Lord Maude of Horsham
To move that this House takes note of Her Majesty’s Government’s support for trade and investment and the contribution such support makes to economic growth.
The Minister of State, Department for Business, Innovation and Skills & Foreign and Commonwealth Office (Lord Maude of Horsham) (Con) (Maiden Speech)
My Lords, this short debate covers the range of my new ministerial responsibilities, but also affords me the occasion for my maiden speech in your Lordships’ House. I was going to say, “in this unfamiliar Chamber”, but as I look around it, the less unfamiliar it seems. It is full of familiar and, I hope, friendly faces. I hope that by the time I sit down they will be no less friendly than they are now.
It is a huge responsibility to be a member of the legislature of a great nation. I was privileged to serve for 27 years in the other place. My late father served a similar period in the House of Commons. Like me he left it twice, although in his case both departures were voluntary; in my case, the first was not—I was liberated by the electors. In my father’s first departure from the House of Commons he did not just leave Parliament, he left the country as well, with the result that my first school was in Sydney, Australia.
I have been through a number of careers on my journey to your Lordships’ House. I have been a barrister and an investment banker as well as a politician, but public service has always held a very strong allure. Twenty-two of the 27 years I spent in the House of Commons were on the Front Bench, for the last five years as Minister for the Cabinet Office, where I led the Government’s efficiency and cost-saving programme. In the last financial year we saved some £20 billion compared with 2009, and the Civil Service was like-for-like 21% smaller. It was essential for the success of Civil Service reform—which is, and always will be, a work in progress—that it commanded strong support right across the political parties. It would not have been possible to make even the progress that we did, in the face of significant institutional resistance, without such cross-party support. I shall endeavour to secure the same wide-ranging support in my new role.
I thank noble Lords for the warm welcome that I have received since arriving in this House, especially my noble friends Lord Hurd and Lord Forsyth, who supported me on my introduction. I also very sincerely thank all the staff and officers of the House for their unstinting assistance and welcome.
I am an unreconstructed free trader. As a trade Minister in the late 1980s, under the leadership of my noble friend Lord Young of Graffham, I negotiated the arrangements for the 1992 deadline for creating the European single market. Britain was then the doughtiest proponent of the most open and liberal approach—I would say the approach closest to that of the founding fathers of the Common Market. More than 20 years later, there is still much to do to complete that single market.
The point we made then was that the world was becoming ever more competitive. It was true then and is doubly or trebly true today. Today’s world is increasingly globalised and digital. Time zones and borders no longer present the same barriers to overseas trade, so we need to press ahead with removing state-imposed barriers to trade. The world, and especially Europe, is hungry for growth and jobs. We know that trade creates jobs. Some 31 million jobs in the European Union—more than 14% of EU employment, up by two-thirds since 1995—are linked to sales to the rest of the world. These jobs are in general more productive and better paid than those in the rest of the economy.
Of course, we know that the ideal is a multilateral agreement within the WTO framework. We will continue to work with our partners for a successful outcome to the Doha round at the ministerial meeting in Nairobi in December, but we should not hide from ourselves how challenging such an outcome will be. In the mean time, the European Union can, and should, press ahead with bilateral free trade agreements. It is clear that these can work for Britain. For example, since the provisional application of the EU-Korea free trade agreement in 2010, British exports to Korea, excluding oil, have increased by 54%, including an 87% increase in car exports and a tenfold increase in sales of jet engines. We believe that current and potential trade agreements could over time benefit Britain by more than £20 billion a year.
The contribution of international trade to growth and jobs in Britain is likely only to increase in the years ahead—90% of global economic growth in the next 10 to 15 years is expected to be generated from outside Europe, one-third of it in China alone. We have to turbo-charge the EU’s trade agenda to bring about the economic benefits of these trade deals as quickly as possible.
We have to complete the live negotiations, get moving on stalled negotiations, and launch new negotiations with key economic partners. That means implementing the EU’s free trade agreements with Canada and Singapore, concluding negotiations with the United States, Japan and Vietnam, revitalising talks with India and Mercosur, which in both cases have run on for far too long, launching new negotiations with Australia and New Zealand on new free trade agreements; and negotiations with Mexico and Chile on modernising our existing free trade agreements. Moreover, we need now to move towards negotiations on a free trade agreement with China. This matters, of course, for the developed world, but opening up international trade is central to development and poverty reduction across the world, and should play a key role in the post-2015 development agenda. Britain’s strong position on overseas aid, as one of the very few Governments to deliver the UN target of 0.7% of GDP, gives us real moral authority in promoting this.
Britain at its best has always had a very open economy. Major British companies have been ready to invest overseas, and have been successful by and large in doing so. We are, of course, very open to investment from overseas. We are today the No. 1 location for foreign direct investment in Europe and second only to the United States in the global rankings. Britain is seen to be a great place to do business. The World Bank reports that it is easier to do business in the UK than in any other major European economy.
Of course, there is more that we can and should do. We want to make the UK the most open, welcoming and business-friendly country in the world—the place where people and companies want to put their ideas, energies, money and talents to work. That means: continuing to cut red tape and regulation for businesses; supporting London as the world’s leading international financial centre; continuing to build world-class infrastructure; 21st-century skills and knowledge; and a tax system that supports growth and innovation and rewards hard work and success.
In 2014 we secured more manufacturing projects than Germany, which was a significant achievement for our manufacturing industries. The UK hosts more Chinese investment than Germany, France and Italy combined. Britain created more jobs through foreign direct investment than any other country in Europe. It is a good story but there is much more that we can and will do.
Exports account for 30% of Britain’s economy. One in four UK jobs is linked to exports. Companies that export tend to perform better; they tend to be more productive, more innovative and more likely to stay in business than non-exporters. But if performance on inward investment is good, our export performance lags behind. Exports stand at an annual value of around £500 billion, generated by 223,000 companies. While the proportion of British companies exporting is comparable with Germany and France, our performance on exporting goods lags well behind the services sectors. In particular, the average export value of goods is lower, significantly so among medium and larger companies. Almost half of companies exporting goods and services have done business in fewer than five countries. A recent study suggests that, based on past experience, around half of those exporting today might be expected to quit exporting within six years.
We can do better than that. It cannot be for UKTI and UK Export Finance, admirable though these organisations are in many ways, to carry the sole burden of supporting exports. The whole of government needs to be mobilised behind our exports drive. In recent years the Foreign and Commonwealth Office has strengthened its support for exporters but can do more. We need all our overseas posts to show the same relentless focus on Britain’s commercial and economic interests that the best already show. All home departments that engage with business sectors should be responsible for ensuring that government is helping and encouraging businesses to explore overseas markets. We need to make the most of all those willing to fly the flag for British business abroad, and I especially thank all those Members of both Houses who act as unpaid trade envoys. Our business ambassadors also play an important role.
We have doubled our exports to China in recent years but, in truth, we are only scratching the surface of that gigantic market. We are spending £20 million to support first-time exporters. But there is much more that we can and will do. We need to use digital channels to get information to companies in a simpler and faster way. I am looking forward to launching a national campaign this autumn to encourage more British companies to internationalise their business.
Investment and exports are vital but they do not represent the entirety of the ways in which British businesses and our economy benefit from international engagement. The UK-Israel Tech Hub is an innovative approach that focuses on helping to bring together potential partners, which may not directly result in substantial investment or immediate formal exports but none the less builds strength through synergies. There is already one UK-China tech hub, and we need to be quick to build similar new ways of extending the reach of British business.
Your Lordships’ House contains a wealth of experience and knowledge on all these matters, and I look forward to the comments and suggestions of noble Lords during the debate. I beg to move.
Lord Maude of Horsham
My Lords, I am very grateful to your Lordships for the warm welcome and the very bipartisan spirit in which this debate has been conducted. I said at the outset that I knew that your Lordships’ House contained a wealth of knowledge and experience on all matters pertaining to trade and investment, and the debate has amply borne that out, with a majestic and historic sweep going at least back to Magna Carta—very appropriately on this day—and a positively cosmic geographic sweep embracing joint space initiatives. It has been hugely impressive and I am enormously grateful for the breadth and depth of the contributions to the debate. I am afraid that time will not permit me to do full justice to all the points that have been raised, but I will deal with as many as I can.
The noble Lord, Lord Stoneham, began with issues around the commitment in Magna Carta to free trade. It is good that we remember that today. He and a number of other noble Lords talked about the proposed EU referendum, and the desire that this should be conducted as quickly as possible. I was rather sorry to hear the noble Lord, Lord Pearson of Rannoch, say that he was going to be well behaved; that was rather disappointing. He and I have not always been on opposite sides of the argument. When I was shadow Chancellor in the last part of the 1990s, we were joined in our opposition to Britain joining the single European currency, the euro. How right we were, and how glad we should all be that we avoided that trap and snare. Many thought that it would be a disaster—that was the word that often crossed people’s lips—if we stayed out, but we were right then, and it was a pleasure to collaborate with him on that occasion.
The noble Lord, Lord Davies, talked principally about productivity, which of course is a huge issue. A number of noble Lords talked about the puzzle over why our productivity, as measured, falls below that of our competitor countries. Of course, in 2010 Britain was just emerging from a major recession—a recession that, if I may be slightly partisan, happened to start around the time that the noble Lord left the Conservative Benches to join Labour. I am sure that that was just a coincidence. The challenge, obviously, was to stabilise the economy and to create jobs. There is a productivity puzzle, but there is also an employment puzzle. Economists have scratched their heads for the past five years about how an economy which, certainly in the early period, did not have a strong level of economic growth was none the less creating jobs. It was extraordinarily successful at creating jobs. Of course, these are two sides of the same coin, but none the less we take the productivity challenge very seriously indeed. The Government will be publishing a productivity plan. The Government cannot create greater productivity. We can remove barriers to greater productivity, and we will do our best to do that. This is hugely important, and it will be a key challenge for this Administration.
My noble friend Lord Caithness, a member of the club of former Paymasters-General—which includes my father, if we are going to go back into the depths of history—talked about the progress towards doubling exports. He asked about progress with implementing the recommendations of the Cole commission. It has not yet published its final report. I met the members of the commission last week, and very productive that was, and I am looking forward to their full report. I think there will be some interesting ideas which we will certainly want to take forward.
My noble friend asked about progress on the implementation of EU single-market directives. He is quite right to focus on that. Our record is not always quite as stellar and perfect as we like to maintain, but none the less if single-market measures are to create the economic upside that we all hope for, they need to be implemented properly and rigorously. The European Commission will be publishing a single market strategy in the autumn. I know that the new Commission, particularly the vice-president of the Commission who has responsibility for the digital economy and the digital single market, is deeply committed to making rapid progress on that front.
The noble Lord, Lord Kakkar, spoke with great expertise about healthcare and life sciences, in which he has enormous knowledge. He is completely right to emphasise that these are areas of great strength and that with the growth in healthcare markets, particularly in China, India and the Middle East, this is a huge opportunity for Britain. I am delighted that my friend the Minister for Life Sciences, George Freeman, is hugely committed. He sees it as a key part of his role to support British businesses in making the most of those opportunities. Of course, public procurement can support our export initiatives. The noble Lord on the opposition Front Bench and the noble Baroness, Lady Kramer, also talked about the potential for using procurement to support exports. They are right about that. This is a big opportunity.
The noble Lord also spoke about the role of trade within the Commonwealth. He gave an interesting and, I am sure, completely accurate statistic that the cost of trade between Commonwealth countries is nearly 20% less than outside. I did not know that, but that is powerful. We do underplay. I sometimes think that the “C” in “FCO” is a little underemphasised. I pay great tribute to the role of my noble friend Lord Marland in promoting trade and business activity within the Commonwealth. It is an underexploited opportunity for British business, and we will be looking to take all of that forward. I know there is a programme of activity in the margins of the Heads of Government meeting in Malta in November, which I am hoping to take part in, that will support this initiative.
On the same theme were the remarks of my noble friend Lady Mobarik, whom, as she said, I met earlier this month. Of course, she is completely right to talk about the potential in emerging markets. The seduction is always to try to target down and limit the number of places in which we give government support for exports. It is absurd that we should not take seriously this market of nearly 200 million people in Pakistan, with all the affinity that there is and the connection with the Pakistani diaspora in Britain. I am sceptical of the overtures sometimes made to me that we should narrow down our focus, either by way of sectors or by way of geographies. The truth is that we have a very well-developed network of overseas missions, and every single one of those overseas posts—not just the UKTI people—should be really focused on looking for business opportunities. It is not just for UKTI; it is for everyone concerned with government to look on behalf of British businesses for opportunities.
I completely take the point that my noble friend makes that Pakistan is too big an opportunity to be ignored. It is a hugely strong relationship. I visited Islamabad just before the election, and I was struck by the fact that too much of our relationship and the Government’s interaction with the Government of Pakistan has, understandably, been around issues with security, counterterrorism, Afghanistan and so on. Far too little of it has been about developing the economic and commercial relationships that can create huge benefits for Pakistan and Britain.
My noble friend Lord Risby mentioned that we had worked together on four different occasions. When he decided to leave the House of Commons five years before I did, he must have thought that at last he was getting away from me—but foiled again. I pay huge tribute to the work that he has done in opening up on behalf of Britain, and with the support of the Prime Minister, this important market in Algeria. Again, that makes the point—if you were going to draw up your list of the 20 most important markets for British business, it would not necessarily include Algeria. Yet there is an opportunity that we can exploit and open up if we do it in different ways.
The role that my noble friend takes as the Prime Minister’s trade envoy in Algeria is one example of doing things differently. With the commitment that he shows and the knowledge and expertise that he brings, we can open up opportunities for British business. The initiative of trade envoys is completely bipartisan—Members of both Houses, from all parties and no parties, are involved in it—and I am happy to restate my commitment to it and that of the Prime Minister. We will build on this; it has worked for the most part extremely well, and we think that we can go much further.
My noble friend talked about the commitment of ambassadors. That is not, I would say, completely universal, but it needs to be. It is really important that the official leadership of the Foreign and Commonwealth Office makes it clear that it is a primary duty of the heads of mission overseas to give enormous support to British business and Britain’s commercial interests.
The noble Lord, Lord Clement-Jones, talked very knowledgably about the importance of professional and particularly legal services. He and other noble Lords talked about the tensions that can exist between a concern that immigration should be properly controlled and the constraints that that can be seen to impose on economic and commercial development. He is completely right to draw attention to that. Frankly, any Government will have to grapple with those tensions and manage them in a grown-up and mature way.
The noble Lord also asked about savings in the UKTI budget, which is relatively small in the context of overall government spending. We will be expected to make efficiency savings—that was my day job for the last five years, and I can see scope for that. However, to pick up the point that my noble friend Lord Leigh raised about the balance between what UKTI spends on its own resources, as it were, and giving financial support to businesses to enable them to develop their exporting, I see scope for rebalancing within that budget.
My noble friend Lord Popat talked about SMEs, as have many noble Lords. SMEs are very dear to my heart; part of the work that I led in the last Parliament was on increasing the amount of government procurement spend that was spent with SMEs. We said that our ambition was that it should rise above 25%, and in 2013-14 it went up to 26%. There is a relationship between procurement and exports. He and other noble Lords are right to say that there is huge scope for building on SMEs’ propensity to export, and for understanding properly why too many SMEs start exporting and then stop. That is something that we need to understand better than we do at the moment and to address.
Regarding my noble friend’s focus on Africa, I again make the point about targeting. We know that, while this will not be at all uniform, parts of Africa are growing and will continue to grow very fast, and we need to ensure that our presence in those markets is equipped well to ensure that British businesses can take advantage of that.
The noble Lord, Lord Bilimoria, spoke with huge passion and knowledge about the progress that has been made in the British economy in the past 30 years. I was impressed that, in his long list of sectors where Britain has strengths, beer came in only half way through; he slipped it very elegantly into the middle of his list. He referred to the tour that we both had of the Rolls-Royce facility at Goodwood. He asked about JLR and said that he had last been there a couple of years ago. Yes, he will find next time he goes that that is out of date. I recently visited the new line producing the new XE car. It is amazing in terms of productivity: you will see very few people on that line and a lot of robots. It is gleaming and smart—there is not an oily rag on site—and hugely impressive.
With the success of sectors like automotive, we need to ensure that we build more of a supply chain as well. When a vehicle gets built in this country, typically 45% of its content is imported. That compares with America or Germany, where typically 25% will be imported. We have strengths in this area but we need to build on them and go further.
The noble Lord referred, as did other noble Lords, to the “Great” campaign. It is an unusual example of consistency, where we built a brand and have continued to invest in it. One of my jobs in the last Parliament was to prevent government departments spending money on advertising and marketing, and we managed to cut out spending that did not continue to focus on that channel. It is very powerful and, although the methodology may not be perfect, as the noble Lord, Lord Mendelsohn, mentioned, that it works and succeeds and we should stick to it is beyond doubt.
My noble friend Lord Sheikh talked very knowledgeably about Africa. He knows it extremely well and is deeply committed. He asked whether the co-ordination between departments is sufficient. The answer to that is that it is never completely sufficient but it is better than it was, and I will continue to work hard to make it yet better. On his suggestion that our overseas posts should be tasked with preparing really good plans based on an assessment of opportunities, frankly, whether or not there is a big UKTI presence there, that is absolutely what our posts should be doing. I take that extremely seriously.
I enjoyed the contribution of the noble Lord, Lord Pearson; I can assure him that I am capable of reading more than one page at a sitting, but I am grateful to him for his pointers towards the short versions, and will add that to my reading list.
My noble friend Lord Leigh talked about China and its importance. China is very big; we have doubled our exports, but we are only at the very beginning of this. British businesses are not yet getting into the tertiary let alone deeper cities that are there, so that should be a huge focus for us. We have overtaken France to become the second-biggest European exporter to China, but we can do much more. He talked about financial services, which is a huge strength for us, and we need to build on what can be done there.
The noble Lord and others talked about the EU-US free trade agreement. Noble Lords will have noticed that the Obama Administration has had one or two difficulties with Congress in recent weeks—that is not unusual. However, there is a huge commitment from that Administration to use their remaining time in office to achieve a complete negotiation.
On the concerns raised about the NHS, on which I had a meeting with some representatives of trade unions this morning, I am confident that the issues are not well founded. However, I understand the concerns and will ensure that they are properly addressed.
I am enormously grateful to all noble Lords who took part in this important debate and I hugely appreciate the warm words and good wishes expressed to me as I take on these responsibilities. Making a success of this endeavour is hugely important to the success of our country, and I take great heart from the support given in the course of this debate.