Economy: Government Policies

Lord King of Bridgwater Excerpts

Thursday 24th March 2011 Lords Chamber

[Lord King of Bridgwater]

My Lords, it is a particular privilege for me to be the first to have the opportunity to congratulate the noble Lord, Lord Hussain, on his immaculate maiden speech. It combined exactly what the House likes to hear: a very interesting explanation of his background and experience, and then some very interesting thoughts on the situations that he has faced in the many varied activities in which he has been involved. I could not help thinking that he was almost a founder member of the big society, given the part that he has played both in Rochdale and in Luton, which makes it even easier for me to call him my noble friend. As he has been unsuccessful standing for election twice but has now been welcomed to these Benches, I hope that he will not have to stand for election again.

I was also pleased with the noble Lord’s commercial experience of having run things. He has passed the Sugar test as someone who has actually run something. I plead guilty myself: I speak in this debate as somebody who has spent all my life, apart from my time in government, trying to run things in business. I endorse strongly what the noble Lord, Lord Sugar, said. Given my noble friend’s particular background, the situation we face, the attempts to traduce the Muslim tradition in the world at present, and the need for people with the courage to speak out against some dangerous and evil people who are trying to mislead many of their community, he has a valuable part to play. I know that the House will listen with great interest to his further contributions, which we will certainly welcome.

I thank my noble friend Lord Lawson for the way in which he introduced the debate. I shall just repeat my previous remarks about elections: under a different form of House, I do not think that the House would have had the privilege—the day after the Budget—of having a debate led with the authority and experience that we had from my noble friend. However, I am afraid that I have just one comment, which is that I do not think that he is quite as good a Tory and exponent of Conservative economic policy as the noble Lord, Lord Sugar, but in other respects he was extremely good.

The debate is about the Government’s policies to promote enterprise, growth and the fundamental rebalancing of the economy. In my judgment, that is most certainly needed. My concern is that it is tougher than many people think. An old adage is often quoted that the future is not what it used to be. A lot of people are going on as though we have had a bit of hiccup—a bit of a knock—but that we will be back on the old track. So why do we not have normal growth coming back? The situation is infinitely more difficult. We face a record budget deficit. I noticed that the Chancellor mentioned the risk of a continuing sovereign debt crisis. We go home last night and hear that the Prime Minister of Portugal has resigned and that there is a crisis meeting this evening in Brussels, which I understand our Prime Minister will attend. Under the arrangement introduced by Mr Alistair Darling at the end of the last Government, if there has to be a substantial drawing down of assistance for Portugal, the implication is that it could cost this country a further £3 billion. I do not think that was known at the time.

An interesting passage in the Chancellor’s speech yesterday referred to the relative interest rates in various countries. He made the point that, although we have a deficit bigger than any of these countries, our interest rate is relatively comparable to that of Germany. As he said yesterday, it is half the rate payable in Portugal, a third of the rate of interest that Ireland has to pay, and a quarter of the rate that Greece has to pay. Of course, the figure for half the rate of Portugal is already out of date because I do not know what Portugal’s rate will be now. If it has no Government there will have to be an election, so there will not be any Government for another two months and it cannot agree on any of the public expenditure cuts and improvements needed to stabilise its position.

We have to earn our living in this world. As Will Hutton said in an interesting article, the present faltering recovery could easily be blown off course by any major crisis. When we look at earning our living in the world and ask where our markets are going to be, we must look at the situation in the eurozone. Ireland is a much bigger customer of this country than many people realise. How good is Ireland’s purchasing going to be? How good are our sales going to be to Ireland in the next year or two? Then there are Spain, Portugal, France and Italy. I am sorry if the catalogue goes on—I thought of marking my comments earlier by saying that anyone of a sensitive disposition ought to leave before I got too far into the difficulties that I see facing us. But of course we then have Japan. As we stand here today, we do not have any idea what will happen, with people running in and out of Tokyo. Is there or is there not a risk to the drinking water in Tokyo? How bad is that crisis going to be? Every day we see a different estimate of what the cost to Japan may be of the quite appalling disaster that has overcome that country.

Then there is the instability in north Africa and the Gulf—a part of the world of which I have had some experience. Those who would wish to see a change of Government and wish to see democracy introduced into many of these countries must also recognise what an appallingly difficult situation those new Governments will face. They will come in with a 50 per cent increase in food prices, and not only an increase but in many cases an acute shortage of food. They have increases in fuel prices as well and some very serious youth unemployment. That is the background against which there will be new, inexperienced Governments, and I do not give them a lot of chance to be enduring Governments who will be able to quickly establish the calm and stability that the market needs. It is against that background that I see the challenges that we face.

I used to sit in a school chapel under a poem by Sir Arthur Hugh Clough, which said:

“If hopes were dupes, fears may be liars”.

I remember the final line, quoted without a stutter by King George VI in one of his Christmas messages when America came into the war. He said:

“In front the sun climbs slow, how slowly,

But westward, look, the land is bright.”

I think that that needs changing now, because in economic terms I am not sure that the westward does look so bright. Eastward, yes, I hope—with the opportunities that we have not seized as we should in India and in China—and southward as well. South America and Africa are areas and markets that are much more interesting now. There is an interesting times conference going on at the moment, with African leaders asking why Europe and Britain does not take more interest.

There are great challenges ahead and undoubtedly it will be very difficult. But Iain Macleod’s first law of Budgets is that first impressions are usually wrong, and I have some hopes that, having seen this described as the most pro-growth Budget seen for a generation, we may at last slowly and in a most difficult situation start to climb out of the problems that we have inherited.