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House of Lords

Thursday, 31 March 2011.

11 am

Prayers-read by the Lord Bishop of Ripon and Leeds.

Olympic Games 2012: Olympic Truce

Question

11.06 am

Asked By Lord Bates

Baroness Garden of Frognal: My Lords, the UK will be promoting a fresh resolution calling for the continued observance of the Olympic Truce for the 2012 Games and is currently working with overseas partners in 15 countries and planning activity in a further three on International Inspiration, a sports programme targeted at countries in development. Other initiatives are being considered by the Foreign and Commonwealth Office and we expect to learn the results of this work shortly. The London Organising Committee of the Olympic and Paralympic Games is also undertaking truce-related programmes.

Lord Bates: I thank my noble friend for that Answer and for the encouraging progress that has been made. Can she confirm that this Olympic Truce resolution is a resolution of the General Assembly of the UN, which quite specifically calls on all signatories to pursue initiatives for peace and reconciliation in the spirit of the ancient Games during the London 2012 Games? This year, the resolution will be not only signed but proposed by the United Kingdom Government. Does she agree that it therefore presents a unique opportunity to hand on a legacy from the London 2012 Olympic Games not only in medals won and land reclaimed but in the lives changed and saved and in the health and humanitarian aid extended?

Baroness Garden of Frognal: I thank my noble friend and of course I agree with what he says. He is tireless in his work to achieve successful outcomes for 2012 through the Olympic Truce, which indeed presents a unique opportunity for the UK to lead on proposals for the sort of peace and reconciliation that he suggests. In previous years, these truce agreement proposals have not resulted too often in major outcomes, but that will not prevent us from trying again this year. It will, of course, be for the United Nations to agree policy actions.

Baroness Billingham: My Lords, we must congratulate the noble Lord, Lord Bates, on his tenacity; I think that this is the third or fourth time that we have debated this and we are all becoming much more

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familiar with it. It is encouraging to hear today a significant change in the Minister's reply. In the past, however charmingly she has replied, all that she has sent the noble Lord has been a "Dear John", but maybe things are now changing. Having watched the cricket yesterday, do we not remind ourselves of the potency of sport for peaceful objectives? Having seen Pakistan and India sitting side by side and embracing each other, I wish his project well. I hope that the Minister will continue to use that as an example of sport and peace and the ways in which they can go together.

Baroness Garden of Frognal: I thank the noble Baroness for her kind words in among that. I am not quite sure where the question was, but if it was whether we agree that sport is an excellent forum for international co-operation, the answer is yes, indeed we do. The Government have some major programmes to encourage sport among young people as well as to support our major adult sporting events.

Lord Higgins: My Lords, does the noble Baroness accept that some of the finest athletes in the world, particularly long-distance runners, come from areas that are now troubled by war in one form or another? The idea of the truce was that people in those circumstances could get to the Games. Does she accept that we should do everything possible to ensure that good athletes can do so? Will she also recognise that few athletes remain at the top for more than four years and that if they are prevented from attending they have therefore lost a once-in-a-lifetime opportunity? Not only are they disappointed, but so are the people who hoped to beat them.

Baroness Garden of Frognal: My noble friend speaks from his own experience as an Olympic athlete and of course I agree with what he says. We in the UK will do what is in our power to encourage people from disadvantaged countries to attend and compete in the Games. A great deal of that depends on the response from those individual countries as well but, as I have said, that will not stop us trying.

Lord Low of Dalston: My Lords, what success are the Government having in brokering a truce between the noble Lords, Lord Coe and Lord Moynihan?

Baroness Garden of Frognal: The noble Lord raises an issue that has been in the news just recently. The two organisations that the noble Lords represent normally work closely together for the good of the outcomes of the Olympic Games and I have no doubt that, in the greater interests of delivering a highly successful 2012 Olympic Games, any disputes will soon be resolved.

Lord Faulkner of Worcester: My Lords, does the Minister agree that it would be in the interests of peace and reconciliation if the directors of Tottenham Hotspur Football Club were to abandon their extraordinary attempt to go to judicial review over the legacy issue of the stadium?



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Baroness Garden of Frognal: My Lords, Tottenham Hotspur's decision is probably slightly wide of the Olympic Truce, but I note what the noble Lord says.

Lord Addington: Would it not be good if the idea of a truce were extended by this Government and indeed all our allies to all the major sporting gatherings-world cups, championships and so on-so that those taking part paid some attention to international activity outside? That would be a real legacy to take away and it would not be confined to an event that takes place once every four years.

Baroness Garden of Frognal: I entirely agree with my noble friend. Sporting activities of any sort provide opportunities for co-operation internationally. We recognise that there is a high degree of competition between countries, but that does not alter the fact that there is tremendous camaraderie between sportsmen and sportswomen in any one sport. For them to get to know and befriend their counterparts in other countries can only be to the good in building international relations.

Baroness Heyhoe Flint: My Lords, does my noble friend feel able to mirror the Spirit of Cricket campaign that the MCC has promoted in furthering cricketing causes in Afghanistan, which was promoted originally by my dear late friend Lord Cowdrey?

Baroness Garden of Frognal: My noble friend raises an important point. Once again, the use of the Olympic Truce for these sorts of developments has to go through the United Nations, but inevitably we are hoping to build up programmes with other countries. I mentioned the International Inspiration programme, which aims to bring the benefits of sport to 12 million children in 20 countries. We are trying to expand that; it is an ambitious programme but it might be a feasible one.

Trade Unions: Ballots

Question

11.14 am

Asked By Lord Lea of Crondall

Lord De Mauley: My Lords, the Government have no plans to change the statutory procedure for the recognition of trade unions.

Lord Lea of Crondall: I thank the noble Lord for confirming this double standard. There is a high hurdle-a double hurdle, in fact-for trade unions to jump, but in the Government's proposals for a radical change to the constitution there is no such double hurdle at all, simply a vote of 17 per cent to 13 per cent or whatever. I have two questions for the Minister. First, given that

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on 16 February the noble and learned Lord, Lord Wallace of Tankerness, opposed the Rooker amendment on the ground that it would be a deterrent to people turning out because they might not know whether their votes would count, are workers not deterred as well? Secondly, if on 5 May the turnout is 37 per cent, will the Government repeat Mr Clegg's comment on the Barnsley by-election that 37 per cent was "an abysmally low turnout", or-surprise, surprise-will they say, "That was astonishingly high", and that 25 per cent or something like that is a perfectly good basis on which to change our constitution?

Lord De Mauley: My Lords, the two cases are completely different and there is no reason why the balloting arrangements should be the same. The voting constituencies in union recognition ballots, averaging a few hundred, are tiny compared to those of referendums. The workforce concerned is often co-located and can be easily accessed. It is therefore much easier in this case to ensure a large turnout, provided that the workers are genuinely interested in union recognition.

Lord Razzall: My Lords, I am sure that the Minister will find it ironic that the noble Lord, Lord Lea of Crondall, should at the same time be advocating the removal of the threshold in trade union recognition ballots and the introduction of a threshold in the AV referendum. I find that absolutely extraordinary and no doubt the Minister does as well.

Lord De Mauley: Yes, my Lords.

Lord Peston: My Lords, I do not think that the Minister has even understood the Question that has been put to him, but consistency and rationality are not exactly hallmarks of the present Government. Does he recall that the threshold amendment that we are talking about was passed in your Lordships' House on the basis of a full argument? Why is there a different set of criteria here, given that your Lordships voted for a threshold in the first place?

Lord De Mauley: My Lords, I hear what the noble Lord says. I suggest that we have had a fair amount of debate on the subject over recent months and I suspect that more may be occasioned in the future. There is little precedent for thresholds being applied to referendums in the United Kingdom. There was no threshold in the referendums on Scottish and Welsh devolution in 1997, the Belfast agreement or the Greater London Authority in 1998, or in the north-east referendum in 2004. Also, no threshold is specified for mayoral referendums under the Local Government Act, despite very low turnouts having been seen in practice in some cases.

Lord Grocott: My Lords, the Question was fundamentally about whether the Government are adopting a consistent position in respect of determining the validity of a decision. Can the Minister simply explain why, when we are changing the constitution of the country, presumably for a very long time, the Government feel that there is no necessity even for the

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level of a threshold that is required for the recognition of a single trade union? It seems to most people to be a totally contradictory position.

Lord De Mauley: My Lords, let me say, if I may be so bold, that that was not what the Question was about. The Question was about union recognition ballots. The Government's position on that is, "If it ain't broke, don't fix it".

Lord Geddes: My Lords, for the avoidance of doubt, is the noble Lord, Lord Grocott, not slightly misinformed? We are not voting for a change in the constitution on 5 May. We are voting as to whether we should have such a change.

Lord De Mauley: My Lords, I do not think that I have anything to add.

Lord Young of Norwood Green: My Lords, this is a complex issue that is probably worthy of a lengthier debate; in seven minutes, even without hesitation, deviation and repetition, we are going to give it only a cursory examination. I trust that the Minister will agree that the seminar at No. 10 this week on encouraging employee engagement, an approach started by the previous Government, is a path worth pursuing. Will he also agree that, during the recent recession, trade unions with enlightened employers agreed to things such as a shorter working week, temporary lay-offs and delayed pay increases to save jobs, using this period also to engage in additional training? Surely the Minister will agree that encouraging constructive dialogue between trade unions and enlightened employers is a much better way forward than trying to restrict trade union recognition.

Lord De Mauley: My Lords, I cannot find anything in what the noble Lord said with which to disagree. I will leave it at that.

House of Lords: Prayers

Question

11.20 am

Asked By Lord Roberts of Llandudno

The Chairman of Committees (Lord Brabazon of Tara): My Lords, as noble Lords are aware, the Prayers read at the beginning of each Sitting of the House are read by one of the Lords Spiritual. The Lords Spiritual sit by virtue of being representatives of the established church, and the Prayers reflect that. Any changes to alter the Prayers would need to be considered by the Procedure Committee and agreed to by the House. There are currently no plans to alter the arrangements for Prayers.



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Lord Roberts of Llandudno: In Wales, we do not have an established church, but is it not time for Prayers in the House, including the present Prayers, to reflect the diversity of the different faiths and denominations that we have not only in the House but in the United Kingdom? Is this not an opportunity for us to consider having a minute of silence and reflection in addition to the Prayers?

The Chairman of Committees: My Lords, the practice of Prayers in the House is believed to have started in about 1558, and was common practice by 1567. The present form of Prayers probably dates from the reign of Charles II. Recent changes to the form of Prayers included allowing a choice from a range of Psalms, which was agreed by the House in 1970, and again in 1979, and one or two other minor changes. It might be a little premature to consider changing them now.

Lord Anderson of Swansea: As a Welsh non-conformist, like the noble Lord, may I assure the Minister that many of us are wholly satisfied with the timeless sentiments and superlative prose of the present Prayers? However, may I ask the Bishops' Bench to consider one little matter as an act of fellowship and togetherness-that at the end of Prayers we all repeat the Grace, as happens in the other place?

The Chairman of Committees: I would need to discuss the latter point with the Bench of Bishop but I entirely agree with what the noble Lord said in the first part of his question. I do not believe that there is anything in the Prayers which could possibly be seen as offensive to members of other religions.

The Lord Bishop of Ripon and Leeds: My Lords, I hope that we will take on board the point which has just been raised. The noble Lord, Lord Roberts, makes an important point about how the House is to demonstrate its inclusivity while retaining what is good and worthwhile in its living heritage. In this year of celebration of the King James Bible, and its continuing inspiration 400 years on, will the Chairman of Committees comment on whether our Prayers, which date from the same era, also embody virtues which are simple, eternal and unifying?

The Chairman of Committees: I am sure that the right reverend Prelate is right. If there are further recommendations for changes to the Prayers used, I would be happy to look at them.

Lord St John of Fawsley: Does the Chairman of Committees agree that he has expressed the view of most Members of the House, though not all? I agree with him entirely that we must not interfere with the rights of the Lords Spiritual. At the same time, I believe in the idea behind this Question. We can best meet it by respectfully and humbly offering advice to the right reverend Prelates either in private or in public. Is he aware that I have put down a Question for Short Debate which contains the suggestion that we have a debate on the ecumenical movement between different churches and faiths? May I suggest that we

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have it in the dinner hour as the noble Lord would then be in peril of hearing me speak, which would get him out of purgatory?

The Chairman of Committees: The noble Lord makes some interesting points, but I am not sure that any of them require an answer from me.

Lord Hughes of Woodside: My Lords, I declare an interest as an honorary vice-president of the British Humanist Association. Without commenting on the established church, I will say that my personal preference is that we should not have Prayers at all. If we have to have an opening ceremony in which religion may play a part, will the Chairman of Committees make sure that the views of humanists are properly taken into account?

The Chairman of Committees: My Lords, the noble Lord questions why we have Prayers. It is a strength and a defining feature of the House that its practices are a matter for its own governance. These customs and practices can be altered, but after consideration by the Procedure Committee and then by the House as a whole. I remind noble Lords that attendance at Prayers is voluntary, not compulsory.

Lord Elton: My Lords, may I assure my noble friend that the concerns of humanists are entirely met by prayers by Christians in this Chamber every day?

The Chairman of Committees: Well, yes, my Lords.

Lord Clark of Windermere: Does the Chairman of Committees accept that there is a feeling that we need to move forward on this? Perhaps I might suggest that we bear in mind the sentiments best reflected in Hymn 279 in the Primitive Methodist Hymn Book, which begins:

"When wilt Thou save the people?

Oh God of mercy, when?

Not kings and lords, but nations,

Not thrones and crowns, but men!"-

and I include women in that.

The Chairman of Committees: I am grateful to the noble Lord for informing me of the contents of that hymn, but I am not entirely sure I agree that it is the sentiment of the House that we should move on this matter.

Lord Elystan-Morgan: The noble Lord has properly reminded the House of the traditions of its ancient past. However, with regard to the immediate future and the anticipated reform of the House, can he confirm that there have been consultations with the representatives of Christian denominations other than the Church of England, and indeed on a wider basis, with regard to the future composition of spiritual representation?



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The Chairman of Committees: My Lords, I thought that we might come to the arguments about reform of the House. I am pleased to say that I have not taken part in any consultations on reform of the House. I understand that we will see proposals for reform fairly shortly. It will then be in matter, if and when there is a new House, for that House to decide whether it wants Prayers and, if so, what form of Prayers it wants.

Lord Cormack: My Lords, I am sure that the noble Lord, Lord Anderson of Swansea, spoke for many of us when he endorsed the present form of Prayers and made the plea for the Grace to be said together. However, will my noble friend agree that many in this House who are not of the Christian faith, such as my noble friend who sits beside me who is a Hindu, warmly welcome the sentiments contained in the Prayers and the majesty of the language in which they are uttered?

The Chairman of Committees: The noble Lord is absolutely right. I tried to give that impression in an answer I gave earlier.

The Earl of Sandwich: My Lords, may I suggest to the Chairman of Committees that we introduce variety in the Collects? There is a wonderful range of Cranmer Collects. Could he say how the committee represents the church's views? Is there a permanent member of the committee from the church?

The Chairman of Committees: My Lords, the noble Earl wrote to me about the possibility of using different Collects. I have the matter in hand and I will come back to him in due course, after I have consulted the Bench of Bishops.

EU: European Financial Stabilisation Mechanism

Question

11.29 am

Asked By Lord McAvoy

The Commercial Secretary to the Treasury (Lord Sassoon): My Lords, the European financial stability mechanism was created following agreement by a qualified majority of member states at ECOFIN on 9 May 2010. All contact between the Treasury and the then opposition parties in that period followed the agreed Cabinet Office guidelines for the 2010 general election. Both my right honourable friend the Chancellor and the previous Chancellor set out their accounts of the discussions in their written evidence to the Political and Constitutional Reform Committee.



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Lord McAvoy: My Lords, I thank the Minister for his Answer. Which of the two following positions is correct-David Cameron saying that George Osborne objected to joining the mechanism or Treasury Minister Justine Greening, who signed the document, saying that cross-party consensus had been gained?

Lord Sassoon: My Lords, they are both correct. It may be helpful if I explain the situation a bit further. The discussion on which there was consensus concerned the process that would apply at the ECOFIN meeting on 9 May. There was no consensus on the question of the underlying policy matter. As my right honourable friend the Chancellor said in his written evidence to the Political and Constitutional Reform Committee:

"The purpose of the phone call was not to reach agreement, but for Mr Darling to consult me on the course of action he proposed. Given he was still Chancellor of the Exchequer at that point, representing the UK in a dynamic negotiating environment, it was for him to reach decisions. He did this, aware of my views".

That is the evidence of my right honourable friend the Chancellor.

Lord Lawson of Blaby: My Lords, can my noble friend confirm that, whatever precisely may have happened on that regrettable occasion in the recent past, so far as the future is concerned there is firm agreement between us and the European Union that, when the present mechanism is replaced by a new mechanism in a couple of years' time, we shall not be part of or bound by that new mechanism?

Lord Sassoon: My Lords, I am grateful to my noble friend Lord Lawson of Blaby, who, as is customary, brings us back to what is really important. I can absolutely confirm what he says. At the European Council on 17 December 2010, this Government did what the previous Government failed to do, which was to get agreement that there would be an amendment to the treaty that would achieve a permanent mechanism to be established by the member states of the euro area to safeguard the financial stability of the euro area as a whole. Therefore, it is indeed correct that, as of 2013 at the latest, the United Kingdom, being outside the euro area, will not be part of this mechanism. That is the critical point, which I can confirm.

Lord Davies of Oldham: My Lords, I agree that this is an important point of public policy. However, it should be appreciated that there is a significant matter at stake, because my right honourable friend Alistair Darling appears to have been accused by the Prime Minister of acting out of faith as far as the present Government are concerned. The document signed by Justine Greening, the Economic Secretary and therefore answerable to the Chancellor, related to the legislation. It is headed "Explanatory Memorandum on European Union Legislation" and the last paragraph is as follows:

"It should be noted that whilst agreement on behalf of the UK was given by the previous administration, cross-party consensus had been gained".



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Is an apology not due to my right honourable friend, who acted entirely properly and consistently with this note?

Lord Sassoon: No, my Lords. No apology is due. I have already tried to make it clear, but let me make it absolutely clear again. Consensus was reached on the process by which the ECOFIN qualified majority voting meeting would take place. That, as has also been made completely clear, is quite a separate matter from my right honourable friend the Chancellor making clear his position on the underlying policy matter. The two matters are distinct. The decision on the policy matter was for the then Chancellor, Mr Alistair Darling. He was the Chancellor at the time and he took the decision.

Lord Newby: In view of the stress tests on the Irish banks that were recently announced, will the Minister confirm that any further support that the Irish banks might need via European mechanism facilities that are already in place will not require any additional funding from the European financial stability mechanism?

Lord Sassoon: I am grateful to my noble friend Lord Newby for again bringing us back to important current matters. The results of the Irish banks' stress tests, as I understand it, will be released by the Central Bank of Ireland at 4.30 this afternoon, so it would be inappropriate to comment on them. Of course, the Irish authorities have consulted Her Majesty's Treasury, the Bank of England and the FSA about the impact of bank restructuring, and the Government expect that the forthcoming announcement will remain in line with the broad principles of the support package provided to Ireland. I would just add that the Government have made clear their commitment to ensure that the Northern Ireland banking sector continues fully to meet the needs of businesses and consumers in Northern Ireland.

Lord Pearson of Rannoch: In view of what the noble Lord has said, whatever Mr Darling and Mr Osborne may have said to each other is entirely irrelevant because the Commission had the nerve to bring forward the mechanism under a clause in the treaty-in fact, the clause is to allow member nations to help one another in natural disasters-which is decided by majority voting in the Council. Therefore, the British Government had no hope of avoiding our 14 per cent share of £50 billion, which we can ill afford at the moment.

Lord Sassoon: My Lords, without rerunning previous discussions with the noble Lord, Lord Pearson of Rannoch, on the precise interpretation of the articles, the critical thing is that under the agreement reached at the European Council on 17 December, and very much led by my right honourable friend the Prime Minister, it is clear that Article 122(2) of the treaty will no longer be needed for purposes of support in this form. Without debating what has happened in the past, let me just say that my right honourable friend at the European Council has secured complete clarity for the future.



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Business of the House

Timing of Debates

11.37 am

Moved By Lord Strathclyde

Motion agreed.

Draft Defamation Bill

Membership Motion

11.38 am

Moved By The Chairman of Committees

Motion agreed, and a message was sent to the Commons.

Civil Contingencies Act 2004 (Amendment of List of Responders) Order 2011

Charities (Pre-consolidation Amendments) Order 2011



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Companies Act 2006 (Consequential Amendments and Transitional Provisions) Order 2011

Pensions Appeal Tribunals Act 1943(Time Limit for Appeals) (Amendment) Regulations 2011

Pensions Appeal Tribunals Act 1943 (Armed Forces and Reserve Forces Compensation Scheme) (Rights of Appeal) Regulations 2011

Motions to Refer to Grand Committee

11.38 am

Moved By Lord Strathclyde

Motions agreed.

Economy: Growth

Debate

11.39 am

Moved By Lord Hollick

Lord Hollick: My Lords, today's debate on growth draws on the impressive range of experience and knowledge in our Chamber. We have five maiden speeches to look forward to-from the noble Lords, Lord Kestenbaum, Lord Wood, Lord Collins and Lord Popat, and the noble Baroness, Lady Worthington.

One of the keys to growth is productivity, and in today's time-constrained debate, although gratefully somewhat extended, that means saying more in less time. I will do my best. I do not wish to rehash the debate about the pace of the fiscal consolidation adopted by the Chancellor. That was discussed at length last week. Putting the public finances on a sound and sustainable footing after the financial crisis is an essential first step towards recovery, but we cannot cut our way out of our economic problems. We also need a credible strategy for growth, because growth matters. Small changes in the growth rate over the next few years can undermine the Chancellor's deficit reduction plan, and if he chooses to stick to plan A that might well lead to even deeper and more damaging cuts. Low growth in the short term will make big differences to our standard of living in the long term.

A reduction in our long-term growth rate from 2.5 per cent to 1.5 per cent would reduce aggregate growth over the next 20 years by nearly 30 per cent. A prolonged period of low growth would inflict a decade

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of stagnation, a loss of international competitiveness, a sharp deterioration in public services and a generation of jobless young people. The Government now acknowledge this and have begun to turn their attention to growth. Growth in our economy is currently anaemic, and we still have the full impact of the cuts to come, with their inevitable blow to consumer and business demand and confidence. Food and fuel prices are rising, and the Japanese economy has been badly hit. Against that background, the risk to the OBR's forecast is very much on the downside.

The Plan for Growth, published with the Budget, is a welcome document, and so are many of the measures announced in the Budget to promote growth. The plan is the latest in a long line of efforts to improve our economic growth rate, stretching back to the work of Neddy in the 1960s. Indeed, my noble friend Lord Layard and I are veterans of the 1996 Commission on Public Policy and British Business report, entitled Promoting Prosperity. What is striking about this 50-year body of work is that, after allowing for the impact of greater globalisation and the emergence of new technologies, there is a remarkable consistency of analysis, findings and proposed remedies. Underinvestment, low productivity, inadequate skills, lack of availability of finance and over-burdensome regulation are ever-present themes. This consistency points to the deep-rooted nature of the problem and the sheer difficulty and complexity of raising the growth rate in a developed country in a highly competitive world economy.

Another lesson from past growth initiatives and plans is the overriding importance of excellent and consistent implementation and execution of policy measures. Too often, Governments chop and change, introducing new wheezes which have a short-term political impact but fail to provide the consistent and predictable environment that business needs. Much is promised, but little is delivered.

Improving productivity is a key driver of growth and has rightly been a priority in all plans. Yet, despite a good relative performance over the past 15 years, UK productivity per hour is some 17 per cent lower than the US and 10 per cent below that of Germany. Our services sector, the largest driver of jobs growth, responsible for 65 per cent of private sector output, accounts for much of that productivity gap. Improved skills, not least management capability, greater innovation and improved levels of investment are necessary preconditions to improving productivity.

The Budget brought some notable changes to planning and important clarity on tax treatment of overseas profits, but only limited deregulation. Some old friends reappeared. Enterprise zones, despite their very modest record and short-term impact, are back in fashion. Better, surely, to make the whole of the UK an enterprise zone with time-limited measures to promote enterprise, investment and business formation. If the Government really believe in localism, allow our cities to introduce their own set of policies to attract investment, to develop clusters and to meet local training needs. Business and investors partner with cities around the world, and would welcome the opportunity to do so in the UK.



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While that deregulation is promised, other parts of the Government are busy undermining proven ingredients of our success. The creative sector, where I spent much of my career, accounts for more than 7 per cent of GDP, and relies on the steady supply of richly talented individuals. That does not happen as a course of nature. The likes of James Dyson, Paul Smith, Ridley Scott, Simon Rattle, Keith Richard and Alexander McQueen all went to art school, where the wild and the wacky creative talents can flourish. Art schools have had significantly to up their intake of overseas students to make ends meet. That, and the high level of fees, risks choking off the very supply of talent, often from disadvantaged backgrounds, that we need to remain a world leader.

Reductions in the level of taxation on profits and an increase in the level of tax incentives to invest are guaranteed a very warm welcome, but have they been targeted effectively? In the light of the need to boost investment, I would favour tax breaks on investment rather than a faster reduction in the overall rate of corporation tax. Why does investment in capital goods receive favourable tax allowance treatment, when intangible investment in process improvements, creative ideas, skills and IT, all of which drive innovation and productivity and in many businesses are the most important components of growth, are disadvantaged? In addition to their aim to achieve simplicity in tax matters, the Government should also adopt the principle of neutrality.

The UK has long been a laggard in capital investment. Last year, investment sank to 15 per cent of GDP, down from a 30-year average of 17 per cent, compared with 19 per cent in Germany and 21 per cent in France. Two particular areas of underinvestment stand out: infrastructure and energy. In its report last November on growth priorities, the McKinsey Global Institute estimated that the UK needs to spend £350 billion on transport over the next 20 years to renew our strategic network of roads, railways and airports to expand capacity and help to close the productivity gap. A further £170 billion is required over the same 20-year period to renew our energy infrastructure. It is therefore regrettable that the Government have gone for a quick political fix on fuel duty by clobbering the oil companies and thereby putting the oil companies' investment plans at risk.

The Government currently enjoy exceptionally low long-term borrowing costs and should and must be at the heart of this vast infrastructure investment programme. But here we come up against a persistent and wretched piece of Treasury dogma, which dictates that, unlike in most OECD countries and contrary to the rules operating in the European Union, all borrowing by the Government, even if it can be serviced from cash revenues, must be included in the PSBR. Of course, borrowing that has to be financed through future taxation must be included, but if the return exceeds the cost of borrowing, the borrowing should not count towards the PSBR. As my former colleague at the IPPR, Gerry Holtham has pointed out, a state infrastructure bank could turn the PFI model on its head and provide loan finance for the construction of a road which could then be leased to the private sector in return for a rental income which can service and

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repay the debt. Road usage forecasting is sufficiently robust to enable the risk to the taxpayer of default to be covered by an appropriate guarantee charge, which should be included in the PSBR.

The income to finance the renewal of our road network will flow from the long overdue introduction of road pricing, which can easily be deployed using the vehicle number plate recognition system that works very effectively in London. Charging consumers for the use of expensive public assets is a fact of life in most countries, but in the UK, the very threat of it leads to a serious outbreak of jitters in the Government. I have advocated its introduction to Ministers in this Government and their predecessor and have always been met with an enthusiastic response to the idea but a terror at having to take responsibility for its introduction. The very severe challenges we face require boldness and courage from the Government. Timidity simply will not do.

Road pricing is but one example of how Governments can open up new markets and foster demand without recourse to the Exchequer. This Government and their predecessors have been quietly and impressively working, using administrative and legal powers to create new markets in the energy sector. Feed-in tariffs and the upcoming Green Deal are two such examples. The costs of the solar panels installed under the feed-in tariff scheme are largely borne by the total population of electricity consumers. The Green Deal is likely to see a range of energy-saving technology installed in homes, paid for by loans from electricity suppliers, which will be paid out of fuel-cost savings. The green mortgage thus created will attach to the property until repaid, regardless of who the owner is. Both schemes will create many jobs quickly, boost the economy and encourage product innovation and manufacturing. Another more conventional idea floated by the Secretary of State at the Department of Energy and Climate Change just before the Budget, which sadly did not survive the Treasury cull, was to lower the rate of VAT to 5 per cent for a limited period for home refurbishment and repairs up to a limit of, say, £20,000. This would have created many new jobs quickly, improved the housing stock and brought some cash transactions that are currently not in the VAT net back into the VAT net-all at a modest cost to the Exchequer. Perhaps the Secretary of State's suggestion is being held back for next year's Budget.

Another opportunity to stimulate a market and create demand at no cost to the taxpayer is the provision of sophisticated healthcare technology to the home that can be monitored remotely and that will allow the elderly and infirm to remain safely and happily in their own home and to delay or avoid the expensive option of a care home. This could be financed out of existing local authority budgets.

Ready access to finance is the sine qua non of growth. SMEs complain about the lack of availability of loan finance and the steep cost of loan renewal. Project Merlin might help but needs to be very closely monitored. Many SMEs are held back by a lack not of loan finance but of capital, and while there are welcome increases in the EIS and VCT allowances for early-stage companies, the threshold levels are set far too low to

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help the one sector of our economy that can create the majority of new jobs that we so badly need. Again, timidity seems to have won out.

The Plan for Growth reminds me of my school report-"a worthy and promising start, but much, much more needs to be done". The OBR's judgment was more dismissive; it saw insufficient evidence that The Plan for Growth would do anything to raise long-term growth. I anticipate that your Lordships will identify today many ideas and opportunities that will help us to improve on that position.

11.52 am

Lord Higgins: My Lords, it is a pleasure to follow the noble Lord, Lord Hollick, and I congratulate him on obtaining this debate. He certainly made a very thoughtful speech. It is interesting that he presented no alternative to the Government's views; rather, he presented a series of ways in which the present policy could be enhanced. Each of the items that he mentioned deserves careful consideration.

As the noble Lord pointed out, we had an opportunity last week to consider cuts and the rate and extent of them. I remain firmly of the view that the Government are doing the absolute minimum required to get the economy back on an even keel, because, as the OBR report and the Red Book make very clear, even at the end of the five-year period, despite all the cuts and the tax increases, the actual amount of debt will have gone up rather than fallen. The longer one delays in taking action, the bigger the amount that you eventually have to pay off in total.

Perhaps I may make another point. As the noble Lord also rightly points out, the time available for debate today has been extended, but it is still down to four minutes per speaker. It is very difficult to deal with the points that he has made in a speech of four minutes. We should seriously consider whether a really extended debate in the Moses Room in which we could go into the OBR's report in depth, because it is a very good report indeed and raises a number of issues, would not be more to the advantage of the House than time-limited debates on the Floor of the House.

I distinguished last week between two ways in which the expression "growth" may be used. It may be used to represent the fact that existing spare capacity is being used up more and therefore there is growth, or it may be used to represent increasing the underlying productive potential, which the noble Lord largely concentrated on. The course which the OBR is setting in gradually mopping up that excessive capacity-it anticipates that the end of the cycle will come in about 2016-is the right way to go. That is very similar, I feel bound to say, to what was attempted back in the early 1970s, although unfortunately that was wrecked by a massive increase in import prices. We are faced with the same problem. It was stigmatised as a dash for growth. I do not think what we are now proposing is that, nor do I think that it was then. What we have to do is get a steady increase in the amount of demand in the economy.

As regards the underlying productive potential, certainly we need to have more investment but we also need more saving. The reality is that those who have

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saved prudently, particularly those on low fixed incomes such as my former constituents in Worthing, find that their savings have been seriously attacked. It is very difficult to think why anyone should save at the moment, given that it is virtually impossible to get a real rate of return on savings. Therefore, as far as the productive potential is concerned and the Keynesian relationship between saving and investment, I would very much hope that the Government will now take further steps to increase the level of saving and give some real incentive for savers in the sense of an actively positive rate of return.

I find that I am already out of time and I have a speech for about the next two hours. Alas, I shall resist that temptation. None the less, the noble Lord has got the debate off on a very sound footing and I look forward to hearing what follows.

11.55 am

Lord Newby: My Lords, I thank the noble Lord, Lord Hollick, for introducing this debate and I very much look forward to all the speeches, not least the maiden speeches. In my short time, I should like to say something about manufacturing. It seems to me that we have a unique opportunity to see growth in this sector. In a sense, the bankers have done manufacturing a favour in that banking no longer has the kudos, nor appears to many young people, I suspect, to be quite the wonderful career that it did.

There is no doubt that within and among young people there is a huge interest in this sector. I have done some work with the F1 in Schools and Greenpower charities, both of which set engineering tests for schools to enable children to get a taste of engineering and to promote engineering as a rewarding career. There is no doubt that the enthusiasm with which these programmes are taken up demonstrates a very large interest. Demand for engineering as a career is not a problem.

The issue is how we should put the structures in place to enable young people to take it up easily. I should like to commend two initiatives in the Budget. The first is the university technical colleges, which will promote vocational training. This area has been consistently underplayed. Many educationalists say that children should not specialise at an early age but my work with organisations such as the Prince's Trust and SkillForce persuades me that for many children a vocational route is clearly what they want and is apparent at a relatively young age. Anyone who wants to see a case study should read the autobiography of Stuart Pearce, the under-21 England manager. He was hopeless academically but was a terrific electrician, which is what he did before he went into football. Many children know at a relatively early age that they do not want to study many academic subjects but that they are really interested in vocational subjects.

Secondly, this Government have increased the number of funded apprenticeships in the previous Budget and in this Budget by 125,000, which is very welcome. The challenge is on the private sector to take them up now that they are available. The manufacturing sector having been keen to ask the Government for additional support for apprenticeships, the ball now is in its court. I hope that the Government will press it hard to make sure that these apprenticeships are taken up.



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Another issue promoted in the Budget which the sole voice of the noble Lord, Lord Bhattacharyya, has reminded us about over the years in your Lordships' House is the value of promoting high-value manufacturing via partnerships between the industry and universities. The decision to promote and to support high-value manufacturing, technology and innovation centres-surely that is the least elegant phrase among all the acronyms that the Government have come up with-is extremely welcome. The first, in Sheffield, on its own will generate 400 jobs and will enable the specialist engineering sector in that area, which Boeing and others have supported, to flourish further.

More generally, I have considerable sympathy with the proposals of the noble Lord, Lord Hollick, for investment. We support road pricing and I would support the proposal which I am sure the noble Lord, Lord Skidelsky, will be speaking on: a national investment bank. The Treasury will argue against many desirable things. That should not be a reason for our not doing them. The noble Lord, Lord Hollick, said that at this point we should be bold and that timidity will not do. We need to tell the Treasury that, as well as everybody else.

Noon

Lord Kestenbaum: My Lords, I begin by expressing gratitude for the generosity and warmth with which I have been received into your Lordships' House. I have experienced kindness and consideration from everyone I have encountered. I have also discovered that the wisdom residing in this House is quite extraordinary. My sponsors, my noble friends Lord Sainsbury and Lord Puttnam, did much to ease my nerves, and the dedicated staff have been a remarkable source of guidance-in one case literally, as a distinguished doorkeeper gently stopped me from walking straight into a broom cupboard on my very first day here.

Perhaps this challenge of losing and then regaining one's bearings is an appropriate personal metaphor. As my family name, Kestenbaum, indicates, home until the traumas of the 20th century was Germany. Leipzig and Frankfurt were our origins. At the time when Europe turned dark, our family, together with millions of endangered others, fled. It was a circuitous route, first to the United States and then to Japan, where I was born, then back to the US, and finally, as a child, to Britain. It was here that our community learnt that this country did not expect you to make a choice between loyalty to one's faith and loyalty to the national interest while both are pursued with dignity.

But as I enter into this debate on economic growth, it is no coincidence that I should reflect on the two economies in which I grew up: Japan and the United States. My parents, while bringing up a young family in Japan, saw at first hand what has since been dubbed the Japanese economic miracle, a transformation in the standard of living powered by growth. But the lost decade of the 1990s, as it became known, is yet to be found. The United States, our family's pre-war refuge, became the world's largest economy not least by virtue of new technologies which saw GDP per head grow sevenfold in the 20th century. But despite this, more recently President Obama has said that the US economy, in order to grow, will need to reach a level of innovation

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not seen since the space race. So I am grateful to my noble friend Lord Hollick for calling urgent attention to this matter. We are now learning the same lesson as those other economies-that growth is not a national birthright, and the heady days when economic power was concentrated in the hands of a few are over.

In recent years my colleagues and I have been privileged to back some of Britain's brightest young entrepreneurs. During my time as CEO of NESTA, and now as chief executive of Lord Rothschild's family investment interests, we have scrutinised thousands of business plans and met hundreds of young high-tech innovators; and I have watched their concerns, particularly among a group of young entrepreneurs in Manchester with whom I worked closely. Those talented graduates did not just want to build new businesses, they wanted to feel that the embrace of new ideas and new technologies was central to our national purpose. The prize is great. Research published last week by NESTA entitled Vital growth shows that these fast-growing, innovative businesses continue to punch way above their weight, with just 7 per cent creating half of the new jobs. As your Lordships consider ways to increase this number, we might also consider the lessons of those Mancunian entrepreneurs. Innovation has to be embedded in our culture-it must be central to the national story.

This national culture of innovation so often provokes false choices, either a constant flurry of well-intentioned interventions or staying firmly out of the way. After all, say some, Thomas Edison did not need state aid to create the incandescent lamp-a lot of pluck and a little luck was all it took, so the argument goes. Yet an economic culture that produced innovators like Edison and others did not emerge by chance. Edison benefited from a postal service, new roads, public libraries and a stable banking system. All these were the public goods that made innovation flourish and showed how economic growth is built on a tapestry of skills, science, finance and regulation all working in tandem.

So often this interplay takes place where one might least expect it. Many of the high-tech entrepreneurs that I have worked with in recent years took their inspiration from Silicon Valley. The conventional wisdom is that, "There's an economy entirely sustained by individuals", and yet, subtle and intelligent public policy is everywhere in Silicon Valley. Defence spending funded a generation of microwave technology there that created the foundations for the semiconductor industry; the procurement strategies of DARPA kick-started hundreds of technology businesses. This combination of technological talent, supportive public policy and effective financing mechanisms is at the heart of great innovation economies.

This debate focuses quite rightly on the conditions for economic growth, but perhaps I may make one final, wider observation. Growth as a public policy imperative can do much: it can create jobs; it can reduce welfare dependency; it can over time help finance public services-it can do all these things at its best. But rapid economic growth simply for the relentless pursuit of wealth alone will do nothing for the long-term health of our nation. Economies never measured progress by the yardstick of growth in isolation, but, rather, how that growth made for a better society. So this

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debate, I suggest, is as much about the society that we wish to build as it is about the economy which will help build it.

I offer thanks to your Lordships' House for giving me the opportunity to make my maiden speech on a subject that I feel will underpin many of our concerns in the months ahead.

12.06 pm

Lord Bilimoria: My Lords, what a privilege it is to follow the absolutely superb maiden speech of the noble Lord, Lord Kestenbaum. This is a debate tailor-made for his Lordship. He has hit the ground running, showing the invaluable input that he will bring to this House, particularly in the field of innovation and enterprise where he has had huge experience. He made his mark in this country as the former CEO of NESTA, the National Endowment for Science, Technology and the Arts, the largest endowment in the UK, fostering innovation, and the country's biggest source of seed finance for technology start-ups.

Our House is renowned for its wisdom, and, of course, it follows that there is a certain maturity of age among our distinguished Members. With Jonathan, we have someone so young and yet with so much varied global experience which he will bring to bear here, having worked as a venture capitalist, having been the chief executive of my noble friend Lord Sachs' Office of the Chief Rabbi and with his involvement in the arts and in higher education. He may very well have walked into one of our broom cupboards, but he has certainly made a grand entrance today and we look forward to many future contributions.

I thank the noble Lord, Lord Hollick, for securing this crucial debate. Last week's Budget had so much that was music to the ears of the entrepreneurial community: encouraging start-ups; increasing the entrepreneurs' relief limit; and the setting-up of enterprise zones-and, let us not forget, had it not been for enterprise zones, we would not have Canary Wharf today. The support for apprenticeships is tremendous, although I am yet to be convinced about the university technical colleges concept. StartUp Britain is terrific; however, we must remember that, as the noble Lord, Lord Kestenbaum, referred to, and as Professor Colin Mason has pointed out, 6 per cent of UK businesses with the highest growth rates generated half the new jobs created by existing businesses. Professor Mason tells us:

"The UK's problem is the lack of high-growth firms"-

the gazelles-

The reduction in corporation taxes is great news, but as the Chancellor said:

Those were the Chancellor's words. The sooner the 50p tax rate is abolished, the more attractive Britain will be and, in fact, the tax take will go up. As for a property tax, this will take us back to the dark ages. I hope that this idea will be quashed before it can even get off the ground.



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I am president of the UK India Business Council, supported by UKTI. At our annual summit in Manchester this month, the Indian High Commissioner, His Excellency Nalin Surie, said of India: "Our growth is your opportunity". Yet British business is scratching the surface. We need to do much more to encourage British business to go global, particularly to countries such as India.

I have voiced my concern about the drastic cuts that the Government are making. Of course, we need to make savings, but it is what you cut that matters, and you do not have to cut everything. For example, cutting so severely investment in higher education will really harm this country. This, combined with a crude immigration cap, is seriously hampering higher education and business. We need to encourage growth and to keep investing in our infrastructure.

I have just returned from a business delegation hosted by the Emirate of Dubai, and in spite of all the problems that that country has experienced recently in terms of debt and a huge property crash, it is continuing to benefit from the phenomenal investment in world-class infrastructure and becoming a world-class hub in the region as a result of that investment, attracting 10 million tourists a year as well as trillions of dollars investment into Dubai.

This year I graduated from my nine-year president's leadership programme at Harvard Business School- I suppose that I am a slow learner. My study group presented me with a wonderful book, TheRational Optimist. Of course, I hope that they were referring to me. With all Britain's problems today-high inflation, low growth, high unemployment, a giant deficit, huge debt and far too high public spending-we are still one of the most open economies in the world. We still have so much of the best of the best in the world, be it advanced engineering, higher education or science. Only this week it was announced that Britain is in the top three in the world in the publishing of science papers-ahead of France and Germany. I bet that by 2050, the giants of India and China will be the two largest economies in the world, but I also bet that this tiny country will still be in the top 10.

12.11 pm

Lord Popat: My Lords, it is with a great sense of honour and privilege that I speak for the first time in your Lordships' House.

I am grateful to all noble Lords, and to the staff of the House, who were particularly helpful in allowing my Guru Moran i Bapu to witness my introductory ceremony in the Chamber. It is his teachings of truth, love and compassion that are the guiding principles of my life. His presence was in itself an historic occasion, as no Indian spiritual leader had ever attended this House to witness such a ceremony, and for me it was a great honour.

As some of you may know, I was born in Uganda and came here at the age of 17 under very difficult circumstances. In January 1971, I accompanied my father to drop my sister at Entebbe Airport, from where she was flying to study in the UK. At the stroke of midnight, the army of Idi Amin, the then dictator of Uganda, took control of the airport and ordered all flights to be cancelled.



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Our family knew that our time in Uganda was limited, and in May of that year I moved to Britain, working in a Wimpy bar. The following year, Idi Amin expelled 30,000 Ugandan Asians, ordering them to leave within 90 days. They left behind a prosperous past and walked towards an uncertain future. I would like to thank the Conservative Government then led by the late Sir Edward Heath, who, along with a number of voluntary organisations, helped my fellow Ugandan Asians in our hour of need. We have never forgotten this lifeline that we were given, and I am proud to say today, 39 years on, these very same people are some of the most hard-working and patriotic in the country.

The powerful emotions that I feel today are simply explained. This country can boast that here, in Britain, people in genuine need of refuge can find a safe home, live in peace and rebuild their lives. If that was not enough, we were given the same rights as those who were born here, including the right to vote, which is a gift that we particularly cherish, yet that right is superseded by the privilege of joining your Lordships' House. From what I have witnessed in your Lordships' House, and what I have learnt during the last 40 years, Britain's tolerance, decency, fairness and justice are its finest qualities. It is testimony to the tolerance and generosity of this country that the Hindu community is explicit in being proud to be British and proud to be Hindu, seeing no contradiction between the two. On the contrary, it is a mutual reinforcement.

I decided to take the title of Lord Popat, of Harrow, because for 30 years I have been a member and am now president of Harrow East Conservative Association. My parents lived in Harrow and I see this as a tribute to them, to whom I owe everything. My only regret is that they are no longer here to share this with me.

Over the past 40 years, the Ugandan Asians who came here as refugees have played a very successful role in Britain's economy and are now a central part of Britain's economic fabric. After training as an accountant, I myself have run my own business-and this brings me to the topic of today's debate. The past decade of government reminds me of President Reagan's pointed insight into the Government's view of the economy:

"If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidise it".

It is about time we broke this cycle.

Our difficulties are bank borrowing, a complicated tax system, endless employments regulations and a planning system recently described by the noble Lord, Lord Wolfson, as glacial. Small businesses are responsible for six out of 10 jobs in the UK. They are the engines of economic growth, and last week's Budget saw a series of welcome announcements, including the commitment of no new regulations on firms with fewer than 10 staff for three years, and the simplifications of the tax code. This will help to create new jobs, growth and prosperity, and I look forward to doing all I can to assist the Government in furthering this agenda.

12.16 pm

Lord Hamilton of Epsom: My Lords, we have heard two maiden speeches, which have gone to remind us all of the richness and variety of the membership of your Lordships' House. We are very privileged to have with

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us the noble Lord, Lord Kestenbaum, with his experience of the Japanese and the US economy, which are two very different economies from our own. I think it is also true to say that he is extremely proud of his Jewish blood. We should pay tribute to the Jewish immigrants who come to our country, who have done so much to make it move forward and have shown so much enterprise, which has made us the country we are today. I declare an interest as I have a certain amount of Jewish blood myself on both sides-but unfortunately not enough.

I also pay tribute to my noble friend Lord Popat. I spent a certain amount of time in east Africa, in Kenya rather than Uganda, and I know the massive contribution that was made there by the Asian community. Of course, it was a tragedy for Uganda when Idi Amin decided to kick it out. There was a terrible moment here when we hesitated before actually agreeing to allow those Ugandan Asians to come to this country. What a good thing we did. Uganda's loss was certainly our gain. Once again, we benefited from incredibly entrepreneurial immigrants who played a very massive role in the growth of our economy and the movement of our enterprises. My noble friend is, indeed, very welcome in our House, and we are very lucky to have him here.

I congratulate the noble Lord, Lord Hollick, on launching this debate. I was extremely glad, as my noble friend Lord Newby was, that he raised the whole issue of road pricing. Road pricing is certainly something that should be embraced by our Government. It has the effect of actually getting motorists to contribute to the costs of the driving which they do, but I can understand why the Government are hesitant. The motoring community is certainly one that Governments rather hesitate before they antagonise them. But I think that this is the way forward, and I hope serious consideration will be given to road pricing. We have to be very brave if we are going to do it, and we have to price existing roads to pay for future roads. I totally accept the noble Lord's point that technology has now moved on and has made this possible.

I would like to address the question of what I would describe as the phoney war about the whole business of deficit reduction. There is a concept being put forward by the shadow Chancellor, Ed Balls, that somehow there is a rather easier way of addressing the deficit. There is a suggestion from the Labour Party that if by some extraordinary circumstance it had actually won the last election it would have stayed with the Budget of the former Chancellor, Alistair Darling. I do not think there is the slightest chance of that happening whatsoever. If we had a Labour Government today, in total or global terms their deficit reduction plan would be very similar to the one that this Government are putting forward. If they had been in power Labour, too, would have taken £6 billion-worth of savings in the current year. It is a complete load of nonsense to suggest that there is somehow an easier way of approaching deficit reduction when the problems that we have are so massive. The reason for that is that although Chancellors love to pretend that they are in total control of the economy, the bottom line is that they are not. The people who have massive influence on our economy are those in the markets.



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If we had gone ahead with the Darling Budget and had done nothing to change it, we would now be paying much higher interest rates than we are on our debt. That would merely roll forward the problems that we now have of increasing debt. This is one of the sadnesses that I have with the Budget which we have just seen: we are watching the total amount of government debt climb, in the OBR's forecast, from £759 billion in 2009-10 to £1,359 billion at the end of the Parliament. I would like to see us repaying debt. It is very sad that we are going to inflict this enormous burden of debt on future generations.

12.21 pm

Lord Wood of Anfield: My Lords, it is a privilege to be standing before you today. In particular, I am proud to be representing the cause and interests of redheads from across the political spectrum. I pledge to stand up for this minority in the years ahead. As an academic, my experience of public speaking has largely been limited to university lecture halls. I was given three tips by an academic colleague before my first lecture that I have obeyed religiously ever since. First, always insert a joke just after halfway through to wake your audience up if they are in danger of falling asleep. Secondly, never distribute your hand-out before you begin speaking or else your audience will pick it up, walk out and get a cup of coffee instead of listening to you. Thirdly, like Cicero, always make your points in groups of three. This advice has stood me in good stead and I pledge to repeat this formula during my contributions to the House in the years ahead.

I have felt not just a slight sense of awe but a great sense of humility since beginning my time on these famous red Benches. That is in part because, as a student and teacher of politics, I am acutely aware of the wisdom, distinction and contribution to Britain of generations of noble Lords who have come before me and served in this House, and in part because, at its best, I know that this House can provide an opportunity for scrutiny, reflection and collaboration in a political system otherwise short of such qualities and a place to speak up for those whose voices do not often get heard.

I am also humbled by the fact that I am surrounded by many of the people, on all sides of this House, who inspired me first to study, then teach and then practise politics. I had a sense as a teenager that politics was, as Tony Blair once said,

and could offer the possibility for ideas and collective action to change our country for the better. I believed it strongly during my time working for the former Prime Minister, Gordon Brown, to whom I will always be indebted and whose dedication to public service is second to none. I still believe it passionately and I hope my time in this House fuels rather than dims that optimism. Lastly, I thank noble Lords from all sides of the House for their kindness, in particular my noble friends Lady Nye and Lord Kinnock for their encouragement, friendship, cups of tea and hand-holding.



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Growth is of course the necessary condition for meeting the aspirations of the British people and funding the public services on which we all rely. My point today is that we should take this opportunity as a country, as we emerge from the international recession, to move beyond a simple concern with what Keynes called,

as,

In particular, we need to focus on three crucial aspects of economic growth. First, we need to aim not just for growth but for sustainable growth in which consumption is based on rising living standards, not excessively dependent on borrowing; where business profits rise as a result of investment and innovation, not simply through speculation; and where environmental sustainability is built in rather than bolted on to the business models of small and large firms alike. This is a long-term ambition. It cannot be achieved through a quick fix, and it requires thinking about how we reshape our economy in quite fundamental ways.

Secondly, we need to move on beyond the rather stale polarity of laissez-faire on the one hand and the demonisation of old-style corporatist industrial policy on the other, to work out not whether but how a Government can provide secure foundations for long-term growth and for raising productivity. Increasing the value of what we produce demands an intelligent role for government intervention: to stimulate greater innovation, modernise our infrastructure and ensure that our banks serve the investment and research needs of companies as well as they serve the short-term interests of their shareholders.

Thirdly, alongside our determination to restore growth, we must have equal determination to ensure that the proceeds of growth are enjoyed by the many, not the few. This is not the case at the moment and has not been for a while. In 1979, the top 1 per cent received under 6 per cent of Britain's personal income; in 2005 they received over 14 per cent. For the last 30 years, 22 per cent of every extra pound earned has gone into the pockets of the top 1 per cent. Since the global recovery from the financial crisis began, real wages in the USA have increased by $168 billion and in Germany by €36 billion, but in Britain real wages have actually fallen while profits have risen by £14 billion.

In the United States a debate is raging about how growth can raise living standards for all, and whether it is globalisation, technological change, the competition for talent or political choice that is behind the increasing polarisation of rewards. In Britain that debate is only starting now but is long overdue. I hope that noble Lords agree with me that it is a subject to which we should devote some time in this House in the coming months and years, because doing our utmost to ensure that economic growth is not only strong and secure but shared widely is surely among the first duties of those who govern Britain.

12.26 pm

Lord Skidelsky: My Lords, I listened with great interest, as I am sure we all did, to the attractive maiden speech of the noble Lord, Lord Wood of

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Anfield. He comes to the House from a notable academic and policy-advising background-Magdalen College Oxford, then No. 10 Downing Street. He will bring to our deliberations a much needed blend of theoretical rigour, practical experience and social passion. We got a flavour of all three in his maiden speech and it is certain that they will give distinction to his future contributions to our debates. I join other noble Lords in thanking the noble Lord, Lord Hollick, for securing this debate.

My proposition is quite simple: there is too little demand in the economy for robust growth, and the Chancellor's policy of taking demand out of the economy is exactly the reverse of what is needed. The squeeze in public spending seems bound to stay, but there are two ways in which we can try to increase growth in the economy despite the cuts.

The first, referred to by the noble Lords, Lord Hollick and Lord Newby, is to set up a national investment bank with a mandate to invest in green projects, transport infrastructure, social housing and export-oriented SMEs. A limited fiscal commitment of, say, £10 billion over four years would allow the new bank to spend, say, £100 billion over that period with conservative gearing, provided that it was allowed to borrow. That is the key point. The Chancellor has taken a small step in that direction by giving the go-ahead to the green bank, but that will be allowed to spend only £3 billion and it cannot borrow until 2015, and even then only if the Government's debt reduction target is being met, which I doubt will be the case. The Chancellor has lost a big opportunity to scale up the original idea. A principal merit of my scheme is that a national investment bank could create a new class of bonds, long term but with a slightly higher yield than gilts, which would suit long-term investors. It would thus be a way of mobilising pension funds for investment in the long-term future of our economy.

My second point is that we need to rebalance the economy away from financial services towards high-value manufacturing and creative services, two things mentioned by previous speakers. The banks have a key role to play in this, but for that we need radical banking reform. That has scarcely been started. I therefore support Mervyn King's championing of a British Glass-Steagall Act to split the banking system into commercial and investment banks. We need to avoid like the plague repeating the situation when the core commercial banks were so riddled with bad bets foisted on them by their investment-banking masters that they ran out of money to lend to households and businesses-the very people requiring support in a recession. That is quite apart from the enormous loans and debts with which they have saddled the taxpayer.

This is not just a matter of rebalancing British banking to serve the needs of the economy; it is a matter of rebalancing power in the economy to serve the needs of the British people. As things stand, the banks are the permanent government of the country, whichever party is in power. Unless we can break their power, I fear that all that issues from our political processes and what we are saying in this House today will be a lot of,



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12.30 pm

Baroness Coussins: My Lords, the recent White Paper Trade and Investment for Growth contains one fleeting mention of the shortage of language skills. I declare an interest as chair of the All-Party Parliamentary Group on Modern Languages and urge the Government to strengthen their strategy by improving the UK's language competence. None of the overarching objectives can be fully achieved without it.

UK companies do not seem to understand that the lack of language skills is an important barrier to growth. A survey in 2010 found that, across Europe, 33 per cent of businesses regard foreign language skills as "very important" when recruiting graduates, but the figure for the UK was only 5 per cent, with three-quarters of UK companies saying that they were "not at all important". Can the Minister say what the Government can do to encourage businesses to invest in language training and to develop a better understanding of the benefits of language skills? We know that export businesses that proactively use language skills and the cultural knowledge that goes with them achieve on average 45 per cent more sales. Other research suggests that improving language skills could add up to £21 billion a year to the UK economy.

Another figure worth quoting, given the explosion in online sales, is that over 70 per cent of consumers require information in their native language in order to make an online purchase, while people who do not have good English are six times less likely to buy from an English-only site. It is self-defeating and inaccurate to think that English is enough. Only 6 per cent of the world's population are native English speakers and 75 per cent speak no English at all. The relative amount of internet content in English is declining but that in Chinese is rising and there are more blogs in Japanese than in English.

Neither is English enough in the world of scientific research, which will inform commercial innovation. In China, there are 4,600 scientific journals, only 186 of which are published in English. Employers in the UK who are ahead of the game know that they do not just need people who can speak French and German, although these remain the most sought-after languages. Mandarin or Cantonese come next. With markets opening up in central Asia, Latin America and the Far East, employers also need Spanish, Russian and Arabic. If our school leavers and graduates are not able to offer these skills, employers will recruit overseas.

Sadly, our young people have less and less to offer in the way of language skills. Urgent interdepartmental work is needed between the Treasury, BIS and the Department for Education to make sure that the review of the national curriculum results in a better outcome for languages. Most state school pupils study no languages after the age of 14 and an OECD survey put Britain joint bottom of a league table of 39 countries in the developed world for the amount of lesson time spent on languages. This really is an important barrier to our potential for growth.

I ask the Minister also to speak to his colleagues in BIS to ensure that a further barrier is not created by abolishing the fee waiver for students spending a year abroad as part of their degree. This really would be a

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real own goal. Market reports consistently say that employers prefer to recruit graduates who have spent time living abroad as part of their course, whether they are linguists, engineers, lawyers or anything else.

It is ironic that we should have such a problem with languages when we have a hugely multilingual population. We should make more of this. Companies considering where to locate regard the availability of language skills as absolutely essential. The message about London's linguistic diversity as an asset for attracting inward investment needs to be heard more loudly and proudly.

Finally, is the Minister aware of the EU report on the language industry itself, which is set to double in value to €16.5 billion by 2015? The report sets out ways for businesses, especially SMEs, to benefit from multilingual competence. Will the Minister encourage British businesses to take advantage of this potential for growth?

12.35 pm

Viscount Eccles: My Lords, I am left wishing that I spoke more languages than I do.

That politics and sustainable economic growth are uneasy partners comes out of this debate very strongly. They do not fit well together. As the noble Lord, Lord Hollick, who introduced this debate, said:

"Much is promised, but little is delivered".

As the noble Lord, Lord Kestenbaum, said, innovation has been and remains the key to the advance of science and technology. Of course, Governments are always behind the curve. They do not keep up with the front line of innovation. The noble Lord, Lord Hollick, took us back to Neddy, the late Lord George-Brown and 265 million tonnes of coal, if I remember rightly.

At the time, I was working for a medium-sized business that made pithead gear, mine car circuits, skip-winding plants and coal washery plants. We made a lot of them. I suspect that the average life of those plants as against the predicted and perfectly feasible life would not be better than half. They went out of commission one after another when they were still in totally good working order. As the noble Lord, Lord Sugar, reminded us in an interesting speech a week ago, Governments are really only good at scene setting. We need good technical education, as the noble Lord, Lord Newby, said, good roads, as the noble Lord, Lord Hamilton, said, and low taxes, but please keep out of the clockwork. Indeed, the noble Lord, Lord Sugar, said that Governments should always keep out of the clockwork because they do not understand the front line; they have never been in the front line, he said. That may be going a little bit far.

I was allegedly in command of a steel foundry in Stockton-on-Tees, where I was given good tips on which horse was going to win that afternoon. I was a part-time marriage counsellor. Steel foundries are quite dangerous. We used to take the factory inspector as close to the furnace as we could in order to minimise his visits. We did not have a serious hospital-type accident for the whole time I was there. The workforce kept me out of danger much more than I did them. As the noble Lord, Lord Sugar, said, we have arrived at a

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dependency culture, which means that we think that everybody else should solve our problems and perhaps we should not solve them ourselves.

That leads me, finally, to a health warning. The Government offer a lot of schemes. Governments always have. They say: "If you do this, you will get this grant at the end of the process". I have suffered from these schemes for many years, but they never include a health warning. The health warning should say: "Please remember that when you apply for a government-based grant it is coming out of public money. It has come from the taxpayer and must be handled very carefully. You should calculate the amount and cost of time that it will take you to apply. When you have done that, double it".

12.39 pm

Lord Collins of Highbury: My Lords, first, I thank the officials and staff for such a warm introduction to this House. Not only did they make me feel extremely welcome, they made my husband, Rafael, feel extremely welcome to. Rafael has put up with me working very long hours for a very long time, first for the union Unite and then for the Labour Party. He thought that things would change when I took my seat here. Your Lordships can therefore imagine his surprise when I said that my Whip would require me to be here all night. Yes, it did take a lot of explaining.

Secondly, I thank your Lordships, not least for the fact that I am able to say "my husband". These Benches have helped transform my life and the lives of countless other lesbian and gay people in this country. I am immensely pleased that it is no longer just noble friends on one side of this House who applaud progress in this area but noble Lords on every side of the Chamber. That consensus is a sign of this House at its best.

I am greatly indebted to my sponsors, the noble Baronesses, Lady Jones and Lady Prosser. Like myself, my noble friends-the "Margarets"-are products of the trade union movement. It was the Transport and General Workers' Union-now Unite-which enabled me to leave its employment temporarily to attend university. My union provided me with many opportunities that I would not otherwise have had. I hope that noble Lords on the government Benches look to the trade unions when seeking inspiration for their big society.

It was my own experiences as a child that drew me to politics, as I imagine was the case with many of my noble friends. The death of my father meant that my mother was faced with the loss of her husband, her home and her livelihood in short succession. She was determined to provide for her children and her hard work and resolve secured our future. Yet my mother would have been the first to acknowledge that things might have turned out very differently had it not been for the progress achieved through politics. It was the Equal Pay Act that transformed my family's income and provided a level playing field for women like my mother. It was changes in the law that gave my mother protection from exploitation and it was changes in the law that enabled her to become an economically active individual rather than being dependent on the state. Politics is the personal and in the necessary task to reduce the deficit my fear is that this has been forgotten.

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I am further concerned that amid all the talk of rolling back red tape, we must be very careful that we do not also roll back those 30 years of progress through politics and forget that politics is the personal.

I know that my mother would have been very proud if she could have been here today to hear me speak. Her struggle then is the struggle of thousands of working women now who support their families and grow the economy. If we make it harder for them to work, and drive down the economy, we will only make it harder on ourselves. I hope that noble Lords will take these points on board.

Finally, I, too, thank my noble friend Lord Hollick for making this debate possible.

12.44 pm

Baroness Prosser: My Lords, it gives me great pleasure to welcome my noble friend Lord Collins of Highbury to this House on the day of his maiden speech. I am one of the "Margarets" to whom he referred. I first met my noble friend in the 1980s when I came to the Transport and General Workers' Union as a paid organiser-in retrospect, a naive newcomer-experienced in local politics, which I quickly learnt did not equip me well to deal with the internal macho politics of the trade union movement.

My noble friend helped me find the right path. He was junior to me but he was an operator who knew just what was going on both nationally and regionally, and certainly who was doing what in central office. He knew the union rule book inside out and backwards and he made himself indispensable to the then and subsequent general secretaries. We became firm friends and I learnt of his kindness, his commitment to what is right and his generosity of spirit. He supported me during my year as president of the TUC, travelling with me at home and abroad, making sure that I spoke to the right people and steering me clear of those deemed best avoided. Our close friendship and constant companionship at union events led to us being known in the T&G as "Victoria and Albert". Both my noble friend and I moved on up the union hierarchy, working closely with our then general secretary, Bill, now the noble Lord, Lord Morris of Handsworth. Our leadership of the T&G marked a particular high point in the union's recognition of its diverse membership with a black general secretary, a woman deputy general secretary and a gay assistant general secretary. I often thought that if the old GLC had still been in existence, we would have been given a grant. I was immensely proud when my noble friend was appointed general secretary of the Labour Party. He has devoted energy, commitment and political skill. I trust that he will be well remembered for it.

Turning to the subject matter at hand, I, too, thank my noble friend Lord Hollick for placing this debate on the agenda today. I want to concentrate my remarks on the positive impact on economic growth made by government investment in the training and upskilling of the workforce. In particular, I draw attention to the Women and Work Sector Pathways Initiative, a skills programme designed to help alleviate the estimated loss to the economy of between £15 billion and £23 billion per year through the underuse of women's

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skills and capacity. This is the figure quoted in the Women and Work Commission report launched in March 2006, which persuaded the then Chancellor of the Exchequer to allocate dedicated funds to help rectify the situation. The programme commenced in mid-2006 and continues to this very day-the last of the financial year 2011. During this time, more than 23,000 women have benefited from training, retraining or upskilling. Investment in the scheme by the Government up to the year end March 2010 has been just over £14 million, superseded by the employers' contribution over the same period of just over £20 million in cash and in kind.

The programme is under the umbrella of UKCES and delivered by participating sector skills councils. Over the past year, 13 sector skills councils ran 14 programmes, including land-based skills, textile and fashion, PSV driving, construction management, financial services, tourism, and so on. The aim of the scheme is to target women in sectors where they are underrepresented or where there are skills shortages. The UKCES has commissioned Leeds Met University to evaluate the programme and in its latest report, which covers April 2009 to March 2010, the writers expressed concern that the economic downturn may have had an adverse impact on employers' willingness to engage in training. This was not, however, the case and employers and participants alike have again expressed high levels of satisfaction. Some 92 per cent said that they would like the programme to continue and 85 per cent of participants said that they would like to continue with further training. Only 7 per cent of employers said that participation entailed too much paperwork or bureaucracy.

So here we have a successful training scheme, described in glowing terms by employers and participants alike, capturing more than 5,000 women per year, costing less than a measly £5 million per year-and what does the Minister do? He decides to merge the scheme into a general scheme entitled the Employer Investment Fund. The women's programme will continue until the autumn, while the other aspects of the new scheme get sorted out and organised. Of course I desperately hope that the new arrangements prove as successful as those of the past five years. Of course I desperately hope that women workers will not yet again be dropped to the bottom of the agenda-but I am not holding my breath. I thank noble Lords and emphasise that these are all essential ingredients to a financially healthy scheme.

12.50 pm

Lord Stoneham of Droxford: My Lords, I congratulate the noble Lord, Lord Hollick, on initiating this debate, and the maiden speakers on their first speeches in the House. It is a gamble to deal with the structural deficit in one Parliament, and to do it primarily by public spending reductions. However, the strategy has already had one major success in reassuring the bond markets so that the UK can borrow more cheaply than countries with lower deficits. Tight fiscal policy, combined with easy monetary policy and a competitive exchange rate, provides the best choice for avoiding a sovereign debt crisis while ensuring acceptable increases in growth.



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The problem is that the alternative is a bigger gamble still. It was right in 2008 to allow a rise in public borrowing to restore growth and avoid a calamitous rise in unemployment, but the second highest deficit in the OECD must now be corrected. No one yet knows how public spending cuts will affect them, and this is creating uncertainty in the economy. That is one of the principal reasons to get on with consolidating the public finances rather than dragging out the process over two Parliaments. People will always assume the worst until it is done. For some it will be painful, but for many it will not be as bad as they anticipated. Consumer spending will be weak in the coming year, but all attempts to promote growth on mounting consumer debt will end in tears. It is business investment and exports that must provide the impetus.

There are encouraging signs. The economy is already two-paced. Despite the understandable gloom in areas where public spending is strong, manufacturing and exports have prospects and growth that they have not experienced in a decade. We want to get other businesses out of the mentality of cost cutting to maintain profit margins and to now start planning for growth.

The actions of the banks are one of the keys to future growth. I think that we all have doubts about whether they will respond when the country needs them, but if we are to get the uplift in business investment that we need, they must lend more to business and particularly to SMEs, because they are their only source of capital and finance. The Government's dominant shareholdings in the banking sector must be used to set targets for the lending that the country can reasonably expect from the banks. The lack of borrowing capacity in the green bank was a principal disappointment in the Budget, as the noble Lord, Lord Skidelsky, highlighted.

The other key requirement is to achieve stability in the outlook for interest rates. Any move upwards must be avoided now, but at some later stage it will be better to have the certainty of a modest, gradual and inevitable move upwards, rather than to have consumers and businesses fearing the worst. The economy always takes longer to respond and policy-makers hope. It takes time to change direction. However, we must be patient and hold our course. As uncertainty lifts, the economy will start to pick up.

12.54 pm

Baroness Worthington: My Lords, it is a great privilege to stand before you today to give my maiden speech. I will begin by thanking my sponsors, my noble friends Lord Eatwell and Lord Bassam of Brighton, and my mentor, my noble friend Lord Puttnam. I also extend my gratitude to all the staff of the House who have made me and my baby son feel very welcome. My elevation coincided almost exactly with my becoming a mother-in effect, two life sentences in one week. I am most grateful for the tolerance and patience that everyone has shown towards me as I try to balance these two important new roles. I am grateful to my noble friend Lord Hollick for tabling an important debate as it allows me the opportunity to offer some thoughts on the issue I know most about: the need to tackle global climate change with sustainable economic policy.



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Climate change is the political and moral challenge of our time. Each year brings fresh evidence of the consequences of gambling with our planet's atmosphere. Future generations will judge us on how we act on this issue more than on any other. To date, sadly, our progress has been too slow. In preparing this speech, I looked back through Hansard and was interested to see that in March 1991, a week after the Budget had been published, the House held a debate on global warming. A great deal has changed since then, but sadly some concerns expressed by noble Lords two decades ago are still very pertinent today.

The good news is that in 2011 our economy is less reliant than it once was on the burning of fossil fuels. The carbon intensity of our economy has steadily fallen. The bad news is that this has not necessarily been done deliberately: it is largely due to a decline in our heavy industries and manufacturing, and to the dash for gas. To consciously reduce emissions is a much harder thing to achieve, as we have discovered in a succession of well meaning but largely ineffectual climate change policies throughout the 1990s and 2000s. This is why, when I worked at Friends of the Earth, I felt that we needed a new legal framework to begin the process of decarbonising our economy.

Having set up the campaign for new climate laws, I left Friends of the Earth to join energy company Scottish and Southern-poacher turned gamekeeper, if you will. There I was fortunate to work closely with the CEO, Ian Marchant, who was a great inspiration. My recruitment was his idea and I think that his intention was to shake things up a bit-both his organisation and my own preconceptions. Until that point I had campaigned to shut down dirty, old, coal-fired power stations, two of which Scottish and Southern owned. I still believe that we need to shut down our old coal, but I now have a lot more respect for the men and women who work tirelessly to keep the lights on. Our task is to ensure that they can continue to do so without a negative impact on the environment.

While at Scottish and Southern, I was seconded to the Department for Environment, Food and Rural Affairs. There I was able to view life through yet another prism and came to better understand the process of government. I became part of the team tasked with drafting the Climate Change Bill. When the Act entered the statute book in 2008 it was a world first, committing the UK to delivering emissions cuts of 80 per cent by 2050 using a series of successive carbon budgets.

With a climate Act in place, what has changed since 1991? The only mention of the environment in the Budget Statement of the then Chancellor, now the noble Lord, Lord Lamont, was in relation to an increase in fuel duty; yet 20 years of high fuel taxation has proved only that it is very difficult to price people and goods off the roads unless there is an affordable alternative.

Last week's Budget at least contained a few more references to climate change, but it was still a long way from being a green Budget. Fuel duty was frozen, but with no clear plan for weaning us of our addiction to oil. The green investment bank, as previous speakers

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have said, has its hands tied. The carbon floor price is merely an expensive way to deliver no environmental impact, with no guarantees that anything will be built. Under the previous Government, an investment of just over £20 million secured jobs in an electric car manufacturing plant in Sunderland. I am sad to say that the scheme that enabled that investment no longer exists.

I am conscious that time today is limited. There are many issues relating to climate change and energy that I hope I can return to in subsequent debates. We need to have a deep debate about the role of nuclear power. The recent terrible events in Japan remind us of the risks inherent in a technology that was developed primarily for Cold War military application. A civilian nuclear programme based on inherently safer, thorium-fuelled reactors could engender a paradigm shift in how we view nuclear power.

Britain has a history of delivering industrial revolution. This revolution towards a sustainable, low-carbon economy will not be easy; it will involve countering a large number of powerful opposing forces and vested interests. However, as Archimedes once remarked, "Give me the right place to stand and I can move mountains". I hope that in this Chamber, I am standing in the right place and that, together, we can move mountains.

12.59 pm

Lord Broers: My Lords, we have had a series of outstanding maiden speeches in this debate, and it is my privilege and pleasure to thank the noble Baroness, Lady Worthington, and to congratulate her on a truly excellent maiden speech. She brings to this House a wealth of knowledge on climate change matters, as she has clearly demonstrated. She has worked on these crucial issues with the energy industry, advising Scottish and Southern Energy. She then brought her expertise to government, working on the Climate Change Act, and she helped the Government in their campaign to inform the public about the importance of these issues. Her contributions to public understanding have been noteworthy, and I know that we all look forward to her helping this House deal with, for example, the complexities of carbon trading and the EU Emissions Trading Scheme, not to mention the green investment bank. We welcome her warmly.

I was pleased to find in the Budget some real, if insufficient, attempts to tackle the major issues that confront us-those of low productivity, lack of spending on R&D by industry, out-of-date and inefficient infrastructure, and expensive financing. Many have said that we must restore our industrial base and our infrastructure.

I start with infrastructure. I regard banking as just another element of infrastructure. As with housing, energy and transport, it should be efficient and low cost, and I fail to see how this is consistent with banks seeking profits of the order of 20 per cent or more. Would we be happy if our rail operators made similar profits? Where our banks are operating overseas, it might be justified on the basis that their practices contribute to the current account, but here they should be taking professionally calculated risks on industrial initiatives rather than gambling on obscure hedging

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instruments. I totally support Mervyn King in his attempts to separate these issues but I do not find much in the Budget to assure me that they will do so.

I join others in pointing out that we need to increase our manufacturing output. Our deficit in manufactured goods remains at about £50 billion. It is encouraging that manufacturing is now growing at 12 per cent, but at this rate it will still take 15 to 20 years to recover what we have lost in the past 12 years. Coutts and Rowthorn have pointed out that an increase of only 10 per cent in manufactured exports, combined with a 10 per cent fall in manufactured imports, would generate a £45 billion improvement in the current account balance, which is equal to the total UK net earnings from financial services and insurance and more than one and a half times that contributed by all other services. To do this, we need more competitive products, and to create these we need a broad spectrum of creative engineering.

The good news is the Government's acceptance of Hermann Hauser's technology innovation centres but, if these are to succeed, industry must concentrate its R&D resources in them, as do the Germans. The enhancement of the enterprise investment schemes are also good news. They will stimulate the formation of new companies and appropriately reward our courageous and professional venture capitalists and angels.

The overall problem of course is much larger than can be resolved with the TICs and by new start-ups. Overall spending on R&D must be increased. At 1.8 per cent of GDP, our spend is 40 per cent lower than that of the US, 30 per cent lower than that of Germany and 20 per cent lower than that of France. Our situation is unbalanced. We have a science budget of £4.6 billion, which supports a science base that is second only to that of the US and is our greatest asset, but this is not matched by our spending on development, which should be several times higher. The TSB is doing a brave job with its budget of roughly half a billion but the rest must come from the private sector, which does not seem to be happening.

The reduction in corporation tax will help, as will the progressive increases in R&D tax credit, but why is the change in R&D tax credit restricted to SMEs? Only the large companies can mount the prime manufacturing projects that we desperately need, and it is the large companies that sustain the SMEs. I ask the Minister to explain the Government's thinking on this.

We have a great opportunity to increase manufacturing output by building our new energy and transport systems. However, sadly, much of this may come from overseas. There is hope that these foreign-owned companies will manufacture those systems in the UK, but surely it would be better if, to take the words of the Chancellor in concluding his Budget speech, more of it carried the labels:

"'Made in Britain', 'Created in Britain', 'Designed in Britain' and 'Invented in Britain'".-[Official Report, Commons, 23/3/11; col. 966.]

These are courageous words but it will take more than the changes in the Budget if we are to succeed in doing this. I ask the Minister to reassure us that there is more to come.



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1.05 pm

Lord Bhattacharyya: My Lords, I join those who have thanked my noble friend Lord Hollick for securing this debate. I also support the remarks about the excellent maiden speeches that we have heard.

As the director of Warwick Manufacturing Group, I declare an interest as a professor of engineering and as someone who has worked for 40 years in the field of manufacturing here and abroad. I am also a long-time student of the gap between speeches and the shop floor.

The Chancellor's Budget speech referred to a "march of the makers". Apprenticeships, the UTCs, extending the Enterprise Investment Scheme, the Manufacturing Advisory Service and the green investment bank are some worthwhile modifications of programmes set up under the Labour Government. They are welcome but the "makers" have heard fine words before and have been let down. The devil is in the detail and in how things are implemented. Sadly, we have never been good at that in the United Kingdom. We do not want a repeat of the "white heat of technology", which in the 1960s promised much but delivered little.

Today, manufacturing is enjoying a surge in exports and profits, driven by exchange rate gains, increased competitiveness and sticky wages. Quite a lot of that comes from inward investment, some of which I have been privileged to bring in myself. However, there are major issues to be addressed if this growth is to be sustained. In the 1950s, British gross capital formation was a little over half that of Germany and Japan. It stood at 16 per cent of GDP. Today, capital formation is 15 per cent of GDP-still significantly below our main competitors. In 2009, as the noble Lord, Lord Broers, said, UK investment in R&D shrank both in cash and real terms. Business R&D fell significantly. There was a recovery in 2010, but by the final quarter we were flat-lining again.

We need better incentives for the private sector to invest in developing improved products and systems. While the R&D tax credit changes are useful, the reductions to capital allowances work in the opposite direction. Further, the research funding system is so complex and distant from commercial reality that many small companies get little advantage from participating in R&D programmes. In this House, we have debated impact many times and, while I agree that evaluation based on commercial impact is not right for all subjects, in applied sciences and engineering it is surely essential.

Why do we need such commercial clarity? We need it because, although manufacturing is fashionable today, experience tells us that existing schemes and centres will stick a "manufacturing" badge on their projects to secure funds without delivering what we need. We need clarity on impact to prevent that. Indeed, we are already seeing the bizarre situation of projects trying to secure funding from government and talking about a 15-year strategy before being sustainable and delivering commercial impact. That is far too long. However, many good things have happened. I agree with the noble Lord, Lord Newby, about what the Technology Strategy Board does when it comes to technology and innovation strategy. However, it does not have much money. If it were doubled or tripled, it would still be a

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minuscule amount compared with what is needed-it is at the front end of all our approaches to the manufacturing industry. The perennial problem of underinvestment is exacerbated by the inability of business to obtain finance.

I do not want to repeat what the noble Lord, Lord Skidelsky, said regarding an investment bank, but it would be dishonest of me to say that the Budget was bad for manufacturing. However, if we are to succeed, we need more than a splash of fuel. We need to supercharge the engine. Time will tell whether this Government's deeds match their words.

1.10 pm

Lord McFall of Alcluith: My Lords, I thank the noble Lord, Lord Hollick, for securing such a vital debate today and congratulate all the maiden speakers on such excellent speeches. I wish them well in their journey in the House of Lords.

Growth is essential to reducing the public debt ratio. Cutting the deficit without that being accompanied by strong growth will end up in disaster. Let us remind ourselves of the Labour Government in 1997. From 1997 until 2002, the Labour Government stuck to the Conservative spending targets and the UK net debt fell from 42 per cent of GDP to 29 per cent of GDP. They did that precisely by growing the economy, not just by cutting spending alone. There are economic growth policies consistent with debt stabilisation but the problem for this Government is that they have scared the population witless with their austerity message. "Vote for us and death tomorrow" is not a good slogan, so they will need to change. They realise now that there has to be a different mantra. They have to give people some hope and something to look forward to.

The recent Budget, as people have indicated, is a big gamble because it is taking more than £100 billion out of the economy and, at the same time, there is an ambitious 3 per cent growth target by 2015. That can be done only by investment. We need investment in our communities, our infrastructure and most of all in our people. Let us remind ourselves of the lessons of the 1980s. If the slack in the economy persists for too long unemployment becomes structural. That is why we need investment today.

The Labour Government left some good legacies for this Government-some positives on which they should build. For example, the labour market performance is better than in previous recessions, although unemployment is now going up for both young people and the population in general. Company liquidations and home repossessions are fewer than they were in previous recessions and the large depreciation in the currency has most certainly helped drive the export market. We are in an environment of historically low interest rates and it would be folly to disturb that in the present climate. We need to exploit the relative price changes and complement these policies by making use of the low interest rate environment and by complementing behavioural changes induced by the increased oil prices to promote a low carbon economy. We must also ensure that we maximise the boost to tradables by the fall, or depreciation, in the currency.



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These are extraordinary times and the crisis is not yet finished, as we can see in the Republic of Ireland today. It has had its bailout but almost all Irish banks will be nationalised today as a result of it. The crisis is still working its way out in Europe-in Greece and Portugal. Given the crucial importance of the European market for our exports, the Government need to be careful in their attitude to possible future bailouts. If they do not engage in this process, that will further risk reinforcing the divisions with those both within and without the currency. There is no doubt that there will be implications for our foreign policy, which is very sensitive to the Government as we stand today.

Extraordinary times demand extraordinary measures. I would not be advocating, as others have done, an investment bank had it not been for extraordinary times. I called for the very same in a Guardian article, "Britain needs a state bank", on 9 January 2009. Sadly, the Government at the time did not take that up, but it is very important if these objectives to growth are to be attained. If there is a European investment bank, why cannot there be a UK investment bank? If we have a network of post offices throughout the country, why cannot the post office network be used to ensure that the Government achieve their ambitious lending targets?

Today the Government are offering cheap finance. If we ensure that the debt is indexed, finance can be done at 1 per cent and we need only get money back to service the debt. Mention has already been made about the attitude of the Treasury to public investment. The HMT approach to public investment needs revisiting. Given the big gamble, the Government need to show boldness, as my noble friend Lord Hollick said, and not timidity. We need policies that are consistent with these ambitious targets and I suggest that one beneficial step would be to change the slogan from "Cuts, cuts, cuts" to "Investment, investment, investment".

Baroness Warsi: My Lords, I remind the House that when the clock hits "4", four minutes are up.

1.15 pm

Baroness Greenfield: I thank the noble Lord, Lord Hollick, for the opportunity to discuss this wide-ranging topic. As a neuroscientist at Oxford and Chancellor of Heriot-Watt, I shall focus on innovation in universities by considering four bottlenecks along with some examples of how we might deal with them.

Bottleneck one is the limited talent pool of young scientists forming the next generation of researchers. Currently only 16 per cent of A-level candidates opt for one or more science subjects, so how can we sell science effectively to bright sixth formers? Just one idea could be a twinning scheme where graduate students sign up for an ongoing relationship with a local school, thereby themselves gaining invaluable experience. The continuing mentoring that could ensue, as well as work experience in the twinned lab, might completely transform the career plans of a 16 year-old.

Bottleneck two is the diminishing talent pool resulting from the sub-optimal retention of women in science. One crucial issue here is the conflict of pregnancy and its aftermath with the demands of a highly competitive

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research career. Returner schemes, such as those pioneered by the Daphne Jackson Trust, would ring-fence funds for fellowships for anyone who had taken time off from research for primary childcare responsibilities. However, only the Government could have the resources to roll out a returner fellowship competition to an extent that would make a real national impact.

Bottleneck three is the lack of a cohesive strategy for optimising translational research. Universities generally have limited patent budgets, which can force technology transfer offices to form spin-out companies too early so that a very high proportion fail and patent applications may be dropped before any value can be realised through licensing. Meanwhile, investors are often wary of a technology that the scientists are unable to explain to them in terms that they can understand. Such investors may also view the work as: too high risk; at too early a stage; too little, given the funding required, to give a good return; or having a burn rate that is too high and exits that are not obvious.

One possibility around these cultural minefields could be to set up venture capital syndicates that do not invest as such but give some private sector grants. Modest but highly timely amounts of money could be awarded, with the financial burden diluted by the collective membership. In return, however, each individual member of the syndicate would have privileged access to the research as it was developed and therefore first refusal to purchase the IP and perhaps develop the spin-out as and when the work matured and as and when people felt personally that the time was right. The notion of private sector grants is not in the national culture of either academics or, indeed a venture capitalist, so the Government could be perfectly positioned not to contribute financially but rather to act as a kind of co-ordinating broker.

Bottleneck four lies in the current attitudes of non-translational but potentially highly innovative basic research. Surely for originality to flourish we first need to let a thousand flowers bloom, but the current peer review process is open to criticism-especially and typically when money is tight-of being risk averse. In addition, currently only 10 to 15 per cent of research council grants are successful. Let us assume that that does not mean that some 90 per cent of British academics are simply poor scientists. A very heretical, yet perhaps effective, change might be to abolish the peer review system and research councils altogether and divide the available funds along with the vast sums saved from the bureaucracy equally between eligible scientists. Of course, there would need to be careful thought as to where the boundary conditions of eligibility were set, along with potential penalty measures.

It would be a fascinating paper exercise at least, to see how much money would be immediately available to each scientist to explore their particular scientific challenge, unencumbered by insecurity or lengthy futile applications. Given breathing space, scientists could once again truly maximise original thinking and regain the confidence for developing innovative theories that challenge existing dogma. Why would such an intellectual nirvana help the more practical issues that we are debating today? Bear in mind the fact that quantum theory concerning the inseparable nature of waves and

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particles, when it was developed at the beginning of last century, seemed to be a highly abstract notion. Now, however, this improbable theorising has led to lasers, transistors and modern computers, as well as an understanding of molecular bonds and X-ray crystallography without which modern molecular biology would not be possible. To those four bottlenecks, there are no easy answers, but those are at least some suggestions for unblocking them.

1.20 pm

Lord Soley: My Lords, I echo the congratulations to the noble Lord, Lord Hollick, on securing this wide-ranging debate, and welcome the excellent maiden speeches, which are a good indication for the future of this House.

I want to focus my very limited time on the importance of aerospace and aviation policy. I have a straight request to the Government: please get an aviation policy. I do not accept what the Secretary of State said in his letter published in the Times yesterday, in response to wide-ranging comments in the Times from many businessmen and from the City of London that if we do not attempt to protect our premier hub airport we will diminish in importance.

I should say at this stage that I no longer have an interest to declare, because I am no longer campaign director of Future Heathrow. Believe me, everyone in this country has an interest in preserving a premier hub airport for Britain. We are the only country in continental Europe and among the emerging nations of Brazil, India, China and others which has not either already expanded or is expanding its airports, particularly hub airports. Hub airports are the way the global economy interconnects. It is the way that the European economy is connected. It is the way that investment decisions are made about where you can meet.

In the limited time available, let me give one or two simple facts to the House. A few years back, Heathrow could fly you to 240 destinations worldwide. Now it is 180, and the airport is full. Frankfurt can fly you to 307. Frankfurt sits in the middle of the largest, richest market in the world and can fly you to 307 destinations. What is its pitch in China, India, Brazil and everywhere else? Come to Frankfurt for your investment decisions and we can fly you on to wherever else you need to go. This Minister, more than any other, will know that Frankfurt has a burgeoning financial sector. London does not have to have the only and premier financial sector in Europe, and we will not do if we continue to hand the business over to Frankfurt. When the chief executive of Schiphol Airport in Amsterdam heard about the British Government's recent decision not to have any expansion of airports anywhere in the south-east, the response was the same as before: "Good news for Schiphol; bad news for London". Schiphol will fly you to 21 British regional cities; Heathrow will fly you to seven.

This is not an argument about the environment. I yield to no one in my concern about climate change-I wrote my first article about it back in 1981-but I do not believe and never have believed that you can solve the problem of climate change by hairshirt policies

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such as telling people, as the Government recently did, that they want to decrease the demand for flying. We have to be cleverer about it. I have been telling the aviation industry for a considerable time that it needs to sharpen up its act in conveying the message. Frankfurt has reduced its CO2 emissions below its level in 2004, although it has doubled its expansion. If the Germans can do it, we can.

When Dubai's hub, rather immodestly called the world hub, comes on stream, it will also bypass Heathrow for many from the Middle East and the Indian subcontinent. Many big companies located around Heathrow have already moved. Where have they moved to? To Amsterdam, to Frankfurt-less so to Paris-but increasingly to Madrid. BA's tie-up with the Spanish airline means that many of the flights now coming in from Brazil and the rest of South America go not to Heathrow but to Madrid. I say to the Government: if you do not get an aviation policy, this country will marginalise itself in the global and European economy. We will pay an awfully high price for that and will not do anything to improve the climate.

1.24 pm

Lord Empey: My Lords, it is good that once again we are discussing matters that go to the very heart of our economic future. I, too, thank the noble Lord, Lord Hollick, for securing this debate. We have also had a banquet of maiden speeches in the House today, and it has been wonderful to hear them; they certainly enrich our proceedings.

Investment, innovation, technology, infrastructure, skills and job creation are the buzzwords we all use when talking about our nation's ability to regain economic momentum. Members may be aware that this autumn, WorldSkills 2011 will be held here in London. WorldSkills is a biannual event which was last held in Calgary in 2009. I had the privilege of attending that event as Skills Minister, along with members of the previous Government. We saw many of our young people competing with their peers from all over the world, and the UK did very well, obtaining many medals for excellence in a variety of disciplines. Even higher targets have been set for London this year. WorldSkills is a bit like the skills Olympics, although the association does not like to call it that. It gives young people, whether they are training to be tradespeople, beauticians, gardeners or workers in aerospace, the confidence to take on the best in the world.

However, my main point is that whatever training is provided or acquired by the state, the most important thing cannot be manufactured: the right attitude. I fear that the attitude towards work, especially manual and manufacturing work, is severely deficient in this country. There has been much criticism that thousands of people have come into this country, mostly from within the EU, and gained almost half of the new jobs created during the boom years up to 2008. Why did that happen? Many employers told me that the big difference between the indigenous and migrant workers was their attitude and work ethic. There were no duvet days for many of those migrant workers, no sick days, and they were always available for whatever overtime they were offered.



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I know that such comparisons are dangerous. Many of those migrant workers did not have families so were freely available without other commitments. Also, many were highly skilled, so businesses did not need to pay to train them. Nevertheless, there is some truth in the anecdotal stories about their attitude to work that needs to be taken seriously. We are also in danger of leaving a pool of disillusioned indigenous workers, many of them in our inner cities.

The workforce of this country built up this nation's wealth for centuries, and many paid a heavy price with their health and often their lives. I have seen with my own eyes the skills that many of our people possess and which, under continuous upskilling of our existing workforce, they can acquire. However, there is a missing link. In many cases, people do not connect the acquisition of a skill with a rewarding lifestyle. Too many people have been sent to training schemes that have not led to a job. That has undermined the principle of work paying, as those schemes are frequently seen as a waste of time. We have much to do to break that cycle, particularly in concentrated geographical areas of our country.

I hope that the Minister can confirm that Her Majesty's Government will do all in their power to promote the type of work ethic that once made this country great. Without restoring a meaningful balance in our economy, particularly in manufacturing, we will never develop the ability once again to create the wealth that will pay for the public services that all of us so desperately want to be delivered. The information and ideas that have come from different parts of the Chamber today have demonstrated that we have the ideas that can lead us back to the greatness of our industry as it once was.

1.28 pm

Baroness Warwick of Undercliffe: My Lords, I am delighted to be able to contribute to this debate, in which we have enjoyed some marvellous maiden speeches. I congratulate my noble friend Lord Hollick on securing this opportunity to follow up last week's wide-ranging and illuminating debate on rebalancing the economy.

I strongly believe that a strategy for economic recovery must prioritise our strengths in innovation and high-level skills. High-level skills are the currency of today's knowledge economy, and I want to concentrate my remarks on the critical role played by the UK's higher education sector in providing and developing those skills. This is a subject on which I have spoken previously in this House and elsewhere, and which I explored on many occasions during my time as chief executive of Universities UK.

Higher education has been called a global powerhouse for knowledge economies. That is certainly the case in the UK. Our universities and higher education colleges have an unparalleled record in fostering innovation, enterprise and skills and in helping to create wealth and job opportunities. I know our Government understand this. Indeed, the coalition Government acknowledge that universities are essential for building a strong and innovative economy. This reflects a widespread political recognition of the importance of higher education to the UK achieved over the past decade and the

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unprecedented political and financial commitment given to this highly successful sector by the previous Government. This was achieved in part because the universities themselves were able to produce the evidence to convince government that higher education was a worthwhile investment, not a cost.

As we consider a growth strategy and await the higher education White Paper, I urge the Government not to lose sight of this essential point: if we are not to fall behind competitor nations, many of which are investing heavily in universities, we cannot afford to row back on our investment in knowledge and knowledge transfer. Despite the years of additional investment, we still spend less on higher education than the OECD average. Meanwhile China and India are already turning out more engineers and more university graduates than the whole of Europe and American combined. Of course the public funding climate has changed. Universities understand that they have to shoulder their share of the cuts, so last week's Budget's encouragement to our research base in the form of changes to R&D tax credits and an additional £100 million in capital expenditure for science was very welcome. The spending review also gave some protection to the science budget in cash terms. However, these chinks of light should not blind us to the scale of the cuts being applied to higher education. Universities are by their very nature long-term organisations. World-class research, the creation of new ideas, products and industries and the development of a highly skilled workforce are all long-term benefits. Like other noble Lords, I refer to the OECD 2010 innovation report which concluded that Governments must continue to invest in future sources of growth, such as education, infrastructure and research. Cutting back public investment in support of innovation may provide short-term fiscal relief but will damage the foundations of long-term growth.

I wish to make two further short points about how we can best nurture our high-level skills. We must continue to support ways of transforming research into innovation, build stronger links between the UK's science and research base and industry, create more spin-out companies and attract overseas investment to the UK. We must provide an environment in which international collaboration can flourish. That means a student visa system that is understood to be welcoming to international scholars. Of course abuse must be tackled, but the Government must also ensure that our ability to attract the best students is not harmed as a consequence. As Vince Cable has acknowledged in another place, we cannot measure where our investment should be in monetary terms alone. If we are to be players in the global knowledge economy, we cannot afford to lose momentum in our investment in higher education. To stand still in this regard is to fall behind.

1.33 pm

Baroness Wheatcroft: My Lords, the prime requirement for growth is a stable economic environment. That is the golden rule. Noble Lords will recall that the previous Government had a different rule. In his first Budget, Chancellor George Osborne had to report that Gordon Brown's golden rule about restricting the country's borrowing had not quite been met. In fact, the target

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had been missed by £485 billion. Rules may be made to be broken, but surely not by £485 billion. Restoring the nation's finances is the prerequisite for a thriving business economy. There are other things that a Government can do to foster business, and last week we saw some welcome steps in that direction, particularly with the reduction in corporation tax, and a firm commitment to reduce the 50 per cent rate of income tax is also something that will encourage the business community. There is plenty of evidence to demonstrate that punitive tax rates do not enhance a nation's wealth.

What is truly important for businesses is the degree of certainty and clarity about the regime in which they operate and the taxes and regulations that apply. The Government have indicated that they understand that tax is unduly complicated and that there is a need to simplify it. The noble Lord, Lord Wood, in his admirable maiden speech, suggested that a joke half way through a speech would be welcome. I do not really have one, but I refer noble Lords to Tolley's Tax Guide. It now runs to 1,897 pages, which is an increase of 185 per cent since 1999. That is not really funny. Businesses need a break from too many rules and too much regulation. Although the Government are moving in that direction, there is still plenty of scope for a scythe to be wielded.

The animal spirit of true entrepreneurism will win through if we do not put too many obstacles in its way. Britain has some great businesses, but we need more. We are in the forefront in the services sector, but despite the understandable talk of the financial world needing to slow down a bit, manufacturing is actually already a greater contributor to our economy than financial services. There are some great success stories. We cannot compete with the low-cost economies of the world on price, but we can on quality and design. I was cheered yesterday to hear of a business in Lancashire that weaves its own fabrics and turns them into high-quality furnishings. It is called Herbert Parkinson, and it is owned by the John Lewis Partnership. It employs 300 people, and last year its sales exceeded £47 million. This year it will top £50 million. It succeeds because it produces the quality and design that customers want. British companies will not undercut the prices of Sri Lanka or Turkey, but we can compete with the world's best when it comes to quality and design.

We hear repeatedly that smaller companies and entrepreneurs find it hard to raise the finance they need to foster this sort of quality. If that is the case, I have one potential solution. Our larger companies are currently sitting on huge amounts of cash. I fear that the investment bankers will be knocking on their doors, trying to persuade them to buy their rivals and spend their money that way. That would generate welcome fees for the bankers, but we know that rarely do such takeovers bolster the nation's wealth. It would be better by far that those big companies back smaller entrepreneurial outfits, providing them not just with cash but with confidence and contacts. Tax breaks for such investments have been mooted. Xavier Rolet, the chief executive of the London Stock Exchange, has suggested it. I do not think tax breaks should be the reason. I think that companies need to invest and nurture smaller businesses, and I encourage the Government's business council, which is doing some wonderful work, to encourage just this idea.



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1.37 pm

Lord Mitchell: My Lords, 11 years in your Lordships' House and for the first time, I have lost my speech. Actually, it was left on the Northern line, so while somebody was having a lot of fun reading it, I was having a quiet panic in the Bishops' Bar, trying to reconstruct it. Anyhow, here goes.

First, I thank my noble friend Lord Hollick for securing this debate. He started as an entrepreneur, he ran a major media group and now he is with one of the premier private equity companies in the world. He is the quintessential businessman. I, too, am an entrepreneur. I have started three companies from scratch, built them up and eventually sold them. It is great. I have loved being an entrepreneur and I would recommend it to anybody. Seeing companies grow and develop and seeing your staff grow is fantastic. However, there is a dark side to being an entrepreneur as well. It is terrifying not being sure that you can meet the payroll, there are problems with the banks, all sorts of things wake you up in a cold sweat at two in the morning and the stress is enormous. So when I hear the Government say that 300,000 public sector employees will, as a result of all the cuts, somehow find another job because of private sector growth and the entrepreneurial society that we are going to form, I simply do not believe it. I cannot conceive that somebody who has been working in the public sector for 10 or 20 years is somehow suddenly going to come out and become an entrepreneur. It absolutely does not make sense to me.

The tone of today's debate has been, "What is wrong with the UK economy?". I want to devote the two minutes and 15 seconds that I have left to what is right. It is a very exciting story. The noble Lord, Lord Kestenbaum, in his excellent speech, talked about Silicon Valley. We now have a Silicon Valley in this country. It is not in Cambridge; it is three miles from here and it is a revolution. It has the most wonderful title of "Silicon Roundabout". It is to be seen around Old Street and Brick Lane-indeed, that whole area. It is the east London cluster development and it is better than anything else in Europe. It is fabulously exciting and it needs an awful lot more publicity.

I suppose that one of the things that people always said about Silicon Valley was that it was clusters of people with similar ideas in life getting together after work. I recommend to any noble Lord taking a drive around Silicon Roundabout to see the bars, the restaurants and the unbelievable enthusiasm around there. It is full of young people all working in small businesses in creative industries such as applications for iPhones, music, advertising, fashion and movies, in all of which London is to the forefront. As I said, young people are doing all this. There is something about that area that Cambridge would never have and the City and the West End never have. It is edgy and cool and it attracts these sorts of people.

How did this area come about? It did not come about under this Government or the previous one either. It was spontaneous. It just happened. It has just grown like Topsy. Why? First, low rents were available. Secondly, it was close to the centres of finance, fashion, theatre and advertising companies. It has produced these raw entrepreneurs, to the extent that today American

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companies such as Cisco and Google have decided to invest in these areas and in these companies. It is very exciting.

These companies are now running out of space. Where will they go to? After the Olympics in 2012, many of them will work in the Olympic park and, for the first time anywhere in the world, an Olympic Games will have a true legacy made up of high-tech and creative industries.

1.42 pm

Lord Morris of Handsworth: My Lords, in this debate I have noted a broad measure of agreement right across your Lordships' House-agreement on the fundamental requirements for sustained economic growth, many of which were so ably set out in the introduction by my noble friend Lord Hollick. I associate myself with his comments.

We all believe in a stable economy that is underpinned by sound monetary and fiscal policies, we are all committed to the pursuit of excellence at every level of our education system and we all support an economic model that is based on investment, research and innovation. We all want to see Britain leading the world in its exports, supported by a robust and transparent finance sector. Of course, with my background I am proud to say that in Britain we have the most flexible labour market in the European Union. Therefore, if I am right about the fundamental requirements for economic growth I am bound to ask what is holding us back; why the German economy is growing in a recession throughout Europe; why the US, China and India are growing world exporters while growth forecast in our country is being revised down and down; and why investment is being reduced time after time in sector after sector.

However, investment is not just about investment in plants and machinery; it is also about people. That is why I use the term "socially responsible", because that is one of the requirements for economic success. The well-being of this or indeed any nation directly correlates with the economic performance of the country. The society in which we live expects certain norms to be part and parcel of social and economic policy. That is why it is so important that we start right at the beginning in the early years.

Of course, what we have experienced recently are cuts in the social infrastructure. That will not deliver growth. There is no growth to be had in cutting swimming pools or indeed closing parks and libraries. In the long term, some of the policies that we are following will in themselves retard growth. The increase in university tuition fees will probably deter some of our young people from taking those vital steps towards higher education. One of the engines of economic growth, particularly in the venture capital sector, is our pension funds. The recent decision to change the contribution rates will mean that less and less is available for that important sector. To conclude, we have run out of options by following cuts. The only option left to us is to go for growth.

1.46 pm

Lord Rees of Ludlow: My Lords, noble Lords might have read about the winners of the 2010 Nobel physics prize, Andre Geim and Kostya Novoselov. They are

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both Russians who came to the UK in 1999, to Manchester University, where they were given freedom and support for a speculative request, which paid off massively. They discovered that carbon atoms could form a sheet just one atom thick-a new material called graphene with astonishing strength and novel electric properties. They needed time but no costly equipment. The clinching experiments involved strips of Sellotape. Graphene might be the basis for transformative technologies, but its development will not be so cheap and it will be fully as intellectually challenging. Engineers like the noble Lord, Lord Broers, would endorse the message of the old cartoon showing two beavers looking up at a hydroelectric dam. One is saying to the other, "I didn't actually build it, but it's based on my idea". Will the UK deploy the resources and expertise to benefit from discoveries such as graphene?

This episode prompts other concerns. Would younger counterparts of these two Russians today make the UK their preferred destination? Would they even get entry visas? Do our brightest and best young people perceive a spirit of enterprise in a country in which science and engineering offer good career prospects? Even in the privileged environment of Cambridge-I declare an interest as a professor there-my younger colleagues seem ever more preoccupied with grant cuts, job security and so on, and prospects of breakthroughs will plummet if such concerns pray unduly on the minds of even the brightest.

In research, international excellence is all. The difference in pay-off between the very best and the merely good is by any measure thousands of per cent. Therefore, most crucial in enhancing value for money for taxpayers is not scraping a few per cent in efficiency savings; it is maximising the chance of big breakthroughs by attracting and supporting top mobile talent and sending positive signals to the young.

In his state of the union address in January, President Obama asserted that his nation faced another Sputnik moment due to the rise of the Far East as a competitor. He argued against cuts in R&D investment with a neat metaphor. He said that you cannot make an overweight aircraft more airworthy by removing an engine. That message is even more vital for the UK. Science and innovation are essential engines if we are to rebalance our economy away from an overdependence on the financial sector. What is needed is a 10-year or 15-year road map, which offers hope that, after four years of declining real-terms funding, science can share the fruits of the recovery that it should help to generate. We can surely afford it. The total UK science budget is now less than the bonus pool for London bankers.

We do not know what will be the 21st-century counterparts of the electron, the double helix and the computer. Nor do we know where the great future innovators will get their formative training and their inspiration. But the UK will decline unless it can sustain its edge in discovery and innovation, get its share of these key people and ensure that some of the key ideas of the 21st century are generated and, even more important, exploited here.



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1.50 pm

Lord Patel: My Lords, it is a pleasure to follow my noble friend Lord Rees and I will continue the theme that he started. First, I declare an interest as chancellor of the University of Dundee, where I also worked for nearly 40 years. The university's College of Life Sciences and Division of Signal Transduction Therapy is a model of the largest collaboration of academia and pharma in the United Kingdom. It is about such collaboration that I wish to speak today.

The Academy of Medical Sciences report, Academia, Industry and the NHS: Collaborationand Innovation, and the NESTA report, All Together Now: Improving Cross-sector Collaboration in the UK Biomedical Industry, highlight the opportunity that the UK has, with its world-leading pharma industry, biomedical science and National Health Service, to produce innovations and economic growth. The pharmaceutical industry is changing its model of R&D investment to that of more extramural funding, which I believe provides opportunities for the United Kingdom.


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