Economy: Growth

Lord Bilimoria Excerpts

Tuesday 29th January 2013 Lords Chamber

[Lord Bilimoria]

My Lords, I remember coming to this country as a boy in the 1970s, when my father was posted here as the Indian Army liaison officer with the British Army, and seeing a country on its knees. Just a quarter of a century before that, this country had the largest empire that the planet has ever known but, at that time, the world had written off Britain as a has- been. When I came back to England as a 19 year-old student in the early 1980s, Britain was the sick man of Europe.

I welcome the Minister and congratulate him on his amazing leadership in the Olympics. He has an impressive track record—to use a pun—of delivery, which is what this debate is about. If you fast-forward to today from the 1970s and 1980s, we are a country which is possibly entering a triple dip recession. Yet this country has shown, over the past three decades, that it can completely reform its economy and that, despite all these problems, we are one of the 10 largest economies in the world. With no empire we are still a very wealthy country with so much going for us. So what are we doing wrong? We cannot blame everything on the global situation or Europe. We seem to have come to a binary way of looking at the world: in or out of Europe, austerity or spending, tax cuts or tax rises. If only the world was so simple. As the noble Lord, Lord Forsyth, said, we know that public expenditure of 50% of GDP is not only unaffordable but not right. We also know that the coalition Government’s tough talk of austerity seems to mean that we cut everything, including higher education and defence, no matter how vital some of these areas are, as the noble Lord, Lord Skidelsky, said. Just look at what is happening, unpredicted, in North Africa now. How short-sighted are our defence cuts, particularly in regard to troop numbers, now that we are intervening in Mali?

We know that, even with the Government’s tough talk, expenditure is going up not down. As the noble Lord, Lord Forsyth, said, debt is going up, not down. We have heard throughout this debate that austerity may have actually worsened our chances of recovery. At the very least, it has sent out a very negative signal and sapped the confidence of our consumers and our businesses. The only thing this tough-talking austerity has achieved is maintained our triple-A credit rating, but it seems that we might be on the cusp of losing that, too. It is ironic that our current global financial crisis was caused by the lowest prolonged level of interest rates we had known. I am talking about interest rates of 5%. We have now had three years of interest rates 10 times lower at 0.5% and that is what is propping up our economy. What will happen when those interest rates increase?

The Government have, to be fair, tried a great many measures: quantitative easing, injecting liquidity, fixing the regulatory and supervisory banks and putting more power in the hands of the Bank of England. That is terrific. The Government are doing absolutely the right thing on schools and welfare. However, the Government need to be fair and firm and they need to go further in some of these areas. Our welfare bill, including pensions, is over £200 billion a year. There is still a benefits trap and it pays not to work. A trial of a scheme which requires compulsory community service for jobseekers has been successful. Could the Minister confirm that this will be rolled out nationwide? I remember an event organised by the noble Lord, Lord Forsyth, at which I spoke to the former Australian Prime Minister, John Howard, about Australia’s very successful welfare-to-work scheme. He explained that he thought it was going to be very unpopular but it proved to be very popular, including with the jobseekers themselves. That is not austerity—that is the wrong word. It is about being firm and fair, and that would be in the best interests of this country because work pays and it is good to work. Of course, if you genuinely cannot work, the safety net should be there to assist those who genuinely need it.

How do we therefore get this economy into growth? The appointment of the incoming Governor of the Bank of England, Mark Carney, sends a very positive signal—the appointment, for the first time in history, of someone who is not British shows what an open country and economy we are. It is going to bring in fresh thinking. For example, he has suggested that apart from inflation targeting we should have GDP growth targeting. Does the Minister agree?

To get the economy growing, not only do we have to cut wasteful, unfair public expenditure but we need to change the mindset and attitude from that of an entitlement culture to an aspirational culture. To generate growth, we need to be competitive. We have a situation in this country in which our taxes, overall, are far too high. Time after time, we have seen that reducing taxes not only increases investment in the form of entrepreneurship and foreign investment but creates employment. Increasing taxes, on the other hand, stifles the economy, jobs and consumers. As the noble Lord, Lord Forsyth, said, just today it has been revealed that this Government have implemented almost 300 tax rises. These increases are harming business. In my industry, the brewing industry, the beer duty escalator has contributed to killing our pubs—the heart of our communities. Our alcohol duties in this country are up to six times higher than in some of our colleague European countries.

As a proud manufacturer in this country, I know the huge potential that manufacturing has to spur the growth in our economy. Manufacturing creates jobs, not only through the people who work in the factories but through the supply chains and the service sector. We face an uphill battle in terms of balance of trade. Manufacturing is key to increasing our exports. My business has exported to more than 40 countries. The noble Lord, Lord Howell, said that the potential for exporting is enormous. At last the Government have woken up to the need to rebalance our economy in favour of manufacturing, but we need to go further. We need an industrial policy that targets a specific level of manufacturing as a percentage of GDP. Does the Minister agree?

It is good that the Government are reducing corporation tax to 21%, but are we being bold enough? What about Ireland reducing it to 12.5% and sticking to it, with all the problems that that country has gone through? Employers’ national insurance is one of the most unfair taxes. We should be offering a break to SMEs that create jobs. We should not be taxing the creation of employment but celebrating and incentivising it. We need to support SMEs, as the noble Lord, Lord Mitchell, said, particularly in raising finance. I have said it before and I will keep saying it: despite all the government schemes intended to encourage SMEs, they are not working. Finance is still very difficult to raise for all businesses, particularly SMEs, as the noble Lord, Lord Lamont, stressed.

We need to do much more to encourage our businesses to engage with emerging markets. I am the founding chair of the UK India Business Council. I have seen what UK Trade and Investment does and I applaud its efforts, but we need to do much more, particularly to correct the negative image of our economy created through the rhetoric of austerity that continues. It is spoiling a lot of the work that UKTI is trying to do.

One of the most important elements of recovery will be the creation of new businesses. If we invest in entrepreneurship, we could create those extra 1 million jobs that we are looking for, with tens of thousands of new businesses—small businesses. They have to employ just a handful of people and one can create a million jobs. Entrepreneurship needs to be celebrated and embraced. Businesses and the whole of Britain needs continually to understand and appreciate, as my noble friend Lord Jones constantly says, that it is businesses that create the jobs that pay the taxes that create the growth in our economy. We need policies to encourage optimism among our entrepreneurs, rather than gloomy rhetoric about cuts and tax rises.

One of the reasons that the United States consistently bounces back, year after year, is that it invests much more than we do in research and development. The Minister outlined some measures that the Government are taking to encourage it, but we need to do much more, not only in university research but in helping the private sector. Can the Minister really say that the Government are doing their best on this? Our higher education sector is the best in the world, along with that of the United States, despite our sector being underfunded proportionately by up to three times when compared with America. Just imagine how much more we could achieve if we had the same proportionate level of funding that the Americans put into higher education and research and development.

This has become a bit of a Cambridge University debate, with the noble Lord, Lord Deighton, and his supervisor, as well as the noble Lord, Lord Eatwell, followed by the noble Lord, Lord Wolfson, who was treasurer of the Cambridge Union when I was its vice-president. It goes on. He spoke about the quality of investments. We all know that infrastructure investment must happen, but it has to happen fast. HS2 is going to take 20 years. Is that some sort of joke—a high-speed network being delivered at slow speed? It baffles us all over here. What about airports? What is happening about that strategy? That needs to be implemented fast. These large infrastructure projects are desperately needed for our competitiveness.

The mindset of the Government needs to change and, in the words of our inimitable Mayor of London, Boris Johnson, this Government should “junk talk of austerity”. We need to do that because the Government have to be seen to be firm and fair, and positive and aspirational in their outlook. They need to make the cuts required in areas such as welfare, but they also need to show that we want to be more competitive in cutting taxes. We need to look outwards and work much more with developing nations, such as the BRICS countries. We must be confident that despite all our problems, we have so much going for us. Just imagine what we could achieve. On 26 January, it was India’s Republic Day. I am reminded of the words of Mahatma Ghandi, who said:

“Your beliefs become your thoughts. Your thoughts become your words. Your words become your actions. Your actions become your habits. Your habits become your values. Your values become your destiny”.

The time has come to change our beliefs and to believe in ourselves with confidence. Then we can determine our destiny.

Bank of England

Lord Bilimoria Excerpts

Tuesday 22nd January 2013 Lords Chamber

[Lord Newby]

My Lords, the Question that has been raised, about whether to change the inflation target, is an important one. Before any change is made, however, the question that we have to answer conclusively is: what could the MPC do under that target that it cannot do now? A debate is currently going on that is academic in part and in which all the commentators are involved. For the time being, however, we see no reason to change the current framework.

[Lord Bilimoria]

My Lords, the Government should be congratulated on appointing Mark Carney and for the first time bringing in somebody from outside the United Kingdom to serve as Governor of the Bank of England. It shows not only what an open country and economy we are but that we can get a fresh input of ideas—such as the suggestion that we should look at GDP as a target as well as interest rates. I think that the noble Lord, Lord Barnett, probably meant to ask whether the Bank of England should look at inflation targeting as well as targeting GDP—as the Fed in America always has—to help growth in the economy.

[Lord Newby]

My Lords, I am extremely grateful to the noble Lord. The House will be aware that under the Bank of England Act the MPC has to meet, or aim to meet, an inflation target. Subject to that, it has to aim to promote the Government’s broader economic objectives. It is worth pointing out that in the past 20 years, the vast bulk of which have been conducted under the current regime, we have had an inflation target of 2%, inflation having been one of the main economic problems facing this country over recent decades. Against a target of 2%, the outturn has been 2.1%, so it has been a pretty effective target.

United States Budget: Economic Impact

Lord Bilimoria Excerpts

Monday 10th December 2012 Lords Chamber

[Lord Newby]

My Lords, I agree with the noble Lord that the US economy is extremely important to our exporters. Last year, we exported £80 billion of goods and services to the US, which amounted to 16% of our total exports. However, perhaps I have watched too many episodes of “The West Wing” but I suspect that a deal on the US budget will be done in time, albeit at the last minute.

[Lord Bilimoria]

My Lords, it is estimated that if the US falls off its fiscal cliff, its GDP will fall significantly. Will the Minister admit that, following the Chancellor saying in the Autumn Statement that deficit reduction will now take three years longer, we in this country have already fallen off our own fiscal cliff?

[Lord Newby]

No, my Lords, the situation is quite the opposite. The fact that the Government took decisive action in 2010 to effect a fiscal consolidation over a number of years—and then flexed that, given the severe headwinds that we faced from the eurozone—means that we are not faced with a fiscal cliff and we are now looking to a period of growth next year that will be higher than that anticipated in, for example, the eurozone.

Financial Services Bill

Lord Bilimoria Excerpts

Wednesday 18th July 2012 Lords Chamber

[Lord Borrie]

Yes, of course I will withdraw my amendment, but I must express disappointment with the disinclination of the Minister to take the one further step that would enable a change to be 100%, rather than whatever percentage of good boys will conform to a code of practice.

[Lord Bilimoria]

My Lords, I accept that there is an element of contradiction in advocating, on the one hand, that we go carefully on transferring consumer credit but, on the other, that we transfer CMCs. I just make two points on consumer credit. I argued strongly for its transfer at the time of the FSMA; I am pleased to see it happening; I think that that is correct. CMCs are basically a financial service. They are lodging claims for people, whatever the cause. I hope that, in due course, it may be transferred to the FCA.

Amendment 108 withdrawn.

Eurozone

Lord Bilimoria Excerpts

Monday 9th July 2012 Lords Chamber

[Lord Sassoon]

I am grateful to my noble friend for confirming the success of the recent European Council, a Council which confirmed among other things that the single market had to be considered in the context of fiscal union, which brought important parts of the new EU patent court to London, and which considered a raft of other growth-related matters.

[Lord Bilimoria]

My Lords, will the Minister confirm that the Government keep pushing the eurozone countries to go in for more fiscal and monetary union and yet do not seem to accept that that cannot take place unless there is a sovereign union in the way that there is in the United States of America or a country such as India? Why do the Government not accept that, and why do they keep encouraging the eurozone countries to pursue more and more fiscal and monetary integration?

[Lord Sassoon]

My Lords, I am pleased to say that no encouragement is now needed from the UK. The paper by the four presidents—the presidents of the European Council, the European Commission, the European Central Bank and the Eurogroup—set out what they believed to be appropriate in relation to fiscal and monetary union. That work will continue and the UK is participating in the discussions in and around those reports. We are being fully supportive of those efforts.

Banking Reform

Lord Bilimoria Excerpts

Thursday 14th June 2012 Lords Chamber

[Lord Bilimoria]

My Lords, building on what the noble Lord, Lord Eatwell, has just said, if we look back at the financial crisis, the FSA was asleep on the job, and that is being addressed by the Financial Services Bill. There is no question about that. The organisations that have got away scot free in the banking reform and the Financial Services Bill are the credit rating agencies, which were so much to blame globally for the crisis, the credit crunch and the great recession. Will the Minister address that point? Secondly, does he agree that it is surely a question of balance? Have we got the balance right with the banking reforms? There is no question that the good point about the big bang is that it opened up the economy, but the negative is that it is probably too open and not regulated enough. Are we going too far here? Quite frankly, this looks like Groundhog Day to me. We have been here before in 1933 with the Glass-Steagall Act. What lessons have been learnt from that? Have we not learnt?

[Lord Sassoon]

The noble Lord, Lord Bilimoria, makes a very good point about the credit rating agencies. The Bill is about the structure of banking. Credit rating agency regulation is now essentially in the hands of the European Commission. The appropriate sub-committee of your Lordships’ European Union Committee produced an excellent report, which we debated recently, on this subject. Yes, we must keep the subject of credit ratings under discussion, but the competence is not primarily here, and it is not the subject of the Statement we are addressing.

On the lessons of history, Glass-Steagall and so on, this is a different model from the Glass-Steagall model and from the model that the US is implementing at the moment. The commission talked to a very wide range of people and, I am sure, studied the history very carefully. In the knowledge of the current and historical international precedents, that was its fundamental judgment about the high but flexible ring-fence. I believe it has come up with something that takes all those lessons on board, is appropriate for what we need now and is not going to impact significantly on the necessary driver for growth in this country, which is keeping credit flowing this year, next year and the year after.

Financial Services Bill

Lord Bilimoria Excerpts

Monday 11th June 2012 Lords Chamber

[Lord Myners]

My Lords, I rise briefly to add my support to the views expressed by the previous speakers. There are significant issues in this Bill which require attention. They are not issues that divide on party political lines, and it is clear from today’s debate that there is a wealth of information and understanding in the House. Having previously taken legislation through Committee both in the House when I was a Minister and in Grand Committee, I have no doubt that this Bill should be appropriately considered by the whole House in order to be able fully to draw upon the knowledge and expertise of your Lordships. I would enjoin the Minister to withdraw the Motion that the Bill be taken in Grand Committee in order to allow further time for discussions through the usual channels—taking into account the views which have been expressed this evening from all sides of the House.

[Lord Bilimoria]

My Lords, perhaps I may add that this came to a head with the Welfare Reform Bill, which was committed to a Grand Committee. I remember what a stand-off there was between the Opposition and the Government. That was a sad day for this House. In the end a compromise was reached so that much of the Bill was debated on the Floor of the House. We must be careful about the signal we send out to the country about the priority of something as major as this crisis, which has brought the country to its knees. We must be careful of the message we send out before we make this decision.

[Lord Lucas]

My Lords, we have to face the fact that we do not do as good a job in Grand Committee as we do in a Committee of the Whole House. There is no opportunity for Peers widely to participate in Grand Committee in the way that there is in the Chamber. Given the importance of the Bill and the depth of interest in it, I hope very much that the Government will listen to what has been said.

Financial Services Bill

Lord Bilimoria Excerpts

Monday 11th June 2012 Lords Chamber

[Lord Bilimoria]

My Lords, it is a privilege to follow noble Lord, Lord O’Donnell, and I am sure that I speak for all your Lordships in congratulating him on the most superb maiden speech. I have known Gus O’Donnell from the time he was Permanent Secretary to the Treasury, going back 10 years. I can honestly say that not only did I always like him as an individual but I never ceased to be impressed by him. After the Treasury, he was at No. 10 Downing Street, Cabinet Secretary, Head of the Home Civil Service, and Secretary to the Cabinet Office. In fact, he followed exactly in the same footsteps as our noble friend, the noble Lord, Lord Turnbull, who also went from being Permanent Secretary to the Treasury to holding those three positions at Downing Street. Now the jobs of the noble Lord, Lord O’Donnell, are being performed by three individuals. Let me emphasise that I am not saying that any of his successors are one-third the man that the noble Lord, Lord O’Donnell, is. He also had the distinction of serving three Prime Ministers—Tony Blair, Gordon Brown and David Cameron—in his six years at No. 10. Talk about high-flyers—you do not fly any higher than the noble Lord, Lord O’Donnell. No wonder people call him “GOD”—not just because of his initials but because of the huge respect that we all have for him. He has achieved all this as a youngster—he is still in his fifties; he has not even hit middle age yet. That will start when he turns 60 in October.

The noble Lord was an Oxford Blue in football, and I think that by now he must be realising—football being a game of two halves—that our Chamber, unlike the other place, is not just about the Government and the Opposition; we have the added dimension of the Lords spiritual and the Cross-Benchers. We, the Cross-Benchers, are so proud and happy to have the noble Lord in our fold. He has already said that he could be in the running for the position of the next Governor of the Bank of England. Watch this space. We look forward to many more fabulous expert contributions from the noble Lord in the years to come.

I have always said that one of the best things that Gordon Brown ever did was create the independent Monetary Policy Committee when he took over as Chancellor in 1997. It was able every month to set interest rates on an independent basis, proactively and reactively—and transparently. However, one of the worst things he did was create the tripartite arrangement of the Treasury, the Bank of England and the FSA. In the good times—the boom times—until 2007, this tripartite system was a happy merry-go-round. When we hit the crisis, this happy merry-go-round became a hopeless blame-go-round, and we realised that the tripartite system was not fit for purpose, as the Minister said. It was disastrous, and I am so happy to see that with this Bill, the buck will now stop firmly and squarely with the Governor of the Bank of England.

We know that the Governor of the Bank of England, Eddie George, was extremely concerned when the tripartite system was set up, and he voiced his concern that the Bank of England was having its powers taken away and transferred to the FSA. We now know that this was the most foolish thing to have done. The FSA has the joint remit of financial services in the consumer market, protecting consumers and promoting competition, and was so focused on that consumer-facing aspect that its role of supervising and regulating the banks was ignored and neglected. Frankly, the FSA was out of its depth and ignored the most crucial aspect of its job. I could say that the FSA stood for “fairly sleepy agency”. I remember taking part in debates in the House in the run-up to the Northern Rock nationalisation in 2008, four and a half years ago. I remember finding out at that point that the FSA had researched Northern Rock and in 2006 had marked it as “high impact” and as requiring close supervision. It also marked it for a review in three years’ time. That was an organisation that was on top of things and wanted to act quickly, but of course it was all too late. By September 2007, Northern Rock was bust and £26 billion was required to bail it out—the largest amount required for any company in the world at that time. Of course, following the sub-prime crisis that led to the credit crunch, which led to the financial crisis, which led to the great recession, which led to the sovereign debt crisis, which has now led to the eurozone crisis, we now know that £26 billion is pocket money.

I welcome many of the Bill’s provisions but I am concerned that there is too much focus on the new bodies being created and on the theme of stability. No one would dispute the need for these bodies—and I congratulate the Government on introducing them—but I worry about the implication of leaving the Monetary Policy Committee pretty much as it is. No one could dispute the requirement for stability and prudence but, as many noble Lords have said, these must go hand in hand with growth in the economy.

In the spring of 2008, when Northern Rock and Bear Stearns had already gone to the wall, seeing the writing on the wall the MPC sat idle. It was so obsessed with its inflation targeting and so afraid of having to write to the Chancellor that it kept interest rates at 5% for six months after the collapse of Bear Stearns. Instead of bringing them down straight away, it waited too long and then had to bring them down sharply from October 2008 onwards. We must change the myopic, blinkered approach that the MPC has been forced to take, focusing solely on inflation and not, as in America, and as the noble Lord, Lord Lamont, suggested, on maximising employment and, as my noble friend Lord O’Donnell said, looking at the overall state of the economy. Through this Bill, the Government must consider revising the MPC’s mandate to ensure that it plays its part in securing recovery for the long term.

Talking about new bodies, the FPC’s mandate is seemingly pulled from the Hippocratic oath. Its mandate is to do no harm to the economy. It seems to have left out the rest of the oath, as there is no real mandate to cure the economy of the ills from which it may be suffering. I ask the Minister whether the mandate of the FPC—as well as the general system of financial and monetary regulation, including the MPC, which does not really seem to fall under the Bill at the moment—can be expanded to target growth and full employment and not just stability.

The acid test of the Bill is: if this new structure had been in place five years ago, would it have prevented the scale and effect of the crisis that we had? Would it have been able to anticipate things—to hear the warning bells and react to them in time? Would it have been able proactively to see things coming? That is the test, and I should be interested to hear whether the Government have assessed that, even in a simulation exercise.

When I chaired the UK India Business Council, of which I am president, I would boast to our counterparts in India about the wonderful light-touch regulation that we had in Britain. Of course, we now know that it was flawed. It is not about light touch; it is about the right touch. Do the Government really think that this new system strikes the right balance of regulation that this country so desperately needs?

What about the structure of the Bank of England? Much power has been given to the Bank but, as has been said, cannot the court be restructured to have a more supervisory role, reporting directly to Parliament? Not enough non-executive directors are proposed. Can the Government say that they have the balance right on all the boards—the FPC, the PRA and the Court of the Bank of England—with enough non-executive directors? Are they going to be properly resourced in terms of access to information in order to perform their roles properly? Also, the MPC publishes information every single month and is very transparent. Will the FPC, the FCA and the PRA also publish regular reports in a transparent manner?

I go back to the point that the MPC is neglected in the Bill. The only crossover seems to be the governor himself. I do not have too much of a problem with the buck stopping with the governor and with the governor having all these roles. However, I am worried about whether there is a mechanism for co-ordinating all these, which the noble Lord, Lord Myners, who is not in his place, spoke about. There could be conflict between boards. There are dual roles and there could be duplication. If there is a problem, things will fall between the cracks and we will go back to the old blame-go-round. This clarity of co-ordination where the cultures are concerned is not clear and we need to work on that in Committee.

What about the powers of the PRA? It is important to get this figured out. It is focused too much on large institutions; but the Australian Prudential Regulation Authority implemented the whole of Basel II through guidance alone and shows how general guidance can sometimes be given. This whole area of guidance is completely missing in the Bill.

To conclude, this Bill is wonderful news. We are actually putting power back into the hands of the Bank of England and I welcome that very much. However, I think that we are missing a key aspect—the role of the MPC and the co-ordination between the MPC and the FPC in making sure that the new structure is focused on achieving stability, preventing crises, generating maximum employment, generating low inflation and moderate interest rates, and, most importantly, on generating and sustaining growth in the economy.

Debt

Lord Bilimoria Excerpts

Tuesday 29th May 2012 Lords Chamber

[Lord Sassoon]

My noble friend is right to point out quickly the confusion that many of us occasionally suffer on the difference between debt and deficit. Of course, the two things are different.

[Lord Bilimoria]

My Lords, does the Minister agree that one of the main reasons for the financial crisis and the great recession was the record level of low interest rates—we were talking of 5%? Now, for three years, interest rates have been 10 times lower than that. Do the Government want to help money to flow through? Lending needs to increase to small businesses and it is not happening at the moment. Secondly, could the Minister summarise the Government’s strategy and prognosis for the interaction between debt, deficit, interest rates and inflation?

[Lord Sassoon]

My Lords, I think we shall need a little longer on the latter part of the question. The noble Lord, Lord Bilimoria, raises an important point in that the first thing we have to do is to ensure that interest rates are kept low. I need hardly remind the House that 10-year interest rates, as of last night, were at almost record lows at 1.75%. We want to see the benefit of those low interest rates flow through to businesses, which is why, among other things, we have the national loan guarantee scheme. In the time of the noble Lord, Lord Barnett, there was not 3% inflation but it peaked at 26.9% and interest rates were more than 10%. That is why I know he is sympathetic to the challenge we have and why my right honourable friend the Chancellor is doing such a fantastic job in these difficult headwinds.

Queen’s Speech

Lord Bilimoria Excerpts

Wednesday 16th May 2012 Lords Chamber

[Lord Bilimoria]

My Lords, six months ago I read out this quote:

“The era of procrastination, of half measures, of soothing and baffling expedients, of delays, is coming to its close. In its place, we are entering a period of consequences”.—[Official Report, Commons, 12/11/36; col. 1117.]

Those were the words of Winston Churchill in 1936, and we all know what happened three years later.

We have finally had a Queen’s Speech, after what I believe was an unacceptably long gap of two years. Could the Government assure us that this will not happen again, and that we will have year-long sessions in future, as is customary?

One message that the Government have very clearly got across in their two years is talking tough about austerity, and the two big benefits of this have been that Britain has retained its AAA credit rating and continued to enjoy phenomenally low bond yields, as the noble Lord, Lord Razzall, said. But how long can tough talk last? I am glad that the Government have stopped blaming all the problems on the previous Government—although they have just done so. Now they are blaming Europe, and we have the eurozone crisis building up and about to explode, as many of us predicted. France and Germany, formerly the best of friends, are now at loggerheads, and there is growing certainty that Greece will have to leave the euro—it is almost definite—with all the possible contagion that this will bring. We have entered a double-dip recession. The Nobel laureate, Paul Krugman, wrote recently:

“Britain … has achieved the remarkable feat of doing worse this time around than it did in the 1930s”.

And what is in the gracious Speech? We hear that:

“A bill will be brought forward to reform the composition of the House of Lords”.

Is that the most important thing in the public’s mind? We know that it is not. It is the lowest priority to this country, and if we go down that route we will be accused by our people of being like Nero, fiddling while Rome burns.

On top of this, we have had a Budget with some great measures in it, such as cutting the 50p rate of tax. I believe that it should go down to 40p. It also reduced corporation tax, which was fantastic. On the other hand, it was a PR disaster, upsetting so many people: charities, pensioners, heritage lovers, the Church of England and even pasty consumers. Now, as we have heard from the noble Baroness, Lady Royall, the Institute of Chartered Accountants in England and Wales has said that the child benefit plans announced in the Budget are seriously flawed.

On top of that, we have business leaders criticising the Queen’s Speech for not having enough of a plan for growth for business. As we have heard, the response from the Government is that these leaders of business should stop whinging and work harder. I know from running my business how tough it is to grow a business in this economic environment—and the Government are saying to me that I am not working hard enough? How dare they?

We have had blunder after blunder. The NHS reform has been badly handled to the extent that we face the dreadful thought of doctors going on strike. The defence review was rushed through, and now we face the blunder of having no carriers and no Harriers for almost a decade, with the Government executing a U-turn on the carrier aircraft which will cost us billions from the defence budget. Will the Government accept that they have made a blunder with regard to the loss of capability and of money on that score?

The Government have cut higher education funding, one of the jewels in Britain’s crown. Just last week a report was released that found that in government expenditure as a percentage of GDP for higher education, we in Britain came 41st out of 48 countries in the world. I have been saying for many years that we need to increase spending on higher education funding. One reason the United States is always ahead of the game is because it invests far more, in absolute terms and as a proportion of GDP, in both public and private expenditure on higher education. That is why its productivity and its innovation are always streets ahead. Why do not we learn from that? Could the Government explain?

Then we have had the big society—big talk and big platitudes, with the best of intentions. People could genuinely question whether the Government are in tune and in touch with people. Only one city out of 10 wanted an elected mayor. Now we have elected police commissioners, and we know that the public are not that keen on that. The turnout in elections is bad, with that for the London mayor elections at only 38%. In India, in the state of Uttar Pradesh, turnout was at 60% in the recent legislative elections. Do not the Government understand that people do not want more elections, politicians and partisan bickering? People’s worries are about their jobs, job security and economic prosperity; that is the priority.

On top of this we have had the immigration cap, which wrong-headedly encompasses foreign students. Would the Government admit that, by including foreign students in the overall immigration numbers, they are forgoing an enormous opportunity, which brings up to £8 billion into this economy? Nick Pearce, a fellow member of the UK-India Round Table and director of the IPPR, recently asked:

“Will the next generation of world leaders, like Manmohan Singh, Benazir Bhutto or Bill Clinton, be educated in the UK if the UK Government restrict the flow of students to the UK’s world-class universities?”.

As someone who came to study in this country from India, I know how much foreign students bring to this country and the bridges that we build for generations to come.

On the other hand, where schools are concerned, I pay tribute to my old sparring partner, Michael Gove. For two years running he led the Oxford Union while I led the Cambridge Union—although we will not ask what the result was. Last week we both spoke at the Brighton College education conference. I believe that he is doing absolutely the right thing in freeing schools from the shackles of local councils, encouraging free schools and academies, and appreciating the independent schools in this country, which are the best in the world.

The gracious Speech states:

“My Government will build strategic partnerships with the emerging powers”.

As president of the UK India Business Council, which is backed by UKTI, I see the phenomenal opportunities offered by companies such as Tata, which owns Jaguar Land Rover, creates jobs over here and now exports Jaguar Land Rover cars back to India. That makes me feel very proud. However, as a proud manufacturer, I note that there was nothing in the gracious Speech about encouraging manufacturing or providing tax incentives for manufacturing. Will the Minister tell us why the Government cannot do this?

We have a bloated public sector that the Government are rightly trying to cut. Public spending should be 40% of GDP. We have taxes that are too high in terms of VAT, fuel duty and income tax, and we have a welfare state and a benefits trap that need to be addressed. I am glad to see that the Government addressed welfare spending in the gracious Speech although I understand that this is a sensitive issue.

[Lord King of Bridgwater]

The noble Lord says that no encouragement is being given to manufacturing. However, is he aware of the very encouraging recent news about major new investment in this country on the part of two major car companies? That is significant news for manufacturing and builds on today’s very welcome announcement that this year, for the first time since 1976, we have exported more cars than we have imported.

[Lord Bilimoria]

I could not agree more with the noble Lord. All I am saying is that, if we had more incentives for manufacturing, we would have even more such success stories. In fact, Britain has so much going for it. We have the finest universities, the best in design and creative industries, tourism, sport, advanced engineering, the City and our financial markets, the accounting profession, the law profession, and we have our wonderful monarchy and Her Majesty celebrating the Diamond Jubilee this year. We need to harness these amazing assets and use them to generate growth. We need infrastructure spending to create the environment for business to succeed. However, businesses are not getting the money. Will the Minister tell us what is happening with the £20 billion credit-easing scheme? I do not think that it is flowing through.

I conclude: more than anything else, the Government need to show real leadership, not to create fear through austerity or accuse business leaders of whinging and not working hard enough. They need to create hope and optimism—hope, not hopelessness. We have so many strengths in this country; they just need to be unleashed. We need to unleash the great British spirit—the spirit of Great Britain—and unleash hope, optimism, opportunity and aspiration.