefall in the economy has
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We have also had to mobilise huge resources to help those who lost their jobs and who need to retrain, to provide alternative sources of credit for small businesses and to extend lifelines such as the car scrappage scheme. After a difficult year of retrenchment, rising business confidence suggests that we have moved from fighting crisis to building recovery. Indeed, confidence even seems to be spreading to the Benches opposite. I note that the other day the shadow Business Secretary was commending my department for producing such workable policies. He even suggested that he would try to match them. On this, as on so many other points, I am grateful for his support.
These Bills are about prospering in the global economy on the other side of the recovery. They are about fighting for our future prosperity as boldly as this country has fought off the recession. I commend these measures to the House.
4.03 pm
Lord Hunt of Wirral: My Lords, I begin by drawing attention to my interests as set out in the Register.
I thank the noble Lord the First Secretary of State, Secretary of State for Business, Innovation and Skills and Lord President of the Council for introducing this very important debate. I also welcome the latest expansion of his portfolio. I know that his role as Minister for Information has not yet been publicly confirmed but, having presumably become dissatisfied with the domain temporal, I understand that the First Secretary of State has now extended his remit into the domain spiritual as well. I apologise to him for not mentioning this before, and I sense a slight flurry of unease on the Bishops' Benches, but the noble Lord is to be congratulated on becoming a Church Commissioner.
I should also say how much we are looking forward to the maiden speeches of the noble Lords, Lord Sugar and Lord Martin of Springburn, who we all welcome to this House. The noble Lord, Lord Martin, is an old friend and was briefly my pair in the other place-an arrangement that suited us both very well indeed. He has already attended debates in this House assiduously, including virtually every speech that has been made in this debate since it started a week ago. We all look forward to what I suppose must be his first full parliamentary speech in almost a decade.
The House will also be looking forward with great and special interest to the maiden and subsequent speeches of the noble Lord, Lord Sugar. As the noble Lord, Lord Davies, confirmed on 12 November, when the noble Lord, Lord Sugar, speaks on business matters, he speaks with the full authority of the Government, not that this Government have much authority left these days.
I do not think that this country has ever been in greater need of a clear and effective legislative programme. Consumers, entrepreneurs and businesses need confidence, and today's news about the covert-not my adjective
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It was demonstrably clear by the end of 2008 that Labour's policies had failed, and failed miserably. Ever since, Ministers have sought to exculpate themselves. Their favourite scapegoat, which we heard again in the noble Lord's speech, rapidly became the rest of the world-anyone but themselves. We have been subjected to the endless repetition of the phrase "global economic downturn". It is astonishing that Ministers have continued to use this excuse even when it became blindingly obvious that the problems with which we are struggling are far more entrenched and pervasive in this country than elsewhere.
There is an old trade union phrase with which noble Lords-particularly those on the Benches opposite-will be familiar, which is first in, last out. That sums up this Government's economic record-first in Europe into the recession and now last out of it. Ministers are driving us into eye-watering levels of debt to fund an unprecedented fiscal stimulus, but what do they have to show for it? Almost 5,000 companies went bust in the third quarter of this year, and every day nearly 400 people declare themselves bankrupt. One in five young people is unemployed and one child in six is growing up in a household where no one works. On both counts, we have the worst record of any of the 27 countries in the European Union. Just as they did in the 1960s and 1970s, Labour policies have brought our country's private sector to its knees, and still the First Secretary of State persists in maintaining that the traditional Labour mantra of spend, spend, spend is the answer.
What has happened to the money that the Government have so recklessly borrowed and spent? The successive, snappily named schemes announced earlier this year have evidently not provided what businesses need. The enterprise finance guarantee scheme, which by the way is just a pale shadow of the far more robust Conservative policy, has only managed to persuade businesses to draw down some £340 million out of a potential £1,300 million. That poor uptake rate is apparently being repeated in the capital for enterprise fund, the trade credit insurance top-up scheme and the automotive assistance programme. If you ask businesses why they are not taking advantage of these offerings, the answer is plain and forthright: the restrictions, requirements and red tape involved are so burdensome that it is simply not worth the time, trouble and effort. So the much-needed, much vaunted flow of liquidity-the lifeblood of business-is simply not coming through yet. The idea of enmeshing struggling businesses in yet more red tape when the burden was already dangerously onerous in the good times is one that could occur only to this Government.
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This legislative programme shows a consistent lack of comprehension. It does not recognise the cold reality that prevails outside the cloud-cuckoo-land that Ministers seem to inhabit. We have a Bill that criminalises the sort of reckless fiscal behaviour in which only this Government would ever dream of engaging. I shall leave it to my noble friend Lady Noakes to give the Financial Services Bill and the Fiscal Responsibility Bill the treatment that they deserve.
We have deafening silence on so much that really matters to our economic well-being. The failure of this Government can best be summed up in the short, troubled life of one Bill-the Postal Services Bill. Where is it? We have a company in difficulty, facing identifiable problems and offering a feasible solution. It is being denied the opportunity to reform and modernise itself purely because of political manoeuvring and the Prime Minister's characteristic refusal to face facts.
I recognise the personal commitment of the First Secretary of State to that essential legislation, and I will spare his blushes by not quoting back at him now all the statements he once made about how important it was to get that Bill to Royal Assent as quickly as possible. I fear that he has several notable failures to his name, but the failure to deliver on the Postal Services Bill may come to be seen as the most abject of them all. I could almost feel sorry for the First Secretary of State-almost.
There is, however, one Bill that I am happy to welcome. An effective Digital Economy Bill is, as the First Secretary of State said, a necessary step in the right direction. We shall be looking closely at it as it passes through the House to ensure that it really encourages investment, innovation and modernisation within sectors crucial to our economy. However eye-catching that Bill may be, with all its modernistic bells and whistles, it cannot address the fundamental economic weaknesses that this Government will leave behind.
In a country that appears to be ready for change, many people have drawn parallels with the situation in 1997. Those parallels are highly questionable. For a start, in 1997, my good friend Kenneth Clarke-a star who continues to shine brightly in another place-left behind him what everyone has always described as a golden economic legacy, the result of firm, calm, responsible stewardship of the economy. How wise it is for the leadership of my party to draw on his wisdom once again.
Back in the late 1970s, we did not have the benefit of such stewardship of the economy. It is a time that the First Secretary of State and I recall well, because we were both involved at the time in the leadership of the British Youth Council. I am certainly not going to quote his words at him-I know him too well for that-but together we had to lament and to suffer the social and economic crisis that, by 1979, had left this country all but ungovernable. Now we are reliving the worst aspects of those dark days.
My noble friend Lord Howell of Guildford wrote at the time in his excellent book, Freedom and Capital, about how social tensions and economic strife feed off each other. He wrote:
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"Quality of life ... has deteriorated. Fewer families feel they ever have spare cash to spend or put aside ... Household budgets get tighter, family arguments more tense, under economic strain ... Outside the front door the surroundings are often getting scruffier, not cleaner, and life outdoors certainly more dangerous and violent after dark ... Public services have been getting worse, not better"-
How prescient my noble friend was, for could not that charge sheet have been written only yesterday? Every day that the last Labour Government remained in office was, for this country, another day wasted. How history repeats itself.
In their justly celebrated book Britain's Economic Problem: Too Few Producers, which was published in 1976 and updated in 1978, Robert Bacon and Walter Eltis vividly and stoutly demonstrated how weak political leadership and the growth of the corporate state were stifling the life out of the free enterprise economy:
"With growing public expenditure and taxation, profits can become so low that the market sector will generate insufficient investment ... Economists ... can support the allocation of investment resources through the market, or they can support policies of higher public spending, but they cannot have both".
New Labour was elected on the false premise that this country, and the state, in particular, could have its cake and eat it. Perhaps there is indeed nothing new in heaven and earth because that is exactly the old Labour message. Sooner or later, it always turns to bust, or dust. As my noble friend Lord Patten of Barnes once put it, the facts of life are Tory. Like the Bourbons, the First Secretary of State and his colleagues forget nothing but they also learn nothing. Another Labour Government, another fine mess.
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