§ 5 p.m.
§ Moved, that the Bill be now read a second time.—(Lord Cockfield).
Lord Bruce of Donington
My Lords, by convention and, indeed, in part by law, your Lordships' House is debarred from doing anything very much about the Finance Bill. But it has become the established convention over the years that discussion of the Finance Bill provides an opportunity for a review of the economic state and prospects of the nation. Indeed, the noble Lord, Lord Cockfield, has made many notable contributions on this subject over the last four years when he and I have faced one another across the respective Dispatch Boxes. Yesterday, we had the opportunity of discussing the industrial state of the nation. I would not wish to weary your Lordships by going over again what was discussed in some detail then. Nevertheless, this occasion provides the House with the opportunity of considering the Government's performance in general over the last four years and of listening to the very learned response of the noble Lord.
The most notable feature in the taxation field to which the Finance Bill itself relates, but which I do not intend to discuss in detail, is the way the Government have discharged their election manifesto promises to reduce the level of taxation. I have been known sometimes to address the House in what I think have been well merited yet terse terms on this subject. It suffices for my purpose today to give the version of The Times concerning the manner in which the Government have discharged this mandate. According to The Times of 21st April:A cut of 7p in the basic rate of income tax would be needed to restore the real tax burden, adjusted for inflation, of a typical family to its level before this government took office, the Treasury has revealed. The figure applies to a married man with two children on average earnings. This takes into account the rise in income tax (less child benefit) and national insurance contributions between 1978ߝ79 and 1983ߝ84. The figures demonstrate that despite the tax cuts in the last Budget the Government has failed to fulfil its election pledge to reduce the tax burden at all income levels. Only the most affluent now pay less tax than they did four years ago".Those are somewhat sedate terms in which to express the situation but the facts unpleasantly remain—that after all this time and after all the hardships through which the nation has passed, this is the position in which the Government are left at the 599 end of all their fiscal policies. It is no good the Government saying that the recent Budget changes, measured in real terms, leave the average worker 19p a week better off. It may be the case, on the basis of rises in wages suitably adjusted for inflation, that this is the ultimate take-home benefit. However, this contrasts with the facts revealed in The Times of 5th May that directors' average pay now reaches £40,825 per annum, and that the salaries of directors rose last year by 13.9 per cent. We are not talking of 13 per cent. on £4,000 or £5,000 a year. We are talking of 13 per cent. on a very much higher average. Despite all the protestations of the Government originally in relation to tax, the poor have got poorer and the rich have got richer.
The other feature of their policy that the Government proposed to carry out was dedicated to control of the money supply. I shall he merciful with the noble Lord on this point. I shall not go into the matter in too great a detail. Everyone now knows that the Government's assumptions on monetary policy—that reducing the money supply would automatically have beneficial consequences on inflation—have turned out to be complete nonsense. In fact, had the Government's own assumptions that there was a two-year time lag between rises and falls in money supply and their effect on inflation been realised the inflation rate now would be running at well over 20 per cent. The arguments adduced at the time by the noble Lord supported by one noble Lord from the Cross-Benches, Lord Harris of High Cross—I do not see the noble Lord with us today—have been completely disproved.
The other policies that the Government have carried out have had disastrous effects. The noble Lord knows full well by now that the rise in interest rates upon which the Government embarked, together with the coming of North Sea oil, succeeded in raising the exchange rate. At one time, this was regarded by the Government as a very desirable objective. The House will recall the Prime Minister's pride when the exchange rate reached 2.40 dollars to the pound. One recalls how proud she was that the pound could look the dollar in the face. But, of course, the consequences for British industry were disastrous. The exchange rate was a grave impediment to our exporters whose competitive position was made very hard indeed.
At the same time, imports into this country were facilitated. Although this had the desired effect, which I have no doubt the noble Lord had in mind, of bringing down the rate of inflation, it also devastated wide sections of British industry. Owing to the artificially low price of imported manufactures, hundreds upon hundreds of British firms were driven out of business. So that has been the other result.
The marginal result was that the City of London benefited very much by these policies. Indeed, it has been merrily operating not so much for the provision of funds for new investment in British industry but more particularly for a whole series of takeovers of existing enterprises based upon anticipated yields that have come into perspective from time to time.
Therefore, while wide sections of the British public have suffered, while unemployment has risen to well over 4 million—after having made allowances for the figures that have disappeared from the register, which have already been dealt with—we have now reached 600 the stage where one in every seven of the population is on supplementary benefit. That is a rather formidable consequence of the policies that have been carried out. As the Financial Times was constrained to put it in its editorial on Tuesday, 10th May:On the face of it, the economic record of her Government looks bad; the rise in unemployment, especially young unemployed, the decline in output and the absence of growth. Only the performance in reducing inflation is outstandingly good. The task in the election campaign is to demonstrate that this will lead to recovery".It goes on to say:No Government deserves a second term in office if it cannot reasonably promise to bring unemployment down".In my view that is a very reasonable statement.
But what are the prospects? One of the most extraordinary occurrences over the past few weeks has been the endeavour to suppress the report of the National Economic Development Council which was referred to in The Times of 12th April. The reason for that is quite clear. The particularly survey, which incidentally had been compiled from 40 National Economic Development Office sector committee assessments of the prospects to the end of the decade, came to the conclusion, not aided by any party political considerations, that no increase in jobs was in prospect for the rest of the decade. Perhaps that is the reason why the election is being called now. Perhaps if the Government had neglected to go to the country for much longer, developments later on in the year would have borne out the position as stated by NEDO. We know quite well that the Director General of the CBI, whose close association with and affection for the Conservative Party was well revealed at a recent dinner, seems to be more optimistic. There has been optimism before but the result has never materialised anywhere above the horizon.
The fact of the matter is that, whatever they may say in the forthcoming election campaign, the Government have no policies to offer the country which can demonstrate with any kind of reasonable expectation, with any kind of reasonable regard for the truth, that they are going to reduce unemployment measureably within the next decade, or certainly within the life time of any future Government with which a misguided electorate might entrust them. If the noble Lord has any observations to offer to the contrary in his reply, if he can hold out any prospect which is based upon reasonable expectations, he has a perfect opportunity to do so. However, it will require more than the continuation of grinding reference to some of the homilies with which we have been regaled over the past four years, to reassure the public that the Government have any real plans that enable this very considerable blot on the whole of the social and economic landscape of the United Kingdom to be reduced, let alone obliterated.
In more recent months the Government have drummed into our heads, and are continuing to do so, that there are no prospects of what they describe as "real jobs" unless the country become more competitive. We on these Benches are all for British industry' and British commerce becoming more competitive. We are all for industry becoming more efficient. These are defects in British industry at all levels, not least, I am bound to say, at management levels.
601 However, I want to deal with the last plank upon which the Government are basing their policies: the necessity for the United Kingdom to become more and more competitive. I am omitting from the argument for the moment the effect that the exchange rate of the pound against other currencies has had upon the competitiveness of British industry, although of course it is quite considerable. The noble Lord knows quite well that when the pound was at its peak in New York, it made British products uncompetitive to the tune of about 50 per cent.—an almost impossible situation.
I do not want to discuss competition in a vacuum or even by reference to numerous statistics, because statistics can be manipulated a number of ways according to the bent of the person who is offering them, and they are very often presented outside the context for which they were originally intended. In previous debates I have drawn the attention of the House to various examples. Indeed, one can only deal with these matters by supplying concrete examples that have been the subject of detailed and independent research. I demonstrated some months ago as regards Wales an example where British workers, supplied with identical equipment and working under similar conditions, were just as productive as foreign nationals. I also demonstrated that the wage rates applicable in the United Kingdom and, to some extent, applicable throughout Europe sometimes at higher levels, were not in fact responsible for the degree of uncompetitiveness that arose. The figures that I gave and the sources that I quoted have at no time been disputed by any noble Lord and, indeed, have not been disputed by the Government. Therefore, the question of competition becomes of some importance.
The House will recall that more recently, on 7th April last, we found out the Government's attitude towards competition by foreign countries, even by countries outside those within what is called "the Western sphere of influence"—in other words, the OECD countries. Your Lordships will recall that I instanced the case of the British Shipbuilders' quote for a cable ship which, through a somewhat mysterious route involving a company called International Transport Management or rather ITM (Offshore) Limited, (who for some obscure reason had not filed their accounts for a couple of years) went to a Korean company by the name of Hyundai, and I never got any response to that.
One thing that was important was that the Prime Minister was involved in making the decision that British Shipbuilders, or the subsidiary of British Shipbuilders, should not get the contract. Your Lordships will recall that it was quite proved—and my figures were nowhere challenged, though there has been abundant opportunity to do so—that the competition we were getting from South Korea was largely based on the fact that the wage rates there were some 23 per cent. of those applicable in Europe, and there were other factors involved as well. These matters were never satisfactorily answered.
The expressed attitude of the Government is that not only does United Kingdom industry have to compete with the other industrial countries of the West in the OECD countries, including Japan and the 602 United States, it also has to compete, and the Government are determined that it shall compete, with countries such as South Korea which are among the newly-industrialised countries, and I believe which the noble Lord, Lord Cockfield, had the opportunity of visiting recently. He will undoubtedly at some time, whether on these Benches or the other Benches, according to how the arithmetic goes, give us some account of his visit there.
However, I have some fresh news to tell the House. Not only did this contract go to this South Korean company, Hyundai, on the basis of what on all accounts was completely unfair competition, from which it was the duty of Her Majesty's Government to protect British manufacturers in exactly the same way as the United States has not the slightest hesitation, where it gets instances of this kind, of protecting its own, but it also went to a company—and I speak not under parliamentary privilege but in reading the Financial Times of 24th April last from page 9 of the Saudi Arabian supplement—which was banned for two years for bribery in Saudi Arabia. Indeed, it can only recently have emerged from the status of suspension. Therefore, not only do we willingly condone the passage of contracts to countries which trade unfairly, but we also allow them to go to companies which have been banned in other countries for bribery.
The facts about Hyundai's suspension for bribery must have been known to our Foreign Office representatives in Riyadh. If they did not know, then they were not doing their job properly. If they were known by the Foreign Office, as they should have been since the Saudi-Korean matter had been raised at that time, they should have been transmitted to the Prime Minister's office. But the position is that not only are Her Majesty's Government prepared to tolerate unfair competition on the basis of wages costs which are enforced by a semi-military Government whose trade unions function in very much the same way as those to which the Government and Opposition object in Poland, but from companies which have a history of bribery.
It would be interesting to hear the reply of Her Majesty's Government on that, and the extent to which they are willing in future to allow these things to happen. The matter is more apposite because there is a company in the East Docklands area called Blackwall Engineering Limited which recently tendered to the Central Electricity Generating Board—the CEGB again—for some ship repairs in the comparatively small sum of £77,000. It was told by the CEGB that its price was very competitive, but we now learn that this contract also has gone to this mysterious company, ITM, and we wonder whether this has also gone to Korea.
These are serious matters. It is far better to raise them, as I have done today, in the particular than to talk in generality about them. The fact of the matter is that the Government are quite prepared for this competition to continue. All they are really seeking to do, if they can, is to depress British wage levels, and endure further British unemployment if they cannot depress their wage levels to those subsisting in South Korea. I hope that the Government are going to answer that.
603 I shall close shortly, and I must apologise for keeping the House, but these matters are of some importance and they deserve to be aired in Parliament. The Government came to office on the basis of uniting the nation. They have done nothing of the kind. All they have done is to make the rich richer, and the poor poorer. These are long days from the days when we were last in crisis in World War II, when there was a greater measure of fairness and justice among all our population. The fact that there was a greater measure of fairness and justice produced that purpose which took us through the war itself. The Government's task, in the face of the depression largely induced by them, was at least to unify the nation by a greater measure of fairness and justice. This they have not done. For this, they ought to be condemned.
§ Viscount Massereene and Ferrard
My Lords, before the noble Lord sits down, may I point out in 30 seconds that he appears to accuse the Government of having a high pound and strong currency during the majority of the time this Government have been in power, and therefore harming our export trade and causing unemployment. But I remember when the pound was at five dollars to the pound before the war, and we had a thriving export trade. I was always taught that if a country can only export because it has a weak currency, that country is decadent.
Lord Bruce of Donington
My Lords, I am grateful to the noble Viscount. One thing he will remember is that by the division of labour which took place during the war itself we ourselves bore the great brunt of the damage inflicted on us by the enemy. The United States suffered no damage to its industries; indeed, many of them were enhanced by the war effort itself. So far as we are concerned we, at 1945 prices (and they are very much higher today) sustained damage of about £7,158 million. We started off right from the bottom, and it is to the great credit of post-war Governments that progressively we enhanced our position from that situation.
§ 5.28 p.m.
§ Lord Beswick
My Lords, I propose to take two minutes to raise one point, a personal point I fear, which springs from a parliamentary Question asked on 26th April. The noble Lord, Lord Cockfield, on that occasion went to some trouble to give details of the improvement since 1979 in the position of a man earning £45,000 a year. He made the claim, quite properly, that this was due to the Government's taxation policy. He also stated that the position of an unemployed man had improved since 1979.
I asked the Minister to make it clear whether the position of the unemployed man had improved because of an enlightened tax policy, or whether it was not due to the higher benefits from a contributory pension scheme. The noble Lord, rather surprisingly, is reported as saying that there seemed some innuendo in my question, and he proposed to ignore it. Several noble Lords, not all on these Benches I might add, have expressed surprise at the use of that rather scurvy term "innuendo". My admiration for the Government's financial policy does not exceed that of my noble friend Lord Bruce of Donington. But my 604 affection for the noble Lord himself is a factor of parliamentary life. I therefore give him this opportunity to withdraw an expression which was not in keeping with the spirit of my supplementary question. After all, why resort to innuendo when the facts speak so clearly?
When a choice has to be made this Government invariably have helped the wealthier as opposed to the poorer people. To some extent, the Finance Bill, which we are ostensibly considering, has been expurgated for reasons of expediency and it does not therefore go as far as it would have gone. Nevertheless, it still remains a fact that the Government's taxation policy has been retrogressive. I hope that the noble Lord will accept that when that criticism is made it is fairly made and cannot be dismissed as an innuendo.
§ Lord Cockfield
My Lords, it was Richard Brinsley Sheridan who said:The right honourable gentleman is indebted to his memory for his jests and to his imagination for his facts".I have never accused the noble Lord, Lord Bruce of Donington, of making a jest, but when it comes to his facts his imagination is, at times, a little awry.
The noble Lord, Lord Bruce, started by saying that the convention had grown up over the years that the Finance Bill should be the occasion for a broad-ranging debate on the economy. He certainly ranged broadly enough. I would, however, refer him to a speech made by his noble friend the Lord McCluskey on 4th April 1979—the Labour Government had then fallen by vote of another place. As a result, your Lordships were considering, as they are on this occasion, a Finance Bill which had been agreed between the parties for rapid implementation. Lord McCluskey said this: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".—[Official Report, 4/4/1979; col. 1913.]I hope the noble Lord will have the opportunity of refreshing his memory during the Recess which lies ahead.
I propose to concentrate on the Finance Bill, but before I do so I should reply to the noble Lord, Lord Beswick. The last thing in the world I should want to do would be either to cast any reflection on him or to cause him any distress. I hope he will understand in what I am saying that that is very much in my mind. The words used by the noble Lord were as follows:I wonder if the noble Lord could make it absolutely clear, so that we may follow these matters more fairly".—[Official Report, 26/4/83; col. 802.]The implication of the words "more fairly" was that what I was saying was unfair. It was in that sense that I understood the noble Lord to be making his point.
The word "innuendo" is a legal term and in relation to the use of the word "fairly" in the context in which it was used by the noble Lord, I felt it was correct to describe that as an innuendo. But I hasten to assure the noble Lord that there was no intention whatever on my part of casting any reflection upon him. I hope that he will accept that explanation in this spirit.
§ Lord Beswick
My Lords, of course I accept that, but if I ask for something to be considered fairly I mean 605 that I want it to be considered fairly and that there is absolutely no question ever of there being some underlying innuendo in that. I accept what the noble Lord has said.
§ Lord Cockfield
My Lords, I do not propose to expand on what I have said which I believe answers the point that the noble Lord has now made. I wish to repeat that the last thing in my mind was to cast any aspersion or to cause the noble Lord, for whom I have great respect, any distress in this matter.
I shall now return to the Finance Bill. This is not the Bill as it was introduced by the Government. It is the price of their co-operation in the passage of legislation essential to the proper administration of the country. The Opposition have forced amendments to a number of important clauses. These comprise: first, Clause 12, where the effect of the amendment forced by the Opposition will be to hold the thresholds at which people begin to pay the higher rates of tax and the investment income surcharge at the 1982ߝ83 levels, rather than to increase them by 14 per cent., as the Government had proposed.
Secondly, Clause 15 is the clause on small companies' corporation tax, where the effect of the amendment forced by the Opposition is to leave the profit limits for the small companies' rate of corporation tax at their existing levels, rather than to increase them substantially as the Government had proposed.
Thirdly, Clause 18: the effect of the amendment imposed by the Opposition is to maintain the mortgage interest relief limit for 1983ߝ84 at £25,000 rather than to increase it to £30,000, as the Government had proposed. The Opposition apparently claim—although the noble Lord, Lord Bruce of Donington, barely addressed himself to the Bill—that their actions on the Bill reflect some high principle. The reality is that the Opposition's actions are both mean-minded and, were they to have any lasting effect, disadvantageous to many groups in the country.
The amendement to the income tax clause—that is Clause 12—forced by the Opposition will mean that some 300,000 people will be brought into the higher rate charge of tax and nearly 1 million people in all will pay more tax. The people who are affected are for the most part middle managers, professional people and people making their way in business—the very people who are essential to ensuring growth and the creation of wealth. But the truth is much worse than that. Every single one of the 25 million or so people paying income tax is now under threat by the Opposition.
Last time the Labour Government increased the rate of tax from 30 per cent. to 35 per cent. What we are now seeing is the thin end of a very nasty wedge. Let there be no mistake about this. The Labour Party stands for higher taxation for everybody. The sheep's clothing has now slipped, and we see the very nasty wolf underneath.
We have promised, immediately we are returned to power, that we will reinstate the reliefs and allowances that the Opposition have deleted. Were the Opposition to win, every one of the million people liable to higher rate tax will be fined by the Labour Government as they claw back the relief already given. The same 606 politics of envy are evident in the Opposition's attempts to impose a lower limit for mortgage interest relief—a limit of £25,000 rather than the £30,000 that the Government had proposed. This is a blow struck not only at the householders immediately affected but, in the long run, at everyone who wishes to buy his own home. The threat is there. The limit of £25,000 was originally set in 1974. It has been heavily eroded. The Labour Party simply do not want people to own their own homes, and they are determined to penalise those who do so.
All I would say in conclusion is this. The Bill itself, as originally presented, typified the Government's policies to improve the environment in which enterprise and wealth creation operate, creating the foundations for sustained recovery of output and employment. I therefore commend the Bill to the House, even truncated as it is, with a promise that in the not too distant future I shall be commending to your Lordships a second Finance Bill which will consign the Opposition's actions to the discard of fiscal history.
§ On Question, Bill read a second time; Committee negatived.
§ Then, Standing Order No. 43 having been suspended (pursuant to Resolution of 10th May): Bill read a third time.
§ Moved, That the Bill do now pass.—(Lord Cockfield.)
Lord Bruce of Donington
My Lords, I rise simply to correct the noble Lord on the question of the convention governing debates of this kind and to say that the noble Lord would have known quite well, if he had looked at the list of speakers—and he knows quite well through the usual channels—exactly what the intention of this debate was going to be. He knows quite well that on an occasion such as this—and it has happened over the last two or three years—it is quite the normal thing for the economic state of the country to be discussed. I say that, through the usual channels, he was well aware that I was going to take this line today.
§ Lord Cockfield
My Lords, I was well aware that the noble Lord was going to take the line that he has taken, and for that notice I am grateful. But I was pointing out to him, and I point out to him again, that the line that he has taken is contrary to the established practice on an occasion such as this, as indeed is illustrated by the speech of his noble and learned friend Lord McCluskey on a similar occasion.
§ Lord Beswick
My Lords, may I ask the noble Lord to accept that if he goes further back in his researches he will find the the practice then was always to have a debate on the Finance Bill?
§ Lord Cockfield
My Lords, we are in exceptional circumstances. Where we are dealing with normal circumstances I accept what the noble Lord says, but these circumstances are exceptional.
§ On Question, Bill passed.