Employment

Lord Bilimoria Excerpts

Thursday 20th March 2014 Lords Chamber

[Lord Bilimoria (CB)]

My Lords, when the United States was formed in 1776, it took 19 people on a farm to produce enough food for 20 people, so most people had to spend their time and effort in growing food. Today, it is down to 1% or 2% to produce the food. So let us consider the vast amount of supposed unemployment produced by that. There was not really any unemployment produced; what happened was that people who had formerly been tied up working in agriculture were freed up by technological developments and improvements to do something else, which enabled us to have a better standard of living and a more extensive range of products. That is freedom—arguing against the race to the bottom. The noble Lord, Lord Giddens, talked about robots, but I have gone back to 1776. Nothing has changed in that sense.

I thank the noble Lord, Lord Freud, for initiating this debate. I have just a few points to make. First, the rise in the overall employment rate is real and is at record levels and, correspondingly, there has been a fall in unemployment. With the economic dominance of the south-east, there is a need to rebalance the economy by supporting manufacturing, particularly in the regions. Continued tax reform is also needed. The Office of Tax Simplification is an oxymoron; our tax system is getting more and more complicated.

UK unemployment has fallen by 63,000 to 2.33 million. The unemployment rate now stands at 7.2% of the population. As the noble Lord, Lord Holmes of Richmond, said in his excellent speech, employment has risen to a record of more than 30 million. The bad news is that the NEETs are still close to the 1 million mark; although the figure is falling, it is still above 900,000. The number of people claiming jobseeker’s allowance has fallen to 1.175 million. Over the year that number has dropped by 363,200, which is terrific. That is all really good news.

The new Governor of the Bank of England, Mark Carney—I say new, but he has been in post for almost a year—made a fundamental mistake in saying that he was going to give us forward guidance and that when unemployment fell to 7% the Bank would think of raising interest rates. That figure has been reached more quickly than thought, and he has had to back-track on the forward guidance almost straightaway. Interest rates are still at a record low of 0.5%. Just think: what got us into this financial crisis was what was then perceived as being the longest period of low interest rates for a long time—and they were then at 5%. Interest rates are 10 times lower than that, but still we cannot increase them, although the unemployment figures are near, or at, what the Governor of the Bank of England wanted them to be. They have been kept unchanged at 0.5%.

The real issue is public expenditure. Public expenditure used to be around the 40% mark. It was 42% of GDP in the early 1970s. Then under the previous Government it went up to almost 50% of GDP. By the late 1980s it was below 40%. We need to get that public expenditure down to 40%, because our tax-collecting ability historically has been around 38% to 39%. If we can get our public expenditure down to 40% we will have a balanced economy and will eliminate the deficit.

UK manufacturing is not dead, by any means. We are excelling in manufacturing. Our aerospace industry is the second largest in the world. Our automotive industry, of which I speak regularly, is flying. When Tata Motors bought Jaguar Land Rover in 2008, I spent a whole day at the Land Rover factory. Wow—it was impressive. I am due another visit, because my last one is already outdated. The company is now making more in profits than it paid for a business that nobody was interested in buying in 2008: that is how well it is doing. It is also exporting and creating employment.

We have heard the great news that Bentley is moving its 12-cylinder engine manufacturing from Volkswagen in Germany to Crewe in the UK. How wonderful is that? Rolls-Royce is manufacturing at Goodwood. Therefore, we have the best of the best quality—the best cars in the world—being manufactured here in Britain.

Our chemical industry is huge; our defence industry is huge; our electronics industry is huge; and so is our food and drink industry. I speak from my own experience. I mentioned yesterday that we were manufacturing a great deal in Europe. In fact, the majority of our production was in Europe some years ago and we decided to reshore to the UK because here we can produce world-class beer. We now produce in Burton upon Trent; we are winning award after award and exporting around the world. I am proud of that.

We have a plastics industry and a steel industry; we also have a textile industry, which we thought was dead but which is not dead at all. There are still almost 80,000 businesses employing 340,000 people and generating £11.5 billion of turnover.

What about the regions and the whole focus on London? We have a country where one big city is the capital and the financial capital and is much bigger than the second biggest city, Birmingham—let alone Manchester or anywhere else. If we look at a large country such as the United States, New York is big but you have Los Angeles, Chicago and lots of other big cities. If we look at another large country, India, there is Mumbai but also Chennai, Bangalore, Hyderabad, Calcutta and Delhi, which are huge cities in their own right. We have this one big city. I am very proud of London; it is the greatest of the world’s great cities. But how can we encourage business and employment in the regions? The answer is simple: we must encourage manufacturing. We cannot manufacture in London; we have to manufacture in the regions. That can create the jobs.

The Financial Times analysis tells a story in which the percentage of people on jobseeker’s allowance benefits dropped by more than 30% last year in places as varied as Oldham in the north, Stafford in the Midlands and the Suffolk coastal region. This is great news. If we can carry on in that vein, we will have growth and employment outside London.

Again, worries about lopsided economic growth are not new. The noble Lord, Lord Giddens, talked about developments 50 years ago, at a time when the economy was also recovering after a period of stagnation. The then Labour leader, Harold Wilson, complained in Parliament of a two-nations economy and said that,

“the Chancellor has to try to restrain the overheating which he sees in the South at a time when large areas in the North are still in the chill grip of his predecessor’s freeze”.—[Official Report, Commons, 14/4/1964; col. 285.]

Those were the comments of Harold Wilson on Reginald Maudling’s 1964 Budget speech.

We should look at the great signs of success. We have already heard that Hitachi is to move its rail business headquarters from Japan to the UK, and that Bentley is to move from Germany to the UK. Companies from Japan and Germany, the pinnacles of high-tech manufacturing, are moving to the UK. This is fantastic. Hitachi says its move will expand the number of rail jobs to 4,000, which is excellent. I have already mentioned Jaguar Land Rover and Bentley. The Chancellor has promised to cut the costs of manufacturing to boost growth, and he has done it. He predicts that energy costs will go down by £7 billion. Again, that is excellent.

Immigration is one area where I fundamentally disagree with the Government. Their immigration policy has sent out the wrong signals around the world to foreign students and academics. That affects not just universities such as Oxford and Cambridge, where 30% of the academics are foreign. For example, more than 30% of the academics at Birmingham University are foreign. As I say, bad signals have been sent out, and the number of Indian foreign students is now plummeting, but we should look at the contribution Indians make to our economy. On Friday, I went to the celebrations for the principal of West Nottinghamshire College, who has been made a dame. She is the first Indian-born dame in 83 years. She came to this country as a young bride unable to speak English but today heads the most successful further education college in the UK, and probably one of the most successful in the world. That is the power of immigration.

The statistics show that Indians make a huge contribution to our economy. In 2013, Indian men topped the ethnicity employment table in the UK and Indian women came second. Indian men had the second lowest rate of unemployment—and so it goes on. One in seven companies is founded by a migrant entrepreneur. Migrants make a huge contribution to our economy and create jobs. Migrant entrepreneurs have been a benefit to this country.

In looking at overall business performance, we must not neglect SMEs. The Minister talked about all the Government’s initiatives. I was on the National Employment Panel for eight years and on the New Deal task force before that. SMEs account for 59% of private sector employment and 48% of private sector turnover. Within SMEs, small businesses account for 79% of employment and 69% of turnover. We need to encourage these small businesses to grow, because the argument about big companies not paying corporation tax misses the point. Yes, we would like them to pay more corporation tax, but that tax makes up only 8% of our tax take. Most of our tax take comes from the tax that is generated by employment—more than 50% comes from PAYE and NI-paying employees and NI-paying employers. The more jobs we create, the more tax we will generate; therefore we should encourage SMEs to grow.

I have suggested to the noble Lord, Lord Young, that we should have a competition in this country to sponsor staff from 100 companies to attend the Cranfield School of Management business growth programme or the University of Cambridge Postgraduate Diploma in Entrepreneurship. It costs £10,000 to attend these programmes. The businesses that send people to attend those programmes will grow faster than other businesses because we will be training our entrepreneurs to perform better and grow their businesses.

We need to go further on national insurance breaks. Ralf Speth, the chief executive of Jaguar Land Rover, said that the secret of his company’s success was innovation. UK Trade and Investment was mentioned by the noble Lord, Lord Shipley. Exports are crucial. The further we go down the route that I am suggesting of training our entrepreneurs, encouraging manufacturing in the regions and generating jobs, the more exports will follow. I have mentioned my own experience as an example of that.

To conclude, what is the purpose of business? I think that, yes, you want to create a product that people love, but you also want to create employment for the well-being of the people whom you employ. In every survey that asks people what is most important to them, they say family. What else is important to them? They say health. What else is important to them? They say their working life. If people do not work, they are not going to be happy. A happy country is a country with, ideally, full employment. We will never get to full employment, but at least let us try.