Lords Parry Mitchell Speech to Lords debate on UK economy and the governments role in promoting growth 29th January

2013

My Lords, in many cases anniversaries mean nothing, just dates in the calendar, but sometimes they are useful moments to take stock. Tomorrow will be the 1,000th day that this coalition government has been office and indeed it is a good moment to take stock of the economy. I must therefore thank the noble Lord, Lord Deighton for securing this debate. As one of his sponsors at his recent introduction I feel that I bear responsibility because for him it is going to be very tough.

The noble Lord was doing other, and dare I say much more important things, when this government came to power on 6th May 2010 and he cant be held responsible for what has happened since then. He has been dealt a rotten hand were I he, I would say not my fault guv. But its the lot of this parliamentary system that ministers, especially Treasury ministers, must soak up all the criticisms so I can hardly hold back either today or tomorrow when I ask the first oral question of the day. Any way we look at it, the score-card on this 1,000th day is lamentable.

Last week we received the GDP figures for the final quarter of 2012 as we all know growth, or better still, lack of growth was minus 0.3%. We are heading for triple dip recession unheard of in modern times no wonder the prime minister was anxious to distract attention with his speech on Europe. I know that the Government get tetchy when my honourable friend the shadow Chancellor talks about flat lining. But with only 0.4% growth over the past couple of years, what else can we say?

Now compare this to Germany, which has experienced growth of 3.6% over the same period, or better still the United States where the figure is 4.1%. America is a very pertinent comparison in many ways their economy and ours are parallel yet while we wallow they are experiencing improving growth. Dont take my word for it just look at the Dow Index, which is racing ahead. Indeed the Nobel Laureate Paul Krugman in a notable column in the New York Times last week totally debunks the deficit hawks in his own country.

The United States did not pursue a policy of austerity but instead chose stimulus through massive public investment. With interest rates at rock bottom. The result is that deficit and public spending as a share of GDP have started to decline of their own accord. Contrast this with George Osborne, whos slashed public investment and raised taxes on families. In doing so hes killed business confidence and growth and the result? the deficit has increased as a share of GDP up over 7% on the equivalent period last year.

The facts in America as they are in our own country, is that when the financial crisis hit, the economy went into a tailspin tax receipts fell and unemployment benefits rose but the Americans unlike us, held their nerve, re-invested and as the economy is recovering the deficit as a share of GDP is falling.

Its really easy economics to understand, so why does our Chancellor take quite the opposite position? If our economy were recovering then maybe it all would have been worth the pain but its not everything is heading south. Indeed in America reasoned forecasts suggest that the Federal deficit will be below 3% of GDP by 2015 a number I am sure we too could live with. So my Lords where we on this the 999th day of this totally misguided policy? Our economy is static. Our people are suffering. Our businesses lack confidence. Banks arent lending. Companies are sitting on piles of cash instead of investing. Our trade gap is widening. Its a total disaster, much of which could have been avoided were it not for the obsessive compulsion of George Osbourne.

My Lords my front bench brief is SMEs - an acronym by the way that I loathe. By combining small businesses with medium sized businesses it shows how out of touch people are. Small and medium sized businesses have very little in common except for the fact that they are not large. But since everyone else uses this definition I suppose I am going to have to live with it.

Interestingly SMEs have held their own during this economic crisis. Employment figures have been pretty constant over the past five years and so to have export achievements. It has been the large companies and the public sector that have shed their workforces. And it

should never be forgotten that SMEs contribute over half of the UKs GDP. This sector should be promoted and helped and it is here that I have some of my greatest concerns.

It is absolutely true that this Government have spawned a multitude of financial initiatives to help SMEs at one point it seemed liked a monthly occurrence that one programme or another was being announced to a baffled world.

But whilst the Government may feel that they are doing well the fact is that in the SME sector the situation is dire. No matter what programmes are announced very little financial assistance is getting through to the SME sector. Many believe that the commercial banks take a significant cut out of government programmes in order to puff up their own balance sheets. Its all so complicated and even for me, difficult to differentiate one programme from another. It all smacks of insufficient thought.

I believe that the Government are making a grave mistake in looking to the high street banks to deliver their programmes. For the truth is this the banks have forgotten how to relate to the SME sector. Five years of saying no, of being sceptical, of consigning troubled companies to the intensive care unit, now means that saying yes is hard to do.

Last month I had the opportunity to visit the German Sparkassen banks. I know noble Lords are probably familiar with the German system, but what a contrast? Over 40% of corporate debt in Germany is channelled through these local savings banks. What impressed me was the long-term commitment that these banks have to their business customers, often going back decades. They stand on the touch line cheering their customers on.

What a contrast to banks in our country. How many small companies have even met their bank manager? How many loans are accepted or rejected solely based upon an online application? Never a human being in sight.

In Germany when a company gets into trouble it seldom comes as a surprise and if a banker is close to his customer he can make an assessment based on something more than a computer print-out. My Lords I know that some people say that we have had enough banker bashing, but until I see banks offering a real helping hand to SMEs I will continue to criticise.

I would like to end by referencing my own area of business passion and that is technology. As some noble Lords will know my whole business career has been in IT services and its an area that I really care about.

The Prime Minister seems to be captivated by technology particularly the new business hub at Tech City. Now I am always sceptical about this. I have seen too many politicians who somehow think that they are tech savvy just because they can turn on their Blackberries its a lot more than that.

We are blessed in this country especially in London. We have all the constituent parts that are able to feed the new tech revolution. Not just IT, but fashion, media, advertising, pop music etc all are now converging into a new and very exciting tech revolution. Much of it powered by smart phones and tablet devices. Mobile computing is here to stay and is becoming as ubiquitous as the pen or pencil. Plus we have been swept away in the usage of technology this country uses more on-line shopping than exists in any other developed county.

So I would like to end my speech today by asking the minister a question that matters to the sector that I hold dear.

The noble minister has been given the brief to speed up and manage infrastructure projects. Finally we have had an announcement on HS2 - first and second stages, and no doubt a major announcement on new airports is coming if the Tories can stop fighting themselves though for the life of me why does it have to wait so long? Of course I know the answer but why does party politics always have take precedent over the national requirement?

When we left office we were ready to roll out Universal broadband to all households by the end of 2012. But the Coalition failed to make-good this guarantee and as a result still 5 million people are denied access to even the most basic broadband coverage. Millions of families and thousands of rural businesses are suffering as a result.

We have to be right at the front in IT technology but we cant do it without the super connection. Can the minister give your Lordships house assurances on this development? ENDS