United Kingdom Internal Market Bill

Lord Cavendish of Furness Excerpts

2nd reading & 2nd reading (Hansard): House of Lords
Monday 19th October 2020 Lords Chamber

[Lord Cavendish of Furness (Con) [V]]

My Lords, it is a pleasure to follow the noble Lord, Lord Browne. I have heard it suggested that there is no need for this Bill. Indeed, such doubts are rehearsed by the distinguished Select Committee on the Constitution in its 17th report. This may be technically and legalistically correct. However, I would contend that such a view overlooks a significant historical consideration. Before we joined what was to become the EU, a single unified internal market was for 300 years the constitutional bedrock of Great Britain, extended to Ireland 100 years later. The absence of the taxes, custom duties and other restrictions that were so crippling to much of mainland Europe created the conditions to usher in the industrial revolution. Now, as we prepare to leave the EU, it is imperative that we legislate to restore the conditions of a single UK market, tailored to the 21st century. Yes, the Bill is necessary.

There can be no doubt that the Government find themselves in a bind, one that is to a large extent of their own making. Furthermore, the European Union Select Committee, of which I have the privilege of being a member, has long warned of the problems that have now become so critical. I was also deeply saddened that a Minister of the Crown should speak in the other place as he did. As my noble friend Lord Bridges said, it is no mitigation to say that others, including the EU, breach international law. However, there appears to be no agreement among senior lawyers as to the legitimacy of the proposed measures that have given rise to such controversy. I cannot agree with the Constitution Committee’s witness who said:

“Let us accept that the Bill breaks the law.”


The Bill does not break the law, nor does it threaten to do so. According to Mr Martin Howe QC, no breach of international law could possibly occur until regulations under the clauses in question were actually brought into force; even then, whether or not making such regulations would amount to a breach would depend on the circumstances then prevailing and the reasons for making those regulations.

I have heard it said that the inclusion of the controversial clause is part of a negotiating tactic. There are further suggestions that the tactic has worked, to the extent that the EU withdrew from its indefensible position of threatening to withhold third-country listing. The problems that could arise from the failure to address the nightmare so-called direct effect could have catastrophic consequences, something that has been largely ignored by the media and, sadly, has earned scarcely a mention in contributions today. Scandalously, the Opposition Front Bench was entirely silent on the matter.

I support a Government who uphold and defend the country’s vital interests. I sometimes gain the impression that I am in a minority in your Lordships’ House. I hear it claimed that objections to the Bill are unrelated to Brexit. It is certainly the case that many noble Lords, much to their credit, have buried their pain and sadness occasioned by our leaving the EU and chosen to move on. However, this House is essentially a remainer House and its committees are remainer committees. There is nothing dishonourable in that but it seems to have led your Lordships’ House to move from acting as a revising Chamber to being one of opposition, a position apparently supported by the noble Lord, Lord Butler of Brockwell.

I have been a Member of this House for 30 years and I remember being on the Opposition Benches with a built-in majority. I recall how we acted with considerable restraint, as we certainly should have done. In those far-off days, Cross-Bench Peers tended to vote only on matters of their field of expertise while the Lords Spiritual were reticent in displaying their partisanship. It all seems such a long time ago. I mention this because it occurs to me that if this House is serious about trying to influence the Government, it might alter its tone. I reflect that on the great issues of the time, and many others, this House has put itself at odds with the Government, with the other place and, to judge by the general election, the people of this country. It bodes ill for an institution to persist in saying that it knows better than the people it is supposed to serve.

Economic Environment: Growth and Jobs

Lord Cavendish of Furness Excerpts

Thursday 11th July 2019 Lords Chamber

[Lord Cavendish of Furness (Con)]

My Lords, it is a pleasure to follow the noble Viscount, and I may comment on some of his remarks in due course. We are indebted to my noble friend for securing this debate and for the compelling speech with which she introduced it. She covered much of what I might have wanted to say with greater insights than I can offer.

I have two matters by way of introduction: since I intend to identify what I regard as the obstacles to business growth, and in doing so venture some criticism of the Government, I say to my noble friend the Minister, who is also a fellow Cumbrian, that I acknowledge the many good things that the Government have done. Not least, they have gone a long way to bringing under control the public finances, which had reached such a terrifyingly bad state of affairs. I echo other noble Lords in congratulating them on their moves in regard to education. Secondly, in the matter of declaring a personal interest, I refer noble Lords to my entry in the register of interests. However, having checked with the Companion, I think that on this occasion I am required to be more a little specific. Accordingly, I declare personal interests through my family’s business in south Cumbria, consisting of farming, forestry, mineral extraction, aggregates, housebuilding, leisure and National Hunt horseracing.

My noble friend Lady Neville-Rolfe has great experience and standing in the business world, whereas the cohort to which I belong is the SME sector. I also talk regularly with SME friends and neighbours, especially where they are engaged in the field of high-tech. There is strong evidence of a worrying decline in business confidence, and I think it is widespread. Not only has investment in small firms fallen for four consecutive quarters, but 72% of businesses in the sector have no plans for capital investment in the months ahead. I do not think the prospect of leaving the EU in itself is the cause of these trends; in fact, many seem to welcome it. Innovative entrepreneurs tell me that they are not even greatly exercised by the thought of leaving on WTO terms. There are, however, two Brexit-related issues that do have a bearing, in addition to the one mentioned by the noble Lord, Lord St John. First, there can be no doubt that the interminable process has inflicted serious damage on business prospects. Secondly, the avoidable collapse of net migration from the EU from 189,000 to 74,000 has resulted in difficulties in accessing suitably skilled staff in certain parts of the country. The figures speak for themselves—one in five small employers rely on staff from the EU.

There are in this country 5.7 million small businesses; that is over 96% of the total. Between them, they generate £2 trillion, or 52% of all private sector turnover. I am led to believe that they contribute handsomely to the Exchequer, but I have been unable to locate the figure—perhaps the Minister might help me when he comes to reply. The sector employs 16.3 million people, or 60% of all private sector employment. About 5% of them export to the EU; many of them do not export at all. Some 96% of businesses employ fewer than 10 people.

The SME sector is in trouble, and the Government appear to be blind to its problems and deaf to its appeals. The obstacles to success encountered by this sector are numerous, but I am especially struck by three figures: between 2016 and 2017, the proportion of SMEs that found the burden of rates and taxation was a barrier to success rose from 36% to 41%—the noble Viscount, Lord Chandos, and I might have a discussion about that, because it seems to conflict with his view; in the case of skills shortages, the proportion rose from 30% to 37%; and regulation and red tape as a serious inhibitor of growth went from 42% to 46% in the same period.

On this last point, it is complete nonsense for noble Lords on the Benches opposite to suggest, as they often do, that we want a bonfire of regulations. We want to keep regulation to a reasonable minimum; we want it to be simple and proportionate. To that extent, we are probably in agreement with the noble Viscount. I would welcome recognition from the Government that the imposition of regulation always falls disproportionately on the SME sector, a fact that large companies exploit when lobbying in Brussels so as to disadvantage their smaller competitors.

I appreciate that, taken individually, the enterprises we run are utterly insignificant. However, collectively, it is surely the case that the sector as a whole is by magnitudes the most important in the country, outside perhaps that of financial services. It should hardly need saying that among those in this group are literally all the big players of the future. The Minister will rightly point to small business relief and rural rates relief. However, qualification for those depends more on property values and service provision—for example, a rural post office—than actually providing sustainable employment in the rural community.

In our family business, we find that the margins are generally squeezed to the point that we are postponing and cancelling agreed investment. This is for the first time in half a century. This little incident illustrates my point: as a consequence of one of our recent mineral activities, we inadvertently created a new environment for the great crested newt, which lost no time in adopting it. We then proposed to undertake additional works, to the detriment of the newt’s habitat, and were quite rightly and by law required to rehouse this charming amphibian and do so under expert supervision. The newt was duly found an alternative home. I tell this story to point out that the cost of this came to £150,000 and led directly to the abandonment of a very substantial investment and the creation of about 15 permanent jobs. It is a question of proportionality.

The problem is largely cultural; by degrees, an official class has developed a hostility to those it is meant to serve. This is particularly in evidence among planners, quangos and various agencies possessed of doubtful lines of accountability. The Government can and should do more to address the problems of productivity, public sector procurement—where SMEs are still very largely excluded—technical training and of course business rates.

Those who nourish our nation’s prosperity and on such a scale, as do a number of my neighbours in Cumbria, deserve better. I ask the Government to rethink their attitude to the sector, renew their efforts to understand its troubles and cherish a little all those millions of men and women on whom our future and prosperity depend.

Industrial Strategy

Lord Cavendish of Furness Excerpts

Monday 8th January 2018 Lords Chamber

[Lord Cavendish of Furness (Con)]

My Lords, what a pleasure to follow the noble Lord, Lord Bird, whose own generosity of spirit has borne fruit wonderfully.

I now see that I am not alone in having had a sinking heart when talk of a new industrial strategy first entered the realm of public discussion. “Here we go again,” I thought, “another exercise in picking winners, shielding inefficient business and offering grand promises to those who prosper least in our society”. I was wrong, or at least I am persuaded that my cynicism was misplaced. I heartily congratulate the Government on their industrial strategy White Paper, and I thank with equal enthusiasm my noble friend Lord Henley on his excellent speech that opened this important debate. Under consideration is a hugely ambitious set of proposals. I asked myself if perhaps it was too ambitious and indeed unrealistic in its scope. On reflection, I concluded that past failures by Governments seeking to improve economic performance stemmed in part from too little ambition rather than too much, and from a narrowness of scope that resulted in flawed delivery.

I found the White Paper an exciting read, if not a page turner. It is unusually thoughtful and has an especially winning feature from my point of view: everyone can feel justified in feeling that their particular circumstance is being taken into account. We are invited, in effect, to participate in something intended to improve the lot of each one of us in every part of the UK. Although I always listen to my noble friend Lord Howell with the greatest respect, I take issue with his rather gloomy outlook here. Both the nation’s children and its ageing population are discussed, as are town and country, while the devolved Administrations and large and small businesses all get a hearing. It is pleasing to read in a document about industrial strategy that the environment and the fascinating concept of “natural capital” find a place. It anticipates Britain’s departure from the EU but it is not at the expense of anything else.

The comprehensive nature of this White Paper is really encouraging. I first got wind of the fact that thought and vision had found their way into a government White Paper when I read the debate in another place following the Statement on 27 November in vol. 632 of Hansard. It was delivered by Mr Greg Clark and I join other noble Lords in being extremely pleased that he remains in office. With very few exceptions, the Statement was well received in the other place and constructively debated. It is fair to say that the same could be said of the press coverage that followed the announcement, and I feel that the same has happened here in this debate. The House should be extremely grateful to the noble Lord, Lord Mandelson, for the even-handedness of his introduction and its tone, which was impressive as well as authoritative. I particularly hope we will come back to his anxiety that institutionally this country has great difficulty in thinking in the very long term—or what in business we would just call “the long term”—because that does great damage.

As a Conservative, it comes naturally to me to challenge any and all extensions of government interference in such areas of industry. Indeed, the White Paper commendably acknowledges that risks are attached to the Government’s approach. There are risks, and one would need to be a great optimist to expect all these great ideas to materialise as planned. We should take to heart my noble friend Lord Heseltine’s warnings in that respect. Broadly speaking, though, there has been a great deal of consultation leading up to the publication of the White Paper, and the very fact of continuing devolution suggests to me that the Government of the day need in reality to be an active participant in the nation’s economic development. The Government’s dominant role in providing such areas as health, welfare and education lead me to exactly the same conclusion.

If I understand it right, the paper suggests that the delivery of these proposals will rely heavily on partnership. I applaud that aspiration, with the proviso that the partnership has to be genuine and mechanisms will need to be in place—through, I suppose, the independent commission—to ensure that it does not become one-sided. One should never underestimate the capacity of Governments to bully when they feel they hold all the cards. I was especially pleased to read of the Government’s intention to ensure that 60% of contracts for major projects will be awarded to the SME sector. Living as I do alongside very dominant tier 1 companies, I am very familiar with supply-chain promises that fail utterly to materialise in practice. I urge the Government to make a reality of this pledge and take seriously my noble friend Lord Maude’s remarks about supply chains.

I do not think I have ever risen to speak in your Lordships’ House unless I have felt that at least most of what I had to say stemmed from personal experience. When a debate of this nature is listed I try also to consult local friends and acquaintances engaged in entrepreneurial activity. Perhaps I should declare my own interests as listed in the register of Members’ interests. In a word, after 10 years of international trading, my work has been in a highly varied family business based in Cumbria, with some 200 souls on the payroll.

The White Paper leaves me in no doubt that cities and areas of the UK that conform to modern best practice in terms of governance are and will be ahead in the queue to benefit from the proposals that we are discussing. It is not clear to me that the county that the Minister and I have the privilege of living in has quite got up to speed in this regard. I remember a senior civil servant telling me in exasperation, “Your trouble in Cumbria is that you are overgoverned and underled”. Again and again the White Paper lays stress on the importance of local leadership if its proposals are to bear fruit. I hope we in Cumbria will take note of that and will be given time for amendment of life. I wonder whether the Minister has any thoughts not just on our lovely county but on other places that need rather a different approach if the people who live there can expect to benefit from the really exciting prospects that the White Paper lays before us. It is, in essence, the same question that my noble friend Lord Heseltine asked the Minister.

While I understand that the Government wish to demonstrate ownership of this thoughtful White Paper, I confess to being a little surprised by how little the private sector is involved financially. In a recent debate I drew attention to a CapX article by Mr George Trefgarne suggesting that infrastructure projects could be financed privately through the means of what in Victorian times were called project bonds. A faintly related idea subsequently surfaced in the patient capital review, and tucked away in the White Paper is mention of the possibility of pension funds being enabled to enjoy slightly greater investment flexibility. Huge sums of money are stashed away in this country—or so I am told—looking for a home, a point made by my noble friend Lord Griffiths. I am at a loss to understand the apparent reluctance of the Government to encourage private sector participation in infrastructure projects. I wonder again if the Minister might be in a position to comment on that.

I turn to a paragraph in the paper that suggests that UK taxation levels are “competitive”. I am sure that statement, whatever it is meant to mean, is capable of being defended. I merely make the point that even if headline rates appear reasonable, taxation is still very high overall, and damagingly so. There may be good reasons why relatively high levels of taxation exist as part of repairing the country’s finances. However, as I have said before in your Lordships’ House, burdensome regulation, high taxation and an enduring perception that the Government and their agencies are hostile combine to be a serious disincentive to investment, especially regarding the impact on the SME sector. It is because of these disincentives—I say this with great sadness—that my own family business has recently deferred, perhaps indefinitely, what amounts to a very substantial investment for a small company. It is very difficult to measure what I would describe as public sector hostility. I have encountered it with planning authorities, a wide range of regulators, quangos and, on occasion, even the police. In recent months, I may have detected some improvement in public sector culture. Indeed, I am much encouraged by the collaborative tone of the White Paper, which suggests that maybe some lessons have been learned.

A close neighbour of mine in Cumbria has built up a small business in his backyard that manufactures subsea acoustic navigational equipment for military customers and search-and-rescue divers. This splendid pioneering young man acknowledges gratefully the help that he receives, especially R&D incentives and the measures that protect his intellectual property. However, he writes:

“UK manufacturers are bombarded by European compliance legislation that is applied with very little thought to type or quantity produced. Some of this legislation such as CE marking (Conformité Européenne) and WEEE (Waste Electrical and Electronic Equipment) compliance are extremely difficult and onerous to achieve and are very effectively pricing us out of the market. In theory, if we were asked to design and manufacture just one small batch of product it would need to conform to all the same red tape put in place for mass manufacturers”.


My talented friend suffers also from tier 1 neighbours who breed huge salary competition, creating skills vacuums for smaller enterprises. What he has yet to encounter, as I have, is the grotesque practice by some big companies which lobby EU officials to add burdens to compliance and thus disadvantage their agile, small competitors.

These serious imperfections in the current business climate facing SMEs need to be addressed, and I hope that they will be, but that is not to suggest that they diminish in any way the opportunities outlined in the visionary White Paper. My hope is that the strategy will take account of inherited flaws in the present system.

The White Paper touches everybody and seeks to better the lives of all of us. It captures the new mood that free trade is a moral as well as an economic imperative. It equips our country with the means to prosper in a global market, free from resort to protectionism. It speaks of innovation and advanced technology not in terms of profit and balance sheets alone; it speaks with rather unusual warmth and humanity of how we and those who follow us might live happier, more fulfilled and contented lives.

Queen’s Speech

Lord Cavendish of Furness Excerpts

Monday 26th June 2017 Lords Chamber

[Lord Cavendish of Furness (Con)]

My Lords, while it is always interesting to follow the eloquence of the noble Lord, Lord Morris, I wish that at some point somebody would explain to me how one can reconcile giving up austerity with keeping the national finances in good heart without endowing future generations with debt.

I should very much have liked to speak on many aspects of the gracious Speech but concluded that I would say one thing on one subject where I have the most personal experience and on which, incidentally, my noble friend the Minister was silent during his excellent opening speech. It concerns the SME sector of British business, which, I am told, contributes more than 80% of our output and growth. I have fears for its future, and these fears have been echoed by my noble friends Lord Inglewood and Lady Fookes.

First, I need to declare my interests. For most of the last 45 years, I chaired a family group of companies in Cumbria concerned with farming, forestry, leisure, mineral extraction, housebuilding and horseracing. Although I have relinquished the chairmanship to my daughter, I remain on the board of these businesses. At no point over those last four decades has it been more difficult than it is today to maintain the level of investment that these businesses require. Fearing that I may have had problems of my own creation, I consulted widely with some 20 businesses in my area. Without exception, all told the same story. Nor this time can the blame be laid at the door of the banks, even if they have let some people down.

In a sentence, the cause of the problem is a record high burden of taxation, much of it through stealth taxes, the disproportionate effects of regulation and, added to those, a mean-spirited and unhelpful culture that has developed over time among the numerous public sector agencies that impact on our working lives. Those three things combine to squeeze margins to the point where investment carries unjustifiable risk. I want to be clear: this is not about personal taxation. The Government are plainly right to work remorselessly to restore the public finances to health—and I accept that all of us who can have a part to play there—but what they should not do is to cripple the sector that contributes so enormously to creating jobs and prosperity.

I wish to say a word on those three ugly sisters—or brothers, if you prefer. Ministers may, with justification, pray in aid numerous schemes and devices to assist the SME sector, but that does not alter the fact that today’s tax take is at an all-time high—a point made by my noble friend Lord Borwick. Business has been vocal as to the impact that it carries in respect of business rates and national insurance contributions—that ill-named tax on jobs. Less well publicised are the regular hikes in the insurance premium tax, starting as it did at 5%, then rising to 9% and, more recently, to 12%. These are serious impositions and fall disproportionately on SMEs, which have less access than large companies to sophisticated financial advice.

Where regulation and employment law are concerned, it should be obvious that for myriad reasons they impact more heavily on SMEs than on larger concerns. To an alarming extent—I have personal experience of this—large companies lobby for increased regulation on the basis that they can afford complicated compliance, knowing that their smaller competitors cannot. An especially venal complicity on the part of the Brussels institutions has added to my conviction that Brexit is for the good. Brussels plays host to some 60,000 lobbyists, paid by large multinationals whose sole job, as far as I can see, is to obtain regulation that favours them and harms their smaller competitors. Perhaps my noble friend would add that to the list of unacceptable practices that he wishes to legislate against.

Finally, I must turn, with some sadness, to the present-day public sector culture, which I find damaging to smaller enterprises. It is worse among the supposedly independent agencies than among government departments, and it is conspicuously awful among the powerful monopoly utility companies. There has been a growing tendency over many years among powerful agencies to bully and harass those over whom they can exercise some control. The attitude might be summarised by the experience that members of the public have nowadays when they visit a hospital. The parking they used to enjoy close to the main building has now frequently been given to the staff, and as often as not we are now sent considerable distances and have to pay for it. All change these days, I find, is for somebody else’s convenience and never for mine. I even notice it in the Palace of Westminster.

Perceived hostility on the part of public sector organisations and the often slovenly service they give carries a huge cost. Planning is a powerful example. I could point to numerous examples of SME companies seeking to invest suffering endless delays for no good reason at the hands of planning authorities. What is so galling is that these people seem to have neither an interest nor an understanding of the harm they inflict on their own communities or of the good they could do by a simple change in attitude.

In my local community, I believe I have identified investment delayed or cancelled amounting to tens of millions of pounds. I also believe I have identified the reasons and given them to your Lordships. If those reasons can be addressed, I confidently predict that the sector will respond magnificently and produce still more jobs and tax revenues and enduring prosperity for all.