Economy: Government Policies

Baroness Wheatcroft Excerpts

Wednesday 7th December 2011 Lords Chamber

[Lord Sassoon]

I do not accept that at all. Of course we all wish to see a strongly growing economy. The latest forecasts from the OBR are that the private sector will generate 1.7 million jobs over the forecast period. That is strong growth in the private sector.

[Baroness Wheatcroft]

My Lords, while cutting the deficit is essential, it will undoubtedly leave many people facing financial hardship. In the light of that, does the Minister have any comment on the stories this morning about the forecast growth in what is known as payday loans and the interest rates—some might say extortionate interest rates—charged on them?

[Lord Sassoon]

I completely agree with my noble friend that it is very concerning that people on low incomes should be exploited. Therefore, it is important that this issue is fully debated. However, I would also point out that the latest forecast from the IFS shows that real household disposable income will stabilise in 2012 and sharply rise in 2013.

Autumn Budget Forecast

Baroness Wheatcroft Excerpts

Tuesday 29th November 2011 Lords Chamber

[Lord Sassoon]

My Lords, the first thing to remind the House of is that it was my right honourable friend the Chancellor who took the lead in ensuring that the Basel III reforms on capital were phased in over a period to 2019, which was accepted by the G20 precisely for the reasons that the noble Lord gives; that is, that we did not want to place more burdens on the credit situation in the short term. Similarly, the Vickers commission has recommended that certain of its reforms be on a similarly extended timetable for the same reason. As for today’s measures, the £20 billion of underpinning of the national loan guarantee scheme is directed at ensuring that the flow of credit to small and medium-sized businesses continues, as it must do as we go into the recovery phase of the economy.

[Baroness Wheatcroft]

My Lords, the noble Lord, Lord Myners, referred to the march of the myth-makers. Does the Minister agree with me that perhaps the biggest myth was that we had done away with boom and bust? As a result of that, what we are paying in interest on our debt is more than what we are spending on education, and that is with interest rates at the low level that plan A had assumed. What does the Minister think will happen to those interest rates if we do not stick to plan A?

[Lord Sassoon]

My Lords, I dread to think what would happen to interest rates. The interest rates on our 10-year money have stayed rock solid. They are slightly down today, at below 2.3 per cent. Where is Italy? It is north of 7 per cent. Every 1 per cent increase in our interest rates would cost this country £21 billion or £22 billion. To look at it another way, by keeping our interest rates below the levels which were forecast by the OBR only in March this year at the time of the Budget, we have saved £21 billion or £22 billion on our interest bill, money that can be much better spent on our public services. I dread to think where we would be, but it would be in horrendous territory.

Banking: Government Shares

Baroness Wheatcroft Excerpts

Monday 13th June 2011 Lords Chamber

[Baroness Wheatcroft]

My Lords, one of the answers to getting more lending to our small firms, who are clearly not yet being well served by Project Merlin, must be to encourage more competition. Can the Minister assure me that he sees no conflict between the desire to get the maximum price for the Government's investments in banks and ensuring more competition?

[Lord Sassoon]

My Lords, I am grateful to my noble friend as she enables me to point to the mandate which UK Financial Investments was given by the previous Government. It was that in creating and protecting value for the taxpayer it must have due regard to both financial stability and competition. At all stages, whether it is the involvement of the Independent Commission on Banking or the mandate of UKFI, competition is at the centre.

Economy: Growth

Baroness Wheatcroft Excerpts

Thursday 31st March 2011 Lords Chamber

[Baroness Wheatcroft]

My Lords, the prime requirement for growth is a stable economic environment. That is the golden rule. Noble Lords will recall that the previous Government had a different rule. In his first Budget, Chancellor George Osborne had to report that Gordon Brown’s golden rule about restricting the country’s borrowing had not quite been met. In fact, the target had been missed by £485 billion. Rules may be made to be broken, but surely not by £485 billion. Restoring the nation’s finances is the prerequisite for a thriving business economy. There are other things that a Government can do to foster business, and last week we saw some welcome steps in that direction, particularly with the reduction in corporation tax, and a firm commitment to reduce the 50 per cent rate of income tax is also something that will encourage the business community. There is plenty of evidence to demonstrate that punitive tax rates do not enhance a nation’s wealth.

What is truly important for businesses is the degree of certainty and clarity about the regime in which they operate and the taxes and regulations that apply. The Government have indicated that they understand that tax is unduly complicated and that there is a need to simplify it. The noble Lord, Lord Wood, in his admirable maiden speech, suggested that a joke half way through a speech would be welcome. I do not really have one, but I refer noble Lords to Tolley’s Tax Guide. It now runs to 1,897 pages, which is an increase of 185 per cent since 1999. That is not really funny. Businesses need a break from too many rules and too much regulation. Although the Government are moving in that direction, there is still plenty of scope for a scythe to be wielded.

The animal spirit of true entrepreneurism will win through if we do not put too many obstacles in its way. Britain has some great businesses, but we need more. We are in the forefront in the services sector, but despite the understandable talk of the financial world needing to slow down a bit, manufacturing is actually already a greater contributor to our economy than financial services. There are some great success stories. We cannot compete with the low-cost economies of the world on price, but we can on quality and design. I was cheered yesterday to hear of a business in Lancashire that weaves its own fabrics and turns them into high-quality furnishings. It is called Herbert Parkinson, and it is owned by the John Lewis Partnership. It employs 300 people, and last year its sales exceeded £47 million. This year it will top £50 million. It succeeds because it produces the quality and design that customers want. British companies will not undercut the prices of Sri Lanka or Turkey, but we can compete with the world’s best when it comes to quality and design.

We hear repeatedly that smaller companies and entrepreneurs find it hard to raise the finance they need to foster this sort of quality. If that is the case, I have one potential solution. Our larger companies are currently sitting on huge amounts of cash. I fear that the investment bankers will be knocking on their doors, trying to persuade them to buy their rivals and spend their money that way. That would generate welcome fees for the bankers, but we know that rarely do such takeovers bolster the nation’s wealth. It would be better by far that those big companies back smaller entrepreneurial outfits, providing them not just with cash but with confidence and contacts. Tax breaks for such investments have been mooted. Xavier Rolet, the chief executive of the London Stock Exchange, has suggested it. I do not think tax breaks should be the reason. I think that companies need to invest and nurture smaller businesses, and I encourage the Government’s business council, which is doing some wonderful work, to encourage just this idea.

Financial Crime: Legislation

Baroness Wheatcroft Excerpts

Thursday 17th March 2011 Lords Chamber

[Baroness Wheatcroft]

My Lords, I know that I risk upsetting the sensibilities of some noble Lords when I say that I am glad that the Bribery Act has not yet been implemented. This is not because I take a cavalier attitude towards corruption, but because it is only fair to British business that the Act should not yet be in force. I do not suspect that our companies are all involved in shady practices and that they should be allowed to continue in that vein for as long as they can get away with it. On the contrary, I have sufficient faith in British business to believe that it can win contracts without resorting to buying them in one way or another. My qualms about the implementation of the Act coincide with those voiced so admirably by my noble friend Lord Hodgson.

I have listened to what the noble Lord, Lord Goodhart, has to say, and I cannot agree with him completely. To be critical of the Bribery Act is not to condone the payment of massive bungs to corrupt dictators and their chums, nor even to go along with expensive gifts being lavished on minor officials in the hope of winning their good will. It is merely to say that business, like life, has nuances that need to be understood. Yet the business world has been very slow to raise its voice publicly to query any aspect of the Act. It knows, as I do, that to question any aspect of this legislation is to risk being branded as somebody who condones crookery, as if one is either in favour of the Act or in favour of bribery—and this, of course, is nonsense. We need to remember that we are in complicated territory here, where perceptions differ.

In 1997, as noble Lords will surely recall, Formula 1 racing in the shape of Bernie Ecclestone wrote a cheque for £1 million and subsequently found that plans to ban Formula 1 from tobacco advertising, so important to its finances, had been put on hold. Naturally, there was no connection between the two occurrences. The then Prime Minister was appalled that anyone should think there might be. He was, as noble Lords will remember, a pretty straight sort of guy. Others saw things differently. As I say, we are in complicated territory. I found it as dispiriting as the noble Lord, Lord Goodhart, when the SFO inquiry into BAE was dropped; I think that it was that pretty straight sort of guy who was involved there, too.

The Bribery Act as drafted would subject business to a more draconian regime than even that of the United States. What is more, it attempts to throw its net over companies that are not even headquartered in the UK but do business here. A company that is based in Russia, with some link to the UK and doing business in Kazakhstan, for instance, could find its activities there making its directors guilty of breaking UK law. That would be quite a challenge for UK prosecutors. It seems that the impossibility of stretching the arms of British law quite so far have now been recognised and that reassurances are being given that a mere listing on the London Stock Exchange does not bring a company within the ambit of the Act. Look at the motley collection of overseas companies that now make up a large proportion of the FTSE 100 and you will understand why this point had to be clarified.

The previous Government were absolutely justified in their efforts to prevent potentates being paid large sums in exchange for contracts, but this Act goes too far. Not only does it risk disadvantaging British business, but it puts those who are striving to win much needed work for British people in the appalling position of not knowing what will or will not be considered legitimate business practice. Until we have clear guidance on matters such as facilitation payments and hospitality, this Act should not be implemented. Surely any facilitation payments are outlawed under the Bribery Act, despite them being allowed, as we have heard, even under the US Foreign Corrupt Practices Act. In parts of the world, a small sum ensures that goods or documents move from A to B. Presiding Governments condone that situation; it is part of the prevailing culture. We might wish that situation to change, as the noble Baroness, Lady Williams, does, but for Britain to say no when the rest of the world says yes is commercial madness. One leading UK company doing business in Colombia decided that it had better stop paying the minor payments that it made. The result was that every one of its vans was impounded and its drivers imprisoned. We have to move carefully on this, just as we do on hospitality.

Another issue is the fact that government has to set the lead in conduct rather than just in legislation. It is imperative that UK Trade and Investment and its special representative should be models of complete probity as they attempt to drum up business for Britain. Their aims are admirable, but there is widespread disquiet about some of the relationships that have arisen. This will not stop. Surely it is time for change. Some noble Lords have expressed concern about the reputation of British business abroad in the absence of implementation of the Bribery Act, but I fear that questions over UKTI might do at least as much damage, if not more.

[Lord Blair of Boughton]

My Lords, I spent much of the autumn teaching senior police officers in India. We explained the Bribery Act to them. They told me—