Queen's Speech

Lord Bilimoria Excerpts

Wednesday 2nd June 2010 Lords Chamber

[Lord Bilimoria]

My Lords, I congratulate the Minister on her appointment. We have all witnessed the hard work that she has put in in this area. I also congratulate the noble Lord, Lord Henley.

Today, we have a huge public sector debt and a huge deficit. Working-age employment is at its lowest level since 1996 and we have over 5 million out-of-work benefit claimants. We are one of the most highly taxed economies in the world and Europe is on the brink of disaster. The previous Government blamed our crisis on the global situation and now the current Government are blaming the previous one for everything. Surely we have had enough of the blame game.

Being out of the euro has saved the British economy from being added to the list of the PIGS countries. For the euro to be truly effective, I believe that you need political, emotional and economic alignment. In reality, countries set their own fiscal measures, there is no emotional commitment and, as we know, there is no economic alignment—just look at Germany and Greece. Thanks to being out of the euro, we have not been straitjacketed by the euro interest and exchange rates. I am all for keeping a mutually beneficial relationship with Europe as a trading partnership.

On the subject of trading partners, I am absolutely delighted that the enhancement of the UK’s partnership with India was mentioned by Her Majesty in the gracious Speech. I agree with Larry Summers, who said that,

“the dramatic modernisation of the Asian economies ranks alongside the Renaissance and the Industrial Revolution as one of the most important developments in economic history”.

I am proud to be president of the UK India Business Council, supported by UKTI. India’s economy has grown by over 6.5 per cent while we have been in recession. British business, in particular our SMEs, could be doing so much more.

The coalition Government’s move to reverse the national insurance increase is welcome; according to the FSB, it will help to protect 57,000 jobs. On the other hand, the 50p top tax rate, the non-dom levy and the proposed capital gains tax increases not only send out all the wrong signals to the world but also hinder our ability to create a balanced economy. Many studies suggest that an increase in capital gains tax does not actually increase tax receipts; it is quite the reverse. For example, during the last century in the United States, virtually every time taxes were lowered, whether on employment, savings, investment or risk taking, tax revenues went up, not down. A small country such as Britain can flourish only if it is able to create a highly skilled, highly creative, innovative, open and value-added economy, and this can be achieved only by the Government creating the right economic environment that attracts both inward investment and the best brains. Creating a competitive tax structure is essential to enable this. As Winston Churchill famously said,

“for a nation to try and tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle”.

The introduction of the Office for Budget Responsibility is a positive move, as is the plan to increase the Bank of England’s regulatory power. In my opinion, the FSA was asleep on the job and definitely not up to the job. I am convinced that, if the Bank of England had been in charge, much of the suffering in our financial sector and the economy over the past three years would have been prevented.

The welfare reform Bill is also welcome. We have a benefits trap in this country. Today, the difference between welfare support and a 40-hour week on minimum wage is just £37—hardly enough to inspire people in difficult times to seek jobs. As I have said before, in 1997 government spending accounted for 40 per cent of GDP, similar to the level in the United States. Last year the figure rose to 52 per cent of GDP. That is just not sustainable. We have a public sector that is not delivering; it is overpaid and full of jobs for life and gold-plated pensions. Setting a target for reducing public sector spending to 40 per cent of GDP is essential and would, in effect, wipe out our deficit.

This is not just about making cuts; it is about making the right cuts. Ring-fencing services for votes has led to an incredible sense of imbalance. On the one hand, the Department for Work and Pensions has a £135 billion budget, yet we skimp on national security and our Armed Forces while our brave troops are making the ultimate sacrifice for us.

I am delighted that the Minister has talked about supporting SMEs. There is talk of a £500 million loan guarantee scheme, but that is a drop in the ocean when compared with the £1 trillion of quantitative easing for the financial sector. Again, this is about priorities. Britain’s higher education sector punches above its weight and is the best of the best in the world, in spite of 13 OECD countries outspending the UK as a proportion of GDP. It is important that cuts in the area are completely avoided. Education is our future and the key to our competitiveness.

I believe that this Government can snatch victory from the jaws of defeat if they recognise that it is the private sector that creates the jobs that pay the taxes that pay for the public sector and that thus pay the people who genuinely need our help. We must never forget, as the Minister said, that by stifling business we kill the goose that lays the golden egg.

This was a game-changing election and I am very hopeful about this new coalition. However, our economy could either be “Con-Dem-ed” or “Con-Liberated”. For the economy, although things look incredibly bleak at this moment, now is the time to seize the opportunity—to go down the route not of the politics of envy but of the politics of aspiration. Now is the time to unleash the spirit of enterprise and achievement for which this great country has been famous for centuries and centuries.