UK: Competitiveness

Lord Haskel Excerpts

Tuesday 8th June 2010 Lords Chamber

[Lord Haskel]

My Lords, I, too, congratulate the noble Lord, Lord Levene, on putting down his Question and I very much welcome his tone of optimism. But we really need to know and understand what is the coalition Government’s view on competitiveness, and who better to explain it than the noble Lord, Lord Sassoon. He comes with a formidable reputation and I look forward to what he has to say. I also congratulate him on his first appearance at the Dispatch Box.

For many, competitiveness refers to our ability to trade: the exchange rate for sterling. Some would say that all we have to do is reduce the value of sterling and we would become more competitive. If only life were so simple. Yes, with the recent devaluation of sterling, our exports have increased, but in addition we need to substitute imports because they have become more expensive. To increase our exports we need more of the brains, skills, supply chain, investment and all the other things, tangible and intangible, that go into successfully supplying goods and services. It may be complex, but what do the Government think is a competitive exchange rate?

Innovation, the ability to convert science and technology into products and services has become a race between nations to translate discoveries into economic success stories before other nations do so, and our ability to do this is crucial to our competitiveness. The Labour Government put a lot of effort into helping British industry win this race, so where do the coalition Government stand? Are they going to continue this effort or cut it? And to be competitive, most countries have built up an infrastructure to bridge the gap between research, technology and commercialisation. Here, it is the task of the Technology Strategy Board to deliver our national strategy and to bridge the gap. Its innovation agenda is crucial to our competitiveness. Does the Minister agree?

Equally important is how good our financial sector is at financing the enterprise and the new technologies essential to make us more competitive. The Hauser report and the recent report from the Council for Science and Technology lists many areas of new technology where we currently have a technical leadership and a defensible technology position, giving us a very good chance of becoming competitive. Are the Government going to accept these recommendations? Will they ensure that the finance is available?

Or is there no role for government in this? Tory dogma says that too much government stifles individual initiative and so it is best to rely on market forces and individual initiative. Others say that the state is an engine of progress in competitiveness. At the same time, Ministers speak of shifting the responsibility for this kind of support downwards from national to local, but local government has been a big loser in the first round of cuts. Are Ministers looking both ways? Where does the compromise lie?

The noble Baroness, Lady Noakes, spoke about taxation. Many say that the debate about capital gains tax is central to our competitiveness. They say that taxing capital gains saps initiative. Unfortunately, well meaning tax concessions to encourage this initiative have unintended consequences, such as hedge fund managers paying tax at a lower rate than their cleaners. Of course, the real way to tackle this from a competitiveness point of view is to tax consumption and not income. Is the Minister prepared to go along this route?

The noble Baroness, Lady Noakes, and the noble Lord, Lord Levene, spoke about regulation. All new Governments tell us that the less regulated we are the more competitive we become. Of course poor and outdated regulation needs to be cut, but this is not the real threat to our competitiveness. As I said in the debate on the Queen’s Speech, the real threat to our competitiveness is the absence of competition through unregulated market failure. On this the coalition agreement is silent. By choosing to be populist and ignoring the important, the Government will not help our competitiveness.

I agree with the noble Lord, Lord Levene, that our attitude towards world trade is very important. Will we be more competitive by being independent or by advancing international co-operation? Some say that to be more competitive we should abandon many of the rules of the European single market: “Trade with Europe on our own terms”, they say. How is the coalition going to manage our partnership with Europe to strengthen our competitiveness? This is crucial because, thanks to the Labour Government’s handling of this, the European Union has become our biggest market.

There are, of course, other considerations. How far do managers have to consider environmental and social issues—the triple context, as Tomorrow’s Company puts it. Are our businesses more competitive if the attitude of business owners is one of stewardship or one of shareholder value? Which reflects the more responsible economic model the coalition agreement talks about? Which is more competitive?

These are some of the elements that affect our competitiveness, and there are many more. The point that I wish to make is that our competitiveness is not a matter of destiny or chance; we have to choose. Our competitiveness will be determined by the sum total of these choices. What are they to be?