Economy: Inflation

Lord Sugar Excerpts

Tuesday 11th March 2014 Lords Chamber

[Lord Newby]

There is a tension as far as the Bank of England is concerned. If it does not say anything it is criticised for not giving any indication of what it thinks; and when it does say something, it is criticised for saying what it thinks. That is an inevitable problem. On balance, it is better to have the governor and other members of the senior management of the Bank of England explaining what they think is happening to the economy, what they are doing and why they are doing it.

[Lord Sugar (Lab)]

My Lords, the average family has paid £1,350 extra in VAT since it was increased by the Government. I am hearing noises from the Government that the economy is supposed to be looking up a little. If that is the case, would the Minister consider asking the Chancellor to revert back to a rate of 17.5% in his Budget next week?

[Lord Newby]

The noble Lord is not alone in hearing that the economy is improving: the economy is indeed improving. The British Chambers of Commerce increased their growth forecast to 2.8% only yesterday; the growth in permanent jobs, according to KPMG, was last month at its second highest since records began. As far as VAT is concerned, the noble Lord is asking the Government to spend somewhere in the region of £12 billion to £14 billion extra. We have not eliminated the budget deficit: the only reason we have what now looks like sustainable growth is that we have a credible path for the public finances and interest rates and we are not going to throw that away.

Financial Conduct Authority

Lord Sugar Excerpts

Tuesday 15th October 2013 Lords Chamber

[Lord Newby]

My Lords, last week the Financial Conduct Authority published its first attempt to deal with the problem that the noble Lord raises. It is proposing that it should be possible only to roll over a loan twice and that if a consumer has a CPA with a loan shark—sorry, if it is a loan shark, it probably does not have any CPA—or an entirely reputable company, the number of payments that will be able to be taken under such an authority will be reduced to two. This will therefore deal pretty comprehensively with the specific type of issue raised by the noble Lord.

[Lord Sugar (Lab)]

My Lords, I have seen the suggestions put forward by the FCA on payday loans in an attempt to protect consumers. May I respectfully say that whoever drafted them is a little naïve? Needless to say, those devious people alluded to here will work around them in a few moments. Does the Minister recognise that the only way to solve the issue is to cap the exorbitant interest rates charged and, more importantly, impose strict advertising guidelines where the advertisers are forced to devote as much prominence to warnings as they do to the sales pitch? By that, I do not mean some micro-printing in jargon that is not understood by the average consumer.

[Lord Newby]

My Lords, the FCA has made proposals on advertising, which the noble Lord may have seen. As for a cap on interest chargeable, the view at the moment is that the FCA does not believe that that is the most effective way of capping the total charge made. I am sure the noble Lord will have seen the Which? report in recent days, showing that borrowers from high street banks are sometimes paying as high, if not higher, effective rates of interest on their loans because of other charges. The key thing is to have a cap on the total cost of credit, rather than simply go for a cap on the rate, which payday loan operators certainly can get around by imposing a whole raft of other charges surrounding the conditions of the loans.

Taxation: Tax Collection

Lord Sugar Excerpts

Thursday 4th July 2013 Lords Chamber

[Lord Newby]

My Lords, the noble Lord raises an important point. Eighty-four per cent of Apple’s non-US operating income was booked by an Irish subsidiary that was not tax-resident anywhere and paid tax at a rate of 0.05%. That is clearly unacceptable and is why the G20 will look at the issue later this month. It will be presented with a report from the OECD that suggests not only what action is needed but sets deadlines for taking it and makes proposals on the resources that are going to be needed to implement the new rules.

[Lord Sugar]

My Lords, the issue here is one of transfer pricing policy by foreign companies such as Apple, where, to put it simply, the prices of their merchandise are inflated and the margins that they make parked outside the UK. The merchandise is then sold on for virtually cost price in our country. Will the Minister consider making an assessment of these companies’ sales and applying a profit margin criterion, based on industry standards? They can argue about it afterwards, including about the disclosure of their true costs.

[Lord Newby]

My Lords, this is exactly the issue which the OECD is looking at currently. Along with the French and the Germans, we have made a significant financial contribution in terms of getting experts working on this. There are a number of ways of dealing with it. The noble Lord suggests one way. The key thing is that we rapidly come up with new rules and get them implemented at an international level.

Economy: Budget Statement

Lord Sugar Excerpts

Thursday 22nd March 2012 Lords Chamber

[Lord Sugar]

My Lords, I join the noble Lord, Lord Bilimoria, in welcoming the noble Lord, Lord Heseltine. I feel honoured to participate in a debate in which the noble Lord has made his maiden speech. I am sure that I will be joined by other noble Lords in saying that we look forward to hearing him speak a little more in the future. His maiden speech was interesting in the sense that there was no need for the normal preamble of him telling us who he is.

It is common knowledge that Governments across the world tend to spend far more money than they collect by way of taxes and hence create great piles of debt. Every so often there is a wake-up call where certain initiatives are put in place to try to reduce that debt. We are no different in this country. I understand, albeit that it is no consolation, that from 2014 we will receive itemised tax bills, which among other things will show how much each of us is paying by way of debt interest. Indeed, one may ask whether the current spending budgets of the Government are forecast to exceed income again. One thing for sure is that the debt is going to rise as we seem to be borrowing far more than was forecast since the last spending review.

The fact is that the economy of the country is supported by business. If one were to run a company in that manner—continually spending more than one’s income—we all know that that company would go bankrupt. If one of my companies did that and I started printing money, as mentioned by the noble Lord, Lord Higgins, to ease my situation, no doubt I would be put in prison for counterfeiting. We will not get this deficit down unless we have a plan for jobs and growth to get the economy moving. To do that, we need to encourage small and medium-sized businesses to invest, to be daring and to kick-start the economy and employ lots of people.

It amazes me that the Government’s Business Secretary announces a lot of hollow initiatives under the guise of helping small businesses, yet he has never been in business. He has never been on the coal face, never run a business and has never understood the needs of a small business. I am sure that if the noble Lord, Lord Sassoon, had a pain in his groin, he would not want me to remove his appendix since I am not a surgeon. That may be a stupid analogy, but I am sure that I am making my point.

Yesterday’s Budget contained the usual lip service of how the Government are going to help small business. They have continually made these statements but so far we see no evidence of it. As my noble friend Lord Eatwell mentioned, it is the same as the promise made to put fuel into the tank of the British economy. Instead, the economy has stalled and unemployment has risen, as has the aforementioned debt.

On the subject of lip service, I am concerned about politicians deflecting the real issues and placing blame elsewhere—for example, jumping on the bandwagon of bank bashing and singing the same old songs about the lack of money being lent to small to medium-sized enterprises, or bonuses being paid to bank executives. All this does nothing other than depress the business environment. It is not encouraging in any way, shape or form. It is sheer political capital. I urge all politicians to change the record and to start to instil confidence in the marketplace instead of depressing it.

One never hears outrage expressed at the bonuses payable to, say, Sir Terry Leahy, Sir Stuart Rose or Sir John Rose in their capacities as chief executives of Tesco, Marks & Spencer and Rolls-Royce. I say “quite rightly so” because that is business: you employ experienced top executives and set them targets to get things done—in other words, incentivise people. Yet when banks, some of which have a large public shareholdings, employ top executives whose sole purpose is to take over, clean up the mess, and improve the financial position and in turn the public’s investment, those executives are chastised for accepting bonuses. The reality is this: carry on doing that and those people will simply go and get a job in a different type of company where the culture of paying bonuses is not frowned upon. Replace them, pay peanuts, and you will get monkeys. There is no question about that. You will delay recovery of the billions that have been invested from the public purse.

Then there is the alleged issue of banks not lending to small and medium-sized enterprises. I had first-hand experience of this issue just under a couple of years ago when I was a government adviser. I investigated it in depth and discovered what I believe is still the position today, and that is that many companies out there are depressed by the messages of doom and gloom about the current economic situation. They are not investing, they do not wish to invest, and in fact they are tightening their belts. They do not want any money and are not asking for it because they are nervous due to the lack of confidence in the marketplace, and much of that is created by politicians jockeying for position or applause on BBC “Question Time” and a very mischievous media.

Then there are some companies that do want to borrow money. However, I regret to inform noble Lords that none of your Lordships would lend some of these businesses one brass farthing because they are simply not worthy and a bad risk. Yet it is those people who shout the loudest and make a lot of noise, which again attracts the newspaper headlines that are regretfully being used by certain politicians to popularise themselves. The noble Lord, Lord Bilimoria, mentioned the £20 billion credit-easing scheme. I am sorry to be so sceptical about this thing, which is designed to underwrite cash lent by banks to SMEs. I hope that it is not an open invitation to the banks to act in an irresponsible manner by dishing out loans that they would normally have rejected as high-risk. We must bear it in mind that they now have the Government underwriting those loans.

I have always stated that the last thing any businessperson wants is government interference. All that businesses require is an environment where enterprise can prosper, and that of course means allowing people to trade freely on a level playing field, and to work in an environment where taxation is reasonable and where there are no onerous regulations or obstacles. That is the sole job of the Government. They also need to create a more positive feeling in the marketplace to encourage small to medium-sized enterprises and indeed give people the confidence to start up their own businesses, become self-sufficient and in turn go on to employ other people.

Noble Lords have already talked about the Budget so I shall restrict my own comments. It should have contained some meaningful offerings to encourage investment and instil confidence. We need things that are tangible and can be touched, such as a reduction in VAT, a one-year national insurance holiday for small businesses taking on extra workers, a reduction in business rates and a reduction in duty on diesel. Those are just a few things that would make an immediate impact and be a genuine help to small businesses. Instead, regrettably, we have the hollow promises that we continue to hear.

Economy: Government Policies

Lord Sugar Excerpts

Thursday 24th March 2011 Lords Chamber

[Lord Sugar]

The House will be indebted to the noble Lord, Lord Lawson, for initiating this debate and for what he has said. He will recall that when he was Chancellor under the noble Baroness, Lady Thatcher, I was one of her blue-eyed boys. The young fellow from Hackney, who had done well, was a fine example of entrepreneurial spirit. She hauled me all over the place, displaying me as a prime example of what can be achieved. I was in and out of Downing Street more often than the window cleaners and possibly the noble Lord, Lord Lawson.

The thing is, people like me are a dying breed. When as a young man I went to a bank with my hand out, they thought I was part of a Morecambe and Wise team. “Do you have any collateral, a balance sheet, some history of profits?”, they asked. “No”, I replied. “Well then, clear off”, was their response. Like many others, I realised at an early stage that if you want something, you have to get it yourself. My idea of government support was: you supply me hospitals, schools, a police force, roads to drive on and a good environment for me to do business in, and that will do me fine; but do not poke your nose into my business.

To reflect on the past 15 years or so, it has been customary for a person dressed in a nice pair of designer jeans and a nice blue blazer with a white open-collared shirt, a bottle of Evian in one hand and a wonderful Microsoft spreadsheet in the other, to walk into a bank, mention the word dotcom and walk out with £5 million. Those days, I am afraid, are over. We all know what went wrong there; and we also know what a mess the banks got into recently; but the penny has not dropped with some people. We still have in some cases an expectancy culture, where people still think that there should be money freely available to finance lost causes, poorly run companies or a whim of an idea.

When I was employed as an adviser to Her Majesty's Government last year, I had occasion to visit many small to medium-sized enterprises across the country and spoke to several thousand people. The most frequently asked question of me was, “What can this Government do to help my business?”. My reply was not perceived as helpful. I told them, “Do not rely on any Government to assist you in running your business. You are people who have chosen to go into business, which is very enterprising, and I am pleased about that, but do not expect to get any advice from the Government about what products you should make, what ideas you should pursue, what services your business should provide or how you should market your products and generate income, because that is what you are supposed to do”.

More recently, I have asked people, “Who is there in government able to dish out such advice? Just step back and look at them”. Take, with the greatest respect, the current Business Secretary. He has never been in business or run a business. He has been an adviser or a politician all his life. He has never touched the coalface. Frankly, what does he know? It is this realism that brings me to my next point. In my opinion, the current Government are very good at window-dressing the demise of the economy by blaming it all on the banks. It is very convenient continually to repeat the same old broken record: “It’s not our fault. It’s the banks’ fault; it’s the previous Government's fault”.

Let us take a look at that for a moment. True, the banks were irresponsible, and they have been told in no uncertain terms to get their act together. However, having told the banks to get their house in order, the current Government are constantly bleating that the banks are not being helpful in lending money to small businesses, whereas the message to the small business community should be one of realism in understanding that no one is going to lend money to a lost cause. The banks are now looking at the traditional criteria of showing some assets or having some historic record of profits before parting with their money. They are definitely open for business. That, I remind your Lordships, is how they make some of their money. In my recent seminars, I have received comments from some people along the lines of, “The bank has been outrageous. It has actually asked me to put up some collateral—my house, for example”. Well, I am very sorry, but why not? Why should it take a risk on you if you are not prepared to take a risk on yourself?

In my capacity as a business adviser to the previous Government, I visited many Business Link centres, which I understand are funded in some way by government although I am not at all clear how. The cost of running these organisations was something in the region of £250 million per year. To be perfectly frank, apart from meeting a nice bunch of people, there was no real business advice dished out other than simple stuff you could pick up and learn for yourself by going on the internet. I urge the Government to redeploy money spent on these types of initiatives in other directions. As a simple example, there are so many empty premises around the country, large factories and warehouses, that can be converted and made into incubator factories. They could contain a core factory and a silo of workshops on the periphery. The core factory would be accessible to the individual businesses like satellites around a nucleus.

The noble Lord, Lord Lawson, said that sometimes you need to be unpopular. I think that the Government should come clean in their message to help small-to-medium-sized enterprises. You cannot on the one hand tell the banks, “You've been naughty by being irresponsible”, and on the other hand say, “Go and be irresponsible again. Go and help lost causes”. Give SMEs the facts of life. By all means be bold and be adventurous, but be realistic. Do not expect anybody in Whitehall to give you any hints and tips on how to do it because, basically, that is a case of the blind leading the blind. You are the business people, you are the ones with the ideas, and you are the ones who are going to drive your businesses forward, but regrettably, as with everything else in life, there are no free lunches.

All government can do is to provide a good business environment and assistance from HMRC—for example, export credit guarantees if you are successful enough to find an export customer, tax breaks for entrepreneurs who sell their businesses and tax deductions for investment in R&D. Here is the final point. To take advantage of the lollipops, as the noble Lord, Lord Lawson, called them, the wonderful tax incentives announced in yesterday’s Budget, perhaps I may just bring everybody down to earth again by saying that to benefit from them, you have to make a profit first. How to do that is something on which this Government, and perhaps some others, have not been capable of advising.

[Lord De Mauley]

I remind noble Lords that speeches are limited to seven minutes.