Debate on the Address

My Lords, this has been a wide-ranging debate. Before I respond to it, like other noble Lords, I should like to place on record my admiration for the service given to this House and the Government by my noble friend Lord Sainsbury of Turville. He has a fine record, particularly in his promotion of science and innovation. I also add my welcome to the Front Bench to my noble friend and colleague Lord Truscott. He comes with impressive credentials, as will already be clear from the way he opened this debate. I also welcome the noble Baroness, Lady Wilcox, to her new role on the Conservative Front Bench. Today, we have benefited from two first-class maiden speeches. The noble Lord, Lord Bilimoria, a fellow chartered accountant, spoke with the authority of somebody who has built and run a business, with a little help from me, and I warmed, in particular, to his ethos of putting something back into the community. The noble Lord, Lord Rowe-Beddoe, also brings a strong business background to your Lordships’ House, and he has already applied it in the service of the Welsh Development Agency. I was delighted that he spoke in particular about the importance of the creative industries. I look forward to both noble Lords continuing to swell the ranks of those who speak in this House on matters of business and the economy. The Chancellor will present his Pre-Budget Report on 6 December. It will include a full update of the Government’s economic forecasts and fiscal projections. We will obviously discuss and debate those matters in due course. Before I take stock of some of the Government’s key economic achievements, I shall deal with some of the points raised in today’s debate. The noble Baroness, Lady Noakes, talked about unemployment. Unemployment levels and rates are low by historic standards. The IMF noted that a flexible and dynamic labour market is one of the UK economy’s key strengths and that unemployment in the UK is significantly lower than in the euro area. On inflation, the UK is enjoying the longest period of sustained low inflation since the 1960s. With regard to public debt, the Government are meeting their strict fiscal rules, even under cautious assumptions. The Budget 2006 projections show that both the golden rule and the sustainable investment rule will be met over the cycle. The noble Baroness also asked about economic migration. The economic impact of migration from new EU member states has been modest but broadly positive, reflecting the flexibility and speed of adjustment of the UK labour market. Competitiveness was raised by several noble Lords. We have a productivity gap with France, Germany and the US. The UK has made progress since 1995 in closing the gap with France and Germany and is the only G7 country not to have fallen further behind the US. Since 1997 the UK has had the best combination of unemployment and inflation in the G7. Before 1997 the UK had one of the worst. The noble Lord, Lord Sanderson, queried whether the Government are friendly to business. I would assert that they certainly are. I point to the capital gains tax changes, the inheritance tax relief—a matter I think the noble Lord acknowledged—the reduced lower and basic corporation tax rates and of course the lower income tax rates than those we inherited. Noble Lords probed the OECD figures. The UK is a relatively lightly taxed economy. According to the latest information, in the UK the tax rate on corporate income is 8.1 per cent of GDP, the OECD average is 9.6 per cent, and in the EU 15 it is 8.2 per cent. So we compare favourably on those grounds. On the approach of the Government, the DTI simplification plan is addressing industry’s concerns about complex rules, inconsistencies and other irritants, the frequency of the changes and the need for greater co-ordination between government departments. My noble friend Lord Bhattacharyya spoke about the significance of the longer-term challenges that we face in the economy, in particularly the influence of China and India on the global economy. As he basically demonstrated, it is impossible to debate the domestic and global economy without reference to Asia, especially China and India. Indeed, they are in a league of their own. But, in the past two years UK exports of services to China have grown by 54 per cent, and the UK is the largest EU investor in China, with more than 5,000 investment projects. To put it all into context, India and China educate about 4 million graduates each year and the UK educates around 250,000. That shows the nature of the challenge we face. I welcome the right reverend Prelate the Bishop of Manchester’s welcome of the Digital Switchover (Disclosure of Information) Bill. He pointed out the risks of data sharing. But the scope of the Bill is similar to the Television Licences (Disclosure of Information) Act 2000, which gave free licences to those aged over 75. My noble friend Lady Kingsmill welcomed the Exchanges and Clearing Houses Bill. It is important that this preserves the light regulatory touch for our exchanges. I am pleased that this also has the support of the Conservative Benches. The noble Lord, Lord Lee of Trafford, said that the Government are not interested in tourism. I reject that assertion. One has only to look at the Prime Minister’s engagement with the Olympic bid and what that could mean for this country and tourism and beyond. Total tourism consumption was £92 billion in 2003, which equates to 3.4 per cent of total UK GVA. The number of visits made to the UK by overseas residents in 2005 was the highest ever recorded—30 million—with investors spending a record £14.2 billion. My noble friend Lord Brookman spoke with passion about the steel industry and its community. Despite major restructuring over the past 30 years, the UK steel industry is, and will continue to be, a significant employer and an R&D intensive contributor to the UK economy. In 2005, Corus made investments totalling £280 million to improve quality and productivity. That was a real vote of confidence by the company in its employees and the long-term strength of the UK economy. There are issues about the UK steel industry’s competitiveness with India and China. India and China are Kyoto signatories but, as developing countries, they have no fixed targets. Energy-intensive users such as the steel industry have, by their nature, predominantly local markets, so UK competition basically comes from the EU. The noble Lord, Lord Wade, referred to his RisingStars fund and the importance of technology and of spin-out companies from universities. I agree. He also referred to the importance of seed capital. Of course wealth creation depends in part on the infrastructure of skills, of education, of research and transport infrastructure. The private and public sectors are inter-dependent. On the public sector balance, the Government have set out their fiscal frameworks—the golden rule and the sustainable investment rules—which are being met. On the investment funds for the start-up sector and finance for business, we successfully launched the first phase of the enterprise capital fund of Pathfinder 2006 to help the development of high-growth SMEs caught in the equity gap. There are other provisions, too. The noble Lords, Lord Dykes and Lord Oakeshott, mentioned debt. The Government are aware of these issues and aim to provide a framework of macro-economic stability and awareness of financial issues within which people can make informed, responsible decisions about how much debt it is prudent to incur. The Treasury has worked closely with the DTI and the DWP on reform of consumer credit regulation—we had the Consumer Credit Act—and its Tackling Over-Indebtedness: Annual Report 2005 provided an update on the large amount of work that has already been done. The noble Lord, Lord Dykes, tempted me on what the Chancellor is going to do about gas-guzzlers, but I think that is a matter for the Chancellor at Budget. He also referred to the public sector. The Government public sector is leading on a reduction in carbon emissions, which falls under Defra’s energy performance target. The Cabinet is leading by example with a pledge that the Government estate will go carbon-neutral by 2012. The noble Lord, Lord Barnett, focused the spotlight on the Conservative’s tax reform commission proposals—a package which, if ever implemented, would be regressive. He probed the question of whether tax cuts would generate growth. Indeed, if the assertion is that they will, presumably they will become Conservative policy. We look forward to pronouncements in due course on that. He will understand, as will my noble friends Lord Sheldon and Lord Peston, that the Government do not comment on decisions of the MPC. It is truly independent, which is why it was created. The noble Lord, Lord Sheldon, asked why we should take the lead on climate change. Is it not right that this is an international problem above all others, and that we have particular responsibilities to developing countries? The noble Lord, Lord Marlesford, asked whether the economic strategy would change under a Gordon Brown Government. The economic strategy is the strategy of the Government. The Chancellor has clearly been at the forefront of that strategy, and I have no doubt that it would not change under a Government of which he were the Prime Minister. The country can be assured of that. The noble Lord also spoke about the dangers of protectionism emerging in France. He is right: that is a worrying development. The noble Lord, Lord Beaumont, offered some interesting views, which it is difficult for the Government to accept, on how to deal with the consequences of climate change. It is, of course, important that we have a full discussion on these matters. The noble Lord, Lord Currie of Marylebone, talked about the importance of the telecommunication sector. There is a strong story to tell—prices are down, choice is wider, and satisfaction is up—but he supported targeted help for vulnerable people on switchover to digital. He illustrated some of the challenges that regulators face. An example is the complex area of food promotion to children, where Ofcom has sought to strike a balance that protects the health of children but also considers the impact on the broadcasting industry. The noble Lord, Lord Peston, talked about productivity—I think I have dealt with that—and inequality. We should be clear on this. I think that my noble friend Lord Whitty recognised that the Gini coefficient, the measure of income inequality, has turned down a little after an inexorable rise from the 1980s. The bottom quintile of real growth in household net incomes before housing costs was 2.6 per cent over the period of this Government to 2004-05, while the top quintile was 2.1 per cent, so change is happening in the right direction. However, there is still much to do. The noble Baroness, Lady Valentine, spoke of the significance of London; indeed, it is one of the only two truly global financial centres in the world. One of the Bills before the House aims to ensure that we keep our light-touch regulatory regime concerning exchanges. She also stressed the importance of transport infrastructure. Crossrail is important for London’s future and that is why the Government have introduced a hybrid Bill, but there are issues about how it should be funded. The Tube PPP is delivering a network capacity increase of 25 per cent by 2016, with eight lines to be upgraded and other investment. When my noble friend Lord Rosser speaks, I am reminded of why I came into politics. He acknowledged the progress made by the Government on the economy, but stressed the issues that still remain in order to narrow the gap on inequalities. So far as private equity and hedge funds are concerned, these can bring financial benefits to markets by providing liquidity and help to drive financial innovation. However, the Government are mindful of the risks to which the wider economy associated with hedge funds can be vulnerable. The Treasury, together with the FSA and the Bank of England, continues to monitor these issues. My noble friend Lord Whitty welcomed the consumer legislation and that related to digital switchover. The proposed help on digital switchover is for the over 75s and households with one person with a significant disability, but I note his point about those in social housing. I have ranged over some of the key statistics related to inequality. I shall come on to green taxation in a moment, but increasing the percentage of GDP represented by green taxes is not necessarily the right outcome. Sweden and the Netherlands are the only two other countries likely to hit their Kyoto targets, but their percentage of green taxation has reduced over the past four or five years. That is because if you have climate change agreements, for example, you are reducing the take from green tax. There are also equity issues, about which my noble friend Lord Whitty made an important point. The noble Lord, Lord Oakeshott, asked about loss of corporation tax from highly leveraged buyouts. I do not have the data and perhaps I should encourage him to listen to the Chancellor when he next pronounces on these matters. On debt, I think we do have to get away from challenging every decision made by the ONS or other government departments that is not acceptable to the Opposition. So far as concerns Network Rail going off balance sheet, the ONS is an independent statistical agency and its judgment was supported by the European statistical agency, Eurostat. On PFI liabilities, some were on balance sheet and some were off; an independent judgment is made on those. The noble Baroness, Lady Wilcox, asked about redress schemes. The detail of those has not yet been decided, but such schemes will enable rogue estate agents to be banned. She challenged the issue of regulation, although I recall that the noble Baroness was involved in the consideration of the Regulatory Reform Act. We should look at what happening in that area. We have the Davidson and Hampton reviews, the process of government in putting forward the code, regulatory impact assessments and new regulations. A great deal of work is going on, including work on the simplification plans to which my noble friend Lord Truscott referred. Consumer protection will be strengthened by providing a single point of contact on consumer issues. Business investment is not at a record low. It has risen by one-third since 1997, over twice the rate of growth seen in the preceding eight years. I turn briefly to the Statistics and Registration Service Bill, to which several noble Lords have referred, including the noble Lords, Lord Moser, Lord Jenkin of Roding and Lord Oakeshott, and my noble friends Lord Peston and Lord Haskel. To ensure statistics produced across government are of the highest professional quality and integrity standards—and are seen to be so—the reforms will cover official statistics produced across government, a point probed by my noble friend Lord Peston. In particular, the independent board will oversee the ONS. The noble Lord, Lord Moser, of course, speaks with particular authority on this matter. He served with great distinction as the head of the Government’s statistical service and I welcome the fact that he welcomes the Chancellor’s initiatives, the structure and the consultation involved. I note his point about what seems to be a change of direction in the status of the board. Doubtless there will be opportunities to debate this in the passage of the Bill as we discuss the legislation in detail. The fact that it remains a decentralised system within a single integrated system is important. The Government recognise the pre-release and doubtless there will be discussion on that also. The noble Lord, Lord Jenkin, raised a similar point about which government department should be involved. I am sure we will discuss that in due course. The noble Lord’s other point related to—