Economy: Growth

Lord Haskel Excerpts

Thursday 31st March 2011 Lords Chamber

[Lord Haskel]

My Lords, first, I congratulate my noble friend on this debate. I should also like to commend the Minister for his perseverance. This is the third Thursday on which he has been on that Bench. I am very pleased that this debate has moved on and that we have not heard a lot of speeches which continuously tell us that all our troubles have been down to the previous Government.

I agree with my noble friend Lord Hollick that the Government’s paper, The Plan for Growth, has many hopes and aspirations. Who of us does not support balance in the economy and growth in manufacturing, investment, skills and science and technology? We all share, and have shared, these aspirations for many years. When I talk to people in business today and ask them what they consider to be the most important factor for their future prospects, the answer is not tax, regulation, or the five things that the Government list in their paper. It is people such as those who my noble friend Lord Hollick listed and the noble Lord, Lord Hamilton, spoke about; as a Jewish immigrant, I thank him for his words. It is not people who are anxious to avoid tax. As my noble friend Lord Kestenbaum said, it is people who want to be part of a national effort to build our economy. But this topic is entirely absent from this paper. It is the modern style of outward-looking, entrepreneurial people-based management which seems to be the hallmark of most new successful businesses, about which my noble friend Lord Mitchell spoke.

The noble Viscount, Lord Eccles, spoke about government grants. Yes, the Government do try but their finance is available in small packets for specific purposes. Schemes are announced all the time. One such scheme, announced in May 2010, was a tax break for the first 10 employees of a new business set up in Britain’s poorer regions This scheme received special mention in the Economist on 3 March. A government source described the take-up as “incredibly low”. It was incredibly low not because of bureaucracy but because this fragmented attitude no longer works. Trying to tease out individual causes does not seem to work any more. Businessmen have to bring it all together. At the end of the day, you either have confidence in the people and the project or you do not. As everyone knows, it is people who matter, which is where our priority should lie.

Economy: Government Policies

Lord Haskel Excerpts

Thursday 24th March 2011 Lords Chamber

[Lord Haskel]

My Lords, I, too, thank the noble Lord, Lord Lawson, for giving us the opportunity for an early debate on the Budget. The noble Lord urged the Chancellor to make a virtue out of unpopularity. His noble friends on the Lib Dem Benches must be confused, because they have the unpopularity without the virtue. As usual, we will have to wait for some time to see if the Chancellor's aspirations contribute to growth, and what will be the impact of the small print.

I will deal with one small aspect of the Budget, for the results of which we will not have to wait. Before I do, I congratulate the noble Lord, Lord Hussain. I am sorry that he is not in his place, because I see him as a kindred spirit. I, too, am an immigrant who built up a business. Mine was in Yorkshire rather than Rochdale. I, too, passed the Alan Sugar test: I put my house on the line. I say to the noble Lord, Lord King—I am sorry that he has just gone out—that I, like my noble friend Lord McFall, see business and industry as part of society. That is why I am on these Benches, not on those. The separation of business and society concerns me. I have never known a time when the two were more divided. Sadly, this is a time of hostility between them.

The cause is not difficult to find. We have seen extravagant pay deals, not only for bankers but for other executives. The noble Lord, Lord Oakeshott, spoke of tax avoidance. Businessmen move their businesses around the world to pay less tax. Martin Sorrell of WPP said on the radio this morning that now that he has got his way, he will move his business back. All this gives the impression that a business is just a money-making machine for a few lucky people—so much for the idea that we are all in this together and are all sharing the pain. Andrew Whitty, the chief executive of GlaxoSmithKline, one of our major corporations, strongly warned against this last week. I say, good for him.

However, the Budget seems to indicate that the separation of business and society is what the Government want. Does it matter? It does, because in today's business world it is from this interface that much growth and innovation come. We see this in the new ways in which we communicate with each other—and there is a lot more to come. There are new ways of keeping healthier, new and better ways of learning, new and imaginative ways of living a greener lifestyle, and new ways of harnessing our experiences as we go through life. Venture capitalists in America call this the experience economy. The Government are looking for innovative ways in which business can deliver public services—cutting back the state, as the noble Lord, Lord Lawson, put it. Surely it is from this interface between business and society that the new ideas will come, yet the Government's actions are going in the opposite direction.

Perhaps I may give a couple of examples. One is apprenticeships. Youth unemployment is a social problem crying out to be tackled and it is one where business can play an important part. The noble Lords, Lord Renton and Lord Griffiths, spoke about this. The Prime Minister said that we want to make all young people,

“feel more part of our country”.—[Official Report, Commons, 23/3/11; col. 947].

So why are the Government not doing something for all young unemployed people instead of speaking about 40,000 or 50,000 apprenticeships? Only one firm in 10 offers apprenticeships. Yes, we are told that there will be new technical colleges, but society is going to have to carry the pain of the resentment of the many who are left out.

Many noble Lords have welcomed the fact that planning restrictions are to be eased. This is the very procedure that protects society but the Government have chosen to listen to the special pleading of business. The problem with planning is the inefficient way in which it is managed. Yes, that could well be improved by localising it but councils have been told in this Budget to come down firmly on the side of business. How they may deal with this apparent contradiction in terms is a mystery to me, but it only reinforces the divisions.

The Budget is going to reduce red tape. Wonderful. Every Government in every Budget have promised to do that. However, the purpose of regulation is also to protect society, to ensure that we have clean water, clean air, safe food, safe transport, and protection for our children and old people. The way to cut regulation is not just to listen to the special pleading of business about the things that they find burdensome but to remove the regulations which no longer serve society. There are plenty of those. Until this attitude is changed to one that combines the interests of business and society, the promised bonfire of regulations will continue to be a damp squib.

We are told that our public servants stand in the way of innovation and that our deficit is caused by a bloated public sector. Yes, our Civil Service probably does need restructuring and modernising, but why is this not done by showing dynamic leadership and by modernising the way that the public service works with new structures, new equipment and new models? Then, those involved will want to make it happen. But no. The Government choose to demotivate and demoralise the very people who are going to have to implement their new policies and the result is yet more division.

Given the limited things that the Government can do, why are they cutting off this promising area of jobs and growth, or can this just be left to the market? Certainly in the past 20 years standards of living have risen and businesses have grown. Perhaps much of that was based on the credit boom, on the devaluation of sterling, and on North Sea oil, which the Government are milking again, but at least business and society shared the benefits. However, now that has come to an end and it cannot be repeated. The world has moved on to a place where innovation, new jobs and new businesses have as much of a social ingredient as a technical and scientific one. Surely sensitive and sensible involvement from the Government and regulators will help to speed up this kind of innovation and growth, moving it along. However, I am afraid that I see no signs of that in the Budget or, indeed, elsewhere in the economic policies of this Government.

Financial Crime: Legislation

Lord Haskel Excerpts

Thursday 17th March 2011 Lords Chamber

[Lord Haskel]

My Lords, the noble Viscount, Lord Eccles, is very fortunate indeed. Early on in my business career, I remember visiting an official overseas in a very protected market to obtain permission to sell some of our technology to a company there. In a bookcase behind his desk were the complete works of Shakespeare, the Oxford Shorter English Dictionary and the works of Dickens. I thought I would compliment the official on his interest in and knowledge of English literature. He looked at me in rather a peculiar way and handed me a copy of Dombey and Son. I opened it, and in the centre was a cut-out that exactly fitted US dollar bills. I would say to the noble Baroness, Lady Wheatcroft, that there was absolutely nothing nuanced about that. I am not sure if it was my distaste for corruption, my concern for the law or my love of books, but I never did conclude that deal because I wanted to preserve our reputation, and there were lots more deals to be done.

In another country, corruption was explained to me by the fact that because the laws and institutions were weak, largesse should be shared with those with whom you have ties of dependence, and therefore it was not corrupt to pay off somebody’s cousin. This is why we must not undermine our strong and independent institutions—institutions such as the police. I think that the proposed legislation to make the police accountable to political commissioners can lead to undermining their independence. They have that kind of arrangement in the United States, and their experience is not good. Instead, we should be strengthening our institutions: our free press, our freedom of information and of speech. Legal tricks such as super-injunctions and unaffordable libel actions weaken our defences against corruption, and this is where our laws need strengthening. I welcome the proposed although rather timid Defamation Bill, but I wonder why it does not go a lot further.

Where I do think we have institutionalised corruption is in the world of tax avoidance. There are armies of bankers, lawyers and accountants who ensure that even though the letter of the law is respected, increasingly immoral ways are found of perverting the spirit of the law to ensure that tax is avoided. This has been justified to me by quoting my noble friend Lord Mandelson. He has said that he does not mind people being filthy rich, but people forget the rest of his sentence. He does not mind people being filthy rich as long as they pay their taxes. To hide its true purpose, the tax avoidance industry adopts the language of real business, so technical innovation and reinventing your business model do not mean finding new products, services and markets, and new ways of supplying them. No, they mean registering your business in a tax haven and becoming a non dom to avoid tax while still enjoying the, admittedly decreasing, benefits and services which make this country the civilised place that it is.

Business leaders rely on the Government to regulate, to educate, to create a skilled workforce, to do research in science and to build the infrastructure, and they are quick to complain when there is not enough. Yet they use dubious means of avoiding the taxation necessary to pay for it all. As my noble friend Lord Eatwell put it, that is financial artifice. They make it very difficult to find out how much corporation tax is actually being paid by large firms because tax planning is a cat and mouse game played all over the world. For instance, we will never know about Cadbury because Kraft has moved its domicile to Switzerland. Most studies show that 28 per cent corporation tax is budgeted for, but is rarely the amount actually paid.

Caroline Lucas MP is today introducing in another place a Presentation Bill about disclosing the amount of corporation tax paid and the profits made. Will the Government support her?

The noble Baroness, Lady Williams, explained that the tax avoidance industry also ensures that we are a wonderful tax haven for those who are resident elsewhere, irrespective of how their wealth was earned. We now know that the Home Secretary plans to give immigration priority to those who want to participate in it. Is this wise?

All this poisons our politics. However much the Government talk about us all being in this together, as my noble friend Lord McFall said, there will be very little sense of shared pain until tax avoidance is tackled. Economic morality is an ethical issue, so I congratulate the noble Baroness on introducing this debate and on raising this ethical matter.

Banking: Liability.

Lord Haskel Excerpts

Tuesday 7th December 2010 Lords Chamber

Asked By

[Lord Haskel]

To ask Her Majesty’s Government whether the report published on 2 December by the Financial Services Authority regarding the Royal Bank of Scotland finalises the matter of liability.

[The Commercial Secretary to the Treasury (Lord Sassoon)]

My Lords, on 2 December the Financial Services Authority closed a supervisory investigation into the Royal Bank of Scotland group. The review confirmed that RBS had made a series of bad decisions in the years leading up to the financial crisis, but concluded that enforcement action was not warranted.

[Lord Haskel]

I thank the Minister for that reply. Is he aware that this report fails to respond to the widespread concerns expressed by many people, some of them on his own Benches, that the report deals with the letter, but not the spirit, of the law? Will he tell us how the restructured FSA under the remit of the Bank of England will function more appropriately and take this into account?

[Lord Sassoon]

My Lords, we do not know what the report says because we have not seen it. We cannot say what the report deals with, but it is clear that it concludes that enforcement action is not warranted in this case. The FSA cannot publish the content of the RBS review because information gathered from the bank during the course of the review contains confidential material. The report remains confidential under the Financial Services and Markets Act 2000. I am grateful to the noble Lord for drawing attention to the fact that we are embarked on a process completely to redraw the financial regulatory architecture. I expect that under the new architecture, the new prudential regulatory authority will be able to exercise powers under the tools we give it to minimise the risk of another case like RBS coming up in future.

Comprehensive Spending Review

Lord Haskel Excerpts

Monday 1st November 2010 Lords Chamber

[Lord Haskel]

My Lords, I am not going to speak about the economics of the CSR. My noble friend Lord Myners did that with devastating logic. My concern is about the process. Can the Government and the local authorities carry it through? It is easy to put numbers on a spreadsheet; it is a lot more difficult actually to deliver the proposed savings, as the Government, with the housing benefit and child benefit problems beginning to become apparent, are beginning to find out. Is this project a sound platform, as the Minister put it, or is it fantasy land, as my noble friend Lord Peston put it?

I start with Sir Philip Green’s report. I feel qualified to do this because for 30 years I was in the textile business and on the receiving end of exactly the sort of thing that Sir Philip proposes. Unfortunately, he told the Government only half the story. After you get the hard talk, most firms will then carefully send someone round to ensure that the goods or the services that have been ordered will be delivered on time and satisfactory in quality and that there will be no problems. They know that the problems of the suppliers become the customers’ problems, only magnified. Is Whitehall set up to be the kind of enlightened customer who is needed to do that? Is it more Toyota and less Topshop?

Writing in the Financial Times on 20 October, my noble friend Lord Adonis has his doubts. He says that, based on his experience as a Minister over many years, the intensive Whitehall support, as he calls it, is just not there. Last week, when debating government contracts with consultants, we were reminded that the National Audit Office said that the Government lack the information, skills and strategies to manage them.

What are the Government going to do to make sure that the budgeted savings are actually delivered? With this lack of time and skills, the Government are right on one thing; cut a service entirely rather than trim it and do it badly—do it properly or not at all. However, they are seeking to economise by encouraging the outsourcing of some of the services on the principle that the private sector does it better and cheaper than the public sector. This is sheer dogma, as my noble friend Lord Peston explained. What has produced the improvement is not privatisation but competition, and where the public sector has had to compete with the private sector, the public sector has done pretty well. We need look no further than the National Health Service. Where some NHS operations have been contracted out to the private sector, the private sector has had to be paid between 30 and 50 per cent above the tariff of the NHS hospitals. The chief economist of the King’s Fund also pointed out that the private sector takes the less complicated cases.

On Welfare to Work, independent reports state that there is no hard evidence that the independent sector does better than Jobcentre Plus. Indeed, when Pathways to Work was rolled out for people on incapacity benefit in 2008-09, the private sector providers performed worse than Jobcentre Plus, and private sector prisons are certainly not consistently at the top of the performance tables.

Instead of sacking civil servants and contracting out services or closing them, why have not the Government allowed them to compete with the private sector? If we are all in it together, surely they deserve a chance too; or is it again too much rush, too little thought, all in the name of no alternative?

The experience of the London Borough of Barnet proves my point. It had its own mini-CSR some time ago, and last week the council leader said that the savings for this year will be less than half those projected in its budget precisely because of the problems that I have outlined. Surely there is a red light flashing there. However, a decision has been made; people will be sacked and it is up to the private sector to employ them. Let us consider how realistic that hope is. I know that the Government have the support of many business leaders in this policy, but you will notice that they are careful to give their support in their private capacity. This is because when it comes to business, things are different. Again you get only half the story. My noble friend Lord Knight pointed out that, yes, they may be creating new jobs, but old jobs are being destroyed at a faster rate because of the continuous search for innovation and increased productivity. This applies to every sector. A typical British manufacturing worker today produces four and a half times as much as their equivalent did in 1980. That is why there are far fewer jobs in manufacturing even thought manufacturing output is about 70 per cent higher than it was then. This applies throughout business and industry.

The Government tell us that 176,000 vacancies are known to jobcentres, implying that these are jobs for people on the unemployment register. Last week, the noble Lord, Lord Sassoon, told us that 300,000 jobs were created in the second quarter, and the noble Lord, Lord Lamont, repeated it. Again we get only half the story. What we are not told is how many jobs ceased to exist and how many jobs were taken up by the 40,000 or 50,000 people a week who are in employment but change jobs. It is easy to cherry pick the labour market figures, but it is very difficult to give a true figure.

Like other noble Lords I ask where these extra jobs are going to come from. I welcome the plans to invest more in our infrastructure; I welcome the plans to develop Britain’s offshore wind power industry. Certainly these should create new jobs but, like the noble Lord, Lord Bilimoria, I ask whether this is enough. I welcome the new innovation centres—a Labour innovation, I might add—but do not expect quick results; it will take three or four years before they show results. The Technology Strategy Board and the knowledge transfer networks have been doing this kind of work for some years and, yes, there are several projects in the pipeline. I declare an interest as the honorary chairman of perhaps the largest knowledge transfer network. However, this is a pretty thin supply-side narrative, as my noble friend Lord Myners put it. Growth in the economy does not necessarily mean more jobs; it may mean more output, but the two do not necessarily go together.

Where is the money for these new jobs going to come from? Big business has money but is looking to cut its costs by destroying jobs while most new jobs are created by small and medium-sized enterprises—the very sector that is being starved of investment capital. Like the right reverend Prelate the Bishop of Leicester, I, too, think that there is something wrong when banks are making a fortune trading the very debt for which the rest of us are making sacrifices. Is it because quantitative easing does not get beyond the banks? Banks do not create jobs—innovation and demand do. Perhaps the quantitative easing should go straight to business and industry.

I am concerned about the Government’s ability to manage their strategy and budget. Will the promised savings be delivered? Will the private sector be able to absorb the jobless from the public sector and still remain competitive? I am concerned about where all this is leading: about the direction of travel. The Minister portrays the CSR in economic, fairness and reorganisational terms; others see it differently. I am a bit of an old leftie and I see it in terms of the Government failing in their duty to protect the public good from private interests, an issue to which several noble Lords have referred. Whatever our perspective, it is testing the limits of our tolerance. The CSR should be given more time and approached with a lot more caution and humility.

Public Expenditure: Value for Money

Lord Haskel Excerpts

Tuesday 26th October 2010 Lords Chamber

Asked By

[Lord Haskel]

To ask Her Majesty’s Government how they assess value for money when allocating public expenditure.

[The Commercial Secretary to the Treasury (Lord Sassoon)]

My Lords, value for money is a key consideration when allocating public expenditure. The spending review has prioritised growth and fairness, underpinned by radical reform of public services. Departments were asked to prioritise spend against tough value-for-money criteria set out in the spending framework and the economic value of all capital projects was considered. In addition, public ideas were sought on how to make savings and deliver more for less.

[Lord Haskel]

My Lords, I thank the Minister for that rather narrow accountant’s view of value for money. What prompted this Question was when the Prime Minister said recently that there was more to life than money. He said it in the context of the extra value that we get from sport, the arts and having a roof over our heads.

[Noble Lords]

Question!

[Lord Haskel]

The question is coming. The Prime Minister said it in the context of the extra value that we get from sport, the arts and social capital. My question is: will the Minister say how these non-monetary values are taken into account when assessing value for money?

[Lord Sassoon]

My Lords, questions about value for money are asked in the context of a wide range of other factors that are all set out in the Government’s Green Book, which is a 100-page document that has been used for 20 years or so. It has become a model of its kind around the world, and sets out value for money in the context of the complete range of factors that have to be considered.