Baroness Kramer (LD)

My Lords, this has been an outstanding debate, and I join others in congratulating the noble Lord, Lord Bridges, on obtaining it and opening with a powerful speech. I did not agree with all of it, but it was definitely powerful. I want to slightly change the tone of this debate. I suppose that is strange for a winding speech, but it seemed to me that we had very little attention to the extraordinary strengths that we have as a country. A significant part of our workforce is very highly skilled. Our legal framework is the basis for much of global commerce. We have world-leading sectors in financial services, life sciences, technology and the creative arts—I think the noble Viscount, Lord Chandos, focused on technology—and that is to name but four. We have exceptional universities which breed new opportunities. We have a track record of entrepreneurship, often at the leading edge. We are the place to start a new business. The noble Baroness, Lady Lane-Fox, focused on AI and digital as an extraordinary opportunity to completely reset where we take our economy. Some people look at this only as risk, but I see this as the most extraordinary advantage if we go from being on the back foot and talking just about strategy and step-by-step minor adjustment to seize the chance of change. Thanks to the noble Lord, Lord Pitt-Watson, I and others had a meeting yesterday with Chris Woolard, who is now the wholesale digital markets champion. For once, I was hearing someone within the orbit talking about serious action at speed. That is the lesson that the Government have to take on board. Today we have heard about the appalling headwinds that we face as a country, economy and government. I started trying to write down the names but suddenly realised that everybody was naming those headwinds, whether it is public debt to GDP at 94%, taxes at the highest levels since World War II or gilt issues at the highest interest rates since 1988. The noble Baroness, Lady Morrissey, and somebody else, perhaps the noble Lord, Lord Hill, focused on index linking. I have screamed at the Bank of England so often on that issue, and unfortunately it is coming home to roost. I want to pick up the issue stressed by the noble Lord, Lord Bridges, on demographics and the dependency ratio, because this is something else that I and my colleagues have attempted to stress constantly. That dependency ratio is now at 57.8%. Alarm bells go off when a dependency ratio gets to 50%, and we are well over that point. It is getting worse with our ageing population. We have to address the issue that we have a very small working-age population to sustain our growing elderly population. We dodge that issue. It ties into the immigration debate as well and is so often ignored. We have to thank the noble Lords, Lord Howell and Lord Turnbull, for bringing in climate change, which seemed to be generally overlooked. Other than a quick mention by the noble Baroness, Lady Alexander, nobody talked about Brexit. How extraordinary. There is a 6% to 8% scarring of the economy. The other blows that we have had have been temporary and we have had a chance to recover from them. This is permanent scarring to the economy and ignoring it is extraordinary. I know that is Tory party policy at the moment, because you cannot be blamed for the damage if everybody forgets about it. On these Benches, we do not forget. How can we turn all this around? We need to focus on growth, which was part of the discussion here but only a small part. This House will not be surprised that my first proposal is to negotiate a bespoke arrangement for a customs union and single market with the EU. The supposed freedoms that the public were promised by Brexiteers turned out to be few. In economic terms, any benefits were utterly insignificant while the damage has been huge. Businesses, especially small businesses, have struggled to grow without participating in EU supply chains and getting the benefits of an EU domestic market of an additional 450 million people. That scarring of 6% to 8% is not something that anybody can ignore. It is huge. Ordinary people pay the price daily as Brexit harms push up the cost of living. The noble Baroness, Lady Alexander, and others talked about devolution. If it is done properly then I agree that it can drive growth. Importantly, for it to do so it must be across the country and include disadvantaged areas. The House can therefore imagine my utter frustration when this Government rejected my amendment to the Financial Services and Markets Bill which would have led to a rapid expansion of the available credit to small business to be provided by a growing network of community banks and credit unions qualifying as community development financial institutions. My amendment, which is inspired by the “Fair Banking for All” coalition and campaign, would require the mainstream banks, where they have abandoned local lending, which they have, to fund community development financial institutions. Little businesses are the backbone of our community. Many want to grow a little bit faster than they would organically but cannot get that loan for the next shop, van or worker or for the workshop extension. We always talk about unicorns, but we forget that the backbone of our economy is in those small businesses that are growing just more than organically. It also has that spread into every area and community. I am afraid that, sadly, the Government will not deliver their agenda of good growth in every postcode without my amendment or something very similar. At present, even though the Government make money available for credit to small businesses, the mechanisms are simply not there to deliver the appropriate lending to small firms. As I have said many times, mainstream banks no longer just do not have the branches, but do not even train their staff in the necessary skills base. I also agree that businesses which intend to scale up and be the next unicorn need different financing from that which is currently available, in the form of long-term patient capital that can carry high risk. We all want those companies to stay in Britain. I still have troubles with the Mansion House Accord and the recent pensions legislation. They are just so narrow. They are based on taking the tiny pensions of the lowest paid and least financially aware and putting them into high-risk illiquid investments. Most of those investments will fail. It is a very unattractive strategy. We need a structure that will produce the products that Britons will be willing to invest in. Britons have something like £61 billion in investment savings that could be channelled in large part into these activities. With the end of the defined benefit schemes, we have seen that new products that are attractive to people and meet their risk appetite and return appetite are not being provided by the markets as they are at present, even though there are plenty of willing investors. I suggested that there could be a structure in which the Government encourage risk investment but provide some sort of backstop for the poorest. I thought that no one would take the idea seriously, but the industry is starting to do so and I am now involved in quite a number of conversations around this issue. However, it needs much more imagination. The Government should focus on driving the private sector to produce the kinds of investments that would attract people, because the money essentially is there. I think we could go on, and all of us could produce a significant number of proposals which could stimulate and drive growth, but the Government will have to pull the levers on it. As my very last comment on what I want to see, I agree with all those who are pleading with the Government to be consistent. Having a policy of growth and then a policy—the last person to discuss it was the noble Baroness, Lady Morrissey—of raising employers’ NICs is a complete insanity. There needs to be consistency and direction. The Minister will be well aware that many of the voices that have spoken today have said that: set the strategy, set the goal and then keep to it in every policy decision that is made.