Lord McFall of Alcluith
My Lords, I thank the noble Lord, Lord Hollick, for securing such a vital debate today and congratulate all the maiden speakers on such excellent speeches. I wish them well in their journey in the House of Lords.
Growth is essential to reducing the public debt ratio. Cutting the deficit without that being accompanied by strong growth will end up in disaster. Let us remind ourselves of the Labour Government in 1997. From 1997 until 2002, the Labour Government stuck to the Conservative spending targets and the UK net debt fell from 42 per cent of GDP to 29 per cent of GDP. They did that precisely by growing the economy, not just by cutting spending alone. There are economic growth policies consistent with debt stabilisation but the problem for this Government is that they have scared the population witless with their austerity message. “Vote for us and death tomorrow” is not a good slogan, so they will need to change. They realise now that there has to be a different mantra. They have to give people some hope and something to look forward to.
The recent Budget, as people have indicated, is a big gamble because it is taking more than £100 billion out of the economy and, at the same time, there is an ambitious 3 per cent growth target by 2015. That can be done only by investment. We need investment in our communities, our infrastructure and most of all in our people. Let us remind ourselves of the lessons of the 1980s. If the slack in the economy persists for too long unemployment becomes structural. That is why we need investment today.
The Labour Government left some good legacies for this Government—some positives on which they should build. For example, the labour market performance is better than in previous recessions, although unemployment is now going up for both young people and the population in general. Company liquidations and home repossessions are fewer than they were in previous recessions and the large depreciation in the currency has most certainly helped drive the export market. We are in an environment of historically low interest rates and it would be folly to disturb that in the present climate. We need to exploit the relative price changes and complement these policies by making use of the low interest rate environment and by complementing behavioural changes induced by the increased oil prices to promote a low carbon economy. We must also ensure that we maximise the boost to tradables by the fall, or depreciation, in the currency.
These are extraordinary times and the crisis is not yet finished, as we can see in the Republic of Ireland today. It has had its bailout but almost all Irish banks will be nationalised today as a result of it. The crisis is still working its way out in Europe—in Greece and Portugal. Given the crucial importance of the European market for our exports, the Government need to be careful in their attitude to possible future bailouts. If they do not engage in this process, that will further risk reinforcing the divisions with those both within and without the currency. There is no doubt that there will be implications for our foreign policy, which is very sensitive to the Government as we stand today.
Extraordinary times demand extraordinary measures. I would not be advocating, as others have done, an investment bank had it not been for extraordinary times. I called for the very same in a Guardian article, “Britain needs a state bank”, on 9 January 2009. Sadly, the Government at the time did not take that up, but it is very important if these objectives to growth are to be attained. If there is a European investment bank, why cannot there be a UK investment bank? If we have a network of post offices throughout the country, why cannot the post office network be used to ensure that the Government achieve their ambitious lending targets?
Today the Government are offering cheap finance. If we ensure that the debt is indexed, finance can be done at 1 per cent and we need only get money back to service the debt. Mention has already been made about the attitude of the Treasury to public investment. The HMT approach to public investment needs revisiting. Given the big gamble, the Government need to show boldness, as my noble friend Lord Hollick said, and not timidity. We need policies that are consistent with these ambitious targets and I suggest that one beneficial step would be to change the slogan from “Cuts, cuts, cuts” to “Investment, investment, investment”.
Baroness Warsi
My Lords, I remind the House that when the clock hits “4”, four minutes are up.
The Commercial Secretary to the Treasury (Lord Sassoon)
My Lords, we have had a tremendously interesting and wide-ranging debate today. I thank all noble Lords who have contributed, particularly the noble Lord, Lord Hollick, for securing what is in effect, I suppose, part two of our growth/Budget debate. I recognise what the noble Lord, Lord Haskel, kindly said about the endurance of the Minister who has to sit here, but I note that many other noble Lords have sat here throughout. I am only grateful to at least have a week between the two debates rather than have it on two consecutive days.
I completely agree with the noble Lord, Lord Davies of Oldham. It has been an overwhelmingly constructive debate, in which many positive ideas have come from all round the House, and this presents me with an additional challenge today. Last week I attempted, maybe foolhardily, to make some mention of all noble Lords’ contributions to that debate. But I know my limitations. Today, with even more speakers and an even shorter time to respond, I apologise in advance but I am not going to be able to make mention of everyone who spoke. There were lots of good ideas, not all of them workable, but it is right that you should push the envelope in imaginative ways, whether in the use of faith buildings or encouraging science in schools. There are all sorts of great ideas coming from around the House, and I will make sure that those are considered by the Treasury or the other departments responsible.
In general, the message I take away is very welcome, because I know that the temptation is for us all, or for a lot of us, to be making political points. The message that I take away is that there are many good things in the Budget and in the growth document that went with it, but that we have to work harder—I understand that—and consider lots more of the ideas that are coming up. In the phrase of the noble Lord, Lord Hollick, it is a worthy and promising start. I appreciate that. I take to heart the big challenges for us—that we must be bold and not timid as a Government. I agree, and I will come back to that. We must always remember the big picture. I agree with that. We have to live up to the challenge of the Government’s part of the bargain of delivering and not just making promises. I will come back to each of those themes in a minute.
I start by acknowledging the five excellent maiden speeches that we have heard today—from the noble Lords, Lord Kestenbaum, Lord Wood of Anfield and Lord Collins of Highbury, my noble friend Lord Popat, and of course the noble Baroness, Lady Worthington, who has confused me by moving seat. I am glad to see that she is back in the Chamber. There was a common and very important theme in those speeches, some of it put very movingly, about what this country and this House have done to foster diversity, whether of ethnicity, faith, gender or sexual orientation. Of course, we must not forget that diversity in hair colour is also a feature of life. The maiden speakers also, by their diverse backgrounds in business, academia, the unions and the environment, and by the quality of the individual speeches, could make no better case for this making a genuinely value-adding House that we are all part of. That was a great addition to what was, in any case, a very important debate.
I remind noble Lords of the context of this year’s Budget and growth plan. The Budget is about reforming the nation’s economy so that we have sustainable growth and jobs in the future. “Sustainable” is a word that has been used by a number of noble Lords. It is worth very briefly reminding ourselves, as a number of speakers have done, that this will not be possible without sticking to our deficit reduction plan. My noble friend Lord Higgins was the first to point out the constraints within which we live. It is that plan that has secured the economic stability, the international credit rating and the low interest rates that are the platform from which we must go forward with sustainable growth.
Last week’s Budget was built on clear economic principles of sound public finances—and no wavering on that—but support for private sector growth, reward for work, help with the pressure of high fuel prices in the short term and a new vision for growth. That vision for growth has four key ambitions at its heart: that Britain should have the most competitive tax system in the G20; that Britain should be the best place in Europe to start, finance and grow a business; that Britain should be a more balanced economy by encouraging exports and investment; and that Britain should have a more educated workforce that is the most flexible in Europe. Those noble Lords who had the stamina to be here during last week’s debate as well will know that I went through each of these four areas thematically. But let me today take a slightly different cut through the issues, prompted very much by the challenge of the noble Lord, Lord Hollick, that we must be bold and that timidity is not enough. That is linked to the challenge from a number of noble Lords that we must attend to the big picture.
Let me suggest to your Lordships a number of areas in which I believe we are being bold and addressing the big-picture issues. Take corporation tax: the fact that we are heading, in three years from now, down to a corporation tax headline rate of 23 per cent, which will take us to the lowest rate in the G7 and one of the lowest in the G20. I suggest that that sends the clearest signal possible around the world that this country is again open and welcoming to all businesses to come and base significant global operations here.
Deregulation is a difficult, challenging topic which the previous Government worked hard on but we have to find new ways of tackling it credibly. Again, we will be bold so we are starting right now with a new initiative to put tens of thousands of individual regulations on to a public website. Two weeks at a time, chunks of regulation related to a specific part of the economy will be open to challenge. At the end of the period of public challenge, it will be up to the departments concerned to argue why any regulations which have been challenged by the public must stay in place. The presumption of the committee led by my right honourable friend the Business Secretary will be that if people identify a regulation that has to go, it has to go unless there is an overriding reason for it to stay. I suggest that is bold.
Planning is a critical issue for growth in this country, and we will bring out some draft new planning guidelines within the next few months. They will have in them a fundamental new approach which has, at its heart, a presumption in favour of sustainable development. In addition, the new planning rules must have a process in place where the entirety of planning, including appeals, has to be finished in no more than 12 months. For those of your Lordships who have businesses stuck in planning processes that go on for three or four years, I suggest that is a bold approach.
A number of speakers brought up the field of energy and the question of setting a carbon floor price was raised. I suggest that setting a carbon floor price is a bold, difficult but necessary part of underpinning the huge amount of new energy investment which this country needs, so we will not shy away from taking the difficult decisions.
We have heard a lot about education—
Lord Davies of Stamford
Will the Minister not acknowledge that although setting a carbon price might be very desirable if it was based on international agreement, if it is based on a purely unilateral or national move we shall be handicapping our industry and our growth, and contributing nothing at all to the reduction of global warming?
Lord Sassoon
My Lords, I do not wish to be discourteous to the noble Lord, Lord Davies of Stamford, but if I am to do justice to at least some of the points that have been raised in the debate so far, he will perhaps forgive me if I do not answer his question in intervention. I would rather do justice to some of the points made in the debate.
On education and bringing people into the workforce, I could mention a number of initiatives but let me just draw attention to the apprenticeships. Those are one key plank of what has to be a bold transformation of young people’s appreciation of the different and valuable routes into work. The total number of apprenticeships that will be available over the next four years is 1.1 million, so the Government are playing their part in making the apprenticeships available. I hope that, as my noble friend Lord Newby has said, business will rise to the challenge of taking up those places. Again, these are big-picture issues and this is, I suggest, a bold approach.
Lastly, there has been mention from a number of angles of the challenge to get finance into our corporate sector, whether SMEs or the whole of industry. We have set the banks the challenge now, through the deal that we have done with them, whereby they have agreed to make up to £190 billion of credit available for new loans, and more if it is necessary. That very significant amount of money should meet the reasonable demands of growing businesses in this country. When the banks are under considerable pressure to manage their balance sheets more prudently under new capital and liquidity rules, I suggest again that getting financing through to businesses is one of the big-picture challenges and that we as a Government are rising to that challenge in a suitably bold way.
Another big-picture theme that has come up a number of times and which deserves particular recognition is that of infrastructure because, again, the size of the challenge is enormous. A number of speakers raised this, the noble Lord, Lord Hollick, first, with the noble Lord, Lord Bilimoria, and others following after. We have identified £200 billion of infrastructure investment as being required over the next five years in economic infrastructure alone: in energy, water, broadband, transport and so on. The reason that this is so important is clear. We have an ageing infrastructure which needs considerable refreshment and rebuilding and because of that, at the very start of the Government’s work on our growth plans last autumn, we put out the first ever National Infrastructure Plan. That is starting to identify, sector by sector, the vision that we have for the infrastructure that is necessary for this country over the next 25 years and more.
We committed in the growth programme and the Budget to coming up with a rolling forward programme of infrastructure projects, so that we can start to give much greater certainty than there has been to the construction and financing industry in this country. If we expect businesses and financiers to take the strain, which they will do on 60 to 70 per cent of that £200 billion of infrastructure, we need to give them some clarity about where these programmes will be directed, so that is what we will do.
In answer to the specific challenge from the noble Lord, Lord Soley—although he knows this well—it is worth restating that, yes, aviation policy is very important. That is why my right honourable friend the Transport Secretary took time to work up a consultation paper that was published yesterday. I acknowledge that it may not meet the aspirations of all interests in the aviation sector but it is the start of a critical debate. I acknowledge that that debate must be had: that is why the consultation paper has gone out on aviation policy, which is one critical component. Alongside that, I acknowledge the references that were made to our commitment as a Government to high-speed rail. We must look at transport within a holistic and complete picture.
In this general area, there were also a number of references to the desirability of a green investment bank, a national investment bank or an infrastructure bank; your Lordships expressed it in a number of ways. I entirely understand the ambitions of the noble Lord, Lord Skidelsky—the noble Lord, Lord McFall of Alcluith, made this point as well—but without going into the technical details of PSBRs and how government accounting works, the first thing to say is that having a very large national investment or infrastructure bank is simply not possible given the constraints that we have on the Government’s balance sheet. However one looks at it, this would score against the national borrowing. Even if the case were made, and there are strong proponents on both sides of the argument about how big a green or a national investment bank is required, we have to be realistic about the constraints of the public balance sheet.
Within that, we announced last week in the Budget that we have brought forward by one year the starting date for the operation of the green investment bank to 2012-13. I do not want to make political points, but this Government for the first time have committed the money—£3 billion. That is a good start. We have committed money to this project in a way that there was previously a lot of talk about over the past few years. The bank will be able to leverage in private sector money so, even though in the first couple of years of its operation it will not be able to have its own borrowing, the leveraging effect of the green investment bank, by working with private sector investors, will be materially important to the more challenging investment schemes that must be introduced in the areas of new energy and new technology.
That is to address a few of the specific points made. I end by drawing attention to one or two of the reasons to be positive, which are very welcome. Yes, there are huge challenges, but the noble Lord, Lord Rees of Ludlow, reminded us about the latest Nobel prize-winning team, working with graphene, that has been based in this country and the need to exploit that; the noble Lord, Lord Mitchell, talked about Silicon Roundabout with great passion and the way that that will translate through the Olympic legacy and Tech City into something that is really lasting; my noble friend Lord Flight talked about the 428,000 jobs that were created in the private sector last year; the noble Lord, Lord Bhattacharyya, talked about our great strengths growing again in manufacturing and exports; and my noble friend Lady Wheatcroft gave us a specific example in the design and textile world of what we can do.
This has been a wide-ranging debate. I take from it a great challenge to Government, which I assure noble Lords the Government are committed to driving through. I also take away some great strengths that we have to work on. The Government are putting our economy back on the right path. We are supporting and will support enterprise, and we are driving innovation. We are doing our part as a Government to invest in skills, jobs and infrastructure. The Budget stands firm on our plan for the recovery; it is a plan that is good for business and good for growth and will help to create the prosperous economy that the people of Britain deserve.