Government Spending Review 2013

Lord Risby Excerpts

Wednesday 3rd July 2013 Grand Committee

[Lord Risby]

My Lords, it is a great pleasure to follow my noble friend Lady Kramer, who makes the very important point that unemployment has fallen and that we have seen growth in the private sector and the emphasis on infrastructure that has characterised the Government’s policy. I congratulate my noble friend Lord Deighton, who brings such enormous private sector expertise to the role that he is fulfilling, which adds huge value to what the Government are doing.

I think it is fair to say that all European countries are trying to restrain expenditure and look at how to generate economic growth. We are in the fortunate position whereby there are now signs of some economic growth. Indeed, most organisations believe that in the coming year we will have the highest rate of growth in Europe of all the major economies, albeit that there is still room to go much further. However, the truth of the matter is that we remain vulnerable. We are not tied to major currencies such as the euro and the dollar. We need to continue our policy of restraint to keep mortgage rates and borrowing costs low, as we still have to borrow an enormous amount. While the point of today’s debate is to look to the future, it is worth remembering that key element of the review, as we know that the markets can be fierce in their judgments, as we saw when they made a judgment some years ago about the competence of policy in this area and promptly devalued our currency by 25%. That has meant that inflation has continued at a high level, which we must never see again.

However, I should very much like to consider how we can stimulate growth from external activity and foreign investment, which were alluded to in the spending review. All Governments are of course trying to do this, but last week an interesting statistic from UNCTAD revealed that foreign direct investment into the United Kingdom rose by 22% in 2012 to the highest in Europe, £41 billion, compared with a drop of 18% in the world, 42% in Europe and, extraordinarily enough, 85% in Germany. It is clear that much of this investment arises from the fact that we have an open economy and are very welcoming, but it is also important to note the high level of re-investment that has been made by foreign-owned corporations in this country, which suggests that they have a high level of confidence. China, with which we have had some political difficulties, has continued to make major investments, and I hope that after the resolution of a recent difficulty this investment will increase further.

Nevertheless, our trade and export activities have been inadequate. For example, there was hardly any improvement in 2012 in our manufacturing and service exports when compared with the previous year. Of course, our European markets have been weak and we have tried and been successful in expanding our exports to countries such as Russia, China and India. Nevertheless, we could have done much better. This is now simply a necessity for us. Household budgets are of course being squeezed and European markets look to remain anaemic. Over the next two years, 90% of world demand will be generated outside the EU.

In the spending review, the Government have set a national challenge to double UK exports and to get 100,000 more companies exporting by 2020. In consequence, £140 million was announced in the Autumn Statement last year to help SMEs to export. I am pleased to see in the spending review that despite the pressures, funding certainty has been given to UKTI to continue with this policy, thereby maintaining the support for the next few years. Some £70 million was announced to package overseas export promotion more professionally, and a new unit has been formed—noble Lords will agree that this is important—to look at the attractions of investment in our financial services sector, again with particular emphasis on SMEs. The CBI welcomed all this by declaring:

“It’s right to link increases in UK Trade and Investment’s budget to improved commercial nous, at a time when it must be firing on all cylinders to boost exports and support the drive for growth”.

It is fair to say that all Prime Ministers have been for years trying to advance the promotion of exports from this country, but I should like to talk about an initiative that was brought into being in November last year, the creation of prime ministerial trade envoys. There are eight of us, six of whom are in your Lordships’ House and two of whom are Members of the other place. We were appointed on a cross-party basis. The whole idea is to assist UKTI, our embassies abroad, our export effort and, with the appellation of being called a prime ministerial trade envoy, get the highest possible access. As it happens, I am the trade envoy to Algeria. Perhaps I may touch on this for a few minutes. The role of the trade envoy is to enhance and develop commercial partnerships through the following: identifying commercial opportunities both for trade and investment, bringing together UK and target market business leaders to develop opportunities to secure the high-level access that I mentioned, and working with the export promotion activities of our embassies and UKTI. It is good that this is done entirely on a cross-party basis. Yesterday morning, we had a very good meeting in which we were trying to exchange best practice and to see how we can work together to really drive this element of our national life, exports, which have frankly been inadequate when compared with many other countries, even in Europe.

I should like to talk a little about Algeria because it summarises exactly what I am talking about. We have had no historical links to that country, but it has $190 billion dollars of reserves and a $300 billion infrastructure programme. We start from a very low base, but in the past 18 months there have been an enormous number of ministerial visits, which were very welcome, including that of the Prime Minister in January. We now have a clear partnership with Algeria. So many of the countries that we are talking to and to which we want to export feel, particularly after a post-colonial experience, that there should be a partnership in the fullest sense of the word. We now have, for obvious reasons, a security relationship and a defence relationship with Algeria, which is important. Every week, English-language schools are springing up all over the country, and we hope that during the course of the next month or two, hopefully in September, we will sign some major contracts. This has come about because of a concerted effort led by the Prime Minister and other Ministers. I pay tribute to a very dynamic ambassador in this regard.

This applies to my colleagues who are prime ministerial trade envoys. It is happening everywhere. It is part of a process, on which I hope everybody will agree, of reorienting our exports to more dynamic markets. It will not solve all our problems, but in the past we have seen erratic and feeble export promotion, and that is changing. This is happening at the highest level of government and is reinforced by the commitments made in this spending review. We have so much to offer. I talked about our open economy and the English language. We make a virtue of not paying bribes and not getting involved in anything like that. We have attempted to reinvigorate UKTI and there are trade envoys to support this. That is all under the direction of my noble friend Lord Marland.

This week, as my noble friend commented, the BCC reported a remarkable level of export activity among its members that showed a considerable increase in confidence to a six-year high. That was also reflected in the purchasing managers’ index, which showed an improvement. I hope that the efforts that are now being made will address a key element of our future growth, and I welcome the commitment given to this in the spending review and the Government’s commitment to try to make this happen.

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[Lord Davies of Oldham]

The very tragedy, in my view, of Labour’s watch was that it actually continued too many of the positions adopted by the Conservative Party in the 1980s. As regards manufacturing—the noble Lord, Lord Haskins, also made an important point on that—we should have put much greater emphasis upon the development of skills in our society. We have not equipped any of the next generation for the kind of economy that we seek to sustain.

I understand what the noble Lord, Lord Risby, indicated in terms of the enormous value of foreign investment. Of course we would all welcome that but does he think that foreign investors are enthusiastic about the great uncertainty over Britain’s relationship with Europe? That is the product of discord in the governing coalition. How welcome is that for potential investors? The noble Baroness, Lady Noakes, indicated the areas in which she welcomed what was happening but even she will recognise that the IMF has said that some £10 billion ought to be invested in infrastructure in “shovel-ready” industries, particularly construction. It ought to be put into housebuilding because that is the fastest way in which you could inculcate some element of demand into the economy. However, are the Government pursuing that strategy? If the noble Lord, Lord Deighton, were able to identify schemes that could fulfil that aim, I would be surprised. I give way to the noble Lord.

[Lord Risby]

I am most grateful but a little confused by what the noble Lord is saying. We have just had a record increase, the highest ever, in foreign direct investment in this country, way ahead of anywhere else and the highest in Europe. The point that I was making is that that trend is increasing, so I am afraid that his argument is not sustained by the reality.

[Lord Davies of Oldham]

My Lords, I was making a point that the noble Lord ought surely to take into account. Far from there being an environment in which foreign investors will necessarily find a place to invest in the future, as long as we are extremely uncertain about our relationship with the biggest market that we service, Europe, it is bound to cause anxieties among investors.

I also noted what the noble Lord, Lord Higgins, said—he is also my noble friend when we are on the golf course. He was very concerned to address some real points to the Minister with regard to the future of interest rates and the assumption made about future public expenditure. The Minister must address that point in his reply.

I appreciated the point that the noble Lord, Lord Shipley, made about local authority finance and being able to identify local resources. One product of the debate on Scottish independence and the referendum will be to identify those issues as far as Scotland is concerned. That is bound to give a stimulus to the broad argument that the noble Lord is putting forward about the resources available to the various localities of the United Kingdom and the needs that may be identified. I would have thought that that is bound to take a significant step forward as a result of the debate on next year’s Scottish referendum.

The noble Lord, Lord Flight, entertained us all with the Hayek versus Keynes debate. Although the noble Lord said that growth before the Second World War was considerable, he may have noticed that full employment in this country did not return until we went into wartime defence production. It is quite clear that under the Hayek principles you can certainly run an economy with a considerable level of unemployment. However, that word has not been manifest in this debate at all because the fact that we have significant levels of unemployment is a limited consideration for all those on the Conservative Benches concerned with how to manage the economy. We have people coming out of our colleges and universities who are highly qualified by any standards and who, in the past, would have expected to find a choice of jobs. They are facing a situation where the market is such that there are no jobs available. That is why I was grateful that the noble Lord, Lord Flight, identified the thinking behind the Conservative position and, to a more limited extent, the Liberal Democrat position with regard to what the Government are doing at present.

It took the right reverend Prelate to introduce morality into this debate. Why is it that the only person who is prepared to talk about those people who suffer the real costs of what is being carried out in the name of austerity is the right reverend Prelate? He identified the shock we all felt in the Chamber yesterday when it was suggested by a Conservative Minister that food banks are supply-driven and nothing to do with people’s needs. People’s needs have occasioned the development of food banks, which are necessary, but our great shame. Nor is there any understanding on the Conservative side about what it is to lose one’s job at present. It is quite okay to say, “We will cut public expenditure by making sure that there is a week in which one cannot claim jobseeker’s allowance”, but what do noble Lords think the morale of a family will be when someone loses his job against a background where the chances of getting a fresh job are very limited indeed? Why is it that, within that framework, it is thought that a really effective cut is to make sure that an application for support cannot be made until a week has elapsed?