European Union Membership (Economic Implications) Bill [HL]

Lord Ahmad of Wimbledon Excerpts

Friday 25th November 2011 Lords Chamber

[Lord Ahmad of Wimbledon]

My Lords, yet again the question of Europe is one which we find dominating headlines. Indeed, it is impacting daily lives and for this reason and others, I join in the chorus of approval and tributes being paid to the noble Lord, Lord Pearson of Rannoch, today. His timing of this debate is quite impeccable.

“What we should grasp, however, from the lessons of European history is that, first, there is nothing necessarily benevolent about programmes of European integration; second, the desire to achieve grand utopian plans often poses a grave threat to freedom; and third, European unity has been tried before, and the outcome was far from happy”.

Those are the words of my noble friend Lady Thatcher.

We see the currency born of the European ideal today fighting for its mere survival and economies of Europe that led the world as proud nation states looking across the world, perhaps, to emerging and developing nations with envy at their growth rates and investment levels. Yet as turbulence grips Europe, Britain, as ever a proud nation in Europe, continues to play a pivotal role in seeking to provide assistance, guidance and, most importantly, leadership and financial contribution where and when it can. This is notwithstanding the backdrop of our own economic challenges on the domestic front. We are supporting neighbouring European economies to ensure our treaty commitments.

Therefore I find recent reports of warnings being issued by the President of the European Commission to my right honourable friend the Prime Minister to put the European ideal first and not to think of the UK, particularly with reference to the benefits of the vibrant City of London, quite frankly a ludicrous proposition. Indeed, I should perhaps declare an interest as someone who currently serves in the City of London. Does the President of the European Commission really believe that the argument that we shall be left behind will resonate with our Government and, more importantly, with the British people? It will not.

Economic and monetary union and the birth of the euro brought with them similar cries of: “a two-track Europe”; “Britain will no longer have influence”, which many noble Lords have said; and “Frankfurt will become the economic capital of Europe”. Has any of these propositions come true? No. We were right not to join the euro then, and we are right today to defend the City of London against prohibitive taxes for the benefit not only of the City and what it brings to Britain but of Europe as a whole.

Let me recount the time of the launch of the single currency. I remember talking about this. One concept that was often raised was how we remember who is going in and who is going out. If you throw Greece into the equation, a baffling acronym came about: PIGS. I say no more. Price stability was one qualifying criterion. Others were successful membership of the ERM, interest rate convergence and fiscal prudence—and let us look towards prudence. One of the criteria was a 60 per cent ratio of government debt to GDP. Was this strictly met? You need only look at Belgium at 122 per cent and Italy at 121 per cent. Those criteria were not strictly adhered to.

Then there was the cost of the introduction. One of the elements was fiscal policy spillovers. A European-wide interest rate would mean that EU countries would have to increase their intra-EU transfer payments to help others. How Greece would have loved no competitive devaluations in the current climate. These are no longer downside risks or doomsday scenarios; they are a living reality facing the single currency today. Monetary union without fiscal union was never going to be a sustainable proposition. That has proved correct. There are many in business and in public life now who rather than lecture the country should eat a bit of humble pie.

I turn briefly to the EU’s proposed tax on the City of London. According to some reports it might mean that 80 per cent of the revenue would come from London. The director-general of the CBI said that it is,

“a Brussels revenue-raising exercise, and one that will hit London disproportionately hard”.

The City of London is our jewel in the crown. It has been a big asset for the UK and, indeed, for Europe. If we are asked to be good Europeans, should good European not defend what is good about Europe? The City of London is good about Europe. However, rather than be proud Europeans and proud of this European centre, officials in Brussels are seeking to price the City of London out of the market. It is therefore right that voices are raised and resistance is shown at these blatant attempts to target the heart of our economy.

We are a proud nation with a rich history and a country which has demonstrated on the world stage that it fights for freedom, democracy and the promotion of strong trade. Standing up for Britain does not mean that we are against Europe. The countries of Europe remain among our largest trading partners. However, it is right that we should stand against giving further powers away. I was therefore pleased to support the European Union Bill which passed through your Lordships' House earlier this year, because it called time on the juggernaut of European integration. We need to look at the virtues of a proposal before we forgo any national interests for some perceived general good as conceived by a Brussels bureaucrat. Indeed we need to repatriate powers as the Government are seeking to do. We have also found, perhaps, an unlikely ally in Chancellor Merkel, who only yesterday said that the new Commission proposals on eurozone countries submitting their budgets for approval to Brussels to solve the euro crisis are “extraordinarily inappropriate”.

In conclusion, there should be a simple message to those who seek to move towards greater European political and economic union: you integrate further if you want to; our country is not for further integration. However, that should not mean that we are against Europe. It should be the Government’s role to establish perhaps a third way in Europe where membership of the EU is not a journey to a federalist Europe, but one which seeks to establish the role of nation states in Europe where we stand and play our part as an independent country in Europe, not as a region of an integrated union.

Economy: Government Policies

Lord Ahmad of Wimbledon Excerpts

Thursday 24th March 2011 Lords Chamber

[Lord Ahmad of Wimbledon]

My Lords, I join other noble Lords in thanking the noble Lord, Lord Lawson of Blaby, for bringing forward this debate at an important time for our country. I, too, wish to pay tribute to the maiden speeches of the noble Baroness, Lady Stedman-Scott, and the noble Lord, Lord Hussain. One touched on the issue of youth engagement and youth employment, and the other on community cohesion and fighting extremism—issues which, I can assure both noble Lords, resonate with your Lordships’ House.

The Budget just delivered in the other place by my right honourable friend the Chancellor was about sustaining confidence in the markets; it was about demonstrating a willingness to continue to make difficult decisions to tackle the burden of debt; it was about implementing measures which are not governed by short-term headlines but aimed at long-term growth. I believe it achieves all three. Indeed, the influential ITEM Club has already alluded to the fact that the Government have achieved the aims of both controlling expenditure and increasing revenues.

It was interesting to follow a former City Minister after hearing him respond, in part, to my noble friend Lord Risby, who asked, “What is the alternative?”. I noted that he said that the Conservative Party and the coalition Government believe in small government. We do. What is the alternative—big government? We have had enough of that already.

At the height of this global economic downturn, I wish to focus on the City of London and its crucial role. Financial services account for a 10 per cent share of UK GDP—more than in many other major economies. On employment, UK financial services across the country employ more than 1 million people, with 3,000 people employed in financial services in more than 62 constituencies in the UK. Financial services generated a trade surplus of more than £36 billion in 2010, and the tax take of UK financial services amounted to £53.4 billion in the year 2009-10, accounting for approximately 11 per cent of the UK tax receipt. As regards UK GDP, we can see that the contribution that the UK makes with its financial services sector is greater than that of both France and Germany. At a time when the coalition Government are rightly making difficult decisions on expenditure, with the vital contribution made by the financial services industry to the Exchequer, even as the effects of the crisis wade across institutions in the City, the industry has demonstrated resilience in these challenging global economic conditions.

We need to ensure as a Government that we work with firms operating across the financial and professional services to see that the UK remains as a good place in which to invest and work towards creating a sounder environment for growth. Indeed, I welcome recent statements from the City in the preamble to the Budget about firms that have said that they would stay the course and remain in London. They recognise that steps were necessary in regulating certain markets and they see the need to address wider economic conditions. That means that they need to be part of the solution. We should move forward and stop blaming banks. The coalition does not blame banks, as was said earlier by noble Lords opposite, although we do hold the previous Government to account. But it is not about blaming banks; it is about working with banks.

Indeed, I am reminded of my early years. The noble Lord, Lord Hodgson, talked about credit scoring now becoming the core activity for banks—and banks need to look at that again. I am reminded of my own career. When I started and I walked into my first job as a lending officer within a bank, I was told, “Tariq, what you need to apply is Campari and ice”. As a teetotaller and a young trainee, I thought that was a rather strange acronym to put forward. It was a matter of looking at each small business, its character and ability and means to pay. We need to get banks focused on that style of lending. Therefore it is right that the current Government are working with the banks to ensure that we create the right conditions for small businesses and large corporates to prosper. We can take the example of Goldman Sachs and the programme for 10,000 small businesses, with free business and education courses. SMEs are reliant on bank lending, yet debt capital markets are another option. We need to work hard in ensuring that we remove some of the hurdles and barriers to diversify the financing sources for SMEs.

We are seeing new actions announced in the Budget, with reforms to the enterprise initiative scheme; raising income tax relief to 30 per cent from April; and the big society bank, dealing with the need to increase civil organisations’ financing through social finance intermediaries. On bank financing, there will be £190 billion in new credit for businesses and £76 billion to be allocated to the SMEs. We heard the noble Lord, Lord Sugar, allude earlier to those SMEs that have no collateral and those businesses that have no track record. The review and the extension of the enterprise finance guarantee in new lending, which should raise more than £2 billion in this Parliament, is also to be welcomed. Then there is the business growth fund for established SMEs with high growth potential. The UK banks have increased their contribution, bringing the total size of the fund to £2.5 billion. That is due for launch in May 2011. Then we will be working with the BBA to restore bank business relationships, which may have faltered, and to improve standards with lending and business mentoring. That demonstrates the willingness of this coalition Government to work with banks to deliver the solutions our economy and our country needs.

It is my belief that this Budget tackles the debt legacy left by the Labour Government. We have heard a string of Labour spokesmen offering us advice, but as my noble friend Lord Risby said, the only advice they can offer is that we are doing all of this too quickly. No alternative is offered. The approach of the coalition Government, with George Osborne as Chancellor, does not carry the support of the Benches opposite but it carries the support of institutions such as the IMF, the OECD and the IFS. It is a Budget of growth, focused on the long term and on the recovery of our economy and our country.