Economic Prosperity and Employment

Lord Newby Excerpts

Thursday 18th July 2013 Lords Chamber

[Lord Newby]

My Lords, I join other noble Lords in thanking the noble Lord, Lord Haskel, for introducing this debate, particularly because he gave me advance notice that he was to draw some of his remarks from the recently published book by the noble Lord, Lord Sainsbury, which meant that I spent a happy time reading that book while watching the cricket last weekend. I recommend it to all noble Lords.

One of the challenges for a Minister in my position after such a wide-ranging debate is to try to have a theme running through my concluding remarks. I would like to take as my theme—my text, if you like—two of the three defining beliefs of the noble Lord, Lord Sainsbury, in what he calls progressive capitalism. They are the importance of institutions, which he says need to be market-supporting rather than directed, the need for an active and competent state and the need for fairness. We have been talking very much about the first two today and I shall concentrate on those. I should like to take as my core text one sentence from the book of the noble Lord, Lord Sainsbury, which underpins a lot of what noble Lords have said. It states:

“I can think of few more challenging or socially valuable jobs than building up a high value-added business in today’s knowledge economy”.

If that is the text, I think that we are all progressive capitalists now.

The noble Lord, Lord Haskel, discussed these themes and made the point with which no one would disagree: we need to raise our game in a number of respects. I start with skills, and draw noble Lords’ attention to a press release issued today by Young Enterprise about the skills challenges that employers face, and they are quite interesting. The press release states:

“The five most important skills British employers think young people should have when entering the workforce are: communication and literacy … a positive attitude … self-management … people skills … and team working”.

As we discuss curricula and structures, at least four of those five areas of core skills are very rarely debated. I will not spend much time on them today, other than to say that we need to think about them more. I am very pleased to see that the noble Lord, Lord Stone, agrees.

In terms of raising the game, I agree with the requirement of the noble Lord, Lord Haskel, that Whitehall must raise its game. The noble Lord, Lord Mitchell, also talked of games—the Olympic Games. He commented on how much was achieved by the Government working well with high achievers. There are lessons to be taken from that, and the Government have taken one of them in appointing my noble friend Lord Deighton, who oversaw the Olympics, to bring some of the disciplines that he used there to government, not least in terms of the way in which we manage infrastructure. Everybody agrees that Governments in this country have been poor at delivering infrastructure projects to time and on budget. He is focusing his attention on getting government departments to produce infrastructure capacity plans, use private sector expertise and worry, a lot more than they have sometimes done under past Governments, about delivery.

I agree very much with another comment by the noble Lord, Lord Haskel, about the need to replace short-termism with long-termism. I commend to all noble Lords the LSE Growth Commission, which specifically looks at these issues. I am very pleased to say that members of the commission are in detailed discussions with Infrastructure UK to look at how some of their learnings can be brought to bear in the way that we do things.

The noble Lord, Lord Cope, and the noble Baroness, Lady Kramer, concentrated their remarks on SMEs, which they said were crucial. That is something on which we all agree.

The noble Lord, Lord Cope, talked about UKTI’s shift in focus towards SMEs. This is very welcome and is having a real impact. The other specific initiative taken by the UKTI—one of the most cost-effective initiatives that the Government have undertaken—is its appointment of trade ambassadors from across your Lordships’ House. These are having a material impact on developing trade links with some of the countries that we have traditionally ignored; my noble friend Lord Sharman in Morocco and my noble friend Lord Risby in Algeria, for example. We are finding that there is considerable scope for enhanced UK trade with parts of the world that we have tended to ignore.

The noble Lord, Lord Cope, talked about the challenges of the PAYE system. I agree with him. He may be right in saying that companies will find it simpler in the long run to adopt the latest technology. With regard to national insurance, we have introduced a £2,000 per year allowance for businesses. That will be particularly beneficial for SMEs. That is not a mechanical point but it is a hard cash point.

The noble Baroness, Lady Kramer, talked about funding, particularly the challenges in getting new forms of funding into SMEs. I very much agree with her. One of the leitmotifs of this debate has been people drawing on experience from elsewhere in Europe and North America. We can learn from these countries but it is quite difficult, as the noble Lord, Lord Sainsbury, says in his book, to replicate exactly their institutions. The American community development and investment funds work very well in the States, but it is not easy simply to transpose them here. On the question of new sources of funding for SMEs, one of the key things to have happened is that the PRA has in effect torn up the old methodology of the FSA in terms of getting new banks going. It was virtually impossible to start a new bank in the UK and we clearly need a raft of new banks, not least business banks. I believe that the PRA’s approach to this will prove to be extremely beneficial. In the mean time, the Government have introduced the Funding for Lending scheme, which should help small business funding and is in the process of establishing a business bank.

The noble Lord, Lord Giddens, thinks that we should be academic-led in the way that we look at these issues—I suppose that, as an academic, he would. I hope that we do not need to wait to have a raft of academic literature in front of us before we can start doing a lot of the things that he would like us to do. He talked, for example, of shale gas and whether we could take that opportunity quickly enough. As he will know, when the spending review was announced, we announced that we were taking a series of steps in the very near term to move forward on the development of shale gas here. These include developing technical planning guidance for shale gas exploration and looking at how we can put in place a generous community benefits scheme so that those communities that will be affected will be fairly recompensed. We are also consulting on tax incentives to encourage exploration. Hopefully, we are making a lot of quick progress in an important area that is bound to be controversial.

The noble Lord, Lord Monks, used a phrase that I have not heard for a considerable time, “the commanding heights”. It used to be extremely prevalent in political discussion. One of his main concerns was that too many UK companies have been bought by foreign companies and that foreign owners have different priorities from domestic ones. That is right, sometimes. However, we must have a more nuanced view. One of the most impressive success stories in British industry in recent years is that of Jaguar Land Rover. Does anyone think that there was a company in Britain that could have taken over Jaguar Land Rover and made the success off it that Tata did? I do not. It has been a phenomenal success. The Kay review, looking at short-termism and long-termism, will play a part in trying to redress the balance here, but I do not think that a great constraint on foreign ownership of British companies is a good idea.

The noble Lord spoke of the problem of top salaries and growing income inequality. That has been a very significant development in recent years, driven largely, but not exclusively, by the financial services sector. When I served on the top pay board, we looked at methods of beginning to redress this, not least by shareholder activism, and the Government are implementing a large proportion of those measures. Bank bonuses, without a bank bonus tax, have fallen very significantly—they are down 70% in the case of RBS and 40% in the case of Barclays.

The noble Baroness, Lady Valentine, raised a number of issues. I cannot deal with all of them. On airports, all I will say is that the Government taking quick, decisive action would be extremely easy if there were no such thing as public opinion. In this case, any Government would, quite rightly, take public opinion into account, as well as the narrower, though crucial, economic analysis that would underpin any decision.

The noble Baroness made a point about immigration and visas. As she knows, we are looking at methods of improving the situation in respect of visas, not least for China. We have introduced a VIP visa service for visitors from China. I could not claim that we have this right. It would be easier, in a narrow respect, if we were members of the Schengen agreement, but she knows as well as I do that that simply will not happen. We are looking at other ways of redressing the problem.

She pointed out that London is a centre for businesses that want to trade in Europe and that we need to engage in the EU as an equal partner. I agree with everything that she said on that subject. I also agree with the noble Baroness, Lady Donaghy, who pointed out the costs of adopting a Norwegian posture. To me, that is simply a risible option.

I thank the noble Lord, Lord Bates, for his speech, not least because he has saved me from saying a great deal of what I would otherwise have said about what has been happening.

The noble Lord, Lord Bhattacharyya, referred to protecting the science budget. The Government have done that. Any debate about science, particularly this one, should recognise the seminal role that the noble Lord, Lord Sainsbury, played as the first politician for a very long time to take science seriously. Without his persistence, we would not have had the expenditure on science in the previous Government that this Government have been able to build upon.

I share the support of the noble Lord, Lord Bhattacharyya, for HS2. While I agree with the noble Lord, Lord Mitchell, that the way we do business is changing, I have spent a great deal of time travelling to Birmingham over the past 20 years—once to do with developing Brindleyplace, as it now is, in its early stages and, secondly, working for a charity—and in both cases there is no way I could have done that without being there and engaging people face to face. While I am sure that a hologram of myself in front of Birmingham City Council or a head teacher would have been mightily impressive, I simply do not believe that at any point in the foreseeable future we will be able to do without transport.

We will need more of it. One of the things that has not been mentioned is that the population of the UK is set to increase significantly over the coming decades, which means that all forms of transport will need to be enhanced. That is why the Government have put so much effort into looking for longer-term infrastructure proposals, and why those proposals are included in, and form the basis of, the spending review last week.

I liked the point of the noble Lord, Lord Bhattacharyya, about evaluating the way in which we do things. I shall certainly raise that issue with my colleagues in BIS.

The noble Lord, Lord Bradshaw, referred to the value of engineers and said that there were too many apprentices who were not engineers. What we have got to do is to increase the number of engineering apprentices and not reduce the number of apprentices in a range of other industries. An apprentice in the catering industry is as important to me as an engineering apprentice. There are good examples of leading companies in the UK who have terrific records on apprentices—BAE and Rolls-Royce, for example. The university technology colleges will help to change, to a certain extent, the bias against a vocational approach to careers and I hope that they succeed.

I have referred to the points made by the noble Baroness, Lady Donaghy, but I would like to comment again on the shortfall in engineering graduates. One of the matters that the noble Lord, Lord Sainsbury, mentions—and with which I strongly agree although it is controversial—is that we need to better align the courses that we provide in further and higher education with labour market needs. This is a major challenge, not least because many young people are working very hard to obtain degrees in subjects that they think are quasi-vocational, such as law, and then find that the careers that they had envisaged for themselves simply are not available because of the excessive competition. I agree with the noble Baroness that tourism is a hugely important sector that is sadly overlooked.

The noble Lord, Lord Skidelsky, raised a raft of macroeconomic conjectures. The only part of Keynes that I would like to quote back to him is the importance of animal spirits. It seems to me that animal spirits are now operating in a different direction than they were a year ago. That is one of the key reasons why we are seeing growth, and will see faster growth in the future.

I agree with him completely about looking at the unemployed as a resource. However, I think his analysis is flawed because when you look at the level of unemployment in London—8.6%—who can say that there are not jobs in London for every Londoner who wants one? London has hundreds of thousands, if not millions, of people who come from the rest of the world to take up jobs that could be done by Londoners if they were properly trained. This is not a macroeconomic failure. There is a huge supply-side failure that we have completely failed to grapple with over the years, and we need to do better.

The noble Lord, Lord Hunt of Chesterton, referred to the Damascene conversion of Mr Willetts and asked me to comment on it. I am afraid that I cannot see within the mind even of my own colleagues, far less those of my coalition partners. I am sorry that he did not mention the fact that the Government have confirmed that they are investing in the new high-performance computer for the Met Office, which I am sure he will welcome.

The noble Lord, Lord Kirkwood, talked about long-term unemployment, which is a huge problem. The Work Programme is designed to address that. Although it is doing better it needs to be more flexible, and I hope that it will be.

The noble Baroness, Lady Turner, referred to investment being the key. Indeed it is. The Green Investment Bank has £3 billion of government funding, and so far, of the £633 million it has committed, for every government pound committed private investment has brought in three.

The noble Lord, Lord Stone, raised the question of self-awareness. I hope that he will start with Members of your Lordships’ House.

The noble Lord, Lord Shipley, raised a number of key points, some of which I have dealt with. On public procurement policy, the problem that he raised, which was new to me, seems to be a very real one. I shall take it up with my colleagues and write to him.

The noble Lord, Lord Davies, basically suggested that things were extraordinarily gloomy. The only thing I would say to him is that there was a 1.4% growth in real household disposable income last year; over 1.3 million more people are now working in the private sector; last year employment grew faster than in any G7 country; and the number of women employed is the highest it has ever been.

This has been a fascinating debate. We have discussed fundamental issues relating to the economy and society and I am extremely grateful to the noble Lord, Lord Haskel, for initiating it.