Economy: Growth

Lord Popat Excerpts

Thursday 21st June 2012 Lords Chamber

[Lord Popat]

My Lords, I thank the noble Baroness, Lady Kramer, for bringing this debate before the House. My noble friend the Minister also very kindly responded to a recent debate on business finance, so I shall do my best to avoid repetition.

The economic climate we find ourselves in is undoubtedly one of the most challenging scenarios that this country has faced in recent history. Yet its origins were longstanding. There was far too much public sector borrowing and far too little investment in infrastructure; there was too much reliance on the City and the services industry and not enough was done to reform education standards; and there was too much regulation, taxation and compliance for small businesses and not enough exporting to high-growth economies. The tough decisions were unfortunately delayed and the strategic approach to the economy was left wanting.

Unfortunately, this Government inherited an economy in dire need of drastic action. The Government have taken the first, and most important, step to stabilise our great economic ship and they have set out a credible strategy to bring down the deficit that has reassured the markets and allowed Britain to bypass many of the symptoms of uncertainty facing other economies. The announcements this week of falling inflation and unemployment numbers are yet more signs of an improving economy. Now it is time to set an ambitious course for our economic ship. The Government are rightly committed to rebalancing the economy, leaning back towards the private sector for economic growth.

I wish to focus on two of the four main objectives set out in the Government’s growth strategy; namely, to,

“make the UK the best place in Europe to start, finance and grow a business”,

and to,

“encourage investment and exports as a route to a more balanced economy”.

As I have said in this House before, whenever I speak to small business owners, I hear about the difficulties that they are having with financing. I am pleased to report that I am beginning to hear reports of businesses being helped by the £20 billion national loan guarantee scheme—a brilliant scheme that has effectively no cost to taxpayers—and the long-term funding from the Bank of England to our domestic banks, as announced last week, will undoubtedly help small businesses.

In regard to regulation, the Chancellor said recently in the other place that the total cost of regulation imposed on businesses since 1998 is almost £90 billion a year, a staggeringly high figure. Like many businessmen, I have been encouraged to hear the Government's plans to reduce regulation particularly in regard to staffing issues. I strongly support the work to reduce the regulatory burden on small businesses. Yet I remain concerned that the very necessary changes to the planning system may struggle to materialise as desired and that our planning system will remain, as the Chancellor said, a chronic obstacle to economic growth. We must ensure that our small businesses do not continue to invest thousands of pounds in consultants, lawyers and architects only to fall at the final hurdle of our planning system because of anti-growth attitudes in town halls across the country. Only this month my noble friend Lord Wolfson, the chief executive officer of Next, was quoted as saying that he had not spent £100 million he had set aside for investment because he could not get planning permission. Although Next is certainly not a small retailer, it is a clear example of ambitious firms having economic activity held back by a planning system that is not fit for purpose.

I move on to the desire to encourage exports. Many noble Lords will be aware that the UK’s share of global exports had declined from 5.3% in 2000 to 4.1% in 2010. I recently asked the Liaison Committee to consider establishing an ad hoc committee to examine the Government's work on aiding SMEs to export their goods and services, a committee that I am delighted to say has now been formed and is being chaired by my noble friend Lord Cope. I hope that this committee is able to bring about a series of suggestions to help our SMEs reach new markets. Unfortunately, while many of our large firms find it easy to transfer from domestic sales into exporting, that situation is very different for small businesses. Those SMEs which do not export often start doing so because of fortune rather than any strategic priority; and they tend to export to familiar markets, such as the eurozone, rather than high-growth markets such as India, China and, in the next 10 years, Africa. If we can reverse these trends, the effect on the UK’s economy will be positive for many years to come.

I do not wish to prejudge what the committee will find in its report, but it is vital that we review the diplomatic support that our companies receive overseas. The Government have in the past indicated a preference for more businessmen to be involved in our diplomatic relations, and this would be a welcome move to help prioritise growth. I also feel that we can be more proactive with certain countries and regions. For example, Britain has had little or no diplomatic contact with the Chief Minister of Gujarat—economically the fastest growing state in India—yet our international competitors are regularly knocking at his door. We cannot afford to be left behind.

I hope that we get a chance to consider the transport and infrastructure needed to help SMEs export. Our competitors are increasing their airport capacities as new markets open, and so must we.

The Prime Minister said in the other place after the Queen's Speech that:

“We must revive the private sector, spread growth and jobs across the country and make sure that financial services truly serve the economy—not the other way around.—[Official Report, Commons, 9/5/12; col. 25.]

He said that the task of delivering rebalanced growth will be achieved most effectively by “swimming with the tide” to take advantage of the long-term domestic and global changes, particularly the rise of middle-class consumers in emerging markets, spurring a greater demand for our services. That is exactly right. The most important thing is to make sure that our actions match our rhetoric, and that we demonstrate that not only is Britain open for business, but that we are a nation that thrives on seeking out new economic opportunities.

It is often disheartening to read press coverage of businesses in Britain, as if profit were something to be avoided. I believe that this Government are demonstrating that not only do we welcome businesses, but we want to support them. The Government's growth strategy has the right aims and I hope that they are able to rise above the inevitable criticisms they will encounter as they make the right decisions to sail Britain into bluer, calmer and more prosperous waters. Through taking tough decisions in the short term, such as increasing competition in the finance sector, improving our infrastructure, boosting our exports to the high-growth markets of the future and reforming our planning system, we will give businesses, entrepreneurs and investors the confidence to grow our economy.