HL Deb 04 April 1979 vol 399 cc1906-14

Standing Order No. 43 having been suspended pursuant to Resolution of 2nd April:

2.58 p.m.


My Lords, I beg to move this Bill be now read a second time.

Moved, That the Bill be now read 2a.—(Lord McCluskey).


My Lords, even today it would not be inappropriate if the formality of the passage of these Bills were interrupted briefly by a few words on something as important as the Finance Bill. Usually, as your Lordships will be aware, the Second Reading of the Finance Bill provides the House with an opportunity for a general economic debate. I am not suggesting for one moment that this would be appropriate today. That debate is about to be taken to the country, and at this time in our affairs that is where it should be taken.

There are one or two matters which might be stated. In this and other economic debates that we have had in the House we have over the past couple of years welcomed the improvement which has taken place in our financial economy. However, we have also deplored the lack of improvement in what is called these days our real economy; that is, the performance and strength of our industrial and business life. Here we must record a history of great failure. The total level of national production in this country in manufacturing industry has even now barely reached—or perhaps just now surpassed—the level of 1973 or even the beginning of 1974 when we were unfortunately on a three-day week. Our productivity, as opposed to overall production, in this country is still woefully low and in these last five years has fallen still further behind the productivity in other countries. It is not so many years ago that the average output of the British worker in manufacturing industry was about half as big again as that of the German worker or the French worker. On average, it is today probably 20 per cent. to 30 per cent. less than the output of the average German or French worker.

In the last five years national productivity in manufacturing industry has risen by a mere 3½ per cent., whereas earnings in that period in manufacturing industry have risen by no less than 120 per cent. You do not have to look much further than the enormous increase in money earnings between, on the one hand, 120 per cent. and the almost infinitesimal increase, on the other hand, of 3½ per cent., to see the reason for the loss of competitive power of British industry, and why it is so impossible to stimulate growth in our economy without sucking in imports rather than pushing out the output of our own manufacturing industry.

Over the last two years we have had a series of debates in your Lordships' House on some of the most fundamental problems facing British industry. The last one was as recently as a week ago today, when we had a debate on industrial innovation. In all these debates, as well as in our general economic debates over all these years, noble Lords on this side of the House, and many noble Lords in all parts of the House, have expressed their belief in the need for creating some radical changes in our economic and industrial environment. There can be no doubt that one of the main issues in which such radical change is required is in the level and system of personal taxation in this country.

This Finance Bill brings about for our people some minor reductions at least to take account of inflation during the last year. Over the last two years, we recognise that the present Chancellor of the Exchequer has at least been moving in the direction of bringing personal taxes downwards rather than continuing to put them upwards; but the measure of the mammoth scale of increase in personal taxation brought about in the lifetime of this Government is shown by the fact that merely in order to bring down the level of taxation to what it was when this Government took office five years ago would require a further £2,000 million of tax reductions. That is one of the reasons for the very grave lack of performance in the real industrial economy in this country. In letting this Bill through, we simply want to express our deep conviction that until a Government will do something about this, nothing else will produce results.

3.5 p.m.


My Lords, I think it would be appropriate for someone from these Benches to say just a few words about this Bill, and perhaps in doing so I might support in one or two regards what the noble Lord, Lord Carr of Hadley, had to say. Certainly, with him, we lament the failure of Government policies in the last few years to help in improving our performance in relation to productivity within industry. Like him, we continue to feel that there needs to be some reduction in the levels of direct taxation.

It continues to be our belief also that until such time as the major parties are prepared to analyse and together confront our major industrial and economic problems, it will be difficult to solve them. I think your Lordships will find that this will be a major theme in the discussions and contentions put forward in the forthcoming General Election.

For the rest, I am happy, on behalf of my noble friends, to support the passage of this Bill, given its limited objectives to maintain for the time being present levels of taxation and the other changes that have been agreed, until such time as a new Administration can be formed which will be able to introduce a full Budget at an appropriate time after the forthcoming Election.

3.6 p.m.


My Lords, the deterioration which the noble Lord, Lord Carr, mentioned in our productive effort did not suddenly begin in 1974; in fact, it has been going on for well over half a century, and it has been going on in a period when taxation was nothing like at the level it is now, and there was no improvement in our productive effort. So merely to say that the present problem is caused by high taxation is sheer nonsense.

Is it not the case also, when we think in terms of taxation, that a great deal of it has gone towards improving the level of training for apprenticeship for skills which have been neglected for a great many years? Is it not also the case that those who have gained perceptibly from the policies of this Government are retired old-age pensioners and people who cannot fend for themselves? I should have thought that the Government's record in expenditure on the social services in general is something of which we can all be very proud; and when we look at what the side opposite did, they should be very ashamed.

3.7 p.m.


My Lords, before my noble and learned friend addresses himself to what we have heard from the other side of the House, may I offer a few observations? I listen to the noble Lord, Lord Carr, frequently, and I often admire his clarity of expression, but I am going to be quite frank and forthright today. What he said was just a load of rubbish. I could not be clearer than that or more factual than that: just a load of rubbish. I have a long experience of political life and of industrial life, and I can recall episodes in the industrial history of this country when there was vast unemployment, reaching almost to the figure of 3 million, and when there was a trade recession of a phenomenal character; yet at the same time taxes remained as they were.

Let me put before your Lordships' House a submission. The noble Lord, Lord Carr of Hadley, said in his short speech that what was required was a reduction in personal taxation, in order to promote greater competition and higher productivity. That is what he said. If he had mentioned a reduction in taxation that bears heavily with a phenomenal weight in industry itself, I could have understood it. But supposing that the personal taxation of every Member of your Lordships' House, including many industrialists, was reduced, does anyone suppose that would cause greater competition against our formidable competitors or that it would lead to greater productivity? Does anybody suppose it would have that effect? It would probably lead to higher consumption: that is what would happen. Those who were disturbed by what is called excessive personal taxation and were unable to consume goods of high quality at high prices would utilise the benefits derived from reduced taxation by consuming more of the goods they would like to use. That is what would happen. It would have no other effect at all.

Why does anybody with such intelligence as the noble Lord, Lord Carr of Hadley, talk like that? I could understand if he was trying to do a little bit of electioneering, but I would not suppose that that was at all in his mind; it would be far from his mind. It would be quite improper, anyhow. This is not the appropriate occasion. Of course, if it were the appropriate occasion I might offer a few observations on the subject myself, having contested up to 20 elections in the course of this century. But I prefer that it should be otherwise.

I hope that we are not going to hear this kind of stuff in the course of the Election. Let us concentrate on the facts of life. We are in a potentially technological era. We have not reached the peak, or anything like it. God knows what will happen when we do! But we have to take into account automation, we have to take into account the fact that many employers would probably employ more people if they were not called upon, whenever they employ an additional worker, to pay National Insurance at a high level. These are some of the factors that operate to our disadvantage. The noble Lord need not interrupt; I am coming to my conclusion, and probably it is about time. Do not let us hear any more of that kind of stuff.


My Lords, may I point out one fact? I do not want to argue with the noble Lord. I said that this was one of the measures; not the only one. Secondly, will the noble Lord recall that only a week ago today we debated a report on industrial innovation, by a committee of which his noble friend the Leader of the House is chairman. This is apt in relation to what the noble Lord said about the technological revolution. One of the conclusions of that report was that a reduction in personal taxation was one of the most fundamental things needed in order to stimulate this industrial revolution. Those were the views of a committee presided over by his noble friend the Leader of the House.


My Lords, my only reply, since the interrogation seems to be addressed to me, is this. I can recall what happened before the first World War when we had a trade recession of a phenomenal character, which would almost have led to a revolutionary situation had there not been an outbreak of war. I can remember 1931, arising out of the American financial recession, and the situation in this country which was partly a reaction. We have incidents of that kind. There are all kinds of reasons, with inflation, for a lack of productivity, and—I have advocated this many times in your Lordships' House and even in the other place—if there were a little more co-operation in the industrial era, a little more merging and, perhaps, a better understanding and the production of goods of higher quality, such as we can do and as we used to do, then we might be better off.


My Lords, I hope that there may be room for a Cross-Bencher for just a few minutes. I should like to say that, as long as we have a Government which has to borrow anything from £8,000 million to £12,000 million a year, we cannot expect anything but running inflation, and as long as that continues and a clamp is put on wages there is bound to be extreme industrial discontent. I never remember a time since 1926 when the whole population of this country has been so incredibly fed-up. I think my noble friend Lord Carr was entirely right.

I have recently had some conversations with a German doctor abroad, and he told me that Germany is full of English doctors. My wife has recently spoken to a Norwegian who, quite independently and in another country, expressed astonishment that Norway is full of English doctors. The BBC has run a programme on English doctors in Holland. There is no doubt that they are going abroad. The head of the Royal College of Surgeons recently told me that only a relatively small percentage of the entry for the Royal College of Surgeons consists of British students. It is not worth learning special skills, taking special trouble or risks or showing enterprise to do anything in our country while this situation continues. Taxation is too high, the population is too discouraged, and industrial discipline is at an extremely low level. The fact that British Leyland has to make Japanese cars is a monstrous occurrence. I hope that it will be successful but, really, it is the writing on the wall.

In conclusion, I want to say that what I believe our countrymen really want to see is a state of affairs in which the parties are more interested in setting our country on the right lines and enabling it to change from the bad direction in which we are now going—because we are still heading towards the rocks. I think that we should like to see a certain co-operation between the parties on all those matters about which they could agree, in order to enable us to recover. I believe that there is a huge consensus. I know that this is the wrong moment to say so, just before an election, but I hope that my colleagues on both sides of the House will write these remarks on their hearts, because otherwise this country is going on downwards.

3.17 p.m.


My Lords, I do not know whether the noble Lord, Lord Carr, thought he was opening the election campaign in your Lordships' House, or whether he merely wanted to go on record as stating as a conviction something which he wanted us to believe rested upon a volume of evidence. There is really no evidence. There may be beliefs and there may be strong feelings, but there is really no evidence that the level of taxation by itself is an explanation of a number of the economic and social ills that the noble Lord described.

I think that all who talk about the present level of taxation, and the measures to be taken to alleviate the level of taxation, should be more specific about the remedies that they would propose. When the noble Lord and other members of the Conservative Party talk about shifting taxation from direct to indirect taxation, we are entitled to know where it would be shifted to and what would be the burden that was shifted. Then we should get some idea of how much was to be taken off the burden of direct taxation, and placed, in the form of indirect taxation, upon the shoulders of a large section of the community who are not at present paying income tax at all. One has to be careful that the shift that is made is not from the better off to the much worse off section of the community.

Another aspect of the matter—I shall be very brief—is the subject of reductions in public expenditure. The noble Lord's Leader, Mrs. Thatcher, in a television broadcast the other evening, said that every pound taken in public expenditure means one less pound to be spent on the things we need, such as food, the maintenance of the car, the mortgage and other amenities of life. But one might equally say that every pound spent in consumer expenditure means one pound less for a better Health Service, longer queues to get into hospitals and less care for the elderly, the sick and the disabled. After all, there is in the lives of the people at all levels an equation to be struck between social provision and personal consumption. Many people these days seem to ignore the great value to them of social expenditure which, after all, is paid for in the form of taxation. So let us have a balanced argument about this, if we are to have one at all.

I am not sure what little mischievous thoughts were in the mind of the noble Lord, Lord Carr, when he got up. I do not know whether he hoped to get away with a statement of his convictions as being a statement of fact, or whether he really wanted to start an argument. Obviously this is neither the time nor the day for us to conduct a full-dress debate, but those who provoke others ought to take the consequences, however brief they may be.


My Lords, I understand that I have a right of reply, although I am astonished to find that I am called upon to exercise it, as I had understood that the proceedings in relation to this Bill would, as normally, be formal.

The noble Lord, Lord Carr of Hadley, was quite right when he said that the debate is to be taken to the country, and it is a pity that he did not sit down after making that remark. If the noble Lord and his friends take this debate to the country, I hope that in the course of their campaign they will not try to over-simplify the issues, as he has done today, or indulge in bidding for votes on the basis of slogans like, "Cutting Taxes". As my noble friend Lord Houghton of Sowerby has just said, it will not do to say, "Cut Taxes" without explaining how, without increasing the public sector borrowing requirement, one is going to save money on other services.

Is the noble Lord going to specify at some stage whether his party will reduce expenditure on the police, or on hospitals, or on education, or on housing, or on defence? When over-simplified remarks of this kind are made and when assertions like this emanate from the Benches opposite, I wish that the noble Lord would tell us, and the country, where the cuts are to be made in the public services financed out of this very taxation.

We have had a number of general economic debates and debates on specific problems to which reference has been made. Your Lordships will not want me to repeat anything which was said in the course of those debates, but I look forward to hearing the noble Lord, Lord Carr of Hadley, making these same points, with more specificity, from the place that he occupies now in about six weeks' time, and to giving him an adequate reply.

I can confirm what my noble friend Lord Lee of Newton said— and, indeed, the noble Lord, Lord Kaldor, has repeatedly demonstrated it in the course of debates geared to economic matters in this House: the problems of productivity and of economic performance in this country are not new; they have been with us for perhaps more than half a century. Lord Kaldor has given a specification which shows that the problems have been real and observable for something like a century.

It will not help the passage of this Bill or, indeed, anyone in your Lordships' House if I continue the kind of wrangle and assertion which has been going on this afternoon.

On Question, Bill read 2a: Committee negatived; Bill read 3a, and passed.