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Queen’s Speech

My Lords, I begin, as other noble Lords have done, by congratulating the noble Lords, Lord Sugar and Lord Martin of Springburn, on their maiden speeches. I have only once ever addressed the noble Lord, Lord Sugar, before. It was 11 years ago, in the improbable surroundings of St James’s Palace. He was there in his capacity as chairman of a well-known football club, and I was there as a representative of the Prince’s Trust, trying to persuade football chairmen to get involved in a programme with young people, working with the trust. At the end of my lecture, the noble Lord, Lord Sugar, advanced on me in a rather ferocious manner and said, "You’ll be hearing from me in the morning". I spent a sleepless night, but at 9.30 the next morning the secretary of Tottenham Hotspur did indeed ring me up. I went to see him, and Spurs now has a community foundation that employs more than 100 people. I hope that the noble Lord can bring the same energy and effectiveness to his work promoting small businesses across the UK. Today’s debate has concentrated on the state of the economy and on three big issues: the role which the state should play in preventing recession and promoting growth; the need to rebuild the public finances; and how we ensure that the financial services sector does not threaten the stability of the economy as a whole again in the way that it has over the past year. As a prefatory remark, I share the optimism of the noble Lord, Lord Eatwell, about the future path of the economy. I do not, in this singular respect, agree with the noble Lord, Lord Skidelsky, that one should look to the 1930s to see what is likely to happen next. The analogy with the 1930s does not seem particularly apt, if only for two reasons. First, motors of growth across the world do not depend just on America and Europe in the way that they did in the 1930s. If we look at what is happening in China, India, Brazil, and in much of the east, there are robust levels of growth which will continue and grow. A long period of slow growth is much less likely in both America and Europe than if we ourselves had to be the motors of growth for the world as a whole. Secondly, the role of the G20, hastily cobbled together though it may be, means that instead of countries operating in a protectionist spirit, we now have the world’s 20 most important global leaders at the very least paying lip service to working together to promote growth, and in many respects actually doing something about it. On the role of the state in preventing the recession and promoting growth, we on these Benches agree with the principle of the fiscal stimulus, if not necessarily with all the details. We share the Government’s view that it has had some beneficial effect. We also agree that it would be foolish to move too aggressively at this point to cut the budget deficit, and that one needs to be sure that growth is under way before any rebalancing takes place. Here I agree with both the noble Lords, Lord Skidelsky and Lord Desai. We do, however, think that we now need additional measures to promote growth for the medium to long term while at the same time moving towards rebalancing the economy. I shall refer to just one of those measures this evening. We need to find a new mechanism to channel more funds into infrastructure investment, not least to fund the growth of the green economy. That is not only necessary for our long-term competitiveness; it also creates many jobs in the short term. We have therefore called today for the establishment of a national investment bank along the lines mentioned by the noble Lord, Lord Eatwell, earlier on. We would hope that such a bank might receive wholesale and retail funding. We are not quite suggesting that we revert to the concept of war bonds, because we are not in a war, but the concept of recovery bonds, which might be attractive to individuals and wholesale funders, has merit. We hope very much that this option will be pursued as a way of bringing together a number of initiatives that the Government currently have under way to extend the scope of infrastructure investment. The noble Lord, Lord Sanderson, talked about nuclear investment in Scotland. Scotland has the potential to generate more electricity from wind and wave power than virtually anywhere else in the world. But it will not do that without much more investment than anybody is currently proposing. We believe that an investment bank could play a large part in generating funds for such an initiative. We heard a number of other suggestions for rebalancing the economy, concentrating on sectors beyond the financial services. I support the comments made by my noble friend Lord Lee about the importance of the tourist industry. It is a Cinderella industry that employs many people in some of the poorest, lowest-income parts of the country, and it needs to succeed if those economies are to succeed. Finally, the noble Lord, Lord Eatwell, again stole my words in terms of redirecting funding from rich to poor. He pointed out the value, in terms of growth, of a stimulus to people on low incomes. That is one of the reasons why we have been in favour of a tax switch which would involve higher taxation by raising the capital gains tax level, reducing tax relief on higher income earners’ pensions and redirecting that to people at the bottom end, to bring millions of people out of tax. The second issue that we discussed this evening is the need to rebuild public finances—a point on which everyone is agreed in principle. In the Queen’s Speech the Government are proposing a fiscal responsibility Bill—the successor to the fiscal rules, the golden rule and the sustainable investment rule. Unfortunately the rules were not sustainable when pressure arose, and the fiscal responsibility Bill is not worth the paper it is written on unless we know how the Government will meet it. Where is the sanction if the Government miss the targets in the fiscal responsibility Bill? It is the most threadbare of proposals and, without some beef behind it, has no real credibility. We are looking forward to the Pre-Budget Report to hear how the Government intend to begin to move towards their self-imposed target. It is an arbitrary target—why 50 per cent rather than 40 per cent or 60 per cent or any other figure on either side of those? But we accept, and we hope that both the Government and the Conservatives accept, that if we are to meet that kind of target, we will have to take lots of decisions that will be relatively if not absolutely unpalatable. My noble friend Lord Oakeshott talked about public service pensions. That is one area that any Government will have to look at. But there are others. We will be discussing the Pre-Budget Report in another month. The final big issue relates to how we make the financial services sector less reckless in excessive risk-taking, if we can; or, if it is to be reckless, reduce the impact of the consequences of that risk-taking on the state if things go wrong. The Financial Services Bill proposes to strengthen the regulatory structure in a number of ways. It proposes to make the tripartite structure a Council for Financial Stability. This is a completely vacuous change. It is almost totally meaningless and does nothing to change responsibility; it just gives a new title to the same people, meeting and discussing the same things. The Bill also gives the FSA a financial stability objective, which in itself seems sensible. The key issue is how the tripartite structure—although it is no longer called that—responds in difficulty. We discussed this when the Banking Bill was going though and strongly supported proposals to have the Bank of England’s Financial Stability Committee be a joint committee of both the Bank and the FSA. We thought that was how financial stability could best be safeguarded under stress. All that, though, is largely irrelevant to the way in which the banks work and the changes that are needed. We need to look at capital ratios, levels of borrowing, international co-ordination, breaking up the banks between the casino and utility functions and paying for government insurance. Most of these issues are not covered at all in the legislation. The two which are—namely remuneration and living wills—leave a lot of the details unanswered. The noble Lord, Lord Plant, said, "Do not expect any change on the part of the bankers". One of the lessons from the experiences of recent months is that the bankers certainly have not changed and are putting up ferocious resistance to any single change. Over the last few days we have had the spectre of Mr Tiner saying that it would be bad for banking if capital ratios were increased. There has been a concerted attempt to stop the Government doing anything about disclosing remuneration levels at a time when we now know that the two nationalised banks received over £60 billion in support from the Government. It is probably too much to expect people to be grateful in life but, certainly, if any class has cause to be, it is the bankers, and if any class is not, it is the bankers. We wish the noble Lord, Lord Myners, all strength in his continuing battles in that area. I refer quickly to a couple of other points that were made. I strongly agree with everything that the noble Lord, Lord Sawyer, said about the new mutuals. I hope we can find a mechanism to strengthen that sector. So far we have failed. There has been a lot of talk about it, but we have not succeeded. I hope very much that the comments of the noble Lord, Lord Addington, about the Flood and Water Management Bill will be taken on board and that we get that Bill through the House before the election. Finally on legislation, we have heard very good speeches about the Digital Economy Bill from the noble Baroness, Lady McIntosh of Hudnall, and the noble Lord, Lord Puttnam. We support much of what they said. I particularly underline what the noble Lord, Lord Puttnam, said about the need to explore ways in which our traditional commitment to impartiality in news gathering can be further safeguarded in legislation. That will obviously come up when the Digital Economy Bill is being discussed. At least that Bill has some possibility of being enacted before the election. I fear that both the financial Bills that we have discussed will fall by the wayside and that, instead, we will be looking at some rather different financial bills after the next general election.