Economy: Growth

Lord Sheikh Excerpts

Tuesday 29th January 2013 Lords Chamber

[Lord Sheikh]

My Lords, I am very grateful to have the chance once again to contribute to a debate on what has been and continues to be our Government's number one priority: promoting growth to reduce our national debt and restoring stability to our economy. It is important that we continue to have such discussions in order to continually monitor progress and exchange ideas about how we can assist our recovery further. I congratulate my noble friend Lord Deighton on his excellent speech at the outset of this debate. I also congratulate him on his ministerial appointment.

Concerns were raised last week following Friday's announcement that our economy contracted in the last quarter, so this debate is most timely. The Chancellor was clear in the Autumn Statement that, despite the inevitable blips, our economy is ultimately improving. The deficit has been reduced by a quarter since the Government came to power in 2010, significantly lightening the further pressure on our debt each year. Employment is of course a key driver of growth and recovery and we have seen more than 1 million new jobs created in the private sector in the same period. Unemployment is at its lowest level for 18 months and the number of people in work has reached another record high. Demand for manufacturing orders is also expected to rise in the next quarter. Taking such indicators into account, it is fair to say that we are still on a stable path to long-term recovery.

We also received extremely positive news just yesterday that the FTSE 100 index rose to above 6,300 points for the first time since May 2008. It has now gained nearly 7% since the beginning of the year. The fact that the value of our top 100 companies is at its highest for nearly five years can only be seen as a bold endorsement of the direction in which the City of London and our economy as a whole is heading. Such a rise will only increase investor confidence further and continue to build its own momentum—which in turn allows business to expand, provides further employment opportunities and increases dividends, ultimately giving people more money in their pockets and a greater sense of financial stability.

I refer to an encouraging report recently produced by UKTI which found that 46% of major financial service companies in the UK are actually overseas-owned. In particular, it emphasised how the United States uses the UK as a springboard from which to access the rest of Europe and that we are particularly well placed to benefit from the ongoing boom in the world’s emerging markets. One of the Government's key targets on the economy has been to ensure that Britain is seen as open for business, and this report evidences just how accessible we have made ourselves to overseas investment.

This does of course remind us of the wider global context within which we are operating and to which our own economy is closely linked. In such a globalised economy, we cannot be fully confident of future prosperity unless our neighbours, allies and trading partners are also in positions of reasonable financial health. Just last week, the IMF downgraded its global growth forecast for the next two years, mostly due to the continuing crisis in the eurozone, which is now expected to remain in recession throughout 2013.

We will continue to be vulnerable for some time and must not be knocked off our disciplined course of austerity. The more severe the illness, the more cautious the treatment will be and the longer it will take to recover. Now more than ever it is important that we have strong leadership. Our Prime Minister was clear last week in Davos that trade, tax and transparency are our economic priorities heading forward. As a businessman, I fully support this approach.

The Government have already been taking numerous measures to stimulate growth: local enterprise partnerships and enterprise zones have been established; our corporation tax is now the lowest in the G7; and just earlier this month the expansion of the start-up loans scheme was announced. In particular, I commend the Government's continued commitment to seeing through the plans for the High Speed 2 railway line. I appreciate that there is some controversy surrounding these plans, but the wider long-term benefits to the United Kingdom simply cannot be underestimated. As the Prime Minister said, this project is an engine for growth in itself, ultimately creating tens of thousands of jobs. Reducing journey times between some of our major cities would be a significant step in addressing the north-south divide that currently exists in our economy and would regenerate regions that are sometimes overlooked.

I think that we would all agree that overseas trade is one of the most important elements to ensuring healthy, consistent growth. The Government understand this—one of their four aims to achieve growth is to encourage investment and exports. This is where we must create and maximise any and all opportunities.

I am concerned by the long-term decline in our share of global exports. We will not reach the great heights that we once did if we continue to buy so much more than we sell. That is why I am so pleased that the Government have developed a renewed focus in this area, with UK Trade and Investment actively encouraging small and medium-sized businesses to increase the exporting of their goods and services, particularly to emerging markets. I also welcome the wider commitment to double British exports to £1 trillion by the end of this decade.

I have previously mentioned in your Lordships’ House that over the past two and a half years I have travelled to a number of countries abroad and promoted trade between the United Kingdom and overseas countries. There are of course growing opportunities in countries such as Brazil, Russia, India and China. There are also prospects to do more business in the Middle East, central Asia and several African countries. I know some of these countries very well.

We should maintain and in fact strengthen our trade links with the USA and with other European countries. I am a great believer in the Commonwealth. We should build stronger trade links with other Commonwealth countries. I totally endorse what my noble friend Lord Howell said with regard to the Commonwealth countries. I believe that we have a good story to tell about provision of our services and manufacture of our goods. We must, however, make sure that our businesses are world-leading and globally competitive in order to attract inward investment and continue to increase further the potential for us to export to the rest of the world.

Our motor vehicle industry is a good example of where this is already happening. Last year 82% of all cars made in the United Kingdom were exported overseas. The total was 1.2 million vehicles—the highest ever. Britain is set to produce 2 million cars in 2017, following £6 billion of investment in the motor industry in recent years.

We have greatly improved our manufacturing methods and produced impressive vehicles which are now in greater demand. From trade comes growth, and from growth comes prosperity and stability. As a businessman, I have always believed that a successful organisation needs to produce very good products which should be competitively priced. It should then undertake an active marketing campaign. In doing so, it must always keep a close eye on its expenses. The Prime Minister has said that he wants every department in Whitehall to be a growth department, and he insists that every Permanent Secretary has growth as a key objective.

The Government are playing their part by giving business a positive and supportive framework around which to build and project itself. The Government are actively involved in improving infrastructure which will provide employment, attract investment and help businesses. Building up skills is also an important objective of this Government. We all believe in cutting red tape and giving more powers at local levels.

None of us has been naive to the fact that it was never going to be easy and would take some time for our economy to heal. The combination of the previous Government's financial mismanagement and the wider global situation was a mix so toxic that it caused damage on a monumental scale. However, I believe that these measures and a continued ideological drive towards growth as a means of rebalancing our economy will ensure that we continue on our path to recovery. I am confident that we will promote growth and cut the deficit if we maintain the course that our Government are pursuing. It will be a hard task that requires the co-operation of government departments, various sectors of the industry, the business community—in fact, everyone in the country. I am sure that Britain will live up to its name of being great.