UK: Competitiveness
Debate between Lord Sassoon and Lord Levene of Portsoken
The Commercial Secretary to the Treasury (Lord Sassoon)
My Lords, I rise with considerable trepidation to address this most august of Houses for the first time. First, I thank the officials of this House, who have been so helpful and supportive in easing me into your Lordships' House. Last week, I listened to the well merited tributes paid to the noble Lord, Lord Myners. I know that he will indeed be a very hard act to follow, and I am very grateful to him for his kind words this afternoon, as well as to my noble friend Lady Noakes, who so ably carried the Treasury portfolio on the opposition Front Bench. I was tempted to remain sitting and just leave the two of them to get on with it, but I will carry on.
I am also particularly grateful to the noble Lord, Lord Levene of Portsoken, because the topic of this debate resonates with so much in my background. My great-great-grandfather came to this country from Bombay in 1858 as an inward investor to build trading links with the cotton mills of Lancashire and to establish a financial base for our family in the City of London. So it is absolutely in my blood to want our financial sector to grow and prosper and that it should support the needs of the UK’s industrial base. Whether this makes me a Swiss/Indian/Iraqi banker I do not know, but I am not a pure Swiss banker.
In the first part of my career as a banker, I advised on the privatisation programmes of the UK and many other countries—privatisation programmes that were so central to the structural reforms and growing investment flows of those countries. When I moved to the Treasury in 2002 as a civil servant, I was responsible for competitiveness issues. I made it part of my business to travel regularly to the major Asian economies, the Gulf states and to other countries to listen to the concerns of inward investors, to explain UK competitiveness policy and to argue for open markets for our exporters of goods and services. I am tempted to talk about other aspects of my time in the Treasury, but I shall stick to the convention of making this a non-controversial speech and perhaps respond to the noble Lord, Lord Young of Norwood Green, on another occasion.
In my new role as the first Commercial Secretary to the Treasury, I combine in my responsibilities both financial services and wider business policy, so the UK’s competitiveness is again a central concern of mine. I am therefore delighted that we are discussing how this Government intend to maintain the UK's competitiveness. However, we are here not simply to maintain our competitiveness; we are here to improve it.
This means, first, recognising those drivers of competitiveness where the UK is a leader but where we must work ever harder to preserve our advantages. I am thinking of the UK’s flexible labour market, of our pool of highly skilled talent, of our competitive markets and of our openness to inward investment and investors. On the other hand, the UK suffers from some long-standing structural weaknesses. The challenge here will be to set a clear medium-term policy direction while cutting our cloth in line with the new economic realities. In this category I put our infrastructure and energy policies, dealing with lower skills and planning policy, and translating our science base into profitable enterprise.
In terms of immediate action, we need to look at two drivers of competitiveness that have been much talked about today: tax and regulation. High taxes damage business and hamper investment. We need lower, simpler and more predictable taxation. For this reason, the Budget will set out reforms on corporation tax. We will set out a road map for the creation of the most competitive corporate tax regime in the G20. We also need to keep a hawkish eye on regulation. We will introduce a one-in, one-out rule, and sunset clauses will be imposed both on regulations and regulators so that the need for each regulation is regularly reviewed.
I should turn to some of the specific points raised in this important debate, but I recognise that if I addressed only half of the questions put by the noble Lord, Lord Haskel, we would be here all night. Your Lordships will perhaps forgive me, therefore, if I pick out just a few major points; I shall write on some others. With a couple of weeks to go before the Budget, a number of macroeconomic points, made particularly by the noble Lord, Lord Myners, and tax points, made by, among others, my noble friends Lord Patten and Lord Northbrook, we shall just have to defer for now. However, I shall try to respond to some points, starting with the questions put by the noble Lord, Lord Levene of Portsoken, about helping exporters, which I regard as critical. As I have said, I did a certain amount of that in my previous role. I believe that we must continue to work with UKTI and ECGD to ensure that their support continues to be targeted where it can most help our UK exporters.
The noble Lord, Lord Haskel, asked a number of questions about choice, of which I shall pick up on one or two—one of my answers responds to a point made by the noble Lord, Lord Levene of Portsoken. When it comes to the state versus the private sector, we advocate neither a laissez-faire model nor state control of the market. Regulation must at all points be proportionate and targeted and must help the aims of businesses and households.
Having said that I cannot talk much this afternoon about taxation, I want to answer a question asked by my noble friend Lady Noakes about tax simplification because it is not just a matter of rates. The noble Lord, Lord Young of Norwood Green, referred to headline tax rates. They are very important, but we also need a tax system that is certain, flexible and proportionate, so I can confirm that the Government will set up an office of tax simplification to suggest reforms to the tax system.
I talked about the need for putting downward pressure on UK regulation. The question of European regulation was raised by a couple of noble Lords. Yesterday, I was talking to Professor Mario Monti, the former commissioner, who has recently written a key report on how to drive forward the single market. Although not everything in that report would be endorsed by the Government, there are some critically important things, including a welcome approach that he suggests for the European Commission to put its own house in order for better targeted and better enforced regulation.
There were one or two questions and comments about skills and questions about savings being made in expenditure, including a question asked by the noble Lord, Lord Haskel. To indicate the importance that the Government attach to skills and to dealing with cuts in expenditure in a sensible and responsible way, within the recently announced £6.2 billion savings in 2010-11, there was a plan to reinvest £200 million in improving Britain’s growth potential, £150 million in funding 50,000 new apprenticeships and £50 million in capital investment in FE colleges most in need.
The noble Baroness, Lady Coussins, drew our attention to the important question of languages. It is easy to be complacent about this. Every time I go to China, I am reminded that the Chinese leadership is increasingly speaking English, and I feel very inadequate. I take the noble Baroness’s general point to heart, and I will feed back to colleagues the specific point she raised.
Another important issue raised by a number of noble Lords was public sector cuts and public sector workers. I admire and respect the contribution of public sector workers. Of course there will be savings from lower-priority schemes within the programme of spending cuts that is coming, but key front-line services will be protected, and we respect the public sector workers who provide those and all other services.
Finally, the noble Baroness, Lady Valentine, talked about the need for a new dialogue between banks and industry. All I can say is that I have policy responsibility for both banks and industry in my new portfolio, which is probably an indication that our Chancellor exactly takes her points.
I am embarrassed that the necessity for brevity in my speech this afternoon makes my comments seem no doubt both superficial and rather trite. However, we have highlighted some key factors that affect the UK’s competitive position, and they will certainly very much help me as I work on this agenda in the months ahead.
Lord Levene of Portsoken
My Lords, I am sure that the Minister is about to sit down, but I hope that I may be permitted to congratulate him on his incisive maiden speech. He has spent much of his career advocating and critique-ing the work of the financial services industry in the City. As we heard from the noble Lord, Lord Young of Norwood Green, he has done so wearing many different hats and serving a number of different political masters with equal effectiveness and irrespective of their political affiliation. Now that he not only is a Member of your Lordships' House but bears the heavy responsibility of a Minister of the Crown, I am sure that he will fulfil those responsibilities with great distinction and that we can look forward in this House to his very perceptive insight into the future. I apologise for my interruption.
Lord Sassoon
I am very grateful to the noble Lord. That is the sort of interruption that I can take. I am particularly grateful to be thanked afterwards as well as in advance. I end simply by saying that the prize, if we get all this right and can restore the UK’s position as the most competitive economy, is very clear.