Economy, Lord Taylor of Warwick


Someone once said, “Greed is good”. That was the dreadfully misguided mantra of Gordon Gekko. He was the mercenary financial trader, a character played by Michael Douglas in the Oscar-winning Hollywood film “Wall Street” in 1988. The film ended with Gekko in ruins when his greed backfired, but Oliver Stone, the film’s director, was dismayed to see that Gekko became a hero to many wannabe financiers, rather than a warning. Considering the credit and casino-type banking culture which then dominated the next 20 years, the moral of the film was ignored.

Our whole finance and economic system is based on confidence, which is sometimes not objective or rational. There was a time when the City and Wall Street were seen as the masters of the universe. No longer. The scale of the financial and economic downturn has surprised many. Loss of confidence has fathered the fear factor. Economic forecasters now seem less like Mystic Meg and more like “Mystic Mug”. Even in this noble and learned House, no one can confidently predict whether the Dow or FTSE will rise or fall tomorrow.

I agree with the charge sheet highlighted by my noble friend Lady Noakes at the beginning of this debate. No one doubts that there is a global recession, but the Government did not save for a rainy day. That is a fact, and it is not only raining now—it is pouring. However, we are where we are. The Government had a dilemma when the failing banks approached them: to buy out, bail out or burn out. We have a rather uncomfortable “Strictly Come Dancing” situation, where the so-called professional bankers are now expected to waltz in tune with the amateur, ordinary taxpayers who have bailed them out. The problem is that we do not know whether the Government’s plan will work.

The banks do not need more regulation—they need effective regulation. In this, I agree with the noble Lord, Lord Powell of Bayswater, and my noble friend Lord Forsyth. We know that the market should not be allowed to operate in a moral vacuum, or we will continue to have executives being rewarded for failure.

OPEC, which represents the world’s major oil-producing countries, has tried to hold the world to a price ransom by restricting the production of oil. It literally has us over a barrel. There needs to be not only more effective regulation but a different culture, where enterprise and ethics can mix.

However, the Government have an ongoing problem. In a national and global recession, they still need to provide the right economic conditions to create jobs and supply public services. The answer, in my view, is not the Government’s solution, simply to borrow and spend more. This is the time to harness the innovation and expertise of the private and voluntary providers. I am pleased to hear that this is something that a Conservative Government intend to do.

By that I mean social enterprise, which has been described as the Cinderella sector of the British economy. It needs a higher profile, when you consider that it comprises at least 55,000 enterprises, with an annual turnover of more than £27 billion. A social enterprise is a business with the primary objective of ploughing profits back into the company or the community. Yes, it wants to make a profit, but not profit alone. It is not driven simply by the desires of the shareholders and owners. This economic model enables Governments to tackle difficult social problems without an increasing drain on the public purse and the taxpayer.

Despite its growing importance, social enterprise is still under-researched compared to more traditional firms. A good example is the Co-op bank. I have no financial or other link with the Co-op, but it has over 6.5 million customers, and is the largest consumer co-operative in the United Kingdom. It is interesting that the Co-op bank, along with the other members of the UK’s ethical banking sector, is not only surviving the meltdown but experiencing new levels of consumer confidence and investment. Started in 1872, the Co-op bank puts its success down to the fact that it is a prudent lender, and transparent, with a code of ethics.

Profits at the Bristol-based Triodos Bank are up 50 per cent. My point is that many banks in the mainstream sector are suffering and asking for help while banks in the ethical sector, doing it the right way, are actually thriving. Maybe there is a lesson to be learnt there. Outside the banking sector, the Nuffield Hospitals are another example of a social enterprise that is actually working. Social enterprise is based on the recognition that innovative solutions to the world’s economic and financial problems are unlikely to come from markets left to their own devices.

In the present economic climate, some companies may be tempted to cut back on training and education. That would be a false saving, a disaster. The Government must continue to encourage business to develop the skills of its workforce. In this I agree with the excellent points of the noble Lord, Lord Bilimoria, echoed by the noble Lord, Lord Haskel. This country needs small business. It needs business to create wealth; no Government can do so. To overtax and overregulate small business is a step backwards. The noble Lord, Lord Bilimoria, made some excellent points on behalf of that sector, which we must take into account.

Organisation. It was pointed out to us that the Doha round of talks started nearly eight years ago and has still not reached agreement. That is a disaster for the world, especially for its poorer countries. As the noble Lord, Lord Powell, said, the sentiment was that, as trading nations, we must build bridges between nations, not walls.

In conclusion, you do not have to be a prophet to make a profit. However, this recession is a time for fresh, creative thinking out of the box. We cannot have a financial system which allows a hedge fund boss to pay less income tax than his office cleaner. It is time for fresh thinking. Seek, and ye shall fund.