Economy: Budget Statement

Lord Bilimoria Excerpts

Thursday 22nd March 2012 Lords Chamber

[Lord Bilimoria]

My Lords, when I found out yesterday that the noble Lord, Lord Heseltine, was going to be making his maiden speech today, luckily I was sitting down. I remember very clearly bumping into the noble Lord soon after I joined your Lordships’ House. I asked him whether it was true that he had not made his maiden speech, having already been in the House at that time for five years. He said it was absolutely true, and I asked why. He replied, in a very humble manner, “Who wants to hear from me?”

He was in the other place for 35 years; a Cabinet Minister for over 20 years; what a shame it is that we, as a House, were losing out on all that wonderful experience. Yesterday was the Chancellor’s day, as all Budget days are, but it was also the birthday of the noble Lord, Lord Heseltine. Yesterday was also a special day for me as a Zoroastrian Parsi, as it was our new year, the first day of spring. So it is an excellent new year’s resolution for the noble Lord finally to make his maiden speech, more than a decade after joining your Lordships’ House.

Look at what we have missed out on. I am sure that some of your Lordships would have wished for a decade’s silence from certain of our fellow Peers, but certainly not from the noble Lord, Lord Heseltine. We know the wonderful apocryphal story about Michael Heseltine, as a young undergraduate, jotting down his future on the back of an envelope: “Millionaire at 25, Cabinet Minister at 35, party leader at 45, Prime Minister at 55”. Of course, the noble Lord denies this, but the reality is that he has achieved so much, and he could have—and many would say should have—become Prime Minister.

The noble Lord might not have reached this final milestone, but there was never a dull moment in his career. He was in the unique position of being a truly successful entrepreneur in his own right, while also serving as a very successful politician. He was an impactful president of the Board of Trade in the early 1990s. There is no better person to have been selected by the Government to chair a review into the potential for links between the state and private sectors. How the Chancellor would have benefited from having that review before yesterday’s Budget. Thanks to this, we in this House have now had the benefit of hearing the fantastic contribution of the noble Lord, Lord Heseltine, today, and we hope that his famine of speaking will turn into a veritable feast for us in the years ahead.

[Noble Lords]

Hear, hear.

[Lord Bilimoria]

My Lords, our economy has been in recession, and thereafter bumping along the bottom, for coming up to four years now. There is no question that the Government’s tough stance and posturing with regard to austerity have sent out the message internationally that has enabled our borrowing rates to remain extremely low. It has also sent out a message to the country that we need to tighten our belts and make sacrifices. To that extent, the Chancellor has had to try his best to balance his books. Of course, a balanced budget is a very prudent thing indeed. However, we have to ask ourselves, what is the point of a zero-sum game? As Martin Wolf said in the Financial Times today, this is:

“A Budget without economic significance”.

On the one hand, as an entrepreneur I have been thrilled with so much of what the Chancellor announced yesterday. The reduction in corporation tax rates, which will give us one of the lowest rates in the G20, is an excellent decision. The removal of the 50p rate of tax, albeit not back to 40p where it should have gone, is at least a move in the right direction and makes a huge impression in attracting investment and the brightest talent to this country from abroad. Psychologically, the 50p rate was over the tipping point, and I am happy to see it removed.

On the other hand, this Budget has hurt a great many people. Our fuel taxes are the highest in Europe by far. Consumers have been squeezed with high inflation, and in many cases falling earnings, and higher taxes such as VAT. In my own industry, as chairman of the Cobra Beer Partnership, a joint venture with Molson Coors, I have seen the damage excessive taxes have done. While we are fortunate that our brand is growing, the beer industry in Britain has shrunk by nearly 30 per cent in 30 years.

As Mark Hunter, chief executive of Molson Coors UK, said in today’s Times:

“There are no winners from the beer duty escalator. Ordinary British drinkers are paying more tax to drink less beer, reducing overall government tax revenues and forcing British brewing into a deeper, duty-fuelled decline”.

Mark Hunter also happens to be the chairman of the British Beer & Pub Association. He said further:

“Beer drinkers in Britain already pay a whopping 40 per cent of all European beer tax and yet drink only 13 per cent of the beer—and we are disappointed that the Government has chosen not to end this crippling policy”.

Sadly, we are still seeing 15 pubs close each week—pubs that are at the hearts of our communities. When you hit beer, you do not just hit pubs and the brewing and manufacturing industries, you also hit our farmers. Our beer is brewed in Burton upon Trent and 100 per cent of our barley is British, and we are proud of it.

What we have lost in this country over the past decades is a balanced economy. As president of the UK India Business Council, the origins of which are the Indo British Partnership, which was launched by the noble Lord, Lord Heseltine, when he was President of the Board of Trade in 1993, I know that India aims to have manufacturing making up 25 per cent of its GDP. In our case, manufacturing is heading towards 10 per cent of GDP. Increasing manufacturing increases jobs, and manufacturing jobs lead to services jobs, both directly and indirectly, and to jobs in the supply chain. My big concern about this Budget is that I do not believe it is doing enough to generate growth and jobs. In fact, the growth forecast is 0.7 per cent to 0.8 per cent, and then to more than double to 2 per cent next year. When can we believe any of these forecasts? Will the Minister give us some reassurance on that?

The Minister talked about the £20 billion of credit easing for SMEs, which is fantastic news. But I was disappointed that, sadly, the media hardly covered this. Will the Government talk more about the scheme? Will it be like the Government’s small firms loans guarantee scheme? Will this money flow to the banks? Already I have heard that HSBC will not sign up to it. How will the Government ensure that banks lend this money to the entrepreneurs who need it? The Government urgently need to flesh out their plans and communicate this to business and to the country because it has the potential to have an enormous impact on SMEs, which are, after all, the engine of the growth of this country.

As the noble Lord, Lord Heseltine, has said, we need to invest far more in research and education if we are to make this country competitive and improve our productivity. This is, unfortunately, where the United States, time and again, is way ahead of us. While we are bumping along the bottom, the United States economy has been growing. One of the main reasons for that is that it invests far more in higher education and in research and development than we do. I do not think that this Budget has done enough to close this gap. Will the Minister respond to that please?

As regards our Armed Forces, we have been in Afghanistan longer than World War I and World War II put together. We have lost precious lives and have so many badly wounded soldiers, which has caused huge loss, pain and grief to friends and families, and to our whole nation. But the monetary cost has also been huge. I am happy to hear that the Government will be reinvesting the money saved from an early pull-out from Afghanistan by putting some of it into the accommodation which is desperately needed for our troops and their families. However, I am greatly concerned that the Government have chosen to freeze the raise of our soldiers’ salaries to only 1 per cent. The soldier’s basic salary is £7,000 lower than the national average. Is this the way for us to uphold the military covenant? Is this the way we show our gratitude to our brave Armed Forces?

The Government rushed through the SDSR, destroying Nimrod, getting rid of Harriers and getting rid of our carriers. We could have used those carriers, those Harriers and those Nimrods in Libya. Now we learn that the change to catapult-based aircraft carriers will have to be scrapped, which will result in billions of pounds wasted and in cutting our capability. We did not predict the Arab spring. We need to be prepared for what will happen in the future.

As has been said so often, this Budget has also hit our pensioners. They are currently being squeezed by low interest rates, which are necessary but are affecting their savings. They have also been hit by high inflation. As I have said, I support the reduction of the 50p rate of tax but the so-called “granny tax” that the Chancellor announced makes this look like a Budget that is helping the rich at the expense of poor pensioners. Is that the message that the Government want to send out? As we have heard, it has been a PR disaster.

I have heard that the Budget Committee of the House of Lords, of which I was a member last year, will no longer be convened this year. Hence, we will miss out on the wonderful expertise that we have in this House. Will the Minister confirm that that will be the case?

In conclusion, I am grateful to the Government for the many business-friendly measures in this Budget. It is reassuring to see further cuts in areas where cuts are required, such as in welfare, which is the largest area of spend—£10 billion. The infrastructure spend, broadband and looking at a third runway at Heathrow are all essential. But I am afraid that this Budget has not addressed enough the fundamentals of economic growth, job creation, research and education. A balanced Budget is not enough—it cannot be a zero-sum game. A good Budget balances the books, gives a more balanced economy for industry and innovation, and encourages a growing and competitive economy.

Economy: Quantitative Easing

Lord Bilimoria Excerpts

Monday 19th March 2012 Lords Chamber

[Lord Sassoon]

My Lords, I reiterate that the MPC has operational control and freedom here. The Government, on behalf of the taxpayer, indemnifies the Bank against losses, so of course any increase in the limit of the asset purchase facility has to be authorised by the Treasury. As to what people’s quotes might be, I know that I get into trouble if I start questioning whether the noble Lord, Lord Barnett, has correctly quoted my right honourable friend. I am sure that he did, but in completely different circumstances. The situation now is that we have tight fiscal policy. Against that discipline, the monetary policy of the Bank of England can be conducted with confidence. Tight fiscal discipline and loose money is the policy prescription. I suspect that that was not the policy prescription when my right honourable friend made that quote.

[Lord Bilimoria]

My Lords, can the Minister tell us of the effect of QE in helping lending flow through to SMEs? We hear about feast and famine with regard to lending to SMEs. Has QE really helped in banks lending to SMEs?

European Union Membership (Economic Implications) Bill [HL]

Lord Bilimoria Excerpts

Friday 25th November 2011 Lords Chamber

[Lord Bilimoria]

My Lords, we are caught between Utopian ideology and harsh reality which, throughout the eurozone crisis, has yielded to illogical, irrational arguments and behaviour. Just this week we have had President Barroso imploring Europe to unite. In a way, he is saying, “United we stand, divided we fall”. We have a constant clamour for whether we should have an “in or out” referendum. We have the noble Lord, Lord Heseltine, saying that we will ultimately join the euro. One of the best decisions this country made was not to join the euro.

We have people calling for and predicting a two-track euro, with the inner core consisting of France, Germany and a few other countries, with an outer core of the PIGS et al, and then you have others saying that there will be a shrunken eurozone with the PIGS et al going back to their own currencies. Then you have those saying that the euro will disintegrate altogether, which would have a catastrophic domino effect around the world. Then you have everyone putting pressure on Germany to save the euro, including our own Prime Minister and Chancellor, while just this week the Bundesbank had to pick up 39 per cent of the German bond sale after commercial banks bought just €3.6 billion of it. What a lot of confidence we have in Germany. We have German Chancellor Angela Merkel saying that Germany would be prepared to give up a piece of national sovereignty in order to survive. Then she said:

“No one should take it for granted that there will be peace and affluence in Europe in the next half century … If the euro fails, Europe fails”.

We are just refusing to accept the elephant in the room. The European project, which has been so brilliant, and instrumental in keeping the peace and promoting free trade and the free movement of people between the countries of the European Union, has pushed the envelope too far with the creation of the euro. We talk about countries being run by technocrats, but to satisfy the Utopian dream of our Eurocrats—of creating a United States of Europe—we stand where we do today.

We may have a European Parliament but we do not have a federal Europe and we need to wake up to this. I have said from day one that the only way that the euro can work is for us to have complete political, fiscal and emotional union. That means being an India or a United States of America, which have true federal systems and where the centre is in control of currency, interest rates and national taxes. That is a fiscal union. Most importantly, the centre is responsible for the defence of the united federal country. A true fiscal union needs to have a central bank as a lender of last resort. The European Central Bank has shown itself to be completely powerless. It is the IMF that we must rely on, although the IMF showed itself to be useless in the financial crisis three years ago and needs to be reformed.

Being a federal system means a complete surrender of any sovereignty by the states that make up these countries. Can we realistically see that ever happening in Europe? If we are relying on political will to make this happen, we are fooling ourselves. With the euro, a one-size-fits-all approach cannot and does not work. You cannot have countries and economies as extreme as Germany and Greece under one exchange rate and one interest rate: they will never be in sync at any one time.

Now is not the time to get out of Europe. I am a supporter of Europe. Now is the perfect time for Britain to lead in restoring the European Union to what it should be: a trading bloc of goods and services, and of people with shared principles and values. However, even with those shared values, the European Union has lost the plot. Day after day we are being hampered by European regulations that are stifling our businesses and removing the flexibility of our labour force.

The noble Lord, Lord Pearson, suggests that a committee should be formed to perform a cost-benefit analysis of being in or out of Europe. Surely such a committee is unnecessary. Surely the Government carry out this cost-benefit analysis every single day. I am confident that the Minister, in his response, will give us this cost-benefit analysis in detail in this House today.

We have huge strengths in Britain. We are by far the most international country in Europe. We are looked upon as the gateway to Europe. That could be because we have London, the most global world city and the greatest of the great cities, because of our financial markets or because of the English language. We are not to be led by Germany and France. Kipling’s words were:

“If you can keep your head when all about you are losing theirs”.

In spite of our awful financial predicament, we have the confidence of the global financial community with our interest rate yields, which are better than Germany’s, and our AAA rating.

Trying to keep the euro together in a shrunken eurozone, or trying to keep the whole project together, is just postponing the inevitable. Logically, the euro cannot work without full fiscal union and I cannot see that happening in Europe. Historically, it has never happened. We need to work towards an orderly, staged shrinking—and perhaps even eventual dismantling—of the euro and, most importantly, redrawing the European Union and going back to basics to make it what it is meant to be. We have to wake up; these are dangerous times. Even the Governor of the Bank of England is saying, “I don’t know what’s going to happen tomorrow”. Will we go back to when Her Majesty the Queen, on a visit to the London School of Economics during the financial crisis, asked, “Why did nobody notice this?”?

To conclude, as a country, we are best when we are bold. That is the spirit of this country. Now is the time for Britain to take leadership. It was not many years ago that Britain was referred to as the sick man of Europe. Today we should be seen as the sensible man of Europe. The euro is not only underwater but dead in the water. I quote:

“The era of procrastination, of half-measures, or 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 the House of Commons in 1936. We have to wake up and face the consequences.

Economy: Capital Expenditure

Lord Bilimoria Excerpts

Tuesday 4th October 2011 Lords Chamber

[Lord Sassoon]

My Lords, as the noble Lord, Lord Barnett, knows very well, we have set up the Office of Budget Responsibility to keep track of all the forecast numbers and we will get its update later in the autumn. The critical point is, as my right honourable friend the Prime Minister said at the weekend, we are spending over £3 trillion of public money in four years and we are not going to wreck what we now have in a very low interest-rate environment for the sake of spending a few more billion. We will stick to our spending plans.

[Lord Bilimoria]

My Lords, does the Minister agree that although we need to cut public expenditure there is a very strong case for increasing capital expenditure in these austere times to create jobs and, as the noble Lord, Lord Barnett said, to create growth? Furthermore, will the Government explain what they are doing to incentivise and facilitate the private sector to invest in infrastructure once again to create jobs and desperately needed growth?

[Lord Sassoon]

I very much agree with the noble Lord. That is why in the spending review last autumn we increased the amount of capital spend every year, up to £2.3 billion extra in the final year of the period. That is why we are spending £30 billion on transport—one of the most economically enhancing areas of spend and more than was spent in the previous four years. In the private sector, we are ruthlessly attacking the planning system that is so costly and so time-consuming when people want to put infrastructure in. That is why we are making sure that all the market structures, such as in energy, are conducive to the new infrastructure spend we need. That is why we are looking at the whole area of regulation around infrastructure, because I completely agree with him—70 per cent of the economic infrastructure is going to come from the private sector and we are working to make sure that that money flows.

EU: Credit Rating Agencies

Lord Bilimoria Excerpts

Monday 3rd October 2011 Lords Chamber

[Lord Sassoon]

My Lords, there are quite a number of points wrapped up in that question. The first point to recognise is that the credit rating agencies plainly got it wrong when it came to the structured products which were at the heart of the financial crisis. On the other hand, their record in other respects during the financial crisis, and particularly the sovereign debt crisis, has been reasonably good, and all the evidence shows that. Having said that, I completely agree with the noble Lord that competition is very much what the Government would like to see, but the way to introduce competition is absolutely not to have any publicly funded or publicly sponsored credit rating agency. Indeed, Mr Barroso himself recognised this recently by opposing any suggestion of a European publicly funded agency. I agree with the noble Lord that we want to see competition, but not through setting up a government sponsored agency.

[Lord Bilimoria]

My Lords, to follow on from the noble Lord, Lord Foulkes, surely the Minister agrees that these credit rating agencies were instrumental in causing the credit crunch and financial crisis by rating what ended up being worse than junk bond instruments as triple-A? They were allowed to get away with being funded by the people they were reporting on. Is there moral hazard with the banks? This is moral hypocrisy. Is enough being done to address it?

[Lord Sassoon]

My Lords, I have already said that the credit rating agencies got it completely wrong when it came to the rating of structured products. As a result of that, there have already been two regulations, so-called CRA1 and CRA2, out of Europe since the crisis and a third set of proposals is expected in November this year. The first two sets of proposals address the matters which the noble Lord raises. There is now a system of registration. There are new regulations around conflicts and how to handle them, as well as around transparency and disclosure. I agree that the issues he raises are serious, but they are very much the ones which the European regulations have addressed.

Public Expenditure: Deficit Reduction

Lord Bilimoria Excerpts

Tuesday 6th September 2011 Lords Chamber

[Lord Newby]

My Lords—

[Lord Bilimoria]

My Lords—

[The Chancellor of the Duchy of Lancaster (Lord Strathclyde)]

My Lords, there is time for both noble Lords. Perhaps we can hear from the noble Lord on the Cross Benches and then from my noble friend Lord Newby.

[Lord Bilimoria]

My Lords, the Minister talks about growth; we hear about the Chancellor sticking to his plans; but we also hear a clamour for Plan B. What is going on around the world is unprecedented; with the EU and the American debt crises there is so much uncertainty. By raising taxes the consumer is absolutely squeezed. As for perception and reality, there is a perception of cutting even though the cutting is not taking place as much as we all think. We all know that public debt was far too high under the previous Government. What are the Government going to do to generate growth?

Finance (No. 3) Bill

Lord Bilimoria Excerpts

Monday 18th July 2011 Lords Chamber

[Lord Bilimoria]

My Lords, the philosopher Kierkegaard said:

“Life can only be understood backwards; but it must be lived forwards”.

Right now the Opposition blame our current economic difficulties on the global economic crisis which started with the subprime crisis five years ago, and the current Government blame the previous Government’s mismanagement of the economy, resulting in the huge deficit and the high levels of borrowing which have, in turn, led the Government to embark on a programme of cuts across the board, and a tax policy to try and address the deficit as well. Unfortunately, the current Government are also going to have to blame the woes on the European sovereign debt crisis and the eurozone crisis, neither of which are of this country’s making.

There is no question that public expenditure under the previous Government reached levels that were far too high—50 per cent of our GDP when it should have been 40 per cent. Reducing this to 40 per cent would sort out our budget deficit in one swoop: but it cannot be done overnight. The imbalance between the public and private sectors has finally come to a head. The Government are finally starting to address this, but again it will take time.

As to monetary levers, the Bank of England is forced to keep interest rates at 0.5 per cent in spite of ballooning inflation because of the fragile state of the economy. Of course, the final lever that the Government have is the Finance Bill and taxation. Before I go into detail, I will highlight the 10 tenets of a better tax system, as laid out by the Institute of Chartered Accountants in England and Wales, of which I am proud to be a fellow. They are: statutory, certain, simple, easy to collect and to calculate, properly targeted, constant, subject to proper consultation, regularly reviewed, fair and reasonable, and competitive. Does the Finance Bill tick all these boxes?

I was proud to serve on the Finance Bill Sub-committee of the Select Committee on Economic Affairs, and I thank our chairman, the noble Lord, Lord MacGregor, his staff and advisers and the rest of the committee for the excellent work that they performed. There was a clear consensus among our witnesses that, if implemented consistently, the Government's new approach to tax policy-making would represent a major step forward on the road to better tax legislation for this country. I do not wish to blow our own trumpet, but most witnesses proposed that better use should be made of the expertise and experience of the House of Lords in matters of tax policy and legislation.

We have far too few Joint Committees of our two Houses. We all know about the new Joint Committee that has been set up to deal with reform of the House of Lords. However, given that as things stand the House of Lords does not have the power to vote on Finance Bills, would it not be wonderful if we had a Finance Bill Joint Committee of the two Houses, on which, sitting around the table, the expertise of this House could be brought to bear side by side with those who are going to legislate on the matter? There should be more Joint Committees of our two Houses. This would lead to both Houses working more closely together and to better mutual understanding—an understanding that at the moment is greatly lacking in the other place. This has been openly admitted by many Members who came from the other side of the building and who concede how little they knew and understood of the workings of this House. Will the Government consider this suggestion?

A serious matter that was spoken about in our sub-committee was the worrying disconnect between the workings of Her Majesty's Treasury and Her Majesty's Revenue and Customs, and the lack of specialisation in either. The sub-committee also looked at tax evasion and tax avoidance. More and more, the lines between evasion and avoidance are being blurred. As the noble Lord, Lord MacGregor, said, on the basis of HMRC's figure, the Exchequer loses £22 billion from evasion compared with £7.5 billion from avoidance. We have therefore recommended that the Government should publish an anti-evasion strategy as well as an anti-avoidance strategy.

Lowering the corporation tax rate was seen as a very good move, as headline rates matter, especially in attracting global inward investment: but, sadly, the impact of these reductions is lessened because capital allowances are being changed, meaning that the effective rate of corporation tax for many businesses will not be reduced. That is particularly the case for small businesses and manufacturers.

We still have the 50p rate of tax that the Finance Bill did not address. This desperately needs to be removed, especially if we want to attract inward investment and the best talent from around the world. Many of our taxes are far too high. For example, and declaring my interest as the founder of Cobra Beer and chairman of the Cobra Beer Partnership, a joint venture with the global brewer Molson Coors, we in Britain have one of the highest rates of beer duty in Europe. Points have been made about how the Treasury says it is tackling problem drinking by increasing the tax on higher-strength beers and trying to stimulate the market for lower-strength beers. However, this is toying at the edges as it represents a very small portion of the beer market.

Meanwhile, the Government's ban on low-cost selling, covering VAT and duty only, means that, given tax anomalies, £20 could allow retailers to sell up to 40 cans of beer at 4 per cent ABV—70 units—10 bottles of wine at 14 per cent ABV—98 units—seven bottles of fortified wine and up to 103 cans of cider, making a total of up to 340 units. What will the Government do to assess alcohol taxation in the light of maximizing revenue and minimizing harm?

In conclusion, we know that high taxes stifle not only consumer spending but businesses and growth. What the economy desperately needs is confidence and growth, and the Finance Bill should do its best to encourage growth. In the other place, we were told that between 2008 and 2009, nominal GDP fell by 1.8 per cent, which cost £20.6 billion, and tax receipts dropped by 3.7 per cent, costing £19.9 billion. That shows that growth more than anything else—more than the cuts—will bring down our deficit and our borrowings. However, with high taxes across the board, we are stifling growth. As long as we do that, with the best will in the world, consumption will continue to falter, inward investment will continue to be deterred and the economy will continue to bump along the bottom.

I welcome much of the work that the Government have done in reforming taxation policy: but going back to Kierkegaard's words, the future has to be lived, and the future should be about a simple, competitive tax policy that generates growth for our economy.

Finance: Off-exchange Trading Venues

Lord Bilimoria Excerpts

Monday 18th July 2011 Lords Chamber

[Lord Sassoon]

My Lords, I am no great expert on dark matter and black holes, but I think the distinguishing point about dark pools is that they are a venue for trading that enables confidential orders to be submitted and matched using a reference point that comes from a transparent market. As soon as the trade is done, the details are reported publicly. Therefore, there is confidential trading and then full reporting, which is the critical feature of the market. Various platforms are available for the market, which accounts for something of the order of 7 per cent of UK and European equity trading. It is not a dominant part of the market by any means, but it is one that we are watching.

[Lord Bilimoria]

My Lords, one of the best moves in the mid-1990s was the creation of the alternative investment market, AIM, which has been a great success. I was a director of an AIM company that is now a FTSE 250 company. However, the biggest problem with AIM was always liquidity. Liquidity is an also issue outside the FTSE 250 on the main market. Can the Government do something to improve liquidity? Should more be done or are they happy with the situation?

[Lord Sassoon]

My Lords, I certainly agree that mechanisms that help liquidity such as dark pools, which are run by investment banks, multilateral trading facilities or independent operators, are indeed aids to liquidity if they form a proper part of the market. The proponents of high-frequency trading, too, cite them as an aid to liquidity. I completely agree with the noble Lord, Lord Bilimoria, that the last thing we want for example the European Commission to do is to restrict sensible increases in liquidity in our markets without looking at the evidence base that needs to be assembled.

Oil Prices

Lord Bilimoria Excerpts

Wednesday 8th June 2011 Lords Chamber

[Lord Sassoon]

My Lords, I am very happy to confirm that this Government are entirely comfortable with the structure around the MPC and have complete confidence in the governor. I could go on. I have quotes from 40 years ago. I was going to use quotes from 30 years ago but if the noble Lord would prefer me not to use them on this occasion I will not do so. However, his words of wisdom are always my guide.

[Lord Bilimoria]

My Lords, I agree with the Bank of England in keeping interest rates low to support the economy but on the other hand we have rampant inflation: food inflation is 5 per cent; wheat has gone to 70 per cent; corn is 100 per cent. The consumer is being squeezed because we have wage deflation. Does the Minister agree that the Government are between a rock and a hard place? In that situation, should not the Government consider reducing taxes to help the consumer and encourage growth?

[Lord Sassoon]

My Lords, I completely agree with the figures given by the noble Lord for the very considerable increases in commodity prices over the past year. Those are, of course, driven by global factors, but they impact very severely on consumers and businesses in this country. That much I agree with. He referred to low interest rates. This is absolutely critical. We have almost record low interest rates on our 10-year gilts at the moment—3.33 per cent, I think, last night. That is a recognition of the confidence that the Government have in the underlying fiscal policy but it also reinforces that the Government’s contribution is to make sure that we continue to have a prudent view on public finances and do not deviate from the course that we set for reducing the fiscal deficit that we inherited.

Economy: Growth

Lord Bilimoria Excerpts

Thursday 31st March 2011 Lords Chamber

[Lord Bilimoria]

My Lords, what a privilege it is to follow the absolutely superb maiden speech of the noble Lord, Lord Kestenbaum. This is a debate tailor-made for his Lordship. He has hit the ground running, showing the invaluable input that he will bring to this House, particularly in the field of innovation and enterprise where he has had huge experience. He made his mark in this country as the former CEO of NESTA, the National Endowment for Science, Technology and the Arts, the largest endowment in the UK, fostering innovation, and the country's biggest source of seed finance for technology start-ups.

Our House is renowned for its wisdom, and, of course, it follows that there is a certain maturity of age among our distinguished Members. With Jonathan, we have someone so young and yet with so much varied global experience which he will bring to bear here, having worked as a venture capitalist, having been the chief executive of my noble friend Lord Sachs’ Office of the Chief Rabbi and with his involvement in the arts and in higher education. He may very well have walked into one of our broom cupboards, but he has certainly made a grand entrance today and we look forward to many future contributions.

I thank the noble Lord, Lord Hollick, for securing this crucial debate. Last week's Budget had so much that was music to the ears of the entrepreneurial community: encouraging start-ups; increasing the entrepreneurs’ relief limit; and the setting-up of enterprise zones—and, let us not forget, had it not been for enterprise zones, we would not have Canary Wharf today. The support for apprenticeships is tremendous, although I am yet to be convinced about the university technical colleges concept. StartUp Britain is terrific; however, we must remember that, as the noble Lord, Lord Kestenbaum, referred to, and as Professor Colin Mason has pointed out, 6 per cent of UK businesses with the highest growth rates generated half the new jobs created by existing businesses. Professor Mason tells us:

“The UK’s problem is the lack of high-growth firms”—

the gazelles—

“which go on to be ‘companies of scale’, rather than not enough start-ups. We need quality, not quantity”.

The reduction in corporation taxes is great news, but as the Chancellor said:

“high tax rates can do real damage … They crush enterprise, undermine aspiration and often undermine tax revenues”.—[Official Report, 23/3/11; Commons, col. 957.]

Those were the Chancellor’s words. The sooner the 50p tax rate is abolished, the more attractive Britain will be and, in fact, the tax take will go up. As for a property tax, this will take us back to the dark ages. I hope that this idea will be quashed before it can even get off the ground.

I am president of the UK India Business Council, supported by UKTI. At our annual summit in Manchester this month, the Indian High Commissioner, His Excellency Nalin Surie, said of India: “Our growth is your opportunity”. Yet British business is scratching the surface. We need to do much more to encourage British business to go global, particularly to countries such as India.

I have voiced my concern about the drastic cuts that the Government are making. Of course, we need to make savings, but it is what you cut that matters, and you do not have to cut everything. For example, cutting so severely investment in higher education will really harm this country. This, combined with a crude immigration cap, is seriously hampering higher education and business. We need to encourage growth and to keep investing in our infrastructure.

I have just returned from a business delegation hosted by the Emirate of Dubai, and in spite of all the problems that that country has experienced recently in terms of debt and a huge property crash, it is continuing to benefit from the phenomenal investment in world-class infrastructure and becoming a world-class hub in the region as a result of that investment, attracting 10 million tourists a year as well as trillions of dollars investment into Dubai.

This year I graduated from my nine-year president's leadership programme at Harvard Business School— I suppose that I am a slow learner. My study group presented me with a wonderful book, The Rational Optimist. Of course, I hope that they were referring to me. With all Britain's problems today—high inflation, low growth, high unemployment, a giant deficit, huge debt and far too high public spending—we are still one of the most open economies in the world. We still have so much of the best of the best in the world, be it advanced engineering, higher education or science. Only this week it was announced that Britain is in the top three in the world in the publishing of science papers—ahead of France and Germany. I bet that by 2050, the giants of India and China will be the two largest economies in the world, but I also bet that this tiny country will still be in the top 10.