King’s Speech
Lord Liddle Excerpts(6 months, 1 week ago)
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Lord Liddle (Lab)
My Lords, never in the last 40 years has there existed a bigger gap between the grim realities of our present national economic situation and the fantasy world that the Government, from their pronouncements, appear to live in. The Prime Minister declares that inflation is down, the economy is growing and debt is set to fall. The Prime Minister may meet his target of halving inflation, but the fact is that it is stubbornly higher than in the United States, France and Germany; the cost of living for millions, now dependent on food banks, continues to rise; and interest rates are going to stay much higher for longer than the Government think. Economic growth is, at best, at a snail’s pace; the Bank of England thinks there is going to be no growth at all for the next two years. As for debt falling, that is based on projections of public spending and borrowing that the Institute for Fiscal Studies regards as completely unrealistic, given the demographic pressures on our public services and the clear breakdown that exists today—and those projections are going to get even worse if there are tax cuts in the forthcoming Budget.
The fact is that the cumulative hangover from the 2008 banking crisis, Brexit, Covid and Liz Truss has put into reverse the catch-up in living standards that this country enjoyed in the years of John Major’s and Tony Blair’s premierships. Last week, the ONS produced figures on total factor productivity, which is the main driver of living standards. Under Major and Blair, total factor productivity rose by no less than 27%, but since 2007 it has grown by 1.7%.
Future historians are going to regard these 13 years of government as wasted years of destructive populism, when successive Governments failed to build patiently and constructively on Britain’s great strengths: our universities, our scientific pre-eminence, our technological opportunities and our massive creative strengths. There has been no building on them. Business investment has flatlined since 2016—remember what happened then, by the way. Britain stagnates while we have a City of London in decline, a hospitality sector unable to recruit the European workers that it needs, retailers desertifying our town centres and a construction industry that is failing to build the homes that our families need. Just on housing, we will see 250,000 housing completions this year—not enough—and this is estimated to fall next year to 151,000. There were supposed to be 144,000 housing starts this year, but the figures for election year are 70,000. What a record of failure this is, and an incalculable cost to many families.
We need new policies for growth—a modern industrial policy—but this has to be applied with consistency and discipline. We need the comprehensive planning reform that Michael Gove had to abandon because of Conservative Back-Bench pressure. We need a government drive for more apprenticeships, which have gone down under the present Government. We need reformed further education colleges—a real vocational ladder of opportunity. And we need a much better trading deal with the European Union than the one that the noble Lord, Lord Frost, negotiated.
I have just rejoined our Front Bench as a transport spokesman, and I am grateful to the noble Baroness, Lady Smith, for this. It takes me back to the department where, 47 years ago, I first started as a special adviser. Transport is a vital part of the growth agenda, as the noble Lord, Lord Birt, explained. A principal reason for our poor economic performance in this country is the huge and growing gap between our city regions in the north and Midlands and in London and the south-east. It is far bigger than in other European countries, and the lack of transport investment plays a major role when it comes to connectivity with London and within and between the city regions. We must change course and do better than this, and I am confident that a Government led by Keir Starmer will.
UK Economy: Growth, Inflation and Productivity
Lord Liddle Excerpts(10 months, 3 weeks ago)
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Lord Liddle (Lab)
My Lords, I congratulate my noble friend Lord Eatwell on the brilliant clarity of his introduction to this debate. I also congratulate the noble Lord, Lord Sahota, who is a relatively new noble friend. I am not going to talk about Brexit, but I agree with virtually everything he said.
If we have a change of Government, which I am sure we will, it is clear that a Labour Government are going to inherit a situation of great economic difficulty, if not crisis. How do we deal with that? Robert Shrimsley had a very good column in the FT this morning about how to offer hope in this situation. One thing we have to do is to listen to a former Chancellor like the noble Lord, Lord Lamont. Inflation is a big problem, and a Labour Government will have to tackle it. I did not agree with everything he said, but on that fundamental point I think he is right. So how do we tackle inflation and do something to offer people hope as well?
I do not think there are any quick fixes. My life in politics started off with the Maudling boom, which led to the balance of payments difficulties that Harold Wilson had such difficulty grappling with. We then had the Barber boom, the second Wilson Government and the problems of very high inflation and all that. We had the Lawson boom at the end of the 1980s, which contributed to some of the difficulties that the noble Lord, Lord Lamont, had to grapple with. In a way, the Truss experiment was a repeat of that. The only thing is that in the intervening decades, the financial markets have got much quicker at reacting to problems.
It is very important that the Government do not think that they can break their own fiscal rules. They have to maintain the confidence of the financial markets if they are going to succeed. I am not an advocate of austerity—I think mistakes were made in the post-2010 period—but I am an advocate of stability. We have to prioritise stability.
If there is a parallel, it is when I first started working as an adviser for Tony Blair and Gordon Brown. It was in the 1992 Parliament, when the noble Lord, Lord Lamont, was Chancellor, and there was tremendous pressure from Back-Bench Labour MPs for us to support a great Keynesian expansion. Gordon stood out against that with absolute firmness and determination because he knew that that was not the way forward. I expect the same of Rachel Reeves, and I am very hopeful about that.
We have to somehow find a means of prioritising investment. In public services, the focus has to be on investing money now to save money in the medium to long term so that we reduce the pressure for further public spending increases. I can cite lots of examples where you could make a case: adult social care, the MacAlister report on children’s social care, education catch-up and making the NHS more community-focused and less hospital-focused. If we come up with those kinds of proposals, we have to have rigorous independent monitoring of them to ensure that their objectives are achieved and the targets met. We have to bring into government people with fresh ideas about how to run public services.
More importantly, we have to invest to grow. If we can find projects that produce a higher return than the borrowing we have to secure, it is logical to go ahead with them. However, at the same time, we have to find a way of meeting our debt rule in the medium to longer term. I support a modern industrial policy. We have to have policies that focus on competition; getting better access to the European single market; skills; R&D; and infrastructure. We also have to have a modern industrial policy that looks at sectors, such as the car industry, and sees what can be done to save them. Production has halved in the past three years; what are we going to do to save it? There seems to be a lack of urgency on the part of the present Government.
My final point is also on industrial policy. Again, it has to be rigorous. We have to have independent assessment of the investments we make; it cannot be done on the basis of ministerial favours and handouts. The next Labour Government should prioritise the policy of investing prudently in our future. That is how they will make a difference.
UK-EU Relationship in Financial Services (European Affairs Committee Report)
Lord Liddle Excerpts(1 year ago)
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Lord Liddle (Lab)
My Lords, I agree with the noble Viscount, Lord Trenchard on this. It has been a privilege to be a member of the European Affairs Committee and to work with him on many of the issues that we have addressed. Although we disagree on some things, I have always found his views to be of value and have learned something from them. That is important in any parliamentary system.
It has also been a very great privilege to work on this committee under the chairmanship of the noble Earl, Lord Kinnoull. I have the greatest regard for him. This is now one of the swansongs of his period as chair of the committee, but he has been a very good chair indeed. I have known the last four chairs of the European committee of this House very well. I met Lord Grenfell when I worked in government; Lord Roper was a very close personal friend; and I came to have enormous affection for the noble Lord, Lord Boswell. The noble Earl, Lord Kinnoull, however, has I think been the best of the lot. His ability to bring together the disparate views on that committee and to arrive at rational and sensible conclusions is something to be praised. Although the House gains from him becoming the Convenor of the Cross Benches, the cause of a sensible debate about Britain’s relationship with the European Union has suffered something of a loss.
As with all the outputs of this committee, this is a good report. It is a pity that we are debating it nine months after it was concluded, because a lot is changing in this world all the time. We have seen growing concern about the position of the City of London, with the feeling that it is losing out to New York and that Asian financial centres are rising up. The City is a huge national asset. I am not anti the City of London—I am a strong supporter of it and believe that it is one of the things that Britain is really good at. We have to try to build on its strengths.
It is a concern that people are worried about the problems facing the City, but we have also learned in the last year that there are grave risks in financial regulation. In the autumn, we had the confidence crisis in the bond markets, which was stimulated by the Truss Administration and required a huge rescue mission by the Bank of England to stabilise our pension funds. That is a matter a great concern to ordinary people, and we should be conscious of those risks.
Furthermore, we have also seen an outbreak of financial instability, with bank failures in the United States. We do not know what impact this might have on Europe in the future—who knows? As a social democrat, I have become a great believer in the workings of the market economy. Capitalism is the most dynamic way of getting economic growth, but I believe in the warnings of Keynes about the tendency to instability in capitalism and for there to be episodes of great banking collapse, which cause huge problems for ordinary people. With very little growth in our living standards, as we have seen since 2008—and we have not really recovered from that—it is very important that, as far as possible, we do not risk any further episode of financial crisis and uncertainty.
The paradox about the recent position of the concerns about the City of London is that it has all happened since Brexit but very few people think it has anything to do with Brexit. At least, that is what they claim. I have a certain question about that. The fact is that no one wants to challenge the reality of Brexit, because we know it is there. It is no good complaining about it—we have to do something about it. We have to make the existing arrangements work.
Although the evidence in our report is that Brexit has not caused the anticipated damage in terms of job losses in London, as far as we know, the unanswered question is: is business shifting elsewhere without us even realising it? When new business opportunities are created, are they created in the United Kingdom? This is a difficult thing to judge, because it is not as though there is a single continental financial centre which is taking over from London. There are signs of things going to Dublin, Paris or the Netherlands. To what extent Brexit is contributing to the relative decline of the City is, for me at any rate, an unanswered question.
A lot of people, such as my colleague on the committee, the noble Viscount, Lord Trenchard, think that Brexit provides huge opportunities for the financial sector. There have been calls for a new big bang and a decisive break with what is characterised as stifling European regulation. I have to say that I do not buy into this argument at all. My views are that, while it is sensible for Britain to steer its own course on financial regulation now that we are out of the EU—to be prepared to diverge, particularly as we are the leading financial sector player in Europe—I am not persuaded that the opportunities for divergence are massive or that they would bring great economic opportunities, without also creating great risks.
The reason for that is simple. Although Brexiteers think that these financial rules were imposed on us, they were not. We negotiated most of these rules at the Council of Ministers and it was the British position that was dominant in framing them. It would be surprising if there were to be lots of benefits from breaking with those rules, because they were framed with the interests of the City of London in mind. I know that from personal experience in government.
This Government have talked big about the opportunities of Brexit in financial reform and all that. What is actually proposed is reasonably modest; I read Jeremy Hunt’s speech on the Edinburgh reforms and it did not seem to be that great a shift. I am glad that the Government have abandoned the proposals that were canvassed at one stage for them to be able to override the judgment of regulators—although I do support the need for there to be parliamentary scrutiny of the actions of regulators.
One of the worries I have is this business about changing regulators’ objectives to include competitiveness. At a time when financial markets are extremely fragile, that could be a mistake. Our objective should be a strong City, perhaps with more of a focus on domestic growth—including how to get pension funds investing more in infrastructure and have more of a market for growing British companies, enabling them to access equity—so we do need reforms there, but we must put first and foremost the need to avoid financial crises such as another banking crisis. The national interest would best be served by a close relationship of dialogue and co-operation with the European Union. That is why I reiterate the calls made by the noble Earl, Lord Kinnoull, about the need to get on with signing the memorandum of understanding, which will lead to a structured relationship of co-operation with our European friends.
Financial Markets: Stability
Lord Liddle Excerpts(1 year, 6 months ago)
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Lord Liddle (Lab)
My Lords, I welcome the noble Baroness, Lady Penn, back to her rightful place on the Front Bench. The speeches so far, led by the noble Lord, Lord Sharkey, have been of the highest quality. I must confess that I have already learned a lot from listening to experts such as my noble friend Lord Kestenbaum. I will make some brief observations on how we handle the situation we are now in.
First, we have to recognise that our national sovereignty, where we live in the world, is limited. Kwasi Kwarteng and Liz Truss thought that Brexit had somehow liberated them from constraints on national sovereignty. It has not, and that fact must be recognised.
Secondly, financial stability is essential. I believe we will face a very tough Budget but, when we make these tough decisions, it would be a great mistake to cut the programmes which are most likely in the long term to improve our rate of growth and therefore our ability to finance public services and a generous welfare state. If a Government present well-worked-out plans for investment, which should be audited by independent bodies, and if we invest wisely, we can borrow wisely to improve our position in future. I hope that will still be the case, because we need to invest in not only capital programmes but training. If we are to solve the problems of the health service, we need to invest in the workforce, particularly the social care workforce, because that is a crucial condition of getting the escalating costs of running the NHS under some kind of control. We need to invest in order to save; that is essential.
Thirdly, in tough times we should not neglect problems of poverty and inequality, or the essential role played by public services. We are getting to the familiar point that we want a Nordic welfare state with US levels of tax. That cannot be sustained with our demographic pressures, particularly on the health system. How do we get out of this? I do not believe we can solve the problem simply by imposing fantastically high taxes on the top 2% or 3%. We can do a bit more of that, but we cannot solve the fundamental problem of the welfare state by doing it. We need tax reform.
The noble Lord, Lord Young, illustrated in his excellent speech how prudent tax reforms could improve the housing situation and bring in more money to the Exchequer. The same is true of pensions. Why should better-off people get 40% tax relief when they invest in a pension, as I did, when people on average earnings get only 20%? We should have a standard incentive for investment in pensions. That would bring in a lot of revenue to the Exchequer, and it would be fair.
There are ways forward. Rachel Reeves has begun to address tax reform in business rates, but we must go further in other areas. I hope we can find a way out of this crisis that allows us to invest in growth and also maintain a sense of social justice.
The Parliamentary Secretary, HM Treasury (Baroness Penn) (Con)
My Lords, I join all noble Lords in thanking the noble Lord, Lord Sharkey, for the opportunity to debate this important topic.
The central responsibility of any Government is to protect national security, and an essential pillar of that security is economic stability. That economic security and stability has real and profound impacts on people’s lives, as we have heard in today’s debate, from pensions and savings to mortgage costs and the broader cost of living.
The Motion that we are debating today speaks of the importance of stability in financial markets, and I agree with all noble Lords on the desirability of this. However, it is also important to recognise that many of those factors influencing stability can be beyond our control. There are global forces that can create volatility in the financial markets, as we saw in the past with the global financial crisis and more recently with the shocks of the global pandemic and the energy shock in the aftermath of Russia’s invasion of Ukraine. The role of government and the regulators is to ensure that we have a system that is resilient to those shocks. Since the financial crisis in 2008, that is what we have sought to build.
We created a new Financial Policy Committee to look at risks across our financial system, backed by the powers to tackle them. On the question the noble Lord, Lord Tunnicliffe, asked about whether the Treasury will take a view on financial stability risks in addition to the Financial Policy Committee, the Government remain committed to the Bank of England’s independence, so it is right that the FPC can independently assess the level of resilience required to promote UK financial stability.
We have also developed the UK resolution regime, which provides the financial authorities with powers to manage the failure of financial institutions in a way that protects depositors and maintains financial stability, while limiting the risks to public funds. We have implemented regulations to strengthen the resilience of the banking system, with the major UK banks now reporting core capital ratios three times higher than before the global financial crisis. There has also been a concerted international effort to strengthen the financial system and ensure that the authorities have the necessary tools in place to protect financial stability.
Recognising in particular the significance of the non-bank sector, over the last decade the Government and UK regulators have worked closely with our international partners through the Financial Stability Board to identify vulnerabilities and enhance the sector’s resilience. It is important to pursue this work through international fora due to the global nature of the financial system, and the Government, the Bank of England and UK regulators play an active role in this work. As a result, the system is much more resilient today than it was in 2008.
However, alongside the UK’s independent financial regulators, we continue to closely monitor any developments that could be relevant to UK financial stability. The Treasury, the Bank of England and the Financial Conduct Authority have well-established and mature systems for monitoring the health of our financial services firms and responding when incidents occur. We are also committed to maintaining and enhancing the UK’s position as a global financial services hub.
The noble Baroness, Lady Bennett, questioned what the financial sector delivers for the United Kingdom. She will probably be familiar with the statistics that financial and related professional services employ more than 2.3 million people across the UK, creating £1 in every £10 of the UK’s economic output and contributing nearly £100 billion in taxes to help fund vital public services. We plan to continue to strengthen that sector through the Financial Services and Markets Bill, which is currently in Committee in the House of Commons. We are all—
Lord Liddle (Lab)
The Minister has stressed, rightly, the importance to the prosperity of the City of London of financial regulation, and of a stable financial regulatory regime, which I certainly support. However, the Government are talking about taking powers to overrule regulators. Can the Minister confirm whether or not these powers will be included in the Bill when it gets to this House? Can she tell us how she thinks that will contribute to the independence and stability of the regime, which is so fundamental, as she admits?
Baroness Penn (Con)
I cannot confirm that, but I am sure that when that Bill comes to this House, we will spend sufficient time scrutinising its provisions and ensuring that they deliver the outcome that we all want—a stronger financial services sector—which is important not just for the City of London but for people’s everyday lives in the country.
Finance Bill
Lord Liddle Excerpts(7 years, 8 months ago)
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Lord Liddle (Lab)
As several noble Lords have said, this Finance Bill belongs to a previous era—not just the era of George Osborne’s chancellorship but also a past era in a more historical sense, one that began with our membership of the Common Market in the 1970s, was shaped largely by the Thatcher Government and ended with the vote for Brexit in June this year. With our exit from the European Union, Britain has to devise a new political economy from the European one that has shaped our destiny since the 1970s. I will talk about this and develop four or five brief themes. I am afraid I am not going to talk much about my noble friend Lord Hollick’s excellent report.
The first theme is the one referred to by my noble friend Lord Darling. It really is time to end the phoney war about where we are on the consequences of Brexit and what the Government’s policy now is. The Government have got to make some hard choices. They have to decide how much priority they give to the single market. They have to say whether they are prepared to contribute financially in order to get access to European markets and to common policies that are in our interests, such as those for research in our universities. They have to be clear whether they are prepared to accept being members of a market where the regulations are not going to be determined in Britain, because that will be the position. I hope that Mrs May will try to resolve some of these uncertainties in her speech at the Conservative Party conference. In the national interest, I hope that she makes clear that the overriding goal of the Brexit negotiations has to be to retain the maximum economic openness that our economy enjoys as a result of its membership of the European single market.
However, we have to do more than that. We have to try to explain better to people how the benefits of that openness can be shared in a fair and transparent way. I do not know whether something could be made of this in policy terms, but I have just been thinking of the many young people who come to work in Britain from the continent. It is clearly evident, as many economic studies have shown, that they make a very positive contribution to the Exchequer. Could the Government find a way of identifying and hypothecating that tax contribution in order to establish a migration impact fund which dealt with some of the social consequences and tensions that have resulted from free movement?
My second theme is that the Chancellor should launch, in his Autumn Statement, an ambitious public investment programme to address the loss of economic potential as a result of Brexit and the tail-off in economic growth as a result of falling private investment. This should be targeted at new sources of growth and designed to correct the regional imbalances in the economy. We should set up a kind of office of public investment which verifies projects on the basis of their value for money. That would reassure people that borrowing money for these purposes was not wasteful spending, but would actually increase economic growth and, as a result, reduce the burden of our debt in the long term. We have to do something about public investment. In the last days of the Labour Government, under my noble friend Lord Darling, it was running at 3% of GDP. It is now well below 2%. It has got to go up: that has to be done.
My third theme is that this new investment programme needs to be part of a coherent, long-term economic plan. Yes, I use the word “plan”, which the Conservatives used so much in the general election campaign. We have to have a plan and a new industrial strategy, which the new Prime Minister has said she is committed to by changing the name of the BIS department. As I say, we have to have a plan and an industrial strategy. I do not think that that is too difficult to do. In fact, it is a logical fit with Brexit, because the Government have already committed themselves to examine the trading position of the British economy sector by sector. It is a relatively short step from that analysis for the Government to work with business sector by sector to identify strengths and weaknesses and threats and opportunities, and examine what positive help a Government can give to industry’s success. Therefore, I welcome the return of an industrial strategy and hope that it will be taken very seriously. I also hope that it will be backed up by resources and that the EU resources currently available for this purpose through the structural funds will not be abandoned but will actually be amplified by the new Government.
Fourthly, the Brexit vote was clearly a cry of pain from the left-behind in our society and a rejection of the elites. Business has to listen very carefully to that message. We have to find ways of re-legitimising the market economy and capitalism. In the post-war era, we thought that the worst excesses of capitalism had been tamed. Today, they have returned. It is terrible that the models of business that people think about in Britain are people such as Sir Philip Green at BHS and Mike Ashley of Sports Direct. What an example they set. Mrs May is very right to stress the need for better corporate governance. I certainly look forward to those proposals and hope that they have real substance.
We must also think about labour market flexibility. I have always been strongly in favour of labour market flexibility, but has it gone too far in Britain? The noble Lord, Lord O’Neill, mentioned the Government’s new skills funding approach. Surely, this is an opportunity to try to raise standards in areas such as hospitality, catering and social care, where one would hope that, by training people better and paying them higher wages, one could deal with some of the abuses—as I see it—of labour market flexibility, and the dependence of some employers and business models on the ready availability of low-skilled migrant labour.
My final point concerns our policy for sterling. I am not sure what I think about this, but we need a national debate on it. One of the clear consequences of Brexit has been a fairly sizeable devaluation. This, of course, will represent in time a significant squeeze on real wages and living standards. Do the Government think that a fall in sterling is an inevitable consequence of Brexit? Do the authorities see a lower rate for sterling as a desirable thing in these circumstances? Should it go further? Should the exchange rate return in some way as an objective of government and Bank of England policy? The governor of the Bank has pointed out that, with our massive balance of payments deficit, we are dependent on the “kindness of strangers”, as he put it. However, one could ask legitimate questions about some of these foreign inflows. Of course, we welcome—everybody should do so—overseas direct investment. But are the flows that are coming in to finance M&A and property investment, particularly in London, desirable—and could we do something to throw grit in the wheels of those processes in order to make them less desirable? This is something that we need to think about.
There are many challenges with Brexit. As the noble Lord, Lord Kerr, said, the economy is entering a long period of grave uncertainty, and it is only through very bold government action that we can address this. I very much hope that the Government will prove up to the challenge.
Queen’s Speech
Lord Liddle Excerpts(7 years, 12 months ago)
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Lord Giddens (Lab)
My Lords, let me join the queue to congratulate the right reverend Prelate the Bishop of Newcastle on her terrific maiden speech and, I gather, on her athletic prowess. She is a very welcome addition to your Lordships’ House.
A huge intellectual and policy-making revolution is beginning today across the world as the limitations of the efficient market hypothesis become evident. We have reached the limits of endless privatisation. The structural strains that we see everywhere, the rise of populist parties, the sharp relative decline of the BRICs, about which the Minister knows a lot, and the accumulation of huge levels of debt in the advanced economies will demand profound revisions in our thinking and policy-making both globally and locally. I see very little sign that the Government have recognised the depth of this imminent intellectual and policy-making shift.
I shall speak of only one area where a great deal of innovative thinking is happening, which is the debate about reindustrialisation in the West. Rebalancing the economy, the march of the makers and the fabled northern powerhouse, which have been mentioned, are the Government’s way of talking about this debate, yet very little flesh has been put on those bare bones. There is a reason for that, which is that the Government find it hard to come to terms with the need for active industrial policy.
The wiping out of large swathes of British manufacturing industry has been a disaster for many communities in the north and in parts of Scotland and Wales. The contrast with Germany is very telling. Only two days ago—sorry, two decades ago—manufacturing in Britain accounted for 22% of GDP—[Interruption.] Mr Mandelson calling.
Lord Giddens
Only two decades ago, manufacturing in Britain accounted for 22% of GDP compared to 23% in Germany. Today, in this country it has fallen to 9%, whereas in Germany the percentage is almost unchanged. It is a huge contrast. As we know, Germany has a substantial trade surplus, whatever you make of the UK trade deficit.
Reindustrialisation should be understood as an avant-garde process, not a reversion to protectionism. As I see it, three components are involved, although each interrelates with the other in a dynamic way—or ideally should do so. I shall put what I have to say as three questions to the Minister.
The first picks up on the speech of my noble friend Lord Morris. What lessons will the Government seek to learn from the travails of the British steel industry, specifically those involving Tata Steel, an episode whose outcome is still far from clear? Will the Government look simply to sell on whatever assets can be disposed of or consider developing a more rounded policy in which social costs are balanced against the economic ones and where longer-term strategies are involved?
Secondly, I think that I was one of the first people in your Lordships’ House to talk about the reshoring debate in the United States several years ago: the idea of bringing back offshored industries to the US. That movement has had considerable success. Firms have been attracted back to their country of origin by a mixture of positive inducements and the fact that rising labour costs, especially in China, have reduced the benefits of offshoring. Has Reshore UK, set up by the Government, achieved anything of note? I have found it hard to find it, if so, and it seems pretty radically underfunded compared to its American counterparts.
Thirdly, and most importantly, some of the most significant advances across the world are happening in what has come to be called advanced manufacturing, driven in large part by the digitalising of production and distribution. Robotics, 3D printing and supercomputing power are the main forces involved. The promotion of advanced manufacturing has become a prime concern of the federal Government in the United States. A recent report of the National Science and Technology Council argued that the knock-on effects are absolutely huge. For each such manufacturing job created, 16 other jobs are established.
The authors of a new book on these issues, The Smartest Places on Earth, spent two years travelling through the United States and across Europe studying areas of industrial renaissance. They came up with remarkable results and speak of “turning globalisation on its head” through the emergence of new hotspots of innovation and job generation, many of them in rustbelt areas ravaged by outsourcing. Costs are being reduced not by cheap labour but by what they call smart production. Manufacture is being reinvented in quite a different guise from the past. The “rustbelt”, as they put it, has become a “brainbelt”.
No one knows at this point how transformative advanced manufacturing will turn out to be in terms of the overall economy. However, a key feature is that the traditional divisions embodied in orthodox economic statistics, between manufacturing and service industries, are being broken down. The puzzle about why productivity has not improved even as the pace of innovation grows might be elucidated here, since perhaps the established measures are becoming obsolete.
The UK does not brook large in the book to which I have referred, although other parts of Europe do, interestingly. The authors question the idea that EU countries are becoming industrial museums; they see them as the centres of an enormous amount of information. What strategies are the Government deploying to ensure that the UK is not once again left behind?
Entrepreneurs’ Relief
Lord Liddle Excerpts(9 years, 2 months ago)
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Lord Newby
My Lords, the Treasury is keeping records and noting the number of businesses. There are a record number of private sector businesses in the country at the moment, with an increase of 760,000 compared to 2010. There is of course a whole raft of measures, from having a long-term economic plan that has kept interest rates low to much more specific measures to support small business, which is helping this phenomenal growth.
Lord Liddle (Lab)
My Lords, can the Minister, in praising the Government’s economic record, explain to the House why if entrepreneurship has flourished so much in this country we have one of the largest trade deficits in the world, at 6% of GDP?
Lord Newby
My Lords, we have had a trade deficit for a very considerable time. One of the reasons we have such a large deficit now is that the amount of net income from UK investments abroad has fallen dramatically, not least because a lot of foreign companies have been investing here. However, the Government have set an ambitious target for increasing exports. By common consent, UKTI is far more focused in what it is doing than it has ever been. We are seeing an increasing number of British companies exporting to an increasing number of countries.
National Infrastructure
Lord Liddle Excerpts(9 years, 3 months ago)
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Lord Liddle (Lab)
My Lords, I declare an interest as a member of Cumbria County Council. My purpose in speaking in this debate is to bring a cold wind of Cumbrian reality to all this chatter about infrastructure. When it comes to infrastructure, London gets most of what it wants—as, probably, as a global city, it should—but the rest of England has to be content with crumbs. These crumbs are from Chancellor Osborne’s table, which his spin doctors try to confect into some imaginary tray of appetising cream cakes. They look tempting and delicious when they are offered but, in the modern world on public health grounds, you are not allowed to get near them.
In Cumbria, we were greatly heartened by the Chancellor’s talk of a northern powerhouse and by the idea of High Speed 3 connecting our great northern cities. But what is the reality? A couple of weeks ago, the Transport Secretary, Patrick McLoughlin, who is a good man, came to Carlisle. It was one of those visits to marginal constituencies that Ministers have to make at this time in the political cycle. Doubtless, he had asked his department to identify what suitable goodies he could announce or perhaps reannounce for Cumbria. However, the cupboard proved very bare. There would be no road improvements to link the centre of Britain’s nuclear industry on the west coast to the M6. Nor would there be improvements in rail connectivity or an improvement in the east-west line from Carlisle to Newcastle. That is a journey of 60 miles, which in the modern world takes 100 minutes but should take 45 minutes. Instead the Transport Secretary came up with the announcement of a single additional early morning train service to take workers from Carlisle to the nuclear site at Sellafield. In my youth, the railway would have described that as a workmen’s special.
This beneficial improvement came out of the recent refranchising of the Northern and TransPennine rail services. What Mr McLoughlin failed to highlight in this announcement was that, as a result of this refranchising, Barrow-in-Furness has lost its direct rail service to Manchester Airport, which used to run every two hours. That service was a crucial lifeline for this isolated town. Why is Barrow losing this service? It is because the TransPeninne units have to be transferred south to tackle overcrowding on the Chiltern line. In other words, there is not so much a northern powerhouse as a southern smash and grab. As a consequence of this shortage of modern rolling stock, in order to provide services in Cumbria, diesels from the freight operator DRS will have to be used to haul old-fashioned coaches that have been retained for steam train excursions.
That is an extraordinary failure and it shows a deeper failure. We in Cumbria were supposed to get the third nuclear power station to be built, but there is no planning for that power station. It is in the national infrastructure plan, but there is no planning whatever. Planning is lacking. That is why I fervently hope that a new Government will implement the proposals made by Sir John Armitt in his excellent paper.
Defence: Budget
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Lord Newby
My Lords, the Government are committed to that 2% for the remainder of this Parliament and into the next Parliament and to keeping the defence equipment budget growing. Any commitments in the medium term beyond that are commitments that the parties will be making in their manifestos.
The Lord Privy Seal (Baroness Stowell of Beeston) (Con)
My Lords, I am sorry for taking up time in the Chamber, but it is actually the turn of the noble Lord opposite.
Lord Liddle
My Lords, has the Minister read the analysis in Monday’s Financial Times which shows that, on the basis of what at least the Conservatives are proposing, the implications in the next Parliament for non-protected departments will be a budget cut of one-third? What might be the impact of this analysis on the defence budget? Does he believe that the Prime Minister’s assurances to the defence community carry any credibility whatever?
Lord Newby
My Lords, I did read the Financial Times article. It is fair to say that all the parties going into the next election will have different views about how to bear down on the deficit. The Conservatives have one view and the Liberal Democrats have a different view as to where the balance between expenditure cuts and tax rises should fall. I have no idea what the Labour view is.
Young People: Alternatives to University
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Lord Liddle (Lab)
My Lords, I thank the noble Lord, Lord Monks, and congratulate him on introducing this debate. This is one of the central challenges facing British society, both economically and socially. Unless we can do something about vocational education we will face an increasing problem of NEETs, of which my noble friend Lady Nye has spoken. Opportunities for young people without qualifications are in secular decline. Unemployment rates for people without skills are rising and this is a huge social challenge. At the same time, we have the economic challenge of the huge skills shortages that we know exist in STEM subjects in technician-level jobs. That is a major barrier to us becoming a more successful industrial country. There is now a bit of an opportunity to reindustrialise ourselves.
There have been many expert speeches today, and I am not an expert in this field, but I have thought about it as someone involved in politics for a very long time. What has always struck me is how we have known about this major problem in our society—certainly for decades, though some would argue for over a century—yet no Government have managed to crack it, despite effort, lots of activity and lots of public money. Something about our politics explains this failure. It is partly a lack of ability to build consensus about how we do things—consensus that can last and survive a change of Government.
I remember that when we came to power in 1997 we had two very big promises on vocational education, both of which are worth reminding ourselves of because they show how Governments can fail as well as succeed. One was that we would establish a university of industry, which sounded wonderful—a kind of Open University for skills. The other promise was to establish an individual learning account which, again, sounded an absolutely wonderful idea where employers, individuals and the taxpayer could contribute to a pot of money with which people could decide for themselves how to improve their qualifications. Both of those great ideas bit the dust. Indeed, the ILA was a bit of a disaster and had to be withdrawn at very short notice.
A bit of my bedtime reading at the moment is the excellent book by Tony King and Ivor Crewe, The Blunders of our Governments. This is an area in which there have been blunders by Governments, with too many interventions from the top down by Ministers who try to change things. In future, we have to learn the lessons of that and try to think longer term on how we tackle these problems.
We should look to one of the great successes of Britain, which is our university system. Why are the universities successful? They are autonomous institutions, have a mixed economy of funding and have the ability to decide their own strategy. In vocational education we do not have that number of strong enough institutions and we must put the effort into remedying that systemic failure. What sorts of things would I look at? I would think about how we expand the excellent idea of university technical colleges. I do not think that they will really expand unless we empower our cities to do more in this area. Cities have a crucial role in deciding what skills are needed to be developed in their area.
Secondly, we have our colleges, as the right reverend Prelate said. At present, too many of them are chasing funding streams rather than thinking about how, as institutions, they play a role in the development of their local economy. I think that somehow we have to liberate the colleges. We need to give professional bodies, such as the engineering bodies, a much bigger role in deciding on technical qualifications which should become the ticket for the job. I believe that we need to correct the overflexibility of our labour market. I have come to the view that we will not make progress in this area unless we incentivise employer co-operation sector by sector, so that money for training is provided in return for controlled entry standards and decent pay for people who are doing apprenticeships. The Government have actively to try to bring employers together and perhaps recreate the kind of partnerships that used to exist in some areas with the industrial training boards. It is the institutions that need to be developed if we are to make this sector as successful as our universities have been.