Queen’s Speech — House of Lords, 2015-06-04
Topic: Macroeconomics
Patience Wheatcroft (Conservative, Centre-right): My Lords, I add my voice to those who have congratulated my noble friend Lord O’Neill of Gatley and the noble Lord, Lord King of Lothbury, on their maiden speeches. In my former life I used to listen to them both intently and I shall continue to do so. My noble friend Lord O’Neill is, of course, known for his acronyms and the noble Baroness, Lady Liddell, suggested that he should come up with some more. I am confident that he will bring us all the PIES: productivity increases, infrastructure investment and economic sustainability. I will say a few words on each A lot has already been said about productivity. Recently, the Bank of England’s experts produced an article trying to analyse what the causes were. Of course, they talked about low skill sets and pointed out that, after Spain, we have the lowest proportion of unskilled labour of any country in the OECD, but they confessed that they were unable to explain the full extent of the productivity shortfall. I will throw in one suggestion: too often, our management is not up to scratch. There is real reluctance in this country to part with people who clearly are not the right people in the right jobs. There is a big contrast with the United States in that. When Jack Welch ran General Electric, he was renowned for saying to one-10th of his managers every year that both they and the company would be better off if they changed direction. While not advocating a 10th every year, too often we do not have the right management taking our companies in the right direction We have too much regulation and the gracious Speech promised us a Bill to cut red tape. In our new Business Secretary, Sajid Javid, we have somebody who actually knows about business. As he said, he grew up living over the shop. I have every confidence that he will slice through the red tape. I hope, too, that our new Government will be able to bring us the Transatlantic Trade and Investment Partnership. It has stalled so often, but if we can get it through it will bring huge benefits to this country I should like to think that the local enterprise partnerships, which are already proving so successful in parts of this country, will now be built on by the Government. They vary incredibly in what they can do and in the calibre of people working there. They could do a great deal more for small businesses. As others have said, much of our future lies in growing the small businesses that we have. At their best, local enterprise partnerships can really help there; they need government help and to benefit from talking to each other. The Federation of Small Businesses has produced an in-depth report looking at how these organisations function and suggesting ways that they might do better. Too often, they are governed by big business and do not cater for the needs of small business What else could we do that would benefit productivity? How about remuneration? A new report has come out this week from the Chartered Management Institute, which refers to an, "unacceptable discrepancy between pay and performance", in Britain. It looked at 72,000 employees and found that 30% of those rated as "not meeting expectations" were paid a bonus. That is quite hard to understand. When it looked at higher-paid people and directors, it found that it was not 30% of people who had not met expectations who received bonuses, but more than 40%. Clearly, we need to look at remuneration again The noble Baroness, Lady Drake, spoke at length about low pay and the link between low pay and productivity. While it is not an issue for government to legislate on, as others have remarked—we do not want too much legislation—it is up to shareholders to begin to put more pressure on companies to distribute the rewards of growth a little more fairly. It cannot be right that the gap between the top and the bottom is now so great that the people at the bottom are being subsidised by taxpayers while the people at the top get huge bonuses. I would like to see shareholders really wake up to this and do a bit more Going back to those PIES, on infrastructure we have heard about HS2. My noble friend Lord O’Neill pointed out that he has not always been the strongest advocate of HS2 beyond all else—perhaps the east-west connection is at least equally important—but there are much smaller things that impede this country’s efficiency. Since it was in the Conservative manifesto, I see no harm in reminding people that we are apparently pledged to fill 18 million potholes before 2021. I do not know who counted them but it is there in black and white We have done a good job so far on economic sustainability but there is a long way to go. I point to one issue where I have concerns. We have got through one financial crash but where will the next one come from? A former chairman of the Federal Reserve in the States, Paul Volcker, said that he could think of only one financial innovation that had been of any benefit to the public in the past 20 years, and that was the ATM. I am inclined to agree I am fearful about algorithmic trading. I do not know whether noble Lords have read Flash Boys by Michael Lewis. It is quite a scary tome and points to something that is the very antithesis of investment—and investment is what we need. Therefore, I ask the Minister to investigate whether the regulators are looking at this carefully enough.