Queen’s Speech

Baroness Wheatcroft Excerpts

Monday 13th May 2013 Lords Chamber

[Baroness Wheatcroft]

My Lords, it gives me great pleasure to follow the noble Baroness, Lady Lane-Fox, and I congratulate her on such an insightful maiden speech. As others have said, she is a very welcome addition to this House, bringing to it a remarkable business background and a determination to help everyone make the most of digital technology. She is now working with the Cabinet Office to that end, but I first met her when she was running lastminute.com, the business she started with Brent Hoberman. Unlike so many digital businesses, lastminute.com is still going strong. However, the noble Baroness, Lady Lane-Fox, has moved on and now sits on several boards, including that of Marks & Spencer. She has also launched a chain of karaoke clubs. I like to think that many of your Lordships are members and enjoy their facilities.

In February, “Woman’s Hour”, that most influential of programmes, anointed her as one of the 100 most powerful women in the UK. From what we have heard today, I am certain that she will make a very powerful contribution to your Lordships’ House. Britain needs more people to build businesses and create wealth. The gracious Speech spelt out that the Government’s first priority is to strengthen Britain’s economic competitiveness, but we have a long way to go. I am delighted that by 2015, this Government will have cut the rate of corporation tax to a level which makes the UK the joint lowest in the G20, but a low rate of corporation tax will not ensure our competitiveness. The UK suffers from a dire level of productivity. Figures released in February by the Office for National Statistics showed that output per British worker trailed the G7 average by 21% in 2011. Output per hour was some 16% worse than across the other major industrialised economies, the worst figure for 18 years. Economists expect that the picture will be even bleaker in the current year. According to Spencer Dale, the Bank of England’s chief economist, the level of private sector productivity is around 15% below the level that would be implied by a continuation of the trend before the economic crisis hit. My noble friend Lord Deighton pointed to the new investment in infrastructure and transport being made and that will help, but it will not cure the problem.

Today, in his inimitable style, the Mayor of London gave his own explanation for why UK productivity may be low. He referred to classic,

“British short-termism, inadequate management, sloth, low skills, a culture of easy gratification and underinvestment in both human and physical capital and infrastructure”.

No doubt London’s business leaders will wish to respond to his considered view. I do not completely share it. However, it is clear that low productivity disadvantages the country and we need to find a way to improve it. The gracious Speech heralded some welcome measures for business—in particular, the promise of further deregulation. Red tape remains a major hindrance to business efficiency and undoubtedly puts UK firms at a disadvantage when competing particularly with those from outside Europe. Europe, of course, is where much of the red tape begins.

I also applaud the move cited by my noble friend Lady Kramer to exempt companies from the first £2,000 of their national insurance bills. That should encourage businesses to recruit, but the Mayor is right when he cites low skills and a lack of investment as the key to Britain’s productivity problems. The Government are doing their best to enhance the skills of those currently in the education system and are committed to trying to ensure that school leavers not going on to university move into training or apprenticeships. However, we have far too many unskilled workers. According to the Chartered Institute of Personnel and Development, there are on average 45 people applying for every low-skilled job. Improving the skills of the older unemployed is essential—and so is investment.

Britain’s companies are sitting on an unprecedented cash pile. Non-financial businesses had a total of £672 billion in the bank last year. The Government have tried to encourage them to invest. Generous capital allowances are available but that policy has not been noticeably successful. There seems to be a risk aversion in business and the key may be to address the chronic short-termism that the Mayor cites. The owners of big businesses, the shareholders in public companies, do not encourage investment for the long term, because they are too interested in short-term gains. We need to find a way of encouraging investors to think long term and to foster an attitude that does not view stocks as mere gambling chips. There have been many investigations and reports into this but, so far, nobody has found a solution. If the Government were to find some means of encouraging and rewarding institutional investors for taking a long-term view, it would result in an improvement in productivity.

The other aspect of the economy on which I should like to focus is the dominance of London. Even allowing for the importance of financial services to the capital and the hammering that the sector has taken in recent years, London’s economy has outperformed that of other regions since 2007. Between 2007 and 2011, it grew by a nominal 12.4%, compared to just 2.3% in some parts of the country and no more than 6.8% anywhere else. This led to London’s share of output increasing from 20.7% to 21.9% over that period. The right reverend Prelate the Bishop of Birmingham spoke eloquently of the needs of the regions.

Whether the statistics say that we have escaped a double-dip recession or not, there are many parts of the country where the views of economists count for little. If it looks like a recession, if it feels like a recession and if it hurts like a recession, it is a recession. The Government are pledged to push a greater proportion of growth-related spending to local areas from 2015, and we have heard how that will be of benefit. However, more can be done. The numbers employed in the public sector are decreasing but will remain substantial. Wherever possible, those jobs should be pushed out of London—not just the clerical jobs but the jobs at the top. In the digital age, with Skype available to all, there is no need for everyone to be in the capital. The savings in property costs would be beneficial, as would the boost that would be delivered to the regions. I am sure that plenty of civil servants would hesitate even to contemplate this and might talk about the huge transport bills that they would incur when coming to London for meetings. Forget it; they can just go online. I am sure that the noble Baroness, Lady Lane-Fox, can advise on how that could be done. There is much talk of rebalancing the economy away from financial services to manufacturing, but a bit of rebalancing away from London would also be a good idea.