| Previous Section | Back to Table of Contents | Lords Hansard Home Page |
We are already rated among the 10 most competitive economies in the world by the World Economic Forum, which publishes an annual index of the best performing countries distinguished by their competent economic stewardship. We certainly have had competent economic stewardship. We have over the past 10 years enjoyed an unprecedented period of stable economic growth which we should not take for
11 Jan 2007 : Column 376
But we must also ensure that our children and young people are educated and equipped with the skills and learning to operate comfortably in such a world. We cannot afford to waste the talents of our people. The proper development and management of our human capital is vital to our competitiveness. As the noble Lord, Lord Leitch, pointed out in his excellent report published recently, our nation’s skills are not at present world-class. We have neither the quantity nor the quality of necessary vocational skills. We must do more and will do more to embed a culture of learning in our society. Increased investment is planned in this area to enable us to be more competitive in the global economy and to eliminate inequalities at home.
I am personally most concerned that we are not harnessing the skills and talents of our women. They are graduating in greater numbers than men and with better degrees and qualifications. Yet, as the report of the EOC published last week points out, they are missing from the senior positions in our economic life. This is a symptom of poor human capital management which the UK cannot afford. I know that my noble friend Lady Gale shares my concern and has more to say on this point.
But we cannot merely look at the potential economic opportunities for ourselves in the world. It is the rich countries which are already benefiting from globalisation through the import of cheap manufactured goods and access to new markets. We must in a globalised world recognise that others need help to meet basic needs. The debate today flows on easily and well from that promoted earlier by my noble friend Lady Whitaker. We must be good neighbours in a global world. It is worth reminding ourselves that more than 1 billion people do not have access to clean water; 10 billion children die of preventable childhood diseases; and AIDS, TB, cholera and malaria claim millions of lives throughout the world each year. We have the skills and the resources to tackle this. And this is not an entirely altruistic ambition. It is in our own interests from many points of view, not least that the global nature of travel means that infectious disease is very mobile. It is also the case that it is in our interests from a security point of view that people in the developing world see us as sympathetic to their problems and supportive of their economic and social goals rather than hostile. Healthy, educated people in secure communities working in productive and satisfying jobs make good global neighbours.
It is clear that the free market is the best way to ensure the most efficient allocation of goods, services, capital and opportunities in a global economy. However, while the free market may ensure efficiency, it cannot, left unregulated, ensure fairness, equality of opportunity and a cohesive society. It is through policies of social justice, combined with policies to encourage economic progress, that conditions can be created where people can make the most of their lives. It is the task of
11 Jan 2007 : Column 377
However, globalisation brings with it huge opportunities as well as challenges and how we recognise and respond to these opportunities will shape our lives and those of our children. I beg to move for Papers.
2.17 pm
Lord Patten: My Lords, in declaring my business, commercial and City interests, I begin by warmly congratulating the noble Baroness, Lady Kingsmill, on the timing of her speech because competitiveness in this country is at a cusp and it deserves the close attention that she gave it in her excellent and far-ranging speech. I am sure that if my wife, who, like the noble Baroness, is a businesswoman of longstanding, were present in the Chamber, she would share my admiration for the noble Baroness’s speech. Furthermore, as the noble Baroness also raised the subject of the very handsome jacket she is wearing, I am sure my wife would want me to point out that a similar check is obtainable in another store, probably at a competitive rate by comparison, of which my wife is a non-executive director—that is, Marks & Spencer.
I am a great believer in competition and would wish to see a statue raised in Parliament Square to its virtues. I would also wish to hear someone taking part in our debate representing the missing ranks in the Chamber. I know that Bishops are always very busy, but it is unfortunate that we do not often see them in the Chamber taking part in our debates on competitiveness and the economy. I am in order in speaking as I am referring to Bishops in the Chamber. It is sad that such debates are sometimes seen as Prelate-free zones. I would not want that to be the case in future and would encourage Bishops to play a role in guiding us on virtue.
As regards our competitiveness, we need to have some objective measures in the UK. I shall concentrate on that rather than on the global reach of the noble Baroness, Lady Kingsmill, before examining two other areas, one of which will be familiar: that is, tax and spending levels. They are so important to business and competitiveness. I want then to look at an area that has not received much attention recently but which I think will roar up the political agenda; that is, the importance of integrity and ethics in business not only as good things in themselves but as positive business-getters and going straight to the bottom line in business.
One could pick and choose lots of statistics on our competitive situation. I have tried not to do that. At best, one can say that the present Government’s record was pretty reasonable until the beginning of this century. It then began to fall away. My evidence for that is the World Economic Forum September 2006 report, which points to the UK dropping to 10th place in the rankings, and to the report a month later by our very own and dear Office for National Statistics. On 4 October it reported:
“UK productivity in 2005, as measured by GDP per worker, was behind the average of the other G7 countries as a group”.
11 Jan 2007 : Column 378
But I do not for one moment suggest that the Government have broken the British economy in the same way as I must reflect on the fact that a general serving in the Army has said that they have broken the British Army or, as we all know in the Chamber, they have so successfully broken the Home Office. I do not think that the economic record of the Government has been at all bad. They have done pretty well in leaving to one side and letting them get on with their own business the most sophisticated financial markets in the world and letting them flourish with light-touch but effective regulation. They have also continued to promote a flexible labour market.
On the other hand, I believe that the Government have overtaxed the businesses of this country. We can see that businesses are acting vigorously by relocating. I will not talk about the sort of lobbying we have on this issue but simply ask the House to reflect on the fact that 19 large British companies such as Omega and Hiscox have relocated. Hiscox, which is an insurance company—here is a reverse declaration of interest: I pay it; it does not pay me—has relocated its insurance business to Bermuda. In oil, Shell has done the same thing and relocated to the Netherlands. Experian has gone to Dublin. The time has come for the Government to look again very seriously indeed, with international and multinational companies such as Kraft spurning the UK, at scrapping corporation tax on foreign dividend income in this country in the interests of trying to preserve our competitive position.
Unless that is done I believe that in a very short period of time we will see a substantial number of companies moving to new locations, not just in western Europe but to Dubai—to locate in tax zones like that—and smaller companies moving to the Baltic states. That will happen in the next five to 10 years. We will see a mass migration out of this country of competitive businesses, which is not what the Chancellor really intended when he introduced the cat’s cradle of taxation controls. It means that our pile of tax legislation is second only in its height to that in India.
Secondly, and lastly, I turn to the importance of integrity, transparency and ethics as vital components in business success and thus in our competitiveness. Just before Christmas, some big institutions in the City, of which the noble Baroness spoke so warmly, said very important things about the importance of ethics. That was heartening. This issue will roar up the agenda. In a letter published just before Christmas, F&C referred to the need to have an investment climate that is,
We must never undermine the integrity of the capital markets any more than we must undermine personal integrity. That is why I was also very pleased to read the view of the chief executive officer of Hermes, Mr Mark Anson, stating:
11 Jan 2007 : Column 379
“Lack of credibility in the regulation of one company can spread to the rest of the stock market creating higher risk premiums and cost of capital”.
These are very important issues indeed for the Government to reflect on.
I reflect on the very wise words of the present excellent Solicitor-General back in 2004 when he was an industry Minister. In another place he said that poor standards in this respect are “bad for business”. I am sure that is a sentiment which he and our present Attorney-General quite often reflect on as they consider the conduct of businesspeople in this country.
Good business has business interests, but it should have values of transparency, ethical clarity and honesty. These things are business getters, not business losers, and are very important in maintaining our competitive position.
2.25 pm
Baroness Valentine: My Lords, I should perhaps begin by saying that my jacket is mail order from Boden. I thank the noble Baroness, Lady Kingsmill, for introducing this debate today. I know that she backs bringing business and government closer together. I would add to that the need to bring business and skills provision closer together, particularly given today’s debate. I also endorse her encouragement of more senior roles for women in business.
I would like to focus on the importance of “Team UK” in competing globally. In an increasingly global economy, our strengths and weaknesses become more noticeable. The UK needs to play to its regional and sectoral strengths. I use a football illustration: there are not many Liverpool fans who would support Wayne Rooney of Manchester United on a weekly basis. However, plenty of those fans support Mr Rooney as a member of the England team when it comes to the World Cup.
London First, of which I am chief executive, has produced a report, entitled Keeping the UK Competitive. It examined the economic relationship between London and other UK regions and made recommendations to government on spending priorities to support UK competitiveness. Two characteristics of the UK economy stood out. First, 40 per cent of export growth since 2000 has come from London, predominantly from the financial services sector. Secondly, London and the rest of the UK are increasingly inter-dependent rather than competitive. A successful London is more a source of opportunity to Glasgow, Manchester or Birmingham, than a threat.
Regional economies are structured differently. London is highly specialised in financial and business services, while the north-west and the West Midlands are specialised in manufacturing and East Anglia and north Wales in agriculture. Where significant inter-regional competition exists, it does so between other regions and not with London. Another example of that symbiotic relationship is that there is often a view that London is a brain drain on the rest of the country. What in fact happens is that graduates come
11 Jan 2007 : Column 380
Businesses based in London sell to consumers in the rest of the UK, and vice versa. Typically, London exports financial and business services and buys manufactured goods. London exported around £125 billion of services to the rest of the UK in 2004 and imported around £110 billion worth of goods—a relatively balanced trade.
On the global position, London can compete credibly for a bank’s European head office. Once won, a London HQ can help Manchester or Edinburgh win secondary offices versus European competitors. London competes for business with world cities such as New York and Tokyo. This global competition is increasingly understood by other UK cities as Birmingham competes with Brussels and Liverpool with Lisbon. So an emerging entente cordial between the capital and other UK cities is helping to attract inward investment: a collaboration born of pragmatism.
What are the constraints on UK productivity and growth? The report is clear. We need investment in transport and in job-related skills. Our large cities are highly congested. Public transport is patchy in quality and capacity. Overcrowding on London’s Underground is unprecedented in extent and unbearable in effect. How can City businesses grow if new employees cannot get to work? This might drive business from the UK—a matter that has been touched on—or deter new employers coming altogether. Sir Rod Eddington’s recent report confirmed the importance of transport to the economy. If Government truly recognise that, this year’s Comprehensive Spending Review must prioritise transport investment. In particular it must commit to Crossrail.
Skill deficits and worklessness drag down productivity. To be globally competitive, the UK requires world-class skills training. The current system is not sufficiently responsive to the market's diverse and changing needs. Skills provision must be driven by the market—by demand. That may mean different skills and training offers in different parts of the country.
Government talk of increased productivity conjures visions of white coats and clipboard time and motion studies, on 1960s production lines—clearly not the right concept for 2007 and entirely inappropriate to the productivity of London and the service sector.
London has an insatiable demand for high-end skills, to which success against global competition only adds. That demand is, rightly, satisfied by recruiting the world’s best. If London stays an attractive place to live and work, our businesses will attract more such stars, benefiting UK plc.
At the other end of the skills spectrum, many less productive, lower-skilled roles are filled by immigrants, including some 70 per cent of staff in London hotels. But London's real productivity issue relates to those not in work. London has the highest unemployment rate in the UK at a stubborn 8.2 per cent. The reasons
11 Jan 2007 : Column 381
To conclude, the United Kingdom is a successful and competitive economy. We need to recognise and play to the different strengths of the UK regions. As a 20th century business leader, Henry Ford, said:
If we work together as cities, regions and nations to maintain and build on our strengths, we will ensure that every citizen has the opportunity to share in that success.
2.32 pm
Lord Bhattacharyya: My Lords, I thank my noble friend Lady Kingsmill for securing this debate on such a vital topic. As a former deputy chair of the Competition Commission, she has great expertise in these matters.
Global competition is nothing new. All my working life I have been wrestling with global competition, especially in the manufacturing sector. I remember the Japanese product invasion that took place in the 1970s. It happened so suddenly and provoked so much debate. I also remember coming back to this country after visiting Japan many times when there was disbelief that that could happen, and being told that it was only because of cheap labour costs. Of course, what Japan exposed was the inefficiency of the manufacturing sector in the West. Our products were old-fashioned and very little innovation was taking place.
I do not need to tell noble Lords how that competition affected the UK. We were inward-looking and complacent. Our complacency about our products left us far behind. Even then, it was perceived that the Japanese were competitive because of low labour costs and cheaper capital. There was a clamour for protection in the West, but Japan, extremely cleverly, invested in Western assets.
In the end, we discovered that Japanese growth was due to intelligent investment, rigorous training and an emphasis on quality products. A new lexicon entered the business vocabulary: “just in time”, “lean”, “total quality” and “team working”. Japan was no miracle; it was structured common sense intelligently applied. As a result of Japanese innovation, consumers and economies around the world benefited from an innovative value-for-money product base. The West learned from Japan. The resurgence of the western automotive and white goods industry shows the benefits that we gained from global competition.
Next was the rise of the tiger economies. At first, their growth was entirely due to their low cost-base, light regulation and good infrastructure. Growth was
11 Jan 2007 : Column 382
However, during the past 10 years, global competition has taken on a different magnitude with China and India opening their economies. China began by merely producing other people's products, but has now moved on to using its expertise to build its own technologies. The rate of purchase by Chinese companies of foreign technologies is unbelievable. Every time I go there, I see a new Chinese company being formed by taking over a western company. That is one reason why I am always concerned when we say that we as a nation must concentrate on knowledge-based economies. Knowledge is transferable at the click of a button.
I remember working with Japanese companies in the early 1980s. Their training and R&D were entirely driven by the private sector. At that point, the Japanese education system trailed the West and companies knew that they would succeed only if they developed a skilled workforce. The same was true in South Korea and is happening today in China—R&D and skills are primarily driven by the private sector. I wish that British corporations were focused on R&D to the same extent. I would not mind having levies if that is the only way to get a skilled workforce in this country.
There has been a convergence of understanding by Governments of the fiscal frameworks and foreign direct investment required for growth. Almost all of the world's Governments now want to grow their economies and understand the economic drivers of growth to make it happen. As a result, I shall not spend too much time on that. However, I shall mention one thing. I was interested recently by what Chirac said about the reduction of corporate tax rates. We will face more pressure on that front in the coming years, because that is what is happening throughout the world. In our trade with China and India, although they are growing so much, we are languishing as a country. We have not improved our trade relationships with those countries to the extent that our competitors have.
The great transformation of the global marketplace is the growth of the digital economy. The scale of the change has been breathtaking. Most homes in the UK now have more than 10 microprocessors, found in appliances ranging from phones to washing machines. More than a million UK homes now have broadband access and the figure is growing at an astronomical rate. In the business world, it is no longer possible to imagine a successful business that is not part of the digital economy. The transformation is directly linked to the liberalisation of the global telecoms market. Unbundling has transformed the industry. Competition has driven innovation, cost reduction and new markets. It has been the spark plug for competitiveness in all sectors. Without the digital economy, China and India would not have been able to grow as fast as they have. Take India, where the IT service, back-office and
11 Jan 2007 : Column 383
It is clear that we need the UK to be at the top of that sector. Just imagine how the financial sector would suffer if it fell behind in data security or speed; or how the media industry would look if others took the lead in data-handling and visualisation. I must admit that there are not huge capital costs and I know that a huge amount of people in China and India are working in that area. It does not take much time to take a lead in those areas.
| Next Section | Back to Table of Contents | Lords Hansard Home Page |