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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