The Economy

Lord Dykes Excerpts

Thursday 28th April 2016 Lords Chamber

[Lord Dykes (Non-Afl)]

My Lords, I thank the noble Lord, Lord Bilimoria, for his helpful suggestions. Perhaps one day we should have the ambition of making him more enthusiastic about the European Union in all its aspects because he remains somewhat sceptical. He thinks that it is unavoidable, it has to be done and that it is the best thing for Britain. That is sufficient for the moment. He also referred to the possibility of a person of Indian origin becoming the Prime Minister of this country in the future. If for some interesting and intriguing idea that person was a Parsi, he would to have go to the House of Commons pretty quickly in order to be a candidate for that role, which he would fully deserve, given all the work he does.

I also express my gratitude to my old friend and colleague from our days in the House of Commons, Quentin Davies, now the noble Lord, Lord Davies of Stamford. We have both been European enthusiasts for many years. I shall emulate his excellent example today by being the only other speaker in the debate who will speak without notes, although I shall refer to a piece of paper when I mention one particular fact. The noble Lord was dead right in what he said. It is interesting that this debate, which is about the national economy, has been mostly about Europe and the dangers of Brexit. I am glad about that. I am very grateful to the noble Lord, Lord O’Neill of Gatley, not only for launching this debate, incidentally, but for referring to the European aspects of it and how creating a stronger economy in Britain is dependent on us remaining a member of the European Union economy as well.

Incidentally, I thought that the noble Lord, Lord Bilimoria, was far too pessimistic and unkind about the European Parliament. He has missed out on the developments in recent years, where it shares a legislative function 50:50 with the Council of Ministers. There are more regulations rather than just directives, so the Union is getting stronger by the moment. That includes us as well, despite the fact that we are not in some aspects of it, which is a pity, I think, and a bit slow and tardy on our part. The European Parliament’s record as a developing institution, which was strange, bizarre and remote to most people, is pretty good if compared with, admittedly somewhere that became one single country—the United States—where the turnouts in federal elections after independence, and even after the Civil War, were incredibly low for many years. Indeed, they were dominated mostly by a property qualification, so very undemocratic intrinsically as well. It was not “one man, one vote”.

When did the United States achieve a single currency? It was not until 1910, when it had the US federal dollar on its own. It took a long time there as well, but it became one single country. Probably the European Union will not do that, as the noble Lord, Lord Bilimoria, was inferring. However, we do not know about that; the agenda on that is open for the moment and it may develop because a lot of the other European countries have the strength psychologically of not worrying about this daft notion of a loss of sovereignty—which I suppose last existed even in Britain in 1912. Even then, by the way, a few years later the British Armed Forces in the First World War were under the control of a French commander-in-chief. That is a loss of sovereignty in those old-fashioned terms. Modern sovereignty in the European Union comes from making collective decisions together, many of them through unanimity and treaty decisions where there is no voting and everybody agrees. A lot of progress is being made where that collectivity of sovereignty from the whole Union decision also increases intrinsically and automatically, at the same time and simultaneously, the national sovereignty of each member state.

So none of the other member states worries at all about this British thing of losing sovereignty. It is like an old-fashioned person who went to a posh public school and now that the family has run out of money wanders around saying, “I don’t want to mix with these people because they’re very rough and go to public bars; I am very posh and grand”. It is geopolitical snobbery on a grand scale. It is very disturbing that distinguished people from other countries who come here, such as the noble Lord, Lord Bilimoria, think maybe that sovereignty is in that concept. That is completely out of date. This is a global village, let alone the European Union.

There are aspects of the British economy, too, which hold us back from being stronger in the European Union. I hope that we will be, and I hope that we will remain when the referendum comes. I scribbled a few of them down when listening to some of the things said in this debate. The manufacturing proportion is inadequate, for a country at our stage, at only 11%. It is a strange thing that people say, “Well, it doesn’t really matter. Services are much more glamorous, chic, and so on, while manufacturing is very boring, nerdy and tendentious, so it doesn’t really matter”. I think that it does. With the exception of the motor car industry, which is very successful in exports at the moment, there is no big significant growth in what I would call the long-standing manufacturing industries and sectors in this country.

Low investment, too, persists in net new UK domestic capital formation both in the public and private sectors. Perhaps the noble Lord, Lord O’Neill, would agree with me about the mistake we made by not having a Minister for the economy as well as a Minister for finance at the Treasury, as Germany does, which separates the two functions, ensuring that the real investment coefficients are kept in the forefront of debate in Germany. The trade deficit is ominous—the biggest ever figure. I think I am right in saying that all the other major European countries that export to us all have surpluses with us. A little bit of modesty, please, when we say we are unique and the most successful economy in the European Union. Germany is streets ahead of any other country and remains a very modest country in its geopolitical attitudes on the economy.

We have ominously low productivity, as the Minister referred to, which needs attention in the future. Although apprenticeships have increased in number, we still have a lot of poor-quality, semi-pretend apprenticeships that a lot of people in them feel very disappointed by and grumble about. These things can come together. If Britain stays in the European Union, we can then become a stronger economy.

I was rather disappointed recently to see that, in February, the very distinguished former central bank governor, now a Member of this House, the noble Lord, Lord King, was very sceptical about the single European currency. I think it is a great mistake in this country to have that attitude of, “Thank God we’re not members”. We were driven out of the exchange rate mechanism and now we are actually afraid of the euro. It scares us. We are afraid to be a member and do not think we can actually cope with it. If we all went to psychoanalysis and therapy that is what would come out when we were hypnotised. We would say that we were scared of the euro.

The noble Lord, Lord King, is just writing a book about the impending collapse of the euro. We were reminded that the noble Lord had been wrong on quite a few of the forecasts he made over the years. I remember him saying distinctly, in 2003, that the previous decade for Britain had been NICE, standing for “non-inflationary consistently expansionary”. He also said that 2004 would also be part of a very encouraging decade. That was a few years away from the major financial crisis. He made other predictions that were incorrect. That just shows that predictions are always difficult, particularly when they concern the future, so none of us should make too many predictions; otherwise we will make mistakes.

The financial crisis began totally in the United States. It was not a creation of any other, and there were bank failures here as well. The Labour Government did what was necessary to rescue those banks. Gordon Brown got no credit for it at all in the British press, nor did any of the senior Labour people defend the policy. The noble Lord, Lord Hain, made an excellent speech earlier, and I agreed with very much of what he said. The return of Keynesianism is absolutely essential and unavoidable in this country before we all go insane in economic terms. The noble Lord mentioned Alistair Darling, now the noble Lord, Lord Darling, and his contribution in reducing the deficit, and all the rest of it. Yet, no one—not even he—defended the Labour Government’s position of rescuing this country from the worst financial crisis that had been seen for decades, and then proceeding to run the economy reasonably well just for a very short time before they lost the election. Why did not Labour figures in those days defend what had been achieved by the Labour Government? It is most extraordinary.

I recall, as a Liberal Democrat Peer in those days, having discussions about the construction of the coalition. I think I am right in saying that about three-quarters of Liberal Democrat Peers wanted to deal only with Labour. The sums would not add up. Ed Balls was very difficult and the noble Lord, Lord Adonis, tried very hard to get something going but it was not possible. The other Labour leaders seemed to be concerned with the future: they wanted to move on. They then acquired the reputation of economic incompetence which was unjustified. It is extraordinary that a political party did not defend itself in those terms. It did do damage because it added to the pressure of people to give in and agree with the neo-liberal economic model, which has been a disaster for this country ever since it started in the early 1980s. People have been brainwashed that it is the only show in town.

I once made a very rash speech in Harrow, my constituency in those days, saying that if you create a society where the only thing that matters is making money, the society itself actually gradually disintegrates, even for the people who are trying to make the money. It does disintegrate and becomes a much nastier society. That is what has happened in this country under the neo-liberal economic model. There are lots of things that the Government can do with socioeconomic policies, not just economic policies to revive this country and strengthen it in the future. That does need our membership of the European Union.