Wealth Creation and Taxation

HL Deb 23 November 1983 vol 445 cc271-315

4.45 p.m.

Debate resumed.

Lord Ezra

My Lords, I join the noble Viscount, Lord Whitelaw, and the noble Lord, Lord Barnett, in congratulating the noble Lord, Lord Boyd-Carpenter, on choosing such an important subject for debate today. He has worded the Motion in such a way that we need not be too repetitive. It covers such a wide range of important topics that I believe most of us will try to choose one particular angle on which to concentrate.

We have heard with commendable brevity from the noble Viscount. Lord Whitelaw, what is the Government's policy. We had what I believe many of us felt was a brilliant contribution on tax reform from the noble Lord, Lord Barnett. It is a subject on which, in view of its importance, I hope that we shall be able to hear him many times in the future.

As I listened to the noble Lord, Lord Boyd-Carpenter, as someone who for many years worked in a nationalised industry, I felt tempted to respond to some of his remarks. He was kind enough to disarm me by referring not only to my role; he also reminded us that at one time he, too. was the chairman of a nationalised industry—and a very distinguished chairman he was. I should like to see the day when noble Lords opposite can perhaps speak about nationalisation with rather less fervour than they do at present. It seems to me that every time the word "nationalisation" is mentioned, they see a colour which is not normally associated with them. I feel that we should be getting to the point at which we can look at this whole question rather more objectively.

It is a pity that when the weaknesses of nationalisation are referred to, certain industries only are mentioned—those which are in difficulty, such as steel, coal, shipbuilding, and the railways. But these industries are in difficulty in varying degrees throughout the world. Little mention is made of the sectors under nationalisation, such as telecommunications, electricity, gas, and the Post Office, which, measured in profit and loss terms at any rate, are very successful. Neither is mention made of the contribution coming from many of these industries. Sometimes size is an advantage. It enables a considerable degree of concentration of technical research and development to take place.

I refer to the industry with which I was associated. The mining industry has made remarkable progress over the years since the war in massively reducing the incidence of accidents to a point at which we are the least accident-prone mining industry in the world. We have made enormous progress in dealing with pneumoconiosis to the point at which the incidence of new cases is very low indeed. We have in our mining industry won the Queen's Award for technical innovation in dealing with this matter. Then there is the technical development in methods of mining itself. I hope that the day might come when a rather more balanced view will be taken of the contribution that these industries—all of which are great in their own right—make to our affairs.

But I would rather not dwell on that aspect too long. I feel that there are other temptations held out to us in the Motion put before us by the noble Lord, Lord Boyd-Carpenter. The aspect which tempts me to speak on for a little while is wealth creation, which, after all, is the nub of the whole issue raised in the Motion. Here is a problem which we would do well to ponder in order to consider how we can start to create real wealth in this country at a rate which will enable us not only to see living standards continually improved, but to make adequate provision for those people who, through age or infirmity, need to be helped.

We only need to consider the great pressure on social expenditure these days to realise that the creation of wealth is not proceeding at a rate which enables us to do all that we should like to do. At the root of this question of wealth creation, I feel, lies the question of capital formation. The record of Britain in recent years in capital formation is dismal indeed. There are many figures that I could quote, but I shall quote just a few. I shall take the period from 1979, when the recession set in, to 1982. If one takes the rate of capital growth—fixed capital formation in manufacturing industry—one sees that in that period it actually declined by 34 per cent. If one takes the construction industry, one sees that in that period it declined by 49 per cent. If one takes the transport industry, one sees that in that period it declined by 36 per cent. If one takes housing, one sees that it was 26 per cent. Admittedly, in some of the sectors there is now some improvement, but I have taken the last figures available for a full year.

The question is, how can we deal with this situation? If we do not deal with this problem of capital formation fairly soon, I think that we shall get into very great difficulty.

Last week we had a debate on our overseas trade, and in analysing the figures of this trade it was possible to discern what seems to be the consequence of the lack of capital investment in our manufacturing industry. For the first time for very many years—we were told from the Government Benches we had to go back to 1931—we have actually seen the emergence of a substantial deficit in our manufacturing balance of trade. That upsets the whole of our balance of trade because we know that the great benefit we are getting from oil at the moment is going to start slowly declining before long and unless we can make sure that the contribution to our overseas payment from manufacturing industry, as well as the very important contribution made by invisibles, is built up to take over from the contribution now being made temporarily by oil, then we shall indeed be in great difficulty.

We come to the question of how we might deal with this problem. There is nothing new that one can say here because it has been amply and vigorously debated in recent years. Indeed, the CBI at their Glasgow conference went through this subject in great depth and detail and the conclusion that was reached there, if you read summaries of the speeches as they appeared in the press and listened to those who talked on radio and television, was that they were getting increasingly worried about the lack of resource which was finding its way into capital formation.

What emerges from this debate in my opinion, among those who are involved with industry, whether public or private, is that they feel that we have not yet got the conditions under which this lack of capital formation can be put right. In the private sector there is still the feeling that there are impediments in the way of the burden of real interest rates, national insurance surcharge, and the many things we have talked about so many times in this House. In the public sector there is this question of the infrastructure which has also been fully debated.

What I worry about when I hear about all these cuts in public expenditure is that it does seem to be having such a very substantial impact upon capital formation, which seems to be the wrong objective. The trouble about this whole issue is that the dividing line between desirable investments in the public and private sectors is a very thin one. The interdependence of the two sectors is very considerable indeed.

In the days when I was responsible for the coal industry and we invested substantial amounts in new mines, we knew that that investment would immediately have to be undertaken by the private sector, and I do not believe that this interdependence of the two sectors in relation to capital formation has been sufficiently realised.

We know of the Government's great reluctance to enable public expenditure to rise in any aspect. Nonetheless, I think here is a matter which must be looked at very seriously. As there is interdependence, can we not perhaps deploy some creative thinking as to how these necessary investments can be financed which could involve both sectors?

We were told some years ago in the coal industry that if we could find suitable ways for injecting private capital into some of our projects which came out with the Government's limit on our capital expenditure, we could proceed with them, and the Treasury gave us some ground rules: so we worked very hard at finding ways round this problem because we now knew that we could attract external capital. It ended up by being some sort of parlour game. The more we thought we found solutions on the basis of the Treasury's ground rules, the more they seemed to change the rules. After a time I am afraid we had to give up.

We heard only the other day of a rather imaginative proposal which certain private contractors had made to undertake an extension of the road building programme. Reports in the press have already indicated that the Treasury are likely to turn that down. I wonder whether we cannot try to persuade our friends in the Treasury that perhaps they have a responsibility for a bit of creative thinking from time to time and not just to tell other people to be creative and then sit back and turn down their ideas. We have a real problem here. There must be a solution to it. We need to get more capital formation in the infrastructure in such a way that provides us with much needed resources and facilities and at the same time stimulate a whole great tranche of the private sector. There is money ready to be put into these projects and surely it cannot be beyond our wit and capability in this highly computerised, technological age to find a way round that.

The noble Lord, Lord Boyd-Carpenter, in his speech referred to the criticism that had been made about selling off national assets to meet current expenditure, and I think I am right in saying that he also believed that anything realised from the sale of these national assets should go into asset formation. I hope I understood him correctly.

Lord Boyd-Carpenter

Entirely.

Lord Ezra

If so, I should like to say that I heartily concur with that sentiment and I should like to make a small suggestion here. If we take our minds to the Province of Alberta in Canada, a Province which has been blessed with very substantial mineral resources, they realised that those resources would not last for ever: a large part of the proceeds which the Government gained from the exploitation of those resources they put into what they called a Heritage Fund and that fund has been used to develop longer lasting industrial activities.

It is worth consideration whether the amounts realised from the sale of national assets should not be put into a capital formation fund for the stimulus of much-needed investment either in the public or the private sector by whatever desirable means might come to hand. At least we should then know that we are not losing out in this, that we are not transferring capital assets from the public to private sector in such a way that they would simply mop up a large amount of the resources at that time available in the private sector for capital formation.

This is, I am afraid, what is likely to happen if we have such a large issue of new shares as the Telecom's privatisation will involve. It means that a large part of the resources allocated by the institutions for equity investment will be mopped up. It is not an answer to that, as I have heard said, that if the Government did not get the money this way they would have to do it by gilts issues, because the two markets are totally separate. Anybody in the banking world will know the way the institutions work is that they allocate certain resources to one market and certain resources to the other, and I do think that we shall find that the substantial sales to the private sector of public sector assets that are coming up could do harm to this objective to stimulate investment and capital formation. This is another issue to which we might address ourselves in the wholly laudable objective of creating real wealth in this country.

I do not want to take up more time. I wish to concentrate on making two proposals arising from the very important Motion put to us by the noble Lord, Lord Boyd-Carpenter. These are, if I may remind you, that we should find some way of making sure that the funds released from the sale of assets are used for the creation of other assets, perhaps by allocating them in a specific way. I should also like to suggest that we give some creative thinking to ways in which public and private investment can be brought together to finance desirable infrastructure projects.

5.1 p.m.

Lord Maude of Stratford-upon-Avon

My Lords, it was represented to me some time ago that the habit of elderly graduates from another place exclaiming the happy coincidence that they had made their maiden speeches there here, so to speak, had become a rather boring commonplace, so I thought that I would not mention that today but just say that it is nice to be back after all these years among so many old friends in all parts of the House. It is a particular pleasure to have the opportunity to make my maiden speech on the Motion of my noble friend Lord Boyd-Carpenter. I do not think that it will embarrass him, since he wears his years so lightly, if I say that I have known him for more than half a century and have learnt much from him over the years. It was good to hear him still in such excellent form today.

Important as capital formation, investment and the ownership of industries are, I want to deal with another form of resource today. I believe that the greatest and most important resource that any nation has is its people and that any restrictions or controls which prevent their proper employment in productive and satisfying work are to be deplored. There are today far too many of these restrictions, particularly those which deter small businesses from taking on one or two more workers. This is particularly true of the self-employed, the one-man business. I know at least half a dozen in the country area where I live, independent craftsmen who are grossly overworked, who are booked up with jobs months ahead and who would be delighted to be able to take on one or even two assistants. But the restrictions of the extra paperwork that becoming an employer involves are too complicated and costly to make this attractive.

One has to consider first the position of the wife of such an individual. She is probably sitting by the telephone most of the day doing the book-keeping, planning out the orders and certainly coping with the VAT during her evenings and at week-ends. Just the sight of the PAYE tax tables and the accompanying forms on top of them is enough to make the idea of employing someone singularly unattractive to her at least. A survey by the Economist Intelligence Unit recently showed that the United Kingdom came almost bottom of the European league in measures taken to help profitability of small businesses. It was only in tax incentives that it came near the top. I would give credit to the last Government for the tax incentives they gave to help firms start up and expand; the loan guarantee scheme, the business start-up and expansion schemes, and so on. But the PAYE and national insurance system is a very severe burden on very small firms.

The fact is that the Inland Revenue does not like the self-employed. For obvious reasons, it takes longer to get in their tax money than it does tax from those who are subject to PAYE. So it came about, at the time when the last Government were trying to encourage the self-employed, that the Inland Revenue was busy forcibly reclassifying self-employed people as employees. It is estimated that no fewer than 107,000 self-employed people were so forcibly reclassified during the lifetime of the last Government. This is very hard on the one-man business which starts, as so many of them do, with only one customer or client. If he is forcibly made to become an employee of that customer or client, he finds it much more difficult to get others. It stifles the growth of that business at the start.

But it is when the one-man business takes on an employee that the cost burden rises most sharply. The costs of acting as unpaid tax and insurance collector for the Government are very regressive. The cost of collection per employee is many times higher for the smallest firm than for the largest. Whereas the very large firm gets a substantial offsetting cash flow from the PAYE system which may far outweigh the collection cost, the very small firm benefits very little indeed. It should surely be possible to devise some method of offsetting the burden of collection costs for very small businesses with one or two employees. But PAYE and national insurance are far from being the only deterrents to employment.

I do not propose to discuss today the vexed question of wages councils, which generates a certain amount of heat and which might be thought a shade too controversial for a maiden speech, important though the problem is. But becoming an employer brings much trouble in its wake. There are the provisions on unfair dismissal and redundancy. There are the complicated laws and regulations on race and sex discrimination and equal pay. The employer is likely to come to the notice of inspectors under the Health and Safety at Work Act 1974, the Factories Act 1961, the Fire Precautions Act 1971, the Offices, Shops and Railway Premises Act 1963, and Heaven knows how many more. At a certain size, the firm may become liable to pay a training board levy, though one will not get very much benefit from it. All these were well intentioned measures, but together they constitute a nightmare for the very small business or the one-man business contemplating taking on an assistant.

It might have been hoped that the youth training scheme would have helped in the respect, but I am sorry to say that the Manpower Services Commission has been pretty bureaucratic and restrictive about this. Even under the previous schemes it often refused to include one-man businesses in the scheme at all on the grounds that the young person could not be adequately supervised. Indeed, the problems that the youth training scheme was designed to cure are for the most part problems that have been created by Governments themselves. I submit that it really is time that this Government made a genuine effort to remove the bureaucratic burdens and restrictions on very small businesses and to simplify the tax system to remove injustices.

It may seem an unnatural reaction, but I do have some sympathy with the Inland Revenue. They have a job to do and they have to administer the system with equality for all. But I believe that a system that tries to treat everyone alike may end by doing justice to no one. I believe that more flexibility and understanding would be welcomed, for it is true, I am afraid, that some income tax and VAT collectors do unduly harass small businessmen.

In conclusion. I am convinced that the scope for increased employment is great if some of these deterrents can be eased. There are about 2 million self-employed people in this country and about 1½ million very small businesses. Many of these could use one or more extra workers. Indeed, some could be the great firms of the future once they get off the ground. It is salutary to consider from what small beginnings some of the great enterprises of today sprang—for example, Mr. Morris in his bicycle shed. I seriously doubt whether many of them would have got off the ground at all if they had had to contend with the complications, the regulations, the restrictions and the Government-imposed costs which confront the small businessman today. The need for action is obvious and I hope that the Government will rise to this challenge, and soon.

5.12 p.m.

Lord Beswick

My Lords, I have the privilege of being the first to offer congratulations to the noble Lord, Lord Maude of Stratford-upon-Avon, and I do so with sincerity and alacrity. Having graduated with him to this Chamber and having followed his career, although occasionally at a distance, in public service, I have the utmost admiration for both his intellect and his integrity. However, I find it a somewhat frightening thought when he tells us that together he and the noble Lord, Lord Boyd-Carpenter, have a century of mutual experience. The fact that for 50 years they have been sharpening up each other's wits and intellects must make us all the more careful. I am sure that I speak for every one when I say that I do hope that it will be possible for the noble Lord, Lord Maude, to come and speak to us as frequently as he wishes.

The noble Viscount the Leader of the House paid a most pleasant compliment to the noble Lord, Lord Boyd-Carpenter. I would echo that compliment about the most formidable powers of oratory which the noble Lord possesses. I am sure we all have to discipline ourselves to ensure that the force of the argument does not cloud the substance of what he endeavours to put over to us. I was a little surprised to hear him say that he agreed with us about the lack of wisdom of selling off national assets and using the proceeds as current revenue.

In the last week or so there have been a number of Questions put to the noble Lord, Lord Cockfield, speaking for the Government, and I do not recall that we had any great support from the noble Lord, Lord Boyd-Carpenter. Certainly the noble Lord, Lord Cockfield, had absolutely no doubt about the wisdom of this action. It will be remembered that ultimately he fell back on the argument—and I quote from the answer that he gave to the noble Lord, Lord Diamond—that there was, "a fundamental difference of philosophy".—[Official Report, 16/11/83; col. 1281.] I fear that there is a fundamental difference of philosophy, and I find it difficult to follow the noble Lord, Lord Boyd-Carpenter, when he says that the present Government have strayed a little too far towards the path of impartiality. There is a difference between us—and I think that I speak about this matter within the context of what the noble Lord, Lord Maude of Stratford-upon-Avon, said about the absolute need to consider the investment in people. The fact is that since this Government came to power the division between one body of British people and another is wide, is widening, and ought to be narrowed, and is one of the most unfortunate features of the present political scene.

I have to say, sadly, to the noble Lord, Lord Boyd Carpenter—for whom I have reason to have the greatest respect—that his speech and the policies that he propounds will widen still further the gaps which are developing between us. There is, tragically, a widening gap today between those who have a job and those who do not have a job. For all the restraints on pay settlements, current earnings continue to go beyond the RPI, while at the same time, by one device or another, payments to the unemployed fall below the rise of living costs. Of course there has been a consumer boom. Some of those in work are doing very well indeed.

But there is another widening gap between the low and the high wage and salary earner. Every percentage settlement applied across the board has the effect of widening that gap. A week ago the noble Lord himself complained about a 6 per cent. wages board award. However, it is not the percentage figure that matters, but the base to which it is applied. Indeed, 6 per cent. on the wage of a shop assistant or a health service worker will mean about another £5 a week, but the same percentage on the wage of a man earning £20,000 a year means another £1,200 a year—over 400 per cent. more if we want to fool ourselves with percentages. Yet for the low and the higher paid worker the cost of a pint of beer, or a packet of sugar, or a pound of potatoes, or the price of gas and electricity, is almost exactly the same.

If we are considering wage rates and the need to increase motivation and productivity—which is one of the themes in the noble Lord's Motion—we might consider another phenomenon of the current scene. Payments to those who dig our coal, deliver our letters, nurse our sick, or bury our dead, are examined in detail by the press and in this House. But only half of wage and salary earners in this country are covered by agreements which are publicised or by trade union negotiations. Among the other half, in which the people are not members of trade unions, there has been in the last year or so a quite remarkable wage explosion.

I suppose that £50,000, £60,000, or £100,000 a year for a footballer might be justified on the basis that he plays only for a few years, though I am not sure that this applies to a man who only comments on football, yet who is said to earn £80,000 a year. In my view that type of thing is bad for football: but it is part of this new, commercial entrepreneurial spirit which the latter-day Tories suggest will now save Britain. Probably more serious than the payments to a few footballers are the claims which are now being made on society by those who presently operate in the brash, new financial organisations. A year or two ago, before this Government came to power—and the noble Lord, Lord Ezra, might confirm what I say—a salary for the head of a great manufacturing organisation was held to be reasonable at £25,000 or £30,000 a year. But that is now chicken feed, especially for those who are in finance or in public relations and who are not conspicuously creating real wealth. I read recently that Merrill Lynch were prepared to pay up to £200,000 a year for an analyst. Maybe that is exceptional for that kind of desk work, or maybe the report was exaggerated. But I have a list of salaries now being paid of between £250,000 and £500,000 a year.

The noble Lord, Lord Boyd-Carpenter, spoke understandably—and I so much agree with him—about the need for both incentives and motivation. But I have said before, and I say again, that a society which relies on that order of motivation is not a society which will endure.

There is another gap which is relevant to this Motion—the gap between those who depend upon, or are compelled to resort to, the social services, and those who pay for them. The noble Lord wishes to reduce the burden of taxation, but what is a burden to one man is a source of relief to another; and both live in the same society. Let me say at once that there are some enormous items of expenditure which I think we must all regret. Apparently, Fortress Falklands is costing us £600 million a year, though the runway is extra. The bill for Northern Ireland must be even higher. There are hundreds of millions of pounds going to waste on the scandal known as the common agricultural policy. And the item which is really causing financial trouble is the economic policy which brings about unemployment and makes a potential taxpayer into a drawer of the dole. We could usefully discuss lightening those burdens, but I want to put tax-paying into a different context.

The other day we must all have read of a worker in a field who had his arm cut off. He picked up the arm and went for help, and at the national health hospital he had the limb sewn back on. We must all marvel at that man's courage. But ought we not also to rejoice in the fact that we have built a society which can provide a service of that kind? The cost of that new surgical equipment is one cause of the rise of health costs, but we ought not to talk of a burden. Is it really a disincentive to us if we work to create a society of that kind?

I think it can be shown that some cuts in social services can be bad economics. Next week I shall ask an Unstarred Question about the care of those among us who are mentally ill, and I think that it will be possible to show that an increase of expenditure on local government care services would enable recovering patients to be released earlier from hospital, with a consequent eventual net saving to the public purse, as well as an increase in human happiness. There are a number of ways in which an increase now in social services, instead of a cut, can mean a saving in the years ahead.

I again turn to the subject on which I started; namely, the sale of assets which were previously held in common to limited sections of the community. More and more people are coming to realise, with the noble Lord, Lord Boyd-Carpenter, that it is unsound business to balance the housekeeping accounts by selling off bits of the house; or maybe I am not putting that as strongly as I should for it seems from last week's Statement that £2 billion has been raised by selling off entire houses—and at up to a 50 per cent. discount on market values.

I do not believe—and in this I agree with the noble Lord, Lord Ezra—that a crude argument of public versus private enterprise is helpful. I believe that there is a need for both. I have myself worked in both. I am in favour of a mixed economy. Not the least damaging consequence of the Government's policy is that it has diverted thought and action from getting the best out of both the public and the private sector.

There are three areas of relationships within the public sector to which we should be giving attention, and where improvements are possible. One area is that of trade union relationships. It is possible to say that in the public sector union organisation is easier and the influence is stronger. This strength can be, and sometimes is, used to procure settlements more favourable to the producer than to the consumer. But the approach here should not be to try and get back to some Victorian concept of master and man, or to glorify market forces with the sanction of the sack. We should be seeking more than ever to secure a steady development of worker participation in management.

Alongside that approach we have to face the problem of wage bargaining. I have some experience of the practical difficulties of imposing from Whitehall a so-called incomes policy. With all those difficulties in mind, I still say that some attempt must be made to ensure that strength in negotiation is not confused with fairness. Overall fairness must mean that we do not try to restrict settlements in the organised half of the national workforce, while within the other half the doctrine of "grab what you can" still prevails. Moreover, in any consensus in the future I hope that there will be not only a minimum wage, but a maximum figure, too—a ratio between the highest and the lowest paid in the country.

Another area in which constructive improvement is possible is that of consumer representation and influence. For all the valiant efforts of the noble Baroness, Lady Burton of Coventry, there is still much to done there—and not simply in the narrow field of prices and service to the consumer, but also in the whole question of identity with the community as a whole.

There are private companies which would love to have the potential feedback from customers which is open to some national industries through consumer councils.

In appropriate corporations I am sure that we could have consumer representation making a positive contribution, not only towards an even more efficient service, and not only in curbing an undue tendency towards syndicalism, but also possibly in countering the bigoted anti-public ownership stance of the gutter press and, indeed, the more elegant criticisms and prejudices of Conservative propaganda. We need to ensure, and then to show, that the interests of the British people are identical with the industries which they own: and the consequence could be a very real incentive and motivation in those who work within those industries.

The third area of relationships in which, in my view, change is overdue is that between public corporations and the Treasury. If public sector management is less than totally resistant to a 51 per cent. sale of shares, it is because this means for them protection from Treasury frustration. The doctrine that productive investment in the public sector has a malign influence on the demand-supply situation in the economy, but that this does not apply if the national holding is only 49 per cent., surely is stretching dogma too far.

Along with others, including the noble Lord. Lord Ezra, I have already said that I am not disposed to pick faults in individual private companies. I do not need anyone to preach to me the merits of personal initiative. But what I shall argue is that if we are to have a properly balanced economy and a truly civilised society, then we need more, and not less, public investment.

Mr. Peter Rees, the Chief Secretary to the Treasury, said at The Times conference last week that: Privatisation was also the solution which produced the most efficient allocation of resources for investment". I wonder whether post-war experience really proves that. The noble Lord, Lord Boyd-Carpenter, made great play of the point that increased profits from some of those organisations have now gone from the public into the private sector. But he knows as well as I do that a company does not make increased profits in one year as a result of the decisions taken in that year. In all those cases the investment when under public control and public ownership had been ample, and those investments are now paying off, as they should have done in either case under public or private control.

Apart from that, does the noble Lord really tell us that we should have the present basic energy industries, as efficient as any in the world, if they had been left after the war to private capital? Should we have had the same massive conversion to North Sea gas? Would the rural areas in the United Kingdom have had the same electric power, post, or telephone services if the market forces dogma had prevailed? Of course not.

Long-term investment in basic manufacturing industry just does not appeal to private capital. We have seen this past few days something of the money markets' idea of social priorities. They poured £500 million into the flotation of a casino. The issue was over-subscribed 55 times. The week before BAT announced that they had surveyed the economic scene and decided that the £700 million that they had to invest would go into the financial sector. I have no doubt that that was wise from the point of view of the shareholders of British American Tobacco, but from the point of view of Britain it was not so good.

In the years I have spent in this House I have learned to hold in great regard the readiness of colleagues with vast experience to identify the issues which will really shape our national character in the years ahead. In the debate of 9th November on the Health Service I was especially impressed by the words of the noble Lord, Lord Richardson, a former president of the General Medical Council, and who is never concerned with short-term political arguments. He spoke of, "the very great threat" which confronts our teaching hospitals: and of St. Thomas' s in particular he said that if present projections are applied, it will amount to the extinction of St. Thomas's…as a national centre".—[Official Report, col. 868.] The impression made upon me by that was heightened because in the same week, as it happened, I had sat at lunch next to the head of one of Oxford' s colleges. He told me that Oxford could not complain of their allocation from the UGC, but he went on to say that the overall economies meant that they were no longer attracting talented young people to an academic career. "If this process continues", he said, "we shall not have a university of international standing at Oxford by the middle of the 1990s".

If we get tax cuts now—the tax cuts which the noble Lord is demanding—we might well step up the current boom in video sales. But Britain would be better off if we had not cut the home improvement grants. The allocation of resources by the private market might well mean that we get a super casino in the West End, but should we not all feel much prouder if the standing of Oxford was maintained and our teaching hospitals were preserved?

It gives me great encouragement to think that more people are beginning to see the implications of the present Government's economic policy. Maybe this is what Peter Walker was getting round to saying as reported this morning. Recently I have derived even greater hope from the feeling that the new leadership in the Labour Party would soon be putting this new philosophy into practice.

5.35 p.m.

Lord Orr-Ewing

My Lords, I should like to start by adding my warm congratulations to the noble Lord, Lord Boyd-Carpenter, who opened this debate. For us all, wherever we sit in the House, that was a speech that was such a tour de force that we shall long remember it as a high point in 1983. I should also like to add my congratulations to the noble Lord, Lord Maude of Stratford-upon-Avon, and old friend from a long period together in another place. How right he was to concentrate in such an effective maiden speech on the problems of the small businesses. I should like to endorse everything he said. I hope that this Government are not running out of steam on that front. We started with great energy, great enthusiasm, and we need to keep it up, because if pressure is not kept up the Treasury will have their way and tax them out of existence.

It is right to have a debate of this nature on this subject at this moment, because the public accounts for the coming year have just been published in a grey paper, and it is desperately important that we should consider where the wealth creation is going to come from and how we can help it in the future. I shall not repeat it, but there is much to be said for what the noble Lord, Lord Boyd-Carpenter, said in his opening speech about the heady days of the 1930s. I was re-reading recently—I have it here, but in the interests of brevity I shall not quote it—Let Us Face the Future, the programme on which the Labour Party won the 1945 election. All the quotations are a little hollow today in that almost every forecast about the service being better and the price being lower to the public was wrong.

They are not the only people who got it wrong, by the way. A programme like that goes ahead with enthusiasm, but one looks to see what Lord Beveridge said when the National Health Service was set up, of which so many people have spoken, and which can go on expanding and improving provided that we have a healthy wealth-creating sector. It is strange to think today that he forecast that the cost of the Health Service in its first years of operation would be about £70 million, but that it would be a reducing cost because the health of our nation would steadily improve and there would be fewer people seeking to go to our hospitals. That is a forecast which is so amazingly wrong that it is now costing £14,500 million, not £70 million, and employing, by the way, 828,000 people.

Looking at the results of the nationalised industries—and there are some 20 of them and they are all different in many respects such as size, position, centralisation, subject and everything else—it is broadly true to say, as has been said in this debate. that prices have regularly increased rather more rapidly—considerably more rapidly in some cases—in the nationalised industries than the RPI has increased. It is also sad that the productivity of labour in the nationalised industries—and perhaps restrictive practices that go with that—has not matched up. The employment costs of gas—I was studying them recently—are up by 38 per cent. more than the employment costs in the private sector. Coal is 21 per cent. more than in the private sector, as an average. Even in telecommunications and electricity they are up 18 per cent. more. Therefore, although big investments have been made in many of these fields, it has not unfortunately yet been matched by big improvements in productivity.

It is important that we should discuss the public sector from time to time, the public industries particularly, because they represent exactly a tenth of the total United Kingdom gross domestic product. They also employ 1,500,000 people. So on any score they are of considerable importance. Of course, they also dominate some sectors of our economy—sectors which are vitally important infrastructure to British industry. The whole of transport, energy, communications, road, rail, air, telecom, steel—all these industries are in the public sector, as well as shipbuilding and part of aerospace, and therefore it is a worthy subject to discuss.

I am sad in a way that noble Lords opposite, who have not made desperately partisan speeches, have not come forward with any constructive ways in which they believe the performance of the nationalised industries might be better. I think that that is sad. I do not blame the managers or the work force in any way. I, like the previous speaker, worked for a national monopoly, the BBC television service, for many years. It was rather more fun in its early days; it has probably become more bureaucratic since then. I also worked in the private sector for many years. I do not criticise in any way. I find that people work in nationalised industries with exactly the same dedication and loyalty. The very size of the organisation sometimes has a repressive effect on their energies and ambitions.

We have to go on trying to prod the nationalised industries because they will long remain monopolies, even if all the ambitious proposals for privatisation come about. It will leave many of the twenty untouched. We must go on prodding, probing and encouraging the use of productivity measures, of comparative figures between one and another and among the regions of a single organisation. One should carefully monitor the amount of research and development money which is going back for the future of those industries. The reaction time and the innovative process should also be examined, because if a decision has to go through a number of layers or strata before it is endorsed it will take a long time and may lose its thrust in the process. Capital expenditure has long been monitored by successive Governments.

One of the astonishing things when we discussed British Telecom recently was that it turned out that the organisation has only one profit centre. Here is an enormous organisation by any standards, with no knowledge of certain facets. It could not tell whether public kiosks were making a loss or a profit. It did not believe that there were losses as some people had suggested, but there were no figures to say so. Now two large accountancy firms have been put in to British Telecom to see whether they can start some cost centres and begin to get some facts on the business which is managed. It is a sad fact that it is said the processes will take a further two years before there will be any figures by which efficiency can be measured.

It is wrong to say, as one speaker did, that British Airways has not been livened up by the threat of privatisation. It is true to say that British Telecom has changed out of all colour, not just from red to yellow. It has really woken up. One of the problems for the small private companies is how they will compete with British Telecom, which is a very lively outfit and prepared to spend almost any amount of money advertising. A Member in another place said during the Committee stage of the Bill, which I read recently, that £17 million had been spent in launching Merlin, one of the new projects. I know that £1,000 has been spent in Scotland for every paging gadget that is sold—£1,000 for every gadget sold, though they cost only £100 each. British Telecom is not short of money or energy; just the mere whiff of competitive grapeshot has had a salutary effect.

All Governments since the honeymoon of Socialist days of 1945–51 have attempted to grapple with the problems. They have put forward a number of solutions. I remember new formula after new formula. The original one was breaking even taking one year with another. That did not work out very well because we never came across "the other"; we always came across the uneven one. Then there was the capital investment which should only be undertaken if there was rigorous "discounted cash flow"—the buzz word at that time—so every capital investment project had to be examined under this score and unfortunately we never got around to examining it.

Then there was Government control and interference. Every time one tried to insert a whole layer in the Ministry responsible, the people concerned had first to learn about the business then had to try to control, as someone recently said, and waste an awful lot of time of the management in answering questions to educate the people who were their official bosses. Governments of all persuasions have tried.

The introduction of external finance limits has had some salutary effects because it has meant that if one can generate the profits within one can undertake more ambitious capital programmes and research and development for the future. That is a healthy discipline and probably the best we have had for some time.

We all have a duty in the House, wherever we sit, conscientiously to seek routes for improvement. In 1984 there are two areas which we understand are to be privatised. I like others do not like the word, but it describes the efforts. It is sad that in the case of British Telecom the DTI, the Ministry responsible, estimates that, despite all the objections from the POEU, 97 per cent. of telephones will remain under the aegis of British Telecom and only 3 per cent. will be won by Mercury, the rival network which is to be set up. That does not seem to be anything like true competition when one remembers that if one has technically 30 per cent. of a market one is subject to a Monopoly investigation. What happens when one has 97 per cent. of the market set up under a statute?

What is sad, particularly in view of what my noble friend said about small companies, is that 97 per cent. goes to British Telecom and 3 per cent. to Mercury, and all the other fringe services—the 47 little companies who provide paging, mobile telephones and message answering services for doctors and other people who need them—are apparently unthought of. No one has encouraged them. In fact their growth is being inhibited by forbidding them to have the frequencies which they need with which to expand and to create the jobs.

Lord Strabolgi

My Lords, why do it?

Lord Orr-Ewing

My Lords, I am delighted that people are doing it because I believe a pace-setter is required and Mercury will act as a pace-setter for British Telecom. I even think that the Hull telephone exchange acts as a pace-setter because that is one yardstick by which one can measure the efficiency of telephones in this country without having to go to France, Sweden or anywhere else. A pace-setter, whether or not one is the best 1,500-metre man in the world (I was not) is a very valuable person to have because one can measure oneself against his efficiency.

I was sorry to read that British Caledonian will not he given the chance to grow. I still think that 80 per cent. of the market in British Airways hands, however good it is. and however good its administration, is too much and 10 per cent. is too small a portion for British Caledonian. I should have preferred to see it more equally divided.

That brings me. finally, to what we intend to do not only with the industries which may be privatised in 1984 but with all the others. Let us suppose we privatise two in 1984; that still leaves 18 others. Should we perhaps be strengthening the Monopolies and Mergers Commission? When we set it up there was a feeling that it should deal with both monopolies and restrictive practices. I think it should, and I think it should be enlarged and modernised in the light of experience to do that.

We also have the Office of Fair Trading. I know it is struggling, and sometimes it is successful, but it is a slow moving outfit. Can it really investigate whether trading is fair between the national and the private sector? In the case of British Telecom there is to be Oftel, the Office of Telecommunications; a new outfit to control. I wonder whether we are giving all these organisations sufficient strength and sufficient teeth to do a job and create a competitive economy within the national industries and mixed industries where we have both. It seems to me that we want to examine these methods most carefully, otherwise all our efforts to privatise will not be successful.

5.50 p.m.

Lord Harris of High Cross

My Lords, I strongly welcome the Motion in the name of the noble Lord. Lord Boyd-Carpenter. It exactly reflects my own impatience with the failure of the Government to push on more rapidly in reducing the burden of taxation which has grown remorselessly throughout the whole of this century. If we look back to 1900 we find that Governments took 15 per cent. of the national income. By 1938they took 30 per cent. of the national income, by 1960 they took 40 per cent. and, through the 1970s, they took around 50 per cent. of the national income. I checked back with the Blue Book for 1982 which showed that for that year total state spending was£128,000 million of a net national income of £240,000 million. Those two figures tell us that central and local government and their various offshoots laid claim to 53 per cent. of all the income earned by the exertions and enterprise of this nation.

In a prudent world all this mounting public spending has to be financed from rates and taxes of a whole variety of kinds or it has to be borrowed from current savers and eventually to be repaid by future taxpayers. It must be obvious, even to such overflowingly generous and well-intentioned people as the noble Lord, Lord Beswick, that there is some limit to the amount of tax that Governments can take without doing more harm than good. This is a matter of judgment. Unlike the noble Lord, Lord Barnett, I judge that we have already gone beyond the bounds of prudence.

I would assert that, above a modest level, all taxes damage our economic performance in a variety of ways. Most people, despite what the noble Lord, Lord Beswick, has said, do not positively rejoice in paying higher taxes. There is no such thing as a free tax. We all know that local authority rates have rocketed, firms have been forced out of socialist city centres and sometimes, too often, have been forced out of business.

Lord Beswick

My Lords, I did not talk about rejoicing in paying higher taxes. I rejoiced that we had a system which could give the surgical treatment which a poor man needed. Does not the noble Lord also rejoice in that; and, if he does rejoice, does he not accept that it follows that we must pay taxes?

Lord Harris of High Cross

My Lords, we must go back and look at the record of Hansard. The noble Lord implied that people should take pleasure in paying taxes because it led to some good things of which you approved. I approve of some things that the Government do but I thoroughly disapprove of many other things where I can see that my money is wasted. So I cannot take pleasure in the total burden of tax that falls upon me. My argument is that income tax and national insurance contributions raise costs, depress efficiency, distort effort, make British products less competitive than foreign competition and so destroy jobs.

I was not impressed by the complacent comparison of the noble Lord, Lord Barnett, with European tax levels—and for a number of reasons. In the first place, the structure of our own income tax is, in my view, more onerous, especially on lower and higher incomes. Secondly, European earnings over the post-war years have risen a good deal faster than those in Britain; so that, despite rising taxes, take-home pay has risen faster in those other countries. Furthermore, Britain suffers from larger handicaps than France, Germany or even Sweden, especially in our troublesome trade unions and in the more extensive nationalisation. Therefore, we need all the additional help that we can get from lower taxes.

It is a fallacy to suppose that taxes do not matter because only some people are affected by their disincentive impact. The noble Lord, Lord Barnett, conceded that some people are so discouraged; and that concedes my point. The only dispute is how widely that particularly damaging effect runs. I wholly agree with the noble Lord, Lord Barnett, in his attack on taxes on lower income. I would say that before the war working class families like my own parents never paid taxes unless incomes rose to something like two or three times average earnings. Today income tax starts for many at levels nearer one-third of average earnings, and even below the entitlement level to supplementary benefit. It is no wonder that we hear of the unemployment trap and the poverty trap and so forth where people are discouraged from taking a job which would leave them worse off after loss of tax and benefits than if they had stayed on social security. As the noble Lord, Lord Barnett, acknowledged quite explicitly, we are literally taxing people into poverty and unemployment as well as taxing other people into the black market or the underground economy.

Another count against this great tax snatch is that by knocking-off almost 40 per cent. from take-home pay workers are encouraged to try to pass the buck to the employers by demanding wage and salary increases which firms cannot afford. The buck eventually has to stop somewhere, and it tends to stop on the backs of the creators of wealth. It is indisputable that all taxes are a negative transfer of goods and services away from individuals and towards the Government. The trouble is that higher taxes must, however marginally the noble Lord may think, reduce the flow of wealth which alone enables us to pay increasing taxes in the future.

A further disadvantage of high public spending which has not been touched upon is that no Government can give as good value for our money as we get when we spend it for ourselves and our families. The men in Whitehall cannot know and cannot really even care about individual preferences which differ very widely. They are inevitably inclined to spend other people's money just as though it was other people's money. I have a great deal of admiration for an unnamed noble Earl—and I went back to the Hansard of 7th November 1979 to check my recollection. On that occasion (in column 977) I found from a noble Earl who was then, and is now, a Minister, the following words: I rather like spending other people's money; it is one of the most enjoyable functions of a Minister's life". At that time I was deeply shocked. That was four years ago. Now I am a hundred years older and wiser and sadder; and I have come to accept that there is not much prospect of getting politicians to treat the taxpayer's money with the most especial respect which it should deserve.

Even if Ministers were recruited exclusively from the legendary one-armed Macedonian with sewn-up pockets, I would argue that it is impossible for public services to be as cost-conscious as private suppliers who have to compete to win customers. Even in the recession, we have seen that managements in local government, in education, and in health services have faced none of the market disciplines that have compelled private enterprise to improve efficiency by cutting out waste, ending slack working habits, reducing manpower often by 10 per cent., 20 per cent., or 30 per cent. without, in many cases, reducing output or capacity. The additional difficulty that has been touched upon is that state services and nationalised industries have over-powerful trade unions that have fought, often without scruple, to retain over every over-manned post and preserve every demarcation and restrictive practice.

I may say with respect to the noble Lord, Lord Ezra, that I think I heard him say that the National Coal Board had won Queen's Awards for some of its technical triumphs; but it would win no taxpayers' or customers' awards for its efficiency or its return on capital over a period of years.

The trouble fundamentally, which has been touched upon earlier, is that wherever any activity is plugged into Government all the pressures are for more spending. The noble Lord, Lord Barnett, would agree, I know, with this proposition in the light of his own excellent post-mortem on the years 1974 to 1979 when he was the Labour Chief Secretary at the Treasury. His remarkably readable requiem entitled, Inside the Treasury, is full of instructive revelations which I never cease to advertise in this House and before wider audiences. If his sales are doing well it is partly due to my advocacy. Early in his book he lamented—and I quote: The days had long since passed when I naively thought it would be easy to persuade my colleagues that two plus two really did make four". A little later he said: So many of my colleagues wanted to have their cake and eat it; even the most intelligent of them wanted both tax cuts and public expenditure increases". I think the noble Lord's colleagues are not so different from many Ministers on the other side of the House, but I think I can say with some confidence that at least the present Government have not been guilty of that degree of folly. I have no doubt that the present Chancellor would like to get spending and taxes down, even if Mr. Peter Walker and other Tory rustics and romantics are not entirely in agreement. Therefore, I would urge Mr. Nigel Lawson to persevere, and I offer this concluding thought: no single boon would do more for growth and employment prospects than a large and continuing reduction in the burden of taxation on workers, savers and investors. It is they—millions of ordinary and extraordinary people, not Governments of any party—who are the true source of Britain' s wealth and future prosperity.

6.1 p.m.

Lord Boardman

My Lords, like other noble Lords, I should like to congratulate my noble friend Lord Boyd-Carpenter on the introduction of this debate in his inimitable style. I also congratulate my noble friend Lord Maude of Stratford-upon-Avon. It is a joy to hear him once again, having listened to him with pleasure for many years in another place.

One matter which has not been mentioned so far in the debate is the dramatic change which has taken place since 1979. Prior to 1979 there was a sort of ratchet effect operating which made it appear quite impossible ever to shift back from increasing state intervention and state ownership to greater reliance upon the private sector. But since 1979 that has been released: not an easy task. It says much I think for the courage and perseverance of the Government, and in particular of my right honourable friend the Prime Minister, that the reversal has been achieved. It has now become possible, for the first time for many decades, for there to be a shift hack to get a better balance between the public and the private sectors.

No-one should minimise the extent of that achievement. Lip service has been paid to the aim by previous governments over some 30 years. Previous Conservative Governments had pledged themselves to try to get back to a greater private sector and to prevent the increase in the public sector's erosion of so much of our activity; but the sum total up to 1979 was minuscule. There was I think a de-nationalisation of road haulage; there was a return of some of the pubs—the Carlisle Brewery, I think it was—to the private sector. The noble Lord, Lord Ezra, will remember that there was a transfer of the National Coal Board brickworks to the private sector; and there was a travel agency. But that was about the lot. Indeed, the balance tended to go somewhat the other way and, as the noble Lord, Lord Barnett, reminded us, we had the nationalisation of Rolls-Royce. I will not go into the circumstances of that but I am sure the noble Lord will well remember the responsibility that his then colleagues had for that sad state of events—

Lord Orr-Ewing

Hear, hear!—the RB.211.

Lord Boardman

My Lords, the reasons why there was so little shift back, the release of that ratchet, were manifold. There was massive resistance by the Labour Party and massive resistance by the trade unions in the public sector. Then of course there was the recognition that, these vast public monopolies having been created, to return them to the private sector would probably lead to a private monopoly which to many was and is unacceptable.

The consequences of the massive shift to the public sector, unintentionally, were economically disastrous. I believe that if we plotted the industrial decline of the United Kingdom since the war and matched it against the trend of increasing state intervention, we should find a remarkable correlation between the two graphs. The vast state-owned monopolies had an impact on the economy which has done grave damage. No Government have felt able to stand back and say: "Let us allow them to get on with their business". The levers of power which Government Ministers have in those industries are irresistible; and management, as my noble friend Lord Boyd-Carpenter said, had to act in a strange environment. The management of those industries, as my noble friend said, was often of a very high quality. Management at all levels in those nationalised industries are not blamed for the circumstances. They worked within an environment which made it impossible to apply the same judgments as applied elsewhere. They were directed by political considerations rather than industrial ones; pricing policy was not fixed upon ordinary commercial terms but upon its impact upon the RPI. Employment policies were fixed upon the effect, particularly concerning unemployment, in constituencies that might arise if what would otherwise be a sensible commercial decision was taken.

Management, as has also been said in this debate, had a blank cheque and they were free from the disciplines of the market place. I had ministerial responsibility for some of those industries for some two years and I know the frustrations suffered by management on the one hand and by Government on the other. In the middle there were the powerful public sector trade unions, determined to preserve their jobs, their place in the wage "pecking" league, and their restrictive practices. It was really a recipe for economic chaos and I suggest that the pudding has been proved in the eating.

I do not want to bore your Lordships with statistics, but I noted with interest and my usual pleasure the figures quoted by the noble Lord, Lord Harris. I will avoid putting figures to you, but since 1979, as I have said, the direction has been reversed. Some may say—indeed I believe I should myself— "too little and too slow". But to reverse the momentum of some 30 years takes some doing.

One may ask: what are the benefits of reverting to a greater part of our industrial and commercial activity being in the private sector? May I give one small illustration from my personal experience? The noble Lord, Lord Ezra, will recall, as indeed would the noble Lord, Lord Gormley, who is no longer in the Chamber, that the National Coal Board possessed a whole lot of brickworks—old, not main line activities, loss-makers, starved of capital. To prise those out of the National Coal Board was a major effort. Every opposition was put forward, I am sure with the very best of motives, from the noble Lord, Lord Ezra, and the noble Lord, Lord Gormley. The resistance was great, but it was achieved and they were prised out and sold to the private sector. Perhaps I may just finish this sentence and then I will gladly give way to the noble Lord, Lord Ezra. They went to the private sector, to a company of which some years later I became chairman. I may say I am no longer chairman. Those brickworks are now the most modern in Europe; they are highly profitable, using highly competent, efficient and well-paid staff; and they are making a very significant contribution to the nation's economy and welfare.

Lord Ezra

My Lords, I thank the noble Lord, Lord Boardman, for letting me speak on this question of the brickworks. If I may, I should like to correct the record slightly. I should also like to say that our relations with the noble Lord were always amicable while he was a Minister. The point is not that we did not want to sell off the brickworks; we wanted to get a good price for them. It was my task to nurse those brickworks, and I spent some years on it, to the point at which we thought we could profitably dispose of them, which I am glad to say we did. We disposed of them because it did not seem to us to make good commercial sense to go on operating a brickworks which we had inherited from the old mine owners.

Lord Boardman

My Lords, of course I accept the noble Lord's interpretation. But what he has said endorses my point, which is the desirability of getting that type of peripheral activity away from the main line activity and back into the private sector, where it can be managed more effectively. The Government are moving in this direction and I congratulate them on what they are doing with British Telecom, British Airways and the like. But these large denationalisations will take time. and I ask my noble friend to consider urging the nationalised industries and the public sector to look through all the bits and pieces that they have on their books, which are not part of their mainline activity.

Every part of the public sector should be required to reveal all the resources that it employs, all the jobs that it does, which are not essential to that mainline activity. For example, as the noble Lord, Lord Ezra, is in his place, I ask: why should the Coal Board have investments in builders' merchants, and why should the electricity and gas boards have their showrooms? Are they essentially a mainline activity? Is a direct labour force the most cost-effective way of maintaining our roads, and so on? These are questions which should be asked. I believe that the answers will reveal massive barnacles on the hulls of these vehicles, slowing down progress and wasting resources.

It is not something which applies only in the public sector. It applied throughout much of the private sector. In more prosperous days, large companies accumulated masses of bits and pieces. Due to the recession and the need to clean out and release what resources they can, many of them—I hope all of them—have looked at their "bottom drawer" and have seen what they could turn out. The recession has forced them to divest and many of these divestments from the private sector have been to very successful management buyers.

Now is the time to get this divestment through. It is difficult to achieve in recession; but I believe, as my noble friend Lord Whitelaw said earlier, that the indicators are all hopeful. They are all going the right way. Inflation is down and will come down further; interest rates are low and I hope that they will come down lower; the growth forecast is 3 per cent.; public attitudes have come to accept the sort of change which is so essential; there is reasonable stability in exchange rates and cash resources are available from the private sector. That is where the financial services of the private sector make such a massive contribution to our economy and to our overseas earnings.

In this context, I declare an interest as I am chairman of a major clearing bank, and may I remind my noble friend that it is this part of the economy, the financial services sector, that has done so much to support and sustain the weaker parts of our economy; that has made, and is making, a greater contribution to the preservation of the international financial system, which is the greatest source of net earnings from overseas, as well as providing the means for British industry to compete in world markets.

If, as the press suggests, the Chancellor of the Exchequer is minded to impose further special penalties on this sector, he will be putting his whole philosophy in reverse. If the reserves of British banks are to be eroded by further taxation, then "the normal banking prudence", to which the Prime Minister referred in her Mansion House speech last week, will limit the support available to British industry as it comes out of recession, and the contribution to achieving the financial stability that is needed in those parts of the world which provide major markets and jobs. That task, if it is worthwhile—and is for the Government to decide—and if those circumstances arose, would fall on the public purse. For that reason, I say that it would be a reversal of the policies which the Chancellor and the Government are pursuing.

I conclude by congratulating the Government on the direction which they are taking. They are moving in the right direction. They have overcome the ratchet effect, of which I spoke earlier, and I hope that they will speed it up wherever possible. I also hope that they will look at all the peripheral activities which should and could be returned to the private sector. Finally, I put in a plea that they do not weaken the private financial structure, which carries the weight of British industry and commerce.

6.16 p.m.

Baroness Seear

My Lords, 1 should first like to join those who have congratulated the noble Lord, Lord Maude, on his maiden speech tonight, and on his emphasis on the development of and help for the small business, which has always been a subject of great concern to Members on these Benches. Your Lordships will be pleased to hear that I shall be very brief, partly because of the late hour and the number of speakers still to come but even more because, much to my alarm, the noble Lord, Lord Barnett, in the second half of his speech and with a great deal more eloquence than I could command. said nearly all the things that I wanted to say. This is a fate which, sooner or later, befalls all speakers coming later in the list, but it is slightly disconcerting when you believe that you have points to make which other people are less likely to bring forward.

The first part of the debate has concentrated on the question of wealth creation. It seems to me rather a pity that so much time has been spent on arguing as to whether wealth creation is better carried on in the private or the public sector. Underlying the discussion there has been emphasis, about which I think there is agreement on all sides, on the need for greater investment. But, surely, what is important is getting that greater investment and seeing that it is used to the greatest possible effect in both the public and the private sectors.

Indeed, as the debate has gone on this evening, and having listened to speakers from the other side of the House, I am tempted to put to the noble Earl, Lord Gowrie, a question which we used to put from these Benches in the days of the Labour Government. Do the Government still really believe in a mixed economy, or do they not? We always had protestations from the Labour Government, which we did not always believe, that they did, in fact, support the mixed economy. Is this still true of the Conservatives, and will they confirm that this is the position? From the tenor of many speeches tonight, one really begins to think that they believe there is no use at all for a public sector. However, of the importance of capital formation for wealth creation there can be no doubt, and I think there is very little disagreement inside your Lordships' House.

This leads me to say once again, as we have said so often in the Alliance, how extraordinary and regrettable it is that the Government are so unwilling to make funds available for essential capital investment in the public sector. I was very glad to hear that they are to spend money on building new prisons, which are long overdue. But, surely, money should be found for such things as home improvements, which we were told at the end of last week are to be cut, and for the repair of the sewers—a subject which we have pressed for a very long time. That is job-creating, essential work which must be done sooner or later. Surely, if there is one job which cannot be indefinitely delayed it is the repair of our 100-year old sewers, and, if it were done on the scale required, it would be very job-creating. The Government say that they cannot spend that kind of money without returning to inflation. We can only point out to them that the amount of money that it has been estimated to cost is less than the margin of error which is made regularly every year in the estimate of the PSBR. That is all I wish to say on the first part of today's debate.

I want to pick up and underline one or two of the points made by the noble Lord, Lord Barnett, about the incidence of tax at the lower level. I do not believe that anybody has so far made the point that we are not in fact a very highly taxed country. In the league table of taxation I believe that we are about half-way down the league table compared with other industrial countries. If we look at the level of tax in relation to productivity and unemployment, there is no correlation whatsoever.

There is no indication from the figures, when you examine them comparatively, that the existing level of tax contributes one way or the other to the major problems that we in this country face. But the noble Lord, Lord Barnett, was surely absolutely right to stress the appalling incidence of tax at the lowest level of all and to point our that, because of the muddle we are in and because of the way in which tax and social security payments have been added incrementally, ad hoc, to meet particular problems as those problems have arisen and have never been reviewed as a whole since we began schemes of this kind, we are now in the most frightful muddle so far as tax and benefit at the lower level of the scale are concerned.

"The poverty trap" has become one of the phrases that is very commonly used. So is "the black economy". They are the other areas about which I wish to speak. We regard them as marginal problems that are always with us and probably always will be with us, and there is not very much that we can do about them. What I want to say tonight—I am very sorry that the noble Earl, Lord Gowrie, is not here because I wanted particularly to address these remarks to him—is that surely the time has come, at the beginning of a new Government with three or four years ahead of them, to examine seriously, perhaps on an all-party basis, these two subjects which are of major importance in order to find out whether or not we can work out a very radical reform which will get rid of the poverty trap and deal with the issues which are associated with the black economy.

To take first the poverty trap, may I just repeat that the issue of the poverty trap and the issue of the black economy have been talked about for a very long time. But no Government have attempted to tackle them on a radical basis. There has been no real examination on an all-party basis of what can be done to get rid of the poverty trap and to explore the issues connected with the black economy. This is not a marginal matter. It is a matter of very considerable importance, and it is going to get more important unless we do something about it. It has been with us for a long time. We do not have to do it tomorrow; we can take our time, study it and try to get it right. The noble Lord, Lord Barnett, illustrated the absolute nonsense of what is, with tax and insurance alone, practically a 40 per cent. marginal rate at the lowest level of all. Then there are the additional losses because of the means-tested benefits and the very strong inducement indeed to people not to get jobs when they are at that level, because it simply is not worth their while.

The noble Lord, Lord Barnett, said—and I agree with him—that the Government do not know the answer in the short term. There are certain things one could do. I have always found it difficult to believe that there would not be some value in having a lower band of tax. It would not take us very far, but it would be something. We did have a lower band at one time; if my memory serves me right, it was introduced by Roy Jenkins when he was Chancellor of the Exchequer in the Labour Administration. For some reason which I have never understood, unless it was as a result of pressure from the Inland Revenue on the ground that it is easier to cope with a smaller number of bands (but that is only fancy on my part; there may be no truth in it), we removed that lower band and restored it to, at that time, 33 per cent., plus national insurance. This is absolutely absurd.

All parties have attempted to look at this question in terms of a tax credit scheme. The more one examines it the more obvious it becomes that only some form of tax credit scheme—the amalgamation of the tax and benefit system into one system—will make sense in the long run. I know, because my party and the Social Democratic Party have done a good deal of work on it, that it is not at all easy, but we are equally convinced that it is essential to find a way. I would suggest to the noble Earl that now is the time to get together the most high-powered group that we can find to work the maggots out of tax credit schemes, for tinkering about with tax and benefit is going to get us absolutely nowhere and will leave us indefinitely with a poverty gap, with all the undesirable economic and social consequences which flow from it.

My second point is the effect of tax on the creation of the black economy. I have shocked some members of your Lordships' House in the past by saying that I do not take a very appalled view of the existence of the black economy. It is real work; it is real income for the people who earn the money from it; it gives them something to do; certainly it is a great deal better than having nothing to do. But it has also very considerable and serious disadvantages. That it is large there can be no doubt. I do not believe it to be profitable to spend a lot of time trying to calculate how large, because we shall never know. But if we look at the figures which measure GNP by expenditure and compare them with the figures which measure GNP by either income or production, it is quite clear that a very great deal is going on in the black economy.

Although there are advantages and benefits which flow from the black economy, there are also very great disadvantages. No doubt a small black economy has always existed and is something we can all live with. But I do not believe there can be much doubt that it is growing. Nor do I believe that any of us would like a country which had, as other European countries already have, a black economy which was a very sizable proportion of the economic activity of the country as a whole. Some of both the economic and social consequences which would flow from an economy which had a very heavy black edge to it are not what I believe any of us would want. Perhaps the least of the disadvantages of the black economy is that it mucks up the national statistics quite impossibly. We do not know what the GNP really is; we do not know what money is available for taxation; we do not know what the true figure of unemployment is. All these things we ought to know. If the figures are only small it does not matter, but as they get bigger it becomes very serious indeed.

One of the advantages of the black economy—here I know that I shall shock some people—and probably one of the reasons for its success is that it introduces a flexibility in labour costs which our excessively rigid system of labour pricing does not enable us to have in any other way. A great many people in the black economy are underpaying themselves, in trade union terms, quite considerably. That is why they are able to get jobs. But that is by the way. That is one reason which would make the system appeal to some Members of your Lordships' House, while it would be deplored by other Members of your Lordships' House. But the black economy probably also involves a considerable waste and distortion of genuine entrepreneurial effort. There are undoubtedly people in the black economy who would be capable of making a very considerable contribution if their efforts were better supported and better directed than they are at present, because plainly there are many limits to what they are able to do when they are operating in that way.

We surely want to find ways of getting people to come out of the black economy and into the normal operation of the economy. I do not know how one achieves that, but we must find a way; we must find a way of making it really worthwhile. It is not worthwhile at the present time for a man who is running a successful plumbing business on the side to run his own small business as a proper small business—openly recognised, paying tax, and doing all the things that small businesses should do.

I urge the noble Earl that the second project that should be undertaken in this field is another investigation into the ways in which one can reduce the size of the black economy—not spending a long time trying to measure it, but accepting that it exists. It is our old friend the elephant again: we cannot define it but we know it when we see it. We must try to see what policy steps can be taken to reduce the inducement to stay in the black economy and to give positive encouragement. It will probably mean some rather drastic steps; making changes which many people may not wish to make. But if we do not do something now, we shall before very long be in the situation in which the black economy is so deeply established as a major part of the economy that there will be no way of altering matters.

The Earl of Lauderdale

My Lords, before the noble Baroness sits down, does she have in mind a Select Committee of this House to investigate the matters she has described as being so urgent? Does she have any suggestions to make on that point?

Baroness Seear

I had that in my mind, my Lords, as one possible way of dealing with the question, but I did not want to say so in precisely those words.

6.32 p.m.

Baroness Carnegy of Lour

My Lords, your Lordships' experience and expertise in the matters under debate are, of course, copious. I have been listening with enormous interest, especially to my noble friend Lord Maude of Stratford-upon-Avon, whose maiden speech was on an aspect very near to my heart. But personally I have a great fear about this debate and, perhaps even more importantly, about the national debate now going on across the country.

My fear is that the Government underestimate the extent to which the vast majority of the people of this country now understand the essentials of this situation in which we find ourselves: and that as a result of that underestimation, Parliament will be too slow, and not nearly radical enough, nor nearly creative enough, in determining the way forward from this time on.

Since 1979 the British people have in many ways been taken into the Government's confidence. We have come through several years of learning hard lessons, and we have disciplined ourselves to hard policies. There is now, even in the area in which I live—which does not typically vote Conservative, or anything like it—a widespread view that the old ways will not do any more; that to carry on with the old structures, even if we had a lot more money to spend on them, would not work; and that to keep those structures and spend less and less on them would be even worse.

Likewise, increasing numbers of people in all walks of life appreciate very well that economic reality is crucial. They know also that the economy is not an abstruse creature with a life of its own and uncontrollable by ordinary human beings, but that it is largely made up of people in this and other countries who can influence the economy, and that the economy exists for us, and not us for it.

People are aware, too, of the history of the welfare state. Those who are old enough to remember—and others know from them, and from television—the high hopes of the 1940s and 1950s, shared across a large part of the political spectrum, know that we had found the best way for an educated modern society to maximise freedom and fulfilment for us all. They therefore understand why today we still ask every citizen to forgo part of his or her income, in the form of tax, rates, or national insurance for those in work; and in the form of lower benefits and pensions than would otherwise be available for those not in work or retired, in order to pay for education, health and social services; public housing, employment and training services; roads and railways, and to subsidise coal mining, postal services, and the rest.

People also know from their own experience the way in which the system of paying for essential and very personal services by way of the state actually works in practice. Responsibility for these matters may be in the hands of democratically-elected and replaceable councillors and Members of Parliament, but it is not clear that those people are able to ensure that precious potential spending power forgone by individuals is turned into provision where the individual customer's needs or wishes are always paramount.

It does not pass unnoticed, for example, in the great housing schemes of the Scottish cities that schools are still not seeking the greatly increased answerability to parents which those parents strongly desire. Across the country, despite the marvellous operations which the hospitals are capable of performing, hospital patients and visitors do not by any means always feel that the hospital exists for, and belongs to, them—which, of course, it does.

People notice the roads coned off and traffic jams prolonged for far longer than is actually needed for the job. They also observe expensive chromium-plated barriers which have recently been purchased on their behalf by the Post Office, so that they—the waiting customers—may be coralled like sheep waiting to be dipped. They notice, too, that housing officials—and even councillors themselves—are often markedly reluctant to help people with advice about expediting the buying of their own homes or to accommodate their wishes as tenants in other ways.

On the employment front, there is growing understanding that if the state makes it too difficult for employers to employ people, or if self-employment involves too many problems, there will simply be less employment. Likewise, if the creation of part-time or fixed-time employment opportunities is discouraged, there may be no opportunities in that particular area at all.

There is also—dare I say it?—considerable disillusionment about the role of politiciansin all this. Local government councils and Parliament itself are widely suspected of being concerned more with political gamesmanship and manipulation than with dedicating themselves to the creation of a setting in which, given the constraints and the new possibilities of changing times, the people of this country can find ways of leading happy and fulfilling lives.

For most people, the power to live their lives in the way that they want, and the freedom to exercise responsibility as they see it, comes from time to time through the ballot box; though in practice, largely through having the power to spend. They have recently voted, and the vote was massively anti-Socialist. It is now for the Government to recognise what it is that the people are wanting and are saying; to continue to take the people into their confidence; to take courage, to be innovative and radical; and with all speed to set about finding ways of meeting at least some of those clearly expressed desires.

6.40 p.m.

Lord Mottistone

My Lords, it is indeed a privilege to follow my noble friend Lady Carnegy of Lour in making such a heartfelt speech from the country as opposed to the great theories that we all advance, and I thoroughly endorse from my part of the country a great deal of what she has said. I too should like to congratulate my noble friend Lord Maude and endorse so much of what he said about the difficulties very small businesses have in expanding themselves in a small way because the very stiff rules of the Treasury make it so difficult for them. My thanks are particularly to my noble friend Lord Boyd-Carpenter for introducing this most important debate.

My own experience is in having been a manager in the public sector, in the private sector and in a non-profit making quango. From all that I think I have gleaned a profound truth: that is, that it is most important for us all to realise that the key to prosperity is competition in an open market, and the key to the ability of a country to look after its old, its sick and its children is for the country to be prosperous.

The great lesson, as I see it, of the past 50 years has been that the theories of Marx and his many socialist successors have been shown to be totally false. My noble friend Lord Boyd-Carpenter quoted from a book by the late Lord Morrison of Lambeth, Socialisation of Transport. If I might briefly remind your Lordships by paraphrasing what my noble friend quoted, it was that service will improve, prices will fall. industry will be more efficiently conducted. I would add also that the board of a nationalised industry and its officers must regard themselves as the high custodians of the public interest.

Sadly, in practice the very reverse of each of these high hopes has in the event occurred. It is indeed tragic that real humans have let the theorists down, not only in free countries like ours where we can all take important choices but also in dictatorships riddled with secret police. But we should not be surprised. The Bible gives ample evidence of similar human failings. What is indeed more tragic is the slowness of many people to grasp the lessons of the past 50 years. It is understandable that the sincere theorists should cling to their theories even when totally discredited. It is also understandable that trade union leaders in nationalised industries who have gained tremendous power in artificially buttressed unproductive industries should wish to cling to that power even if it is gradually destroying their industry by making it uncompetitive in the world market.

But the rest of us who desperately want a prosperous country which can take a proper share in helping to put developing countries on their feet, as well as looking after our own disadvantaged people properly, really must throw off all false ideas about any practical benefits from state or corporate ownership. The message is being well understood by other countries, like Germany, Japan, Singapore, et cetera. We have not much time to waste in turning over all the industries we can to private ownership. In doing so, however—and here my noble friend Lord Orr-Ewing made the point, as indeed did my noble friend the Leader of the House—we must not forget, as I said at the outset of my speech, that the key to prosperity is competition. A denationalised industry that has more than 40 per cent. of any of its markets and is able to control its own market place is more of a danger than a sleepy nationalised giant.

The noble Lord, Lord Barnett, told us that there were of course inefficiencies in public bodies and also inefficiencies in large private industries. I am not so sure about that second point in relation to the first. Perhaps I could illustrate what I think and illustrate the message that I am trying to convey to your Lordships albeit humbly, by concluding by recounting to your Lordships two really live stories which demonstrate those points. Last week a television set which I had been borrowing was recovered by its owner. We realised on Monday that we would require another television set on Wednesday because a young nephew was coming home for his half-term holiday. On Tuesday morning I rang up the private enterprise firm Radio Rentals, which, as your Lordships will know, is in competition with several other rental companies. By five o' clock that evening we had the set installed and working. I should mention that my son-in-law when told about this said "It must be unfair special treatment for Peers"; for he had had to wait a week for his set.

Let us compare this with the treatment that my same son-in-law and my daughter received from the nationalised gas board. They came back from the united States—where incidentally, prompt service is the normal practice—last April. They took possession of their house on 28th June. The men from the gas board discovered on 1st July that the gas central heating was faulty and they reported that major repairs were necessary. My daughter assumed that they would return to do this reasonably soon, and she did not take any immediate action. However, by 18th August she was a little concerned and rang the gas board. She now blames herself for not chasing sooner. The interesting feature of this story is that the gas men made her feel guilty for not keeping them up to the mark. There was no question of them giving a service. That is a subtlety but an important one, and it bears out what my noble friend Lady Carnegy was saying. The men said that they would repair the system after 18th August. They finally arrived on 21st October, saying there had been a strike. They did not ring up to say they could not come because there was a strike; they just eventually turned up. The central heating was still not working last week, five months after it was orginally discovered that a major repair was necessary, so my daughter and son-in-law had to come to dinner with us to escape the cold.

Superficially your Lordships might think that a television set is simpler than a gas heating system somehow, but do not forget that the central heating problem was a repair and not an installation job. I worked for Radio Rentals 15 years ago as the director of personnel and training. In that company we had a problem in getting sufficient trained engineers to instal the sets, to maintain them and to respond to calls. In those days they frequently had to instal the aerial as well as the set. That is not so much the case now. Our problem was that by long-established practice the engineers were required to do a five-year apprenticeship. This was not good enough for a company which had to balance the books to survive. That is a key point. So the technical director asked the training staff to work out a minimum training scheme for competent engineers. We adopted a basic 16-week technical course plus nine months' practical training in the field under supervision to produce people most of whom were as good as the five-year apprentices. Indeed, our prize student came to us straight off his milk float.

Your Lordships may feel that if one can do that to produce shorter training courses there may be some other factor. How about safety? We all know that gas explodes, but let us not forget that the high voltages in television sets may he just as much a killer as gas. They are safe for the public because of good set design by free enterprise designers and competent installation by engineers such as I have described.

Quite honestly, to have a difference of one week in installation and five months for repairs. whatever the background reasoning, is absolutely disgraceful. Even the employees of a pre-war municipal gasworks would have done far better—but they would not ever have seen themselves as Lord Morrison's high custodians of public interest. For heaven's sake!, let us stop fooling ourselves that Government of any sort can run any industry. We must have competition to prosper; and without prosperity our welfare state will founder.

6.51 p.m.

Viscount Chandos

My Lords, I should like to join the other noble Lords who have spoken this afternoon in thanking the noble Lord, Lord Boyd-Carpenter, for introducing this debate on a stimulating, but contentious subject. After one of my first speeches to your Lordships' House, the noble Lord suggested that my contribution exhibited a radical naivety, or perhaps a naive radicalism, which reminded him of some of the speeches made by members of the Labour Party in another place when, immediately after the Second World War, they were lodging temporarily in your Lordships' Chamber. I hope that the noble Lord will not think me impertinent if I say that the subject of the debate which he has proposed, and his speech, suggest to me naivety certainly, but perhaps radicalism also, now that the advocates of a return to laissez-faire economics have been able to claim the description "radical" for their views. It seems to me simply naive, however, and not at all radical, to say that public ownership is bad and private ownership is good.

My noble friends and allies in the Social Democratic Party and Liberal Party respectively are declared supporters of the mixed economy, and can justifiably claim to be the only political grouping to be supporters and defenders of the mixed economy, though many noble Lords who sit on the Labour Benches here are individual supporters of the mixed economy, as the noble Lord, Lord Barnett. has shown. Many others, such as the noble Lord, Lord Beswick, have made distinguished contributions to the mixed economy. The official policies of the Labour Party can now only be described as ambiguous, while the views of many of the most active members of constituency and local Labour parties are openly opposed to the continuation, let alone the expansion, of the mixed economy.

There are also many distinguished members of the business world on the Conservative Benches in your Lordships' House. I believe that many share a view similar to that of noble Lords on this side of the House that the mixed economy represents the best approach to increasing the wealth of this country and of all those members of our community in a complicated, competitive, and challenging world. Once more, however, the official policy of the Conservative Party, and the attitude and spirit behind it, have grown increasingly different from this view and increasingly distant from the real interests of all members of our society, whether in industry, commerce, public service, or private life.

The noble Viscount, Lord Whitelaw, described the theme of today's debate as being central to this Government's objectives—an admission that the Government have finally taken up residence in their own ideological tax haven: cloud cuckoo-land. I regret therefore that the noble Lord, Lord Boyd-Carpenter, whose career has encompassed parliamentary politics, as well as service as chairman of a major public body and as chairman and director of notable private companies, should nonetheless feel that his experience points to such a serious imbalance between the strengths of the public and private sectors. With what the noble Lord will undoubtedly think is the blind idealism and optimism of youth, I think that he is wrong.

One of the problems of speaking at this stage of the afternoon's debate and trying to summarise the position of my noble friends and allies, is the excellence of many of the speeches that have come before. Not only did I find much common ground with the views of the noble Lord, Lord Maude of Stratford-upon-Avon, but I can also say that his contribution was an outstanding part of today's debate, as would be expected from a noble Lord who was not only such a distinguished Member of another place, but who has included the town of Stratford-upon-Avon in his title.

I have to contend, furthermore, with following not only the excellent speeches of my noble allies Lord Ezra and Lady Seear, but also the first speech that I have been privileged to hear by the noble Lord, Lord Barnett. In my short time in your Lordships' House a number of the noble Lord's colleagues on the Labour Benches have suspended party rivalries and said some kind and encouraging things about my speeches. I should therefore like to call a similar, but temporary, truce and express my admiration for the speech of the noble Lord, Lord Barnett, very little of which differed from the views held by any of my noble friends and allies—which is perhaps why he is now in your Lordships' House, rather than having been selected by a Labour constituency party to return to another place.

One phrase used by the noble Lord, Lord Barnett, seemed decidedly familiar to anybody who has listened to the policies proposed by the SDP in the past two-and-a-half years; namely, the dangers of treating the nationalised industries as a political football. Rather than complain that the noble Lord has stolen our football, if not our clothes, I should like in my speech to concentrate on suggesting a sensible approach to determining the frontiers between the public and private sectors—not rolling them back indiscriminately like a squadron of tanks at full tilt, crushing friend and foe alike, or pushing them forward recklessly, without rhyme or reason, but creating an environment in which both public and private sectors can grow for the benefit of employees, consumers and the owners (as shareholders or taxpayers) of those businesses.

Some noble Lords have mentioned companies that are now in public ownership, or have been in public ownership and are now private sector companies, or vice versa, in every case to prove the point of view which they hold. It is inevitable that such examples are selective, just as the instances that I shall ask your Lordships to consider will also be selective. In mentioning various names I should perhaps declare that in my professional life some of my banking colleagues are, or have been, involved in a number of the transactions to which I shall refer. Needless to say, anything that I say reflects my own views and I hope those of my noble friends and allies, but not necessarily those of my professional colleagues. Equally, nothing which I say is based on anything other than publicly available information.

First, perhaps I may ask those noble Lords on the Government Benches which instance of the sale of Government shareholdings they would consider the most successful. It does of course depend on the objectives of such operations—whether they be simple fund-raising for the Government, the attempted improvement in the efficiency of the companies concerned, the satisfaction of manifesto promises, or whatever. On one set of criteria I would suggest that perhaps the sale of the holding of the National Enterprise Board in ICL, the computer company, should take first prize. Every investment manager in the City must admire the Government's timing in selling at the top of the market and no doubt reinvesting the proceeds in some constructive and profitable way. Sadly, however, the liberation from Government control of that company did not have any noticeable effect on its profitability—or not a positive one, since it was effectively bankrupt not long after. It has of course now staged an encouraging recovery in private ownership, with collaboration agreements throughout the world, but only after the Government had guaranteed a considerable portion of its debts for a time to ensure its continued survival.

The Government cannot, of course, allow major companies in the private sector to go bankrupt any more easily than those in the public sector, here or in any other industrialised country, as demonstrated by the US Government's support of Chrysler a few years ago. So it is wilful misrepresentation of reality for the noble Lord, Lord Boyd-Carpenter, to claim that employees of nationalised industries are really less dependent on profitability for their continued long term employment than those in a major private sector company. The more, moreover, that the Chief Financial Secretary to the Treasury says that nationalised industries do not have to succeed to survive, the more he is exacerbating whatever problems there are.

Taking some further examples of companies where the Government have sold some of their shareholding, I believe that both British Aerospace and Cable and Wireless have benefited from the change in their corporate status and the other consequential changes. As I have said to your Lordships on previous occasions, the success of British Aerospace now is undoubtedly the result of the merger of its constituent parts at the time of its nationalisation under the distinguished chairmanship of the noble Lord, Lord Beswick.

Equally, even if the efficiency of Cable and Wireless might have improved in the last two years, who can deny that the foundations of its outstanding business were laid in its 30 years of public ownership, as, of course, can be said for other high technology companies such as International Aeradio and Amersham International. During the time such companies prospered in public ownership it would be invidious to single out private sector companies which declined. whether or not terminally.

I suggest to your Lordships that while these examples are selective, they do demonstrate, unlike those used by other noble Lords, that there are two sides of the argument. Businesses are dynamic, and at different times they need varying degrees of support, intervention, finance and autonomy. Furthermore, even in those countries such as Japan and Germany, where their economies have grown most significantly in the last three decades, the level of Government intervention, if not necessarily of Government ownership, has been very substantial.

I believe, therefore, that a rational policy towards the frontiers between the public and private sectors should be based not on simple ideology but on the intelligent balancing of a number of different factors. First, there should be stability, unless there are good reasons for changing the ownership of a company. The noble Viscount, Lord Whitelaw, emphasised the importance of competition and the prevention of monopoly. The conversion of a public monopoly into effectively a private one, as in the case of British Telecom, is unacceptable, and the potential increase in efficiency from such a transaction does not seem to be great. Second, however, within the general principle of stability there must be a readiness to make changes where benefits can be identified, and those changes can cover the acquisition of a shareholding in a company, whether whole or partial, as well as the disposal. But in every case not only the management but all the employees of the company must be carried along and convinced of the benefit by the Government.

I would ask the Government to consider the case of Sealink, where I believe the best solution to the company would be one involving the participation of the employees in the same way as in the case of the National Freight Corporation, and unlike the case of British Transport Hotels, where the Government rejected an offer by the employees for a majority of the hotels in favour of one where the group was split up.

My noble ally Lady Seear has represented our views on the second part of the debate, on tax, very effectively, and I will not add much to that. I should merely like to pick up a comment of the noble Lord, Lord Boyd-Carpenter, who felt that those people who were taxed at a rate of 75 per cent. were a minority cause who deserved support. I am sure the council of Amnesty International will drop further business to consider such a proposal! In conclusion, my Lords, I would suggest to the Government that there are many things that have much greater urgency to our economy, and to which they should give prior consideration, rather than the subjects proposed by the noble Lord, Lord Boyd-Carpenter.

7.5 p.m.

Lord Bruce of Donington

My Lords, the House has already expressed its gratitude to the noble Lord, Lord Boyd-Carpenter, for having introduced this subject this afternoon. The House has also had the opportunity of hearing a maiden speech from the noble Lord, Lord Maude, to whom I should like to offer my congratulations as one of the former inhabitants of another place when it was in this place but who, owing to the harsh arbitrament of arithmetic, vacated his seat at precisely the same time as the noble Lord arrived. I very much enjoyed his speech, and I sincerely hope that he will take a further opportunity of enlarging further on some of those matters to which he referred this afternoon relative to small businesses, particularly one-man businesses. I rather thought that the application of all the items in his long list of restrictions as applicable to one-man businesses only was possibly slightly exaggerated, but, nevertheless, the noble Lord raised a matter of very great importance and we on this side of the House sincerely hope that he will return to it.

When I read the Motion on the Order Paper in the name of the noble Lord. Lord Boyd-Carpenter, I thought he was going to discuss with us the need to liberate "resources" required for the creation of wealth. There was an inference behind that; but he meticulously kept his resources to cash, to ordinary wealth resources, rather than human. I myself confess to some wonderment, because, of course, capital has been liberated for a very long time. I remember well that in 1979, when the exchange control regulations were lifted, capital in this country voted with its feet on its confidence in the Conservative Government by departing from this country in very large quantities indeed. As noble Lords, particularly those in the banking community, know quite well—and I am looking at the noble Lord, Lord Boardman, and the noble Viscount, Lord Chandos—capital can be transferred from one side of the world to another in a matter of minutes by telex and by other means, and indeed has been.

The idea that capital needs liberating, I must say, is rather a novel one. Capital exists in very considerable quantities, some of it in bank deposit form and in various other forms—and, indeed, is held by institutions on a very wide scale—and I was interested in the way the noble Lord was going to deploy his argument as to how it could be liberated. The inference was, I thought, that by pursuing a programme of privatisation, wealth was somehow going to be liberated and production was going to fructify. Of course. the reverse is true. Any liquid resources that are spent merely in acquiring shares in an existing company or acquiring control of it are a purely passive investment. In fact, the more that funds are put into passive investment, merely into acquiring ownership of nationalised, or indeed other, industries, the less money there is available to devote to constructive and valuable investment projects. I should in that connection like to express my complete agreement, or perhaps I had better say almost complete agreement, with the arguments so ably advanced by the noble Lord, Lord Ezra.

It is the whole question of investment in productive industry, investment in infrastructure, that lies at the core of the country's future prosperity. When considering important matters of this kind it is really no good to embark upon the familiar diatribe that we have heard many times before in which all the alleged evils of nationalised industries are paraded before the House. This serves no useful purpose when we are addressing ourselves to the key problem which was proposed by the noble Lord, Lord Ezra. however amusing it may have been to contemplate the noble Lord, Lord Harris of High Cross, putting out his own fires, having rockets on his roof to defend himself, paving his own roads round his house and doing all the other things that are provided by local authorities or by the Government of the day. This is the question.

I am glad that the noble Viscount, Lord Chandos, raised one or two questions about the way in which the denationalised companies had behaved since they had become privatised. This illustrates the complete hypocrisy of the suggestion that somehow, by investing money in acquiring nationalised industries, you liberate funds. 1 have made it a point to study the accounts of British Aerospace which, as your Lordships recall, was privatised in 1980 under the British Aerospace Bill. I observed from its latest report, dated March 1983, that at the present time it has unused medium-term hank facilities of £300 million in addition to unused short-term facilities of over £200 million and further liquid assets of another £250 million. In short, British Aerospace Limited has done very well indeed largely, as I think is widely acknowledged, due to the efforts that were made by the old company in investment when it was under the control of my noble friend Lord Beswick. This is not, I think, in dispute.

I was therefore surprised to find in the course of Sir Austin Pearce's speech that the company was looking for Government aid for the new air bus. In fact, in The Times last week I observed that some £420 million was being applied for. This is surely a little remarkable. At the time of the privatisation, the noble Lord, Lord Trefgarne, speaking in this place and moving the Second Reading of the Bill, said: I wish to emphasise that our intention is to create a free-standing company, independent of Government and, by the same token, divorced from automatic Government subsidy. This is an essential departure from the usual practice adopted for a nationalised industry". The noble Lord also said: The successor company will be free to raise its finance on the commercial markets of the world: it will have no special claim on the public purse".—[Official Report, 3/3/80; col. 17.] This must be a triumph for privatisation. Here we have a company that was privatised and which is now apparently looking, in spite of it being an independent private concern, to the Government to assist it. I have no objection in principle to that for entirely other reasons. I do not take the narrow view that it is not right for the state in certain circumstances to aid private companies. Indeed, as the noble Lord, Lord Boardman, will probably recall, considerable efforts were made by a Conservative Government to aid Rolls-Royce, and Rolls-Royce was ultimately nationalised by them, as again the noble Lord will recall.

It seems to me remarkable that, having been privatised, British Aerospace is behaving in exactly the same way as before. Is it to be thought that this private company could not obtain its funds from the normal market in the City of London or elsewhere? Did it try to do so? If so, why was it unable to obtain funds from the City which, according to the noble Lord, Lord Boardman, is the fount from which all benefits flow and sustain? Its accounts show a good record. Its prospects are good. Why, therefore, should it happen to do that?

My guess is that it tried. My guess is that, in accordance with the original intention of the Government, it did try to raise the £420 million but the City, financed with the lush prospect of being able to invest its money, £4,000 million of it, in British Telecom for doing nothing, with an established profitable concern in which its investment was gilt-edged, or would be near gilt-edged, preferred to hold its money for the further lush pickings that will arise on the privatisation of other industries. That is my guess—

Lord Beswick

My Lords, I think that I should put one point straight. Most of the liquidity to which the noble Lord refers consists of customers' deposits which can never be put into anew project. And the new project for which Government support is being asked will probably take seven to 10 years before it is profitable. I hope that the wrong impression is not taken from what the noble Lord says.

Lord Bruce of Donington

My Lords, no. I take that immediately from the noble Lord. I have no objection to that at all. I am certainly not suggesting that the funds that I detailed coming out of the chairman's speech should have been devoted to investment purposes. Certainly not. There are several ways of raising money. You can have a rights issue. You can have a new issue altogether. There are several ways of raising money in the City for a project of this kind.

It seemed a little odd to me that the suggestion should be made that, somehow, privatisation was the answer to all our problems. Clearly, it is not. If, in the event, Her Majesty's Government decide to advance, on whatever terms they think fit, the £420 million to British Aerospace, it will, on their own definition of the public sector borrowing requirement, come out of that, and therefore it will have a very bad effect on the other aspects of Government expenditure.

I come to the tax disincentives. I thought that the case for a radical tax change was very adequately dealt with by my noble friend Lord Barnett and, indeed, by other speakers. It is a very complex matter and, as an accountant, I know the complexities of it. I do hope that at some time an effort will be made to have a more rational tax structure. However, it is one thing to say it, but quite another thing to embark on the very complex way of carrying it into effect if we are to be—as we always wish to be in the United Kingdom—as fair to the individual taxpayer as we can. It is the desire to attain equity within our tax system that gives rise—as I am sure my noble friend Lord Barnett will agree—to many of its legal abstrusities and complexities. But it would be a mistake to assume that British industry suffers unduly from its tax burden. Nobody likes to pay taxes and certainly nobody would wish to impose on British industry tax burdens that are unfair or uncompetitive in relation to our colleagues.

Some study may have been made of the recent paper put out by the Institute of Fiscal Studies which dealt with this question and endeavoured to arrive at a comparison of various countries as regards the percentage of their total tax revenues devoted to the taxation of companies either on capital or on the payroll. The fact of the matter is that we were well below any other country in the Western world in this respect. In France such taxes amount to 50.5 per cent.; in Italy 44.5 per cent.; in Japan 41 per cent.; in the United States 36 per cent.; in West Germany 32 per cent.; and in the United Kingdom 26 per cent. So I do not think it can be said that, in comparison with other countries competitively, we are over-taxed in that particular sense.

The worst aspect of the whole question of resources is that we tend to evaluate them in cash, bank balance or capital terms. One of the resources that we waste the most is human resources. I would point out to those who keep on parroting the cry of reducing Government expenditure, that at the moment our extra unemployed are costing us £8,500 million a year. One of the finest ways to reduce Government expenditure would be to reduce the number of unemployed and to pursue policies that resulted in that. If that were done very much on the lines that have been suggested by my noble friend Lord Barnett, and certainly by the noble Lord, Lord Ezra, if some constructive effort were made to evaluate and to give priority to the vital capital investment of this country regardless of whether it should be made by the private sector or by the public sector—but preferably it would be done by a combination of them both—it would ensure, first, that our expenditure on unemployment would be far less and, secondly, it would make for a far better social climate in our country, a far better relationship within industry and ultimately a far greater degree of creativity and production in all the companies in this country.

7.25 p.m.

The Earl of Gowrie

My Lords, I should like to begin conventionally, but sincerely in this case, with two congratulations. I should like to congratulate my noble friend Lord Boyd-Carpenter on introducing the debate and on the way in which he did so, and perhaps most of all, on keeping the Government's eye on the ball which the electorate gave them. When faced with the day-to-day problems of any large, mixed economy, it is very easy to get your eye off the ball which your electorate has handed to you. My noble friend reminded us of that, and his reminder was echoed most eloquently later in the debate by my noble friend Lady Carnegy of Lour.

I also want to congratulate most warmly my noble friend Lord Maude of Stratford-upon-Avon. As the House may be aware, in the first term of the Conservative Government my noble friend was Paymaster General and during that time he used to send round small forms—short pieces of paper—with reminders of policy and reminders about how policy should be translated into action. They were models of their kind. I have them filed away in my office, and occasionally I pit them against the briefs that I am given. I always find as a result of doing so that I remain a healthier, if somewhat drier, Minister than I might otherwise be.

I also thought that in his own, single and, very largely, unpaid person my noble friend answered the request of the noble Baroness, Lady Seear, for a committee to look into the effects of the black economy. He did so with great concision and eloquence, and I hope that the noble Baroness will find that what he said repays study, as I certainly shall.

The central theme of the debate has been the creation of wealth for the country by removing disincentives and liberating the energies and enthusiasms both of individuals and companies. It is the business of wealth creation upon which we have to keep our eye—whether we do it within the public sector, or within the private sector, or whether we shift the balance a little between the two.

Wealth is created by the efforts, skills and inventiveness of individuals. Governments do not create enterprise; they can, however, get in the way of its creation. In our philosophy the responsibility of Government is to provide the overall conditions under which individuals can give of their best. We have a range of policies to strengthen these conditions and encourage competition and enterprise. They range fairly widely, and they involve trying to wind down controls. They also include, for instance, an improved legislative framework for trade unions (and today we are sharply aware of the justified need for that legislation); the direct encouragement of small businesses; the privatisation, or "freeing", of industries, which is the more attractive term which we have discussed today; trying to achieve lower tax burdens on businesses and on individuals; and a lesser, rather than a greater, share in the mix of public spending.

Lower inflation of course provides the necessary conditions for wealth creation by giving greater certainty about the future for individuals and businesses, by enabling them to plan ahead, and by recognising that inflation is in itself a very large form of taxation. It is only under such conditions that sustainable growth can emerge. In the first term of the Government we got control over inflation and, almost as important, we succeeded in reducing inflationary expectations.

In the next term of the Government we must establish control over public expenditure, and we must reduce taxation, if we can do so, without additional borrowing and, therefore, without future inflation. I believe that we can and will be able to succeed in this; and the substance for this belief can I think be found in a phrase used by my noble friend the Leader of the House when he opened the debate from our side. He said: We are now growing faster than any other country in the European Community. My noble friend also referred to the three main themes to which the debate has constantly returned: to taxation, to control of public spending and to privatisation. I should like quickly to treat with these in turn, dealing if I can on the way with some of the points raised.

The overall burden of taxation has increased, which is a great disappointment to the Government but not, I would suggest, wholly surprising in a great recession and in a time when the priority has been given to reducing inflation and therefore to reducing borrowing. But against that background it is worth mentioning in a little more detail some of the steps which the Government have succeeded in taking to encourage enterprise and initiative through the tax system as an earnest of our determination to go on with fiscal improvements of this kind and to get the overall burden down in the life of this Parliament.

For instance, in the field of capital taxes the annual exempt amount for capital gains tax has been increased three-fold in real terms, and we have taken the substantial step of indexing future gains. The threshold for capital transfer tax has been more than doubled with, in addition, indexation of the threshold and rate bands and considerable improvements in the reliefs for business transfers. On company taxes, a much more generous system of stock relief was introduced in 1981, and the small companies; rate of corporation tax has been reduced from 42 per cent. to 38 per cent., with substantial increases in the profits limits for this reduced rate to enable more companies to benefit. Again, I hope that my noble friend Lord Maude will take account of that as he was concerned with this issue.

There have also been improvements in the reliefs on interest for borrowng to invest in close companies, partnerships, co-operatives and, recently, employee buy-outs. These will help to create that vital sense of identity between an employee and the success of his firm; the sense of "we" as against the sense of "they" on which all good enterprise depends. There have also been a number of innovatory tax reliefs to encourage the provision of finance for unquoted companies, and these were mentioned in the debate: the venture capital scheme introduced in 1980 and extended the next year; the business start-up scheme introduced in 1981 and extended last year and this year its transformation into the business expansion scheme. Measures such as these have done much to eliminate the "equity gap" which was so much the concern of the late 1970s.

I believe that these changes are consistent with the aims of my noble friend's Motion. He may say, and others may echo him, that the Government have not done enough. I certainly would not dissent from that. We have not done enough and we intend to do more. We were re-elected on a manifesto which had as its objectives further improvements in allowances, lower rates of income tax and the encouragement of wider ownership by lowering taxes on capital and savings. It also remains our objective further to reduce these disincentives. Mention of the word "disincentives" came in the very interesting and clear speech, as we would expect of the noble Lord, Lord Barnett. I was going to play the old trick of selectively quoting at him some of his remarks from his book, Inside the Treasury. I shall desist from doing so for two reasons. One is the lateness of the hour and the fact that I must get on with my speech, and the other is that I found a perfectly marvellous passage in it which I intend to use in Manchester tomorrow!

The poverty and unemployment traps mentioned by the noble Lord, indeed, present this country and the Government with very real problems, even though they affect a relatively small proportion of the working population. As the noble Lord emphasised, there are no quick, easy or cheap solutions and many of the solutions proposed—including, I fear, some proposed by the noble Baroness—not only involve radical changes in the tax and benefit system, but would be liable to end in an increase in taxation, and therefore in a worsening of the very problem that was intended to be cured.

The traps have of course arisen because of the development of an overlap between tax and social security benefits, as tax has been levied at lower and lower levels of income in order to finance higher and higher levels of public spending, including those same benefits. The realistic response surely is to try and reverse this trend: to increase tax thresholds by releasing resources through controlling public spending, and by allocating the resources so released—provided also on top of that release hopefully by some economic growth—to tax cuts rather than spending increases. That is certainly the Government's aim in this regard.

On this issue of public spending, I wish to emphasise the key point that growth requires low borrowing to keep down inflation and interest rates and low taxation to provide the necessary incentives. May I say to the noble Lord, Lord Bruce, that, of course, we do not think that incentives by themselves or low taxes by themselves, are all-in-all for improving the output of an economy, but it was his noble friend Lord Barnett—then Mr. Joel Barnett as Chief Secretary—who saw the point of the disincentives in corporation tax and who, indeed, made it easier for companies not to pay it.

The earnest of the Government's achievement here in terms of control of public spending lies in the outcome of the annual review this year, which has been to hold the planning total for 1984–85 at the level announced in previous plans. That repeats the Government's achievement last year. This is the first time that this has been done in two consecutive years. We mean to keep up this record. I think that this more than anything should be an indicator to some of those like the noble Lord, Lord Harris of High Cross, who believe that in some way the Government may be losing their drift, losing their way, or departing from the concepts on which they were elected. I must confess to the noble Lord, Lord Harris of High Cross, and to the House that I was the guilty man who confessed in an earlier debate that Ministers in fact rather like spending other people's money. But my confession was a wry, perhaps even an ironic, recognition of the difficulties of controlling public expenditure, not of any lack of determination to do so.

There has been much mention made of the nationalised industries; and in his opening remarks my noble friend dealt with the privatisation issue. I shall not make too much of it now. I noticed that the noble Lord, Lord Ezra, said that we must look at the nationalised industries rather more objectively. When arts bodies call on me as Arts Minister to look at them rather more objectively, it is inevitably a prelude for requests for more public money—and they are often richly deserved requests. So the noble Lord's sentence made my heart sink. Then—lo! and behold!—only a few moments later the noble Lord, Lord Beswick pointed out that there was too much under-investment in nationalised industries and that more money would have to be provided. I simply want to say that we are not at all hostile, as the debate has suggested in some quarters, to the concept of capital formation in the public sector. During the latest public expenditure review, in spite of the overall successful outcome of retaining last year's base levels, we have been very much aware of the need to find room for worthwhile capital spending projects.

I ask the noble Lord, Lord Bruce of Donington, who criticised us in this respect, to look objectively at this part of my speech at any rate. There will be some increases in capital programmes. There is the issue of the overdue prison buildings; and the conspicuous reduction in the housing programme is not a capital reduction but mainly an increase in council house sales—£300 million out of £500 million.

The revised total provision for housing capital next year is still no lower in cash terms than for this year. Details of public sector capital spending have of course still to be worked out for the three years ahead, and certainly capital projects must he carefully evaluated within the overall public expenditure policy; but they are only a small part of total fixed investment in the economy which has been rising steadily since the trough of the recession in 1981, and is forecast to be 13 per cent. higher than that level in real terms next year.

The noble Lord also mentioned injections of private capital for public capital projects. Again, he and I have trodden this ground before, and trodden the ground of the problems of mixing guaranteed capital with capital that is subject to real risk. I can say to the noble Lord that in 1982–83 total public sector capital spending was nearly £17 billion, excluding special sales of assets and public sector housing sales, and even more important is that Government expenditure or borrowing—and already, as I have shown, it is at a high rate rather than a low rate—should not squeeze out profitable private sector investment. It is encouraging to see that this has grown, and it is expected by the CBI to grow by 5 per cent. in the coming year. One way by which profitable private sector investment can grow is through more privatisation, and again my noble friend dealt with some of our ambitions in that direction.

There has been mention of efficiency. Privatising can lead to much more efficiency. Large savings have already been achieved by contracting out, as the House will be aware, and we want to continue the impetus there. But I want to make it clear that contracting out will not be undertaken regardless of cost. My right honourable friend the Prime Minister laid great emphasis on this point when she said that it will be done—I am quoting her— only when commensurate with sound management and good value for money for the taxpayer". I cannot see that Members of your Lordships' House, wherever they sit, could really object to those sentiments.

I have a special interest as Civil Service Minister in efficiency within our own purlieus, and with putting our own house in order. We are aiming to reduce the scale of government, and thus the burden of financing it. In 1980 we announced our aim of reducing the size of the Civil Service by 14 per cent., from 732,000 to around 630.000, by 1st April 1984. This target should be reached, and that is a considerable achievement in itself. Our aim over the next four years will be to maintain a steady pressure on manpower numbers in order to take maximum advantage of all opportunities for the further improvement of efficiency. Your Lordships will notice that this is taking place outside the context of the wider debate as to what services government should, or should not, provide.

In conclusion, there is one point which, with my particular responsibilities. I would not wish to overlook in the wording of this Motion. I notice that it speaks of liberating from the control of Government…more of the resources required for the creation of wealth". I believe that the word "more" is important here. The Motion in the name of my noble friend does not say "all", nor does it say even "most". None of us would deny the essential role of our public services: the defence of the nation; the education and health services; an efficient transport system: and (dare I say it?) the high arts activities, which have always been subsidised. whether by states or by. monarchs. All these in their different ways contribute to the quality of our national life, and in many cases to our efficiency and our economic well-being.

There are many functions which can well be provided by a well-run public service, and some which can be provided only in that way. I hope that that answers the questions put to me by the noble Baroness, and by the noble Viscount, Lord Chandos, as to whether we believe in the mixed economy. Of course, as should have been quite clear, if not from my remarks then from the remarks of my noble friends Lord Orr-Ewing and Lord Mottistone, we believe in the mixed economy, but we also believe in attending to the proportion of the mix.

Our concern is to strike the right balance: to keep to the public sector those things which can best or uniquely be provided there—and in these cases to ensure value for money—and for the rest to rely to the greatest extent possible on the skills and freedom of the private sector. For many years that balance has been weighted too heavily towards public provision and against individual endeavour. We aim to redress that imbalance, not only in taxation but in public spending, industrial enterprise and individual incentive. I believe that the Government's objectives accord fully with the spirit of my noble friend's Motion, and I therefore congratulate him on the way in which he moved it.

7.46 p.m.

Lord Boyd-Carpenter

My Lords, although the hour is not by the recent standards of this House a late one, I understand that the custom and practice of the House suggests that what I say at this stage should be largely formal, although I may well yield to the temptation to reply to one or two arguments which were specifically directed at me during the course of the debate. My first and pleasant duty is to thank all of your Lordships who have taken part in this debate, and also, if I may do so without impertinence, to remark on the excellent precedent which has been established, inasmuch as I understand that all of your Lordships who took part in the debate are here present at its termination. Without making heavy weather of this, the good practice of the House that this should be so has, in recent months, not always been completely observed by all of your Lordships. I hope that the good example which your Lordships present tonight have set will have its repercussions in future.

I should like also to thank particularly the noble Lord, Lord Harris of High Cross, for a reason of which I think your Lordships are not aware. He had set down for early debate a Motion not in precisely the same terms as the one before your Lordships at the moment, but broadly similar in effect. In accordance with the proper rules of this House one cannot gazump, or near gazump, a fellow Peer's Motion, and I had therefore to approach the noble Lord, Lord Harris, to ask his permission. I am glad to say that he not only most generously gave it but contributed greatly to the debate by the speech he made on it. I should like to express my gratitude, and that of a good many of my colleagues, to the noble Lord for that.

So much has been so rightly said about my noble friend Lord Maude of Stratford-upon-Avon that I shall only say that I ventured in advance to forecast that his speech would be one which would appeal greatly to your Lordships. I am glad, as one whose forecasts do not always come off completely, that on this occasion I am not subject to any criticism whatever on that point. We all, I know, share the hope that my noble friend with his great experience and considerable powers of speech, will adorn our debates in the future.

I should also like, if it is not an impertinence, to congratulate the Leader of the House on what I believe is for him a somewhat novel occasion. In his long and immensely distinguished career he has not, on the whole, specialised in speeches on financial and economic matters. Indeed, the only link that I could really find between his participation today and his previous distinguished employment was the old remark, "The only way to prevent crime paying is to nationalise it". My noble friend the Leader of the House—it is an impertinence to say it, but nonetheless I say it—gave us a most effective speech. We are greatly indebted to him, as to my noble friend Lord Gowrie, who has just wound up.

This has been, not an unusual debate but what to people outside would be an unexpected debate in the normal run, because it has been noble Lords on this side of the House who have been advocating change, and conservatism has been manifested very strongly in the speeches from the other side of the House. This is reflecting what is becoming evident in the country as a whole, that the Government, under their present Prime Minister, are—if I may adopt the phrase of the noble Viscount, Lord Chandos—the radical ones faced with the massive, almost reactionary conservatism of the Labour party. This only shows that your Lordships' House is, as always, fully up to the moment in the movements of public opinion.

With your Lordships' permission, I should like briefly to refer to two or three specific points that were put. I hate, as he said he hated quarrelling with me, to quarrel with the noble Lord, Lord Barnett, because we belong to the same union, or indeed to two of the same unions. We have both been through similar and, in both cases, similarly trying experiences both as Chief Secretary and in the Public Accounts Committee. When he was good enough to allow me to interrupt him, he missed the whole point about British Airways. It is beyond dispute that there is a very close coincidence in date between the great recovery in British Airways and the announcement that it was to be privatised.

I know there are other factors—one formidable factor being my noble friend Lord King of Wartnaby—but I believe the noble Lord, Lord Barnett, overlooked the fact that the knowledge that British Airways was going into the private sector greatly helped my noble friend in the changes he was making because it became apparent to all in British Airways that they would be subjected to the disciplines of the private sector. Therefore, steps in respect of overmanning, for example, which would have encountered appalling resistance at an earlier date, went through with considerable ease. It is difficult in an interruption to put over a point with complete clarity and fullness, but I hope that the noble Lord, Lord Barnett, will reflect on this and not, as he seemed to he doing in his speech, brush that argument aside.

I have only one other point in respect of the noble Lord, Lord Barnett, whose speech I know he knows I very much enjoyed, which is that he seemed to ignore the stimulus which competition, the disciplines of the market and all the atmosphere of private industry have upon denationalised industry. He could not quite brush aside the fact that those industries which have been denationalised in the recent past have shown so much better results.

I should also comment for one reason on one observation of the noble Viscount, Lord Chandos. I do so only because he used, no doubt inadvertently, rather strong language in describing an argument of mine. He was good enough to observe that it was wilful misrepresentation to suggest that there was any difference between nationalised and privately-owned industries in the need to be prosperous if they were to survive. I do not wish to seem over-sensitive; indeed, none of your Lordships would believe I was after a number of years in English public life, because no one who was would have survived that. "Wilful misrepresentation" is a strong term not often used in this House; indeed it carries a connotation of a criminal offence. But I should like to deal with the substance, as he put it this way, of the noble Viscount's observation.

I maintain and reaffirm the view that not only is there a great difference between a nationalised industry and a privately-owned one in this respect, but it is a difference of major importance. It is perfectly true, as the noble Viscount properly said, that particularly large industries may have to be or think they have to be rescued by the Government of the day if they get into bad trouble. But in practical terms there is all the difference in the world between an industry which knows that it is owned by the Government, which the Government cannot allow to go bankrupt, which the Government have to sustain, however heavy its losses, and a privately-owned industry which, if it gets into serious trouble, can ask the Government for help and may even hope the Government will help, but which, even at that late stage in the day, has no certainty that that help will be forthcoming.

One may be thinking, for example, of the effect of trade union action. The knowledge in the unions in the public sector is that, however rapacious their wage demands may be, however much damage they may do by industrial action to their industry, they are not destroying their industry or their jobs. In no company in the private sector is there any such certainty. This is a significant factor—I beg the noble Viscount to consider this—by way of difference between the two.

I do not intend to take the discussion of points further, though I made some notes in the course of the debate. It therefore remains for me, once again, to thank your Lordships for the personal courtesy which so many of your Lordships showed to me and which I deeply appreciate.

The substance of the Motion is for Papers. I would remind your Lordships of one of the horror stories of this House. The late Lord Woolton was replying to a debate in this House and, among his many qualities, that great man did not have much concern for the niceties of procedure. Therefore, to the horror of his officials, he accepted a Motion for Papers. This created a practical problem which was resolved by our ever adroit and humorous officials arranging for delivery at the private house of the noble Lord who had moved the Motion for Papers, a vanload of out-of-date papers from the Printed Public Paper Office. I am anxious to avoid that fate. I hope your Lordships will protect me from it by accepting my application to withdraw the Motion.

Motion for Papers, by leave, withdrawn.