My Lords, last month, I accompanied my university contemporary, Greg Clark, the Universities Minister, on a delegation to India. I spoke at an Indian higher education conference. Sitting next to me, sharing the platform, was the first ever permanent secretary-equivalent of a department newly created in India by Prime Minister Narendra Modi: the department for skills and entrepreneurship.

I declare my various interests to do with this debate and the Bill. Last Monday, I spoke at the opening of Global Entrepreneurship Week alongside Vince Cable, where it was revealed that London is one of the top two cities for entrepreneurship in Europe. Last week, I became a founding member of the Guild of Entrepreneurs, which will soon become a livery company in the City of London. We are currently on the 687th Lord Mayor of London, so it has taken us a long time to establish a Guild of Entrepreneurs.

Yesterday, I was at my old university, Cambridge, speaking at the 10th anniversary of the Centre for Entrepreneurial Learning at the Judge Business School. I have been proud to have been appointed one of the first two visiting entrepreneurs at Cambridge, and have been involved with the CfEL since its inception, spreading the spirit of entrepreneurship throughout the university—not just the business school but the whole Cambridge University community. More than 300 students from around the university attend projects such as Enterprise Tuesday. Look at the culture shift that has taken place. When I was at Cambridge in the 1980s, there was no business school. Today, there is not only a flourishing business school but a centre for entrepreneurial learning.

However, there is not one mention of the word “entrepreneurship” in the entire text of the Bill. Can the Minister explain that omission? I am of course delighted, as the Federation of Small Businesses noted, that the Bill even exists in the first place. There is a lot that is music to my ears. There is so much of what the Minister said that is fantastic, such as helping businesses start from home, and childcare help for businesses. She herself noted that small businesses make a huge contribution to the UK economy. Between them, SMEs comprise 96% of all UK businesses, accounting for about half of UK jobs and one-third of private sector turnover—the engine of our economy.

Speaking as someone who started a business with just two people that has grown over the years, I have seen first-hand entrepreneurial businesses. My business has dealt a lot with the curry restaurant industry. More than 10,000 of them are represented by the Bangladesh Caterers Association: pioneering entrepreneurs who have made curry the favourite cuisine of this country. I know the sacrifices that those individuals have made; I know how difficult it is to start, to grow and to survive in business. One of the first cases I ever sold of my product was to a local corner shop. Of course, those corner shops have survived and grown thanks to the Asian community. So I have been a micro-business, an “s”, an “m” and now I have a joint venture with a global giant.

There is a problem with the terminology used in the Bill. Grant Thornton—I declare an interest as I have dealt with the firm for many years as a client—has noticed that there is an unnecessarily restrictive definition of SMEs in the Bill. The current definition of SMEs used by the Government largely excludes mid-sized businesses from many of the provisions of the legislation, such as on access to finance, late payment and credit information. However, these same businesses will still have to abide by a number of additional burdens, such as the duty to publish a report on payment practices.

Grant Thornton estimates that approximately 34,000 mid-sized businesses will be left behind by the Bill, as they lack the resources of the large corporates that are needed to cope with additional regulatory reporting but are not granted the same exemptions granted to SMES within the Bill. Will the Minister acknowledge and, I hope, deal with this omission by widening the positive provisions to a larger section of the business population and altering the definition of an SME used in the Bill, which is based on the Companies Act and restricts an SME to a turnover of just £25 million.

On access to finance, the United Kingdom lags way behind our major competitors. Just look at Germany, where SMEs can draw upon close personal and financial links with a multitude of local lenders, many of which are state owned or operated as mutual firms. Germany’s small and medium-sized businesses, the Mittelstand, are exemplary and have been the centre of the economic success of that economy. The United States has always been brilliant in the way that it has helped to fund its small businesses, but I believe that we could go even further. In fact, the Institute of Chartered Accountants in England and Wales, of which I am proud to be a fellow, recommends that in order to help businesses with the wider issue of finance and cash flow the Government should foster new business growth by introducing critical growth loans, where a percentage of the loan is guaranteed for SMEs trading for between two and five years.

I have benefited personally from the Government’s small firms loan guarantee scheme, which is brilliant at enabling businesses that do not have the collateral to get the Government to back the security with the bank that lends to the business. We could and should increase that lending far more than we are. Does the Minister agree that we should be doing this? Business is going global. The Bill talks about export finance and there is so much good work going on. UK Trade & Investment has sponsored a programme called Sirius, where we attract the brightest young graduates from around the world to come and open their businesses here in the UK. This is the sort of initiative that we should be encouraging and growing.

With regard to the moral aspects of the Bill, the fact that we are addressing the minimum wage is excellent. If the Bill is clamping down on those rogue businesses which exploit their workforce, that is great news. I cannot think of any ethical business that would pay less than the minimum wage, let alone the living wage. However, the Guardian reported last week that despite the Business Secretary’s rhetoric last year that the coalition Government would crack down on firms that underpay their employees, there have been no successful prosecutions of such illegality since February 2013. Can the Minister confirm that? The annual survey of hours and earnings for the Office for National Statistics recently reported that around 287,000 workers were paid at less than the minimum wage in 2012. Are the Government aware of that and why are they not doing more about it? I hope that the Bill will be able to address this. Can the Government assure us about it?

With regard to the pub industry, I said that I declared my interest and I cannot spend the whole of my time declaring my interest in this area. The sad thing is that more than 10,000 pubs have closed down in the United Kingdom in just the last decade. We need to do everything we can to save the British pub, which is at the heart of British communities. The beer tie itself is somewhat of a double-edged sword. Of course, it allows big brewing or pub groups to invest in the pubs. To actually start a pub, you have to put down perhaps £250,000. However, if you are with a big pubco you do not have to do that and can actually run a pub. That is the advantage of being part of a big pub group.

However, if by doing that you also have to pay 70% to 80% above the market price for your beer, and pay higher rents, that does not feel fair at all. Given the recent defeat on this issue in the other place, I am delighted to hear the Minister say that the Government have listened and are going to try to achieve what I hope will be a middle way, where we can have the benefits that the big pub groups bring while enabling our pubs to be competitive and flexible, and to flourish, thrive and grow.

With regard to insolvency, Britain’s insolvency environment ranks pretty highly. In fact, we rank seventh in the world. The Bill talks about reforming insolvency in this country. I do not believe it is doing it in bold enough terms. For example, we are not going as far as having the famous American Chapter 11 or the Canadian Division 1 principles—and, surprise, surprise, countries number 1 and 2 in the insolvency environment are Canada and the United States of America. Those two measures, Chapter 11 in particular, provide a company trying to restructure with protection from creditors to give it time to do so. I have gone through this. I tried to institute a company voluntary arrangement. We got 90% of our creditors to agree, but we could not go through because there was no protection and one of the creditors scuppered the whole arrangement.

The Bill talks about pre-pack administrations. This is meant to be the least worst alternative. I have had to go through this procedure. It is awfully painful, but it is there to save brands and businesses if companies go through the procedure above board, as we did. I am proud to say that today we have a brand and a company that are flourishing. The worst thing about it is that when I went through that procedure I realised how badly misused it is in this country. It is misused to the extent that shareholders, creditors and, worst of all, employees suffer. That is not on. I do not think that the measures in the Bill go anywhere near far enough to improve the pre-pack administration regime. Bringing in Chapter 11 would be the best way of taking things forward. Do the Government agree?

Most importantly, this Bill is not just about businesses remaining as they are. As the Minister said, around one-fifth of small businesses say that they want to grow significantly and are determined to do so. The overall thrust of this legislation is aimed at making it easier for SMEs to operate and grow within the economy, which is something we should celebrate. Why are the Government not going further? One of the things that SMEs need is education. I attended the business growth programme at Cranfield. Cambridge has the diploma in entrepreneurship. These are fantastic courses, but they cost up to £10,000 a year. The Government should have a competition for 100 businesses a year to attend these courses to improve their competitiveness and help them to grow. Will the Government accept this suggestion?

I do not want to look a gift horse in the mouth. The fact that the Bill exists in the first place is wonderful, but I despair that it does not emphasise entrepreneurship. I worry that Britain today is number 2 in the world in inward investment. That is something we should be proud of because we are an open economy. However, I hear stories of Indian businesses having huge problems opening bank accounts and setting up companies over here. We are trying to address money laundering, but we are hampering our competitiveness and inward investment capabilities. We are one of the top 10 economies in the world. We have to encourage entrepreneurship, growth and employment.

The following article was published on the New Statesman’s “The Staggers’ blog on Monday 1st September.

Founded in 1913, the New Statesman is one of the most well-respected current affairs magazines in the United Kingdom.

The government must stop treating international students with hostility

This year, the number of foreign students undertaking higher education in Britain fell for the first time since 1983. The government must stop treating them with contempt.

Aung San Suu Kyi, Bill Clinton, Desmond Tutu, Mahatma Gandhi. Each one of them has shaped the world in which we live and, as it happens, every one of them was educated here in Britain.

Along with the United States, the UK’s universities are the finest on the planet. The ability that this gives us to attract the world’s talent to these shores represents not only an enormous economic opportunity but also a crucial component of our nation’s cultural strength. It is something I have been proud to observe in recent months as the newly appointed chancellor of the University of Birmingham.

I came to the UK from my birthplace of India because of the outstanding quality of its higher education institutions, but it was Britain’s internationalism – its unique role as a point of congregation for ideas and creativity from around the globe – that allowed me to start Cobra Beer here.

And yet despite the mutually beneficial historic relationship between the UK and international students, this government continues to badge them as immigrants, a group it treats with a contempt bordering on outright hostility.

That’s despite new research from Universities UK, which found that only 22 per cent of the British public considers overseas students to be immigrants. Political leaders from the Deputy Prime Minister to Lord Heseltine have added their voices to the call for international students to be removed from the immigration figures. And yet the Home Office still refuses to take action, despite the evident failure of its crude policies towards controlling net migration, shown recently to have risen by 68,000 in the last year.

Net migration may be rising but one vital statistic is going the other way, with potentially severe consequences. This year the number of foreign students undertaking higher education here in Britain fell by 1 per cent – the first time a decline has been recorded since 1983. With government-sponsored poster campaigns barking “go home or face arrest” and the disastrous, failed proposal for “high risk” visa applicants from nations like Sri Lanka, India and Pakistan to pay a £3,000 “security bond” deposit upon entering the UK, it’s little wonder that the world’s brightest and best are starting to look elsewhere.

Indeed, an NUS poll carried out earlier this year recorded that 51 per cent of international students found the British government “unwelcoming”. That damage is being done to Britain’s reputation on the world stage as a home for the future talent on which our economy increasingly depends couldn’t be more clear.

And while the government is helping promote a climate of hostility against overseas students, the Universities UK research clearly demonstrates that this does not reflect the public mood. 59 per cent of respondents to the survey said that the government should not reduce numbers of international students, even if such action made reducing overall immigration numbers harder.

Our universities are competing in a zero-sum game of global proportions and every engineer, programmer and aspiring entrepreneur that we turn away will be welcomed with open arms by the likes of Canada, Germany and Australia. Given that the Department for Business, Innovation and Skills estimates overseas students contribute more than £13 billion to the UK economy, that is a prospect we should all be extremely worried about.

For years the government has been ignoring the well-founded requests of colleagues within the House of Lords and many more besides, to remove international students from the immigration statistics. Now the public has spoken too; and it is time the government started listening.

Lord Bilimoria CBE is founder and chairman of Cobra Beer, a crossbench peer and chancellor of the University of Birmingham

DERMOT MURNAGHAN: Now the General Election in India is of course a huge operation and we’re often told it’s the world’s largest democracy where over 800 million people are eligible to vote, that’s more than the entire population of Europe.  Well now after five weeks of voting the election is almost over so who’s going to win power and how could it affect Britain?  Well I’m joined now by the British businessman, Lord Bilimoria, co-founder and chairman of Cobra Beer, he was born in Hyderabad in India of course and has just returned from India.  You were there at the start of the elections which were way back, what, at the beginning of April?

LORD BILIMORIA: April 7th, yes.

DM: My goodness me.  So where do you see the momentum now, is it with the BJP?

LORD BILIMORIA: Yes, very much the consensus is that Narendra Modi, the primary candidate for the BJP, is predicted to win.  It’s a question of how much his BJP party wins because there are 543 seats and they have to get 272 to get a majority.  In September they predicted, oh if he gets over 180 he’ll be able to form a coalition, well now that went up and he’ll definitely get over 200 now, they are even talking about his NDA, his Alliance which is made up of 27 parties, possibly getting an outright majority from day one.

DM: What could that mean for India?  He has been described in the past as a Hindu nationalist, he had his right to visit the UK, he even had his passport … they wouldn’t allow him in, it is said that he actually could be divisive for India.

LORD BILIMORIA: Well he has been Chief Minister of Gujarat State in western India, a very successful Chief Minister, he was re-elected, is in his third term now and as a state it has actually done very well from a business point of view.  Yes, of course he was Chief Minister in 2002 soon after he was appointment when those awful, awful incidents took place which were tragic not just from India’s point of view but from the whole world, he was Chief Minister then but in the ten years that the Congress party have been in power he has not been convicted so we in Britain do business with Gujarat.  When I was Chairman of the UK India Business Council I was not allowed to take delegations to Gujarat, now we have…

DM: There are 150 million Muslims within India, I know it is  a vast population, well over a billion as we know but nevertheless, can he heal or exacerbate those tensions?

LORD BILIMORIA: Well India is a secular country, no one can lead India without having a pluralist and secular attitude because of the vast number of minorities, of which the Muslims are the largest.  It is one of the largest Muslim populations in the world and I think if he comes to power he will have to work with everybody and of course, what’s really complicated about India is it’s 35 states and union territories and each one of these states is like a country.  The Chief Minister of a state is Prime Minister of that state and has a lot of autonomy as well, so you have got to work with the states and politically it is very complicated.  Here it is relatively simple with the Conservatives, Labour, Lib Dems and UKIP, in India there are so many parties.  Here we get excited if Boris Johnson is perhaps standing as MP and being Lord Mayor for one year, you’ve got members of the Upper House in India now standing for [loads?] of our seats, you’ve got people who stand for more than one seat, you’ve got people who are trying to make a stand by standing in contentious seats to just make a point and it’s so complicated.  The figures, 815 million people being able to vote, the largest election in the history of the world.

DM: But those complications lead and also have a bearing on one of the age old problems for India which Narendra Modi would have to wrestle with, the issue of corruption.  He’s an outsider it seems, he is not one of those Delhi elitists is he, does that help?

LORD BILIMORIA: Well it helps for example that he has actually run a state for over a decade and being Chef Minister of State, you’re actually governing that state.  One of the criticisms about President Obama of course is he was never a governor of a state, he’d never run anything before he became President of the country and I think that’s to his credit that he’s been Chief Minister of State and he has got that experience but that’s different running one state to running a country of 1.25 billion and all its diversity.

DM: And just tell me from a business perspective, you are ideally placed of course having business interests there and here, would he improve that environment, the relation between India and UK in terms of trade?

LORD BILIMORIA: There is no question, every single business person I’ve spoken to in India wants Narendra Modi to be Prime Minister because they see him as being pro-business, as promoting business, promoting exports, promoting inward investment and from India and UK’s point of view, here in the UK we have over one and a half million people of Indian origin, it is the largest ethnic minority population in the country which I’m proud to say does incredibly well here in Britain and I think a lot of those are Guajarati’s as well and for them to have Narendra Modi, somebody from their state becoming Prime Minister I think there will be a huge, huge surge in business between the UK and India.  In fact the stock market is already predicting his becoming Prime Minister and exit polls are now allowed, they are only allowed after the voting finishes on the 12th and then the election results are announced on the 16th so when the exit polls are released and of course when that result comes out on the 16th, they are predicting the stock market in India is going to rocket.

DM: Okay, we’ll await those results with interest.  Thank you very much indeed for your predictions and your analysis, Lord Bilimoria there.

My Lords, last Friday, Professor Venkatraman Ramakrishnan—known as “Venki”—the winner of the Nobel Prize in chemistry 2009, joint chair of the structural studies centre at the University of Cambridge and a fellow of Trinity College, received an award at the Asian Awards at the Grosvenor House Hotel for outstanding achievement in science and technology. In his acceptance speech, he said:

“I was very touched by the Prime Minister who gave us such a warm welcome address in a video message earlier this evening but I have to say, over the past 10 years, the level of xenophobia and anti- immigration rhetoric has been ramming up—visa laws are increasingly restrictive, so that’s hard for us senior scientists to attract the best talent! They do not see necessarily that actually Britain is really a wonderful place. I get offers regularly to go back to the U.S and I always decline, because I love working here. That perception has to be changed and can only come” from the Government changing their policies on immigration. There I end the quote from one of the world’s great scientists.

Foreign academics make up 30% of all the academics at our top universities, including Oxford and Cambridge, and foreign students are some of our most talented undergraduates and postgraduates. If people such as Professor Ramakrishnan are saying things like this, who knows how many future Nobel Prize winners are choosing not to take up a position at our universities?

I am an alumnus through executive education of the Harvard Business School. In January, I was present for a speech that the president of Harvard University, Professor Drew Gilpin Faust, gave to her university’s London alumni at the Guildhall. Professor Faust made it very clear that Harvard would make the best effort to attract the best students and academics from around the world. She said:

“The future we face together, the future we shape, will depend perhaps most of all on who we are and who we will be. Attracting and supporting the most promising students and faculty are crucial to all we aspire to do. When we think of what Harvard has meant to the world, we inevitably find ourselves focusing on people: the extraordinary individuals to define our identity and embody our aims”.

There you have it: the president of Harvard making it absolutely clear that her university will do whatever it takes to get the best academics and the best students, regardless of their social or economic background or their ability to pay. In July 2010, Nitin Nohria became the 10th dean of Harvard Business School. Nitin Nohria is an Indian who studied at the Indian Institute of Technology before going to the United States to study at MIT. In July, a fellow Indian academic, Rakesh Khurana, will take over as the new dean of Harvard College.

That is what we are competing against, and that is an example from just one university abroad. How easy it would be for us to lose our stars, such as Professor Venkatraman Ramakrishnan, when the likes of Harvard have an ethos such as that. The competition is not coming just from the United States. Canada is on an aggressive recruitment drive for international students. Australia and New Zealand are both attracting thousands of students from India, China, Korea and Japan to study in Sydney, Melbourne and Christchurch. Why are we not following their lead in trying to attract the best and brightest overseas students to our country?

The threat is not just from the Anglosphere. The French Government are moving to simplify the visa application process for international students. The ministry for education in France has just announced that it plans to double the number of Indian students at France’s universities by the end of the decade. Why do not our Government set a target to double the number of international students? Why do not they set a target of any sort to attract more international students, let alone from countries such as India?

The situation is not good. For the first time ever, our total student numbers are down. In a rush to reduce net migration to tens of thousands by the next election, the Government have succeeded in convincing some of the world’s most talented young minds that Britain does not want them. A report last week from the Higher Education Funding Council for England showed that international and EU student numbers decreased by 4,595 in 2012-13, the first such decline since 1985. That followed a survey from the National Union of Students in January showing that 51% of international students found the Government unwelcoming. In 2012-13, meanwhile, the number of Indian postgraduate students at Russell group universities declined by 18%. That is worrying news when the Department for Business said that education exports were worth £15 billion. That is wonderful news, but it makes the position all the more absurd when we are finally seeing signs of economic recovery.

Just today, we have heard that we are the fastest-growing economy in the developed world. If we want that to be sustainable, we need to invest in research and development.

We spend a fraction of the OECD average on R&D funding. The Minister says that the Government have preserved their funding for research, but the Times Higher Education Supplement points out that, according to the Office for National Statistics, the UK spent 1.72% of GDP on R&D in 2012, down from 1.77% in 2011. Can the Minister confirm that?

At the moment, that places us in a miserable position in the EU 28 group. We are currently 12th, behind countries such as Slovenia, Estonia and the Czech Republic. Finland spends the highest proportion of its GDP on R&D at 3.55%, but even the EU average is 2.06%, and we are well below that. Investing just an extra 0.5% of GDP in science would make such a huge difference and should be a priority. That would give us the competitive edge for sustainable growth.

The fact is that our great universities—we have many—are succeeding despite, not because of government policy. The changes to student loans will come back to bite us. When the Government announced the changes to the system in 2010, they said that only a small number of universities would charge the new maximum of £9,000, tripled overnight from £3,000, and that the new system would create a more sustainable market-based environment in our universities, which would be better funded than ever. On all those measures, the scheme has failed. Only last month, the Government quietly announced that about 45% of university graduates will not earn enough or will not be able to repay their student loans. If the figure is only slightly out and reaches 48.6%, the Government’s own experts calculate that the Government will lose more money than they gained by increase in fees in England to £9,000 a year. Can the Minister confirm that?

The result of this is clear. Universities are no better off, students are worse off and the Government will end up having to pay even more to fund higher education than they did under the old system. The Government said in 2010 that the changes would allow for a free market of choices between courses and that competitive universities would prosper. There is no free market: almost all the universities are having to charge almost the maximum £9,000 for courses, when previously the Government said that only a minority would. The reason is that when the Government tripled the fees, they reduced the funding to universities and withdrew teaching funding almost entirely. Will the Minister concede that this was a big mistake? Can he tell us how many of the universities are charging near that £9,000 and what proportion of students are paying it? I am excluding the expensive courses, such as medical courses.

As I said in a debate that this House had on the Immigration Bill, the Government’s madcap immigration cap has harmed us. Over the past year, the number of Indian students has fallen by 25%. That is also partly because of the abolition of the two-year post-study work visa. Every time that I talk to foreign students they say, “If only we could have that ability to work for two years”. The current system is not easy when they have hardly any time to find a job. It is too difficult but that two-year post-study work visa really helped them to pay for their expensive education, gain some work experience and continue to build generation-long links with their countries. It did not help to have “Go Home” vans or the £3,000 bond, which were, thankfully, scrapped. These messages are sending out completely the wrong image: that this Government do not want international students. I wholeheartedly agree that the Government need to clamp down on illegal immigration and must continue to do so. However, that does not mean that we should harm the good immigration, particularly in our universities, which are desperately in need of academics and students.

Speaking recently, the chief executive of the Higher Education Funding Council for England, Professor Madeleine Atkins, said:

“International students enrich our universities and colleges—and our society—academically, culturally, and through their contribution to the economy. Supporting high-quality international education is a crucial part of ensuring that the UK continues to engage with, and benefit from, the increasingly interconnected world”.

The higher education sector is one of the jewels in the United Kingdom’s crown, as all of us who work within higher educationknow.I am privileged to be associated with a number of universities. I sit on three university business school boards: Cambridge, Birmingham and Cranfield. I also have appointments at Cambridge. I know that this tiny country, with less than 1% of the world’s population, has six of the top 20 universities in the world according to the latest QS rankings. There is higher attainment by ethnic minoritystudents than ever before and our universities will continue to dominate the international rankings, but these achievements have not been borne out by government policy, which is lagging behind. The Prime Minister is fond of referring to Britain as being in a global race for growth, trade and investment. Unfortunately, the juxtaposition between the Government’s economic and immigration policies more closely resembles a three-legged race.

I conclude that if we want to have a sustainable, competitive economy, yes, we need better school education and skills but our higher education is a crucial priority and must continue to be so. We must invest more in higher education as a proportion of GDP, from both public and private sources. We need to remove student immigration from the immigration figures. Can the Minister say whether the Government are going to do this? Our competitors do not include figures for student immigration within their immigration figures: the United States does not, nor does Canada or Australia. Can the Government also ensure that the two-year work permit is brought back in, so that students can work after they finish their studies, and that we invest more in R&D as a percentage of GDP than we currently do? Then we will stand a chance of competing in the global race.

My Lords, when the United States was formed in 1776, it took 19 people on a farm to produce enough food for 20 people, so most people had to spend their time and effort in growing food. Today, it is down to 1% or 2% to produce the food. So let us consider the vast amount of supposed unemployment produced by that. There was not really any unemployment produced; what happened was that people who had formerly been tied up working in agriculture were freed up by technological developments and improvements to do something else, which enabled us to have a better standard of living and a more extensive range of products. That is Friedman—arguing against the race to the bottom. The noble Lord, Lord Giddens, talked about robots, but I have gone back to 1776. Nothing has changed in that sense.

I thank the noble Lord, Lord Freud, for initiating this debate. I have just a few points to make. First, the rise in the overall employment rate is real and is at record levels and, correspondingly, there has been a fall in unemployment. With the economic dominance of the south-east, there is a need to rebalance the economy by supporting manufacturing, particularly in the regions. Continued tax reform is also needed. The Office of Tax Simplification is an oxymoron; our tax system is getting more and more complicated.

UK unemployment has fallen by 63,000 to 2.33 million. The unemployment rate now stands at 7.2% of the population. As the noble Lord, Lord Holmes of Richmond, said in his excellent speech, employment has risen to a record of more than 30 million. The bad news is that the NEETS are still close to the 1 million mark; although the figure is falling, it is still above 900,000. The number of people claiming jobseeker’s allowance has fallen to 1.175 million. Over the year that number has dropped by 363,200, which is terrific. That is all really good news.

The new Governor of the Bank of England, Mark Carney—I say new, but he has been in post for almost a year—made a fundamental mistake in saying that he was going to give us forward guidance and that when unemployment fell to 7% the Bank would think of raising interest rates. That figure has been reached more quickly than thought, and he has had to back-track on the forward guidance almost straightaway. Interest rates are still at a record low of 0.5%. Just think: what got us into this financial crisis was what was then perceived as being the longest period of low interest rates for a long time—and they were then at 5%. Interest rates are 10 times lower than that, but still we cannot increase them, although the unemployment figures are near, or at, what the Governor of the Bank of England wanted them to be. They have been kept unchanged at 0.5%.

The real issue is public expenditure. Public expenditure used to be around the 40% mark. It was 42% of GDP in the early 1970s. Then under the previous Government it went up to almost 50% of GDP. By the late 1980s it was below 40%. We need to get that public expenditure down to 40%, because our tax-collecting ability historically has been around 38% to 39%. If we can get our public expenditure down to 40% we will have a balanced economy and will eliminate the deficit.

UK manufacturing is not dead, by any means. We are excelling in manufacturing. Our aerospace industry is the second largest in the world. Our automotive industry, of which I speak regularly, is flying. When Tata Motors bought Jaguar Land Rover in 2008 I spent a whole day at the Land Rover factory. Wow—it was impressive. I am due another visit, because my last one is already outdated. The company is now making more in profits than it paid for a business that nobody was interested in buying in 2008: that is how well it is doing. It is also exporting and creating employment.

We have heard the great news that Bentley is moving its 12-cylinder engine manufacturing from Volkswagen in Germany to Crewe in the UK. How wonderful is that? Rolls-Royce is manufacturing at Goodwood. Therefore, we have the best of the best quality—the best cars in the world—being manufactured here in Britain.

Our chemical industry is huge; our defence industry is huge; our electronics industry is huge; and so is our food and drink industry. I speak from my own experience. I mentioned yesterday that we were manufacturing a great deal in Europe. In fact, the majority of our production was in Europe some years ago and we decided to reshore to the UK because here we can produce world-class beer. We now produce in Burton upon Trent; we are winning award after award and exporting around the world. I am proud of that.

We have a plastics industry and a steel industry; we also have a textile industry, which we thought was dead but which is not dead at all. There are still almost 80,000 businesses employing 340,000 people and generating £11.5 billion of turnover.

What about the regions and the whole focus on London? We have a country where one big city is the capital and the financial capital and is much bigger than the second biggest city, Birmingham—let alone Manchester or anywhere else. If we look at a large country such as the United States, New York is big but you have Los Angeles, Chicago and lots of other big cities. If we look at another large country, India, there is Mumbai but also Chennai, Bangalore, Hyderabad, Calcutta and Delhi, which are huge cities in their own right. We have this one big city. I am very proud of London; it is the greatest of the world’s great cities. But how can we encourage business and employment in the regions? The answer is simple: we must encourage manufacturing. We cannot manufacture in London; we have to manufacture in the regions. That can create the jobs.

The Financial Times analysis tells a story in which the percentage of people on jobseeker’s allowance benefits dropped by more than 30% last year in places as varied as Oldham in the north, Stafford in the Midlands and the Suffolk coastal region. This is great news. If we can carry on in that vein, we will have growth and employment outside London.

Again, worries about lopsided economic growth are not new. The noble Lord, Lord Giddens, talked about developments 50 years ago, at a time when the economy was also recovering after a period of stagnation.

The then Labour leader, Harold Wilson, complained in Parliament of a two-nations economy and said that,

“the Chancellor has to try to restrain the overheating which he sees in the South at a time when large areas in the North are still in the chill grip of his predecessor’s freeze”.

—[Official Report, Commons, 14/04/1964; col. 285.]

Those were the comments of Harold Wilson on Reginald Maudling’s 1964 Budget speech.

We should look at the great signs of success. We have already heard that Hitachi is to move its rail business headquarters from Japan to the UK, and that Bentley is to move from Germany to the UK. Companies from Japan and Germany, the pinnacles of high-tech manufacturing, are moving to the UK. This is fantastic. Hitachi says its move will expand the number of rail jobs to 4,000, which is excellent. I have already mentioned Jaguar Land Rover and Bentley. The Chancellor has promised to cut the costs of manufacturing to boost growth, and he has done it. He predicts that energy costs will go down by £7 billion. Again, that is excellent.

Immigration is one area where I fundamentally disagree with the Government. Their immigration policy has sent out the wrong signals around the world to foreign students and academics. That affects not just universities such as Oxford and Cambridge, where 30% of the academics are foreign. For example, more than 30% of the academics at Birmingham University are foreign. As I say, bad signals have been sent out, and the number of Indian foreign students is now plummeting, but we should look at the contribution Indians make to our economy. On Friday, I went to the celebrations for the principal of West Nottinghamshire College, who has been made a dame. She is the first Indian-born dame in 83 years. She came to this country as a young bride unable to speak English but today heads the most successful further education college in the UK, and probably one of the most successful in the world. That is the power of immigration.

The statistics show that Indians make a huge contribution to our economy. In 2013, Indian men topped the ethnicity employment table in the UK and Indian women came second. Indian men had the second lowest rate of unemployment—and so it goes on. One in seven companies is founded by a migrant entrepreneur. Migrants make a huge contribution to our economy and create jobs. Migrant entrepreneurs have been a benefit to this country.

In looking at overall business performance, we must not neglect SMEs. The Minister talked about all the Government’s initiatives. I was on the National Employment Panel for eight years and on the New Deal task force before that. SMEs account for 59% of private sector employment and 48% of private sector turnover. Within SMEs, small businesses account for 79% of employment and 69% of turnover. We need to encourage these small businesses to grow, because the argument about big companies not paying corporation tax misses the point. Yes, we would like them to pay more corporation tax, but that tax makes up only 8% of our tax take. Most of our tax take comes from the tax that is generated by employment—more than 50% comes from PAYE and NI-paying employees and NI-paying employers. The more jobs we create, the more tax we will generate, therefore we should encourage SMEs to grow.

I have suggested to the noble Lord, Lord Young, that we should have a competition in this country to sponsor staff from 100 companies to attend the Cranfield School of Management business growth programme or the University of Cambridge Postgraduate Diploma in Entrepreneurship. It costs £10,000 to attend these programmes. The businesses that send people to attend those programmes will grow faster than other businesses because we will be training our entrepreneurs to perform better and grow their businesses.

We need to go further on national insurance breaks. Ralf Speth, the chief executive of Jaguar Land Rover, said that the secret of his company’s success was innovation. UK Trade and Investment was mentioned by the noble Lord, Lord Shipley. Exports are crucial. The further we go down the route that I am suggesting of training our entrepreneurs, encouraging manufacturing in the regions and generating jobs, the more exports will follow. I have mentioned my own experience as an example of that.

To conclude, what is the purpose of business? I think that, yes, you want to create a product that people love, but you also want to create employment for the well-being of the people whom you employ. In every survey that asks people what is most important to them, they say family. What else is important to them? They say health. What else is important to them? They say their working life. If people do not work, they are not going to be happy. A happy country is a country with, ideally, full employment. We will never get to full employment, but at least let us try.

My Lords, the leading Cambridge historian, Dr Clare Jackson, says that politicians on both sides of the Scottish independence debate could learn from King James VI of Scotland, who also became King James I of England. He dedicated his life to creating a truly united kingdom that would see Scotland, England—including the Principality of Wales—and Ireland share more than just a crown. The main thing is that he engaged in a huge public relations exercise using emotive rhetoric, and he knew how to compromise. He made the first attempt at creating a new flag. Dr Jackson said:

“It shrinks the tendency to assume that everything happening now has never been thought of before”— a point made by the noble Lord, Lord Forsyth. She added:

“Now exactly 300 years after Queen Anne’s death, the 2014 referendum will decide if the settlement she made will last or if Scotland will once again become an independent country sharing a monarch with England, just as it did throughout the Stuart century”.

I thank the noble Lord, Lord Lang, for his excellent speech in leading this debate. We have heard all the arguments so far and we will continue to hear them. We have heard about Alex Salmond and his SNP’s wish list and the serious consequences. As the noble Lord, Lord Robertson, said, Scotland is tiny. It has 8.4% of the population of Britain and contributes 8.1% of the GDP. From the noble Lord, Lord Forsyth, we heard about the famous Scots in every field imaginable, not just today but historically, always doing brilliantly. Scotland has so much that we need and it has so many hidden gems. Wearing my Cobra Beer hat, Heriot-Watt University very kindly gave me an honorary doctorate. The university has the International Centre for Brewing and Distilling, one of the three finest in the world, and it must remain not just Scottish but British.

Alistair Darling clearly pointed out that Mark Carney, the Governor of the Bank of England, had said that,

“the failings of the Eurozone show that to have a successful monetary union you require fiscal and political union”.

I have said that time and time again. Mr Darling said that,

“the Governor’s judgement on currency unions is devastating for Alex Salmond’s currency plans. Why? Because the whole point of independence is to break the fiscal and political union that makes monetary union possible”.

Of course, Scotland has always had its own bank-notes—and long may they keep them.

Let us remind Alex Salmond about 2008. I have just returned from my annual week at the Harvard Business School. In March 2008, Alex Salmond made a speech at Harvard University and spoke about the “arc of prosperity” through Ireland, Iceland and Norway. He referred to,

“the lesson we draw from our neighbours in Ireland—the Celtic Tiger economy”.

He went on:

“With RBS and HBOS—two of the world’s biggest banks—Scotland has global leaders today, tomorrow and for the long-term”.

We are discovering the strength of that Scottish financial sector—but look at what London has done.

Let us keep this in perspective. In a currency union, Scotland has 10% of GDP and Britain has 90%. If it ever breaks up, we know who will call the shots. Losing the strength and security of the UK pound would have a profound impact on the Scots. The noble and learned Lord, Lord Wallace, as Advocate-General for Scotland, sent us a letter which clearly stated:

“The UK Government’s position is clear—Scotland benefits from being part of the UK, and the UK benefits from having Scotland within it”.

The letter gave a list of the “Top 20 Benefits of the UK”. He very clearly spelled out the Government’s stance on the matter.

One prediction following the assumption made by the House of Lords Select Committee on Economic Affairs was that it would result in Scotland accruing around 90% of oil revenues. Its report described this as the,

“economic bridge over which Scotland would pass to independence”,

and expected it to make up for all the loss of finances allocated by our Treasury under the Barnett formula. However, as has been said, the impact of prices in the oil market could just throw this, as could the length of time that oil will last. It would be a very unpredictable source of revenue.

Looking ahead, the university sector in Scotland is strong and we are proud of it. The Scottish Government are maintaining free access to higher education for Scots and people from the EU—except for people from England and Wales. In research funding, to this day, 15% of research for Scottish universities comes from UK charities. If Scotland breaks away, that will not last.

The Prime Minister has assured Mr Salmond that the reform of the Barnett formula, which gives Scots £1,364 per head more spending than the UK average, was “not on the horizon”. He did not say that it will never happen but Scotland has the assurance that that is not on the horizon. On 27 November 2013, YouGov published a poll which asked British citizens how they would vote—if they were able to—on whether Scotland should be an independent country. The response, by political party, was: Conservative, 65% no; Labour, 60% no; Liberal Democrat, 62% no; and even UKIP respondents voted 55% no. The response by gender was: males 57% no and females 54% no. It is overwhelming that the people of Britain, let alone the people of Scotland, do not want this.

Let us look back at history. Adam Smith, the great economic theorist and moral philosopher, never saw himself as Scottish. He was north British. Edinburgh, the Athens of the north, was a great centre of learning and at the heart of the Scottish Enlightenment. The wonderful Balmoral Hotel, where I have stayed, was known as the North British Hotel until the 1980s.

I will draw on my experience in India. The partition of India into India and Pakistan was a huge mistake. It did not last. My father fought for the liberation of Bangladesh. The united India of 1947—despite many attempts by parts of India to break away—has stayed united, and it is stronger united. Scotland today has the best of both worlds, being an independent country but being part of the United Kingdom.

Any Government will have many priorities, but the top four are: first, the security of citizens, both external and internal. If Scotland breaks away, we have heard that defence will go for a six. The second and third priorities are health and education, which the Scots have anyway. The fourth is the economy, and Scotland would be far weaker by being outside the UK.

The key issues are not just practical but the emotional. King James played on the emotional to get unity, and the noble Baroness, Lady Goldie, in her excellent maiden speech, said that she was equally proud to be both Scottish and British. My father’s regiment, the 5th Gurkhas shared battle honours with the Cameron and Gordon Highlanders. As a colonel, he made a pilgrimage to Inverness to visit the regiment because it meant so much. These are emotional identities.

In conclusion, my friend Amartya Sen, the Nobel laureate, speaks of identity. We have multiple identities. I am proud to be a Zoroastrian Parsi; I am proud to be an Asian in Britain; I am proud to be Indian; and I am really proud to be British. In the same way, I think that the Scottish are proud to be Scots and proud to be British. David Torrance published a book entitled The Battle for Britain: Scotland and the Independence Referendum. This is not about Scottish independence; this is a battle for Britain and a battle for the United Kingdom, which must stay united.

The noble Lord, Lord MacGregor started with the complexity of the UK tax regime. He spoke about multinationals and the infamous example of Starbucks which, from 2006 to 2011, had UK revenues of $18 billion yet paid UK corporation tax of only $16 million. As the noble Lord said, there is a serious issue of avoidance. The Select Committee on Economic Affairs—I am proud to have been a member of the Finance Bill sub-committee every year—has produced a thorough report, Tackling Corporate Tax Avoidance in a Global Economy: Is a New Approach Needed? The report says right up front that the present system is not working and urgently needs reform. It says that it is confident that the Treasury will bear this in mind as it conducts its proposed review. However, we have heard that the Government have not really listened to the report, and will not be taking much of it into account.

The report highlights that UK corporation tax, having come down to 20%, is the lowest in the G20. The German rate is 29%, France’s is 33% and the United States’s is 40%. This is wonderful news. On the other hand, the report also highlights something which is not understood by the public: a significant feature of the UK’s corporation tax regime is the low rate of allowances for capital spending. Our regime does not encourage investment. In fact, within the OECD and the G20 countries, only one country, Chile, has a less generous allowance than the UK. We must look at this as a whole.

The other major point which has not yet been highlighted in today’s debate is how much corporation tax yields as a percentage of GDP. Again, the report lays this out clearly in a table comparing us with other countries such as France, Germany and the United States. Our UK share of corporation tax receipts has held up pretty well in spite of falling headline rates. As a percentage of GDP, in 2005 corporation tax was 3.2%; today it is 2.7% in spite of rates having fallen. The nub of it all is that, of the contribution by tax to total HMRC receipts, corporation tax stands out in that it is only 8.7%. It is dwarfed by income tax at 32.2%. National insurance contributions constitute 21.8% and VAT constitutes 21.4%. This clearly shows that, yes, everyone is getting upset about corporation tax not being paid by certain companies, but are people talking about all the other taxes that these companies are generating, predominantly through creating employment. Employment generates a far greater proportion of taxes than corporation tax. We are not quite getting the context of and perspective on this. I will come back to that point at the end of my speech.

In fact, 81% of UK corporation tax is paid by the top 1% of companies. Here we are getting upset about 1% of companies; 99%—SMEs have been mentioned—are paying the full rate of corporation tax in many cases. We are losing a sense of perspective. The report says:

“In total, PwC say that Hundred Group members contributed around £8 billion in corporation tax in 2012 and a further £16.8 billion in other taxes borne”.

A multinational company is not taxed as a single entity but as a number of legally distinct, individual companies all over the world. The present tax system around the world encourages multinationals to move their profits around the world. That is the reality. We are trying to stop that. The report recommends ways of stopping it. When I was on the sub-committee for the previous Finance Bill, we focused on the GAAR. As the noble Lord,Lord Hollick, said, when he came up in the business world he was taught the distinction between evasion and avoidance. To a chartered accountant it is very simple: evasion is illegal; avoidance is allowed. Now we are going one step further and saying “abuse” as well. However, it is clear that the GAAR will not catch everything. It is narrowly focused. It will not, for example, catch the Starbucks situation at all. That needs to be communicated. I am glad that the Government have listened and that the GAAR will be communicated to the public.

I am proud to be a fellow of the Institute of Chartered Accountants in England and Wales. The report says:

“The ICAEW offers advice to its members that appears to go well beyond the Code of Conduct. It states, for example, that

‘Although tax avoidance may be legal, whether something is within the law isn’t the only thing that matters. You are under a duty to take into consideration the public interest and at all times to comply with ICAEW’sCode of Ethics … The boundary between legal tax avoidance and illegal tax evasion is not always clear and there’s a danger that what starts out as legal tax avoidance may slip into illegal tax evasion’”.

Who is competent to catch all of this? The noble Lord, Lord Lawson, raised the point of the structure of HMRC, this merged entity. Is it fit to deal with this? What about the relationship between the Treasury and HMRC? A lot of the policy is formed in the Treasury and HMRC is meant to execute it. Can the Treasury make this policy properly?

Then there is the question of reputation. In my business, our most valuable asset is our brand. The threat of naming and shaming companies is serious. We, as companies, are all very concerned about our brands. Much more can be done in this area by naming and shaming companies.

The Government actively promoting the implementation of the G8 proposals on the movement of funds between companies is very good. We need to continue to do this. Again, however, it will not solve everything. A unitary tax system, treating multinational companies as single entities in the global economy, is attractive in theory, as the report says, but is quite frankly utopian. In practice, we cannot even get the EU to agree on corporation tax rates. How on earth are we going to get the whole world to agree on something? We have to realistic and practical about this.

The setting up of a Joint Committee to supervise and oversee this matter is a great idea. The expertise of the House of Lords in this area is far greater than the expertise in the other place. This expertise is used in the Finance Bill sub-committee. If it could be used on a permanent basis, that would be great. Will the Ministerconsider forming such a committee to oversee the issue on a general basis? I think that the confidentiality argument is absolute nonsense, as was said by noble Lords earlier.

I now come to the points made by the noble Lord, Lord Lawson, which I thought were excellent. He hit the nail on the head. He said that corporation tax in the modern world is inequitable between multinationals and SMEs and that, in the way it is structured at the moment, it has had its day. He has summed it up. The noble Lord,Lord Browne, talked about a tax gap of £32 billion and said that the tax gap is going up. I want to refer to a friend of mine, Vindi Banga, who is a former head of Unilever in India and was then on the main board of Unilever here in the UK—companies do not get more multinational than Unilever. He wrote an excellent article earlier this year in the Telegraph, headed, “Tax compliance should be judged by rules and not morals”. This was when the Starbucks issue was at its height, when it was being bashed by politicians—the noble Lord, Lord Hollick, referred to this. The Prime Minister, David Cameron, at the World Economic Forum in Davos, said:

“Companies must wake up and smell the coffee”.

One cannot get more specific than that. Vindi Banga then talked about IP royalties; the way companies move profits around the world, perfectly legally. One

way, of course, is to charge royalties from where the IP is headquartered. Let us say that the IP is headquartered in a country outside the UK; royalties are charged and paid, reducing the tax here in the UK. However, what we overlook is that the UK is also a recipient of royalties and we encourage IP. We encourage the innovation of IP, the generating of IP and the holding of IP. In net receipt terms, the UK receives more royalty income than we pay out. So it will go against us if we stop that in trying to address tax evasion.

The other point that Vindi Banga made—this is my main point—is that our tax system has to be competitive because we, as companies, operate in a really competitive environment. In fact, while evasion is immoral, avoidance, if it is legal, is a duty: companies almost have a duty to try to pay as little tax as possible in order to be as competitive as possible and to survive and compete in the global environment. However, there is something that could and should be done. Could the Government bring in even more regulation for companies to disclose all the tax that they are paying in one simple table? Every company would disclose how much it generates as a result of its operations in terms of PAYE paid, employer national insurance paid, employee national insurance paid, VAT collected as a result of sales, and corporation tax. In my company’s case, there would also be the excise duty generated as a result of the company’s existence. That would put into perspective how much tax a company is generating.

The noble Lord, Lord Leigh of Hurley, made a very valid point about the legislation that exists because our tax code is so complex. In spite of all the efforts of the noble Lord, Lord Lawson, we still have such a complex tax system and legislation is constantly plugging holes. The noble Lord, Lord Leigh, said, very correctly, that it is not fit for purpose and that we must continue to try for a global solution. He spoke very clearly about SMEs, which are paying too much tax, in relative terms, unfairly. As a country, we do not have a competitive tax regime overall. Our corporation tax rate may be one of the lowest, but our capital allowances, on the other hand, are not good enough and our top rate of income tax, at 45%, is still very high. The overall tax burden on the consumer and on companies is actually very high. Do the Government have the guts to address the overall situation?

I conclude by getting to the crux of all this, which is that we should not really be focusing on corporation tax, although we must address that. My dream is for us to have a simpler, fairer tax system that is competitive, attracts investment and promotes spending, saving and growth.