HL Deb 07 November 1967 vol 286 cc262-79

2.48 p.m.

Debate further continued on the Motion moved on Tuesday last by Lord Cooper of Stockton Heath—namely, That an humble Address be presented to Her Majesty as follows:—

"Most Gracious Sovereign—We, Your Majesty's most dutiful and loyal subjects, the Lords Spiritual and Temporal, in Parliament assembled, beg leave to thank Your Majesty for the most gracious Speech which Your Majesty has addressed to both Houses of Parliament."

LORD ERROLL OF HALE

My Lords, when my noble friend Lord Carrington introduced last Thursday's debate on the gracious Speech, he said in his opening remarks: … in large measure the problems which confront us around the world are due to our economic weakness and the Government's failure to find a solution."—[OFFICIAL REPORT. 2/11/67, col. 157.] We have now had the present Government in office for just over three years, and this is a fitting occasion for noble Lords to consider where the country now stands. We have a stationary economy, record unemployment, an all-time high in peace-time taxation, and the pound virtually at its lowest for a number of years.

In looking at the situation, I suggest that the first thing we must remember—and, indeed, we should remember this in relation to the earlier Questions and Answers this afternoon—is that our economy is very susceptible to overseas happenings. For example, the closure of the Suez Canal was no fault of Her Majesty's Government, but it resulted in a considerable accentuation of our economic difficulties. The stoppage of Nigerian oil has also harmed our balance of payments, and the slow down in the economic growth of Germany has similarly made our exports to that country mere difficult. I repeat that these adverse factors are not the fault of Her Majesty's Government. But neither should Her Majesty's Government take credit for what I might call international good luck, so to speak, such as the substantial change in the terms of trade in Britain's favour.

There are also those overseas events which have harmed our trade, and for which Her Majesty's Government must bear some or all of the responsibility. For example, there is the ban on arms sales to South Africa, now apparently under consideration; there are the sanctions against Rhodesia which, whether they may have been justified or not, have nevertheless harmed our overseas trade; and there are the deplorable diplomatic relations with Spain, which again harm our trade, simply so that the Labour Government may maintain their longstanding vendetta against General Franco.

My criticism of Her Majesty's Government is this: that it is wrong for them to have been so bullish when they knew that some of their policy decisions would adversely affect our overseas trade, and wrong for them to make no allowance in their calculations for possible overseas events over which they could have little or no control. My Lords, this lack of confidence in Britain abroad stems not only from our present weak external position, but from a lack of confidence in Her Majesty's Government and in their ability to make the economy strong at home. Conversely, as my noble friend said in his speech on Thursday, a strong economy at home would rapidly lead to confidence in us abroad. I therefore suggest to noble Lords that we take a look at some features of the home economy as we see it to-day.

I admit frankly that, although I am but an amateur in these matters, I do not find it at all easy to diagnose exactly and precisely what is wrong. In my view, there is no one single cause for the lethargy or weakness at home. If there were, it should be comparatively simple to put it right. There has been no single wrong decision by Her Majesty's Government, but rather a whole series of faulty acts of policy which, if each one were taken separately, would be of limited significance, but which, when taken altogether, are now having a serious cumulative effect on the health of the economy. I should like to give some examples to illustrate what I have in mind, grouped under three heads. I should like to start first with industry and commerce, then to deal with the individual and, thirdly, to deal with matters overseas.

Starting with industry and commerce, I think the most serious thing which the Government have done in a series of separate actions is to dilute the profit motive. I think noble Lords will accept the fact that the need to earn profits is the prime motivation of industry and commerce. It is the profit and loss account which really keeps companies on their toes, and we ought to recognise this fact for the truth that it is. If noble Lords do not believe my assertion, I would ask them to ask those firms which are currently the loss-makers, and they will tell you just how serious it is to make a loss. If they continue to make a loss they go under or are taken over, and the directors of those firms are usually for the "chopper".

When Labour Ministers were in Opposition it was common for them to refer in derisory terms to industry coming to Whitehall with their begging bowls. The situation is very different now. Now Her Majesty's Government fairly pour the taxpayers' money down their throats. Examples are the export rebates, given to many firms who are exporting extremely successfully and are in no need of it; the regional employment premiums, pouring money into the pockets of prosperous firms in the development areas who do not in fact require it; and investment grants instead of investment allowances, so that the test as to whether one is going to make a new capital investment is no longer whether it is going to be profitable but, rather, "Hoorah !—45 per cent. of the cost will be paid for by a Government grant".

The selective employment tax is, of course, a great bonus for all those engaged in manufacture. It is a curious tax, because it cuts both ways. It gives a bonus to the manufacturers of roulette tables, but imposes a tax on the hotels and on the tourist operators of this country, who between them earn far more foreign exchange than almost any other single industry in this country. Because of the importance of this tax, I should like to ask the noble Earl who is to speak next but one in the debate if he is prepared to state whether the selective employment tax is having the effect which Her Majesty's Government intended. The effect of all these measures, which I have inevitably mentioned only briefly, is to give prosperous firms a substantial but unnecessary money bonus and to cushion the less efficient from the hard facts of economic life. If you cannot make profits, at least you can get money from the Government—that is the economic philosophy which is prevailing to-day.

Then there is another matter, for which Her Majesty's Government must bear the full responsibility, which is having an adverse effect on commerce and industry. That is the façade—and it is no more than that—of consultation with industry. There is a mood of exasperation in industry and commerce to-day because the Government profess to consult but the result of the consultation is always the same—no change. Here again I should like to ask another question of the noble Earl. Can the noble Earl, when he speaks, give a single substantial example of Government policy being modified as a result of consultation with industry?

A further cause for disquiet is the Industrial Reorganisation Corporation. Here we have a Government agency whose Chairman, presumably with the approval of the whole board—at least, of those who have not yet resigned—is openly taking sides in the current takeover battle between A.E.I. and G.E.C. I ask the noble Earl: Do Her Majesty's Government approve of what is being done in their name in this matter? If so, the future is gloomy for business confidence, and it is business confidence which we all need to build up. I must say that an approach by the Industrial Reorganisation Corporation to a company in the future will probably be interpreted as an impending kiss of death. Nor can the industrialist board members, their numbers sadly reduced by recent resignations, be feeling very happy, because perhaps even now officials of the Industrial Reorganisation Corporation are tunnelling away under their own companies without their knowing anything about it at all. This is not good for business confidence.

It is in this atmosphere of suspicion and distrust that the Government are proposing to introduce the Industrial Expansion Bill. Indeed, it is the only economic measure of any significance that I can find in the gracious Speech. At a time when we should all be concentrating on getting Britain back on her feet, the Industrial Expansion Bill is trying to buy by stealth what cannot be achieved by persuasion. It is true there has been consultation—there always is. But with what result? Industry remains completely opposed to Government holdings in private companies, but this view is ignored and the Government are determined to press on.

The Prime Minister said in another place last week that many companies had asked for the Government to take equity holdings in their businesses, but I cannot see that as a valid reason, because, in the first place, if the companies want it I should have thought that this Government would have said, "We shall not do it". But, more seriously, the fact that some companies have asked for this does not make it a right thing to do, and I believe it is wrong in principle. The money so invested will seldom need to be repaid; indeed, that is the very definition of an equity issue. So far as the taxpayer is concerned, it is virtually lost for ever. Companies which receive capital sums from the Government ought to have the financial discipline imposed on them of repaying it within a reasonable time. It is a test of their own confidence in their own future. This Bill, if it goes through in the form which we have been led to believe it will take, will in fact do the very reverse of what is needed—namely, to build up business confidence.

It is rather fascinating to observe that the introduction of corporation tax—another of the Government's much-heralded measures—has made the issue of ordinary shares much less attractive, because they are more expensive to service. This, then, is the moment the Government choose for going into the ordinary share business themselves—and, of course, doing it with the taxpayers' money. The Government have already given certain assurances about their intentions in regard to the Industrial Expansion Bill. I should like to ask the noble Earl whether he can say that the assurances so far given will, in fact, be formally written into the Bill, because unless they are, they can remain nothing more than oral assurances.

My Lords, I have dealt briefly with industry and commerce. Now I should like to turn to some of the problems of the individual in Britain's economy to-day. The extra national effort which is required is the sum of all the efforts of the individuals of this country, so we ought to look at the situation surrounding each and every individual. We must accept, I submit, that the great majority of us, from the lowest to the highest, work for money in our pockets. Those in the professions and in the higher echelons of industry are fortunate to have additional inducements: the interest of the work itself, the social value of the work or the sheer sense of achievement. But the professional classes are just as interested in money in their pockets as those who work by hand in factories and mines.

The teachers, we know, have a great sense of vocation, but they are certainly not silent about their requirements for more pay. The doctors, too, have a great sense of vocation in their work of healing, but they are among the most clamorous for more money. The fact is that it is the high rate of tax on earnings, and particularly the marginal rates on increases of income, that so frustrate those who could, and would, do more for themselves and for the country. Perhaps I may here make a quotation from The Times about the miners at a certain colliery. In The Times of October 16, 1967, a reporter reports on the dismal production record at Nantgarw Colliery, near Cardiff. The colliery manager is reported as saying that the situation was the most frustrating he had ever come across, but, "What can you do?", the reporter asked the man. The answer was, "Nothing! Some blokes would rather earn £15 from three shifts than £25 from five. … After all, when you have paid tax it doesn't make all that much difference either way, does it?".

That is at one end of the scale, and I am sure that noble Lords will all know of instances of successful professional people who take in leisure the rewards which they cannot retain by money for extra work. Industrialists know, too, the difficulties of transferring able men to more important jobs because the net increase after tax is so meagre. And if it means moving from one part of the country to another, the Inland Revenue is always eager to raise an assessment on the removal expenses if these seem to them to be on the generous side.

My Lords, a great deal has been said about the brain drain: the departure of engineers, scientists and technologists to the United States of America. But I want to refer to another drain which is also serious—it is what I might call the "cultural drain"—and to do so in strictly money terms. For this part of my speech I am grateful to Mr. Milton Shulman, whose article in the Evening Standard puts the matter clearly and succinctly. He refers to the author of a book, Dr. Desmond Morris, who was a curator of mammals at the London Zoo. Dr. Morris has written a book called The Naked Ape which is likely to make him about £200,000 in one year. Mr. Shulman's article says: Catapulted into the most astronomical of tax brackets, Dr. Morris can calculate that the tax man will want something between £170,000 and £180,000 of that bonanza … Dr. Morris … is planning to give up his present job … and do his future writing abroad. If he does this, the Inland Revenue will get nothing of his £200,000. In the same article Mr. Shulman refers to some of our excellent actors and actresses. He says, in his characteristic phraseology: Although we spawn some of the highest-earning artistic talents in the world, only a few of them give the Exchequer any cheer. Richard Burton, Elizabeth Taylor, Noel Coward, Terence Rattigan, Leslie Bricusse, Anthony Newley, Audrey Hepburn. Julie Andrews, Peter Ustinov, Graham Greene, Graham Sutherland, do not, as far as I know, pay any income tax in this country. Now, my Lords, I am only quoting from him, and I have only his word for it, but even if it is not 100 per cent. true, the fact remains that this represents a double loss. There is nothing for the Inland Revenue from these talented individuals, and there is no foreign exchange for the Bank of England. And why have they done this? Because of the excessive and discriminatory rates of income tax against well-paid individuals. This is a theme which has been debated before. Her Majesty's Government can go on saying that direct taxation is not a deterrent and producing all sorts of figures to show you are worse off in Sweden, or better off in Holland, or that the French do not pay their taxes when they should—or anything else they like to say. But why will they not, just for once, listen to the stream of well-informed opinion to the contrary, and do something about it?

I put under the heading of the individual the whole question of labour relations and their effect on our production output. Why is it that labour relations to-day are so bad under a Labour Government? Why is it that individuals—ordinary decent people—suddenly seem to become soured by the industrial situation which the present Government seems unable to resolve? I am not going to say more myself on this matter, because I know that my noble friend Lord Balfour of Inchrye is going to devote part of his speech to this important subject.

On a more lighthearted note, but it is symptomatic of the way the Government treats the individual, I should like to refer to the £50 tourist allowance. This irritates and exasperates far more people than the Government realise. I have a surgeon friend who tells me that he spends a good deal of his time signing invalid certificates for people who can thereby get additional foreign currency for their invalid tours abroad; while he himself is stuck with the £50 limit. Curiously enough, another friend of mine who is a hairdresser (one would hardly expect him to be worried) is frustrated by the £50 limit because, he says, "I do not do much else, but I do like to have a good holiday abroad when I can get one." It irritates and frustrates far more people than Her Majesty's Government realise or are prepared to admit. It makes people just that much more sour. "Why bother?", they ask. "Why take trouble? We cannot even spend our money as we like."

The Government may well say that the average expenditure per head per annum is only £47. In that case, why impose the restriction? The Government may point to a reduction of some £25 million as a result of their controls; but it is probably not due only to that, because tourist expenditure as a whole, in this country and abroad, is down this year compared with last year. It is one of the results of the squeeze of the Government's own making. Furthermore, the control is irrational. I think, although I have not been able to check it, that it breaks one or more international agreements—not that that matters very much to Her Majesty's Government, because they broke no fewer than eleven international agreements when they imposed the imports sur- charge in 1964. Still, I think it is a pity to break international agreements.

It is irrational, as I was saying, because a person in this country can buy, say, a Mercedes Benz car, and thus commit the Government, or the Bank of England, to transferring, say £2,000 across the exchanges. That person can then have all the pleasure of driving his car as far as Cornwall or the Isle of Wight for his summer holiday. But if he wants a reasonable holiday abroad, he is limited to an expenditure of £50. Why should the person who wants to have a foreign car be able to appropriate £2,000-worth of foreign currency but when he wants to buy a holiday abroad be limited to £50 per head? It is this irrationality of the whole exercise that annoys, irritates and frustrates so many people. It depends, of course, on the fact that one is going abroad and not to the Isle of Wight or to the Scilly Isles; and this leads me to my third theme, the attitude of Her Majesty's Government to "abroad".

My Lords, it is a very mixed, ambivalent attitude, I find upon examination. New private investment abroad is now so severely restricted as to be almost non-existent. The requirements imposed by the Bank of England as to estimates of profitability, and so on, make it virtually impossible to invest, unless one is going to a casino. Then we are told that the sterling area, of course, is different. This is where I venture to suggest the Government are in error. I should like to put it to Her Majesty's Government that a purchase of rubber from, say, Malaysia, has to be paid for by the export of goods and services from the United Kingdom just as surely as, for example, a purchase of tobacco from the U.S.A. Trading-wise, there is no difference between the sterling area and the rest of the world. Although, ironically, one may spend unlimited sums on travel within the sterling area, it becomes an offence to spend more than £50 outside the sterling area. Additionally, investment in the developed sterling area is subject to what is called voluntary control. If one is so foolish as to volunteer one's proposals to the Bank, one finds that voluntary control is the same severe control imposed on private investment to the non-sterling areas. So, for once, I under-stand, a number of firms are realising that the word "voluntary" really means voluntary; and that you need not apply to the Bank if you do not wish to.

What is particularly odd, in my view, in regard to the Government attitude in this matter is that, while they discourage investment in the developed sterling area, there is no restriction on private investment in the so-called under-developed sterling area. We are encouraged to invest only in those sterling area countries where the risk is highest and the prospect of a return on the capital is the slightest. And this is a time when we need to maximise our overseas earnings! Yet, while private productive investment is so curtailed, Government expenditure overseas goes on and on. It may be said in reply that we are pulling our forces out of Aden, and that that will reduce a certain amount of Government expenditure overseas. But I understand that Her Majesty's Government are already committed to something like £50 million in aid for the Adenese after we leave. So there can be no real reduction in overseas expenditure on that particular account.

The situation is not made any easier because of Her Majesty's Government's scorn for invisible earnings. This partly arises through their never having quite understood what they are and, further, their basic distrust of anything that goes on in the City of London. I should have thought that three years in office would have taught them a few lessons. But apparently it has not done so yet, because it is Britain's invisible earnings which have come, and are coming, to our rescue. I hope that the Labour Government will study the Bland Report on invisible earnings, which has just recently been issued. I know that other speakers will be referring to this important subject, so I will not go into the matter in any detail; but I must say that the Report shows that over the years we have always, with one or two exceptions, had a deficit on our external trading account. But, equally over the years this has always been made good, or a surplus may have been earned, because of the extent and value of Britain's invisible earnings. To put it simply, proceeds from exports plus invisible earnings equal imports plus overseas investment. And when one looks at this, one sees that over the years Britain's payments record is a good one —that is, if you leave out Government expenditure overseas—and certainly as good as that of West Germany, which has virtually no overseas Government expenditure at all.

My Lords, the remedy for the weakness in our external account lies in the hands of Her Majesty's Government. While they vacillate, foreigners naturally ask one question. Indeed, they ask me repeatedly, both in London when they come here and also when I have the good fortune to go abroad—and I am sure that other noble Lords have had similar experiences—"Is Britain going to devalue the pound?" or, it may be, "When is Britain going to devalue the pound?" My reply is that we will not devalue, and I give in support the solid reasons for my beliefs. They reply, "But you are only in Opposition; you cannot speak for Her Majesty's Government," Therefore I invite the noble Earl, when he rises this afternoon, to give a categorical assurance that there will be no devaluation of the pound sterling.

My Lords, you may feel that my remarks this afternoon have been of a somewhat gloomy nature; but I do not think that the situation is so bad that it cannot be put right. It is within the capacity of Her Majesty's Government to take a series of helpful decisions which would have a cumulative effect in the right direction. As a few examples I would say: recognise the profit motive and set it to work; stop the hand-outs of money to those who do not need it and with the money so saved lower direct taxation and corporation tax; abolish the selective employment tax, and spend less of the taxpayers' money. Her Majesty's Government would be astonished at the speed of Britain's recovery, but the world would be delighted.

3.16 p.m.

LORD BYERS

My Lords, there are, I think, few people in this country who can feel much satisfaction with our economic situation to-day. Therefore, I consider it is right and proper that we should speak in this House, in this debate, quite frankly but constructively. It is unusual for me to find myself, as I do, agreeing with a great deal of what has been said by the noble Lord, Lord Erroll of Hale, in a speech, but I think—and I can assure your Lordships that there has been no collusion in the matter—that the answer is that we both mix in different circles, particularly in industry, and feel we ought to bring this frank message to this House, telling your Lordships of the feelings outside—for at every level of the nation there is a feeling of frustration, of having been let down. There is bitter disappointment that the hopes of the Labour 1964 technological revolution (to which so many of us looked forward) have, in fact, been forced into the deep freeze.

There is bitter disappointment that the present Government have brought very little to the present economic scene which was not in the Conservative Party's manual of procedure for those interminable 13 years before the Labour Government came in. And where the Government have done something different they have done some idiotic thing, like bringing in S.E.T.—and the sooner that goes the better. Many of us wonder—and I make no accusation, but serve a warning to the Government—whether the Government have decided to embark on the old Tory game of programming the economy so that we get a period of playing things down for the two years after an Election and that, suddenly, everything gets better until the General Election take place in four or four and a half years' time. I hope that is not going to be done, for it is the worst form of "Stop-Go" that we could have in our economy; and it is no better when it is done by a Labour Government than when it was done by a Conservative Government.

But above all there is a growing feeling of lack of confidence at different levels of our society. It takes different forms. In business there is a genuine feeling that the Government have no ultimate objective; there is a growing feeling that the Government do not understand what is required. Occasionally, someone like Mr. Ray Gunter says publicly that business must make more profits and Mr. Fred Lee echoes the same sentiment from the far North. But, basically, the inherent historical hostility of the Socialists to profit-making, even in conditions of genuine competition, is still there; and I think it is doing a great deal of damage. I must not, of course, refer to what takes place in the other House, but there is a Motion on the Order Paper there, put down to-day, which really sums up the feeling of many Socialists against private enterprise and against the profit motive.

Among the workers, too, there is a sense of frustration; because they did not expect, when a Labour Government came into power, that unemployment would be used as a weapon to keep wages down. Temporary unemployment, yes; industrial retraining and industrial redeployment, yes—they are prepared to take that: but not an aimless policy which seems to be getting them nowhere. So we have a vicious circle. Business has not enough confidence to increase its investments—indeed, many plans are being postponed to-day—and with not enough investments there are not enough jobs and production does not increase. So the national cake gets no larger and therefore we cannot distribute it better.

As the noble Lord, Lord Erroll of Hale, has said, it is easier to identify the lack of confidence than to prescribe a way of overcoming it, but I should like to suggest some of the things which the Government could do. The first thing is to redefine clearly the sort of society we are trying to create. In my view it is not a Socialist one. I do not believe that the Labour Party really want to create an old-fashioned Socialist system. What I believe most of us want is a social system based on an efficient mixed economy, in which there is a high priority for social justice. If we can get the Government really to believe in this and proclaim it, then I think that we could make some progress. I believe that we should avoid any further nationalisation. Nationalisation is no longer the emotional platform slogan it was when I first came into politics. I am very doubtful about the transport proposals in the gracious Speech. There may be something to be said for them, but, frankly, I think this will just become another irritant.

I do not take the same view as the noble Earl, Lord Erroll of Hale, about Government investing in business. But I would say this: that if Government are going to put money into business, it would not be a bad idea to put it in on the convertible basis, so that in five years' time they can decide whether they want to go on with any business, when they see how well or how badly it is doing. But I have no inbuilt fear of the Government's taking a part in businesses. It happens in other countries in the world and there is no reason why it should not happen here.

But I believe the Government have to re-think their policy about investment grants. At the moment these are loaded in favour of the development areas. I do not want to be misunderstood. I am in favour of helping the development areas, and areas outside which have high unemployment, but this should not be the sole criterion. We should not be satisfied with just getting industry to produce anything in the development areas in order to reduce unemployment. We should encourage enterprises which are socially useful, which can save imports and help exports, which could, for instance, reduce building costs and enable us to get more houses for the same amount of money. Again, we should be prepared to give the full allowance to firms outside the development areas to expand their activity and to reduce their overheads. In other words, we should use more discrimination.

I was in Yorkshire at the week-end, and in Barnsley I was told that a number of pits would be closing. But little seemed to be going on to encourage new industry to the area. I should have thought that one could see pits closing down three or four years ahead; then some sort of forward planning would have been done long before this happened, so that people would have alternative employment. I should think that this is a matter of poor co-ordination. Barnsley is not in a development area, but I consider that there should be proper encouragement, even at this late stage, for industry to go there by making them eligible for at least the 45 per cent. grant, if they are prepared to go and establish something new in the area.

Is it not time that we looked at the whole economics of the pit closures? No one would want to keep uneconomic pits open indefinitely, but surely there is a case for not closing them until alternative employment is in sight. I can understand the National Coal Board, in terms of their accountancy, saying that a pit is definitely uneconomic; but if we put on the other side of that what we have to pay the miners who are out of work in National Insurance and National Assistance, what we lose by their not paying taxes and not spending much money in the shops and so decreasing purchase tax paid, I think we shall see that there is a case for phasing these pits out in such a way that we can offer genuinely alternative employment to the miners.

The same goes for capital expenditure. I accept—I am sure the noble Lord, Lord Erroll of Hale, does, too—that in times of balance-of-payments deficits some curb is necessary on capital expenditure. But where is the sense, so far as overseas spending is concerned, in the Government's providing money for some underdeveloped countries to erect costly prestige buildings for their rulers to live in and denying to British industry the right to export capital to Australia and Canada? It has been demonstrated that where that capital has been exported, it creates a new asset and a new earning power to help the balance of payments. This is a question of being more selective, of discriminating in the right way.

Incentives in industry at all levels are required. The Government should have a fresh look at this subject. They should drum it home to the people that there is nothing wrong with high wages provided they are earned and that increases are based on improved productivity and efficiency. In addition, we should keep constantly under review the disincentive effect of present taxation on earnings above £20 a week. In France and Germany, they are moving fast towards co-ownership and co-partnership. Surely this is something we ought to be looking at, to see whether it is not wise to encourage this, particularly by tax concessions. We should try to find ways (I know this will be controversial, but if we are to have an effect on the brain drain, something like this will have to be done) to give a chance to ambitious young people really to stay in this country and build up capital—not fortunes, but enough to provide a measure of independence. I should like to think that the bright ones in business and in the professions, the hard-workers who are prepared to get down to the job, should be able, by saving or investing, by the time they are 35 to have up to £10,000 to their names, and by the time they retire not less than £25,000 to £30,000. That would give a measure of independence to this country which could be very valuable in the long run.

I am not so sure about taxation on actors. I thought that there was little change in the system which the present Government had introduced. I feel that these actors have been away from us for a long time—possibly thirteen years plus three. I do not think that there is anything new in that. But I am interested in keeping our bright young people and hard workers and letting every child in the country feel that he will have the opportunity of building up some capital—to wipe off the mortgages, to have that extra freedom which can mean so much to people. But I am afraid that we have the opposite attitude: to take everything off people: to make the taxes as heavy as possible. I think that is wrong. We ought to look at the whole field of taxation, of tax concessions to help employee shareholding, and to provide opportunities for people to save more. We ought to look once again at the aggregation of a man and wife's incomes. I am sure that there is much to be said for treating their incomes separately. If the Chancellor would get down to the job of simplifying our tax structure and shifting the emphasis from direct to indirect taxation much would be achieved, so that people could save more, bearing in mind that if this is done we must at the same time make proper allowances in the social services for the pensioners and others who will have to pay higher costs for the things they buy.

There is much the Government can do. But, to come back to the point made by the noble Lord, Lord Erroll of Hale, firms are not going to invest or expand unless they have confidence that there will be a market for their goods. To give this confidence there are certain things which I think the Government could and should do. First, they must try to re-establish profit in the public mind as something which is respectable, because profit in industry is the only means we have of paying for the social services, for the expansion of education and for the things we want to see in a Liberal and radical society. Until we establish profit as respectable, we cannot expect industrialists and others in industry to work flat out to increase output and sales, and to undertake capital expenditure to make more profit. Without this effort and investment there will not be the vacancies to reduce unemployment. And this is vital. We must create the confidence that will enable people to be justified in making new investment which will mean that people will have jobs and will be producing useful things.

When the Chancellor of the Exchequer comes to produce his Budget (and I have often wondered why we have to wait until April for the Budget; why we cannot do some of these things in taxation now instead of waiting six months) he might well give thought to the German idea of taxing idle profits at a higher rate than distributed ones. I have often wondered why we continue to make a distinction, for instance, between earned and unearned income. I can quite understand its being done thirty or forty years ago, when unearned income meant rent; it meant the payment you received from the tenants of your farms; it meant taxing the landed gentry. But today unearned income often means the investment that many people have put aside for their old age. I believe that this subject should be looked at again. At the very least we should have the same tax rate for unearned income, because it is often unearned income which creates the new investment that makes jobs for the people.

Secondly, I think the Government should examine their own contribution to price inflation. S.E.T. has resulted in higher prices, and so has the imposition of the fuel tax. Many things which the Government have done could be reexamined. Thirdly, the Government must be seen to be working with industry and the trade unions on some sort of long-term plan to achieve growth. At the present moment, the policy appears to me to be quite incoherent. It reminds me of the notice that I saw last Saturday on Hull railway station, which read: British Rail announce increases in the price of their reduced fares. Like Government policy this is topsy-turvy; but at least Topsy grew and grew, aid it is growth that we want to get into the policy.

LORD PEDDIE

It was pointing in the London direction.

LORD BYERS

The noble Lord is right; it was on that platform. I think that is indicative of the thinking today. I believe that a coherent policy should start by being far more selective: selective in overseas investment; selective in encouraging development and expansion at home. And it ought to aim to get decisions made by the Civil Service far more quickly than is the case at the moment, because with over 500,000 unemployed one cannot afford to take time in minuting over this, that and the other and spending 15 months before coming to a decision. We want a bit more pep put into the administration.

Fourthly, the ratio of Government expenditure to private investment is still not right. The Government should announce—and this would give confidence—that they propose to reduce the level of Government expenditure, but at the same time to ease credit restraint to encourage private investment to set up the demand that we need. Fifthly, personal taxation must be reformed.

I believe that there is one silver lining, and it is that during this whole period, if I am right, productivity has gone up. That is a great thing. We are beginning to get more efficient. But in getting that efficiency we must recognise the need to create the demand of the market in order to take up that efficient production. The Government have not an easy task, but, in my view, this is the time to make a re-assessment to see whether we cannot get the right targets; and if we get the right targets, I believe that we shall get things moving.

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