King’s Speech

Lord Birt Excerpts

Monday 13th November 2023 Lords Chamber

[Lord Birt (CB)]

My Lords, in the debate last year following the gracious Speech, the Minister declared that she would outline the plan for a world-class transport network. She said that

“few things transform the prospects of an individual, a community and, indeed, an entire nation more than a modern, well-functioning transport network”.

I agree.

Just over a year later, a Minister reminded us that:

“HS2 is a key part of the Government’s levelling-up agenda … The section … between Crewe and Manchester will also form the foundations for Northern Powerhouse Rail … speeding up east-west rail services between the north’s towns and cities”.—[Official Report, Commons, 3/7/23; col. 32WS.]


In October last, Liz Truss as Prime Minister promised an HSR link linking Liverpool to Hull via Manchester and Leeds. I can confirm the need for that. Just a few days ago, after a football match, I travelled on the comically misnamed TransPennine Express from Liverpool to Leeds, that modest distance taking almost one and a half hours. No surprise: the train was five minutes late departing. My short wait was accompanied—as invariably is the case in stations these days—by public announcements that two trains had been abruptly cancelled: one to Warrington, the second to Blackpool North. Is this a

“modern, well-functioning transport network”?

The in-principle go-ahead for an ambitious high-speed network in the UK was given by Tony Blair in 2004, almost 20 years ago. The noble Lord, Lord Adonis, duly picked up the baton and launched HS2. All three main political parties when in government in effect gave the project their full support, but in 2014 the link to Europe, to HS1, was dropped. Later, the eastern leg to Yorkshire, the branch to Liverpool and the enabling spur north of Manchester to Scotland were dropped. This year, the links to Manchester and the east Midlands have been dropped.

The UK currently has 113 kilometres of high-speed rail, linking St Pancras to the Channel Tunnel. The International Union of Railways has collated the global data for 2023. As of 1 October, Sweden had 860 kilometres of high-speed rail, Italy 920, Germany 1,600, France 2,700, Japan—a far more mountainous and densely populated country than the UK—3,100, and Spain, the European leader, 3,900. Perhaps noble Lords might like to guess how many kilometres of high-speed rail China has. Is it 4,000 kilometres? In fact, China has a remarkable 40,000 kilometres of high-speed rail versus the UK’s 113 kilometres. Whatever would the UK’s great railway pioneers make of our falling so far behind, our chopping and changing, and our inability now as a nation to plan and keep to it?

As Tony Blair’s strategy adviser at No. 10 in the early 2000s, I worked with a team of Department for Transport and Cabinet Office officials to examine the state of the UK’s road and rail infrastructure. We identified then that we had the least developed infrastructure of any major country. We demonstrated that the UK had invested a lower share of GDP by far than other leading countries and that for half a century Governments of all persuasions had cut back on infrastructure spending whenever the economic winds turned against them. When Tony Blair gave the green light to progressing a UK high-speed network in 2004, China had precisely no high-speed rail. Incredibly, its 40,000-kilometre network has all been built in the 15 years since 2008. The World Bank has published an extensive report on China’s achievement, identifying the key reasons for its success: a well-analysed long-term plan with minimal changes once approved, standardisation of design and a competitive supply industry, all resulting in a low cost per kilometre built. We need to abandon the frenzied, short-term calculation that shames our political system and return to good, steady, strategic government. Hasten the day.

Greece

Lord Birt Excerpts

Monday 6th July 2015 Lords Chamber

[Lord O’Neill of Gatley]

My Lords, as my noble friend says, these opinions have been offered by many people, including in the past week or so, according to media reports, the IMF. It is not of great help in resolving issues today to reflect on what might or might not have happened in 2010. However, in the discussions that take place this evening and tomorrow, all sorts of options and ideas will be pursued to, I hope successfully, bring these growing economic risks and challenges under better control.

[Lord Birt (CB)]

The Minister has rightly emphasised that we are at an extremely delicate stage. At such delicate times, is it not also important to be really clear about the principles involved? The Greek Government have willingly, knowingly borrowed money on a massive scale from a number of institutions, including within the EU, over a very long period. Will the Minister agree that—if only pour encourager les autres—the worst of all options would be to accept that a sovereign Government should not repay their debt?

[Lord O’Neill of Gatley]

My Lords, my reaction, possibly based on my past experience, is as with a number of other questions that have been put to me. Ahead of such important discussions, I do not think it is particularly useful for me as the Minister, or for anybody in similar areas of government, to speculate idly about what is right or wrong. A lot of information is available about events that have led up to this crisis. It is the responsibility of the Greek authorities, having taken their stance to the Greek people over the weekend, together with eurozone Finance Ministers and their leaders, to try to bring this crisis to a better resolution in the next couple of days.

Queen’s Speech

Lord Birt Excerpts

Thursday 4th June 2015 Lords Chamber

[Lord Birt (CB)]

My Lords, a new Government have a unique opportunity to set a clear strategic direction for the longer term and thus to achieve real, fundamental and enduring change, as Clement Attlee and Margaret Thatcher once did. 1 hope that this new Government will begin first by articulating a long-term plan for reducing our nation’s indebtedness. Earlier this year, the noble Lord, Lord Deighton, set out in a Written Answer the aggregate debt of the G7 countries in 2012, which was the last year for which comparable figures were at that point available. Aggregate debt is not just government debt but all debt; it includes private households as well as the finance and general business sectors.

The picture unveiled by the noble Lord, Lord Deighton, was truly gory, and the OECD’s updated figures for 2013 appear to show the same grim picture. Two countries stand out from the crowd: Japan and the UK. Japan is higher up the naughty step than we are, but the UK, by a wide margin, is far more indebted than other G7 countries, with total aggregated debt of seven times GDP—a truly shocking figure.

We appear suddenly to have a welcome, if belated, consensus that when the sun shone the last Government but one should have saved, not spent. This Government accept, I think, that when the global tsunami struck, private-sector debt was also too high and that as a country we were massively overexposed to debt in the financial sector, as the bank rescues all too dramatically illuminated.

In his Answer, the noble Lord, Lord Deighton, suggested that overall levels of private and commercial-sector debt should not threaten our financial stability, but he declined to set any explicit targets for the future. Would the Minister set out in her concluding remarks how we will know when we have reached the point of comfort as a nation for both sector and aggregate debt? We have in total 45% more debt than Germany. Would we, for instance, like to reduce down to current German levels, or even beyond? How long should we take to do that? What principles should guide us? Perhaps the Minister will say.

Our approach to bringing down the deficit, as we must, should also be strategic and not technical. On many occasions in my life, working in both the public and private sectors, I have had to drive or preside over spending reductions. In reducing public spending the focus should be not on capacity reductions but on maintaining desirable public outcomes more cost efficiently and by myriad means: promoting competition, ending duplication, improving processes, sharing services, harnessing technology and much more.

We should also be suspicious of the shallow, much repeated assertion that spending cuts must equal capacity cuts. In most areas of the economy, more can and is being done for less. I continue to see substantial evidence that that can be true in the public sector, too. But there is a problem to overcome if we are to achieve that goal. In my time in government, I saw how weak Whitehall was at analysing cost structures—I say this surrounded by a phalanx of former Permanent Secretaries to the Treasury. It was a world away from best private-sector practice, and I see no reason to believe that it is much better now. Not only the departments but the Treasury itself needs a more muscular value-for-money capability, and now is the time that it needs it most. If we focus just on cuts we will make a grievous error, for in healthy organisations you invest even as you cut. You prioritise, keeping within your means in the here and now, but at one and the same time you plan for the longer term.

As a nation we must be clear-sighted about our long-term priorities. With black clouds on every horizon, with the world a troubled and volatile place, the first responsibility of government is to design, to build and to maintain a security and defence capability that will meet our future needs. Next, we must improve the health of our economy, as well as safeguard our defence. We must identify why our national productivity has been lower than that of comparable countries for so long. For certain, as the noble Lord, Lord O’Neill, suggested in his punchy maiden speech, we must invest in the future skills our economy will need. We must accelerate spend on our road and rail infrastructure, on which we are by far the worst compared with our competitors, and we must end the shameful delay in creating appropriate national strategic airport capacity. Let us be alert to the pace at which much of Asia moves, and let us not be left badly behind.

Finally, a new Government must ask themselves what capabilities and accountabilities they need at the centre, not only to drive and to monitor a massive and unavoidable programme of change right across Whitehall but to improve our national planning. Who in government foresaw that our population would grow by 7.5% in 10 years, and in the middle of highly adverse economic circumstances? Who forecasted and planned for this? I suggest that no one did. We need at the centre of government a proper focus on long-term and integrated planning.

Now is the moment to begin to drive the UK, over the next five to 10 years, to a more harmonious and stable place—a UK with a more balanced, productive, less indebted economy, and with a more alert, agile and efficient state. This can be achieved, but only if we seize the moment and start now.

Economy: Growth

Lord Birt Excerpts

Tuesday 29th January 2013 Lords Chamber

[Lord Birt]

It is a pleasure to follow the keenly felt and eloquent speech of the noble Lord, Lord Forsyth. It was not the first in this excellent debate. As the noble Lord, Lord Barnett, has reminded me, I am not qualified to add to the powerfully expressed views of some of our leading economists during the course of the debate, with others still to come. However, I shall offer some perspectives from the front line of the real economy.

I am involved as a director in a number of leading businesses in Europe and the UK, as well as a promising internet start-up. I am also an adviser to one of Europe’s leading private equity houses; as a result, I am exposed to a great number of portfolio businesses, chiefly operating in the UK and Europe. Anyone who works in the ever more complex and competitive global economy, or anyone who has ever happened across the rusting industrial archaeology of the old Eastern bloc—I am sure this is common ground on all sides of the House—will testify that government cannot substitute for entrepreneurs or for genuine corporate expertise. The noble Lord, Lord Lawson, reminded us of that at the beginning of the debate.

What can Governments do to promote growth? First and foremost, as others have said, they can maintain a stable economy in which business can plan with confidence—something we have resoundingly failed to do in this last period of our history, as we all recognise, whatever the mix of reasons for that. Surely it is plain that the route back from the dire circumstances we find ourselves in, whether it is route A or route B, is a long one.

Secondly, from Governments, we need tough regulation of our financial institutions—and we are probably about to have it. They have let us down. We need that regulation to ensure that they manage risk responsibly, which they patently failed to do; that they lend sensibly; and that they do not hoard huge rafts of assets—which they are still doing—that they have neither the skill nor the means to develop and grow. That is undoubtedly one of many causes of the absence of growth in the real economy.

Thirdly, Governments need to ensure that the climate for investors is friendly and internationally competitive. In my experience, the incentive regime for business start-ups in the UK works well. But there is a particular failing in the capital markets that I do not understand, and which needs investigating. Investment in start-ups by business angels or small venture capital companies is thriving. As a result, early stage companies in the UK are prospering in large numbers at the moment, particularly in the new technology sector. However, UK capital to grow these successful young companies into major regional or global players appears mysteriously absent. There are many strange failures in our capital markets that we need to work harder to understand. With a lot of these younger companies, highly professional and acute US players fill the void and snap up our best companies before they can grow in a UK or European environment.

There is a further difficulty in attracting substantial global investment into the UK, which I do not think anybody has mentioned so far. Major investors are nervous still about the instability in the eurozone. I am exposed to many of these investors—the giant US pension funds, or sovereign funds in the Gulf—and they have trillions to put to work; there is no absence of funds in the wider world. Rightly or wrongly, they wrap up the UK into their concern. So it is in our interest as a country, though perhaps we cannot do very much about it, to help to accelerate the painfully slow process of resolving the eurozone crisis.

Fourthly, Governments can help to ensure that UK business has access to the right skills, as several noble Lords have mentioned. As we all know, we have some educational institutions of global renown, but we do not begin to produce all the skills that we need for the UK economy. In business meetings in the UK now, I regularly find that I am the only British citizen in the room.

We need to motor our economy to attract rare skills from abroad, but our immigration rules may begin to handicap us. President Hollande’s early actions, and the response of France’s business elite to them, remind us that talented individuals with rare skills in great demand globally are highly mindful of the overall tax regime when they decide where to settle.

As the noble Lord, Lord Mitchell, noted, Britain is currently the most advanced e-commerce environment in the world. However, we saw the lack of critical skills in areas of rapid development such as mobile and data mining. Without resorting to an entirely directive approach to designing resources within our education system, the departments for business and education need to be more alert and fleet-footed in spotting critical skill shortages and speedily encouraging and incentivising the relevant educational institutions in the UK to meet them.

I have left until last our area of greatest comparative weakness, which many noble Lords have already mentioned: the UK’s persistent failure to invest in infrastructure. As others have mentioned, I note that the Deputy Prime Minister acknowledged last week that it was a mistake to cut into the Government’s capital investment programme when the deficit reduction programme was first agreed. Mr Clegg may not be aware that we as a country have been here many times before. He should ask his officials to dig out the analysis conducted by the Cabinet Office Strategy Unit during my time at No. 10 on why we had by far the worst transport infrastructure in the developed world. I wholeheartedly support all that the noble Lord, Lord Wolfson, said about that, particularly the wonderful passion that he expressed about our impoverished road system. A large part of the reason for that chronic underinvestment over many decades—indeed, for the past 40 years, as the study identified—was that Governments of all persuasions had cut capital ahead of revenue expenditure when a downturn occurred. This is not just a recent occurrence.

At the time of that study, I concluded that the main root cause was the culture of the Treasury itself, understandably determined at such times of national reverse to rein back public spending. Officials aggressively target the easy wins first, and tomorrow’s capital spending tends to carry far less political pain than today’s welfare cut. Thus we continually fail to invest in infrastructure to modernise our economy and, as many have said, make it more productive.

Last Friday, I journeyed from Düsseldorf to Frankfurt Airport, a distance of about 120 miles. It took no time at all. I travelled by a high-speed train, which reached a top speed of 200 miles per hour. The train stopped, most conveniently for me, not in the city centre but at Frankfurt airport itself. Frankfurt airport has four runways. Heathrow—our lead airport—is not integrated into our main rail network. As we all know, it has only two runways, and, as we are all painfully aware, it is always—especially in winter—absolutely bursting at the seams.

This month, the Chinese Government announced plans to build a seven-runway airport for Beijing. In the last decade, China has built a fraction under 4,000 miles of high-speed rail track. The UK currently has a paltry 68 miles of high-speed rail track, and we are already experiencing an almighty struggle to build only another 330 miles of track by 2033, in 20 years’ time. Why will it take 20 years’ time to build that absolutely critical national arterial train line?

We need a considered 20-year plan—we needed it long ago, but we are where we are—for modernising our road, rail and air infrastructure in the UK, and for incentivising the private sector to fund it. We also need a sense of urgency. Beyond that, we need a full-bodied integrated and strategic approach within Government to UK national productivity, encompassing skills and incentives as well as planning and infrastructure.

The Minister has resoundingly proved his ability to focus on a big challenge and to deliver it emphatically. Will he offer any hope that in the midst of this intensive and prolonged economic crisis, we can at long last begin a process of focusing systematically on UK productivity?

Economy: Growth

Lord Birt Excerpts

Thursday 31st March 2011 Lords Chamber

[Lord Birt]

My Lords, the UK economy in London and the south-east is measurably as productive as any in Europe, not just because of the City’s world-leading financial services—something that we threaten at our peril—but, just as importantly, because of the vibrancy of London’s creative and business service sectors. However, overall, UK productivity persistently lags behind our leading competitors, as many noble Lords have pointed out. What can the Government do about this? Economic value is not created by Governments but by individuals who have insight and ability, and access to capital to realise that insight. Yet many individuals and businesses in recent years have been experiencing something akin to a cataclysm. The economy has taken a veritable body blow. Thus Government can most help business by engendering a stable economic framework, something that Governments the world over, along with regulators and financial institutions, have all too conspicuously failed to do over the past few years. Learning and applying the lessons of this widespread policy failure is the first priority both globally and nationally, and none of us can be certain we are there yet, as the chastening news from Ireland today reminds us.

In the UK, we look increasingly to the global labour market for rare and valuable skills. Overall, our own education system focuses insufficiently on the need to arm individuals and to provide the UK economy with the skills needed at every level to power modern business. For decades, our high-level educational outcomes have lagged behind our competitors, and that needs to change. Moreover, overly rigid immigration rules will block the entry of vital skills and talent, and thus threaten our productivity even further. So too, amid the realities of the global economy which I daily live and breathe, will internationally uncompetitive tax regimes for individuals and corporations. High tax rates will not prompt an immediate exodus, but I have seen at the margin the impact they have, and it is adverse to our true national interests. I should declare my own interests as a director or shareholder of several companies operating both nationally and globally; these are listed in the register.

Other factors are reducing our productivity. The principles that underpin the UK’s planning regime are admirable, but the interminable length of many of our planning processes and the fact that there is no economic penalty for all those who can cause delay—often very considerable delay, and many of them from the public sector—is enormously value-destructive. Our economy is also handicapped by the worst transport infrastructure by far in the developed world. The individual who wrote in a recent business department paper that the UK has a “well developed infrastructure network” should be sent immediately to Holland, where I was last week, to compare, for instance, the superb Dutch road and airport infrastructure with the UK’s own. Perhaps the Chancellor, when next contemplating his admirable aims for promoting UK productivity might reflect, when travelling to his own constituency in the north-west on the M6, that it is Europe’s worst and most congested strategic route, and then remind himself of the trivial investment in current spending plans for improving our national road infrastructure.

In conclusion, if we are ever to bring productivity in the UK up to world standards, the Government will need to roll up their sleeves and focus on getting the big things right, on addressing the stubborn, difficult and often politically unappealing challenges that have long held back and still hold back the UK economy from fulfilling its true potential.