Business: International Competitiveness

Baroness Neville-Rolfe Excerpts

Thursday 16th January 2014 Grand Committee

Asked by

[Baroness Neville-Rolfe]

To ask Her Majesty’s Government what direct measures they are taking to promote enterprise and the international competitiveness of British business.

[Baroness Neville-Rolfe (Con)]

My Lords, I ask this Question today to call attention to and encourage the measures that the Government are taking to promote our international competitiveness. This is a huge subject, and I will not talk much about the excellent work done by our ambassadors, UKTI, and by our Prime Minister to improve exports to China, Russia and so on, as I know that other noble Lords will do that. I will focus on three key drivers of enterprise and competitiveness: tax and regulation—we need fewer, better and clearer regulations and a mindset that encourages enterprise; infrastructure; and education. These are critical to a skilled workforce.

Economic advances stem from ideas developed by individuals and by private companies. When government has sought to take a direct hand in business, the results have often been disappointing. But government can and must provide a sound macroeconomic framework, sensible policies on tax and regulation, sound legal, competitive and educational structures and a good transport system. If policies in these areas are unwise, business finds it much harder to succeed. Enterprise and industry is also the source of the wealth on which ultimately everything else depends. That basic fact is sometimes overlooked. Schools, health, defence and welfare are important, but the resources available are dependent on the wealth that the business sector creates.

I come to this subject as someone who has spent many years working for a British company, Tesco, which has been one of the major commercial successes of the past 20 years. As a civil servant I led the deregulation initiative under my noble friend Lord Heseltine. I hope that my continuing business interests, which are recorded in the register, will keep me up to date in this House.

I begin with tax and regulation. As regards macroeconomics, the Chancellor has adopted the right strategy in rebalancing Britain away from reliance on debt and deficit. The deficit is declining rapidly as a proportion of GDP and we now have 30 million people in work. More important, from my perspective, is that for every one job lost in the public sector, four new jobs have been created in the private sector since 2010.

To match other countries in competitiveness, we must keep business headquarters in Britain. In my experience, philanthropy, R&D and a focus on a country’s interests all go with the headquarters, so it is excellent news that WPP, the advertising giant, has returned from Dublin to London. I welcome the new regime for taxing companies’ overseas operations and the Patent Box. They will help us to keep here companies such as GSK and ARM, which exports the chips for the iPhone to China. Best of all is the policy to reduce corporation tax; to help us to compete I would like to see it even lower.

We also need a regime that helps the 4.9 million small businesses in the UK. What the Government are already doing is not very well known: £2,000 off national insurance; an allowance to boost jobs from this April; no national insurance charge at all from next April for under-21s who earn less than £813 a week; a £25,000 increase in the investment allowance for plant and machinery until 2015; £150 million in start-up loans—a long list. For the high street, which is close to my own heart, 360,000 small businesses pay no rates at all because of the doubling of business rate relief.

I am the president of EuroCommerce, the EU-wide association of 6 million retailers and wholesalers. For us, the most important driver of enterprise is the EU single market. We also work hard to open up world trade, and I was delighted at the progress made at Bali, which included changes to border processes worth billions of pounds in saved time. I offer many thanks to my noble friend Lord Green, who did so much to make this happen.

I turn to the vexed subject of red tape. I know from my time in government, in Brussels and, indeed, my weeks in this House that everyone believes passionately in their own proposed regulations. However, the cumulative effect, especially on small business, can be disastrous and enforcement a further burden. Often, our regulators are judge, jury, scribe and enforcer, and so frightened of the media that they take a heavy-handed approach.

We have a programme of deregulation, but to make a real impact on small business, we have to change the mindset in the public sector from bureaucracy to customer focus and the elimination of wasteful error. We have to do less and champion simplicity—fewer, clearer laws, forms and penalties and better process using simple IT, including apps. Tesco taught me a lot about cost control. A process that saved one second at the checkout saved the company £2 million. We learnt lessons from complaints as well.

My second theme is infrastructure and the investment we need in our proverbial roofs. Some great things are being done. Crossrail is fantastic—although you never hear about it, possibly because it has admirable cross-party support. It is a £15 billion project and is estimated to bring benefits of £42 billion. The building of 55,000 new homes will come forward. Thousands of jobs have been created, some with small contractors as far away as County Down. It is a model project, to my mind, with the cost shared equally between government, Transport for London and business.

We need to mend the roof north of Birmingham as well. We need imaginative plans for our northern cities with transport links that do not just come to London, such as the Northern Hub and the Ordsall Chord, Manchester’s own Crossrail, which links Victoria to Piccadilly.

It is a digital age, and as the UK leads Europe in digital business and consumer internet access, we need proper broadband and mobile coverage everywhere. I commend the 2012 report of our Communications Select Committee on this very subject. In Shanghai, my phone works well. At home in Wiltshire, I had to go to the local cafe to do business last summer because of broadband problems. The Government are investing £500 million with matching funding from local authorities and BT. These are huge sums, so why cannot we require a basic level of connectivity everywhere by 2015? What about an official map, perhaps held by the Land Registry, to show street by street what progress is being made?

Finally, I turn to education. International competitiveness depends on education, and it is a scandal that in the latest OECD tables, our best place was at number 21. The Secretary of State is doing many good things, with free schools a fine innovation—we just need more of them. So are the new academies, such as the London Academy of Excellence at Newham, which sends more children to Oxbridge than some famous private schools. I hope that the Minister will update us on examples of business involvement in education that can really inspire others, such as our studio schools and university technical colleges.

However, as a businesswoman, I am very concerned about the way that Britain is being left behind. We need to improve education across the board and stop it being a postcode lottery. That is the best route to social mobility and reversing those worrying PISA scores. I would allow more grammar schools to expand.

In any event, I think that streaming should be the norm in our schools, as it also helps innovative teaching to be used in the slower streams. By recognising that children have different skills and strengths, more streaming could also give a boost to vocational training. Let us learn from Germany, where trades are learnt from sitting alongside experienced master craftsmen and engineers, and where employers have a big role in course design. The scale of apprenticeships under this Government and across the economy is a story that we should celebrate but work to improve yet further. Rolls-Royce had 318 apprentices in 2012, and this year, Tesco had 4,127.

I have one final point, and it is a warning. Looking back at the run of general elections, one sees parties vying to promise short-term measures that crack down on business and do disproportionate damage. There have been recent unfortunate examples. We must avoid this temptation: the effect will be to hurt our international competitiveness, our reputation and our country. We must promote enterprise and the competitiveness of British business. I look forward to further suggestions from noble Lords and to the Minister’s response.