Queen’s Speech

Lord Shipley Excerpts

Thursday 5th June 2014 Lords Chamber

[Lord Shipley (LD)]

My Lords, a number of speakers have said that this debate on the gracious Speech gives us an opportunity to assess the success of the coalition Government as they enter their fifth year. The speech reminds us that the Government have a long-term plan to rebuild our economy which, if it is to be achieved, requires further reductions in the deficit and continued low interest rates. I subscribe to that aim. The Government’s overall debt continues to rise and the only way of controlling and reducing it is to reduce the annual deficit. Of course, the deficit will be reduced if tax revenues rise but for tax revenues to rise we need growth, and growth will be encouraged by continuing low interest rates. That is particularly important for those parts of the UK which have higher than average unemployment rates. That is why I am pleased that the Bank of England did not seek to raise the base rate when unemployment fell below 7% nationally. The continued recovery needs low interest rates to encourage business investment.

In this respect, I am particularly impressed by the recent performance of the small business sector and welcome the small business, enterprise and employment Bill which, for the first time, specifically addresses the needs of the country’s 4.9 million small businesses. Small firms have been responsible for four in five jobs created during the three years between 2010 and 2013. In addition, nine out of 10 unemployed people either found work in a small firm or started their own business in that period. I welcome the proposals to help small businesses grow, not least in procurement policy, where Whitehall has been too keen to push procurement contracts towards large national companies, mostly headquartered in the south-east, and away from regionally based companies which are smaller but nevertheless have excellent track records in delivery and localised training. The test of that Bill will be whether the Government deliver their procurement ambitions. The Government say that they want to provide small firms with fair access to the £230 billion spent each year in the form of public procurement contracts, so I hope it will become clearer how this will be done when we discuss the detail of the Bill.

Overall, the recovery cannot just be about cutting the deficit and I welcome the emphasis in the gracious Speech on growth, infrastructure investment and access to finance, not least because the outcomes from Funding for Lending have been lower than we would wish. The Bank of England recently reported that Funding for Lending had fallen by £2.7 billion. In recent months, it has been only for business lending and not housing. However, the evidence seems to be that lending to SMEs has not been boosted. It could be that crowd funding and peer-to-peer lending are rising and accounting for part of that gap but it is vital that small businesses can borrow more from the banks.

The potential of the small business sector is very great. A few days ago I visited a small but fast-growing precision engineering company, Chirton Engineering, which is to host the new North East Advanced Machining Academy. The academy is the product of work by Tyne Metropolitan College, working in collaboration with Chirton Engineering, Tyne North Training and North Tyneside Council, and it will enable students to be trained to the highest of standards on specialist machines and ensure that apprentices are job-ready for their first day on the factory floor. What particularly impressed me was the integration of an expanding business with training and apprenticeships in engineering, and with excellent linkages to local schools.

I spoke earlier about the opportunity that this debate gives us to comment on the Government’s achievements, and apprenticeships are one of them. I congratulate Ministers, particularly BIS Secretary of State Vince Cable, on their determination to give young people the opportunity to learn on the job. Some 1.6 million apprenticeships have been created since the 2010 election, and I welcome the plan to build that further to 2 million apprenticeships by 2015. I do not want to be overcritical of the previous Government, but the Future Jobs Fund was expensive. Each placement cost up to £6,500 and created short-term placements, predominantly in the public sector. Half of Future Jobs Fund participants went straight back on to benefits after the six-month job ended. What this Government have done, and are continuing to do, is proving much more sustainable.

A number of speakers today have talked about the commitment in the gracious Speech to increase housing supply. I welcome that because the shortage of affordable housing, both to buy and to rent, is becoming critical. While there is some evidence that Help to Buy is not by itself creating a bubble in London and that it seems to be working in the regions, the fact remains that the affordability gap has risen to almost 10 times average salary in 2013. That is not sustainable.

The problem is a shortage of supply. Rightly, the Government plan to increase supply, but the question is whether they will provide the means at the same time as they desire the end. It is not just about reforming the planning system or, as the noble Lord, Lord Sawyer, pointed out, garden cities. It is about providing decent homes for all, which, together with a good education and a secure job, are the foundations of an inclusive society. The Government are planning to do something. It is good to see that they will provide support to smaller builders to develop new homes with a £525 million builders’ finance fund, which will deliver up to 15,000 homes on small sites. The problem is that too many small construction firms—two-thirds of them—closed down when the recession hit. It has become clear that more competition with larger firms is in the public interest. I am also pleased that the Government will introduce a £150 million repayable fund to support up to 10,000 new service plots for custom-build homes, and that there will be further reform to make it easier for empty buildings to be converted into new homes, supporting brownfield regeneration.

Welcome as all these initiatives are, I fear that they will not be enough to deliver the 250,000 homes that the country needs each year over the next few years to meet demand. The Government simply must use every means at their disposal to get councils building again. We have heard what happened in the 1950s and it is entirely possible to do that all over again. As a start, I hope that the remaining cap on local authority borrowing can be removed in its entirety. That would help.

There is mention in the gracious Speech of Scotland, the case for Scotland staying in the UK and the implementation of new powers. The gracious Speech says:

“My government will continue to implement new financial powers for the Scottish Parliament and make the case for Scotland to remain a part of the United Kingdom”.

It is the first part of this that I want to look at more closely because I think it has profound implications for English local government. I declare my interest as vice-president of the Local Government Association. The issue is going to be this: once the referendum is done and dusted, who raises what taxation? Too often over the past two to three decades, the issue has always been that money is disbursed from London. We have heard from my noble friend Lord Flight about the £70 billion that is effectively transferred from London and the south-east, in terms of public spending, to other parts of the United Kingdom. That is a very large sum of money. The time is coming when all parts of the UK, if we are not to have a continued centralised state in London, are going to have to take greater responsibility for raising the sums that they spend.

There has been devolution in the past three years to local enterprise partnerships, to local councils and to combinations of local councils in the form of combined authority, but that question of who raises what taxation is rising up the agenda. I think that there is greater awareness of this now in England; there certainly is in Wales. There are pilots, of course, not least the Greater Manchester earn-back model, which gives Greater Manchester a half share in the increase of all taxation. However, English local government now needs to be fleet of foot and help to define and drive forward the devolution agenda, because we know from European experience that devolved power drives faster growth and we need to replicate that across the UK.

Devolution in transport funding is well under way and Ministers and the DfT should be congratulated on that. For one thing, it will require local areas to prioritise their projects. Wish lists are all very fine, but if local government wants to make a success of devolved powers it simply must be able to prioritise across council boundaries.

In conclusion, I shall say three things. I have been very impressed by the contribution of the Governor of the Bank of England. His points about inequality, the overdominance of London and the potential of a housing bubble in London have been well made. I am much more positive about London than some other speakers have been. It is possible that part of the growth of London is cyclical, but clearly not all of it is. London is producing high tax revenues that get recycled to others and a large number of jobs for people across the United Kingdom. For me, London’s success is a success for the United Kingdom. We have to bear in mind that London has a very strong economy, but the part of the UK that has highest rate of child poverty is immediately adjacent to the City of London and is the London Borough of Tower Hamlets, so the problems of equality are not just between London and the rest of the country but within London. These are major issues for politicians of all parties. There is clear evidence that, even if you take out expenditure on Crossrail, more capital infrastructure funding has been spent in London than in other parts of the United Kingdom. That needs to be reversed.

I note the comments that have been made about devolution. This Government have done far more than any previous Government on devolving to the constituent parts of England. However, it takes time to be a success. The process has been going for just over three years. One of the things I have learnt in the work that I have been doing is that you need a structure to devolve to. It often has to be a structure that transcends individual council boundaries. I see the city deals process and the local growth deals as a step in a long-term process that moves greater decision-making out of London.

Finally, I think we are starting to see the green shoots of growth in a whole set of ways. The gracious Speech identifies the strengths that this coalition Government have produced. As long as we bear in mind all the warnings that we have heard about rising inequalities, that growth agenda can continue to be supported.