Budget Statement

Lord Haskel Excerpts

Thursday 21st March 2013 Lords Chamber

[Lord Haskel]

My Lords, many noble Lords seem to agree that we are in a difficult economic situation. Some noble Lords have explained that this is because the Government’s plans to stimulate, rebalance and grow the economy are clearly not working. Yet we are told that there is no alternative and that one day the policy will work—but at what cost? The highly respected Trussell Trust expects the number of people in the north-west using food banks to rise to more than 230,000. That is the cost. Is this the kind of country we want to live in?

The Minister spoke of economic realism. Blaming others and factors outside our control is not economic realism. Adapting to and embracing, not blaming, the changes is realism. Our economic problems are many and complex and each requires realistic attention.

The noble Lords, Lord Flight and Lord Bilimoria, spoke of exports. The Government have tried to help them through devaluation. However, that does not really work any more. A lot of our exports are made up partly of imports and that does little for productivity. According to the Bank of England’s analysis, the major economies in the eurozone have seen their exports grow faster since 2009 than has Britain. Why? It is partly because of the drop in exports of financial services but also because those economies have not been able to devalue because they are tied to the euro. Their only alternative is to produce more goods and services that others want to buy. Here, devaluation allows some firms to stay in business and become “zombies”. Is this why employment is increasing but productivity is plunging?

It could be that some firms are retaining skilled labour in the hope of better times to come. Meanwhile, those people are not as productive as they might be. Also, firms may be investing in things other than plant and buildings—investments that are not being measured. They are so-called intangibles such as investing in business processes and systems, writing new and better software, enhancing their brand and investing in new concepts such as big data. Has the Minister seen the research that shows that this kind of investment is growing but not counted?

The Government also have to be realistic about the fact that the financial sector is changing, not only because of the loss of trust through mis-selling, excessive pay and market manipulation but because much of its business has become trading value. Trading in value is a zero-sum game—some get richer and some get poorer—whereas trading in goods and services that people want and need benefits everyone. Trading value as our major economic activity cannot be the right course, and people have now realised this. As my noble friend Lord Eatwell put it, that is why the Government have to put far more emphasis on trading in goods and services that people want and need. That is where our efforts should be going in this Budget.

The Minister emphasised the cut in corporation tax. Of course that is welcome, but the headline rate does not change things much. It is all the other facets of tax that determine what a business really pays. The cut in employers’ national insurance, when it comes, will affect far more businesses, as will next month’s rise in business rates.

Yes, this Government talk about making efforts to adapt and embrace change in their support of our industrial sector, the supply side. The Secretary of State for Business, Innovation and Skills has fought to maintain the size and excellence of our science base. The Technology Strategy Board is being supported and strengthened. That is fine but, as my noble friend Lord Bhattacharyya asked, is it enough? My noble friend Lord Kestenbaum also made that point.

I recently visited Bavaria and learnt that what we spend as a nation to support industry is matched by the single state of Bavaria in Germany, and it shows. What we as a country export to Germany is matched by the exports of the state of Bavaria alone. The reason is that for 50 years Bavaria locally has consistently maintained and supported the fundamental planks of a modern industrial strategy, the strategy that my noble friend Lord Kestenbaum described, involving skills, technology, innovation, procurement, infrastructure, finance and supply chains—a policy that can be roughly described as the Heseltine view. That view was expressed in his report and debated in your Lordships’ House on 6 December last year. In that debate, nearly all speakers welcomed his recommendations, and the noble Lord, Lord Shipley, did so today. They welcomed the active role of the state in promoting economic growth while devolving power to other centres away from London. In his Budget, the Chancellor, too, accepted some of those recommendations. Does this indicate a change in direction?

My noble friend Lord Bhattacharyya told us that rebalancing and growing our economy is a long-term project. It is a project done successfully by building, not destroying. There were many good things to build on in the fields of innovation, science, technology, local funding, skills and apprenticeships. Yet for short-term political gain, Ministers destroyed or talked down much of this. Indeed, they continue to do so.

If the Government want to build confidence—confidence that we can grow our way out of these economic difficulties—they must signal their commitment to continuity by indicating that all these elements, whoever created them, will be tackled and built on in the interests of our long-term economic growth and not talked down in the interest of short-term political point-scoring.