The Economy
28^th 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”.

The article is available here and a full transcript of the interview is below:

 

Philip Salter: How has Britain’s business relationship with India changed over recent years?

Lord Bilimoria: Whenever I take people around Parliament I show them the mural at St Stephen’s Hall which depicts Sir Thomas Rowe, Britain’s first Ambassador to India, presenting his credentials to the Mughal Emperor Jahangir in 1614. The UK’s relationship with India spans over 400 years and when I was brought up as a child in India anti-colonial and anti-empire sentiment abounded.

Since liberalization in 1991, everything has changed. The Indian economy has opened up and there is now much more mutual respect between Britain and India. The British Council recently conducted a survey of young Indians’ attitudes to different countries called India Matters and, in almost every category, young Indians rank the United States as their destination of choice, with Britain a clear second. British universities, which are some of the best in the world along with those found in the United States, were singled out as one of the most attractive aspects of moving to Britain.

Prime Minister Modi clearly stated that India now looks upon its relationship with Britain as a relationship of equals during his visit to the UK in November 2015. This, in many ways, is terrific as India’s population is 20 times Britain’s, but it demonstrates the UK’s world-beating capabilities in almost every field. It sits at the top table on the world stage and is a global power, with the fifth largest economy in the world in absolute terms.

However, there is no running away from the fact that the whole world is now trying to do business in India. The UK is the largest investor in India and vice versa – with companies like Vodafone , JCB and Molson Coors investing in India and Tata, Jaguar Land Rover, and Tetley investing in the UK – but there is now strong competition between leading economies to do business in India. The UK needs to ensure that it retains its competitive advantage and that the ties between the two countries remain strong.

 

Salter: Has closing the post-study work visa route damaged the UK-India relationship?

Bilimoria: In my roles as Chancellor of the University of Birmingham, President of UKCISA, and Chairman of the Advisory Board for the Judge Business School at the University of Cambridge, I have seen the damage caused by closing the post-study work visa route to the UK-India relationship.

The number of Indian students coming to the UK has halved in the past few years. The introduction of the post study visa, which I spearheaded in Parliament, made a huge difference in enabling students, and particularly Indian students – one of the largest groups in the UK – to study here. The visa allowed students to earn money to pay off their university fees, which are expensive by Indian standards, and enabled them to gain necessary work experience. It also helped to build bridges between countries, all while allowing the world’s best and brightest to contribute to Britain’s economy.

The British public support allowing talented international students to stay and work after their studies, with 75% of the public backing overseas students being allowed to work here. The Home Secretary’s immigration policies are economically illiterate when it comes to international students. The broad push to reduce immigration at any cost means that opportunities to attract the immigration that the country needs, highly skilled individuals in a variety of fields, such as finance and academia (30% of academics at our best universities like Oxford, Cambridge and Birmingham are foreign born), are missed. It also disregards the huge amount of soft power gained from international students studying in Britain.

Scotland was the first country in the UK to introduce the post-study work visa and MSPs on Holyrood’s Devolution Committee are now calling for the UK Government to reinstate the visa. This is the right step to take. Theresa May and the Home Office’s attitude, typified by decisions to reduce the number of international students studying in the UK and include international students in net immigration figures, is damaging and takes a short term view, rather than the long term view needed to benefit the UK.

 

Salter: Which countries are the UK’s key competitors in attracting finance and talent from India?

Bilimoria: Without a doubt, the United States is the number one destination for young Indian people and there are now a number of Indians heading huge US companies, including Microsoft, Google, Pepsi, and MasterCard. The United States is also the most attractive overseas study destination for students, with numbers from India growing fast. Other competitors for Indian students are Canada, Australia, New Zealand and Germany. These countries have put in place ambitious strategies to increase the number of international students attending there and, while there are no targets to increase the number of international students studying in the UK, France plans to double the number of their overseas students by 2020. Theresa May’s Australian counterpart has even thanked the Home Secretary for her immigration stance after the number of students attending Australian universities has surged after the implementation of visa streamlining processes and the depreciation of the Australian Dollar.

 

Salter: Are you seeing a growth in entrepreneurship in India and the UK? If so, which industries/sectors have the most potential for mutual benefit?

Bilimoria: When I first came to the UK in the 1980s entrepreneurship was looked down on, conjuring up images of Del Boy and second hand car salesmen. Margaret Thatcher’s encouragement of entrepreneurship helped to change that and each subsequent government has successfully promoted entrepreneurship in the UK. Now it is cool to be an entrepreneur. The UK has become a lot more aspirational and is one of the most enterprising countries in the world, with London ranked as the second best city in Europe for entrepreneurship.

India unleashed its entrepreneurial talent during its liberalization in 1991, which saw the rise of global Indian companies. India excels in the tech and telecommunications sectors, producing behemoths like Infosys and Air Tel; these sectors, along with the Higher Education sector, show the most potential for economic benefit between the UK and India.

 

Salter: What do you think the UK can learn from the way business is done in India?

Bilimoria: There is a lot that the UK can learn from India, but one important principle that is now becoming widely emulated in the West is that of Jugaad – an Indian term for an innovative fix or a simple work-around. Professor Jaideep Prabhu of Cambridge Judge Business School has written at length about the benefits of this type of frugal innovation and Jugaad is becoming increasingly more accepted as a legitimate management technique. Companies around the world are beginning to adopt Jugaad to counteract a reduction in research and development costs and to encourage creative, out of the box thinking in order to maximize resources.

 

Salter: What do you think India can learn from the way business is done in the UK?

Bilimoria: There is no question that Britain is the best country in the world in which to base a business, with an excellent rule of law and justice system. It is renowned for its fairness and is used by businesses around the world as a center for justice and arbitration. London is the number one financial center in the world and has a number of world-class universities right on its doorstep. Cambridge University has more Nobel prizes than any other university in the world – 92 – and the UK is an excellent center of research, producing the third largest number of research papers in the world. The Royal Society represents the pinnacle of scientific achievement and, incidentally, for the first time in history the President of the Royal Society, Sir Venkatraman Ramakrishnan, is Indian. He is also a Nobel Laureate from Trinity College Cambridge.

Britain is a world leader in a number of fields, including in manufacturing, accountancy, law, architecture, design, and creative industries. It represents the best of the best and the Government’s GREAT campaign does an excellent job highlighting this.

On 3rd July, Lord Bilimoria was invited to be the Chief Guest Speaker at the Annual India Link Awards. He spoke about India-British relations and their smart power on the world stage, and his comprehensive speech (a transcript of which is available below) was extremely well received by all those present.

To cap off a wonderful night, Lord Bilimoria was also awarded with the India Link International Indian of the Year Award 2014-15, which recognised his significant achievements in the business and education sectors.

“India-Britain alliance as Smart Powers on the World Stage”

 

Your Excellency, Dr Varendra Paul, Deputy High Commissioner, My Lords, Sir Mota Singh – who has been a great inspiration to me throughout my career here in the UK, the first Indian ever to become a judge here – Dr Satyapal Sharma thank you for your welcome, and most importantly to Krishan Ralleigh and Vijay Ralleigh. It is remarkable what you have done in creating, running and publishing Indialink for twenty-one years. (applause)

I have here C.B. Patel, someone who I’ve known from the day I started in business, whose son was at Cambridge with me. And CB was saying to me just now – he has been one of the most eminent Asian publishers in this country – and he said he’s been doing it forty years, and for somebody to be here twenty-one years later, not just surviving but doing so well and having done an amazing job – hats off from CB Patel.

To give this lecture, following in the footsteps of another individual who has always inspired me, been a mentor to me, Lord Paul – thank you for what you’ve always done for the community, and I’m humbled to follow in your footsteps in delivering this lecture.

And we’ve got Bob Blackman here – a Member of Parliament who has been a great friend of the Indian community, thank you for being here as well.

There are many people I could single out, but I do want to single out one other person who’s sitting very quietly over there, and that’s Mr Sachar, the founder of the Asian Who’s Who and the Asian of the Year awards, who is always in the background, has never received recognition for what he’s done year in, year out for our community. (applause)

I take you to south India many, many years ago. There were two young brothers. The nearest school in Kerala for these brothers was in a little village six kilometres away. And the brothers would walk to school – and only the older brother got a place, the younger brother did not – the younger brother would sit outside the older brother’s classroom – and it was a hut, basically, this school – and the older brother would pass the textbooks through the window, to the younger brother.  That is the only way this younger brother could start learning. And of course eventually, the young boy got a place at school and he was very bright. He was so clever that years later, he got a scholarship to the London School of Economics. They were so poor it took the family a year to raise the money just to buy the clothes for him  to come to the UK – they had to defer his admission by a year. He came to the LSE, excelled, joined the foreign service – became head of the foreign service – and then eventually became the first dalit president of India, President Narayanan, who I had the privilege of knowing.

That story tells you that anyone can get from anywhere to anywhere. There is no stopping anyone for all the prejudices that exist, you can get anywhere. And I go back to India and I actually went to school in Trivandram for two years, to the Loyola school, a Jesuit school, when my father was commanding a battalion of Gurkhas there. And the India that I remember from my childhood was an India that was a closed country, a closed economy, inward-looking, protective. It was an India where consumers were starved of choice. It was an India which was run by a few business families, and no one else got a look-in. It was an India where people like Swraj Paul took a stand, and that took a lot of guts.

And when I set up Cobra in 1989-1990 – this is our 25th anniversary – just a little older than Indialink – I remember then, India was still that India. But I believed that India would one day open up, I believed that India would liberalise – and sure enough, in 1991 India did liberalise. Gurcharan Das, the famous author and journalist, produced a book called India Unbound. India actually was unleashed, and in spite of this liberalisation, in the 1990s the Indian political situation was very, very fluid. We had periods where you had one prime minister after another, literally one after another, and there was great instability politically, and yet in 2002 I spotted, finally, that the India growth story was taking off, and the Indian economy started to take off, where growth rates started to hit nearly 10%, well over 8%, and in 2003 I was appointed the UK chair of the Indo-British Partnership, and it was absolutely fabulous that things were finally beginning to take place.

And I founded the UK-India Business Council, and I remember then India had the BJP in power in 1999-2004, and that BJP government was doing so brilliantly economically – here was the economy booming, and yet in 2004 they were thrown out. Why? When you’re economically so successful? And of course the reason was because that growth was not seen to be inclusive enough. And you then had a congress government for ten years. And I was on PM Manmohan Singh’s advisory council for five years, and I saw that government in operation. And I saw the challenges that India has. And without a doubt, India is the most diverse country in every way – in terrain, in race, in religion, in every way it is the most diverse country in the world.

And I saw that the India that had been unleashed, one thing that powered it forward to this day, is the vibrant and free press that India has – represented here in the UK by people like Krishan Ralleigh and Indialink. And I also saw India’s capabilities, with all its challenges.

But then what about this country? This country which I came to in the early eighties, was looked upon as the sick man of Europe. This country was a country with no respect in the world economy whatsoever. I was told by my family and friends in the early eighties, that if you ever decide to stay and work after your studies, remember you will never get to the top – you will not be allowed to get to the top. You will not be allowed to get to the top because there will be a glass ceiling for you.

And they were absolutely right, three decades ago. Today we see the transformation, how that glass ceiling has been shattered. Looking around this room, people have shattered that glass ceiling. Today Britain, far from being the sick man of Europe, is the envy of Europe with a hugely successful economy.

And Britain’s soft power – I could talk for hours on Britain’s soft power. The BBC – whatever we may criticise about the BBC within Britain – we should always be grateful for the BBC. The world admires the BBC. And British music – whether it’s pop music, rock music, the Beatles, Queen, the Rolling Stones, or classical music, our Royal family, our creative industries, our sport, our schools – the most famous schools in the world, Eton, Harrow – this little country with less than 1% of the world’s population came third in the Olympics and Paralympics.

I could keep going on – our universities are the best in the world along with the United States. At any one time, one in seven world leaders have studied in the United Kingdom. Including the Greek finance minister! (laughter). The former PM of India, Dr Manmohan Singh, was a graduate of both Oxford and Cambridge. You can’t buy that kind of soft power! The institutions that this country has, are just phenomenal. Just look at London’s amazing museums, the Royal Societies – just in the medical profession alone, each one of the Royal Societies – of surgeons, physicians, gynaecologists, obstetricians, oncologists, you could just go on – each one world-class.

I’m proud to be the seventh Chancellor of the University of Birmingham. Anthony Eden, when he was Chancellor of the University of Birmingham, served for twenty-seven years and continued to serve even when he was Prime Minister – that wouldn’t happen today. And later this month I will be bestowing an honorary doctorate on Ajit Seth who just stepped down as Cabinet Secretary in India.

The University of Cambridge, my alma mater, has won ninety Nobel prizes, more than any other university in the world. One college at Cambridge, Trinity College, has been awarded thirty-two Nobel prizes. Another college, where Stephen Hawking is a fellow and professor, Gonville and Caius College, where Homi Bhabha went, where Sir Dorab Tata went – thirteen Nobel prizes. This is the power of British education.

I went to Milan where the world expo is taking place as we speak, and I went to speak at the opening week of the expo with the British ambassador in Italy, with the head of UK Trade  and Investment, and I went to visit our pavilion – and every country in the world has a pavilion at the expo, they are very impressive pavilions, because these pavilions are showing off that country and its capability. And do you know the most creative pavilion by far, is the British pavilion. You walk into it, it’s like walking into a garden, and there is this huge steel structure which is a beehive, with flashing lights – and the flashing lights are the movements and behaviour of a live beehive, at Nottingham University, here, which is being transmitted over there. With the queen bee and her activities, with musical humming, replicating what a beehive is doing, in this huge structure. That is how creative we are as a country – the most creative by miles in the expo.

This is the 200th anniversary of the battle of Waterloo. I visited the battle site, just outside Brussels, earlier this year, and the Duke of Wellington – the great hero of Waterloo – his motto was, “Fortune favours the brave”. And do you know, the battle of Waterloo wasn’t just Wellington defeating Napoleon – yes, that happened, but what it really demonstrated was the power of allies. It wasn’t just the British against the French – it was the Dutch, the Germans – if Marshall Blucher, the Prussian German general, had not arrived to help Wellington, Wellington would have lost. And those allies stopped Napoleon – a brilliant man, but a man who wanted to conquer the whole of Europe – resulting in one hundred years of peace in Europe, until the dreadful First World War, the centenary of which we are commemorating. Just look at that unity and peace, and here we have Greece with its financial problems – I don’t think we should ever take for granted the European Union and the peace that it has brought in Europe.

Going back to Britain’s power – design. We are brilliant at design. The most valuable company in the world, soon to be a trillion-dollar company, the first ever, Apple. The chief designer of Apple is Sir Jonathan Ive – a Brit. Our architects – Germany is seen as the most powerful country in Europe. Well if you go and see the German parliament, the Reichstag – it was rebuilt by Lord Foster, a British architect.

The Higgs-Boson that was just discovered – by the way, Higgs is a Brit – it was discovered in Geneva at CERN, an amazing laboratory, and I was taken around CERN by Sir Tejinder Virdee – Indian origin, British professor at Imperial College, one of the heads that discovered the Higgs-Boson. And who was the other head? Professor Dave Charlton of Birmingham University. So there again, these are revolutionary findings done by people from Britain.

And by the way, when I was there I was shown the computer lab at CERN, and there was a sign saying a person who worked here discovered and created the internet in 1989 – Tim Berners-Lee, a Brit. And then there was a sign there saying in 1993 the internet would be free to use in the world. So Britain is at the heart of transforming the world. London as a financial centre, despite the financial crisis, is still the number one financial centre in the world.

And the House of Lords had a committee on soft power chaired by my noble friend Lord Howell, and speaking at the launch of this report on soft power, Lord Howell commented recently on a group of Japanese visitors given a tour of Britain, and they said what was the highlight of the visit? And they said, a visit to the Burberry store. Now there are so many British brands that are just doing so brilliantly around the world – but the British brand that Britain needs to promote more than anything else, is Britain itself – because the world does not appreciate Britain’s powers and capabilities. That’s why the Great campaign that the foreign office has got going on within Britain and around the world is necessary, and is actually becoming a huge success.

And Professor Nye of Harvard University gave evidence for the House of Lords Committee, and he said the crux of international relations today is not just whose army wins – it is also whose story wins in the information age.

And talking of armies, hard power is important as well – soft power on its own is useless without hard power. And there I think we are in a really dangerous position here in the UK, where the government is refusing to commit 2% of GDP spend on defence, which is a NATO commitment. We are one of the most powerful defence forces in the world, and yet we do not have aircraft carriers thanks to the defence review five years ago, until another five years from now. We do not have marine reconnaissance aircraft because we’ve destroyed our nimrods, and we’ve got Russian submarines coming into our waters without the capability of surveillance. We don’t have our harriers that were on our carriers. Our British army is now coming down to the level where, at 82,000, we cannot fill Wembley Stadium. And I think with all the problem we’ve got around the world, with ISIL, with what’s happening in Ukraine, we cannot afford to shrink our defence forces and we should be spending at least 2%.

This is the 200th anniversary of the Gurkhas, my father the late Lieutenant-General Bilimoria was commander-in-chief of the central Indian army but also head of the Gurkhas, President of the Gurkha Brigade in India, commanded his battalion in the liberation of Bangladesh. And a fellow Zoroastrian Parsee, Field Marshal Sam Manekshaw, called Sam Bahadur by the Gurkhas, said of the Gurkhas, “If a man says that he’s not afraid of dying, he’s either lying or he’s a Gurkha”(applause) And I was privileged to lead the debate on the Gurkhas on the 200th anniversary in the House of Lords, the day after the pageant at the Royal Hospital Chelsea, which was attended by the Queen, the Duke of Edinburgh, Prince Charles and Prince Harry.

Britain has amazing capability in manufacturing as well. We have world-beating capabilities in manufacturing, but on the other hand our manufacturing is now just 10% of GDP.

We have parliamentarians now of Indian origin, represented by Lord Loomba here, Lord Paul. In 1987 when I was at Cambridge, I remember great celebrations because we had an Indian MP elected here in the UK, for the first time since India’s independence, Keith Vaz. The first Indian MPs going back to 1892, were all Parsees: Dadabhai Naoroji 1892, Sir Mancherjee Bhownaggree 1895, Shapurji Saklatvala 1922. One liberal, one conservative, one labour – and I am the first Zoroastrian Parsee in the House of Lords and I am a cross-bench peer so I have squared the circle! (laughter)

And there was one hereditary peer, Lord Sinha – those were the four Indian parliamentarians before India’s independence. Then there was a big gap, then Lord Chitnis who was at Birmingham University with my mother, a liberal peer – that was it until Keith Vaz in 1987. And I remember we celebrated the 25th anniversary of this first group of ethnic minority MPs in 1987 – in 2012 we stood on the steps of Westminster Hall, and there were sixty-nine of us on those steps. From four, to five, to sixty-nine. We’ve come a long way but we’ve got a long way to go.

Indian food we’ve been eating this evening – Cobra beer – all part of India’s soft power.

If you visit Imperial College right here in Kensington, in the middle of the college there is a tower in the quadrangle called the Queen’s Tower. In 1887 it was erected to commemorate the Golden Jubilee of Queen Victoria. The first Buckingham Palace garden party was held to celebrate Queen Victoria’s Golden Jubilee. And there at the bottom of this tower, the plaque reads ‘Her Majesty, Queen Victoria – Empress of India’ – the biggest and most powerful empire the world has ever know. And yet now there is no empire. Now the army is less than Wembley Stadium’s capacity.

And we had the visit of General Dalbir Singh Suhag who is now the chief of the Indian army, from my father’s regiment, the Fifth Gurkha Rifles Frontier Force – and I was with the General here, and I said “General, how big is the Indian army today?” 1.3 million. So India has huge hard power – India needs  huge hard power. India is in an area of huge instability, and historical issues with neighbours,  issues with Sri Lanka, issues in liberating Bangladesh, issues with China, with Pakistan – India needs hard power, and PM Narendra Modi has made that a priority.

When it comes to manufacturing, it may be 10% of our GDP but PM Narendra Modi has the “Make in India” initiative where he is targeting an increase in manufacturing from 16% to 25% of GDP. And I think we should have a target of getting our manufacturing in this country to a specific percentage in the way that India has.

And talking about UK-India, I was in India  – I arrived back today and I was driving from Chandigarh via Haryana to Delhi. Driving down an amazing four-lane highway. Suddenly on the left, between Chandigarh and Delhi, we came to a town called Karnal. Karnal is not a huge city, it’s a town – and there I saw the most impressive Jaguar Land Rover showroom I have ever seen – in the world! Owned by the Tatas – and today I was with the Jaguar team – and Jaguars are great cars, I think Farokh you drive a Jaguar as well – and nobody wanted to buy Jaguar Land Rover in 2008, nobody but the Tatas – their sales fell off a cliff in the financial crisis – but they stuck by it, invested in it, in design, in innovation. I was with their chief engineer today – today Jaguar Land Rover makes more profit every year than they paid for the whole company, when nobody wanted to buy it in 2008 (applause)

And the strongest form of India’s soft power, by the way, is sitting in this room – the people of Indian origin who are now reaching the top of every field, whether it’s Governors in the United States of America, some of the wealthiest and most successful businessmen in the world, whether it’s people right here in this room – the Indian community is reaching the very top. Mastercard is run by an Indian, Ajay Banga; the new head of Deloitte, the firm of accountants, is an Indian; and I could go on, Indians now leading the world..

And of course with our two countries we’ve got cricket putting the two countries together, and no better example than my childhood hero, my lifelong hero, Farokh Engineer who’s here with us today (applause) and I’ll never forget when I first met him when I came as a student to this country and I remember, at an event at the High Commission, I was so excited about it, and I said to him ‘ You know you’re my childhood hero – I remember you as the best wicket keeper in the world’ He said ‘No no no I wasn’t the best wicket keeper in the world – I was the VERY best!’ (laughter) I knew here is somebody where a journalist said to him, “Like Don Bradman you made a century before lunch, didn’t you?” He said ‘no I didn’t I made it by hitting the first ball for six after lunch!’ He was 94 not out before lunch. This is a legend, so Farokh, thank you for being here and for being an inspiration to us all (applause) 

And of course India’s soft power, I could go on – Bollywood, Indian music, Indian classical music – Indian classical dancing – we’ve seen Polomi who performed such a beautiful dance – let’s give her a huge round of applause again (applause)

Ravi Shankar – I remember once when Ravi Shankar was speaking at the Nehru Centre, and I met him – what a legend. There he spoke about about how he communicates with an audience. He said anyone can play an impressive raga, and with great flourish, any well-trained sitarist can do that – he said, I can do that, that’s not how I’ve connected with my audience. Every string I pluck, plucks every heart of every individual in the room. That was what made him the greatest ever Indian classical musician. Those legends that India has.

Yoga! I was privileged when Prime Minister Modi made the UN have international Yoga Day on 21st June which is the summer equinox, and we had the High Commissioner in parliament and I had my fellow parliamentarian including Bob Blackman who was witness to this, we conducted Yoga in parliament. (applause) We had mindfulness, meditation, office yoga in our suits, which you can do at your desk, breathing exercises, from Shri Shri Ravi Shankar’s institution, and Wellington College where my older daughter goes to school, named after the Duke of Wellington, created by Queen Victoria – every child at Wellington College is taught mindfulness, and that of course, all from India.

And as a chancellor of University of Birmingham on the other hand, I have one bone to pick with this government, and the coalition government. And that is the immigration policy. I think that is harming UK-India relations, I think it’s harming Britains’s soft power. And I’ve seen at universities the damaging rhetoric, when Theresa May said… ‘I want every foreign student to leave the day they graduate’ George Osborne the chancellor had to step in and say no, we will not do that. Taking away the two-year post-graduation work visa from foreign students – that was a mistake. Including foreign students in immigration figures and setting a net immigration target in the tens of thousands is wrong. Foreign students are not immigrants, they’re here as students, one of the biggest exports that Britain has – £13 billion – they enrich our universities, build generation-long links, and we should not jeopardize that at all. We should be encouraging foreign students. And the British public love the fact that we have foreign students here. If you ask the British public and survey them, do you think foreign students should be allowed to work in the UK after graduation, 75% of them say yes, they should be allowed to work. So I think the government is out of tune there, they should clamp down on illegal immigration, but when it comes to foreign students we should be setting targets to increase the number of international students, especially from countries like India.

The Premier League – Manchester United has shops in India. Indians now follow British football. The exchange of academics between universities is phenomenal. I just launched an initiative with the British Council called Generation UK-India, where 25,000 British students are now going to go and experience India over the coming years. Hundreds of them a year have started doing ‘Experience India’ and they all want to go back.

The Sirius program which I helped launch is encouraging foreign graduates to come and open their businesses here in the UK. And entrepreneurship in India, look how it’s flourishing – Narayana Murthy and the charitable work that he does. Azim Premji of Wipro and thousands of schools that he has funded – this is an inspiration to us all.

So before  I conclude, I do want to talk about one individual, Mahatma Gandhi. C.B. and I were talking about Gujarat – Lord Paul says he’s just been recently – I was in Ahmdabad and Gandhinagar earlier this year and I went to Mahatma Gandhi’s ashram. And there you have some of his old papers, which were brought out and it was a privilege to see them. And his whole thing was about right against might. He took on the whole British Empire and beat it, with right against might. And I always say in business, it is better to fail doing the right thing, than to succeed doing the wrong thing. And Mahatma Gandhi was a great inspiration. And keeping a country together – it is a miracle that India stays together. It is so diverse. And here, a small country like the UK, there is a danger of the UK falling apart, with the SNP now having 56 MPs whose sole objective is to break away from the United Kingdom. With the In or Out EU Referendum coming up here in Britain, I think we need to keep things together.

So before I conclude I’d just like to read this poem, my favourite poem – we just sang the Indian national anthem, well that was written by Rabindranath Tagore, a Nobel laureate from India, and my favourite poem of his is this:

Where the mind is without fear
And the Head is held high
Where knowledge is free
Where the world has not broken up into fragments by narrow domestic wars
Where words come out from the depth of truth
Where tireless striving stretches its arms to earth’s perfection
Where the clear stream of reason has not lost its way into the dreary desert sand of dead habit
Where the mind is led forward by thee into ever-widening thought and action
Into that heaven of freedom my father 

Let my country awake

(applause)

That poem says it all about the UK, about India, about Europe. And Prime Minister Narendra Modi , he’s got a plan about democracy , demography, demand, he’s got his dreams, he says that India’s changing fast, growing fast, moving faster than expected, learning even faster, India’s readier than ever before, and yet India’s challenges are as great as ever.

Corruption still has not been eradicated, the License Raj still exists. It is a challenge, it is huge. PM Modi is all-powerful and yet he lost an election under his nose in Delhi, and now we’ve got the Bihar elections coming up this year. I contributed to a book called ‘The New Bihar’ by N.K. Singh – and in that we were trying to see how did Bihar, the state where we have a brewery – we now brew Cobra in Punjab, Haryana and Bihar – and when I started brewing in Bihar, people said, Karan you’re going to Bihar? Are you serious? Have you got armed guards? Have you got kidnap insurance? And of course they were talking about the Bihar of over a decade ago. The Bihar now under Nitish Kumar, to his credit, crime went down six times in six years. Bihar is now a completely different Bihar to the perception people have. And it’s about governance, it’s about growth, it’s about inclusiveness, it’s about investment.

And I’m delighted that PM Modi is now going to be coming to the UK. I hope it’s definite – I believe it’ll be later this year in the autumn, because the last official PM visit we had from an Indian PM, I chaired the UK-India Investment Summit between PM Tony Blair and Dr Manmohan Singh at Lancaster House in 2006. So my message to PM Modi is please come to Britain, we’re waiting to receive you.

Earlier this week, I was driving from the brewery in Bihar to Patna, through rural India. And there I saw four mobile phone masts in a village, and there as the sun was setting, I saw three buffaloes with children riding on their backs, returning from the fields to the village. Hundreds of millions of mobile phone users, the biggest in the world – Vodafone is now number two in the world thanks to India. And there juxtaposed with that, children on buffaloes – a scene you would have seen thousands of years ago in India. That is the magic of India, that is the miracle of India.

PM Narendra Modi is a brilliant orator in Hindi, and in his speeches he often uses the word takhat – strength, power, and Professor Joseph Nye of Harvard University says that if you have the combination of hard power and soft power, you have smart power. And I think Britain has smart power. And I think India has smart power. Together we can be the smartest of powers.

And so, where Mahatma Gandhi is concerned, I conclude, I was very proud to be on the committee which set up the statue, we had our first meeting in July and the statue was built in March – government can move quickly when it wants to. And my favourite quote of Mahatma Gandhi’s, if I may paraphrase it – is this – because I believe in India and the UK and their potential, together in the future, because:

Your beliefs become your thoughts,

your thoughts become your words,

your words become your actions,

your actions become your habits,

your habits form your character,

and your character determines your destiny.

Thank you very much Krishan, and congratulations to you.

(applause)

 

My Lords, I congratulate the noble Lord, Lord Maude, on his excellent maiden speech. It was a very balanced and frank speech and we look forward to much more of the same. I was privileged to interact with him in his role as Paymaster-General when I was a commissioner for six years at the Royal Hospital Chelsea—the Chelsea Pensioners—where he used to come regularly. Other interactions included going round the Rolls-Royce factory in Goodwood, where he showed a huge interest in British manufacturing.

 

When I came to this country from India in the 1980s, entrepreneurship was struggling to shake off a very negative image. The word used to conjure up images of dodgy second-hand car salesmen and people wanting to cut and run. There certainly were people wanting to break through the glass ceiling then but they were held back by attitudes including excessive regulation. Our business climate did not help. We made cars that no one wanted to drive, we mined coal that no one wanted to burn and we owned businesses that no international company wanted anything to do with. In this environment, when I decided to set up Cobra Beer, my father, who was commander-in-chief of the central army in India from the Gurkha regiment—last week I was privileged to lead a debate on the 200th anniversary of the Gurkhas—and had 350,000 troops under his command, said, “What are you doing with all this education? You’re becoming an import/export wallah”.

His words would have been echoed by the parents of many other prospective entrepreneurs—but just look at how present-day Britain is and how the world has changed. Entrepreneurship is cool and we have a society where anyone can get anywhere, regardless of race, religion or background. More importantly, we have a society in which we can encourage people to come to the United Kingdom to make their way in the world, and in which we enjoy a huge level of entrepreneurial talent. In fact, London leads New York and Hong Kong in terms of highly skilled, knowledge-based jobs—there are 1.5 million of them—and a recent report showed that London is one of the top two cities in Europe for entrepreneurship.

 

The Minister and the noble Lord, Lord Popat, mentioned infrastructure. We have some great infrastructure projects. Crossrail is being built beneath our feet. It is a £15 billion project and the estimated economic benefit is almost £50 billion. We will see huge effects, with thousands of jobs and world-class infrastructure.

 

Our universities have not been spoken about enough in this debate. In the QS university rankings, London had more top-rated universities than any other city in the world. The success is not confined to London. I am proud to have been installed recently as the seventh chancellor of the University of Birmingham. We, too, were in the top 100. Along with America, we have the finest universities in the world—and, talking about Americans, in 1758 American statesman Benjamin Franklin wrote:

 

“An investment in knowledge pays the best interest”.

 

That is a statement that I hope more countries will emulate.

 

Of course, education is an export that this country should be proud of. We have amazing strengths. The Minister spoke of inward investment. We are number two in the world in inward investment after the United States—a country that is more than six times bigger than we are. For such a tiny island, we really do, as noble Lords have said before, punch above our weight. We have 1% of the world’s population.

 

Since coming to England as a 19 year-old in the early 1980s, I have seen Britain transformed from the sick man of Europe to a country that is now the number five economy in the world. We enjoy one of the most open and free business climates in the world and we are a country where entrepreneurship is admired and celebrated. In spite of our tininess, we are right at the top table: a member of the G8, the G20 and NATO, and with a permanent seat on the UN Security Council. Our tourism industry alone brings in nearly £100 billion and we have the most respected royal family in the world.

 

We have world-class capabilities in every field, including advanced engineering, aerospace, automobiles, beer, architecture, design, fashion, literature, music, film, sciences, universities, museums, theatre, opera, ballet, law, accountancy, advertising—and sport. Britain came third in the Olympics and the Paralympics, with 1% of the world’s population.

 

This is brilliant. This is absolutely amazing. In our automobile industry, Tata Motors, run by a fellow Zoroastrian Parsee, took over Jaguar Land Rover in 2008. I spent a whole day there in 2008, soon after the takeover. I believe that I am due another visit, because my visit is completely outdated. Jaguar Land Rover is now making more profits than the Tata group paid for the company that it took over in 2008—a company that nobody wanted to buy. The automotive industry is a great British success story. Last year, Bentley announced that it was moving the manufacture of its 12-cylinder engines from the Volkswagen plant in Germany to Crewe in the UK.

 

It is often said that Mrs Thatcher destroyed manufacturing in the United Kingdom. The reality is that we produced more in 1990 when she left office than in 1979. The car manufacturing industry is, if anything, riding higher than ever. These are companies with British workers and British premises and British sales exported throughout the world. With a little help from India, we have the best-quality cars in the world—I am proud to drive one—being manufactured here in Britain. What a contrast with the bad old days of Rover and Morris Minor.

 

I could go on. Automobiles are just one example. Hitachi recently announced that it planned to move its rail business headquarters from Japan to the UK. Companies from Japan, India, Germany—pinnacles of high-tech manufacturing—are moving to the UK. This is fantastic and brings more jobs over here.

 

Not enough has been said about partnering. Last year, we were told the amazing news about India’s “Mangalyaan”, which successfully entered Martian orbit for just over a tenth of the price of the latest NASA voyage to the red planet. Indeed, for less than the cost of the film “Gravity” the Indian space programme was able to do something that very few nations in the world have managed. Last year the Chancellor announced that £80 million would go towards funding joint space missions with India, and the UK Space Agency is doing so much to promote foreign investment in scientific research. If India can reach Mars, just imagine what we can do if we work together.

 

The pace of change of foreign investment in the UK is accelerating. The talent that we are attracting continues to grow. My joint venture partner Molson Coors owns the largest brewery in the world in Colorado, but it also owns the largest brewery in Britain, in Burton-on-Trent in the Midlands, where Cobra beer is brewed. The Prime Minister visited the brewery last year.

 

It is an American-Canadian firm that is increasing inward investment over here. It plans to invest £75 million in its brewing operations in Burton-on-Trent over the next five years. Once again, high-tech manufacturing and chemical engineering are just the sorts of things we need.

 

The UKTI’s Sirius programme, which I was proud to champion and launch, is a brilliant programme encouraging young entrepreneurs from across the globe to set up business in the UK via its 12-month support programme. It is amazing. UKTI calls it, “the richest package of its kind in Europe”.

 

In its first 12 months, thousands of young graduates from around the world, from almost 100 countries, applied to join the Sirius programme to start up their businesses right here.

 

On the other hand, I have been very outspoken in my belief that the coalition Government’s immigration policy—which, unfortunately, the current Government seem to be continuing—was very damaging for business and sent out the wrong signals to our universities and academics and in terms of attracting investment and business. We should change our immigration rhetoric and, for a start, stop including international students in the immigration figures.

 

Inward investment in the UK is one of the genuine success stories to have emerged from the financial crisis. In every way, foreign investment is helping to transform Britain and the world for the better. On the other hand, the Minister, in his very frank speech, said that our exports are lagging. In the three months to April 2015, the UK’s deficit on trade in goods and services was estimated to be £7.2 billion, widening by £1.6 billion from the three months to January 2015. Our GDP growth is good, but our GDP per capita could and should be much higher. Our inflation is zero, which is brilliant, and our employment rate is fantastic—at 73.4% in December 2014 to February 2105, it was the highest rate since comparable records began in 1971. This is marvellous. At the close of trade on 8 May, the FTSE was 2.3% higher and the pound experienced the largest one-day rise against the dollar since the previous general election in 2010.

 

Noble Lords, including the noble Lord, Lord Davies, have spoken about productivity. It is one of the most important factors in the success of a country. The more efficient an economy is, the more that can be produced in a sustainable fashion. High productivity growth leads to a higher growth rate in the economy. The reality is that in 2013, based on GDP per hour, the UK came sixth of the G7 countries and productivity was 16 percentage points lower than the G7 average, which is the widest productivity gap since 1991. Does the Minister agree that this is a huge challenge that we have to address?

 

We have heard about a balanced economy. Manufacturing industry used to be much bigger than it is today. Today it employs 2.6 million people and accounts for 10% of our GDP. Almost 70% of our R&D investment goes into the manufacturing sector and, as we have heard, goods produced in the sector account for 45% of all exports. As a percentage, however, we underinvest by miles in R&D and innovation compared with the OECD, EU and American average. Will the Minister acknowledge that?

 

When it comes to all the great coalition Government initiatives for manufacturing—the catapult centres, the advanced manufacturing supply initiatives and so on—the Government still have not set a specific target of increasing manufacturing as a percentage of GDP. The Indian Government on the other hand have said that they want manufacturing as a percentage of GDP to reach 25%. Will the Minister agree that we should set a target for manufacturing as a percentage of GDP? It has dropped from 30% to 10% of GDP since the early 1970s, and we must arrest this decline. Investment in manufacturing was £26.2 billion—23% of total investment in business—and that has fallen once again.

 

Before I conclude, I emphasise that the Government have the right intentions. The Chancellor of the Exchequer said:

 

“We want the words: ‘Made in Britain’, ‘Created in Britain’, ‘Designed in Britain’ and ‘Invented in Britain’ to drive our nation forward”.—[Official Report, Commons, 23/3/2011; col. 966.]

 

Well, let us now walk the talk.

 

Not much mention is made of UK Trade and Investment. I have been privileged as a founding chairman of the UK India Business Council to work with that body, and I think that it does a great job. Could the Minister reassure us about support for UKTI going forward? The High Commission of India has been amazing. What are we going to do to encourage businesses to use its services more? In India, they have been fantastic. Now an Indian beer, Cobra, is being brewed in Burton-on-Trent, where IPA was brewed to send out to the troops in India. The Indian high commission helped us to launch Carling beer, a British joint-venture product of ours, in India. This is marvellous. The Minister said that the EU-India free trade agreement should be vitalised. Will the Minister tell us when that will be concluded? As for Europe, I was privileged to speak at the annual meeting of the Council of British Chambers of Commerce in Europe. What support has been given to these excellent initiatives around Europe and around the world, including the British Business Group in India?

 

The noble Lord, Lord Stoneham, said that we should really be committing more to defence. I have asked the Government many times whether we will commit to spending 2% of GDP, the NATO target. Our hard power and soft power is what makes us strong.

 

The noble Lord, Lord Clement-Jones, spoke about the Magna Carta. What an auspicious day on which to make your maiden speech, on 15 June 2015, 800 years after the Magna Carta. Let us think of Britain’s influence, reputation and respect from that one document 800 years ago, and how it has influenced the whole world. This is what we underestimate.

 

I conclude by saying what a brilliant campaign is the GREAT campaign, again not mentioned so far in this debate. I urge the Government to get even more behind it. When I spoke at the Milan Expo, along with Dominic Jermey, the head of UKTI, I visited our British pavilion, the “beehive”, which was the most innovative, creative and different by miles. We stole the show, and we are going to do that until December. In Germany, which people talk about being the most powerful economy in Europe, who built the German Parliament, the Reichstag, but our own Lord Foster?

 

In design, we are the best in the world. The UK is the epicentre of trading—we have been a trading centre for ever—and the epicentre of truth, justice, fairness and openness.

 

The Minister and I visited the Rolls-Royce factory, where you see this acronym everywhere: PRIDE. We should have pride in our abilities as the best trading nation and inward investment nation in the world.

My Lords, in his first Budget in 2010, the Chancellor said that the Government would,

“have debt falling and a balanced structural budget deficit by the end of this Parliament”.

—[ Official Report , Commons, 22/6/10; col. 168.]

Despite the Chancellor’s tough talk about austerity and cutting public expenditure, the reality is that public expenditure as a percentage of GDP has continued to increase. I thank the noble Viscount, Lord Younger, for leading this debate.

Yesterday, it was announced that the Government will spend £746 billion in 2015-16, rising to £765 billion in 2018-19, compared with £692 billion in 2010. Government spending is increasing and, as a percentage of GDP, our national debt is rising. According to the OBR, it will now peak at 81% of GDP in 2015-16. This means that the Chancellor will completely miss his target to ensure that net debt is falling relative to GDP by 2015-16.

We have a perception of austerity that has simply not been matched by reality. Yesterday, the Chancellor acknowledged that we are at least another four years away from that target. To build on what the noble Lord, Lord Skidelsky, said, if we are borrowing £300 billion more than the Chancellor said he would in 2010, why should anyone believe him this time around? The OBR has predicted that public expenditure is going to have to fall to 35.2% of GDP by 2019-20—the lowest level since the 1930s. Let us remember that the 1930s were pre-welfare state days. Can the Minister confirm that that is really achievable?

In order to achieve those cuts, it is predicted by the OBR that the defence budget, which is already negligently too low, will have to be cut by 60%. Can the Minister confirm that that might have to happen, although it is hoped that it never will. However, I was delighted to hear that the Government will be giving money to veterans, including £2 million for the Gurkhas. I was privileged to have been brought up with the Gurkhas. My late father, Lieutenant-General Bilimoria, was commissioned to the 2nd Battalion, Fifth Gurkha Rifles (Frontier Force), and was president of the Gurkha Brigade when he was commander-in-chief of the Central Indian Army. I was privileged to have been brought up with two Victoria Cross holders from birth—they were living legends. Therefore, I thank the Government for doing that.

However, it is the low level of interest rates for a prolonged period, at the level of 5% that led to the financial crisis from which we suffered. Yet today we are being propped up by interest rates that are 10 times lower—at 0.5%. Government borrowing has been increasing year on year and expenditure on debt interest has contributed to it. It is more than £1.27 trillion and is costing us £1 billion a week—more than the entire defence budget.

Does the Minister agree that interest rates might have to rise? The Governor of the Bank of England made a ridiculous statement that he would start increasing interest rates when unemployment fell below 7%. Unemployment is at 6% now and interest rates have not gone up, but they will go up at some stage, and if they do the debt interest levels will go up. The SNP made the mistake in its budgets with the oil price and its budgets are shot to tatters at the moment. Will the Minister give his views on future interest rates?

Wearing my hat as chancellor of the University of Birmingham I have seen that our higher education sector is one of the jewels in our crown. I am delighted that the Government are about to announce loans for postgraduate studies. On the other hand, we highly underinvest in higher education as a proportion of GDP compared with the OECD, the EU and America. On R&D and innovation, the patent box is all very well—it is stored—but if we invested the same proportion of GDP as countries such as America, the OECD and the EU, we would help our productivity hugely. Our current account deficit has reached 5.2% of GDP, which is worse than Italy and France. Our fiscal deficit of 5% is almost double that of the United States, let alone Germany which has just 0.2%.

As the noble Lord, Lord Adonis, said, skills are so essential. I am proud to be an ambassador for Studio Schools. Last month I opened the Vision Studio School in Mansfield. That is the sort of initiative that I am glad the Government are backing. Tax breaks to apprentices are excellent but, on the other hand, the word “entrepreneurship” was completely missing from the SME Bill. Entrepreneurship should be the cornerstone of our future growth. I launched the 10th anniversary of the Cambridge University Centre for Entrepreneurial Learning this week. That is what we should be backing. The Sirius campaign, backed by UKTI, bringing young entrepreneurs to Britain to develop their businesses, is a great initiative that the Government should be doing.

The Government are doing a lot, but are they doing enough on the big things? We have a tax system that is so complicated that the tax code is now 17,000 pages long. The Office of Tax Simplification is an oxymoron. Our corporation tax rate is low but our income tax rate is too high. Capital gains tax is too high. The Indian restaurant industry which we supply and the Bangladesh Caterers Association UK are constantly complaining about VAT and asking for it to be reduced. Our hospitality and tourism industries say that VAT is far too high. We do not have a competitive tax system.

The noble Lord, Lord Rose, in his excellent speech, spoke about confidence. We need confidence, productivity, and a better educated and more entrepreneurial workforce who think globally. Government expenditure should be at a believable rate: 35% is unachievable; 40% would be a realistic rate. We could then balance our books and have an educated, productive, confident and enterprise-based economy so that, even as 1% of the world’s population—that is all we are—we can continue to punch above our weight.

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.

He was joined by the Bulgarian Ambassador to the United Kingdom. Konstantin Dimitrov, and Labour MP Barbara Roche, the former Immigration Minister.

The following transcript was kindly provided by Sky News.

DERMOT MURNAGHAN: Well immigration is one of the most divisive issues in politics at the moment but does our opinion of immigrants change depending on what country people come from to the UK?  Well a poll for this programme suggests that of course it does.  In the exclusive YouGov poll carried out for this programme people were asked ‘Do you think that immigrants from each of the following countries make a positive or negative contribution to life in Britain today?’  Well Australia, the United States and Germany came out top, at least 50% of people think they do make a positive contribution, immigrants from India and Poland also did pretty well coming out at 44% but the figure was much lower for immigrants from Bulgaria and Romania, just 18% of people think they make a positive contribution to life in Britain and in fact more people think they actually have a negative impact.  So why is that?  Well I am joined now by Bulgaria’s Ambassador to the UK, Konstatin Dimitrov, by the Labour MP Barbara Roche who is a former immigration minister and chair of the campaign group, the Migration Matters Trust and by Lord Bilimoria, an Indian born British businessman of course who is chairman amongst other things of Cobra Beer, a very good morning to you all.  Well Ambassador I want to start with you, first of all your reaction to that poll in that your countrymen and women when they come to the UK, they aren’t really rated very highly?

KONSTANTIN DIMITROV: Yes, I’m not surprised, it’s a combination of the brutal anti-Bulgarian propaganda for years now by certain politicians and media whose name I will not mention for obvious reason and the second point, a simple lack of personal knowledge of Bulgarians by many Brits.  Why?  Because there are only about 60,000 Bulgarians working in the UK in a population of 64 million so there is a very low chance for anyone to have met a Bulgarian or worked with a Bulgarian person and moreover, one other thing, it is exactly in places where there are no Bulgarians that people are very much prejudiced against Bulgarians unlike centres of mixed communities where Bulgarians are seen as very …

DM: You just tell us, I know you’ve told me before, that the majority of Bulgarians who come to the UK come here to get jobs and when the jobs disappear or when they have worked long enough, they go back to Bulgaria.

KONSTANTIN DIMITROV: Exactly, just 1080 people have been registered to receive substantial work benefits in the UK last year, imagine, 1080 people, that’s absolutely negligible.  Our compatriots are primarily between 18 and 35 years of age, single and they come here to work primarily as a result of an a priori agreed upon contract.

DM: Barbara, you come in to this, clearly there are different perceptions of different nationalities here, do you think we need some cool heads when it comes to discussing this issue, in particularly migration from within the European Union?

BARBARA ROCHE: Oh absolutely, I absolutely agree with what the Ambassador has had to say and indeed when I was a Member of Parliament and now in my role as Chair of Migration Matters, that’s what we actually try and argue.  We just need to look at the facts and I also think it’s time that all political parties know and say what’s in their heart of hearts, that actually legal migration can be a very positive good for this country both in our public services and for our economy so the more we know the facts, the better.

DM: Do you think there is any point trying or should we not even try at all to limit migration from within the European Union and in particular underlying these figures, these findings we’ve got in particular to restrict Bulgarians, Romanians and a lot of East Europeans?

BARBARA ROCHE: I think the difficulty is that when we talk about this, and I am somebody who actually does believe in freedom of movement within the European Union, I think it is one of the fundamental tenets.  I remember one of my very first votes as a young woman was to vote for Britain to actually stay in the Union and not only is freedom of movement a good thing but we actually don’t often discuss the fact that there are very many British people who are working elsewhere in the European Union, particularly young people, and they value their freedom of movement and we would lose that.

DM: Lord Bilimoria, you come in, are you heartened by the fact – and this then begs the question, is it just a matter of time of the indigenous population so to speak getting to know the immigrant population – India is pretty popular, it features up there along with the Poles coming in at 44% approval?

 LORD BILIMORIA: Well that doesn’t surprise me at all and I am relieved to hear that the Indian community is being appreciated for the contribution that it has made for decades to this economy and I would think this immigration debate has become so dangerous now particularly driven by UKIP, where everyone is being tarred with the same brush and you don’t look at the good immigration that has helped this country become great.  I mean look at Bulgaria, I know a very, very impressive young Bulgarian banker who works for the Queen’s bank who is highly impressive, you’d want somebody like that in this country.  We look at countries on this league table that you have just put up, you’ve missed out Bangladesh.  This evening I am going to be speaking at the Bangladesh Caterers Association annual awards dinner, over 1000 Bangladeshi restaurateurs from around the country, they are the ones – over two-thirds of restaurants are owned by Bangladeshis – they are the ones who actually brought curry to our homes, we love that food and yet they can’t bring in the skilled chefs that they need.  Look at Tata who own Jaguar Land Rover, a company six years ago nobody wanted to buy, now it is so successful.  Who is the Chief Executive of Tata Jaguar Land Rover in this country?  A German, Ralf Speth.

 DM: Just to stay with this, Lord Bilimoria, do you think it is some of the perceptions and misperceptions if I can coin that phrase, that go around especially this idea that the vast majority of immigrants some people think come here to claim benefits, to sponge off society.  When people get to know for instance the South Asian community, let’s lump them all together, they are very hard working, there is a lot of productivity going on there.

LORD BILIMORIA: Hard work, family values, education.  Look at foreign students, we still include international students in our immigration figures and the government has got this ridiculous target and one of the biggest mistakes that David Cameron has made is to put up this target of reducing immigration to the tens of thousands.  They are more than double that figure, they are never going to hit that figure.  I think that was a huge mistake to make and they are paying the price for that right now.

DM: Ambassador, what do Bulgarians, your nationals who come along to you, what do they tell you about the way they are treated by the UK population because there is that classic case where you might answer a survey like ours and say I am not very keen on Bulgarians and Romanians and others but when you actually have met someone or worked alongside one of them as you mentioned, you think they are okay.

KONSTANTIN DIMITROV: I would revert back to the last point I made, those who have worked with Bulgarians are very open and many Brits, 400,000 Brits a year go to Bulgaria to spend their time there, to have their holidays there, to even buy properties there.  If there is some inborn antipathy no one would do that.  The problem is those who are objects of propaganda and indeed those who haven’t met any Bulgarians at all, statistically these are quite convincing parameters as only 60,000 people in your country out of a country of 64 million, how could you possibly have an idea as to the contribution of such a small batch of people to your economy or to the texture of your society?

LORD BILIMORIA: And if you look at it, the other point is if you ask Theresa May, tell me the number of illegal immigrants in this country she wouldn’t have a clue, her department wouldn’t have a clue.  They don’t know whether it’s half a million, a million, a million and a half because we have lost control of immigration in that sense.  We still don’t have exit checks at our borders.  We would have a queue of Indian IT companies ready to do that job so that we can scan everyone’s passport when they come from wherever in the world, scan everyone’s passport when they have gone and then we would know who shouldn’t be here who are still here.  We should be attracting the best and the brightest people to this country.

DM: Barbara Roche, there is an absolute numbers argument going on here as well.  If you get net migration of 250,000, just do the maths, over 20 years you end up with millions more people here and whatever nation they come from it just means that particularly public services are put under enormous strain.

BARBARA ROCHE: You have to look at it two ways, first of all it is absolutely right that countries, and we need to control our borders and certainly when I was the Immigration Minister that was a tenet.

DM: But how would you stop it?

BARBARA ROCHE: Well what you have to do first of all is also to acknowledge that people come and people go, we live in a global world and …

DM: But you just said that you don’t support stopping Europeans coming in and they are the vast majority of migrants so how do you control your borders?

BARBARA ROCHE: I actually think, I want to go back to the question that you asked about public services, you were talking about the strain on public services.  What the figures show and what the OECD says is that actually migrants contribute more to public services than they take out.  I think it is estimated that nearly 40% of our doctors, nearly 40% are migrants so the question is, are we asking the right questions about the effects on our public services?  If we stopped migration tomorrow our public services would be worse and our debt would be worse and I also would say if you stopped migration here, what is going to happen to all those people who want their holidays [inaudible] … the European Union?

DM: Okay, quick thoughts on that Ambassador, I know you want to come in on that.

KONSTANTIN DIMITROV: That is right and also let us face a truth, outsiders, foreigners, come to work here because there are niches that the Brits wouldn’t like to take up, they wouldn’t like to go to the agricultural sector because there is no interest in such positions so of course legally our working citizens of the European Union will continue to come here to fill in the niches which are not wanted for other reasons by the Brits.  If the Brits started filling those niches in, there would be no need for such immigration as we talk about.

DM: So market forces can deal with it.  Last point to you Lord Bilimoria.

LORD BILIMORIA: Well I think it’s across the board. It’s what the Ambassador has just spoken about but also I mentioned the Chief Executive of Jaguar Land Rover, my joint venture partners at Cobra Molson Coors, we had a worldwide search for our UK chief executive, who is he?  A Belgian.  We want the brightest and the best across the board, from the Commonwealth, from the European Union and the biggest advantage of this country is that we are an open economy and that’s why we are still number two, number two inward investment country in the world today is this tiny country.

DM: Oh well pointed out, I didn’t know that.  Listen, I must end it there, thank you very much to you Lord Bilimoria, good to see you, Konstantin Dimitrov, Ambassador and Barbara Roche, thank you very much indeed.

My Lords, over the past weeks, I have received numerous requests by journalists from around the world because one of the seven schools that I attended was the Hyderabad Public School. The 46-year-old chief executive officer of Microsoft, Satya Nadella, also attended the Hyderabad Public School. He then went to the United States for his education and is now heading one of the world’s largest companies, with a market cap of $340 billion.

Earlier this afternoon, I attended a talk by the Governor-General of Canada, David Johnston. A huge part of his speech was about education and about Canada wanting to attract the best students from around the world. Like me, he came as a foreign student to Cambridge to read law. Is it not sad that, on 16 January, the Times Higher Education Supplement carried the headline “Overseas student total falls ‘for first time’ as Indian numbers collapse”? It went further and stated that,

“the number of non-EU students at UK universities fell by 1 per cent last year, the first such decline ever recorded”.

An NUS survey of more than 3,000 international students conducted in January found that 51% of non-EU students thought the UK Government unwelcoming. Meanwhile, in Canada, the Government aim to double the number of international students in Canadian educational institutions by 2022, raising the total to 450,000 yearly. In Australia, more than 74,000 student visa applications were lodged in the September 2013 quarter, 7.1% higher than the same period in 2012 and the highest for this quarter in the past four years. In France, the Government have moved to simplify the visa application process and to double the number of Indian students studying at French universities. Does the Minister have a target for increasing the number of foreign students in the UK, let alone of Indian students?

The Russell group has reported that the intakes of postgraduate students from India at its institutions dropped by 21% in 2011-12, with a further drop of 18% in 2012-13. Even the growth rate in new students from China has started to taper off. Meanwhile, postgraduate student numbers to the United States increased by 40% in 2013. Visas granted to Indian students across all levels in Australia have risen by 22% in the past year, following the introduction of a more open immigration policy, and visas granted to Indian students in Canada rose by 8% in 2012.

The Prime Minister talks about Britain having to take part in a global race yet the Government’s insistence is on following this madcap immigration cap policy and targeting bringing down the immigration level to the tens of thousands. This is shooting ourselves in the foot. What are the Government thinking of? Why do the Government keep including student numbers in the immigration figures when Canada, Australia and the United States—our immediate competitors—do not? Does the Minister agree that we should exclude foreign student numbers from the immigration figures? The Government might then hit their target but they should not do it for that reason: they should do it because this policy is sending out the wrong messages. The Prime Minister has said that there is no limit to the number of students that we want to come to study in the United Kingdom—I have heard him say that myself—so why are the Government not following the example of our counterparts in Canada and setting a target to double the number of foreign students coming into the United Kingdom?

In contrast, let us look at what is happening over here. The number of Indian students has fallen by 25% and the overall non-EU enrolment of overseas students has dropped from 173,560 to 171,910. The Government are sending out a negative message: that Britain does not want foreign students. The noble Baroness, Lady Hamwee, referred to the perception of reality. The perception has become reality and the Government have been bringing out ridiculous ideas. When the idea of a £3,000 bond for foreign visitors was floated, it did not take long before the Government backtracked. However, it sent shockwaves around the world. I kept getting asked about this on every visit to India. Then the Government had the amazing idea of having vans going around the UK saying “Illegal immigrants go home”. I do not like quoting Nigel Farage but even he—a man perceived to be entirely anti-immigration—said:

“I think the actual tone of the billboards is nasty, unpleasant, Big Brother”.

There you have it.

There is no question that a lot needs to be done to reform immigration in this country. Illegal immigration is out of control. The noble Lord, Lord King, asked whether we know the numbers. Have we lost control of our borders? I think we have. The UK Border Agency was not fit for purpose and has been disbanded. Can the Government tell us the number of illegal immigrants in this country? I will let the Government round it up to the nearest 100,000 but I bet that they could not even give a figure. They do not even know whether it is half a million or a million. The coalition Government have given a manifesto commitment to reintroduce exit controls and there is matter in the Bill to address this. However, the Government should bring in mandatory scanning of all passports when people leave this country—whether they are British, EU or non-EU—and scan them when they come in. The technology is there for us to know who has come in, who has left and who has stayed when they should not be staying. We could then control illegal immigration. Why are the Government not doing that? The e-Borders programme is a step towards that but we could get to that step right now.

As the noble Lord, Lord Dholakia, said, the Government are right to crack down on sham marriages, but they are wrong to bring in landlord controls and ask the landlords to do the job of the border authority. Even the Minister responsible for the Bill, Mark Harper, could not find out the status of his own cleaner when he had tried hard to do so. This is impractical and I fear that it will be another government U-turn.

The proposed NHS fees are unwelcoming. As a former foreign student in this country, I know how expensive it is to study here. The average international student will spend something in the region of £75,000 during a three-year degree programme. A PhD student coming in with a spouse and children could pay thousands of pounds in advance for this. These fees will seem like a penalty charge and could be a powerful disincentive. In a survey carried out by the National Union of Students, 74% of the non-EU students surveyed, who would be subject to the charge, said that an additional charge of £150 per year of study would make it more difficult or impossible for them to study in the UK. The Minister said that the figure is only 1%, but the perception, unfortunately, is the reality. More than 82% of those with dependants say that free access to the NHS was important in their choice to study in the UK. The current visa fees are really expensive in any case and the Government have just announced a 40% increase for some additional family members. Why do we need NHS charges? Most students are young and healthy and do not use the NHS much. The Government have been penny wise and pound foolish.

On the matter of the appeals process and the changes proposed in this Bill, Universities UK notes that more than 50% of appeals by students are successful. If these measures are brought in they will be deprived. In the House in 2007 I initiated a debate on the two-year post-study work visa. The noble Lord, Lord Adonis, was the Education Minister answering at the time. He listened, the Government responded, it was brought in and we saw international student numbers go up. Even the Business Secretary disagrees with government policy on this. Vince Cable has said that around £17 billion is generated each year by universities, £10 billion of which comes from overseas students through their fees and expenditure. At last year’s Liberal Democrat party conference he warned that a lot of students who would normally come to Britain would go instead to America and Australia where they thought a “warmer welcome” would be given to them.

If students here want to work after this expensive education it is important for them to be able to pay for it, gain work experience, pay some taxes, and build the generation-long links with this country and their countries—and on the whole they go back to them. Three generations of my family have studied in this country. Moosung Lee, a PhD candidate at the University of Minnesota, notes that 27% of world leaders have been educated in the United States. The Americans are streets ahead of us. We are missing out as a result of this and we need to start thinking long term. Shutting down the bogus colleges was good, but we do not need to create a perception that what was true for them is true for our good universities as well.

My recommendations are as follows. First, student figures should be removed from the immigration figures to send out a clear message that we do not include them in the Government’s madcap immigration cap target. Secondly, a system in which everyone’s passports will be scanned in and out of the country, at all ports of entry, should be introduced as soon as possible. Thirdly, the Government should bring back the post-study work visa. The mechanism at the moment is not fit for purpose. Can the Minister tell me how many graduates have taken up work after they have graduated under the new scheme that the Government have initiated? Fourthly, NHS charges for students should not be brought in. Students are spending huge amounts of money here already. A fee of £150 a year is a classic example of being penny wise and pound foolish. Fifthly, the Government should scrap the ridiculous and impractical idea of landlords having to make checks on foreign nationals and especially students. Landlords are not immigration officials. Finally, the Government should reform the appeals process that is already flawed. They should not be bringing in a system that will make it worse. Already 50% of appeals by students are successful.

As the noble Lord, Lord Dholakia, said, Britain is a most amazingly fair and just country. London is the most cosmopolitan city in the world. Recently, I led a debate to mark the 150th anniversary of the Zoroastrian Trust Funds of Europe to ask Her Majesty’s Government how they have recognised and supported the role and contribution of faith and minority communities in Britain during Her Majesty’s reign. All of us who spoke in that debate were able to give scores of examples of the amazing contribution that immigrants have given to this country. We would not be where we are without the contribution of immigration. On the other hand, we know that people abuse this country’s generosity and the Government must clamp down on those excesses.

However, the Government now have a system that creates negative perceptions and unfortunately those perceptions have become reality. The Government must stop going down this path before it is too late and this wonderful country is permanently damaged.