Industrial Strategy

Viscount Hanworth Excerpts

Thursday 1st February 2024 Lords Chamber

[Viscount Hanworth (Lab)]

My Lords, Britain is in decline. To avert that decline, we need a comprehensive and sustained strategy for encouraging investment in our publicly owned social infrastructure and in our economic infrastructure, which is predominantly in private and corporate ownership.

We need to spend money to revive the social infrastructure and the services that it sustains. This raises the question of where the money should come from. The answer is that it must come from taxes. This is a truth that becomes increasingly difficult for political parties to acknowledge as an election approaches.

The revival of public infrastructure will not be enough to restore our economic prosperity. Private industry must also meet the challenge of investing in new technology and new factories. There has been a dire lack of industrial investment over many years.

The hope is entertained that this deficit can be overcome by dint of foreign investment in the UK. A recent report by the noble Lord, Lord Harrington, extolled the virtues of this recourse while regretting that, in consequence of Brexit, there has been a modest decline in the value of such capital inflows. The assertion that such investment is unequivocally favourable to our economy must be challenged. Direct foreign investment is virtually synonymous with the sale of our assets to foreign owners.

The large inward capital flows we have experienced over the years have had the effect of easing our balance of payments deficits. They have also been immensely profitable to the City of London, which has mediated them. They have also had the effect of sustaining the demand for sterling in the international markets, and of elevating its value. This has been one of the prime causes of our economic distress. Our goods have become too expensive to compete in foreign markets and our industries have wilted in consequence of a lack of demand for our exports.

Steps should be taken to reduce the value of the pound in the currency markets. This can be achieved by purchasing foreign currencies when the value of the pound exceeds certain levels. The effect would be to make British goods more attractive abroad. This would stimulate our industrial sector by increasing our exports. The process of recovery will be protracted. It might have the same duration as the processes of industrial decline that we have experience since the 1960s.

Small and Medium-sized Enterprises: Mistreatment

Viscount Hanworth Excerpts

Thursday 27th June 2019 Lords Chamber

[Viscount Hanworth (Lab)]

My Lords I shall reiterate some things that have already been said in the excellent preceding speeches. In November 2013, Lawrence Tomlinson delivered his report on the practices of the global restructuring group at the Royal Bank of Scotland. The bank had been rescued from insolvency by the Government and was effectively in public ownership. Lawrence Tomlinson was the special adviser to Vince Cable, who commissioned the report. Mr Cable was the Secretary of State for Business, Innovation and Skills from 2010 to 2015.

The aspersion against the Royal Bank of Scotland was that its global restructuring group, which was tasked with assisting small and medium-sized enterprises in financial difficulty, had driven many of those clients into bankruptcy by increasing the charges it imposed on them, denying them further credit and recalling existing loans. The bankers in GRG were under an injunction to improve the liquidity of the ailing megabank, which led to a so-called dash for cash.

A further charge was that the bank had sequestered the assets of the distressed enterprises by acquiring them at knockdown prices determined by the bank’s internal valuers, or valuers whom it had commissioned. The sequestered assets had fallen into the hands of an organisation called West Register, which was the property division of RBS. Having acquired the assets at fire sale values, the organisation was able to hold on to them until they could be sold at a profit. There was a clear conflict of interest between the bank’s obligation to care for its customers and its pursuit of profits.

The complaints against the Royal Bank of Scotland were numerous and bitter. In consequence of the testimonies gathered by Tomlinson, they merited further investigation. The Financial Conduct Authority was therefore called on to conduct a thorough and independent inquiry. Its recourse was to commission a report from Promontory Financial Group, a global consulting firm that advises clients on a variety of financial matters, including regulatory issues, compliance, due diligence and the like. Since 2016, the group has been wholly owned by IBM. The Promontory report largely substantiated the claims of the Tomlinson report. In the process, it discovered some appallingly callous and unpleasant attitudes on the part of the GRG staff towards their customers, which were revealed by some internal emails, the contents of which were widely publicised.

The FCA proved unwilling to release the Promontory report. Perhaps it did not wish to have its hand forced. Instead, it chose to summarise the report in a brief internal summary and in the final summary published on 13 June. However, meanwhile, the Promontory report has been published at the insistence of the Treasury Select Committee of the House of Commons, which gave the FCA a deadline of 16 February 2018.

An immediate reaction on reading the Tomlinson report might be to declare that bankers had been behaving like crooks and spivs. A response to that could be to declare that, unfortunately, such dealings are in the nature of banking and that, anyway, the bankers were doing nothing illegal. Thus, it could be argued that the bank was merely exercising its legal rights as a lender. By and large, the Promontory report adopted the first of those attitudes. Its central conclusion was that there had been widespread inappropriate treatment of the clients of the Royal Bank and that this treatment had caused material financial distress.

Nevertheless, the FCA’s final report declared that no evidence has been found of criminal intent of the sort that would convince a court of law. As we have heard, it has also insisted that commercial lending does not fall under its regulatory purview. In the main, the FCA’s report evinces the second of the two attitudes that I outlined—albeit that, for the sake of appearances, it acknowledges some faults of the Royal Bank. The report is at pains to avoid attributing blame to individuals within the bank, suggesting that to do so might expose them to personal danger. This seems far-fetched, unless one regards as personal dangers the loss of reputation or the revocation of an honour, as befell the chief executive of the bank.

MPs on the Commons Treasury Committee and the All-Party Parliamentary Group on Fair Business Banking, some of whom have banking experience, described the FCA’s report as a complete whitewash. In partial recognition of its malfeasance, the bank set aside £400 million for the compensation of its victims, to be administered by a High Court judge. In July 2018 it was announced that the scheme would close for customers with fresh complaints. At the time only 803 of 1,230 complaints received had been resolved, with only 370 of these upheld. The payout amounted to only £10 million. This sum can be put in perspective by reference to a statement in the Promontory report to the effect that in 2011, GRG contributed £1.2 billion to RBS’s bottom line.

Where does this leave us? The answer is that there is a deficit in the financial regulation of banks, for which the present Government are wholly responsible. They have failed to act on the recommendations of the Vickers report, which argued that casino banking, with its dangerous speculation, should be separated rigorously from commercial and personal banking. The Government have paid no attention to this. More recently, they have resisted a call for the financial regulation of the FCA to be extended to cover commercial lending. Indeed, the Promontory report warned that not doing this risks a repetition of the sort of events that occurred in RBS.

Under different political circumstances, I would be calling for the Government to act decisively now. However, I do not imagine that we can expect anything of the sort from the new management that will shortly be taking over the Government. There will be very different circumstances when our party takes over the shop.

Housing: Availability and Affordability

Viscount Hanworth Excerpts

Thursday 12th October 2017 Lords Chamber

[Viscount Hanworth (Lab)]

My Lords, the tenets of a political ideology can endure for a very long time, even when they have become utterly inappropriate to current circumstances. The nostrums of Margaret Thatcher were absorbed by members of the present Conservative Government when they were adolescents or young political aspirants and they have been followed by some of them without a second thought. One of the aims of Margaret Thatcher’s Government was to ensure the growth of a so-called property owning democracy. The idea was a simple one: by giving ownership of their houses to council tenants, a significant number of erstwhile Labour supporters could be converted to property-owning Conservative voters.

Under the Housing Act 1980, which established the right to buy, local authorities, which had hitherto been responsible for as much as a third of the nation’s accommodation, would have their responsibility for housing radically curtailed. Their role would be taken by commercially orientated housing associations and by a building industry no longer entrammelled by the interference of government. Half the proceeds from the sales of council houses were paid to local authorities; but, instead of being allowed to spend the money on building more homes, they were compelled to use it to reduce their debt. It is remarkable that, in spite of this programme, the objective of increasing property ownership is now further from being realised than at any time in recent history. According to official figures, the proportion of home ownership in England has fallen to its lowest level since 1985, while the number of people privately renting is now higher than it was in the early 1960s.

The Government’s reaction to the difficulties of first-time buyers, in the face of the scarcity of accommodation and exorbitant house prices, has been to establish the Help to Buy scheme, in pursuit of the Thatcherite nostrum. In 2013, George Osborne set aside £7 billion for this purpose and, on the eve of the recent Conservative Party conference, a further £10 billion was promised. It is extraordinarily inappropriate to address the scarcity of affordable properties and the problem of inflated house prices by a scheme that can serve only to stimulate demand.

We also need to ask who is being helped to buy. The truth is that many people who can well afford to purchase property from their own resources are being helped with their mortgages. No less an authority than the Daily Mail has recently drawn our attention to this extraordinary misdirection of public funds. The paper has asserted that four in 10 recipients have been earning more than £50,000 per annum and one in 10 has been earning at least £80,000. More than 5,000 purchasers have had six-figure incomes.

It is also reported that the major housebuilding firms have made unprecedented profits as the housing crisis has worsened. Together, the four most powerful companies—Persimmon, Taylor Wimpey, Barratt and the Berkeley Group—made more than £2 billion in pre-tax profits last year. Much of this money has come from Help to Buy. Moreover, these developers have been able to evade their responsibility to provide a modicum of affordable housing by exploiting the provisions of the Growth and Infrastructure Act 2013, which has allowed them to appeal against the requirements of the local authorities.

At a time when housebuilding has been at its lowest level, the private rented sector has ballooned in size. It now accounts for just over 4.5 million households—nearly double the 2.3 million of 2004. The new figure represents 20% of the total, whereas in 2002 it was only 10%. On average, those buying their home in England with a mortgage spent 18% of their household income on mortgage payments, whereas rent payments were 28% of household income for social renters, and swallowed up 35% of the household incomes of those renting privately.

Of course, many properties in the private rented sector are former council houses that were once provided by councils at affordable rents. The inflated costs of renting such properties are being met in part by the payment of housing benefit, which makes a major demand on the Government’s finances. The Office for Budget Responsibility has forecast that spending on housing benefit in 2016-17 will amount to £23 billion.

There is a clear need for a far greater supply of affordable properties. The only effective way of providing this is to give local authorities the remit to oversee a major housebuilding programme. The Government have at last become aware of this necessity. They have plans for a new generation of council and housing association homes and they have set aside £2 billion for the purpose. The inadequacy of this provision is stunning. It should be compared with the far greater sums of money that have been devoted to Help to Buy and it is dwarfed by the size of the annual budget for housing benefit.

It will not be an easy task to revive the housebuilding activities of local authorities. Most of the organisational structures that served the building programmes of the 1930s and 1950s have been lost. The architects’ offices have closed and the direct labour force has evaporated. It will be perilous to rely on the services of the large contractors, which have hitherto profited hugely at the public’s expense. I also observe that the planning regulations, which had been developed and refined over many years, have recently been junked by the Conservative Government in the act of vandalism that established their National Planning Policy Framework. The next Labour Government will face a gargantuan task.

Clinical Pharmacologists

Viscount Hanworth Excerpts

Monday 12th September 2016 Lords Chamber

[Viscount Hanworth (Lab)]

My Lords, I wish to speak in the gap.

Prescribing is one of the major roles and responsibilities of a doctor. It follows that a sound knowledge of pharmacology should be an important element in the training of all clinicians. We are now embarking on an era of medicine where treatments by drugs are becoming increasingly specific to individual patients. These developments and the application of such remedies is complex and demanding and it requires the oversight of experts.

Since the creation of the first academic departments of clinical pharmacology in the UK in the 1950s, the discipline has played a substantial role in studies in experimental medicine, and in large-scale clinical trials.

Concerns have been expressed in recent years that the number of clinical pharmacologists in the UK is falling; many of the individuals concerned are within 10 years of retirement, so there will be an even more critical shortage of clinical pharmacologists in the near future. The consequence of a dearth of specialist pharmacologists and a dearth of knowledge of pharmacology among the generality of clinicians is worrying.

Poor prescribing is one way in which patients can come to harm. A lack of knowledge can also make general practitioners vulnerable to the persuasions of drug companies that are intent on selling their remedies without regard to their efficacy or their dangers. It is difficult to estimate the cost to our health service of the inappropriate adoption of drugs that have been the subject of hard sales techniques, but it must be considerable.

What is lacking from our health service, and what it once possessed, is a facility for conducting exacting trials of pharmaceutical remedies. The decline in the number of specialist clinical pharmacologists in the health service and the marginalisation of pharmacology in medical training implies that there will be acute problems in the near future. These problems will be the legacy of a remarkable oversight on the part of the Department of Health and of the General Medical Council, over a period of more than 20 years. It is time for this situation to be amended.

Terezin Declaration: Holocaust Era Assets

Viscount Hanworth Excerpts

Monday 26th March 2012 Lords Chamber

[Viscount Hanworth]

The enormity of the Holocaust places it in a category of its own, and a recognition of this is embodied in the Terezin agreement. The stated objectives of the Terezin accord have been pursued by the signatories with varying degrees of alacrity. The signatory that has faced the greatest practical task in identifying the victims and their inheritors and in making consequential actions is Poland. It was acknowledged by Nigel Ross, the principal British delegate to the conference, that although Poland had to a large extent dealt with the matter of communal restitution, it had made no real progress in the matter of personal restitution. It is undeniable that there have also been acts of bad faith. There are now very few survivors who have had a direct experience of the Holocaust, so the issue here is the restitution of properties to inheritors of Holocaust victims. Surely the reason why so little has been forthcoming from the Poles in that respect is that they fear that by making such restitutions they will encourage a much greater number of claims from other parties. There was a considerable displacement of Germans from Poland at the end of the war and they and their descendants must surely be encouraged to make claims, if other claims were allowed.

There are many more recent cases to contend with that have arisen from the post-war communist period. In a fragile post-communist era, the Poles have preferred to let sleeping dogs lie, instead of addressing the abuses of the previous era. One such abuse has left an erstwhile dictator in control of a vast estate that was expropriated under his regime. I am reasonably familiar with Poland, and, in particular, with the city of Lodz, which I have visited on three occasions and to which I will return in May. The city was a textile manufacturing town that was built mainly in the 40 years from 1840 to 1880. During that period, it accumulated a mixed population of Poles, Germans, Russians and Jews. I first visited Lodz in the 1980s; in the Polish winter, it was a dank and grizzled place. No one thought of showing me its former splendours. The stucco of its architectural adornments had, in main, become unstuck. The city was undifferentiated in its misery and decay.

On my last visit, two years ago, I was astonished to see the city renewed. It had become self-conscious in its beauty. The huge textile manufacturing complex of Israel Posnansky, referred to simply as Manufaktura, has been restored to its former glory as a huge shopping centre and leisure complex. Its four-storey workshops have become hotels, museums and art galleries. The population of the city is becoming increasingly heterogeneous, comprising Poles, Germans, Baltic people and Russians. One former element that is missing is a Jewish population. The city is still derelict in some quarters, indeed it is increasingly so. One such area, which is adjacent to Manufaktura, once housed a predominantly Jewish population. The buildings are in decay because the rights to the properties are undecided. Perhaps if the intentions were fulfilled, the Terezin declaration would serve to establish the rights of ownership of the descendants of those who vacated these properties under duress. However, the properties have surely lost their value. Calculated at present values and diminished by at least two rounds of death duties, they would amount to a paltry inheritance.

I should hesitate to make recommendations regarding other people’s inheritance, but I do have a suggestion to offer. A statute of limitations should be negotiated, with certain strong provisos. It should be agreed that the titles to the properties in question should revert to the municipality. The provisos are that this should happen only if the municipality would undertake the restoration of the properties, and a prominent acknowledgement should be made of their provenance and of the generosity of those who have relinquished their entitlements.