Business and the Economy

John Redwood Excerpts

Monday 14th May 2012 Commons Chamber

[Vince Cable]

I do not think that the Foreign Secretary actually said that. He works extremely hard with me and my colleagues promoting British business around the world. A large part of his job is commercial diplomacy and he is doing it extremely well.

One key proposal in the enterprise and regulatory reform Bill is legislation for the UK green investment bank, which will drive the transition to a green economy. The Bill will set the bank’s purpose, ensure its independence and make funding provision. The bank will be formed as a public company under the Companies Act, with initial funding of £3 billion to March 2015. It will operate independently from Government, but will agree its strategic priorities with the Government. Until formally established, the Government are making investments, on commercial terms, in green infrastructure through a specialist team in my Department. I reported to a Standing Committee of the House two weeks ago on its progress.

[Mr John Redwood (Wokingham) (Con)]

I think that the Secretary of State agrees with me that the Vickers proposals for more competition among our domestic banks are very good. What further measures can the Government take urgently to get some competition in banking capacity in the high street?

[Vince Cable]

My right hon. Friend is right that, in addition to the structural reforms, competition is essential. He will know that the Government are endeavouring to carry through as ambitiously as possible the divestment of branches from Lloyds, and a potential solution to that is in sight. There are also some excellent new banks coming up—Handelsbanken and Metro bank are good examples—and we must ensure that the regulatory process is as efficient as possible in order to get those up and running. I thank him for his continued pressure on that important point.

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[Mr Umunna]

In case the hon. Gentleman has not noticed, we are in a double-dip recession. That says something about his party’s policies, given that, as I have just said, it inherited an economy that was growing, unemployment that was falling and a recovery that was setting in.

Before the Queen’s Speech, there was, of course, the Budget. Let us remember what people said about it. The general secretary of the TUC said:

“We needed a Budget that looked to the future and made jobs - particularly for young people - the national priority… Instead we have got a Budget by the rich for the rich.”

The chief executive of the Forum of Private Business said:

“what small businesses and the economy need are confident strides forward now. Largely, that has not happened in this Budget.”

People were looking in the Queen’s Speech for signs that Ministers understood what people were telling them—to change course and to put in place policies that will deliver an economy that works for working people and businesses, and the building blocks upon which a new economy can be built.

Did the Queen’s Speech deliver the change that people and businesses signalled they wanted to see? There are things that we welcome, subject to the small print being worked through. I have given the Business Secretary credit for ensuring that the Government established the Independent Commission on Banking. We are playing our part, in a cross-party spirit as far as possible, to implement its recommendations, and will look at the detail when it is published. The Government, by their own admission, said that they were bequeathed one of the best competition regimes in the world by this party. The Business Secretary will need to demonstrate that the creation of the single competition and markets authority—which he has just spoken about—will improve on that legacy, not squander it.

Our 2010 manifesto included plans to create a supermarkets ombudsman to protect farmers and food suppliers from unfair and uncompetitive practices by major retailers. The Government are taking that forward through the grocery adjudicator, which the Secretary of State has mentioned. We will work to ensure that the grocery adjudicator is given powers to ensure fair access across the supply chain. In office we set up the primary authority scheme—which he also mentioned—to help reduce the local regulatory burden on firms. The enterprise Bill will extend that to include more businesses, which is welcome. The Secretary of State also referred to the changes to parental leave. Again, we will look at the details, but on the whole, that does not sound like a bad measure.

We were told that the enterprise Bill would contain measures on executive remuneration—something the Secretary of State has just repeated. In order to build a more productive and responsible capitalism, it is important to ensure that we bring an end to rewards for failure and the excessive pay we have seen, which is bad for our economy and our businesses. On both sides of the House we agree that change and reform must be led by shareholders and investors with Government support. In office, we were the ones who introduced the advisory shareholder votes on remuneration reports, which have been causing a lot of news recently.

[Mr Redwood]

What approach would the shadow Minister recommend to the remuneration of senior executives and directors in banks with state shareholdings?

[Mr Umunna]

I would say that their pay should be linked to performance against criteria and specified objectives. Our argument in relation to RBS is that the Government are the biggest shareholder. They have lectured others about the need for greater shareholder activism, but it would be good to see it from those on the Government Front Bench.

However, despite all the things I have welcomed, in sum, it is business as usual for this Government. This Queen’s Speech signals little change in approach. For the person looking for work, this Queen’s Speech offered no hope; for individuals, families and firms faced with increasing energy and water bills, and rising transport costs, it offered no hope; and for sound and successful small businesses struggling to get by in this recession of the Government’s making, it offered no hope. However, listening to the Business Secretary, one would think that the Queen’s Speech had been positively received. I do not know who he has been listening to, but this is what our business leaders have said about his Government’s Queen’s Speech. On Friday, Justin King, the CEO of Sainsbury’s and a member of the Prime Minister’s business advisory group, which is meeting as I speak, said:

“Consistency is what gives confidence. Unfortunately, what we have seen over the past couple of years is something that could not be described as a consistent pursuit of a clear policy”.

In other words, uncertainty—created by the Business Secretary’s Department and all across Whitehall—is reducing businesses’ confidence to invest for the long term. On Saturday, the director general of the British Chambers of Commerce said:

“there is a big black hole when it comes to aiding businesses to create enterprise, generate wealth and grow”.

Business people are clear: what they want is a Government who will step up and work in partnership with them to create the conditions for private sector growth. What they have got is a Government who step aside and leave business to struggle on alone.

What was the Government’s response to those comments by business people? Step forward the Foreign Secretary. Yesterday—in what the Business Secretary described as “commercial diplomacy”—he said:

“I think they should be getting on with the task of creating more of those jobs and more of those exports, rather than complaining about it. There’s only one growth strategy: work hard”.

What on earth does the Foreign Secretary think this country’s business owners do all day? His message is clear. He is saying that the fact the economy is not growing has nothing to do with the Government’s failed economic policies. He is saying that it is not growing because the people in all our businesses out there are not working hard enough. How out of touch can the Foreign Secretary be?

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[Mr John Redwood (Wokingham) (Con)]

I remind the House that I offer business advice to a global engineering business and a small investor management business.

We meet today with the winds of danger blowing once again from the euro area. We meet to discuss measures in the Queen’s Speech to make Britain more competitive, to equip Britain better, and to produce more jobs and deliver more goods and services around the world. No one in this House would disagree with the aim. All the main parties agree that we need more economic growth. I think they all agree it is easier to get a deficit down when we are creating more jobs, getting people who are out of work into those jobs, and generating more income and activity, than when we are not. There is no disagreement across the Floor of the House about the aim.

However, when debating how we are going to get that growth and give the best possible support to the companies and individuals who create the jobs and make things happen, we must also recognise that there is a very threatening and menacing problem on our doorsteps. As we meet here today, we know that the Greek political parties may not be able to form a Government at all, or they may not be able to form a Government that can put through the necessary measures to meet the requirements of the EU and IMF loans in Greece. They may decide on new elections in some weeks’ time, creating a dangerous hiatus; and those elections may produce a Government who fully reflect the view of the Greek people, as expressed in the last election to a considerable extent, that they do not wish to co-operate any longer with the lethal mixture of policies that the euroland senior politicians have put forward.

That matters to the United Kingdom, not only because some of our exports and services are sold within euroland, but because, as members of the European Union, we will participate in some of the meetings about what kind of growth strategy Europe as a whole can develop, and we will be a party to some of the decisions that will determine the future of the euro. If the Greek tragedy unfolds such that the Greek state cannot meet the requirements, the European Union has to decide either to give in yet again and come up with another compromise, or that there has to be an early exit of Greece from the euro. It would be better for the British economy and for the future of euroland if an early exit of Greece from the euro were organised quickly, and in confidence up to the point when the necessary announcements must be made. I would not expect the British Government to confirm that that is their aim, but I hope that Ministers are working closely together, representing the greatest financial centre in western Europe and perhaps the world, with that in mind. The sooner the Greek problem is solved, the sooner we can get on with sorting out some of the wider problems in the European economy.

If it is decided to cobble together another compromise, massive headwinds against growth and prosperity in our continent will continue to blow forcefully. Will an early Greek exit be easy to handle? No, of course not. Will it be pleasant? No, of course not. But the Greek people have got to the point where they cannot take any more years of austerity, and in some way or another Greece has to be made competitive. If is it is completely impossible, as it seems to be, in a democracy to slash wages by the amount the German side of the argument seems to say the Greeks should slash wages by, other means have to be used: having a devaluation and having a new currency.

The United Kingdom has one big advantage in the crisis: we have our own currency, it is freely floating,and we are much closer to having competitive prices than Greece, Italy or Spain can possibly be within the euro. Any measures that my right hon. Friends can take to improve our competitiveness in order to create more export jobs, the better. How right Ministers are to see that there has to be a huge reorientation of British exports towards the emerging markets—to the faster-growing territories of Asia, Latin America and parts of Africa—because Europe is making such a comprehensive mess of its economy and its prospects. It is destroying hope and jobs on such a massive scale that our only hope as a country is to support and orient our businesses to where the growth is and where the opportunities are to be found.

That means taking urgent action to mend our banks and to establish more competitive banking, with more money to lend to our companies, because they are going to need working capital and investment capital. They are going to need to gear up for the 2.5 billion Indian and Chinese who want to come to the world party, many of whom, I am pleased to say, will come to the world party and will be the market that replaces the European market, which is failing so visibly.

We also need competitive energy. Surely the Secretary of State would agree, at least in private, that if we wish to lead an industrial revival in this country or anywhere else, we need cheap and competitive energy in plentiful supply. We should not be saying, “Let’s make everything in China, so it does not score against our carbon dioxide totals.” Let us make things here. If we have cheap energy, we will have more chance. Modern manufacturing creates lots of jobs in marketing, legal work and promotion. It does not create many jobs on the shop floor because it is automated, which requires access to lots of cheap energy. That is what I want this Queen’s Speech to address: cheap energy, less intensive regulations—

[Mr Deputy Speaker (Mr Nigel Evans)]

Order. I remind hon. Members that there is a six-minute limit on speeches.

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[Danny Alexander]

I do not have that information to hand. However, the point I made earlier, which he ignores, is that in many cases where the regional growth fund has been awarded, the private investment takes place well in advance of the public funds being needed. The measure he seeks to use of who has received public funds is therefore not necessarily the best measure of the investment that has taken place, quickly stimulated by the award of regional growth funds. If he looks around the country, he will see many examples of private sector businesses that have been awarded moneys from the regional growth fund and have started their investments well in advance of public funding arriving, because that is how their projects have been planned. If he were doing his job properly, he would understand that that is the way in which many businesses operate.

We have also heard a number of comments about the banking Bill. Indeed, strong support for that Bill was expressed on both sides of the House, and there was support, too, for the strong recommendations of the Independent Commission on Banking.

[Mr Redwood]

Has the Chief Secretary noticed the latest forecast, which says total City bonuses are likely to be only £2.3 billion this year, as opposed to £11.5 billion at the peak, under the Labour Government? Will he consider representations in favour of a bankers’ bonus tax in the light of how little revenue it will raise compared with the original forecast?

[Danny Alexander]

I was about to come on to the mess that the Labour party made of our economy, but the right hon. Gentleman’s question causes me to bring those remarks forward. One of the most calamitous failures of the last Labour Government was the complete failure to regulate the financial sector and to control the excesses that built up in the banking system, and the figures he gave are just one example of that. The banking Bill will implement the reforms that are necessary to deal with some of the excesses and, more importantly, to protect the taxpayer and the British economy from the sorts of problems that previously arose. It was very striking that in neither Labour Front-Bench speech did we hear any apology for the previous Government’s failure to regulate the banks properly, just as we heard no apology for the mess they made of our public finances and the many other mistakes they made, too.