Queen's Speech

Lord Wallace of Saltaire Excerpts

Wednesday 26th May 2010 Lords Chamber

[Viscount Trenchard]

My Lords, I join other noble Lords in congratulating my noble friends Lord Howell of Guildford and Lord Astor of Hever on their very welcome appointments. I also congratulate my noble friend Lord Ferrers and my new noble friend Lady Falkner of Margravine on their excellent speeches yesterday in moving an humble Address.

Not only here but across the developed world, markets are extremely fragile and confidence is shattered. In these circumstances, it is surely a good thing that my right honourable friend David Cameron and my new right honourable friend Nick Clegg have so quickly been able to agree a common programme to tackle the extremely serious structural budget deficit and spiralling national debt that was built up over 13 years of Labour government. I had not realised that my new noble friends on the Liberal Democrat Benches had also recognised that government has become much too large and overarching and must urgently be slimmed down, thereby releasing scarce resources for investment in what we all hope will be a resurgent private sector.

I do not believe that the manifesto of any of the three main political parties adequately recognises the severity of the public sector cuts that will have to be made. Now that the election is behind us, I am confident that our new coalition Government will face up to the Herculean task that they face. I am heartened that the noble Baroness, Lady Royall, said yesterday that the Opposition will, where appropriate, seek to co-operate, help and support. We shall see.

I must declare an interest: I am employed by Mizuho International plc, a subsidiary of the Mizuho Financial Group of Japan. I am thus doubly unpopular, being both a banker and a politician. But I believe that politicians are trying to pin too much of the blame for the financial crisis on the banks. I understand that the taxpayer is already in the money as far as the shareholding in RBS is concerned and that, if investors can recover a modicum of confidence in the stock market, the prospects are that Lloyds Banking Group will also show a healthy profit.

Corporation tax revenues from the City of London alone have in the past covered our defence budget by 150 per cent. Of course, we need to create the conditions where our manufacturing industry can also thrive, but this will not be assisted by the adoption of policies intended to rebalance our economy away from financial services. There is already evidence that the new powers recently given to the FSA are excessive and harmful. I believe that it is essential that the FSA should show more restraint in the use of those powers. I hope that the Government will review them and consider whether they are appropriate or not as they prepare the draft legislation to reform financial services regulation. I am happy that the FSA has been reprieved and that it must submit to oversight by the Bank of England in respect of micro-prudential regulation.

Much more serious than the question of how far the FSA is subordinated to the Bank of England is the shocking realisation of the fact that it no longer has any power to make any new regulation. Our regulators are, or will shortly be, the European Banking Authority and the other two EU-level regulators. It is also shocking to realise that EU Finance Ministers and the European Parliament have both adopted versions of the alternative investment fund managers directive demonstrating that they now have the power to regulate our alternative fund management industry, which includes UK investment trusts and property funds—indeed, everything which is not a UCITS. That has serious negative ramifications for the City’s future prosperity and I trust that the Government will not let matters rest there.

It is my privilege, utterly unmeritorious, to enjoy the appointment of honorary Air Commodore of 600 (City of London) Squadron Royal Auxiliary Air Force. In the past, I served in the Territorial Army for 10 years. The Reserve Forces provide excellent value for money. I hope that the forthcoming Strategic Defence Review will consider the possibility of increasing further the contribution to our defence effort made by the Reserve Forces. They can also make a tremendous contribution to the Government’s intention to create a big society, and to encourage individual and social responsibility.

I was happy to learn that defence programmes have been protected from the £6.2 billion efficiency savings, because the Ministry of Defence has not benefited from the previous Government’s profligacy in the way that some other government departments have. We are very good at defence and universally recognised as such. It is one of the reasons we punch above our weight as a nation and our economic recovery depends on maintaining our position in our areas of excellence. I warmly welcome the Government’s commitment to support fully our excellent Armed Forces—support which they both need and deserve.

I sometimes wonder why so many of our senior FCO mandarins are somewhat deprecating about our ability to continue to exert influence for good around the world through our embassies or acting alone, as well as co-operating with others. I lived in Japan for more than 11 years and have been closely involved in the establishment of financial businesses in China and Korea. In these endeavours I know how greatly I have been helped by the background of the UK’s strong bilateral relations with those countries and the effective presence of our high quality diplomats on the ground. I do not agree with those who think that we can exercise influence around the world today only by combining our diplomatic representation with that of our European partners through the EAS. I regret that the FCO’s budget is to be severely cut back at the same time as spending by the EU on diplomatic representation is being massively increased. This is unhelpful to the perception of the United Kingdom and the promotion of British interests abroad.

The gracious Speech contained a commitment,

“to spend nought point seven per cent of gross national income in development aid from 2013”.

I found this a surprisingly precise commitment compared with other spending cuts. It caused me to wonder why DfID is maintained as a separate department of state. I remember when it was headed by a Minister of State and was operated as a division of the FCO. I notice that it enjoyed an increase of funding in real terms of 12 per cent in 2008-09, whereas the FCO was forced to accept cuts of 11 per cent.

I wholly agree that we should, even in these straitened times, continue to provide development aid to genuinely poor countries, but I would ask Her Majesty’s Government to examine what savings could be achieved from downsizing DfID and merging it into the FCO, which should also ensure that its disbursements are more closely aligned with our national interest. If this were done, perhaps we might find that we could afford even more than,

“nought point seven per cent”,

of GDP for international aid.

Finally, I want to refer to the references to constitutional reform in the gracious Speech. I do not think that the people will thank the Government if much time is spent on debating these matters in contrast to the time that Parliament must commit to solving the acute economic and fiscal problems that the country faces. I welcome the sensible decision to reverse the previous Government’s misguided decision to carve the hearts out of Devon and Norfolk.

I regret the commitment to a referendum on AV and, in particular, the pressure being applied by my new noble friends to bring forward to 2011 the date for such a referendum. I have not liked the AV system since I was not elected to the executive of the Cambridge University Students’ Union in 1972 despite receiving more first preference votes than another one, or perhaps two, candidates who were elected. I believe that most people have only a very superficial understanding of the merits and demerits of various different voting systems. I think that matters such as this should rightly be decided by Parliament. It was so much more appropriate that there should have been a referendum on the Lisbon treaty than that there should be one on AV. It is no surprise that the gracious Speech informed us that proposals will be brought forward for a reformed second House that is wholly or mainly elected on the basis of proportional representation.

Japan replaced its partly appointed and partly hereditary second Chamber with a second directly elected House. I believe that it would be a serious mistake if we were to do the same thing. Another place represents the people and we should never compromise its sole right to do so. We in this House are summoned to advise the monarch—that means the Government. Our role is to scrutinise legislation, to use your Lordships’ undoubted expertise to improve it and to ask another place to reconsider when we believe that is in the national interest. Ultimately, we must defer to those in another place because they are the people’s representatives and we are not.

[Lord Wallace of Saltaire]

My Lords, perhaps I may remind noble Lords that the recommendation from the Chief Whip at the beginning of the debate was that we should keep to seven minutes. Having myself in the past often spoken one or two minutes longer than I should have done, I say this diffidently. But if we want to finish by 10 o’clock, we need to hit seven minutes or certainly no more than eight minutes.