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The Commercial Secretary to the Treasury (Lord Deighton) (Con)
My Lords, it is a privilege to open this debate following Her Majesty’s gracious Speech. The measures set out yesterday demonstrate this Government’s commitment to securing the UK’s economic success by creating a stronger, more competitive economy for the longer term. Through the British people’s hard work and the effective policies of this Government, we find ourselves in a far superior economic position than this time last year, when some were expressing concern regarding the prospects for recovery.
No major advanced economy grew faster than the UK over the past year or in the first quarter of this year. Employment is at record levels. Last month’s inflation of 1.8% was below target. We are seeing competition in the supermarkets, which is pushing food prices down. Wages are rising at a similar pace to prices and real take-home pay is increasing. We are completing major infrastructure projects: for example, a dramatically improved King’s Cross station, smart motorways to relieve congestion across the country and, yesterday, a new Queen’s Terminal at Heathrow airport to enhance our international connectivity.
The fiscal challenge facing this Government in 2010 required urgent action. This meant not just committing to reducing the deficit, which is on course to halve this year from that 2010 level, but doing it in a way that gave markets confidence and helped keep interest rates low. The Government’s decision to deliver the majority of consolidation through reduced spending was the only credible option for our country. As a result, the independent Office for Budget Responsibility now predicts that in 2018-19 the UK will have a surplus for the first time in 18 years.
By almost all measures, the performance of the UK employment market is excellent and improving. One way, however, of getting more people into work is by addressing the high cost of childcare. This issue particularly affects women. Even though female participation in the workforce is at an all time high, if we could equalise their labour force participation to that of men the UK could increase growth by 0.5% per year. We are therefore introducing legislation that will further support working families with the cost of childcare. This is beyond the existing £5 billion invested every year in early education and childcare. The Childcare Payments Bill will implement a new tax-free childcare scheme providing up to 1.9 million families with 20% support towards their childcare costs of up to £10,000 per year per child—£2,000 credit per child. This will be available from autumn 2015. This Bill replaces employer-supported childcare with a new, fairer scheme that will be easy to access online, open to working parents irrespective of who they work for, and available, for the first time, to the self-employed.
The quality of a nation’s infrastructure is a key driver of its economic growth. That is why this Government have put investment in transport, energy, telecommunications, flood defences, water, waste and intellectual capital at the heart of our economic strategy. We are making significant progress. Over 2,000 infrastructure projects and improvements have been completed over the past four years. In this financial year alone, over 200 new projects are due to start and another 200 are due to complete, which will directly support over 150,000 jobs in the construction industry. These are part of the £36 billion of investment planned for 2014-15.
These projects form part of our national infrastructure plan, which it is my pleasure to oversee at the Treasury. That plan not only sets out the Government’s decisions about what infrastructure our country needs over the next decade and beyond, it also sets out our strategy for how it will be delivered. It lays out the action that we will take on financing, which builds on both the innovative long-term public funding settlements that we have already announced—£100 billion of capital investment in projects over the next Parliament—and the steps that we have already taken to support private-sector investment, for example through the UK infrastructure guarantee scheme. A significant portion of the UK’s infrastructure investment takes place through corporate financing by our utility companies in the capital markets. This is an extremely efficient way of getting things done because of the confidence that investors, both domestic and international, have in the integrity and independence of our regulation of these sectors. We should hold on to that independence dearly.
The national infrastructure plan also lays out the action that we will take on strengthening planning, where a number of improvements have helped to take planning approvals to a 13-year high. The new specialist planning court for infrastructure, which opened in April, and the additional measures published in the Infrastructure Bill that we have introduced will further streamline the regime for major infrastructure and speed up the discharge of planning conditions. These reforms to planning will further support our efforts to generate a faster, much needed, increase in the housing supply.
In last year’s spending round, the Government committed to the largest programme of roads investment since the 1970s. Between 2010 and 2021, the Government will invest more than £24 billion in our roads. By committing this significant amount of long-term capital and by reforming the Highways Agency so that this capital is deployed efficiently, we intend to address the stop-start cycle of investment previously seen in roads and to ensure that our road network can continue to support the economy and its growth.
On rail, legislation for the first phase of a new north-south high-speed railway is progressing through this Parliament. It is 120 years since we built a mainline railway north of London and it is absolutely imperative that we seize the opportunities that this presents. The new railway complements this Government’s transformational investment in our existing railways. Between 2014 and 2019, Network Rail will spend over £35 billion, continuing a substantial programme of expansion and renewal. We are building the Northern Hub, a programme of rail upgrades across the north of England that will allow up to 700 more trains to run each day and provide space for about 40 million extra passengers a year, and we are delivering an unprecedented programme of electrification across the country.
Passengers on the great western and the east coast main lines will benefit from £6 billion of investment in fast new electric trains, and of course we are transforming rail capacity in the south-east by completing—on time and on budget—Crossrail and Thameslink. That includes rebuilding London Bridge Station, which is being done quite dramatically by keeping it operating at the same time for the benefit of customers. HS2 will connect eight of Britain’s 10 largest cities and more than double capacity on some of our busiest routes. It will directly employ nearly 25,000 people in construction, and the regeneration around stations will support up to 100,000 further jobs. I chaired a task force that examined how to maximise the benefits from this project, and I was persuaded that it can be truly transformational, particularly for our cities in the Midlands and the north, if we approach it strategically and collaboratively so that we capture its full economic potential. I am now working across government to make sure that we do just that.
I was delighted by the overwhelming cross-party support shown for the HS2 phase one Bill during the recent Second Reading debate in the other place, but there remains a long way to go until this legislation receives Royal Assent. I urge Members of both Houses to make this happen quickly, because I believe it is crucial that the scheme’s huge benefits are felt by people and by businesses up and down the country as soon as possible.
Finally on infrastructure, through the reform of the electricity market we have established a framework that will drive investment in energy infrastructure, deliver renewable energy and make sure that we have secure supplies for the future. We have already seen more than £45 billion of investment in electricity infrastructure since 2010. We have agreed the terms for a new nuclear power station at Hinkley Point, the first in a generation. We have set aside more than £1 billion to drive innovation in carbon capture and storage, and that is one of the best offers to develop this technology in the world. We have also increased the share of our electricity that comes from renewables to almost 15% in 2013, up from under 6% at the start of 2010.
It is also important that we get the most from our existing oil and gas reserves in the North Sea. Three months ago the Government accepted Sir Ian Wood’s recommendations on this subject, and we are introducing measures in the Infrastructure Bill to put the principle of maximising economic recovery of petroleum in the UK into statute. Shale gas has significant potential for boosting economic growth and competitiveness, and the Government are creating the most competitive tax regime in Europe to encourage its development, but more still needs to be done. The Government want to put in place the right regulatory framework to support a shale gas industry while ensuring that we protect the environment.
Moving on to local government, we believe that the local enterprise partnerships are best placed to identify local priorities for growth and drive forward local economic development. The Government are currently implementing the recommendations set out by my noble friend Lord Heseltine in his review of UK growth entitled No Stone Unturned in Pursuit of Growth. So far, we have agreed 24 city deals across the country, which have successfully devolved resources to local areas. We are going further. The Government are currently negotiating a growth deal with each of the 39 LEPs that will see them receive a share of the Local Growth Fund, which will total £2 billion in 2015-16 and will be at least £2 billion in each year of the next Parliament. These growth deals demonstrate the Government’s commitment to empowering local areas to take control of the growth agenda in their local economy.
I would like to close my remarks by reviewing how we are making sure that our policies impact people in the fairest way possible. Tax avoidance not only deprives the UK of the money it needs to fund public services, it also undermines public and business confidence in the fairness of our tax system. The National Insurance Contributions Bill includes measures to strengthen the robust stance that this Government are taking in tackling all forms of avoidance. Our approach here is simple: in return for offering a competitive tax system that promotes economic growth, we expect everyone to pay their taxes, and the anti-avoidance measures included in the Bill will reinforce this principle. In addition to tackling those who do not pay their fair share, the Bill will also simplify the collection of national insurance from 5 million self-employed individuals by implementing the self-assessment scheme recommended by the Office of Tax Simplification.
The other main thrust of our fairness policies is quite simply to reduce the tax burden on the millions of working people in the country. In this respect, noble Lords should note that the personal allowance will increase again to £10,500 from April next year, and fuel duty has been frozen until the end of this Parliament. We have helped local authorities to freeze council tax in every year of this Parliament. We are reducing the impact of government policies on energy bills by £50 for average households—a way in which we can sensibly control energy bills. We have also made it easier to save and easier for people to access their pensions. But the best way of getting money into people’s pockets, and the best way of helping them to raise their living standards, is from the jobs and opportunities that are created and sustained by a dynamic, growing economy. I believe that the measures set out by Her Majesty yesterday will achieve this.
Lord Adonis (Lab)
My Lords, it is a great pleasure to follow the noble Lord, Lord Deighton, and to pay tribute to him for his sterling work over the past year in promoting HS2. Six weeks ago, the House of Commons carried the Second Reading of the HS2 Bill by the colossal margin of 452 votes to 41. HS2 is vital to transforming transport capacity and connectivity between London and the major cities of the Midlands and the north. The Bill will proceed in this Session with our support.
However, if HS2 is the “Flying Scotsman” of the new Session, the rest of the Queen’s Speech barely merits “Thomas the Tank Engine”. Starting with the economy, the gracious Speech tells us:
“An updated Charter for Budget Responsibility will … ensure that … governments spend taxpayers’ money responsibly”.
I assume that this means that the Chancellor will be updating his fiscal rules of 2010 and proclaiming them as a charter. However, since the Chancellor is not on target to meet either of his 2010 rules by 2015 as intended, because of the weakness of the economy for most of the four years since he became Chancellor, it is hard to see why the public should have more confidence in any new set of rules just because they are dressed up as a charter.
As for the proposed legislation to cut bureaucracy and promote access to finance for small businesses, we welcome any measures to deal with late payments in particular—although the public sector is itself often the culprit. However, the Government have spent the past four years announcing one initiative after another on access to finance, mostly to little effect: remember Project Merlin? The House will not be holding its breath. The plain fact is that, as the Bank of England’s latest Trends in Lending report said in April, lending to all businesses is still falling, with small and medium-sized enterprises hit worst.
The Queen’s Speech also promises yet another Bill to reform the planning regime and to promote infrastructure, even as the ink is barely dry on the previous Growth and Infrastructure Act—intended, yes, to reform the planning regime and to promote infrastructure. “Déjà vu all over again”, as someone once said.
The House will therefore want to focus not so much on the measures in the Queen’s Speech as on the economic fundamentals. Thankfully, the economy is at last reviving. We all welcome the recent improvements in employment and output, and the fact that inflationary pressure remains low. However, before we hear too much about an economic plan that is working, the best gloss that can be put on Britain’s relative economic performance is that, at last, we are in catch-up mode. Unlike the US, Germany, France, Canada and Japan, the UK’s GDP is still below its 2008 peak—out of the G7, only Italy has a worse record. As the Office for National Statistics says in its latest analysis,
“UK real GDP fell by 7.2% … and the subsequent economic recovery has been one of the slowest in the G7 … and in UK economic history”.
Nor has economic growth been accompanied by any pick-up in productivity, the key determinant of long-term prosperity. Productivity growth in the UK since 2007 has been lower than in all other member countries of the G7, including Italy. This underlying productivity weakness partly explains why average real incomes have been languishing for so long and why wage growth has been so weak.
Exports remain especially weak. The current account deficit stands at 5.5% of GDP, the highest level since records began in 1955. Over the past two years, the UK’s exports have been flat, and the Government are not remotely on track to meet their target of doubling exports to £1 trillion by 2020.
As for employment—made much of by the noble Lord—the top-line employment figures tell only part of the story. For instance, 1.4 million people are working part-time because they are unable to find full-time employment. As the Bank of England notes, this very high number of people reporting that they would like to work longer hours points to considerable underemployment. The rise in claimed self-employment, which accounts for more than half the increase in total employment reported since last summer, also suggests that millions simply cannot find permanent jobs and are looking for other ways to make ends meet.
Youth unemployment remains especially high. At 19%, the UK’s youth unemployment rate is higher than that of Italy, Denmark, France, the Netherlands, Austria and Germany. We are failing the next generation —a lost generation of young people with poor skills and no work, and little hope for the future.
The truth is that Britain is growing but the foundations are weak, the young are especially disadvantaged and a good deal of today’s growth is being driven by consumer debt and a surge in house prices. This partly also explains why growth is so regionally imbalanced, concentrated on London and the south, while the Midlands and the north do less well. Tellingly, 21 of the 25 worst performing retail centres in the country are in the north, the Midlands and Wales, while 22 of the 25 best performing are south of the Watford Gap.
Household consumption and private housing investment, fuelled by the housing price surge in London and the south-east, represented fully 60% of GDP growth last year, while net trade and business investment, essential for driving innovation and high-value jobs, remain worryingly low. A critical issue is the failure to build new homes on anything like the scale that the country needs. The rate of housebuilding is lower than at any time since the 1920s. Barely half of the 200,000 new homes a year that are required are being built nationally, and less than a third of the 60,000 a year needed in London.
Where are the policies to deal with these fundamental weaknesses, to improve youth skills, to transform vocational education, to accelerate investment and to dramatically improve the rate of housebuilding? To tackle youth unemployment, we need more apprenticeships and more work opportunities for young people, yet the number of apprenticeships for under-19s is still below its 2010 level—a figure disguised by the Government lumping all apprenticeship numbers into one total, when most of the growth under this headline number is for those already in employment in their mid or late 20s. Even in the public sector, apprenticeship numbers are pitiful and too little is changing too slowly. The Civil Service used to have no Whitehall-wide apprenticeship scheme whatever. Now it has just started but for a mere 100 apprentices when there should be thousands.
The Government’s Youth Contract, billed by the Deputy Prime Minister as the big answer to youth unemployment when it was launched two and a half years ago, has massively underachieved. The policy was for 160,000 wage incentives for employers taking on long-term unemployed young people. There were also to be 250,000 unpaid work experience places. Two and a half years later, a mere 4,000 young people have been placed with an employer for six months with full government support; that is just 2.5% of the way to 160,000. Furthermore, a recent employers’ survey revealed that 81% of the jobs advertised under the Youth Contract would have been offered anyway. As for the 250,000 work experience placements, fewer than half have in fact been created.
It is a similarly worrying story on housebuilding. Why is the rate of housebuilding so low? It is because of a serious construction skills shortage, private sector land-banking and the unwillingness or sheer inability of the public sector in its various guises, from local government to the MoD and the NHS, to get building on its own land. There have also been some nimby councils but others want to do more but do not have the powers. The Government have done far too little to tackle these problems. For example, three years ago the Prime Minister told us that he wanted to see new garden cities. So far only one has been announced, in Ebbsfleet, which already had planning permission for 10,000 homes.
To drive improvements in skills, housing and infrastructure, the Government should be following the advice of the noble Lord, Lord Heseltine, and empowering England’s cities and localities by radically devolving budgets and powers to local authorities and to local enterprise partnerships, overcoming what Vince Cable called the Maoist abolition of the regional development agencies in 2010. Instead, only a fraction of the Heseltine devolution has taken place, mostly dependent on complex and protracted individual city deal negotiations, which is far from the rocket boost required.
It is a similar story of half measures or no measures in respect of energy and infrastructure. The average dual gas and electricity bill is now at a record £1,353, up from £819 in 2009. Over the four years to October 2013, gas prices increased by 21% and electricity prices by 25%. The Office for National Statistics estimates that the share of household income going on essentials has risen by 10% since 2003, which is a huge burden on family budgets. The lack of an effective energy market is part of the explanation. That is not just our contention: since Ed Miliband put this issue up in lights, it has become the Government’s and the regulator’s contention too.
In February, Ed Davey asked the big six energy companies to review their pricing. He also asked Ofgem to think radically and even consider breaking up the big six if they had been overcharging. In March, Ofgem reported back that it found evidence of both collusion and overcharging, evidence of “possible tacit coordination” between energy companies that includes a,
“strong alignment of pricing announcements, in both timing and extent”,
and evidence that the big six have seen increasing profits that do not appear to reflect increasing efficiency, a possible sign of lack of competition. A Competition and Markets Authority investigation is now under way, but nothing is being done in this Queen’s Speech to freeze or reduce energy prices while that happens and we will not get any action on competition until after the election. As for energy infrastructure and new supply, according to a recent survey by the CBI and KPMG, two-thirds of British companies fear that UK infrastructure will deteriorate over the next five years, and their concerns are most critical on energy.
Legislation on fracking is proposed in the Queen’s Speech which, the Government say, would put shale gas production in line with the coal industry, water and sewerage, all of which have access to underground land. We welcome that in principle, provided that communities are reassured about impacts on the environment, including contamination of the water table, but the critical issue is that a fifth of the UK’s power-generating capacity will close over the next decade, but plans for delivering new gas and nuclear power stations are well behind the curve. Ministers talk about a dozen new nuclear power plants, but only two are as yet proceeding. As for gas, because of a lack of clarity and confidence in the Government’s capacity mechanism for encouraging new supply, we face a situation where existing gas stations may be mothballed but there is little appetite for new plants. On renewables, there appear to be two separate Governments: Ed Davey’s DECC is in favour while Eric Pickles’s DCLG repeatedly turns down applications for extra capacity.
The story on housing and energy applies to transport, too. Although a few welcome projects, such as Crossrail, Thameslink and HS2, are proceeding—mostly, I should note, inherited from the previous Government—there are too many plans without delivery, the biggest plan of all being the constantly relaunched national infrastructure plan, which is a catalogue of everything on the infrastructure drawing board, only a fraction of which is actually being taken forward
In one vital area of economic importance, extra airport capacity in the south-east of England, there is not even a plan, just a commission, which is not due to report for another year, because for the entirety of this Parliament, the Government have not even been able to form a view, let alone to take a decision. It is the same with the new lower Thames crossing—vital infrastructure to relieve the M25 Dartford crossing, the most congested short stretch of road on the entire trunk network. The previous Government published three options for the new crossing five years ago. Since then, the coalition Government have merely reduced the three options to two so there still is no plan, let alone a decision. Yet a new crossing would be entirely paid for by the private sector through tolls.
The Government’s non-delivery is summed up by the extraordinary saga of the A14. The upgrade of the A14—a vital growth corridor from the east coast ports to the Midlands—was shovel-ready in 2010. One of the first acts of the coalition Government was to cancel it, along with a string of other major transport schemes. Two years later, in 2012, Ministers tried to resuscitate the A14 as a toll road with magic money. That scheme collapsed and last year, finally, the Government said that the A14 would go ahead on its original plan. So a vital major trunk scheme, which might have been finished by now, is not even remotely close to starting. A very large number of the schemes that the Minister mentioned in his remarks from the road plan of last year are simply the resuscitation of schemes that were cancelled in 2010.
As a country, we face huge challenges. At last there is growth but far more needs to be done to tackle youth unemployment and underemployment, and to construct the homes, infrastructure and energy and transport systems that Britain needs to thrive. Where the legislation in the Queen’s Speech addresses these problems, we will give it our support but the imperative is for a bold and ambitious Government—and for that, the general election cannot come soon enough.
Lord Razzall (LD)
My Lords, I think it is common ground on all sides of your Lordships’ House that this was a gracious Speech that was very short, with only 11 Bills promised to add to the three or four being carried over from the previous Session. I listened with interest to the noble Lord, Lord Adonis, but did not quite follow his analogy of this being a Thomas the Tank Engine speech. I was sorry that he did not use the attack used by a number of his friends from another place, which I much preferred. They referred to it as being a zombie speech from a zombie Government. Of course, the people who have put that into the mouths of their spokesmen do not really understand what zombies are: although zombies may well be the living dead, they are also immortal.
I am surprised that the Labour Party has chosen to attack this speech for being very short because the only shorter Queen’s Speech in living memory was in the run-up to the 2010 election. There were even fewer Bills promised by Labour at that stage but of course they also had their problems with the coalition between the Blairites and the Brownites. I welcome a short gracious Speech because, to me, good government is not just about legislation. We can all remember the 21 or so law and order Bills that the Labour Party brought in during the 13 years when it was in power but do we think that any one of those had any effect on the crime statistics? Indeed, I have long come to the conclusion that the purpose of a detailed legislative programme is to keep idle hands busy in the House of Commons.
For my part, rather like the noble Lord, Lord Adonis, I propose not to concentrate on the Bills set out in the gracious Speech but to take a look at the current state of the British economy and perhaps to describe what I see as some of the pitfalls ahead. Notwithstanding the noble Lord’s reservations, there can be no doubt that the UK economy is on the mend. Output is growing at its fastest rate since before the financial crash, unemployment is falling as new jobs are created and inflation is back below the Bank of England target. However, for politicians, like most people in your Lordships’ House, the issues are both political and economic.
First, on the political, for the two coalition parties the challenge is very clear. As a result of the Fixed-term Parliaments Act, we now know the date of the next general election, which will be on the first Thursday of May 2015. To do well in that election, both our parties need to demonstrate that the economic policies of the coalition are working and that a return to a Labour Government would put the economic recovery at risk. The coalition has of course been successful in persuading the electorate that the financial crisis in 2008 was the result of the Labour Government’s profligacy. This is obviously slightly unfair as it ignores the effect of the sub-prime mortgage collapse in the United States, notwithstanding the reservations of the noble Lord, Lord Forsyth. However, the success of the arguments made by the coalition is demonstrated by polling figures that have consistently shown that the Government are better trusted to manage the economy than Labour. Of course, Labour has not been helped by the refusal of the shadow Chancellor, Ed Balls, to show any remorse for Labour’s period of economic stewardship.
The second recent political argument has been over spending plans for the five years after 2015. The legacy inherited by the coalition in 2010 was a double whammy of an unsustainable deficit of government spending over income and a crippling government debt burden. George Osborne and Danny Alexander, the two key Treasury Ministers, have committed their respective parties to further steps to eliminate the deficit and reduce debt after 2015, although naturally there are disagreements to come between the two parties as to how in practice this would be achieved. In the mix of tax increases and spending cuts, the Tories will be more likely to avoid the former whereas the Liberal Democrats will not wish to rely solely on the latter. However, the two parties are united in opposition to Ed Balls’s recent proposals, which appear to concentrate solely on deficit reduction, ignoring the debt burden.
Inevitably, the political positions of the coalition will not succeed unless the economic recovery continues for the next 12 months, and this is where the economic arguments are relevant. Will the coalition parties be able to claim that the economy has recovered on their watch? As the noble Lord, Lord Deighton, and I have indicated, the portents are good. The polls are indicating a surge in the economic confidence of both business and the consumer. Surveys by the employer organisations indicate a significant increase in proposals to invest, and clearly the Government claim some credit for the increase in growth. The noble Lord, Lord Deighton, has rightly described the plans for which he has responsibility in infrastructure spending. I have said before that I have often thought that government policy in this area is rather,
“analogous to a swan, sailing serenely on while declaring that there was no alternative to the austerity programme but underneath the water the legs are paddling furiously to create initiatives to promote economic activity: infrastructure spending, with Crossrail the largest infrastructure scheme in Europe; the regional growth fund; the Green Investment Bank and the business bank; the development of an industrial strategy by the Department for Business, Innovation and Skills, with concentration on key areas of industry; and the stimulation of the housing market by the Help to Buy scheme”. [Official Report, 27/3/14; col. 608.]
The overwhelming factor at the moment, though, has been the return of what Keynes described as “animal spirits”. No one—no economist, and certainly no politician—quite knows why, over the centuries, consumers have suddenly lost confidence in the economy in which they live, thereby triggering a downturn in economic activity. However, there can be no doubt that the process has been now been reversed in the United Kingdom. As the Bank of England has pointed out recently, the tell-tale sign is the fall in the amount of cash held in ISA accounts—I prefer my pronunciation —which was £2.8 billion in April, the largest monthly fall since ISAs were first introduced in 1999. This cash is currently finding its way into property, equities and the high street.
So what are the risks to our economic recovery? First, as a recent CBI survey indicates, there has been a significant change in business attitude. Business now believes that the biggest threat is political risk. As John Cridland, the director-general of the CBI, has said:
“The UK now has more stable economic foundations, and political risks must not jeopardise this”.
The political risks are obvious. First, whatever one’s view about Scottish independence, there can be no doubt that were the vote to be yes, this would have a disruptive effect on the British economy even if it were only in the short term. Secondly, there is a political risk in what seems to be increased competition in anti-business rhetoric coming from all sides of the political argument as we approach the election, of which I suppose the best example has been Labour’s proposal for an energy freeze which, rightly or wrongly, is clearly having an impact on ongoing investment in the energy field.
Then we come to the political risks of Europe. A number of my colleagues and I have for some time been arguing that there is a significant risk to the growth of our economy if multinational companies form the view that we are going to come out of Europe in 2017. The motor car industry is obviously a classic example, and last year for the first time we exported more cars than we imported. Do we really think that investment in the motor car industry will be continued if people really feel that we are going to come out of the European Union?
Whatever views may be on our role in the European Union, there is no doubt that a recession in the eurozone would seriously damage our economic prospects. There seems to be a serious possibility of Europe spinning down the sort of inflationary spiral which affected Japan for 20 or 25 years. I hope the whole House will agree that in this context the intervention this week by the European Commission with a prescription for UK economic policy—the Times called it,
“a breathtakingly obtuse invitation to tax more and spend more … from the architects of the eurozone’s slump to the leaders of Europe’s fastest growing-economy”—
was totally inappropriate. Indeed, one might assume that the officials who wrote that were in the pay of UKIP, in the same way that I always assumed Arthur Scargill was in the pay of Central Office in Millbank.
Let me return the compliment to the European Commission, certainly to the ECB. I very much hope that today Mr Draghi—who may well already have done so but had not by the time this debate started—will cut the key ECB benchmark interest rate and will stop draining cash out of the banking system by sterilising bond purchases through weekly market operations. This would ultimately create €165 billion of extra money in Europe. This would be better than straightforward quantitative easing, which could be challenged in the German Constitutional Court and would in practice drive down German and French borrowing costs the most, which is not where the drive down needs to take place. I hope Mr Draghi takes this advice, if has not already done so.
The Lord Bishop of Leicester
My Lords, I want to take the opportunity of this debate to raise some questions about the balance of power between London and the regions in our country today. The gracious Speech emphasised the new financial powers to be implemented for the Scottish Parliament and the National Assembly for Wales. While this is welcome, it highlights even more acutely the need for urgent action to address the very different environment for local government in England, in spite of what the Minister briefly said to us about resourcing local economic partnerships.
It is surely now vital that more power should be devolved from the overly centralist and siloed Whitehall closer to communities that have a stake in the success of places and to where a real link between politicians and positive action can be formed, as the report of the noble Lord, Lord Heseltine, recommended. My conversations in the east Midlands point to a clear consensus that the balance of power between local and central government is not right. Councils are now placed in the impossible position of taking responsibility for abolishing front-line services that are both wanted and needed by local communities. One of the clear messages of the recent elections is surely that a large part of the population has begun to lose confidence in our political processes and that trust has dangerously eroded between the electorate and its representatives.
This suggests that we have reached a moment requiring both leadership and courage: first, in recognising that localism has become an empty word, especially to practitioners, who regard local discretion as little more than a myth. This is demonstrated by the national Planning Inspectorate’s habit of taking big decisions in the teeth of local opposition and the capping of council tax levels. Secondly, leadership is required locally to achieve an effective appraisal of local democratic systems which are so multilayered and overlapping that people increasingly struggle to relate to them. We need now to make progress in rationalising the mishmash of unitary and two-tier structures and, frankly, to reduce the number of locally elected representatives. Would it not be worth considering whether a form of proportional representation might be appropriate for local authority elections in view of the one-party states that now appear in several cities and London boroughs?
These reforms are not best left to some future Parliament but require attention now before the attenuation of local government reaches crisis levels, with even more unbalanced growth across the United Kingdom and even more damage to public service outcomes. The challenges we face are too complex and particular to be left simply to broad national solutions. Rather, we need to draw much more effectively on the creativity and civic energy of local communities. We must think differently about what it means to be a citizen, seeing ourselves not simply as consumers of services but as genuine partners in providing them. This means facing and challenging the unwillingness of many in national government to lose control over public services and decision-making, because they still harbour a fear that local institutions lack the required capacity or capability.
Yet without some risk, innovation and courage in this area, local government will continue to be starved not only of cash but of the civic talent it desperately needs in order to make the scale of transformative changes required of it in the years ahead. At the top of these changes and concerns is of course the funding of adult social care, which clearly is an issue that now troubles most of the population in one way or another. While we have all read headlines about gaps in local authority funding, it is salutary to think that to date none of them has really picked up on the additional costs which the 150 top-tier councils will face if the Government do not meet the cost of capping adult social care, whether on the Dilnot formula or not.
Surely we are now at the point at which it is urgent for the Government to recognise that these costs cannot be laid upon local authorities without bringing the whole structure of local government crashing down. Allied to this is the equally urgent need to face and work through the complex issues surrounding integration of the NHS and social care services. If this is left simply to vested interests—whether political, clinical or bureaucratic—a once-in-a-generation opportunity will be lost, and the scare stories about black holes in the NHS budget, quite apart from those in local authority budgets, will continue to haunt us.
Noble Lords will perhaps forgive me for reminding them that Leicester, at the heart of my diocese, is indeed to become, after protracted legal proceedings, the final resting place of Richard III. This has focused the attention of all of us, especially our city and county councils, along with Leicester University, on the need for closer partnership working at many levels if all the necessary plans and preparations for reinterment with dignity and honour are to be put in place. Such partnership working—on many other matters, of course, as well as this—must be the pattern for the future and will require new attitudes and work patterns with more flexible, outwardly focused and engaged local authority personnel learning how to work with and trust other public and private sector institutions more creatively.
The Richard III experience has also reminded us of the significance of place for all our citizens. People are interested in their story, their heritage, their narrative and character, as well as their prosperity and prospects. On these Benches, we might call this the soul of a place. Here, too, we find a particular role for the churches in partnership with local authorities as significant leaders in creating a sense of identity, and stimulating opportunity, quality of life and cultural richness.
In the City of Leicester and the County of Leicestershire, our city and county councils have taken an effective lead in presenting the story of the Battle of Bosworth and the death and discovery of Richard III, and in creating a major new civic space around our cathedral. All of this speaks to the importance in our national story of this controversial king.
Successive Governments have acknowledged the need to reduce pressure on local government and provide greater local flexibility, but this need is now critical. None of us wants to face a future without an affordable plan for adult social care or to accept a culture that accommodates an increasingly atomised and fragmented public service provision, leaving frail and vulnerable people, in particular, increasingly exposed and anxious. As devolution to the nations of the United Kingdom progresses in this Parliament, so the challenge of resourcing and empowering local authorities in England must be faced and responded to. The gracious Speech’s pledge of Her Majesty’s Government to continue to work to build a fairer society surely requires the revitalisation of local government as an essential part of that pledge.
Lord MacGregor of Pulham Market (Con)
In the time available to each of us it is necessary to confine ourselves to a limited number of points and even then to deal with them only in staccato fashion. I warmly welcome the Queen’s Speech and wish to make four points.
However, first I wish to congratulate my noble friend on the Front Bench on his speech. I thought he made an outstanding case for the work on infrastructure that the Government are doing at the present time. I do not intend to repeat the many points he made, but I wish to say how fortunate we are to have him taking the ministerial lead on infrastructure. I believe that we are greatly benefiting from his skills, experience and track record.
I turn to my first point. I wish to follow the noble Lord, Lord Razzall, and dismiss the suggestion by some Labour Front-Benchers that this is a lightweight package from a Government who have run out of steam. I well remember, as Leader of the House of Commons and therefore chairman of the committee making recommendations to Cabinet, the discussions for the programme leading up to the 1992 general election. There are always many candidates for legislation. Every department has a shopping list, and there are always many more candidates than can be entertained in any one year, but that is particularly the case in an election year. The legislative programme has to be shorter than usual in that year. There is no scope for spill-over legislation. Even in those days, when we did not know when the election would be called, provision had to be made for that. Today, with a fixed-term Parliament, we know that the Session will be short. There will certainly be many other things to occupy Parliament: the implications of the Scottish referendum, whichever way the vote turns out, and much debate on EU matters and an EU referendum in advance of the general election, to name just two. I believe that the Government have judged the weight of the Queen’s Speech absolutely correctly.
Secondly, I warmly welcome the economic measures—the charter for budget responsibility, to deal with spending taxpayers’ money responsibly, something which throughout my parliamentary career I have always felt to be of the utmost importance. In this context, I recommend that all with an enthusiasm for this should read the book Conundrum co-written by my successor as Member of Parliament for South Norfolk, Richard Bacon, which is based on years of work by the PAC and demonstrates how much more still needs to be done on this front of spending taxpayers’ money responsibly. I welcome the emphasis on start-ups and small businesses. My first ministerial job was as Minister for Small Businesses. In fact, I was only the second such Minister in the DTI. Much progress has been made since those days. The contribution of these businesses is much more widely acknowledged, but clearly more can be done, and I warmly welcome that. Above all, I welcome the emphasis on the long-term plan to build a stronger economy and reduce the deficit. I believe that the Chancellor’s determined pursuit of his strategy has been masterly and he has seen off his critics. It ill behoves the shadow Chancellor to criticise, given the very important part that he played in the previous Government’s huge overspending and the increase in government debt, which left us so vulnerable when the international crisis came.
I have great respect for the noble Lord, Lord Adonis, but I was astonished by his speech today. There was no word of acknowledgement from him about the disastrous legacy that we inherited. He seems to ignore the fact that the Labour Government were responsible for nearly 10 of the past 13 years. It would be interesting to cost the programme that he has laid out today and see what that would do to bring down the deficit. In that context, the Chancellor has seen off his IMF critics, who now acknowledge that, when they made criticisms of him in the past year, he was right. Like the noble Lord, Lord Razzall, I was deeply concerned by the European Commission’s recent intervention calling for the Government to rein in the Help to Buy scheme and increase council taxes. That is none of the Commission’s business. I am a firm believer in subsidiarity, and this is a classic breach of that principle, unhelpful in the current context of the debate on the role of the Commission. It is entirely the Chancellor’s responsibility to deal with these matters.
That leads me on briefly to my third point—housing—which it is appropriate to mention in a debate on the economy, given the recent comment from the Governor of the Bank of England that the housing market posed the “biggest risk” to the UK’s economic recovery. There is recent evidence that the Help to Buy scheme is helping the housing market outside London, particularly for first-time buyers, and that the increase in house prices there may be easing. I believe that the way to tackle such excessive risk as there may be in the mortgage market is not by raising interest rates but rather by tackling it through a tighter approach to loans-to-incomes ratios, as the Financial Conduct Authority is now considering and Lloyds and RBS are now doing. It is a throwback to the regimes that we all knew when taking out our first mortgage. Prudence was imposed on us by relating the size of our mortgages to the incomes that we earned. But London is a special case. Here the continued rise in house prices is creating serious problems for many young people seeking to own their own homes. Partly, that is a reflection of the increasing numbers seeking to live and work in the capital and partly it is because the housing supply is failing to keep pace. I applaud the measures in the Queen’s Speech to deal with that.
An increasing contribution to the problem is the way in which the housing market in so much of central London is now dominated by soaring prices paid by foreign buyers. Of course, we must expect and welcome many foreign residents with high incomes living here in London if London is to remain a dominant international financial and business centre. But I am concerned that so many of the new developments in the centre of London and spreading out seem to be marketed first to very wealthy foreign purchasers seeking a safe haven for their investments and not regularly living here. That is having a considerable ripple effect, way beyond central London. All of us who live in London but not in the centre are experiencing that. I welcome the introduction in the Finance Bill of the measure that non-residents disposing of UK property should pay capital gains tax, but nevertheless my concern remains. I believe that the Government should continue to monitor that very carefully.
Finally and fourthly, I particularly welcome the proposal in the Queen’s Speech to,
“introduce a Bill to bolster investment in infrastructure and reform planning law to improve economic competitiveness”.
In particular, the Bill will,
“enhance the United Kingdom’s energy independence and security by opening up access to shale and geothermal sites and maximising North Sea resources”.
This measure was one of the proposals that the Economic Affairs Committee of this House recommended in its recent report, The Economic Impact on UK Energy Policy of Shale Gas and Oil. I believe that this is one of the most important reports the Economic Affairs Committee has published during my chairmanship of it. I ask the Minister to urge his colleagues to produce the government response in good time and well before the Summer Recess so that we can have a full debate on this issue as today I can outline only briefly some of the issues.
The committee was immensely impressed by the US experience over recent years in relation to shale gas and oil, which has transformed the American economy, lowered energy prices, produced substantial employment, caused a lot of the energy-intensive industries to consider going back to the United States and led it to export a great deal of coal to Europe, which is not the most environmentally beneficial form of energy. That American experience, which will not be repeated in full here, has been dramatic. Shale gas and oil could provide a huge opportunity for the UK, with lower energy prices, although not on the scale experienced in the United States, and greater energy security, which is particularly important in the context of what is happening in Ukraine. The development of shale gas and oil could retain energy-intensive industries in the UK and help to mitigate climate change as it is an effective carbon dioxide reduction measure. However, the problem is that progress is painfully slow. We are only just beginning to see applications to do exploratory drilling and we simply have no idea how much shale gas and oil can be produced in this country until we go ahead with exploratory drilling. We have not really started on the process. As the noble Lord, Lord Adonis, correctly pointed out, there are real risks of energy shortages and rising energy prices occurring in this country towards the end of this decade because of the reduction in coal-fired plants and the slowness of getting nuclear proposals through. Therefore, we urgently need to take full advantage now of the potential offered by shale gas and oil.
We identified the planning process as one of the main obstacles. We did not recommend that the regulatory environment should be weakened but we believe that the delays which arise in dealing with a multiplicity of agencies greatly inhibit companies that wish to exploit shale gas and oil. Therefore, streamlining is essential in that area. We examined a huge amount of scientific evidence, looked with great care at all the environmental and other objections, and concluded that all could be met, given our rigorous regulatory regimes. In short, shale gas and oil exploration is potentially a major opportunity for this country but we need to get on with it. This is a good first step in getting on with it but I ask my noble friend to ensure that we have a full debate on this subject before the Summer Recess, given its serious implications and great potential.
In conclusion, much of what is in the Queen’s Speech is very good and I warmly commend it.
Baroness Andrews (Lab)
My Lords, in this debate, I want to focus on one of the most understated aspects of the gracious Speech, which has already been referred to in passing by my noble friend Lord Adonis and the noble Lord, Lord MacGregor. It is, of course, housing. We were told that one of the themes of this year’s Queen’s Speech was to be aspiration. There is one thing to which we all surely aspire and that is decent homes for ourselves and our children. That aspiration has never been so far out of the reach of so many people, and the Queen’s Speech, I am afraid, does very little to make it a reality.
We were also told that this was to be a bold Queen’s Speech. There are very welcome references to garden cities, and isolated initiatives such as selling high-value government land and more Help to Buy, but they require close scrutiny and certainly do not add up in terms of scale, investment or coherence to what is so obviously needed. If this were to have been a bold strategy, it would have had to set out a full and proper vision and strategy for housing the nation—a clear prospectus for meeting the needs and ambitions of all communities, all tenures and all ages. To match the national mood of anxiety about housing, it should have been at the core of the text of the Queen’s Speech—not a series of marginalia—recognising the frustration in so many families as they watch prices and rents spiral out of control.
I had hoped today that we could debate housing within the wider context of the economy. It was disappointing that the Minister made such passing reference to housing, not even mentioning it in his list of infrastructures that drive the economy and should be prioritised. The noble Lord, Lord MacGregor, has wisely drawn attention to the real fears that by stoking the housing bubble in London there is a threat to a very fragile economic recovery. The London housing crisis exemplifies with brutal clarity the extent to which we have a not only dysfunctional but dangerous housing market, fuelled by policies focused largely on demand that have not impacted sufficiently on supply. Without being at all partisan, surely we can all agree that there is something seriously wrong with a housing policy whereby £23 billion is spent on housing benefit to subsidise housing costs and only £1.5 billion is spent on capital investment in social housing for those in greatest need.
“Crisis” is an overworked word but is justified in the context of London. Every day, as the noble Lord, Lord MacGregor, said, we see absentee millionaires’ flats rising on every available space in central London. I hope the Government will not only listen hard to the call for monitoring that process but think about the actions required to reduce it. Less visible are the families being driven out of London by the bedroom tax, or the young and professional families who are stuck in insecure and overpriced rented accommodation, with no hope of buying into the market or moving out of London. Young people are paying a fortune for the most appalling, shared rented accommodation. We in the last Government thought we had come close to solving the problems of homelessness and evictions by investing in homeless hostels and improving conditions. It turned out not to be the case. The national association of ALMOs reflected only yesterday that the percentage of rent arrears in households affected by the bedroom tax had increased from 37% to 69% by the end of June 2013, and is now about 27% above the base position.
To date the Government have tackled the housing crisis primarily through welfare restrictions and advantageous mortgage take-up. A fair and effective housing policy needs to plan to restore the balance of the housing market to meet the totality of housing needs. The fact is that while Help to Buy can help the few, help to build is the only way in which to help the many. What might a policy focused on help to build consist of? We need clarity and certainty around the number—an accelerated number—of new homes that we need to build, and how they would be financed and distributed across tenures. There is no mystery to the figures. By 2021 we will need to house an additional 221,000 households each year. We also know the price of failure. Almost 10 years ago to the day, Kate Barker spelled out the problem in her review of housing supply:
“I do not believe that continuing at the current rate of housebuilding is a realistic option, unless we are prepared to accept increasing problems of homelessness, affordability and social division … hampering our economic success”.
How very right she was, and she recommended an annual target of 230,000 new homes. In 2007, the last Government were building 170,000 a year, the highest rate for 19 years.
I would therefore be grateful if the Minister could clarify the agreed government target for housebuilding. Is it 200,000, as I understand the Housing Minister to have said, or is it 300,000, as some of her Liberal colleagues are saying? Does she agree that even the lower figure would demand a significant input from public and social providers? What proportion of that housebuilding target will be social housing? Does she agree that there is an indisputable economic case for social housing? This was reinforced recently by no less than PricewaterhouseCoopers, working with the London and Quadrant housing association, in a report called The Numbers Game. It clearly shows that, for those on lowest incomes and in the greatest need, housing at social rents offers the best deal, not just for tenants but for taxpayers and providers. That sort of evidence lends further volume to the chorus that is calling for the Government to remove the cap on the housing revenue account, which stops local authorities from building. That chorus is not just the usual suspects: it includes the Home Builders Federation and the CLG Select Committee. It is not a minority argument. In fact, the Government have already conceded the case: borrowing limits have already been raised by £150 million. That is a welcome recognition that the system is not fit for purpose. The logic is to abolish it altogether. Very handily, the Deregulation Bill is coming down the track into this House shortly. It is an obvious vehicle for doing this, which would kick-start more social housing.
The right reverend Prelate has called for more co-operation and partnership working at local level. How right he is. We need to see the LEPs working across boundaries. We need to see the sub-regional partnerships planning systematically for housing. We are making up so much ground that was already in place when we had regional spatial planning. It is a tragedy that we have to reinvent some of that.
Let me suggest a few more things the Government can do quickly, in the next year, to make help to build a reality. My heart sank when I heard of another reform of the planning system. We have only just had the guidance on the National Planning Policy Framework. More than anything else, planners need certainty in the system. They need to know what they will be able to invest in. Why do the Government not look, for example, at legislation to identify and free up land banks, which are deliberately being held back for long periods, to create the range of new delivery vehicles needed if the Government are serious about garden cities—not just garden cities, but good, high-quality, well designed urban extensions? Why do the Government not acknowledge that the new homes bonus has not led to an increase in building? They should go back and have a look at the housing and planning delivery grant, which was really effective.
Help to build also means taking the long view on the demography of this country and planning for a society that is growing older and occupying a lot of housing stock. There are not sufficient decent, high-quality homes for older people to move into. If we made that a priority, recognised that we are dealing with the whole community’s housing needs and integrated housing as the front line for decent health and care for elderly people, we would have a much more intelligent approach to housing and health and care.
The most urgent action is to help what Ed Miliband has called Generation Rent. My noble friend Lord Adonis referred to it as a lost generation, living in insecurity and with soaring costs in the private sector. These are young, vulnerable and exploited people, often in very low-paid jobs or unemployed. Despite being a supposed free market, private renting is a major cost to the taxpayer. It benefits from a patchwork of subsidies, guarantees and tax reliefs. It is the main driver behind the huge escalation in housing benefit. The next Labour Government have committed to build a modern rented sector, with sensible reforms around the core rights of consumers. We can look to other successful countries that are doing that, such as Germany. We can look to New York, where Mayor Bill de Blasio plans to build no fewer than 200,000 affordable units to rent. He has the support of the Real Estate Board of New York behind him, because it knows that a regulated market, properly done, has the self-interested support of the whole market. Why can we not do that in London, instead of letting the market rip?
Finally, there is time to do two things that can make a big difference. Legislation can still be brought forward this year to regulate letting agents and to extend the powers available to deal with rogue landlords. Those two immediate changes would help the most vulnerable. We have a year before the election. It is not too late to do any of that. Somehow I suspect we will have to wait for another Government to do it. I hope that will be a Labour Government, who will put different values and priorities into place.
Lord McNally (LD)
My Lords, the guidance invites us today to discuss the economy, infrastructure, transport, energy and local government. As it happens, I want to discuss all those topics but as they apply to one particular place.
My full title is Lord McNally of Blackpool. I chose it in recognition of my pride and affection for that town and its immediate locality, the Fylde, where I grew up in the 1940s, 1950s and early 1960s. In those days, Blackpool was one of the most successful holiday venues in Europe—an international centre for entertainment, with a hinterland supporting a diverse service and manufacturing base. It was an exciting place in which to grow up and one for which I retain an enduring affection. However, I am well aware that, although I retain many friends and family on the Fylde coast and although, as my son once shrewdly observed at the age of eight, “Daddy is always happier on a Saturday night when Blackpool have won”, I speak now as an exile of nearly 50 years.
My reason for using the opportunity of the gracious Speech to speak about Blackpool is that I worry that, without concerted effort by both local and national government, the town could reach a tipping point which would make regeneration impossible. I sometimes think that if Blackpool had had a manufacturing rather than a tourist-based economy, its need for help would have been more easily appreciated. If a mill, a pit, a steelworks or a shipyard closes down, the impact is more immediate and so is the response. Blackpool’s business is tourism, which, as the noble Lord, Lord Pendry, and my noble friend Lord Lee of Trafford have constantly argued with successive Governments, has never been given the priority it merits by dint of its capacity to create jobs and stimulate economic activity.
Over the past 30 years, Blackpool has had to deal with a variety of factors beyond its control, which together add up to the perfect storm. The decline of Britain’s old industrial base—the shipyards, the textile mills, the coal mines and the steelworks, to which I referred a minute ago—robbed Blackpool of its traditional holidaymaker market just at the time when those in the new and surviving industries were discovering package holidays and cheap flights to the sun. Blackpool is still Britain’s largest seaside resort, with iconic attractions such as the Tower, the Winter Gardens and the Pleasure Beach, which attract millions of visitors a year. However, unlike in my youth, most of those visitors are there for the day or the short term. This reduction in the length of visits has resulted in an oversupply of holiday accommodation. That, in turn, has resulted in many properties being converted into flats and houses for multiple occupation, which in turn become occupied by those on housing and other benefits. The result is high levels of social deprivation and poor housing conditions in parts of the town’s inner areas and an increasingly transient population, reinforcing social challenges.
The blunt fact is that Blackpool has had to spend a disproportionate amount of resources, manpower and energy responding to social care, health, housing and educational needs which are not of its making. This, in turn, diverts resources and energy from the task of revitalising the visitor economy and improving the housing stock and local environment so that the town becomes once again an attractive place to visit and in which to live. Blackpool urgently needs a coherent and co-ordinated programme of measures which will reverse the decline and create a benign circle of confidence and growth. I know that the Government are in the process of considering a strategic economic plan drawn up by the Lancashire Enterprise Partnership. I urge the Government, when they respond next month, to do so with a sense of urgency and imagination.
I have to say that I believe a great opportunity was missed when Blackpool was rejected as the location for a super-casino. It is ironic that Blackpool was refused a super-casino, which is probably the most thoroughly regulated of all gambling outlets, while Parliament waved through new opportunities to gamble from the ease of one’s own sofa or when strolling down the local high street. I still believe that the casino option should be revisited to revitalise the economy and to use Blackpool’s unique brand name to create a multi-activity resort, as has happened with many successful regenerations around the world.
Even after the disappointment of the casino decision, Blackpool has pressed ahead with a wide range of initiatives which I believe require a positive response from the Government. There is the proposal for a museum to celebrate Blackpool’s unique contribution to entertainment, and proposals for an energy academy. Work is already under way on refurbishments to Blackpool Tower and the Winter Gardens. The promenade has been upgraded and redesigned, new trams run on re-laid track, and the Pleasure Beach continues to provoke terror and delight with rides of space-age technology. I pay tribute to the town’s two MPs, Gordon Marsden MP and Paul Maynard MP, for their assiduous fight on the town’s behalf.
The Lancashire Enterprise Partnership measure to which I referred is before the Government as we speak, and the outcome is expected in July. If approved it will result in much-needed improvements to Blackpool’s economy and the creation of new jobs, with transport proposals to improve access to Blackpool’s tourist attractions and the arrival points to the town, a new major visitor attraction and the establishment of a new energy skills headquarters, as well as plans to address the quality and choice of housing on offer.
This is all good news but it must be the beginning and not the end of a process. The Government need, at long last, to give tourism the priority that it deserves. There is also a need for a holistic approach to the development of this coastal region. I wonder whether there is not a case for revisiting the concept of a City of the Fylde from the Wyre to the Ribble to tackle some of these issues. I mentioned earlier the very strong industrial history of the Fylde. I heard what the Minister said about the shale gas industry and the comments and observations from my noble friend Lord MacGregor. What I say now is only a personal observation, but I believe that if there is a region where fracking could be done safely and successfully it is west Lancashire, with its long association with the chemical industry, with British Nuclear Fuels and with offshore gas and wind. There is an industrial tradition on the west coast which could very quickly be revived. I was delighted to learn that the site of the old ICI works at Burn Naze, where my father worked for 47 years, is again a growth point for the manufacture of polymers and chemicals.
Higher education also has a part to play, and I am pleased that Fylde College and Lancaster University continue to co-operate to ensure that the sub-region has the required skills to match the needs of a regenerating economy. I have already referred to the idea of an energy centre of excellence, which would further strengthen the educational base.
I know that the Cities Minister, my right honourable friend Greg Clark, has visited the town and taken a personal interest in Blackpool and its future. I would like him now to do a “Heseltine” and make a personal commitment to Blackpool’s future or, even better, dispatch the noble Lord, Lord Heseltine, to Blackpool with an “action this day” brief to get things moving. When Alderman Bickerstaff visited the Paris Great Exhibition in 1890 and saw the Eiffel Tower for the first time, he said “We’ll have one of them”, and we did. When the opportunity came to levy a cultural rate in the 1920s, Blackpool used the money to fund the illuminations, which are still going strong and delighting millions every year. That spirit is still there. Not for nothing is the town’s motto “Progress”.
Because I have retained my Blackpool accent I am often asked where I come from. When I say Blackpool, there is inevitably an outpouring of fond memories of days of fresh air and fun, particularly the fun. That positive name recognition and good will is still there but Blackpool needs a little help from its friends. The building blocks of recovery are all there. A good deal of groundwork has been done. There now is a need for a positive approach from government which will turn opportunities into realities. I look forward to my noble friend’s response.
Lord Birt (CB)
My Lords, it is a pleasure to follow the noble Lord, Lord McNally, and his hymn of love to his native city. As a Liverpudlian, I fondly recall visiting Blackpool routinely as a child and less fondly watching Stanley Matthews give us a display of how to play football in the second football match I saw as a child.
In 2008, the UK economy suffered a body blow. At long last, we are beginning to recover, but our bounce back has been slower than other leading economies. Moreover, it will be 2018 before we are again, as a nation, in fiscal balance. Our debt levels are now, and will remain for some time, among the highest in the world. It will be a generation before they return to prior levels, always assuming that we will have responsible Governments in the future willing to work to that goal. All parties standing at the next election will, I hope, set out their plans for returning our national debt to historical and defensible levels.
Our lengthy recession has had manifold adverse consequences, as we are all aware. Many individuals and businesses have moved backwards in their fortunes. Responsible savers are paid minuscule rates of interest, well below the rate of inflation, yet still pay tax on the proceeds—punished twice over for their prudence. Even the best-run economies were affected by the global recession, but the UK’s difficulties were intensified: first, by a large financial sector, parts of which, as we all know, were infected by an ingrained culture of risk-taking and greed, making casino bets with their clients’ money; and, secondly, by a failure of government correctly to forecast tax revenues and tailor the level of public spending accordingly. On the one hand, regulation of the finance sector failed us; and on the other, the institutions of government proved inadequate to the task of managing our public finances. Changing the culture and behaviour of a whole industry is not a trivial task, but let us cross our fingers that the new financial regulation reforms will work.
The OBR is a welcome new institutional fixture of manifest independence and integrity. Alongside an independent Bank of England—another welcome reform of recent times—the OBR, if it is retained and respected by future Governments, should prevent political hopefulness and opportunism once again tipping over into recklessness. Yet one fatal imbalance in our economy has not been addressed: for 40 or 50 years, like a badly run business, the UK has consumed too much and invested too little.
Public investment in the UK as a share of GDP is consistently below that of other countries. Unsurprisingly, there is a clear correlation between countries with excellent infrastructure and national competitiveness. The UK lags behind the rest of the world, as once we led it, in creating modern infrastructure and—surprise, surprise—our national productivity trails our competitors too. We know that we allowed our Victorian water and sewerage infrastructure to decay, that we were slow off the blocks with broadband, that we have procrastinated over power generation for the past two decades, and that we have by far the most congested roads and underinvested road and rail infrastructure of any major country. The cold statistics speak for themselves, but each of us can make brutal comparisons whenever we travel to competitor countries. It is shameful but characteristic that we did not long ago resolve how to deal with chronic undercapacity at Heathrow, one of the UK’s most prized strategic assets.
Last year’s Treasury document, Investing in Britain’s Future, was a list of directionally sound projects, but it was neither a vision nor a plan for modernising our creaking, crumbling, unfit-for-purpose national infrastructure within the span of a generation. I greatly respect the record of the noble Lord, Lord Deighton, and I do not for a moment doubt his good intentions, so I will look keenly at the plan he outlined earlier to see how far it goes towards meeting those long-term goals. As a nation, we need to resolve to set aside 3.5% of GDP annually for investment, which is the long-term OECD average. We have been so far below 3.5% for so long—we are currently at something like 1% to 2%—that we probably need to spend 4% to 5% of GDP on our infrastructure for at least 20 years simply to catch up with other nations.
We also need some formal mechanism to embed a long-term commitment on investment into our budgeting, and perhaps in her concluding remarks the Minister will tell us what share of GDP the newly announced infrastructure plan implies over the next five to 10 years. For decades, Governments of all kinds have promised investment but have then short-sightedly cut it at the first sign of economic reverse, most recently vouchsafing in late 2008 that capital spend would be protected—I quote the Treasury of the time—“to support the long-term productivity and competitiveness of the UK economy”, only to see the capital budget savaged, cut by almost half, in the period from 2009 to 2011.
We should continue the process of remedying the long-standing weaknesses in the governance of our economy and, alongside the OBR and an independent central bank, create a new institution of some kind that will depoliticise long-term infrastructure investment. Projects, as we know, can take decades to gestate, plan and deliver. We need an organisation that will bring together the main political parties in order to forge and stand behind a consensus about our national infrastructure. HS2 and the skilful cross-party work of the noble Lord, Lord Adonis, offer us some hope that this might be achieved. Let us complete an institutional framework that will stabilise our economy, improve our productivity and end the catastrophic dislocations that have plagued us on and off for half a century, and which have substantially reduced our economic performance as a nation and prevented this creative and enterprising country from achieving its full potential.
Baroness Noakes (Con)
My Lords, four years ago, the Government inherited an economy on its knees. We had emerged from the most severe recession in post-war history. We had a big structural deficit. Government debt was more than 60% of GDP and rising. The previous Government had no plans to deal with this. They left an uncompetitive economy and tax system with a corporation tax rate of 28% and a top personal rate of 50%. It has been a long haul over the past four years to restore the economy to something that resembles health. The job is far from over, but there is a lot to rejoice about. The economy really is growing again—and at the fastest rate in the developed world. Unemployment is falling rapidly and real disposable incomes are starting to rise again. I am sure that the Benches opposite will join me in rejoicing that manufacturing industry, which suffered so much under the previous Government, is now firmly on an upward trajectory. My right honourable friend the Chancellor was wise to reduce the deficit largely through expenditure reductions rather than taxation, and he was wise to ignore the Keynesian sirens calling for more spending and more borrowing.
On the downside, the deficit remains stubbornly high and it is not a cause of celebration that the debt to GDP ratio will peak at nearly 80%. There is still an absolute necessity to continue to bear down on government spending. The Government have played a difficult hand very well, but there are of course some things that they could have done better. Our energy policy is still a mess. We have the self-inflicted wounds of environmental policies that load costs onto British businesses and on to vulnerable consumers. We need some common sense on how much this country is prepared to pay for green luxuries. I endorse everything that my noble friend Lord MacGregor of Pulham Market said about the potential for shale to transform our economy, but dealing with underground access to shale resources in the Infrastructure Bill is but a small part of what the Government need to do to get this moving. Like my noble friend, I look forward to the government response to the report of the House of Lords Economic Affairs Committee on this.
There is also much work still to do on reducing regulatory burdens. There is only so much that we can do in the UK, so we will have to take the fight to Europe—and the sooner we get into serious negotiations over our membership of the EU and its terms the better.
However, my main topic today is taxation. It was wonderful to hear in the gracious Speech that the Government would continue to cut taxes. My right honourable friend the Chancellor has done much good work already. I will single out two things in particular: the path to the lowest rate of corporation tax in the developed world and the reduction in the top rate of income tax. However, the Government get few points for tax simplification. The Office of Tax Simplification was a great idea and has done excellent work, but its recommendations have not all been heeded, and more than 2,000 pages of complex tax legislation will have been added to our tax code by the end of this Parliament.
The Chancellor has shown his capacity for radical thinking with his excellent pension reforms, announced in this year’s Budget. I look forward to the pensions tax Bill delivering those reforms. What the country now needs is a similar reforming mindset applied to the tax system. I draw noble Lords’ attention to a substantial report on a single income tax, produced two years ago by the 2020 Tax Commission, which was sponsored by the TaxPayers’ Alliance and the Institute of Directors. It echoes the conclusions of work done by my noble friend Lord Forsyth of Drumlean’s Tax Reform Commission over eight years ago. The report recommended that most taxes should be abolished and replaced with a new single tax on income. This major simplification would replace the existing income tax, national insurance, corporation tax and various capital taxes including inheritance tax. For good measure, it would get rid of the detested air passenger duty.
The commission recommended a single 30% tax rate on income plus a total restraint on taxes as a percentage of national income of around one-third. The essential argument for a low-tax regime is that high taxes act as a drag on the potential of the economy. The 2020 Tax Commission estimates that its proposals would add over 9% to GDP over 15 years. Importantly, the annual growth rate would permanently be increased by around 0.4%. These potential prizes are too great to ignore.
The Tax Commission’s analysis included dynamic modelling carried out for it by the Centre for Economics and Business Research. This is the key. Many of us were delighted that the Chancellor used dynamic modelling to underpin the reductions in corporation tax last year and the recent cut in fuel duty—so far, so good. What we really need the Treasury to do is move towards using dynamic modelling as a way of life. It is good to use dynamic modelling for specific taxes but the Treasury should be using it to understand how to drive the tax system to support the whole economy. Traditional modelling methods will inevitably produce incremental rather than radical approaches to policy. If the analysis of the 2020 Tax Commission of a single low rate of tax is even half-true, the Treasury simply has to embrace it.
Of course, analysing the impact of a radical tax change is one thing and implementing it is another. It is not easy in an advanced economy such as ours to re-engineer the tax system in a short period of time. There have to be transitions to avoid destabilising the economy and harming individuals. There is the underlying paradox that if you take a long time over transition and overprotect the status quo, you will not see the benefits of higher growth, which is the aim. So there is a case for boldness.
I can see why the Government might shy away from wholesale restructuring, as proposed by the 2020 Tax Commission. It does seem pretty scary. But I do not understand why the Government are not pressing ahead with one key element of the tax commission changes: namely, merging national insurance with income tax. This has a growing body of support. The Office of Tax Simplification proposed it in its review of small business taxation; the Institute for Fiscal Studies supports it; and surveys of businesses show strong support.
Informed commentators know that national insurance is a tax in all but name, but the one thing that has managed to keep it alive is that it is the ultimate stealth tax. Gordon Brown knew that when he raised the extra 1%, allegedly for the NHS—and it seems that Mr Miliband is thinking about trying the same wheeze if he gets a shot at running the country. I find it extraordinary that the Exchequer Secretary has used the Beveridge notion of the contributing principle as the rationale for keeping them separate. Expecting citizens to contribute in return for qualifying for benefits is fine, but you do not need the fiction of a separate national insurance fund to achieve that. The time has come to be honest about national insurance. No one pretends that merging the two systems is a walk in the park. There are many legal and administrative hurdles to overcome. But the prize is great if we want a simpler tax system.
Lord Forsyth of Drumlean (Con)
What would my noble friend do about the problem of pension income, which is not subject to national insurance?
Baroness Noakes
I was about to say that the TaxPayers’ Alliance produced a very thoughtful report, which showed how a transition could be made within five years and could also protect the expectations of pensioners at the same time. There is a way of doing it. All I would say to my noble friend and to noble Lords generally is that it can be done—it just needs a Government with the will to do it.
Lord McKenzie of Luton (Lab)
My Lords, it is a particular pleasure to follow the noble Baroness, Lady Noakes. Tempted as I am to engage in the tax debate, I think I ought to stick to my prepared script and talk about local authorities.
In last month’s local elections, more than 4,000 individuals were elected in England to serve on some 160 local authorities of one description or another. Many would have been re-elected and some elected to serve for the first time. The democratic process delivered joy for some and despair for others, but for my party it delivered more than 300 more councillors and control of 82 councils. As the largest grouping on the LGA, it now falls to us to provide its chair, Councillor David Sparks, the first Labour councillor to become chair since my noble friend Lord Beecham. I propose to take this opportunity to reflect briefly on the challenges for those councillors—those continuing and those just elected—as they make their declaration of office and see what, if anything, planned for the new Session is designed to help them.
The scene has been very much set by the outgoing chair of the LGA, the Conservative Sir Merrick Cockell, who described councils as being at a tipping point, warning that council services are at breaking point. He has been reported as declaring that the current funding arrangements will not see us through for very much longer and expressed concern about the running down or wholesale closure of services such as libraries, road maintenance, school support schemes and youth clubs. We know that local authority spending on adult social care has already been cut by £1.8 billion since 2009-10, and there are 300,000 care workers on zero-hours contracts. That is before we have to face the big issues referred to by the right reverend Prelate the Bishop of Leicester.
As we have debated before, funding for local government overall has been cut by 40% during this Parliament—bigger and earlier cuts than those to any other part of the public sector—but it is the distribution of those cuts that shows the true nature of this Government. Poorer communities have been disproportionately hit, as evidenced by the fact that the 10 most deprived local authority areas lose 10 times the amount of spending power per household compared to the 10 least deprived local authorities. Liverpool gets a 27% reduction in spending power per household, while Surrey and Wokingham get an increase—so much for creating a fairer society.
At a time when we hear the Lib Dem wing of the coalition boasting about how many people they have taken out of income tax by raising the personal allowance, and Eric Pickles asserting that councils have a moral duty not to increase council tax bills, we know that hundreds of thousands of poor people are having big increases in their council tax bills because of the localisation of council tax support—delegating responsibilities but cynically not providing adequate funding. That is just one of the dilemmas confronting elected members: should they charge the poor to help pay for the very poor or should they cut services further? In the mean time, more households are being summonsed for non-payment and more are experiencing the heavy hand of the bailiffs.
If we believe that the impact on the poor is an unfortunate oversight, the plans to withdraw specific funding for local welfare provision—the successor to the discretionary Social Fund—tells us otherwise. Of course, the iniquitous bedroom tax, which we will repeal, is yet further evidence of a Government who neither understand nor care about the misery their measures are inflicting on vulnerable families.
Councillors are on the front line of having to deal with the consequences of one of the coalition's biggest policy failures, touched on by my noble friend Lady Andrews: housing. Despite a plethora of announcements and initiatives, housebuilding has been at its lowest in peacetime since the 1920s, with the number of affordable homes built last year dropping by 26%. The NAO concluded that there was little evidence, for example, that the new homes bonus has yet to make significant changes to local authorities’ behaviour in increasing housing supply.
We know that under the coalition Government, homelessness is up, rough sleeping is up and the number of families with children living in bed-and-breakfast accommodation has reached a 10-year high. Housing deprivation has ramifications across other council services. Switching government funding from investing in new homes to subsidising housing costs with housing benefit means that central government now spends more than 20 times as much on housing benefit as on building grants to support the provision of new affordable homes—as things stand, a trend that will continue.
We have seen some revival of council house building, generally led by Labour authorities, but overall, as we have heard, we are building fewer than half the new homes needed to fulfil demand, let alone to deal with the backlog. To be fair, it is not a new phenomenon and successive Governments have failed to build at the rate we once did. As a result of all that, more and more people are being locked out of home ownership and are living in the private rented sector. Across England, a quarter of adults under the age of 35 are living in their childhood bedroom. There are now 4 million households in the private rented sector, of which 1.3 million are families with children, and nearly 5 million people on local authority waiting lists. The average cost of rents has gone up by 13% since 2010 and renting is now the most expensive tenure, with renters spending on average 41% of their income on rents. Many face unpredictable rent hikes, while high and unpredictable costs are made worse by the uncertainty and insecurity of short-term tenancies of six to 12 months.
All this is helping to fuel the cost of living crisis and directly impacting on business competitiveness, especially in London. That is why we need to change legislation to make three-year tenancies the default in the market, as the Government’s voluntary approach is inadequate. We would also provide for an upper ceiling on rent increases during the tenancy, but with negotiated market rents as the starting point. There is more. We will stop tenants being hit by rip-off fees from letting agents and regulate residential lettings and managing agents to protect tenants and landlords. We will also introduce a national register of landlords and make it easier for local authorities to introduce licensing in their area, to drive standards up and rogue landlords out.
Nothing in the Government’s programme announced yesterday touches on these issues or acknowledges the problem, and nothing addresses the fundamental problems in the housing market or matches our commitment to build 200,000 homes a year by the end of the next Parliament. There is the commitment to legislate for development of a new garden city at Ebbsfleet and, as far as it goes, that is to be welcomed. However, there is a failure to ensure the provision of affordable housing or other garden city principles in that development, and the number of homes announced is some 5,000 fewer than were originally announced in 2012. The proposed reforms to planning to support small builders are ones that we could support but we will have to examine the detail. However, there is nothing to address the more deep-seated problems with the current planning system. No effective action is proposed to stop developers hoarding land with planning permission and nothing addresses the weakness in the planning system of the duty to co-operate, which is denying some local authorities the right to grow.
An incoming Government in 2015 will not be able to turn back the clock on funding but they could address the fairness in distributing the resources available. Labour councils and others are already meeting the challenges of austerity in many ways and more can be done if we build on the model of city deals throughout local government. It is crucial that we support councils to deliver economic growth in all areas of the country. This means devolving real power from Whitehall to towns and cities so that working together with local businesses—as in the city deals, where it is good that 24 have been agreed to date—they can take responsibility for transport, housing, jobs and skills and economic development. We need to be radical in breaking down the barriers to integrated working, including ending Whitehall’s silo mentality.
The Local Government Innovation Taskforce set up by Ed Miliband is looking at how Labour in local government is already innovating and responding to the challenges that our communities face. In some of the councils where we made gains last month, it is possible to see what is on the agenda. Priorities are being set locally: in Crawley, Labour will require 40% of new housing to be affordable, for example, while the priority for Croydon is to make it a living wage borough. Getting money out of the centre, from Whitehall to the town hall, is essential if we are to rebuild confidence in the power of people working together to create a future that is right for them and their communities. So, from the safety of this unelected House, I say to all those elected councillors: when the euphoria of election fades and the scale of the challenge emerges, keep the faith. Local councillors have a vital role to play for their towns and cities, their communities and, indeed, their country.
Lord Palumbo of Southwark (LD)
My Lords, I am delighted to contribute to this debate on the Government’s programme for the coming year. The country’s financial position is, of course, central to this programme. Current UK Government debt is approaching 100% of GDP. Household debt is roughly the same. Financial sector debt is more than double this amount, due to the historically large size of our banking industry. Then there are off-balance-sheet issues such as private finance initiatives and unfunded pensions. I appreciate that it is a matter of opinion as to whether these should be included as liabilities of the state but if the country were to account like a business, they would be. These add perhaps another 200% of GDP to our debt. Economists differ as to our total debt amount but on any basis we must be approaching 500% of GDP, which makes Britain one of the most indebted countries in the world.
Over the past four years, the Government have made heroic efforts to combat the legacy of the 2008 financial crisis. While opinions might differ as to the wisdom and effect of quantitative easing and other stimulus programmes, the Government have steadied the financial ship. The problem is that despite the austerity narrative, public spending continues to rise and our debts continue to grow. Then there are a number of other issues thrown into the political mix such as Scottish independence, immigration and Europe, which perhaps distract from the key fiscal debate. Beyond this, it is a very difficult debate to have because it involves cutbacks to the way we live and, as your Lordships know, human beings are hard-wired to avoid pain. Who will vote for that and which politician will put pain centre stage in their manifesto?
There are many opinions on how to deal with our economic problems. I know that I am inexperienced in politics and your Lordships need no lessons in “a better way of doing things” from me. Alas, as a businessman, I have no other frame of reference. John Micklethwait and Adrian Wooldridge from the Economist recently published a book, The Fourth Revolution. In it they drew lessons from the Asian economic model, in particular from Singapore. These lessons provide some interesting ideas, including: a system for educating public administrators from an early age and paying them generously—in business terms, hiring the best; a more robust system for social welfare with higher contributions from individuals and businesses; more emphasis on self-reliance and, most of all, long-term business planning. I appreciate that Singapore operates under a different political system and that some of its methods would be difficult to apply in western democracies. However, the country’s success rather speaks for itself. We have also seen western countries such as Sweden adopt Singaporean-type methods, such as the tight fiscal rules which reduced Sweden’s debt from 70% to 37% of GDP in fewer than 20 years.
I understand that there is tremendous nuance in this area of debate. It is all too easy to sound off and there are no easy answers. However, we must plan for some bumps in the road ahead, such as when rates normalise or we have further political uncertainty. I sincerely hope and expect our recovery to gather pace but if it should falter, we may need to consider more stringent business methods with which to run our lives.
The Lord Bishop of Rochester (Maiden Speech)
My Lords, I thought that your Lordships might welcome a maiden speech as a kind of interlude in the midst of today’s business. I am most grateful for the welcome that I have received in your Lordships’ House since my introduction on, of all auspicious days, April Fools’ Day. I am particularly grateful for the courtesy, kindness and helpfulness shown by the Lord Speaker, Black Rod, the Clerk of the Parliaments and their staff.
I enter your Lordships’ House as Bishop of Rochester and thus, in a sense, I represent parts of Kent and south-east London which were for a time predominantly Saxon, if tradition is to be believed, in contrast to the Jutes who inhabited east Kent. For most people, such historic divisions have disappeared along with the history of early medieval times, but of course we in the Church of England hold strongly to our historic divisions, even sometimes holding them with affection, and to this day a great gulf therefore continues to be fixed down the middle of Kent in ecclesiastical terms between the diocese of Rochester and the diocese of Canterbury—it outdates us by a mere seven years.
More seriously, I come to your Lordships also as bishop to prisons, a role that I have recently inherited from the former Bishop of Liverpool who I know brought care, commitment and intelligence to that role both within your Lordships’ House and more widely in the nation. It is a role that I have accepted with enthusiasm and some modest knowledge, not least because I am married to someone who has spent a great deal of the past few years in prison—in her professional capacity, I hasten to add. The title of “bishop to prisons” notwithstanding, the brief covers most of the criminal justice and penal affairs world. In that regard, I look forward to engaging, within the life of your Lordships’ House, with matters such as the proposals for secure colleges, which merit some serious thought and attention, and others that no doubt will be touched on in this House next week.
As an aside, I was aware in some of the reporting of the gracious Speech, or rather its televising, of the continued observations that I am part of an all-male Bench. One of the tasks that I carry at the moment is to take before the General Synod in July this year the draft Measure that would bring that position to an end, and I suppose that I crave your Lordships’ encouragement in those matters later this year.
The Lord Bishop of Rochester
Having been what one might call a jobbing vicar for 23 years, I come to your Lordships’ House with that background. My journey has taken me from living and working in inner-city Birmingham for a number of years and then in more suburban parts of that city to rural north and west Norfolk and, now, within the very mixed socioeconomic geography of north and west Kent and south-east London. In each of those rather varied settings I have found myself drawn to, among other things, a particular interest in and engagement with issues around housing and homelessness. Having served for some 20 years on the boards of housing associations, first in the city of Birmingham and then in East Anglia, and now chairing the trustees of Housing Justice, which is the national ecumenical voice of the churches on these matters, I expect also to take a particular interest in these issues within the work of the House.
A number of speakers in this debate—the noble Baroness, Lady Andrews, and the noble Lords, Lord MacGregor and Lord McKenzie—have touched at some length on issues to do with housing. I hope that it is not thought too controversial for what is meant to be an uncontroversial maiden speech if I touch on some of those matters again. It is hard at present to go even 24 hours without being aware of some comment, research report, announcement or other public contribution on housing-related matters; reference has already been made today to the recent intervention of the Bank of England, and there have been many others. At some point, housing-related questions impinge at almost every level on discussions around the economy, family life, community well-being, societal cohesion, welfare policy and much more besides.
Living and working in rural Norfolk for six years, I became aware of the pressing need for small-scale affordable housing developments in villages. They are essential to sustain the diversity and vitality of such places—their community infrastructure, as it were—not least by enabling local younger people to remain in their communities and to be economically active in those places. In the south-east, where I am now, an area dominated by the London housing market, as we have heard, there is a similar need for housing to be available to those working in the lower-waged sectors of the economy—sectors that are vital for that economy. We have heard of the huge pressure on housing, both for purchase and for rent, in the south-east. In our socially disadvantaged communities across the nation, there is a simple need for decent places to live at prices that can be afforded in communities where support networks and opportunities for training and employment are also close at hand.
Why do these things concern me as a bishop, or indeed simply as a human being? Because at a very deep level our human well-being is bound up with our sense of belonging and identity—and, our sense of the global notwithstanding, belonging and identity are in turn bound up with our sense of locatedness and, more specifically, of what we might call home. For those like me who draw inspiration from the Judaeo-Christian tradition, we find in the Hebrew prophets a vision of a person sitting in security beneath their vine and their fig tree, with no one to make them afraid, and at another point there is the encouragement, even when finding oneself in a strange place, to build homes, settle down and plant productive vineyards. These are visions of settledness, locatedness and security. “Home” in that sense is of course about much more than bricks, mortar and roof tiles, but certainly in our culture, and perhaps more specifically in our weather, to think of home without adequate and affordable bricks, mortar and roof tiles is very hard indeed.
As we have heard, the Government’s programme for this Parliament, as outlined yesterday, touches on housing matters at a number of points. There is the expression of a continuing aspiration to increase housing supply by means of reforms of various kinds, including to the planning system, about which we have also heard; initiatives such as the garden cities, the first one of which, at Ebbsfleet, will be in my diocese; and support for small housebuilding firms. Alongside this, there is the intention to see new homes built to a zero-carbon standard although, while I welcome that, the big issue is of course the retrofitting of existing homes to those sorts of standards, which is far more difficult.
I await the outcomes of all this with interest because, as I think we all know and acknowledge, there is an awfully long way to go regarding housing supply, markets for housing both for purchase and for rent, and many other issues connected with housing in one way or another. I am well aware that the issues are complex, having worked in the field in one way or another for 25 years, and that there are no easy answers, but I cannot rest content for as long as there are those without somewhere to call home and, more sharply, without security in relation to the shelter over their head. I trust that Her Majesty’s Government will continue to give these matters focused attention for they are foundational, yes, for the economy, but also for our individual, familial and societal well-being.
Lest it be thought that people like me talk about these things and then simply sit back and expect others to make things happen, I would point out that the churches are not inactive in this field. Our work at the sharper end of homelessness, often of course in partnership with others of good will, is well known: winter shelters, advice centres, day care and the like. But it goes further than that: there is, for example, under the umbrella of Housing Justice, the organisation that I chair, a project that we call Faith in Affordable Housing. Developed over recent years, this helps to make church-owned land and property available for development for affordable housing purposes. The resulting developments are small scale but are beginning to emerge in both England and Wales, in urban and rural settings. We need more such initiatives. As well as legislation and policy, we need imagination, creativity, a properly entrepreneurial spirit and a restless passion for what is right and good for the future of our society in this regard. This is for the well-being of us all—and, more particularly, for that of our children and our children’s children.
Lord Jenkin of Roding (Con)
My Lords, it is a particular pleasure for me to congratulate the right reverend Prelate the Bishop of Rochester on, if I may say so, a very attractive and persuasive maiden speech. Housing is certainly a very important issue, as a number of speakers on all sides of the debate have made clear today. The right reverend Prelate, as he explained, brings very special knowledge and experience in that regard to our debates, and we will very much welcome that.
He has also talked about his work in prisons. That is an enormously important area for the work of the churches, in order to help the prisoners when they come to be released back into the community and hope for their redemption. He did not mention one of his interests, which is urban regeneration. I spent some years at the Department of the Environment dealing with those problems, and I have no doubt that the right reverend Prelate will bring much wisdom to our debates.
I have to tell the House that the right reverend Prelate is very keen on choral singing. As a founder member of the Parliament Choir, I hope he may be persuaded—although I think it somewhat unlikely—to attend the weekly rehearsals and sing in one of the choir’s performances. Perhaps that is asking too much.
It is a particular pleasure to me to be able to welcome the right reverend Prelate’s maiden speech as I have a brother and a son who are in the church and I draw considerable benefit from their advice, as the right reverend Prelate the Bishop of Leicester well knows from what has been said in recent years. I say to the right reverend Prelate the Bishop of Rochester that we all very much look forward to the contributions he will make to our debates in the future.
A number of speakers have already touched on the Infrastructure Bill, and I join my noble friend Lord MacGregor in congratulating my noble friend Lord Deighton on his speech and on what he had to say about that subject. We all await the development of the very exciting proposals which he outlined to the House.
On the subject of energy, there will be not only the infrastructure proposals directly. As the gracious Speech noted, we are going to see measures to implement the electricity reforms which were legislated in the previous Session under the Energy Act 2013. Rather unusually, the gracious Speech referred to what in practice will amount to delegated legislation which is involving much activity by DECC. I had a Question down two days before Prorogation and miraculously it was answered by the Minister before we prorogued. I was very pleased about that. My noble friend Lady Verma outlined the programme for the EMR secondary legislation:
“It is the Government’s intention that these regulations will be laid before the House at the beginning of June 2014 and published concurrently”.—[Official Report, 14/5/14; col. WA508.]
Well, time has slipped, as I learnt yesterday that it is now going to be towards the end of June. I hope that is not a harbinger of other delays in future. There will also be a number of responses to consultations that have been issued over recent months, and it is quite clear that the department has a great deal to do. It means that this House will also have a lot to do in dealing with that delegated legislation.
Among the issues which we will be considering is another matter that is left over and about which the Minister has not had a reply. It is the application to the European Commission for state aid approval for the various measures in the electricity market reforms. The first being considered in detail at the moment is the application for the nuclear power station at Hinkley Point in Somerset. Those of us who took part in the debates on the Energy Bill were encouraged to write to the Commission and express our support for the application in the hope that the Commission would approve it. I duly wrote and stressed that the Government’s electricity market reforms are vital to allow essential investment in new low-carbon generation of all types to come forward. One does not often get acknowledgements from government departments, but I had a very handsome formal acknowledgement from the Commission and I have no doubt that others who wrote in did as well. I made it clear, and it is certainly true, that EDF and its partner firms need clear and timely approval from the Commission that the arrangements that have been agreed with the Government and are now the subject of legislation are compatible with the state aid rules. The Competition Directorate has completed its consultation, and we have been assured by Commissioner Almunia that he intends to decide the case during his term of office, which ends later this year. There must be no delays to this progress. Our margins are getting very slender, and although the nuclear power station will not be operative until the early 2020s, other investment will need to go forward and we need the approvals to enable that to happen.
In particular, I want to mention the capacity market. The measure in the Act is the framework intended to ensure that we have investment in electricity generating capacity, particularly to help to keep the lights on when the wind does not blow. Regulations, which are awaited with keen interest, have been the subject of fierce negotiation between the industry and DECC. It is now looking as if what comes forward will meet most of the representations that have been made by potential investors. Last month, I had a very helpful letter from the Minister for Energy, my right honourable friend Michael Fallon, in which he spelled out the measures that are likely to be in these regulations. This House will want to look at them very carefully when they are issued to make sure that they achieve what is required.
The capacity market also has to be approved by the EU Commission and is the subject of a separate application under the state aid rules. It has been difficult to find out where the application has got to, but yesterday I had an answer from my noble friend. In advance of her letter, her office very kindly answered my question about the process and timing of that state aid approval and stated:
“We have engaged with the Commission since the start of the policy development process and continue to do so. Discussions with the Commission are at an advanced stage and the Commission is fully aware of our deadlines. At present, we do not foresee any delay and our plans for the first auction in December remain on track ... A delay is not currently anticipated”.
We shall want to watch this very carefully. There have been huge delays in the investment programmes so far, and we cannot afford any more. We are facing very narrow margins over the next two or three years, and this urgent gas-fired investment will be essential to keep the lights on.
The gracious Speech foreshadowed the Infrastructure Bill, which had its First Reading this morning. As my noble friend Lord MacGregor made clear, it includes measures to ease the path for the development of shale gas and oil and geothermal energy. It is interesting that the consultation paper that has been issued covers both almost in parallel because they raise exactly the same issue of deep drilling. Shale gas involves horizontal drilling, which is part of the technology. A lot is known about this because of the consultation paper that has been issued. There has been quite a lot of consultation with stakeholders in recent months. I agree with my noble friend Lord MacGregor that this implements the recommendation that came from his Economic Affairs Committee. Like him, I hope we shall have a response to that very soon so that we can debate in the House that hugely important report. Suffice it to say that the report sets out in detail the very great economic benefit that will accrue to this country from the successful exploitation of this energy source. Of course it must be safe, and of course the environment must be protected, but the evidence that was given to that committee shows that, in fact, that is all entirely possible.
Why do we need this new provision? When I was reading law at university more years ago than I care to remember, I was taught that the common law of England provided that the ownership of land—I shall eschew the Latin, because I know it is out of order—roughly translated, carries ownership of the space up to the heavens and down to Hades. Of course, the minerals below that have long since been nationalised and therefore do not belong to the landowner, unlike in America where they still do. The right to use the space is still that of the owners. Below 300 metres—the figure in the consultation paper—it really can be of absolutely no practical use to the landowner at all. Yet some of the opponents of fracking have threatened to buy strips of land all around so that they can stop the exploitation of shale gas simply by saying, “Sorry, you cannot go through our land”. The Government have made it clear that this is of huge importance to the economy of this country and in helping Europe as a whole to become less dependent on imported sources of gas. I will warmly support the proposal in this Bill.
However, there seems to be a question of timing. The consultation was launched last month and is not due to end until August, in the long recess. Are we really going to debate this Bill and the clauses in it without knowing whether it will in fact be approved by the Government and without having seen the Government’s response to the report? I find this quite difficult. It would be helpful if something could be said about that when the Minister winds up.
It was suggested at one point that this Parliament would have very little to do in its last Session. However, as my noble friend Lord Razzall and others have said, that simply is not true. We are going to be extremely busy, and I warmly welcome the gracious Speech.
Lord Giddens (Lab)
My Lords, I also congratulate the right reverend Prelate the Bishop of Rochester on his excellent maiden speech, which was both forceful and charming—two qualities which are hard to merge. I hope that the right reverend Prelate enjoyed the reference to “up to the heavens and down to Hades”, because that is the way we speak in the House of Lords.
I have recently, after many years, been rereading Marx. After all, capitalism is in the middle of probably the biggest crisis that it has experienced in its existence, because it is now a global system. Here are one or two choice quotes which I dug out from Marx:
“just as any revolution eats its children, unchecked market fundamentalism can devour the … long-term dynamism of capitalism itself”.
Here is another juicy little quote:
“Capitalism loses its sense of moderation when the belief in the power of the market enters the realm of faith”.
The net result, Marx concluded, is revolution.
I do not know whether I have fooled anyone—probably not the Minister—but these phrases do not come from Marx at all but from an altogether different source: Mr Mark Carney, the Governor of the Bank of England. They were made not a century ago but as recently as last week. Moreover, Mr Carney’s objective was not to overthrow capitalism but to rescue it. The speech was, however, remarkable, especially given the source from which it came. I ask the Minister for his opinions on some of the themes which it contains. They are pretty powerful. The speech was full of implications for policy-makers and is relevant to the themes of the gracious Speech.
Mr Carney identifies some of the economic stresses and strains that have caused disillusionment among citizens, have alienated many of them from orthodox politics and have helped to fuel the rise of populist anti-establishment parties. He identifies three sets of factors in his speech. All, I suppose, are pretty well known but they are fundamentally important. First, he mentioned the emergence of staggering levels of inequality, especially at the very top, with the bankers in the lead. He says:
“Bankers made enormous sums in the run-up to the crisis and were often well compensated after it hit. In turn, taxpayers picked up the tab for their failures”.
Huge resentment has followed from the fact that ordinary people have had to pay for the excesses of the rich. At the same conference at which Mr Carney spoke, Christine Lagarde, the head of the IMF, made similar points in an equally forceful fashion, not about inequality in general, but about extreme inequality at the very top. I am pleased to see that the gracious Speech contains not one but two references to creating a fairer society. I would like, later on, a bit of expansion on how this is going to be achieved.
Mr Carney’s second point, made by many noble Lords here this morning, is that the recovery leaves large swathes of young people especially isolated from prosperity or jobs. The famous “lost generation” is a phrase used by everybody but is no less powerful for that because it is a serious risk. Even in my sector, as a university person, a substantial proportion of college graduates are unemployed—much larger than was the case a few years ago.
The governor’s third point is about the enduring effects of the crisis upon the poor, of which we have again heard mention today, especially in decaying working-class areas. These people bear,
“the real costs of financial instability—unemployment and the seizure of credit”.
Does the Minister accept this analysis, which seems to me to be very accurate? I particularly ask the Minister whether the Government accept the key theme of the speech—which is why it is such an important speech to be given by the Governor of the Bank of England—that market fundamentalism has proved divisive and dangerous. That is a big thing for the Governor of the Bank of England to say, and its implications are important.
Mr Carney indentifies three basic strategies which the Government should actively pursue to try to pick up the threads of these difficulties. Again, I will list them as a threefold set of remarks. The first policy should be to reintroduce competitive markets where market principles have become undermined. As Mr Carney puts it,
“Many supposedly rugged markets were revealed to be cosseted”.
Would the Minister agree that this includes situations of oligopoly? In circumstances of oligopoly, you have neither public control of the companies concerned, nor do you have a market. That situation applies in fairly large chunks of British industry today. It would be interesting to know if the Government have any policy of attacking that issue.
Secondly, Mr Carney says we should affirm the centrality of social justice, concentrating especially on the redistribution of wealth and income. He said,
“inequality… is a critical determinant of well-being”.
What policies do the Government have in place to reduce inequalities at the very top? The stress on tax avoidance has been important and consequential, but it is clear that much more needs to be done and we are dealing to some extent with a global and not just a national issue. What progress has been made, in the Government’s eyes, in either closing down or limiting the impact of tax havens?
The third point made in the speech is that we have to rebuild a sense of vocation in business and especially in banking. Mr Carney said:
“In the run-up to the crisis, banking became about banks not businesses; transactions not relations; counterparties not clients”.
What should the role of Government be in promoting a culture of ethical business? How can relationship banking be introduced on a substantial scale?
I do not ask these questions in a particularly partisan spirit because we all have an interest in saving capitalism from itself.
Lord Wrigglesworth (LD)
My Lords, I am very grateful that I am following the good and noble Lord, Lord Giddens. The last time that he and I spoke in a debate he made some very kind remarks following my maiden speech. If I had spoken before him today he might have felt the need to rectify the remarks that he made on that occasion, although I hope not. I shall not follow him in his analysis of the governor’s speech, but I join him in complimenting the right reverend Prelate on his maiden speech today. The right reverend Prelate’s comments on the housing market—I shall say something about it as well—will bring comfort to many. It is very reassuring to know that he and his colleagues do so much good work not only in the housing sphere but in so many other spheres in this country. I am sure that it will be rectified and that we will benefit in future debates from the experience he has had.
I was in the other place for nearly 14 years and have spent 25 years in various businesses primarily in the north of England but in the north-east in particular. I have frequently thought that so many of those involved in politics—particularly in the other place, if I may be forgiven for saying so—considerably underestimate the importance of confidence in the business world and in business decisions. Therefore this very delicate flower needs to be nurtured and sustained. It is a very delicate flower and a very sensitive issue.
Those of us with long memories can think of other occasions when confidence was shattered and damage done as a result of events spiralling out of control. I think of the Millom Co-op in Cumbria going bust in 1969, which led to a run on co-operative societies throughout the country. I was very involved in the co-operative movement at the time. The situation led to something happening which people do not recognise today, when the Co-operative Building Society changed its name to the Nationwide Building Society. It had a profound impact on businesses. I have often thought of that occasion during the recent discussions about the Co-operative Group and the difficulties that the Co-operative Bank has been facing.
We also had the secondary banking crisis in 1974. I was working in the City at the time. It was a major banking crisis. The Bank of England launched a lifeboat to save many banks but it allowed some of them to go to the wall. That crisis had the potential to cause a run on the system of the sort that we have seen in more recent years. Then, of course, we saw Northern Rock all of a sudden undermining confidence and the start of a run. Before that situation could be controlled it almost spiralled out of control.
It was of fundamental importance for this Government to inspire confidence in what they were doing and to gain the market’s confidence. I would maintain from these Benches that my colleagues in government, not least the Chief Secretary to the Treasury, who has been primarily responsible for some of these matters, and the Deputy Prime Minister have made a major impact in maintaining the confidence of the markets. The Chancellor and the Government have made a difficult judgment which has had to be carried through and sustained over time, but it has led to that confidence. Apart from any other benefit, it has saved billions of pounds in interest on the debt which the Government have to sell on the markets. It has been crucial to get that judgment right. When one is in the sort of situation that the Government were in it is better to err on the side of caution rather than risk losing the confidence of the markets.
The Office of Budget Responsibility’s March outlook report stated that the Government remained on course to meet the fiscal mandate a year early in 2017-18. The underlying deficit in public sector net borrowing peaked at 11% of GDP in 2009-10, but the underlying deficit has fallen in cash terms and as a percentage of GDP for every year of this Parliament. The OBR reported that the deficit had fallen by more than a third by the end of last year. The deficit is forecast to have halved in the coming year from its post-crisis peak to reach 5.5% of GDP—£95.5 billion—which will be the first time in six years that annual public sector net borrowing will be below £100 billion.
According to the International Monetary Fund, between 2010 and 2013 the UK has reduced its structural deficit more than any other G7 country. If there is any question in anybody’s mind as to why the markets have confidence, one need only look at what the Government have achieved. This party on these Benches has paid a heavy political price for that austerity programme, but it was absolutely in the national interest that it should be carried through and sustained. I am proud to have been associated with what the Government have done on that front, which has led to the start of growth in the economy that we are seeing now.
The objective of long-term sustainable balanced recovery is still there. It is being sustained also by direct action by many departments, in particular Vince Cable’s department, with Vince Cable himself carrying through an industrial strategy that has underpinned the monetary policy and fiscal policy that the Government have pursued.
There has been support for public sector investment with green investment, the green bank, the business bank and the industrial strategy itself in many respects, with the training, innovation and technology strategy and the catapults. I could go through the whole range of things that that department and others have carried through, not least of which has been the work of the regional growth fund.
I was deputy chairman of the regional growth fund with the noble Lord, Lord Heseltine. That has had an enormous impact in regions such as the north-east in sustaining, in particular, smaller enterprises and getting investment in manufacturing going in a way that everyone in the country would like to see. The regional growth fund has been criticised for not getting money into the pockets of the businesses that have been awarded the money. It should be understood that this is not like other grant-giving bodies. If firms bid for grants, nothing is given until all the due diligence has been done and the contracts agreed. However the regional growth fund is a challenge fund where a conditional offer is made. The matter then has to go to due diligence and negotiation of the contract before the grants are given, which can take a very long time. Sometimes during the course of that negotiation and the due diligence being carried out it will be decided not to give the grant. That is the nature of a challenge fund of the regional growth fund-type. It is doing a magnificent job in the regions of this country and makes a very considerable impact, which has led to some of the jobs that have been created.
However, over the next five years this Government and the new one will have to make further judgments on public spending as the time to do so arises. We need to avoid getting involved, certainly on these Benches, in any “cold shower” economics—as in “Cold showers are good for you”. I refer to the masochists, who think that cutting is a virtue in itself. There is a balanced judgment to be made in sustaining the confidence of the markets, to which I referred, while at the same time ensuring that public services are protected and the weak and vulnerable are taken care of. That is a judgment that successive Governments will have to take—and there are going to be some very difficult judgments. If the party opposite ends up in office after the next general election, it will have to make some very difficult decisions on what to do about ring-fencing education and health—as will we, if we are in the same position as we are in at the moment. Anyone who looks at the public expenditure forecasts will see that, if they continue to be ring-fenced, they will be a massive proportion of public expenditure, which I believe is unsustainable. If that is the case, there are going to be some very big and difficult political decisions to be taken on what to do about education and health. I flag that up as something that a Government will have to do something about in the fairly near future.
Secondly, there is no national housing market, and some very misleading debate takes place on that issue. It is grossly misleading to talk about the average house price without taking into account all the regional differences in the country. According to Economic Research Council figures, across England and Wales house prices have increased by 6.7% over the past year, but remain about £10,000 below their peak price in late 2007. However—and I quote from my own experience—in the north-east, prices have increased by only 2.9% over the past year and actually fell in April, compared to March. Compared to their peak price, homes in the north-east are still £30,000 cheaper than they were in 2007. However, differences between the north-east and the national average are small when compared with the London market, where there has been an annual increase of 17% and prices are now £90,000 higher than at the previous peak of 2007.
I plead with those who want to start taking national policy decisions that will affect the markets outside London not to think that taking steps on the Help to Buy scheme is going to affect anything in central London. Frankly, I am not sure that there is much that the Government can do, unless it is a very radical policy, to affect the central London housing market anyway. How do you control overseas investors and the cash that is going in? You can control the mortgages and sustain the banking system, but you would find it very difficult to stop the money coming into the London housing market from the places from which it is coming in at the moment. That is one plea that I make. In future, these decisions will be extremely difficult if we are to sustain the confidence to which I referred.
I am delighted with how the gracious Speech has carried forward the economic policy measures of the past four years. I very much like the programme of legislation that is outlined in it, and very much commend it to the House.
The Lord Bishop of St Albans
My Lords, I, too, congratulate my colleague the right reverend Prelate the Bishop of Rochester on his maiden speech. From these Benches, I can say that we are delighted that he will bring a great deal of insight and experience, not least into housing and prisons, into our debates.
There were a considerable number of areas in the gracious Speech which we, too, would welcome. Before I get on to specifics, I will make one or two general points. After the gracious Speech yesterday, I took my guest through to the other place, where the debate had already started. The Leader of the Opposition spoke of the very considerable disconnect between the electorate and Parliament. He pointed out:
“About 10% of those entitled to vote at the recent elections voted for UKIP, but as significant is the fact that over 60% did not vote at all. Whatever side we sit on in this House, we will all have heard it on the doorstep … ‘It doesn’t matter who I vote for.’ Of course that is not new, but there is a depth and scale of disenchantment that we ignore at our peril—disenchantment that goes beyond one party and one Government. There is no bigger issue for our country and our democracy, so the test for this legislative programme, the last before the general election, is to show that it responds to the scale of discontent and the need for answers”.—[Official Report, Commons, 4/6/14; col. 15.]
I recognise the problem, especially among the younger generation, but surely that is due at least in part to the loss of the concept of the common good. I fail to see how any particular piece of legislation is going to deal with that deeper discontent. There has been such emphasis on the mantra that rights and entitlements trump duties and obligations that we have lost the widely held narrative about how communities and families thrive and flourish and have lost sight of the fact that we find our individuality within families and communities, in mutual relationships. In short, we have created, or allowed to be created, unrealistic expectations about what life can offer and what politics can deliver.
Part of our task, as well as the legislation laid out in the gracious Speech, is to create a debate about how we live together that will involve our rights, of course, but also a much greater emphasis on what each of us needs to contribute. That tension is illustrated in yesterday’s legislative programme laid out before us, such as in the reforms to planning law. As part of the proposed infrastructure Bill, Her Majesty’s Government pledge to,
“Speed up the pace of delivery in key areas of infrastructure developments”—
wait for it—
“whilst still safeguarding the need for communities to be involved”.
Therein lies the tension that we are all trying to grapple with.
I welcome the Government’s commitment to responsible stewardship of public resources through seeking to simplify planning and infrastructure decision-making procedures. Yet the importance of giving proper consideration to those whose lives will be affected by these changes must not be overlooked. Subsidiarity must be a key principle in any reforms—working towards a more participatory democracy, in which all people feel that they have a stake in a shared society and want to engage in the democratic process. It is not an easy task. We have to insist that people do not retreat into an unthinking, uncaring nimbyism that refuses to address the real problems facing us. That is precisely the point that my colleague the right reverend Prelate the Bishop of Leicester made in his speech.
We find that same tension in the area of housing. I, too, welcome the announcement that there will be an increase in housing supply. There is no doubt that, certainly in some parts of the country, there is a huge shortage. But I know that in many areas, not least in some rural areas with which I have had close connection, the building of large quantities of housing is precisely the reason why some people feel that politicians do not listen to them. That is the dilemma that we are grappling with. Those people feel powerless; they think that their vote cannot, and does not, make a difference. How can we find ways to engage with local communities, again insisting that they do not put their heads in the sand but engage with the problems in their localities? Surely this is one of the areas where we need to work out a way to devolve powers from Westminster and enable more local solutions for housing.
One of my particular interests is the rural economy and rural sustainability. I note Her Majesty’s Government’s commitment to opening up shale gas sites,
“by clarifying and streamlining the underground access regime”.
I recognise the importance of energy security, which will certainly be threatened in the coming years. However, the discussion about changing the law to allow companies to exploit gas reserves under privately owned land in return for only minimal compensation to landowners, even if the latter object, may not be the best way to achieve this end, especially if it is clear that profits are being taken out of that area and going somewhere else. Is this not another area where we need to think about introducing local agendas whereby communities can see that they will get tangible benefits from opening up the land and from the gas that is taken from it?
I am fully aware of the vital importance of energy security but have reservations about the wisdom of Her Majesty’s Government’s continuing overreliance on fossil fuels. We cannot afford to wait until we run out of fossil fuels before turning to alternative sources of energy. Indeed, we have more than enough fossil fuels remaining to do almost irreparable damage to our world. Rather, we must continue with serious sustained investment in research into and development of renewable energies to go along with the legislation on shale gas.
If the United Kingdom is to meet its commitment set out in the Climate Change Act of an 80% reduction in emissions from 1990 levels by 2050, growth in the renewable energy sector will be needed way beyond the current 15% share of the national electricity supply. I applaud the Government’s push for an EU energy and climate change package that would mean at least a 40% reduction in greenhouse gas emissions by 2030. To this end, the Government’s investment in renewable energy sources must match the growth in private sector investment, which has created more than 37,000 green jobs across the UK in the past five years.
I note that there is time in the coming year for draft legislation to be published providing for direct elections to national park authorities in England. However, I should point out that many of us were not only hoping that legislation would be brought forward to respond to the forestry report, which was published in July 2012, but had tabled Written and Oral Questions on the matter. I am sure that some noble Lords are thinking that that topic is not for debate today as it concerns rural affairs, which will be discussed some time next week. However, one of the key points about the forestry report is that it is not just about the environment or leisure but has profound economic opportunities and implications for rural areas. I will not refer to them all but point out where it seems that we need to do some joined-up thinking.
We have been promised that the forestry report will be taken forward but some time has elapsed since its publication. This is one of the report’s recommendations:
“Government, woodland owners and businesses to seize the opportunity provided by woodlands to grow our green economy by strengthening the supply chain, and promoting the use of wood more widely across our society and economy”.
Another recommendation states:
“Local Enterprise Partnerships should work together to bid for funding … to develop woodland enterprise zones in areas where there are opportunities for a revitalised woodland economy to help create jobs in rural areas”.
I will quote one further recommendation:
“Local Authorities should use their Local Plans to introduce a ‘Wood First’ policy for construction projects to increase use of wood in buildings”.
Incidentally, this fits in closely with the Government’s desire, as spelt out in the gracious Speech, which states:
“Legislation will also ensure that new homes are built to a zero carbon standard from 2016, which will reduce carbon emissions and reduce household energy bills”.
The recommendation goes on:
“They should also create a positive planning environment for sustainable wood and forestry businesses, as well as those based on woodland leisure and tourism, that should always enhance natural capital”.
I hope that as we take the legislation forward some of these aspirations and recommendations will be brought before us.
A number of noble Lords have pushed Her Majesty’s Government to take all these recommendations forward, not least for economic reasons. I hope that a way will be found to do that in the coming year.
Lord Marlesford (Con)
My Lords, I suggest to the Opposition Front Bench that the continuing message from the opinion polls, as confirmed by the results of the European Parliament elections a couple of weeks ago, is that criticism from Mr Miliband or Mr Balls of how the Government have handled the economy is very unconvincing.
The Chancellor has taken us out of the recession. That is what matters. Britain is growing at 3.3%, the same as Germany and much more than the USA. Socialist France, under the disastrous M Hollande, who is, in some ways, as weird as Mr Miliband, is growing at a derisory 0.1%. Italy is still in recession. Even with Germany to help it, the eurozone is making only 0.8% growth, while the rate in Britain is 3.3%. Unemployment, on the ILO basis, in the last quarter of 2013 was 7.1% in Britain while the rate in the eurozone was 12%, with France at 10.8%, Italy at 12.7% and Spain at a horrific 25%. The US rate is 7% and in Germany it is an enviable 5.1%. Net borrowing has been greatly reduced from 11% of GDP during Labour’s last year in office to 6.6% in 2013-14. However, not surprisingly, net debt—that is, the total government borrowing—is still far too high at 76% of GDP, well above the comparable Maastricht 60% target. We had been well below the Maastricht limit for more than 30 years until Gordon Brown so unwisely took the brakes off the economy. Inflation, the monster we must never forget, is not on the horizon but is never off the map. In 2010, using the old RPI, which I believe to be a much better indicator than the CPI, it was 4.8% and is currently 2.5%.
All this, of course, involved a period of austerity, with most of us seeing our take-home earnings falling in real terms over the past four years. Mr Miliband says that all this could have been achieved without the pain of austerity. Indeed, he implies that he would take the brakes off again. That reminds me of the story of Columbus and the egg. When Columbus came back from discovering America, the King of Spain gave him a great banquet and everyone praised him. Some of the courtiers were rather jealous. They said, “We could have done that, too. Why all this praise for Columbus?”. Columbus—after dinner, admittedly—took an egg and asked, “Can anybody balance this egg on its end?”. They all tried and of course could not do so. He tapped the bottom of the egg until it was nice and flat, and made it stand on its end. They all said, “We could have done that”. “Yes”, he said, “when I had shown you how”.
Having given priority to the views of Mr Miliband, let me come on to the advice we are getting from the EU on how we should run our economy. When I read it, I was reminded of the remark of the great Clement Attlee to Harold Laski when he was at his most loquacious:
“A period of silence on your part would be welcome”.
I would make one point on the EU and tax. Following the European Parliament elections, the Commission really must face up to the impracticality of the financial transaction tax unless it is operated on a global basis. Sub-Committee A of the EU Committee, which I am about to leave after four stimulating years under the excellent chairmanship of the noble Lord, Lord Harrison, spent many months pointing out that the FTT was potentially deeply damaging to Britain’s position as Europe’s financial centre. London is one of the three great financial centres of the world, along with New York and Hong Kong. Now that there is diminishing support for the FTT, it should be abandoned and there should be a focus on introducing a workable stamp duty.
I want to mention one particular worry over the economy—the amount of toxic debt that still lurks. I want to take one item only as an example: the level of credit card debt that has overrun. It is not the debt that you and I pay off each month, but what is not being paid off and is therefore subject to very high rates of interest—anything between 16% and 26%. On the whole, few people can afford to borrow at such rates. Certainly, the sort of people who use credit cards to do so cannot afford it. It is basically unsecured debt and is therefore highly toxic. The last time the banks sold off this debt to the debt collectors they received between 8p and 12p in the pound for it. The level of that debt is currently more than £57 billion—more than £1,000 for every adult in the UK. It is also more than 20% of the market cap of all five big banks put together. In terms of stress tests on banks, we are talking serious money. Let us be clear that this consumer debt is completely different from mortgage debt, which is, to a large extent, secured by the houses on which it is made. The percentage growth in overrun credit card debt is interesting. It had been in single figures until the middle 1990s. It increased to 13% by the start of 1995, it increased hugely to 25% a year later and it has only recently started to come down again. Actually, it is beginning to creep up again. There is, for me, an unsolved mystery in the difference between the monthly figures published by the British Bankers’ Association and those published by the Bank of England. I am trying to discover the reasons.
Finally, I turn to the issue of how to deal with the taxation of residential property. One way not to do it is through the mansion tax proposals, so unwisely postulated by Dr Cable before he had begun to work out how to do it, and foolishly picked up by Mr Miliband. If Mr Miliband were to read the memoirs of the noble Lord, Lord Healey, he would see a warning on how not to introduce a wealth tax until you have worked out the details. Noble Lords will remember that Mr Healey tried to introduce a wealth tax in the 1970s. A lot of obstacles appeared and the proposal was referred to a Commons Select Committee, which said that the scheme could not work—and Mr Healey wisely abandoned it.
However, we all accept that although council tax was an excellent replacement for the disastrous poll tax, it has been hugely overtaken by the housing boom. To have eight bands, A to H, based on April 1991 house values, with top band H representing houses worth more than £320,000, is wholly inadequate when so many properties are making millions. There is an understandable and justifiable demand for those with much more expensive houses to pay a higher rate of tax of some form or other. I propose a completely new set of bands that could be called I to P, with the lower band, I, representing houses below a value of £500,000. The bands would then increase: from £500,000 to £1 million, from £1 million to £2 million, from £2 million to £5 million, from £5 million to £10 million, from £10 million to £15 million, from £15 million to £20 million, and over £20 million. One could have much higher rates of council tax on that basis. The key would be not to impose the new rates on all houses now because there would be, first, the gigantic problem of revaluation and, secondly, all the anachronisms of people who have lived for a long time in a house that is much more valuable than they would now be able to afford. There would be an element of retrospection in that. I suggest that the new bands, from the moment they were approved by Parliament, would apply to all subsequent domestic property acquisitions. They would be based on actual market prices, not arguable notional prices based on what district valuers think properties are worth. They find it difficult enough even to work out inheritance tax, let alone value every house. One would use the figures reported to the registrar, and people would know what they were in for when they bought a house. The system would not be retrospective; it would be workable and the sooner we introduce it, the better.
Lord Sawyer (Lab)
My Lords, I have spoken in almost every housing debate since I became a Member and was slightly concerned that today, given all the other economic issues, housing might slip off the agenda. I am pleased that that has not been the case and that many noble Lords—not least the right reverend Prelate the Bishop of Rochester, whom I congratulate on his maiden speech—have addressed it.
Housing is probably the number one economic issue that British people outside this House care about. The previous full debate in this Chamber on housing was back in January, when my noble friend Lady Ford raised the issue. Since that time, it is fair to say that it has gained considerable traction in the public mind. Indeed, in its editorial of 9 May, the Times said:
“Housing is the biggest problem in British politics. If it gets less attention than the biggest problem in British politics … this is because it is a problem that nobody knows how easily to solve”.
That is true; none of us really knows the solution to the British housing problem. The reasons for this unsolvability have been well aired in this House today and many times before, and I do not intend to go through the list of the problems there are in trying to house our people properly. It is true that there is a market frenzy in housing, which I hope will abate, but it gives way to a market frenzy of policy solutions—of daily advice from commentators, new reports from think tanks and opinions from politicians. It is hard for people to understand where we might be going at any given time. I find some of the advice quite depressing. I do not know why the Mayor of London has to be seen to stand up for foreign absentee landlords against the housing needs of millions of people in London. I also do not understand why we get so excited about opinions from the European Commission. Lots of domestic politicians and commentators in this country have talked about housing tax reforms, so why do we get excited because the European Commission says, “Why don’t you look at that?”? Well, why do we not look at it? It seems a sensible thing to do. The housing debate needs to get less excited and more serious so we can be seen to represent people’s deep concerns, and not just see it—as I think some people do—as some kind of political football.
There are some quite exciting things taking place in housing. A lot more people are thinking about self-build initiatives—in other words, finding their own way out of the problem and not depending on the Government, the state or developers. That is a great, although small, step forward. Is it true that we will find the modern prefab? Maybe we will; it has been good to read about that. Experts have tried to find the modern prefab for many years and failed, but it looks to me, given the frenzy of activity and heat generated around the issue, that maybe we will find an answer: a small, affordable home that would help to house the lowest paid and the unemployed. Boy, how much happier I would be to see that achieved than see another big tower block go up in central London.
Although I obviously have differences with part of government policy, it is important to recognise that the number of builds has improved and that the Government take housing seriously. Nick Boles has made an important, thoughtful and radical contribution to the debate. We need radical solutions. My biggest anxiety in this policy plethora is that the initiatives will come and go—some will succeed, some will fail—and then, when the turmoil ends and the media wagon moves on to put another issue at the top of our headlines, the problem will remain: still not enough decent homes in the right place for the right people.
That is why, when I thought about what I might ask us to think about this afternoon, I returned to the themes of the January debate in the House. The burden of the argument in that debate, led by the noble Baroness, Lady Ford, and others, was that we needed to think more carefully about the new town development corporation approach, to see whether it could give us a more rounded solution to all the individual policy initiatives we have—not just in London. I take the point made by many noble Lords that there might be different policies for London and the south-east. We need to look at where people’s needs are, wherever they may be. Any policies that look at new towns should focus not just on a set number of new towns, but on what people want and on creating, as has already been said in another place, population densities of about 100,000 people.
I never cease to be impressed by the achievements of my parents’ generation—the generation that kicked off the new town movement. That generation built 32 new towns for their families and their children. Where would we have been without that? We would not have been as well off as we are today. This approach is different from a garden city approach. There is no doubt about that: there were only two garden cities and 32 new towns. Garden cities were created by a group of idealistic people, who many of us in this House—certainly those of us on the left in politics—would identify with, but they are not new towns. There were much clearer guiding principles, more rigorous requirements—both from architects and planners—and more involvement from people. The people who inhabited the new towns had a lot more involvement in their environment than we normally see today. Although I support the new town concept, I would like us to be clear that a couple of new towns will not solve our housing problem.
I am pleased to say that the development corporation idea has had some support since January. I came across a recent report from the Housing Forum—a cross-sector, independent housing organisation—that said:
“While recognising the importance of both local authorities and housing associations, there is a limitation to the speed and scale that can be delivered within the confines of their operations, both geographically and operationally”.
The Housing Forum has tried to learn lessons from the London Docklands Development Corporation, which it felt did a good job by doing things such as bringing together local authorities, overcoming difficulties with planning permission, grant giving, using compulsory purchase order powers and overcoming all kinds of issues that probably no company would have on that scale today. It created 24,000 new homes, which does not sound very many to me, but still.
The Housing Forum’s report continues:
“As we continue to struggle to corral a complex and poorly functioning housing market to deliver new homes, it could be that a major interventionist approach will ultimately be the only way of bringing the key components of land, finance, planning and purpose together”.
We should think about that. That is basically why I am on my feet today. Of course, that is not the only solution. Some commentators really annoy me: somebody comes up with an idea for a new town or a garden city and the commentators say, “It has to be brownfield sites”. Nobody says existing cities would not be developed on brownfield sites. As mentioned by the noble Lord, Lord Wrigglesworth, you would not look at developing new towns in the north of England today; you would look at developing on brownfield sites in the inner city. We need both policies to run together; we cannot have a one-policy solution.
As I come to the end of what I wanted to say—I am sure you will agree it was not very much—I want to make one point; sometimes you just have to get up and make one point and that is okay. I just want noble Lords to hear this. As I read about and observe what is going on in our society and in our homes, probably like a lot of noble Lords I feel anxious and upset about what people are having to go through. When I see houses and apartments that are vehicles for profit or pensions, and not for people who need buildings to live in—they are locked out—I get really angry. I would like to see an elected politician—probably a Prime Minister or a leader of the Opposition, somebody with power who the people will listen to—stand up and say, “What we want in this country, what I want to deliver for you, my British friends, my electorate, is world-class housing for this country”. Our politicians said they wanted a world-class Olympic Games and they delivered it. We have sent our England team to play in the World Cup. Did we say we want them to come second or third? If we are lucky we might do that, but are we not sending the team out to be the best in the world?
We have the best architects in the world: Rogers, Hadid, Foster and many more. When they travel the world, and as they build these beautiful new buildings, what do they say to their clients when they ask, “But haven’t you got one of the most problematic housing markets in the developed world in your own country?”? They have to say, “Yes, we have”. I say, why do they not help us to solve our problem? Why do they not talk about world-class housing for people who live in this country? Maybe the Prime Minister will use the Wolfson report to make that point. I am very much looking forward to that. Maybe the leader of the Opposition will use the Labour Party’s equivalent, the Lyons review, to say the same thing: that we want world-class housing. Maybe he will not: maybe we will just get more housing reviews.
Lord Tope (LD)
My Lords, as I am primarily going to talk about local government I should begin by declaring an interest as a vice president of the Local Government Association, but for the first time in nearly 20 years in your Lordships’ House I do not have to declare an interest as a councillor in the London Borough of Sutton. I hasten to add that that was by my choice, not the people’s choice. I felt that 40 years was enough and I did not seek re-election.
However, I was invited to the first Liberal Democrat group meeting on the Saturday morning after the election. I like to think I was invited to give some fatherly advice to all the newly elected councillors; the truth is, I was invited because I was the only one they could find who knew how to conduct the group elections by the single transferable vote. I went into the too-small room and saw before me the 45 newly elected and re-elected Liberal Democrat councillors. The nine Conservatives remaining were in a cupboard down the corridor having their group meeting, which took about 10 minutes—they sacked their leader.
The thought that struck me forcibly for the first time as I looked at our new 45-strong Liberal Democrat group was just how much it looked like our local community. For years now, we have had a pretty good gender mix, which is still there and still strong. We have had, for borough population, a better than average visible ethnic mix. I could see from the family names of the newly elected councillors that they reflected a fair number of European countries. I saw a mobility scooter parked at the door, and I happen to know that at least two of our newly elected councillors have been assisted by a scheme to help people with disabilities to attain elected office.
However, what struck me most forcibly and what was new was the age range of our new councillors. At least five of them were under 30, which, I am sorry to say, these days is quite an achievement. Of particular pride to me was the fact that several of those new young councillors had been born in the borough when it was run by the Liberal Democrats. They had been at the schools in the borough when it was run by the Liberal Democrats and now they were there as part of a Liberal Democrat administration. I understand that my Conservative and Labour friends will think that there is nothing unusual about that, and indeed in many areas of the country that is not unusual for their parties. However, for my party it is not just unusual but unique, so I was very proud of that. The Liberal Democrats were expected to retain control of Sutton council, so when we did it really was not news. There was much more news in relation to places where we were not retaining control and to some places where, sadly, we were not retaining councillors at all.
However, I wondered why nobody asks why an outer London suburb of 200,000 residents and no particularly distinguishing characteristics has elected a Liberal Democrat council eight times over for 32 consecutive years. I wondered even more why for half of that time—for 16 years—it has elected Liberal Democrats to more than 80% of the council seats. We still support proportional representation; we would just like one or two other councils to join in the experiment.
I say all that not just to boast—although I feel that I have something to boast about—but because I think that having the answers to those questions would certainly be a service to my party and might offer some lessons for politics and politicians as a whole. It is a truly remarkable achievement. If any of my noble colleagues are also wondering about the answers to those questions and are perhaps thinking of commissioning a poll, I shall be only too happy to suggest the questions and to co-operate in finding some of the answers.
I now move on to the subject of local government more widely and more generally. Local government represents roughly 25% of public expenditure and therefore it is inevitable and fair that it should have had to bear its share of reducing the deficit. Indeed, as my noble friend Lord Wrigglesworth said earlier, with the ring-fencing of education and health, it is even more inevitable that much of the brunt of deficit reduction will fall on local government, and that has happened. I cannot honestly say that local government makes no complaint about that. For as long as I can remember, it has always complained about the financial settlement, regardless of who are in government and regardless of the financial situation. However, I believe that all parties in local government generally have done remarkably well in coping with their share, or perhaps more than their share, of the deficit reduction. I recognise and accept that, and I always have done. My main regret looking back—and I said it at the time —was that it was so front-loaded and that so many of the deficit reduction measures for local government happened in the first two years. I say that particularly because truly transforming services and local government cannot be done in a hurry under the pressure of having to find immediate and substantial budget cuts. It takes time. With hindsight, and perhaps not just with hindsight, I would rather that we had been given the full four-year period to meet the same targets.
I now want to look to the future. For most major local authorities, the worst is yet to come. We know now that for most authorities the financial year 2015-16 will be the worst so far. The relatively easy budget cuts have been made. I say “relatively easy” because many of them have not been easy at all, but relatively they have been. What are left now are the severe cuts to public services, and all authorities, of whatever political persuasion, will this year—not next year—struggle with having to make difficult, controversial and inevitably unpopular budget cuts.
I understand and wholly accept that there have been significant and disproportionate effects on some sections of the community, but I do not think that the greater majority of residents all over the country—north and south—have been personally greatly affected by budget cuts. That is going to change over the next 12 months and it will happen during a period in which the coalition parties, certainly, will be trying to convince the public that the recovery is on the way. They will be trying to convince them that the past four years of hardship were worth it because the recovery is starting, but that is not likely to be the local experience.
That is clearly an issue for my party and our coalition partners but I do not think that I will see any wise Labour Party people rejoicing either. They will know that those budget cuts are being made in the town halls, and it is at the town halls that people will be protesting to those making the unpopular decisions. In most cases now—sadly, from my point of view—it is Labour councillors who, first and foremost, will get the blame. There is nothing in that for any of us. The outcome will inevitably be even more public disillusionment and disengagement and all the effects that we know only too well will come from that. I feel very sad to give a gloomy but inevitable prognosis for the period up to the general election.
There is one particular issue on which I want to comment. For a local authority, being able to raise income is often a better choice than cutting a budget. It needs to be done proportionately and fairly but, if it is done to raise greater income and thus avoid greater cuts, that surely is usually a better option. Yet, so often when a local authority embarks on that course, Ministers complain about it. I shall take one recent example, although there are many. Charging for the collection of green garden waste in a local authority—I think that it was probably in Birmingham—was recently criticised by CLG Ministers and by one in particular, and it is an issue that many of us are going to have to look at. However, it is a discretionary service; there is no requirement on local authorities to collect green garden waste. To paraphrase the noble Lord, Lord McKenzie, it is, if you like, a service paid for by the poor to provide to the rich. I use both those terms relatively, but all those who live in flats or small houses with small or no gardens are paying through their council tax for a so-called free service to those of us who are fortunate enough to have large gardens and silly enough not to do sufficient composting. At any time but particularly under the current financial constraints, what on earth is wrong with charging for that service? Why does the Secretary of State suggest that there is something wrong with it and why—I can probably guess—does a local Conservative MP choose to describe it as a stealth tax? I would have thought that it was anything but stealthy. I think that Ministers need to think about their attitude towards this.
One particular area of charging which is, and always will be, controversial is parking. Earlier this year, the Department for Transport carried out a public consultation on local authority parking strategies. I think that if there is one subject that should be left to local authorities, it is parking; nevertheless, the Government, and the Department for Transport in particular, have carried out that consultation. At this stage, I am not going to start a debate on parking but the end of the consultation document states:
“A summary of responses, including the next steps, will be published within three months of the consultation closing”.
The consultation closed on 14 February. The analysis of the results and the next steps should have been with us before 14 May. I looked on the website last night to see that the results are still being analysed. I have seen quite a lot of the results. I suspect that the analysis is not taking very long. Probably what is taking a little more time is what the next steps will be. I do not suppose the Minister is likely to tell us those next steps this afternoon or will drop just a few hints, particularly about the use of CCTV cameras, which is causing much concern. If nothing else, perhaps she will tell us when we will have the analysis of the results and, even better, when the Government will decide on the next steps. Best of all, will they decide that it is best left to local authorities to decide for themselves?
The greatest welcome from local government for this Queen’s Speech is that there is no significant local government legislation in it, although a number of Bills, such as the Deregulation Bill and the Infrastructure Bill, are of particular interest. As has been said several times already today and no doubt will be said many times more, our real interest is in the Queen’s Speech after the next Government have been elected. We will see from whoever is in government whether they have a commitment to the devolution of power, which must mean a devolution of revenue raising and spending, and whether that really will be in the next Queen’s Speech.
I conclude with the comment that, based on the election results two weeks ago and most opinion polls for a long time now, the party most likely to be in government in a year’s time is the Liberal Democrats.
Lord Northbrook (Con)
My Lords, at the start of his speech, the noble Lord, Lord Tope, talked about commissioning polls. May I advise him that he may need to be careful after recent Lib Dem experiences in this area? Like the noble Lord, Lord Razzall, I shall concentrate on the general economic situation rather than look at details of the Bills in the forthcoming Session. The gracious Speech comes after a generally very well received 2014 Budget. The economy continues to recover. Latest official figures showed the UK economy growing by 0.8% in the first quarter of 2014. Forecasts continue to be revised upwards. Only last Friday, the British Chambers of Commerce became the latest organisation to upgrade.
According to the Financial Times, the chambers now expects GDP growth for 2014 to be 3.1%, which is up from its previous forecast of 2.8%, continuing the strong forecasts of the first quarter and, if achieved, the highest rate since pre-crisis 2007. Separately, the CBI’s latest growth report suggests the UK economy has continued to perform strongly in the second quarter of this year, with the growth survey of its group reaching a record high, making it the best reading since it started gathering data in 2003.
At the time of the Budget, the Chancellor highlighted the Office for Budget Responsibility’s forecast for GDP growth. The annual budget deficit is coming down and the borrowing target for 2013-14 was reached. The unemployment rate is continuing to decline. Inflation forecasts remain low. Therefore, the economic background continues to improve although there is still a long way to go. Quite rightly, the Budget focused on measures to help business as well as giving important help to savers and taxpayers mainly at the lower end of the tax scale.
Looking overall at the UK economy’s improvement, a year ago at the Budget the Chancellor said that the OBR’s forecast for 2014 GDP growth was 1.8%. It is now 2.7%, which was a good sign of recovery. The 2015 figure also was adjusted upwards. Annual borrowing is also showing a marked improvement. Britain borrowed a horrendous £157 billion the year before the coalition came to office. As was pointed out by my noble friend Lord MacGregor of Pulham Market, the noble Lord, Lord Adonis, in his speech failed even to mention this by way of background to the coalition’s deficit reduction strategy.
In 2014-15, the OBR said that the budget deficit will fall to £95 billion. Although it has taken longer than expected and there is a long way to go, it predicts that it will fall to £18 billion by 2017-18. According to the Red Book, interest payment savings on the debt over this Parliament are expected to amount to around £10 billion per year by 2015-16 as a result of the Government’s consolidation plans.
Unemployment figures also show an encouraging trend. The latest jobless figures published last month show that the number of people out of work fell to the lowest figure for five years. To put this into a longer period context, according to the Office for National Statistics, at the time of the Budget, employment was up by nearly 500,000 people for the year ending January 2014. According to the Budget speech, 1.3 million more people were in work than when the coalition came to power in 2010. According to the ONS, the claimant count fell by 24% in the past year, which is the largest annual fall since March 1998 according to the Budget Red Book. Youth unemployment went down by 58,000 in the past year, which also is a good sign. I applaud the imposition of the welfare cap linked to inflation, which I see is now supported by the Opposition, although I know that cyclical unemployment benefits are excluded.
The next area showing an encouraging recovery is manufacturing. The latest survey on UK manufacturing, published on Monday, stated that UK factory output is continuing to enjoy one of its strongest growth periods for 22 years according to a Markit/CIPS publication. The latest CBI industrial trends survey, published on 22 May, stated that the UK manufacturing sector remained solid in May and that output is expected to rise strongly over the next three months. The CBI quarterly industrial trends survey, published in April, stated that business optimism among manufacturers saw its sharpest improvement since 1973 on the back of strong growth in orders at home and abroad. Encouraging news also appeared in March on manufacturing pay deals. Pay settlement figures in manufacturing rose to 2.6% in the first quarter compared to last year’s average of 2.4% in the latest sign that the squeeze on living standards is easing.
The services sector is also showing a good recovery. The latest Markit/CIPS survey stated that the UK’s dominant economic sector grew at a faster rate than expected in May while employment in the sector stayed at the 17-year high recorded in April.
As other noble Lords have stated, another economic indicator performing favourably is inflation. The OBR forecasts that it will fall below the 2% target in 2014 at 1.9%, and will not exceed it at any time before 2018. Tuesday’s latest figures confirm the satisfactory trend.
In the 2014 Budget, there were welcome measures to help business. As the Chancellor said in his speech, when the coalition came to power the corporation tax rate was 28%. Very shortly, corporation tax will be down to 21%. The corporation tax rate cut has been a great help to companies, as has been an innovative move to benefit pharmaceutical companies and others with the new patent box tax regime. The second major boost for business in the Budget was the increase in the annual investment allowance from £250,000 to £500,000 till the end of 2015. This was warmly welcomed by the manufacturing and agricultural sectors.
The third major area of help was company energy costs. The Chancellor can be congratulated on producing a £7 billion energy package that will cap a green tax and shield companies from rising renewable energy subsidy costs. The major manufacturing trade body, the EEF, and the employers’ group, the CBI, have praised all the above as well as congratulating the Chancellor on his apprenticeship funding, changes to the R&D tax credit regime, the extra support for UKEF to boost exports and the decision to make permanent the seed enterprise investment scheme, which is such a help in financing new start-ups.
I now move on to measures for savers. First, I warmly welcome the Chancellor’s proposals from 2015 with regard to pensions, allowing investors free access to spend or invest their pots as they wish once they have reached the qualifying age. I remember occasions when this was nearly achieved in the past but fell at the last fence, so I am delighted to see the Chancellor finally acting to give pension savers their freedom. Also, I welcome the new pensioner bonds for those over 65, paying up to 4% if held for three years.
Next, I warmly welcome the Chancellor’s plans to extend the ISA limit to £15,000 and the merger of the cash and shares ISAs. According to the Daily Telegraph, these tax-free accounts are now held by 24 million people. Sensibly, in a separate move, the Treasury has also allowed, encouraged by a campaign by the noble Lord, Lord Lee of Trafford, and myself, AIM stocks to be included in ISAs.
I also welcome the abolition of the 10% tax rate on savings for certain savers and basic rate taxpayers. The increase in the personal allowance is most welcome too—up to £10,500 next year from £10,000. The limited increase in the starting level for the higher-rate band is also welcome, but more needs to be done to uprate this in line with inflation and, over the long term, consideration should be given to bringing the top rate down to 40%.
Turning to the most gracious Speech, I welcome the small business, enterprise and employment Bill in particular, which has been welcomed by the CBI among others. I welcome the updated Charter for Budget Responsibility and was impressed by the Minister’s remarks on infrastructure projects with regard to planning, roads and shale gas. I was also attracted by the idea of the noble Lord, Lord Birt, for an independent commission for major infrastructure projects.
In conclusion, the Government have been right to stick to their course on deficit reduction. I listened with interest in the March economic debate to the ideas from noble Lords opposite that there should have been increased government spending earlier in the Parliament, but these do not seem to have been generally repeated today. That would have been a dangerous course because the markets could well have been upset by a perceived lack of control on government finances. The recovery is heading in the right direction. There is still a long way to go, but the coalition’s approach has been fully justified.
Lord Lea of Crondall (Lab)
My Lords, after that Panglossian account, I wonder whether the noble Lord who has just spoken was knocking on the same doors as I was a couple of weeks ago. Many Labour politicians who were knocking on doors found a deep sense of insecurity right across the country, apart from in London, where the experience is generally not the same as that of the rest of the country. All the statistics show that—not least the fact that house prices in London are double the rest of the country. The rest of the country more or less moves together.
There is no easy way to fix this, but fix it we must because otherwise we will be left in the position of those people on the continent who remember the 1930s. I remember that when I was on the Bruno Kreisky commission on unemployment in Europe one wise old bird said, “Well if people don’t believe that politicians can do anything about their insecurity in employment, why do we need any politicians?”. That has dangerous implications. I do not want to exaggerate, but the malaise is not unrelated to some of the types of data that we have been hearing about. I will give two examples.
Involuntary temporary and part-time work is growing, but the actual numbers are startling. I was going to say, “Hands up who know that the ONS has shown that these categories of involuntary temporary and part-time work have risen by 66% and 103% respectively since 2008”. A new analysis by the ONS of zero-hour contracts shows the scale of insecure work. There are 1.4 million such contracts—or 2.7 million if the 1.3 million contracts for people who are reported as doing no work over the two-week time period used for the analysis are included.
There is another example of an unjustifiably satisfied gloss being put on the state of our economy at the moment. I pick up the point that arose from a remark by the noble Baroness, Lady Noakes, with whom I always enjoy crossing swords on these occasions. It is true, as she said, that no major advanced economy has grown as fast as we have in the past 12 months. But the explanation for that is very largely that, in the vernacular, if you dig a bigger hole, you have to grow faster to get out of it. I will give you the statistics. If we look at the total position of the British economy and the German economy from the same benchmark starting date of the same quarter of 2008, our position as of April is that we are still two thirds of 1% lower than before we fell off the cliff. We are still below the peak. Germany, from the same benchmark starting date, is now 3.83% higher than before the peak. That is the relevant statistic—not how fast we are growing in one or two quarters at the present time, welcome as that is.
Baroness Noakes
I am fascinated by what the noble Lord said. Could he remind noble Lords under which Government the hole was dug?
Lord Lea of Crondall
It was Lehman Brothers what dug the hole, if we want to get to that level of sophisticated debate. Gordon Brown was the most courageous statesman in the world in stopping it being even worse than it was. The noble Baroness represents the flash boys in the City and so on as part of the ideal economy, but I would say that it is those people what created the crash. Unless there are any more questions I will proceed.
We had a 7.2% fall from the peak, as I think my noble friend Lord Adonis pointed out.
One party in the coalition Government was the party of Disraeli, who famously referred to one nation. We are losing a sense of one nation and I would like to hear a little more from the Benches opposite about whether they do not think that there is a deep, chronic problem now in talking about one nation. Of course, there are three or four dimensions of it. There is the regional dimension, which I will come to, and top-down, education and social class. We all know that you can measure all the interactions until the cows come home. However, it would be foolish to deny the absolutely extraordinary change in the degree of inequality in this country over the past few years. We have now gone back to before 1945. I am holding up a graph which normally hangs on my wall. It looks like we are climbing Mount Everest, having last seen a similar peak of this ratio before the Second World War. That is not conducive to one nation or to a healthy economy.
I want to talk a little about the structural problem that is reflected in the contrast between the two economies in the United Kingdom: the London economy and the non-London economy. All the figures for the non-London economy of the UK correlate to some extent and show that the London economy is nothing like that of the rest of the UK. A brilliantly argued and well researched report by Deutsche Bank Securities published last November reached the conclusion that,
“there was less correlation in growth patterns between London and the rest of the UK than between the different members of the eurozone”.
It is hard to believe that, but it is pertinent to another point that will immediately become obvious. What are the implications of this? How many people in this House, particularly those on the Benches opposite, which have one or two more Eurosceptics than there are on the Labour Benches, have argued that the economic growth patterns seen in the eurozone mean that it is not possible to have a single monetary policy or any sort of economic governance? Based on that criterion, what if I were to say that we cannot possibly govern the United Kingdom? Would it be said in this House that we cannot possibly govern the United Kingdom?
Lord Flight (Con)
I thank the noble Lord for giving way. Is not the crucial point that within the United Kingdom there are transfer payments worth at least £70 billion per annum from the more prosperous south and south-east to the less prosperous north, Scotland, Wales and Northern Ireland? The problem in the EU is that Germany is unwilling to make transfer payments to the less prosperous parts that are unable to compete with that country.
Lord Lea of Crondall
If that is the reason why the noble Lord does not agree with the eurozone, I would say that over recent months Angela Merkel and her friends over there have been ready to put their hands in their pockets to do what it takes. It is all to do with the single market and having a single currency. I think that this could be a diversion; I am just drawing attention to the fact that the United Kingdom is in the same position. The transfer payments that we need now are becoming a huge challenge, given the rates of return—unless you count what might be called the external economies such as HS2, which I strongly support.
I strongly support the infrastructure proposals for our roads, but I would say to the noble Baroness, Lady Kramer, that she should note that the graph detailing major road expenditures over both Governments has gone up and down even more dramatically than the Blackpool Pleasure Beach attraction to which the noble Lord, Lord McNally, earlier referred with such nostalgia. We cannot have sudden switches on and off for road expenditure—I was going to say something unparliamentary—with not much in other periods.
What are the policy consequences? Someone who sits in this House but is not with us today said something about getting on your bike. Getting on your bike is fine, of course, if you want to go and work in London. But we know that there is a terrible dilemma around the green belt, town and country planning, and more growth in London relative to anywhere else. I strongly support what the Government have said about HS2 tying up with the Northern Hub. Infrastructure plans, as well as other subventions in terms of training, the labour market and so on, have to be somewhat disproportionately higher than for what might be called a private rate of return. If you were a private enterprise running education in Bolton, you would have to deal with this on a broader basis. I would ask the Government to consider whether they appreciate the scale of transfers which have to be made, which must also come with a challenge to enterprise to respond.
One nation is receding from us—hence the malaise, insecurity, lack of full-time jobs and so on. Mr Miliband has been mentioned and I will refer to him. Only Mr Miliband has the analysis that will lead to the policy with which the next Labour Government will be able to make a significant improvement to these structural problems.
Lord Teverson (LD)
My Lords, I take a particular interest in energy and climate change, so it was some relief to see in the list of Bills that we do not have another energy Bill this Session, the previous one having taken up most of the time of energy teams on all sides from the general election through to December last year. As my noble friend Lord Jenkin of Roding said earlier in the debate, there is relief that it is all about implementing quickly and effectively all the enabling secondary legislation that will be needed to make sure that our energy supplies in this country—hopefully renewable rather than non-renewable—are guaranteed, protected and in place over the next one or two decades.
Having said that, I particularly want to draw the Government’s attention to the fact that the latter parts of the Bill put much greater emphasis on the demand side of electricity markets, in contrast to the complete and utter focus on supply at the beginning. I ask my noble friends, Ministers and the Secretary of State in DECC to make sure that that momentum continues, particularly when it comes to the capacity mechanism that is out to consultation. A number of important decisions will be made fairly soon on demand-side management, and the demand side should be taken fully into account so that we can benefit from the investment that will lead to further reductions in electricity costs as well. I hope that that emphasis will remain strong.
What we have in the Infrastructure Bill, as has already been mentioned by many noble Lords, is fracking and being able to exploit that resource and get around the legal difficulties and hurdles that there are at the moment. I support this in principle. I think it is quite a difficult message to sell, because stating that you are going to take away people’s rights, even though the fracking will be at a greater depth than 300 metres underground—I think that is the proposal—will mean that there are concerns. It is a way forward through which we can exploit our resources effectively. It has been true of other areas of energy already. However, we have to make sure that the environmental controls on gas from those unconventional sources are absolutely tight, that they work completely effectively—not just partially—and that people can have complete confidence in the environmental checks as that industry starts to work.
Again, we have to remember that gas can only be an intermediary fuel in the UK’s energy mix. I suspect that it is unlikely that we will have a lot of gas that will benefit from carbon capture and storage, or from other ways of taking carbon content out of gas, so it is an intermediary technology. Nevertheless, as illustrated many times by my Conservative colleagues, we have seen that by introducing more gas into the generating mix in the short term, the United States, which is still the largest economy in the world, has managed to reduce carbon emissions quite significantly. I may come back to that theme later on.
What intrigues me from a renewables point of view, as someone who lives in the far south-west, is that the logic—forgive me, I was going to say spin, but I am sure it is not—of this particular development and legislation is also about helping geothermal generation, not just of electricity but of heat. I hope that my ministerial colleague in her answer will state or confirm that with the increased profile of geothermal energy in the gracious Speech we will have further action from the Government in promoting this technology—not just through the renewable heat initiative, which has started to work very effectively, but in terms of electricity generation. We have a fantastic resource, which is completely renewable and not an intermittent power source either. From that point of view, I hope we will see a brighter future for it.
The other area I wanted to move on to is that of zero-carbon homes, which is a DCLG issue as well as one of energy and environment. I am interested to read the proposals as they are published on that, because we have had a target—set, I think, by the previous Government—for the number of zero-carbon or carbon-neutral homes by 2016. That was a very important target but one that was always under threat from the temptation to dilute it as we approached that date. I am very pleased indeed to see that the Government have reaffirmed their intention to meet that target and maybe to meet it in a more practical sense. Through what they describe as “allowable solutions”, there are ways outside that particular development to make sure that overall, maybe through community energy schemes and that sort of thing, developments are carbon-neutral. In particular, I press on the Government and my noble friend the need to make sure that those definitions and restrictions, and the allowances to move away from the building itself being zero-carbon, are interpreted strongly and really are delivered. If that is the case, it will be a sensible way to move forward in this area.
However, I am concerned that there is an exclusion around small developments. No one would wish to promote smaller developments more than I do. I live in a village community. I think it was Prince Charles who asked why we do not have more small developments in village and other communities, as well as garden cities and new towns. I agree—we should have those smaller developments and they should be a significant proportion of the total housing stock—but it is dangerous to exclude them totally from this legislation.
One thing really worries me about this, given my business background. In a way, I can see that there is a sort of logic that says that smaller developers do not necessarily have the skills and are not necessarily able to apply some of these technologies. However, you then create a barrier to growth for those organisations in the future—in a way, this is where the whole construction industry needs to learn those skills and to be able to apply them. I will be testing that exclusion very strongly, because I think it is likely to be a mistake. We have learnt that the biggest mistake over the past decades, particularly in the 1960s and the 1970s, was to build homes that we have to spend an endless amount of extra money retro-converting decades later to make them suitable places that people can live in within sensible energy budgets in the future.
I was delighted with the part of the Speech—I am sure it was not supposed to be quite as marginal as it perhaps appeared—that said:
“My Ministers will also champion efforts to secure a global agreement on climate change”.
This, perhaps, is the most important area for all of us that will develop in Lima in December this year at the international conference and particularly a year later in Paris, where we expect and hope—I certainly do—that there will be a new international agreement on climate change. The announcement in the United States by the Obama Administration that they will start to get tough on their own emissions was a major step forward in setting the climate, if I can put it that way, for those negotiations, not just with Europe and developing countries but with China in particular.
In the past week, I think, the final figures for EU emissions for 2012 came out, and there are already provisional ones for 2013. The 2012 figures showed that European emissions had come down by 1.3% and were very close to the Kyoto target for the European Union of 20% from 1990. That target will be met soon, but there were two major exceptions in those figures. One of them was Germany, where emissions had gone up. The other, I regret to say, was the United Kingdom: our carbon emissions had gone up 4.5% and our overall greenhouse gas emissions by 3.5%. They are coming down in 2013 but not by that amount.
Why is that? It is because, despite the fantastic work this Government have done in delivering renewables, we have moved from a primarily gas-based system of electricity generation to one based on coal. Just over 40% of our electricity is now generated by coal. Those coal stations are expected to move out of production over the next decade, but I ask the Government to redouble their efforts. Regrettably, they did not do this completely in the Energy Act, but they should make sure that while the UK promotes shale and alternative gas, at the same time the old dirty technologies of coal generation disappear. That way, our emissions can come down substantially once again.
Baroness Jones of Moulsecoomb (GP)
My Lords, I was not here yesterday but I listened very carefully and I was, quite honestly, very disappointed. The Bills that are coming before us offer nothing to the disadvantaged and nothing to the vulnerable. The poor and the disabled are virtually ignored, which means that these Bills will open up the rich-poor divide even more than it has been opened up already by this Government. It is a shame that this is happening, and the Government really have to deal with it. I will raise a few issues that I would like answers on and will flag them up as I come to them.
The idea of infrastructure is always very interesting. For decades now, new power stations, energy supply projects and so on have been put in infrastructure, which means they are relatively protected from funding cuts. However, energy efficiency programmes do not come under the infrastructure tag. Why not? A good energy efficiency programme means that you do not have to build the new power stations, so why is that not infrastructure as well? I would like an answer to that.
Secondly, I assume that all infrastructure projects are assessed for their economic, social and environmental benefits. Are they prioritised according to what is the most beneficial? Many of the policies in the Queen’s Speech do not have any concept of what is good for people and good for the planet. It is obvious that future spending restrictions on capital investment in infrastructure are going to be much less than in other areas, so we really need to put in as much as we can away from funding cuts. That is absolutely crucial.
Finally, the Infrastructure Bill seems to offer assistance to big oil companies and housebuilders but not to hard-pressed householders. It builds on the tax breaks that fossil fuel companies have already been given in the hope that they will find gas and sell it cheaply to bring down bills. If that money were given to householders to insulate their homes, that would be a much more efficient use of the money and, of course, overall much better for the environment. Hoping that the big companies will do the right thing is madness; it is a forlorn hope and we have to think about better ways to protect ourselves. We really should not be spending public funds on the extraction of fossil fuels that would be better left underground. The Government have not understood the IPCC’s recent report, which says:
“There is a clear message from science: To avoid dangerous interference with the climate system, we need to move away from business as usual”.
The Infrastructure Bill also gives new freedoms to the Highways Agency for road construction and introduces planning changes to fast-track developments. With the problems that we have already with our carbon emissions, building new roads is, again, absolute madness. I just do not understand how any Government could think that this is all right.
Global agreements on climate change are wonderful —we really need them—but they come to absolutely nothing if the Governments who are actually setting the policies and spending the money do not understand what climate change means. Specifically, this fracking trespass Bill introduces a new right of corporate trespass for oil and gas companies and threatens home owners across Britain because it will allow companies to run shale gas pipelines under private land without seeking the consent of home owners. I understand that the Prime Minister said today in the other place, in response to a question from Caroline Lucas MP, that it will not be legal to frack against a property owner’s will. Perhaps the Minister could clarify that point and tell me whether the Prime Minister is speaking for the whole party.
The fracking trespass Bill would also decimate our environment and climate infrastructure. It will not only make local conditions very bad because of the pollution that it will cause and the lorry movements and so on, it will mean the development of a whole new fossil fuel industry that will make it impossible for us to keep to our climate change targets.
Thirdly, this Bill suggests that the Government have already chosen National Grid’s slow progression energy scenario but have kept quiet about it. Perhaps the Minister could let me know if that is true. In 2012 National Grid released a report, UK Future Energy Scenarios, which gave three options. The first was “Slow Progression”, which assumed that climate change targets would be abandoned. The second was “Gone Green”, which was to meet climate targets. The third was “Accelerated Growth”, which was about meeting climate targets early. This Bill suggests that the Government have chosen the slow progression and have in effect abandoned the whole concept of climate change targets.
I will now say what I really would have liked to have seen in the Government’s plans for next year. There are four things. The Government could still introduce them. Perhaps we could discuss them afterwards if the Minister would like to take them up. The first is a fossil fuels divestment Bill, which would require the withdrawal of all public funds that are indirectly or directly supporting companies or activities involving the exploration and extraction of fossil fuels, domestically and internationally, and to reinvest all such funds in zero-carbon energy generation and energy conservation measures—a much better use of the money.
The second Bill would be a fair pay Bill, which would set a company-wide pay ratio of 10:1: that is, the lowest paid worker in a company should get 1/10th of what the CEO is paid. You pay the CEO whatever you think he or she is worth but you make sure that your cleaner or your security guard is paid at least 1/10th of that. That would start to rebalance the rich-poor divide that is widening under this Government.
The third Bill would be a public ownership Bill, which would promote public ownership of public services, introduce a presumption in favour of service provision by public sector and not-for-profit entities, and put in place mechanisms to increase the accountability, transparency and public control of public services, including those operated by public companies.
The fourth Bill would be a housing Bill to prevent rent increases above inflation for existing tenants and to increase security of tenure with five-year tenancy agreements. A little of this is being done in London and it looks as though it could be extremely successful. With the problems that we already have with housing in London, it would seem logical to produce something like this.
I do not want to sound alarmist. When I talk about destroying the planet, I am not talking about really destroying the planet; I am talking about destroying the little bit of the planet that we rely on for our existence. The fact is that if we do not take climate change into account, if we continue with business as usual, we are damaging not only our future but that of our children and grandchildren.
Lord Horam (Con)
My Lords, I pay great respect to the campaigning zeal of the noble Baroness, Lady Jones, on climate change and the environment. If I may say so, I share her concern for the environment. I was for six years the chairman of the Environmental Audit Committee in the other place. I hope that we managed to push climate change a little bit up the media agenda during that time. As it happens, I was born in the Bowland area of Lancashire, where fracking for gas has had its first trials. I have therefore studied the issue rather more closely than I have others.
I have to say that although I respect the point of view of the noble Baroness, Lady Jones, I fundamentally disagree with her on fracking. It seems to me that it will actually lead to greater energy security for this country, it will help with fuel poverty and it will help by creating a new industry—and we badly need to rebalance the economy. It will also help with climate change. One can argue about that, but I think that the dash for gas did help with climate change in the past and this will help in the future. Looking at the local situation in that rather beautiful part of the country, the Bowland area of Lancashire, it would do no more damage to the immediate aesthetic of the environment than do electric pylons and wind farms, to take two examples.
Therefore, I support my noble friend’s remarks in his opening speech and what the Government are doing on new measures to help fracking. I was glad to hear from the noble Lord, Lord Adonis, in his opening speech, that the Labour Party also supports this. It is profoundly in our national interest that the reserves underneath our feet should be exploited, whichever party is in power, frankly.
One thing I liked about the Queen’s Speech was that it was relatively short. I am all in favour of brevity—I hope I do not disprove that with the length of my speech now—particularly in legislation. This may be a product of advancing age but I like to think it is actually a product of advancing wisdom. If we have fewer Bills—I think 11 are promised in this Session of Parliament, although no doubt there will be a certain amount of creep in addition to that—against 28 in the previous Session, which is quite a reduction, it means that Bills can be both better drafted and better scrutinised by your Lordships’ House. I also think it will mean less time spent by Ministers rushing around dealing with issues in Parliament and more time for good governance.
It is good governance that really matters in this country at the moment. More than ever, if we look at the global situation with China, Russia, India and so forth developing as they are, the UK needs excellent governance and I believe that in the present coalition we have a good, radical, progressive Government who are doing broadly the right thing. An example of that is how on the very first day of the Queen’s Speech debate they have flagged up the issues of infrastructure, transport, energy and local government that are at the heart of the need to improve things—as the noble Lord, Lord Birt, and others said in the debate—together with skills and education. They are the twin tracks of necessary improvement which we need to grasp very firmly.
As regards transport, first, I am delighted that my noble friend Lady Kramer has at last got a task worthy of her talents and that she has thrown herself into it with such evident enthusiasm. I am a strong supporter of HS2, at least partly because, as I said, I am from the north of England originally. I was born in Lancashire, educated in Yorkshire and for 13 years I represented a constituency in the north-east of England. I am a sort of northern mongrel, but I therefore claim to have some understanding of the problems of the north. Transport-wise, what the north needs is good connections with the Midlands and the south. Good connections will enhance people’s confidence in that part of the world in building businesses in the north.
At the moment, rail capacity is strained to the limit and, indeed, beyond. There are queues at Euston and King’s Cross at certain times of the day. There is no doubt that we need new capacity and that, just as Ernest Marples, many years ago, started building the new motorways separate from the old trunk roads, we should build a new rail route that is distinct from the old Victorian lines. There is really no alternative.
None the less, I am conscious of the demands which HS2 will make on the communities and individuals affected by the route, and I believe that the Government should be generous in those circumstances—they never have been generous enough in the past—in terms of both mitigation measures and, where necessary, compensation. The only thing I found odd about the recent review by Sir David Higgins is that he thought that the link between HS1 and HS2 at Euston and St Pancras should be reconsidered. That baffles me. I thought that part of the point was that you could get on a train in Birmingham and get off at Brussels. Nigel Farage may not agree, but to me that makes total sense. I hope that my noble friend will reconsider that and keep it in the programme.
In addition to greater rail capacity, we need more motorways and trunk roads. On a journey to the Ribble Valley up the M6 in the recess, I was struck once again by how the slightest hiccup—a small accident or some roadworks—can reduce the traffic to a stationary state for mile after mile. Many motorways are now often a nightmare to travel on. I am not an advocate of predict and provide but, none the less, we need more provision. I was pleased by the sentence in the Queen’s Speech on that and by the further details indicated by my noble friend in his opening speech, although I have to say that the point about the A14 made by the noble Lord, Lord Adonis, is absolutely relevant. I opened the Cambridge section of the A14 when I was a Minister for Transport 25 years ago, one grim pre-Christmas day, and it has crawled and stuttered along since then.
Then there is the thorny question of London’s airport capacity. Obviously my noble friend will not be able to say much about that because the situation is under review, but from the perspective of someone who is not only a northerner but has been an MP for a London constituency during my career and has run an international business from London, I have no doubt that we need a third runway at Heathrow.
I was in Dubai recently. Dubai has recently taken over from Heathrow as the busiest international airport. Paul Griffiths, the English managing director of Dubai Airport, has taken it to the top in seven years and is worth listening to on the subject of the third runway. His opinion is that Heathrow must have a third runway, even though it will mean more competition for Dubai. He said in the Sunday Times recently:
“Britain needs it, and Heathrow is the right place for it. It is close to London and close to all the major motorways. An airport”—
this is significant—
“is only as good as its ground transport links”.
I hope that Sir Howard Davies and my noble friend are listening. Again, one has to be sympathetic to local noise problems, and really good compensation—I hear talk of 25% above pre-blighted market value—is the right approach.
Finally, I turn to housing, which has been much commented on during our debate. The Government’s Help to Buy scheme has undoubtedly kick-started construction, and I also support garden cities, but those initiatives by themselves and the other small ones cannot hope to fill the gap of about 200,000 homes a year that we need. That can come only from a concerted, Government-led effort involving housing associations and local councils. More than two years ago I wrote a memo for the Government advocating that they emulate the 1951 Conservative Government, when Harold Macmillan was appointed Housing Minister and given the target by Winston Churchill of building 300,000 houses a year—it seems a miracle, does it not?—which he achieved in three years. Incidentally, Britain’s debt to GDP ratio at the time was 200%, so no excuses there.
Obviously, I accept that things have changed a lot since 1954 when Harold Macmillan achieved all that. The planning laws, in particular, have become much more complex, but as one who started a successful housing association back in the 1970s, I know what can be done if the political will is there and the incentives for housing associations and local councils are structured in the right way. I very much hope that the Government will bring forward an initiative of that kind in the not-too-distant future so that we can look at it in the context of the next general election.
So there are holes in the Government’s programme—in particular, on Heathrow and on housing—but, broadly speaking, they are moving the country in the right direction. All I can say is: please get a move on.
Viscount Simon (Lab)
My Lords, I should declare my interests as in the register, as I will be speaking about practical matters of concern which some might consider as coming into the subject of transport, but which were not covered in the gracious Speech.
The number of deaths and serious injuries on our roads was predicted to fall by 2030 in an academic study published by the Parliamentary Advisory Council for Transport Safety. I hope that that proves to be correct, but I have my concerns about sufficient suitably trained roads-policing officers being available to enforce the laws. I suspect that few noble Lords will have seen a marked traffic car on a motorway for a long time, and that is the same for criminals, who go from A to B knowing that the chances of being stopped are very remote. The number has been reduced and is being reduced further. In some areas, driver training has also been reduced. I wonder whether, in the not-too-distant future, there will be enough officers to train other officers in the special investigatory skills required following a road death or serious injury.
Further, as more emphasis has been placed on investigating serious accidents, the resource that does that has been withdrawn from roads, meaning that there is less deterrent to prevent such accidents. That is set, as I have already said, against a background of reducing the number of trained officers. Why are those reductions taking place? All police forces are having to reduce operational and administrative costs and, as the cost associated with running traffic operations is high, it is an area that is financially attractive to chief constables in assisting them to achieve the Government’s requirements.
The Institute of Advanced Motorists, under a freedom of information question on excessive speed, has drawn attention to the fact that there is a good need for a deterrent presence of roads-policing officers out there on the road, ready and willing to deal with those who misbehave deliberately. Driving at 149 miles per hour, which was the speed of one of the drivers mentioned in the article, is a deliberate act, not an error.
We all think that it is awful when we read of drivers with points over the maximum of 12, but there are some out there with more than 40 points on their licences. The information available to the courts needs to be up to date, but that is not always the case, I have been told. I draw the Minister’s attention to the fact that not only the DVLA but the courts need to be both efficient and quick in updating their records accurately.
I was interested to read a newspaper article about young drivers being involved in more road accidents than others as a percentage of all drivers. We all remember when we passed our driving tests and thought that we were the best drivers in the world but, since those days, road and traffic conditions have changed. The time is ripe for introducing special conditions to be imposed on young drivers and for them to have graduated licences. This is a road safety proposal and not, as the Government have stated, a restriction on their driving. We all know that, in time, we learn by experience and I hope that the Government will introduce appropriate legislation.
On a completely different matter, which has been raised, the European Union has proposed that diagnostic software chips are placed in all new vehicles in the near future, which would enable authorised people to interpret what a car and driver was doing at a particular time. This would have extremely useful implications, which I leave noble Lords to work out for themselves. I imagine that the insurance industry, the police and some other departments would welcome this, whereas certain motorists would say that it was an invasion of their privacy.
The Government’s efforts to make speeding and other driver misbehaviour gain the stigma of being regarded as anti-social needs to be maintained and not allowed to decrease. Much of that is about the visibility of ministerial and government leadership. At the moment we hear and see little of this, despite the huge total cost of road deaths and serious injury collisions increasing every year.
The Law Commission’s final report and draft Bill retains and strengthens the existing, two-tier system between taxis and private hire and sets national standards, which are based on those currently in force in London under the Private Hire Vehicles (London) Act 1998. I understand that the private hire industry broadly welcomes the proposed reforms and I look forward to the Minister confirming that the Government intend to bring forward those proposals. It had been my intention to mention other disturbing matters, including the background to the proposed taxi demonstration on 11 June, but I think that I have said enough.
Lord Shipley (LD)
My Lords, a number of speakers have said that this debate on the gracious Speech gives us an opportunity to assess the success of the coalition Government as they enter their fifth year. The speech reminds us that the Government have a long-term plan to rebuild our economy which, if it is to be achieved, requires further reductions in the deficit and continued low interest rates. I subscribe to that aim. The Government’s overall debt continues to rise and the only way of controlling and reducing it is to reduce the annual deficit. Of course, the deficit will be reduced if tax revenues rise but for tax revenues to rise we need growth, and growth will be encouraged by continuing low interest rates. That is particularly important for those parts of the UK which have higher than average unemployment rates. That is why I am pleased that the Bank of England did not seek to raise the base rate when unemployment fell below 7% nationally. The continued recovery needs low interest rates to encourage business investment.
In this respect, I am particularly impressed by the recent performance of the small business sector and welcome the small business, enterprise and employment Bill which, for the first time, specifically addresses the needs of the country’s 4.9 million small businesses. Small firms have been responsible for four in five jobs created during the three years between 2010 and 2013. In addition, nine out of 10 unemployed people either found work in a small firm or started their own business in that period. I welcome the proposals to help small businesses grow, not least in procurement policy, where Whitehall has been too keen to push procurement contracts towards large national companies, mostly headquartered in the south-east, and away from regionally based companies which are smaller but nevertheless have excellent track records in delivery and localised training. The test of that Bill will be whether the Government deliver their procurement ambitions. The Government say that they want to provide small firms with fair access to the £230 billion spent each year in the form of public procurement contracts, so I hope it will become clearer how this will be done when we discuss the detail of the Bill.
Overall, the recovery cannot just be about cutting the deficit and I welcome the emphasis in the gracious Speech on growth, infrastructure investment and access to finance, not least because the outcomes from Funding for Lending have been lower than we would wish. The Bank of England recently reported that Funding for Lending had fallen by £2.7 billion. In recent months, it has been only for business lending and not housing. However, the evidence seems to be that lending to SMEs has not been boosted. It could be that crowd funding and peer-to-peer lending are rising and accounting for part of that gap but it is vital that small businesses can borrow more from the banks.
The potential of the small business sector is very great. A few days ago I visited a small but fast-growing precision engineering company, Chirton Engineering, which is to host the new North East Advanced Machining Academy. The academy is the product of work by Tyne Metropolitan College, working in collaboration with Chirton Engineering, Tyne North Training and North Tyneside Council, and it will enable students to be trained to the highest of standards on specialist machines and ensure that apprentices are job-ready for their first day on the factory floor. What particularly impressed me was the integration of an expanding business with training and apprenticeships in engineering, and with excellent linkages to local schools.
I spoke earlier about the opportunity that this debate gives us to comment on the Government’s achievements, and apprenticeships are one of them. I congratulate Ministers, particularly BIS Secretary of State Vince Cable, on their determination to give young people the opportunity to learn on the job. Some 1.6 million apprenticeships have been created since the 2010 election, and I welcome the plan to build that further to 2 million apprenticeships by 2015. I do not want to be overcritical of the previous Government, but the Future Jobs Fund was expensive. Each placement cost up to £6,500 and created short-term placements, predominantly in the public sector. Half of Future Jobs Fund participants went straight back on to benefits after the six-month job ended. What this Government have done, and are continuing to do, is proving much more sustainable.
A number of speakers today have talked about the commitment in the gracious Speech to increase housing supply. I welcome that because the shortage of affordable housing, both to buy and to rent, is becoming critical. While there is some evidence that Help to Buy is not by itself creating a bubble in London and that it seems to be working in the regions, the fact remains that the affordability gap has risen to almost 10 times average salary in 2013. That is not sustainable.
The problem is a shortage of supply. Rightly, the Government plan to increase supply, but the question is whether they will provide the means at the same time as they desire the end. It is not just about reforming the planning system or, as the noble Lord, Lord Sawyer, pointed out, garden cities. It is about providing decent homes for all, which, together with a good education and a secure job, are the foundations of an inclusive society. The Government are planning to do something. It is good to see that they will provide support to smaller builders to develop new homes with a £525 million builders’ finance fund, which will deliver up to 15,000 homes on small sites. The problem is that too many small construction firms—two-thirds of them—closed down when the recession hit. It has become clear that more competition with larger firms is in the public interest. I am also pleased that the Government will introduce a £150 million repayable fund to support up to 10,000 new service plots for custom-build homes, and that there will be further reform to make it easier for empty buildings to be converted into new homes, supporting brownfield regeneration.
Welcome as all these initiatives are, I fear that they will not be enough to deliver the 250,000 homes that the country needs each year over the next few years to meet demand. The Government simply must use every means at their disposal to get councils building again. We have heard what happened in the 1950s and it is entirely possible to do that all over again. As a start, I hope that the remaining cap on local authority borrowing can be removed in its entirety. That would help.
There is mention in the gracious Speech of Scotland, the case for Scotland staying in the UK and the implementation of new powers. The gracious Speech says:
“My government will continue to implement new financial powers for the Scottish Parliament and make the case for Scotland to remain a part of the United Kingdom”.
It is the first part of this that I want to look at more closely because I think it has profound implications for English local government. I declare my interest as vice-president of the Local Government Association. The issue is going to be this: once the referendum is done and dusted, who raises what taxation? Too often over the past two to three decades, the issue has always been that money is disbursed from London. We have heard from my noble friend Lord Flight about the £70 billion that is effectively transferred from London and the south-east, in terms of public spending, to other parts of the United Kingdom. That is a very large sum of money. The time is coming when all parts of the UK, if we are not to have a continued centralised state in London, are going to have to take greater responsibility for raising the sums that they spend.
There has been devolution in the past three years to local enterprise partnerships, to local councils and to combinations of local councils in the form of combined authority, but that question of who raises what taxation is rising up the agenda. I think that there is greater awareness of this now in England; there certainly is in Wales. There are pilots, of course, not least the Greater Manchester earn-back model, which gives Greater Manchester a half share in the increase of all taxation. However, English local government now needs to be fleet of foot and help to define and drive forward the devolution agenda, because we know from European experience that devolved power drives faster growth and we need to replicate that across the UK.
Devolution in transport funding is well under way and Ministers and the DfT should be congratulated on that. For one thing, it will require local areas to prioritise their projects. Wish lists are all very fine, but if local government wants to make a success of devolved powers it simply must be able to prioritise across council boundaries.
In conclusion, I shall say three things. I have been very impressed by the contribution of the Governor of the Bank of England. His points about inequality, the overdominance of London and the potential of a housing bubble in London have been well made. I am much more positive about London than some other speakers have been. It is possible that part of the growth of London is cyclical, but clearly not all of it is. London is producing high tax revenues that get recycled to others and a large number of jobs for people across the United Kingdom. For me, London’s success is a success for the United Kingdom. We have to bear in mind that London has a very strong economy, but the part of the UK that has highest rate of child poverty is immediately adjacent to the City of London and is the London Borough of Tower Hamlets, so the problems of equality are not just between London and the rest of the country but within London. These are major issues for politicians of all parties. There is clear evidence that, even if you take out expenditure on Crossrail, more capital infrastructure funding has been spent in London than in other parts of the United Kingdom. That needs to be reversed.
I note the comments that have been made about devolution. This Government have done far more than any previous Government on devolving to the constituent parts of England. However, it takes time to be a success. The process has been going for just over three years. One of the things I have learnt in the work that I have been doing is that you need a structure to devolve to. It often has to be a structure that transcends individual council boundaries. I see the city deals process and the local growth deals as a step in a long-term process that moves greater decision-making out of London.
Finally, I think we are starting to see the green shoots of growth in a whole set of ways. The gracious Speech identifies the strengths that this coalition Government have produced. As long as we bear in mind all the warnings that we have heard about rising inequalities, that growth agenda can continue to be supported.
Viscount Trenchard (Con)
My Lords, I thank my noble friend Lord Deighton for his excellent introduction to today’s debate and congratulate the right reverend Prelate the Bishop of Rochester on his excellent and thought-provoking maiden speech. Yesterday, I was able to listen to the excellent speech by my noble friend Lord Fowler, which was entertaining and informative, proposing the Motion for an humble Address. As he rightly pointed out, it is a great pity that our noble friends on the Liberal Democrat Benches were unable to support the totally justified constituency boundaries proposals. It is widely but mistakenly believed outside the House that their position on that was justified by the fact that your Lordships’ House declined to support proposals for its reform, whereas, as your Lordships are well aware, the quid pro quo for the parliamentary boundaries Bill was actually the referendum on adopting the alternative vote system, which was granted to our coalition partners but was decisively rejected by the electorate.
The gracious Speech states that the Government will work to promote reform in the European Union, including a stronger role for member states and national Parliaments. I trust that the Minister will make clear whether a stronger role for member states actually means repatriation of powers over certain areas of our national life. In particular, I believe we strongly need to recover full control of our financial markets and their regulation. The FCA and the PRA should sit at the same table as the EBA, ESMA and EIOPA and should not be subordinate to them. The latter three should be the regulators for the financial markets of the eurozone countries. The recent European elections, albeit on a low turnout, show clearly how important people think this matter is, and I look forward to the next Government being able to negotiate a better settlement with our European partners. It is a pity that negotiations with them cannot start until after the general election in May 2015.
In connection with that, I have to say that I do not think the adoption of fixed-term Parliaments has necessarily been a good thing. If we have to have fixed-term Parliaments, I believe the term should be four years rather than five. The average term of Parliaments since the Second World War has been rather less than four years, and those countries that have adopted the fixed-term Parliament system in the main provide an opportunity for the people to elect their representatives once in four years or less. In the United States, it is four years; in Australia, a Parliament can run for a maximum of three years. Furthermore, it makes our political life rather dull if there is no opportunity to speculate on the timing of the general election. Ironically, the absence of speculation on timing probably limits the power of the electorate against that of the Executive even though, theoretically, the reverse is the case. I understand the reasons why the coalition Government decided to adopt the fixed-term Parliament principle four years ago, but many people feel that this Parliament is already a little bit stale. It is a pity that the Prime Minister does not have the opportunity to go to the country for nearly another year. That is notwithstanding the notable achievements of the coalition Government in saving the economy from the disaster for which it was headed.
The next Conservative Government will need to start the urgent task of negotiating with the European Union as early as possible. To start only after May 2015 does not allow much time to negotiate both real reform to the structures of the Union and the repatriation of powers over matters better decided at the nation state’s level. This will be extremely complicated and needs to be agreed with our partners before a new basis for membership can be put to the people in the referendum promised for 2017.
Although I do not think that fixed-term Parliaments are a good thing for all time, I must congratulate the coalition Government on all that they have achieved in their four years to date. They have clearly confounded the sceptics who denied the reality of the recovery that has been taking place, and the reduction in the budget deficit has been much greater than many had predicted. This has been recognised by the IMF. Also, the employment statistics are most encouraging. It is heartening to know that we have recently been more successful than any other G7 country in reducing our deficit.
Although it is not the subject of today’s debate, the centrepiece of the gracious Speech was the proposals to reform the pension system. I believe that the automatic enrolment pensions which were introduced two or so years ago have met with only limited success. I ask the Minister whether these reforms to workplace pensions are intended to replace the auto-enrolment pensions or to supplement them. The Government’s press release states:
“By no longer forcing people to buy an annuity we are giving them total control over the money that they have put aside over their lifetime and greater financial security in their old age”.
I am very clear that it will give them greater freedom and control. As for greater financial security, I am not quite sure that that will necessarily follow.
I am not quite sure why the measures concerning pensions reform are not combined into a single Bill. The pensions tax Bill provides the freedom for individuals aged 55 or over to have free access to their savings held in defined contribution schemes subject to paying tax at their marginal rates at the time of draw-down. However, it is the private pensions Bill which would allow the Department for Work and Pensions to decide whether to allow recipients of defined benefit schemes similar access to their savings or not. While I welcome the Government’s decision to give individuals the right to access their defined contribution pension pots in principle, it is important that an appropriate health warning is provided to those exercising their new freedom. Those who buy an annuity today can still receive a return of more than 5% and do not bear the risk that they may not receive this return for the 40 years or so that they may well live after retirement. Those who withdraw their funds and invest them in managed funds or a mixed portfolio would do well to receive higher returns than they would from an annuity. The impression given recently by the media is that the pensions industry has been exploiting people’s savings by providing poor returns and applying hidden charges. This is less than fair. To purchase an annuity on retirement will still be the best course of action for many.
I note the Government’s plan to introduce a third type of pension: defined ambition schemes. Under these schemes, risks will be shared between pensioner and provider. It will be interesting to see in what terms “ambition” will be defined by pension providers and whether prospective contributors to such schemes will have similar ambitions.
The noble Lord, Lord Adonis, was too dismissive of many of the measures in the gracious Speech. The Federation of Small Businesses has warmly welcomed the small business Bill. The childcare payments Bill has also been widely welcomed. The Government propose to make childcare tax deductable to the extent of £2,000 per annum per child. This amount is, of course, not nearly enough, but it is nevertheless very welcome.
I strongly support the opinion expressed by my noble friend Lady Noakes that too little has been done to simplify tax and it is disappointing that the gracious Speech contains no Bill to achieve this. The combination of income tax and national insurance makes a great deal of sense. I ask my noble friend the Minister whether the Government will commit to move ahead with this.
I strongly agree with my noble friend Lord Marlesford in what he had to say about the EU financial transaction tax and hope the Minister can assure the House that London will be completely protected from the negative effects of this tax.
I strongly support the Government’s proposals to stimulate investment in shale gas projects included in the Infrastructure Bill. Shale gas can certainly provide an economic and relatively clean contribution to our energy mix. However, the best and ultimately most economic way to obtain energy security in the nick of time is to accelerate the development of new nuclear power stations. Hinkley Point is a start, but much more progress needs to be made soon with the other proposed projects.
It has been a privilege to participate in this debate. Even if this Parliament is already a little stale, we will have plenty to do. I look forward to the remaining speeches and especially the Minister’s winding up.
Baroness Thornton (Lab)
My Lords, perhaps I may suggest to the noble Viscount, Lord Trenchard, that although Parliament may be stale, we in your Lordships’ House never are—we are always fresh.
Surely one of the tests of the efficacy of a legislative programme is what it does to our society and whether it offers more help to those who have not very much or to those who already have a great deal. I will be testing the gracious Speech on its effect on equality in our economy.
The government parties, not surprisingly, are very keen on a programme that appeals both to their own party members and to their electoral interests, and let us be clear: this gracious Speech is mostly about those things. On the other hand, we on this side are seeking more—much more—for families and individuals whose lives are often a struggle and who rightly feel that this Government do not have their interests at heart. How are they served by this legislative programme? What will this government programme do for the 1 million young people who are unemployed and were mentioned by my noble friend Lord Adonis in his opening remarks? I looked in vain to find anything. What in this programme will help people with disabilities who are struggling with the cruel complexities of Iain Duncan Smith’s welfare reforms? Again, I looked in vain.
What in this programme will deal with the fact that childcare costs have risen by 77% in the past 10 years? Of course I welcome the late-in-the-day proposal that tax-free childcare worth up to £2,000 is coming on stream. However, it is too little too late, and why not this year instead of next? Just one in five families will receive help through tax-free childcare. Some 4 million families on universal credit could be waiting until 2017 or later for any extra help. That is three times as many as the number of those who will benefit from the tax-free childcare scheme.
What is in this programme for the low paid? Many of them are resorting to food banks, because high rents and fuel bills and their low pay mean that they cannot afford all the food that their families need. I looked in vain for that, too.
Figures from the House of Commons, analysed by the TUC, reveal that, nationally, one in five jobs pay under the living wage. As is so often the case, the situation for women workers is even worse. The most striking example in this research is in Kingswood, in the south-west of England, where over 56% of women employees are paid less than the living wage. I looked at this legislative programme for what would help those women workers, but I looked in vain.
Like my right honourable friend Ed Miliband, I welcome what can be welcomed, particularly where Labour set the agenda anyway, as we did on the childcare proposals. On the national minimum wage, Labour has committed to raising it to a higher proportion of average earnings and to improving enforcement, with penalties increased to up to £50,000 for non-payment. So while we welcome the £20,000 penalty that is proposed in the gracious Speech, we do not think that it goes far enough. Labour has committed to banning exploitative zero-hours contracts, including ensuring that those who work regular hours month after month get a regular contract. Of course, we also welcome the ban in the Queen’s Speech on exclusivity clauses that stop workers on zero-hours contracts from working for another employer, but it does not go far enough.
On childcare, we have announced plans to help working parents with 25 hours of free childcare for three and four year-olds. The childcare proposals in the Queen’s Speech do not match our plans, and they do not make up for the childcare crunch of reduced support. On the gender pay gap, if this Government had continued to make the same rate of progress that we have made in government on closing the gender pay gap, women would get £177 a year more in their pay packets. As my honourable friend Gloria De Piero has said:
“David Cameron likes to paint a rosy picture when it comes to women in work but the reality for most women struggling with the cost-of-living crisis is that things are getting worse for them and their families”.
She also said that,
“44 years on from the Equal Pay Act being passed, women are still earning 80p for every pound men earn”.
Why is addressing the inequalities in our economy so important? I take women in our economy as an example of how counterproductive, piecemeal, traditional, short-sighted and often punitive the economic and social programme of this Government has often been. I draw on three impeccable sources—the McKinsey Women Matter series, the TUC and the Maternity Alliance. Every year since 2007, McKinsey has produced a report about the economic value of women in business and, particularly, in the boardroom. The TUC represents millions of women workers. Both organisations agree, in their own way, about the underperformance of the UK in the economy and business due to the barriers that women face at work. McKinsey has discovered that companies in the top quartile for female representation—the top 25% of companies in terms of the share of women on their executive committees—perform significantly better than companies with no women at the top. They have on average 47% higher equity returns and 55% higher earnings before tax and interest. Companies that have no women on boards earn less and perform worse than those with women on them. Diversity leads to prosperity.
I turn to the question of women’s representation in boardrooms, which has improved partly because of the work done by people like my noble friend Lord Davies in his report. I am very pleased and welcome the support that the Government have given to this and the targets that he set. I am very pleased about the increase of the number of women on boards in FTSE 100 companies, from 12.5% in 2011 to over 21% in May this year. That is to be welcomed. However, the fact that there are only four female chief executives in the FTSE 100 is simply not good enough. In his latest report, my noble friend Lord Davies said:
“Gender balance makes good business sense. Women make up over half of the UK population, account for nearly half of the working population, outperform men educationally and are responsible for the majority of the household purchasing decisions”.
The problem is that women are basically outnumbered at all levels of the pipeline to the top. It is not so much a glass ceiling as, as the Chartered Management Institute describes it, a “glass obstacle course”. In March this year, the TUC analysis of the 10 best-paid and the 10 worst-paid occupations in the UK showed a stark gender divide. Nearly two-thirds of the 900,000 employees in the best-paid occupations, such as financial managers and medical practitioners, are male. Legal professionals, head teachers and college principals are the only top-paying occupations that employ more women than men.
There is also a lack of part-time positions in the top jobs. Employees are half as likely to work part time in top-paying professions, at a rate of 13.7%, as they are in the rest of the labour market, at 28.3%. Among chief executives and senior officials, the best-paying occupations in the UK with an average hourly wage of £43.17 an hour, just 6.6% of employees work part time and only one in four is female.
In contrast, of course, the lowest-paid occupations, such as retail assistants and cleaners, are dominated by women and part-time work. Of the 2.6 million employees in the 10 lowest-paying occupations, where average hourly wages range from £6.20 to £6.82, 1.7 million employees are female and 1.8 million work part time. The concentration of women and part-time workers in the UK’s low-wage sectors shows why fair pay remains such a big issue for women and why part-time work so often pushes working women into poverty, and thus their families too.
The virtual elimination of the gender pay gap for full-time workers under 40 years of age will be of little comfort to the millions of women who have had to trade down jobs or put their careers on hold to find work that fits round their childcare or caring responsibilities. Surely a great lack of imagination and a clinging to traditional ways are indicated by the fact that the opportunities to ask for part-time work, flexible working and reduced hours on returning from maternity leave are generally restricted to fairly low-level positions and to women who are already well established in their jobs.
That leads me to the issue of having children and what happens in the workplace. The Maternity Alliance says in its recent report that in 2005—three years before the global financial crisis of 2008 and subsequent recession—a landmark study by the Equal Opportunities Commission found that half of all pregnant women suffered a related disadvantage at work, and that each year 30,000 were forced out of their jobs. That is a shocking and disgraceful finding. However, eight years on, all the available evidence suggests that such pregnancy and maternity discrimination is now more common than ever before, and that as many as 60,000 women are pushed out of work each year. Faced with mounting evidence of this proliferation of pregnancy and maternity discrimination, key government Ministers have until very recently simply denied that there is a problem. In November, however, in announcing £1 million of funding to enable the Equality and Human Rights Commission to undertake a new study of this issue, the Government seemed finally to accept that such unlawful discrimination,
“remains prevalent and more needs to be done to tackle it”.
That realisation has come a bit late, however, and there has still been no action.
Unfortunately, the Government have introduced a number of measures that make it harder for women to tackle such discrimination. Access to free employment advice has been restricted and almost all civil legal aid has disappeared. The questionnaire procedure in employment tribunal discrimination claims, which facilitates the revealing of crucial information held by the employer which is otherwise not available to the claimant, is set to be abolished in April 2014. That is a great shame and the Benches opposite should think very carefully about its implications. Perhaps most damagingly of all, since July 2013, those wishing to pursue a tribunal claim for pregnancy, maternity or other discrimination must pay up to £1,200 in upfront tribunal fees. It is difficult enough to take forward a claim against your employer, but then to have to find £1,200 before you start is both shocking and discriminatory. Surely the message from the Government to employers should be that an economic recession and hard times are no excuse to flout the law.
I could give other examples, but what it all adds up to is a Government who really do not get it when it comes to women and the workplace. At best, the Government make the right noises, as the Minister did in his opening remarks. In particular, individual women inside the Government have been working hard on this issue. However the product—that is, the prospects for women—still looks like the same old same traditional way of running our economy and businesses. Just to make sure that it was really difficult to find out the equality impact of government policy, one of the first things they did was to stop counting that impact in any meaningful way.
Working women therefore need a Labour Government to tackle the scandal of low pay by substantially increasing the value of the minimum wage, end the abuse of zero-hours contracts, guarantee mums and dads in work 25 hours of free childcare for three and four year-olds, and give all parents of primary school children access to childcare through their schools from 8 am to 6 pm. Actually, we need a Labour Government.
Lord Flight
My Lords, it was healthy to see that the gracious Speech put in big letters up front that the key objective was to get the economy growing. That must surely be in the interests of all people. I cannot help thinking that that is not a bad criterion against which to measure individual policies: are they going to be good or bad for economic growth? Perhaps if President Hollande had done that, he would have avoided causing the French economy so much damage.
I add my congratulations to the Chancellor on having got our economy back to decent growth. I well remember that not long ago the IMF was rapping us over the knuckles, saying that we had not got it right. In a sense, you cannot blame the Labour Party for offering criticism; it is its job to oppose. However, three years ago I predicted that growth in the UK would be 3% by the time of the 2015 election. At that time people thought that I was not being particularly sensible, but that is about what it will be. As has been pointed out, this has been achieved while inflation remains healthily under 2%.
In essence, the Chancellor has taught Hayek but mostly done Keynes by printing £180 billion of money and continuing to run a budgetary deficit of well over £100 billion. If that is not Keynes, I am not sure what is, but it is fair to say that that was needed after a 7% crash in the British economy, just as Keynes was needed and was successful in the 1930s. The issue is when you turn down the Keynesian gas and revert to more standard economic management.
I also particularly welcomed in the gracious Speech the incentives for shale gas exploitation, the new collective defined contributions pension schemes and the proposals for streamlining planning approvals. Two of my children and I have been involved in the planning process over the past year. It is a complete nightmare and extremely expensive, involving environmental this and planning that—all for fairly simple and straightforward things. It is blindingly obvious that the problem is lack of supply because of the extent to which our planning system has become so complicated.
I have only one reservation for the near term: I hope that the Bank of England does not leave it too late to start to nudge up interest rates, particularly given that the economy has returned to normal, because the obvious risk is that when rates are increased they will have to be put up by a greater quantum, which would have more of a shock effect on the economy at the time.
However, we are not adequately talking about two big issues. One is that, taken together, health spending and the totality of welfare expenditure are now running at around £350 billion per annum—close to half of all government spending. As Mrs Merkel said in a different way, that expenditure is growing much faster than tax revenues or the economy. It is simply not sustainable in the long term, and it is particularly in the areas of welfare spending and the unfunded costs of ageing that Governments are going to have to think again. If they do not, there will be major economic problems in the future.
This is also reflected by the fact that we currently have a structural deficit of around £100 billion per annum. Although some of that can be addressed—as much as possible, we hope by economic growth and rising tax revenues, I do not think it will all be dealt with thus. We have reached the stage of economic recovery where those issues need to be thought about in a little greater depth and the can cannot be kicked down the road.
The second issue is savings and productivity performance. We need a savings rate of around 10%; it is more like 3%. Productivity growth since 2005 has been virtually zero overall. Manufacturing productivity has grown reasonably, but in the service industry—unbelievably—it has declined. The two obviously interrelate, in part because savings equals investment: if we have low savings we are likely to get low investment. However, that is not the only cause. Low levels of saving have been a major cause of poor productivity growth for over a decade. One cannot but observe that this goes back to the introduction of tax credits around 2004. I remember when the Heath Government brought in similar proposals to subsidise employment with their negative income tax proposals. The then leadership of the Labour Party—I use their arguments from 2004-05—warned that, if we do subsidise employment, we run the risk of having excessive employment in areas that are not growing, of discouraging people from getting skilled up, and of damaging productivity growth, just as the Speenhamland system did in the early part of the 19th century. The whole equation of savings, productivity growth and tax credits needs to be looked at in a little more depth.
Since 1997, the savings rate has also been driven down by the destruction of what was the best pension system in Europe. That destruction has been caused partly by overburdening final salary schemes, partly by the 1997 tax rate and partly by continuous tinkering with the rules. I very much hope that the gracious Speech will mark much more constructive thinking by the Government about pensions and retirement saving. That is how we can practically get the savings rate back up and generate the funds we need for investment in this country.
Again, a by-product of the inadequate savings rate has been, as I think was pointed out by the noble Lord, Lord Adonis, a current account deficit that has now risen to over 5%. For nearly 20 years we have financed that by selling off companies and the family silver. I will not say that that is running out, but there may come a time when it will not be in the national interest to keep on selling assets to pay for current consumption.
I repeat that there has not been in economic policy an adequate focus on the two key areas of savings and productivity growth, but there are three good news territories that I will focus on which I see in the commercial bit of my life. One is a wonderful explosion in entrepreneurship and a new-technology industrial revolution that is going on. I have to admit that a lot of the latter is in London—I will come back to that point—but I do not believe that the figure of 4.5 million self-employed is a reflection on people not being able to get contractual work; I think that a lot of it is voluntary. Something like one-third of young people now want to be entrepreneurs. In my generation everyone wanted to be a civil servant or work for a large corporation. Now, people are much bolder and much more imaginative, and this country, more than any other, is really exploiting the new technology that is coming up. Therefore, I think that there is very good news for the future beneath the surface.
Secondly, I think that we should welcome and not resent the success of London. Jobs in London are reckoned to be 39% more productive than jobs in the rest of the UK. It has more people employed in highly skilled, knowledge-based industries than any capital anywhere in the world. At the end of the day, this is generating the tax revenues that will help stimulate other parts of the country. I find it disappointing when people talk almost in terms of being jealous of London’s success because it is not matched at present by parallel success in other parts of the country. Let us remember that in the 19th century Manchester and Birmingham were doing brilliantly and London was not doing so well. Therefore, things swing to and fro.
Lord Lea of Crondall
I do not recall anybody saying that they resented the success of London. We have two economies in the United Kingdom that are getting further and further apart, and it is going to be very hard not only in economic terms but in terms of social cohesion if that continues. Many people made that argument but I did not hear anybody say that they resented London’s success.
Lord Flight
If the noble Lords thinks about it, that is just what he has implied. Effectively, he is saying that if London were not so successful the UK would be more homogeneous and that would be better. I am saying that we should use London’s success to earn the money to help pay for new investment in other parts of the country and the transfer payments that are needed. That is what is actually happening. I think that we should take a positive view of London’s success and not a negative view because other parts of the country are not doing as well at present.
I close with my third area of good news. When I looked at the Government’s infrastructure plan back in about 1911—I am sorry, 2011; I am much older than I look—I asked the Financial Secretary to the Treasury when these things were going to happen but he could not give me an answer. I am delighted to hear today from my noble friend Lord Deighton about all that is now happening, and I congratulate him on having really got things going. The plans were there but we had all manner of burdens and hurdles to get over to make things happen. It is good news that they are now happening, as those infrastructure investments are badly needed. Therefore, I end on what I view as three very positive things for this economy.
Lord Harrison (Lab)
My Lords, it is a great pleasure to follow the noble Lord, Lord Flight, who, like the noble Lord, Lord Marlesford, who spoke earlier, has been a dedicated and engaged member of Sub-Committee A with our inquiries into European Union financial and economic regulation. I join in the praise of the noble Lord, Lord Davies, who is a more recent recruit to that committee.
I hope that I will give some comfort to the noble Viscount, Lord Trenchard, on one of the subjects that our committee has tackled: the financial transaction tax and our potential alienation from the wider European Union. To his credit, the Chancellor of the Exchequer indicated that the health of the UK economy depended on the health of the eurozone. To his discredit, now that the eurozone has recovered under the decisive leadership of the European Central Bank president, Mario Draghi, George Osborne has claimed that the faltering UK recovery was all his own work. However, a faltering UK economy it was and is, and the ambition of the Chancellor to rebalance that economy has palpably failed. Those are not just my words but those of the European Commission. In its recent pronouncements on the European Semester process, with which members of Sub-Committee A are all too familiar, it identified some of the shortcomings within the United Kingdom’s economy: for example, the public finances still being in excessive deficit, as mentioned by the noble Lord, Lord Flight; the failure to broaden tax breaks; and the distortions in property taxation.
As regards the financial sector, I welcome the Bill on small businesses, which I hope we can explore further. The distortions of the housing market most recently were criticised on the “Today” programme by the noble Lord, Lord Wolfson, who described the Help to Buy measure as simply a sticking plaster. As the European Commissioner rightly said, we need a further boost to housing supply. Let us remember those golden days when Lord Macmillan was Housing Minister and we built 300,000 homes a year, as well as the house price increases that have happened in the United Kingdom.
Unlike the Prime Minister, who appears, in the word of Lady Thatcher, frit to tell us the nature of the proposed reforms of the European Union, the CBI has come out with some very clear statements. One concerns the failure in trade, as illustrated earlier by my noble friend Lord Adonis, and our ability as the United Kingdom to succeed in increasing trade. Recently, in a debate in this Chamber, I discussed the imbalanced economy because of our failure in trade; I will not repeat that. However, the siren voices of UKIP suggest that leaving the European Union will somehow return us to cheap butter and lamb from New Zealand: that will not be so. The truth is that the UK trades more with Belgium than with China.
The single European market is the great opportunity for the United Kingdom. It is not just a single market in which we can trade but the incubator for making us more competitive to sell our services and goods in the world outside and to achieve new markets. As for the idea of leaving the European Union, all those massive trade deals—one of which was concluded by the noble Lord, Lord Green, with the WTO, following the Doha round, or the TTIP, which is the great broad alliance of the two major economic continents bestriding the Atlantic and is with us at the moment—would not be achieved for the benefit of British people if we were not part of the European Union. That is not just what I say: President Obama said that, were we to leave in 2017, he did not have the stomach to have a separate trade deal with the United Kingdom.
The CBI’s second point of what we should be doing to reform the European Union is to complete the single market. After all, it was the inspiration of Arthur Cockfield in this House—when he was Mrs Thatcher’s appointed commissioner—which, inspired by Jacques Delors, created the single market, which was the biggest cutter of red tape and bureaucracy throughout the European Union. How nice it would be to hear from a Minister of the Crown that they too believe in the worth of the single market. Mr Cameron has often said that the single market is important but he has done nothing to further United Kingdom domestic and economic interest by extending it. Can the Minister name three examples in the past four years where the United Kingdom working with others has extended and broken down barriers to free and fair trade within the European Union? We have failed to make friends and influence people. As I said earlier, in Sub-Committee A we often talk to the ministries of the United Kingdom Government and ask them not just to block other people but to work and combine with other member states to open up the paths to the freedom of the single market.
The third element that the CBI talked about is the protection of non-eurozone interests and this is where the noble Viscount, Lord Trenchard, comes in. We have severely criticised the financial transaction tax. But the Government, in their first reply, said that they were for the financial transaction tax, as long as it was applied globally, which was never possible. It would be a huge imposition on the City of London. We have fought that, united, on Sub-Committee A, and I am glad to say that we have finally woken the Government up to take action on that distinct threat to the prosperity of the City of London as the European Union’s—not just the UK’s—premier financial market.
The Liberals are still in confusion. The other day, Danny Alexander said, “Oh yes, the financial transaction tax—that’s fine they can go ahead and do that”. However, the worry that has been expressed by the noble Viscount, Lord Trenchard, is that gradually we will have 18 members of the European Union out of 28 who are part of the eurozone. As more and more join—and they will and they do—our protection, which has been secured by this Government, will fail as the number goes down below four.
Incidentally, colleagues may have heard the other day that Angela Merkel was called up to be on a quiz show in Germany. As we know, she carries around her Blackberry. She was called as part of the quiz where you can phone a friend for help. It was not clear whether the caller was David Cameron, but that seems to be the United Kingdom’s approach: phone a friend. Phone Angela Merkel. She is friends with us and she will see us all right on the night. But the world is changing and we had better wake up. There are more and more members of the European Union’s single market and we had better ensure that when we speak we make friends with everyone, not just Angela Merkel.
Important decisions are shortly to be made about the European Commission’s President. We have taken against Mr Juncker. He is not my favourite person, but there we go. I proposed Pascal Lamy, who recently retired from the WTO, or Christine Lagarde, who of course has been associated with the IMF. They will go before the European Parliament to be interrogated by MEPs as part of the democratic process. Andrew Lansley has possibly been identified as our potential commissioner. Why should he not come before a Select Committee of the House of Lords? Why should he not, as part of his learning process about the European Union, come before us? We have been saying on the Select Committee that we should increase the work of national Parliaments in the scrutiny of the European Union. There is a ready example. Perhaps the Minister would like to reply to that suggestion.
The European parliamentary elections have been broadly misread. The two major pro-European Union blocs will remain in the European Parliament—the EPP and the Socialists and Democrats group. Apparently the socialists are now democratic, although that was not the case when I was there: we were simply socialists. I thought that would be of interest.
I hope that we can ask the media to put the spotlight on the lazy UKIP Members of the European Parliament. I want to pay respect to and say something light about the Liberal Democrats, which happens so rarely in this House. Some outstanding people have been lost in the European parliamentary elections, including Sir Graham Watson, and of course Sharon Bowles is to retire. I hope that they both find a place here. Perhaps I may also mention Cathy Ashton, who has been absolutely outstanding despite the rubbish printed in the press. She has been working hard behind the scenes, just as she did when she was the Leader of this House. She has highlighted a problem for Andrew Lansley. He will not get any sort of economic brief; he will just be given something such as culture, which is fine. However, too few Brits, only 4%, are aspiring to and getting major positions within the European Union, although it is worth noting that some 12% of those positions should be occupied by British civil servants. What can the Government say about that?
I have little to add to the excellent speech of my noble friend Lord Adonis, which set out what Labour will do. One of the things we will not do—I am so pleased that our leader has said it—is have this absurd referendum in 2017. Did no civil servant advise the Prime Minister that 2017 is the next time that the presidency of the European Union will be held by the United Kingdom? Imagine being President of the European Union and saying, “Oh, by the way, we are just voting to leave”. That will build confidence enormously.
I did say that small businesses are to feature in a Bill, but I want to conclude with a few words about local authorities. I was a member of Cheshire County Council for a decade, and was very proud to be so. I was also involved in Merseyside. The noble Lord, Lord Heseltine, gave inspiration to ensuring that we develop more financial and economic centres in Britain than just those in London. I know of the Labour Party’s proposal to set up two banks to help small businesses and the regions. These are areas that need promotion and it is right that we should do so.
In the single market of the European Union we have a golden opportunity. We need to find friends and to speak some of the languages they understand. We need better co-ordination between this Parliament and the European Parliament and the UK Members of it. In that way, we will be able truly to rebalance the economy, which as yet we have failed to do.
Lord Bradshaw (LD)
My Lords, before this debate I contacted two people. I do not know what their political opinions are, but they both run successful SMEs, one in the manufacturing sector with a large proportion of exports of high-value products, and the other in the service sector, whose company has been voted as one of the best companies to work for by its employees. I asked for their opinion of the coalition Government. They both replied in the same way: “We are having good government”. I then asked them what help should be given to SMEs in furthering their businesses. They responded with two points. The first was the need to reform the business rate system, which bears heavily on small businesses, particularly those in the manufacturing sector. The second was that we must not leave Europe. However, we must confront the huge waste of money due to the high salaries and expenses associated with the place, and in echo of the Prime Minister’s words, them being “so bossy”. However, we do not have to leave all this until 2017 or even 2015. We should start arguing for what we want now, because we have a lot of useful suggestions to make.
On the subject of the coalition, I pay tribute to a few of the Ministers in your Lordships’ House. I single out the noble Earl, Lord Howe, and the noble Lords, Lord Taylor of Holbeach and Lord Nash, as three who have been particularly careful over the past couple of years to engage in the most meaningful consultation. They have attended countless meetings and modified a lot of things in the original Bills before they were carried into law. I must say that, in the 10 years I was here under the Labour Government, I rarely got any concession at all. The process among most of the people on these Benches has been to try to work together even though we have different philosophies.
Turning to transport, I am very concerned that we may be moving into an era of “predict and provide”, when we should be turning to smarter management of a lot of the infrastructure we have. However, the most important thing that I want to say is that the state of structural maintenance of our highways is an absolute disgrace. Everybody gets complaints about potholes. Who exercises proper discipline over the quality of repairs carried out by the utilities that constantly dig up our roads? They do not seal the edges of the holes, so that moisture gets in and the next winter we are back where we started.
One of the major problems is the revenue-capital split of the Treasury. There is a point—I have been through all this on the railways—where heavy structural maintenance should be a capital item. Maintenance is something you carry out two or three times a decade, but structural maintenance you carry out once only 20 or 30 years. These are capital items, and we should look very carefully at the way that they are accounted for. We should concentrate our road investment on the really strategic roads, which have often got bad safety records. The Minister will know that the A1 north of Newcastle going up to Scotland is a particularly bad road, and I hope that she may have some good news for us on this
I turn to the electric railway. We are not going to build any more diesel trains—all new trains will be electric. My conversations with the rolling stock companies lead me to the conclusion that they are absolutely willing to take the risk in financing freight locomotives and new passenger electric rolling stock. I plead with the Minister to let the market decide what they offer and to not let officials keep dipping their hands in subjects which they do not understand. This is all about technical issues of mechanical and civil engineering and does not benefit at all from constant interference.
I turn to some of the irritants—the things that the media seize on and use to beat Governments, whether they are a coalition, Labour or whatever. We have heard today from the Rail Regulator that there was a 5.7% increase in rail passenger journeys last year. The railway is growing very fast, but it is held back, mainly by the procrastination of officials over rolling stock. The time has come for us to not raise rail fares at the end of this year. We have huge growth but it enables the media to portray the industry as being very expensive when in fact, except in a few cases, it is actually quite cheap.
People are equally concerned about energy prices, as many Members have said. Bearing in mind that utility companies generally took far too much money out of people’s pockets, I wonder whether we could have a moratorium on energy prices. I am not saying that we should put a cap on energy prices permanently, but I believe that consumers are due some sort of recompense from these companies.
We know that getting appointments with GPs is very urgently at the top of people’s list of irritants. Strong action to deal with this problem will help keep cases out of hospital and help make people more content with the service.
This party very reluctantly agreed to raise higher education fees and we have suffered for it. But the higher education sector has not responded by giving its students a real increase in value for money. Often people get only about three hours a week of lectures and I do not believe that overall the higher education sector has stepped up to the plate at all. It should be increasing its productivity. It is a perfectly reasonable demand.
Turning back to transport, we have to find a way of making young people’s bus fares more affordable. They often cannot afford a car or transport and often live far from their places of work or education. Much could be done to encourage them. I do not know whether my noble friend the Minister has any news for us but I would like to believe that the progress being made in some parts of the country is being replicated in others.
I was at a conference of the bus industry last week and I am quite clear that the partnership that local authorities can bring about with operators is of enormous benefit. I was talking about Oxfordshire. They had to review all their services in west Oxfordshire. The county and the operators got together. They had £3 million of cuts to be made but the industry found, by various manipulations, £2.7 million out of that. So there was a very small reduction, compared to what they began with. I contrast that with the announcement from Northumberland County Council that it is withdrawing free school transport for anybody over 16. That strikes me as a particular contrast between people who work in partnership and people who work against one another.
There is much to do and we on these Benches look forward to a busy and useful Session. I personally refute any suggestion that this is a stale Parliament.
Lord Davies of Oldham (Lab)
My Lords, this has been an excellent debate, with many very effective contributions. Of course, it was graced by the maiden speech of the right reverend Prelate the Bishop of Rochester. We hope that his obligations to another assembly do not mean that he will not be able to attend ours with some degree of regularity and make contributions such as he did today.
These debates are extremely difficult to wind up, as the Minister will prove in a few moments, I trust. Partly of course it is because although a number of departments are down to be considered, noble Lords always make comments on departments that are not on the list. The list includes five major departments so the House will have to forgive me—and the Minister, I have no doubt—for prioritising my response to the issues.
We had a penetrating analysis of the economy in this debate. The Minister emphasised progress on infrastructure and plans for the future. I must say that most of the areas he was able to emphasise seemed to be infrastructure projects which went back in time. Crossrail and Thameslink were both started under the previous Government and HS2 was the initiative of my noble friend Lord Adonis, who opened for the Opposition in this debate. I am not surprised that the Government are eager to claim credit for the progress that has been made over the past few years, but on all sides of the House we recognise that major infrastructure projects are bound to proceed across several Governments. I hope the Minister will recognise that in a debate such as this, where he is meant to defend the Government’s policies and plans, reference to those originated in the past may not carry quite as much weight.
The noble Lord, Lord Birt, raised an issue to which the Minister made no reference and I am not sure whether the Minister replying to the debate will make much reference to it either. As the noble Lord asked, how on earth can it make sense that one of the most successful airports in the world, which is operating constantly at peak capacity and serves the nation in such a significant way, has five years of delay because the Government decide that it is too tricky an issue to address until after another general election? That, I should have thought, counterbalanced some of the praiseworthy attempts to show that our infrastructure programmes were on target.
My noble friend Lord Adonis referred to another area about which we have considerable concern. Everyone knows that the A14 road is of great significance to the country. After all, it links the Midlands to the docks at Felixstowe. It is a road that has been under incredible pressure for a considerable period. It also links with the A1, and therefore goods from the north. Where is the A14 at the moment? It is constantly subject to delay about whether its position should be enhanced. The Minister indicated that at last there is a desire to make progress on the A14. Yet again, we have seen several years of delay on a crucial transport infrastructure project.
As for the legislation, that concerned with transport scarcely measures up to the significance of transport as a crucial element in the economy. In the Queen’s Speech, we have a proposal, to which we are not in outright opposition, to change the nature of the Highways Agency. We agree that it is advantageous to try to ensure that the agency has some long-term perspective on its work. We also agree that it is entitled to some degree of operational independence. Not just we in this House but the Select Committee on Transport in the other place have great difficulty understanding the reasons behind the change to lock in the roads budget and incentivising staff by getting rid of the restrictions of Civil Service pay. I wonder whether those two objectives merit legislation related to transport in this debate, because they do not answer the questions that we have. Is the Highways Agency to be a strategic body? If so, where is the place for the Minister in the Department of Transport if a body is responsible for planning the roads for the future? How do we make this body answerable to Parliament? What will be the basis of more day-to-day scrutiny of this body and how will it be held to account? Will we in fact see any relationship between this body and the local and regional government to which it obviously ought to relate? The answer is quite straightforward: there are no answers at this point. We will of course debate the issue but this scarcely looks like a measure which is adequate to the needs of transport at this time.
We have also seen others introduce important dimensions to this debate in terms of transport and the welfare of people that revolve around the issues of local government. We often feel that, with regard to a debate on the Queen’s Speech, local government should be significant enough to be a focal point of the debate with a Minister answering on it. However, we are not blessed with that decision today. The right reverend Prelate the Bishop of Leicester first raised that issue of local government and the importance of communities, and my noble friend Lord McKenzie brought his formidable knowledge to the issue to emphasise how much pressure local authorities were under. While we might have thought that that viewpoint was bound to be expressed by the Opposition, the noble Lord, Lord Tope, having first regaled us with the multifarious successes of the Liberal Democrats in the local elections, went on to indicate that the worst is yet to come. He said that local authority budgets would in fact be under greater pressure in this coming year, during the run-up to the 2015 election, than they have been up to now. The House should quail at that prospect because it is of course accurate.
Several noble Lords went on to discuss the issue of housing. It was raised first by my noble friend Lady Andrews in her very thoughtful contribution but my noble friend Lord McKenzie referred to it and the noble Lord, Lord Shipley, also emphasised housing in his speech. It was also referred to in the maiden speech of the right reverend Prelate the Bishop of Rochester. Of course we all welcome Ebbsfleet and the concept of a garden city but Ebbsfleet will produce 15,000 homes, when on all sides it is recognised that the scale of the housing crisis we face is measured in terms of hundreds of thousands of homes. That is why we would have expected something more significant from the Government on housing than we have in that Bill.
The noble Lord, Lord Jenkin, missed no opportunity to emphasise the energy aspects of the debate today. He was following the noble Lord, Lord MacGregor, who had referred to the important report of the House of Lords committee. We agree that it is important that the issue of shale is discussed as fully and as early as possible. There cannot be gains in delay but there are gains in ensuring that we get it right and give reassurances in the legislation to local communities on the potential extraction of shale. However, it would be absurd not to recognise the importance of getting as much information before Parliament as quickly as we can. That is why I support those two noble Lords in their representations on the work of the committee and appreciated the emphasis which they both put on shale.
Much of the debate revolved around the issue of the Treasury and the economy. We all appreciate that the base on which the development of our society turns depends a great deal on our ability to increase the resources available to the nation and to secure the fair distribution of those resources. I thought that we might have a fairly predictable and pedestrian debate on the economy but we were electrified by the contribution of my noble friend Lord Giddens, who asked the Minister summing up the debate to consider the position of two philosophers, Karl Marx and the Governor of the Bank of England. The Minister knows that she can concentrate on the Governor of the Bank of England but my noble friend was concerned to put before this House, and demand that the Government consider, the fundamentals of the nature of our economy and our society. There is plenty of evidence now to identify that distinctly unequal societies perform less well, have lower rates of economic growth and have lower rates of satisfaction in their communities than more equal societies. There is evidence developing now, and of course the Governor of the Bank of England was referring to this, that societies that seek to create more equal and rational rewards are better.
We never hear from the other side of the House—or at least very rarely; certainly not in my presence—concern expressed about the absurd difference that has grown up between the pay of chief executives along with those who are highly paid in industry and commerce and the static position of wages over the past decade. If the Government think that they are sailing into sunny uplands with a gentle drift towards success in the next general election, I point out to them that there was one reference that said that real people are yet to see the benefits under the coalition’s economic priorities. The person who that quote is taken from is Kenneth Clarke, who happens to be a member of the Cabinet in the coalition Government.
There is a great deal to worry about in the extent to which our communities have suffered so grievously over the past four years. I know that the Government purport to say that all the sacrifices were worth while because at last we have growth. We were bound to get growth at some stage, but we have had wasted years in which our people have seen their living standards decline in significant ways. It is therefore important that the Government recognise that the challenge is laid down from this side of the House. The Queen’s Speech scarcely merits much in the way of challenge. Most of us have scarcely seen a Queen’s Speech so devoid of content. If it is not zombies who have produced this gracious Speech, it is certainly those who agree with their colleagues in the Commons that a year before the day when you know an election is going to be called, you are much better off being in your constituencies talking to your constituents than passing legislation that Ministers are trying to foist on you.
The Minister of State, Department for Transport (Baroness Kramer) (LD)
My Lords, it is a pleasure and an honour to welcome the right reverend Prelate the Bishop of Rochester and congratulate him on making a maiden speech; to do so on the Queen’s Speech takes exceptional courage. He said that he has hard work ahead of him to achieve the goal of women bishops, and asked if there was enthusiastic support in this House. I assure him that there are many who will provide him with such support; indeed, he may regret asking the question.
The noble Lord, Lord Davies of Oldham, was right to say that the better the debate, the worse the wind-up. I realise that I have an extraordinary challenge in the wind-up today; there were so many speeches today across such a wide range of issues that I realise that in the time available it is going to be absolutely impossible to respond to all the points that have been made. Where there are questions that I have been unable to answer by the end of the debate, and there will be many, we will try to follow them up.
I start by putting today’s discussion in some sort of context. Four years ago we gathered in this Chamber to debate the first Queen’s Speech since the formation of the new Government. It was also the first time that Britain had a full coalition for more than half a century. However, we were also in the middle of the biggest economic crisis for decades. It was crucial that in that first Queen’s Speech we sent out a strong message of intent to reassure the country. Indeed, Her Majesty’s opening words in that Queen’s Speech of May 2010 made absolutely clear our top priorities: to reduce the deficit, restore economic growth and govern with fairness and responsibility. We know that those are the yardsticks against which this coalition Government’s performance will be measured.
I do not intend to reiterate the speech made by my noble friend and colleague Lord Deighton at the beginning of this debate, which listed the successes and achievements on the economic front. They were echoed by my noble friend Lord Flight, who predicted 3% GDP this year—I hope he will give me some good horseracing predictions, because that requires true courage and acuity. My noble friend Lord Razzall talked of the animal spirits that are pushing forward the economy. My noble friends Lord Northbrook and Lady Noakes pointed out how manufacturing is on an upward trend. That was a real challenge for us to achieve, and we are achieving it. My noble friend Lord Wrigglesworth talked about the achievement of reducing the structural deficit and achieving confidence in the markets at the same time as real fairness in the ways in which we have had to make cuts in order to manage the deficit. My noble friend Lord Shipley talked about the robust contribution of small businesses, as did quite a number of other noble Lords. When you listen to that list, you recognise that this is very far from a zombie Government. This Government are alive and kicking. I take the point that zombies are immortal. Now there is a prospect.
In fact, if anyone is looking a little pale on this occasion, it has to be the Opposition and their speeches today. I am just astonished at the level of amnesia. When I listened to the speeches made by the noble Lords, Lord Adonis, Lord Giddens, Lord Lea of Crondall and, to an extent, Lord Davies, they all seemed to have forgotten the state of the economy that they handed to us. I say to the noble Lord, Lord Lea of Crondall, and this is crucial, that, yes, there was a financial crisis, but the Government had run this economy in such a way with such overspending that there was no resilience to come back from it, and it is because of that that we faced the crisis that we did, which was so much worse than that in other developed countries. It is from that base that we have moved forward.
I say to the noble Lord, Lord Adonis, that many of the issues that he raised and criticised this Government for were actions that his own Government had not taken. Although this is slightly out of the range of the economy, one of the things that shocks me most is that as I go up and down the country and talk to young people who are now just getting into employment, they came through education during the Labour years when they did not get the skills they needed, when there were no apprenticeships, respect for vocational education or opportunity. It is those changes, including 2 million apprenticeships by the end of this Parliament, that are beginning to make a real change and eat into the figure for long-term youth unemployment. I agree that we must focus on that relentlessly, but that is just one of the many issues on which I wanted to challenge.
The noble Lords, Lord Giddens, Lord Lea of Crondall and Lord Davies, and the noble Baroness, Lady Thornton, all raised the issue of inequality. We have been in a period of real austerity. We are beginning to recover. We are now seeing wages begin to recover, which is crucial, but we also made sure that people kept their jobs. To have been through the period of recession that we have been in and to have managed to keep down unemployment, which is now down to 6.8%—which is not where we want it, we want it much lower—has been a very significant achievement. What more could you do to tackle inequality than to start to take people at the bottom of the earnings scale out of income tax? That is something that Labour never conceived of doing. Labour may now be on board—everybody is on board—but my party led on this issue and has been crucial in making those kinds of changes, along with apprenticeships and the kinds of opportunity that are offered.
The noble Baroness, Lady Thornton, mentioned women. Since the coalition Government came to power in May 2010, there are 446,000 more women in employment. Between 2011 and 2012 the gender pay gap reduced for all employees. Even if you look only at full-time employees, it also reduced. We are not where we need to be but, my goodness, we are on the path. There are not many who could have said that, certainly not coming through the kind of economic period through which we have been. We must not relent.
I will try quickly to cover some of the key issues. On the issue of women, the tax-free childcare that we are now putting into place, something that has never been done before, as well as the improvements that we are making in the support to parents on universal credit, are great breakthroughs. They will be very important in the lives of people, especially in the lives of many women.
Quite a number of noble Lords raised the issues of social housing; I am trying to watch the time as best as I can. Social housing was the focus of speeches by the noble Baroness, Lady Andrews, and the noble Lord, Lord Sawyer; it was covered by the right reverend Prelates the Bishops of Leicester and of Rochester; and the noble Lord, Lord Shipley, talked extensively about it, as did the noble Lords, Lord McKenzie of Luton, Lord MacGregor of Pulham Market, Lord Wrigglesworth and Lord Harrison. They fell into two groups. There was discussion of affordable housing and housebuilding. When we came into government in the financial crisis, obviously the consequence of that financial crisis was that housebuilding had largely collapsed. It is one of the first industries that gives way in that kind of financial crisis. We have been coming back from that, but the impact of the crash was huge. Housebuilding is now at its highest since 2007. Over 445,000 homes have been built since April 2010; 170,000 affordable homes will be built between 2011 and 2015—we have got to 99,000 so far; and £23 billion of public and private finance will help to ensure another 165,000 more affordable homes between 2015 and 2018, which will be the fastest annual rate for 20 years.
We need to keep absolutely focused, which is one of the reasons why the Bills that were announced in the Queen’s Speech were so important. The ability now to transfer unused land held by agencies from those agencies to the HCA to turn into housing projects much more quickly will be one of the many things that will help, along with the changes in planning law which, as many have said, is not a protection in many cases but an obstacle. We need to change that dynamic.
The other issue that was raised was concern about the house price bubble in London. Hopefully, that is now mitigated against as we look at the most recent figures. I want to be absolutely clear that, as some said on the Floor of the House, Help to Buy does not appear to have been a contributor to that: Help to Buy has been helping people outside the London area. Mark Carney’s name has been taken in vain on quite a number of occasions, but what is really important is that the Bank of England is now looking at macroprudential tools rather than interest rates only to try and manage the housing market. It is now becoming tougher, for example, to qualify for a loan in London for high-priced houses. Mechanisms like that can help us deal with those bubbles without the necessary resort, which will have to happen at some point, to interest rates.
Somebody raised the question of foreign buyers. Noble Lords will know that Boris Johnson now has an agreement with builders in London that they will market first in London rather than overseas. There are other measures like that which we can manage to achieve. Others mentioned some of the tax steps that have been taken to try and contain that.
I move on quickly from that issue to the issue of energy, which obviously plays a big part in the Queen’s Speech. Again, I am under tight time pressure, so I will focus fairly heavily on the issues of extraction of oil and gas from shale, and geothermal. I want to provide some reassurances—I am desperately looking to find out exactly what the question was—that the report of the Economic Affairs Committee, discussed by its chair, the noble Lord, Lord MacGregor, my noble friend Lord Teverson and the noble Baronesses, Lady Noakes and Lady Jones, and others, will be responded to before the summer recess.
There is a consultation at present on the Government’s proposals for underground access. I say to the noble Baroness, Lady Jones, that this concerns access below 300 metres. Many of the people who oppose the headline that they see on this measure have no idea that we are talking about levels below 300 metres. It does not apply to surface access. It is very much to the credit of this country that we have a very tough regime of approval for the kind of exploration that would be necessary for shale oil and gas extraction. They are internationally recognised and there is no attempt to break down those protections, which are essential for the confidence of the community. Others have talked about the importance of sharing the benefits with the community, and a number of programmes deal with that. I will gladly write to noble Lords with more detail because I can see that time is racing away from me.
There were a number of questions on devolution and local government from the right reverend Prelates the Bishops of Leicester and of St Albans, the noble Lord, Lord McKenzie of Luton, and my noble friends Lord Tope and Lord Shipley. Devolution is absolutely critical and the Government have taken it forward in a way that no one has for a generation. I work with the Local Growth Fund. Local enterprise partnerships are obviously working closely and are deeply engaged with their local authorities and other stakeholders in the community and are coming forward with strategic plans for economic growth in their areas, bringing in new kinds of thinking and breaking down the old silos, which is critical. It means that the Government are handing over the motivation for and the design of those strategic economic plans to local areas, which is a crucial piece of devolution.
I look at simple things in the transport world where we transferred significant parts of the support that we give to buses, including the bus service operators grant, back to local authorities. There is very much a pattern. I recognise that these are hard times, but the good local authorities have looked at the harder financial profiles they face and have managed them very effectively. I take on board the warning of my noble friend Lord Tope; we have had that same concern virtually every year. Really good authorities have found ways to deliver for local people—and, ironically, the approval ratings for local authorities have gone up significantly: they are now at 77%. So there are ways, and we must demand that at a time when every penny is important.
Infrastructure forms a significant part of the nature of this Bill and a number of people raised it. The noble Lord, Lord Birt, said we did not have a plan; we certainly have a plan by any definition of a plan that I know in the national infrastructure plan. As the noble Lord, Lord Deighton, is sitting here, I asked him to confirm what I am saying. The plan sets out what the Government want to achieve, the approach in each sector, and the action they will take to ensure delivery, including identifying key priority investments.
That has been crucial, and sometimes the numbers used to describe investment in the UK and to compare it with other countries fail to recognise that essentially road and rail are public investments in this country, but nearly every other kind of investment in infrastructure comes from the private sector. I was recently in the United States, where they are now trying desperately to copy what we are doing because one’s ability to leverage in that kind of private money significantly increases the amount of investment in infrastructure and creates so many possibilities that could never come from just using the public purse. So we need to stop using distorted figures when we look at these numbers.
Noble Lords talked of their concern over the new status of the Highways Agency—the noble Lord, Lord Davies of Oldham, mentioned it.
Baroness Kramer
I will have to come to the noble Lord with that number, because I do not have it to hand. I would be quite interested in seeing it myself, as I have not seen it expressed in that way—but I would be delighted to.
Something that is very important about the Highways Agency, which encapsulates the real change that this Government are bringing to infrastructure, is that it will sit as the delivery implementing agency, in effect, for future roads investment. Sitting outside it is the roads investment strategy, which remains entirely the responsibility of the Secretary of State. I should say that the Highways Agency is also wholly owned by the Government—it is definitely an agency. For the first time, we will have long-term certainty of funding for roads and a programme over a Parliament in the same way that we have had for rail. Many in this House have pointed out that the problem in project after project has been that investment has been subject to a stop-start set of decisions, which have disrupted long-term investment. Now we can begin to have that kind of assurance. Bringing into the Highways Agency people with the skills to deliver that efficiency, just as we are doing in the rail sector, is absolutely crucial. With the scale of investment that we are undertaking, we have to make sure that every penny is well spent. That means that we need that specialised expertise and we will have it going forward—we hope, if this House and the other place agree to the kinds of proposals being put forward in the Queen’s Speech.
I have less than two minutes, so I close by reiterating my thanks to everybody who is here. I recognise that there are very significant areas that I have not covered, but I shall try to do so in writing in response to questions. Finally, it has been an absolute privilege to be in the Department for Transport at this time. I look back at previous Ministers, and many in this House who had to deal with cuts and decline. We are at a time when this Government are taking a completely different approach towards infrastructure. It is part of the growth, because it becomes the framework for important economic growth. We are building Crossrail, we are completing the Northern Hub, and there will be £70 billion of capital investment in transport over the next Parliament. We are trebling the budget for major road schemes. Network Rail will spend £38 billion over the next five years. We have doubled the investment in cycling and we are investing £500 million to position Britain at the forefront of ultra low-carbon motoring. As the demand for travel rises, we are meeting that challenge.
Busy arteries such as the west coast main line will be overwhelmed in the next decade if we do not build new capacity between our cities in the form of new rail, which is why we need the new north-south rail High Speed 2. I can tell the noble Lord, Lord Horam, that it is of course our intention that eventually there will be an HS1-HS2 link. The scheme in the programme was simply inappropriate and unworkable. It is something we want but we recognise that it will need to be looked at in the future.
However, the most important thing about HS2—this goes back to the discussion on the economy and equality—is that it offers so much opportunity to the Midlands and the north, which they deserve. We must take connectivity along with it. That goes back to the devolution issue. The noble Lord, Lord Deighton, has led that work and worked closely with the communities in the Midlands and the north. They have told us what connectivity is needed to maximise the benefits of HS2. That line offers a future in which once again, as has always been the case traditionally, the Midlands and the north can balance out London and we achieve growth all across our nation so there are no areas to which we have to transfer payment, as it were. Rather, there will be great generation of wealth, income, jobs and new business all across the country.
I thank noble Lords for their contributions and wish there had been time to respond to more of the questions.