Lord Haskel
Main Page: Lord Haskel (Labour - Life peer)
Lord Haskel
That this House takes note of the economic and financial prospects of the United Kingdom.
Lord Haskel (Lab)
My Lords, I welcome this opportunity to introduce an economics debate because so much has happened in recent months regarding our business and our economy. Ten months ago, we debated the economy after austerity. We looked at the impact of technology, of climate change, of terrorism, of conflict and of low oil prices. Even though these problems remain, I would have liked to have called this debate, “Bremain”. However, the powers that be thought that we should look beyond 23 June, and they are right. There is life after the referendum, and possibly a life more turbulent because added to these old pressures are: the uncertainties of protectionism and trade wars after the elections in the USA and Europe; the effect of excess capacity in China; redundancies in the UK oil industry, even though the price of oil has risen; and the fall in manufacturing output since the last debate.
In addition, we are seeing sentiment moving away from our preoccupation with the deficit. Two weeks ago, the OECD and the IMF both suggested that we might have avoided the low investment in our infrastructure, rising inequality and poor productivity by growing out of our financial difficulties instead of cutting costs. There is much to debate, and I am most grateful to noble Lords who are participating and to the Front Benches.
There is more of a social dimension, too. In recent months, when speaking of the economy, the Government also speak of increasing life chances and helping people who face economic challenge and disadvantage, with a more generous and humane concern about people’s economic insecurities and difficulties. Does this mean that the Government are coming round to our way of thinking—that the market also has to serve people, not just business? Does it mean that there might be government intervention, not only when there is market failure but when there is environmental and social failure—in fact, reflecting the ideas of Labour Business, an organisation of which I have the pleasure to be an honorary officer?
For some time, many have felt that things are not working out as they should—that the cost of austerity could be much larger than the economic benefit. Now there are important allies, whose “disquieting conclusions” as the OECD puts it, is that these policies result in increasing inequality and undermine economic growth. On Tuesday, I heard a major City investor say they now look for good social, environmental and governance factors as a condition for investment, because that is where they are finding competitive advantage. When people feel more secure about the welfare state, they become more willing to accept change, to accept the onset of intelligent machines and robots and the digital economy, which disrupts working patterns—although whether to the extent of 47% of existing jobs, as experts have said, I do not know. Meanwhile, we are stuck in a jobs-rich and low-investment economy, with flat productivity, stagnant wages and lacking in skills, with many workplaces reluctant to utilise labour-saving technologies. At this time of change, when many workers are not with any employer, or are with many employers for a short length of time, it is important to ensure that people enjoy the basic protections when it comes to health, pensions, job security and training. As part of their concern for people, will the Government work towards this end, perhaps in association with the trade unions, which understand these things, where business is concerned? Otherwise, technical progress will become demonised, and investment will go elsewhere.
These ideas are not new; they just need active implementation. The recent papers from the IMF and OECD are just one more nudge in this direction, a nudge to which I hope the Government will pay attention. Another nudge came from the recent EY report about inward investment. The point of the EY report is that inward investors found Britain attractive because of our quality of life, our stable social climate, our diversity and our culture. But inward investors, like that City investor, are now having concerns, largely because of the effect that austerity is having on those elements. The report voiced other concerns—about the environment and the high cost of housing. But, of course, another major threat to foreign direct investment is our leaving the single market. I suspect that foreign direct investment is one reason why many people in business are in the remain camp, together with the practical advantages of free trade.
Part of the remain case should be to present a vision of what we want the European Union and single market to look like when we remain, and particularly what we would try to achieve during our probable presidency in 2017—how the economic welfare of people as well as business can be improved by setting basic standards to prevent a race to the bottom, a race that not only workers but good companies would suffer from.
Initiatives of this kind will indicate that not only are we staying in the single market but we intend to play an important and leading role in its development. However, there is more to do. Half our exports to the EU are manufactured. This is because the uniform regulations and standards make it easy, with many facilities being available for 28 countries. For instance, you can register your trade mark on one piece of paper, and it is valid in 28 countries. Many companies now sell their products or services by profiling potential customers from data available over the internet, but different countries have different rules about personal privacy and protection. We in the UK are rather more liberal over data protection, but this form of direct marketing is growing strongly and we need one rule for all.
So much about the economic strategy in Brussels. What about the economic strategy at home? Many have accused the Government of having none. In response, Ministers trot out the various technology centres and institutes that have been set up—the Advanced Manufacturing Research Centre, the Centre of Nuclear Excellence, offshore wind investment or the British Business Bank—but this is not a strategy; it is filling in gaps. Certainly it is sometimes filling them in well, but many gaps remain.
Ministers also point to our world-class science. Yes, we have world-class science and technology, and we have world-class scientists and technologists, but we have very few world-class science and technology businesses. Why? This has been answered many times by people such as John Kay and the noble Lord, Lord Turner, and we are waiting for the Government to act. Perhaps they need an emergency to act, as is happening in the steel industry, but that is not a strategy; it is being a fire brigade.
It is the same with productivity. Ministers produced a productivity paper last year which we debated in this House hoping that it would be an important part of the Government’s industrial strategy, but it has disappeared. The BIS committee in another place described the proposals in it as a vague “collection of existing policies” with non-existent milestones. We also know that with long-term interest rates available to the Government at virtually zero, now is the time to invest in the infrastructure, housing, technologies, training and intangible investments needed to raise our productivity. Yes, we have passed the Enterprise Act, but again that was just a catch-up exercise to plug gaps which were becoming more and more obvious. A strategy is not just filling in the gaps as they arise, it is not just dealing with emergencies as they arise, it is not just something spoken of and then forgotten; a strategy is long term. It needs constant nurturing. All these elements need an annual review to understand the short-term changes and to learn lessons. This is the kind of commitment that we seek to raise our productivity.
On 25 May, I asked the Minister about our balance of trade. He surprised me and many noble Lords when he complacently replied that,
“our trade deficit has been relatively stable at around 2% of GDP for the last seven years”.—[Official Report, 25/5/16; col. 383.]
However, that deficit accumulates, and it is now at an all-time high of 7% of GDP. One thing is clear: because of the trade deficit, we are completely dependent on inward investment to pay our way in the world. In no other developed country have inward investors taken control of such a large part of business and industry, finance and public services, welfare and health. I can certainly see the big advantages of foreign investment in industry, with its policy of long-term investment in production and skills. We certainly gain in technology, but ownership matters. Big decisions are taken elsewhere. UK firms are told where they can and cannot export.
Also, much of the money is spent on buying and selling assets, not investing in growth and development. If you walk through my part of London, you will find that the hospital building is owned by a Japanese bank, the street lights by a Swedish finance company, the buses by a state-owned Dutch company and the water by a company in Jersey. The brochure promoting the northern powerhouse presents it as a great opportunity for overseas investors.
There have been a series of initiatives to support foreign direct investment, but if a local citizen is unhappy with what is provided, it is becoming less a matter for the council and more a matter of the terms of the contract with the provider. Meanwhile, we in Parliament are doing what we can to encourage localism. Does the Minister agree that there must be a limit as to how far this can go, not only because this is affecting our democracy but because it restricts our choices in economic development and balancing our economy? I am all for free trade and against trade barriers, but I think a public interest element should be present in these negotiations. The Government are obsessed by the wrong deficit. Paying our way in the world is becoming more important than just balancing our books.
This debate is about the economy. So I ask the Minister: are we a stronger economy when we have a vision for the single market after the end of this month? Are we a stronger economy when we have political control over our basic services and industries? Are we a stronger economy when we carefully invest in our future with a long-term strategy? Are we a stronger economy when we pay our way? Are we a stronger economy when there is a safety net to see us all through these hard times of economic and technical change? I look forward to hearing the views of other noble Lords, and I beg to move.
Lord Haskel (Lab)
I thank all noble Lords for participating in this debate, which I have found fascinating. It is interesting that most of us agreed on the benefits of remaining within the single market. People spoke of the benefits to shop prices and the cost of living; the benefits to science and to the north-east and how important that is; the benefits to our national and economic security; and its importance to financial and capital markets, and to the hospitality industry. Several noble Lords spoke about the turbulence that the referendum is causing and how that could have been avoided, and questioned whether the whole thing was really necessary anyway.
My noble friend Lord Chandos spoke about the obligations of the single market as well as its benefits, and he is quite right. A number of other noble Lords raised other issues. I agree with the noble Lord, Lord Leigh, about small companies. I myself built up a business and know exactly what he is talking about, although I do not agree with his views about small businesses and the single market.
I found the views of the noble Lord, Lord Polak, about Raspberry Pi very interesting. He and the noble Lord, Lord Stoneham, raised the whole question of the importance of technology and technological entrepreneurs, and I agree with them entirely. Have there really been 8 million Raspberry Pis? I am amazed at the number; I thought there were about 2 million or 3 million. I know that the BBC gives out a similar device; in fact, my grandchildren set theirs going using their smartphones.
I thank my noble friend Lord Hanworth for raising the effect of our continually not paying our way, and the uncertainties of the pound for our deficit. He is quite right. The noble Lord, Lord Stoneham, also told us about the importance of paying our way, and I agree with him. I thank my noble friend Lord Davies for his kind words. He is right to raise the whole question of productivity and how it affects us all, particularly our standard of living.
The Minister spoke about cutting the deficit and what our bookkeeping targets were, but we are still waiting for them to be achieved. Of course he did not tell us about the cost of all that—the social cost, the cost in inequality and the cost of lost investment at a time when the Government could invest at virtually zero cost. The other point to which I am not sure the Minister really responded was how much it all depends on inward investment. There is of course a great cost to that. The noble Lord, Lord Leigh, said that we ought to invest our money in other countries where we get a better return. I am not sure that that is the only consideration and that we are wise now to depend so much on inward investment. There is a democratic risk there.
Several things have not been mentioned, such as climate change and other risks. Of course, the overuse of antibiotics is a risk to us all. The noble Lord, Lord O’Neill, is doing work on that and I am glad that he is getting on with it.
My time is up, so I thank all noble Lords for speaking. I am most grateful to everybody for their contributions.