Government Spending Review 2013

Lord Haskins Excerpts

Wednesday 3rd July 2013 Grand Committee

[Lord Haskins]

My Lords, I did not intend to participate but could not resist doing so when the noble Lord, Lord Higgins, mentioned the Open University, which has always been very well represented in the House. I happen to chair the Council of the Open University and I was gratified to listen to his story. It is one that I have told many times to people, who listen with increasing disbelief that it could ever have happened. Not only did Mrs Thatcher do as the noble Lord, Lord Higgins, has suggested, she actually broke a manifesto commitment to shut the place. We are eternally grateful to her for that.

I am speaking today because I chair a local enterprise partnership, I sit on the Efficiency and Reform Board in the Cabinet Office, which is an experience in itself, and along with many other noble Lords I recently served on the Select Committee on Small and Medium Sized Enterprises. I was in Whitehall this afternoon talking about the situation with regard to LEPs, and it is clear that there is not very much money. I do not think that that should come as a great surprise to anyone, but some of my colleagues in the LEPs were getting a bit hot under the collar about it. However, anyone who thinks about it will realise that we are not in a situation where money is going to be dished out in a big way, and nor should we be, so we must concentrate on those things that do not relate to money but which can profoundly improve the economic situation.

As a representative of the Humber LEP, I talk to many would-be investors in renewable energy in the North Sea. It is hoped that some very big external investments will be coming in. Of course money comes into it, but there are some real issues that we have to deal with. The environment for people investing in this country is, broadly speaking, positive when compared to investing in, say, France or even in Germany. The broad impression is that this is a good place in which to do business and we must support that.

However, two or three points come up all the time. One that applies right across the country is the skills issue. I do not think it is so much about spending more money but about using the money that is presently available more effectively and efficiently. Last week I was talking to the head of a college in Leeds who pointed out that the college has to manage 39 different funding streams. That is just crazy. The college spends more time trying to understand where the money comes from than spending it. Successive Governments have looked at this but they have always baulked at tackling it. The reason they do not tackle it is twofold. First, Ministers come in with their own pet schemes that they put into the system and no one can cancel and, secondly, the Civil Service—the Whitehall engine—does not like to have its arrangements upset. These 39 schemes really should be whittled down to nine or 10.

The second issue is that of our major projects, which the Cabinet Office Efficiency and Reform Board has been looking at for the past few years. It is scary how badly these projects have been mishandled over the years—going back 20, 30 and even 40 years. We have to get a grip on that and make sure that we do not do it again. Once again it comes from the Whitehall silo mentality where one department finds it difficult to talk to another department. I contrast that with what I see when I go to Scotland to look at how they are doing things there. Whitehall could learn a lot from Scotland. In Scotland, Northern Ireland and Wales, the Ministers and officials know each other and communicate with each other.

I will give noble Lords an example. The noble Lord, Lord Heseltine, is taking a great interest in what we are doing in the Humber. We are looking at regulation. Regulation is another issue which constantly comes up, not because there is too much of it—that is not the issue—but because of the way in which existing regulation is mismanaged. I have a big investor at the moment who is having to go through one regulator and then start again with another, very often duplicating what the first one had done. We are setting up a pilot group to get all the state regulatory agencies together so that when a major project comes along, we all sit down around a table, agree what the issues are and apportion the regulatory problems. That does not sound very exciting, but it makes a huge difference to the attitude of investors.

Finally, looking at the local authorities, the test is whether you have the political leadership to carry all this out. It varies enormously across the country and we could do a lot more. Have we got the quality of officers in the local government offices? Finally, have we got the local business leadership we need to bring all that together, as in the 19th century with the Joe Chamberlains? I am afraid that a lot of the corporations have fled to London. You are not dealing with big companies with a lot of clout in the regions, but we will do our best.

EUC Report: Economic Governance

Lord Haskins Excerpts

Thursday 16th June 2011 Lords Chamber

[Lord Haskins]

My Lords, when I was reading the Van Rompuy report last night, on the very day when Greece appeared to be on the verge of spiralling out of control, I had a feeling that we had all been sleepwalking through a surreal nightmare in the past few years and were continuing to do so.

I have always liked the expression, “Closing the stable door after the horse has bolted”. It seems as if this is what we are trying to do. But a number of horses have escaped from this eurozone stable and have yet to be recaptured. There is no point in making the stable secure if there are no horses inside. That is why resolving the immediate crises in Greece and Ireland, particularly, is so critical. Better economic governance is an academic exercise until that has been achieved. However, assuming—and this is a big assumption—that by 2013 the horses are all back in their stables, there is the question of whether the proposals from the Van Rompuy taskforce are sufficient to make the doors more secure or whether we might have to consider knocking the eurozone stable down altogether and rebuilding it into something called “fiscal union”.

There is one very good reason why the present proposals may work. That is, to coin another equestrian metaphor, “Once bitten, twice shy”. I do not believe that in the short term the various guilty parties will repeat the errors that they made which created the crisis in the first place—though having experienced three other banking crises in my business career, I am quite sure that over time the banks will behave badly once again.

The idea of a European semester is a good one, in which all member states would present, discuss and co-ordinate their fiscal policies on a regular basis. Early signs of misbehaviour within national economies will be identified and, consequently, the markets will react before it is too late. But I have reservations about the proposals to strengthen sanctions against breaking the stability and growth pact. I am sure that when some unfortunate Commission official turns up at the Élysée Palace to collect the fine for some French misdemeanour, he or she will get a pretty dusty answer. The most effective sanctions should, of course, come from the markets, which failed lamentably to do so in the run-up to the present crisis. Incidentally, I was very surprised to hear President Obama in Westminster Hall the other day speak about the crisis in the past tense. If the semester process is not opaque, the markets will be much better equipped to respond appropriately. There will be no more dodgy Greek statistics, no more skulduggery in the Anglo Irish bank, no more raising Greek debt as being of the same quality as German debt, and no more sleight of hand between Goldman Sachs and the Greek Government—as well as a greater understanding of the link between private, corporate and sovereign debt.

The Commission rightly wants to see more pressure on countries that run large deficits to reduce them, but I remain sceptical as to whether it will be able to bring much pressure on countries that run large surpluses, although I agree that excessive surpluses are not desirable.

I have two other worries about how events may be moving. First, let me quote from Monday’s Financial Times and a piece by Larry Summers, who was until recently President Obama’s European guru. He said that the financial crisis was,

“caused by too much confidence, borrowing and lending, and spending”,

but that ironically and paradoxically, it will be,

“resolved only by increases in confidence, borrowing and lending, and spending”.

Therefore, this may not be the time to raise their levels of equity too quickly. It is better to wait for the upswing—if, and when, it comes.