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Queen’s Speech

My Lords, I join other noble Lords in welcoming the maiden speeches of the noble Lords, Lord Sugar and Lord Martin, especially that of the noble Lord, Lord Martin, because he referred to the Bible rather more often than Members on these Benches usually feel that they have the freedom to do. We look forward to his further speeches—perhaps he will encourage us in the sources that we draw upon in the future. The diocese of Chester has a long-standing link with the Solomon Islands. The wisdom of British rule in those islands is shown in the way in which many traditional aspects of the indigenous culture were sustained and encouraged. One involves the way in which land is held, usually on a custom basis—that is, the land is regarded as belonging to a certain family and is then allocated to members of the wider family or community to provide for their needs. In western terms, people do not own the land as such but have the custodianship of it on a life-tenure basis. In the capital of the Solomons, Honiara, this older custom basis of holding land has given way to a concept of ownership, with land able to be sold from one person to another. This has led to disputes and violence as one system of landholding overlaps with another. On a visit there, a local bishop emphasised to me the importance in the wider Solomons of maintaining the traditional custom-based community ownership of land and said how much he feared for the traditional stability of community life if the western model were to be more widely introduced. I am not suggesting that our traditional property-owning democracy is inferior to this alternative model, but it serves to remind us that there are different bases upon which a democratic society can choose to organise its economic life. In this country, for many decades during peacetime, we have had a shifting emphasis between free market economics and state-regulated economics with varying degrees of state ownership. The period immediately after the Second World War saw a move towards nationalisation and state regulation on a scale that we find unfamiliar today. There was then a period under both Conservative and Labour Administrations where Governments broadly accepted the post-war status quo. The period since 1979, as we have been reminded, has seen a sharp reversal towards free market economics and an accompanying programme of privatisation. Since 1997, the free market model has largely been continued under new Labour but with a steady rise in overall public expenditure. Over the past couple of years we have seen a financial earthquake, with the main causes being traced to an overreliance on unregulated free markets. It is understandable and welcome that the gracious Speech should contain proposals for greater regulation of financial markets, including greater consumer protection, and for a long-term framework for fiscal stability. The Fiscal Responsibility Bill attempts to respond to the problem of deficits, which seem to be slipping out of control. Real questions can be asked, as we have heard, about the appropriateness of this type of legislation. It reminds me of legislating that people shall be good, which, on the whole, does not succeed terribly well. The underlying dilemma is that, as a country, we have aspired to European levels of public expenditure while also aspiring to North American levels of taxation. You cannot really have it both ways, with one economic foot in Europe and one in America. Perhaps that dilemma will never be fully resolved given the oscillations of the past 60 years or so, but unless we attempt to resolve that dilemma we are likely to yo-yo between different Governments pulling in different directions as the pendulum swings one way or the other. That in itself is bad for Britain and bad for business. When I hear businessmen speaking, above all they want stability in economic management so that they can make their investment decisions with a sense of long-term stability. In our complex world, many decisions have to be taken with a horizon that stretches far beyond the five-year horizon of a given Government. That is even truer today as our world becomes more complex and more globalised. The delay in facing the need for the replacement of our nuclear plant is a case in point. Successive Governments with short-term horizons put off addressing an obvious long-term issue which should have been faced. Now we are trying to play catch-up. To take a different area, I think that later generations will look back with some horror on the way in which my generation has essentially squandered the benefits of North Sea oil and gas, spent in one generation and, frankly, with precious little nationally to show for it. I have always believed that a substantial proportion of this one-off windfall tax revenue should have been set aside in a long-term national investment fund, rather as the Norwegians have done. But that would have required successive Governments to have reduced their immediate spending power, which would hardly have made them popular. Given the tension between the desire for European levels of public spending and American levels of taxation, that has not been an attractive prospect for any Government. Unless we can resolve that in some way, we shall just go on yo-yoing, with the pendulum swinging, in the years to come. I conclude with a different point. We are now set for a new balance between free market practices and regulation, which I welcome. Markets never exist in a pure state, in a socio-economic vacuum. They are necessarily shaped by the political forces of society. My fear is that the new regulation that is promised is too negative in tone, in terms of limiting bonuses, of limiting risk and so forth. Up to a point, perhaps that is where the immediate need is, but we should look further to the positive goals that society can properly set and beyond the immediate horizons of economics. For example, I would welcome a clearer legal and financial framework that sought more directly to counter the tendency of free market policies to produce exaggerated winners and losers. In recent decades, we have seen a sharp growth in financial inequality in our country, but with negative social effects, which are ever more clearly documented in obesity, teenage pregnancy, underachievement, school crime and much more. It has sometimes been said that inequality is the price that has to be paid for economic efficiency. While there may be some truth in this, it now seems clear that the drive to subject all areas of our lives to market competition risks eroding the fabric of the social life and social institutions of our society, with the kickback that that ends up costing more and weakening the economy in the process. For an economist, the opposite of competition is monopoly, but beyond both of these is a need to foster a sense of community solidarity and common values—a social co-operation that economics seeks to serve and not dominate. I began by referring to the way in which South Sea islanders attempt to maintain their wisdom of the ages in the face of the destabilising encroachment of unregulated market economics. Beyond the Bills in this short Session, where is our wisdom of the ages to be found?