Queen’s Speech

Lord Cotter Excerpts

Wednesday 25th May 2016 Lords Chamber

[Lord Cotter (LD)]

My Lords, I will speak on the economy generally—so important for us all. Briefly, like many have already, I refer to the in/out referendum. I will not elaborate, other than to say that when it comes to the economy it is vital to build on our existing contacts, which are clear and important. Those advocating we come out have not said much specifically and tangibly about the economic future. We will be set adrift without ready replacement for the work we now enjoy through the EU.

Time and again when it comes to the economy, productivity, or lack of it, has been raised, as indeed it was by the Minister in his opening remarks and by my noble friend Lord Oates. I recently met with the organisation ADS, the national trade association for the UK’s aerospace, defence, security and space sectors. It points to the fact that there has been a 30% increase in productivity growth in its sector in the last five years, compared with 2% generally across the UK economy. Why? It has a lot to do with the way it invests in skills and good management, and has a commitment to apprenticeships. The aerospace sector places a lot of emphasis on apprenticeships, thereby having a skilled workforce—so key to productivity. I have learned how key apprenticeships are to the high level of skills that such companies have—so vital for this sector and how supportive they are in this respect.

But, most importantly, I have learned from management in the space sector the emphasis that it places on working collaboratively with the workforce. It is vital that management respects and works with its employees, which has not always happened elsewhere. It is, as I and this sector believe, essential that there is leadership from management, but also, most importantly, that it listens to and inspires those who work for it. I am not suggesting a “them and us” management approach, which is too common, but one that is collaborative and clear—that is, we do not want the heavy-handed approach of the past, which is so destructive when it comes to getting the best out of people and thereby to achieving high productivity.

I relate to this personally. Early in my career after leaving school I worked for a small plastic manufacturing company run on “them and us” principles. I left after a couple of years because of this attitude. I remained in business and ran my own business for many years, latterly in the manufacturing sector, but before that in trading and supplying to shops. I was approached by the original business I had worked for for just two years, asking whether I would come back to run the business, which I did. Within just two months or so after I changed it from a “them and us” company to a collaboratively management-run company, it lifted off the ground and produced the results that are very necessary for any company to achieve. To get productivity we need good management, as I saw in my career. A key aspect of the 30% increase in productivity achieved by the aerospace industry has been through good management and respecting the employees.

I say to the Government that we must train management. It is vital that they achieve a high standard and ensure that managers are properly qualified before they are allowed to run companies. I support what my colleagues and others have said: too many people are paid fantastically large sums of money when they are just incompetent. To have a healthy and productive economy we need investment.

Again, I urge the Government to take strong action, helping with investment to ensure that they and large firms pay SMEs promptly—an issue I have raised in the House many times. Indeed, I ask the Minister to confirm what I saw in a newspaper—that the new business tsar will challenge late payers in person. Is that happening? If not, it should be. Small firms in this country suffer greatly from late payment. I leave that in the hands of the Minister and hope he can consider the issues of management and productivity.

Economy

Lord Cotter Excerpts

Thursday 10th September 2015 Lords Chamber

[Lord Cotter (LD)]

My Lords, today we are considering the economy. Growth is generated through businesses, of course, but the Government, as ever, have a role to play. SMEs are crucial, so the Government’s commitment in the Queen’s Speech to cut red tape for business by £10 billion is very important. So often business has been held back by unnecessary red tape and bureaucracy—I have experienced that myself in another life. Many Governments before have said that they will cut red tape, but this time I look to our Government to give us feedback and indicate how the cut-back is being achieved.

It was interesting that the Government said they would create a small business conciliation service to help settle disputes between small and large businesses. That initially brings to mind a continuing problem for SMEs—namely, the late payment of debt, which is a frequent problem that arises between small and large businesses. The larger-capacity businesses have the money but they often do not pay their debts promptly, and I look to the conciliation service as perhaps a way forward. Business Ministers have in recent times addressed FTSE companies, urging the many which have not done so to sign up to and implement the Prompt Payment Code. I ask the Minister how successful their request to FTSE companies has been and whether they will carry on pressurising those big companies to pay their debts on time.

There is much to say on the economy but I shall touch on just one or two other points. The need for exports to increase is key, as is enabling, helping and encouraging the business sector to get finance specifically for exports. I know that many smaller companies are discouraged from exporting for lots of different reasons, among which is the need to get finance to expand their exports. I ran a small business and at the time we were fairly fortunate in being able to export for various reasons. Therefore, there is a need for UK export finance to be brought on to a par with the world’s best export financial agencies.

Productivity has been debated already. At this stage, I thank the noble Lord, Lord Haskel, very much for initiating this debate and for the points that he made on productivity. I agree very much with him that lack of productivity can sometimes be the result of poor workplace relations. I had experience of that some years ago when I was asked to take on, as managing director, a small manufacturing company which for decades had been run poorly by management on a “them and us” basis. The approach from the top was very poor and the workforce naturally felt disengaged and uninspired to work hard. In a short time, having been asked to take on the company as managing director, I changed all that, establishing a very different culture of working as a team. Within a very short time, the company lifted off, and I was able to achieve that through my long-standing commitment—in thought anyway—to a team approach, not a “them and us” approach, when it came to business. Therefore, I hope that management training nowadays emphasises, among other issues, how important it is to have good workplace and management relations.

Queen’s Speech

Lord Cotter Excerpts

Thursday 4th June 2015 Lords Chamber

[Lord Cotter (LD)]

My Lords, the Government have a big job on their hands when it comes to business. We have had an excellent debate today and many issues have already been raised. I should like to raise a few more points on some of those issues. How the business community operates is crucial for jobs but also for trade, and thereby for the profitability or otherwise of this country. We need to include in our aims—the Government do, anyway—to ensure that we increase the interest and ability of firms in this country to export. As I say, we need to be a profitable country for many reasons. There are many other strands to address.

To add to the list, we have had problems in the past on inward investment, as the Government will know. This area needs to be looked at again and again. There have been issues with visas and with people from overseas being able to come to this country to set up businesses and trade. A very important aspect of business is to ensure that young people are trained up and ready for the workplace. Many colleagues have spoken about engineering and the different abilities and skills needed. I am sure that many others in the Chamber will be monitoring and following up time and again over the months on these points. At this point I will mention one issue which I think was raised by the noble Baronesses, Lady Liddell and Lady Wheatcroft, and others. That is the need to make tourism a very important strand in the ability of this country to trade.

I hope that when it comes to the enterprise Bill, these and many other issues will be addressed because, as I have said, the Bill will need to cover so many of them. One issue that the Government have announced that they will address is red tape. The often-trumpeted reductions in red tape must happen this time. Many say that this country is adept at rule-setting. Am I going too far in saying that Governments in the past have excelled when it comes to regulating and regulations? I do not think so. With my lifetime of experience in operating a small business, I can and will point out to Ministers how those self-employed people struggle so often against bureaucracy. I have some specific examples in my mind.

There is much to address under the heading of finance. The difficulty for small businesses in getting finance and having money lent to them has been referred to already. We have had a debate on this area this year and I would appreciate a specific report back on late payments, which is a very big issue for industry and construction, for example. Specifically, a figure was quoted a while back of £39 billion being owed to SMEs because of overdue payments. Is this improving? The Government have written to FTSE companies to encourage those not signed up to the Prompt Payment Code to do so. I would be glad to learn whether that has succeeded and will be carried forward as a strong issue. I would be pleased to hear about the record of the Government and other Governments on local and national payment, by government and local councils, as well.

As the Minister will know, we have welcomed the concept of the business bank. As somebody who has been in business for much of my life, the bank’s overall funding and financing will be important. But there is also the importance of having local ability to raise money, and people with the knowledge to understand the business needs of their areas and the people operating locally. That is a very important strand of the business bank. I have spoken before about local enterprise partnerships, which I hope can be engaged to bring localism back into the picture.

There are many issues to be covered. Broadband was referred to again today. The previous Government made announcements about the appointment of various organisations when it comes to broadband, but I am told that in rural and other areas of the country our broadband is still just not necessarily up to the mark.

There is much to do when it comes to business, which is crucial for jobs and our country’s future. I look forward with great pleasure to the Government coming forward with their business Bill and to trying my best, with many colleagues, to influence the many aspects of the business Bill we need for jobs and the future of this country.

Small Businesses: Finance

Lord Cotter Excerpts

Wednesday 25th February 2015 Lords Chamber

[Lord Newby]

That is why we have created the British Business Bank specifically to deal with these market failures. The bank aims to unlock £10 billion of new finance by 2017-18. On lending to small businesses, the noble Lord should be aware that gross lending has grown by 25% in the past year and by 41% over the past two years.

[Lord Cotter (LD)]

My Lords, recently the Business Minister wrote to the FTSE companies which are not signed up to the Prompt Payment Code. More than £39 billion is owed in overdue payments to SMEs, so this is a very important issue. Can the Minister tell us what progress has been made on encouraging the many FTSE companies which are not signed up to the code to do so and on ensuring that we carry on pursuing this matter? SMEs are saying that late payment of bills is the main bar to their growth.

[Lord Newby]

My Lords, I agree absolutely with my noble friend. We are looking at this in the context of the Small Business, Enterprise and Employment Bill and tightening up the speed with which the Government pay their bills. We will keep bearing down on businesses to make sure that they improve their performance in this area.

Small Business, Enterprise and Employment Bill

Lord Cotter Excerpts

Wednesday 7th January 2015 Grand Committee

[Lord Flight (Con)]

My Lords, I first declare an interest as chairman of the Enterprise Investment Scheme Association. This issue falls under the Treasury rather than the BIS, so it often gets ignored in terms of its crucial importance in raising equity capital for small businesses. Once you have the equity capital, you can gear up with borrowing. EIS, under Governments of both main parties, has raised more than £12 billion since it started; over the past three years, the amount raised has doubled in each of those years and is now well in excess of £2 billion for the current year. When the present Government came into power, one of the constructive things that they did was to go back to negotiate with the EU to widen the parameters of the EIS, which had been unhelpfully narrowed during the previous Labour Government. Equity finance for small business is almost more precious than debt finance, and there is a wider range of providers of debt finance now increasingly available. I want to register the point on a BIS Bill in a BIS debate today that the Treasury and the EIS is crucially important for small business.

[Lord Cotter (LD)]

Before we move on, I thank the Minister for her response so far. Within the Bill there is this talk about the annual report and the need for the Government to address the issues in that sort of way. On behalf of the small business sector, I feel that we need to continue to look at issues in the Bill—but also particular issues, to one of which I shall refer the Minister. With the annual report, there is a very serious issue with the small business sector and finance, with regard to late payment to them from big businesses. There is a significant issue there, with 50% of big businesses not paying small businesses on time. I hope that monitoring and reporting back on such issues will be something that is ongoing throughout this Bill.

For example, there is a prompt payment code, which is voluntary—or it has been a voluntary code in the past. I very much hope that as part of the annual report Ministers will agree to look at the code and consider whether it is strong enough and whether it has been implemented enough by the businesses involved and by the Government themselves. Late payment is a serious issue when it comes to finance for small businesses; they should have that money available to invest and employ people in the local area.

[Lord Mitchell]

I must thank everybody, particularly the Minister, for her reply. Of course, this is a probing amendment—and I think that we have managed to probe and get quite a lot out of it that is beneficial. I thank the noble Lord, Lord Flight, too. I absolutely agree that there is a huge issue with equity for small businesses. Since I started studying economics a long time ago, there has always been that equity gap that needs to be plugged. In some ways, I am not sure that a huge amount of progress has been made on it.

I suppose that it depends on how you look at these things. If you go to visit some of the banks, as I do—and I hear what the Minister says in that regard—you could think that after five years it is a golden period for small businesses and that it is all absolutely rosy. You hear stories, such as were mentioned by the noble Baroness, of 71% of all applications being approved. However, it depends what you mean by an application. Many applications fall at earlier levels before they get to the formal point.

All I can say—I shall be speaking a little later about my own experiences with a small business—is that it is incredibly tough for small businesses that have been going for two or three years to raise the money necessary for them to expand, and I am talking about successful companies. Therefore, I suppose that I take a far more pessimistic view than the noble Baroness. More needs to be done to encourage these businesses. Nevertheless, I am somewhat reassured by what she said, and of course I beg leave to withdraw the amendment.

--- Later in debate ---

[Lord O’Neill of Clackmannan]

My Lords, I should declare an interest as president of the Specialist Engineering Contractors’ Group, which is an umbrella trade association in the construction industry. Something like 95% of the businesses in construction employ fewer than 10 people. They are often the weathervane of the British economy, you might say, in so far as they are the first to lay off people and often among the last to get started again.

In a supply chain, small businesses are extremely vulnerable to the problems of payment. In some respects, they are probably not that concerned about the bureaucratic burdens that the people who are not paying them money are going to have to face as a consequence of the amendments that the noble Lord, Lord Mendelsohn, has so eloquently spoken in favour of. I start with that premise, but I make the additional point that regulation is a pain in the neck for the people who undertake bad practice. The rest of the people have nothing to fear from it; the other businesses do not have problems with it. We know that there are always examples of unintended consequence, but if that were the reason why we did not do something, we would never do anything in this House or the other place. I think that it is necessary to have some form of discipline to bring people into line.

One of the great disasters of this Government has been the Green Deal. Noble Lords may recall that this was going to be the mechanism whereby houses would be insulated and new central heating would be made available, and it would all be paid for out of the energy savings, which would then be deducted from households’ energy bills—it would pay for itself. One reason why that did not get off the ground was that among the promoters were to be a number of supermarkets, whose record in late payment was such that the people in the Specialist Engineering Contractors’ Group said, “We wouldn’t touch that with a barge pole. If their payment terms are of the order of 100 days, we don’t want to have anything to do with them”. This early example of a government-led scheme foundering was down to a lack of trust on the part of those small business men—people such as the electrical contractors, the small plumbers, the lads who do the central heating—who were not prepared to enter into agreements with those companies that had a dreadful record of slow payment. The Government have to look at the reasons for some of their own disappointments—I will not put it any more strongly than that.

On supply chains, I credit the Government for following on from what Peter Mandelson started when he was in BIS in trying to ensure that government contracts were paid within 30 days. Part of the problem was, of course, that the main contractor got paid but the money never trickled down the supply chain. That was one of the difficulties and it still exists—which is why the Federation of Small Businesses and other groups are extremely distrustful of the blandishments of Governments of any complexion, because in so many instances they have not been properly thought through.

If we are to have a more transparent and more effective means of securing payment in a prompt way, I cannot see that that is a problem. It may be embarrassing when big companies are named and shamed, but I do not necessarily think that that is a bad thing. We have seen this with those companies which we now know do not pay their taxes in the United Kingdom. Many of us are no longer consumers of Starbucks products. What they do is legitimate—it is just that the law is not very satisfactory here—but we have a choice as consumers, and we choose not to go there.

A lot of people would find it quite embarrassing if the companies that they regard as being good suppliers and trustworthy companies are found to be squeezing these small, vulnerable businesses. When we talk about cash flow in respect of these businesses, we are talking about perhaps somewhere between £5,000 and £25,000—about two or three weeks’ work. It is that kind of thing. We talk about support for small businesses, but they are not philanthropic institutions. They exist in order to do a job of work for which they will be promptly paid, so that they can then pass on that money to their employees.

This is an important set of amendments. It does not matter if, at the end of the day, the Minister says that the wording is wrong. That is the standard reply to any debate at Committee stage: “We like the principle but we don’t like the wording”. The Minister has a plethora of civil servants there who can give the wording and draftspeople who can do the business. Therefore, I do not think, at this stage, that that is a satisfactory response, if I can anticipate what the Minister will say.

I will finish on one last point. I have been at this game a wee while now, and the default for opposition draftsmen of amendments is that wherever you find a “may”, you make it into a “shall”. After May of this year, the tables will be reversed and a number of noble Lords will be learning the ropes of opposition. I have to say that it is not a particularly pleasant job—I had 18 years of it and it was pretty hellish. The point I am really getting at here is that it is a sign of intent. If the Government are serious about one of the fundamentals of the assistance to small business, it is making sure that these small businesses get paid by the larger businesses for which they have undertaken to do work at a fixed price within a reasonable time. They are entitled to no less than that. That is what this suite of amendments from this side of the House, in my view, is designed to do.

There are imperfections in these amendments, but their intention is quite clear. I would like to think that we are not that far away from the Government on this issue. This has to be a consensual matter if we are going to have a continuous industrial strategy that we can all sign up to.

[Lord Cotter]

Before the Minister replies, I will just follow on from what the noble Lord, Lord O’Neill, said. From his experience, the down-the-line payment is a very important point indeed. It is increasingly incumbent upon government, when it gives contracts to the big contractors, to ensure in some way or other—although we do not want to bring too much regulation in—that these large contractors are monitored in terms of their payment record when it comes to subcontractors. The smaller businesses supplying or helping the main contractor frequently, as the noble Lord, Lord O’Neill, said from his experience, suffer badly because they do not get the payment. The large contractor in that case should not be given contracts in the future if it does not have some form of checking or commitment to ensure that it pays small businesses in the proper manner that is required.

Economy: Sustainable Jobs

Lord Cotter Excerpts

Thursday 27th June 2013 Lords Chamber

[Lord Cotter]

My Lords, this debate is timely and essential, as noble Lords have said, and we thank my noble friend Lady Brinton for introducing it.

We need jobs—at least, many people of all ages need them—but I am particularly concerned about young people’s jobs, and for those we need growth in this country. This is a widely held view. As the CBI said just the other day:

“We believe that the government’s priority must be to protect spending that promotes growth”.

At one time this nation of ours was a great manufacturing country. The tide has changed, but we still have the potential. However, in recent years we went off the rails for many reasons, some of which were in our control, some of which were not. We are a great country when it comes to innovation and imaginative ideas. Many great inventions stemmed from the UK. It is therefore welcome that in the spending round that has just been announced, protecting and thus encouraging investment in science is the right thing to do, and the Government intend to do that.

I welcome the Government’s stance, but can the Minister say as a matter of record what our level of investments in R&D in this country is? Among the G7 at one time we were at the bottom, or second to bottom. Can the Minister clarify that? It is only through growth that we in this country are going to turn the corner and increase jobs. We are living in a time when much is changing in technology. We need to be in the forefront, which means that it is key that we maintain science resources and capital budgets. That is a good story, because the Government intend to do that.

In the struggle that our young people are having to find jobs, there is not such a good story to be told. Time and time again, as noble Lords have already said, when the issue of careers advice and guidance is raised, the message is still that this is just not being done effectively. Only yesterday I was a meeting and was told that once again apprenticeships—this route to jobs—are still not being mentioned in schools. This has been going on for years and years. In many parts of the country, certainly when I have had meetings with educators in the south-west and elsewhere, the message is the same: the advice and preparation for work are just not good enough. I get this from employers as well, who say that sometimes young people are not prepared for the work ethic. This is of great importance.

To go back to the point about manufacturing, we have not been encouraging enough pupils to go for the hands-on vocational jobs over the last few years. If I had a pound for the number of times I have heard the cry, “We need more engineers”, I would be quite well off. It happens time and again, and it is going to take a while correct it, but we must do just that. It is my contention that it is just not adequate to say that our young people can look up the opportunities for jobs on the computer. As has been said already, they need more face-to-face encouragement and help to find jobs.

Incidentally, on the practical side of life, it is welcome that the Government are planning more university technical colleges. Further education is a vibrant and vital sector in many parts of the country, as I can attest. In Weston-super-Mare, for example, our local college, Weston College, is spearheading apprenticeships, which my colleagues have referred to before, is successfully working with local employers to create local partnerships, and is in all senses providing a hub of activity. I know that this is also happening in further education colleges throughout the country.

The Government have a number of schemes to try to help people into jobs, but to assist in this they need to concentrate on growth and on encouraging various sectors to provide the necessary jobs. I will mention one sector in which for a number of reasons I have a personal interest, and which, like other colleagues, I have raised in this Chamber: the hospitality and tourism industry. This offers jobs over a complete range of abilities, from the unskilled to those with top skills. For that reason, and because it is a major source of jobs throughout the country, we look to the Government to encourage people to come to this country as tourists. On a little negative note, I regret to say that it is an area that needs more sharpening up.

I have in my hand Travel GBI, which has the headline:

“Tourists put off from UK visits by ‘wall of tax’”.

The Minister will know that this problem has been raised many times and that the Government say time and again that they are aware of it. I will raise it again, because I think it is so important, particularly because I have an interest as secretary to the All-Party Parliamentary China Group and in the difficulty that Chinese tourists have in coming here. When they come here they spend something like 10 times as much as the average tourist from other countries, yet we lag severely behind even a close neighbour, France, where the tourism level is 10 times higher than it is here. I do not want to end on a negative note, and I hope the Minister will reassure us again that we are looking at this serious issue.

The tremendous increase in apprenticeships is very welcome, and has been mentioned by many colleagues. Apprenticeships are, of course, a direct way into work. My noble friend Lady Sharp and others have said that there are concerns about ensuring that this is the real route to real jobs.

Finally, I know that the Minister shares the view, as we have talked about it before, that we must talk about apprenticeships and training, but I make the plea that in training and for all who are concerned with it in this country we give a very high priority to training for management. Sometimes we do not attain the very best level of management, and we are seeing this increasingly day by day in various spheres of activity. Without good management, we cannot create and keep good jobs.

Global Economy

Lord Cotter Excerpts

Thursday 11th August 2011 Lords Chamber

[Lord Lea of Crondall]

I had better spell it out as sometimes it does not get across.

That tour could demonstrate that the higher economic growth rate in Britain than in Germany could help solve the German problem. I have a second question arising from that. My noble friends will not be aware of this but I asked a Written Question about the relative position of German multinationals and Britain’s multinationals and the proportion of value added in Germany and Britain, the home country. It is pretty obvious from the FT Global 500 employment figures that Germany, which has only about half the number of multinationals as Britain, is miles more successful. Employment in Germany—that is the value added as a proportion of the German economy—is far, far higher than in British multinationals.

My question, which I shall repeat, asked the Government to give me the statistics. I had the most perfunctory reply in one sentence from the noble Lord, Lord Sassoon, that the Government are not interested in such statistics and that it was not their job to collect them. The Department for Business knows what the figures are, and the relative value added of our multinationals in Britain and the relative value added of multinationals in Germany. Will the Minister today say that he will look at the matter more carefully and give me, the House and the Library a less perfunctory answer?

[Lord Cotter]

My Lords, we all recognise the need for growth in the economy. The Statement repeated by the Minister today said that we have to work hard to have a private sector that competes, invests and exports. In the light of that and the need for growth, I refer to a report in the Financial Times today. It indicates there has been a flood of applications from other parts of the country for investment funds backed by the state available in the northern part of England. In some cases, it is one in 10 and in some cases, in Yorkshire, one-fifth. That flood of applications indicates strongly that small and medium-sized businesses are desperate for scarce loans and equity funding, which they cannot obtain because they do not come from that part of the country. Can the Government do more to help?

I ask once again, as did my colleagues and noble friends, Lord Oakeshott and Lady Kramer, whether the Government will take on board that that highlights the struggle that small businesses in particular are having to get funding from banks because of high prices, costs and tougher covenants. This is a nation of small businesses. We read the report in the FT today that there is a great demand and wish for funding but it does not seem to be available.

[Lord McNally]

My Lords, I withdraw entirely the snide remark I made about the long-windedness of economists. May I suggest that we hear from the Minister now?