Comprehensive Spending Review

Lord Bates Excerpts

Monday 1st November 2010 Lords Chamber

[Lord Bates]

My Lords, it is a privilege to follow my noble friend Lord Allan after his excellent maiden speech, which observed all the conventions that he rightly outlined at the beginning of his speech. As someone who is relatively new to this House and made a similar journey from the other end of the Corridor, I think that the speed with which he has adjusted to the climate of this House bodes well for the future. One of the great joys of following the maiden speech of someone who is so intertwined with the world of information technology is that there is an embarrassment of material that one can refer to. I shall not mention much of it, other than to say that it is highly impressive and worth viewing, especially the noble Lord’s weblog. He began his undergraduate studies at Cambridge in anthropology and archaeology. I am not quite sure which of those areas will be of most value in understanding the workings of your Lordships’ House, but I am sure that they will both come in very handy. He also had remarkable prescience in giving way in the 2005 general election in his Sheffield Hallam constituency to an unknown politician from across the pond called Nick Clegg, who went on to achieve some rather impressive things, as I am sure the noble Lord will do in his contributions in this House. His contribution this evening has been very much welcomed.

Given the time constraints, I want to add something new to the debate, which I am thoroughly enjoying and have found provocative and interesting, as always. That newness will come from speaking about the region that I come from—the north-east of England, where I am involved in two small and medium-sized enterprises. I have a passion for the region, which is often cited as being one of those that will be most severely hit by the forthcoming public spending constraints. There is a great deal of fear in the region about the consequences of those decisions that are coming down the track. It is not easy. However, I have to preface my remarks by saying that we would not be in this position had the foot been applied gently to the brake two years ago in public expenditure rather than heavily to the accelerator. This accelerated the level of debt and, therefore, the initiatives that are necessary for this Government to take to correct the national macroeconomy. It is important that that is said, but it has been said many times already this evening and I think that it is generally accepted. I want to focus on what can be done and what the consequences might be.

The north-east of England has a higher dependency on the public sector than any other region in the United Kingdom. The public sector accounts for 56.4 per cent of the north-east economy. A study by PricewaterhouseCoopers—I retrieved it from the UNISON website, so I hope that it is accepted on both sides of the House as a reliable source—estimates that the impact of the public sector cuts on the public and private sectors over the next five years will be around 43,000 jobs or 4.1 per cent of the workforce in the north-east, which currently numbers around 1 million. Every single one of these job losses will be a personal tragedy for those affected, but if handled correctly these changes in our economy can put the north-east economy on a more sustainable and upward path for the future.

As evidence for this, I cite a collection of data that has been produced by the north-east public relations firm Recognition PR, which has tracked the new private sector job announcements in the regional press from September to the end of October. The total number of new jobs announced in the private sector was 4,451 in two months, which is very encouraging. Moreover, the same regional newspapers identified some £271 million of new investment by the private sector in its businesses in the north-east. That is more than the entire annual budget of the regional development agency, so it is a significant sum. It comes not from bureaucrats picking winners but from business owners investing in their own businesses, so the likelihood of its succeeding and leading to further growth is also there.

One of the great strengths of the north-east is that it is one of the few regions that exports more than it imports. Exports from the north-east in the second quarter of 2010 were at their highest level ever, at £2.29 billion. Again, that is a cause for some encouragement to believe that the private sector can, if freed up, fill the gap that will necessarily be created by adjusting the national public finances.

We are not an island in the north-east of England. Therefore, when you talk to businesses about what is necessary, they will tell you first that what we need is macro-stability. Unless there is macro-stability, investors will not invest in the region and customers will shy away. Therefore, it is essential that these actions are taken so that we retain low interest rates.

I am also keen that we create an enterprise economy—one that is very much focused on growth. In that effort, the decisions to reduce corporation tax rates, to do away with the previous Government’s proposed increase of 1 per cent in national insurance contributions, which would have ripped another £250 million from the north-east economy, and to freeze business rates will all help, as will freezing interest rates. The sooner we get back to growth, the faster the new jobs will come. If the economy of the north-east grows by 2 or 3 per cent, that is another £1.2 billion of investment in the regional economy. It is like adding a new Sage or companies the size of Greggs and Northumbrian Water to the regional economy every year. That will create jobs and wealth.

In the two minutes remaining, I will focus on the lessons that we can learn from the past. I was involved in public life in the 1980s when changes were made to the heavy, nationalised industries. I know the heartfelt pain that was caused in many communities, including to many members of my family who were involved in those industries at that time. One thing that I thought was a great mistake that we made as a Government, even though we did what was necessary at that time, was not to reskill and retrain people, allowing them to drift into the benefit culture, from which many of those communities still have not emerged. I think that there are some real opportunities. When people are leaving the public sector, we should provide them with the skills and retraining necessary to contribute to the private sector. As an example of this, the Northern Recruitment Group has set up a course called “Leadership Enterprise Opportunity”—a great title for a course. It takes senior executives who are leaving the public sector and retrains them to apply their skills to the private sector. That is having a hugely beneficial effect. Not only are those individuals securing jobs, but they are realising that a lot of the skills that they have—particularly in the areas of finance and IT—are easily transferable into the commercial sector and can contribute to the growth of that sector.

Finally, I love the imagination that was shown in introducing a cut or a break in national insurance contributions for new businesses that are setting up outside London and the south-east. This is an imaginative approach to providing incentives for businesses and for people to set up enterprises. However, I think that we could go further. I wonder whether the Minister would consider starting a discussion about whether we could recreate some of the attributes of the old enterprise zones, which did so much to bring about the physical regeneration of parts of the north-east of England. We could say that in certain black spots—for example, Middlesbrough, Hartlepool, Easington and Blyth—if you set up a new business, not only will you not pay national insurance contributions on the first 10 employees, but you could also get breaks in corporation tax, business rates or capital allowances. This would use the difficult choices that have to be made at this time in order to build a more sustainable footing for the regional economy going forward.