House of Lords
Broadband: 4G Mobile
Baroness Garden of Frognal
My Lords, Ofcom is examining this issue in partnership with the Government and the mobile and broadcast industries, and it consulted on proposals last year. The Government announced in February that up to £180 million would be available to address interference problems, and that that would be administered by a body called Mitco, with the money coming from the winning auction bidders. Ofcom published its second consultation on this matter in February and is currently considering responses.
Lord Dubs
My Lords, does the Minister agree with Ofcom’s estimate that over 2 million households are liable to be adversely affected through interference with their television when 4G masts come into operation? Will she further indicate whether the money that the Government are making available will include both the installation costs and the cost of the filters necessary to avoid interference, given that for the majority of households this will not be a do-it-yourself job but will require a fully qualified fitter to do it?
Baroness Garden of Frognal
My Lords, the number of households affected is something of a flexible feast. In many households the interference will be negligible and easily remedied, and in those cases the filters will be provided free. People will be expected to install the filters themselves, but Ofcom ran a test; 95% of those trying to fit them had absolutely no problem in doing so, and that included people of all ranges of ability. The actual fitting should not prove as much of a problem, but contingency funds will be available if it is.
Baroness O'Cathain
My Lords, does the Minister realise that fitting the filters is not easy? I am not a complete idiot, but I had to pay £130 to get my filter fitted by a BT engineer. The reality is that there are lots of people around, and I think I am usually quite reasonable about these things, who are not going to be able to do it. I truly believe that 2 million is a gross underestimate of the number of people who are going to have problems with this.
Baroness Garden of Frognal
My Lords, there is general agreement that rolling out this broadband is in the interests of the economy and of the country as a whole. This development affects mainly those who are on Freeview rather than on satellite and cable. Detailed work has gone into checking which people will be the most affected, and the final figures are very much lower than the 2 million being suggested. From the Ofcom test it appeared that most people had no problem with the filters, but for those who do there will be additional resources to help them.
Lord Gordon of Strathblane
How has this situation come about? I confess that I had always thought that, as with most things, we tended to gold-plate our spectrum separation. I was a member of a Select Committee under the chairmanship of the noble Lord, Lord Fowler, which only two years ago took evidence on the switchover of digital radio and television, and no one involved reported any problems.
Baroness Garden of Frognal
All these developments can happen quite quickly with the rollout. With this one, it was not previously appreciated quite how much interference there might be when the 800-megahertz spectrum was rolled out for other reasons. The properties most affected by this will be those that are very close to the masts. Most of the others will have minimal interference, which can be dealt with relatively straightforwardly. A lot of contingency planning has gone into ensuring that people are not disadvantaged.
Baroness Scott of Needham Market
My Lords, Ofcom, which one has to assume knows what it is talking about, has estimated that there is a £200 million shortfall between the money being made available by the Government and what it will cost viewers to adjust their sets. Why, when the mobile phone companies will make a lot of money from 4G spectrum, should consumers end up having to foot the bill?
Baroness Garden of Frognal
The costs for this will be borne predominantly by the licensees of the 800-megahertz spectrum; that will be part of the auction bid that they will have to sign up to. It is certainly not expected that the Government will have to pay substantial sums of money to support what is basically a commercial transaction, albeit one with, of course, very significant impacts for the economy and for people generally.
Lord Maxton
Will the Minister give an absolute assurance right now that, whatever problems might arise from this, there will be no further delay in the implementation of the 4G rollout? We in this country are already too far behind other countries in rolling it out.
Baroness Garden of Frognal
Yes, indeed, my Lords. This is one of the counterarguments: that we really want this to roll out as rapidly as possible. In many other countries this has already happened. Our advantage is that we have been taking lessons particularly from Sweden, which was in the forefront of the rollout, in where the difficulties occurred and where we might be able to fast-track our system.
Baroness Garden of Frognal
How close is close? It will depend. If your house is right next to a mast, you might be very severely affected. Obviously, it will become less of a problem the further away from the mast the property is.
The Countess of Mar
The noble Baroness has said that no extra costs would fall on the Government—that is, the taxpayer. She has not spoken about the extra cost to the consumer, which is what the House is concerned about. How much of the costs will fall on the consumers?
Baroness Garden of Frognal
I am not sure that there will be significant costs to the consumers for this. It will obviously be an additional service when it is rolled out. The filters for the adaptation will be free, and in most cases the installation will be free, so the actual cost to consumers should not be significant when the rollout is completed.
Baroness Garden of Frognal
There should be a cost only if an additional service is being provided that is of benefit to the consumers. People are normally prepared to pay for services that give them benefit. If any additional cost arises, that should be where it is.
Lord Pearson of Rannoch
My Lords, is the problem of living close to a mast permanent, or will it be sorted in due course? How will this affect long-term property prices?
Baroness Garden of Frognal
You probably need Mystic Meg to answer that one. All these things advance as technology advances, so the solutions to any problems advance as well. I cannot see why it should affect property prices. In extreme cases where people simply cannot continue to get Freeview reception, there will be provision for moving them to a different platform so that they continue to receive their television and broadband services. As to property prices, that probably needs to come under a different Question.
House of Lords: Reform
(12 years, 6 months ago)
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Lord Lee of Trafford
To ask Her Majesty’s Government what is their latest estimate of the cost of their plans to reform the House of Lords.
The Chancellor of the Duchy of Lancaster (Lord Strathclyde)
My Lords, on behalf of the whole House, I wish my noble friend a very happy 70th birthday. As to his Question, cost estimates depend on the content of the Bill. Therefore, the Government will publish full cost estimates when we introduce a Bill.
Lord Lee of Trafford
I thank my noble friend for his good wishes. My finest birthday present would have been for him to announce that the Government’s proposals were to be withdrawn because they are nearly friendless and wholly unnecessary.
Is my noble friend aware that the noble Lord, Lord Lipsey, a distinguished and recognised economist, has costed the Joint Committee proposals? The details have been sent to the Library and are freely available. He projects that the total cost of the recommendations will be nearly £500 million by 2020, broadly split between running costs of £300 million and election and referendum costs totalling £200 million—in other words, half a billion pounds in total. That is equivalent to the cost of 15,000 nurses’ salaries in one year. This £500 million compares with the total cost of running this House for the past five years of £91 million; it is five times as much. When the public wake up to this gross waste of money, will they not kick the proposed Bill firmly into touch?
Lord Strathclyde
My Lords, we will publish a Bill before the Summer Recess. When we do, we will have a full estimate of what a reformed House would cost. However, noble Lords would be wrong to assume that this will necessarily be an enormously expensive enterprise. After all, part of the purpose of reform is to reduce significantly the size of the House. However, we will make a full cost estimate when we publish the Bill.
Baroness Boothroyd
My Lords, the Prime Minister recently said that he had not ruled out a referendum on Lords reform. Bearing in mind that this House was told last May, after the country had rejected the AV system, that the cost of that referendum was around £120 million and still counting, what estimate have the Government arrived at for a referendum on Lords reform in these hard-up days?
Lord Strathclyde
My Lords, the Government are not convinced of the case for a referendum, even though it was a recommendation of the Joint Committee of both Houses, which reported earlier this year. The noble Baroness will have to be patient until we publish the Bill, which we will do relatively soon.
Lord Soley
My Lords, are the Government satisfied that detailed scrutiny of legislation will continue to be done in this House, regardless of whether it is elected in whole or in part?
Lord Strathclyde
My Lords, if we had an elected Chamber, I do not see why elected Members should not be able to give legislation exactly the same expert scrutiny as this House currently does. The noble Lord himself was formerly elected and I am sure that many of the skills that he uses now were skills that he learnt in another place.
Lord Elton
My Lords, it is simplistic to argue that to be democratic a House of Parliament must be elected. The importance of the House rests in its function, not in its appearance. Did not the experience of the Terrorism Bill 2006, when your Lordships prevented the House of Commons enacting a Bill that allowed one Secretary of State, having talked to one policeman, to lock up any private citizen for three months without any access to law whatever, show that the unelected House is actually the defender of democracy and should be retained as such?
Lord Strathclyde
My Lords, I hate to say it but my noble friend is rather straying from the original Question on the Order Paper. He makes a very valuable defence of the second Chamber, and the House of Lords in particular, over the past 10 years. However, given that if this House were to be elected it would be on a different basis from the House of Commons—with different constituencies and a different electoral system—there is no reason to believe that a second Chamber, so constituted, would not be able to do some of the very valuable things that this House has done in the past.
Lord Kakkar
My Lords, how can Her Majesty’s Government reassure the people of our country that in destabilising the relationship between your Lordships’ House and the other place their proposals for House of Lords abolition will not undermine the constitutional monarchy?
Lord Strathclyde
My Lords, I have every confidence that the robust nature of the British constitution would be able to bear well an elected second Chamber and it would have no impact whatever on the constitutional monarchy.
The Minister of State, Ministry of Justice (Lord McNally)
I think that we will hear from my noble friend Lord Tyler—and noble Lords should have a look at the third Question that we are coming to.
Lord Tyler
My Lords, returning to the original Question, can my noble friend assure the House that when an estimate is prepared in the light of the Government’s Bill in a few weeks’ time, we will have a true comparison of the future likely costs of not reforming the House along the lines of the Government’s Bill?
Lord Strathclyde
My Lords, I do not think that I can go quite as far as my noble friend wants. Yes, I believe that there will be a comprehensive breakdown of the costs of a reformed Chamber. As for the costs of the future of this House, that is more difficult to see, but the House needs to be aware that the total costs of this House are currently around £90 million a year, forecast to rise to £103 million in 2012-13.
Lord Brooke of Alverthorpe
My Lords, is the Leader of the House aware that some Members of this Chamber believe that the present composition is unsustainable and needs reform? Is he also aware that it is my birthday today too?
Lord Strathclyde
My Lords, I am very glad that it is the noble Lord’s birthday. I am surprised that we have had no questions on age limits being introduced in this House. I join him in being one who thinks that the House should be reformed.
Lord Cormack
My Lords, I am grateful for that support. Does my noble friend accept that the present House is cost-effective, and does he deplore the indiscriminate attacks on the bishops? We appreciate their presence, believe that they perform valuable duties, and we do not expect them to sleep on the embankment.
Lord Strathclyde
My Lords, I entirely agree with my noble friend. Bishops are eligible for the daily allowance and all the travel allowances, like any other Peer. I think that the House regards the bishops as providing very good value.
House of Lords: Behaviour in the Chamber
(12 years, 6 months ago)
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Lord Addington
To ask the Leader of the House what is his assessment of current standards of behaviour in the Chamber of the House and whether he will make time available for a debate on this subject.
The Chancellor of the Duchy of Lancaster (Lord Strathclyde)
My Lords, standards of behaviour vary, which is why in a self-regulating House it is incumbent on us all to take responsibility for ensuring that the rules set out in the Companion are adhered to in spirit as well as in letter. I would welcome a debate on the subject should my noble friend secure time for it through the normal routes.
Lord Addington
I thank my noble friend for that Answer. Does he not agree that certain habits that are coming into this House, such as trying to intervene on people excessively and compulsively, are becoming much more of a pattern and that the noble Lord who is speaking does not have to accept an intervention? Is it not the case that in a debate where we have a speakers list and a noble Lord intervenes and the intervention is accepted, that noble Lord should be here at the end of the debate to hear the summing up?
Lord Strathclyde
My Lords, I have every sympathy with what my noble friend says. The Companion allows Members to interrupt each other with,
“a brief question for clarification”.
But it also makes it clear that Members are entitled to,
“refuse to give way … in time-limited proceedings when time is short. Lengthy or frequent interventions should not be made, even with the consent of the member speaking”.
That is good practice for the House of Lords and we should not emulate aspects of behaviour in another place that do not suit the flavour of this Chamber.
Lord Richard
My Lords, it is certainly true that the House is now a bit more assertive than it was. I am bound to say I think this is a good thing rather than a bad thing. It is also true that people get intervened on in the course of their speeches. It seems to me that that is part of normal debate. I hope the Leader of the House agrees that this is meant to be a House of debate, not one in which people just get up and read set speeches from a script. In that sense it is much healthier than it used to be. Will the noble Lord consider another issue, which is Question Time? Behaviour at Question Time seems to be getting increasingly disorderly. I hope the noble Lord will agree that one of the main reasons for the disorder is that there is confusion as to whether the other side of the House is entitled to two slots or to one. On this side of the House we are perfectly clear that the coalition is entitled to one slot in the normal ladder and not to two. I ask the Leader of the House to confirm that again.
Lord Strathclyde
My Lords, I very much welcome the assertiveness of the House. However, there have been instances in the past of Peers intervening in an opening speech and then leaving the Chamber, not intending to speak themselves. This is something which I think we should all deprecate and is not part of the normal traditions of this House. I wish to make two comments about Question Time. I think that the behaviour in the House over recent months has been very good and I have had to intervene on very few occasions. I comprehensively disagree with what the noble Lord, Lord Richard, says: we have a very good system of understanding which side should speak next. The statistics demonstrate that at Question Time Labour Peers probably speak more than is their fair share.
Lord Geddes
Will my noble friend confirm to the House yet again that there is no such person as a noble Minister?
Baroness Hayman
Does the noble Lord the Leader of the House agree that an underlying pressure on behaviour in the Chamber is the size of the House and the number of Members who want to participate? On an earlier Question, he spoke about the increased costs of a reformed House. Will he confirm that an elected House and a reformed House do not have to be the same thing, and that a smaller reformed House would in fact be cheaper than the current House?
Lord Strathclyde
My Lords, I understand the point that the noble Baroness makes. In 1999, the average attendance at the House of Lords was 350; in 2005, it was 400; in the previous Session it was 475; so we can see the increase there. However, as far as behaviour is concerned, more than half of the Peers appointed since the general election have not attended any of the induction seminars offered by the Clerk of the Parliaments. I have written to them, encouraging them to do so. I am glad to say that the Clerk of the Parliaments will be resuming a further series of seminars in the autumn and I would very much encourage them to go along.
Baroness Royall of Blaisdon
Like the noble Lord the Leader, I welcome the fact that this House is more assertive in terms of interventions, but it is not so different from how it was in the past. I well recall that my noble and learned friend Lady Scotland was intervened on 20 times in one speech. I would like to put that on the record. Does the noble Lord agree that if more recommendations from the Goodlad report on working practices were agreed to and implemented perhaps that would assist with behaviour in the House?
Lord Strathclyde
My Lords, many of the recommendations in the Goodlad report on working practices have been agreed, but quite a lot of them have been rejected by the House. The Procedure Committee will no doubt wish to take that into account.
Lord Dykes
Does my noble friend share my dismay about the behaviour of some Members of the House of Commons? Has he seen that the president of my party in the other place, Tim Farron, described Peers as unelected political appointees coming in for a few minutes to get £300 a day? The deputy leader, Simon Hughes, said that the tax-free £300 a day was the only reason that Peers come in to the House and that we are lobbyists anyway. As a full-time working Peer, I bitterly resent such an accusation. What is my noble friend’s reaction?
Lord Strathclyde
I hope my noble friend will take it up with the president of his party.
The Countess of Mar
My Lords, does the noble Lord agree that it is not our place to criticise Members of another House?
Lord Strathclyde
Yes, my Lords, and I think that the feeling should be reciprocated in both Houses.
Lord Crickhowell
My Lords, will the Front Bench perhaps give a lead on one matter and stop the growing practice of the Whips trying to intervene and stop important speeches during Second Reading debates—a practice that is in breach of the rules and conventions of this House?
Lord Strathclyde
No, my Lords, I completely disagree with my noble friend, but I am very glad he raised that point. The Whips on all sides of the House have a responsibility to draw attention to when a rule, as laid down in the Companion, is being broken and to offer guidance to the House. That is what they do, and they should continue to do it.
UK: Oil Refinery Capacity
Baroness Smith of Basildon
To ask Her Majesty’s Government what assessment they have made of UK oil refinery capacity in the light of the imminent closure of the Coryton oil refinery in Essex.
Baroness Stowell of Beeston
My Lords, the Government have assessed the impact on the security of fuel supply and energy resilience in the event that Coryton closes. London and the south-east are served by a number of supply points, and suppliers have plans in place to maintain their operations. There is a healthy global market with supplier diversity, and the UK has a further seven operational refineries. Consequently, there are no significant risks to the security of supply or energy resilience.
Baroness Smith of Basildon
My Lords, I really worry that the Government are being dangerously complacent on this issue. The Coryton refinery supplies 20% of the fuel to London and the south-east, and its closure will cause a £15 million hole in the local economy and the loss of hundreds of jobs. In a similar position, the French Government invested to protect its national refining capacity, but our Government refused to help and cited European state-aid rules and adequate capacity in Europe. Can the Minister explain why the French Government can support their industry but we cannot? Why are the Government relying on European and world exports at the expense of British industry and British fuel security?
Baroness Stowell of Beeston
My Lords, no one wants to see any business fail and in such circumstances our first thoughts must be with the workers—the people whose jobs are at risk, even though they have done their best to make Coryton efficient and competitive. Indeed, it is very disappointing that the administrators have not found a buyer for the refinery as a going concern. It is right for me to offer noble Lords some context to explain why that is the case.
Potential bidders are faced with high up-front investments to make the refinery viable for the long term. UK refineries are facing tough competition from others in Europe and Asia. The profit margins are low and there is overcapacity in the sector. Eight European refineries have closed in the past three years, and more are likely to do so. Also, the European refinery industry has become out of balance with changing domestic demands. Noble Lords might like to know that since 2000, petrol demand has fallen by 35% and demand for diesel has risen by 34%. We looked long and hard at whether state aid should be provided for Coryton but came to the conclusion that it would not be sustainable because of the existing overcapacity in the refining industry and declining demand for petrol. As to the long-term future, I would add that the department is working with the UK Petroleum Industry Association on a sector-wide UK refining study and intends in the autumn to set out a strategic policy framework for the UK refining sector.
Lord Tomlinson
Is the Minister aware that it would be folly indeed to judge our refining capacity needs on the basis of current consumption, when we are in a double-dip recession? Surely, we all expect the economy to improve and demand to increase? I was not quite sure from her reply whether she referred properly to European state aid. Can she tell us clearly whether the Government have rejected the idea of applying for it? If not, have they applied? If they did apply, what was the effect?
Baroness Stowell of Beeston
My Lords, on the noble Lord’s first point, I should repeat what I have just said. Over the past 10 years, the consumption of petrol has gone down by 35%, so this is not a recent phenomenon at all. More specifically on state aid, the department looked very carefully at whether state aid should be provided for Coryton but we have come to the conclusion that the existing overcapacity in the refining industry and the declining demand for petrol, as I have just made clear, mean that state aid would not be sustainable, irrespective of whether it is allowable under state-aid law.
Lord Dixon-Smith
My Lords, I declare a sort of interest: I used to drive a petrol-engine car, which averaged 26 miles to the gallon. I have replaced it with a diesel-engine car, which can average more than 50 miles to the gallon, and I am not the only person in the country in that situation. Does my noble friend agree that the normal evolution of business dictates that businesses come into and pass out of cycle, and that the real question we should be discussing in relation to Coryton is not how much we might spend to keep it continuing in an industry that is already oversupplied but how we can evolve the site so that it has a long-term viable future and how quickly we can reopen it?
Baroness Stowell of Beeston
I agree with my noble friend. As I made clear in an earlier answer, the Government are looking not just at the current and immediate situation of Coryton but at our nation’s long-term refining needs—something that we are taking very seriously. So far as I can see, that did not happen in the years just before we came into government.
Lord West of Spithead
My Lords, has the work that was started under the previous Government on the resilience of fuel supplies—liquid natural gas and ordinary gas supplies—continued, bearing in mind that, for example, LNG supplies to the UK now account for 12 per cent of our energy requirements? That demands an LNG carrier delivering the gas about every two days, and we were working out resilience plans to accommodate such a supply being stopped, with other plants being available. Is that work continuing and, if so, where? It used to form part of the NRA but it seems to have disappeared.
Baroness Stowell of Beeston
I think I will have to write to the noble Lord on his specific question. However, I repeat my earlier point. At the moment, we have more capacity in this country for refined oil than we need. We are exporting more petrol than we are using, and we are importing more diesel than we are producing. Converting a petrol refinery to a diesel refinery would cost around $1 billion.
Business of the House
(12 years, 6 months ago)
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Lord Strathclyde
That the debates on the Motions in the names of Baroness Scott of Needham Market and Baroness Kramer set down for today shall each be limited to two and a half hours.
Voluntary Sector and Social Enterprise
(12 years, 6 months ago)
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Baroness Scott of Needham Market
That this House takes note of the role of the voluntary sector and social enterprise.
Baroness Scott of Needham Market
My Lords, I am delighted to have the opportunity today to introduce a full-length debate on the voluntary and social enterprise sector. Whether it is care for the elderly, support for people with disabilities, the provision of housing, advocacy, magistrates dispensing justice, protection of our wildlife or conserving our built heritage, the voluntary and social enterprise sector is at the centre of it. In this Olympic and jubilee year, the efforts of volunteers will be showcased in a way that we can all hope will leave a lasting legacy.
I am looking forward to the contributions of noble Lords from all sides of the House, and I declare a non-pecuniary interest as the chair of the England Volunteering Development Council.
We have come to use the expression “third sector” to embrace a whole gamut of activities from the voluntary sector: social enterprise, mutuals, co-operatives, community interest companies and a host of arrangements which no longer fall into the neat, old-fashioned public/private split.
The voluntary sector and what we now call social enterprise have been around for centuries. In my part of East Anglia, the medieval guilds were as much about welfare as they were about trade. In recent times, we have become used to vital services being delivered by the voluntary sector, the WRVS Meals on Wheels service being a great example. However, today’s picture is very complicated indeed. Many services previously provided by the public sector are now being carried out by voluntary organisations and by social enterprises which have spun out from their original public services.
A significant number of large charities have created social enterprises to generate income for them, and some social enterprises, such as housing associations, now have commercial arms that generate income which is ploughed back in to help fund their social objectives. Most of the tens of thousands of these organisations are very small indeed, and have every intention of staying that way. Support has grown up in the form of a number of umbrella bodies such as Volunteering England, Community Service Volunteers and Social Enterprise UK.
What truly defines this sector is that it is full of people who have identified a need, and have set out to fill it. If the Government did nothing at all, this sector would still exist—philanthropy and concern for humanity have existed since the dawn of time—but to really maximise its impact, what government at all levels does, and does not do, is important. So I want to use today as a chance to think about some of the ways in which the Government can nurture the sector by genuinely recognising and promoting the enormous contribution made by volunteers and by those who have chosen business models which put society before profit.
Every year, more than 20 million people across the UK volunteer around 100 million hours and the estimated economic impact of their activity is in excess of £40 billion. The impacts are virtually incalculable. The YMCA alone estimates that it impacts on half a million young people every year. I particularly want to talk about volunteers rather than charities because my fear is that Government are putting too much emphasis on giving money, as opposed to giving time.
It is funny that many people do not really think of themselves as volunteers; they just get on with it. For example, carers, many of whom are very young, carry a huge responsibility. Tens of thousands of people volunteer as an integral part of their faith. People who run heritage railways or arts organisations do not consider themselves as volunteers but enthusiasts. Last week, I chaired a meeting at which former Olympic athlete Dave Moorcroft was talking about the Join In project and he mentioned the athletics club where he started his career. He spoke of someone who had volunteered there for decades, who, when complimented on his volunteering, said, “I'm not a volunteer, I work here. I just don't get paid”.
It is worth reflecting on the nature of volunteering, and the language that we use to describe it. A case study highlighted by the CSV demonstrates this really well. A London hospital which had had little success in its general appeal for volunteers, began to make more specific calls: for example, it asked for Bengali speakers to help patients, which resulted in people coming forward very quickly as they could see that they were needed. Understanding motivation is really important when we think about volunteering in the context of unemployment. Charities and social enterprises are marvellous at providing paid employment for those who have particular employment challenges: for example, ex-offenders, long-term unemployed, and people with disabilities and mental health problems.
The Sue Ryder organisation runs a scheme for ex-offenders which costs £50,000 a year to run and places around 100 people a year in its shops as a pathway to get them back to work. As it costs more than £40,000 to keep someone in prison, that is massively cost effective. For many others, it is a great thing to use volunteering as a way of keeping people engaged and ready for work. However, I have real concerns about making volunteering a conditional part of receiving benefits. That comes with enormous problems. The idea of forced volunteering is anathema to much of the voluntary sector. Perhaps bespoke social enterprise companies would be a better way of providing such opportunities if the Government believe that conditionality is right.
Understanding more about attitudes to volunteering is really important at a time when more public services are being delivered by voluntary organisations, charities and social enterprises, either because it is a deliberate policy or as a response to cuts. We need to know what volunteers think about job substitution and whether they feel that their good will is being taken for granted.
We do not know much about public attitudes to services provided by volunteers. It is important that recipients do not see themselves as somehow receiving second-rate services because they are no longer being delivered by the local council or health authority. The services are often better. We need to ensure that there is no kind of stigma attached to being seen as the beneficiary of charity either through an individual act of volunteering or through a charitable organisation. I am not aware of much research that has been done in this area but it is highly relevant to public attitudes and to the attitudes of the organisations that commission services.
One aspect of recent public service cuts is that people are stepping up to ensure that the things they value, such as libraries, continue to exist. Volunteering is a free gift from the volunteer, but not a free good to society—professional staff are needed to manage volunteers. In order for third sector organisations to thrive, they not only need to feel valued but to be supported. We know that these organisations and individuals thrive when supported by high-quality information, training and advice from local and national infrastructure bodies. The role of these organisations in offering support, sharing good practice and building partnerships is essential. The national survey of volunteering showed that 31% of regular volunteers said their volunteering could be much better organised, and 28% said there was too much bureaucracy.
I know that the Government are committed to getting more people to volunteer and with modern technology it is easier than it has ever been to match people’s enthusiasm with organisations, but it does not work as well as local volunteer centres which offer face-to-face advice and match up individuals with the right organisations. It is very costly for charities to deal with unsuitable volunteers and demotivating for the individuals.
It is also important that the Government understand that volunteer organisations do not have limitless capacity to take on volunteers. They often need some element of professional guidance and back up. A recent survey carried out by the Lloyds TSB Foundation showed that half of all small to medium charities have seen an increase in interest in volunteering, which is only to be welcomed, but a third of them were unable to cope with the demand.
The social enterprise sector is one of the most exciting developments of recent years, although it has existed in various forms for centuries. If you have ever bought a copy of the Big Issue, or been to the Eden Project or shopped at the Co-op, then you have supported a social enterprise. A recent report from Social Enterprise UK highlighted how social enterprise is contributing to the economic fight-back in many of the most deprived communities, in a way in which neither the public nor private sectors have been able to do. The report showed how social enterprises are being run by younger people than seen in the traditional SME sector, have a higher proportion of female directors and more directors from black and minority ethnic communities.
One thing that social enterprises and the voluntary sector have in common is that they are being held back by conventional public sector procurement practices. There are a number of reasons for this. Risk aversion is one of them. Lack of knowledge and understanding is another and the dreaded “economies of scale” another still. But these have to be overcome if our third sector is to continue to thrive, and the benefits of sustainable and innovative alternatives to conventional services are to be realised.
Earlier this year my noble friend Lord Newby took the Public Services (Social Value) Bill through this House and I pay tribute to him for that. Public bodies will now be required to consider how the services they commission might add value to the well-being of their areas. In practice, this could mean that mental health services could be delivered by organisations actively employing some people with a history of mental health problems who really understand the services that they are delivering. Housing providers could create jobs for the long-term unemployed in housing management and catering contracts could include use of local suppliers. It is not about spending more, but about thinking how you spend to give more local impact.
I hope that the Government will undertake to work with public sector commissioners to implement the Act when it comes into force in January, as it could transform the way in which services are delivered. We have to stop being scared of small-scale providers—in many areas they are being frozen out by large contracts. I was really pleased to hear about Oldham, where special efforts have been made to allow microsocial enterprises to compete using an organisation called Community Catalysts. All sorts of stories have emerged from there, including one about two women who were fed up with working for a large impersonal domiciliary care organisation. They set up their own social enterprise and care for 15 people in a highly personal and flexible way.
The Government last week announced that they are making £19 million available to support social enterprises and will be placing lead officers in all the major departments to take the lead on the work. That is to be welcomed. Will the Government now consider a similar approach for the voluntary sector? It is always a problem for any government to deal with issues which cut across departments but it is imperative that all parts of government think about how they can make a difference. For example, the Home Office could make the new portable criminal record checks free for volunteers. The DWP still needs to work on clarifying the impact that volunteering has on the payment of benefits. We really need the Treasury to think again about the VAT regime. The Sue Ryder organisation told me that one of its hospices typically pays £44,000 a year in VAT while an identical NHS operation would get 57% of that back. The changes to health services need to be mindful of the role of third sector providers, through including them on the health and well-being boards, and ensure that Monitor effectively carries out the fair play field review.
There is so much evidence about what the third sector in all its glorious complexity delivers. It delivers where no one else does and often does it better. Beyond the matter of service delivery comes the impact on society where contributions are made by individuals whose motivations are rooted in the place where they live. The impact of volunteering and of being involved in social enterprise—two related but different activities—is marked both for providers and for people who receive the services. Where public services have spun out to become social enterprises we often see much increased levels of productivity because individuals are more motivated by being able to concentrate on what they care about and in knowing that the profits that they make are desirable because they are reinvested.
The impact of volunteering on the well-being of the volunteers is well known, especially after retirement when an estimated quarter of people report that they volunteer. The third sector contributes so much in so many ways that it is difficult to value enough their contribution in creating the cohesion, the social capital and the trust that we all need in order for individuals, communities and society to thrive—but value them we should. I beg to move.
Baroness Byford
My Lords, I congratulate my noble friend Lady Scott of Needham Market on setting out so clearly the complex scene within the voluntary sector. I am sure that other speakers will highlight particular aspects but there are one or two areas that I want to mention. My noble friend commented on whether volunteers are valued for the service they give as much as they would be if they were working in the public sector. Her comments prompted me to turn my mind back to when I delivered meals on wheels in my local village—which, unfortunately, is not now done by volunteers, although state provision is doing it very well—and to reflect that it has lost the local link that people had in the village. They knew the person delivering the meal and would talk to them about their family. It is a sign of the times, although I am glad that in some areas such meals are still delivered by volunteers.
My noble friend also raised the important question of why a person joins in the first place—why do they feel there is a need which will cause them to volunteer? Sometimes it is because they had a relative who has been ill or perhaps some type of family problem. Others are particularly interested in wildlife or in community in the wider sense. I suspect that, in the first instance, many volunteer simply because they want to do something to help. My noble friend was right to say that sometimes it is just a matter of determining how they go about becoming involved as a volunteer. My noble friend has explained that issue clearly so I will not go down that line again.
There were difficulties even before this period of austerity. For many charities, the number of new, young volunteers coming forward has been insufficient to replace those who are leaving because of age, ill health or, in some cases, a feeling that they are not appreciated. What a terrible thing it is for these people to feel they are not appreciated. However, I am sure that in this jubilee year—which has been, and will continue to be, a wonderful experience for so many—we can chalk up another success. Younger people have come forward to help organise and run fun jubilee celebrations. They have discovered that volunteering was not only fun, challenging and hard work but also uplifting and rewarding.
Social enterprise organisations—there are some 62,000 of them in Britain today, contributing more than £24 billion to the economy and employing nearly 1 million people—are a new form of non-profit-making companies. This has the potential to become an important way of providing services at sensible prices while creating job opportunities for people who are willing to work for a reasonable reward. There are, however, a number of stumbling blocks to which I should like to draw the Minister’s attention.
Health and safety occupies a particular position in our national life—I wonder whether there has been a radio or television comedy show in the past 10 years that has not had a dig at it. In principle, health and safety is very important; consider, for example, the improvements to car design that were instigated partly by the need to reduce accidents. However, it can also be abused: examples include bans on playing conkers in the playground and the astonishing announcement made by the Royal Mail in Doncaster only last week that it would not deliver mail to a certain area in the rain because a postman had fallen over and been hurt. Where is it leading us?
The next big concern, which my noble friend touched on, is CRB checks. I am glad that the coalition is committed to reducing the number of such checks. Many older people who have been involved in charities for years were insulted and upset when they were asked to have a CRB check. They felt that they were no longer considered trustworthy. It appeared that no limit was placed on the number or purposes of these checks. I know that it was also a big expense for the voluntary organisations.
Perhaps I may also touch on the position in the City of London. The City of London Corporation is supporting the Big Society Capital social investment fund and that is to be encouraged. It is giving grants of £15 million a year through the City Bridge Trust and is very anxious to help and support those who are willing to volunteer.
There is a range of other organisations that I could mention but I will single out just two. The first is our churches, a national organisation which has parishes everywhere. I am deeply concerned, however, about the way that our churches are perceived. People sometimes say to me that they are only for those who are Christian and pray in them, but that is not so. The churches are a welcoming house for everybody and I hope that this role develops in the coming years.
The second group which I should like to cover is those who volunteer to help our police forces. In Leicestershire, we have 174 police volunteers within three local policing units and 290 special constables who give over 79,000 hours of service. They are unsung heroes. They are not always seen as volunteers, as many regard them as part of the force, but they are, in fact, volunteers.
I touch, finally, on the work that we in Leicestershire are doing with young people. Leicestershire has many clubs for young people, and why are these clubs important? It is because they welcome young people and give them opportunities. From there, they can grow to become much fuller citizens and, ultimately, go on to help others themselves.
Lord Prescott
My Lords, I congratulate the noble Baroness, Lady Scott, on providing us with this opportunity to debate issues involved in voluntary service and social enterprise. I am sure that most of us have been actively involved in them through our political lives, have enjoyed the work and continue to do so. However, the noble Baroness defined what she thinks is voluntary, and perhaps it is being exploited. I wish to draw attention to the dangers that are beginning to develop as voluntary labour is brought into the commercial sector and is governed by contract, not community feeling, and profit. That is an important issue for us to consider.
Problems are developing with a big pool of unemployed people being asked to do voluntary work, whether it is voluntary in the sense that you agree to it, as the noble Baroness, Lady Scott, said, or voluntary in the sense of military service when you are told that this is what you will do. When I see the pool of the unemployed and the mandatory work policies being brought in by the Government—and all Governments have been involved in some part of welfare to work—I worry that the schemes that are developing at present are putting greater pressure on unemployed people to volunteer.
A classic example of that happened quite recently under London Bridge, where a number of young people were dumped in the most difficult circumstances. It was during the jubilee celebrations, and they did not enjoy the wonderful experience that the noble Baroness, Lady Byford, has just referred to. To that extent, I want to address my remarks to the kind of development that is occurring in the name of voluntary contribution. In that case, it was people who were providing marshalling services at the Queen's Jubilee, which was a very important thing to do. Some were paid very lowly and some were given no pay and had to face the pressures applied in the name of the voluntary community. First, they were told, “Please come on this—we’ll pay you”, then when they got on to the bus were told, “No, we’re not going to pay you”. Secondly, they were told, “If you don’t do this, you’ll lose your benefit”. A third factor was the incentive that they would probably get a job at the Olympics site at £8.70 an hour, which is quite interesting because that was part of the contract.
My concern is that this is now all about contracts and subcontract work. It is no longer a case of people working voluntarily in the community, but of saying to people, many of them young, “You’ve now been involved in this long-term. You’re going to be offered a job that you can’t refuse”. It is almost like the Mafia kind of contract: “I’m going to offer you a contract that you can’t refuse”, and so you go into the system and work. I will stick to the one case that I am on about; it concerns a company called Close Protection UK that had the responsibility to train these people—not to pay them—and to put them on to go and do marshalling services. That system is now being considered for fire marshalling work at the Olympics site, but I will come back to that in a second. The people got on the bus and suffered a number of indignities. I do not have time to go through them, because a lot of people want to speak in this debate, but clearly they did not have food or access to toilet facilities. It was a damp site to take a tent to as it was pouring down with rain—we all know the amount of rain there was then. Nobody seemed to care at all about those conditions, but we should be concerned if more and more people are being put into that situation when hoping to get from welfare to work. We should not just exploit them by saying that the work is unpaid.
My worry is that the contract given to this company by the London authorities and others to bring in people to work as marshals was for £1.5 million. If that is the case with work experience, why was a condition not laid down in the contract that all the workers has to be paid a certain amount, as is the requirement for the Olympics? If that is not done, companies are more likely to make more profit by using people who are not paid. That is the concern beginning to develop around the exploitation of voluntary labour. Since there have been many reports in the papers, let me say that I have interviewed a lot of the young people who were involved in this and I have a lot of examples of what they said went on that night. It is true that there have been other examples of those who thought that it was a good experience, so there is some dispute, but it is important to find out what really went on.
With the development of these schemes, I worry that the big companies are getting millions and millions of pounds, as we recently saw with A4e. I think that the Government are already offering £2 billion to get these people off work—they are to be paid in some cases but not in others. There is a requirement for training, which sounds like a few hours a week of NVQ and is not very satisfactory. Basically, it means that these people are then pressed into playing a role. I think we are all aware of A4e, which is now involved in trying to show the numbers it got into jobs. In reality, fraud was involved and cases are under way. It is not limited to that company; it is the process of the contract work that is involved.
Let me take this example. Prospects, a private company, had a contract. It was in fact a non-profit company even under Labour, when it dealt with Ofsted. It then turned itself into a mutual company so that it could make profits and has made something like £11 million this year. The motivation then becomes not to public service but to the profitability of that investment by private companies. What begins to concern me is the conflict between the public interest involved and the private interest that is motivated by securing a profit. When the contract was given by a public authority to Prospects, it then had to go to a charity, Tomorrow’s People, which became involved. It then rakes up the people for the south-west area and then goes to another body on another subcontract. They are the ones that have basically exploited the situation.
I do not have the time to go into all those difficulties, but they are now going to be offered the job of fire marshals—we are replacing firemen with fire marshals at the Olympics. I am worried about that. I have written to the Home Secretary. I have written to LOCOG, which set the contract. I cannot go into all the details of the replies but I can tell you that LOCOG is doing nothing about it; it is confirming the contract. If we are going to put our young people in the hands of these people, what we should be saying is, “Have we not got a responsibility for governance?”. The lady who is in charge of this company has been done for perjury; she has had a number of companies. You would not trust any company with her, frankly. But now the inquiry is under way, we will see what the real facts are.
In conclusion—looking at the time, before the noble Baroness gets up to remind me; as I understand it, you can go to 10 minutes but I am not doing that.
Baroness Stowell of Beeston
I am sorry to interrupt the noble Lord but this is a time-limited debate. As it makes clear on the Order Paper, Back-Bench contributions are limited to six minutes.
Lord Prescott
I apologise. I took advice; obviously I got the wrong advice, but I will not exploit that situation. This whole business now means that a massive pool of cheap labour is going to be exploited, and now G4S even wants to buy the police and replace them with this kind of labour. We had better start looking at what is happening with the exploitation of people. I hope we can have a public debate about it. We have started it thanks to the noble Baroness, Lady Scott, and I am obliged to her, but I would like to get into the details of the issue perhaps when there are fewer people here and I can have a longer time to develop the argument.
Baroness Randerson
My Lords, I will take a very different tone from the noble Lord, Lord Prescott, because I want to talk about the advantages of volunteering and social enterprise, rather than complaining about them. I have spent most of my working life with young people, many from very poor homes, and I can tell you that the impact of volunteering on their lives has been empowering. It has enabled them to develop their CVs, get jobs and gain confidence, which is so much needed.
I thank my noble friend for initiating this debate. It is a hugely important topic, as she has outlined. Charities, voluntary organisations, third sector organisations, social enterprises, mutuals, co-operatives—there is a virtual continuum of organisations that undertake some trading but operate for social benefit rather than private profit. I want to concentrate on the social enterprise element of this debate.
The lack of precision in definition is only one of the hurdles that this sector has to overcome. It is true that in many cases social entrepreneurs are able to operate successfully in situations where the private sector would not be viable. That is their huge advantage. They operate overwhelmingly in poorer areas—another advantage. They attract back into work—often by volunteering, sometimes by paid work—those who have for a variety of reasons been out of work. They are job-rich in an age where technology dominates, and by that I mean that social enterprises create more jobs relative to turnover than standard SMEs. At a time of high unemployment, that is a big advantage. They tend to reinvest their profits locally—another advantage.
The major problem social enterprises face is funding finance. Because of the advantages I have listed, plus the lack of a clear definition, they are regarded by most lenders as little more than charities. Banks seem to believe that lending to social enterprises is akin to bailing out a lame-duck business at best. The attitude is that because it is a social enterprise, it therefore cannot be profitable. The financial sector has not yet developed a robust model for investment in the social enterprise sector. Despite the very welcome recent legislation in the Public Services (Social Value) Act, the Government have not yet provided adequate tax relief for those who invest in social enterprise, in the view of Social Enterprise UK.
The enterprise investment scheme and venture capital trusts are aimed at standard SMEs that issue equity, which most social enterprises do not do. Community investment tax relief is the only form of tax incentive that social enterprises can access and it has a lower rate of tax relief than mainstream schemes. It does not allow direct investment; you have to invest via an accredited community development finance institution. This is more than technical jargon; it is an issue of life or death for social enterprises to be able to get the funding they need. Both the problems that I refer to could easily be removed. The eligibility criteria for the funds concerned also need to be widened.
Another way in which the Government can do a great deal to encourage social enterprises is through their procurement policy. As my noble friend said, the procurement process favours large companies, because the contracts let are often much too large for a social enterprise to tackle and the process is so complex. Public sector procurement needs to take account of social value. The Act that I referred to earlier should enable this to happen because the legal structure is now in place, but the key thing is that attitudes on the part of those letting the contracts in the first place have to change.
It is still a common view that social enterprises are likely to be soft on efficiency and that public sector contracts should go to proper businesses. Social Enterprise UK wants the Financial Services Bill to include a clause to ensure that the two new financial regulators support the development of social investment.
The Government have made a good start. Their announcement last week of additional funding is hugely welcome. They have gone well beyond mere rhetoric and are beginning to examine a comprehensive range of policies across government and to ask every time, “Will this encourage social enterprise?”. Social investment should be at the very heart of the Government’s being. It boosts the economy, reduces unemployment, reinforces localism and increases social mobility.
The Earl of Listowel
My Lords, I, too, am most grateful to the noble Baroness for securing this important debate. I am pleased to follow the noble Baroness, Lady Randerson, in talking about procurement.
I should like to ask Her Majesty's Government whether there is a clear evidence base for the use of a mixed market in services for the care of the elderly and of vulnerable adults and children; whether there is not an overreliance on large, private equity-based providers of care; whether more might not be made of giving third-sector care providers preferred status and promoting enduring relationships between those providers and purchasers, provided that outcomes measures are met; and, finally, whether more might not be done by Her Majesty's Government to prioritise their workforce development responsibilities.
Having sat on the board of a not-for-profit adoption and fostering agency, I know how tough the competition for placements is. I would be most grateful to be reassured that the voluntary sector is not being put at an unhelpful competitive disadvantage with regard to large, equity-funded providers. How can we maintain the smallness to which the noble Baroness referred in circumstances of competition with large, equity-based companies?
The Parliamentary Groups for Looked after Children and for Runaway Children, chaired by Ann Coffey MP and Edward Timpson MP respectively, this week launched their report into children who go missing from care, a report made possible by the support of the Children’s Society and the Who Cares? Trust. The first of its five key recommendations was that there should be:
“An independent investigation into children’s homes in England which are failing to manage and protect children who run away or go missing. This is despite spending £1 billion a year on just under 5,000 children cared for in children’s homes averaging £200,000 per child”.
I should declare an interest as I was involved with the report’s production and am an officer of the one of the parliamentary groups involved.
Local authorities now own only 24% of children’s homes and large equity-based companies are the largest providers. From the report’s key recommendations, we can see that this particular mixed market does not appear to be giving value for money and quality care outcomes. I recently met Eva Lloyd, reader in early childhood at the Cass School of Education and Communities at the University of East London. We discussed her book on the mixed market in early years provision, Childcare Markets: Can They Deliver an Equitable Service? The book is to be published on 25 June and is jointly edited by her and Helen Penn. She emphasised to me that the evidence strongly indicates that our model of mixed market for early years provision in the early years area does not give the best value for money. Indeed, we have among the most costly early years provision in the world. This may in part be because we rely so heavily on large, equity-based providers for our childcare.
I contrast this with a non-market approach and the best education system in the world. Finland tops the PISA international charts for education outcomes in literacy, numeracy and science each year. An important aspect of its service is the quality of its teachers. There are 20 candidates competing for each teacher training place. Every teacher, in primary and secondary schools, has a master’s degree qualification. Teachers are trusted. As I understand it, there is no school inspection system in Finland and very loose national curriculum guidance. The analogy perhaps is that each school is like a small enterprise, run by people who are genuinely committed and highly trained by the Government to do an excellent job and who are given autonomy.
The comparison between us and Finland is said to be flawed because our nations are so dissimilar, in particular since Finland has a far more homogeneous population. This is true, but every school class is of mixed ability and I understand there are no exclusions from school. Teachers have to work with the mix of children that is presented to them and they get these fantastic results.
The experiences I describe above lead me to wonder whether we have an overreliance on a mixed market of provision in services for the vulnerable. Should we be looking more at enduring relationships with particular providers and give preferential treatment to not-for-profit providers where they can demonstrate high quality and value for money? Should the Government’s role be more to ensure that the high-quality workforce—the teachers, early years workers, social workers and so on—is available to meet the demand for services for the elderly, children and vulnerable adults, as part of the local and national infrastructure the noble Baroness referred to in her introduction? Do we overprize our system of regulation and inspection but underprize ensuring that there is a high-quality, autonomous workforce available to meet the needs of our children and of our elderly and vulnerable adults? I ask the Minister what the evidence base is for mixed markets in social care provision providing value for money and best outcomes. I look forward to his response.
Lord Lexden
My Lords, it is a tremendous pleasure to follow the noble Earl, Lord Listowel, who manifests his deep concern with social and educational issues in so many different ways. I also join other noble Lords in thanking my noble friend Lady Scott, with whom I have worked closely on European issues in a spirit of true coalition harmony, for securing this debate on a sector whose immeasurable contribution to our nation’s well-being is so rarely afforded the attention and praise it deserves.
It is with particular reference to Northern Ireland—whose welfare and progress are of special importance to me—that I wish to speak today. The Northern Ireland Executive of course bear the main and direct responsibility but it is surely right that tribute should be paid to the progress of the voluntary sector in the Province during this important debate. The largest charity in this sphere in the Province is the Northern Ireland Council for Voluntary Action—NICVA, not a very attractive acronym—which works on behalf of more than 5,000 voluntary groups. It represents the sector to government and provides support and assistance to individual groups. It is therefore well placed to assess the current health of the sector in Northern Ireland and provide practical recommendations on the best way forward in these difficult economic times. The council’s most recent State of the Sector report shows that more than 27,000 people are employed in the Province’s social sector organisations, of whom 80% are women. Together with almost 190,000 unpaid volunteers, they form a substantial part of the Province’s workforce. An annual income of £741 million is balanced against expenditure of £720 million, underlining the very thin margins on which these vital institutions operate.
The feeling in Northern Ireland is that the worst may yet be to come: 14% of organisations predict that they will have to reduce staff numbers in the coming year. Where well endowed institutions and very generous people could previously afford to give generously, they are now having to count every penny. Donations from the general public, which have amounted to £220 million a year, are now falling.
The question for government and the voluntary sector now is how to give services, and the people who depend on them, as much protection as possible. Voluntary groups which can strengthen their position by coming together, sharing resources and widening their spheres of operation can now secure support from an initiative called CollaborationNI, which helps organisations to ensure that scarce resources are used to their fullest advantage. One notable example is called Will to Give, a charity promoting legacy giving, with the bold aim that one day everyone will make a donation to charity in their will. Smaller charities can now advertise and promote their work under the Will to Give banner. Organisations with no experience in this area can learn from well-established fund raisers and donors can support a wider range of causes. My faltering voice may suggest that I should hasten to sign up to Will to Give—forgive me.
The Northern Ireland Executive are allowing charity consortia to bid for contracts together, ensuring that available funds are distributed among a larger number of organisations. The Executive are working to reduce their bureaucracy. As the Northern Ireland Assembly’s Public Accounts Committee noted recently in its Report on Creating Effective Partnerships between Government and the Voluntary and Community Sector, the,
“wide range of Government departments, agencies and other public bodies”
has led to,
“over-bureaucratic, disproportionate and risk-averse approaches”.
The Northern Ireland Audit Office has recently made its recommendations to address those issues, and its best practice principles will be enshrined in a concordat between the Executive and the sector—it seems that my signing up to the Will to Give cannot come a moment too soon.
Many of the problems that confront the voluntary sector in the Province are unique to Northern Ireland, which of course bears the scars of its recent history. The recipients of the largest private donations in the Province are organisations connected with religious denominations, so long and so tragically divided among themselves. This is perhaps the area where the greatest scope for improvement can be found. Although people may still feel divided by the history, they must be united in their present endeavours. Working together, they can develop solutions that cross political and sectarian barriers. NICVA has recently helped groups ranging from the West Belfast Suicide Awareness Support Group on the Falls Road to the Shankill Women’s Centre, enabling them to deliver better services in difficult areas.
The Vital Links project, funded by the European Union, runs a series of policy forums designed to encourage co-operation among the various organisations. The problems caused by poverty, ill health and poor education do not discriminate between those whose lives they ruin. In working together, groups and organisations in the voluntary and social sector are striving to ensure a peaceful and prosperous future of Northern Ireland. In Alexander Pope’s words:
“In faith and hope the world will disagree,
But all mankind’s concern is charity.”
Lord Giddens
My Lords, I join other noble Lords in congratulating the noble Baroness, Lady Scott, on having secured this debate and on the illuminating way in which she introduced it.
The advent of a so-called age of austerity is an invitation in the industrial countries to think again about how we live. Rather than simply talking of a return to growth, with its premise of endless consumption, we should be considering more profound social goals. In place of austerity as a negative value we should be talking of sustainability, both economic and environmental, as a positive one. There is a great deal of discussion at the moment—rightly, in my opinion—about rebalancing the economy in terms of manufacturers and finance. However, we should also be discussing how to rebalance the economy in terms of social and moral objectives.
I do not really like the somewhat crummy term “big society”, which seems to be an ad man’s notion, but there is no doubt that we should be thinking creatively about how civil society can be revitalised. To me this does not mean denying the importance of the state or of markets; it means working creatively with them. Following the noble Baroness, Lady Randerson, I shall concentrate on social enterprise rather than on the voluntary sector as such.
Social enterprise is conventionally a Cinderella when it comes to funding. The challenge today is to try to mainstream it. One can define a social organisation, at least roughly, as a firm in which surpluses are created for directly social purposes rather than the desire to maximise profit for owners or shareholders, which of course does not mean that such organisations cannot themselves be very profitable. According to official statistics, there are about 62,000 social enterprises in the UK, most of them small. However, some very interesting recent research shows that there are probably five times as many so-called hidden social enterprises. These are nominally for-profit enterprises in which social and environmental purposes loom large and which reinvest a substantial part of their surplus to achieve these purposes. In other words, there is a large hidden stratum of socially and morally motivated companies beyond the orthodox measurement of social enterprises.
Hidden social enterprises, the research shows, have superior growth patterns compared with organised businesses. In the research in question, each of them created nine jobs on average in a two-year period compared with six for straightforward smaller enterprises. Interestingly, twice as many hidden social enterprises have been set up by women rather than men. As the researchers observe:
“This research places entrepreneurs exactly where they should be—at the centre of the debate on the way business moves forward after the financial crisis”.
Can all this be mainstreamed? It can and should, and we should be thinking of the large corporations here, not just the small ones. Take the example of the fast-food corporations, which pay only a tiny amount of the costs that their advertising and the resultant changes in diet have in the population. Obesity is a global trend which is directly integrated with advertising that is aimed initially at children in this country and elsewhere, and it is the National Health Service and other state-based organisations that have to pick up the costs. The fast-food companies themselves should be obliged to cover more of those costs through taxation, as is happening in some parts of the United States at the moment; but surely it will also demand more active, energetic and farsighted business leadership from the larger corporations too.
In conclusion, social and environmental concerns should become a driving force also for big companies so that it is integral to what they do and is not just hived off to a tiny department of corporate responsibility that has been set up purely for public relations purposes. Companies that are in the vanguard—and we have quite a lot of evidence of this from farsighted corporate strategies—might find that such an outlook increases their own survival value.
Lord Shipley
My Lords, I, too, express my thanks to my noble friend Lady Scott for initiating this important debate. The coalition agreement pledged to support the creation and expansion of social enterprises, mutuals, co-operatives and charities in public service delivery, and I am delighted that the Government are delivering on this commitment.
It is important for us to understand the scale of the third sector. In my home city of Newcastle upon Tyne, with a population of 290,000, there are 2,300 voluntary and community groups. One-third—some 800—are registered charities. These large numbers confirm the potential of the sector and, as importantly, the demand for their services. Some organisations are big with lots of contracts and experienced staff; others are of medium size, and tend to be more dependent on grant aid; but the largest number are small organisations with low income levels, often working in neighbourhoods.
As the Government are issuing more work through contracts, the ability and capacity to bid has become more important, and this is where the big and experienced organisations have an advantage. The consequence is that larger organisations that cover the whole country are stepping in. These companies can afford to bid and lose, promote loss leaders and use other income streams to repay loan finance.
What steps can the Government take to enable smaller community groups to compete? The best-value statutory guidance published last autumn, together with recent legislation on social value, requires that consideration be given not only to economic value but also to environmental and social value. This will maximise the additional benefit created beyond the simple provision of the service. As has been mentioned, the social enterprise sector has long campaigned for public sector procurement to take account of social value. This legislation should therefore prove important in enabling the sector to compete successfully for public sector contracts. The big challenge now is to make that happen and to ensure that social value becomes a key component of commissioning. That will require that social enterprises, local government, the voluntary and community sector and central government raise awareness and share good practice. I have been particularly impressed, in the north-east, by the social enterprise framework that has been developed and supported by all the social enterprises in the region. Good leadership is emerging.
As for growth and development, Pricewaterhouse Coopers is offering mentoring support from senior staff, and Teesside University has appointed a social entrepreneur-in-residence. Northumbria Water and the CBI are also undertaking work to bring more social enterprise into the supply chains of big companies. On funding and access to finance, the Northern Rock Foundation is leading a piece of work on access to finance for the sector and has already identified investment readiness as a barrier to growth. Business support seems patchy at best, with enterprise agencies generally not having expertise in this area.
Real businesses show what can be done. In County Durham, a social enterprise is designing and manufacturing collections of home and outdoor-living products. The first collection has been designed in conjunction with Durham prison by two designers-in-residence at Northumbria University. The aims are to change public perception of the quality and style of products produced in prison and to build opportunities for offenders, both in custody and back in the community, to gain employment.
What can the Government do more of and what can local authorities do, too? The Government can help to grow social investment by ensuring that social investment tax reliefs are as attractive as mainstream investment schemes. They can learn from the experience of the Work Programme, launched in late 2010. Nationally, it was expected that the voluntary and community sector would get around a third of the contracts but they got only 20%. The reasons seem to relate to the complexity of contracting and the potential for delayed funding. The Government can make sure that their intention—integral to the NHS reforms—that social enterprise and voluntary organisations could offer bespoke services in their local areas is delivered.
We have heard reference in this debate to the VAT issue, which is a matter of serious concern. I give a further example. I understand that if one housing association provides shared services to another, VAT becomes chargeable on that transaction. Maybe the Government will take the VAT issue seriously.
Local government and councils must ensure that cuts to voluntary sector organisations are not disproportionate compared with those that the council itself faces. It is right that councils can be challenged if they are. Councils should not follow EU procurement procedures when they are not required to do so. They should not use formal contracting when commissioning would be satisfactory or go out for retendering for just one year of support, doing so only weeks before a contract is due to start. Councils need to help upskill the sector with capacity-building teams, by helping them with IT, office space and collaborative budgeting, and by assisting transition where it is needed.
Finally, there is enormous potential for the voluntary sector and social enterprise to deliver growth. That potential should not be underestimated by the Government. I hope they will give it due consideration.
Lord Low of Dalston
My Lords, a couple of years ago we had a couple of good debates about the role of the voluntary sector. The subjects for debate referred more to civil society than the voluntary sector but people seemed to take the view that we were free to talk about more or less whatever we liked. That was a couple of years ago, so the noble Baroness, Lady Scott, is to be greatly congratulated on bringing us back to the subject, especially considering the prominent place that the voluntary sector has assumed in the Government’s thinking about the direction of society. I am taking it that the subject for debate today gives us a similarly free hand as to what we talk about.
ACEVO, the Association of Chief Executives of Voluntary Organisations, says that a social enterprise is an organisation that trades for a social and/or environmental purpose and reinvests its profits in support of that social or environmental aim. As we have heard, a well known example is the Big Issue, the magazine that is sold for £1.25 to homeless vendors who then sell it for £2.50, achieving the social return of increased income and independence. The Annual Survey of Small Businesses UK 2010 estimated that there are approximately 68,000 social enterprises in the UK, which contribute at least £24 billion to the economy and employ an estimated 800,000 people. ACEVO would argue that it is unhelpful to draw a hard and fast distinction between charity and social enterprise. All charities need to be enterprising in their outlook, particularly in challenging economic times, and many pursue social enterprise models.
In a sense, social enterprise is something that an organisation does, rather than something that it is. For example, the charities Catch22 and Turning Point work with the private company Serco to deliver an anti-reoffending pilot at Doncaster prison on a payment-by-results basis, in which payment levels depend on the extent to which reoffending is reduced. This is replicating a social enterprise model in which investors are rewarded when a programme achieves targets. If this is what a social enterprise model is, I would have to flag up dangers. Just to be clear about my own position, institutional and ideological, I have 40 years’ experience of working in charities, great and small, ending up as a vice-president of RNIB, having been chair for nine years at the beginning of this century. I am also president of a number of others, declared in the register of interests, and have been president of others that I helped to found back in the 1970s but which have recently either merged or, sadly, folded.
I am thus a great believer in the big society, pace the noble Lord, Lord Giddens, as an expression of the voluntary effort that goes to make it up. The voluntary sector can add much in specific expertise and commitment to the comparatively blunt instruments that the state often has at its disposal, but it should not be contingent on a rolling-back of the state. We need them both; they are interdependent, as the noble Baroness, Lady Scott, made clear. We need the state to remedy the deficiencies of civil society in caring for the vulnerable and providing basic health, education and other services for the population at large. Some Ministers seem to base their view of what constitutes a healthy society—or a healthy economy anyway—on such a rolling-back. Thus the noble Lord, Lord Sassoon, said:
“As the Government, we have to continue to reduce the burden of the state. If we do that, the economy will flourish”.—[Official Report, 22/3/12; col. 1031.]
We have to be careful that the payment-by-results model does not turn into exploitation. Volunteering is a wonderful thing—but there is also exploitation, as the noble Lord, Lord Prescott, reminded us. It is the exploitation of organisations rather than individuals that I want to talk about. Small and medium-sized charities such as Action for Blind People or the Shaw Trust may have the specialist expertise that is crucial to get those farthest from the labour market into work, but they can find it hard to compete with large private-sector organisations with deep pockets that can bear the upfront costs and uncertainty of the final outcome for the length of time that it can often take to get such people into work. Prime contractors, whose aim is to maximise profit by cherry-picking those who are easiest to place, are also failing to refer to the more specialised organisations those who need the specialist support that is far beyond their capacity. For reasons such as these, the Work Programme—the noble Lord, Lord Shipley, also touched on this—by which the Government set such store to support for getting into work those whom they have thrown off benefit, is just not working, at least for those whose disabilities have placed them at a particularly severe competitive disadvantage.
During the spring, ACEVO held a series of round tables and spoke with over 100 charity chief executives to hear their thoughts and concerns about the future across the different sectors and beneficiary groups. Common themes emerging included the point that cuts are significantly affecting the vulnerable beneficiary groups that voluntary organisations serve. These cuts are being implemented in a climate of little or no public scrutiny and a local democratic deficit. The devolution of power to a local level is not accompanied by greater accountability. With the scrapping of scrutiny mechanisms such as comprehensive area assessments in the Audit Commission and low levels of public engagement with local politics, there is a lack of accountability for local spending decisions. Charities would love to act as the armchair auditors envisaged by Eric Pickles, scrutinising local decision-making on behalf of their beneficiaries, but local authorities do not make the necessary data and information available. For example, Rethink Mental Illness recently attempted to ask local authorities how much of their social care budgets were dedicated to mental health and received incomplete information, or none, which made it mostly impossible to determine what funding had been allocated to social care of different groups, what evidence lay behind funding decisions and whether, and how, funding had changed year on year. Fewer than 50% of local authorities contacted provided the budgetary information requested.
Consequently, there is the danger of a forgotten Britain developing—a marginalised and underprivileged section of society that will be increasingly affected by cuts but goes largely unnoticed by much of society. ACEVO argues that the scrutiny deficit must be plugged. The Government have undertaken to evaluate the impact of cuts as several of their Bills have passed through Parliament. Charities can help to fulfil that role, but it requires genuine co-operation and engagement from the public sector.
Baroness Barker
My Lords, I declare an interest as the owner of a consultancy third sector business. I also work in an unpaid capacity with a voluntary organisation called See the Difference, now known as the Giving Lab.
I very much welcome this debate, which is very timely given the huge amount of change and turbulence going on in what I call the third sector. I thank my noble friend Lady Scott for drawing a distinction between charities and social enterprises. I agree with the noble Lord, Lord Prescott, that there needs to be a great deal of clarity about terminology as fuzziness leaves room for individuals to be exploited, which I think is wrong. I am pleased that noble Lords have drawn a distinction in this debate between what is charitable and what is social enterprise. Last year, Social Enterprise UK kindly came up with a helpful definition of a social enterprise. It is a company which trades and earns at least 50% of its income through selling goods and services rather than through contracts in order to generate profits with which to pursue social and environmental purposes. That is entirely different from what a charity does. A charity works with a different skill set in a different way for a different purpose. That is important because much of the public policy which is being made at the moment has at its heart a confusion between social enterprises and charities. More than that, some charities whose traditional sources of income are disappearing are being told that they should become social enterprises. They are facing a lot of challenges in the way that they go about doing that.
The Americans wished upon us the term “not for profit”, which is deeply unhelpful; “not for dividend” is more accurate. Charities and social enterprises can and should make profits in order to do what they do and to be sustainable. Indeed, social enterprises have to make profits. That has a very important implication for social policy. It means that underfunded public sector contracts can no longer be palmed off to the charitable and voluntary sector. I do not think that people in government have understood the importance of that although some people are beginning to do so. I commend to all noble Lords the Public Administration Committee’s report of 2011, which looks at the way in which the big society is being implemented as a public policy by government. The committee was keen to stress that as more and more public sector contracts are outsourced, it becomes more important for government to conduct an audit and accountancy trail about what happens in terms of funding and outcomes for people.
In passing, I mention the article by Zoe Williams which appeared in the Guardian this morning, in which she looks at the future of public service contracts and particularly the naïve notion that small charities will on their own be able to compete either with big charities and big-scale social enterprises or with private companies to take over what are essentially large public sector functions.
I am pleased to see the noble Lord, Lord Hodgson of Astley Abbotts, in his place. He and I have had a number of conversations. I very much look forward to his review of charity law. That report is due to be published soon. We must be clear that although social enterprises are developing and are very innovative and pose challenges to government and the existing charitable sector, charities will go on.
I conclude by mentioning three strategic interventions which I think the Government could and should make in order to help charities and social enterprises emerge from this period of turbulence stronger and more effective. The first is the need for there to be a toolkit which social enterprises and charities can use to determine whether they are investment-ready. There are a number of different sources of investment for those bodies but the people responsible for their governance have hard decisions to make about where to risk the small amount of resources at their disposal. There is a real need for them to have a tool that sets out those business decisions in a clear way that they can follow.
Secondly, charities have always struggled to demonstrate the outcomes they achieve for the people they work with. However, enormous progress has been made by a particular company, Triangle Consulting, which works with a number of different charities and bodies to develop what is known as an outcomes star. It enables charities working in different fields—mental health, drug and alcohol addiction, and older people—to show the outcome benefits for their client group. There is no outcome star for volunteering and, as my noble friend Lady Scott said, volunteering and the encouragement of it are critical to all this development in the future. I wonder whether the Government might look at supporting an outcomes framework for volunteering.
My final point relates to the digitisation of gift aid. The fact that it continues to be a paper-based exercise is holding back charities and social enterprises, and stops them engaging with a new generation of givers. Digitisation of gift aid will be an extremely important step forward for social enterprises and particularly for charities in the future.
Baroness Wall of New Barnet
My Lords, I, too, welcome this debate and very much thank the noble Baroness, Lady Scott, for initiating it and for providing the opportunity for us all to participate. The diversity of contributions has been wonderful. I shall concentrate, as noble Lords might expect, on the relationships between voluntary sector organisations, charities and hospitals.
As chair of the Barnet and Chase Farm Hospitals NHS Trust, I am keenly aware that statutory bodies can and do extend the reach and impact of their services by working with the voluntary and social enterprise sector. This goes beyond the work with volunteers in hospitals, valued and valuable as they are. I could not agree more with the comment of the noble Baroness, Lady Byford, that it must be absolutely dreadful for anyone to end working for an organisation voluntarily because they are not appreciated. Every year in my trust, I host a party—a celebration to thank the volunteers who help in all sorts of ways around our wards. My next opportunity to do that is in two weeks’ time. I love doing it and I look forward to it.
At my hospital, we work with some of the big voluntary sector providers. An example is our work with Macmillan Cancer Care and Citizens Advice. Working in a partnership between the hospital and these two bodies, we have improved the holistic support that we give to cancer patients. We do so by jointly establishing with Macmillan and the CAB a welfare benefits service operating from Barnet hospital. This supplements the work that we are already doing with Macmillan cancer information, which provides education and support to cancer patients and their families—and, indeed, to our staff.
We are acutely aware at the hospital that while significant strides have been made in the treatment of diseases such as cancer, often what bothers patients at the forefront of their minds are practical issues such as managing the day-to-day reality of household finances while undergoing major treatment. The national cancer patient survey revealed that patients across the country were frequently dissatisfied with access to welfare benefits advice, which is very worrying while they are trying to get better and improve their health with cancer treatment, following their diagnosis.
Our welfare benefits service now provides our patients and cancer teams with expert advice, at both Barnet and Chase Farm hospitals, with visiting CAB benefits advisers supporting them. This has enhanced the support work of our cancer teams because they have been able easily to signpost patients to the service, which has been positively evaluated by patients and our staff. The benefits advisers have also provided training for our staff to raise the awareness they need personally to support the individual and point them to those who can quickly help them with easy access. Bodies such as Macmillan bring flexibility and innovation to the delivery of services, and provide a trusted outreach to cancer patients and their families that public services could not do on their own. We are delighted to be working in partnership with the Barnet CAB and Macmillan Cancer Support because this has been a significant addition to our programme of improvement.
I also pay tribute to many other organisations, including the Alzheimer’s Society. We have worked with this charity to develop our approach to managing and caring for patients with dementia and supporting their families. It has provided us with valuable advice and in fact has supported training for our staff. It is also represented on our dementia steering group and, as such, is able to give an informed out-of-hospital view of how the provision and care of patients with dementia should be delivered.
The final group I should like to mention is Solace Women’s Aid, a voluntary London-based charity supporting victims of domestic violence. It has provided our staff with really valuable training in recognising the implications and evidence of domestic violence.
What all these groups have in common is the ability to bring an additional perspective to the work of statutory services and to provide a focus from the point of view of the users of the services and their carers. They also enable us to reach out to provide services in different and new ways, including potentially side-stepping unhelpful bureaucracy.
As we reform and improve public services, it is important to recognise the contribution that the voluntary sector makes. It is important that medical people provide medical care; financial and other support can come from other areas. I hope that the experience I have described at my hospital illustrates the kind of partnership that benefits users of services and their carers.
Lord Hussain
My Lords, I thank my noble friend Lady Scott for securing this important debate.
The voluntary sector in the United Kingdom is recognised by many as the third pillar of our economy. I have spent most of my working life engaged in this sector as a volunteer. This has given me not only a great amount of knowledge and experience but personal satisfaction and an insight into the issues and challenges facing the voluntary sector.
I am sure that your Lordships are aware of the wide range of voluntary sector activities in the UK—from registered charities and voluntary organisations to not-for-profit organisations that provide much needed care services, advice and guidance, counselling, vocational skills training and many other important areas of service. On an international level, many of our charities, such as Oxfam, Save the Children, the Red Cross and so forth, play a leading role in saving lives and improving living standards for millions of people.
Many famous dignitaries are patrons of thousands of charities. Prime examples of course are members of the British Royal Family—Her Majesty the Queen, the Duke of Edinburgh, the Prince of Wales and Prince Harry. The Duke of Edinburgh leads the way with more than 700 patronages, while Her Majesty the Queen has more than 600. Between them, they cover every area of the charitable and voluntary sector, from opportunities for young people to the preservation of wildlife and the environment. The Prince of Wales is patron of more than 400 organisations and of course set up the Prince’s Trust, which last year alone supported 46,000 young people.
It is encouraging to see that the younger generation of the British Royal Family is already very active in the voluntary sector. Prince William is supporting many charities, including Beatbullying, SkillForce, Help for Heroes and many more. Prince Harry dedicates a vast amount of his time to charity work, such as helping with the Lesotho orphans. The Duchess of Cambridge has chosen her charities to work with, and these include Action on Addiction, East Anglia’s Children’s Hospices and the Scout Association.
Other members of the Royal Family are also involved in invaluable charitable work, and there is no doubt that they drive millions of pounds into this sector every year. I praise the generosity of the British people who, in these economically difficult times, increased their contribution to charities by 6.2% in 2009-10, donating an estimated £10.6 billion according to cafonline.org. The value of this sector has been recognised by the previous and present Governments through the giving of direct financial support and the gift aid scheme. However, that support has never been enough. The cuts in the recent Budget have squeezed this sector to the extent that many small charities and voluntary sector organisations have had to scale down their activities significantly or have been forced to close down altogether.
According to Karl Wilding, head of the National Council for Voluntary Organisations, in the Huffington Post United Kingdom, the latest estimate based on OBR forecasts is that charities face £1.2 billion of cuts a year until 2015. It is also estimated that, as a knock-on effect, 70,000 jobs will be lost in this sector in the first year. This, no doubt, will have a major impact on the vital services that the voluntary sector provides.
I fully understand the current financial situation that has forced the Government to make some difficult decisions. Unfortunately, this huge reduction in financial support from the Government to the voluntary sector is unprecedented and is having damaging consequences. Due to the important work carried out by the voluntary sector, I believe that the Government should consider the impact more closely and do everything that they can to reinstate the financial support to the voluntary sector for it to continue providing an excellent service.
Lord Watson of Invergowrie
My Lords, I congratulate the noble Baroness, Lady Scott, on identifying this important subject for debate. The standard of the debate has been very high and it has been varied.
I declare an interest of sorts. After graduating from university, my first two jobs were in the voluntary sector. The first was with the Workers’ Educational Association, as a tutor organiser, and while there I became active in my trade union, then known as ASTMS, which is now part of Unite. I am surprised that no one has mentioned the trade union movement. With 6.5 million members, many of whom work unpaid on behalf of their colleagues, it is the UK’s largest voluntary sector organisation, although it is not typically seen as such.
I think that the voluntary sector is imagined by many people to have developed relatively recently, certainly since the Second World War, but that is not the case, as demonstrated by the fact that the National Council for Voluntary Organisations, the umbrella body for the sector in England, will celebrate its centenary in 2019. According to the NCVO, there are more than 163,000 voluntary sector organisations throughout the UK. As noble Lords have mentioned, the total income for the sector is around £37 billion, with more than a third coming from statutory sources. It is important to point out that, by a ratio of 3:1, that public funding is in the form of contracts for services delivered, rather than straightforward grants.
The effects of public spending cuts on the voluntary sector are already dramatic. A survey by the NCVO in August 2011 found that the sector stands to lose £3.3 billion from the Government over the current spending review period from 2011 to 2016. That is a conservative estimate based on analysis of the Government’s figures published by the Office for Budget Responsibility. The figures assume that cuts will be made proportionately. However, in practice we know that many local authorities have been making disproportionate cuts to voluntary sector funding. Hard hit by cuts in their own funding, councils are putting charities and voluntary organisations that deliver services in the firing line when it comes to cuts. For councils, cutting their own staff means paying redundancy, whereas cutting contracts means that the voluntary sector takes the redundancy hit.
When combined with the wider impact of cuts on vulnerable people and communities, many charities are facing what might be described as a perfect storm of rising demand for services, combined with falling income. As a result, the voluntary sector workforce has been significantly reduced, with the latest figures suggesting a fall of 33,000 over the past year. There are 162,000 registered charities in England and Wales, with another 23,000 in Scotland. They have a combined annual income of more than £60 billion and employ around three-quarters of a million staff. These figures are testament to the power and importance of the voluntary sector.
Social enterprises complement much of what the voluntary and charity sectors do, although they differ from registered charities in that they expect to be revenue-generating from the service that they provide. Social entrepreneurs are establishing businesses that operate to different values. They believe that their business has a moral purpose and they use their entrepreneurial skill to benefit wider society. Traditionally, capital hires labour with the overriding emphasis on making a profit over and above any benefit either to the business itself or the workforce. In contrast, in a social enterprise, labour hires capital, with the emphasis on social, environmental and financial benefit.
My noble friend Lord Giddens commented that the Cabinet Office figure of 62,000 social enterprises currently in the UK was a considerable underestimate, and I go along with that. However, even those 62,000 contribute £24 billion to the UK economy, which is a considerable amount. Some social enterprises in the UK are major players in their sectors, including the Co-operative Group, John Lewis, Welsh Water and Cafédirect.
All that begs the question as to whether voluntary organisations, charities and social enterprises fit into the coalition’s big society project. The voluntary sector has given the big society a qualified welcome, although a number of concerns have been raised, including the impact of public spending cuts, to which I referred, on the sector’s ability to play an increased role in the provision of public services and whether the sector’s independence might be compromised. Some have gone further, claiming that the big society is little more than a cover for the privatisation of public services. Indeed, the union, UNISON, was unequivocal, stating:
“The government is simply washing its hands of providing decent public services and using volunteers as a cut-price alternative … Public services must be based on the certainty that they are there when you need them, not when a volunteer can be found to help you”.
Many noble Lords will have seen in March 2011 the Channel 4 investigative programme “Dispatches”, which concluded that the big society was about,
“privatising the welfare state on a massive scale”.
The programme explored the increasing degree to which the companies Serco, G4S, and Capita are being paid to carry out work previously performed by central and local government. Charities and the voluntary sector, which might like to deliver some of that work, are increasingly unable to compete with those groups, which are making large profits from outsourcing contracts.
When the Office for Civil Society was formed in 2010, one of its first acts was to cut £11 million from existing organisations aimed at encouraged volunteering. The youth volunteering charity, v, lost a further £8 million and almost 100 jobs with the abolition of its schools programme. When you have a stated aim, as the big society does, of seeking to encourage people to become involved locally, where is the sense in cutting experienced organisations and staff who know how to do the job?
Criticism of the big society has also come from within the House of Commons, but the coalition Government are not listening. In December 2011, the Public Administration Committee published a report calling on the Government to re-assess their delivery of the big society by appointing a single Big Society Minister with a cross-cutting brief to ensure that the work involved was consistent between departments. Having received the Government’s negative response, the committee was forced to reiterate its recommendations last month. Perhaps the Minister might enlighten us as to whether, this time, the committee can anticipate a more conciliatory response.
Lord Stone of Blackheath
My Lords, I declare a specific interest in this field. I chair DIPEx, an Oxford-based charity. We are currently internationalising ourselves and I will cite this as an example later.
I propose to Her Majesty's Government that they may wish to create a hub in the United Kingdom that would encourage and support other established British charities and social enterprises to internationalise themselves. For decades, through the British Council, with a budget of £600 million, Britain has promoted language and education and our arts and culture. That is good for Britain and good for the world. Many excellent charities and voluntary organisations have already successfully internationalised themselves, but others are struggling to create organisations that spread worldwide with the right disciplines and standards, and many as yet have not realised the vast potential and advantage to be had by becoming international.
Imagine if we were to encourage British charities and social enterprises—large, medium and small—to consider researching other countries with the same issues that they are addressing here, and linking with organisations in those countries to form international organisations. I envision that to be taken on by either a government ministry or the British Council—or even the City of London; it was hitherto the centre for the finance industry but could become a centre for world philanthropy, possibly using the City Bridge Trust, which was mentioned earlier.
To start with, if perhaps 100 charities came forward to internationalise themselves, the hub would create for them access to international legal structures, the ability to set global standards and access to branding, marketing and website publishing. Even if it were to cost an average of £50,000 for each of those organisations, the total cost to make Britain the hub for 100 international such organisations would be £5 million.
Let me cite DIPEx as an example. I am not asking for help: we are going to internationalise ourselves using our own resources. This is what we decided to do. The DIPEx charity has worked closely with the University of Oxford, and with the support of the Department of Health—it has funded us so far with £2 million of the almost £10 million we have raised—to create www.healthtalkonline.org, a unique online resource. It publishes people’s personal experience of health conditions.
So far, we have covered 70 health conditions, including 10 types of cancer, heart diseases, neurological conditions and diabetes, and life issues such as bereavement, pregnancy and the menopause. The website includes not only the experiences of patients but those of carers, families and friends. On our website, we receive 1 million hits a week and 3 million unique visitors a year. We now know that watching and listening to the experiences of others can have a major impact on a person’s ability to deal with their health challenges through personal empowerment, being better informed and a reduced sense of isolation.
Based on training and support from DIPEx UK, organisations in other countries want us to help them set up parallel projects in their countries. Universities and hospitals in Spain, Germany, Holland, Japan, South Korea, China, Israel, Palestine, Canada and Australia are involved. Together, we will establish DIPEx International as an umbrella organisation to co-ordinate the activities of the group, to collect and publish health experiences worldwide and combinedly to help with fundraising. We have decided to use £50,000 of the DIPEx charitable reserves for this. Oxford would then become an international centre for the highest-quality worldwide health charity. Already as a result of our activity Green Templeton College in Oxford, where we are based, now plans to create HEXI, the Health Experiences Institute, a centre for research into patients’ health experiences worldwide. DIPEx is just one example of a charity doing this.
The International Centre for Social Franchising sees numerous social enterprises whose success has been evaluated and proven; yet, frustratingly, its wheel is constantly being reinvented. These organisations should be replicated in other areas and other countries. The core idea and the accumulated experience should be the starting point for designing and delivering solutions elsewhere.
Today, I merely suggest to the Minister that he asks the appropriate ministry to arrange a conversation with the people involved, to see whether this programme might help the charity and social enterprise field from Britain to make valuable connections and to create new ways to spread aid and services to countries with which we wish to have relations. I propose that the Minister suggests to his colleagues in government that we perhaps arrange a two-day conference where we invite 30 or 40 people from this field who would be interested in helping to take this idea forward. The participants could include, say, five charities; five social enterprises—small, medium and large—the Social Enterprise Coalition; an international consultant in this field such as the Social Investment Consultancy; the Enterprise Bank; Prism the Gift Fund, with which I am also involved; some experienced lawyers in this field; some big UK-based international businesses to help with advice on internationalisation and perhaps funding; the City Bridge Trust; the International Centre for Social Franchising; the Charities Commission; and, perhaps, the noble Baroness, Lady Scott, who promoted this interesting debate. I am sorry that I do not have the resources to research this more deeply. It is merely a suggestion but perhaps noble Lords will feel that it merits further research, discussion and action.
Baroness Benjamin
My Lords, I, too, express my heartfelt thanks to my noble friend Lady Scott for securing this important debate and for her excellent opening speech. The voluntary sector has a unique role in reaching out to every area in society—to the most disadvantaged and vulnerable groups—as well as in funding vital medical research. I should like to highlight the voluntary contribution made by three of the numerous charities with which I have been involved over many years, so I declare an interest.
First, I would like to draw attention to Sparks. Last year, medical research charities invested more than £1 billion in the UK. That has had a considerable impact on patient well-being, has brought huge economic benefits and has attracted industry investment. The UK is a centre of excellence for paediatric research and the world’s brightest young scientists come here because of our long-term investment in child health. Sparks, now in its 21st year, is one such medical research charity. It is dedicated to funding medical research into all conditions that affect babies and children, helping to improve quality of their lives and giving families hope when they think there is none. It is the biggest UK funder of paediatric research—ground-breaking research which has the potential to have a global impact, such as research on body cooling, now used as NHS standard treatment to prevent brain damage in babies born deprived of oxygen and at risk of lifelong disability. That is probably the most important advance in neonatal intensive care for babies in the last decade. Sparks’s legacy and contribution to child health is truly significant.
Scientific research needs to continue but there is a decline in young people studying science, so what are the Government doing to ensure that our schools and universities are preparing our children to be the scientists of tomorrow?
During debate on the then Health and Social Care Bill, it was stated that the voluntary sector would be relied on for crucial developments that the NHS and public health faced over coming years. The Sickle Cell Society does just that, by helping to articulate the concerns of people living and struggling with that disease. Even though the Sickle Cell Society community hub was commended, its application for Section 64 funding was turned down, despite the potential for inequality that will arise when the specialist commissioning takes effect. Its proposals would have ensured that the interests of people affected by sickle cell disease continued to be counted. The Sickle Cell Society, its clients and the wider BME communities are concerned about that situation, and I ask the Government to meet interested parties to discuss how the society can continue to support its important work within the framework of the appropriate NHS Commissioning Board authorities.
Although local authorities provide many excellent services, the voluntary sector can offer a number of advantages as it operates with greater independence, which means that it can co-ordinate support from a variety of agencies to get the whole family the help that they need, and can reduce excess bureaucracy. Barnardo’s has done just that for decades. Last year, it helped over 190,000 children, young people and their families in over 800 services, including young people in care, those not in education or training and children of prisoners. Barnardo’s also lobbies and campaigns on behalf of disadvantaged young people, and its evidence feeds into government policy-making. It has secured numerous changes in England, Scotland and Wales, such as to retain savings accounts for children in care. Through its Cut Them Free campaign, in which 103 local authorities have signed up to tackle the evil practice of child sexual exploitation in their areas, it has secured a government publication—a national action plan—on the topic, which is long overdue.
The voluntary sector faces problems due to public sector cuts, but the Government could take a number of steps to support it even in times of austerity. One way is through local authorities’ procurement processes, as they often fail to engage potential suppliers in pre-procurement talks. I ask the Government to consider a standardised application process, which would reduce repetitive procedure and save potential suppliers large amounts of time and money. I also ask them to put together a list of preferred suppliers for certain themes of work.
Another problem is the lag time inherent in payment by results, which could mean six months before payment starts, making it difficult for charities to compete in the private sector for contracts. That means that charitable assets face a high risk. Will the Government explore the use of staged payment schedules to reduce the risk that charities are exposed to and reward achievements and outcomes, especially when working with the most vulnerable?
We must treasure and preserve our voluntary sector, and support the valuable contribution that it makes to our society. As a country, we have a rich tradition of giving and volunteering, and in times of hardship and financial turmoil it is often the only source of help and respite for those in difficulty. Let us ensure that our policies help rather than hinder our voluntary organisations.
Lord Rana
My Lords, I thank the noble Baroness, Lady Scott, for initiating this debate on a topic that really goes to the heart of citizenship and all that it means to be a participant in the communities in which we live, as opposed to being a bystander on the fringes. The voluntary sector makes a proportionately greater contribution in Northern Ireland than in other parts of the UK. It has assumed this position for several reasons including the extent of poverty in Northern Ireland, which is higher than in many other parts of the UK, and the weak private sector. Both have been influenced by over 30 years of upheaval and violence. This turmoil has created pockets of severe poverty in Northern Ireland, especially in parts of Belfast, mostly notably west Belfast, resulting from higher levels of unemployment and underachievement in education. The noble Lord, Lord Lexden, has already mentioned the good work done by NICVA, so there is no need for me to repeat that, but I add my words of appreciation and share the admiration that he expressed.
The work of many voluntary organisations touches virtually every section of the community. Among the employed are former prisoners from both sides of the divide, who are unable to find mainstream jobs. Especially in today’s difficult economic environment in Northern Ireland, the sector is a major source of employment. As well as carrying out important work on the ground for local communities, the sector contributes to the development of key skills and working experience, builds confidence and helps to raise self-esteem. The sector is contributing to the strategic focus of the Northern Ireland Executive on accelerating the growth of the private enterprise culture. This is helping to rebalance the economy and reduce an unhealthy overdependence on the public sector. The sector has an annual income of around £600 million, most of which comes from the EU. About 45% of it is public funding, about two-thirds of which comes from the Government’s direct purchase of goods and services from community and voluntary organisations.
The voluntary and community sector, with assets of over £750 million, represents about 4.5% of the Northern Ireland workforce. Most people working in the sector are following a vocation in working to help others, and often go above and beyond what is called for to ensure that help is given where it is needed. The figures represent a significant proportion of people who work to help others. It is a community support system that is fundamental to the economic well-being of communities and their stability. It is important that the Government should be seeking to ensure that the funding is underpinned and sustained adequately.
The sector is suffering, like many other areas, from a tightening of funding sources and faces growing pressures regarding EU funding, which has sustained it over many years. Northern Ireland has come a long way from being classed as having Objective 1 status by the EU, which is a good thing. It is now classed in the reasonably prosperous category. The downside of this is that it does not qualify for many EU funding initiatives, as it did. As the current European Union economic funding programmes draw to a close, Northern Ireland will not attract the same level of financial support from Europe, placing significant pressures on the voluntary sector. Much funding has to be given to support stability in the region through economic regeneration by working together in partnership with the many groups and organisations, by promoting integration as well as providing practical help and by working through initiatives such as the PEACE II programme.
Where assistance may be given is in helping to develop sources of finance for social enterprises, enabling these valuable contributors to continue the work that has already been done, but in doing so we must not supplant one organisation with another. If it fills the breach but at the same time creates unemployment, hardship and social upheaval for workers who have already given much of their lives to supporting the community, it is not operating under the auspices of the big society at its best.
With less government funding available, only those voluntary and community organisations that can exploit opportunities to generate revenue and operate in an increasingly businesslike and innovative manner will survive. The private sector can provide considerable support in achieving these goals by sharing skills and resources with the voluntary and community sector. Government can also help by assisting the sector to source the necessary funding to continue to contribute to local community development. However, the indications are that pressure on public budgets is now impacting the sector adversely and threatening to undermine much of the good work already carried out.
It is imperative that when funding issues are being considered, the special nature of the problems that have beset Northern Ireland are not forgotten, so that a fair distribution can be made to ensure that all the good work is not undone in the need for short-term savings that may have a devastating impact for many years to come, and may in the end cost more to put right.
Lord Storey
My Lords, I thank my noble friend Lady Scott for initiating this debate and for her very important opening contribution. Much has been said and written about the big society. I agree with everything that has been said but I struggle at times to understand what the big society really is—or, to put it another way, what the big society does that our voluntary and social enterprise sectors do not do.
Our voluntary sector must be the envy of the world, supporting people, causes and the most vulnerable, and often taking up lost causes and concerns that nobody else, including government, is able to do. We probably have the largest voluntary sector in the world and the largest number of volunteers. As a nation we can be truly proud. Add to that the incredible fundraising that goes on, which again is one of the highest per capita of any country.
We can all see power and responsibility shifting in our society—that individuals and communities have more aspiration, power and capacity to take decisions and solve problems themselves, and that we all need to take greater responsibility for ourselves, our communities and each other.
Two voluntary organisations I know very well are Clare House and Zoe’s Place on Merseyside. Clare House was named after a young girl who was terminally ill, and provides respite care for terminally ill young people and their parents. It needs to raise £3.7 million a year—yes, £3.7 million—just to keep its doors open and offer the same level of service every year. It receives government money of £353,000 from the children’s hospice and hospice-at-home grant, formerly the Section 64 money. It applies for this funding annually. Zoe’s Place cares for terminally ill babies in the most incredibly caring environment. Again, it has to raise £1.3 million a year, and receives £200,000 from the NHS. Where would our big society be without such wonderful organisations?
Many of your Lordships will have received a briefing from the Sue Ryder voluntary organisation, which is also a provider of health and social care. It cares for people with long-term and end-of-life conditions with its community and home-based services, seven hospices and seven neurological care centres. Again, I really do not know how we would manage without voluntary organisations like these or how our NHS and social services would cope without this huge voluntary contribution.
These organisations are not asking for more money. They were delighted when my noble friend Lord Howe agreed to the amendment of the noble Lord, Lord Patel, to the Health and Social Care Act to ensure the production of a fair-playing-field review so that we can understand the obstacles to non-state providers who want to provide public services. VAT and TUPE transfer liabilities are also areas that we should look at.
The voluntary sector is uniquely placed to meet local needs by building up strong community relationships, offering personalised services, meeting local needs and breaking away from the model of one size fits all.
We have heard from my noble friend Lady Barker a detailed definition of a “social business”. To me, it is simply a business which has a social purpose or a social responsibility. What do I mean by that? Let me give you an example.
The Furniture Resource Centre was established in Liverpool in the early 1990s by a pioneering, young-at-the-time social entrepreneur called Liam Black to deal with unwanted sofas that had often been dumped in back entries or, to use the local parlance, back jiggers. It collected them, reupholstered them and sold them. It employed long-term unemployed people and provided training. It approached an enlightened council and suggested a service called Bulky Bob’s—named after one of its employees, Bob. It would collect from residents’ homes bulky items which the council would previously collect and dump in infill sites. The Bulky Bob’s service would allow residents to phone up and a purple Bulky Bob’s wagon would arrive at an agreed time to collect the items. White items would go to a social business called Create, wood items to a charity and sofas to the Furniture Resource Centre. It also opened in the city centre a store called Revive, which sold the refurbished items. It provided not only an excellent service for local residents, but, more importantly, jobs and training for local people. It increased recycling and stopped dumping. Interestingly, Bulky Bob’s, which is self-financing and self-supporting, has expanded to other local authorities with service-level agreements. It also provides a bespoke service of kitting out social housing.
Social businesses and the voluntary sector are realistic about the country’s economic problems. Many fear that they will suffer disproportionately from cutbacks, which will affect their work in many of the most deprived areas of this country where their efforts are most needed. They want greater transparency in the way in which local councils decide to provide services directly or indirectly involving the voluntary sector, and how they calculate the costs and benefits of those different approaches. Let us celebrate the work of the voluntary sector; let us recognise the unique role that it has in our society; and let us work with it to help it continue to thrive in these very difficult times.
Lord Phillips of Sudbury
My Lords, owing to clerical error, my name was not put down to speak and I am thus speaking in the break, and have four minutes in which to deliver an eight-minute speech. I commend my noble friend Lady Scott both on securing the debate and on what she said. Like, I suspect, everybody else in the Chamber, I hate to think of where we would be without our voluntary sector, because it is still the harbinger of the best values that we have inherited and seek to sustain. It is values-rich at a time when, I am afraid, so much of the commercial world, especially the big commercial world, is values-depleted.
I want to mention the role of small enterprises and voluntary organisations particularly in community life, because I think that many of your Lordships will agree that, in our lifetime, there has been a dramatic decline in the vigour and vitality of community life. It is interesting that that word “community” has the same root as “common”, and it is the communality of our lives that has been so hacked back—the common man, the common law, common sense, common land, common wealth, common fate and common fortune. All those things have been put in jeopardy by the circumstances that we all know well: mobility, work, obsessiveness, a certain degree of excessive individualism and so on. It is the small charity, voluntary organisation and social enterprise which is absolutely integral and central to a revival of the “commons”, as one might put it. They are local, rooted and embedded; they know their patch and are known in it. As was the case in my young manhood, when businesses mostly had those characteristics, you inevitably become part of the community and contribute to it informally. You did not call it pro bono, let alone charitable donation. These local organisations, whether private or not, were so integral to effective community life.
I also want to say a quick word about auditing. A number of comments—for example, from the noble Lords, Lord Giddens and Lord Shipley, and the noble Baroness, Lady Barker—have touched on the performance of business, particularly big business. The Public Interest Research Centre, a charity organisation set up in 1971—I was a trustee for 30 years and am happy to say that it still exists—had an idea whose time may now have come. Its main thrust was social auditing in public companies. I think it is well worth considering, and not just by government, whether it is not now time for us to look at what big companies and business entities, which are often global entities, do by way of social contribution as well as profit-making. I am thinking of things like minority hiring, environmental depletion and so on.
Finally I should like just to give a warning, if it is necessary, against any delusions about how much we in Parliament can achieve in relation to small, on-the-ground charities and social enterprises. I sometimes think that the torrent of laws that spew from this place have inadvertently created an attitude and expectation among people that they do not really need to contribute much and it is all down to government. Well, it ain’t.
My time is up so I shall sit down.
Baroness Thornton
My Lords, first, I congratulate the noble Baroness, Lady Scott, on initiating this debate which, as so often, demonstrated the depth and breadth of knowledge in the House about charities and social enterprise. I first spoke about social enterprises in your Lordships’ House when I came here in 1998, and certainly needed to explain what it was I was talking about. Fourteen years later, I think we can say that with the support of the previous Government, pieces of legislation and, indeed, all-party support, we pretty much all know what we are referring to when we talk about social enterprises, mutuals and co-operatives, and we recognise the important role that these businesses and organisations play in our economy and our civil society.
I need to declare some interests. I am a patron of Social Enterprise UK and was its founding chair in 2001, when it was called the Social Enterprise Coalition. I am very proud of the work of Social Enterprise UK as a national voice for social enterprises. I am a paid associate of Social Business International and its new organisation, E3M, which seeks to ensure an input into the development of social businesses across Europe by capturing the experience of leading social enterprises in the UK. The three Ms are money, models and markets, which pretty much outlines the challenges we face. I am also an ambassador for sport at the trade association for sport and leisure trusts such as GLL, which is one of our Olympic legacy organisations. I have been a trustee of Social Enterprise London, Action for Children, Training for Life and the Jamie Oliver Foundation. I am also a volunteer.
I want to raise an issue about volunteering. The noble Baroness spoke about the importance of volunteers. I agree with her about that but was alarmed—although I many have misunderstood what the noble Baroness said—by the idea that carers are volunteers. When I go home to Bradford tonight and become my mother’s carer for the next four days, I am not a volunteer. I am my mother’s carer and do not regard that as being a volunteer. In this country, we are dependent on our carers and our social fabric would collapse without them. We are in danger of being confused here. When I reflect on the increasing stress and burdens placed on carers by cuts in social services and welfare changes, we have to be careful about our definition. Volunteering is surely also about a choice one makes.
I also have to put on record that there is a small irony here in a debate initiated by the Liberal Democrats about charities and social enterprises. Although many Liberal Democrat colleagues have an outstanding record of support for charities and social enterprises, such as the noble Lord, Lord Phillips of Sudbury, who is indeed one of the House’s undisputed experts, the mover of this debate, the noble Baroness, Lady Scott, and others who have spoken, some have been less enthusiastic from time to time. The noble Baroness, Lady Barker, objected to a health Bill with which I was dealing as a Minister. Having to answer her searching questions about the right to request in the NHS, it struck me at the time that the Liberal Democrats perhaps needed to clarify their thinking about the matter.
I hate to cast a political note into this, but I think I need to say, with respect, to those on the Liberal Democrat Benches that their support for charities—such as that of the noble Baroness, Lady Benjamin, in her role as a children’s champion—is in flat contradiction to their voting record on issues such as welfare reform and legal aid changes.
David Cameron seized the initiative by giving support to social enterprise during his campaign for the leadership of his party. As the then chair of the Social Enterprise Coalition, I was delighted by that and helped—behind the scenes, I have to say—to ensure the success of a Conservative opposition Front-Bench tour of London social enterprises undertaken on a red London bus provided by Hackney Community Transport. I shall resist the temptation to speculate how many of those Conservative Front-Bench spokesmen spent much time on London red buses, but Hackney Community Transport, as people will know, is one of the UK’s biggest and best examples of a social enterprise providing public services.
I was pleased about that because it shows, as is still the case, that the growth of charities and social enterprises need all-party understanding and support. That support translated into two main pledges to support social enterprises in public service delivery in the coalition agreement, which I am surprised that no one has mentioned, so I shall. The coalition agreement, which is how we need to judge the success of the Government’s work, states:
“We will support the creation and expansion of mutuals, co-operatives, charities and social enterprises, and enable these groups to have much greater involvement in the running of public services”,
and, secondly, that they will,
“give public sector workers a new right to form employee-owned co-operatives and bid to take over the services they deliver”.
The Government have made some progress in delivering those objectives. The problem, in true coalition fashion, is inconsistency. We also have to look at an unthinking cuts agenda which is driving the charitable and social enterprise sector into becoming a substitute for robust and thriving public services in a manner sometimes reminiscent of the poorhouse of Victorian times. A playgroup that delivers two or four hours a week of play for a child is not a substitute for a nursery which allows families or single parents to hold properly paid full-time jobs. We need both. The noble Earl, Lord Listowel, was quite right in his analysis of children’s issues.
The Conservatives are also guilty of facing in both directions at once. We have seen enthusiastic support by the likes of Jeremy Hunt for philanthropy and, simultaneously, the Chancellor making a complete mess over tax relief for charitable donations in the most recent Budget. I would be grateful if the Minister could give us an update on exactly where that issue is.
Social enterprise and charities are indeed big business. They are a valuable part of our society and need to be treasured as such. I absolutely agree with my noble friend Lord Giddens when he said that social enterprises should be mainstreamed. The noble Lord, Lord Shipley, perfectly described the importance of the challenges facing social enterprises locally. His plea for support and development is absolutely right. My noble friend Lord Stone talked about internationalising our expertise and business models for charities and social enterprise. He, too, is correct. I remember him talking to me about DIPEx many years ago and it was a mere twinkle in his enterprising eye. If ever there were a serial social entrepreneur in this House, it has to be my noble friend.
I have my own example of a new social enterprise going international. Future First was launched in two state schools in 2009 to bring former students back into their old schools to act as inspirational career role models for young people, and indeed my children’s school in Camden was one of those. Since Cabinet Office funding, Future First is now building grass-roots alumni communities in over 500 schools in England, and has begun to export its model. A 10-school pilot in Nairobi is to start this year, funded by a Kenyan philanthropist, and there is a move to build this in the United States. I congratulate the founders and the Cabinet Office, and I wish them well.
The growth of social enterprises owes a great deal to the previous Government, whose public policy, legislative and financial legacy has enabled the coalition Government to continue their support for social enterprise. I very much welcome the launch of Big Society Capital, but one has to recognise that this is a rebrand of the social investment bank that the Labour Government were establishing through dormant accounts legislation, and it has taken two years to get there. I also welcome the Public Services Value Act. It has to be noted that the words “Social Enterprises” were removed, but it is still a worthy piece of legislation. It will not work, though, unless we embed social values in local commissioning—it will go nowhere at all.
I have two further points. One is that I rather hope that the noble Lord, Lord Phillips of Sudbury, will explain to the House and give us a pre-run of the amendments that I understand he is about to put down on the Social Finance Bill. We will be interested in supporting them, because they are the heart of how we get social investment into the Financial Services Bill. The second is that, while I am grateful to the noble Baroness, Lady Randerson, for explaining the community investment tax relief, I would like the Minister to explain what progress the Government are making on that matter.
These are challenging days for charities and social enterprises. Both are proving resilient and imaginative, as illustrated by the noble Lord, Lord Storey, when he spoke about the Furniture Resource Centre, which was a founding member of the Social Enterprise Coalition, so I am very familiar with it. Both need our support and policies that break down barriers to their success. Whether the government parties can provide public policy coherence and face in one direction at the same time is the question—and, indeed, their challenge.
Lord Wallace of Saltaire
My Lords, on what we are discussing today there is a lot of common ground across the Chamber and across all parties. I do not intend to follow the noble Baroness, Lady Thornton, in her slightly partisan wind-up because there is a great deal of common ground.
We are all volunteers. Volunteering, after all, has a long tradition in Britain. Long before the welfare state grew up there were churches and chapels; philanthropy and charitable activities by the well-off; friendly societies; co-operatives among the working classes; trade unions, of course; and, above all, women. My mother retired from her last voluntary post when she was older than a considerable number of the women in the old people’s home of which she was chair. She was one of that generation who would have had a career had she not married. As we know, one of the problems that we are facing in the voluntary sector is that there is no longer that great pool of capable women who are not able to work because they are married. We therefore have to rely on the fit retired much more than we did.
I suppose that in some ways I am one of the fit retired who is a volunteer, as are half the government Front Bench. I work but I am not paid, although that is partly because I have quite a generous academic pension—not, of course, half as generous as doctors’ pensions—which enables me to provide my contribution. Most of us in this House are actively engaged in one way or another in the third sector. Indeed, I remember some months ago the noble Baroness, Lady Scott, and myself being taken by the noble Lord, Lord Mawson, to the Bromley by Bow Centre, a remarkable generation of investment, started on the basis of a rather dilapidated congregational church and now involved in the regeneration of a large area in east London. So I welcome the focus on volunteers and recognise, as do the Government, that support for volunteers is very much part of what has to happen in this sector; you often need paid staff to train and support volunteers. At a reception for small charities the other evening, I met the leaders of a small charity in north Yorkshire which has two part-time paid staff who, in turn, support several hundred women in visiting elderly people living on their own in homes. That is a good example of the sort of thing that all of us wish to support and encourage, but which the state does not easily provide.
Several noble Lords, including the noble Lord, Lord Giddens, have talked about the proper balance between state, society and market. That is what we are all really concerned about here. We need to make sure that, in that balance, there is a strong civil society as part of the mix, both in relationship to the market and in relationship to the state. The Prime Minister has labelled this “the big society”. I, as a Liberal Democrat, would prefer to call it “the responsible society”, or even “the liberal society”: empowered individuals working within strong communities, working with a decentralised state. I remind the noble Baroness, Lady Thornton, that Ed Miliband said in a speech last year:
“I have been clear that we should recognise the shortcomings of the centralised state”.
Indeed, we need to go back, as far as is possible, to much more local engagement and local accountability. Of course, this is a process. Change takes time. The Localism Act 2011 is another part of this, and so is the provision of diverse funding streams—Big Society Capital—now getting under way and, as the noble Baroness rightly says, building on work of the previous Government with other support schemes providing matching funds—for instance, Community First, the Community Endowment Fund, community foundations and private bodies. They are all very valuable, giving grants to social enterprises when they are set up. I was very happy to visit the Community Foundation for Calderdale, which my noble friend Lord Shutt had a great deal to do with starting. Now there is also the Public Services (Social Value) Act 2012.
Then there is the whole question of government contracting, on which we have had a number of contributions and, rightly, some criticisms. The noble Lord, Lord Prescott, raised the particular question of Close Protection UK. I understand that Close Protection UK has taken full responsibility for the very poor treatment that its staff suffered, and has offered an apology to all concerned. The Security Industry Authority has written to CPUK asking for further information to ensure that it is in compliance with the relevant legislation. We in no way wish to see volunteering as a mandatory requirement for individuals to claim benefits, but volunteering is part of the way in which you get people back into the idea of work, and should therefore be offered, as far as is possible, to people as they begin to get out of long-term unemployment and back on to the job market.
There is a changing culture in government contracting, and that also takes time to change. We have a new Crown representative for the civil society sector, who took up post on 18 June, so this is very much a new initiative. He will work closely with the Crown representative for mutuals and the Crown representative for small and medium-sized enterprises to achieve changes in how the Government do their business, and to ensure as far as possible that we catch the small social enterprises and local companies, which we all wish to do. Social impact bonds are another way of trying to help social enterprises cope with payment by results. A number of experiments are under way in that area.
On funding, all businesses, including mutuals and social enterprises, must consider the VAT question raised by the noble Lord, Lord Shipley, as part of their business planning. Our evidence from mutuals has not suggested that VAT is a major barrier to mutualisation, but I will be very happy to talk to the noble Lord further about some of the issues he raised.
The financing of social enterprises was raised by a number of people. We are concerned to encourage charitable donations, giving as much as we can. We recognise that the welfare state cannot meet all the demands that will be placed on society over the next 20 or 30 years, particularly in adult social care. As the noble Baroness will recall, the consultation on the Budget proposals on high taxpayers was intended to raise the issue for implementation in the 2012 Budget. Some extremely vigorous consultation has been under way, as we will all have noticed, and we have taken it into account.
The world of for-profit companies has been raised by a number of people, the noble Lord, Lord Giddens, and my noble friend Lord Phillips in particular. This raises wider issues about the future of company law and what companies’ formal obligations are, which are rather beyond the limits of this debate. Corporate social responsibility does not save you from takeover when it comes. I lives in what was a company village, built by Salts of Saltaire with its very strong sense of local social responsibility, not far from where Rowntree’s did the same in York and left substantial endowments for regional social benefit. I am aware of Cadbury’s and others in that wonderful Quaker tradition. As such, I am conscious that we have gone a long way back in our corporate sector. That includes the Quaker bank, which educated me and of which I remain rather ambivalently a customer, which has lost a lot of its corporate sense of social responsibility. However, that is a wider question, which I encourage the noble Lord to put down for another debate.
We are learning and reviewing as we go. This summer, we will have a social economy review, which will look at how social enterprises operate. Also this summer, after five years of the Charities Act, there will be a Charities Act review, which my noble friend Lord Hodgson has well under way. I was very happy to be briefed extensively by him on the sheer complexity and diversity of the charity sector. I hope he will not mind my saying that I emerged from it confused at a far higher level than I was before.
The noble Lord, Lord Watson, asked whether we were, none the less, cutting down on the public sector. The evidence that we have shows that we are moving towards mutuals where we can. We are also experimenting with mutuals and there will be a mutuals task force report this summer on the experiments in mutual pathfinders in public sector delivery. Some of the evidence that I have seen, which is still limited, suggests that improving job satisfaction and better workforce morale lead to both higher productivity and greater customer satisfaction, which supports experimenting further with the mutual model. That also raises the question of impact measurement, on which we are working in partnership with the voluntary sector. The noble Baroness, Lady Barker, spoke about this, particularly the role of Triangle Consulting.
The government focus is on communities where social capital is low. This is very much part of the thrust. We will all have different labels for what the Prime Minister calls the big society. We have a vibrant civil society in many areas of Britain. Indeed, in my own village of Saltaire, we are almost embarrassed by the number of local bodies, such as the Saltaire Festival, the Saltaire Arts Trail, the Saltaire Village Society, the history society, the allotment society and so on. However, within five miles of Saltaire are large 1950s and 1960s estates, where social capital is very low. The Community Organisers scheme that the Government are running and the national citizen service are very much aimed at encouraging people who have lost the hope that they can control their own lives and manage their own communities to regain hope and faith in that.
Social enterprises play an important part in this because, as noble Lords have said, they employ people locally and reinvest locally. That is exactly what we need. Last year I was in a very large estate in Yorkshire—I had better not say which one—in which the largest single area of local economic activity appeared to be illegal cannabis growing in sub-tenancy council houses. I was going round with the local police support group. We need to get people back employed within their own communities as far as we can, with community associations and organisers and the encouragement of social enterprises, which feed into a revival of self-confidence and a strengthening of local community links.
I would call that building a liberal society. Conservatives would talk about strengthening the little platoons on which a strong society and state should rest. Labour would talk about local co-operation and self-government. I hope that we would all agree on the underlying objectives and admit that we had not got it right but have continued to work on getting it right—and also admit that there is a limit to what central government can do, because much of this has to come from the local level. We have learned that top-down government is not good for civil society. We have also learned that increasing government expenditure on welfare runs up against strong resistance to paying high levels of taxation. Let us hope that the enterprise on which we are embarked in rebuilding a very strong civil society based on voluntary contributions of all sorts in time, money and social enterprise helps to bridge the gap which we may otherwise face in providing support for a changing society, a much larger proportion of elderly people and all the other contributions that we need to make.
Baroness Scott of Needham Market
My Lords, we have had an excellent debate today. Having six minutes in which to speak is sensible compared to the time given us in some debates; it gives noble Lords an opportunity really to develop their arguments. I particularly enjoyed the way in which we have woven together the broad context of the relationship between markets, society, the third sector and so on, with really good examples of local case studies from right across the country, which both demonstrates the points that we are making and in many cases are really quite inspiring.
A number of issues and themes have arisen which we would never get agreement on if we spent the whole day here, and we have to set those aside. But we have also identified a number of specific problems—and, more importantly, a number of solutions to those problems, which make follow-up from this debate very important, provided that government is prepared to listen. It was a debate that was characterised at least until the very end by an absence of overt party-political point-scoring, and it was the better for that. The role of this sector in our society is beyond measure, and I am delighted that across the House today we have recognised that.
Economy: Growth
(12 years, 6 months ago)
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Baroness Kramer
That this House takes note of the importance of the Government’s growth strategy for the United Kingdom economy.
Baroness Kramer
My Lords, this has been an extraordinary and very moving day. I suspect that many of us heard the speech of Aung San Suu Kyi and share the same reaction to it: namely, that we were listening to something very special being spoken by an extraordinary, charismatic person in a way that was both moving and powerful. That probably makes it difficult for us to speak in this debate in a sense. However, I suspect that we are also encouraged by the virtues that she underscored in her speech: namely, the importance of democracy and of the parliamentary process. We can comfort ourselves that in speaking today we are sharing that philosophy.
My colleagues and I sought to initiate this debate as the issue of growth is so important. I was delighted to see the list of speakers, each of whom has a great deal to contribute in putting forward ideas and suggesting priorities and ways in which to tackle this extraordinarily difficult issue for our economy.
The background to the debate is that in 2010 the coalition inherited a badly damaged economy. The previous Government had built their boom on the back of tax revenues pumped up by false profits from the banks—a bubble that burst in 2008—and on the back of consumer spending pumped up by excessive consumer credit and a huge bubble in asset prices, particularly house prices. I remember that in the other place my colleague Vince Cable pressed the need to deal with excessive public and private debt but was generally treated with some scorn. However, public spending spiralled out of control in around 2004. Even before the bank crisis struck, the UK had the highest budget deficit in the G7. The country had no cushion at all with which to deal with any economic shocks, and the shock came spectacularly in 2008. I think most would argue that devaluation of the pound and ongoing public overspending helped to provide an initial cushion, but by the 2010 general election the UK was on track to have the highest deficit in the G20 and Liam Byrne was not kidding when he left that note saying, “There is no money left”.
However, the fundamentals were worse. According to The Plan for Growth, under various Governments the UK had,
“stopped saving, investing and exporting”.
Savings rates had declined to some of the lowest in the developed world. Manufacturing had fallen sharply as a share of the economy. The UK’s share of the global exports market had declined, largely due to our inability to succeed in exporting to high-growth markets. Some of your Lordships have often remarked with astonishment that Belgium exports more to China than we do. Only 6.5% of our exports are to the BRIC countries. The economy had become dangerously unbalanced by both sector and geography. It was far too dependent on financial services, far too weak as regards manufacturing and economic prosperity was concentrated largely in London and the south-east.
Since then we have made some progress. The Government have taken a grip on the structural side of the deficit, using both tax increases and spending cuts. The talk is of austerity but the truth is a far more measured pace of deficit management. In some ways it suits my Conservative colleagues and the Labour opposition to overegg the reality of the rate at which the deficit is being tackled. We will not see deficit reduction in real terms until 2014 at the earliest. It is quite a measured programme and, ironically, if you were to look at the Labour programme outlined by Alistair Darling and the current programme laid out by George Osborne, you would not find a significant difference. I understand that it suits the parties to highlight the difference, but the reality is that we are moving in a fairly measured way.
It also pleases me that the burden has fallen most on the wealthiest 20%, as it should do. A good example is that while corporate tax has been cut to competitive rates, the starting point of income tax has been increased to take more than a million low earners out of tax altogether. This Government have put forward numerous schemes for growth, which include a boost to the enterprise investment scheme, enterprise zones, a doubling of apprenticeships to revive our skill base, £1 billion committed to the Youth Contract, £1.4 million invested in the regional growth fund, half a million pounds invested in the Growing Places Fund, and investment in the green investment bank that will reach £3 billion in this Parliament. The list is long and I suspect that I can rely on the Minister in his closing speech to add significantly more detail to it. The financial markets have responded and shown sufficient faith that long-term borrowing for the UK has fallen to lows unheard of in recent history. Most recently, one is looking at a rate of something between 1.5% and 1.7% for long-term borrowing.
Unemployment has been an ongoing concern, especially youth unemployment, and I suspect that Tuesday’s report of improvement, especially in the full-time jobs figures, will have pleased all noble Lords. I quote Brendan Barber of the TUC who said that it was,
“some long overdue good news”.
However, much more remains to be done, and it would be sad if we became in any way complacent. Whatever the outcome of the euro crisis, it will continue to be a drag on our economy for some time to come.
Like others, in responding to the issues that have been created in our economy, I have been interested to look at lessons from the 1930s. Recovery from the 1930s recession was not based on fiscal stimulus; and I say that because sometimes there is a myth that fiscal stimulus was the answer. That did not really occur until rearmament in the second half of the 1930s. Instead, devaluation and cheap money were key to recovery. In the UK, they led to a surge in housing construction. That strikes me as a useful lesson. Fiscal discipline has allowed the Bank of England room to use monetary policy, with significant QE so far, and I hope there will be more to come.
Lord Foster of Bishop Auckland
I am most grateful to the noble Baroness for giving way, but what is rearmament but public expenditure spent on arms, which creates jobs in the private sector?
Baroness Northover
Perhaps I may point out that we have a strictly time-limited debate; and if the noble Lord wishes to raise some points, perhaps he may seek to speak in the gap, and they can be answered in due course.
Baroness Kramer
I am happy to respond to that. It was exactly my point. Rearmament represented fiscal stimulus but did not come until much later when recovery was well under way. That is one of the important lessons for us—seeing how that recovery was achieved before fiscal stimulus came into the picture. As the noble Lord confirmed, it is an often-used myth that fiscal stimulus was the answer.
The equivalent today of cheap money has been quantitative easing and, to some extent, credit easing. As a consequence, we have had a weak pound, which, along with devaluation, has played a significant role in boosting manufacturing and exports that have carried us through several years at least, although they may not look quite as strong as they initially did. However, that played a definite role, and I am not trying to score party-political points but get back to how we deal with the issues.
However, I am very concerned that in attempting to access opportunity for growth, small businesses have found it extremely hard to get credit and lending from the banks. It is noticeable that in 1932, the banks worked and provided that credit flow to business. I would argue that we do not have that in the same way today. Effectively, we are looking at a banking system that is broken.
Because of all that, I welcome the Chancellor’s announcement of £80 billion for the Bank of England to provide what is now called “funding for lending”. If the banks prove capable of targeting the money at sectors such as small business and at home buyers who have the capacity and the appetite to invest, I think that it can make a difference in stimulating growth. However, my fear—I have expressed this before in this House—is that the banks no longer have that kind of knowledge base, the skills or the capacity effectively to reach small business. It is a custom business and it needs to be designed by people who really understand those to whom they lend. It is not a commodity business, and the banks that we think of as high street banks are essentially in a commodity business. Therefore, I urge the Government to look at RBS and Lloyds to see whether they can push a change in culture and approach so that those mechanisms are used to get the money to the small businesses that need it.
Small businesses provide something like half our GDP, and simply accelerating the plans that they already have for expansion and investment could have a significant impact on jobs and growth. I also say to the Government that, if there is more money for tax cuts, then tax cuts that would impact on the decision of small businesses to invest would be one of the best ways to use that money.
Housing also played a key role in the 1930s and I am sure that it can do so again. Once again—I have urged this before—I ask the Government to set aside a tranche of some of the credit easing for cheap funding schemes for housing associations, especially the small associations that cannot easily go to the market. One million pounds spent on housing repairs creates some 30 jobs. That is an amazing multiplier, and that is the kind of impact that I think we need to see now.
Nearly half a million unbuilt new houses have planning permission but the developers are holding off on construction. We need to tackle this because it could obviously provide a quick win. Land banking at this time is not an appropriate strategy. If financing is the problem, then this is a chance for the Government to tackle it. I am very glad that the Chancellor has now said that he will use the national balance sheet to try to unlock money for housing, as that could make a significant difference.
Pushing the lever on infrastructure spending can also happen through local government. The Local Government Finance Bill is on its way through this House. Tax increment financing is included in the Bill but is so constrained as to be minimal. I ask the Government to look again at tax increment financing, because each local authority has much low-hanging fruit in small infrastructure projects that could unleash new opportunities for growth with a very powerful multiplier effect.
Looking at the list of speakers in this debate, I can see that many colleagues on all sides of the House will be talking about growth in particular sectors—for example, tourism and the creative industries. Again, I think that a sector-by-sector approach to stimulating growth at this point would be powerful in assisting the economy. Therefore, I shall listen to those speeches eagerly to see what lessons can be learnt.
Earlier, we had a debate on social investing, social enterprise and the voluntary sector. That is a neglected area. In a sense, it has been the poor relation so far as concerns financing and investment. Now, there is potential in the City and other places to look at social impact bonds. What is also needed is a willingness by individuals to invest socially, so that, although they want profit, they give up an element of that profit in order to meet a social objective. Tapping into that will start to deal with some of the hardest-to-meet but quickest gains that we can achieve in our economy.
At the bottom of this, growth must be sustainable. It cannot be built on the back of another public spending bubble that will simply burst, and that seems to be the challenge facing this coalition. I shall listen eagerly to all the speeches because I think that it is the responsibility not just of government but of our two Houses more broadly to come forward with ideas that can provide the growth, jobs and prosperity that the country needs. I beg to move.
Lord Popat
My Lords, I thank the noble Baroness, Lady Kramer, for bringing this debate before the House. My noble friend the Minister also very kindly responded to a recent debate on business finance, so I shall do my best to avoid repetition.
The economic climate we find ourselves in is undoubtedly one of the most challenging scenarios that this country has faced in recent history. Yet its origins were longstanding. There was far too much public sector borrowing and far too little investment in infrastructure; there was too much reliance on the City and the services industry and not enough was done to reform education standards; and there was too much regulation, taxation and compliance for small businesses and not enough exporting to high-growth economies. The tough decisions were unfortunately delayed and the strategic approach to the economy was left wanting.
Unfortunately, this Government inherited an economy in dire need of drastic action. The Government have taken the first, and most important, step to stabilise our great economic ship and they have set out a credible strategy to bring down the deficit that has reassured the markets and allowed Britain to bypass many of the symptoms of uncertainty facing other economies. The announcements this week of falling inflation and unemployment numbers are yet more signs of an improving economy. Now it is time to set an ambitious course for our economic ship. The Government are rightly committed to rebalancing the economy, leaning back towards the private sector for economic growth.
I wish to focus on two of the four main objectives set out in the Government’s growth strategy; namely, to,
“make the UK the best place in Europe to start, finance and grow a business”,
and to,
“encourage investment and exports as a route to a more balanced economy”.
As I have said in this House before, whenever I speak to small business owners, I hear about the difficulties that they are having with financing. I am pleased to report that I am beginning to hear reports of businesses being helped by the £20 billion national loan guarantee scheme—a brilliant scheme that has effectively no cost to taxpayers—and the long-term funding from the Bank of England to our domestic banks, as announced last week, will undoubtedly help small businesses.
In regard to regulation, the Chancellor said recently in the other place that the total cost of regulation imposed on businesses since 1998 is almost £90 billion a year, a staggeringly high figure. Like many businessmen, I have been encouraged to hear the Government's plans to reduce regulation particularly in regard to staffing issues. I strongly support the work to reduce the regulatory burden on small businesses. Yet I remain concerned that the very necessary changes to the planning system may struggle to materialise as desired and that our planning system will remain, as the Chancellor said, a chronic obstacle to economic growth. We must ensure that our small businesses do not continue to invest thousands of pounds in consultants, lawyers and architects only to fall at the final hurdle of our planning system because of anti-growth attitudes in town halls across the country. Only this month my noble friend Lord Wolfson, the chief executive officer of Next, was quoted as saying that he had not spent £100 million he had set aside for investment because he could not get planning permission. Although Next is certainly not a small retailer, it is a clear example of ambitious firms having economic activity held back by a planning system that is not fit for purpose.
I move on to the desire to encourage exports. Many noble Lords will be aware that the UK’s share of global exports had declined from 5.3% in 2000 to 4.1% in 2010. I recently asked the Liaison Committee to consider establishing an ad hoc committee to examine the Government's work on aiding SMEs to export their goods and services, a committee that I am delighted to say has now been formed and is being chaired by my noble friend Lord Cope. I hope that this committee is able to bring about a series of suggestions to help our SMEs reach new markets. Unfortunately, while many of our large firms find it easy to transfer from domestic sales into exporting, that situation is very different for small businesses. Those SMEs which do not export often start doing so because of fortune rather than any strategic priority; and they tend to export to familiar markets, such as the eurozone, rather than high-growth markets such as India, China and, in the next 10 years, Africa. If we can reverse these trends, the effect on the UK’s economy will be positive for many years to come.
I do not wish to prejudge what the committee will find in its report, but it is vital that we review the diplomatic support that our companies receive overseas. The Government have in the past indicated a preference for more businessmen to be involved in our diplomatic relations, and this would be a welcome move to help prioritise growth. I also feel that we can be more proactive with certain countries and regions. For example, Britain has had little or no diplomatic contact with the Chief Minister of Gujarat—economically the fastest growing state in India—yet our international competitors are regularly knocking at his door. We cannot afford to be left behind.
I hope that we get a chance to consider the transport and infrastructure needed to help SMEs export. Our competitors are increasing their airport capacities as new markets open, and so must we.
The Prime Minister said in the other place after the Queen's Speech that:
“We must revive the private sector, spread growth and jobs across the country and make sure that financial services truly serve the economy—not the other way around.—[Official Report, Commons, 9/5/12; col. 25.]
He said that the task of delivering rebalanced growth will be achieved most effectively by “swimming with the tide” to take advantage of the long-term domestic and global changes, particularly the rise of middle-class consumers in emerging markets, spurring a greater demand for our services. That is exactly right. The most important thing is to make sure that our actions match our rhetoric, and that we demonstrate that not only is Britain open for business, but that we are a nation that thrives on seeking out new economic opportunities.
It is often disheartening to read press coverage of businesses in Britain, as if profit were something to be avoided. I believe that this Government are demonstrating that not only do we welcome businesses, but we want to support them. The Government's growth strategy has the right aims and I hope that they are able to rise above the inevitable criticisms they will encounter as they make the right decisions to sail Britain into bluer, calmer and more prosperous waters. Through taking tough decisions in the short term, such as increasing competition in the finance sector, improving our infrastructure, boosting our exports to the high-growth markets of the future and reforming our planning system, we will give businesses, entrepreneurs and investors the confidence to grow our economy.
Lord Bhattacharyya
My Lords, I thank the noble Baroness, Lady Kramer, for securing this debate. I declare an interest as chairman of the Warwick Manufacturing Group.
In many ways, this debate is the companion to that led by my noble friend Lord Adonis last Thursday. If last week we focused on the human cost of recession, this debate is about building a better future. When discussing the Government’s growth strategy, the first question is, “Which strategy?”. There is the “cuts first” plan, which says that the key to growth is rapid deficit reduction. There is the “credit easing” plan, which prioritises lending money to the private sector, and there is the “deregulate for growth” plan, which argues that what limits growth is the inability to fire workers. What do these alleged growth plans have in common? They claim to offer a quick fix—just cut, lend or deregulate and things will be okay.
But the search for easy answers is the problem. For decades, the national hunger for a fast buck meant that long-standing industries were decimated. British expertise vanished and excellence in technology went overseas. We outsourced our industrial heritage and now we are paying the price. Most of the government policies will do nothing to change that.
However, I welcome one of the Government’s strategies for growth which emphasises infrastructure, investment, skills, R and D, construction and using procurement to drive growth. Sadly, it is known to us only thanks to a leaked letter from the Business Secretary. I am here not to bury Vince but to praise him. When the Business Secretary told the Prime Minister that Britain needs,
“a compelling vision of where the country is heading beyond sorting out the fiscal mess”,
and,
“a clear and confident message about how we will earn our living in future”,
he was absolutely right. But who is working on industrial policy for the long term? Who is arguing for creating a real British bank in order that there can be lending? Who has taken the risk to address these issues, even rightly criticising our record in the process? It is Ed Miliband and his team, led by Ed Balls and Chuka Umunna.
Therefore, a coalition for long-termism is forming. It must not be some temporary partisan alliance. No long-term agenda can succeed if it is based on party lines. It should extend from the work that the noble Lord, Lord Heseltine, is doing for the Business Secretary as regards the industrial policy review. My party is conducting the same type of thing. The first challenge is to sustain—not even to make it grow—the manufacturing share of our economy, which is just over 12% of GDP according to the latest figures. Manufacturing matters because it alone can provide capital investment, R and D and exports to drive sustainable growth. Manufacturing represents just over one-10th of our economy, but more than 70% of our business R and D, and 46% of our exports.
Manufacturing cannot be made to grow at the click of a button. You have to create a sustainable ecosystem, which takes skill. Real change is not about numbers and training schemes; it is about changing our whole culture, from companies to government to schools. It is not about spinning a new mantra for the Daily Mail every day. Germany and Japan already think long term—from Berufsabschluss to Senmon Gakko. We too must develop a skills system based on market need and not on getting people off the claimant count.
The same is true of infrastructure. We need not a few shovel-ready projects but a sustained programme of investment in transport, energy supply and the environment, so that suppliers can invest with confidence. In R and D, we must achieve critical mass in a few key technology areas and not spend a little all over the place. If low-carbon transport, digital technology, aerospace and energy are our priorities, we must commit to them from blue sky to shop floor.
Our research grants on internal combustion engines are a key element of the UK automotive sector. We currently fund basic research in an unco-ordinated way when we should keep a focus on low-carbon research. EPSRC spends £750 million a year. It is reasonable to ask how that fits with our national innovation priorities. This is not about questioning the Haldane principle but about clear strategic focus. As the Business Secretary said:
“Our actions are, frankly, rather piecemeal. There are lots of individual funding decisions that lack support in other policy areas, or are not followed through systematically”.
We need to bring together research funding, procurement, skills and the supply chain, and give our key industries a voice in each. These key sectors need oomph at the heart of government. The Automotive Council has made a big difference. It helps to develop common priorities for innovation, encourages investment, and links together the UK supply chain. Other sectors need the same support. The failures of the past mean an industrial strategy that is often criticised as picking winners, yet short-termism means that we create too many losers.
When manufacturing firms do not invest in capital, R and D or people, they discover their weakness far too late and collapse. Instead, we must create an environment in which long-term minded businesses prosper. For decades, British business has been gripped by a consultancy and fast-buck culture, which means that you cannot get long-term financing. Even if you can, our reward structure discourages investment. Then we find these low-investment, low-capital firms are mobile and can outsource jobs, and we can do nothing to prevent them leaving. We end up as a nation of nervous shopkeepers and insecure bank clerks.
We can change this—not by picking winners but by shaping sectors. Our focus must be on leading and creating markets. For example, investing in R and D is not about patents or exploiting intellectual property. The days when you could live off patents are over. Business R and D has become a purchase of the ability to create and shape new markets.
A focus on market leadership through innovation encourages sectors to work together to develop common expertise from large firms to start-ups. It becomes self-sustaining, a positive loop of investment, innovation, leadership and new markets. If government supports sectoral innovation, we can pull supply chains to the UK. This will increase profits and employment and encourage foreign investment. If we think long term, we can build, without extra spending, an economy built on investment not speculation—on sustainable value, not flash-in-the-pan booms.
A coalition for long-termism is emerging, but it is not yet in power. That would require the Government to deliver on the agenda in the Business Secretary’s letter. Unfortunately, so far the Government have paid only lip service to it: a press release here, a stunt there. I hope the Business Secretary can change that. If he cannot, we on this side of the House, led by Ed Miliband, will deliver on that long-term agenda. In either case, I am grateful for the work of the Business Secretary and only hope that he will soon find a more long-term alliance than the temporary coalition he is in today.
Lord Clement-Jones
My Lords, I am not going to be provoked. I thank my noble friend Lady Kramer for so expertly setting the scene for this debate. A question on so many people’s minds is, “Where is the growth going to come from?”. I want to focus on the sectors with great potential for growth for which the DCMS has prime responsibility—the creative industries and tourism—both of which, I am glad to say, received some attention in the Treasury’s plan for growth last year and in the update this March. On the way, I also want to touch on higher education.
First, however, I shall say a word about the Olympics. There is no doubt that this has been an extraordinary achievement for the ODA, LOCOG and all the others involved in the preparations for the London Olympics. We were, however, promised a business legacy for the Olympics and I wonder whether the Minister can explain why it appears that, through the IOC rules, some 75,000 businesses will be banned by their contracts for 12 years from declaring that they have acted as a supplier to the Olympics.
Although official breakdowns of statistics are not helpful in this area, the digital and creative industries combined seem to contribute at least 7% of UK GDP, and those employed in the creative and digital fields now number perhaps 2 million. We are pre-eminent in so many areas but there is very strong competition internationally in a number of areas in the sector. I therefore welcome the new tax relief for video games, animation and some TV production that was introduced in the last Budget. Perhaps we will see an improved tax relief for co-productions in next year’s Budget. It is also noticeable how much investment is being made in film and television production—and at this point I should say “of the legitimate variety”. I very much welcome the formation of Creative England to support film and television productions and the activities of Film London to attract film and TV production to London. The UK Film Council estimates inward investment in the film industry at nearly £1 billion per annum, but there is a great deal to be done to secure optimum growth in this sector.
Skills issues in the creative industries need to be properly tackled in each part of the sector to ensure a talent pipeline. Shortages of skilled workers are a particular problem for the creative industries. I welcome the co-ordinated approach adopted by the report of the Creative Industries Council Skillset Skills Group to the Creative Industries Council earlier this year. The report made many extremely useful recommendations, many of which essentially involve action by the industry itself. However, as the Creative Industries Council and government Ministers have strongly endorsed the report, what are the Government, in particular, doing to improve and mitigate further regulatory measures, particularly the regulatory framework for freelance training as part of the Red Tape Challenge? What are they doing to make sure that sector skills council roles are clarified and communicated?
I welcome the strategic partnership between Creative Skillset, the skills council for the creative industries, and Creative and Cultural Skills, which covers a different group of creative industries, but surely there is a strong case for merging the work of the two and ensuring that skills issues across the sector are tackled in a fully joined-up way. The Creative Industries Council report urges greater “synergy and exchange” between STEM subjects and the creative industries. What action are the Government taking to respond to the recommended changes in the curriculum? Does this tie in with their response to the Livingstone-Hope Next Gen review of skills in video games and visual effects?
We also need to recognise that our creativity, ideas and intellectual capital will increasingly drive our future prosperity. The place of intellectual property has never been more important to society or our economy. The report in 2010 by TERA Consultants estimated that 250,000 jobs are at risk if we fail to do anything further about copyright infringement by 2015. The film policy review carried out by the noble Lord, Lord Smith of Finsbury, contained important recommendations about copyright issues, including sanctions for the recording of films shown in cinemas and the important question of implementation of the Digital Economy Act. What is the Government’s response to that? If they are serious about the health of the creative sector, it seems extraordinary that we can only expect introduction of the initial obligations code under the Act in 2014.
Although the Hargreaves report commissioned by the Government has some good aspects it relies on very dubious figures for its economic impact assessment. It seems to assert that current copyright laws in this country are inhibiting innovation, that copyright reform will somehow deliver a massive increase in our creative industries’ output and that copyright exceptions will make Britain more attractive for overseas investors, and so creators’ rights in the UK should be weakened. By contrast, in the first report of the digital copyright exchange feasibility study, Richard Hooper has put his finger on the real issue: there are barriers to the exploitation and licensing of intellectual property rights where there is complexity of process in the organisations involved in establishing ownership of rights, and in some cases insufficient availability of repertoire under licence. It certainly appears that the majority of responses to Hargreaves, published last week, are more minded to take the Hooper approach. There are exciting prospects for a Britain with a digital copyright exchange in place becoming an international hub for rights clearance, if we can get HMRC to negotiate suitable double-taxation provisions.
Turning to higher education, as the UUK report Creating Prosperity at the end of last year made clear, our higher and further education sector makes a major contribution to the development of talent and skill for the creative economy. Some 16% of our students are engaged in courses relevant to the creative economy. Rather than trying to restrict access for foreign students through our visa system, we need to create more internships for overseas students in the creative industries and the arts. As so many have said, not least London First and the vice-chancellors of our universities, we need to exclude non-EU students from our permanent net migration figures, as so many other countries, such as the USA and Australia, are increasingly doing. I look forward to hearing what the noble Baroness, Lady Valentine, has to say on this subject. Perception about UK visa policy is hurting our message that we are open for business and welcome international students and visitors.
How good are we at promoting the quality and potential of these industries overseas? Do we have the right architecture? I welcome the activities carried out by UKTI, in particular the appointment of the new IP attachés. I also welcome the signs of increased co-ordination between Visit Britain, the Arts Council, UKTI and the British Council, but how does that fit in with the Creative Industries Marketing Strategy Board or the Creative Industries Council? Is the Intellectual Property Office involved? If not, surely it should be. I certainly welcome the creation in 2011 of London and Partners as a single promotional organisation for London.
There is also the important question of investment in our digital and creative industries, particularly for start-ups and SMEs, and I particularly welcome the commissioning of work by the Creative Industries Council on access to finance. Can the Minister indicate any conclusions from its report, which I believe was presented to the council on 12 June, and when it will be published? Much depends on how attractive we are as a location for investment. The stories that could be told in our regional cities—for example, Liverpool, Manchester and Birmingham—are good ones. I applaud the Tech City initiative and UKTI’s involvement in that.
I shall not talk about broadband, but that is absolutely crucial to the further development of our creative industries. Tourism, however, is the world's fastest growing activity and the UK has enormous advantages and attractions. Although tourism is acknowledged as the third largest industry sector, employing directly and indirectly some 3.6 million people, there is still a lack of adequate government appreciation of its potential. Symptomatic is the recent letter from the British ambassador to China addressed to the Home Secretary about his frustration over the lack of promotion of Britain as a tourist destination to the Chinese and the cost and complexity of visas for tourists.
We should be much more joined-up. Should there not be a Cabinet committee which joined together the strands of government policy? There are many other deregulation issues—I hope that I have made a contribution to that agenda with my Live Music Act—but we need to make sure that our tourism industry is unshackled by many of the regulations that afflict it.
Lord Bates
My Lords, I, too, congratulate my noble friend Lady Kramer on securing this debate and on the way in which she introduced it. Like her, I find it quite difficult to come back to work after that inspiring speech in Westminster Hall. I feel as though I have been walked up to the mountain top and then need to come back and start inspecting the sewers. However, the sewers in this case are pretty important, because they have to do with jobs, growth and matters of that nature.
I am pleased to be able to follow my noble friend Lord Clement-Jones, who put his finger on something—in fact, Aung San Suu Kyi also mentioned this; namely, how we are perceived internationally. When we berate ourselves for queues at Heathrow, let us remember that they are queues of people wanting to come in, not wanting to get out. Sometimes, we underestimate the attractiveness of this country around the world. When people of the eminence and experience of Sebastian Wood, the UK ambassador to Beijing, call the current strategy on visas self-defeating, we should all take a bit of notice.
When people come to this country to study, they are coming here not to rip us off or to claim benefits but to invest the thick end of £100,000 in the British economy and probably a lot more besides. Including students, who are effectively investors in Britain, in immigration numbers needs to be looked at very carefully, otherwise we will see pressure put on to reduce their number in the face of massive growth. UK universities have supplied some information and research showing that the number of international students will double in the next seven years from 3.7 million to 7 million. That is a huge market and we need to be at the table for it. The UK is home to four of the world’s top 10 universities. As the Government’s advertising campaign tells us, Britain is great, but we cannot say that we are open for business if, when people try to get here, they find that the door is shut.
The noble Lord, Lord Bhattacharyya, mentioned innovation. Let us consider that most of the people who come to this country and to our universities are often very highly skilled graduates, often in science and technology. That same information from UK universities suggested that 40% of teaching in science and technology in UK universities is undertaken by people who come here from overseas. Instead of allowing people two years’ postgraduate work experience to contribute to the UK economy, to set up businesses, to teach, to train and to innovate—which we desperately need—we have ended up changing the law so that we kick them out after three months. It seems crazy. We kick them out and probably send them to the United States, Germany or France, who of course welcome them with open arms. This is a high-class problem, because Britain is attractive. We recognise that there needs to be a public discourse on this. There is no doubt that in the country, and in the heat of battle during elections, immigration is an issue. However, people need to understand that there is a fundamental difference between those people who are coming to this country perhaps not with the best of intentions and those coming to invest and help create wealth and jobs. I very much endorse the remarks made there.
In many ways, that leads into the general comments that I will make. I had a conversation yesterday with an entrepreneur in the north-east called Graham Robb, who has a small business. He said, in a slightly flippant way, that he had taken on four new people over the past month. When I asked him to what he attributed this rapid growth in his business, he said that what was fantastic was that because of the jubilee and the Euro championships, suddenly debt, gloom and doom were off the TV and out of the newspapers, and people were starting to feel good about themselves. The minute that happens, they start to invest and trade. One of the most telling tables in the excellent briefing paper prepared by the House of Lords Library for this debate is the one on business confidence. When asked if they expected business to improve in the next year, 18% said yes, 29% said it would stay the same and 50% said it would get worse. When that is the perception of the people you are relying on to invest and go forward, you realise that you have a problem.
On the other hand, let us look at what engineering and manufacturing are doing. We are seeing some extraordinary performance there, with exports growing quite rapidly—in manufacturing as well, they are up 8%. I know from the north-east of England that we have record exports for the third quarter in a row and there is no sign of that trend abating. It is as if it is only going to gather pace. This is tremendous news. When EEF The Manufacturers’ Organisation was asked what it thinks the outlook is for the next 12 months, 70% of members have a positive outlook and believe they are going to invest in order to take advantage of the good future that is ahead of them. We need to seize on that, along with the other good things that are happening around the economy, and get behind them.
The UK is moving up the world competitiveness league table again. For the first time since 2007, we are now back in the top 10. That is what the world thinks of us and of British manufacturing. It is pretty popular around the world, which is important. If we want, we can tell young people coming out of school that they have no hope and no future, and that the world is going to hell in a handbasket, but that is not what is happening around the world. The Institute of Directors’ latest economic research predicts that the world economy will triple in size during the lifetime of the person leaving school now and that the size of the middle class will expand from 1.8 billion to 5 billion in 2030. It is not all doom and gloom. There is real momentum and real opportunity out there. However, if we are so beset with focusing on our weaknesses rather than actually heralding, championing and exploiting our strengths, such as education and tourism, we cannot take full advantage of it. My conclusion on the growth strategy is that, yes, all the fundamentals are in place. Of course we need to tackle the deficit, keep taxes down, deregulate, introduce and improve skills, and make it easier to set up businesses—all those things are fundamentally important. However, we also need our sales guys to get out there and promote the UK, and make sure for the people at home that when people want to come and invest in the UK, our doors are open and there is a welcome mat there waiting for them.
Baroness Liddell of Coatdyke
My Lords, I too, congratulate the noble Baroness, Lady Kramer, on obtaining this debate. It comes at an opportune time to allow us to explore a number of issues connected with Britain’s economic growth. She was right to draw attention to how many of us have spent most of this afternoon listening to Aung San Suu Kyi. That brings home to us, at the fag end of the parliamentary week, as we are back into humdrum work here in your Lordships’ Chamber, how much she would have valued the opportunity to have the democratic exchanges that take place within this Chamber.
I do not share the noble Baroness’s analysis of the global financial crisis. She seems to have forgotten that in 2010, the coalition Government inherited a situation where we were beginning to move into growth. Two years in, we are into a double-dip recession. However, I will not be hijacked down that route, because I want to take up a number of the issues raised by the noble Lords, Lord Clement-Jones and Lord Bates, in their excellent speeches.
I want to talk about an industry that employs 2.6 million people directly in 200,000 SMEs and contributes £115 billion a year to the UK, almost 9% of our GDP: the tourism industry. As the noble Lord, Lord Clement-Jones, pointed out, it is the third highest earner of foreign currency. It comes just behind chemicals and the financial services industry. One reason why I am interested in tourism—I should point out that I have a registered interest as a non-executive director of VisitBritain—is that I have had a lifelong interest in the regeneration of remote communities.
Tourism can get into the parts of the country that the rest of economic policy cannot reach. The impact of growth in tourism in turning round those economies is considerable. One benefit of tourism is that it can move fast. I saw it very dramatically a decade ago, at the height of foot and mouth disease, when, as the Secretary of State for Scotland, I saw that the rural areas of Scotland, particularly around the borders, were dramatically affected but the rest of Scotland was open for business. The tourism industry, under the excellent leadership at the time of Prince Philip, the Duke of Edinburgh, took the initiative to bring tourism to Britain. As a consequence, a catastrophe for the industry was averted. No other industry can move at that pace. I cannot think of any other industry that can address an economic crisis as rapidly. Too often, government policy has marginalised tourism. I welcome the references to it in the Government’s growth strategy; I just regret that the growth strategy came rather late in the day and has ignored 100 years of economic theory on how to grow yourself out of recession.
DCMS does a very good job of championing tourism, and I pay tribute to this Government, who have seized it more aggressively than other Governments—perhaps out of necessity—but I make my remarks more specifically to the Treasury and, in particular, the Home Office, because I want to take up some of the visa points raised by the noble Lords, Lord Clement-Jones and Lord Bates. We have an industry which is extremely competitive internationally; we remain seventh in the world for visitor numbers and visitor spend. Overseas visitors spend £18 billion a year and contribute £3 billion to the Exchequer. Given the sluggish growth that we have in this country, we should highlight those industries that can bring in spend and Exchequer revenue quickly.
UK net GDP growth has been extremely poor since January 2010, at 1.2%, but international tourism is more than twice that: 3% growth in visits and 8% of growth in spend, according to the ONS. If we are able to continue at that rate of growth up to 2020, tourism’s contribution to GDP is forecast to grow at 3.5%. That means 250,000 new jobs. If an entrepreneur knocked on David Cameron’s door and said, “I can bring you an industry that will create 250,000 new jobs”, David Cameron would snatch his hand off, yet there is a continual process of growth and development in tourism that, if helped, could create 250,000 new jobs, but we put significant barriers to growth in the way. I am tempted to go down the route of air passenger duty and the appalling situation with aviation policy, not least in relation to the slots that are available at Heathrow and the barriers to inbound travel from places like China—but I am not going to go there. Instead, I am going to take up something that the noble Lord, Lord Bates, said about the situation with China.
China is the fastest-growing market for inbound tourism for all of the major tourism economies in the world. In the past decade, we have seen a dramatic increase in the number of inbound tourists who have come from China. Chinese residents spent £72.6 billion on outward travel in 2011 alone. That puts China third in the UNWTO league for expenditure on foreign travel, and it is a 400% increase in a decade. France and Germany are in the top 10 for that spend. Where is Britain? We are down in the 20s. Some of that is down to the issue of slots at Heathrow, but some of it is down to the visa policy that this Government have adopted.
VisitBritain conducted a market research survey of 1,000 Chinese potential tourists. Two-thirds of them said that the visa process was the inhibiting factor in them coming to Britain. Sebastian Wood is not the kind of ambassador who throws his toys out of the pram at regular intervals—I should know; he was my boss at one point. However, he has allegedly drawn attention to this problem. We put obstacle after obstacle in their way. If you want a visa in China, for a start you have to fill in a form in English. Of course, many of us could do that in Mandarin and Cantonese. Secondly, you have to produce original documents such as your marriage certificate, proving your immigration status as well as your financial status and your travel plans, and you do not get them back until the visa is granted. These are important documents; think how twitchy we all feel when such documents are missing. I ask the Government to look imaginatively at how we can deal with this visa problem—America did it.
One of the reasons why France and Germany do so well is that they are Schengen countries. Why can we not give a visa to someone who has complied under the Schengen criteria and allow them to come to Britain when they come to Europe on the Schengen visa? This is common sense, not rocket science. If we can concentrate on making China see Britain as a welcoming place, there is an opportunity for much greater trade and investment.
The noble Lord, Lord Clement-Jones, and indeed the noble Lord, Lord Popat, referred to the fact that we want more investment in Britain and we want to see things tightened up between all the agencies that promote investment in this country. One of our most successful ventures at the moment is that, at long last, the Foreign Office, VisitBritain, UKTI and the British Council are working together. It is about the quality of life here in Britain and what an exciting place it is.
In conclusion, the Olympics are a fantastic showcase opportunity for Britain. We saw the extent of international interest in the Diamond Jubilee. Tourism this year may dip because, ironically, people may think that Britain is full, but this is a chance in a generation to sell British tourism around the world. Let us seize it. It will not cost a lot of money and it will not be complex but keep in mind those jobs, those 200,000 SMEs and the potential of 250,000 new jobs by 2020.
Baroness Sharp of Guildford
My Lords, I, too, thank my noble friend Lady Kramer for introducing so expertly this timely debate. In preparation, I went though a number of the documents that have been issued by BIS over the past couple of years or so. I was struck by the introduction that my right honourable friend the Secretary of State for Business, Innovation and Skills, Vince Cable, made to A Strategy for Sustainable Growth back in 2010. He said:
“The growth we need should be different from the past. Instead of relying on ever increasing household debts financing unaffordable consumption, we should look to greater business investment … We need to position ourselves to prosper through the transition to a greener economy. Our country should make more use of its scientific excellence, so that innovation becomes a motor for long term growth and change”.
In other words—and this was picked up by a number of speakers, notably my noble friend Lady Kramer and the noble Lord, Lord Bates—we need a shift from a consumption-led economy to one led by investment. As my noble friend Lady Kramer has said, there is great hope that we shall see this investment coming from the small and medium-sized enterprises that constitute such a considerable part of our economy. There is real frustration that all the efforts to increase money supply do not seem to reach that sector. We see it in the renewed efforts of the Chancellor in this past week to ensure that that money is targeted for small and medium-sized businesses.
However, as the noble Lord, Lord Bates, said, the problem is also one of confidence. To some extent, one can see that in what is happening at the moment. Britain is locked into what Keynes would have called the “classic liquidity trap”: we are increasing the money supply but it makes no difference. Until confidence among businesses changes—the “animal spirits”, as Keynes called them—we will not see this rising investment that we so badly need.
I find myself worried by what is proposed by the Opposition in terms of a reduction in VAT. It seems that their solution—to reduce the VAT and people will start spending money—is not correct. It just takes us back to an economy which is based on consumption, not on investment. It is vital that we see investment improved.
I will concentrate my remarks on two sectors that Vince Cable mentioned in his introduction: first, the transition to a greener economy and, secondly, making the most of our scientific excellence; on that, I will pick up the whole issue of skills. Mariana Mazzucato, who is now a professor at my former university home of the science policy research unit at the University of Sussex, has pointed out in relation to the eurozone crisis that, in many ways, the message and advice that other European countries ought to be getting is, “Do what the Germans do”, not just in terms of cutting back and austerity but in terms of mirroring how Germany has created its competitiveness. In an article in the Guardian on 17 May she wrote:
“German competitiveness is not due only to its lower unit labour costs (which are not low when welfare benefits are included), but to its strategic investments in research and development, vocational training, state investment banks that create ‘patient’ finance, and its recent emphasis on greening the economy. Similarly, the engineering group Siemens did not win a UK contract for fast green trains because of low wages, but because of its innovation investments, which have made it one of the most competitive companies in the world”.
It is not just in so far as its labour costs are low. It is also because its investment in innovation, and training its staff to use these investments, effectively means that its productivity is far higher than most EU countries, including the UK.
In some respects, one might say that the coalition Government are following this advice precisely. The green investment bank, which was launched last week, is in many respects a state investment bank, aimed at helping firms, particularly small and medium-sized businesses, make the transition into the green economy. This does not just mean photovoltaics and wind energy developments, which have been given so much publicity, but solid investments in better heating systems and insulation. Fifty per cent of the energy consumed in this country is consumed by domestic heating. It remains shaming that the average home in Sweden—a country with a much colder climate than ours—consumes only 25% of the energy used by the average British home. Investments in insulation, draught-proofing and double glazing remain among the best that we can make. They require no long-term planning and development, provide jobs in the hard-hit construction industry and can provide them now, not in three years’ time.
As my noble friend Lady Kramer indicated, we Liberal Democrats have for some time been urging a major programme of housebuilding. In Sweden, new homes use hardly any energy; they are energy-neutral. A major programme of new, affordable homes, built to modern standards, would improve our performance enormously. In the 1960s, when the population was increasing at a similar rate to the present one, the target was to build 300,000 homes a year, many of them in the social housing sector. Today, our target is 170,000 homes over five years—34,000 a year—and last year the number of affordable homes under construction fell to 15,698. The potential is there to use this period of recession to invest in a long-lasting asset that will increase general well-being and the benefits of which should last for a very long time. I can only hope that we will seize this opportunity, for it would appear be a win-win proposition.
I also want to talk about science and innovation. I applaud the ring-fencing of the science budget of £4.6 billion and the extra money that has gone into the research budget in the past 18 months. However, the 2010 spending review slashed capital expenditure in the science sector and, as the Campaign for Science and Engineering has exposed, left the sector as a whole £1.7 billion worse off in cash terms. Spending on science is not just money for research to underpin our science base. It simultaneously trains a cadre of scientists and technicians, who are essential if we as a nation are to pick up and use modern technologies to the full. That is precisely what underpins Siemens and German competitiveness.
I fear that while all eyes have been on undergraduate fees and their impact, we have given no thought to the postgraduate situation. Yet it is the availability of these highly trained and highly skilled workers that attracts high-value-added foreign investment, such as that in the pharmaceutical industry, and which—note the position of Pfizer—will leave us if we do not maintain the training of a large number of highly qualified people.
We may well be ring-fencing science in relation to other public expenditure but we ignore what is happening overseas. Figures for 2009 show that, at 1.8%, the UK spends a smaller proportion of its GDP on R and D than any other G7 nation except Italy, while the government spend of 0.17% is bottom of the G7 league table. Germany, the US and Japan are now up to 3%, while China is fast moving up the league tables, as others have noticed. If we are to meet the aspiration expressed in David Willetts’s speech in January—that Britain should be the best place in the world to do research—we need to increase our spend substantially.
I very much endorse what the noble Lord, Lord Bates, said about the visa issue. We are doing much harm to ourselves with our current visa arrangements, which discourage many postgraduate students from applying to do their work in Britain.
Baroness Valentine
I declare an interest as chief executive of London First, a not-for-profit business membership organisation. I start by adding my congratulations to the noble Baroness, Lady Kramer, on securing today's debate. It is timely, since finding ways of generating and sustaining growth is surely the central priority for the Government.
The Government have already taken some welcome steps. Last week the Chancellor announced further monetary stimulus—or plan A-plus, as some have described it—to support lending by banks to businesses and home owners. He also acknowledged the need to amend the Financial Policy Committee’s objective, so that it now balances the important aim of maintaining financial stability with enabling the banks to contribute to economic growth.
We all want to see the financial sector better regulated. The result will be that our banks are well supervised and stronger, and so more able to support the UK economy. Yet, however welcome these measures, we have to accept that the Government have limited room for manoeuvre. We therefore need to be both innovative in finding measures that can support growth and determined in rooting out policy barriers that stifle it.
Let me start with innovation. We are in a fiscal paradox. A combination of eurozone turmoil and determined action to cut the deficit means that the Government can borrow at very low rates. This is the ideal time to borrow to finance investment to support growth, yet some would argue that the Government can borrow at these low rates only because they are committed to borrowing less. I believe we can turn this contradiction to our benefit, with a twin-track strategy that continues with austerity measures while borrowing for investment in specific, identified, growth-enhancing infrastructure projects, provided that this borrowing and its associated activity are clearly ring-fenced. This approach would not rattle international investors. Rather, the reverse is true; these measures would enhance, rather than undermine, the credibility of the Government’s fiscal policy—and the IMF lent its support to this kind of approach a few weeks ago.
This investment should fall into two categories. The first is in areas where the Government need to finance and fund investment, typically in transport infrastructure. I wholly endorse the comments made by the noble Baroness, Lady Kramer, on the use of tax increment finance in this response. There are many projects across the country whose wider economic benefits have been assessed, and deliver the greatest returns; whose construction would stimulate demand in the short term; and whose operation would support economic growth in the medium and long term. These include the northern hub scheme to bring faster, more frequent rail services to the cities of the north; widening of the A11 in East Anglia; the upgrading and expansion of England’s motorway network; and in London the Tube upgrade programme, Crossrail 2 and new river crossings.
The second is where Government can stimulate new or additional economically productive investment in privately provided infrastructure. For projects with long payback periods, such as in power generation, a relatively small commitment from government could provide the security that would make these projects commercially viable, and thus encourage private-sector finance. This can come in the form of pump-priming from government, long-term pricing commitments, or the removal of an element of risk. Realistically, this is the most likely prospect for developing cost-effective green technologies, for example.
The Government also have a role in encouraging economic regulators to move away from their short-term focus on price. This needs to be balanced with support for building capacity in the network, to meet the growth in demand that is already forecast, as opposed to overseeing a gradual decline and the associated stresses on the system. In this context, it is surely time for regulators to look more favourably on projects that have sat for too long on the drawing board. The recent threat of drought, for example, has brought home to us all the need to invest in the resilience of our water supply. Surely the lowest-hanging piece of fruit is new runway capacity in the south-east, where the private sector is ready to invest if only the Government would let it. I do not want to turn this debate into one on airport policy—the noble Baroness, Lady Kramer, would never forgive me—but I want to reiterate its importance. The UK desperately needs a growth policy which allows us to do business directly with the largest emerging market economies, and that must include direct flights to and from London.
I turn to what I have described as the policy barriers to growth. By this I mean the various ways in which public policy acts as a brake on the private sector investing. As the air capacity issue illustrates, overturning some barriers will require political courage in the face of legitimate and loud opposition—no one should underestimate that challenge—but others can be tackled through politically uncontroversial measures. There are many areas in which there appears to be something of a mismatch between the Government’s declared goals and the policies they have adopted, or the way in which they are implemented. I am sure that some will be raised by colleagues during this debate but as an example I will focus on one critical area—getting into this country to work, study or invest. In so doing, I will continue the theme initiated by the noble Lord, Lord Clement-Jones, and continued by the noble Lord, Lord Bates, and the noble Baroness, Lady Liddell.
The Home Secretary this week criticised businesses that complained about the Government’s immigration caps for “sending a negative message” about Britain. The message that the Government would like to send is that Britain is open for business, but the one being heard by many of those we want to attract is, “Please go somewhere else”. Taking education as an example, a recent survey by the National Union of Students found that 65% of international students would not recommend, or are unsure whether they would recommend, the UK as a place to study as a direct result of government policy. International students could bring income to our universities and acquire an understanding and, I hope, affection for Britain which would stand us well in the future. Our response is to show them the door as soon as they have collected their exam results. Other countries such as Australia encourage them by allowing them to work for a short period after graduation. Abolishing the straightforward post-study work route which allowed non-EU students to work for up to two years after graduation is a penny-wise, pound-foolish move.
In tourism, our cumbersome, expensive and time-consuming visa process costs us substantial potential income. Fewer than 5% of Chinese visitors to Europe come to the UK. Why would they, when they can visit 26 other countries on just one visa, while we make them jump through hoops for one that allows access to the UK only? We need consistency at our borders. For arriving visitors from outside the EU to have to queue for two or three hours at immigration, even if once only, is no way to welcome them or to get repeat business. There is no trade-off between secure borders and the speedy processing of arriving visitors; all that is required is to have enough border force staff on duty in the right places at busy times. In a world of often tough policy choices, this surely is a simple, quick win.
To conclude, at a time when we need the private sector to deliver growth, we need a laser-like focus on the barriers that thwart it, complemented by action to stimulate investment. The Government’s realisation that we need a plan A-plus is welcome; I suggest that we add a few more pluses over the coming months.
Lord Haskel
My Lords, I agree with the noble Baroness, Lady Kramer, and my noble friend Lady Liddell that Aung San Suu Kyi is a hard act to follow. However, I would like to speak about something that she may recognise: namely, confidence. The noble Lord, Lord Bates, spoke about this in his very interesting remarks. The Government have missed out as regards confidence as the threat of a double recession and problems with the euro convinced them that there was no future—economic or political—in austerity alone. Sadly, the Government felt unable to adopt Labour’s five-point plan which comprised deferring or slowing down cutting the deficit, a temporary reduction in VAT and getting more young people into employment and training. In doing so the Government missed the fact that these actions would improve confidence by giving hope for the future. I do not agree with what the noble Baroness, Lady Sharp, said in that respect. It is the Government’s original policy of austerity alone that has contributed to this lack of confidence—a lack of confidence in the real economy, which is where the growth lies.
One reason for this failure is that we have a Government who think largely in terms of the financial sector. Money makes money. But you need the real economy, with goods and services that everyone who has been speaking in this debate has described, to create the money in the first place. This is where the growth will come from. This is where confidence is required. This is where we need to encourage and make positive sentiments, just as much as we need to in the financial markets. Yet this hardly features in the Government’s actions. What we have is a conventional pulling of financial levers—tight fiscal policy, loose monetary policy, and more or less quantitative easing. As the noble Lord, Lord Popat, said, this is not an ordinary crisis. I agree with him; and to help deal with it we all need to take every opportunity to build confidence to support and encourage the real economy.
I agree that Ministers talk about the march of the makers. They talk about the importance of competitiveness. Yes, the Plan for Growth laid out strategic aims, and the noble Baroness, Lady Kramer, told us about them; but when practical opportunities arise to create confidence, the Government do not take them. In fact, they do the opposite.
Let me give you examples that have been raised in your Lordships’ House. The noble Lord, Lord Clement-Jones, spoke about the Olympics. Twice the Government have been asked to take steps to relax the rules that the noble Lord complained about whereby British companies can use the Olympics as a shop window for their products. Twice the response has been what I can only call—with apologies to my noble and learned friends—a lawyer’s response, not a Minister’s response. Sure enough, only last week an article appeared in the Financial Times saying how this had been a blow to confidence because those companies felt they were,
“being left out in the cold”.
The noble Baroness, Lady Kramer, the noble Lord, Lord Popat, and others are urging companies to export. They are right. Indeed, we sit on a committee looking into this. There may be problems with the euro, but business in Europe goes on. Firms want to export to the EU, but are not sure how. Since January 2010, it has been a legal requirement for each member state to have a single point of contact in English on the internet for the purposes of opening up their markets. However, this is not working, and the matter has been raised in your Lordships’ House. It has been raised by the Federation of Small Businesses but nothing has happened. The result has been that people say, “Why should I bother?”. Confidence therefore ebbs away.
The Government’s most recent low-interest lending scheme is designed to spur the banks to new lending. I agree on this occasion with the noble Baroness, Lady Sharp, that clearly the money from quantitative easing and previous schemes is staying in the financial sector. It is not reaching the real economy. Project Merlin is not working and there is a great deal of wringing of hands about this. What do the Government do? Why, they offer more of the same with promises that this time it will work. The noble Baroness, Lady Valentine, described this. Is this going to build up confidence and encourage the real economy to produce the growth that we all so desperately need? It is beginning to look as if this is a Government who never lose an opportunity to miss an opportunity to give confidence to the real economy. These are examples that we have discussed in your Lordships’ House, but there are many more examples elsewhere.
As well as taking these opportunities to build confidence, how else can the Government temper austerity with encouragement and build confidence? Certainly, infrastructure projects, about which many noble Lords have spoken, must help. We are all aware of capacity restraints, shortages and things that need replacing. However, to build confidence, it is also essential to understand what is happening in British business and industry, and then we can build on our strengths.
There are very few large British-owned industrial companies any more, and they have been shedding workers. What we do have is a large number of clever, lively, innovative and enterprising companies that specialise in selling their products, ideas and services to narrow markets—markets which very often they themselves have discovered and shaped, as my noble friend Lord Bhattacharyya described, and which often turn out to be large because we live in an age of global markets. All the data show that these companies are accounting for a larger and larger share of our economy, and they have been the ones taking on people. For example, Formula 1 may be a very narrow area of activity but the spin-off businesses, such as those producing rain-sensing wipers or the sensors that tell the pit about the driver’s physiology, have become worldwide businesses. The growing trend of mass customisation exactly suits this kind of business. Additive manufacturing is becoming a destructive technology in the same way that music databases on the internet are now closing down record shops. We are good at this sort of thing.
Nowadays, these companies often work in groups and clusters, supporting each other, to reduce risk and share knowledge. Business has become much more permeable, especially in the digital world which the noble Lord, Lord Clement-Jones, described. If the Government want to bring about growth and competitiveness early, these are the kinds of businesses they have to support and encourage. The Government can create confidence by championing their products, services and way of business, not by neglecting them. Ministers do not have to take it from me. The Government are well aware of what is going on. Each government department has a scientific adviser who must know about these products and services. Foresight, the Government’s own horizon-scanning service, has and is studying all this and is well aware of what is going on, as is the Technology Strategy Board.
As my noble friend Lord Bhattacharyya explained, our skills and education system need radical improvement, as does our infrastructure and financial system. We have to get 1 million people aged under 24 back into work, and, yes, our industrial base is too narrow, but that takes time. That is for tomorrow and the next day, but today we have to show a sense of urgency and deal with this unusual crisis. We have to find growth by showing support and encouragement, and by building confidence where our strengths lie; then tomorrow we can deal with the rest.
Lord Shipley
My Lords, I, too, thank my noble friend Lady Kramer for initiating this debate. I think it is true that the UK is weathering the debt crisis better than many countries, and we seem to understand why we have so much debt and what needs to be done to reduce it. Our problem is that, in addressing the public deficit and personal debt, growth has stalled. As the noble Lord, Lord Haskel, pointed out, confidence is poor, so people hold cash to protect themselves against instability and uncertainty. As they do that, banks repair balance sheets, businesses hold cash amounting to some £700 billion and individuals reduce their borrowing and try to save more. That is now leading to too much cash doing too little and simply earning low returns in interest. Meanwhile, unemployment is high—particularly youth unemployment—borrowing can be hard even for good business proposals and we continue to build too few homes.
As my noble friend Lady Kramer pointed out, the Government have given leadership through their growth initiatives and in their recent boost last week to high-street lending. We all need to respond to restore confidence and thereby generate jobs. Can more of those with money to spare be persuaded to spend some of it on services, employing, for example, a tradesperson who may be having a tough time getting work? That could make a difference and prevent someone having to cease trading and ending up on state benefits. Can we deliver an urgent boost in housing? We are not building enough new homes; the construction industry has declined by more than 4% in the latest period. There is an acute shortage of most kinds of properties but particularly of affordable, social housing, as the number of people renting rises. I can see no alternative to a major government injection of cash to provide the necessary gap finance to get homes under construction. I hope that the Government will urgently consider addressing this issue because tackling it will drive growth and employment as well as build confidence and homes.
There is also an important point about governance in that I believe there is a direct relationship between local empowerment and local growth. In England, government offices and regional development agencies have disappeared to be replaced by local authorities and local enterprise partnerships. These new structures are bedding in and I am confident that they will build on the successes of the RDAs.
Crucial to this further success is tax-increment financing, which permits borrowing against future business rate income. I agree with the noble Baronesses, Lady Kramer and Lady Valentine, about the importance of tax-increment financing—TIF—in generating growth, because England's major urban areas are suffering from a lack of demand which impacts directly on national performance. Spending and borrowing are being driven down by low confidence, restricting business growth. The recent and welcome moves to increase credit need to be backed by further measures to stimulate demand. Access to borrowing needs to be matched by the ability and confidence to repay that borrowing.
Infrastructure investment creates jobs, confidence and a high-ratio return. With low availability of public finance, TIF is widely recognised as a critical tool in delivering such investment and stimulus. Although the Government have created the means for TIF to operate through the Local Government Finance Bill, they have limited its potential effectiveness with their proposed resets, which make it difficult for local authorities to secure the level of return they need and will in turn reduce their ability to invest. The Government need to be more confident about local government’s ability to manage risk and make robust decisions.
By comparison, Scotland passed a Bill under devolved powers in December 2010 to allow six TIF schemes to run. Scotland looked first at which projects had real merit and then decided what to fund. Although some Scottish schemes are not yet fully resolved, that was a sound principle—to find the growth opportunities and then to allocate the funds. Some £500 million of public finance is now committed, attracting £2.5 billion from the private sector. I feel that England can learn from Scotland on this as it seems to have found a sensible way of proceeding. Many potential TIF proposals in England seek to rebalance the economy by stimulating developing industries such as biotech and high-tech manufacturing, resulting in long-term growth in high-productivity sectors which benefit the national economy. Longer-term pay-back periods may often be necessary to deliver that.
As I understand it, the borrowing by local authorities for enterprise zones announced a little while ago may also be treated more favourably than TIF and will not count against the public expenditure control framework, whereas TIF will. That implies a choice of accounting treatment, which I find confusing. I also wonder whether it would be welcomed by CIPFA.
The Association of British Chambers of Commerce, the British Property Federation, London First, the Centre for Cities, Core Cities, the GLA, the LGA, London Councils, the British Council of Shopping Centres and many individual private sector companies have all called for a much bolder approach to TIF because it is a mechanism that businesses think will help them grow. I very much hope that, during the passage of the Local Government Finance Bill, the Government will be able to respond to the potential that TIF projects offer.
That brings me to transport. I have never understood why the UK does not have a strategic transport plan. We seem to lack an airports plan, a road strategy and a plan for rail. That is not a new problem—it has been the case for too many years. The result is that too much infrastructure investment has been short term in its thinking, with a quick payback period in economic terms. It is not designed to rebalance the UK economy in the longer term. We should remember that private sector investment follows government decisions on infrastructure investment. Thus, HS2, which I support, will define for the private sector, because of its route, where firms should think of investing. It really matters what the Government say and where they think public investment should be placed.
To rebalance the UK economy requires a boldness and confidence about the long-term of transport infrastructure investment benefits to the economy; hence the need for dualling the A1 in Northumberland, improving rolling stock on regional rail services and delivering congestion relief through roads investment rather than having the Highways Agency simply put barriers in the way of development and growth by objecting to developments proposed on the grounds of future road capacity, as happens far too often.
Several parts of the UK suffer from low levels of transport infrastructure investment and their potential for growth is more limited as a result. The Government have the opportunity, two years in, to do something about that and to move from short-term decision-making to a clear long-term strategy which informs their investment and that of the private sector.
Lord Paul
My Lords, I, too, commend the noble Baroness, Lady Kramer, for securing and initiating this timely debate. I declare an interest as the chairman of Caparo Group, an industrial manufacturing company. While we appreciate the efforts made by the Government to formulate a strategy for growth, the manufacturing industry has seen little progress despite much talk. Many of those involved in UK manufacturing sometimes wonder whether the Government have a strategy for growth, given their enthusiasm for austerity. It is a tribute to the continuing efforts of the workforce and management of British manufacturing that so much has been achieved in the face of economic adversity—our car industry is a shining example. Yet, my overall sense is that this cornerstone of our economy and our future has been neglected in Britain for far too long.
That must now change if we are to reassure those involved in the manufacturing industry of their worth and ensure that our most able engineering graduates are not tempted away by the bright lights of the City and the financial markets. Manufacturing is still a solid activity providing stable jobs and long-term careers that can embrace the latest thinking in design and technology. Furthermore, it is vital that a country such as Britain has a strong manufacturing sector for strategic as well as economic reasons. We therefore need to keep manufacturers busy.
Two of the largest sectors of demand for UK manufactured products are the public sector and exports, particularly to the EU. The Government expect private sector export-led growth to offset public sector austerity and spearhead a recovery. Yet what has happened? Manufacturers that have worked for years to achieve world-class competitive standards for the UK now face not only a dramatically weakened eurozone, but a strong pound. Profitable exports to continental Europe are thin on the ground. By adopting policies that will increase real demand for UK manufactured products, the Government can enable UK manufacturing to play a full part in leading an economic recovery.
The cuts in the new infrastructure projects for roads, schools and hospitals of recent years cannot be quickly reversed. Recent moves to restart many of these projects, although welcome, will take too long in the planning process to be of much help in getting the economy growing again in the near term. Instead, the Government should focus on the backlog of infrastructure repairs and maintenance. This would also engage the severely depressed construction sector in a streamlined and accelerated tendering process to rapidly generate jobs with manufacturers and contractors.
A keystone of recent government strategy has been quantitative easing by the Bank of England. While it may have aided money supply problems—some people of course have questioned this—it has backfired on British business. Quantitative easing has helped to artificially depress UK government gilt yields—the rate which the Government have to pay to borrow money—and they are now at their lowest level for more than 300 years.
That may seem like a good thing, so why is it a problem for business? Indeed, it is a good thing for the wider economy. However, the problem is that the same rate is also used to calculate today’s cost of future pension promises. The lower the gilt yield, the bigger the liability that is calculated. Extremely depressed gilt rates have hugely increased pension scheme liabilities and the deficits of many UK companies. According to the Government’s Pension Protection Fund, more than 85% of the 6,432 private sector pension schemes in the Pension Protection Fund index were in deficit at the end of May to the tune of £312 billion. Many of those schemes are supported by manufacturers.
However, only a year ago, less than 65% of those schemes were in deficit, with a much more modest total of £25 billion. Despite assets increasing by £41 billion, liabilities have risen by a massive £329 billion over the year. This has placed UK companies under increasing pressure to fund artificial deficits at the expense of real investment in growing their business. If business cannot invest and thrive, who will be left to pay the pensions? With the way in which pension liabilities are increasing, many manufacturers cannot help wondering whether their business is a pension fund with a manufacturing company bolted on instead of the other way around—almost the story of the tail wagging the dog.
Surely that cannot have been the intended effect of the quantitative easing strategy. In any event, let us take a longer-term view on evaluation of pension liabilities that matches the longer-term nature of the pension commitment. This would allow businesses the stability to build robust plans to meet their pension obligations to the benefit of all, rather than the highly volatile and disruptive approach that currently prevails and has been a competitive drag on the UK economy for far too long.
I would, however, like to congratulate the Chancellor and the Governor of the Bank of England on their recent initiative to provide funding for business through further support for bank lending. As the Government know well, small and medium-sized businesses have suffered for far too long from a lack of adequate sources of capital, which I am sure has been a contributory factor to the decline in manufacturing in this country over the past 40 years. We have of course seen initiatives in the past which, despite good intentions, failed to help those who were targeted. This time it will succeed only if the Government ensure that industry receives the funding it needs. If the current policies and programmes fail, this country will continue to lose its place in the global economic hierarchy. That is why I urge the Government to take a more realistic approach to economic growth and the sectors that can contribute to it.
Lord Stoneham of Droxford
My Lords, the essential task and purpose of the coalition is to reduce the government deficit and restore growth. The nature of our partisan politics exaggerates the differences between the Government and the Opposition. Divisions also lead us to overlook what the real dividing lines and problems are. The biggest problem is that the big drivers of the economy between 2000 and 2009 were private borrowing and public spending. Tim Morgan in a recent publication The Quest for Change and Renewal shows that growth in construction, real estate and finance sectors was 42% and growth in health, education and public administration was 28% while the rest of the economy was languishing at -5%, and the real output from manufacturing was plunging by 26% to remain at 12% of GDP.
This suggests that a huge proportion of the economy is currently incapable of growth due to the overdependence on sectors relying on private borrowing and public spending. It is not surprising that we are having difficulties finding a way out. When combined with the huge explosion of private household debt, which individuals are now rebalancing as precautionary motives take hold, it is not surprising that growth remains illusory. There are no short-term fixes.
I want to address my remarks to the importance of the housing sector to restoring growth, and I declare my interest as chair of Housing21. Housing is a great driver of growth. One new house adds at least one new job in construction and two-and-a-half to three jobs with all the associated purchases in the economy. Twenty per cent of the output of housing is sourced through manufacturing. One of the great disappointments of the previous Government is that, despite the boom they created, only 233,000 houses were being built at the top of the boom, and the number has now fallen to below 100,000.
Housing is very cyclical. As demand rises, it soon reaches supply constraints, not just land, but the capacity of the industry to build quickly and cheaply enough. We need to improve capacity. This is a long-term, not short-term, task. A recession and its economic difficulties are often the best time to achieve change in business and to prepare businesses for the future. No good will come if we simply cut back capacity by reducing cost in the short term. Housing has a huge impact on the wider economy and our social objectives. The noble Lord, Lord Best, my friend and colleague in the housing sector, always uses the example of building 100,000 retirement homes. This not only enables 150,000 people to move to more suitable accommodation, but assists 350,000 people to move to the larger accommodation that is released by those moves, and there are associated benefits in savings on health and social spending and in family morale, not to ignore the economic spending as new homes are set up.
There is growing awareness of the importance of housing in the recovery from the previous equivalent economic catastrophe between 1929 and 1932. Recently this has been highlighted in a CentreForum publication by Nick Crafts and in a speech earlier this week by Vince Cable. Those of us brought up on Keynesian teaching all assumed that recovery at that time came from New Deal economics and rearmament. No it did not. They had a devaluation of 25%, which helped, as now. They followed an orthodox fiscal policy of getting the deficit down. Debt at that time was 180% of GDP, and the servicing costs of that debt were 8% of GDP against 3% now. They followed a policy of cheap money. Interest rates fell from 10% to 1%. The only real difference in the 1930s was that then there was no banking crisis and no credit crunch. In addition, there was a network of mutual building societies and locally facing banks ready to fund mortgages at low interest rates. The Government remained in fiscal balance from 1929 throughout the 1930s and from 1932 the economy started to grow by 3% per annum until the end of the decade, and one of the drivers of that was the doubling of housing development to 300,000 houses a year using cheap money.
What can the Government learn from this and what can they do? There are three lessons and five actions. Institutions must start to lend again so that housing borrowers can take advantage of low rates. Confidence has to be rebuilt. A continuing expectation of low rates is essential to the private sector but also important to housing associations and councils. The role of the state, both nationally and locally, must be in partnership with the private sector to incentivise and indeed leverage recovery using the strengths of its own balance sheets without necessarily adding to the deficit.
Turning to the actions required, housing strategy must encompass all forms of housing and not be preoccupied with owner-occupation, as important as that is. There is a huge need for more private rented, affordable and social housing. Partnership activity between the sectors lowers costs and risks and enables flexibility at the margins when houses that cannot be sold can be rented or used for social housing. Keeping housing in silos encourages social apartheid and raises the cost of housing provision. Mixed developments help cross-subsidisation of social housing.
The Government should consider using quantitative easing measures to directly benefit housing development rather than simply improving the balance sheets of banks. A 1% easing of interest rates could lower the cost of financing housing by 20% to 25%, which is very significant over a 30-year repayment period. It could also reduce the need for subsidising social housing directly. Housing associations are already forsaking banks for bond issues to finance their developments. Examining new sources of funding could facilitate more development.
Not enough progress has been made, despite promises that it was going to be, in sourcing pension funds and institutions looking for suitable long-term investment providing real returns, particularly in private rented housing. Certainty on rent policy and even the development of government guarantees would be better than direct government investment. A whole series of government schemes already provides very significant funding: the Growing Places Fund for infrastructure; Get Britain Building for development finance; freeing up public sector land initiatives; the New Homes Bonus. We have to push on these but we must be prepared to consider that we might have to spend £1 billion to produce 40,000 to 50,000 homes if all else fails.
Finally, as I said in the housing strategy debate I initiated earlier this year, the Government need to be ambitious. There needs to be a housing tsar in government to galvanise the private, public and voluntary sectors to drive these policies and to raise our sights from building 100,000 homes this year—if we are lucky—to over 200,000 in 2015.
I always thought it was that great liberal Conservative Harold Macmillan who broke the 300,000 homes ceiling in the 1950s. Actually it was done in the 1930s and, if I dare to say so, it was probably one of the reasons why that one-nation Conservative Stanley Baldwin formed the Government after 1935, despite the great crash in 1929.
Baroness Royall of Blaisdon
My Lords, I, too, am grateful to the noble Baroness, Lady Kramer, for allowing us to debate the vital issue of growth this afternoon. There is a link between growth and democracy, about which Aung Sang Suu Kyi spoke so powerfully this afternoon. Democracy is frail and it is best nourished by participation in our democratic system, but that requires people to have hope and confidence in the future, including their own economic future. Where hope is lost, where confidence in our system is undermined, fear and extremism take hold. I know that all noble Lords in the Chamber this afternoon will strive to ensure that that does not happen.
The noble Baroness has always given great importance to growth. Indeed, in her maiden speech as Member for Richmond Park, she spoke powerfully about the need,
“to reconcile the importance of environment and sustainability with economic development, prosperity and growth”.—[Official Report, Commons, 23/5/05; col. 473.]
From these Benches, despite what has been said this afternoon, it would appear difficult to reconcile this view with being a member of a coalition Government who are responsible for an economy that has not grown in the year and half since the spending review. One might say that it is a case of “Kramer vs. Kramer”.
From outside government, it is rather difficult to detect any co-ordinated growth strategy. To outside observers, including the CBI, there was little or nothing in the Queen’s Speech. It represents a waste of a parliamentary Session when industry and businesses large and small are crying out for a strategy which will return our country to a healthy rate of economic growth as soon as possible. Despite what has been said, I remind noble Lords that when my Government left power after a tumultuous global financial crisis, George Osborne inherited an economy that was growing. Unemployment was falling. Borrowing was below expectations—£20 billion lower in our last year of government than forecast. Yes, the deficit did, and does, have to be dealt with, but not with such speed. It is thanks to wrong decisions that focused on austerity rather than growth that we have ended up in a double-dip recession.
Growth is the necessary condition for meeting the aspirations of our citizens, providing employment as well as hope, and for funding the public services on which we all rely. Rather than pursing a growth strategy, this coalition Government have chosen fear over hope. They have focused on a policy of austerity that is not working here and is not working in the rest of Europe. In the very short time since his election, President Hollande has brought about a change in discussions in the European Union so that even the Prime Minister is now talking with his European colleagues, although he is not translating words into action. These Benches certainly agreed with President Hollande when he recently said that growth was a condition to meet deficit targets and that it was important to have policies that stimulate growth. I hope that at the European summit next week his influence will be strong.
It is true that there is growth in some sectors—for example, the automotive industry, which is thriving—and I celebrate that, especially when they invest in skills, training and R&D. They are providing sustainable growth in which their profits rise as a result of investment and innovation, not through speculation. My noble friend Lord Bhattacharyya was right to focus on manufacturing and to say that so much more could be done if there were an integrated approach. My party believes that there is a role for intelligent government intervention to stimulate greater innovation, maintain infrastructure and ensure that R&D is strengthened.
The success of major industries is vital also for the SMEs which make up their supply chain. I am told that 99.7% of all businesses in the EU are SMEs, which seems a staggering figure. Our own 4.5 million SMEs employ about 14 million people, accounting for almost half of private sector turnover. SMEs are the foundations of our economy, our community and our country, but, at the moment, those foundations must feel a bit shaky. Some are in danger of crumbling, desperate for an injection of confidence and hope, perhaps crying out for an industrial strategy which would deliver for SMEs as well as for large enterprises. They are worried that UK plc is getting left behind in the global race for the future. It is no surprise that, according to the SME Finance Monitor, the main barrier to future borrowing by SMEs is the economic climate, with 43% of would-be seekers saying that the effect of the economic climate will hold them back from seeking the finance to expand and grow.
I met representatives from the Genesis Initiative just yesterday and was bowled over by the expertise, experience and ideas around the table—these are huge strengths that must be exploited—but I was also acutely conscious of frustrations about missed opportunities. They need a supportive Government with vision and a long-term growth strategy that takes into account the long-term needs of industry and businesses large and small.
The noble Lord, Lord Popat, mentioned red tape, but no one yesterday mentioned it. I was interested to read in the Economist that a recent GE Capital study found that four of the top 10 challenges facing German and French firms are related to regulation, compared with just one in Britain—that is not to say that it does not have to be dealt with, but it is an interesting finding. The same study says that the main challenge for British firms is getting workers with the right skills. It also mentions the high cost of housing when companies try to attract skilled workers. On skills, I would ask the Minister how he thinks that Mr Gove's curriculum changes, which have a total focus on academic subjects rather than any focus on vocational subjects, are going to help. They will force children into a narrow education when we should be nurturing young entrepreneurial flair.
Many noble Lords, especially Liberal Democrats, have suggested that the Government are not putting enough money into building new homes. The noble Lord, Lord Storey, had some interesting ideas. As he mentioned, every house built represents two and a half years of work for one person, yet jobs in our construction sector are still contracting. An excellent IPPR report said today that Britain is in the midst of the biggest housing crisis in a generation. Taking action now to deal with the problem, which afflicts the lives of millions, would indeed stimulate growth. I agree that my own Government did not build enough houses, but there are certainly not enough houses being built at the moment.
I also ask the Minister why more is not being done in these difficult times to enable SMEs to take advantage of the bidding for contracts inside and outside the European Union. German, French and Italian SMEs have much more exposure to markets outside the EU than their British counterparts and I suspect that they have more government support.
We also have the benefit of the Commonwealth, whose potential we should assist SMEs in exploiting. The green investment bank is a fine initiative, with which I agree, but why is there no real discussion or action relating to a national infrastructure bank? Like many noble Lords, I wonder why more is not being done to promote investment in infrastructure, which is a key component for successful business and industry, and is a motor for growth; not to mention the employment that it provides. Unemployment remains a scourge in this country and the wider world, which is why the G20 summit was so important. However, the leadership needed to provide a global plan for jobs and growth appears to have been lacking.
I welcome the fall in unemployment figures announced this week, but even the FT is today talking of future increases, along with the chambers of commerce. Many of the people who are now taking part-time jobs are doing so because they could not get a full-time job. Of course, the increase in the number of manufacturing jobs is good news, but so much more needs to be done. Unemployment for 2.6 million people, including over 1 million young people, and fear of unemployment for millions more means that not only do people not pay tax and government borrowings consequently rise but consumers do not have the confidence to spend. The few are still spending; the many are not. I was horrified to learn that two new food banks open every week and that we have children who are in such poverty that nearly half of teachers have taken food in for their pupils. I am not critical of food banks—far from it, they fulfil a desperate need—but I am ashamed that in the 21st century there is a need for food banks in our country.
The Government clearly have a responsibility to implement policies that stimulate growth in the short term. As my noble friend Lord Wood of Anfield said in an earlier debate,
“we need to move on beyond the rather stale polarity of laissez-faire on the one hand and the demonisation of old-style corporatist industrial policy on the other, to work out not whether but how a Government can provide secure foundations for long-term growth”.—[Official Report, 31/3/11; col. 1359.]
That is why Sir George Cox, as noble Lords will know, has agreed to carry out an independent review, commissioned by my right honourable friend Ed Miliband, into the impact of short-termism on business. Businesses need to be able to take a more long-term view if we are to develop an economy that works for working people and competes with countries where longer-term planning is taken for granted. Sir George is issuing a call for evidence and, in view of the expertise in this Chamber, I very much hope that noble Lords will respond.
Having said that, what we need is action now. Many noble Lords have mentioned the fact that last week the Governor of the Bank of England, understanding the need for urgent action to sustain our economy, announced the funding-for-lending initiative. Of course, this is both welcome and necessary but will only work if the demand is there and small businesses have the confidence in our economy and the growth of our economy to borrow. At the moment, I do not think that confidence is there.
Confidence demands action and unless action is taken that enables businesses to grow and stimulate the economy, thereby giving people hope and jobs, we will not succeed in getting the deficit down. For the present and future well-being of our country, it is imperative to restore confidence and growth but at the same time to ensure that the proceeds of growth are shared by the many not the few. That is the challenge. To date, the coalition—the Liberal Democrats as well as the Conservatives—has failed to meet that challenge and it is therefore failing the hard-working people of this country.
Lord De Mauley
My Lords, I start by thanking my noble friend Lady Kramer for initiating this debate and noble Lords on all sides for participating and for some important, helpful and often creative ideas. Even if I do not have time to touch on all those ideas specifically this evening, I will, I assure noble Lords, take all of them back to the respective government departments.
As underlined in my noble friend’s opening speech, the Government’s overriding priority is to return the United Kingdom to strong, sustainable and balanced growth. There are three parts to our strategy to achieve that. The first two are focused on dealing with the challenges we face now: sustained deficit reduction to deal with the record deficit we inherited; and monetary activism to provide immediate stimulus to the economy through credit easing, quantitative easing and the recently announced liquidity and funding for new bank lending. The third part of our strategy focuses on dealing with the challenges of the future: promoting long-term growth by accelerating supply-side reforms that will enable United Kingdom businesses to develop and grow.
I will deal with each of those in turn, along with the points that have been raised. First, I turn to the immediate challenges. As I think no one would dispute, we are living in difficult economic times. We are recovering from the biggest financial and debt crisis of our lifetimes. If one thing is clear, it is that we cannot borrow our way out of a debt crisis. The actions we have taken to reduce the deficit and rebuild the economy have secured stability and positioned our country as a safe haven in an international debt storm, with interest rates near record lows, benefiting families, businesses and the taxpayer.
Our fiscal plan, supported by the IMF and the OECD, has helped us maintain our AAA credit rating and lowered interest rates to record lows, making business loans and family mortgages cheaper. Of course, as the noble Lord, Lord Paul, said, the eurozone crisis remains a challenge. As we have said before, Britain cannot cut itself off from what happens elsewhere. Problems in the euro area—our biggest trading partner—affect us too, but there are still encouraging signs: 630,000 private sector jobs have been created, more than outstripping public sector losses; manufacturing output, rightly referred to by the noble Lord, Lord Bhattacharyya, is up by more than 3 per cent; and exports outside the EU are up by nearly a quarter since this Government came to office in 2010.
Of course, we acknowledge that there is a long way to go. Building for the future, our Plan for Growth set out a wide-ranging, radical programme of economic reforms to help build a stronger, more balanced economy in the medium term. We have already made significant progress towards our four ambitions.
The first is to create the most competitive tax system in the G20: cutting corporation tax to 24% in April this year, and to 22% by April 2014; committing to lower the top rate of tax; and committing to make tax easier for small unincorporated businesses by introducing a new cash basis for calculating tax.
The second is to make the UK the best place in Europe to start, finance and grow a business. There has been £3 billion saved through deregulation; we have introduced the national loan guarantee scheme, with further support for credit to follow as the Chancellor and the governor announced last week; and we have increased the generosity of incentives for investment in early-stage businesses.
The third is to encourage investment and exports as a route to a more balanced economy—£1 billion has been invested in infrastructure to reduce congestion on the roads, for example—and setting an ambition to more than double UK exports to £1 trillion by 2020.
The fourth is to create a more educated workforce that is the most flexible in Europe. We created more than 450,000 new apprenticeships last year. We will continue to work closely with business to implement our reforms.
I turn to specific questions from noble Lords. My noble friends Lady Kramer, Lord Shipley and Lord Stoneham, among others, asked about housing. Each of my noble friends stressed the importance of housing to the Government’s growth strategy, and they are right. Over the past decade, housing construction, repairs and maintenance have accounted for an average of 3% of GDP. As noble Lords will be aware, the Government published our housing strategy last November. This included introducing the NewBuy mortgage indemnity scheme; launching a new £400 million Get Britain Building investment fund, which was subsequently increased to £550 million; and reinvigorating the right to buy by increasing the maximum discounts to £75,000. My noble friends urged us to go further, perhaps using guarantees, and I am grateful for their views. We have said that the Government are looking at further ways to use the principle of guarantees to boost the credit for housing and infrastructure, and that work is ongoing. We will set out our plans in due course.
My noble friends Lady Kramer and Lord Shipley and the noble Baroness, Lady Valentine, raised the matter of tax increment financing and made a number of specific points. As my noble friend Lady Kramer explained, from April 2013 all local authorities will be able to borrow against future business rates revenues, partly or wholly to fund the provision of infrastructure. That in turn should lead to an increase in business rates, which normally would be taken into account when resetting local authorities’ tariffs and top-ups. However, to allow long-term planning, the Government have set an aspiration to allow 10 years before that reset for TIF. While I accept that that may not be long enough to allow local authorities to finance big-ticket projects, it is another tool that local authorities can use to promote growth in their area and could kick-start many small projects that are, as we well know, ready to go.
My noble friend also mentioned TIF 2, which was the announcement in the Budget that up to £150 million will be available in 2013-14 for large-scale TIF projects in core cities. Bids from core cities are now being assessed. We appreciate that the limit of £150 million means that not all TIF 2 projects will be able to go ahead, but TIF 2 schemes come at a cost to the Government because we have to count the cost of the additional spending that the new borrowing by local authorities supports. As a result, with our continued priority of deficit reduction, the Government have to limit the amount of funding available for TIF 2 schemes at this time. However, I will ensure that the noble Lord’s comments are passed to the Treasury.
My noble friend Lady Kramer touched on the importance of a social investment strategy. She called for the Government to develop one, and I am pleased to say that the Treasury is already undertaking an internal review of the financial barriers to social enterprise. This will conclude by the autumn. The Cabinet Office is also looking at the legal and regulatory barriers to social enterprise through the red tape challenge. We are very much alive to these issues.
My noble friends Lady Kramer and Lord Popat talked about the banking sector. My noble friend Lord Popat argued that the Government should be encouraging the creation of new banks. We have seen a number of new entrants into the current-account market in recent years, including Metro Bank, and I agree with him that it is essential that the regulatory regime facilitates new entrants wherever possible. The Government are of course also supportive of ensuring that the divestments of branches by Lloyds results in as strong a challenger bank as possible. We have engaged with the European Commission and with Lloyds itself on that point.
My noble friend Lord Popat also talked about smaller lenders. He might be interested in the Government’s support for community development finance institutions. For example, £30 million of regional growth fund money has been used to establish a wholesale fund that will provide extra capital for CDFIs to lend on to businesses and individuals. I know that my noble friend Lady Kramer is well aware of the importance of CDFIs. Like my noble friend Lord Popat, she raised the advantages of local banking models focused on building relationships with customers. I very much agree with her that banks need strong relationships with their customer businesses, and it is encouraging to see the success of banks such as Handelsbanken, which focused on its relationships with businesses. More widely, I am encouraged by the work that the major high-street banks have done through the BBA’s business finance task force to build relationships with businesses—for example, through a new appeals process and support for mentoring for small businesses. I am pleased that my noble friend acknowledged the schemes announced by the Chancellor and the governor last week. Those follow the national land guarantee scheme that we have introduced, and measures such as expanding the enterprise finance guarantee and setting up the £1.2 billion business finance partnership to encourage non-bank lending. The Government remain focused on the need to help businesses obtain credit.
My noble friend Lord Popat also raised his concern about the planning system. I certainly agree with him about its importance. Indeed, the Government have made this issue a priority in our growth strategy. Already, we have published the national planning policy framework, which is now in effect. This focuses 1,000 pages of policy guidance into around 50, and includes a powerful presumption in favour of sustainable development. This will remain a focus for the Government because the planning system had simply become too complicated. I hope that the chances we are making can unlock the kinds of investments that my noble friend mentioned, which have in the past been stopped by planning rules getting in the way.
My noble friends Lord Popat and Lord Bates also raised the vitally important matter of exports, a subject which a number of other noble Lords also touched on. There are, as my noble friend said, some encouraging signs, with exports to countries outside the EU up by nearly 25% since May 2010. In terms of the key emerging markets which my noble friend Lord Popat mentioned, and in particular the value of UK goods, exports to India grew by 11.9% over the past year, and to China by 15.8%. As a result, China and India were the destination of 5% of UK goods exports in 2011, twice as large a share as five years earlier.
I agree, however, that the Government have to stay focused on this, including on the diplomatic support which our companies need. Indeed, my noble friend Lord Sassoon is not here responding to the debate today partly because he is doing exactly what my noble friend Lord Bates exhorted us to do—he is meeting with my right honourable friend the Prime Minister and my noble friend Lord Green to talk about how the Government can best target high-value export opportunities and inward investment into infrastructure, a matter to which my noble friend Lord Popat also referred.
The noble Lord, Lord Bhattacharyya, raised the matter of an industrial strategy. I agree with him not only about the dangers of picking winners but that we need to think about the long term. We are developing an industrial strategy to give businesses, investors and the public more clarity about the long-term direction of the economy. We are responding to what industry is calling for, looking at how we can set out a vision for where the UK’s strategic capabilities should lie and how we will support them.
My noble friend Lord Clement-Jones raised a number of points, and I welcome his recognition of the role of tourism and the creative industries in promoting growth. On his specific points, he asked about businesses being banned from declaring that they have acted as a supplier for the Olympics, a matter to which the noble Lord, Lord Haskel, also referred. I agree that it seems, to say the least, a little strange, so we are looking at redrawing the terms of these arrangements. We will make an announcement in due course.
My noble friend also talked knowledgably about skills in the creative industries and suggested merging the Creative Skillset sector skills council and the Creative and Cultural Skills council. I understand that there have been discussions about this, but that it was decided that it was not the right time to take it forward. I will, however, ensure that his views are noted. He also asked about overseas promotion, and I welcome his positive comments on UKTI’s work. UKTI has a network of advisers working on this, working closely with DCMS and other organisations.
Finally, my noble friend asked about the work of the Creative Industries Council on access to finance. I am not yet in a position to tell him what was in the report presented last week but I assure him that it will be looked at closely. I welcome his interest in these sectors and assure him that the Government share it.
My noble friends Lord Clement-Jones and Lord Bates specifically raised the matter of foreign students. We need to bring migration down to sustainable levels. The Government are committed to achieving net migration in the tens of thousands. However, we recognise the economic benefits of overseas students and the substantial export earnings that they create for the UK, as well as the importance of the long-term relationships that they can create. We welcome legitimate students but we must crack down, and we are, on bogus colleges and those who abuse the student visa route. The new system ensures that only high-quality, genuine students can come to the UK to study with legitimate education providers, which, I am sure, is what noble Lords want.
In related comments, the noble Baroness, Lady Liddell, and my noble friend Lord Clement-Jones, spoke thoughtfully about the importance of tourism—with which I strongly agree. Of course, we have enormous opportunities to capitalise on the Olympics this year. I should perhaps mention VisitBritain’s £100 million campaign to attract international visitors, with matching funding from the private sector. Added to that is the Great Britain image campaign, with funding of more than £22 million. We estimate that nearly 90 million people will see these advertisements at least five times. Put together, VisitBritain is running the largest tourism marketing campaign in our history.
My noble friend Lord Bates and the noble Baronesses, Lady Liddell and Lady Valentine, referred to Chinese visitor visas and the recent letter from Her Majesty’s ambassador, Sebastian Wood. Obviously, I would never welcome the apparent leaking of such a letter but it at least shows noble Lords that the issue is being looked at seriously by senior Ministers. I noted the suggestion of the noble Baroness, Lady Liddell, about allowing access to Chinese visitors with a Schengen visa. I will certainly pass that on and make sure that it is considered as part of this work.
The noble Baroness, Lady Valentine, touched on the important issue of airport capacity. The Government are committed to maintaining the UK’s aviation hub status. The aviation policy framework is due to be published shortly and will set out the Government’s strategy to ensure that aviation contributes to economic growth within environmental constraints. The Department for Transport plans to publish a call for evidence on maintaining our hub status this summer. This will give all stakeholders the opportunity to comment in more detail. I am sure that the noble Baroness and London First will put forward their views.
The noble Lord, Lord Paul, spoke about, among other things, the effect of low interest rates on companies’ pension liabilities. It was an interesting point and one that I will look into. However, one must weigh this concern against the very real benefits to those same businesses from the effect of low interest rates on the cost of their funds, to which my noble friend Lord Stoneham, among others, referred.
The noble Baroness, Lady Royall, spoke about research and development, which is extremely important. I am not sure that she asked a specific question but the Government launched their innovation and research strategy for growth in December 2011. It sets out how the Government will support innovation and research in the UK, where our investment can add value, how we will achieve this and how we can leverage significant public and private investment to drive sustainable growth.
There were a lot of questions to which it is impossible to do justice in the time allowed. However, I will ensure that any that I have not been able to answer are addressed in writing. I hope that I have demonstrated that the Government are tackling the current economic challenges head-on. Continued deficit reduction and monetary activism are vital to rebalance the economy and achieve strong, sustainable and balanced growth. Alongside dealing with our immediate challenges, the Government have a plan for growth, which I have outlined today. These issues are vital for the UK economy; noble Lords made that point forcefully today. Again, I thank my noble friend Lady Kramer for bringing this matter to your Lordships’ attention and all noble Lords who have participated.
Baroness Kramer
My Lords, I will just very briefly thank the Minister for his commitment to take back many of these issues to the relevant parts of government and for giving us an indication that in quite a number of areas the Government are already thinking along the same lines as your Lordships. It is nice to come to the end of a debate with a positive conclusion coming from it.
I also very much thank all noble Lords who participated and brought real thought, knowledge and understanding to what we all agree is one of the most important issues facing us here today. I would say to the noble Baroness on the Labour Benches that we have perhaps a slightly different perspective on the issues around deficit reduction and the strategy that she outlined sounded a bit like a bubble and bust strategy, which would worry me indeed. It is easy to raise confidence, but then when it is destroyed again the damage tends to be deeper than the confidence initially created. But we can set apart partisan differences because most of the debate was so extremely constructive and reflected the real strength, knowledge and public interest motive that mark out the Members of this House, and I thank everyone who shared their thoughts today.