UK: Competitiveness

Lord Young of Norwood Green Excerpts

Tuesday 8th June 2010 Lords Chamber

[Lord Young of Norwood Green]

My Lords, I, too, congratulate the noble Lord, Lord Levene, on ensuring this debate. It is also a great pleasure to welcome the noble Lord, Lord Sassoon, to your Lordships’ House, and to congratulate him on his appointment to the Government. I applaud him and look forward to his maiden speech. It is quite a lot for him to do in one evening but I am sure that he will rise to the occasion.

Every Member of this House knows what a privilege it is to be here, but the noble Lord, Lord Sassoon, is particularly lucky. As many of you will know, he served in the Treasury for a number of years. From 2002 to 2006 he was managing director of finance, regulation and industry, so it was he who was responsible for the Treasury leg of the tripartite relationship that was supposed to identify and regulate the systemic risk in British banking—a relationship that we all know failed somewhat spectacularly. Now he has the chance to put things right—that is what you call luck. In 2007 and 2008 the noble Lord, who was still in the Treasury, acted as Gordon Brown’s ambassador to the City and then he left the Treasury to become David Cameron’s ambassador to the City. He is certainly fleet of foot in all directions.

Every speaker in this debate has been absolutely right in stressing that in the global economy, sustaining and enhancing the competitiveness of Britain must be central to everything we do in economic policy. To gain some insight into this coalition approach, I read two recent speeches. I cannot deal with every aspect of them, but the Prime Minister’s speech entitled “Transforming the British Economy: Coalition Strategy for Economic Growth” dealt with three elements. On international action, he seems to think that if the Indian and Chinese markets are opened up more British goods would be sold. That depends on whether we can be competitive. Simply opening up the market on its own does not guarantee that we can take advantage without being more competitive.

On the aspect of modern support, I shall just cover the point about the banks. Will the Minister tell us whether the Government’s policy is that banks should rebuild their balance sheet or should they lend more? It will be difficult for them to do both at the same time. A number of references have been made in the debate to the question of rebalancing. The point has been well and truly made that the financial services make a huge contribution to exports. Getting that rebalancing right—if that is what we are going to do—while not undermining a valuable export service will be supremely important.

A section of the speech was entitled “Liberalise”. Apparently Vince Cable is going to be given the power to say no. Since he has not been given any other powers I suppose that that is something. There was one clear policy commitment in that section, which states that,

“our ambition is to have the most competitive corporate tax system in the G20”.

It is interesting that if we examine corporation tax rates in the G20 we find that 14 out of the 20 countries already have higher corporation tax than we do, and five have lower rates. If we are to be the most competitive we need to cut it by more than 8 percentage points which, to save the Minister looking up the figure, I have worked out. The rough size of that pledge is between £10 billion and £15 billion. It would be interesting to know how we will deal with that.

I was interested that throughout this debate, there have been plenty of pleas for getting rid of taxes. On taxes on bankers’ bonuses, the noble Lord, Lord Levene, warned us that there will not be any bankers left. I find it unlikely that nature will permit that kind of vacuum. The noble Baroness, Lady Noakes, told us that we do not want a tax on jobs and that we certainly do not want any increase in capital gains tax. I will be interested to see how the Government balance that. My noble friend Lord Haskel reminded us that when hedge fund managers are paying less tax than their cleaners, we cannot have got the tax system absolutely right, especially under a Government committed to fairness.

On funding economic growth, I notice that that my previous department, BIS, will suffer cuts of about £836 million—more than any other department. What is the real substance of those cuts and what will be their impact on the competitiveness of British industry? In previous debates, we have heard comments about the previous Government’s commitment to assist Ford with £1.5 billion in building a new engine plant and guarantees given to Nissan, Vauxhall and Sheffield Forgemasters. Will the Minister confirm that the coalition still plans to give that vital support to industry?

I must concur with the point made by the noble Lord, Lord Tugendhat, about the importance of not denigrating the vital role of the public service. We are all committed to ensuring efficiency in the public sector, but how we go about that will be vital. My noble friend Lord Myners stressed that we need to ensure that the Government create the right environment to ensure the creation of jobs, and made the vital point: where will be the source of growth? The impact of growth in demand stimulated by the falling exchange rate embodies a crucial lesson: industry will invest and competitiveness will be enhanced only if there is a prospect of growing demand.

The coalition has not put forward a coherent industrial strategy. That is the reality behind the rhetoric. There is no credible strategy for skills, no credible strategy for research and development, and no credible strategy for funding investment. There is no consideration whatsoever of the impact of its age of austerity on jobs, innovation and competitiveness. The core of the coalition approach amounts to liberalisation plus corporate tax cuts.

In the interests of time and ensuring that the noble Lord, Lord Sassoon, has plenty of opportunity to answer the questions, I will leave my comments there.