HL Deb 04 July 1984 vol 454 cc284-96

3.10 p.m.

Lord Wells-Pestell rose to call attention to the widening social and economic differences between the rich and the poor in the United Kingdom and the need to break into the cycle of deprivation which condemns families to poverty: and to move for Papers.

The noble Lord said: My Lords, the purpose of this debate is to enable the Opposition to draw attention to the widening gap between the rich and the poor and to encourage the Government to do something to narrow that gap. Let me be perfectly frank and say that I do not see this debate as an occasion for a political knockabout, although I fear that some of my noble friends may feel otherwise. I am only too well aware—I want to admit this at the very beginning—that all was not well between the rich and the poor under the last Labour Government. The gap was then very wide, but my point is that the gap is now much wider, and there is abundant evidence to show that.

I have never made any secret of the fact that I have a great admiration for the ability, competence and knowledge possessed by Members on all sides of your Lordships' House. However, I view my task this afternoon with some diffidence because I feel that very few, if any, noble Lords opposite know anything about the poor or the problems resulting from poverty and how they live their lives. I think that may well be borne out, because there are only three Members of the Government party taking part in this debate this afternoon: two noble Baronesses and one noble Lord. I am sure that, so far as the noble Baroness, Lady Lane-Fox, is concerned—and I hope she will not take this too unkindly—we shall hear the voice of official Toryism.

Since 1979 there has emerged a very different Conservative Party, which, measured against the past, leaves—shall I say?—a lot to be desired. Today it is in the main a party of extreme policies and continuous confrontation, led, if I may say so, by a very arrogant Prime Minister—

A noble Lord

Oh!

Lord Wells-Pestell

—who cares little or nothing for the effect of those policies on the ordinary people of this country—

Noble Lords

Oh no!

Lord Wells-Pestell

My Lords, if I think that, I shall say it: make no mistake about it. I took part in the 1929 general election and can look back at the Tory Party's beliefs in action since then. The original heartland of the Tory Party was paternalism, which many of us found unacceptable, but, if I may say so, it was very preferable to the callous indifference of the present Prime Minister's policies in relation to the needs of the poor. Speaking for myself (because that is all I can do) I would much sooner see some of the Tory Ministers today come out of the mould which produced Ministers like the Leader of the House, Lord Whitelaw. I feel that years ago they brought a different attitude, a different belief and a different understanding to our particular problems.

Today it is a very different Tory Party from what it was, and it is not surprising that there is division within the Tory Party today and outspoken criticism coming from some of the senior and most respected Tory Members. Since 1969, because of the widening social and economic differences between the rich and the poor, we have had more newspaper articles, more investigations and more reports than ever before on the plight of the poor, all of them establishing beyond any doubt whatsoever that the poor are getting poorer and the rich are getting richer. I want to quote from something that a Member of your Lordships' House, the right reverend Prelate the Bishop of Liverpool, Dr. David Sheppard, said quite recently: If those who are better off go on excluding the poor the price will be high. It will cost us our fraternity and national unity.". I believe that that is putting it mildly. The belief held firmly by the Government that mass unemployment must be suffered by the poor as the price of wealth creation can only lead to disaster and physical violence, and we need to keep always in the forefront of our minds that violence is the language of the hopeless, the frustrated and the depressed.

I did not want to make any reference, for fear of being misunderstood, to the miners' strike. I do not approve of violence and I am very much opposed to it: but I do wish that some noble Lords opposite and the Conservative Party as a whole would look at what is the basic cause of this trouble. The basic cause is the closure of pits, the loss of work, the possibility of having to sell one's house because one will not have a job and therefore will not be able to pay the mortgage, and of having to move away leaving what we have found over the years in Cornwall—derelict villages, derelict land where the old tin mines used to be. That is what will happen in a large number of our coalfields if they are closed. We ought to think of the destruction that unemployment brings and creates for the individual. We ought to try to weigh up how we would feel if it meant no job, no home and no community. I think I would be on the fighting end if it happened to me, and I am rather a passive individual.

The Policy Studies Institute research just published was commissioned by the Department of Health and Social Security. It reports that there are 4 million people and their families on supplementary benefit. While there is no official definition of poverty, the supplementary benefit levels are the nearest that we have to such a definition, since the amounts are set each year by Parliament as the level below which the income of those not in full-time work shall not fall. Today a single person receives £26.80 a week and a married couple receive £43.40 a week on supplementary benefit. I know that certain additional amounts are paid, but, after those additional amounts are used for the purposes for which they are given, these people are on the supplementary benefit level, which is the nearest that we have to a definition of poverty, and anybody receiving less than that is in fact living in poverty.

I suppose that some of your Lordships would take it amiss if I suggested that some of you spent probably considerably more than that in one afternoon or in one day at Ascot a week or two ago, though I do not think that I should be far wrong. Do your Lordships not think it is immoral—I do—that we should have a society which enables a large section of the community to spend in one afternoon a sum considerably more than one person or two married people receive?

According to the recently published official statistics, some 7¾ million people, or one in seven of the British population, had an income in 1981 at or below the supplementary benefit level—the poverty line. We ought to be ashamed that such a situation exists in Britain today. Official figures show that in 1981 half a million children were living in families with an income below the supplementary level and that 3½ million children were living in families defined as low income.

It was a group of Conservative Members of Parliament who in 1981 said: The greatest threat of all to family life comes from poverty. The greater part is concentrated on the poor with children. This is not tolerable". Has their own party taken any notice of that statement? It is not surprising that we get increased violence, increased crime and increased drug taking, or that they have increased considerably during the lifetime of this Government. It makes an absolute mockery of the Prime Minister's proclamation on entering Downing Street on 4th May 1979, when she said: Where there is discord may we bring harmony. Where there is error may we bring truth. Where there is doubt may we bring faith. Where there is despair may we bring hope. It is the biggest piece of humbug that has been uttered in this country for years.

The responsibility of the Government is to pursue policies which will create a caring and compassionate society and this is a matter with which I hope the noble Lord, Lord Cockfield, will deal. It is really the only one that I want to put to him. If we have a moral responsibility for seeing that people are properly looked after, properly fed and allowed to have a normal existence—and I believe that we have—we should be prepared to sacrifice almost anything to see that people, particularly when they constitute one-seventh of the population, are raised well above the poverty level.

A large number of our elderly people have to spend every other day in bed in the winter because they cannot afford the money to buy coal. One old lady told me that it also saved her a meal, because she did not feel so hungry if she stayed in bed. Is this the kind of society that we want, where the old people are proving by their existence that there is life after death?—because many of them are really dead.

Can we afford—and I do not speak as a unilateralist, because I am not a unilateralist; at least, not yet—to spend the amount of money that we are spending every year on armaments when we have a situation like this? How can we call ourselves Christians, a Christian nation or a religious people if we allow this extreme wealth to walk not side by side, but hand in hand with extreme poverty? I believe that in 1984–85 we shall be spending £17,000 million on defence. The noble Lord will put me right if I am wrong about that, which I may be. In 1985–86, we shall be spending £18,700 million on defence. Can that really be justified?

I know the arguments, but can we really justify that kind of expenditure at the expense of the daily lives of millions of our people in this country? If it is because America wants England as her front line of defence, then she ought to pay for it—every penny of it. I know the argument is that it is for the defence of our own people. I am not asking that we should switch 100 per cent. from defence expenditure to the support of people, but surely to goodness a sufficient amount of money can be saved not to raise them to the level of luxury, but to raise them to a level that is very much higher than the poverty line on which so many of them have to exist today. My Lords, I beg to move for Papers.

3.27 p.m.

The Chancellor of the Duchy of Lancaster (Lord Cockfield)

My Lords, the noble Lord, Lord Wells-Pestell, has, as we all know and appreciate, a great sympathy and understanding for those who are unemployed or sick, or who suffer poverty or deprivation. His concern is a very deeply held personal one, but that ought not to blind him to the fact that these concerns are widely held, not least by members of my own party. I must in this respect entirely refute some of the comments that he has made about my party, my colleagues and the Government that I represent.

May I remind him of the words that Pope wrote in his Essay on Man: In faith and hope the world will disagree: But all mankind's concern is charity. Compassion, like charity, is the concern of all mankind. It is not the prerogative of one political party or of one group in the community. It is something which transcends all barriers of class and party. As John Donne, the divine, said, we are all "involved in mankind". Where we differ, therefore, is not in our perception of the problem, but in our perception of how to deal with it.

Here there is a fundamental divide between the parties. The Opposition are—and always have been—obsessed with the question of the distribution of wealth. We on these Benches believe that the primary objective must be the creation of wealth—the creation of wealth in the form of increasing the production of goods and services and investment which creates that production.

Without that more abundant wealth, the springs of compassion must run dry. What mankind needs is not the wringing of hands or lamentation in the night but the creation of a society which is vigorous, enterprising and self-reliant, a society which fosters and encourages independence of mind and means alike but equally one with the will to succour those who, through no fault of their own, cannot provide for themselves, and above all a society with the means to do so.

Nothing is more tedious, more destructive of good debate, than a long recitation of facts. But, as Browning said: Facts are facts and flinch not". So let us start with the facts. A hundred and fifty years ago, Shelley wrote in his essay A Defence of Poetry the words which the noble Lord, Lord Wells-Pestell, no doubt had in mind: The rich have become richer and the poor have become poorer". These are fine poetic words which have been quoted down the ages by those with neither poetry in their hearts nor understanding in their minds. Shelley's words related to one of the darker periods in our history and they reflect a world long since gone. Over the years there has been a very great change in the distribution of wealth. The evidence of this is all around us. The great landed estates of the 18th and 19th centuries have largely been broken up. The historic houses which form part of our national heritage can rarely now be lived in simply as private dwelling places. Many have been demolished; many survive only by the revenue secured by being open to the public. There is great public concern about the way that private collections of pictures and other works of art are being broken up under the pressure of economic circumstances, often being scattered from these shores.

If one does not believe the evidence of one's own eyes, one can always turn to statistics. The source document is the first report of the Royal Commission on the Distribution of Income and Wealth, presided over by the noble Lord, Lord Diamond, and supplemented now by the reports of the Board of Inland Revenue. In 1911 the top 1 per cent. of the population owned 69 per cent. of total personal wealth. By 1960 this had dropped to 42 per cent. If one includes pension rights—the most important source of savings and of property—the figure today has fallen to 12 per cent.—a very dramatic change.

But more important than this, important though it is, is the immense spread of personal wealth among the broad mass of our population—a development which has received help, encouragement and impetus under this Government. Today, 12½ million people own their own homes; 11 million people are in occupational pension schemes; 20 million people have money in a building society; 10 million people have National Savings accounts; 2 million people own shares in companies. On a more mundane level, 79 per cent. of households have a washing machine; 93 per cent. have a refrigerator; 97 per cent. have a television set; 76 per cent. have a telephone.

Is this, my Lords, the picture of a country where the rich are growing richer and the poor poorer? Of course it is not. It is a picture of a country where the ownership of wealth is steadily extending throughout the whole of our society, and a very good thing indeed it is. It is no answer to these plain facts to claim that millions of people are living in poverty because they do not possess television sets or washing machines, or because their incomes are below supplementary benefit levels. The very measures which are chosen in these attempts to demonstrate the extent of poverty are indeed measures of relative affluence rather than of poverty. Let us therefore put on one side this obsessive preoccupation with the distribution of wealth and these attempts to demonstrate the existence of poverty and turn our attention to the real problems which exist.

It is all too easy to deal with symptoms, not with causes. It is popular—at least in the short run—because government appears to be taking direct action to deal with the problems that worry people. Thus, price control to curb rising prices; pay control to stop excessive wage increases; exchange controls to stop money going overseas; public expenditure as a cure for unemployment; government grants to encourage this activity or that, and so on ad infinitum. We tried this, under successive governments in the 30 years after the war. But it simply does not work. The dismal record of the 1970s amply demonstrates that: money incomes up by 312 per cent. and output up by 25 per cent. You simply cannot succeed by treating symptoms in this way. Fundamental problems need fundamental solutions.

To do justice to the Labour Party, this basic truth had begun to dawn upon them when they were forced to go cap in hand to the IMF. This was very fully recognised by the noble Lord, Lord Barnett, in the spirit of frankness which overcame him when he came to write his memoirs. I hope he has taken this opportunity of rereading that fascinating account of the road to "doom and gloom". Those are his own words. I would not claim to have invented that memorable phrase. Unfortunately, for all the noble Lord's good intentions, once the immediate crisis was over the Labour Government plunged once more down the path of fiscal and economic irresponsibility. It was left to this Government in 1979 to turn to the task of establishing a firm foundation for the future—a task made doubly difficult by the second great oil price explosion and the resulting world recession.

Sound money is the foundation on which progress must be built. Without sound money, there can be no confidence in the future, and investment languishes. Without sound money, wages chase prices, prices chase wages in an ever-increasing spiral of inflation. Without sound money there can be no certainty in the present, no saving for the future. We now have the lowest rate of inflation for half a generation. Inflationary habits die hard. We cannot relax. We must make further progress. But we have established the firm foundation, the rock on which to build for the future.

On that rock, we must build three things: first, a higher standard of living for all our people; second, better job opportunities, whether in employment or in self-employment; third, the freedom that comes from wider property ownership.

A higher standard of living can only come from higher output. There is no real solution to be found in shorter working weeks or early retirement. All too often, devices of this kind result in less output, not more, in higher costs, not lower costs.

The road to higher output comes, and can only come, from producing the right goods, at the right price, and of the right quality. What you produce you need to sell, and you will sell only if other people are prepared to buy. In the last 20 years or so, our share of world trade has halved, and import penetration into this country has gone up by 50 per cent. But for this, we would today enjoy a higher standard of living and a higher level of employment. There have been many factors at work, but lack of competitiveness on the part of British industry has been the most important. This was recognised by the noble Lord, Lord Barnett, in commenting on the Labour Government's performance. What he said was this: Nothing had been done to change our underlying problem of poor industrial performance". He went on to prophesy: The really depressing thought … was that there did not seem to be much that any Government could do about that". But events, I am happy to say, have proved him wrong. The tide has turned. Under a different Government, with different policies, very considerable progress has been made.

Output per head in manufacture now stands at record levels—nearly 23 per cent. higher than the low point in 1980. Unit wage and salary costs in manufacture increased by only 2¾ per cent. last year—the best performance since the 1960s.

But we must not relax. Some of our major competitors—the United States, Japan and Western Germany—are doing better than we are. Continued restraint in pay settlements is essential if we are to maintain and improve our competitive position. Upon this rests the prospects for growing employment and lower unemployment.

There is no evidence that Governments can themselves directly reduce unemployment. Indeed, all the evidence points to the contrary. Despite repeated attempts in years gone by to reflate the economy, the level of unemployment has inexorably moved upwards. Every single Government since the 1950s have presided over a higher average level of unemployment than their predecessors. The effect of reflation has simply been to generate inflation, higher interest rates, higher costs, a loss of competitiveness, and ultimately a loss of output and employment. The steadfast faith of those who still cling to these supposed remedies may be admired for its loyalty, but not for its wisdom.

What Governments can do is to take action to improve the way the economy works, to improve its flexibility and its responsiveness to change, and to remove the obstacles which stand in the way. This is the path we have consistently followed: the removal of controls, on pay, on prices, on hire-purchase and exchange control, all of which entrenched the old and hampered the new; the reform of the labour market, including the restriction of trade union power so often misused to obstruct progress; changes in the employment protection Acts which so often destroyed, not protected, jobs.

In the fiscal field there have been: the abolition of the national insurance surcharge and the reconstruction of corporation tax—two measures designed to remove the bias in favour of machines and against the employment of people; changes designed to improve incentives—reductions in direct taxation, improved share option schemes, reliefs for small businesses; measures to improve mobility—such as the reduction in stamp duty on house purchase; a massive new effort in training to ensure that our young people are better equipped to face the challenge of the new technological world. The list is endless.

The United States' economy has performed distinctly better than our own despite the incubus of the Budget deficit, with a higher rate of growth, a lower rate of inflation than we have, and nearly 5½ million new jobs created in the last 17 months. The answer lies in the greater flexibility of the American economy—its ability to adapt to change; an innovative outlook and an enterprise culture; and a government who take a much smaller proportion of the national output. If we are to live successfully in the modern world, these are things we must match.

It is only by progress along the path I have indicated that we can provide a secure future for our people. But our preoccupation with the future must not blind us to the serious problems faced by those who are unemployed today. In the last few years the standard of living of those in work has been higher than it has ever been. The burden of the recession has had to be carried by those out of work.

The unions, and particularly their leaders, bear a major share of the responsibility for this. Excessive pay increases extracted by the union leadership have left employers with no alternative but to reduce employment in order to stay competitive and remain in business. It is one of the great social and moral disgraces of our age that a movement born in the concept of the brotherhood of man should have destroyed the livelihood of so many of its own members to enable others to enjoy the profits of a higher standard of living.

All this was recognised by the noble Lord, Lord Barnett—if I may be forgiven for quoting him again: If the trade union movement insists", he said, on using its strength to obtain increases in pay that have not been earned, then the net result will be to redistribute"— that is, to redistribute the national wealth— in favour of those who are fortunate enough to remain in employment. And with pay increases in excess of increases in productivity, there is no way in which even present levels of employment can be maintained". Those were the words of the noble Lord, Lord Barnett.

Of course it is not only the noble Lord, Lord Barnett, and myself who recognise these evident truths. The people of this country are recognising them, too. No wonder that trade union membership has fallen to its lowest level for 10 years. No wonder that there is a widening rift between the members and their leadership. It may well be that the members have a greater sense of responsibility to their fellow men than do their leaders. If this is so, it offers hope for the future.

Perhaps I may now leave these economic issues and turn to other matters. I imagine that in the course of this debate we shall hear a great deal about the Government's record in the field of the social services—some of it critical. In this connection, I will remind your Lordships of the words of Edmund Burke: It is a general popular error to imagine the loudest complainers for the public to be the most anxious for its welfare". My noble friend Lord Glenarthur, when replying to the debate, will deal with specific points which may be raised. Meantime, I shall simply place the following facts on record. Total expenditure on social security and health will have risen from £23.8 billion in 1978–79—the last year of Labour Government—to £52£ billion this year; an increase of 23 per cent, in real terms. Pensions will have risen by 83 per cent, against a rise in prices of 76 per cent.—again an increase in real terms. Supplementary benefit has risen by 5 per cent, in real terms. Family income supplement—an innovation of a Conservative Government and one which helps the poorest working families—has increased in real terms. Child benefit, the brainchild of the Conservative Party, stands in real terms at the highest level ever. The principal income tax personal allowances, which particularly benefit those on smaller incomes, were increased in the recent Budget by 12 per cent., more than double the amount needed to compensate for inflation. They now stand 16 per cent, higher in real terms than they were in 1978–79.

My Lords, today we stand at a great divide. We look back over the years of recession—the damage, the hardship and the suffering they caused. We look forward to the years of recovery, on which we are now embarked. In absolute terms, the growth in our national income last year was modest—some 3 per cent.—but it was the highest in Europe. Growth this year, again, is likely to be one of the highest in Europe. Investment, in manufacture as well as elsewhere in the economy, is rising strongly. Taken over a very long period of time, rates of growth in the Western World have probably not greatly exceeded 2 per cent, per annum. But growth of this kind—sustained and compounded over a long period of time—has brought with it a great growth in prosperity and has seen the creation of untold millions of new jobs. That is the challenge which faces us today. It is to encouraging, sustaining and improving the rate of growth in our economy that our policies must be directed.

They have been so directed—with a steadfastness which at times has been confused with obstinacy, with a determination which at times has been confused with rigidity. We are criticised for failure to reduce public expenditure and taxation in the way that we promised in 1979. But that failure is largely a reflection of higher welfare and social security costs, and it is this above all which gives the lie direct to the criticism that Conservatives do not care. True compassion does not consist in wearing your heart on your sleeve, but in putting your hand to the plough and your shoulder to the wheel. It is achievement which matters: and in that, this Government, this party, is very rich.

3.53 p.m.

Lord Banks

My Lords, the whole House will be grateful to the noble Lord, Lord Wells-Pestell, for raising this important subject this afternoon. We know, as the noble Lord, Lord Cockfield, has said, that it is one on which the noble Lord, Lord Wells-Pestell, feels very strongly; but there surely cannot be any doubt that there is very real poverty in our comparatively affluent society in Britain today.

The noble Lord, Lord Cockfield, was naturally concerned to defend the Government's record in relation to that poverty, and I think he was right to point to the well-being of the majority; but I think he was wrong to attempt to minimise the degree of poverty which is endured by the minority to whom the noble Lord, Lord Wells-Pestell, was referring when he introduced the Motion this afternoon. He pointed out that some 7¾ million people (one in seven of the population) were living on what really is the poverty line; were living at or below the supplementary benefit level. Fifteen million more (one in four) were living—and this is in 1981—on an income of less than 40 per cent. above the supplementary benefit level; and things have not improved since then. That figure would include, of course, people on low pay, pensioners and one-parent families.

Not only is there poverty, but that poverty is often acute. The noble Lord, Lord Cockfield, spoke of it as if it were purely relative, as if it were purely a case of some people having more than others but everybody being all right. Yet a recent survey carried out for London Weekend Television revealed that three million people cannot afford to heat the living areas of their homes; six million people lack some item of essential clothing; and 5½ million people have to do without some item of food due to lack of income. The report to which the noble Lord, Lord Wells-Pestell, referred, called The Reform of Supplementary Benefit, produced by the Policy Studies Institute and published this week, examined the position of families with children on supplementary benefit in 1982. They came to the conclusion that the average family started each week with an income of £13 below the level of need as defined by Government figures; more than half were in debt or were behind with bills; half ran out of money most weeks; and more than half lacked basic items of clothing, such as a warm coat or change of shoes for themselves or their children. Alongside that, many did not know when they were entitled to extra benefits.

So one in four are on low incomes, one in seven are on the poverty line, many suffering acute poverty, and the numbers involved in that acute poverty have been increasing. The numbers on supplementary benefit have reached a record level. Unemployment, of course, is the major cause of that. The numbers out of work for over a year have been increasing; and, of course, they still do not get the long-term supplementary benefit rate. The numbers of children living below supplementary benefit level nearly doubled between 1979 and 1981; but the child benefit, although it has been increased, has this year not been increased to the same degree as the tax allowances, although, of course, child benefit did replace the allowances for children. And the numbers receiving family income supplement have increased.

The worst of this poverty is concentrated in the inner cities, and the right reverend Prelate the Bishop of Liverpool, as the noble Lord, Lord Wells-Pestell, reminded us, has compared the comfortable Britain (the majority of us) with the nevertheless considerable minority in poverty, particularly in the inner cities. The Roman Catholic Archbishop of Liverpool only this past week underlined the case of the right reverend Prelate when he spoke of intolerable deterioration in the inner cities. There, the poverty is compounded by appalling housing and environmental surroundings.

The gap between the impoverished and the better off has been increasing in recent years. There have been tax cuts to the better off and there have been cuts in social security—and that must mean a redistribution away from the poor. What the social security cuts mean is that less is being spent on social security than would have been the case but for the policy of the Government. In 1982 it was stated that £1.6 billion had been cut off the social security budget per annum, and that figure is no doubt larger now. That overall redistribution can contain improvements in some particular benefits. The noble Lord, Lord Cockfield, mentioned pensions, and said that they had increased by 83 per cent., and prices by 76 per cent. Of course, that is good as far as it goes, but the Government broke the link between earnings and pensions. If they had not done that, a married couple would at the moment be receiving more than £3 a week extra and a single person more than £2 a week. That is what I mean when I speak of cuts in social security.

If we look at the burden of direct taxes and how they have varied since 1979 we find that in a two-child family on half the average earnings the burden is up by 55 per cent., but for a similar family on five times the average earnings it is down by 14 per cent., and for 10 times it is down by 23 per cent. I think it is right to say that only those with an income of more than £18,000 pay less direct taxes than in 1978–79. So there is very real poverty. Much of it is acute. It affects about one in seven of the population. The numbers have been increasing and the gap between the rich and the poor has been increasing. That last fact has been recognised by Mr. Francis Pym in his recent book, The Politics of Consent. He said: At present the real incomes of the 'haves' and the employed are rising steadily; the real incomes of the 'have nots' and the unemployed are at best static in absolute terms and are declining in relative terms". How should we deal with this situation, where most of us are comfortably off with increasing real incomes and some of us are in very real poverty? The Government always say, and the noble Lord, Lord Cockfield, said it again this afternoon, that what we have to do is to increase wealth and bake a larger cake. I accept that. It is right to seek to increase wealth. But wealth must be distributed so as to relieve poverty, and that involves redistribution. If we were to enter into a period of declining wealth—and I very much hope that we shall not—then redistribution would be more important and not less important, as is the implication of the argument put forward by the noble Lord, Lord Cockfield.

If we could increase wealth and that meant more jobs, clearly that would reduce poverty and there would be more to redistribute. Incidentally, I regard distribution of income as different from the allocation of physical resources. The Government argue that their economic policies are necessary in order to secure that extra wealth. Indeed, the noble Lord said so. But the policies pursued have led to a drop in manufacturing capacity. It is true that at great cost in increasing poverty, through increasing unemployment, the Government have reduced inflation. We must be glad that inflation has been reduced but we cannot ignore the cost. There has been a slight and welcome recovery here, as elsewhere; and perhaps even more here than elsewhere. However, particularly over this past week, the future of that recovery appears to be in some doubt. We all hope it will continue but there is a question mark over it.

How much has that recovery been due to the spending in the United States which has led to the American deficit? How much is it the locomotive power of that American deficit which has been at the root of the recovery? How will our recovery be affected if that deficit is reduced? It may be desirable, for other reasons, to reduce it. What will the impact be? Well, that deficit is something the United States have at the present time and, according to the noble Lord, Lord Cockfield, they also have a very happy economic situation as compared with the one we have this side of the Atlantic. Therefore, it may not be right to describe that deficit as an incubus.

For all those reasons we on these Benches feel that it is desirable to have a limited and controlled expansion of the economy through expenditure on the infrastructure. We would much prefer to see that done on a European basis. The European Centre for Policy Studies only a month ago produced a plan for that to be done on a European basis. It said that if the European Governments are worried that this will cause inflation, they need not be worried because until they have got unemployment down from 10 per cent. 7½ to per cent. it is not going to cause inflation. In other words, there is a degree of slack to be taken up. It went on to say that even if that does not satisfy the Governments and if they are still worried, let them resort to an incomes policy—which we on these Benches have advocated for a long time. I would certainly couple that policy with a determination to maximise the flow of international trade and stand firm against protectionism.

When we return to the issue of how far should we redistribute, we have to consider whether redistribution on a greater scale than exists now would be damaging to incentives. That is often said. Clearly there has to be a limit to the degree of redistribution, but from a recently published national survey of British attitudes it would appear that public opinion is not unfavourable to further redistribution. Of those approached in this survey 72 per cent. thought that the gap between the rich and the poor was too large; 3 per cent. thought it was too small; 79 per cent. thought that taxes on low incomes were much too high, and only 29 per cent. thought taxes on the rich were still too high. There seems to be a readiness to pay more to relieve genuine poverty. The trouble is, of course, that the present creaking, complex, piecemeal social security system that we have is unlikely to be a satisfactory instrument for that redistribution. Of course, that system is now being reviewed within the Department of Health and Social Security and we shall await with interest the results of that review.

My noble friend Lord Kilmarnock will refer, when he speaks later, to some proposals for combining the tax and social security systems in the immediate future to relieve poverty. I believe that in the long term we have to develop that integration of tax and social security into a tax credit scheme which will rationalise and simplify and which will provide the means for redistributing income fairly. I would hope that it will be possible to link that tax credit system to a statutory minimum income, although in recent weeks Frank Field has shown us some of the problems that lie in bringing that about. I am convinced that a tax credit system would offer the best hope of mitigating the poverty trap and ending the conflict between tax and benefit which exists today.

One thing is certain. Although so many of us in all classes are fairly comfortable today we cannot ignore the very real poverty in which a considerable minority of our fellow citizens live.