Economy: Growth

Lord Hollick Excerpts

Thursday 6th December 2012 Lords Chamber

[Lord Hollick]

My Lords, on page 17 of his excellent report, the noble Lord, Lord Heseltine, sets out in graphic detail the persistently poor level of UK productivity compared with our main competitors. His response is, characteristically, to lead from the front. He has demonstrated that one energetic and open-minded person who believes that the state has a key role to play in promoting economic growth can, in six months, come up with a telling analysis of our growth crisis—and it is a crisis—and recommend 89 generally sensible and practical proposals to address that crisis, a task that has eluded a platoon of Business Ministers for two and a half years.

Investment in infrastructure, plant, equipment and skills are, as the noble Lord, Lord Heseltine, points out, essential to improving our productivity. Yesterday the Chancellor made welcome moves in that direction, but far more ambitious measures are required in order to meet the estimated £350 billion infrastructure investment needed over the next 30 years, according to McKinsey. Such measures include an infrastructure bank which can benefit from record low long-term borrowing rates. Road pricing, long advocated across this House, would spur large-scale investment in our aging motorway networks. These measures as well as the proposal of the noble Lord, Lord Heseltine, to help public and private pension funds, insurers and banks to finance infrastructure instead of buying gilts must all be energetically pursued.

The noble Lord is surprisingly reticent about additional measures to stimulate demand, which is the key to growth and investment. The failed efforts to promote lending will continue to fail unless and until businesses can see increased demand to justify taking on more debt or, preferably, raising more equity. There are fiscally neutral ways of stimulating demand. Is using the proceeds of the 4G auction to pay down debt the best strategic use of this windfall during the worst economic crisis of modern times? Why are the Government still taxing houses on the basis of the 1991 valuation when the proceeds arising from a modest revaluation at the top level would finance the reduction of VAT on home refurbishment or a further £200 on the income tax threshold?

The noble Lord’s call for empowered localism to replace the inefficient and bureaucratic Whitehall is welcome and was warmly embraced by the Chancellor. The history of local versus regional versus central delivery is littered with disappointment and failure, all too often driven by political fashion rather than by proven performance. Recommendation 7 hits the nail on the head when it calls for LEP boards to have,

“the necessary skills and expertise to deliver their expanded functions”.

The recent excoriating report by the Public Accounts Committee into the competence of the Regional Growth Fund provides a stark and timely warning of what can go awry.

The noble Lord rightly highlights stability as an essential precondition to economic transformation and goes on to cite our relationship with Europe as a prime example of the need for stability. Now that the noble Lord enjoys the warm embrace of both the Prime Minister and the Chancellor, we can be more confident that a rational voice in support of developing a sustainable relationship with the European Union, our major economic and trade partner, will be heard and, hopefully, heeded.