Queen’s Speech

Lord Forsyth of Drumlean Excerpts

Monday 13th May 2013 Lords Chamber

[Lord Eatwell]

My Lords, I am most grateful to the noble Lord, Lord Deighton, for introducing this part of the debate on the gracious Speech. If only all the good news that he spoke of had some connection with economic reality.

Like all noble Lords, I look forward to the maiden speech of the noble Baroness, Lady Lane-Fox. Many noble Lords may not know that she is an accomplished actress. It was surely no accident that one of her most successful roles was as Miranda in “The Tempest”, since Miranda famously hails:

“O brave new world,

That has such people in’t!”.

The noble Baroness has been a major force in guiding this country into that brave new world of information technology and is one of the most remarkable people in it. We are all delighted to see her in this House.

The whole House is keenly aware that the central issue facing Britain today is economic failure: no growth for two years, output still 2.5% below the level of four years ago, 1 million young people unemployed, productivity well below the level of 2008, the banking system still unreformed, and a government deficit that has not fallen significantly for two years—the worst economic performance of any G7 economy other than Italy.

Given the seriousness of our economic problems, it has been widely remarked upon that there are no Treasury measures in the gracious Speech other than the welcome national insurance contributions Bill and the banking Bill carried over from the previous Session. However, there should be no surprise at this inaction. It is the very essence of the Government’s strategy that the Treasury has a very limited role other than the maintenance of austerity. Activism is to be left to others. That is made abundantly clear in the recent most valuable outline of the Government’s economic policy that accompanied the Chancellor’s letter defining the remit of the Financial Policy Committee. It was echoed by the noble Lord, Lord Deighton, today, but he left out one bit. The letter declares:

“The Government’s economic strategy consists of four key pillars: monetary activism and credit easing, stimulating demand, maintaining price stability and supporting the flow of credit in the economy”.

All that is the responsibility of the Bank of England. The letter continues with,

“deficit reduction, returning the public finances to a sustainable position and ensuring … fiscal credibility”—

austerity—

“reform of the financial system, improving the regulatory framework to reduce risks to the taxpayer and build the resilience of the system”,

which refers to the banking Bill, of which there will be more later,

“and a comprehensive package of structural reforms, rebalancing and strengthening the economy for the future, including an ambitious housing package and programme of infrastructure investment”.

All this is predominantly farmed out to other departments.

Those are the pillars on which the Government’s entire strategy is built. It is worth considering just how sound these pillars really are. First, on monetary activism, there certainly has been plenty of activity—from quantitative easing and Merlin to the Funding for Lending scheme and now Funding for Lending mark 2. The difficulty with all that activism is that when there is a lack of demand, it is very difficult for monetary policy to achieve any traction, so QE2 follows QE1 and there is no noticeable effect on lending. Funding for lending offers banks cheap funds to lend at highly profitable rates, but there is no noticeable increase in lending. Now we have Funding for Lending 2, and without any prospect of sustained growth of demand the result will be the same—no noticeable increase in lending. It is no wonder that in his letter defining its remit, the Chancellor appeals rather plaintively that the FPC,

“takes into account, and gives due weight to, the impact of its actions on the near-term economic recovery”.

In other words, “give me financial stability, but not yet”.

What all that activism has achieved is a serious distortion of the monetary system. The rock-bottom interest rates of which the Chancellor is so proud have put pension funds under severe strain, and pensioners have no chance of buying a worthwhile annuity. The excess liquidity, unused for real investment, is funding a bubble in the stock market that bears no relation to Britain’s real economic condition. The conclusion is that monetary activism may help growth a little bit but fundamentally does not work. That is one pillar gone.

Of the next pillar, reform of the banking system, the key reform is of course the banking Bill. But which banking Bill, the watered-down version of the Vickers proposals favoured by the Treasury or the beefed-up banking Bill proposed by the Parliamentary Commission on Banking Standards? The banking Bill has already passed through Committee in another place, where any amendments related to the serious criticisms of the Bill in the Parliamentary Commission on Banking Standards’ report, published on 11 March, were resolutely voted down by the Government.

A further report by the commission is due at some time in the next four weeks or so. Will the Minister tell the House how the Government intend to deal with the arguments of these two reports? Will the Government recommit the Bill in another place? If not, how are the commission’s proposals to be dealt with in this House, or has the lobbying by the banks secured the Government’s commitment to ignore the commission’s arguments? Conclusion: the banking reform Bill is decidedly shaky.

I turn to the,

“ambitious housing package and programme of infrastructure investment”,

which the Chancellor claims are at the heart of his comprehensive package of structural reforms. These were referred to by the noble Lord, Lord Deighton. We certainly need an ambitious housing package. No peacetime Government since the 1920s have presided over fewer housing completions than this Government have in the past two years. The situation is getting worse. Housing starts fell by 11% last year to below 100,000, while house prices, particularly in London and the south-east, spiralled out of the reach of young people attempting to buy a first home.

So what do the Government do? Unbelievably, they increase the affordable homes guarantee programme that applies to the existing housing stock as well as new build, giving their own special twist to the housing price spiral. This British version of Fannie Mae should be focused on new build. That is what is needed. Even this bit of economic activism on housing is a bit too much for the Treasury’s do-nothing sensibilities. The decision whether the guarantee scheme is to continue in three years’ time is to be handed over to unelected officials at the Bank of England.

What of the programme of infrastructure investment? We were told in the Budget that the Government are planning a £3 billion boost in two years’ time. I ask the Minister why, when infrastructure projects are notoriously slow to get started, work cannot begin now. The Government are committed to borrowing the money in two years’ time, so why not borrow it today? Is the postponement not entirely due to the Government’s attempt to massage a falling trend in the deficit, however slight?

As to the railways, the welcome paving legislation for HS2 proposed in the gracious Speech heralds a change of heart from the more than £1.25 billion cut in railway investment in the last spending review. The planned increased of £9.2 billion for five years from next year is clearly needed and welcome, but will the Minister tell us how it is to be funded? How much of it is to be paid for by an increase in Network Rail’s debt and how much by yet more inflation-busting increases in rail fares? Conclusion: the infrastructure pillar may be in place at some time or other in the future but certainly not today.

Finally, I turn to the fourth pillar of the Government’s economic strategy: austerity, to ensure that,

“fiscal credibility underpins low long-term interest rates”.

As all noble Lords will be well aware, there is a growing international consensus among all serious commentators on economic policy that austerity strategies have failed. The academic work purported to validate the austerity policy has been demonstrated to be seriously flawed. As for Britain, Olivier Blanchard, the chief economist of the IMF, has said that the country is “playing with fire” if it allows stagnation to continue.

As your Lordships are well aware, in 2010 the coalition’s austerity transformed Britain’s growth rate from a steady 2% a year into an equally steady 0% a year, with little prospect of returning to 2% in the near future. The level of output remains stubbornly below the level of output obtained in 2008, while other countries have at least recovered from the worst ravages of the global financial crisis. What is the Government’s justification for clinging to this failed doctrine? The Treasury argues over and over again that any change to the strategy it has followed for the past three years will damage the Government’s credibility in the financial markets, and that the subsequent increase in long-term interest rates would outweigh any benefits from cutting taxes or increasing spending. Since this is the only shred of justification for sticking to the failed austerity policy, it is worth examining for a moment.

First, with whom are the Government seeking credibility? The answer is: the markets. Who are they? What they are not is some single malevolent force tying George Osborne’s hands behind his back as he pleads to be set free to stimulate growth. In fact, the markets comprise millions of individual traders who pore over their computer screens trying to guess how the markets will move in the next month, week or even the next few seconds, and trying to make a secure return. In other words, they are trying to guess what everyone else in the market will do in response, for example, to announcements by firms or Governments, to the release of economic data or to research reports. This is not easy, but it is made much easier if an authoritative source makes statements that every trader believes all the other traders will accept. We have had a striking example of this in the eurozone, where Mario Draghi’s statement that the ECB would do everything necessary to defend the euro convinced each trader that all the other traders would take Draghi at his word. Accordingly, the markets all moved together in exactly the way in which Mr Draghi wanted. Authoritative statements can move markets, so if all the traders are convinced that any relaxation of austerity will result in higher interest rates in the UK, it will.

Credibility is potentially a vice tightening its grip around the heart of the British economy, but what do the clowns at the Treasury do about it? They do everything they can to reinforce those traders’ beliefs. They turn potential into reality and they cry from the rooftops that the markets will tighten the austerity vice because it is the only justification they have left of a failed policy, and the danger for Britain is that anyone will believe them. At the same time, they falsify the arguments for abandoning austerity. No one is expecting George Osborne to take himself off to the Tower of London, crying out to the world, “I was wrong”—although when thinking about it, that is not quite such a bad idea. What we all hope for is a steady and carefully staged change of emphasis. Bring forward that increase in infrastructure spending; why postpone it for two years? A British investment added to a strengthened banking Bill, a jobs guarantee for the long-term unemployed, a real new-build housing programme, and, to improve the existing housing stock, a reduction in VAT on home repairs, maintenance and improvements—none of these requires a fanfare announcement; all they need is real activism from a do-nothing Treasury.

What is left of the four pillars?

[Lord Forsyth of Drumlean]

My Lords, I have much sympathy with what the noble Lord says about clarity. Can he tell us by how much the Opposition would wish to increase borrowing in order to deliver the programme he has just outlined?

[Lord Eatwell]

Gross borrowing could be increased so that net borrowing would fall. That is our strategy.

Again, what is left of these four pillars is something that the Opposition perhaps do not understand. The noble Lord, Lord Deighton, who has a good economics degree, understands it very well. What is left of the four pillars of the Government’s strategy? Monetary activism that does not work, a banking Bill that fails to reform the banks in the way that Britain needs, an infrastructure policy that recedes into the distant future, and a housing policy that does precious little for the new build that homebuyers and the construction industry desperately need. Last, but by no means least, there is an austerity policy that fails to cut the deficit but is very successful in cutting real incomes. Those are the four pillars, but what this Queen’s Speech reveals is that the Government’s economic policy does not have a leg to stand on.

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[Lord Forsyth of Drumlean]

My Lords, it is a great pleasure to follow the right reverend Prelate, who is absolutely right to warn us of the considerable dangers of unmanageable debt both in households—private debt—and in government. We are heading for a doubling of our national debt by the end of this Parliament to about £1.5 trillion to £1.6 trillion. For the life of me, I do not know how it is possible to pay back that kind of money. We are passing on to the next generation a terrific burden, one that is tough enough already with interest rates that are well below historical norms. They will certainly go up, and with them will go the cost and burden of servicing the debt. I have considerable respect for the noble Lord, Lord Eatwell, but when I asked him by how much the Opposition wish to increase that debt still further, he did not really give me an answer. He told me that the Opposition did not understand this. I think that he meant the Government, but he may have been listening to the interview that his leader gave on the “Today” programme, which certainly gave the impression that the Opposition did not understand it.

[Lord Eatwell]

I am grateful to the noble Lord for correcting any verbal infelicities that may have occurred. I wonder if he has noticed that the significant government cuts in expenditure have not resulted in a falling deficit for the past two years. In the same way, an expenditure programme targeted on worthwhile activities that stimulated a flow of tax returns would result in a reduction in the deficit. One other small point: when he says that there is a burden on our children from this debt, I wonder if he ever thinks about who we owe the debt to. The answer is that one group of our children owes it to another group of our children. Collectively, there is no burden.

[Lord Forsyth of Drumlean]

That is all right, then; we will just write it off, there will be no problem and the world will continue to treat the pound in the same way. One of the extraordinary things is that although the pound has sunk significantly on the markets relative to other currencies, we are still not able to increase our exports and improve our productivity. As the noble Lord, Lord Empey, said, the key to this is being able to sell goods and services to a global marketplace competitively. Unless we can increase our revenue, we will not pay back the debt or, more importantly, provide the public services that the right reverend Prelate rightly emphasised as being of importance. The issue for us is how we do that.

The gracious Speech is a bit disappointing in the vision stakes. It is a list of Bills. One of the things that I have learnt in almost 30 years of being associated with Parliament is that legislation is seldom the answer to any problem, and usually creates considerably more. The idea that we should address every problem by thinking of a Bill or a new regulation comes out of this gracious Speech. To be fair, many people have said that they thought that the Speech was a bit thin, and in some regards it was. Perhaps it was modesty on the part of my noble friend, but I do not know why Her Majesty did not refer in the gracious Speech to the fantastic success that we had last summer with the Olympics, when Britain was advertised across the world as a competitive, successful and enterprising nation that was proud of its young people. My noble friend Lord Deighton played his part in ensuring that the Games were an enormous success, along with my noble friends Lord Coe and Lord Moynihan. Perhaps we could have done with a touch of levity in the Speech: I was itching to know whether Her Majesty had any further plans for appearing in Bond movies, for example.

I think that we have to go back to 1946 for the last time that there was a proposal to amend a Motion on the gracious Speech, which is happening in the other place. That amendment arises, again, because of the issues that the noble Lord, Lord Empey, pointed to—because Banquo’s ghost continues to haunt us. I cannot believe that it is now so many years since we discussed the Maastricht treaty yet I find myself mouthing the same arguments now to colleagues as appeared then.

I want to touch on the central themes of the gracious Speech. We have to improve Britain’s economic competitiveness and get Britain working and our economy growing again by investment in infrastructure.

I have to say to my noble friend Lord Deighton, who is a very clever chap, that whatever one’s views on the high-speed train—I have views that I had better not repeat because I want to be supportive of the Government—the immediate need is for jobs now. In roads and transport, we want people out fixing the holes in the road that are there today. We need more activity now in order to create employment. It is no good dreaming up fantastic, high-profile, wonderful schemes that will take place in 25 years’ time. We may not be around to see the benefits of those projects.

Similarly, there is talk of wanting another Bill to reduce regulation. Why do you need legislation to get rid of legislation? I should declare an interest as chairman of a small business that my daughter runs selling handbags—which are very good, by the way. Small businesses are not allowed any rates relief while they are setting up and before they start trading. Rates are a huge burden, particularly on the retail sector. They are competing with companies, such as Amazon, that pay no corporation tax or rates because, thanks to the splendid efforts of many entrepreneurs—not least the noble Baroness, Lady Lane-Fox, whose speech we very much look forward to hearing this afternoon—they are using cyberspace and are therefore able to escape taxation. Their competitors on the high street in bricks and mortar are faced with a burden of rates that they must pay regardless of whether they are profitable. It is no good saying that we are reducing the burden of corporation tax because you pay corporation tax only if you are making a profit, and our high streets are bleeding. We need to look at the burden of business rates and shift it in a direction that takes account of the needs of entrepreneurs and people starting up, particularly in retail.

The gracious Speech also refers to our commitment to encourage people to save for their pensions, but why do my noble friend and his colleagues in the Treasury continue to interfere and change the rules that apply to pension schemes? Raids started with Mr Gordon Brown’s on dividend tax relief. Then we had A-day; rules were going to be set in stone and people could rely on them, but in every Budget and finance Bill we have another nibble at the rules on pension saving. Why does that matter? People might say that it affects only the very wealthy who have built up very large pension pots. It matters because it undermines confidence in a long-term saving vehicle in a country that needs more long-term saving. Then you have the Government, who say that they are holding down interest rates because of their control on public expenditure—which, incidentally, is going up in cash terms—and who are funding their own borrowing by quantitative easing and creating, through quantitative easing, an artificially low interest rate. You then have the contributions that employers and companies must make to company pension schemes determined by the gilt yield. The result is that billions of pounds that would otherwise be going into growth and investment to create jobs for the future are going into pension funds, whence they will never come out because the assessed liabilities of those pension funds have been exaggerated by the Government’s quantitative easing policy. Far from quantitative easing helping, it is causing enormous damage and sucking productive funds out of the economy, from the private sector, which would otherwise be invested in job creation.

There is also the commitment to supporting the union, which, of course, I very much endorse, but if people are being asked to vote in a national referendum about Scotland’s continued place in the United Kingdom, which is in the interests of Scotland and the rest of the United Kingdom, we need to sort out the issues that remain unresolved from devolution and, in particular, the role of Scottish MPs voting at Westminster on devolved matters: the so-called West Lothian question. People voting in the referendum need to know what they are voting for. The Government simply cannot continue to run away from the West Lothian question. They need to say what the arrangements will be in future.

Similarly, if we are to continue with a devolved Parliament, we need a system of funding that is fair to Wales, England and the rest. Barnett is certainly not that. Repeated reports, including one from the House’s own committee that was set up for the purpose, have drawn attention to the unfairness of Barnett. The Government simply cannot say that they are concentrating on reducing the deficit and are therefore not doing anything about Barnett. That is a non-sequitur. There is no relationship between these two arguments.

On what is going on at the other end of the Building in respect of Europe, it seems that the central theme of the gracious Speech is our country being competitive and creating those jobs and opportunities that the noble Lord, Lord Empey, talked about. That depends on our looking outwards and recognising what is going on in Europe. It is not a matter of our leaving Europe; the rest of Europe is leaving us. It is going off on this madcap scheme to have a single currency. There seems to be no price that it is not prepared to pay in terms of the misery being created, particularly in the southern European states. They have unemployment among young people of 60%—more than half their youngsters unemployed. That is not only an outrage but simply unsustainable. The rest of Europe is determined that no sacrifice is too great for the sake of this project.

[Lord Spicer]

Can my noble friend confirm that one of the reasons why it will be so difficult to renegotiate the repatriation of powers that he has implied already is the acquis communautaire? The acquis insists on all movement, all the changes in the treaty, going in one way: towards a federal state. It is endemic in the treaty and is always supported by the court.

[Lord Forsyth of Drumlean]

My noble friend is absolutely right. I remember, when I was an Employment Minister, spending hours trying to prevent the working time directive coming into being, which ended with our challenging it in the courts and being advised that we would lose because the court has a duty to promote the acquis, which is about integration. We are involved in a club that has a particular direction. That direction is to create a country called Europe with one Finance Minister, one currency and one set of interest rates, which will take no account of the relative competitiveness of the member states. We can see what is happening. The result will be years of economic decline. It is our marketplace. It is a big marketplace, of course, but the rest of Europe actually sells more to us than we sell to it. We have a Commonwealth. We have relationships around the globe. We need to get out there and sell to those parts of the world that are growing. That is where our future lies. It does not lie in being tied up in sclerotic bureaucracy created by this organisation called Europe.

As to the referendum, all the political parties are split to one degree or another on our membership of the European Union. We should have a referendum as soon as possible. Just as it was argued in Scotland that we should have a referendum in order to end the uncertainty as quickly as possible, so we should have a referendum to end the uncertainty about our continuing membership of the European Union. Some of my colleagues who are of the same view as me say, “We might lose. Perhaps we should delay it. Perhaps we should put the arguments for longer”. Others, who are in favour of us maintaining our current relationship, take the same view. Let us trust the people and let them decide.

I say to my noble friends that the most disgraceful thing has been the behaviour of the Deputy Prime Minister and the Liberals on this matter. I took part in the general election campaign. I saw the leaflets that were produced asking us to sign a petition to send to Liberal headquarters, with a picture of the Deputy Prime Minister saying that the people of Britain must be given an in/out vote. That is what the Liberals fought the general election on. Indeed, the former Prime Minister, Gordon Brown, was attacked by Nick Clegg at Prime Minister’s Questions for not giving the people an in/out vote. Nick Clegg says that he wants to restore trust in British politics. Holding the Prime Minister hostage and preventing him giving the people a say on this crucial matter is a very funny way of doing that. Let us have a referendum, get it out of the way and then concentrate on building our prosperity by selling our goods and services to the rest of the globe, and using those relationships—our soft power—to make Britain produce the resources and revenues that we need to fulfil our obligations to our fellow citizens.

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[Lord Lea of Crondall]

My Lords, as the first speaker from these Benches following the outstanding maiden speech of the noble Baroness, Lady Lane-Fox of Soho, I add that, as someone who has always been in difficulty in working my computer, let alone shopping online, I stand in awe of anyone in that line of business. Perhaps I can get some private tuition.

I welcome the role that the Bishops are taking on as the only territorial representatives in this House, as well as now having the financial expertise of the most reverend Primate the Archbishop of Canterbury, in both cases indicating a relationship to real people in real communities.

I wish also to refer to the highly political 16-minute speech of the noble Lord, Lord Forsyth. No attempt was made by the Whips on the government Benches to remind him that eight minutes had been advised. It was a 16-minute speech, and I trust that the government Chief Whip will now confirm that we can all have 16 minutes, especially in our case, as my noble friend Lord Bhattacharyya seems to have disappeared.

[Lord Forsyth of Drumlean]

My Lords, I am most grateful to the noble Lord. I think that I was interrupted, and also no time limit has been specified for this debate.

[Lord Lea of Crondall]

There is an advisory limit of eight minutes. I inquired and that was stated. I do not know whether anyone would like to confirm that that is the case.

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[Lord Razzall]

My Lords, first, from these Benches I congratulate the noble Baroness, Lady Lane-Fox of Soho, on her brilliant maiden speech. Like other noble Lords, I look forward very much to her contributions to the deliberations of this House and her contribution to driving growth in the economy, which she touched on so ably in her remarks.

There has been much criticism of the gracious Speech, particularly from those on the Benches opposite, who suggest that it is slight and insubstantial. I do not share that view. The criticism suggests that the role of government is to legislate. I do not believe that that is right; the role of government is to govern. Do we really believe that the 30 or so crime Bills in 13 years of Labour Government caused the recent drop in crime rates? I certainly do not. I come from the school which believes that we have too much legislation, and I have often thought that occasionally a one-line Queen’s Speech saying, “My Government propose no legislation this year”, would be appropriate. Whether your Lordships agree that the primary role of government is to govern, all must agree that the Government now face two major challenges, both of which have been touched on by other noble Lords: what to do about the economy and what to do about Europe.

On the economy, there is common ground that economic growth will not be forthcoming without a correction in aggregate demand. Unlike in the 1930s when Keynes was a lone voice against the austerity measures of the Bank of England, there is also now common ground that an economic slump is not self-correcting, that there are limits to monetary policy alone in dealing with a deficiency in aggregate demand, and that fiscal policy plays a significant role in stimulating demand. But then policy advocates part company. On the one hand, Keynes is prayed in aid, particularly on the Benches opposite, to dignify any proposal to spend more money and oppose cuts, while on the other hand, the right wing—not represented quite so strongly here—sees its authority in Hayek rather than Keynes to justify supply-side arguments—namely, that we need more deregulation, to scrap employment legislation, and that growth will come from the private sector always filling the space left by a retreating state. I have always leant towards the Keynesian side of the argument, but I have to accept that the UK crisis since 2008 is different from that in the 1930s.

In the 1930s, we did not see the difficulties in the banking sector that we have had since 2008. Indeed, in his classic work, Keynes hardly mentioned the problems of the banking sector. If we take banking assets relative to GDP, the UK has the biggest banking sector of any major industrial country. The banking crisis and the measures taken to avoid future crises have, as my noble friend Lady Kramer said, seriously impeded credit flows, particularly to SMEs and to individuals. As the Minister indicated, the Green Investment Bank and the business bank represent an attempt to start to deal with this problem. However, progressing from millions to billions being available for investment through those two institutions will not be easy.

To understand the other difference with the 1930s, I need to be a bit technical. In the 1930s, Keynes assumed that private sector multipliers of two to three times for every £1 of public sector spending would apply. However, the Office for Budget Responsibility now estimates that there is an income multiplier of only 0.4 for tax cuts and revenue spending and a multiplier of one for capital projects. Tax cuts, or an increase in current spending as advocated by certain members of the Opposition, would have significantly less effect on the creation of demand and carry a much greater risk of damage to our credibility in world markets and our ability to finance the deficit. When the coalition Government were formed in 2010, it was clear that the UK would lose the confidence of our creditors without a credible plan for deficit reduction. However, the issue for the Government now is whether the balance of risks has changed. In May 2012, the IMF said that the risk of losing confidence as a result of a more relaxed fiscal policy, particularly the financing of more capital investment by borrowing, may have diminished relative to the risk of deterioration of public finances through lack of growth. I believe that there is now a case for a significant increase in public investment where there are impediments to growth, particularly capital spending on housing and infrastructure spending on the so-called “shovel-ready” projects.

On Europe, the noble Lords, Lord Lawson and Lord Lamont, as well as television star Michael Portillo, have now weighed in on the side of the “come out” camp. I am slightly reluctant to intrude on Tory grief over this issue but will make three points against them. First, the noble Lord, Lord Lawson, disagrees with the common assumption that leaving Europe would cost 3 million jobs. Indeed, he said that the Deputy Prime Minister was talking “poppycock” in using that argument and knew nothing about economics. As Alistair Darling said in the Times last week, although any assessment is theoretical, even if only 1.5 million jobs would be lost, that is a lot of jobs. Secondly, the main thesis of the noble Lord, Lord Lawson, was that our presence in Europe distracts our industry from competing in the growth markets of Asia, India and South America. However, it does not seem to stop the Germans in those markets—and they do not want to come out of Europe. The third argument against those advocating coming out seems to be the potential loss of international investment. The motor car industry is a classic example of an industry that has seen major overseas investment, primarily because of our presence in the European Union. The motor vehicle industry is a huge success story—last year, for the first time ever since the creation of the motor car, we exported more motor cars from the UK than we imported. Why should Tata, the Japanese and the Americans locate a new plant in the United Kingdom if we are outside the European Union? It is a highly risky strategy to assume that the European Union would allow us free trade in motor vehicles if we were outside it.

I have a suspicion that the arguments to come out, certainly from members of the Tory party in another place, have much more to do with fears of UKIP than economics. However, those Members of another place who are in fear of UKIP are in danger of misreading why people have been voting for UKIP.

[Lord Forsyth of Drumlean]

I am most grateful to the noble Lord, who obviously feels very strongly about this and feels that he has very strong arguments. But if they are so strong, why is the Liberal party in the coalition preventing the Government committing themselves to having a referendum, so that we can have this debate and people can decide, given that the Liberals campaigned for an in/out vote during the general election campaign?

[Lord Razzall]

I am grateful to the noble Lord, Lord Forsyth, for his intervention. As in so much of life, the question is timing. We are not in favour of having a referendum now. We might well have been in favour of having a referendum in 2010. Bearing in mind the policy of the Prime Minister to renegotiate our arrangement with the European Union, it seems sensible to have that referendum once that renegotiation has been completed.

Going back to my argument, I do not believe that people are voting UKIP because they want to come out of Europe. That is demonstrated by the detailed research that the noble Lord, Lord Ashcroft, has done. I commend his polling information to all noble Lords. It is very informative. People are voting UKIP because of a desire to go back to a perceived past world of Englishness, with no foreigners, with grammar schools and smoking in pubs, and where people knew their place.

John Major spotted this trend 20 years ago when he glorified a world of,

“long shadows on county grounds, warm beer, invincible green suburbs, dog lovers … old maids bicycling to Holy Communion through the morning mist”.

Unfortunately for his point, John Major quoted Orwell out of context. In criticising the past, Orwell had also talked about:

“The clatter of clogs in Lancashire mill towns, the to-and-fro of the lorries on the Great North Road, the queues outside the Labour Exchanges”.

I fear that this is the world to which UKIP wishes us to return. When I think of UKIP, I also think of 80 year-old Wyn Florey, on my ward committee, who said to me in the 1980s, “Don’t let them tell you about the ‘good old days’; they weren’t”. On the same point, my Tory colleagues might be better persuaded by William Whitelaw, who said in 1972:

“I do not intend to prejudge the past”.

I hope that, in deciding about Europe, Tory colleagues are not seduced by UKIP, and follow the Whitelaw advice. I hope and pray that they will not sacrifice the interests of our children and grandchildren to a misplaced nostalgia.

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[Baroness Hanham]

I was not ignoring Europe. I was speaking directly to the points that were made about India and Africa. Of course our trade with Europe is extremely important, both imports and exports. I do not think anybody is going to want to unbalance that. The noble Lord’s point is well made and I was not trying to underestimate its importance. Trade with the rest of the world is also extremely important.

In January 2013, the Government introduced a one-in, two-out system of deregulation whereby no new regulation is introduced unless it is offset by deregulation of twice the equivalent value. That will be part of the discussions we will be having later when the deregulation Bill comes forward.

I have a sheaf of papers here and about two minutes to deal with them. The noble Lord, Lord Eatwell, spoke about the banking reform Bill. The Government are going to give careful consideration to the recommendations made by the Parliamentary Commission on Banking Standards, including those it makes in its final report. We will consider tabling amendments to the Bill when and if appropriate. The Government have committed to ensure that both Houses will have enough opportunity to consider and debate any amendments tabled.

The noble Lord, Lord Bilimoria, asked about promoting trade beyond Europe. UKTI is working with the Foreign Office and applying a range of criteria to prioritise its focus on emerging and high-growth markets.

The noble Lord, Lord McFall, and the noble Baroness, Lady Kramer, asked about the break-up and sale of RBS and other banks. The government shareholdings in RBS and Lloyds Banking Group are managed on a commercial and arm’s-length basis. UKFI works closely with those banks to assure itself of their approach to strategy. Its objectives are to create value for money for the taxpayer and to devise and execute a strategy for realising it in an orderly and active way over time.

My noble friend Lord Forsyth suggested that quantitative easing has exaggerated the liabilities of pension funds because of low interest rates. We recognise that quantitative easing is a major tool designed to affect the economy as a whole to meet the 2% inflation target over the medium term. Over 2011-12, companies with defined pension schemes have seen their scheme deficits more than double from around £100 billion to £250 billion, but the recent fall in gilt yields cannot be ascribed to quantitative easing alone. Factors such as flight to safety from the eurozone also have an impact.

[Lord Forsyth of Drumlean]

I realise it is rather late, but the point that I was making was that the assessed deficit is based on gilt yields, not corporate bond yields. If the Pensions Regulator were to change that view, huge sums of money that are not required but appear to be required because of the fall in gilt yields would not be put into pension funds.

[Baroness Hanham]

I thank my noble friend for that extra explanation. I shall carry straight on because I might just get a few more of these done.

The noble Baroness, Lady Hayter, asked whether private landlords will be required to check the immigration status of tenants. Many landlords already carry out some identity checks. An additional requirement, such as taking a copy of a passport, should not be too burdensome.

My noble friend Lord Tugendhat asked a number of questions, as did the noble Lord, Lord Monks. They are all quite technical, so I hope they will forgive me if I reply in writing.

There were questions about the consumer Bill that will come before us in the not-too-distant future, and there will be a great deal of debate and discussion on it.

My noble friend Lady Byford raised the question of rural broadband. I am sure she will appreciate that, during the passage of the Growth and Infrastructure Bill a few months ago, there was considerable discussion of rural broadband and the necessity for it including the permitted development rights and the limitation of those. The Government absolutely recognise that rural broadband is essential, not only to promote industry and its facilities but also for individuals.

My noble friend also asked whether local authorities have sufficient resources for planning, based on the new permission for agricultural buildings to be converted. We are giving all authorities a 15% inflation-linked increase in fees. Some have managed to deliver significant improvements in their services despite other reductions.

The noble Lord, Lord Mawson, speaks with great experience and he and I have discussed issues like this before. I note with concern what he was saying about neighbourhood budgets and communities. Perhaps we might discuss that further some other time.

I will probably run out of your Lordships’ patience as time goes on. I will deal with two more points and then answer the others in writing.

The noble Lord, Lord Warner, spoke about youth unemployment as well as other important matters. The 16-17 year-old unemployment level fell by 5,000 to 192,000, down 21,000 from the same time last year. The 18-24 year-old level rose by 25,000, but that is down 25,000 from the same time last year. The proportion of 16-24 year-olds not in employment, education or training has fallen over the year and is currently at 15%. That is too high and needs to come down. I accept entirely what noble Lords say: youth employment is one of the real problems that we need to address. The noble Lord also asked about the resource transfer from the National Health Service to social care. As he will know, all government spending is being reviewed as part of the spending review, including social care funding.

Finally, my noble friend Lord Trenchard asked what we are doing about excessive regulations where primary legislation is not required. The deregulation Bill is not all we are doing to reduce regulation. We are also making changes through secondary legislation, but this Bill will help us meet our target to repeal and reform at least 3,000 regulations in this Parliament.

I must just respond to my noble friend Lord Tope on city deals because he was so nice about me. At the moment there is no plan for rural deals. Of course, some rural areas are caught up within the city deals and are helped by that. The Government plan to devolve to all local enterprise partnerships, rural and urban, the single local growth fund.

I apologise for gabbling and being rather short. Where I have not answered, correctly and in appropriate detail, points that have been made, I will do so in writing.