Queen’s Speech

Viscount Trenchard Excerpts

Monday 13th May 2013 Lords Chamber

[Viscount Trenchard]

My Lords, it is always a privilege and a pleasure to speak in the debate on the gracious Speech. I, too, pay tribute to the noble Baroness, Lady Lane-Fox of Soho, on her excellent maiden speech. Given how important IT is to all of us, it is very good to have her in your Lordships’ House and I look forward to many contributions from her. Like many noble Lords, I congratulate my noble friend Lord Lang on the entertaining and skilfully constructed speech he made in proposing the Motion for an humble Address.

In preparing for this debate today I was struck by the fact that much of the work that your Lordships’ House will undertake in this Session on business, the economy, local government and transport was not mentioned in the gracious Speech. The carrying over of Bills which have substantially completed their progress through another place has resulted in a growing disconnect between the gracious Speech and the agenda set for this House over the coming months.

On transport, the High Speed 2 Bills were announced. However, does it make sense to decide to go ahead with HS2 before deciding on the location of London’s main hub airport? The airport question should surely be determined first. After that it will be clear what enhancements to our railway network will be needed. I am sceptical about the value of shaving a few minutes off the journey from London to Manchester. Certainly I do not believe the figures produced in an attempt to monetise the value of HS2 in terms of enhancement to GDP.

If Heathrow is to remain our principal airport hub and expansion is to take place there, surely HS2 should be routed via Heathrow. If, as I believe should be urgently considered, a new airport in the Thames estuary were to be built, then there might well be a case for a new high-speed railway to be built as a part of the new airport’s links with Birmingham, Manchester and the north.

Among the measures announced in the gracious Speech was the deregulation Bill. We have only just seen Royal Assent given to the Enterprise and Regulatory Reform Act which paved the way for the merger of the Office of Fair Trading and the Competition Commission and some assorted minor tinkering. I fear that the new deregulation Bill, which is not yet published, will bring us more of the same. The Government’s website informs us that the Bill forms part of their agenda to reduce the burden of excessive or unnecessary regulation where primary legislation is required. I ask the Minister to explain exactly what that means. What about reducing the burden of excessive or unnecessary regulation where primary legislation is not required?

The Institute of Directors has commented that the gracious Speech shows a “poverty of ambition” about reducing the regulation of businesses. The Government’s Fifth statement of new regulation states that:

“A substantial proportion of the burden of red tape and bureaucracy emanates from Europe. The Government is working with our allies in Europe to encourage the EU institutions to reduce the EU regulatory burden”.

I fear that the Government’s encouragement of their allies will not achieve a great deal. European regulations in areas where we have lost our national competencies bind directly, without parliamentary ratification, and the transposition of European directives into British law continues to produce a vast volume of cumbersome red tape. I fear that it will be largely a waste of time to debate the deregulation Bill, which will be of such limited effect against the massive tide of new regulation engulfing us.

It is not fashionable to defend our banks and financial institutions, which continue, six years on from the financial crisis, to be bullied and abused by Governments and politicians not only here but in many other countries. Although not mentioned in the gracious Speech, soon the Financial Services (Banking Reform) Bill will come here from another place. Your Lordships’ House will have a duty to ensure that this Bill does not negatively affect the prosperity of our financial services sector and the competitiveness of our financial markets compared with their global competitors. British and foreign banks alike are grappling with the burdens of the new regulatory structure; around 2,000 institutions will be regulated both by the FCA and the PRA. The fastest growing departments in many City institutions are compliance and IT—all power to the noble Baroness—rather than the business departments that promote lending to SMEs. No wonder the executive committees of City institutions spend 90% of their time discussing ICAAP and ILAA rather than talking about how to do more to support and lend to new and growing businesses.

Unlike my noble friend Lord Lawson, with whom I agree on most things, I am not really convinced that the strict ring-fencing of retail banks is either necessary or desirable. I do not think that if ring-fencing had been in place, it would have made any difference to any of the banks which failed. Besides, banks now enjoy greatly improved capital and liquidity ratios, which I believe is more important. However, ring-fencing is going to happen. The Government want it, the banks have accepted it, and your Lordships’ House should concentrate on implementing it with as little collateral damage as possible.

As noble Lords are well aware, our new regulatory system is being introduced at the same time that the three equivalent bodies at the European level have been reorganised as fully fledged regulators. I have heard from some continental bankers that they are surprised that we have undertaken such a far-reaching reform of our national regulatory system because, “Everyone knows that it is intended that eventually the European regulators will do the job for the whole of the EU”. The soaring costs and the continuing uncertainty about the regulation of our financial services markets have undoubtedly already lost us many jobs and business operations to other centres.

I do not know whether it will be possible to repatriate significant powers such as financial regulation, but if the European Union is to consist principally of one very large country—the eurozone, one medium-sized country—the United Kingdom, and perhaps one or two small countries, then I think that it will be neither comfortable nor advantageous for us to remain a member, and I congratulate my noble friend Lord Lawson on his decision to articulate his view at this time. As my noble friend Lord Forsyth so eloquently argued, our future lies in developing our global trading relationships with the Commonwealth and the growing economies of Asia, South America and elsewhere. Of course we would need to negotiate a free trade agreement with the EU, but if South Korea can have one, why can we not have the same? Why would the EU not agree? After all, we buy more from the EU than it does from us.

I have spent a third of my working life resident in Japan, which is at last enjoying its day in the sun after a very long economic winter. I was naturally delighted that the Prime Minister and the former Japanese Prime Minister Mr Noda signed two important collaboration agreements in April last year: one on military equipment procurement and one on civil nuclear power. Hitachi’s acquisition of Horizon, rescuing our new nuclear power industry, is an example of the second. I believe that our excellent trading and investment relationship with Japan can make an increasing contribution to our growth and urge the Government to include Japanese alongside Mandarin Chinese as one of the languages that may be offered in primary school at key stage 2. Given the deep economic ties with Japan, and the fact that the Chinese and Japanese economies are nearly the same size, it is strange and upsetting to our Japanese friends that Japanese is excluded from the list.

The Government deserve congratulations for sticking to their pledge progressively to reduce corporation tax. By April 2015, we should enjoy, at 20%, the joint lowest rate in the G20. That should help the Government’s first priority: to strengthen Britain’s economic competitiveness. Although I keenly support the Government’s economic policy, I would ask my noble friend to explain what the Treasury meant by its statement following the gracious Speech that there would be a crackdown on tax avoidance and evasion, with a £4.6 billion package, including a new information exchange agreement between the Isle of Man, Jersey and Guernsey. Can my noble friend confirm that, in spite of the Treasury’s statement, the Government still distinguish between tax avoidance and tax evasion? Can she explain whether the UK is also a party to the information exchange agreement between the three territories? What is meant by a £4.6 billion package: will it yield £4.6 billion and, if so, over what period, or will it cost £4.6 billion to implement? The language is not clear.

In common with some other noble Lords, I confess that I, too, did not really feel inspired by the gracious Speech. I regret that it felt somewhat lacking in enthusiasm and vision. Nevertheless, there are some sensible measures, already referred to by other noble Lords, such as the Local Audit and Accountability Bill, which abolishes the Audit Commission and outsources and delegates its powers to local communities. The National Insurance Contributions Bill will also, in a modest way, encourage small businesses to take on more employees. I look forward to hearing the rest of the debate and the Minister’s reply.