Last week, Lord Bilimoria took part in a debate about the steps that the Government has taken to boost the UK’s economy. Shortly following the release of the 2016 Budget, the debate gave Peers a chance to scrutinise the Chancellor’s policies and contribute their thoughts about the action needed to improve the country’s economic growth. Lord Bilimoria praised the strides that the Government has made in boosting entrepreneurship, but highlighted topics that the Government needs to improve on, notably productivity and higher education, while stressing the impact that the EU referendum may have on the UK’s economy.
The Economy
28th April 2016
Motion to Take Note
Moved by Lord O’Neill of Gatley
That this House takes note of the steps Her Majesty’s Government are taking to build a stronger economy.
Lord Bilimoria (CB)
My Lords, just about every Peer taking part in this debate has spoken about Lord Peston. I have been here for coming up to 10 years and he showed me kindness and encouragement from the day I arrived and in the debates I was privileged to take part in with him. What I loved most about him was that there was always a smile when he greeted you. He was completely non-political—it did not matter whether or not you were a Labour Peer—and was respected by the whole House. We shall miss him greatly. He would definitely have been speaking in this debate about the steps being taken to build a stronger economy.
This morning I chaired a conference of the Westminster Higher Education Forum. Its theme was enterprise and entrepreneurship in higher education, culture, skills and encouraging graduate start-ups—music to my ears. I was privileged to introduce our keynote speaker, an individual who, when I came over from India as a student in the early 1980s, I used to see on television, read about in the newspapers and who helped to transform this country from being the sick man of Europe that it was at that time. In the Cambridge University that I attended in the 1980s there was no word such as “business” or business school—and as for entrepreneurship, forget it.
It was clear to my family and friends when I came here in the early 1980s that this was a country where, if I worked here after I finished my studies, I would never get to the top. I would not be allowed to get to the top because, as a foreigner, I would come up against a glass ceiling. They were absolutely right, I am ashamed to say. So what has changed in this country over these last decades? What has enabled this country, which was the sick man of Europe in the early 1980s, to become the envy of Europe today? That is the theme of this debate—the steps taken to build a stronger economy. The glass ceiling has been well and truly shattered. Just look at the number of ethnic minority Members of Parliament we have now compared with only a quarter of a century ago when there was a handful.
The person I introduced to the conference this morning was hugely instrumental in changing “entrepreneurship” from being a word that conjured up images of Del Boy and second-hand car salesmen to now being a cool term, encouraged by all Governments. That individual was the noble Lord, Lord Young. The noble Lord is one of my colleagues who, at the age of 84, never stops. He was instrumental in helping to create the atmosphere of aspiration in which the glass ceiling has been shattered. It has gone so far that, as I have been saying for years, a British Asian will be Prime Minister of this country. The Prime Minister himself said recently that a British Indian will be Prime Minister of this country, but not too soon, please.
The business situation has changed dramatically. I am proud to say that today Cambridge University has a business school. In January I was appointed as chair of the advisory board of the Cambridge University Judge Business School. As serendipity would have it, the day my appointment was announced, the Judge Business School was named in the top 10 in the world NBA rankings after only 25 years. The Harvard Business School was founded in 1908. Today the largest society at Cambridge—apart from the Cambridge Union—is the Cambridge University entrepreneurs. We have come a long way.
In the last Budget there was encouragement for entrepreneurship. There was a lowering of certain taxes and increasing of the entrepreneurs’ relief, encouraging wealth creation. Yet, based on this morning’s conference, I had recommended to Vince Cable when he was Secretary of State for Business that we should have a competition in the country for 100 growing businesses to attend courses such as the business growth programme, which I attended at the Cranfield School of Management, and the diploma in entrepreneurship at the University of Cambridge. One hundred of these would cost the Government £1 million but would pay back billions in growth. Vince Cable was excited about it but his civil servants shot him down. Does the Minister think it would be a good idea to encourage entrepreneurship in growing businesses in that way?
Many noble Lords have spoken about productivity. We are lagging behind and we need to do much more. We have heard that we do not invest enough. The noble Lord, Lord Bhattacharyya, spoke about how our investment as a proportion of GDP in R&D and innovation has gone down from 1.3% of GDP to 1%. The noble Lord, Lord Mair, spoke of the importance of investment and innovation and how much more we could do if we were to invest the 3% of GDP that Germany invests.
Let us look at what this country can achieve. I was privileged to visit CERN, where the professors heading the two experiments which discovered the Higgs boson particle are the leader of CMS, Professor Sir Tejinder Virdee of Imperial College London and the leader of Atlas, Professor David Charlton of the University of Birmingham, of which I am proud to be Chancellor. We can go further. This year we had the announcement of the discovery of gravitational waves, finally proving 100 years later Einstein’s theory of relativity. Among the key professors of this discovery were two from the University of Birmingham, Professor Alberto Vecchio and Professor Andreas Freise. One of the instruments that helped in the discovery of those gravitational waves from 1.3 billion years ago was designed and made in Birmingham.
The scientific papers produced by British universities are completely disproportionate to our population, let alone to our investment in research and innovation. Just imagine how much more we could achieve if the Government were to ramp up their spending on R&D and innovation. Does the Minister agree that we should have tax incentives to encourage companies to invest more in innovation? I could tell noble Lords story after story about the glass ceiling being shattered. Earlier I was sitting next to my noble friend Lord Rees, who apart from being the Astronomer Royal was President of the Royal Society—the prime achievement for a scientist. Who is the current president of the Royal Society? It is none other than Professor Sir Venki Ramakrishnan. He is of Indian origin, from Trinity College, Cambridge and a Nobel Laureate.
If we leave the European Union, we will lose a huge amount of research and development funding. It will hamper something that is already underfunded. We will also lose the high level of collaboration that exists between British and European universities. What most people do not realise and is rarely highlighted is the fact that the UK is the number two country in the world for foreign direct investment. Almost half of that is in financial services, but we are still second in the world. Would we be able to retain that position if the EU referendum leads to Brexit? In the perception of overseas countries, there is no question about it. Forget what President Obama said, especially whether he used the word “queue” or “line”. Hillary Clinton has herself, unprompted, confirmed that she too would be concerned if we left the European Union.
People from every single country I have spoken to say this. Whether I speak to members of the Indian Government, the Indian Administrative Service or businesses, they all ask, “How can you leave the EU? We see the UK as the gateway to Europe. We want you to remain a part of Europe”. The IMF has said that we should not leave, let alone the CBI and the Bank of England. I have spoken to professors from Harvard Business School and once again they were unanimous in saying, “You cannot possibly leave the EU”. The noble Lord, Lord Newby, listed many of the myths about Brexit, and there are accusations from the Brexiteers of scaremongering by the Government and the Remain campaign about the uncertainties.
There is no question about it. If we leave the EU, I have no doubt that this country will survive and possibly thrive because we are a hugely adaptable, flexible and resilient nation. I am openly Eurosceptic. I think that the structure of the European Parliament is appalling. MEPs have no connection with the regions they represent. Unlike Members of Parliament where there is a clear connection between Members and their constituents, I do not know anyone who knows who their MEP is. MPs have a clear line of accountability and responsibility that does not exist in the case of MEPs. The European Parliament has to move once a month to Strasbourg. Can noble Lords imagine what it would be like if every month we had to move out to Belfast or Edinburgh—and not just us, but everything? It is ridiculous.
The euro is a proven failed project because one size cannot and will not fit all. I used to think that by not being in Schengen we were losing out on tourists and business people, but now we realise that from a security point of view, we are lucky that we have retained control of our borders. We are not part of an ever-greater integration and there will never be a united states of Europe. I hail from India, which is a truly federal country. There is a central Government, a central defence force, foreign service and tax system, but there are states with chief Ministers who have autonomy and a great deal of flexibility. That combination makes for a truly federal country, but that will not and cannot happen in Europe. The only person in history who has ever united Europe was the Emperor Charlemagne in 800 AD.
The European Union makes up a tiny percentage of the world’s population at 7%, and yet it has 25% of the world’s economy. It also has 50% of the world’s welfare spending. How sustainable is that? The European Union is in urgent need of reform. I turn to the concessions and reforms that the Prime Minister managed to get recently. However well intentioned he was, I am sorry to say that every single person I have spoken to has confirmed that they will not influence them one iota in making their decision on whether to stay in Europe. But in spite of this, and in spite of my being a Eurosceptic and all my concerns about it, I think that we should stay in Europe. PwC predicts a reduction in GDP if we leave and the uncertainties are real. The shock to our economy would be huge. The Minister talked about our current account deficit being high. Our budget deficit remains high, let alone the effect of Brexit on our currency. I do not know if we would be able to withstand those shocks, and being the most successful economy in Europe would not last very long.
Everyone talks about the WTO. The noble Lord, Lord Newby, was absolutely right to ask why all those free trade agreements with the WTO are the cure to everything. He discussed the Swiss, Norwegian, Canadian and Albanian models, but every one of them would still require us to contribute to the European Union and possibly allow the free movement of people.
I shall conclude on that point: the free movement of people. When the subject of immigration was brought up at the conference this morning, the panel spoke of the concerns of those in higher education about our Immigration Rules, which are hampering our universities. That drew applause from the audience. Some 30% of the academics at our top universities like Oxford, Cambridge and Birmingham are foreign-born. Overseas students are still categorised by the Government so that they fall into the immigration figures. Does the Minister agree that we should take foreign students out of those figures? Recently I spoke to the new Australian High Commissioner to India in Delhi. She said, “Thank you for the UK immigration policy because Indian students are now coming to us instead of going to the UK. We are benefiting from the brightest and the best”.
The most important point is this: is it the EU or is it NATO that has maintained the peace over the past 70 years? I would say that it has been both. This was summed up for me by a senior vice-chancellor of a European university who said to me the other day, “How can the UK as a country even think of leaving Europe? You have saved us twice. You are seen to be the beacon of freedom, liberty and democracy. How can you even think of being responsible for what might potentially destroy the European Union? Would you be able to live with that?”. I do not think that is what our country does; we do not operate alone, we work together. The title of the debate concerns the steps to take in order to build a stronger economy. It is relevant to say that it depends on whether we stay in Europe or not. The vice-chancellor of the University of Cambridge summed it up in his opening address for the last academic year:
“If you want to travel fast then travel alone. If you want to go far travel together”.