Lord Skidelsky: My Lords, Sigmund Freud identified a defence mechanism that he called denial, in which a person faced with a fact that is too uncomfortable to accept insists that it is not true, despite overwhelming

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evidence. A good example of denial is the Chancellor’s belief that austerity is a growth policy, despite the fact that the British economy is shrinking. Somewhat better than a state of denial is one that psychologists call cognitive dissonance, a condition of holding two contradictory beliefs at the same time. People in such a condition have a strong need to reduce the importance of one of the dissonant elements. This is more hopeful. If the Chancellor has moved from denial to cognitive dissonance, he may soon move from cognitive dissonance to the honest realisation that his policies have completely failed to revive the British economy.

He may also recognise that they are failing to solve the debt problem. Since the collateral for a country’s sovereign debt is the Government’s potential tax revenue, any policy which produces recession and unemployment automatically increases the deficit and thus adds to the debt. The national debt is projected to rise from 71% of GDP in 2010 to 84% in 2012 according to the IMF, and the deficit elimination programme stretches ever further into the future. That is the fruit of austerity. Earlier in the debate, the noble Lord, Lord Razzall, denied that austerity could be responsible for stagnation because most of the cuts are still to come. That is to miss the point. The real impact of austerity so far lies not in the actual money cuts but in the failure to uprate public spending in line with public sector salaries, which inevitably leads to job losses.

The Government still claim that the main blockage to British recovery is the eurozone financial crisis. We are being buffeted by the euro crisis, but the eurozone crisis is the inevitable result of the very policies championed by the British Chancellor at home. The only reason that austerity has not so far produced a financial crisis in this country is that behind our fiscal policy stands a central bank licensed to print money. This has been the main factor keeping the cost of British government borrowing so low. However, there is a limit to how much the central bank can do to maintain confidence if the debt continues to grow while the economy continues to shrink.

Beyond the cloisters of Whitehall, there has been a welcome change of mood music. More and more people—captains of industry no less, and not just Keynesian heretics like me—are saying that austerity is not enough. EU Commission President José Manuel Barroso talks of the need to relaunch growth in Europe. He and the new French President have endorsed a proposal to add €10 billion to the capital of the European Investment Bank. Growth is back on the agenda in Europe, but is it back on the agenda in this country despite the opening remark in the Queen’s Speech?

What would a growth policy need to be? Conventional wisdom has it that the only way to get growth is to cut taxes and red tape and get the unemployed on their bikes. I am all in favour of good supply side policies, but what the Government fail to grasp is that we have a massive problem of insufficient demand. The actual output of the economy is well below its potential output. Recovery from a slump is not just a matter of making better use of existing resources; it is about bringing into use potential resources which stand idle

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for lack of demand. This was the great lesson taught by Lord Keynes, a lesson which seems to have been entirely forgotten by the first-class brains in the Treasury.

If we see the problem in this way, the question of government borrowing assumes a different aspect. At present, the Government are borrowing billions of pounds a year to keep people idle. Would it not be far better to use that borrowed money to put them to work building homes, repairing creaking infrastructure and promoting the low-carbon energy economy we all want? After all, if the Government have to borrow vast sums of money—and they have to because they allowed the economy to shrink so much—why not at least borrow to create assets rather than borrow to destroy them? The longer you allow workers and plants to stay idle, the more potential output you are destroying day by day, week by week, until, in the end, the potential output of the economy will shrink to the level of its actual output. I have a question for the Minister. Does he really believe that if the public sector sheds 50% of its jobs, those dismissed workers will straight away find employment in the private sector? If not, the austerity policy is simply adding to the dole queues. That is the charge that he must face and refute if he can.

Even in Whitehall, things are stirring. The Queen’s Speech promises a Bill to set up a green investment bank to invest in the low-carbon economy. I congratulate the Business Secretary Vince Cable on his persistence in pressing the case for the green bank against Treasury objections. However, I wish Ministers would think along bolder lines. The bank’s capitalisation is too small—only £3 billion—and it will not be allowed to borrow until April 2015, subject to public sector net debt falling as a percentage of GDP, a prospect that currently looks extremely unlikely.

A practical man would ask what such a bank would invest in, and why, if there are so many investment opportunities around, they are going begging. There are two answers to the second question. First, there are large-scale projects in which the private sector will never invest on its own because the private rate of return is too distant, too modest and too uncertain. That means that, however great the social benefits, the investments will not be made except by the Government or with a government guarantee or subsidy. Most of a country’s transport infrastructure falls into this category. Secondly, there is an additional motive for an active investment policy when business confidence is shattered, as it now is. The corporate sector is sitting on almost £800 billion of cash—more than 50% of GDP. This is because when confidence in the future is low, almost all investment seems riskier for both lenders and borrowers.

Finally, what would a green investment bank invest in? It would obviously invest in carbon-reduction activities. Incidentally, the mandate of the European Investment Bank is wider than this because it includes among its objects the promotion of growth and employment potential. Whatever the bank’s scope, it is crucial that it gets a clear mandate, so that the private sector can plan its investment against a stable policy environment.

Many of us will have pet schemes to bring to the table. For example, there is the proposal of the Institute of Civil Engineers to establish regional water-transfer

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networks via new and existing canal systems. The Scottish Federation of Housing Associations has argued for preventive spending on social housing. Will not the Chancellor understand that we need preventive spending rather than spending prevention? The sooner that the Prime Minister and the Chancellor start investing in Britain, the better. If they continue in the spirit of denial, they will be swept from the seats of power, as Governments have been all over Europe—and they will deserve to be.

8.33 pm

Lord Tugendhat: My Lords, my big disappointment in the Queen’s Speech is the absence of a Bill to deal with top executive pay. Mr Cable appeared to promise one and it is long overdue. In the previous Parliament, the noble Lord, Lord Gavron, introduced such a Bill, which I supported, as did the noble Lord, Lord Taverne, and several other noble Lords from both sides of the House. I am pleased to see that he has reintroduced a similar Bill, so if the Government do not come forward with a measure, it at least lies in the hands of the House of Lords to push this proposition along. I hope it will enjoy the all-party support that it deserves.

The fact that shareholders are at last exercising some muscle over excessive pay linked to poor performance is encouraging. I refer here to the recent revolts at Aviva, AstraZeneca, Barclays, Trinity Mirror and Xstrata, to name only a few companies. We have seen similar phenomena in the United States and Switzerland. However, the fact that shareholders are now exercising some muscle does not mean that the Government can sit back and do nothing. The examples to which I have referred are egregious. We need a framework and a set of criteria within which shareholders can act and the rest of society can assess their effectiveness.

“Society” is a key word here. As Niall FitzGerald, the former chairman of Unilever, has pointed out:

“Business is part of society, not outside it”.

The rate at which top executive pay has increased in recent years puts those who receive it beyond the range of normal society. Here, I do not refer to just the banks by any means. Between 1999 and 2009, the total earnings of FTSE 100 CEOs jumped from 47 times UK median full-time earnings to 88 times. In 2010, the increase in CEO remuneration was 43%, while other top executives achieved even more. Last year’s increase looks likely to be more modest but still way beyond that of most other—probably all—sections of society.

Richard Lambert, the former director-general of the CBI, made two very important points about this phenomenon in an article in the Financial Times last November. One was that this is a “big company” issue, involving a small group of individuals. Those in SMEs are in nothing like the same category. The other was that it,

“is damaging the interests of British business in political, economic and reputational terms”.

Two months ago, Simon Walker, the current—I emphasise “current”—director-general of the Institute of Directors was more blunt. He wrote in the Financial Times that,

“executive remuneration at our biggest companies is at the wrong level”.

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Therefore, let us hear no more nonsense about politicians criticising or seeking to act on top executive pay being anti-business. To the contrary, it is necessary to save business from itself.

Against this background I should like to set out some points and principles that should inform the Government’s approach. The first is to subject to severe scrutiny arguments about an international market in executive talent and the UK being in danger of losing out. There is indeed such a market, there are such individuals and we must ensure that the United Kingdom does not lose out. However, this market is very much smaller and the number of individuals much fewer than most of this theory’s proponents tend to put forward. They account for a very small proportion. Most senior executives do not fall into this category and are neither willing nor able to move internationally. What happens is that the enormous packages sometimes—quite often properly—awarded to the internationally mobile, whether British or foreign, pull up other people’s packages behind them. You then have the phenomenon whereby because someone—whether British or foreign—who has been recruited from outside earns an astronomical amount of money, his or her colleagues therefore need to be within the same range. Of course, that does not follow at all.

That is one reason why it is very important to make senior executive contracts simpler and more transparent. In recent years they have become ever more complex and opaque, and designed to make it hard for outsiders to comprehend the level of benefits. It is vital that shareholders should be able to understand exactly what senior executives stand to get in return for meeting what objectives, and what their severance terms are. The Dodd-Frank reforms in the United States require the publication of a single aggregate figure for the total annual compensation of each board member and we should have the same.

Linked to that, the time has come to look carefully at so-called incentivisation schemes. Too often in recent years these have led to corporate strategies being distorted by the desire of executives to earn bonuses linked to short-term growth in profits or share price rather than taking a long view.

Finally, under this head, Richard Lambert makes a good point when he suggests that companies should be required to produce a budget for the pay of their top executives so that if one executive gets more for some exceptional reasons, others would share in a smaller pot. This budget in turn should be linked to the company’s strategy.

As I said a few moments ago, business is part of society. By that, I mean that it also comprises not only those who run it but those who own it—shareholders, directly or indirectly—and those who work in it. The ultimate decision on senior executive pay must rest with shareholders. But I believe that we should also strive to find a way of ensuring that those who work for an enterprise are able to make an input into what senior executives are paid. The senior executives should have to explain and justify their remuneration to those who work for them. Finding the right way to do that will be extremely difficult but I think that that is one element that also needs to be looked into and to which we need to find an answer.

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8.41 pm

Lord Desai: My Lords, it is a great pleasure to follow the noble Lord, Lord Tugendhat. Before I get to what I want to say, I offer one suggestion to his excellent proposal. I have thought for a long time that, in order to curb high salaries, we should consider adding the wage bill of top executives to the profits and putting corporate tax on all that. Perhaps I may use old-fashioned terminology: let us consider production workers and non-production workers. The wages of production workers are outside this but the salaries of non-production workers are added to profits, and tax is put on both of them. I have always believed that moral exhortation is neither here nor there. It is when it hits the pocketbook that companies will behave themselves.

I want to take up the challenge before us all; namely, what is happening and how we can make things better. In the week since the gracious Speech, the situation in the eurozone has worsened more than we ever thought would be possible. I presume that in the next week or so we may see a serious crisis in it. I start with a proposition which reflects on the speech made by the noble Lord, Lord Skidelsky. Yes, it is possible that there is denial and cognitive dissonance. But if a lot of countries simultaneously are in denial and in cognitive dissonance, it behoves us to ask whether there is another explanation than wilful obstinacy for doing what has to be done.

No Governments want to be unpopular or to have austerity. If a Government choose austerity, there may be a reason behind that. After all, over many years, we have all been brought up on Keynesian economics. Why have we suddenly gone off Keynesian economics, not only in this country but across Europe? Even in the United States, often cited as an example to the contrary, there has not been a major boost to the economy since the first year of the Obama presidency.

I have always thought that there is another explanation for why Governments do not adopt more borrowing and spending to get growth now and to get themselves out of the problem. I believe that this crisis is not like other crises of the past. It does not come from a lack of effective demand. Keynes was always worried about oversaving. This is a crisis of undersaving and we have been in it for many years. In one way, this crisis started in the 1970s when we began to lose manufacturing industry across most OECD countries. There were few exceptions. A lot of the manufacturing industry, especially the low and medium-technology manufacturing industry, moved east or south to where it was wanted. That led to a huge hollowing out of the job market for unskilled or semi-skilled manual workers.

Countries which had a good welfare state put all those people into long-term unemployment and have sustained them. Countries which did not have a good welfare state, such as the United States, let the wages of those people drop to a very low level. In America, we have seen stagnation in the average wage. People who cannot be in manufacturing are in very low paid service-sector jobs. Across Europe, we have maintained long-term unemployment and those who are in employment have been able, for a while, to increase their wages. However, even there, there is a lot of

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inequality because in the service sector you have either very highly paid jobs—for example, financial services—or very low paid jobs in the retail or restaurant trades and so on.

We have had an economic transformation. For a while, we have filled the gap of manufacturing employment with service sector employment and borrowing. Personal borrowing fuelled demand for us for a long time. Corresponding to our undersaving—savings practically disappeared from western society—there was always saving in Asia. Basically, all that saving in Asia was used by us to perpetuate employment, but it was not a sustainable model. If government borrowing had been self-liquidating, and every time the Government borrowed money there was a sufficient multiplier effect and the debt retired itself, we would never have been in this situation. The point is that even European Governments, including France and Germany, were borrowing and running deficits at full employment level, because that was the only way in which they could sustain their welfare states. If that model is not feasible, we have to do something.

I am sorry to be so gloomy, but I do not believe that we will get out of this any time soon. A lot of people think that there is some magic potion that will get us growth. There is a lot of micro-thinking on cutting red tape and this and that. But all those things, even if you did them, would not increase the growth rate immediately, and when they did they would increase the growth rate by no more than one-quarter of 1 percentage point. It is worth doing, but it is not enough.

The issue that we face is whether we can spend our way out. As the noble Lord, Lord Skidelsky, said, we have a problem. The corporate sector is sitting on surpluses and not investing, and the government sector has decided—the noble Lord rightly disagreed, as a lot of other people have—that the Government should borrow more money and get out of it that way. This is the central problem to which the Government have not yet seen a solution. Just as once upon a time we used to believe in crowding out, we now want there to be crowding in, which is not happening. Just because Governments do not spend does not mean that business spends, so I think that there is a missing link in between.

I suggested when we discussed the Budget that there was a way out for the Government, and I know that the Minister will pooh-pooh my suggestion as he did once before. But if there is a windfall gain from an asset sale, such as the Government had from selling Royal Mail for £28 billion, you could say that you cannot spend that money because there is a big liability, yet money is fungible. If you get £28 billion when you did not expect it, there must be £28 billion somewhere else that you can release. The Government should decide on the very low rate of growth that we have achieved. The negative numbers may be slightly more positive and we may not be in a double-dip recession, but that does not matter—we are now counting growth in basis points, not even percentages. What is true and what the OBR has said is that this is going to be a very difficult year. Given that asset sale, or any other asset sale that the Government might plan—I hope they do—we should allow ourselves a little bit of slack.

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Perhaps they could spend the money not on infrastructure investment but in immediate vouchers to those poor grannies whose tax they have increased. Give the grannies £1,000 per granny and you will see a revival in the economy.

8.51 pm

Lord Addington: My Lords, when I put my name down to speak in this debate, it was inspired not so much by what we were discussing today but by the subjects discussed yesterday. Primarily, I am going to talk about the apprenticeship system and the developments in it. The noble Baroness, Lady Wilcox, may wish that she had taken a few more moments over her break, because I have discussed this subject with her far too often; neither of us particularly wanted to, but we felt we had to. We are missing the noble Lord, Lord Young, who talked about apprenticeships.

On this subject, the cock-up school of history is proved right in Whitehall. The training programme for business has not paid attention to what is going on in the education sector. We have a new approach on SEN. Perhaps the Minister could give us an assurance that in future when there is a training scheme we will not make the series of mistakes that we made over the introduction of the apprenticeship scheme. We designed it so that the biggest disability group in the country, dyslexics, or at least those at the severe end—I think that my interests are pretty well known in this House—were excluded from taking the qualification, because it asked for a written English test. You could not use the normal ways around to cope with that test that were available in all other parts of the education sector. I do not think that it was malicious. People said that we must raise standards and have good written skills, so we should have this very tough qualification. When the previous Government brought it in and the problem was pointed out to them, they said, “Yes, we will change it”. But we then had something rather inconvenient called the general election. There are lots of sporting analogies you can make about dropping the ball and bad passes; all I know is that we are now scrambling back to recover from the damage. The last 18 months of my life, which have impinged on the noble Baroness and many other Ministers, have been spent trying to correct this, because we have a series of regulations that make it incredibly difficult to change.

Are we going to ensure that we look more across the board? If you have been in this House as long as I have, you can make a series of set speeches on almost any occasion. For example, you can speak about the Chinese walls that exist between departments, which means that they do not talk to each other. There is a massive example of that happening in the area which I am discussing. Indeed, there are Chinese walls within departments, which means that people in different segments of the same department do not talk to each other. If you are dyslexic, you can take a degree with assistive technology. I declare another interest in that I am chairman of a company which provides such technology. You cannot use that technology when undertaking an apprenticeship or for a course that trains you to develop a skill, usually a manual skill, which involves you not being based in an office with a

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computer. However, you can use it to take a degree in English, which might help you to find such work. A drunken logic is crawling through my remarks.

I hope that the Government will act quickly to correct the mistakes that have been made in this area. The noble Baroness and I are wonderful friends but I do not wish to keep discussing this subject with her. Therefore, I hope that it will be addressed more effectively than has been the case. I thank the noble Baroness as progress seems to have been made in this area. However, I will not celebrate as I thought that I had dealt with this matter on three previous occasions. Perhaps it is a case of fourth time lucky. The previous Government acted in good faith in this regard but we should remember that their attempts to rectify the situation went wrong. The current Government should remember that and try to adopt a culture of cross-departmental oversight. We must not allow the mistakes to which I have referred to recur. If departments look more carefully at what other departments are doing, we will save ourselves a great deal of time.

If you want to help those disabled people for whom it is most difficult to obtain employment, particularly high-value employment—people with dyslexia may comprise the biggest single group of people in these circumstances but they are not the only ones by a long way—and who are most commonly either unemployed or underemployed, you must make training more accessible. Unless you have the culture in place that I have described, you will not achieve this. Please will the Government reconsider this issue and ensure that the mistakes which have been made do not recur and that training is accessible at all times? If that is not done, irrespective of anything else that you might do, you will end up taking two steps forward, one back and then usually one sideways. Life is too short; let us not make the same mistakes again.

8.56 pm

Lord Lucas: My Lords, I cannot help my noble friend on the question of which economist has the best recipe for growing the economy—growing hair, yes, but not the economy. Therefore, I shall concentrate instead on fairness, regulation and votes in this House.

It seems to me that we are going to experience tough times for some while. Under those circumstances, fairness is terribly important. We have to be sure that particular groups do not manage to feather their own nests while the rest of us are having a hard time of it. Therefore, I entirely support what my noble friend Lord Tugendhat said about executive pay. There are structural reasons why executive pay has escaped reality in the way that it has and we need to make structural changes to bring it back into balance. I am grateful to my right honourable friend the Chancellor for the steps that he took in the direction of fairness in his Budget, particularly as regards the payment of stamp duty on the part of people who were dodging paying it by means of measures connected with overseas companies.

I am also grateful to my noble friend the Minister and his colleagues for their help on low-value consignment relief, a nice little dodge that enabled pirates in the Channel Islands to make off with a couple of hundred

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million quid of our money every year. However, he should know that he has scotched that snake but not killed it. The likes of The Hut, which was one of the companies involved, now ships out of Chicago, sending stuff marked as “a gift”. Others bulk ship into Europe and then treat their merchandise as if it was a postal packet coming in, shipping it round Europe in the European mail systems in contravention of postal regulations and VAT regulations. However, with open borders, it is hard to see ways of stopping that. Therefore, I very much hope that my noble friend and his colleagues will remain in close contact with Richard Allen and will use all his understanding and expertise to deal with the remnants of that abuse.

We also need to deal with big companies that are getting away with not paying tax. Goldman was in the news again the other day. That will not do. It is not fair and something has to be done about it. My favourite bogeyman is Amazon, which has £7 billion of sales but pays no corporation tax. That is just taking the mick. The Government have plenty of ways of pressurising Amazon. It is running a most unprincipled monopsony. I cannot find a major book publisher who will come to tea in this House and talk to me about what Amazon does. I have to find out what is happening from the little boys, who are less frightened. If you sell through the Amazon marketplace, you are not allowed to sell anywhere else in the world at a lower price. Amazon makes you keep your prices up elsewhere at the level at which you sell on Amazon, and it appears to be allowed to do that. There does not seem to be any thought of a referral to the Competition Commission. Amazon encourages people who use its marketplace to evade VAT. It was also extremely slow in complying with regulations that require it to produce information about who people are buying from in its marketplace, and it is still not acting satisfactorily in that regard.

There are lots of ways in which the Government can bring pressure to bear on Amazon. They are dealing with the supermarkets in a very similar situation; it is time that they dealt with Amazon. Having these major corporations destroying jobs and tax-paying businesses while paying no tax themselves absolutely will not do.

I want to speak about the benefits of regulation. I am looking forward to our changes in financial regulation. Investor protection has been a positive thing in this country, although it has sometimes been overenacted. I encourage my noble friend to consider extending investor protection because, once people get used to the idea of it, they assume that investments offered in newspapers have some level of protection. However, a few weeks ago the Guardian, which ought to know better, had a supplement carrying pages and pages of advertisements for investments in tropical forestry, offering 18% compound for 15 years. These are total scams, and the people who will make money out of them are the promoters. The uncertainties are enormously played down and the track records do not bear out the projections. A moment of proper financial regulation would see these scams swept away, yet the Government allow them because technically they are not collective investment schemes. In any ordinary sense of the word, they are collective investment schemes in that a

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lot of people are being herded into one investment. However, because each investor nominally owns a tree or two separately, they are not seen as collective investments and are not regulated. A lot of people are going to get hurt by such schemes and the Government really ought to tackle them. We have got used to protection and we deserve it.

The other area where regulation will do some good is in disintermediation. A number of companies, such as Zoopla, disintermediate basic banking. You can borrow from them and lend to them but you do not; you lend to the borrower and the borrower borrows from you directly. If you are a lender and a borrower, you can get much better rates from them than from a high street bank because you are cutting out all the intermediary functions and, in particular, you are cutting out all the costs that come from banks having to carry capital. You are doing away with one of those comfortable lies, which is that it is possible for banks to borrow short and lend long without carrying undue risk. You are taking that risk straight through from borrower to investor and are therefore able to offer much better rates. However, businesses such as Zoopla do not grow very fast and they are not very big, one of the principal reasons being that they are outside investor protection. People do not know how these businesses are run. They are not subject to any overt regulation. However, people have got used to safety and they want it. These businesses are basically good, worth while, sensible, money-saving and growth-generating, and they ought to be brought within the ambit of financial regulation so that people can trust them and use them as part of their ordinary range of investments. The same applies to venture capital.

Earlier, one of my noble friends talked about the price of annuities. If older people want income and young people want capital, matching the two can be done through disintermediation. One does not need to go through the horrible arrangements that have to be gone through at the moment based on gilt rates. If we could extend disintermediation to collective investments, that would be a real attack on executive pay. I am sorry; I am too old to be frightened by the Whips.

When it comes to votes in this House, we like to tell ourselves that we are a House of expertise, experience and independence. If change comes, that situation will degenerate and we shall become a House of politics. We are letting that happen. On all sides in this House, we are becoming more and more subject to the Whips; we are voting according to politics rather than according to our expertise. However, we are being freed from this by the Government because the Government have decided that they have no loyalty to us. They are prepared to sell us down the river for their own political ambitions. Therefore, we do not have to show loyalty to them for a while. We can vote on the basis of our expertise and our understanding. I think that that would improve the politics in this House. If what we sent back to the other end were not the product of political pressure, but the product of our own wise judgment, that would improve the performance of this House. I hope that we shall do that more in the coming year.

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9.05 pm

Lord Lexden: My Lords, perhaps I may turn your Lordships’ attention briefly to Northern Ireland and to Ireland more generally. Ninety-one years ago, famous words of great poignancy were spoken by King George V. He exhorted the divided peoples of Ireland,

“to stretch the hand of forbearance and conciliation, to forgive and forget, and to join in making for the land which they love a new era of peace, contentment, and good will”.

Exactly 90 years later, Her Majesty, acting on behalf of us all, stretched out the hand of reconciliation to the Republic of Ireland. She, too, used poignant words. She said that we can all think of things that might have been done differently or not at all, and she urged us to remember that, although we must respect history, we are not bound by it. Who can doubt that her historic visit to the Irish Republic in May 2011 ranks as one of the most conspicuous of all the multifarious services that she has rendered us over 60 years? It is surely appropriate that we should acknowledge its immense significance and thank her for it in the course of our debate on the humble Address in this Diamond Jubilee year.

After long years of direct rule from Westminster, Northern Ireland, once again, has its own system of devolved government, as it did at the time of Her Majesty's accession. However, it is a very different system. Power-sharing has replaced majority rule. As a result, more people in the Province today identify themselves with the institutions under which they are governed than was possible under the old Stormont system. That will lend added significance to Her Majesty's forthcoming visit to Northern Ireland as part of her Jubilee tour.

As regards the economy, the best known fact about Northern Ireland is that it is unduly dependent on the state. Public spending in the Province is equivalent to more than two-thirds of GDP; some put it closer to three-quarters. Grave disquiet has long been expressed about this state of affairs. With the recreation of political stability, it became imperative to set a new course in economic policy. Only substantial private sector growth can provide a basis for the enduring prosperity that our fellow countrymen and women in the Province have a right to expect. In this, as in so much else, my noble friend Lord Trimble and his courageous Ulster Unionist colleagues pointed the way.

Today, no one seriously dissents from the proposition that the Northern Ireland economy must be rebalanced in order to stimulate private sector business and jobs. The coalition Government at Westminster committed themselves firmly to the task in their agreed programme two years ago. My right honourable friend the Secretary of State for Northern Ireland has recently underlined its importance. Rebalancing the economy, he said in Dublin last month,

“is probably the biggest single contribution that the UK Government could make to sustaining peace”.

He also said:

“Just think of the impact that greater prosperity and jobs could have in parts of Northern Ireland where worklessness and generational unemployment are endemic”.

To remove what has become endemic will take time. My right honourable friend frequently refers to the

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need for sustained action over 25 years. In this he is at one with the coalition Executive at Stormont. It has recently produced an extremely ambitious strategy document, packed with detailed proposals and plans, all designed, in its words, to create,

“a prosperous local economy over the short, medium and longer term to 2030”.

If success is achieved, Northern Ireland will recover its long-lost prosperity. The document states:

“Our economic vision for 2030 is … an economy characterised by a sustainable and growing private sector, where a greater number of firms compete in global markets and there is growing employment and prosperity for all”.

There is a widespread but by no means universal view in Northern Ireland that a bold, unconventional initiative should now be taken to give the process of change powerful momentum. It would involve the transfer of responsibility for corporation tax to the Stormont coalition Executive, with a consequent reduction in the block grant that currently finances their work. This would enable them to cut corporation tax in Northern Ireland decisively. The case for such a dramatic change was discussed at length in the consultation document, Rebalancing the Northern Ireland Economy, published by the Treasury in March last year. It noted that,

“Northern Ireland has its own unique set of circumstances, not least a land border with the Republic of Ireland with one of the world’s lowest corporation tax regimes … Reducing the corporation tax rate in Northern Ireland would have a positive impact on both domestic investment and FDI”—

foreign direct investment—

“which could lead to increased economic growth and a stronger private sector”.

A corporation tax rate of 12.5%, matching that of the Irish Republic, would be in prospect if this unprecedented initiative were to be undertaken. A ministerial working group set up last October to examine the complex and technical issues that may arise is expected to report this summer. My noble friend the Minister may be able to comment on the progress that is being made.

Unsurprisingly, the issue has dominated all recent discussion of economic affairs in Northern Ireland. There is a danger that it could come to be regarded as a panacea for all the Province’s principal economic ills. The Northern Ireland Executive’s new economic strategy document helps most usefully to counter that danger by expounding the wide range of other measures that are needed, such as increased investment in research and development, and expansion of higher-level skills among young people.

Northern Ireland could also gain greatly from a profoundly important Thatcherite idea: the economic enterprise zone, whose time seems to have come again. It occupies no prominent place in the Executive’s economic strategy, but that is where it should be.

The gracious Speech states that the Government,

“will continue to work constructively and co-operatively with the devolved institutions”.

Nowhere is this more important than in Northern Ireland.

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9.12 pm

Baroness Drake: My Lords, the focus in the Government’s programme on fair markets and the regulation of the financial services sector is to be welcomed. With auto-enrolment into pensions, millions more people will save through capital markets. Confidence in those markets has been worn down by mistrust, scandals, charges, complexities and conflicts of interest. Fiduciary duties exist to ensure that intermediaries—those who exercise discretion over other people’s money—act in the best interests of those whose money they look after. However, interpretations of this vital legal principle are dysfunctional, which undermines outcomes for savers, holds back effective shareholder oversight and allows conflicts of interest to prevail.

Those saving in trust-based occupational pensions should be protected by trustees who are legally obliged to act in their best interests. Those saving with an insurance company are subject to the consumer responsibility principle. As FairPensions points out, most savers are unaware of this legal divide. With auto-enrolment, the employer chooses the pension provider and the power of inertia increases saving. The inadequacy of the caveat emptor principle in that situation is evident. However, depending on the type of scheme their employer chooses, savers will find themselves subject to one of two opposing principles: fiduciary duty or caveat emptor. The law should be clarified to overcome the misperception that investors’ duties begin and end with maximising quarterly returns. The Government must provide better understanding and enforcement of investors’ true fiduciary duties.

The Work and Pensions Select Committee concluded in its recent report on auto-enrolment that,

“the Financial Services Bill … offers the opportunity for the Financial Conduct Authority … to look at approaches such as that of introducing something akin to a fiduciary duty for those running contract-based schemes”.

The Joint Committee on the draft Bill recommended that the Bill,

“place a clear responsibility on firms to act honestly, fairly and professionally in the best interests of their customers”.

The Government have responded with a new principle that firms must,

“provide consumers with a level of care that is appropriate”.

I fear that that will prove inadequate.

The issue of rewards for failure is the litmus test of how well fiduciary investors are protecting these savers’ interest in well governed companies delivering sustainable returns. As Professor Kay observed in the interim report of his review of UK equity markets, the purpose of equity markets is to improve the performance of companies that are ultimately the only thing that generates value for savers. They drive growth and create jobs. There is a fundamental alignment between the success of companies and the returns to savers. Equity markets exist to serve companies and savers, not to enrich intermediaries.

By this standard, the pensions industry is weak. From 2000-07, real returns to savers averaged just 1.1% per year, and pension fund payments to intermediaries rose by an estimated 50%. Fiduciary standards of care are an essential part of building a financial system

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that serves savers and the economy. I agree that it was surprising that the Queen’s Speech made no direct mention of executive pay and shareholder rights. Mean FTSE 100 executive pay rose by 49% from 2010-11. Austerity has clearly passed them by.

The shareholders’ spring has seen the flexing of voting power on remuneration reports, but this will not be sustained without addressing the conflicts of interest and behaviours of institutional investors responsible for casting votes on behalf of funds, many holding the savings of millions of people. Take, for example, regulation of the 25 million with-profits policies worth £330 billion. There is no explicit fiduciary duty to protect the best interest of policyholders. Consumer groups such as Which? have criticised the regulatory framework for with-profits policies and failure to control conflicts of interest. The Prudential Regulation Authority will assume responsibility for systemically important insurance companies, but it will not have the remit to protect proactively consumers who hold with-profits policies.

The Bill must provide for the PRA to consult the FCA and consumer groups on the consumer interest. The Government want transparent regulators, but consumer groups and the Joint Committee on the Bill expressed concerns that Section 348 of the Financial Services and Markets Act gold-plates single market directive limitations on the use of confidential information and will prevent the FCA from using the new powers that the Bill gives to it. The Financial Secretary to the Treasury, Mark Hoban, has confirmed that the Treasury will undertake a review of Section 348 with its recommendations made available through the passage of the Bill. I dearly hope that those recommendations will support disclosure.

Finally, figures from the Community Development Foundation show that about 4% of lending to SMEs goes into businesses in the most deprived communities. I recently read an article about the payday loans company Wonga.com launching a service for small firms. Its founder, Mr Damelin, is quoted as saying:

“All our research … tells us that small-business lending is broken and we intend to use our platform to offer a real alternative”.

Banks are failing to extend credit to small companies, but this reveals a worrying development in the credit market that exposes small firms, particularly small firms in deprived areas, to exponentially high rates.

The culture of the financial services industry must change and it must behave, in the words of the business Secretary, Vince Cable, as the servant of the economy, not its master.

9.20 pm

Lord Bradshaw: My Lords, I am going to talk about railway freight electrification, and in doing so I hope to cover six of the seven subjects that are featured on the screens. The economy of the country would benefit from a 10-year programme to electrify the bulk of our freight railways. Heavy lorries are at present dependent on diesel engines and there is no prospect of changing that in the immediate future. If our ports, factories and distribution centres were linked by an electric railway, this would be a means by which the logistics industry would use fewer heavy lorries for trunk haulage,

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thereby reducing pollution, congestion and accident rates. Of course, final distribution would require lorries, but they would probably be smaller ones.

The Government have made a brave start in providing an electric railway. The last Government produced nine miles of electric railway in 13 years. Since the coalition came to office, we have committed to 800 single-track miles of electrification, and I hope that we will add another 130 miles to that target very shortly. Most of this increase is focused on the passenger business. I would argue that the focus of electrification should embrace the potential for freight use and that the forthcoming review of the railway budget and plans, which must shortly be approved for the five years from 2015, should address this subject.

Railway electrification creates jobs in Britain. It cannot be imported. It is a long-term investment in the future. Strategically, it makes us less dependent on imported oil. Efficiency, the prosperity of the regions and strategy have not, up to the present, been reflected in the appraisal systems for new infrastructure investment used by government. These systems are excessively dominated by the practice of adding together a very large number of small time savings made by road users, many so small that they cannot usefully be taken into account by those who are deemed to benefit. This is changing because of the Government. I was told this afternoon that the system had its genesis in Barbara Castle’s day and continued to be used by the previous Government, despite my going to countless meetings at the Department for Transport.

The prospect of freight electrification has been brought a good deal closer by the development in Europe of an electric locomotive. It has a superior load capacity and, most importantly, it has a “donkey” diesel engine so that it can operate away from the main electric railway into depots, distribution centres and sidings where one does not want overhead electrification anyway. Locomotives would be purchased by freight companies provided that the Government paid attention to the diversionary routes and longer loops needed to accommodate heavier trains as well as electrifying the main lines. As this policy is developed by the Government, which I hope it will be, and the prospects of the rail freight industry are kept to the fore, we will be able to look forward within 10 years to having a prosperous, efficient freight railway that would create jobs in its building and that is not dependent on fossil fuels. It will bring benefits for many decades.

Later this year the Government will make a statement of the funds available—the so-called SOFA—after which the Rail Regulator will determine the improvements to our railways that will be made in the five years from 2015. I hope that the Government will take the opportunity presented to bring forward bold plans for the electrification of our freight railway, and I have every reason to suppose that they will. I am sorry to be a bit optimistic in a thoroughly pessimistic House, but I believe there is a real winner here.

9.25 pm

The Earl of Caithness: My Lords, the fact that we have spent four of the past six sitting days navel-gazing is a disgrace, considering the other matters that surround

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us. The fact that two of the days of debate on the gracious Speech were devoted to the constitution when we have had to condense all the other important issues into fewer days has done the House no good.

Turning to the economy, we should all be grateful for the measures enacted by the coalition Government when they were elected to power in 2010—exactly the action and leadership that the right reverent Prelate the Bishop of Durham called for in his excellent maiden speech. The Government started in a good fashion to clear up the mess left by the previous Government. They positioned the UK well for what was to come and inspired confidence.

It is extraordinary that sterling and the UK are considered a safe haven at present. UK bond yields are at a record low of 1.9%, with inflation at 3.5%. That brings money and people to the UK, and we need more of that. Although the level of sterling is a challenge, it is also an incentive for us to become much more competitive. It is not something for politicians to weaken in order to avoid taking more challenging decisions. As my noble friend Lord Ashton of Hyde said in his wise maiden speech, gold-plated regulation is a severe brake on business. My noble friend Lord Sassoon needs to address that, as does every Minister in every department.

In Europe we have been incredibly spoilt for the past 50 years. Yes, there have been occasional difficulties —we had to go to the IMF on one occasion—but by and large we have had good and continuous growth. However, imprudent management, a corrupt banking system and an increasing reliance on debt have led us to believe that the cloud-cuckoo-land we were in would never cease. “The end of boom and bust”, crowed Gordon Brown as he led us deeper into the mire, but now we are facing the truth; the eurozone is in complete crisis, as the UK Government warned it would be in the late 1980s and early 1990s, but sadly political will overrode rational thought and argument. The Governor of the Bank of England calls it the “coming storm”. As the euro train heads for disaster, too many people are still trying to preserve their seats in the first-class compartment rather than to stop the train and change its course.

I believe that in the near future our debates on the economy will be of a very different intensity from that of today. I hope that happens before the vote for separation in Scotland, as in today’s world the one thing that Scotland would not be is independent, either politically or economically.

I welcome the Bill to implement the recommendations of the Independent Commission on Banking, but it is too little, too late. The Bill signifies a substantial change of thinking. I tried to do much the same thing in 2008 with my Safety Deposit Current Accounts Bill. I went further than the projected Bill, and if my Bill had been enacted we would not see many of the problems that we face today. However, I was derided by my now noble friend Lord Razzall, who called my Bill “volcanic”, and the noble Lord, Lord Davies of Oldham, termed it “explosive”. My noble friend hardly mentioned that Bill today, and I await with anticipation the comments of the noble Lord, Lord Davies of Oldham.

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Our banking system is based on judicial decisions made in the 1800s, which legalised the theft of deposits by the banks and allowed bankers to print money and behave imprudently. On the one side, we have the EU; on the other, we have the USA. In his short time in office, President Obama has accumulated national debt more than 27 times as fast as in the rest of its entire history. That train, too, is heading for the buffers at speed.

The two speeches that I appreciated most on days 1 and 2 of our debate on the gracious Speech were those of the noble Lords, Lord Owen and Lord Giddens. We are not masters of our own destiny in today’s age, but the Government need to position us correctly for what will emerge from the current crisis. In that context, the amendment of the noble Baroness, Lady Royall, is irrelevant, as she had nothing new to offer us today. Part of that repositioning must include a complete revision of our banking system.

I was hugely disappointed that my noble friend Lady Wilcox made no mention of tidal or wave power in what she said about the electricity market. If the Government want electricity prices to be fair, the considerable subsidy given to inefficient wind turbines should be scrapped.

I turn to the draft water Bill. At first, I thought that it was sad that it was a draft Bill, but having sat on EU Sub-Committee D, which has just looked at the EU blueprint for fresh water and the revision of the European water framework directive, I think that a draft Bill to be studied by a committee of both Houses is an excellent way forward. It needs to take our report into account. The whole subject of water is much more complex and intricate than many of us who sat on that committee realised.

The future of agriculture depends very much on the reform of the common agricultural policy. Again, Sub-Committee D has fed its thoughts into Europe, many of which have been accepted. However, I fear that there is a marked reluctance among many people in Europe to realise that, with the current crisis, the whole CAP system could collapse at very short notice and that the European grant structure for our farmers could be an anachronism within a short time.

It is hugely important that the Government encourage innovation in farming. Farmers have a very difficult job. There is huge competition for what can be done on the land and there are increasing restrictions. No more land is being created. Producing enough food to feed a growing population will need a whole lot more innovation and encouragement.

On the common fisheries policy, I hope that the European Commission will persevere with the suggestions that it put forward, which were also based largely on Sub-Committee D’s proposals—that was before I was a member of it. If our fishing stocks are to be preserved for future generations, substantial changes such as those proposed by the Commission have to be enacted.

9.33 pm

Lord Broers: My Lords, it is an honour to speak in the debate on the Queen’s Speech. I wish to speak on an issue of major importance to the economy. I spent

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the bulk of my professional career, about 30 years, working in industrial research and development, and this is the only subject that I wish to address today. Research and development is the seed corn for manufacturing and is essential if we are to rebalance our economy and restore our manufacturing output, which has fallen catastrophically from 20% of GDP in 1988 to 11% now, leaving us in ninth place in the world. We were fourth in 1988. Recovery will depend on the excellence of our R&D. R&D expenditure is the best indicator of the likelihood of recovery.

Thankfully, there are signs that the coalition is aware of this and it has supported several initiatives that will help. I will discuss just two of these, though I noted that the noble Lord, Lord Haskel, mentioned the 130 initiatives for manufacturing. I want to talk about the Catapults that are being organised and partly funded by the Technology Strategy Board and the Queen Elizabeth Prize for Engineering, which is privately funded but strongly supported by our leaders. The Catapults came about as a result of Dr Hermann Hauser and his report that recommended the setting up of institutes similar to the German Fraunhofer Gesellshaft Institutes. Industry and academia will work together in the Catapults under the leadership of industry to harness the output of our strong science base for commercial advantage. There are to be seven of these centres, organised by the TSB and funded roughly in thirds by the TSB, by industry and through publicly funded research programmes. I hope that these will include the Framework Programmes, funded by the European Commission. The aim is to have each of these centres receive about £30 million a year total. The seven centres will therefore represent about a £200 million increase in R&D.

These Catapults should make an important contribution provided they are allowed to be independent and driven by the needs of industry and not strangled by the imposition of government-driven regulation and assessment. It will be a mammoth task, however, to scale them up to match the contribution of the Fraunhofers to German industry. There are 60 Fraunhofer Institutes, funded with €1.8 billion annually. Of this, 70% comes from contracts with industry and from publicly financed research contracts and 30% comes from the German federal and länder Governments. We made a good start but there is a long way to go. I urge the Government to set these institutes free and not harness them with unnecessary bureaucracy.

Overall, we need to increase our annual R&D spend by about 0.8% of GDP to match Germany and the USA, or about 1.4% to equal Japan. To compete with Germany and the USA, therefore, we would need to spend roughly an additional £10 billion annually on R&D over and above what we spend today. This places in context the £200 million for the Catapults. Sir Alan Rudge, who has been working with the Electrical Research Association Foundation on these crucial matters, has pointed out that our shortfall is in part due to the reduction in the size of our industrial sector. Many of our companies have excellent R&D, but there are not enough of them; there are others that are failing to invest in the development of the new products that will be essential to their survival.

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The only way we are going to meet this challenge is for the Government to take on board the magnitude of the problem and introduce appropriately strong incentives for industrial companies of all sizes—not just SMEs, although they are incredibly important—to increase their R&D spend and find ways of transferring more of their own funds to innovation and development. We have the talent and the research base to compete on the world manufacturing stage, but without increasing our R&D spend we will continue to sink down the performance table.

Finally, to finish on a positive note, I would like to praise all three political parties for the strong support they have given to the Queen Elizabeth Prize for Engineering—an initiative designed to inspire young people to take up the challenge of being creative engineers. This magnificent prize, to which the Queen has given her name, was funded generously by forward-looking industry. It was launched last November by the Prime Minister, accompanied by the leaders of the Liberal Democrats and the Labour Party, in the Science Museum in a unique moment of political consensus. Like the Nobel prizes, it is an international prize and at £1 million, it is 50% larger than the Nobel prizes. It will be awarded for ground-breaking innovation in engineering that has been of global benefit to humanity. The prize is directed by a board of trustees chaired by Lord Browne of Madingley. I declare my interest as chairman of the international panel of judges.

The prize has been greeted with enthusiasm from all around the world. It is especially pleasing that engineers everywhere have thought it appropriate that the UK should take the lead on this new prize because of the high regard in which British engineers are held. Nowhere is the prize of more importance than in the UK, where it should help to inspire a new generation of creative engineers who will go on to reinvigorate our industrial R&D and thereby ensure a better balance in our economy. It is very encouraging that it has received such strong support from our political leaders.

9.40 pm

Baroness Wheatcroft: My Lords, Governments cannot legislate for growth, we have been reminded today. Nevertheless, Governments can remove some of the obstacles to growth. The regulatory reform Bill announced in the gracious Speech does that with changes to employment law, reductions in red tape and with the inspection regime. I welcome those changes almost as much as the noble Baroness, Lady Turner of Camden, regrets them. The changes have been particularly welcomed by small businesses, which are also being encouraged with a new loan guarantee scheme and even the possibility of rent-free office space in empty government buildings. However, for significant growth in the economy, it is to bigger business that we must look. The majority of small businesses stay small. That may be because of the nature of the business or because of a lifestyle decision. There are many founders who do not even like the idea of having to manage hundreds of employees.

It is the big companies that will help to do away with some of the unemployment that now dogs this country. The latest figures are encouraging but there is

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still a long way to go. Big business must be encouraged to expand but, as pointed out by the right reverend Prelate the Bishop of Durham and others, big business is sitting on cash rather than investing. The right reverend Prelate referred to the survey from the ITEM Club. This showed that at the end of last year, the holdings of currency and bank deposits by the UK’s non-financial companies had reached an astonishing £754 billion. That is half the country’s GDP—maybe they should have bailed out the banks. Why are these companies not investing? We have just heard my noble friend Lord Broers call for more expenditure on research and development. How right he is: failure to invest in the future consigns businesses to the past.

Nervousness about the prevailing economic climate is understandable but it is not holding back companies in China and India from investing. Our companies have to compete with them if they are to survive. I believe that they are fearful of the reactions of their shareholders. A recent survey asked chief executives how they would react to a potential investment proposition that would be for the long-term good of the company but would have a short-term dampening effect on financial performance. The vast majority, under the comforting cloak of anonymity, admitted that they would not make the investment. As my noble friend Lord Tugendhat suggested, some of them may well have been influenced by pay structures, but those structures are moving more towards long-term incentives. I suspect the major part of the problem is that they do not have owners interested in the long-term good of those businesses.

The ownership of the UK’s quoted companies is fickle, often fleeting. The term investor flatters many who are little more than traders. It is the same as the ironic misnomer “investment bank” for organisations which do just the opposite. The insurance companies and pension funds which, as recently as 1993, held over half the stock in UK quoted companies had, according to the Office for National Statistics, fallen to holding below 14 per cent by the end of 2010. Individuals, who had accounted for 54 per cent of shareholdings in 1963, were down to holding 11.5 per cent at the end of 2010. The shareholder spring has certainly shocked one or two people and been achieved by a few active investors, but there are not nearly enough of them. This is an area where a little bit of government help might make a difference. More could and should be done to encourage employee share ownership. Who better to take a long-term view of their company than those who work in it? Research, including some by Oxera, has shown that companies with significant employee shareholdings are more productive than those without.

Now, I am clear about the Government’s need to keep tight limits on spending. Those who would encourage them to spend, spend, spend, believing that Keynes has the solution, forget that Keynes would not have started from here. He would have used the good times to husband the cash and pay down the debt. Sadly, the previous Government just kept borrowing, so this Administration are very limited in what they can do. However, they have taken the view that reducing corporate taxes will enhance long-term growth and have moved strongly to lower those rates. I suggest that employee share schemes should be expanded, the tax relief involved being an investment in growing a stable shareholder base.

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Today, the monthly maximum for a save-as-you-earn scheme is £250, and the annual limit on a share incentive plan is just £1,500. These limits have not moved since 2000. Companies that operate the schemes are convinced that, if the limits were raised, more money would flow into the schemes and their employee shareholding would grow. This has to be a desirable outcome.

With my time running out, there is only one other point that I would like to make. It concerns the comment of the Foreign Secretary, who urged business not to get on its bike but to jump on board planes. Would that it could. Our airports do not have direct flights to the potentially lucrative markets that we need to reach. Germany and France do not disadvantage their businesses in this way. We need increased airport capacity. If we cannot have a third runway at Heathrow then let us have “Boris Island”, but let us not vacillate any longer. Let us take the decision, and do it.

9.47 pm

Lord Touhig: My Lords, soon after I was elected to the other place I was successful in the ballot to introduce a Private Member’s Bill and I promoted whistleblower protection. Unfortunately, my attempt to enact into law a Bill to protect whistleblowers was unsuccessful in 1996, but I was glad that the Bill was later taken up by Richard Shepherd, MP, and in 1998 the Public Interest Disclosure Act became law.

The Act gave protection to individuals who make certain disclosures of information in the public interest and it allowed such individuals to bring action in respect of victimisation. At that time, this country was the first to offer whistleblower protection to workers in all sectors, but over the years a number of legal loopholes have come to the fore and now the Act is ripe for review. I understand that the Government, rather than do this, intend to bring forward legislation this Session to remove just one of the loopholes by which workers complaining about their private employment rights can be protected.

While I support the premise of such an amendment, I worry that it will fail to address the underlying problem. I fear that it will be viewed as an obstacle to genuine and honest whistleblowers who will have to show that their concern is in the public interest. More than that, the amendment does not address the issue of private employment rights and will instead result in a field day for lawyers. In my view, the proposed amendment should form the basis of a wider consultation of business groups, trades unions and others to make sure that this law is fit for purpose.

That leads me to my main concern: that this is a missed opportunity to consult more widely on whether the Public Interest Disclosure Act 1998 is achieving its aim of protecting workers who raise concerns in the public interest. It will also deny us the chance to look more closely at workplace cultures that we might wish to promote in the future. Robert Francis, in his first report of the Mid Staffordshire NHS Foundation inquiry, highlighted the real difficulties that whistleblowers face when he said:

“It must not be forgotten what pressures can be applied to deter staff from coming forward, and how little it can take to dissuade nervous individuals from pursuing matters”.

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A report by the Select Committee on Culture, Media and Sport in the other place into News International and phone hacking highlights the need to make sure that whistleblower protection in the UK is effective. If there is a poor corporate culture, real and effective protection needs to be offered to workers so that the alarm can be raised and the issued addressed before there is a public outcry.

I would like to draw attention to the areas within the legislation that could do with a closer look and a thorough public consultation. The first is that of vicarious liability. Two years ago, three nurses from a walk-in clinic raised concerns about a fellow nurse lying about their qualifications. However, the nurses were subject to bullying and harassment from co-workers. One of the nurses received a telephone call threatening to harm her daughter and to burn down her home. The case proceeded as far as the Court of Appeal, which found that vicarious liability does not exist in the Public Interest Disclosure Act, as it specifically does in discrimination law.

From the experience on the whistleblowing advice line run by Public Concern at Work, harassment and bullying by co-workers is not uncommon, and for protection to be lacking in this area is extremely problematic, as it means that whistleblowers could think that they are protected when they are not. One way of overcoming this would be to examine the framework of the Equality Act 2010.

The second issue relates to the scope of protection offered. Loopholes have been allowed to develop whereby student nurses, doctors, healthcare professionals and student social workers are not protected by the Public Interest Disclosure Act. These loopholes have meant that those who are new to the workplace will not speak up without being safe in the knowledge that they will be protected for raising their concerns. Instead they risk damaging their careers, and as a result we risk creating a culture of silence among the workers of tomorrow. I argue that the list of those covered needs to be revised to include non-executive directors, including public appointments, volunteers and job applicants.

Thirdly, there is the issue of gagging clauses found in compromise agreements and contracts. These prevent individuals from speaking up about wrongdoing. There are stories of increasing secrecy in particular sectors and heavy-handed lawyers giving the impression that individuals have signed a confidentiality agreement that prevents them speaking up about wrongdoing. This in itself is wrong in law, and the Government need to review how they might address this conundrum.

One high-profile example is the case of Dr Kim Holt, a doctor at Great Ormond Street, who was victimised after she and three other doctors wrote to management warning that staff shortages and poor record-keeping would lead to a tragedy. Six months later, her worst fears became reality when an inexperienced doctor who had replaced her at the clinic failed to spot that Baby Peter was the victim of serious physical abuse.

More needs to be done to promote the principles behind the Public Interest Disclosure Act and to prevent our public bodies giving the impression that those

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who leave their employment are never meant to raise these issues again. The Act needs a great deal more discussion and there needs to be more consultation on it. It is unsatisfactory if the Government wish to change the law without allowing for the widest possible consultation.

If we are to foster strong cultures of corporate accountability in the United Kingdom, it is only right that we ensure that we protect workers who raise concerns in the public interest and promote this protection so that raising concerns effectively becomes second nature for all those who work in Britain.

9.54 pm

Baroness Scott of Needham Market: My Lords, I am not an economist and therefore have no intention whatever of venturing into the debate on the deficit, its causes and how it might be tackled. However, I want to reflect on the fact that in this House and beyond there would be consensus that growth, when it comes, will to a large extent be dependent on infrastructure investment, particularly on transport. That point was very well made by the Association of British Chambers of Commerce in its briefing for this debate.

It is often said that transport plays a fundamental role in the economic, social and environmental well-being of our country. Everybody says that, and to an extent they understand it, yet this sector is bedevilled by lack of coherence. Interaction between levels and tiers of government and with industry and finance is haphazard and leads to poor and often random outcomes. A key constraint is the uncertainty of delivery of large publicly funded infrastructure schemes. Current mechanisms often work in total isolation from the development planning process and from financing.

As an honorary fellow of the Chartered Institution of Highways & Transportation, whose members are drawn widely from across the sector, I can commend to the Government the work that it has done to see how this situation can be improved. Its work has shown that there is potential for generating private sector capital through planning gain and the uplift in land values through investment in transport. This is the ethos that underpins the Government’s community infrastructure levy, but much more needs to be done to ensure that government at all levels enter into true partnership with the private sector which needs encouragement to look at profit sharing and collaborative arrangements regarding land acquisition.

The majority of road schemes are and will remain local. With the localism agenda firmly in place, the mechanisms we use to deliver local infrastructure are urgently in need of review. The newly created local enterprise partnerships could take the lead in creating local infrastructure funds, a hybrid public and private sector vehicle for delivering local schemes and giving modest capital returns on private investment. Perhaps the Government could look at how such schemes could work and could pilot some because that would enable local businesses and local citizens to work with local government to invest in their own area. These municipal bonds could include provision for investment from local authorities’ own pension funds. If the

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Government were prepared to prime them by providing some forward funding, it would enable these projects to get off the ground. Their investment would be repaid afterwards by capturing the economic benefit of such schemes. It is often the case that cash flow prevents the private sector funding such infrastructure, but there will be provision to make profit later, so this would be a low risk and relatively low cost mechanism by which the Government could stimulate delivery, particularly of road infrastructure.

Other schemes are worth while but are not quite viable without some level of public support. Here the Government should provide grants to fill the gap and should prioritise those areas that deliver growth. Both gap funding and forward funding will bring forward additional private sector investment in several forms: infrastructure, development and business and employment investment. It is estimated that infrastructure investment can result in a multiplying effect on the economy of between three and six times the initial investment. The challenge is not so much funding it as bringing together planning, funding and delivery. If local government in particular could engage with businesses at an earlier stage, it would increase the chances of coming up with schemes that meet the objectives of both sides, giving each the incentive to make progress. It would also focus the minds of local authorities on schemes that are deliverable rather than on the lists of aspirations that lurk in local transport plans for years with no realistic chance of being delivered.

To bring back market confidence and to encourage parties to engage and investment to flow, we need new mechanisms that would reduce the initial costs of scheme development because at the moment this presents a considerable risk and a large, potentially abortive, cost to investors. This needs all parties to rethink their approach to planning and delivery and their respective roles in them. If the Government are serious about private sector investment in transport, they need to recognise that decision-making and funding decisions have to be streamlined and a more certain environment has to be created. This applies whether you are talking about local or national schemes.

The Government should also consider creating a national hybrid public/private investment funding scheme for large transport schemes. In such a scheme, private investors could pool the risk across a portfolio of transport investments. Decoupling investment from the success or failure of any individual scheme is a standard risk elsewhere and could be attractive in the transport sector.

The Government are looking at new models of managing our highway network, in which roads would become owned and managed by the private sector, regulated by central and local government. Funding would come through the existing system of allocating money or—whisper it quietly—could evolve into road-user charging for funding improvements and new schemes. There is considerable consensus throughout the transport industry that road-user charging could revolutionise the way we use transport by enabling tariffs to reflect the location of the road and the time when it is used. It remains as politically unacceptable today as it was a decade ago, when the Commission for Integrated

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Transport put its weight behind it. Unless there is an outbreak of political consensus to match the professional one, we will make no moves in the direction of road-user charging.

In the mean time, I suggest that the Government take a look at the work of the chartered institute and some of the models that I have suggested this evening. If they do not, they will simply fail to get private sector investment in transport and to deliver the role that new transport plays in developing growth.

10.01 pm

Lord Rowe-Beddoe: My Lords, there is much in the gracious Speech on which I would wish to comment. However, I shall reserve myself to two topics from today’s box of liquorice all-sorts.

First, unlike the noble Lords, Lord Patten and Lord Myners, and maybe others, I warmly welcome the introduction of legislation to establish an independent adjudicator to ensure that supermarkets deal fairly and lawfully with suppliers. As your Lordships have been informed, the creation of such an adjudicator or ombudsman appeared in the 2010 general election manifestos of five parties—Conservative, Labour, Liberal Democrat, Plaid Cymru and the Green Party. Many of your Lordships will have heard of instances of the purchasing power of some major food retailers having a most deleterious effect on both direct and indirect suppliers. We talk of farmers, food growers and food manufacturers. A fair deal is a laudable objective. It would also impact favourably on small grocery outlets, which are in great decline—not terminal, we hope—in many of our villages, small towns and even cities. The Department for Business, Innovation and Skills informs us that five retailers now own some 75% of the UK’s £146 billion grocery market.

Many of your Lordships have witnessed, as the noble Baroness, Lady Byford, so aptly described, the ongoing destruction of village and town high streets as shops—certainly not just groceries—are put out of business, by both out-of-town supermarkets and their smaller in-town offspring. The price benefit to the consumer can be demonstrable, but if the supplier is protected the differential between the giant and the minnow outlet can be greatly reduced. I hope that the legislation will succeed in so doing.

I turn now to the energy Bill. The Energy and Climate Change Committee in another place will shortly receive it for pre-legislative scrutiny, with a view to reporting, I believe, before the summer Recess. The gracious Speech refers to delivering,

“secure, clean and affordable electricity”.

To my great dismay, I find no reference whatever in published documentation to the Severn barrage, the latest proposals for which demonstrate it to be the single most important low-carbon, renewable energy project in the whole of Europe. I crave your Lordships’ indulgence as I am moved, now for the fourth time in some six years, to say a little about the potential and benefits of this grand projet, as our Gallic neighbours would have it. In fact, the ground-breaking—or should I say water-breaking—barrage at La Rance is almost 50 years old and has been demonstrating for all its life the multiple benefits which have been accruing.

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Today, just 101 years after the first reference to the potential of harnessing the power of the second largest daily rise and fall of tide in the world—it must never be said that Governments in this country move with undue haste—we are now aware of the latest proposal to turn these waters into an extraordinary, exciting, once-in-a-lifetime economic stimulus of such magnitude that I cannot understand the Government’s silence. It will produce 5% of the UK’s electricity requirement. During construction, it will create some 35,000 jobs in south Wales and in the south-west of England, with at least 10,000 permanent jobs in both regions on both sides of the estuary thereafter. There will be new rail and road links between the two regions. It will make a significant impact on the UK’s renewable energy targets. Latest designs and much-improved technology have largely met previous environmental concerns, and the La Rance results in fauna and biodiversity should well satisfy investment environmentalists.

A major difference between the current project and that of 1988 is that the proposers have stated that no government funding is required for the £30 billion-plus development. What is required is a clear message from the Government of support in principle, backing through the planning process and agreement to support and allocate appropriate parliamentary time for the passage of a private Bill. I feel absolutely sure that there is a financial appetite to realise this extraordinary project once the green lights are clearly lit in Westminster and Cardiff.

10.07 pm

Lord Bates: My Lords, I rise to attempt to give an optimistic speech, in the present environment, on the economy. In doing so, I feel a little bit like my comic hero and fellow north-easterner, Rowan Atkinson. He used to do a sketch where he came on stage dressed in a track suit and would play the part of a Geordie football manager. He would walk on clasping a football and, looking at the assembled dejected faces in his dressing room, would say, “37-0—but don’t worry, lads, we’ve got everything to play for in the second half. But before we do that, we have got to get back to some basics”. Holding up the ball he would say, “Kev, what’s this? And where’s it meant to go?”. The answer was, “The goal”. Then Rowan Atkinson, the Geordie football manager, would say, “But whose goal?”. That experience of trying to get back to the basics of what we are about seems pretty fundamental.

In that element of grasping for the basics, I thought about what we should be saying about the economy. What is the role of government in the present environment? There are four points on which I want to focus. First, we need to be quite frank about the limits of government. What can we actually do?

The amendment presented to this debate refers to,

“the failure of Your Majesty’s Government properly to address economic recovery”.

Yet, on looking at the gracious Speech, the whole first page is packed full of references. It states that,

“my Government’s legislative programme will focus on economic growth”.

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The next sentence refers to measures to “restore economic stability”. That is followed by references,

“to reduce burdens on business …. to promote enterprise … to establish a Green Investment Bank”,

for fair energy markets, and so on.

There is a profound misunderstanding in some parts of the House as to the role of government. We hear a clarion cry for there to be a greater increase in public expenditure. What do they think is going on? We inherited a situation in 2010 when public expenditure was £669 billion; the figure last year was £730 billion in absolute terms, and it will go on rising year on year for as far as the forecasts go out. Added to that, they speak almost as if we were having a slash and burn austerity drive whereby we reduce every penny of borrowing. Yet we inherited a deficit and a level of government borrowing which was just a shade over £1 trillion and over the next four years we will not repay one penny of that. In fact, we will add 40% to that Bill, which people will have to address in future generations. So the notion that somehow this Government are embarking on some one-sided approach to attempt to lift us out of this present situation is fanciful and misleading. It discourages the many people in this country who are working hard in public service jobs and who fail to understand that the Government are taking their position very seriously and value the contribution that they make to the economy. We are taking a balanced approach between different types of investment and efficiency savings in other parts, as we should.

The point that we need to realise is that Governments do not create jobs. They create the environment in which jobs can be created by entrepreneurs and businesses and their employees. That is what we are trying to do, just as in an Olympic year our responsibility is to put on the Games to make sure that they are safe and secure and that the rules and infrastructure are in place. But the real show is what the individual athletes and Olympians actually do with that opportunity, and that requires some encouragement and inspiration. So telling things as they are in terms of what is actually happening in the economy and what the Government are actually doing, which is being passionate about economic growth and trying to delicately lift ourselves out of the situation, is something that is very important to communicate.

There is quite a big trend at present in banker-bashing and attacking the City of London in every way. Banks played a major part in getting us into this problem by irresponsible lending, but Governments undertook irresponsible borrowing and consumers undertook irresponsible borrowing. In that sense, we all have a part in this. Bankers may have got us into this problem, but they must also be the people who help us get out of this problem, so we have to look to restoring health in that environment.

Then there is the importance of Europe. We sometimes sit on the sidelines and look smugly at what is happening there, without realising that it is our biggest customer. Two-thirds of our exports go to Europe. No wonder that the Foreign Secretary, speaking today, said:

“No single event would provide a bigger boost to the British economy in the short term than the resolution of the eurozone crisis”.

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It is absolutely fundamental to our success that we see Europe advance.

Over the past year, having travelled extensively through Europe, I have had the opportunity to meet on many occasions the diplomats and officials who are out there selling Britain. They are absolutely passionate about selling Britain; UKTI does an outstanding job. I have seen the passion that they have for the greatness of this country and our educational institutions and businesses. This is a fantastic country; it is a competitive international country; it is the sixth-largest country in the world. When the Chinese are looking to place their Renminbi fund somewhere in the world—and they have the choice of everywhere—they have come to the City of London. When the Japanese want to develop a new motor vehicle, they come to Sunderland and the north-east. That is something that we ought to be proud of. Therefore, I urge noble Lords and my noble friends to remember that and get out there and sell what this country is doing, recognising that the Government are doing as much as they can.

10.14 pm

Lord Whitty: My Lords, my main theme tonight concerns economic strategy and the fact that the eurozone authorities and our own coalition Government got diagnosis and prescription profoundly and damagingly wrong, for the reasons that were spelt out so brilliantly by the noble Lord, Lord Skidelsky. First, I have some good news for the Government. Unlike my noble friend Lord Myners, but like another noble Lord who has just spoken, I strongly support the groceries code adjudicator. I champion the consumer, as does the noble Baroness, Lady Wilcox, but we both recognise that it is not in the interests of the consumer for the supermarkets to be able to wipe out farmers and other small producers who are part of the food chain in this country. Therefore, she will have my support on the Groceries Code Adjudicator Bill, although it needs a bit of strengthening.

I welcome other Bills in part. Some of the electricity market reforms proposed in the energy Bill are desirable but it will fail to tackle the problem of investment in nuclear and renewable energy and the problems associated with decarbonising our energy use and of fuel poverty. I had hoped that we would have a fully fledged water Bill. However, as the noble Baroness, Lady Parminter, said, pre-legislative scrutiny may give us a chance to sort out the abstractions regime. That is desperately needed in the light of the pressures imposed on our water resources by climate change and population increase. Therefore, I welcome the commitment with regard to a pre-legislative Bill.

I may also support a few parts of the enterprise and regulatory reform Bill. The rationalisation of the competition structure is sensible. I welcome the green investment bank although I think that it could go significantly further. However, I also fear that better regulation will lead to a substantial attack on environmental regulation and employment protection, which I do not wish to see.

As regards the Financial Services Bill, I welcome the implementation of much of the Vickers report, particularly in relation to the ring-fencing of bank

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activities. However, I am afraid that the rest of the Bill is mostly about the location, labelling and institutional structure of the regulators. Frankly, changing location from the FSA to the Bank of England or changing names on doors does not give much comfort to small businesses that cannot get capital from the banks, to those seeking first-time mortgages or to those who are excluded from conventional credit and are falling prey to legal or illegal loan sharks. Above all, I do not think that the Financial Services Bill goes very far to tackle the turmoil in the money markets and the failings of the banking system across Europe and much of the world. That is the backdrop against which we are discussing this matter.

Like the noble Lord, Lord Bates, I do not share the schadenfreude that is felt in relation to the problems of the eurozone. I also fear that the coalition is believing its own propaganda and adopting the wrong policies partly as a result. The only real success that the Government have gained from their statements on economic policy is that they have managed to convince a fair proportion of the press and the public that the crisis is all the fault of the Labour Government, despite its global nature. Frankly, the Labour Party has not been all that good at defending its record. We have heard that mantra repeated today. There was a Labour Government failure: namely, the failure of banking regulation, which was far too light touch. However, it was not as light touch as the present Chancellor then said; he wanted it to be considerably stronger. Nevertheless, it was not a failure of macroeconomic policy. Up until 2008, the UK debt to GDP ratio was lower than that of most OECD countries and lower than it had been for much of our history. Indeed, that applies also to other countries in the eurozone.

With the exception of Greece, this crisis is not primarily one of public finances; it is a problem with the banks. That was true in Ireland four years ago and it is true in Spain this week. By putting all the burden of resolving it on public finances, the symptom but not the cause of the problem is being tackled. We have the money markets behaving like packs of feral dogs trying to find the weakest link and Governments who are more afraid of the ratings agencies than they are of their own electorates. When their electorates pronounce, what happens? The Greeks are told to vote again until they get it right, and no doubt if the Irish vote no in the referendum, they will be told the same. However, they will not get it right on that basis because it is the wrong strategy.

I speak as a long-standing pro-European and indeed as a supporter of the euro, and I say this with a heavy heart. I think that what has happened in Europe, reflected here too, is that the decent instincts of post-war social democracy and Christian democracy in Europe have been replaced by a combination of the revival of the understandable German terror of hyperinflation and by ideological neo-liberalism, and lying behind the austerity strategy is the belief that you can win the battle against this crisis only by reducing the size of the state. That is what is behind the strategy in Europe and it is true here in Westminster. Who is paying for this? It is not the bankers, who caused it, but the poorest regions of Europe and of Britain, the youth of

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Europe and the most vulnerable workers, with inequality growing between regions, between rich and poor, between genders and between the generations.

I recognise that of course there has to be discipline in relation to public spending and the management of our debt, but that discipline has to take into account the profundity of this economic cycle and, if the financial stability pact is so inflexible that it cannot do so, then it is not only Greece that is likely to be the victim.

In the UK we have adopted much of the same approach. At the moment, it looks milder than it does in Greece and Spain but that may be a matter of time. We have only just had a Budget that rewarded the rich and penalised pensioners and pasty eaters, and of course 90% of the cuts have yet to come. We have now had a Queen’s Speech that does even less to tackle this economic problem. It has not done very much for small businesses; it has done nothing at all to stimulate the housing market, despite the total dysfunction of that market; it has done almost nothing for green investment, although we could build on the green investment bank; it has done nothing for the regions, infrastructure or manufacturing—there is no investment bank, for example—and nothing for employment, except, bizarrely, to make it easier to sack people.

All our leaders can do is to repeat the mantras of the austerity strategy. The noble Lord, Lord Skidelsky, calls that denial. To me, it is a bit reminiscent of the dreadful twilight days of the Soviet Union, with leaders reasserting failed nostrums and phoney statistics in provincial tractor factories. The country deserves better, Europe deserves better and the Government need to do better.

10.22 pm

Lord Shipley: My Lords, on a wide range of measures the Government’s legislative programme is very welcome, not least on banking—particularly the green investment bank—on pensions, on support for children, on competition policy and on constitutional reform. I welcome in particular the decision to consult further on adult care through a draft Bill, because an agreed policy direction is urgently needed.

There has been some criticism in this debate that more should have been said about economic growth in the gracious Speech. However, we should remember that driving growth and rebalancing the economy is the day-to-day work of government, not least through the Budget process. I find the amendment moved by the Opposition today disingenuous because they fail to acknowledge that their own plan for recovery could never have been delivered.

I should like to raise specifically issues arising from impact assessments of Bills and, in particular, the cumulative impact of different Bills passing at the same time. My reason for doing this will become apparent in a moment. We need to understand better that cumulative impact of Bills—for example, the Welfare Reform Bill, the legal aid Bill and the Localism Bill, particularly its housing elements. Each had provisions which impacted on the others. Therefore, individuals and households on low incomes, women, children, single parents, part-time workers and those in rented

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accommodation, among others, may have found themselves affected by several Bills and not just one. Sometimes, as with universal credit, they might gain; in other cases, the impact might be negative. However, the overall position can be opaque. It is not clear to me that the overall direction in terms of impact is properly and fully assessed across Whitehall, and it seems to be left to third parties to do this.

Take child poverty. In October last year, the Joseph Rowntree Foundation reported:

“Relative child poverty will rise from 20 per cent currently to 24 per cent by 2020/21, the highest rate since 1999/2000 and considerably higher than the 10 per cent target in the Child Poverty Act (2010)”.

The foundation has pointed out that universal credit should reduce poverty substantially, but that poverty-increasing effects of other government changes to personal taxes and state benefits will more than offset that. Another source, the Institute for Fiscal Studies, said in January this year that relative child poverty is set to increase by around 400,000 between 2010 and 2015 and absolute child poverty by a further 100,000. Yet the Queen’s Speech specifically says that the Government,

“will strive to improve the lives of children and families”.

So I hope that, in the coming year, we will see real outcomes to this clearly expressed intention. Perhaps a start could be made with the Local Government Finance Bill, which will devolve council tax benefit to local authorities to manage, along with a 10% cut in funding worth some £500 million. Why 10% and who will pay this? Local authorities will be empowered to increase charges on empty properties and second homes but, if a council does not have many second homes or empty properties, the cost will fall either on individuals in receipt of council tax benefit now—by definition the people least able to pay—or on council taxpayers generally by increasing the level of council tax, which is, in practice, cost shunting from central to local government. As pensioners will be excluded from any benefit loss, it means that those on low incomes—many of them families with children—will have to pay the full cost unless it is spread across council taxpayers generally. I find it odd that this is not explained in the summary impact assessment, nor is there an explanation about the impact on child poverty. No doubt we can debate this further at Second Reading and throughout the passage of the Bill.

I pay tribute to the right reverend Prelate the Bishop of Durham for his contribution in his maiden speech on the state of the economy and sources of investment and in particular for his realistic, and in some cases optimistic, assessment of the opportunities, successes and problems of the region that we both live in. I concur with his comments. He drew out in the debate the skills deficit, which is not unique to the north-east of England. Exactly the same issue would apply in other regions; most notably, I attended a recent meeting in the West Midlands, where employers said that in manufacturing, processing and engineering, around 25% of employers are having difficulty recruiting staff at the correct levels. I was quite astonished by the fact

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that, despite the millions of pounds that have been spent in recent years on the skills agenda, we have, particularly at levels 3 and 4, a clear skills deficit.

I believe that the problems of the construction industry need to be addressed urgently. The contraction that is now happening may be alleviated by some extra demand arising from the announcements, particularly in housing, in recent months but overall I think further stimulation will be needed, not least in social housing. Hence the need for more thought to be given to increasing councils’ powers and flexibilities to borrow and the need for greater use of their capital receipts from the right-to-buy scheme to be permitted at the very least.

Today’s employment figures show a chink of light. The need for investment in infrastructure seems to be well understood and I hope that the next 12 months will see the underlying rebalancing of our economy set firmly on its course. Meanwhile, inequalities in the face of our financial problems simply must be minimised and fairness maximised to ensure that everyone is in this together.

10.29 pm

Lord Freeman: My Lords, I will concentrate my remarks concerning the gracious Speech on the proposals put forward on energy. Together with the noble Lords, Lord Whitty and Lord Rowe-Beddoe, I helped produce a report on renewable energy. The single point that I make with great emphasis, and address through my noble friend on the Front Bench to the Department of Energy, is that policy has been developed over the past two years in this Parliament, and now is the time to implement it. There should be no more changes, because the financing of our new energy policy in the coming years will require very significant sums of money as well as certainty for the private sector.

I very much welcome the proposals for the green investment bank and the reforms to the electricity market included in the gracious Speech. The past two years have been very productive for the development of policy in the Department of Energy on low-carbon energy, cutting emissions and facilitating investment; but now is the time to send a message to the private sector—I will come to this in a moment—that there will be no more changes or developments in policy. Time is running out. We need an embargo on further policy initiatives.

I very much welcome the feed-in tariff and the guaranteeing of the price for low-carbon technology—the investment costs of producing electricity. The initiatives taken by the department for building new capacity in both nuclear and renewable energy provide fair incentives.

I will say a word about wind power, and in particular offshore wind. I very much welcome the developments that have occurred over the past few years and the significant investment. Compared with the investment in offshore wind that the Germans and the French have achieved, we have a good record so far. The intermittence in the supply of electricity coming from offshore wind is a problem. I hope that the private sector can develop the technology to take excess power generated by prevailing winds that the Central Electricity Generating Board does not need and store and use

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that electricity, perhaps using new technologies such as electrolysis to convert and store hydrogen for use in transport, particularly delivery vehicles, buses and so on.

The costs entailed in the delivery of this new energy strategy are very substantial. Estimates for the next five years in this country alone exceed £100 billion. When one considers that policies in France and Germany have brought a fall in central government financing, one can understand that we face a very significant challenge in raising the money. Most of it must come from non-government sources. Obviously there will be subsidies for low-carbon technology that the Government will provide, but the bulk of the investment will have to come from the private sector. UK institutions such as pension funds will not be able to supply a large proportion of that money. Sovereign wealth funds will probably be a better source of finance. The green investment bank is likely to have only something like £3 billion, whereas £100 billion will be required over the next three to five years.

We can also export some of our technology—particularly to China, India and Brazil—for cash receipts. Whether the Government or the private sector facilitate that, it could be a source of funding. The EU Project Bond Initiative, aimed at raising money for energy projects and guaranteed by the European Union, holds some promise. I once again emphasise the importance of certainty for the private sector that no more policy initiatives will proceed. Policies completed: implementation now.

10.35 pm

Lord Northbrook: My Lords, I fully support the coalition's plan to cut the budget deficit as being its most important economic aim. If the coalition had not tackled this we could have been in the same state as Greece. Much progress has been made on this front. When the Government came to power, the outturn for that year of net borrowing stood at £156 billion. The final 2011-12 figures showed that it had gone down to £126 billion as per the Government's target.

The success of the conventional gilts auctions so far this month, which have already raised £9 billion at a most favourable rate of interest, shows that the markets have faith in our debt reduction policy, which is so important. The CBI has given its seal of approval to the Government’s economic policies. Its economist has stated that there will be a small recovery this year of 0.6% and a much better improvement in 2013, when the figure will be 2%. The CBI is also confident that inflation will continue on a downward trend and come close to hitting the Government's target of 2% in the spring of 2013. It believes that consumer spending will recover as inflation falls further and disposable incomes begin to recover.

John Cridland, the director-general, also said at the start of May:

“Despite the disappointing GDP estimate for the first quarter from the ONS, we still think the UK economy will grow in 2012, with faster growth next year. Optimism among businesses has been increasing since the turn of the year, with manufacturing demand holding up. And that is beginning to translate into more jobs and investment”.

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The IMF is also fairly upbeat. In April it upgraded its economic forecast for 2012 growth to 0.8%. It cited the colossal efforts in February to avert eurozone meltdown by the European Central Bank when it extended cheap lending to banks. As other noble Lords have stated, we had two bits of very good news today on the employment front and on motor sales. But this can be built on to help business at this critical stage, particularly when things in Europe are bound to get a lot worse.

On Monday, the Prime Minister played host to his Business Advisory Group. Key players such as Justin King of Sainsbury’s have urged the Government to implement in full the schemes that they had and were given.

According to the Sunday Times on 13 May, a report on reforming employment law was drawn up by Apax Partners but was buried on the grounds that it was too controversial. A bonfire of regulations has also been promised, but few businesses report any relaxation in red tape. Indeed, the Government in their own Regulatory Policy Committee 2011 annual report state that the,

“number of regulatory proposals deemed ‘Not fit for purpose’ remains unsatisfactory”.

The report goes on to state that over a quarter of impact assessments failed to pass the RPC test.

The next problem area is the banks. They have two conflicts. First, the Government want them to increase their lending. However, that clashes with their need to build up capital. The Independent Banking Commission requires them to hold much more capital than their foreign rivals. The Bank of England’s new Financial Policy Committee said recently that banks should,

“give serious consideration to raising external capital in the coming months”,

and,

“improve the resilience of their balance sheets”.

Much more needs to be done to sort out this dichotomy so that the UK economy is not placed at a competitive disadvantage to other countries’ banks. Yet this does not excuse the attitude of some banks with regard to lending to smaller companies. The £20 billion national loan guarantee scheme began in March. It enables government-subsidised cheaper loans to companies but apparently the major bank, Santander, has yet to offer this lifeline to its customers, and Lloyds is offering discounts only on loans above £25,000. The Forum of Private Business is unhappy with this situation. Its spokesman said yesterday that:

“This is massively disappointing. We said all along that we had serious doubts whether the smallest firms most in need of cheaper credit would benefit from this scheme”.

Could the Minister please assure the House that more pressure should be put on the likes of Santander and Lloyds, and let me know how much of the £20 billion of the scheme has been taken up?

The banks also have to face in the background the problems of the eurozone. We do not know whether the Greek political parties may be able to form a Government after the election that can put through the necessary measures to meet the requirements of the EU and IMF loans. The European Union has to decide whether to give in yet again and come up with another compromise, or that there has to be an early

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exit of Greece from the euro. It would be much better if an early exit of Greece from the euro were to be organised quickly and in confidence, up to the point when the necessary announcements must be made.

I move on next to the subject of quantitative easing. I am not an economist, but it has been suggested that the QE scheme is not being used fully for what it was designed for. When it was set up, the Bank of England said it would be used for corporate bond purchases as well as gilts. That has not happened. Would it not help the economy much more if QE was switched more towards corporate bond purchases, and what are the risks of so doing? The operation seems designed to help more with debt management issues rather than corporations.

The Government need to cut taxes further. Corporation tax remains high in the UK compared with other countries in the G20. We still rank behind Canada, Mexico, China and Turkey in terms of business taxes. I welcome the Chancellor’s decision to cut corporation tax in the Budget, but we are still only in the middle of the G20 pack, according to the CBI. If we are to encourage manufacturing, why not increase the rate of capital allowances? Also, the top rate of personal tax should be reduced to 40% as soon as possible.

Employee measures contained in the Queen’s Speech are unhelpful to industry. The proposed well-meaning sharing of maternity leave will cause a bureaucratic nightmare and certainly discourage any employment of a husband and partner in a business. Anecdotally, I hear that small business employers are less keen to employ a woman of child-bearing age due to not having the infrastructure to cope.

In summary, the coalition are making all the right moves with regard to the most important issue of deficit reduction, but much more needs to be done to stimulate the economy without resorting to a Keynesian stimulus which could endanger our credit status and make it so much more difficult to get rid of the terrible debt burden that we inherited from the last Government.

10.42 pm

Lord Monks: My Lords, Members of the House may have noticed that two members of the Cabinet have had rather difficult speaking engagements today. The Home Secretary has been to the Police Federation, always a frosty audience when there is a dispute on, and the Foreign Secretary has been at the CBI dinner. For him that would normally be a pretty straightforward engagement, but I wonder how the CBI reacted to his weekend speech and remarks exhorting British business to work harder and stop whinging. Several Members have criticised him for those remarks, but in one area —he may not know that he is going to be congratulated on this; I am sure he does not—that of the deregulation of employment protection law, I think he is dead right. A large number of employer lobbyists have certainly been whinging about that and pressing the Government to weaken employment protection legislation. The gracious Speech serves notice of an intention to take this work forward. That is one of the few ideas that is linked to spurring growth in the current depressed economy.

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This view, which I accept is commonplace among many employers—it is the staple diet of conversations in the lounge bar—is not borne out by the evidence. The Labour Force Survey shows that the effects of employment protection legislation on both spurring and protecting employment are neutral over the cycle. All the surveys that have been done in various countries, apart from those with really excessive regulation, show that to be the case.

We have already debated the rise in the qualifying period for unfair dismissal to two years and the removal of lay members from employment tribunals. I will not go over all that again because there are new proposals now being consulted on, proposals to introduce a fee of over £300 to seek redress at a tribunal and for no-fault dismissals in firms employing 10 or fewer people. That is simply paying them off with the equivalent of a redundancy payment, regardless of the justice of their position or what the employer may have done. We have heard tributes paid to this country and its creativity and I agree with some of that, but for this country to take such an abject route to growth or think it is going to find a way to growth is a counsel of despair. Saying the UK can only compete if our people are cheaper, work longer and are less protected is a counsel of despair, and a low road to growth if ever there was one.

Since the economic crisis hit us, there has been a clear need for more British companies to be able to move up the value chain to be more innovative, more creative and more highly skilled on a wider range of products and services than we have at the moment. That should be the Government’s strategy, not simply a cheapening process, which seems to be the aim at the moment. That would be the high road to growth rather than the low one, and would involve us doing things well and doing new things on a continual basis.

This process should also involve us thinking about what companies and workplaces should be like in the future. How does executive pay fit in? Should workers be on the remuneration committees? Should we develop a more Germanic system of worker engagement, pulling people together for the good of the firm and the good of the country? That is what the company of the future should embrace and that should be our agenda in this area. That is why, on the other side of the North Sea, people in companies embrace the things that I am talking about. For us to get from where we are now to where they are would inevitably mean more law, not less.

Not all employers are whinging about the employment legislation. The Chartered Institute of Personnel and Development said:

“Businesses have far more to lose in lost productivity from a de-motivated and disengaged workforce than they stand to gain from the ability to hire and fire at will”.

I ask the Minister and his colleagues to listen to that wise voice and pay less heed to the whingers.

10.48 pm

Lord Tope: My Lords, I intend to speak primarily about local government so must start by declaring my interest, as I always do, as a councillor in the London Borough of Sutton and a member of its executive,

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if only for the next five days. On Monday, Sutton Council will use one of the many opportunities afforded by the Localism Act, on which we spent so many happy hours last year, to abolish its executive/scrutiny split and establish a committee system that will reflect local government in the 21st century and not be simply a reversion to the service-based committee systems of the previous century.

The subjects for today’s debate are agriculture, business, the economy, energy, environment, local government and transport. Earlier, my noble friend Lord Bradshaw said that he would cover six of the seven in his speech. I can probably claim that I am going to cover all seven of them because all seven are of real importance to local government, and perhaps even more importantly local government has a vital role to play in the success of each of these issues.

Inevitably, much of today’s debate has concentrated on the economy. The days when business and local government regarded each other from a distance with mutual mistrust and misunderstanding are long gone. Each has learnt from the other, each has come to appreciate the better points of the other, and all over the country there are now strong and successful partnerships delivering real benefits for their local communities.

This is a success story on which we need to build. Our next opportunity to do so will be the Local Government Finance Bill, which will be with us in a few weeks’ time. Like the Localism Bill, it comes to us with some room for improvement, not least in that part of the Bill to which my noble friend Lord Shipley referred so eloquently. The other part of the Bill, dealing with the so-called repatriation of business rates, offers the prospect of local authorities providing incentives for real economic growth and working with their local business community to achieve that but to mutual benefit.

If we are really to build on this success, central government must demonstrate that it really trusts local government. It must show that it recognises that elected councillors have their own democratic mandate and are themselves accountable to the people who have elected them, which has usually been done in a far more direct and audible way than elsewhere in government.

The Localism Act made a good start, but it will not implement itself. It provided opportunities for local government, and local government needs to create the space and time to make the most of these opportunities. That would be a challenge at the best of times, and these are hardly the best of times.

Local government is living through a period of unprecedented change and challenge. Those challenges include: the rapid growth in the number of academies and in pupil numbers, particularly in London; local authorities’ imminent and very welcome acquisition of responsibility for public health; the coming of police and crime commissioners, which will inevitably affect the relationship between police and local authorities, which again has improved dramatically in the past 20 years; the changes to welfare and the cuts in benefit; and the huge demands placed on adult social care, to

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which many have referred today; and so on. My noble friend Lord Shipley referred to the cumulative impact of legislation on local authorities, which is huge.

All this change and challenge is happening at a time of cuts in council budgets of unprecedented size and speed. Budgets are reducing dramatically, staffing is reducing dramatically, but the demands on both are increasing at least as dramatically. Doing more for less demands innovation and ingenuity. That is not easily achieved when the greatest demand is to maintain morale among staff worried most about their own jobs and futures. If ever there was a time for those in the public sector to be working together to ensure the most efficient use of its budgets, surely this is it, yet progress on community budgeting, known by the previous Government as Total Place, seems to have ground to a halt—indeed, if it ever really started.

It may be understandable that, in times such as these, organisations become even more protective of their own budgets, but that is manifestly not in the public interest. All central government departments should take the lead in this and require their local bodies, where appropriate, to do the same. It is the responsibility of Ministers individually and collectively to make this happen.

As I have said, councils already do a lot to promote economic growth, working in partnership with business, the third sector and other parts of the public sector, but they are ambitious to do more. City deals with the core cities are very welcome, even if distractions such as elections and referendums have made slower progress than some of us would wish, but we need to do more and to do it faster so as to establish “local growth deals” in areas beyond just the core cities.

I referred earlier to some of the challenges facing local government, yet I take heart that, throughout history, it has been the times of greatest challenge that have produced the greatest change and innovation. I remain optimistic.

10.55 pm

Lord Gardiner of Kimble: My Lords, it has been suggested adversely that the Queen’s Speech was light in its number of Bills. I take a contrary view. Over the years, Parliament has legislated too often and too much; yet I am persuaded that the Groceries Code Adjudicator Bill has now become necessary so that suppliers and primary producers are treated fairly and the long-term interests of consumers are safeguarded. It cannot be in the public interest for our dairy farming sector to decline in the way that it has. In saying so, I declare my farming interest, my membership of the National Farmers’ Union and my executive directorship of the Countryside Alliance.

Rural-based businesses cannot compete without fast and reliable broadband and mobile coverage. It would be churlish not to congratulate Her Majesty’s Government on their determination to address this by committing to 90% super-fast broadband coverage of the United Kingdom by 2015. I fear the remaining 10% is likely to be in rural areas. To address this, Defra’s £20 million rural community broadband fund is now open for applications from the most remote communities and is most welcome. Many communities are working together to find solutions.

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The reasons given for broadband dissatisfaction in rural areas relate to speed, reliability and value. Many rural towns and villages do not benefit from the level of competition in broadband provision that is common in urban areas. In the most remote parts of the country, therefore, the situation is even more acute. The National Farmers’ Union ran a poll on broadband access in rural areas and the results indicated that about 40% of respondents could not get broadband at all, while 90% of those who could get broadband access did not have a reliable connection. There is much more to do.

I also refer to mobile telephone coverage, which is, to say the least, patchy. My own experience in rural Suffolk is that the best reception that I can obtain is if I climb one of the apple trees, which I do during the pruning and picking time of year. To be serious, this lack of coverage hampers rural business opportunities. The creation of small businesses is crucial to our country’s economic prospects, and effective broadband and mobile telephone connections are essential.

The rural economy turns over £300 billion each year and employs 5.5 million people. Farming remains at its core in producing more than half our food domestically and maintaining the outstanding and diverse countryside that underpins tourism, which itself provides business opportunities. We must value the countryside; we expect a great deal from it.

I was brought up in a family where buying British food was a matter of course. Our food here is produced to some of the highest standards in the world. We have set, via regulations, these higher standards for environmental and welfare reasons, but they come at a cost. The burden of regulation has become more cumulative and demanding on British farmers; the Macdonald review into the farming regulation task force established by this Government was not before time. Regulation has imposed higher costs upon the British farmer. In turn, this should mean that the public sector in particular should give a lead.

Despite government buying standards, public institutions are not buying as much British food as they could or should. Each year, the public sector spends close to £1 billion buying food, yet in local education authorities only about 35% know the country of origin of the food they serve school pupils. When it comes to hospitals, only 14% of NHS trusts in Britain know the origins of the food they are serving to patients. I therefore urge decision-makers to look more favourably towards local producers to fulfil their food needs. They will no doubt respond that this will cost more, but if we include in the equation the potential reduction in food miles and carbon emissions, and most importantly the high quality that we require from British produce, it all makes sense.

Only last week, the Prime Minister said that if we care about eating food produced to the highest standards in the world, we need to buy British. That is something that all of us should do more of. Will my noble friend the Minister therefore confirm the importance and value of the British agricultural sector, ensuring that it is recognised and that we have food security at home as a matter of public policy, and that the Government

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will foster the climate in which small and large businesses, whether in urban or rural areas, can prosper and grow so that our great nation’s economic stability can be restored?

11.01 pm

Lord Davies of Oldham: My Lords, this has been a fascinating debate which has been hampered by the fact that although it began with a concentration on the economy—the House will not be surprised that I intend to direct a great deal of my remarks to the advocacy of the amendment moved by my noble friend—and although the economy was bound to dominate the debate, we had six other subjects to consider. Although they were somewhat late in getting under way on the agenda, they did not in any way receive short shrift once addressed by the noble Lords who were concerned with those issues. In response to the debate, therefore, the great danger is that I could make a speech which would take us well past midnight, whereas the Minister is aiming to finish well before.

I must first congratulate the two maiden speakers. The noble Lord, Lord Ashton of Hyde, had to withstand a most stimulating introduction from my noble friend Lord Myners concerning who he was. When he began his maiden speech, his response was of sufficient vigour to show that he is going to enjoy himself in his contributions in this House in the future. We particularly appreciated the points that he had to make about regulatory regimes.

The right reverend Prelate the Bishop of Durham made a most impressive speech. Of course, we all envy him for both the city in which he lives and the cathedral which he has as his major location, but what we admired today was the seriousness of the contribution that he made on the economy. How welcome that was. If there is one obvious criticism of this place which gives rise to the demands for an elected House, it is inevitably that we are geographically limited. We have an overwhelming south-east concentration: a mere smattering of voices is heard from across the United Kingdom as a whole, and the north-east is not excessively represented in our contributions. The noble Lord, Lord Bates, will jump up and correct me in a moment but he knows what I mean when, at times, even he has been a lone voice. It is very welcome therefore that the right reverend Prelate can make a contribution from that dimension.

If the House will forgive me, I will address one or two of the other issues next. My main role for the Opposition is in transport and this debate says that it is about transport. Several contributions were made that were of particular and striking interest on those issues—not least, the significance of transport as the basis for the important infrastructure of the economy. It is also an area in which we could accelerate investment. The case which the Opposition are putting is the necessity for getting people back to work on infrastructure projects, and where those can be accelerated and brought forward, they ought to be. That is an important dimension, which is why I was grateful to the noble Lord, Lord Bradshaw, for his argument about increasing electrification for freight travel. I was grateful to the noble Baroness, Lady Scott of Needham Market, who talked about

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investment in roads. She is on pretty thin ice—not that the ice is always thin on roads—when she raises the subject of road charging. I see no indication from the Government that their radical thoughts have gone that far as yet. However, she is of course right that we need to look at investment in roads, not least at just keeping the present road structure maintained satisfactorily after the ravages of recent months.

The noble Lord, Lord Patten, said that we should bring forward the HS2 rail project as rapidly as we can. I say to the Government—this is not the first time that I have done so—that we in the Opposition are concerned about aviation policy. With every month that goes by we are losing out on international competitiveness because of our lack of airport capacity. We have said to the Government that we are quite prepared to discuss with them ways in which we can have a joint approach to a solution to this issue because of its great significance to the nation. All I say is that we are now faced with an exceptional degree of prevarication. I am grateful to those voices which have today emphasised that the Government should get a move on. As those voices have come from the Government’s side, that has given me even greater encouragement.

The enormously important issue of energy also had a fair airing in this debate. We have got to get our energy policy right. Of course, there were the inevitable collisions. The noble Lord, Lord Crickhowell, talked about nuclear energy. My noble friend Lady Worthington of course has a great deal to say about nuclear power and how we must ensure that we reduce carbon emissions from our energy sources. However, there are enormous costs involved in nuclear power. We all know that. There have been heavy costs in the past, and we are almost starting from scratch on the next stage.

I was grateful to the noble Lord, Lord Rowe-Beddoe, who introduced the issue of the Severn barrage. He knows that the issue has been tested and costed. That is a real problem, but I am grateful to him for highlighting that we need to look at green energy. It is quite clear that we cannot rely on fossil fuels for the future and then meet our emissions targets.

The main subject of the debate was inevitably the economy. My noble friend Lady Royall, in moving the amendment, indentified what we regard as a clear record of the failure of this Government. The noble Lord, Lord Higgins, even indicated that he did not think much of the process by which crucial Budget decisions had been taken, particularly the extent to which Parliament had not been treated with the respect that it ought to have been in the Budget’s presentation. I agree with him entirely on that. The leaking prior to the Queen’s Speech itself was similarly unfortunate. I hope that we will not have those difficulties again.

Of course the noble Lord, Lord Higgins, did not associate himself with the more fundamental point that we are concerned with. Two years ago the Government set themselves a series of targets that they set out to achieve through various strategies such as Project Merlin and the banks’ position, about which we hear very little these days, and the whole question of being able to reduce the debt within a set period of time, a target from which they are already resiling.

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Crucially, the price of the policy that the Government are inflicting on the nation is clearly unacceptable. Austerity is proving to be unacceptable in a range of countries that have given people a chance to have a voice in elections, such as Greece and France. With regard to local government in the UK—the noble Lord, Lord Tope, made a rather late entry into the debate—one aspect is that the cuts already enforced on local authorities have certainly produced a reaction from the electorate.

A short while ago, we ought to have set storm signals for the Government about the programme and policy that they are pursuing. One of the indicators of that in this debate is that, in addition to the trenchant criticism that the Government will have expected from my noble friends Lord Myners, Lord Haskel, Lord Whitty and Lord Hanworth, it came from the Cross Benches too. It was from the noble Lord, Lord Bilimoria, that the first onslaught came, and an extremely cogent and straightforward attack followed from the noble Lord, Lord Low. The analysis of the noble Lord, Lord Skidelsky, identified for the Government the fact that their position is untenable.

I noticed that reference was made to the British motor car industry and how we should be delighted at its recent figures. I take delight in those figures but I have a little difficulty with it being called the “British” motor car industry. I understand that it is a car industry that is in Britain, but of course the industry itself is Japanese. I make this obvious point. In another society, the car industry was saved by government action. If you go anywhere near Detroit or Michigan, you will know that the state can act effectively to safeguard even an industry in the most parlous position. That industry is now making profits and has made a significant recovery. I would be glad if the Minister indicated that the same degree of recovery has been occasioned through successful government support in our society.

The noble Baroness, Lady Noakes, with whom from time to time I crossed swords in our previous incarnations in this House, asked me whether I had addressed myself to the question of the additional borrowing that would be implicit in the strategy that we advocate. The additional borrowing that we would be involved with would be quite limited in comparison to the significant losses of productive capacity represented by the policy pursued by this Government. The fact that we have so many assets underemployed and so many people unemployed is a massive loss. It will take us years to recover. The Government’s own projection—or, more accurately, that of the OBR—indicates that it will be many years before we recover the productive capacity that we had in 2008.

There is one change in the tenor of the Government’s argument now. When they are in difficulty, they are prone now to putting British economic policy in the context of the wider economies. We are faced with the fact that we are not completely in control of our own destinies and we have to take account of the pressures and weaknesses in the eurozone. We all recognise the validity of that argument. It does not quite address with the same force the international context. When the tsunami of the collapse of the international financial system occurred five years ago, according to them,

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our problems were entirely due to the mismanagement of the British economy and there was no issue of context there.

We are quite confident that all sides except those entirely devoted to the Government’s cause—and there are signs of dissent within their ranks too—and independent opinion, particularly independent opinion as represented in this House by the Cross Benches, are indicating that the terms of trade have turned significantly against this Government. Certainly the wider nation outside these walls has already given a preliminary verdict on just what austerity represents. This debate, if it does nothing else, ought to call out to the Government at least to admit that there are aspects of the promises that they made only two short years ago that they will be totally unable to fulfil.

11.16 pm

The Commercial Secretary to the Treasury (Lord Sassoon): My Lords, we have had a wide-ranging and, as ever, insightful debate. I am particularly pleased to have heard the maiden speeches of the right reverend Prelate the Bishop of Durham and my noble friend Lord Ashton of Hyde. I know that the House will look forward to their future contributions if they are anything like as good as their contributions to this debate.

We have an unusual but, we have been reminded, not unprecedented amendment in the name of the noble Baroness, Lady Royall of Blaisdon. While I will respond to as many of the specific points raised in the debate as I can, I will therefore spend the bulk of my time explaining why the House should emphatically reject her somewhat misplaced amendment, which I ask her to withdraw once she has heard what I have to say. Having heard the masterly speech by my noble friend Lord Bates, I rather thought that the noble Baroness might have been minded to withdraw her amendment immediately, but I will have another go.

I welcome this opportunity to reinforce the Government’s commitment to securing our economic recovery and our determination to promote growth, create jobs, and return our country to prosperity. It is not an easy task. It is clear that your Lordships understand the difficult challenge we face to overcome the crippling legacy that was left to us by the previous Government, which included a decade of unbalanced growth that left the UK the most indebted country in the world, resulted in the most highly leveraged financial system of any major economy and meant that the UK entered the crisis with the highest structural deficit in the G7.

All that meant that when we got hit, we got hit the hardest. Our recession was among the deepest and our deficit was among the largest, which means that our challenge to deliver a sustainable recovery is among the greatest. The Government have a strategy to rid the economy of the burden of the debt left by the previous Government and to secure our stability at a time of ongoing European instability, as my noble friend Lord Higgins and other noble Lords reminded us. Our strategy puts private sector enterprise, ambition and innovation at the heart of our recovery. It has

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delivered over 630,000 new private sector jobs since we came into government, which is one and a half times the number of public sector jobs that have been lost.

Let me remind noble Lords that the Government came to office inheriting the largest peacetime deficit the country has ever faced and the largest forecast deficit in the G20, larger than that of many of those countries mired in the sovereign debt storm in the euro area. Two years ago, UK government bond yields were roughly equal to those in Spain and Italy. Because we took tough decisions to tackle the deficit, our rates have now fallen to near-record lows of less than 2%, while those in Spain and Italy have risen to well over 5%, a point made forcefully by my noble friend Lord MacGregor of Pulham Market. Record low interest rates help businesses to secure affordable loans, families to pay mortgages and the Government to finance the debt mountain with which we have been lumbered.

The solution to debt is not more debt. I do not need to take on the noble Lord, Lord Skidelsky, on this. The noble Lord, Lord Desai, and my noble friend Lady Wheatcroft have already done that for me. However, as my noble friend Lady Noakes pointed out, the Opposition would have us pile on yet more debt, suffer higher interest rates and place a bigger squeeze on families and living standards. Indeed, even this afternoon, the noble Baroness, Lady Royall of Blaisdon, advocated more government borrowing. Let me explain to the House that even a 1% rise in effective mortgage rates would add £12 billion a year to household mortgage payments—around £1,000 on a typical £100,000 mortgage. We should make no mistake: it is the poorest and most disadvantaged, not the wealthiest, who are hit the hardest when a country loses control of its finances.

It is fair that we tackle our debts today so that we do not burden our children tomorrow. We should also ensure that we can continue—which we can—to provide high-quality public services and support to those who need it most, and provide those public services partly though refreshed local government, as my noble friend Lord Tope reminded us a short while ago.

We cannot and will not be complacent about tackling the deficit. We are sticking to our plans. Her Majesty’s gracious Speech reaffirmed that commitment. We will not jeopardise the fiscal credibility that is critical to delivering a sustainable recovery. It is only by securing a sustainable private sector recovery that we can help to restore and improve living standards, support families and get people back into work. That is why this Government have set out ambitious plans to unleash private sector growth right across the UK. Those plans include more than 250 wide-ranging and ambitious economic reforms to lift the dead hand of the previous Government’s legacy from our businesses and entrepreneurs.

We are reducing corporation tax to 22% by 2014; cutting an uncompetitive and ineffective top rate of income tax; slashing the red tape that continues to suffocate our most entrepreneurial start-ups; overhauling our cumbersome planning rules to embed a presumption in favour of sustainable development; and setting out plans for some £250 billion of infrastructure investment, including the new green investment bank with an initial capitalisation of £3 billion. In answer to my

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noble friend Lady Kramer, I say that we want to get that £3 billion into real investment as soon as the large projects will permit. As my noble friend Lady Randerson said, the green investment bank is already in business; it is actively considering the first 20 proposals. Beyond that, we are helping to tackle underinvestment in renewable energy as a precursor to comprehensive electricity market reform through the energy Bill, and helping to attract the £110 billion of investment that we need in the next decade to deliver secure, low-carbon energy across the UK. That was a point made very clearly by my noble friends Lord Crickhowell, Lord Selborne and Lord Freeman. The noble Lord, Lord Rowe-Beddoe, pointed out one very challenging but potentially significant opportunity in delivering that ambition.

The Government are ensuring that our businesses have access to finance by securing £190 billion of new lending to UK companies in 2011 and providing SMEs with access to cheaper loans through the new national loan guarantee scheme. My noble friend Lord Northbrook questioned whether it was up and running. Indeed it is, as evidenced by the fact that Barclays and Lloyds have already issued bonds linked to the loans in the scheme.

As my noble friend Lord Caithness noted, securing a more resilient and sustainable financial sector through the banking reform Bill is another priority. It is a measure which, as my noble friend Lady Wilcox said earlier, will complete its passage in this Parliament. We also will increase the opportunities for businesses to capitalise on non-bank lending channels.

Across government, we are matching the endeavour of our businesses to restore growth across the UK. Through the enterprise and regulatory reform Bill, we are driving through regulatory reform, streamlining employment tribunals, boosting research and development through the catapult scheme, as the noble Lord, Lord Broers, reminded us, making it easier to do business and giving employers more confidence.

Lord Skidelsky: How long does the Minister think that it will be before sustainable recovery happens?

Lord Sassoon: My Lords, it is already in progress. The fact that, in the two years that this Government have been in office, the private sector has created twice the number of jobs that have come out of the public sector is clear evidence of that. Today, we have the numbers that show unemployment is at its lowest level in seven months. It is much higher than we would like but it is reducing. These and other evidence which noble Lords have given in the debate shows that, while there is a lot more to do, in the face of these huge headwinds from the eurozone and elsewhere sustainable recovery is under way.

One of the biggest challenges to make sure that that recovery is sustained is regulation. My noble friends Lord Ashton of Hyde, Lord Lucas and Lady Noakes, and the noble Earl, Lord Lytton, all pointed to some big challenges on the regulatory agenda. We will not shy away from them.

In my noble friend Lord Patten’s discussion of regulation, he referred to the fennel on the brochure that the Government put out. I am sorry that I have

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not been able to determine whether they were British or foreign fennel but, either way, making sure that they are supplied through the supermarkets on proper terms is something which the new grocery adjudicator will bring.

In the enterprise area, I can assure my noble friend Lord Tugendhat that, again, as my noble friend Lady Wilcox explained in her speech, we will introduce provisions on directors’ pay in the enterprise Bill. In another important area of enterprise, I can assure my noble friend Lord Lexden that the ministerial working group on Northern Ireland is making good progress and will report this summer.

On rural affairs, we are supporting growth across all parts of the UK. I can absolutely assure my noble friend Lord Gardiner of Kimble that we take these issues very seriously. We are committing £530 million for rural broadband deployment by 2015 and creating rural growth networks to help overcome barriers to growth, such as poor infrastructure and mobile networks. We are adopting the ecosystems approach, as my noble friend Lady Miller of Chilthorne Domer noted, and will introduce reforms in the water sector, as noted by my noble friend Lady Parminter and the noble Lord, Lord Whitty, although I note that we are urged onwards by my noble friend.

I heard very clearly what the right reverend Prelate the Bishop of Hereford said about the importance and difficulties of the agricultural sector, which was also referred to by my noble friend Lady Byford, who again linked it to the importance of the grocery adjudicator.

On transport, we are introducing a Bill by the end of 2013 to secure powers to construct and operate the next phase of the high-speed rail network from London to the West Midlands. I learnt quite a number of things in areas of transport of which I did not know the fine detail until this evening. My noble friend Lord Brougham and Vaux rightly pointed out the difficulties in motor insurance—and now I understand the role that telematics and number plate issues will have as Ministers work both on the cost of insurance and on driving out uninsured vehicles from our roads.

The noble Viscount, Lord Simon, reminded us about high-speed issues, and that is noted. My noble friend Lord Bradshaw again reminded us of some important issues in the rail freight area. My noble friend Lady Scott of Needham Market talked interestingly about the possibilities for the local enterprise partnerships to promote local roads. She got a little ahead of commitments in some areas that I could give, but she was rightly challenging and reminded us of what can and must be addressed.

The global market is changing. Unlike our predecessors, we will make sure that the UK is not cut adrift. Over the last year alone, the value of UK goods exports to India grew by 40% and to China by over 20%. As my noble friend Lord Razzall pointed out, in the first quarter of this year the UK exported more cars than it imported for the first time since 1976. That was driven by strong demand from the US, Russia and China. The opportunities of course flow in both directions. The UK is now the number one destination for inward investment from some of the world’s largest investors,

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including countries such as Kuwait and Qatar. The Tata-owned Jaguar Land Rover has already announced 1,000 jobs at Halewood and £1.5 billion of annual investment in new technologies and products. I was sorry to hear the noble Lord, Lord Davies of Oldham, running down the idea of foreign ownership in our car manufacturing and other areas, when we should be immensely grateful and very proud that we can attract this investment.

My noble friend Lady O’Cathain mentioned the revival of the steel industry. Just last month the Redcar steel works on Teesside kick-started steel production for the first time in two years on the back of investment from Thailand. That is what global investment is doing—securing local jobs.

So this is a comprehensive strategy to return the UK to prosperity. It will not be an easy task and I know that for many families these are tough times, an issue to which my noble friend Lord Shipley specifically referred. But we will not let our poorest and most vulnerable families bear the consequences of the Opposition’s failures when in government. That is why we secured the largest ever cash rise in the basic pension and uprated working age benefits by 5.2 %, protecting the real incomes of the poorest, and that is why we are increasing the personal allowance, reducing tax paid by the basic taxpayer by £350, lifting 2 million people out of tax altogether. It is why we are supporting our young people through the recovery. I agree very much with the noble Lord, Lord Borrie, on the importance of this. It is why we are providing more apprenticeship places than any previous Government. Four hundred and fifty thousand apprenticeships were started in 2010-11—a record in modern times. I am grateful to my noble friend Lord Addington for understanding that we are making progress in this area but that we need to address quality issues—it is not merely a numbers game. It is why we are launching a new £1 billion Youth Contract, supporting up to half a million young people into work, learning their trade, and equipping them for their future career. As John Cridland, Director-General of the CBI has said, it is a scheme that strikes at the “scourge of youth unemployment”.

In conclusion, this is a bold programme for economic reform. It is a vision to return the country to prosperity, tackling the crippling legacy of debt, restoring our competitiveness, boosting private sector growth, investing in our infrastructure and supporting families and young and vulnerable people as we recover from Labour’s economic disaster. As we have seen today, the Opposition have no credible response to the economic challenges that the country faces. Indeed, I have heard no response at all today. Whereas they borrowed their way into trouble, under the coalition we will earn our way out of it.

11.36 pm

Baroness Royall of Blaisdon: My Lords, we have had an excellent and full debate this evening on a wide range of issues. I am very glad that my Benches tabled the amendment that we did so that we could focus the attention of the debate on what we believe should have been in the Queen’s Speech.

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I am very disappointed in the Minister’s reply, as, when he dealt with economic policy, he merely repeated the mantra that he has repeated so many times from that Dispatch Box: that the crisis is all the fault of the Labour Government. However, it is not all the fault of the Labour Government. Yes, when the noble Lord and his colleagues entered government, it was a very difficult time and we were in the middle of a deep financial crisis. However, it was a global financial crisis. In fact, the coalition inherited an economy that was on the path to recovery. It was growing at 2 per cent a year with a deficit plan in place that would have halved the deficit in four years. Instead of that we have unemployment, so the unemployed are not paying their taxes, there is no growth in the economy and the deficit is getting bigger. We now have a double-dip recession and the Minister and his colleagues blame it all on the eurozone. It is strange that they blame the current crisis on the eurozone. However, when they came into government, they said that the problem did not result from the global financial crisis but was our fault. That is all very strange.

I have to take issue with the Minister when he says that high-quality public services are among the big successes of this Government. The postcode lottery in social care is getting worse. Youth services up and down the country have been decimated. Libraries have been closed. School buildings are falling into disrepair and waiting lists are growing. The responsibilities of the state are being rolled back and the burdens are being placed on charities, which want to cope but are finding it more and more difficult to do so because they have so much on their shoulders. Therefore, I think it is a bit rich for the Minister to say that that is a priority.

The Minister also says that this Government will not cut the UK adrift. I am glad if the level of exports is getting better in some areas, and, as the noble Baroness, Lady O’Cathain, asked me to do, I celebrate the success of the motor industry. Clearly, it is very good for the people of the north-east and I hope that it will secure the future of the people in employment in Ellesmere Port. However, while we may not be cut adrift in our exports to India, I would say that we are cut adrift in our isolation in the European Union, and that saddens these Benches. The differences of opinion are clear. We believe that it is the young, the poorest and the most vulnerable in our society who are suffering, and most of the cuts have still not started to bite, as the noble Lord, Lord Razzall, pointed out.

There have been some very important speeches today, including of course that of the noble Lord, Lord Skidelsky, with whom I agree. In his wise contribution he said that it is better to put people and plant to work rather than to destroy them. I certainly agree with that. I also certainly agreed with the right reverend Prelate the Bishop of Durham, who said that confidence in the economy comes from action, not exhortation, and that it comes from cranes and scaffolding. Where are the cranes, where is the scaffolding, where is the infrastructure investment and where are the jobs?

I am very conscious of the late hour. I am very glad to have tabled the amendment because it focuses on the priorities that we believe should have been in the

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Government’s legislative programme. Looking at the result of the local elections and the polls, it is clear that they are also the priorities of the British people. Like us, they want this Government to change course. As I said, I am conscious of the lateness of the hour, so I shall not press my amendment to a vote. With that, I beg leave to withdraw the amendment.

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Amendment withdrawn.

Debate adjourned until tomorrow.

House adjourned at 11.41 pm.