EU: UK Membership

Lord Haskel Excerpts

Tuesday 25th November 2014 Lords Chamber

[Lord Haskel (Lab)]

My Lords, during the short break last week, I read a book by a Swedish journalist named Göran Rosenberg. The book, A Brief Stop on the Road from Auschwitz, described a journey that he had recently made, following in his father’s footsteps from the ghetto in Lodz, Poland to Auschwitz, to a slave labour camp in Germany, to a Red Cross resettlement camp and ending up in a small town in Sweden. At the same time as I was reading this book, there were events going on to mark the centenary of the outbreak of the First World War, which reminded us of all those horrors, as the noble Baroness, Lady Ludford, told us. At the same time, there were some mean-minded nationalistic politics going on, both here and in Europe. All that reminded me why I have been a committed supporter of our membership of the European Union since its birth. It is a means of ensuring a civilised, decent life for our children and grandchildren instead of the poisonous and divisive Europe that our parents and grandparents knew. This view may have gone out of fashion, but it will be back, just as extreme politics comes back.

In my case for Europe, therefore, I make no apologies for putting the human and political arguments first and the economic arguments second. Economics is a means to an end, not an end in itself, as the right reverend Prelate the Bishop of Coventry put it. Looked at from this perspective, the EU is a good deal. The figures from the noble Lord, Lord Stoddart, are misleading. It costs us about 1% of our annual spend of taxpayers’ money. For this we get access to a huge single market and all the benefits of inward investment and trade that it brings, as other noble Lords have explained. It helps us to compete in today’s global economic environment where you must have allies. This is a world in which you cannot go it alone unless you have a portfolio of successful companies creating goods and services that are competitive with the best in the world and that are welcomed and not discriminated against.

This logic is so powerful that its detractors, particularly in the press and in the blogosphere, resort to misstatements. They are cheerfully pedalled again and again, sometimes even with a glass of beer in their spokesmen’s hands. Eventually, these misstatements develop a life of their own, with claims such as loss of sovereignty because 75% of our laws are made in Brussels. The House of Commons Library tells us that the true figure is 25%. There has also been the claim that EU membership stands in the way of our trade with the Commonwealth and Asia. I say to the noble Lord, Lord Empey, that it does not.

Another claim is that the cost is high, but 1% of our government spend is marginal. Another is that we are being overrun by immigrants from new members of the EU. My noble friend Lord Liddle replied to that. In reality, we should be protecting the integrity of our benefits, healthcare and education systems rather than blaming the immigrants from the EU who help service them.

Playing games with our EU membership has dangerous consequences. As multilateral institutions like the World Trade Organization weaken, and as the nature of trade changes, as the noble Lord, Lord Howell, explained, it becomes even more critical for a country like ours to be aligned economically with the EU rather than going it alone in a globalised world. More important, however, is the risk of losing the civilising influence of co-operation, the risk of taking us back to inflicting the terrible journeys and experiences that European nationalism inflicted on our parents and grandparents.

Queen’s Speech

Lord Haskel Excerpts

Tuesday 10th June 2014 Lords Chamber

[Lord Haskel (Lab)]

My Lords, when opening this debate, the Minister said that his proposed legislation would encourage trust. I am very glad he said that because during April there were two popular polls about people’s trust in business, one for the BBC and one for the Financial Times. Both said that 61% of us did not trust business. I am not making a political point. Half of those who felt this way identified themselves as Conservatives. The Minister is right: there is a warning there that it would be wrong of us to ignore.

Most of us know why this is happening. My noble friend Lady Donaghy just said that it was to do with conditions of employment. For years, some of us have been victims of mis-selling by the banks. We have not been getting a square deal from energy companies. As my noble friend Lady Hayter told us, we have not been getting a square deal from landlords. We have not been getting a square deal from rail operators or pension managers and suppliers of public services from the private sector have been disgraced. This is in contrast with booming executive pay and a long line of companies which arrange their affairs so that they almost cease to pay corporation tax, leaving the rest of us to foot the bill.

My noble friend Lady Sherlock reminded us in her opening speech that for years there has been little alignment between the financial markets, our long-term interest, jobs and the common good. This dissatisfaction applies to Government too. As problems arise, so they are dealt with on an ad hoc basis, reacting to events—or to labour policies. This is what my noble friend Lord Liddle called a disparate agenda. This fiddling only adds to uncertainty. It also contributes to the complexity and inefficiency of our public finances. Noble Lords can read the whole depressing story in the recent Institute for Fiscal Studies paper, Tax Without Design.

What can we do to help bring back public trust in business? The answer lies in an intellectually coherent strategy that provides a framework for all of these activities. In his memorable maiden speech, the noble Lord, Lord Bamford, called it a coherent industrial strategy, and I agree. It provides a basis for long-term decision-making. BIS likes to think that we have a long-term strategy, but that is news to everybody else. To succeed, this strategy has to be respected. To make sure it is adhered to throughout government, I would like to see it enshrined in law. We have laid out a strategy in law for health, for climate change, for education and for austerity for our public finances, so why not for business?

What should this business strategy—a strategy with teeth—contain? In part, my noble friend Lord Liddle told us when he called for a comprehensive ethical agenda. We know that most business leaders are committed to high ethical standards: they know that this builds trust. The problem is to convince and communicate this to everybody else in their organisations. Well, there are UN global guidelines that respond to this. Those guidelines, as part of a business strategy in a legal framework, will help rebuild trust in business. We are virtually having to do this with the banking industry.

Quite rightly, business organisations call for certainty so they can plan for the longer term. This means that long-term institutions, such as the Technology Strategy Board, which is so important in developing the technology that the noble Baroness, Lady Wilcox, told us about, have to be given protection of law so that, like the RDAs, they cannot just be abolished on a whim. Part of the answer is not just to regulate, but to rebalance.

Whatever the outcome of the Scottish referendum, surely significant to all of us is the need for more local accountability, which means getting away from the culture of doing deals with central government. I join the Public Accounts Committee in asking why, of the £309 billion set aside by the Government since 2010 for promoting growth in the regions, only £400 million has been allocated. The noble Lord, Lord Heseltine, in his paper, No Stone Unturned, speaks to this. We see many contributing to economic progress, but fewer benefiting. A proper, legal industrial strategy will help us break free from markets that work only for themselves. The noble Lord, Lord Tugendhat, spoke about this. Read the speeches made by the Governor of the Bank of England to the recent inclusive capitalism conference: that will convince noble Lords, even if I do not.

Public investment must also feature, as the noble Baroness, Lady Sharp, just told us. After all, we know, on very good authority, about the benefits of public investment in science. Of course, the strategy must also protect the public interest, by, for instance, stating clearly that tax allowances and incentives are for investment, not for financial dodges. The gracious Speech mentions fair pay and job security, and yes, the Government are trying to stimulate manufacturing, which is so important to the right reverend Prelate the Bishop of Durham. However, all of this is insufficient, random and, most importantly, it lacks coherence.

What about the politics of this? A strategy of this kind reflects the politics of hope. It challenges the insecurity created by blanket austerity. It connects with Europe 2020 and completing the single market. It puts immigration into a non-racial context. Most importantly, it faces up to the huge scale of the challenge facing us, instead of just tinkering with it. Of course, no law will build economic revival and growth—business will. However, the task will be infinitely harder if we fail to win back that 61% of the population who no longer trust business. I am certainly content with the Motion to thank Her Majesty for the gracious Speech, but like many noble Lords—some of whom I have mentioned—I regret that it does not contain an industrial strategy. That will obviously have to be left to a Labour Administration.

Businesses: Small and Medium-Sized Enterprises

Lord Haskel Excerpts

Tuesday 6th May 2014 Lords Chamber

[Lord Haskel (Lab)]

My Lords, I, too, congratulate the noble Lord, Lord Cope, on arranging this debate. It is nice to know that someone has listened to us and has read our work, and that the Government have kept their promise to report back. I also thank the Minister for his letter of 27 March. He told us what has been and is being done in response to the matters we have raised. From his letter, it seems that quite a lot is happening: refocusing the work of UKTI; building more partnerships and working with intermediaries in order to create more awareness and confidence; and focusing on medium-sized businesses. All this is very positive and a welcome response to our report. So, like the noble Lord, Lord Cope, I have to ask: does UKTI have the resources and back-up it needs for all this increased activity? Are adequate staff with business experience available, especially to satisfy the needs of medium-sized businesses, which will be more demanding?

As we have not taken any evidence, it is only indirectly that we can find out how effective all this work has been. For instance, the noble Lord, Lord Leigh, spoke of the various finance schemes. Parliamentary Questions last month in the House of Commons revealed that the export refinancing scheme has still not helped a single business. The direct lending scheme has not helped a single firm. These schemes were designed to replace the export enterprise finance guarantee scheme, which was abandoned after it assisted only five firms. Yes, the number of transactions by UK Export Finance has increased, up to a not very impressive 370, but how many of these deals apply to SMEs? Judging by the briefing received from the Federation of Small Businesses, not many do.

The point is that, as many noble Lords have said, this is a long-term project and it will take time. There will be mistakes, which have to be put right. While working on our report, we went to Bavaria, which interested my noble friend Lord Giddens. The state of Bavaria exports more to the UK than the whole of the UK exports to Germany and we wanted to find out why. Of course, having Mercedes there helps, but the real point is that the state of Bavaria has been supporting exporters for 60 years. There has been unbroken political support, whoever was in power.

That is why I was rather disappointed that the heading on page 9 in the Minister’s document Britain Open for Business: The Next Phase spoke about:

“Sustaining the many good initiatives of the last three years”,

as if it all started when the coalition came to power. The Minister is misinformed. There was government help for exporters when Labour was in power and before that. Many noble Lords have spoken about the need for continuity. For that, Ministers have to show that we are building on the past, not blaming previous Governments as this Government seem to like to do. This is what will help to convince small businesses that government is and will be serious about exports.

To give credit where it is due, I welcome the Minister appointing trade ambassadors from all the political parties and none. Do the ambassadors work with SMEs, or do they concentrate on big deals in special countries? Does that mean that the staff are organised on a sectorial or a geographical basis? I hope that the Minister will listen to other noble Lords, and take politics out of the equation and keep commitment and cross-party continuity in.

We also have to move with the times, which means looking at exports more broadly—perhaps more broadly than in the Minister’s report. The noble Lord, Lord Storey, mentioned intangible assets. On 31 March, the Minister’s own department told us that intangible investment,

“continues to outstrip investment in tangible assets”.

Perhaps this different kind of investment explains the success of many of our younger and newer rising SMEs. Is UKTI doing enough to encourage exports by this business sector? Events such as Export Week and the Liverpool festival that the noble Lord, Lord Storey, told us about are very welcome. They must help many business sectors, but do they help the knowledge sector?

Last month we won a contract to run 16 FE colleges in Saudi Arabia—yes, helped by a government unit designed to boost exporting education. Great—it is a welcome sign of co-operation between government departments and of using exports to assist building capacity. Were SMEs and UKTI involved? Education and intangibles are all part of the knowledge economy, requiring the best brains. So why does the Home Office put barriers in the way? The Minister does not need me to tell him of the problems between the Home Office and BIS over visas for students, technicians and engineers. We need them if we are going to build our exports of knowledge. Indeed, the Minister’s report speaks about this. It is no use saying, as the Minister does in his report, that because this is part of the cross-government industrial strategy there are no longer any problems. Every businessman or researcher’s day-to-day experience tells him or her otherwise. This is where there is growing export potential for SMEs, so let us have a unity of purpose over this.

In our report we emphasise the importance that SMEs attach to working with local organisations. The Minister hardly mentions this. There seems to be little in the Government’s report about the softer or more technical skills of exporting that are so important to SMEs—language and culture, licences, training, signposting. The noble Lord, Lord Cotter, got the same briefing as I did from the Federation of Small Businesses, which speaks of their absence. These are serious barriers and will become more so as normality returns.

At the IMF spring conference the Chancellor said that normality is returning—normal interest rates, normal rates of inflation and normal growth. This is already affecting our exchange rate and the price of our exports. How does UKTI see this affecting our export performance and what advice is it giving to SMEs to prepare for this?

At the same time lots of negotiations are going on under the auspices of the WTO. How are these going to affect our SME exporters? Are their interests being taken into account? Most importantly, how does UKTI respond to the promise of an EU referendum and the uncertainty that that creates, bearing in mind the importance of the European single market that was stressed by the noble Lord, Lord Green? I assume that UKTI has answers to these big questions because all exporters, large and small, must be thinking about them if they have not started asking already.

Finally, last month we were told that from September the Office for National Statistics is going to overhaul our national accounts. All our R&D, knowledge and intangible business are now going to be included in our GDP instead of being seen as a cost of production. Of course, this will bolster our GDP numbers. Leaving aside that this usefully coincides with the run-up to an election, and that there is more to life than GDP, what about exports? Will this reform bolster our export figures as well, to show that really we have been doing better than we thought and are getting closer to the admittedly very testing targets mentioned by the noble Lord, Lord Storey? If so, I hope the Minister will assure us that in no way will this reduce the commitment, hard work, energy, investment and support that UKTI and Ministers from other departments will put into encouraging SMEs to export. Whatever the new figures say, more exports will remain an essential part of balancing our economy in the general economic interest, as the noble Lord, Lord Green, explained, not just for business but for our common good. That is why we have to continue with our efforts, and I wish the Minister every success.

United Kingdom and China

Lord Haskel Excerpts

Thursday 7th November 2013 Lords Chamber

[Lord Haskel (Lab)]

My Lords, I am most grateful to the noble Lord, Lord Dobbs, for initiating this debate because it brings back many happy memories. When China announced the open-door policy in 1978, I was an early businessman to go there. I sold the Chinese the equipment and technology to make some of my firm’s textile products and carry out some of our processes so that they could supply markets that were closed to us in the UK. So began my business association with China, which lasted many years.

I loved going to China. The Chinese proudly took us to the technological wonders, so graphically described by the noble Lord, Lord Kirkham. They also patiently explained calligraphy, Beijing opera and Chinese art. In the philosophical exchange called for by the right reverend Prelate, they came here. The night before they went home, we always gave them a farewell dinner at the Reform Club. There was a lot of interest in this luxurious form of people’s commune. All this helped create the personal relationships so important in getting things done in China. This is because you never really know who is in charge, at any level. The Communist Party maintains its monopoly on power by control of the economy and access to it.

So I was interested when the London Mayor and Chancellor announced their successful business deals in China last month. The Chinese press reported that business had been done because the Prime Minister had admitted that he had mishandled or misunderstood Tibet. Here, some commentators ranging from the Observer to the FT interpreted the business resulting from this visit as kowtowing to the Chinese; I am sure that the Minister saw these reports in the papers himself. Maybe that is true, but to me it looked rather like desperate salesmen doing reckless deals to achieve their quotas. Indeed, the signs are there: the Chancellor announced measures to make it easier for Chinese banks to operate in London by opening branches that are regulated from Shanghai rather than subsidiaries regulated in London. This is exactly what helped to precipitate the crisis in 2008 and, as the noble Lord, Lord Dobbs, mentioned, we said, “Never again”. Of course, if Chinese financial rules are reformed, it would be good for the City to have a bank clearing Chinese currency in London—but at the cost of bending our new banking regulations?

It was also announced that two Chinese state-owned nuclear power companies will take a 30% to 40% stake in Hinkley Point. Once again the Government are taking money and then depending on regulators to ensure tough scrutiny over security, safety, investment and financial issues, a concept not well understood or adhered to in China. And do the British public have faith in this concept? I doubt it, after their recent experience with the banking regulators, the energy regulators, the care quality regulators and the water regulators—I could go on.

Parliament itself has criticised the system of regulation in place to oversee Huawei’s operation here and its equipment that is now part of our digital network. I am all for an open economy and Britain being open for business, but there is a line between openness and recklessness. We must be very careful not to surrender our ability to operate and compete in important sectors of industry. Sectors where we have strengths, such as space, must not be sacrificed on the altar of inward investment. This is why we have to be sure that we are operating the right business model. If we have contractors for crucial sectors of our infrastructure that make it easy for us and make promises, as the noble Lord, Lord Howell, explained, there is little redress when things go wrong, and revoking such contracts is very expensive to us. There is always the temptation to hide these errors because politicians do not want to be embarrassed.

In this era of globalisation, our relations with China in business are complicated. The modern supply chain is so involved that it is almost impossible to track. You do not know if firms are trading with themselves or at arm’s length. The harmonisation of standards is virtually impossible, and this means the careful mutual recognition of regulation. This applies as much to intellectual property rights and data protection as to trade in goods and services.

All this makes dispute resolution highly complicated. Remember, too, that foreign companies in China are sometimes singled out for investigation or state-led smear campaigns simply because they are foreign. This is why we must have a reciprocal relationship with China, not a dependent one, a point made by the noble Baroness, Lady Neville-Rolfe, in her excellent maiden speech, and bilateral co-operation rather than reckless dependency—one of engagement, as the noble Lord, Lord Dobbs, put it. These are all pressures on our business relations with China. We have to think them through properly before doing more deals that we may come to regret.

--- Later in debate ---

[Baroness Wheatcroft (Con)]

My Lords, I add my congratulations to my noble friend Lord Dobbs on securing this important debate and leading it so skilfully. I also applaud the two insightful and interesting maiden speeches we have heard today. I look forward to hearing more from both our new Members.

This is an auspicious day for such a debate. For today, the first ship will enter Britain’s new port, London Gateway. This remarkable deep-water facility will be able to handle 3.5 million containers a year and is just 20 miles down the Thames from London. Earlier this year, the Prime Minister described it as “an emblem of ambition”. So it should be, but I was struck that all the coverage of this new port referred to the imports that will be landing at London Gateway, many of them from China. However, the plan must not be that these ships will leave London empty. London Gateway should indeed be an emblem of the ambition Britain has to build its exports. There is no more inviting market than China.

As we have already heard, our performance has improved markedly. Last year was the third in a row in which our sales to China increased faster than those of Germany, France or Italy, but from a relatively low base. We are still too far behind. Yet, as my noble friend Lady Neville-Rolfe said, there is an appetite in China for British-made goods. Jaguar Land Rover, for instance, sold a record 73,347 vehicles in China last year, an increase of 74% over the previous year. Burberry has been selling its style in China for 20 years and last year Church’s shoes—a brand not unknown to Members of this House—opened its first shop in China.

These are all high-quality brands and we have many more of them. This summer, I was one of those fortunate to attend a wonderful event in the gardens of Buckingham Palace. This was no ordinary garden party but an opportunity for royal warrant holders to display their wares. From sausages to silverware and cosmetics to clothing, the best of British was on show. As potential buyers from abroad looked at what was on offer, the Queen and Prince Philip toured the exhibition, doing their best to boost the sales effort. Ten years ago, the idea of a trade fair at Buckingham Palace, with Her Majesty taking on the role of head of sales, would have been unthinkable. Now, however, Britain is really serious about bolstering its export effort. We had a prime example last month, to which many noble Lords have already referred, with the Chancellor of the Exchequer’s hugely successful visit to China.

At this point—and I am glad to see the noble Lord, Lord Haskel, in his seat—I admit to an interest as a member of the UK advisory board of Huawei, a telecoms company which is playing a major role in the infrastructure of this country and is one of the fastest-growing companies in the world. Huawei is demonstrating ably how the UK and China can co-operate. It is investing more than £1 billion in the UK, including creating a new research and development centre in London. It is also taking on apprentices and doing its best to foster trading between our two countries, taking students to spend time in China and bringing them back here so that what they have learnt can be expanded.

As the noble Baroness, Lady Dean, said, our larger businesses know how to access overseas markets but the imperative now is to ensure that our smaller businesses take advantage of export opportunities. Small high-tech companies which I have never heard of accompanied the Chancellor on his last visit to China, such as games developer Fat Pebble, and Kinosis, which apparently shows surgeons how they can operate via a mobile phone app; I am not entirely comfortable with that, but let us hope that it works.

Trade missions are just the start. Government help should not stop when they land back at Heathrow—and it is, of course, Heathrow. We have not always been good at providing the follow-up necessary to turn contacts into contracts. I am glad to say that this is improving, and credit for that goes largely to my noble friend Lord Green of Hurstpierpoint; we shall miss him.

While encouraging exports, we need to do all we can to persuade increasingly wealthy Chinese to spend their money here. Tourism, as other noble Lords have said, is crucial. The changes in the visa restrictions shall help. However, there are other things we can do. How many retailers and hotels accept Union Pay, the credit card of choice in China and a network second only to Visa in its reach? We should make it as easy as possible for wealthy Chinese to spend their money. I was fascinated to see how this massive organisation views our country. Its website has a small section on the UK which begins:

“Located in Western Europe, United Kingdom is an island country on the Atlantic Ocean … Scotland in the north is a mountainous area flush with cattle and sheep; England in the south boasts enchanting natural sceneries and Wales in the west is famous for rugged mountain ridges and green stream valleys”.

It goes on in a similar, lyrical vein but not, perhaps, portraying the vibrant, creative place we know. The Olympics showed what we can offer, but we must not rest on our Olympic laurels. The GREAT campaign is doing good work in explaining what is on offer in Britain, but it appears that there are some corners of the world that we still need to reach.

There is still a long way to go in fostering understanding between our two nations. A good start, I would suggest—as I always have—is language. Mandarin is not an easy language to learn but it is easier if one starts early. I was impressed to hear of state schools in Michigan where, from the age of four, children are taught every other day in Mandarin. Total immersion works and is cheap to provide: it simply means hiring primary school teachers whose first language is Mandarin. I would like to think that British children might soon be offered the same opportunity so that they will grow up and become effective exporters for Britain.

[Lord Haskel]

Can the noble Baroness refer to the concerns of Parliament over the regulation of her company? That is the point that I was trying to make.

[Baroness Wheatcroft]

The concern was over the way in which the deal with BT had been constructed. That is highlighted in the report from the security committee. As the noble Lord knows, GCHQ monitors everything that goes on between Huawei and businesses in this country.

Small and Medium-Sized Enterprises

Lord Haskel Excerpts

Wednesday 26th June 2013 Lords Chamber

[Lord Haskel]

My Lords, rebalancing the economy is in favour all round the House and rebalancing means a move away from consumer spending and a rising housing market fuelled by debt towards producing and selling more goods and services through investment. It particularly means selling overseas so that we can cut our current account trade deficit and cut it by encouraging SMEs to export.

During my business life, part of my activity was exporting, so I was delighted to serve on this topical committee; a committee so ably led by the noble Lord, Lord Cope, so ably advised by Professor Blackburn and so conscientiously served by staff led by Christine Salmon Percival. We are fortunate to have such an able and versatile staff. To my knowledge, Christine Salmon Percival has been clerk to a committee reporting on science and technology; a committee reporting on legal and constitutional matters; and a committee reporting on the economy—now that is versatility.

We started our inquiry by taking evidence from BIS. It soon became obvious that it was in the process of setting itself up, of putting into practice, its plans to encourage SMEs to export. The Government’s response tells us that UKTI continues to hire more staff. The Chancellor in his Autumn Statement provided additional funds for support in the next two financial years. We are also told that there are plans to use a number of websites to bring existing and future services of UKTI to the attention of business; services for contacts, for mentoring and for other practical help. All this confirms the importance the Government attach to encouraging SMEs to export and it is very welcome, as are the Minister’s efforts, because I know he travels around a lot.

However, it has to be put into practice. The noble Lord, Lord Cope, told us that our inquiries indicated that many SMEs are not aware that all these services are available. We would like business intermediaries, professional advisers, LEPs, chambers of commerce and all the professional organisations also to convey the message. The Government's response agrees with this and I think this is beginning to happen. I do not know whether the Minister went to the BIS open event in the Jubilee Room last Wednesday, but we were told that the Government’s commitments are to do more of the same. It was a very good demonstration of what the Government are proposing to do.

Is it working? Figures published last week show that the value of exports has fallen by 1.3% in the past quarter. The CBI describes these trade figures as “unsatisfactory” and comments that the Government need to do more to help to raise exports to the fast-growing economies. Is there anything more or anything different that can be done?

Did the Minister hear the maiden speech of the noble Baroness, Lady Lane-Fox? She is working with the Cabinet Office to help us make the most of digital technology in communications. She said:

“British businesses also need support, as has been mentioned here already, and small and medium-sized business in particular. We know that only 30% of them are able effectively to use online tools, and that there is a potential £18 billion in the economy if we are able to give them more advanced skills to sell and buy online”.—[Official Report, 13/5/13; col. 160.]

If 70% of SMEs do not have the IT skills to use online tools, maybe UKTI should be working with the Cabinet Office and the noble Baroness to train UK small and medium-sized businesses to use these tools—a bit of joined-up government perhaps?

On 13 June, at col. 1716 of Hansard, the Minister’s noble friend Lord Howell of Guildford argued that trade is operating in a completely different way and that the world's largest single market is now the cybermarket on the world wide web. Are the Government listening to their friends and advisers? What is being done to give SMEs these more advanced skills to help convert them into exporters?

The world of business is changing in other ways. There are other ways of exporting which may be more suited to particular companies or markets or products. Franchising, licensing the product, licensing the know-how, the patent, the trademark—is UKTI helping with this? There was very little evidence of this. Perhaps another way is for UKTI to be more selective and to try to nurture new export sectors—those sectors where the UK has a competitive advantage. Last November the Chancellor, in his address to the Royal Society, listed eight such sectors that would receive special encouragement and money. Again, a bit of joined-up government could make UKTI part of this arrangement by encouraging the SMEs in these sectors to export.

Our report and the noble Lord, Lord Cope, spoke of the problems that SMEs have in getting export finance. We learnt of one solution during our visit to Bavaria. Incidentally, the single state of Bavaria exports to the United Kingdom more in value than the whole of the United Kingdom exports to Germany. For 60 years, it has had its own local state-backed investment bank, which makes export finance one of its priorities. Surely this must be one of the reasons for its success. What is happening to our Government’s business bank, and will it be as local as the noble Lord, Lord Heseltine, would obviously like it to be? In fact, aiding and encouraging local firms to export could well be part of the Heseltine proposals to localise business services by government. However, today’s Statement is not very encouraging about that.

We know from our inquiry—and the noble Lord, Lord Cope, reminded us—that it is not easy for small companies to export. There is the inconvenience, the time, the expense and the preparation. Time and again we were told that the most important thing is for people to have the get up and go—the will and the initiative—to do it. In small and medium-sized companies, exporting often depends on the personality of just one or two people, irrespective of the benefits and financial rewards that exporting brings to the business. So how do you identify these people and these companies? There is a supplement in today’s Financial Times telling us how. Firms using big data identify a potential customer for their style of clothing or people who like a particular kind of holiday or food. Could not UKTI write an algorithm that would identify from big data potential exporters among the SME community? That would be a wonderful cost-cutter.

The point I am trying to make is that the objective of inquiries such as this is not criticism by political point-scoring; it is to question the policy, to question the strategy and to question what is being done.

I think that we all welcome the enthusiasm and energy that UKTI is putting into the work, but the Government’s response seems to say, “Yes, we agree with your analysis. Thank you for your recommendations but we are going on as we are”. I found that rather disappointing because there is obviously more that can be done to achieve what we all seek, which is to rebalance the economy.

UK Trade and Investment

Lord Haskel Excerpts

Tuesday 9th October 2012 Grand Committee

[Lord Haskel]

My Lords, before I came into your Lordships’ House, I, too, was in business. Many of the points that my noble friend makes about UKTI now were also apparent back then, long before my noble friend was there.

As the noble Lord, Lord Cope, said, I am serving on the committee that is looking into this very matter. As he explained, we have started our inquiry, so what I have to say benefits from our early work. Of course UKTI was a very early port of call for this committee. My impression is that here is an organisation in the midst of change, as my noble friend Lady Liddell pointed out. There are new people in senior jobs, some from the private sector. Some local appointments have yet to be made, but in general their task seems to be to reorganise the way in which they work. I believe that we all welcome this. The proposed direction of travel seems to overcome some of the criticisms that we have heard, such as UKTI making its services known, identifying priorities and getting those parts of government such as the Foreign Office and the Home Office to share these priorities and to work more closely with UK Export Finance, the old ECGD. However, it is early days.

However good UKTI is, its work alone will not improve our balance of payments. It is the businesses that have to export and it is the SMEs that are doing more and more of this. The real task must be to find out what it is that prevents small businesses from exporting. Is it lack of finance, lack of know-how, lack of knowledge about the markets, lack of contacts, lack of confidence or just plain old lack of interest? Perhaps the most difficult of these to deal with is lack of interest. You can demonstrate that exporting provides opportunities to increase turnover and to raise productivity and profitability, but people have to be receptive to these arguments. People also have to be prepared to take the risk as well as to undertake the hard work. So UKTI will have to be selective. It is the people that make the difference—this is the can-do attitude that the noble Lord, Lord Cope, told us about—and I believe that UKTI will have to recognise these people.

The main problem for those businesses that do export seems to be finance. The banks say that they are most anxious not only to finance exports but to provide additional services such as debt collection, document preparation, insurance and seminars on exporting, yet somehow businesses say that the banks are their biggest problem. Indeed, Mr Cable, the Business Secretary, said during an interview at his party’s conference that his department’s research showed a high rejection by banks of SMEs wanting to export. There is a mismatch somewhere. I am not sure what UKTI can do about it. After all, the Government have introduced several schemes to try to put this right with what I can only describe as mixed success.

In addition, there are other organisations trying to help exporters: financial service companies that will discount invoices; organisations that will fund your customer so that they can buy your product; the Institute of Export, which provides valuable and necessary skills training for exporters; market research organisations; mentoring schemes; and some large companies that help companies in their supply chain to export. The British Chambers of Commerce and trade organisations also supply information and try to help. Then there are the European single market incentives that the noble Lord, Lord Hunt, spoke about, such as the Enterprise Europe Network and the internet’s points of single contact. There is a lot on offer. So what is the role of UKTI with all this other help available? It is certainly not to duplicate it.

That brings me back to where I started: people. From the exporters whom I have met and from my own personal experience as an exporter, I know that the one thing that really convinces small businesses to get into exporting is when they meet somebody else who has done it and done it successfully. Perhaps they got into exporting by a chance visit, through some technical, scientific or commercial meeting, or through social networking or selling on the internet. The Government, somehow, have to encourage this. Perhaps one way would be to reduce the cost of travel for exporters by allowing a rebate on the air ticket tax, as they do on VAT. I finish where I started. It is this personal aspect that is the most effective, yet it is the most difficult. This is where UKTI has to work hardest if it is going to succeed.

Middle East: Recent Developments

Lord Haskel Excerpts

Friday 13th July 2012 Lords Chamber

[Lord Haskel]

My Lords, as the Minister explained, the Middle East is a huge topic—no single speaker can cover it all—so I would like to speak just about Israel. I am particularly worried about the upturn in the vilification and demonisation of Israel that I have detected in recent months. Knowing his generosity of spirit, I hope that the Minister will not mind if I try to balance the narrative. I hope that he will consider it consistent with the terms of his important Motion.

What do we do when people vilify Britain? I am sure that all noble Lords have experienced this, particularly when travelling in less friendly countries, responding to blogs or debating. We correct facts. We try to explain the realities of power politics in a democracy and how not every British citizen approves of what the Government do. We try to correct a bad impression by speaking of the good things we do. We try for balance. We avoid the one-sided narrative. So let it be with Israel. Let us make sure that compassion for Palestinians does not come in the form of bigotry towards Israel.

There is one area where this is particularly important, one area where the one-sided narrative just does not work and where balance does—trade. Some noble Lords saw this working last month in London at the Innovate Israel event. Even the most hardened anti-Israeli could not have failed to be impressed with the technology on display. It was not just new digital technology for communication, artificial intelligence and manufacturing but new technology for medicine, health and agriculture. Much of British business was there too to find opportunities, network, trade and partner with a country which is now seen to produce some of the most advanced and sophisticated technology in the world.

For almost 20 years I have been trying to persuade your Lordships that technology will create our future prosperity. So I was delighted that the Government considered this sufficiently important to establish a special technology team at the British embassy in Tel Aviv to find projects where, together with Palestinians, the countries can collaborate.

In a debate in another place last month, the Member for Weaver Vale, Mr Graham Evans MP, spoke of his work with Israelis in developing digital printing— or additive manufacturing, as it is now called. This is a technology which is starting to revolutionise manufacturing in exactly the same way as digital music services revolutionised the music business. The Palestinians are interested too. They are involved and taking an interest because they, too, know that you will soon be able to set up a manufacturing plant with digital printers that is as productive as an automated plant that has had millions invested in it. Indeed, when Warren Buffet was once asked to explain why he had invested $4.5 billion in Israel when there was no oil there, his reply was that he came looking not for oil but for brains.

Israel may have offended some in the way that it has tried to defend itself, but at the same time it has created the institutions, infrastructure, education, skills and initiative to produce a technological powerhouse that will benefit the rest of the world, not only through trade but also through generosity. Through its version of the Ministry of Overseas Development, it has provided many—indeed, most—Middle East and north African countries with new agricultural technology to make dry land productive and to make the most of saline and marginal water resources and post- harvest technology to preserve the land. It has also provided those countries with reliable communications technology through IsraAID. Together with that has gone humanitarian aid to places such as Kenya, where there is the world’s largest refugee camp. When Christians were being slaughtered in south Sudan, it was Israel that provided aid. After the earthquakes in Japan and Haiti, Israel provided not only instant communications but also post-trauma healthcare.

Israeli hospitals are known for their scientific research. Indeed, regenerative medicine and life sciences are so advanced in Israel that a special UK-Israel life sciences council has been formed. However, Israel is also generous with its healthcare. In 2011, 115,000 Palestinians were treated in Israeli hospitals and 100 Palestinian doctors trained as interns at Israeli hospitals. Indeed, two Palestinians received organs transplanted from Israelis. On 1 July, 16 Palestinian children—as well as children from other parts of the Middle East and Africa—were being treated at the specialist heart unit for children. My noble friend Lord Turnberg is instrumental in bringing young Palestinian and Israeli doctors and researchers to the UK for training. My noble friend Lord Stone is instrumental in assisting businesses in Gaza to sell their product to major UK retailers. The Portland Trust, which is based in London, uses economic development to promote peace and stability between the Palestinians and the Israelis. This is just the tip of the iceberg, but it is all part of the balance.

The point that I wish to make is very simple. We would all like to see a peaceful two-state solution, with Israelis and Palestinians living together and both states having a right to exist. Trade is a great facilitator of this objective. Demonising and vilifying one side or the other has not worked. It is not going to work. It can lead only to disaster. A balanced approach through trade and aid, an approach which most Israelis and Palestinians would support, must be given a chance. Once again, let politics follow trade. As we are seeing, it is also in our own economic interest to trade and work with these advanced technological businesses.

Will the Minister confirm that this is the policy of his Government? He spoke of the importance of economic development. Does he agree that demonising and vilifying one side or the other is detrimental to that policy and that the Government will take whatever steps they can to stop it?

UK Industry: International Competitiveness

Lord Haskel Excerpts

Thursday 5th July 2012 Lords Chamber

[Lord Haskel]

My Lords, I start with a confession. I have a problem with the concept of international competitiveness. The factors affecting a nation’s competitiveness are different from those affecting the competitiveness of, say, a business sector. For instance, my country’s life sciences can be better than your country’s life sciences, as the noble Lord, Lord Kakkar, explained. The competitiveness of individual businesses is much more obvious—“My cars are better than your cars”. So I am grateful to the noble Lord, Lord Jenkin, for this debate about international competitiveness, but while international comparisons may be important to economists, politicians and bond salesmen, to most of us the competitiveness of our place of work is what is important. This is because competitiveness means productivity. That is where we earn our living, as the noble Lord, Lord Jenkin, pointed out; the two go hand in hand.

In 2003, the then Labour Government asked Professor Porter and others to say how we could become more competitive by raising our productivity. Their response was practical and direct: improve and modernise skills and skills training; stimulate innovation through science and product development; supplement manufacturing with services; encourage a faster take-up of new technologies in the public and the private sector, much of this done through clusters; and encourage people to win the race to the top, not enter the race to the bottom. In the five years up to the financial crash, these principles worked pretty well. Our productivity or competitiveness improved by 2% or 3% a year. Many of the policies of the coalition Government still reinforce and bring up to date these principles. I think they still remain true. Yet since the financial crash our productivity or competitiveness has hardly moved. If anything it has gone down. Can we find the answer in the international competitiveness league table? The noble Lord, Lord Brooke, mentioned the World Economic Forum’s global competitiveness index. This year we rank 10th, and two years ago we were 12th. This index is based on 12 pillars that provide a checklist of factors affecting our competitiveness. Some are relevant, others less so, and some are completely absent. On some of them we do very well. We have some strong institutions; we have a respect for law and an honest and uncorrupted public service. In health and higher education we perform pretty well. We have an effective, efficient and competitive market of a size which allows us to be productive. We also have a market which is conducive to innovation. Thanks to our science base, research organisations and organisations such as the Technology Strategy Board and our fascination with digitalisation we have recently developed a large number of clever, lively, innovative and enterprising companies that specialise in selling their products, ideas and services into what at first seem special markets. However, these markets often turn out to be large because we live in an era of global markets. This is the innovation and marketing that the noble Lord, Lord Jenkin, and the noble Lord, Lord Kakkar, spoke about. The Minister works hard at this and I join other noble Lords in giving him our thanks.

In other areas, we do less well. The noble Lord, Lord Liddle, pointed out that our infrastructure lets us down. The World Economic Forum ranks us 28th for infrastructure, just behind Malaysia. I agree with the noble Lord: our skills training has not kept up with demand, nor has it moved with the time—and, yes, this includes management. The conflict between the longer-term needs of industry and the short-term outlook of our financial sector is legendary. The financial sector may be competitive in its own terms, but in terms of UK competitiveness as a whole it could be a distinct disadvantage. No pillar includes intangible investment. In Britain this is certainly now equal to tangible investment and crucial to our competitiveness because of the nature of the businesses which are growing in this country. I am sure that the Minister of all people would agree that money spent on branding or market development is an important investment. All this illustrates the problem I have with international competitiveness.

However, economic data are not everything. It is always a mistake to separate the economics of business and industry from the needs of society. A fair society and a strong economy go together. This is why both social and economic considerations have to be taken into account when judging our nation's competitiveness. The noble Lord, Lord Jenkin, spoke about inward investment. The noble Lord, Lord Kakkar, pointed out that this means people coming here, as well as money. All of us get the feeling that we are less welcoming to foreigners than we used to be. We have benefited greatly from them in the past—are we having second thoughts? I think we are, and this will not help our competitiveness, nor our productivity. Ministers talk about having competitive regulation. This usually means less, but we are slowly learning that we need better regulation not just less, and we need to explain why it is required. Sadly, we are learning the hard way about regulating the banking industry. Our competitiveness does not increase as we reduce regulation. No, our competitiveness goes up as we introduce better regulation. It will be regulation which is enforced. It will be light regulation which encourages a feeling of freedom but not a feeling of impunity. It will be regulation which properly deals with market failure. In sectors such as the environmental industry, good regulation actually stimulates the innovation and investment, which adds to our competitiveness.

Working conditions, too, have become a factor in competitiveness. Social considerations mean that cheap, sweat-shop clothing has not been competitive for some years. The competitiveness of our tax regime has become a social consideration, too. Yes, the generous arrangements whereby companies and individuals can reduce their tax bills may have been a competitive advantage at one time but, now that it is all out in the open, this will change. Social considerations of fairness have to be taken into account in the competitiveness of our tax regime.

We certainly need a policy boost. At national level, we can encourage the national stewardship code for our enterprises, as the noble Baroness, Lady O’Cathain, implied. We must develop a national long-term vision as to where our economy is going, and we must certainly continue with the productivity work of the 2003 paper. This has served us well.

At a more local level, we must concentrate on raising our performance, our presence and our productivity in those sectors where we are strong. The noble Lord, Lord Liddle, explained why. It will inspire people to make where they live and where they work more competitive. At the same time, we must work towards a more equal society, because all these efforts are much more likely to flourish and succeed in an equal society than in a divided society.

--- Later in debate ---

[The Minister of State, Department for Business, Innovation and Skills & Foreign and Commonwealth Office (Lord Green of Hurstpierpoint)]

My Lords, I thank my noble friend Lord Jenkin of Roding for initiating this important debate and raising the issues with such clarity. Strong trade and inward investment are of course vital to our economic success going forward—on that the whole House seems to be agreed. I thank my noble friend, too, for his kind comments about my role. It is perhaps worth noting that I have spent a fair amount of time in recent weeks and months travelling to 40 different countries as well as continuously around this country. This is not just industrial tourism; this is about understanding the issues that businesses face at this end and at that end in order that we can plan appropriate support going forward.

One lesson we all learnt from the 2008 crisis was that the old growth model is bust. In the run-up to the crisis there was too much growth based on domestic consumption fuelled by debt, and we know that we cannot continue to drive growth in that way. We also know that we cannot rely on government spending also fuelled by debt to drive growth either. The economics textbooks tell you that there are only two other sources of demand in any economy that can drive growth and create jobs—they are, of course, investment and net trade. I would like to talk briefly about each of those.

First, on investment—and focusing especially on foreign direct investment, which plays a key and strategic role in the UK economy—nearly half of total output in this economy is supported by foreign direct investment, a figure which is significantly higher than in France, and much higher than in Germany, America and elsewhere. It is a clear source of competitive advantage to us that the UK is, and has been for many decades, so open to foreign direct investment. It is a cultural orientation which has enabled—famously—the regeneration of the UK automotive industry since the 1980s by Japanese, German, American and now Indian investment. Iconic British brands such as Jaguar Land Rover, the Mini, the Rolls-Royce and the Bentley have been strengthened and revitalised by investment from Germany and India. Innovative cars are being developed and built in Britain now and exported around the world. One-quarter of all of Ford’s engines are built in the UK. The Japanese investor Nissan builds cars in Sunderland and exports some of them to Japan. An impressive 83% overall of cars built in the UK are now exported. The link, therefore, between foreign direct investment and exports is clear.

It is important, however, to remember that it is not just the automotive industry that we can use as an example here—the aerospace industry is another case in point. Airbus and Bombardier, to name but two examples, play a part in an industry that has a 17% global market share. Another recent example of a different kind of openness to foreign direct investment is the China Investment Corporation’s investment of 8.7% of Thames Water. The interesting point about that investment is that it has caused so little comment or nervousness in the British public domain. Can you imagine the same being true if a Chinese sovereign wealth fund invested in the water supply of either New York or Paris?

It is important that we remain an attractive destination for FDI, which means ensuring that our tax regime is attractive, that we minimise unnecessary red tape and that we have a planning regime that is fit for purpose. I know that the whole House will agree with me when I say that a lot of work needs to be done, and is in hand, under those three headings. The headline rate of corporation tax is the most visible sign of how competitive a country is and we are cutting that to 22% by 2014. That will be the lowest in the G7. We are supporting innovation through the patent box and R and D tax credits, and high-growth companies with programmes such as the enterprise investment scheme.

A crucial area where we need to attract FDI is not only in productive activity but in the public economic infrastructure. A number of noble Lords have referred to that issue. The kindest friends of this country would not accuse it of having a world-class public economic infrastructure. Infrastructure UK, a body started by the previous Administration and continued and developed by this one, has been developing increasingly specific project-based plans for investment in transport, energy, water and broadband networks which we will need if we are to compete effectively in the 21st century. It is estimated that around £250 billion of investment will be required between now and 2015, the bulk of which will, of course, have to come from private sector capital working in harness with the Government. That capital will come from foreign institutions, from domestic institutions and also from sovereign wealth funds. A lot of work is being done on that. This is a long-term programme that we have to keep at.

Our regulatory environment is another important signal for overseas investors in this country. We are often, quite rightly, very critical of ourselves, but actually we have a strong reputation overseas for transparency, predictability and the rule of law, and we must never lose this. According to the World Bank, the UK ranks seventh in the world for the ease of doing business and second only to Denmark in the EU. The UK has the fewest barriers to entrepreneurship of any country in the world. It takes 13 days to set up a business here, which is two days fewer than in Germany and almost a third fewer than the international average and a fraction of the time that it takes in some of the fastest-growing, emerging markets around the world.

We have to do much more especially to tackle bureaucracy that is holding businesses back. I note the point made by a number of noble Lords that this bears down particularly on SMEs. It is a continuous challenge. I suspect that if we are standing here in 10 years’ time we will still be pleading for an attack on unnecessary regulatory bureaucracy on behalf of small businesses. But we are working on it. That is why we have introduced the Red Tape Challenge and are seeking to simplify planning procedures—one in, one out on red tape; and the new National Planning Policy Framework creates a presumption in favour of sustainable investment, reducing some 1,000 pages of planning guidelines to just 52.

Secondly, I should like to comment briefly on trade. Historically, our performance has been weak. In fact, since the 1960s, trade has tended to be a drag on growth rather than a driver of growth in this economy. We also have had a burgeoning balance of payments deficit, although that seems to have stabilised in the past year or two or three. The fact, however, is that over the long term we have to find a way of paying our way in the 21st century. We have therefore set an ambitious target of doubling exports to £1 trillion by 2020, which requires growth of a little over 8% per annum compound. Last year we achieved 10.5%, so we are on track, but we have to keep that up, not merely to 2020 but beyond that. To achieve this, we need to look at where we stand in terms of market share. In most markets we lag behind Germany; in many we lag behind France, and in some we lag behind Italy too. I mention those three countries because in some ways they are our most obvious direct competitors.

The rise of the global middle class is a huge opportunity for all of us. As the emerging markets take their place on the world stage—or, in some cases, retake their place on the world stage—what you notice is that everywhere the appetite for the sort of goods that we take for granted is exactly the same, and as strong, as ours. So the opportunities are there. But if our exports do not keep pace with the rates of growth of those emerging markets then we will fall behind the competition. Our challenge is to get more companies exporting and to increase the amount that we export outside of the European Union.

Central to implementing this strategy is UK Trade and Investment. I would like to spend a few moments discussing how UKTI has been reorganised and refocused to meet the challenges we face. We have appointed a new chief executive and renewed the top management team, bringing in people with strong private-sector enterprise. Our UK-based trade advisers now work on incentivised contracts and so do our inward investment services.

In overseas priority markets we have set up a new group to identify so-called high value opportunities—contracts for major infrastructure projects, whole new cities and so forth, which create opportunities so long as we showcase the British offer cohesively and effectively. This is methodical work. We have identified in particular 60 top priorities. For each one of those we have an action team led by someone from UKTI, drawing in industry representatives from the relevant sectors. In some cases they are helping consortia to form; in others they are providing a cohesive offering, in particular creating the framework within which SMEs can access these enormous project opportunities which can seem so daunting to an SME working on its own. As just one example, in Malaysia, UK firms, including some small ones, have won business designing train stations and providing engineering consultancy for the country’s largest infrastructure project, worth over £10.5 billion, in mass rapid transit.

We have also introduced best business practice by strategically managing relationships with our leading exporters and leading investors so that they no longer feel that they have to run from pillar to post when trying to deal with government. This is beginning to produce benefits, although I am confident that this is, again, something that we have to keep up over the long haul if we are really to gain the benefit of providing a cohesive presence for inward investors and large British exporters to deal with. It is showing benefits.

Perhaps our most important task is to help more and more SMEs into the export markets. We have set a target for UKTI of doubling its client base from around 20,000 currently to 50,000, between now and 2015. Of course the vast bulk of that client base is already, and will continue to be, SMEs. We have a new team in UKTI headed by a new executive with strong personal business experience leading the charge on this. We have put in new programmes, and I am pleased to report—because this struck me almost from day one when I got into the job—that we have reversed the downward decline in trade access programme support. We have pushed the budget up this year, and if I get my way we will push it up next year too.

We have introduced new programmes of e-connectivity designed to help SMEs talk to each other and share experiences, because there is nothing so powerful as an SME talking to another SME about the practical challenges of getting into the international markets. We have introduced a new, more flexible approach to charging for market introduction services. I believe that there was too much of a confusion of ends and means, as the budgets for selling these services became the end. No, they are a means and not the end itself: the end is to serve clients and help them get into the export markets.

UKTI is also working much more closely with UK Export Finance, formerly known to many of us as the Export Credit Guarantee Department, which can now for the first time in 20 years offer services to companies of all sizes. For the past 20 years it has in effect been providing services only in the form of big-ticket, long-term credit guarantees for the defence and aerospace industries. We now have a range of products in place which are relevant to an SME in the smallest possible denominations.

Moreover, we know that exporting helps companies to grow. We know that businesses that export do better with the help of UKTI and UKEF. We know that on average companies that work with UKTI go on to win overseas sales of over £100,000 within 18 months. We know that this is value for money from the point of view of the taxpayer. However, I think that it is important to stress a theme that has come through this debate already on several occasions; that is, that the Government cannot do this alone. You will no doubt hold the Government to account for the quality of the services they deliver through UKTI and UKEF and through the Foreign Office and its work through the missions and posts overseas. However, even if you scored us 10 out of 10 on all of those dimensions, it still will not be sufficient.

There is a key role for the supporters and networks of SMEs to play as we help small companies face the often daunting challenge of getting into the export markets for the first time. I am working as closely as I can with, for example, chambers of commerce, including the British Chambers of Commerce, the Confederation of British Industry, the FSB; and also with banks, lawyers and accountants—all of whom are clearly critical to the prosperity and growth prospects of small companies—as well as with trade bodies such as the Energy Industries Council, which my noble friend Lord Jenkin mentioned and with which we do indeed co-operate on many levels, just as we do with a number of other such institutions representing industry interests and needs. The sector groups include the aerospace, defence, security and space industries; the BBA; the Law Society; and the Institute of Chartered Accountants, which I believe is playing an extremely valuable role in helping its members—who have so many SME clients—understand the opportunities.

I have also been working with honourable Members from the other place in a cross-party initiative to encourage them to seek out businesses in their constituencies. If you divide the target that the Prime Minister set of 100,000 new companies into the export markets over the next few years by the number of constituencies in the UK, it works out as just two or three dozen businesses per constituency per year. Put like that it does not seem as daunting as the figure of 100,000. The critical point is that this is a collective effort. Again, a number of noble Lords have raised the possibility of the roles that Members of this House can play, and one or two Members have already referred to missions led by Members of this House. I would be delighted to work with any of the noble Lords in this House who have links to business groups or know particular places well, to find ways of engaging them in what I believe is a collective challenge.

Turning to the various comments made in the extremely interesting and very wide-ranging interventions by noble Lords, I have to say that I will not have time to do justice to all of them. This was a very wide-ranging debate covering many of—essentially all—the issues in the economy today. I will attempt to focus on some of the major themes and commit to writing to noble Lords where I am not able to address particular points.

My noble friend Lord Jenkin mentioned three things in particular. The first was the issue of the awareness of UKEF and, come to that, UKTI. There is work to be done on this. It is clear that not enough of their potential customer base knows of their services and how to get to them. We need to work hard on that. We are putting a lot of effort into this. In particular, in the case of UKEF we are appointing representatives into all of the UKTI offices around the region. I have regularly, as I mentioned, been around the regions meeting with businesses, holding events and so forth. This is continuous work and we have to keep at it.

My noble friend also mentioned the question of life sciences, the importance of the life sciences initiative and the need to ensure that we showcase what we are seeking to do, as well as the need to get on with it— I think that that was really the thrust of the point. I resonate with the point that we need to make sure that the world beyond our shores understands what a telling proposition we have to offer. This is simply one of the best centres for life sciences development and investment anywhere in the world and we need to work to showcase that as effectively as we can. I would like to take away the thought of having some form of group of ambassadors from the industry to work with us in showcasing these opportunities. I believe that we have done that increasingly successfully in healthcare services, a related area where, for example, the noble Lord, Lord Darzi, has led both missions and a working group for us in helping us to showcase UK healthcare services more effectively.

I will move on, if I may, to comments from other noble Lords. The noble Lord, Lord Liddle, made a number of points about the importance of skills investment and the linkage between research in the universities and commercialisation thereof. A number of other noble Lords made similar points. The role of catapults will be extremely important in this.

The term “pea shooter” was used to suggest that we were not doing enough. This gives me the opportunity to make a general statement in response to a number of comments, including those of the noble Lord, Lord Stevenson. It would not be fair to characterise what the Government are doing as merely using a pea shooter. Extensive investments are going on, for instance in apprenticeships. The Government will spend £1.4 billion on start-ups, which this year will involve something of the order of 450,000 new apprenticeships. What we are doing was started by the previous Government and has been continued and ramped up by this one. We are rebuilding an apprenticeship system that fell into disrepair in the 1970s, 1980s and 1990s. We need to rebuild it. I will repeat something that I have said once or twice already. We must stick at this over 10 or more years before we get back to where we should be—with a skilled industrial base for this country. Along with all noble Lords in the House, I look forward to the report of the noble Lord, Lord Heseltine, on the competitiveness of the UK economy.

A number of noble Lords raised the question of Europe. I will dwell on that for a moment or two. It is clearly the case that, whatever the uncertainties about the way forward for the eurozone, we are involved in Europe. We are a member of the European Union, 45% of our exports go to the eurozone and half of them go to the European Union. We are impacted by the European Union. It is absolutely in our interest to continue to press for full implementation of the Single Market Act. The services directive and the digital single market are areas that will make a huge difference to Europe’s competitiveness globally, and to the opportunities that our companies will have in global markets. The Government are fully committed to arguing continually and loudly for Single Market Act implementation.

I am reminded that we are running out of time. This reflects the extensive nature of the debate. We have covered many topics. I would love to have had more time to talk about energy reform and its implications, and to respond to the point of the noble Lord, Lord Paul, about the importance of getting energy policy right for industry, for consumers and for long-term security. This is a difficult and complex area. As noble Lords will know, a Bill on this is being scrutinised in the other place at present.

In general, the message is clear. This is a collective effort. We need to work away at encouraging more companies into international markets. This is not a one-year fix. It is not a programme that we can conceive of implementing only for the lifetime of one Parliament. We will be living with this for a generation as we rebalance the economy away from excessive reliance on domestic consumption towards international engagement.

I will make one final comment. I promise to write to noble Lords whose points I have not been able to address. The more we succeed in this, the more we will not only repair our balance of payments position but contribute to growth. Very important research shows that SMEs in particular that get into international markets enjoy very considerable productive efficiency gains quite quickly—something like 30% gains in the first year or two of taking the first steps into the international market. That goes on as they spread their wings into new markets. It leads to higher profitability, greater longevity, further job creation and, in summary, to the strengthening of the backbone of the economy.

My final point is therefore that what we are talking about is not simply the balance of payments. It is not simply the need that we have to pay our way in the 21st century. It is about the regeneration of the economy that is core to the growth strategy that this Government have in place alongside the deficit reduction strategy and the strengthening of the macroeconomic environment.

Finally, I thank the noble Lord, Lord Jenkin of Roding, for introducing an extremely important opportunity for us collectively to talk about an issue that is central to all of us who have concerns about this country’s future economic potential.

[Lord Haskel]

The Minister spoke warmly of reducing corporation tax. Of course, what he forgot to say was that the Government are also reducing capital allowances by an even greater amount. What impact will that have on our competitiveness?

[Lord Green of Hurstpierpoint]

Corporation tax must be seen in the context of an overall tax package. We have a number of new measures in place. I referred to the patent box, whereby we will tax revenue from intellectual property at 10%. We have very generous R and D tax credits. We have introduced enterprise investment allowances. It would be very difficult to do anything other than recognise that the overall tax framework contributes to a very business-supportive tax environment. It needs to be competitive. The goalposts are moving internationally as other countries seek to create competitive tax regimes. We need constantly to watch what others are doing if we are to go on being an inward destination that foreign investors find attractive.

Middle East

Lord Haskel Excerpts

Friday 16th March 2012 Lords Chamber

[Lord Haskel]

My Lords, I rarely trouble your Lordships with foreign affairs but I want to add my voice to those urging extreme caution over the threat to bomb Iran’s nuclear facilities.

I agree with the noble Lord, Lord Palmer, that Iran’s nuclear ambitions are a serious threat to Israel—indeed, they are a serious threat to us all—but that is all the more reason for extreme caution. One of our in-house military experts, my noble friend Lord West, has spoken elsewhere about how dangerous the idea is; how even a limited attack could escalate into something that we no longer have the military power to deal with; how faulty intelligence and rhetoric could box us into a position where we have no choice but to participate in some form of strike against Iran. As my noble friend Lord Anderson reminded us, once you start a battle you never know how it will finish—especially in the Middle East, where religion, sectarianism or family loyalties can have a strong and enduring influence, as the noble Baroness, Lady Berridge, reminded us.

There will be pressures. I was in the United States during the recent visit of the Israeli Prime Minister. As noble Lords know, I am a long-standing and very staunch friend and supporter of Israel, but even I cringed at the blatant politicking that went on and the partisan show of support in the Republican primaries—support apparently intended to raise the tension over Iran’s nuclear threat. But in the US things are different now. As Martin Kettle pointed out in yesterday’s Guardian, the influence of the neo-cons has gone from the Administration.

Indeed, some of my American friends were very concerned that during the Israeli Prime Minister’s visit the impression was given that this neo-con view was the view of the American Jewish community. But surely what is important to us, as my noble friend Lord Soley implied, is the attitude of the British Jewish community towards Iran. It is concerned but conciliatory. How do we know that? We know it because last year the Institute for Jewish Policy Research, a community think tank—I declare an interest as its honorary president—conducted an attitude survey which, among other things, measured the Jewish community’s attitude towards a threat to Israel from a nuclear-armed Iran.

The survey showed very high levels of concern in the British Jewish community. Most strongly believe that Iran does pose an existential threat to Israel and so are supportive of measures that will protect Israel’s security. However, at the same time most British Jews share a profound wish for this and other Middle East conflicts to be resolved peacefully around the negotiating table rather than on the battlefield. Like the noble Lord, Lord West, they think that the risks involved in that are simply too grave. I will not burden your Lordships with the numbers but they are available on the internet. The Minister’s office should have a copy of this report because he may be interested in the British Jewish community’s attitude towards the settlements, negotiations with Hamas and other matters relating to the Israeli-Palestinian conflict. It is all there.

As other noble Lords have observed, the Middle East picture is being redrawn as we speak. I agree with other noble Lords that the Israeli-Palestinian dispute is part of this. The noble Lord, Lord Hannay, spoke of the Arab awakening. We have to recognise that the awakening phase of the Arab spring is over. We are waiting to see whether the dead hand of the past will continue to strangle the future, as it is doing in Syria. We are anxious to see whether the extremists will drive out the moderates or, as we all hope, there will be some sort of democratic outcome.

As I say, the picture is changing. We would all like a democratic outcome from the Arab uprisings but let us be sure that intelligence rather than politics guides our actions. As we talk, so we gain more intelligence—for example, as regards the existence of chemical and biological weapons, where they are and who controls them. We also gain intelligence on where power lies to make decisions regarding human rights and on the outcome of Kofi Annan’s mission. I welcome the Government’s support for that mission. It has the support of Russia and China, and members of the mission are also seeing regional leaders. Threats of bombing will only harden attitudes, so let us give diplomacy every opportunity to succeed. Let us keep up and increase the pressure through the United Nations both on Syria and Iran and keep trying to persuade China and Russia to modify their policies. Let us continue to work for peace, not war.