UK: Competitiveness

Lord Myners Excerpts

Tuesday 8th June 2010 Lords Chamber

[Lord Myners]

My Lords, I, too, congratulate the noble Lord, Lord Levene, on securing this debate on an issue of considerable national importance. He speaks with considerable experience not only in leading Lloyd’s—a market of excellence and global leadership—but in his many other successful functions in the commercial and public sectors.

I welcome the noble Lord, Lord Sassoon, to the Front Bench. Like the noble Baroness, Lady Noakes, I know that his maiden speech will be excellent. I have known the noble Lord for close on 20 years. He has an excellent reputation for the clarity of his expression; I have always known him to be somebody who answers questions in a forthright and straightforward way and never seeks to duck them. In that respect, he will be a blessed addition to the Front Bench, as we have struggled in previous debates to get any clarity at all about government policy from the noble Lord, Lord De Mauley, and the noble Lord, Lord Henley, who surprisingly has still not written to noble Lords after the Queen’s Speech debate last week. The noble Lord, Lord Sassoon, joins a long list of Swiss bankers who sit on the government Benches. He joins the noble Lords, Lord Freud, Lord Garel-Jones, Lord Brittan, Lord Waldegrave, and many others who have worked for UBS. It is good to know that our economic management is now in the hands of the gnomes of Zurich.

Competitiveness is absolutely vital to our economy. It comes from the value created that exceeds the cost of production. That is the edge that will give us economic competition. It is through being economically competitive that we get growth and it is through growth that we deliver our policy objectives sustainably in supporting education, health and other areas of national importance. The noble Lord, Lord Levene, in a speech given on 17 September last year, a few days after the anniversary of the collapse of Lehman Brothers, said:

“Competitiveness demands excellence, and continued excellence requires constant change and evolution”.

To be successful in that respect we need the right environment. Competitiveness is even more important in an era of globalisation, particularly when mobility of location is so important, as the noble Lord, Lord Levene, noted in his introductory statement.

The Government can create jobs but they cannot create the capacity sustainably to support those jobs if they are either imprudent in their fiscal policy or if the public sector begins to bear too heavily on the economy. However, as the noble Lord, Lord Tugendhat, said, there is good work done in the public sector. We must ensure that during this period, when we face the need for fiscal adjustment, we do not denigrate those who work in the public sector.

We clearly need a policy of fiscal caution. It was right to support the economy during the global recession but there now needs to be fiscal adjustment, as evidenced by the last Government in the Fiscal Responsibility Act. There is nothing progressive about a Government who consistently spend more than they can raise in taxation, and certainly nothing progressive that endows generations to come with the liabilities incurred by the current generation. There will need to be significant cuts in public expenditure, but there is considerable waste in public expenditure. I have seen that in my own experience as a government Minister. I hope that the Government will pursue with vigilance their search for waste and efficiencies without making cuts which are injurious to the provision of public service. The difference between the Government and the previous Government was on the issue of timing and when those cuts should take place.

There was flawed thinking about job creation in the past. I found it very frustrating to sit in meetings with some of my fellow Ministers talking about creating jobs in the green economy and biotechnology. The Government cannot create jobs. The Government can create an environment that is conducive to the creation of jobs, but they cannot create jobs and we mislead ourselves if we believe they can. We need to create a context for competition, incentives for capital investment, protection for intellectual property and promotion of high standards of governance. We also need high- quality business inputs in infrastructure, human capital and physical infrastructure—a subject that I am sure the noble Baroness, Lady Valentine, will speak to in a moment. We need predictable and business-sensitive administrative rules, and a technological infrastructure which promotes innovation.

The economies of the state are not the same as the economies of the business or the family. There is an important role for the Government in supporting economic activity. The noble Lord, Lord Skidelsky, made that very clear in a penetrating contribution to the Queen’s Speech debate last week. The economy is still operating at a rate in excess of 5 per cent below productive capacity. One of the questions that I would like to ask the noble Lord, Lord Sassoon, is: where are the sources of growth for the economy over the next 12 months? Mr Cable has suggested that consumer expenditure will reduce. We know that public expenditure will reduce. Over the weekend, George Osborne claimed the credit for persuading our trading partners to reduce their consumption through their own fiscal deficit programmes, so where does the noble Lord see the source of growth for the economy over the next 12 months? Where does he see the mechanisms for rebalancing the economy, to which the noble Lord, Lord De Mauley, again spoke yesterday? He spoke about the financial sector not growing as fast as other sectors. I find this difficult to reconcile with the fact that we need credit to support the economy. The noble Lord, Lord De Mauley, shakes his head but I have looked at Hansard and the noble Lord is very clear about manufacturing growing at a faster rate than other sectors. Therefore, I would like the noble Lord, Lord Sassoon, to explain to us the actions that the Government will be taking in that regard. I would also like him to tell us whether he believes that the fiscal adjustments that the Chancellor will announce on 22 June are likely to lead to an increase in unemployment. If there is to be an increase in unemployment, I would like him to confirm how much it will be. I would also welcome a comment from him on whether he agrees with the Prime Minister’s observation that monetary policy will have to tighten in the short term.

Finally, I would welcome a comment from the noble Lord, Lord Sassoon, on the banking commission, which is causing considerable uncertainty. When can we expect to have details of this commission? Will its membership be constituted in accordance with public appointment rules?