Economy: Growth

Lord Lea of Crondall Excerpts

Thursday 6th December 2012 Lords Chamber

[Lord Lea of Crondall]

My Lords, we are living through a period of the worst economic situation since well before the recession of the 1930s, if one looks at the loss of potential output. We need a massive kick-start. I am 100% in favour of what the noble Lord has done, particularly as he challenges us all in our cultural assumptions. Where will this massive kick-start come from?

We have a catastrophic imbalance and there are so many ways of looking at that imbalance: north-south divide, the City of London versus the sticks, and even the plebs versus the 0.1%. Indeed, someone has described it as a Wimbledon economy. As long as the multinationals have their headquarters here and their wives and husbands—they are gender neutral these days—can be within spitting distance of Wimbledon, that is fine. Transfer pricing and taxation all comes within that package. So the political radicalism that one wishes to bring to this is a matter of taste.

I start from the position that we need a national investment bank. The City of London has some of the best brains in the country. According to the Office for National Statistics, if value-added equals wages and salaries, then the City of London must be hugely productive and have high value-added because it pays itself a lot. There is something wrong with the measure of the economy in that sense of value added. They are not laying golden eggs; they are laying hand grenades and that is not value added in anyone’s book.

My thought is that the City of London ought to provide the best brains, if that is what they are, to make the national investment bank transfer a lot of our savings. Every time you open a newspaper, they are trying to pump £50 billion into long-term loans which do not get spent, but that should make the kick-start. They should work for national or regional investment banks. After all they cannot all wind up as the Archbishop of Canterbury. The heart of the classic Keynesian paradox is that we are spending too little and yet are told every day that we are spending too much. The noble Lord, Lord Skidelsky, rightly continues to remind us of that.

My final point is on Europe. I will set another challenge to the noble Lord, Lord Heseltine. I would like him to look at how much truth there may be in the notion that Europe is getting in the way of industrial policy. I think that there are a lot of myths about this. There are many things that you can do within the rules of the European Community on industrial interventionism, finance and so on. We ought to nail once and for all the idea that we cannot co-operate in Europe and also have an active industrial policy, including a national investment bank. Everyone else is doing it; why cannot we? I echo what my noble friend Lord Mandelson said in that regard.