Business and the Economy

Lord Field of Birkenhead Excerpts

Monday 14th May 2012 Commons Chamber

[Vince Cable]

That is the type of case that needs to be investigated; clearly, I do not know the facts behind that particular case. I do not want to take this as an opportunity to have go at Tesco; of course, its highly competitive retailing has been of great benefit to millions of customers, and we should not lose sight of that.

This intervention is designed to promote healthy competition, but it also speaks to a wider agenda that has emerged from this crisis, which is for business to be not only confident to expand and invest, but responsible too. That is the motivating factor behind one key element in the enterprise and regulatory reform Bill: our proposals to address directors’ remuneration, where the link between performance and reward has been weakened in recent years. We have a responsibility to make sure that shareholders of UK-quoted companies have sufficient information and power to challenge boards. Under the current regime, companies can all too easily ignore shareholders, and that is why we intend to give shareholders binding votes on directors’ pay.

We published detailed proposals in January and our consultation has just come to a close. We are now considering the responses and working carefully with stakeholders on the details. When we have finalised and published them, legislative measures will be introduced by Government amendment at the Committee stage of the Bill. Shareholders have shown admirable spirit in challenging boards. The so-called shareholder spring is a positive development. They are right to challenge boards; after all, it is their money. Our measures will give them the tools to maintain this challenge and, I hope, to reverse a trend that Labour was far too relaxed about.

Nowhere was Labour more relaxed, and with such disastrous consequences, as in relation to the excesses of the banking sector. We have been persuaded that it will be possible for the banking sector to perform its proper role in channelling savings towards productive business only if there is structural reform separating the so-called casinos from real, traditional banking. The banking reform Bill will boost the resilience of the UK banking sector, making it easier and less costly to wind down banks that get into trouble and curtailing the implicit Government guarantees from which the banking sector benefits. As I said to my right hon. Friend the Member for Louth and Horncastle (Sir Peter Tapsell), we intend to achieve this by mandating the ring-fencing of essential banking services from riskier wholesale and investment activities, as recommended by the Independent Commission on Banking chaired by Sir John Vickers.

The Government have given a clear commitment to legislate by the end of this Parliament, and banks will be expected to implement a ring fence as soon as practically possible thereafter. Implementation of the banking reforms will proceed in stages, with the final, non-structural changes fully completed by the beginning of 2019. This is another historic reform, and one where we lead the world.

[Mr Frank Field (Birkenhead) (Lab)]

I am sure that most of our constituents are grateful for this aspect of the Queen’s Speech. Does the Secretary of State see some link between the support that the Governor of the Bank of England has given him for these reforms, the hoped-for effects of reform on the City, and the fact that certain journalists are now trying to rubbish the Governor of the Bank of England for his support?

[Vince Cable]

I am not here to attack journalists; I am not sure which ones the right hon. Gentleman is referring to. It is certainly true that the Governor of the Bank of England has been absolutely clear from the outset that in order to have long-term stability in banking, these reforms, or something very like them, had to be implemented, as we are now doing.

One area where business success and responsibility coincide is in relation to flexible working. The UK employment framework compares well internationally and has helped to keep unemployment relatively low, despite the extremely difficult economic conditions, but that is not to say it cannot be improved, both for workers and employers. We want a flexible labour market that supports growth and creates employment, and making sure that that happens requires acknowledgement of changes in family life.

Most women now go out to work and men shoulder more of the duties at home. As roles and responsibilities have changed, our lives have become increasingly complex. That is not just true of parents with young children. Many have to combine working with looking after an elderly parent, a sick partner or a grandchild. Extending the right to request flexible working to every employee will make that easier.

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[Mr Frank Field (Birkenhead) (Lab)]

I am immensely pleased to follow the right hon. Member for Mid Sussex (Nicholas Soames). I am sure he will forgive me if I do not develop the themes that he outlined, although I very much hope that his ideas for a corridor in the south will be taken up in the north-west as well.

I want to make a single contribution to the debate, if I may, by stressing the effect that the Queen’s Speech has had on me and therefore, I guess, on many other people in this country. I think we will see it as a dividing line in this Parliament. Before the Queen’s Speech, I guess that many in the House and probably even more in the country wanted to give the Government the benefit of the doubt. Now, however, we begin to see that the Government are bereft on two fronts—first, on ideas about how we achieve growth; and secondly, and equally important, they seem to have no understanding of what would normally be called the art of government. It is not merely a matter of assembling Bills and pushing them through this place. It is about understanding the reaction to them outside and what response to those measures we should expect from outside. The Queen’s Speech is a dividing line in this Parliament. The jury is ceasing to be out on whether the Government have shown that they have both the ideas and the competence for good government.

I shall concentrate on one element that I think is crucial to growth. Of course there is a discussion about how Lord Keynes’s ideas could and should be applied to the economy. There are those who emphasise the importance of reflation. I do not totally go down that route. This year the Government will be borrowing £24 for every £100 that they spend. If that is not reflation on stilts, I do not know what is. If we could conduct a séance and call Lord Keynes up now, he would not, I hope, minimise the importance of reflation, but he would draw our attention to one other aspect of what he thought was crucial at this stage of the business cycle: business confidence.

In the period after the general election, generally speaking, businesses believed that the Government knew what they were about. They did not lay off workers to the same extent as in other recessions, but hoarded them and negotiated more flexible arrangements with them. They believed that there would be a light at the end of the tunnel and it would not be an oncoming train. The key moment when business confidence began to change was the pre-Budget report. Businesses increasingly realised that the Government did not have many ideas in the cupboard about how to deal with the size of the deficit, which was important, but do that skilfully so that we managed to engender growth.

I think the Business Secretary, though he did not mention it in his speech today, hinted over the weekend at what the Government had hoped for in an investment-led boom. The Government’s failure could not be clearer than on that front. Business after business in this country is sitting on huge reserves of capital, waiting for some encouragement from the Government to use that capital to start an investment-led boom, which would lead to employment and increased prosperity for our country. The failure of the pre-Budget report, followed up in the Budget itself, convinced the business community that there was little point in spending those reserves. Quite what they do with them now is anybody’s guess. Until the Government come up with a strategy that convinces the business community that they can do two things at once—bring down the deficit but in a way that encourages business confidence in the future, and, as my right hon. Friend the Member for Sheffield, Brightside and Hillsborough (Mr Blunkett) said, confidence particularly in this country—it is difficult to envisage anything at all getting this economy off the bottom of the recession we are enduring.

A Tory-led Government, who pride themselves on understanding civil society, would never have applied VAT changes to the crucial sector of churches and historic buildings in this country. We are concerned with what goes on not only in churches, but in the surrounding area—in cathedral closes, choir schools and so on. The Government have understood nothing about how standing up at the Dispatch Box saying things can have the most deadly effect in the country on people’s hopes and expectations.

As I said when I began, it is with sadness that I rise to say that now, in the second half of the Parliament, the jury is ceasing to be out, and it believes that the Government have neither the ideas nor the expertise in the art of government to see us through the crisis.