Covid-19: Economy Update

Lord Fox Excerpts

Tuesday 27th October 2020 Lords Chamber

[Lord Agnew of Oulton (Con)]

I agree with the noble Baroness that tier 3 has a devastating impact on businesses and on people’s lives, but it is how we are trying to control the spread of the virus. We see what is happening in Spain at the moment. That is the nightmare that we are seeking to avoid. As I understand it, the overriding way of monitoring whether an area can come of out of tier 3 is when the percentage of those being tested for the virus falls below a certain threshold. This information gives some indication to businesses that they may be coming out of this nightmare.

[Lord Fox (LD)]

My Lords, in answer to an earlier question, the Minister reeled off a whole range of government measures. I do not think he mentioned the Bounce Back Loan Scheme. In September, the BEIS annual report stated that losses from non-repayment bounce-back loans would be in the range of 35% to 60%. I note that this would buy a lot of school meals. Meanwhile, we know that banks are hiring debt recovery specialists to reclaim those loans. With his Treasury hat on, can the Minister tell the House which route the Government favour? Do they favour greater use of debt recovery services to reduce the overall level of loan defaults or do they accept that there will be widespread default? In either case, what level of default is the Treasury modelling?

[Lord Agnew of Oulton (Con)]

It is important to differentiate between default and fraud. As the noble Lord will know, there are no repayment requirements on bounce-back loans for a year. The idea that banks are now hiring debt recovery firms to go out collecting is probably inaccurate. They are increasing their resources to deal with fraud because this has been a problem. I am concerned about this both as fraud Minister and as a Treasury Minister. No repayments are due on BBLs for 12 months from drawdown and we have recently extended the repayment period to 10 years.

Economy

Lord Fox Excerpts

Monday 28th September 2020 Lords Chamber

[Lord Agnew of Oulton (Con)]

My Lords, I can only reply honestly and say that I do not know whether the support announced last week will be adequate. It depends on simply too many moving parts. We all know that if a vaccine is discovered in the next couple of months it would completely change the game. At the other end of the spectrum, if we had a very bad surge which led to huge levels of hospitalisation, that would push us in the other direction. The Chancellor has been consistent in saying that he will respond to the circumstances.

[Lord Fox (LD)]

My Lords, even with the job support scheme, economists and others are predicting at least 1 million being made unemployed by the end of the year. For many of them and their families, the only recourse will be universal credit. The Minister claimed to be proactive, so here is a proactive idea. The Economic Affairs Committee has just issued a report which lays bare the shortcomings of universal credit, so will the Minister undertake that he and his Government will take a look now at that report and respond much more quickly than they normally do because this is an oven-ready way of making sure that universal credit is adequate for all the millions of newly unemployed people?

[Lord Agnew of Oulton (Con)]

My Lords, universal credit has turned out to be a total game-changer for those thrown out of work by this crisis. It has been extraordinarily flexible. If we look at the past three or four years, we have always responded to criticism and have improved universal credit when it has been clear that it needed improving, and I can assure the noble Lord that I will make sure that the report to which he referred is made available to my right honourable friend.

Covid-19: Economy

Lord Fox Excerpts

Thursday 4th June 2020 Lords Chamber

[Lord Fox (LD)]

My Lords, I declare my interests as set out in the register. Today’s debate is timely and the noble Lord, Lord Eatwell, should be congratulated on securing it. Your Lordships’ contributions make it a difficult job to wind up this debate. The backdrop against which it is conducted is one of darkening economic storms. The Institute for Public Policy Research today issued a report predicting that greater than 1 million people will be “plunged into poverty” by the end of the year; included in that are some 200,000 children. This debate is a chance to tease out the Treasury’s thinking on the next steps, and those beyond, for our economy. I hope the Minister will be forthcoming.

First, looking back, noble Lords have mentioned Germany, which is held by many to have tackled the virus very well. What factors contributed to its relative success? We all know that Germany has a strong industrial base as a result of decades of public policy. Yet I believe I heard comments from the government podium implying that the Germans were somehow fortunate to have the private companies they needed to lead their testing programme. Countries make this kind of luck. Germany also has a well-organised regional administrative capacity through which to deliver its virus defence and recovery programme. This stands in contrast to the UK approach, not least on testing and our nascent plans for tracing.

The evidence shows that we are a country where public policy has for decades undermined our industrial capacity, and one with an uncontrollable urge to overcentralise. This is a country where local government has been drained of finance, belittled and undermined, and where the regions and nations are often ignored by Westminster. These chickens came home to roost during this crisis. Unless and until the Government undertake to sustain a meaningful industrial strategy, and do it in a devolved way, any economic recovery efforts will be severely hamstrung. Sadly, it is often the Treasury which is portrayed as an overwhelming influence against these two things. Can the Minister undertake to call off the centralising urges of the Treasury?

We have heard that there will be millions of jobs on the line. Today, Make UK, which represents 20,000 businesses, has told a Select Committee in the Commons that one in four manufacturing firms plan to cut jobs. For example in aerospace, Rolls-Royce announced 3,000 UK redundancies this week, with, of course, a knock-on effect to the supply chain. Elsewhere, today’s IHS Markit survey says that some 64% of building firms reported a drop in construction activity during May. Car showrooms have recently reopened but, not surprisingly, UK car production is down by about 99%.

However, some of the sectors that are suffering worst are made up of myriad SMEs. These include the hospitality, tourism, arts and creative sectors, as set out by my noble friend Lady Doocey and many others in their speeches. SMEs across the country—across the whole economy—are also the drivers of growth, while being key entry places for new people coming into work. For many of these businesses, further loans will not be the answer. The noble Lord, Lord Eatwell, is right to highlight the liquidity trap facing such businesses. Loading them up with debt will cause them to fail. The EU seems to be moving towards a grants system, so, in addition to the question of the noble Lord, Lord Eatwell, on possible equity injections, can the Minister tell your Lordships what the Government’s position is on grants—not just to public organisations, as noble Lords set out, but to private sector organisations?

The noble Lord, Lord Kerslake, and the noble Baroness, Lady Warwick of Undercliffe, spoke about stimulus programmes and focused on housing. Others not in this debate may be pinning their hopes on a consumer-led recovery. The German Government have agreed to a €130 billion fiscal stimulus, centred on a big cut in VAT. They also plan a €300 one-off children’s bonus payment. The aim of their package is to stimulate consumer demand, but given that we make so much less than the Germans a consumer-led recovery here is more likely to benefit Amazon than the UK economy. I would like to tease out from the Minister what the plans are for investing in a recovery. My noble friend Lord Razzall made a raft of suggestions, which I will not repeat, but can the Minister set out how the Treasury is approaching this issue?

The noble and right reverend Lord, Lord Harries, talked about social solidarity and was right to do so. It is extremely unfortunate that even some of those people retaining their jobs are doing so at the expense of having worse contracts than they had before the virus. Within that, we will almost certainly see an upsurge in the number of gig workers. During the crisis, many of us have been sustained by the services of today’s gig workers. The noble Lord, Lord Hendy, rightly pointed out that many of them are employed on very disadvantageous terms. To discourage this race to the bottom, Her Majesty’s Government need to send a message now. One way to start doing that is by implementing the Taylor review of modern working practices. Protection of gig workers and the implementation of decent conditions should now be a priority. The Taylor report contains a range of improvements that the Government have said they accept, yet it is gathering dust. Can the Minister undertake to talk to colleagues about implementing the Taylor review, and to come back to your Lordships’ House and report on his discussion?

Finally, there is our trading position in the world. The EU negotiations seem mired; indeed, the Bank of England is preparing for no deal. The US free trade agreement will lead to nothing before elections there. The Japanese negotiations may yield something sooner, and perhaps a fraction better than the deal we currently have under the EU’s umbrella. At the very best assumption, an EU-Canadian type of free trade agreement, which looks unlikely, would mean at least 5% of GDP being cut. Even if the noble Lord, Lord Lang, gets his dream deals with the US and Japan, those will struggle to recover as much as 1% of the GDP that we have lost. This is all on top of a double-digit hit on GDP from Covid-19.

I am not calling to cancel Brexit—we have left the EU—but for any Government to allow the full effects of a no-deal Brexit on top of the economic shock of Covid is careless with people’s lives and prospects. As the noble Lord, Lord Low, and my noble friend Lord Shipley highlighted, there needs to be an extension to the transition period of two years to allow the Covid-19 pandemic to be managed strategically and carefully. Does the Minister agree that it is far more sensible to give ourselves time to get the best possible trading arrangements with the EU and other third countries before we shut the door on our favourable deal with the rest of Europe?

Briefly returning to industrial strategy, I fully endorse the comments of my noble friends Lord Oates and Lady Sheehan and others such as the noble Baroness, Lady Boycott. We must set out for a green, jobs-led recovery which also seeks the strategic self-sufficiency that my noble friend Lady Bowles mentioned. For a green, jobs-led economic strategy to work, it has to be consistent over many Parliaments. I know that the noble Lord, Lord Stevenson, who will speak after me, is enthusiastic in this regard and that he is a reasonable person, as we are on these Benches. There needs to be a cross-party agreement on the way forward to lock this into the future. Will the Minister go back to his colleagues and propose a cross-party approach to planning for this vital element of our future?

Using most conventional measures, the economy is at least overstretched if not bust. We will have many millions more unemployed people and still more underemployed people, and few jobs for young people. The most vulnerable will be hit hardest. Meanwhile, the climate emergency is accelerating, China and the US are completely polarising the global economy and we are about to put up the barriers to the EU. I look forward to hearing the Minister’s response.

Economy: Update

Lord Fox Excerpts

Tuesday 28th April 2020 Lords Chamber

[Lord Agnew of Oulton]

I assure the noble Lord that we are looking at all options. He makes a good point about the shortage of doctors. As the Chancellor has repeatedly said, we will give the NHS all the support it needs. Noble Lords might recall that in the Budget a few weeks ago—it seems like another era—substantial additional funding was announced for the public sector, and we will of course have our spending round, albeit delayed, in the next few months.

[Lord Fox (LD)]

I draw attention to my interests as listed in the register. Implicit in the question from the noble Baroness, Lady Neville-Rolfe, is the point that the managers of the 4 million-plus people being furloughed will start to think about whether they have a future in the business as soon as next month. A huge wall of cash will be required when these workers come out of furloughing and go back into work. That cash will endanger jobs. The flexibility that they do not have at the moment in the furloughing scheme will be very important. The furloughing scheme needs to unwrap in stages, rather than hit a brick wall. Will the Minister acknowledge that this cash drain will be potentially catastrophic for jobs? Will the Government take on this issue and do something about it?

[Lord Agnew of Oulton]

The noble Lord broke up a little. I think I got the—

--- Later in debate ---

[The Deputy Speaker]

If that would establish a better connection, it would be very much appreciated, Lord Agnew. We will pause until you are able to do that.

[Lord Fox]

May I re-ask my question, given the circumstances?

[The Deputy Speaker]

Yes. As the Minister was not able to hear, the noble Lord should indeed ask his question again.

--- Later in debate ---

[The Deputy Speaker]

I will ask the noble Lord, Lord Fox, to repeat his question so that we can start again.

[Lord Fox]

I reiterate that I declare my interests as set out in the register. The point at which furloughing ends is of great danger for jobs because it will cause a huge drain on cash in businesses. Those businesses have to decide whether or not they will continue to employ people as soon as next month. They need to know that the Government understand this issue and will set up a more flexible way of unfurloughing workers so that they can do it gradually. Can the Minister acknowledge that this is understood and undertake to tell businesses what will happen very soon? They need to know.

[Lord Agnew of Oulton]

I will try to offer some reassurance to the noble Lord. The most important thing to say is that the Chancellor has demonstrated enormous flexibility and dexterity over the weeks of the crisis. As the saying goes, if the facts change, he will change his mind to deal with the emerging situation. I am perhaps a little more optimistic than the noble Lord on the current position; even in the last 10 days we have seen increasing numbers of people going back to work as businesses have responded to social distancing and worked out simple things, such as how to rearrange offices. We are seeing this in the traffic stats of the volumes of people commuting. While I accept that there could be something of a big bang, I am hopeful that it will be more of a gradual return to work. If the noble Lord is right and we see that as an approaching problem, I am confident that the Government will react accordingly.

Covid-19: Self-employed

Lord Fox Excerpts

Thursday 23rd April 2020 Lords Chamber

[Lord Agnew of Oulton]

My Lords, I will not repeat the arguments I made in an earlier response. We will of course keep it under review. Some 11 measures have been made available for a variety of self-employed people and businesses. I will not list them all now, but there is a pretty strong safety net. If there is evidence that some are falling through that net, we will of course keep an open mind.

[Lord Fox (LD)]

Nothing the Minister has said will make insecure workers any more secure today, so can we try another line? There is, to coin a phrase, an oven-ready way of improving the rights and entitlements of many self-employed people. Can the Minister pledge that the Government will at last implement the Taylor review of modern working practices? It is time to give insecure workers at least some sense of security.

[Lord Agnew of Oulton]

My Lords, we will certainly keep it under review. I am not able to give a cast iron commitment on that now. It is worth restating that the package of support we have announced over the last month is very substantial. Our policy has been to make it available in a number of different ways—unlike in some countries, such as Germany, where it has been a very targeted form of support. With these 11 different measures, we are confident that the vast majority of small business proprietors will have their situations protected.

Economy: Productivity Measurement

Lord Fox Excerpts

Thursday 28th March 2019 Lords Chamber

[Lord Young of Cookham]

It is certainly the case that cost per Member is much lower in your Lordships’ House than in another place, although of course there are reasons for this. So far as productivity in your Lordships’ House is concerned, one possible measure would be the number of questions we get through in 30 minutes adjusted for quality.

[Lord Fox (LD)]

My Lords, without bringing the analysis down, it is a fraction; it comes down to that in the end. The denominator is something that the Government like to talk about a lot. Employment levels are high and that is a good thing. However, the numerator is GDP. Last year, we saw GDP grow at only 1.4%—the worst performance since 2009—and the ONS predicts that the figure this year will be 1.2%. Clearly, the chaos we are seeing is driving down GDP growth. How can we ever have the productivity levels that the Government aspire to when the chaos around us prevents investment and confidence in business?

[Lord Young of Cookham]

The noble Lord goes back to an issue raised by the noble Lord, Lord Haskel, which is the industrial strategy. Its main thrusts were driving up productivity, backing businesses with high-quality and well-paid jobs, and investing in skills, growth industries and infrastructure. Investment in infrastructure is up 3%. Private sector investment totalled over £358 billion in 2018, combined with public sector investment. We also have long-term partnerships in 10 key sectors, so we are making progress. One reason that productivity has not been as good as it might have been is that, after the downturn, industry tended to keep people on, but at the same time, investment fell. Of course, that had an impact on productivity.

Interserve

Lord Fox Excerpts

Wednesday 20th March 2019 Lords Chamber

[Lord Young of Cookham]

On the first point, it is important to understand that Interserve was in two halves. The subsidiary companies provided services to the public and private sectors, looking outwards towards the market, whereas the parent company looked backwards at the shareholders and the banks that were lending it money. What happened over the weekend was that the parent company went into administration and immediately, as the noble Lord said, went into a pre-pack and is now owned, in effect, by the lenders. It is the banks of those lenders, not the trade creditors, which are out of pocket as a result of the transaction.

I will write to the noble Lord on the second question, because it affects another department.

[Lord Fox (LD)]

My Lords, the Minister shows great calm, as usual, on these issues. In fact, this squabble was played out across the City pages for weeks. The players in that squabble were the banks, the bondholders and the hedge funds. The Government had no part in that. The fact that Interserve lives to continue is nothing to do with the Government, it is the fortune of what happened out there—it was luck.

The Minister talks about a playbook. How does that playbook affect retrospectively all the services that the companies currently carry out? It is all very well looking forward to future services, but it is services today that were let many years ago that are still threatened by this kind of problem.

[Lord Young of Cookham]

The Government keep all the contracts under review. We have developed arrangements with all the major contractors. We have continuity arrangements known as living wills should there be, by any chance, any corporate failure. As I announced, looking forward, there will be a number of policy changes to ensure that better decisions are taken in future. We believe it is important to have a robust outsourcing market. The fact that Interserve has survived means that we still have a larger number of suppliers in this market than would have been the case had it gone out of business.

Digital Mapping: Restrictions

Lord Fox Excerpts

Thursday 31st January 2019 Lords Chamber

Asked by

[Lord Fox]

To ask Her Majesty’s Government whether they place restrictions on commercial companies seeking to digitally map towns and cities in the United Kingdom; and if not, why not.

[Lord Young of Cookham (Con)]

My Lords, there are no restrictions on the creation of mapping databases of the UK. The UK has world-leading mapping data and this is an area of competitive advantage, offering significant economic opportunities. In 2018, the Government created the Geospatial Commission to elevate this strength and it is currently developing a UK-wide strategy to realise the opportunities. As part of this, it will consider both risks and opportunities for current arrangements for access to mapping data.

[Lord Fox (LD)]

I thank the Minister for his Answer. This is privately gathered data. There is at least one major high-definition survey going on, financed by a foreign-owned company that bases its services on Russian mapping software. Every day, data is processed in places such as Nairobi. This is not Google Maps; it is high-definition software pinpointing our civil infra- structure. The Minister seems relatively unconcerned about this. Can he assure your Lordships’ House that a risk analysis will be carried out on the security nature of this data and some sort of strategy provided around how it is controlled within the obviously important commercial interests going on in this country?

[Lord Young of Cookham]

I understand the noble Lord’s concern. He has tabled a number of Written Questions on the subject. In view of his concern, I have gone back to those responsible for security and received an assurance that those responsible for our critical national infrastructure are not asking for the restrictions on commercial mapping that the noble Lord seeks.

Interserve: Provision of Public Services

Lord Fox Excerpts

Wednesday 12th December 2018 Lords Chamber

[Lord Young of Cookham]

As I said, the Government are in regular contact with Interserve to monitor its performance. Not only does the Cabinet Office have overall responsibility for monitoring the health of the company, but individual government departments that have contracts with Interserve have a dialogue with it about those specific contracts. The noble Lord may have seen the statement which the Cabinet Office issued a few days ago:

“The Cabinet Office has expressed full support for the work the company is doing to implement”,


its “long-term recovery plan”. It is worth making the point that Interserve is very different from Carillion. Interserve is now taking the action that Carillion ought to have taken—to restructure its balance sheet and improve its robustness—and, unlike Carillion, it does not need new money. It needs to turn debt into equity. It is not accurate to make a direct comparison between the two companies.

[Lord Fox (LD)]

My Lords, in a meeting in the Cabinet Office in the spring, I specifically asked David Lidington about Interserve. Since then, there have been a number of warning signals. Ministers may be talking to Interserve, but are they talking to the companies that support Interserve by delivering its services to people? If they did, they would hear from Rudi Klein, the chief executive of the Specialist Engineering Contractors’ Group, who is advising its members not to work for Interserve. The Minister’s response seems very relaxed in the light of what is actually going on. What contingencies are the Government taking in the event that Interserve is unable to deliver services?

[Lord Young of Cookham]

On the first point, I made inquiries to Interserve about the suppliers: 90% are paid within 60 days or less. The Government have now insisted that, where they place new contracts with suppliers, there is a contingency plan to take effect if and when that contract runs into difficulties. Interserve, along with four other companies, is piloting this new arrangement, which was introduced post the problems with Carillion.

Cyberattacks

Lord Fox Excerpts

Wednesday 21st November 2018 Lords Chamber

[Lord Young of Cookham]

The noble Lord will be aware that this is a substantial report published two days ago by the Joint Committee on the National Security Strategy, with 22 senior Members of both Houses. It has 10 major recommendations and the Government will want to respond to those in due course. The noble Lord quoted a little from the report and, just to add some balance, may I also quote from it? It said:

“Many of those who submitted written evidence … welcomed the step change in Government approach in the 2016 NCSS, with some describing the strategy—and the activity it underpins—as world-leading. This appears to be borne out by the notable level of international interest in the UK’s approach to cyber security”.


That gives a somewhat more balanced response than what the noble Lord quoted. There are many recommendations. One is that there should be one Minister; the committee wants what it calls a collective mind—a somewhat Orwellian concept. If we look at the building blocks of national security, we have GCHQ, which is under the Foreign Office; the Home Office, with overall responsibility for protecting the citizen if there is a cyberattack; the Ministry of Defence, which is in charge of offensive cybersecurity; and the Cabinet Office, which is in charge of CNI. It is very difficult to have a collective mind. What is important is having a collective strategy that all the Government agree to, underpinned by substantial resources and supervised by the National Security Council, chaired by the Prime Minister. That is more important than having what the committee calls a collective mind.

[Lord Fox (LD)]

My Lords, in last month’s debate on cybersecurity, the noble Lord, Lord Ricketts, in an authoritative speech, mentioned that the former Attorney-General, Jeremy Wright, had made clear that existing international law, including the UN charter, covers the cyber activities of states; this was the view not just of British experts but of Chinese and Russian experts in 2015. In his reply, the Minister outlined some activities round the Commonwealth that sought to exploit this international law but was uncharacteristically undefined about which other institutions the Government are working on. Which other international institutions are the Government working with which are seeking to exploit existing international law to combat this state-sponsored cybercrime?

[Lord Young of Cookham]

The noble Lord cited the noble Lord, Lord Ricketts. In that debate, he said that Britain is very fortunate to have a world-leading centre of excellence in the National Cyber Security Centre. We believe that the existing legislation is adequate. We co-operate with a range of international partners— Five Eyes and others. I hope the noble Lord will understand that the Government want to reflect on the recommendations in the report and will respond in due course, including to the legal issues that the noble Lord has just raised.