§ 4.11 p.m.
§ Debate resumed.
§ Baroness Seear
My Lords, in examining the two documents, the consultative paper on wages councils and Burdens on Business, in preparation for today's debate, somewhat to my surprise I found a number of points on which I could agree. In the first place, it is easy, if somewhat absurd, to agree that unnecessary regulations, once they have been established as being unnecessary, should clearly be removed. There is no problem about that. I can also agree, with a certain amount of pleasure, that if it has been established that the Government and the administration in their wisdom have produced a positive cat's cradle of regulations, paper, red tape and forms to be filled in, then it is entirely salutary that they should set about the job of tidying up the muddles that they have created. I have no objection to that whatever. We give it the strongest possible support.
717 I also very much agree that much better information could be made available to employers, small and large, about what it is they are supposed to do, what the real meaning is of regulations, and the difficulties they are up against in implementing the requirements made upon them. I give just one example. One is constantly told, and I am sure all your Lordships will have had the same experience, that it is not possible to get rid of unsatisfactory labour. You are told that not only is it the cost of employing more people—and I have been told this again and again—but that if you take anyone on you can never get rid of them. One can point to the figures which are regularly published (but not where most businesses see them) which show that more employees lose their cases in industrial tribunals than win them. This can be said again and again; but apparently it has not gone home. It is up to the Government, the administration, to see that these very damaging and totally false impressions about how legislation works out and how the administration should be handled are corrected. It should not be beyond the wit of the departments to see that correct information about how these things operate should get to the people who need to use them.
I am also very much in agreement that we should take certain steps. I believe your Lordships are aware that I speak as an enthusiastic supporter of the European Community and that I have been a most interested member of the Scrutiny Committee and the sub-committee to the Scrutiny Committee; but I am very aware, partly as a result of that experience, that sometimes Brussels, in forming its directives, loses its head completely. It has even forgotten, it seems to me, and should be reminded of again and again, the important distinction which itself made between a regulation and a directive. A regulation lays down in detail what should be done and it should be kept for the rarest occasions. A directive lays down the objective to be achieved and leaves the member state to devise ways in which that objective should be attained. There has been far too much confusion through directives reading like regulations, and therefore imposing almost impossible burdens on member states because the directive, as it comes out, simply does not fit the existing procedures and legislations of this country; and does it not need to fit if the objectives are to be attained?
This is where the Government—and I agree with the recommendations made in these papers—could bring pressure to bear in Brussels to see that directives are formulated in a different way, recognising the freedom of individual member states to reach the objectives laid down in the directives in their own way and as best suits their country. There is much work to be done there: first, to put right what has gone wrong in past directives; and, secondly, to see that future directives do not take the same shape. In all those ways I very much accept what is said in these two papers.
I shall even say that there are certain points in relation to wages councils where I agree there is room for action to be taken. Wages councils' legislation has grown up piecemeal ever since the old Trade Boards Act 1909, and it is probably time that we took another look at them. I have always believed that in some areas the starting rate for young people has been too high and has tended to price them out of jobs. That needs 718 to be looked at. I also agree that in some cases wages councils deal in a great deal too much detail with what is required in particular organisations. To attain the objectives for which wages councils exist it is not necessary for them to be able to lay down in such minute detail what different organisations are required to do.
Many years ago I had some responsibility inside an organisation for applying wages councils regulations. I felt that there was a great deal of room for rationalisation, with agreement with the wages councils, where there were wages councils' regulations applying inside an organisation—sometimes two or three different sets of regulations if the organisation had within it a catering establishment and a laundry as well as the main productive processes. There was a lot of scope to save considerable time and money and to obtain agreement to align the requirements for people employed under the wages council regulations with those that prevailed in the main industry which the organisation was pursuing, provided the overall conditions of the people who were subject to the wages council regulations were not, as a result of that alignment, less favourable than they would have been if they had been subject solely to the wages council regulations. Ridiculous but very expensive and irritating differences between one set of regulations and another cause a great deal of unnecessary burden on management, particularly middle and lower level management, which should not be unduly and unnecessarily hampered in this way.
Therefore, I am not against having a good look at all these things. Indeed, I go along with the suggestion of the noble Lord, Lord Boardman, or some variation of it, that we probably have reached the time when a Select Committee, or a similar body, could consider the whole of the protective legislation and the wages councils regulations to see whether there is anything which could usefully be done to tidy them up in the areas to which I have referred. So, your Lordships will see that I am straining myself to agree with the proposals which have been put forward. However, I have reached the point where I can strain no further. In reading these papers and listening to the noble Lord, Lord Boardman, it is the assumptions that lie behind the papers and behind his speech which I find it essential to challenge.
In the first place, I have never understood why what goes on in a small business should be regarded as of a quite different order of importance from what goes on in a larger business. Of course we are all in favour of small businesses, my party not least. I must say that I wish that Mr. Schumacher, who in some ways was a great man, had never coined the phrase "small is beautiful". It does not stand up to a week's experience in the lives of any of us. Small can be perfectly hideous. There is nothing more hideous than a small family business which has gone bad on itself. I would rather work in the most disagreeable, mechanised, large organisation than work in that kind of small business. It is nonsense to say that small is beautiful. It can be beautiful, but it can be ghastly. Large can be ghastly and large can be beautiful. So we might as well forget that one. There is no great merit in being small. There is certainly no merit which justifies people treating those whom they employ in a quite different way from 719 the way in which they would be treated if they were in a larger organisation.
There are some regulations which are plainly ridiculous if only three or four people are employed, but there are others from the point of view of the employee—and, after all, that is what employee protection is about—which are important. It seems to me odd to argue that it makes a difference if you have been fairly or unfairly dismissed whether your employer happens to employ 20 rather than 200 people. You are still unfairly dismissed. The number of one's fellow employees makes not the slightest difference.
It makes not the slightest difference if the safety conditions in a small concern are such that you lose a leg whether the employer employs four people or 400. We cannot make a distinction, surely, as to what ought to be required of an employer solely in terms of the number of people he employs. It is not logical and it does not make sense in terms of the objectives of employee protection. This is one of the things which I would hope the Select Committee will look at. There are certain regulations which could well not apply to small businesses, because of particular circumstances which need to be established and which would justify a logical exemption, and for no other reason.
Then there is a strange assumption that seems to run through the whole discussion that it is always inefficient to put in employee protection. Incidentally, one would think that none of our successful competitors had any employee protection at all. Nearly every other industrial country carries a great deal of protection. Some of it is more expensive and more detailed than ours; some of it is less. It has grown up in different ways and in response to different circumstances. But they all have it. In fact quite a lot of employee protection contributes to the efficiency, and therefore presumably to the profitability and job creation capacity, of the employer. It does not reduce it. Would any of your Lordships argue that a thoroughly slovenly, dirty and ill-cared for factory is likely to be more efficient than one that is properly maintained? Those of us who have worked inside industry know that bad housekeeping is the greatest single cause of accidents, lost time and therefore lost production.
I do not say that employee protection marches step by step with efficiency; but in a great many respects good protection is also good business. I have always argued, for example, that equal opportunity legislation, if properly applied, enhances and does not reduce efficiency but increases an organisation's capacity for profitability. It does not reduce it. Let us not assume in this discussion that we are making choices between employee protection and efficiency. We are not. The two things do not always coincide but not infrequently they do.
Running through the whole discussion is somehow the idea—and this comes out very much when we talk about levels of pay—expressed in the rhetorical question which has been asked so often and which I think the noble Lord, Lord Boardman, used today: "Would you rather have low pay or no pay?". And people do not wait for an answer. If one pushes that 720 question to its logical conclusion, how far are we going? We shall be poking boys up chimneys again before we know where we are. Of course we would not do it, but we have to make a deliberate decision as to where we shall call a halt.
There is a feeling, and it has been expressed by the extreme free market people, that we should let pay find its natural level, as they see it. A much lamented Member of this House, Lord Vaizey, when he was a member of the Select Committee on Unemployment, argued along just those lines. It is argued that if we let market forces govern wages and let individual employers fix whatever rate of pay they can fix as they take people on, the market will clear the labour force and unemployment will disappear. That was the argument put forward by a man as intelligent as Lord Vaizey.
Of course columnists always get out of problems of that kind by saying, "Other things being equal". What are those other things? They say that it can be done if there are no trade unions, if we do not have social security payments, if we have complete labour mobility throughout the country and if we do not mind to what low level of pay the lowest paid are to sink. That is where that argument really leads.
Behind it lies a much more profound consideration. As one listens to the discussion one would really think that society existed in order to produce a successful economy. But surely we want a successful economy in order to produce the good society that we want. It is that way round. Therefore we have to make choices. We have to say that at a certain point we are not prepared to pay the price that is required in economic terms and in terms of the society that we shall get if we let those forces work.
We were brought up on Adam Smith, too. The only difference is that we read the text and not just the blurbs. I have here page 427 of the sacred text in which Adam Smith himself says that one pays a price for defence. We might perhaps refer that to the question that we have just been discussing. We are prepared to pay a price for national security: less wealth, more security. We must be prepared to pay a price for a decent, humane society and decent and humane working conditions. That is why we cannot go along with those suggestions.
§ 4.26 p.m.
§ Lord Young of Graffham
My Lords, I am grateful to my noble friend Lord Boardman for introducing the debate this afternoon. It is indeed important and timely. It will also give the House the opportunity to hear for the first time my noble friend Lord Vinson, with whom I fondly remember working not so many years ago. I look forward to hearing him in your Lordships' House on many other occasions in the future.
I greatly appreciated the contribution of my noble friend Lord Boardman in introducing the debate, not least for his report of conversations with his horse. He took us for a canter round the course which I believe amused your Lordships greatly. However, I have to say this. Amusement at individual examples begins to pale when we look at the effect that, collectively, they have on the economy, jobs and the wealth which we so 721 desperately need if we are to achieve a fairer and more equitable society. I say to my noble friend that I am indeed interested in his suggestion for a standing Select Committee. It is an idea which I see is supported by the noble Baroness, Lady Seear. We shall take it away and examine it.
I am afraid that my heart sank when I listened to the contribution from the noble Lord. Lord Bruce. As keen as I am on party matters—and no one is keener—I had hoped that this afternoon would be an occasion on which we could forget party just a little and look at problems which are common to Governments of whichever party. I was very much struck by one remark that the noble Lord made. He said that the removal of burdens was dangerous. My Lords, freedom is dangerous. But I believe that anybody who talks of regulation and has the attitude that it is dangerous to let people be free misses the point of the issue which we are discussing this afternoon.
I was very glad to listen to the noble Baroness, Lady Seear. I believe that once again she showed the great common sense which I always admire in her contributions to our debates. She is right to warn us of the dangers of regulations from Brussels. Only a few days before Easter, at the last meeting there, our Prime Minister drew attention to the danger of excessive regulations appearing in Europe. One could perhaps almost correlate unemployment with the incidence of regulations. It is a matter which we are taking on board. I hope very much that Brussels will now begin to look at itself and at its contribution to the welter of regulations with which we have to deal.
But I would perhaps take issue with the noble Baroness about her "small is beautiful" arguments. I confess to your Lordships that every morning when I stand on the scales I say to myself, "small is beautiful", but not necessarily with success. I honestly believe that she is perhaps thinking of the difficult period that we went through in the 1960s when we confused everything with economies of scale. Small is beautiful because "small", I believe, means better control. However, it is not true to say that regulations which are shrugged off by large companies are not a burden on smaller companies. Large companies can have the luxury of large personnel departments, personnel managers, personnel directors and people to deal with the plethora of regulations, while in small businesses individuals tend to be their own finance director, personnel director and indeed get put off by the experience, which is the subject of our debate this afternoon.
What I should like to say is a word or two about the Motion itself, for it speaks of the inhibitions to the creation of wealth and the opportunities for employment. Surely there is not one of us in this House this afternoon who is against the creation of wealth or making opportunities for employment. Whatever we do, we must create a climate in which businesses, particularly small businesses, can thrive, because the small business is the seed corn of our future and out of it will grow the large business of the 1990s, the year 2000 and thereafter.
The vital element in changing this climate is the freedom to which the noble Lord opposite objects so 722 much—freedom for a business to innovate; freedom for a business to expand; and freedom for a business to react quickly to fresh challenges without the dead hand of bureaucracy and red tape stifling it. All too often Governments have not realised this. Instead of giving enterprise room to flourish, they have smothered it. It is fine to be paternalistic but all of us who are fathers know that we have to give room for our children to grow. It is that opportunity to give room and that inducement to grow which we should look at this afternoon.
Year on year, the amount of legislation getting on to the statute book goes up and up. Today, it is double what it was 30 years ago and it is not a matter which is peculiar to this side of the House. I suspect that Governments of both parties have been equally to blame. The result of all this plethora of regulation, of statute, has been that the requirements of Government themselves are now a major drain on resources of industry and particularly, as I have said, on small firms. Regulations impose burdens in terms of management time, time required to understand them, to meet them and to deal with the agencies that simply go around enforcing them.
Surely we should ask ourselves: how many new firms have simply not been started, not been born, because of the inhibitions of excessive regulations? If there is one thing we need it is a baby boom of new firms if we are to deal with the problems of unemployment. The Americans across the Atlantic know full well of this problem and they are now taking energetic steps to deal with it, and I assure your Lordships that we shall not be far behind.
I do not know how many in your Lordships' House read a recent article in the Financial Times that estimated that before you could start up a business you had to wade through some 270,000 words of Government literature explaining all the requirements that you would have to meet. It would take some 24 hours of solid reading.
A few weeks ago I received a letter from a Member of the European Parliament, who wrote to me that he was about to employ his secretary full-time and asked the Inland Revenue for their "Starter Pack", which is an improved and simplified system for use when one is taking on a first employee. It contains 16 different printed items, each one requiring careful attention lest one falls foul of the law. I wonder from time to time how many people faced with those 16 separate pieces of paper, those 16 forms, those booklets to read, find other, different ways of giving people employment.
One major public company alone estimated that health and safety legislation alone added 5 per cent. to their capital costs. That may be 5 per cent. additional cost well spent, but I believe that from time to time we should examine those requirements to see whether that 5 per cent. and these extra regulations are worth while. What I am not saying this afternoon is that we should do away with all regulation. That would clearly be absurd. Some regulation must always be necessary to protect employees, consumers and the general public. Indeed, Government are well aware of this and will not seek to remove such essential protection, so I do not think we should be frightened by scare-mongering stories about removing all kinds of regulatory protection.
723 If I may say this to the noble Baroness, Lady Seear, of course there is a price for a decent human society and there is never a choice, to my mind, for this Government between low pay or no pay. What we must examine not only now, but, I suspect, again and again as the years go by, is whether we have the balance between protection and burdens right. We must strike the right balance between licence and liberty. Balance there must be, but I suspect that that balance is wrong today. Much regulation is either unnecessary or too complicated and it imposes costs which outweigh any benefits that are gained.
It is ironic—is it not?—that some measures designed to protect workers have become so complex and onerous that they actually deter people from taking on employees at all. Is it not also ironic that the end result of 70 years of rent regulation has been to destroy, not to help, the tenant? Today, when perhaps we need mobility of labour more than anything else, do we not miss the amount of rented accommodation which has disappeared around the country? I sometimes wonder whether the problems of the North-East and North-West would have been quite so bad today if we had had opportunities for people to move down to where the jobs may well be.
The Government have already made much progress in freeing enterprise from the shackles of regulation. Therefore, I would ask the noble Lord opposite to look at what we have already done and at the benefits that have arisen out of it. I remember the outcry in July 1980, when the only operator to Hong Kong was British Airways and then first Cathay Pacific and later British Caledonian began services. Did the ruin occur? Did the airlines close down? No, my Lords, all three are trading profitably today. The traffic to Hong Kong has far more than doubled; and the standard of service, as all those who have been on the airlines will testify, has improved.
In 1980, we also passed an Act which abolished road service licensing for long-distance coach services. What has been the result of that? It has been dramatic. Between 1980 and 1983, fares dropped on average by 40 per cent. in real terms, and applications for 700 new services were registered. There are some who travel on these coaches in the morning from Kent and from further away, who are offered the newspaper of their choice and a cup of coffee or tea. I do not recall these services being offered at that time, or indeed today, by British Rail. The deregulation of long-distance coaches represents a better deal all round for the travelling public.
I have heard much recently about the perils of deregulating the buses, even about the morality of taking such a step. I must tell your Lordships that trials have taken place. One took place in Hereford and Worcester. What was the result? There were 70 per cent. more bus services provided in the Hereford city area; there was a 38 per cent. reduction in ratepayers' subsidy; there was an equivalent reduction in subsidy for the schools services; Midland Red—the bus company—benefited from a 25 per cent. to 30 per cent. increase in productivity; and on average there was a 30 per cent. reduction in fares. I can see very clearly the morality of undertaking steps of that sort.
I now come to telephones. I remember clearly the time in 1980, when I was working for Sir Keith Joseph 724 in the Department of Industry and we liberalised, deregulated, the telephones. In those days, we had a very clear choice of telephones. We had a Trimphone or nothing. I wonder how many of your Lordships remember the Trimphone? Look today at the enormous variety of telephones that are on offer—the PABXs and all the other services which have come through, and the revolution which has taken place by deregulating the services of British Telecom. British Telecom itself appears to me to be in great heart and expanding briskly. Look at what happened when the Government licensed and deregulated the provisions for car telephones and the enormous increases in services which are coming through there.
Finally—in case your Lordships think that I am looking at all of this through rose tinted spectacles—let me talk about spectacles themselves. It seems to me not so long ago that, on the occasions when I was in Hong Kong, I would order glasses and get them the same day. I would go around and see signs up in New York saying, "New reading glasses. Service in one hour or two hours". Then I would come back here and it would take me two weeks to get them. The steps that the Government have taken to encourage competition and the supply of spectacles by deregulation have brought prices down and the consumer is already getting a better deal. I pass a shop not far from where I live where already signs have gone up saying "24 hour service". Is there anyone in your Lordships' House who seriously asserts that the result of deregulation in this case has been harmful?
The noble Lord, Lord Bruce of Donington, suggested that it was an indictment of the Government that we have done nothing to remove existing regulations. In fact, as I have illustrated, we have already done a great deal. But we are not content. There is much more to be done. That is precisely what I hope to do. I say to my noble friend Lord Boardman that up to now we have at least been deregulating. We are privatising. We have increased competition. I suspect that the record of noble Lords opposite when they were in office was rather different. They were concerned with regulation, with nationalisation and with the very avoidance and absence of competition. However, to the extent that there are further things to be done, I hope that I can now assume from what the noble Lord says that the Opposition will not stand in the way of measures that we intend to introduce to remove regulation.
I come back now to the report called Burdens on Business. I hope that noble Lords have read it and that they will have seen that nowhere does it refer to the number of unemployed. That was an extrapolation by a journalist of the Financial Times about the number of jobs—between 700,000 and 1³3 million—that may have been lost through regulation. I would not stand in your Lordships' House and quantify the number of jobs that have been lost. I do not know. I doubt if anyone knows. Of one thing, however, I am sure—that no jobs have been created by regulation. It behoves all of us in times of employment difficulties to see what we can do to revitalise the economy and to develop businesses and allow them to grow and flourish and so let employment grow.
The report reached three main conclusions. The first was that Government rules impose a real burden on 725 small firms. Regulations often look even more daunting to potential entrepreneurs than they actually are. They can inhibit business start-ups. Secondly, it is the burden as a whole that matters. Looked at in isolation, requirements may seem reasonable and modest. Taken one upon the other and taken together, they amount to a daunting and serious obstacle to enterprise. Thirdly, many firms interviewed said that regulations tended to stop them employing people. So action to cut the burden can play an important part in the Government's strategy for jobs.
I was rather depressed about one aspect of the report. The noble Lord opposite has referred to it. I can do no more than refer to it myself. It is the simple statement that many people in small businesses did not consider, until prompted, that regulations inhibited them or prevented the growth of their businesses and employment. What an indictment it is of our society that we so expect this terrible burden of regulation, this terrible burden of statutory requirements, that we no longer know what it is like to be free. One has to look and see the virility of new businesses and new firms in the United States of America and the absence of many of the regulations that I suspect inhibit the growth of business here to realise what it is like to be free. It is almost as if a man who has lived all his life in this country does not miss the Mediterranean sun until he has experienced it. It is my ambition to give people starting new businesses in this country an opportunity of spending a period in the sun.
Over the next few months I shall be leading the follow-up to the report and looking more widely at ways of reducing the burden of Government requirements on business. This will cover businesses large and businesses small. It will cover individuals. I shall aim, with colleagues, to make real progress in reducing the cost to industry of compliance with Government rules. In order to target our efforts most effectively it is vital that we consult as widely as possible. I should welcome any suggestions or comments that noble Lords may wish to make either this afternoon—I shall listen attentively to our discussions—or in writing. Many Members of your Lordships' House have direct experience of working in industry and are well placed to make a valuable contribution to Government thinking. I believe that there is a great opportunity today to achieve decisive progress in our task of creating a climate in which enterprise can flourish. We intend to make the most of this opportunity. I welcome today's debate. Let us say, on what is perhaps the first warm day of the spring and summer, that this is the opportunity for a real spring clean.
§ 4.45 p.m.
§ Lord Vinson
My Lords, I am sure that other noble Lords will recall with mixed feelings of anxiety and pride the occasion on which they made their maiden speeches and that they will make due allowances. I should like to thank many noble Lords for their warm welcome and also to say how well served we are by the staff of the House who go out of their way to be helpful.
I am grateful to my noble friend Lord Boardman for inviting me to cut my teeth in this debate. The creation of wealth since the discovery of the wheel has 726 depended upon invention. So I have to declare an interest. On my passport I have, for many years, been proud to declare myself an inventor. Recently, I heard a very fine sermon given by the most reverend Primate the Archbishop of Canterbury. He praised the work of that great man Albert Schweitzer and rightly held him up as an example for young people to follow. Sadly, what he did not find time to say was that to make possible Schweitzer's good deeds required the provision of food, medical services and money by well wishers from the more prosperous western economies. Schweitzer's work at Lambarene provides practical demonstration that nothing can be given away that has not been produced. It illustrates that the creation of wealth has a fundamental ethical purpose and justification. It shows indeed that charity begins at work.
It is a truism that a necessary condition for the provision of food, shelter and warmth, the education of the young, the care of the old and handicapped and a better quality of life for the individual and the community depends on industrial success. That is why, my Lords, I am sure we agree in all parts of the House that the subject of wealth creation is central to our best hopes for the future. Alas, though, for generations we have taken prosperity for granted. Even at the turn of the century, that perceptive man Rudyard Kipling wrote:Our England is a garden but such gardens are not made by saying `Oh how beautiful' and sitting in the shade".He saw the writing on the wall—then. But national attitudes are influenced by personal experience. It is to be expected that for many people wages and salaries appear to be paid from some crock of gold controlled by Government.
In our sophisticated society, many jobs are insulated from the harsh winds of international competition. They are at one remove from the fundamental forces of supply and demand and the realities that inescapably confront a trading nation. Too many workers, both by hand and brain, have become detached from the basic process that provides their daily bread. It is hardly surprising that this detachment from the wealth creation process has led to a wide misunderstanding of it. How often one sees that the very natural quest for job security has led to the introduction of practices that in the long run result in the opposite effect—that of job destruction.
The road to the dole queue is indeed paved with misdirected intentions. Yet the prospect of national decline focuses the mind wonderfully. I believe that today there is at least the beginning of a new realism, a new awareness, that national prosperity and individual job security alike depend on producing and supplying things that people want to buy at a price that they can afford. History shows that attempts to frustrate this free process invariably lead to economic decline. And today's debate is of course examining that. I expect that others will examine the rigidities that prevent the economy naturally adapting to changing consumer demand.
I should like to concentrate on what I regard as the heart of the matter—and that is society's attitude to the wealth-creating process because unless we get the cultural climate right, we shall continue to introduce legislation or fail to make changes in existing legislation that inhibit that very process.
727 Leaving aside the cultural attitudes to wealth-creation induced by our educational system—which have been well debated in this Chamber—there is one prevailing attitude in particular that gives me much cause for concern; namely, the belief that it is to the service sector that we must look in the future for our economic salvation. While it is true that the service sector will undoubtedly play a very significant part in job creation, it will not by itself contribute much to wealth creation; the essential point being that the cake has to be baked before the service industry can cut it up.
My worry is that failure to understand this simple truth may mean that both personal and Government priorities are misdirected from our primary need—that of a healthy manufacturing sector. The division between manufacturing and services is often very imprecise. The economic difference between growing peas, canning peas and selling peas is blurred in practice, and all three functions are obviously interdependent. But they start with the production of peas—they all feed off the production process. The professionalism of our service sector is one of the envies of the world—but its activities currently pay for only some 15 per cent of our imports and it would be quite unrealistic to suppose that it could sensibly supplant our manufacturing base.
It is all too easy to confuse the difference between making money and making wealth. For example, we cannot eat insurance policies, and traded options will not keep us warm. Insurance policies need properties to insure, and traded copper futures need somebody to produce copper. The provision of goods remains fundamental to wealth creation. Perhaps I may illustrate this by drawing a parallel with the agricultural industry. In 1800 one in three of the labour force worked on the land, yet we were barely self-sufficient in food. Today, in a nation five times the size, we are kept virtually self-sufficient in food by 3 per cent. of the labour force. But the fact that so few of our population achieves this does not diminish the importance of agriculture or the importance of eating. It was the release of labour from the land that enabled the Industrial Revolution to happen which, in turn, raised the living standards of the whole of the Western world.
This pattern is repeating itself again. The numbers employed in manufacturing industry will continue to decline as automation increasingly comes into use. But this in itself does not diminish the importance of having a profitable manufacturing base—a base that needs to depend both on modern sunrise industries and the more pedestrian midday and evening ones too. As with agriculture, it will be the wealth created by manufacturing that will enable employment to grow in the expanding service sectors. Holidays, hotels, hobbies and travel all depend on the leisure that is made possible by the wealth created by production—the well-spring of economic success. It is then all the more essential that we recognise this; and that industry attracts not only some of our best brains but also brains capable of good leadership—leadership built on participation because a sense of common purpose at work is a pre-condition for national success.
728 The year 1986 has been designated Industry Year. We must hope that it will encourage a better understanding of industry's essential economic role and the way in which it serves the community. Not least, it should aim to foster the pride of all those who work in industry in their achievements and their contribution to the welfare of this nation. The heart of the wealth-creating process is to make the best of our most important national assets—the abilities, inventiveness and enterprise of the British people. I have no doubt that this debate will contribute to that essential purpose.
Finally, a number of noble Lords have asked me why I chose for my title to be "Baron Vinson, of Roddam Dene". It happens to be where I live, and it is also an area of special scientific interest because it contains a unique geological formation. This formation has many similar properties to a bad speech. You could say, my Lords, that it has gone on a long time; that it is dull, thick and not very exciting. It will be a constant reminder for me to keep my speeches short‡
§ 4.55 p.m.
§ Lord Henderson of Brompton
My Lords, it is a great honour and pleasure for me to follow the noble Lord, Lord Vinson, and to congratulate him on a most notable maiden speech. He has clearly demonstrated great powers of oratory as well as expertise in the creation of wealth, and we all appreciate the expertise as well as the oratory. I believe that the noble Lord is a Member of the Victorian Order; I believe that he has been in the services, both as a soldier and as a sailor. We have heard about his scientific interests. We also know that he is closely interested in the fine arts and in the crafts. So perhaps I may adapt those great words from "Hamlet" and say that the noble Lord has:the courtier's, soldier's, [sailor's] scholar's eye, tongue, [heart) sword".I am sure that we all look forward to further contributions by the noble Lord to our debates in future.
I particularly welcome the initiative of the noble Lord, Lord Boardman, in bringing this subject before the House, because it is of the highest importance. But it is also a subject of the greatest delicacy. In my view there is absolutely no right or wrong approach to the creation of wealth and the opportunities for employment. In view of the intractable nature of the unemployment problem which so oppresses this nation (and not only our own), and the primal importance attached by this Administration to the creation of wealth as the necessary prerequisite to the creation of jobs and all other good things in life, it is fine for this House to have the opportunity to examine whether legislative and administrative actions can be relaxed without (and this is what I claim to be the cardinal principle) damage to the fabric of society; and, if so, to what extent.
It is that condition which makes this a subject of such delicacy. But in its way it is akin to the detailed debates that this House has had on the Insolvency Bill. A balance has to be struck between the freedom given to the wealth-creator and to the general public interest as a whole, which of course includes the law, both criminal and civil, and such matters as pollution, 729 public health and safety at work, and so on, as referred to by the noble Baroness, Lady Seear; and to the individual members of society, whether or not they are employees of the wealth-creators. The balance has to be struck and, as the noble Baroness, Lady Seear, said, we may well get more wealth if the balance is properly struck than if we take matters to their logical conclusions, as some people tend to do when they talk on this emotive subject.
I wish to confine myself solely to one Act which I regard as a paradigm of the good intention which, in the eventuality, has not been fulfilled; that is the Disabled Persons (Employment) Act 1944 as amended by the 1958 Act. I asked one or two Questions on this subject in the last Session of this Parliament, and perhaps I might very briefly say what this legislation does and why I think it might be dispensed with.
The 1944 Act, as amended by the 1958 Act, establishes a voluntary register of disabled people and places certain duties and obligations on employers of 20 or more workers, and those workers must be registered under the Acts. Under the quota schemes employers with 20 or more workers have a duty to employ a quota of 3 per cent. of the employer's total workforce. It is only a duty; there is no power to enforce it. It is not an offence to be below quota, but if the employer is below quota he has a duty to engage a suitable registered disabled person if any such person is available when a vacancy arises. An employer below quota must not engage (though there is nothing to enforce this) anyone other than a registered disabled person without first obtaining a permit to do so from a job centre. There are also restrictions on the employers discharging a registered disabled person.
A permit may be issued by a job centre to enable employers to fill an immediate current vacancy with a non-disabled person if there are no suitable registered disabled persons available, or—and here is a blanket exemption; you can drive a coach and horses through the Act by using this blanket exemption—he may be given a bulk permit to authorise in advance the engagement of a specified number of workers who are not disabled.
Therefore, it will be readily seen that the 1944 Act, so very well intentioned and indeed a model of its sort—it is enlightened, and was very much in advance of its time—has, alas, proved to be ineffective, partly because it has no teeth and it cannot be enforced. To use the words of the noble Viscount, Lord Long, who was the Government spokesman last Session when I asked these questions (and I quote from Hansard):The problem, at the moment, is that the legislation does not hold up at all".And again:At the moment, it is very difficult to carry out this legislation".That seems to me a clear indication that the legislation should be repealed. Nonetheless, he went on to say that Her Majesty's Government had,decided to retain the existing legislation on the employment of disabled people for the time being".Finally he said:consideration is being given by a working group to suggestions for making the existing quota legislation more effective. The group will Submit its report to the commission"—730 that is the Manpower Services Commission—later this year".—[Official Report, 23/7/83; co1.9.]That was last year, 1984.
Since then, the quite admirable Code of Good Practice on the Employment of Disabled People has been published by the Manpower Services Commission, and I wish to pay the highest tribute to the Manpower Services Commission (as I did last Session) and to repeat that tribute again especially in the context of this code, which places the emphasis firmly on encouragement rather than penal enforcement of statutory provisions. That, to me, is the psychologically correct way to approach the whole question of the employment of disabled people. Nonetheless, the statutory provisions remain, and are, I regret, incorporated in the code, though admittedly they are not given so much prominence—rightly, in my view—as the other provisions in the code.
The question is whether it is right for the 1944 Act to remain on the statute book, especially when it was conclusively proved in 1981 by the Manpower Services Commission itself that the Act was inoperable and unenforceable if only for the reason—the purely statistical reason—that there was then, and I presume still is, less than 3 per cent. of the work-force registered as disabled. Therefore, it quite literally statistically cannot be enforced. If ever there was a case for the repeal of a statute I should have thought that this was it. I would ask the Minister whether he would be good enough to say: how can its further existence be justified? I should have thought that this Act was a candidate for Lord Boardman's Miscellaneous Provisions Bill for repeal.
I must emphasise here that I am speaking entirely for myself. I know that many disablement organisations would be dismayed if the quota legislation were to be repealed, and it may well be that dismay which has led the Government to hold their hand. But I still think that it is legitimate to ask these questions of Her Majesty's Government. First, how much does the quota scheme cost the public sector and the private sector respectively in the keeping of these registers? Is the keeping of these registers cost-effective? Why, if the legislation is to be retained, are not the provisions extended to include all disabled people and not just registered disabled people?
Many people do not register when they are disabled for a number of highly respectable reasons which I do not need to go into. It seems to me that, well intentioned though this Act was in 1944, it is out of all contemporary feeling about the disabled when it draws this distinction between registered and un-registered disabled people. It is out of date as well as being inoperable.
Therefore, I should like the Act to be either phased out or preferably repealed, and instead to rely wholly on the admirable, comprehensive and I would say morally compulsive code of good practice. In doing so those who are unproductively engaged in keeping up and monitoring the registered code could be more profitably engaged.
There is a case for repeal of the 1944 Act. There is even possibly a case (though I am not sure about this) for giving the code of good practice statutory status. Then I believe that the wealth creators would be less 731 inhibited than they now are, unproductive labour could be released, and greater opportunity for employment of disabled people generated whether they are registered or not. There would then open up a much more positive, liberal and less oppressive cultural—I use this word because the noble Lord, Lord Vinson, used it—climate of opinion about employment of people who are disabled, and this could be actively promoted by the Government and actively followed by industry in voluntary cooperation. I very much commend serious consideration of repeal of this legislation to Her Majesty's Government.
The Earl of Selkirk
My Lords, may I ask the noble Lord one question? Would the noble Lord agree that a good many firms in fact observe the 3 per cent. rule?
§ Lord Henderson of Brompton;
Yes, my Lords, indeed I think they do, and many have a quota much in excess of 3 per cent. I have no wish whatsoever to criticise industry in many ways, but it is statistically impossible because the number of people who are registered as disabled are fewer that 3 per cent. of the workforce. It is statistically impossible for this Act to be implemented.
§ 5.8 p.m.
§ Lord Ellenborough
My Lords, it is my most pleasant task and honour to be the first from these Benches to welcome and congratulate my noble friend Lord Vinson. If I may say so, he made an outstanding and most stimulating speech, speaking from great experience as, I believe, the chairman of the Development Commission, and therefore especially well qualified to speak in this debate. I know he said that he was an inventor. I do not know what new innovations he may bring to your Lordships' House, but at any rate I know that noble Lords from all sides of the House hope that he will frequently be making contributions to our proceedings.
I too am indebted to my noble friend Lord Boardman for giving us the opportunity to debate this important subject today. My noble friend Lord Young of Graffham and the Chancellor and his colleagues are certainly to be congratulated for the amount of hard work, thought, and imagination that they have put into these recent White Papers and documents, and the various measures announced in the Budget since.
Although we must never lose sight of the fact that inflation is the root cause of unemployment, nevertheless, as the polls indicate, the public at large is today concerned about unemployment above all else and that is perfectly natural. Even now the Government have to ram home their overriding concern about unemployment because, unfair though it may be and unjust though it certainly is, there is much grossly misleading propaganda that the Government do not care deeply enough and are halfhearted about taking measures which they have taken, are or will be taking. That is what this debate today is all about. It is refreshing to have a debate on employment. We never hear much about employment, which is still going up, with half a million new jobs in 18 months to September 1984. All we here about is unemployment.
732 Part of our trouble is due to attitudes, and perhaps I may say a word about that. I was particularly glad when my noble friend Lord Young, in his speech on 3rd April, referred to the somewhat defeatist articles written by reputable journalists such as Brian Walden in the Standard and Peregrine Worsthorne in the Sunday Telegraph which have appeared recently in certain newspapers. The gist of their remarks was that all British people really want to do is to sit on their backsides, not too much effort is required to be reasonably comfortable and it will all turn out all right in the end. Although they may perhaps contain just a grain of truth, I believe that such articles have got it completely wrong, and they do immense harm. It is important because we have to realise that as a nation either we go up or we go down. By sitting on our backsides in this highly competitive and very unfriendly world we can only go one way and that is down with a nasty bump.
Since the war we have suffered as a nation as one after another of our once great old industries has been largely destroyed because our policies and attitudes have failed to ensure that they remained competitive. No matter how much we spend and what laws we pass, unless we have competitive industries there will be fewer and fewer jobs in the future. The recent White Paper was quite right in emphasising that jobs will come from customers and nowhere else. These are words which should be shouted from the rooftops, written on placards and paraded through the streets.
My noble friend Lord Young has made it very clear that he is well disposed towards small firms and that he wishes to encourage the right climate in which they may flourish. In his speech just now he referred to them as the seed corn of the future. In his speech on 3rd April he said something to the effect that what we miss sorely today are people ready to start small firms and make them large firms—the small firms of 15 to 20 years ago would be employing 500 to 1,000 people today.
I have always been in small firms. I have been a director for many years of a firm which started out in business about 25 years ago with a payroll of three and today employs over 300. It does not quite come up yet to the target set by my noble friend. It is my belief that many such firms feel very frustrated at times and snipping away at the red tape bedevilling them is essential.
In so far as PAYE and National Insurance are concerned, companies are acting as unpaid tax collectors. They not only have to ensure that these taxes are deducted from salary but they also have to make annual returns. In many types of business the new national insurance rate will act as a payroll tax, particularly where a large proportion of staff are earning substantially in excess of the old maximum basis for national health insurance. The change will have a damaging effect upon the firm of which I am a director. I agree with the noble Lord, Lord Marsh, who criticised the new proposals in the debate on 3rd April, that there may be a positive disincentive to employment in this undoubtedly well-meaning piece of legislation, as substantially increased wage or salary bills will result. Many firms in certain sectors may not take on so many people at the top or in the higher parts of the scale as they would otherwise and thus not so 733 much new business will be generated. That will mean that fewer people will be taken on at the bottom end of the scale or some at the bottom end will go and not be replaced. As I have said, I am sure this proposal is well meant and overall it will probably help, but I fear it may be a case of three steps forward and two steps back.
There are many other matters which I could mention in detail, but I shall not, and which interfere with the running of small firms. These P.11.D forms are an awful nuisance as again firms are acting for the Government in producing returns for every employee whose earnings and expenses exceed £8,500. This requires a considerable amount of work in analysing expenses and these returns provide a basis for the Inland Revenue to collect additional taxes. Such things as statutory sick pay records involve a lot of work, company registration and the various Department of Employment forms. It is all time-consuming and the time has surely come when for every new form or regulation at least two should be scrapped.
Lastly, I want to say something about the appallingly high burden of rates on all industrial and commercial firms, to which my noble friend Lord Boardman referred during his speech. Industrial and commercial firms have no vote, and they contribute roughly 55 per cent. of total rate revenue. This varies very much from one place to another. There is no doubt that these high rates are encouraging firms and businesses to move to lower rated areas. This causes increased unemployment and still higher rates in the districts from which they have moved. There is then less rateable value on which rates can be levied. Moreover, domestic ratepayers who become unemployed can claim rate rebates, and thus the remaining ratepayers have to pay more. I think other noble Lords will be able to recall many companies who have moved their offices from London and the big cities to relatively affluent areas and comparatively small towns such as Salisbury, Exeter, Knutsford and so on. No one has contributed more to rates forcing businesses out and causing unemployment than people such as Ken Livingstone in London, and David Blunkett in Sheffield. They have earned a place in the annals of high unemployment as the best recruitment agents for the dole queue.
A survey undertaken by the London Chamber of Commerce and Industry in 1983 showed that high rates led 15 per cent. of companies to reduce their recruitment and 23 per cent. to cut their workforce. I do not know what can be done about this, but suggestions have been made that instead of paying locally-fixed rates varying from district to district, industry and commerce should pay to central government a local government levy which would be related to turnover. The total levy would then be allocated to the various local authorities on the basis of a predetermined formula. This would ensure that, no matter where they were located and irrespective of the level of the local rate payable by domestic ratepayers, all businesses would pay on the same basis towards the local cost of local government services. They would therefore derive no financial advantage from migrating from a higher to a lower-rated area, thus 734 helping to reduce unemployment in the inner cities and concentrated areas. But that, I imagine, could hardly be tackled unless as part of a major rating reform.
My Lords, I end where I began. While inflation is the main enemy, bringing down unemployment is the top priority but it must be done in a way that does not damage our improving competitiveness in wealth-creating industries.
§ 5.20 p.m.
§ Lord Thomas of Swynnerton
My Lords, like my noble friend Lord Ellenborough I, too, should like to congratulate my noble friend Lord Vinson on his admirable maiden speech. It is extremely satisfactory that he should be with us in this House. He must be one of the very few inventors who has been received here. There have been a great many entrepreneurs in the past who have been ennobled but, on the whole, the lot of the inventor in this country, despite the number of inventions for which we have been responsible, has been rather ignominious. Indeed, many of the best of them have fled from these shores to the Continent. It is a great satisfaction therefore to congratulate the noble Lord, Lord Vinson, on his speech and to say that I hope that we shall hear him very often again in the future.
I speak on this Motion, proposed with such wit by my noble friend Lord Boardman, with all the obstinacy, parochial arrogance and pride of one who has filled in his own VAT forms ever since VAT was instituted. I filled them in grudgingly, reluctantly and on the whole adequately. The only satisfaction that I have had from these years of VAT-form filling was to be able to note, a few years after VAT was introduced for the first time, that that intolerable publication, VAT News, was withdrawn from circulation.
As a self-employed man, I am one of, I suppose, 7 per cent. or 8 per cent. of this country's population, in comparison with something like 20 per cent. in the case of most of our competitors abroad. This is a factor which I am sure my noble friend Lord Young of Graffham has borne in mind. I am sure that we do so much on our private plots, as it would be referred to in the Soviet Union, that he will be considering means of increasing our numbers. I speak as a writer whose financial dilemmas were not among those discussed very much, so far as I could see, in that great debate that we had in this House a week or two ago on the future of the arts. Nevertheless, this side of our activities should be remembered. I am sure that when it comes to the point, the writers and artists of 1985 will be remembered (shall I say) for as long as politicians, although of course we do not quite know which writers will be so remembered. We are substantial earners of foreign exchange even though, unfortunately, even if we make something like 80 per cent. of our income from foreign exchange, we do not qualify for the Queen's Award for Exports since that award is given only and specifically to organisations and not to individuals. What an extraordinary confession to have written that regulation!
Furthermore, I must say that some of those who participate in my profession, including, I am glad to know, many Members of your Lordships' House, contribute a very substantial section of the world 735 market in their particular product. I can myself claim at a certain point to have made such a dent in the world market, for example, in histories of Cuba, even though my work on that subject is now out of date. My noble friend Lord Blake, I should have thought, would have contributed something like 60 per cent. of the world market in lives of Disraeli, and I have no doubt whatever that the noble Lord, Lord Bullock, has something like 99 per cent. of the world market in lives of Ernest Bevin. Nevertheless—and noble Lords will be relieved to know that this personal series of complaints will not go on for a moment longer—we are treated rather worse than ordinary small businesses since, of course, we cannot sell our business to anyone else; we cannot pass on our place of work to our sons, even if they happen to be writers or artists themselves; and naturally we pay full rates even if we are unwise enough to live next door to rate-free farmers.
Having delivered that personal appeal to my noble friend Lord Young, I should like also to congratulate my noble friend Lord Boardman on introducing this debate and also to congratulate my noble friend Lord Young on his speech. It is extremely encouraging to those who think as he does and as we do that he should be in such a position as to influence policy on these questions. I would also congratulate the Government on those actions to which he referred. I must confess to a certain sense of disappointment in the speech of the noble Baroness, Lady Seear. Could it be possible that a Leader of the Liberal Party was giving such a grudging reaction to this Motion? Where, I wondered, would Mr. Gladstone have stood on this issue? I have no doubt whatever that he would have stood foursquare behind my noble friends Lord Boardman and Lord Young.
My noble friend Lord Boardman dealt with many of these regulations about which we have rightly complained with the best weapon which one can manoeuvre in this particular debate; namely, wit. We will remember for much longer than most of the points in other speeches in the course of this debate (including, I suspect, my own), the asbestos tile which he flung at all sorts of restrictive regulations. I think that there is one point I want to make on this specific question of the regulations which are so entangling. It relates (as do so many of the points that have been made in this debate) to the burden placed on small businesses. If you are trying to start a business and you are going to employ one person you have to behave exactly as if you are going to employ 1,000. You have to have the same number of documents per man, and you have to do it yourself. Secondly, you have to deal with three separate Government departments: the Inland Revenue, the DHSS and Customs and Excise. There is no difference in this respect whether you are starting a tiny business or a big one. Another restriction is that you cannot take on labour which itself is self-employed. This has been a restriction for many years. And if you are going to be a shopkeeper and if you are going to do this adequately, there is no doubt whatever that you will have to spend something like 10 hours a month on filling in your VAT forms satisfactorily.
Many of these things could be dealt with if the Government were able to consider the possibility of 736 raising the VAT forms to cover those enterprises which contribute most of the revenue from VAT. I think that something like 90 per cent. of the revenue from VAT comes from something like 10 per cent. of those enterprises which now contribute to it. Many suggestions have been made and no doubt many will continue to be made in the course of this debate; and we all think, as we leave the Chamber, of several which we would have wished to put.
Could enterprise zones in some way be extended to become deregulation zones? Could individuals perhaps become, as it were, enterprise zones of their own in certain circumstances? Could we perhaps copy not only the American but the Italian example and see whether we could not arrange the businesses which employ, say, fewer than 15 persons or perhaps five in agriculture (as is the Italian rule) not governed by any of the regulations which we have been talking about? Could we perhaps force, as has been suggested, regulation-giving bodies to carry out some sort of discussion on the impact of such regulations before they are actually issued? Some of these ideas, and others, have been put into a pamphlet which I know my noble friend Lord Young has read. The title is Worried to Death, and it is written by my friends Theresa Gorman and Russell Lewis. I strongly recommend to noble Lords that they get hold of a copy of that.
There is no question, I believe, that we need to act on all these matters. I do not think that we need to be perhaps so apocalyptic as to remind ourselves that the Roman Empire probably collapsed more from an excess of regulation and government intervention than anything else. However, we should take seriously the thought that unless we create and develop a much more lively atmosphere of enterprise in this country some of the best ideas of this Government may not be fulfilled as we would wish. A friend of mine, whom I respect greatly, Ralf Dahrendorf, who until recently was Director of the London School of Economics, made a most doleful statement recently which I propose to quote to your Lordships because it seems to me far more pessimistic than the speeches of many Members of the Opposition. He wrote:Britain is a society of many solidarities totally averse to the spirit of competition between individuals. If you try to set one against the other you get nowhere in Britain. America is exactly the opposite. There is a great tradition of trying to get somewhere on your own. In Britain you always pretend you are not trying".My Lords, that is a very damaging statement, by an eloquent and admirable man; but I think he is probably wrong. He is thinking in terms of the years of the 1950s when he was an undergraduate here, and not of the 1980s when there has been a radical change. He made the same sort of mistake, I say in all seriousness, that Mr. Costa-Mendez, the Foreign Minister of the Argentine Government made, when he recalled his undergraduate days in Britain a generation or two earlier. He did not notice the change.
We have all noticed that there have been a number of alterations in our society in the last generation, many of them disagreeable. We are obviously a much more violent society than we were and certainly much less inclined to accept self-discipline. The hierarchical notion of values which existed in our youth does not 737 exist now but there may be some compensating benefits: the spirit of enterprise which certainly characterised Britain in the past when we had just such a violent and undisciplined society in the 18th century might be able to be revived as well.
I think that many Members of the Opposition, when they criticise the Government for thinking that they are concerned to revive 19th century Victorian values, perhaps make a mistake because the values that we hope will be revived as a result of this Government's endeavours will be the society of initiative such as characterised Britain in the 18th rather than the 19th century. Before your Lordships have a moment to think about that particular historical reference, I have one or two suggestions to make to my noble friend Lord Young of Graffham. I hope that he might manage to persuade his right honourable friend the Prime Minister that his title should be changed from Minister without Portfolio to Minister for Enterprise. I wonder whether he could encourage us all to talk a little more about creating entrepreneurs rather than creating employment because after all the second would follow the first. Words mean a great deal in all these matters. Could he perhaps encourage us all to talk more about some of the successes of Britain in the last generation and not just about the failures? After all, we now know that around Cambridge in the past five years there have been built up something like 350 small high-tech industries of one sort or another which have transformed the pattern of employment in that county, and I think in consequence Cambridge has the smallest number of unemployed in the country.
There are a number of schemes which could perhaps be looked at in a different way. I wonder too whether the Minister could not consider what might be called a target approach to problems of British industry. There are particular sections in British society which could do more. I shall take graduates as one example. The mood in universities among those leaving courses is still very strongly anti-commercial. Could we not perhaps have some sort of inducement in the form of enterprise scholarships to encourage young ex-students to go into business? Could we also think of inducements whereby those in middle life (35 or 40) could find some way of getting out of the very successful enterprises in which they are working? If you are 35 or 40 you might not want to leave Shell, for example, but if there were some inducement to try another enterprise for perhaps two years, with the certainty of being able to go back afterwards, that might be helpful. After all, people did that in the war.
Above all, I hope that my noble friend will seek, through the eloquence which he has shown today, and certainly in public relations, to remind us all that the United States, Germany, Italy and other countries who have been our competitors have done the sorts of things that we are trying to do. History can play a part as well as international comparison. It must be of use to remember that Liverpool was not just a twilight zone two centuries ago. It is a matter of inspiration and of reminding the population as a whole that only through revived enterprise can we hope to recover that positive mood which itself will lead to greater employment and greater prosperity.
§ 5.36 p.m.
§ Baroness Carnegy of Lour
My Lords, my noble friend Lord Vinson, in his admirable speech, has told us that he wears the badge of an inventor. What he did not add was that, having made his initial invention, he manufactured it in a Nissen hut. He floated the invention on the stock market and it won the Queen's Award for Industry. I am not sure whether my noble friend Lord Thomas would be prepared, having written his extremely eminent books which have achieved such enormous exports and have made this country so famous, to print them in a Nissen hut and thus perhaps qualify for the Queen's Award for Exports. However, he has made a very valid point. We are extremely fortunate to have the noble Lord, Lord Vinson, in this House. He has shared his experience and knowledge with us up to a point and we shall learn more of it as time goes on.
I too have to thank my noble friend Lord Boardman for making this debate possible. If I may, I should like to say one thing to him and to the Government, looking at the problem rather from the other end. My noble friend has suggested that there might be a standing committee in Parliament to look at what he called the nonsenses from the employers' end. I wonder whether such a standing committee, or some other organisation, might seek to get much more factual information together about what is really happening in the labour market at the present time, from the point of view of the people who want to work and cannot do so, and who want to work in different ways from the ways in which they are working at the moment but cannot do it because of barriers. This is about wealth creation because the level of unemployment affects wealth creation. It is also about what the economy exists for: which is individual people and their enjoyment and fulfilment in life.
The Manpower Services Commission labour market quarterly report is an admirable document but it has to be based on official statistics which are available at the current time. I think that its limitations were up to a point demonstrated by the interchange that we had at Question Time earlier this afternoon. It tells us about the number of people who are claiming benefit and national insurance; also the number of jobs and the nature of jobs which are available at the job centres. The trends which it draws out are projections forward from the past and projections based on a past which is illustrated by the official statistics that are available.
The rapid and radical changes which are going on at the moment in the labour market are not necessarily being analysed or projected. For example, how many people actually want to earn, are trying very hard to earn and cannot earn? Is it 3 million or is it 5 million? Is it less or is it more? We do not know. The questions that we need answered are these. How many people now are in fact working from home? How many would like to work from home and are not for some reason or other, though the reason could be overcome? How many people are working now for more than one employer? How many people would like to work for more than one employer but cannot do so because of some obstacle?
How many people are partly employed and partly self-employed? How many more people would like to 739 be? How many unemployed people would like to be employed? In general, what new ways are people finding to earn? How many are deterred by benefit regulations? With a picture of this kind that is absolutely up to date, it would be very much easier for the country as a whole to see the future and to overcome the barriers, and it would be very much easier for the Government to prove to people that the kind of changes that need to be made must be made.
If I may give an example, I went to visit two of the Manpower Services Commission's training workshops. In one of them young people were learning to repair old furniture which they had been given. They repaired it, renovated it and sold it. In another they were learning to make fashionable sweaters on knitting machines. In those two training workshops, both situated in the less advantaged parts of cities in Scotland, those young people were worried about how they were going to use the skills which they had gained. Most of the young people working in both training workshops lived in council houses. They would have liked to buy furniture and to have repaired it at home and sold it. They would have liked to buy a knitting machine in order to make fashionable sweaters and to sell them. Both were forbidden by the local housing authority. They were not allowed to trade from their council houses.
Likewise, only last week I met a young person who had learned to design and make children's clothes in another city in Scotland. She had not been allowed to do this in her council house. She had been fortunate enough to find a small unit on an industrial estate where she could do it. I bought a garment from her. She gave me her card and said that in one year she had already sold £7,000 worth of children's clothes. I met a young man at the same event who was a graphic designer. He was doing that from a small business unit. He was not allowed to do it in his council house. If you want to run a hairdressing business at home, you cannot do so in a council house. It is impossible, I believe, under almost all local authorities to trade from council houses.
It is quite difficult to get permission to trade from your private house, even if your trade is a clean, quiet kind of trade which would not raise any objection whatever from the neighbours. This is because of the way in which we used to think about council houses and when we considered that because public money had gone into a house people should not get advantage by trading from it. Now we allow people to sell council houses at a discount. Our thinking about employment from businesses carried on in council houses has not caught up with our other thinking about these matters. So that whole area is something which a Standing Committee of Parliament might look at.
There are very many traditional constraints of other sorts on what you can do in a housing estate. There are boarded-up council houses all over the country. Why should they not be transformed into work premises? Is there any reason why people should not develop self-employment, taking lodgers into their council houses? What about sub-letting? Are enough disused industrial premises being made into small very cheap units in which young people, or indeed older people, might start up? Our whole attitude has to change about these 740 matters and this is the other end of the problem that we have been discussing.
Neither have our attitudes to education and training caught up with the subject that we are discussing. Every young person needs entrepreneurial skill and needs a basic foundation skill as his or her possession, as he or she moves through the new flexible work patterns that we are seeing develop before our eyes. Every young person needs in the future to be able to upgrade his or her skills and abilities as a person, in his or her spare time if necessary because there will be much more spare time from work for learning. We need far more opportunities for distance learning, for learning on the Open Tech pattern or on the Open University pattern. Colleges must go into the areas where people live to give them the training that they need. We have to think quite differently about all these things.
The barriers here are largely attitudes and conventions. We are still thinking in the way we thought in the old days of the old type of full employment and the old type of working aspirations. There are many facets to this. We need the figures, we need the picture of how it is looking to workpeople and potential workpeople now, as well as the picture that we have in the Burdens on Business document, which looks at the subject from the employers' point of view. If we could develop for the public of this country a scenario for the future so that they can see how they can move through the labour market through their lives with an ability to earn, as well as a picture for employers so that they can see what are the possibilities for them, then we shall be able to move forward more rapidly than we are at the moment.
§ 5.48 p.m.
My Lords, my noble friend Lord Boardman has done the House a great service this afternoon by introducing this debate, because there is no doubt that of all the pressing and anxious domestic issues which face the country at present unemployment heads the list, and from that follows the stimulation of employment. I was delighted to hear my noble friend Lord Young's speech in which he depicted the successes which have come about as a result of deregulating business. I am sure that he is right. I congratulate him on it and I hope he will continue that work.
But one sometimes forgets some elementary things, such as that if there is a worldwide recession (which there has been) demand drops. Fewer goods are wanted and those which are wanted are those which are most competitively priced. The Government have therefore, in my opinion, been wholly right in making the control of inflation the highest priority; and they have succeeded. If inflation is controlled, firms have a chance of being competitive. But to be competitive they have also to cut waste and surplus manpower in order to meet the smaller demand. This itself adds to unemployment. So there is in effect a double jeopardy: first, reduced demand creating unemployment; and, secondly, the search for higher competitiveness to meet that lessened demand also creating unemployment. So the ratchet twists twice.
People tend to think that this state of affairs is peculiar to Britain, but of course it is not. My noble 741 friend referred to this at Question Time this afternoon when he gave figures to suggest that the United Kingdom has a greater percentage of its population in work than has any other country in Europe except Denmark. So in that respect we have a positive advantage over our neighbours. There are those who say that we shall have to live with a permanent level of 3 million unemployed because of the impact of computers, microprocessors, robotics and so forth, all the advances of modern technology. I have never been of that school. Man has always invented, and it was a delight to hear the speech of my noble friend Lord Vinson this afternoon when he referred in particular to the fact that it is necessary to invent and to bake the cake before you get others to come in and cut it up.
In the 1890s farm workers burnt the threshing machines because they thought that those modern inventions would do them out of their winter work of flailing corn. It is true that the internal combustion engine did away with the horses, the wheelwrights, the saddlers and the coach builders, but of course it created the garages, the motor manufacturers, the oil tankers, the tyre manufacturers and so on. Invention therefore did not of itself create unemployment, though it altered the pattern of unemployment. I do not believe that the introduction of modern technology will in the total create unemployment, as so many people say, though it will have an immediate impact at the sharp end. In fact, the reverse will happen.
The introduction of these new technologies will create employment by making our goods competitive and wanted. These new technologies are our friends to be welcomed and not things to be frightened of. Nor do I believe that in the 1980s man has come to his limit of ability to create work and to create new ideas. Of course he has not. These new techniques will enable us to do that which we should have been unable to do without them, and so to create employment.
We labour under one great difficulty, which is that for 30 years we had full employment. Everyone said, "Now we know how to control the economy of our country and as a result we have full employment. This is the right of every person. Unemployment is a thing of the past". How wrong we were! We did not know how to control the economy. Unemployment was not a thing of the past—it is here again. Now everybody is saying, "Because we have modern advances we will never have full employment again". My modest reply to that is, nonsense! World economies, by which we are influenced and over which we do not have control (though we do not like to admit it), go in and out like the tides of the sea. We can paddle our lilo in certain directions of our own choice but we cannot control the tide. In my view it is just as unrealistic to say now that there will never again be full employment as it was 25 years ago to say that there would never be unemployment again. So our problem now is how to create employment.
One of the benefits, if that is the right word—and it is not—of the redundancies from the larger firms is that it has stimulated people who have found themselves unemployed to become independent and to start up their own businesses. Small businesses are the foundation of a sound economy. Despite the 742 difficulties of starting up new businesses, to which my noble friends Lord Boardman and Lord Young have referred, in 1983 the net growth of new small businesses was three times higher than it was in 1980. So that is a success.
I shall never forget that when I had the privilege of being a Minister I visited a firm in Staffordshire, which was a depressed area, which had been started up by a man who had been in the steel industry. He had £5,000 and he started with 10 people. When I saw him three years later he told me that he would not sell his business if he were offered £350,000 for it. Only 12 months ago he wrote to me to say that he had moved his factory to a new site and he had a turnover of £2 million. What a success story that was. Out of hardship, in a time of recession, in a depressed area of Staffordshire and in the depressed industry of steel, he had created employment. We ought to shout that kind of story from the rooftops, but for some curious reason we do not.
There are people who create jobs because they can do so competitively, but the irony is that by being competitive they help to lose jobs in those firms which are less competitive. The Government have done a lot to create jobs, but governments can only set the scenes, offer financial incentives and try to stimulate. They cannot provide the initiative and the entrepreneurialism of the businessman. Nor should they try to do so—that must be left to the individual. Governments can provide incentives to work. Oddly enough, they can also provide incentives not to work.
I remember the noble Lord, Lord Energlyn, saying some four or five years ago that people had likened the unemployment of today to that of the 1930s. The noble Lord then said that there was one single difference. In the 1930s the cry was, "Give us work. We want jobs". One does not hear that now. The government have over the years, in their search for compassion, removed the financial anxiety which lack of work created. But they have at the same time in some areas removed the necessity or the incentive for work. Worse still, they have actually made it inadvisable to work. This is unbelievably absurd. It is so unbelievably absurd that one could hardly think it happens, yet everyone knows that it does.
We have heard today a number of generalities as to what might be done and how we could stimulate employment. I should like to refer to one or two specifics. There was an article in the Daily Telegraph of 11th March which said:£70 B and B man says 'It's not worth working'".The article continued:An unemployed building labourer living on social security with his pregnant girl friend in a £70.50-a-week bed-and-breakfast room in London said yesterday:'I could get a job, but what's the point? I could not pay the rent'.On top of the rent for the double room at the … Hotel … West Kensington, the Department of Health and Social Security is also paying the couple £75 a fortnight supplementary benefit. The man said … 'If I could get a council flat for £25 a week it would be worth getting a job. But where I am now I'm better off with social security'.Another unmarried mother, Brigitte, 24, holding her three-week old baby … said she and her jobless boyfriend David, 31, from Manchester, have a £65-a-week room at the … Hotel, Paddington. They have lived there for 18 months with the Department paying their rent and giving them £27-a-week supplementary benefit".If one were to curtail one's remarks to saying that if the welfare state is so constructed that these kinds of 743 examples are provided for, that it makes them a liability on the state and actually makes it imprudent for them to work, then I suggest that those regulations ought to be altered.
Contrast that example with the person who finds himself unwillingly unemployed and who wants to take part-time work, but cannot do so because he would be worse off if he did. I know of one such man—and I am sure your Lordships know of similar examples—who was unemployed, who was offered part-time work, and who wanted to take it. He took advice from the local DHSS and the supplementary benefit people. If he had taken on part-time work, what he earned would have been deducted from his social security payments. He would have been content with that, as he wanted to work—but he would also have had to pay a share of the stamp and so would have been worse off.
If the prospective employer had paid his share of the stamp, that would have been benefit in kind and so the individual would still have been worse off. On top of that, if he reached a certain level of earnings, he would have lost the assistance on his rent and would have been still further worse off. So this man concluded that, despite finding a job and despite wanting to take it, he could not afford to do so.
That was not the end of the story. His wife who, because her husband was unemployed, had become the breadwinner, found that she, too, was restricted as to the hours that she worked. If she earned too much, it would cause cuts to be made in the supplementary benefit paid to her husband. Think of the business of policing all this—"How much money have you earned? How many hours per week have you worked? How many days per week?". In the end, this couple decided that it was not worth it.
Where a system is such that it deters both husband and wife from working, it is a system that needs overhauling. And where a system is such that it deters young people from getting jobs, it is a system that needs altering. Young people when they leave school want to get jobs. They need them for their pride and their character, and in order to be contributors to society. But the potential employer finds that what he has to pay the young man or woman—the novice, the person with no experience at all—is far too high. By comparison with the mature, experienced person the differential is not big enough. Many more people would be employed if the starting rates were not so high. Young people would find themselves proud of a job and earning money rather than being unemployed.
It is not a question of getting cheap labour. It is a question of recognising that the novice has to learn and as such he is a taker from the business as well as a giver to it. That is why I am glad that the Government are considering abolishing the wages councils which often, in disparate industries, set rates of pay at such levels as to deter employment.
Wages councils cover some 2.7 million people and about 400,000 establishments. The councils cover an extraordinary range of extraordinary businesses. Apart from there being a wages council for licensed residential establishments and licensed restaurants, there are wages councils for hairdressing undertakings, for 744 unlicensed places of refreshment and for general waste materials reclamation. The aerated waters industry has its own wages council. Hats, caps and millinery have their wages council, as do linen and cotton handkerchiefs and household goods and linen piece goods. Made up textiles have their own wages council, and so do the rope, twine and net industry, button manufacturers, and the perambulator and invalid carriage industry. Ostrich and fancy feather and artificial flower businesses have their own wages council, and so do sack and bag manufacturers, the lace finishing people, and the cotton waste reclamation business. I should have thought that many of those industries had passed the way of many mortal people by now, but if they have not, maybe it is time that at least their wages councils did.
In what one might call the sympathetic era of 10 or 15 years ago, Governments introduced measures which provided more security of employment. This may have been fine for those days but it did detract from the mobility of employment. It has now become difficult—absurdly difficult—to remove people from their employment if they are bad, and even if by being bad they adversely affect the business and thereby the employment of others.
My noble friend Lord Boardman referred to this point when he spoke about employment protection legislation. If I may say so, he was quite right to do so. The threat of action by industrial tribunals for unfair dismissal and of possible reinstatement hangs like the sword of Damocles over many men wanting to sharpen up their own businesses. It has enabled the thumbscrew to be turned by the more disreputable type of employee, knowing that the employer will not wish to see himself featured in local newspapers and endeavouring to extract a higher settlement from the employer.
The noble Baroness, Lady Seear, said it was not always known that more employees lose cases before tribunals than win. This merely shows the number of people who are prepared to go to tribunals to test the system. They have nothing to lose, but others have. The cost of getting rid of a bad employee can now be exorbitant. This applies not just to the work force but also higher up the scale. The higher up the scale the person is, the greater the cost and the greater becomes the problem. The present law makes it difficult to dismiss bad people and consequently difficult to employ good people.
The same also goes for redundancy payments. These were introduced for the highly meritorious reason that when a person had worked for many years for a firm, he should not find his employment terminated without any recognition being made of the years he had devoted to that firm. That is wholly commendable, but the cost of redundancy to a firm can be substantial. When the firm is in financial difficulties and needs to trim its workforce, frequently the cost of redundancy is yet another burden. Sometimes, rather than accept that burden, the firm hopes for better times only to find that better times do not appear. Having not accepted that burden earlier and trimmed its labour force, the whole firm goes. No doubt many noble Lords have seen this happen as I have.
Also, redundancy payments were not meant to cover—nor should they, in my view—the situation 745 where a company wishes to create a subsidiary and to start it off with employees who work for the original company. Such employees have to be dismissed from the original company, only to be taken on the next day by the subsidiary. On the way, the employees collect considerable redundancy payments from the original company. There is of course no redundancy in such a case; there is just a transfer.
Being redundant and having no job is one thing; being made redundant in order to be transferred is quite a different thing. Indeed, the Government are inadvertently guilty themselves of creating this problem. In order to reduce Government expenditure, the Government have decided to curtail grants made to certain institutions in the hope that funding can be round from private sources. That is entirely understandable.
The irony arises because private industry, when funding items of research, sometimes requires to enter into contracts which are different from those which a Government body can entertain. It is therefore sometimes necessary for the research councils or institutes to set up a private company. The private company may in the main be staffed by research workers from the institute whose funds the Govenment have curtailed. These research workers may have to be made redundant by the institute—only to be taken on, if all works out right, the next day by the private company operating alongside and within the research institute.
So two research workers who have been sitting next to each other for some time can find themselves in the position where one may just have received a capital sum in redundancy pay whereas the other has not. This is hardly good for morale and presumably somebody—probably the Government—has to finance the redundancy caused by the Government's efforts to privatise research. I am not saying that the Government are wrong to encourage the privatisation of research. I am saying that it does produce some curious and unexpected phenomena with regard to employment in the process.
There is another example which is topical. When the Government abolish the GLC certain of its employees will be taken over by other bodies, but many of those employees will first pick up redundancy payments, not because they are being put out of work but simply because they are being transferred. I fail to see that that can be right. The Government have to find the money to finance these redundancy payments, and therefore the principle lacks impact. But apply that same principle to private industry and the impact is substantial; and it gives the potential receivers of redundancy payments a feeling that somehow there is some free money hanging around if only one is astute enough to collect it. I do hope that the Govenment will take advantage of this debate to take a long hard look at the many ways in which both the Government and the law have unintentionally produced obstacles to growth which inhibit the creation of employment and new jobs.
I like my noble friend's idea of a standing committee. I think they will be standing for quite a long while. I also like his idea of an annual Miscellaneous Provisions Bill to sweep away the 746 absurdities. They will be long Bills; they will be fascinating; but they will be welcome.
§ 6.12 p.m.
§ Lord Harris of High Cross
My Lords, I was delighted to hear my noble friend Lord Vinson, whose arrival among us will simultaneously raise our standard of eloquence and reduce our average age by a useful fraction. I really must congratulate the noble Earl, Lord Ferrers, on his remarkably outspoken speech. When I recall the arguments that we fought and lost with him on the Government Benches, even on wages councils, I detect that privatisation has liberated him to make speeches with which I can now wholly agree. I must also say that I am grateful to the noble Lord, Lord Boardman, for inviting us to discuss the obstacles to the creation of wealth and employment.
From the no-man's land of the Cross-Benches I should like to open up a rather wider field of fire than some previous speakers. My target is not therefore confined to Her Majesty's Government, though I agree with others that they have been somewhat tardy in removing impediments to increased production and job opportunities. My chief target would be the deeply entrenched conservative thinking in which the worst obstacles to economic progress are stubbornly rooted. The conservative pattern of mind I hold responsible is, alas!, now most commonly found on the Labour and Liberal Benches, and we got more than a whiff of that from the noble Lord, Lord Bruce of Donington, and the noble Baroness, Lady Seear. I observe that from a list of some 20 speakers, if we leave aside the opener and the closers, we have a tally of one contribution from the Labour side (and I look forward to hearing the noble Lord, Lord Kagan) and none from the Liberal side—and this on an issue investigating restraints and restrictions on freedom in the economy. As the noble Lord, Lord Thomas of Swynnerton, implied, it is a disgrace, and we long to hear the liberal trumpet more surely from the Government Benches.
It is characteristic of the backward-looking conservative approach, most prominent on the Labour and Liberal Benches, that there is a nostalgia for a return to the old post-war consensus in place of what they denounce as the politics of confrontation. Consensus can be made to sound seductively appealing, because surely discussion and agreement are preferable to unilateral decision and action. The trouble with that old, I hope banished, consensus, was that it always concealed fundamental inconsistencies in our economic and political objectives. It was like a honeymoon: nice while it lasted, but it could not last indefinitely. It depended upon avoiding awkward issues; it depended upon ignoring clashes of interest which eventually assert themselves in the best of marriages and in all economic and political life.
The central issue dodged by the consensus was the basic cause of the persistent obstacles to which the noble Lord, Lord Boardman, and others have called our attention. They were highlighted half a century ago in a largely neglected book by an Australian economist, Professor A. G. B. Fisher. His first volume was vividly entitled The Clash of Progress and Security, published in 1935. Ten years later, in 1945, he wrote a larger treatise called Economic Progress and 747 Social Security, which was fundamentally a deep, searching analysis of the threat to prosperity and employment from the failure to adapt our economic arrangements and activities to the ceaseless challenge of change. With a clarity rare among economists, he saw that the overriding political priority then being given to security represented a lethal threat to economic success, on which employment at rising wages ultimately depended.
Fisher illustrated the primacy accorded in those days to security with a couple of telling quotations from Labour and Conservative members of Churchill's war-time Cabinet. The first was from Ernie Bevin in 1940:At the end of this war, and indeed during the war, we accept social security as the main motive of our national life".Not to be outdone, Anthony Eden, a year later, in 1941, is quoted as saying:Social security must be the first object of our domestic policy after the war".Today, 40 years later, such well-meaning aspirations have a rather hollow ring when social benefits and the high taxation of low income necessary to pay for them have removed the incentive for many family men to contribute at all to wealth creation and, instead, have led them to settle for subsisting on unemployment pay.
Social security, however, is by no means the only obstacle to higher output and employment implied by the study of Professor Fisher. He foresaw a period of rapid change in techniques and products which would call for the continuing shift of labour and capital from the older or declining industries into newer and expanding employment. Yet the pursuit of security in its many guises increasingly obstructed the flexibility and adaptation of the labour market to these changing opportunities. The plain truth is that the preservation of the post-war consensus survived only by appeasing vested interests threatened by disturbance from new competition. Thus, for 25 years or more Conservative and Labour Governments acquiesced in every trade union and professional restrictive practice and closed shop which inhibited the creation of new wealth and new employment opportunities.
As our once pre-eminent manufacturing companies fell further behind foreign competition, they were embalmed in ever-higher subsidies. This protectionism gave a temporary illusion of security, but only at the long run cost we are now paying in delayed adjustment to change. When preservation through protectionism failed, Labour Governments tried conservation through nationalisation; and when, with mounting losses, we found we could no longer avoid drastic surgery, we had to send for people whose names are still remembered—Beeching in railways, Edwardes in motor cars, Day in shipbuilding and MacGregor in steel and now coal—to undo the damage accumulated in those years.
In every case the search for security against the impact of change led to what this Motion calls "legislative and administrative" obstacles to wealth creation and new employment. The same could be said, as the noble Earl, Lord Ferrers, has mentioned, of wages councils, rent controls, the dock labour scheme and the so-called employment protection laws—and even, I would argue, of the Shops Acts and licensing 748 laws. Under the old corporatist consensus, "phoney" security and safety first were practised at the expense of the postponed and aggravated insecurity that we are now reaping. It is because this cosy consensus has led through unprecedented inflation to unparalleled unemployment that we must now give priority to wealth creation and to jobs.
Despite the rhetoric it is not, in my view, Mrs. Thatcher who is confronting union leaders and other entrenched political interests: it is the reality of change and the imperative of adapting to it that is now confronting employers and their workforces. I must say that an acid test of the success of the noble Lord, Lord Young, will be some early action on the repeal of wages councils and, I believe, rent control on new lettings. Both of those measures protect the insiders with jobs and homes only by excluding the outsiders who are unemployed and homeless.
On wages councils, the game was given away recently by Mr. Hattersley, who, in a speech in February, acknowledged that ending wages councils would increase employment, but he hurriedly concluded:We cannot just be concerned with jobs to the exclusion of all other goals".In its context, what this meant is that Labour wills the end of high unemployment but simultaneously withholds the means of dismantling obstacles towards that end. Until Her Majesty's Government give a more radical lead to the emancipation of employers, workers, tenants, taxpayers, shopkeepers and entrepreneurs, I fear they will continue to be vulnerable to captious criticism for unemployment remaining far higher than would prevail in a freer economic environment.
§ 6.21 p.m.
The Earl of Dundee
My Lords, I should like to congratulate my noble friend Lord Vinson on an excellent maiden speech in which he illustrated so effectively the importance of manufacturing and reminded us of the ethical purpose of wealth creation. As chairman of the Development Commission and president of the Industrial Participation Association, the House has been fortunate to have my noble friend's advice today, and we hope there will be a great many future contributions from him on a wide variety of subjects.
I should like also to join with other noble Lords in congratulating my noble friend Lord Boardman on introducing this debate. He and other noble Lords have pointed out very eloquently the evils of regulations, and while it was not just his own reference to telephones which rang true it was also not just my noble friend Lord Young's allusion to spectacles which has increased our vision.
Regarding the creation of wealth and jobs, it will be generally agreed by most governments and their subjects that the highest priority should be given to the consideration of all possible means, including legislation, of achieving these ends. However, if a distinction were to be made between, on the one hand, administrative and legislative obstacles which have taken many years to gather and, on the other hand, legislative incentives which may need only a short while to produce and to allocate, it might well be 749 objected that disproportionate attention is generally paid to the latter. It is, of course, always easier to superimpose new measures than to restructure or replace old legislation, even if this has revealed obstacles and anomalies. To whatever extent that objection may be valid in this country, it is at any rate very useful to have emphasised in their own right, as my noble friend's Motion does today, the problems of accumulated legislative and administrative obstacles, which in practice in all countries often remain unremedied for far too long and which, equally, are often underrated, if not obscured, by respective national governments in discussion of their own economy.
However, if harmful obstacles are professed to exist, it should be asked, conversely, why their reduction or removal would necessarily benefit certain categories of business and, secondly, why these categories, if thus benefited, would necessarily be able to help create to a significant degree more wealth and more employment in the country. To take the effect of current regulations on small firms, there may well be no precise evidence that rules and regulations themselves are the major causes of business failure; yet at the same time there is a strong case for believing that if these regulations had already been substantially reduced and revised there would not now be closing down almost as many businesses as, with the help of incentives, are able to start up. Between 1980 and 1982, roughly 360,000 started up and roughly 340,000 closed down. And, to understand the contribution which small businesses can make to employment and the economy, one has only to look at examples of other industrialised countries to see the results which have already been achieved in the United States or in Italy, where 28 per cent. of the workforce is self-employed compared with our own low proportion of 7.7 per cent.
Turning to the assessment of various methods and expedients which have been proposed for reducing restrictions, there is of course the question of discovering the best balance between measures to deregulate in some areas and measures to amend or replace existing legislation in other areas. If it is accepted that many enterprises to some degree, and small firms in particular, are inhibited by regulations in making a significant contribution to the economy that they otherwise could make, then there is a case for exempting categories of a particular size or type from regulations thus connected with non-expansion and high failure rate.
My noble friend Lord Thomas of Swynnerton has already referred to that. When he comes to wind up, will my noble friend the Minister indicate whether the Government are prepared to introduce a Bill in the near future which will give powers to the Secretary of State to exempt from regulations certain categories of small business?
Another aspect is the need to ensure that the cost of regulations does not exceed their benefits. American research estimates that the current annual cost of United States regulations is in the region of 100 billion dollars. Here in the United Kingdom we already know that the administration of consumer legislation alone costs the private sector anything between £300 million and £500 million a year. Does my noble friend the Minister agree that, while 750 disclosure of the total British annual cost of regulations, if made more available, would serve to increase national awareness of the problem, the Government should also adopt a formula similar to that of the American Regulatory and flexibility Act so that no new regulations can go forward until it can be shown that benefits will exceed costs?
In regard to the need to deregulate existing legislation, the noble Baroness, Lady Seear, and my noble friends Lord Boardman and Lord Ferrers have already suggested the use to which parliamentary Select Committees and miscellaneous provisions Bills might be put. My noble friend Lord Young of Graffham has already responded to that. Are the Government willing to amend the Law Commissions Act 1965 to establish a deregulation unit charged with reducing the volume of legislation within a five- to 10-year, or otherwise specified, period?
Then there is the adverse effect of some current taxation arrangements on firms and, again, in particular on small businesses; whether this adverse effect arises from the cost and time spent in collecting VAT, the high level of rates for business premises, or insufficient encouragement to firms to establish their capital base and to expand. On VAT it is calculated that 93 per cent. of the total comes from firms with an annual turnover in excess of £100,000, but three-quarters of all VAT registered businesses have a turnover which is under that figure. For that reason, among other recommendations, it has been strongly urged to the Select Committee which reports to my noble friend Lord Young of Graffham, that the starting point for VAT should be raised to £100,000 turnover per annum. Contrary to some allegations, it is also pointed out that such action would not be inconsistent with any EEC directive. Does my noble friend the Minister agree that, if this action is pursued, while saving small firms millions of working weeks as well as relieving the burden of Customs and Excise, it will hardly diminish revenue to the Exchequer? Would he further agree that among other alterations to help mitigate the adverse effect of taxation on small firms should be included the averaging of tax and profit over several years, an amendment to enable pension schemes to qualify to be linked directly to family businesses and an amendment so that family members can qualify for the same expansion schemes as outsiders when investing in their own business?
Regarding the need to protect the employee and the consumer, there are no grounds for supposing that the present combination of laws is particularly efficient, still less that it strikes a satisfactory balance between the interests of business expansion and those of employee and consumer protection. In that connection, can my noble friend reveal whether the Government are prepared to shift responsibility from the Employment Protection Act instead to contracts of employment between the relevant parties enforceable under common law? That course of action has also been strongly recommended to the Select Committee which reports to my noble friend's department.
In relation to wages councils, while maintaining protection for minimum and low wage earners over 21 years of age, what revised arrangements would the Government support to encourage an increase in the number of apprenticeships or of those in first time jobs under the age of 21?
751 My Lords, satisfactory solutions to excessive regulations and related obstacles can of course by themselves offer neither a miracle cure for unemployment nor a magic recipe for wealth creation. But undoubtedly they can constitute major contributory factors to those ends. The Government have already shown that they are anxious to tackle the problem of those restrictions. Provided that comprehensive and wide-ranging measures are now introduced, the well-meaning intention of the campaign against unemployment can then receive some realistic backing and British business endeavours would also be given new vigour and confidence.
§ 6.30 p.m.
Earl De La Warr
My Lords, I should like to start by adding my congratulations to those of other noble Lords to my noble friend Lord Vinson on his excellent maiden speech. I hope that we shall have many more. I am delighted to find that my noble friend is, like me and some other speakers, a farmer—a VAT-free farmer—so of course together we wept for the plight of my noble friend Lord Thomas of Swynnerton which he so passionately described.
I am very grateful to my noble friend Lord Boardman for giving us the opportunity to have this rather wide-ranging debate. I should say straight away that I will probably be ranging rather further away than some of your Lordships from the question of new enterprise and perhaps a little bit more into the politically contentious, against which we were very properly warned by my noble friend Lord Young, who made an unpolitical speech until, if I may say so, he came to the point where he gave us a splendid trailer for the forthcoming Second Reading speech of my noble friend Lord Belstead on the Transport Bill, about which some of us have been nursing certain doubts.
I am, however, going to discuss a prime barrier to wealth creation, and that is the capture of unions over the past three or four decades by Left-wing militants whose interests are not by any means always those of their members and whose training all too frequently has taken place in countries that by no stretch of the imagination could be called friends of the Western democracies. To put it briefly, that has led to a modern type of luddism which has resulted in a dramatic loss over the decades of our share of exports and a serious growth of import penetration, and, it has to be said, has sent this country way down the European standard of living league. If that subject is not a barrier to wealth creation, I do not know what is.
It has already been said in this debate that we are moving into a period where more realism is creeping into our industrial affairs and, albeit with some massive exceptions, I would agree with that. Legislation cannot by any means do everything. But I should like to say that the package of the three trade union and employment Acts that we have had since 1980 has done an enormous amount in that direction and to create new attitudes. I say that rather specially because I am going on to be slightly critical of one aspect. I have always thought that the achievement of regular, properly conducted elections by the unions for their national officers was the most fundamental of the 752 union reforms that is required. That is why I feel that Part I of the 1984 Act is so important—that is the part which deals with national elections for officers—and that is why I want to offer some comments on it and in a minute come to a few suggestions that I hope may interest the Government.
I cannot embark on that without saying to your Lordships how much I regretted—and I was not alone on this side of the House—the fact that the Government did not go the whole way in the direction of making postal ballots mandatory. They gave a let-out which was almost complete. I think that we shall see much of the result of that decision by the Government, possibly even in the months that lie ahead. Nevertheless, let us agree that they did make the very important presumption that postal ballots were to be preferred, and we must not minimise the importance of that.
Let me quote a few words that were spoken by my noble friend Lord Gowrie towards the end of that Bill when he was discussing union registers, to which I shall come in a minute. He said:My noble friend is quite right in saying that they"—that is, union registers—are a logical continuation of our commitment, strengthened by the debate on Lord Beloff's amendment, to an inexorable move towards postal ballots".I hung on his words then and I hang on those words today.
But, having said that, let me not dwell on the battle we fought last year. Let us look at the situation which we have today. But we must face the fact that we are going to have many workplace ballots in the near future and also that by no stretch of the imagination can a workplace ballot, as we know it now, be conducted in such a way that it is as much proof against rigging as would be postal ballots conducted with other safeguards. The Government have to be extremely alert because they have brought the whole question of balloting out into the open.
I say very seriously that in this country we cannot possibly afford another piece of publicity such as that attending the affairs today of the Transport and General Workers' Union. I make no comment on whether it is right or wrong. I simply say that it is enormously damaging to this country, to our economy and to the way in which we are looked at from abroad.
I come to the first suggestion. Section 3 of the 1980 Act allowed the Secretary of State to:issue Codes of Practice containing such practical guidance as he thinks fit for the purpose of promoting the improvement of industrial relations".I quote again:The Secretary of State may from time to time revise the whole or any part of a Code of Practice under this section and issue that revised Code".There is a great deal of flexibility there. Finally, I remind your Lordships that a code of practice issued under this section shall not of itself render anybody liable to any proceedings, but any such code shall be admissible in evidence before a court.
Under that section we had a code of practice on picketing. Some may feel that it was not as effective as it might have been. I have yet to be convinced that in the long run it will not have been found to be doing a 753 good job. We did not, however, as I think we were promised at the time, have a code of practice on balloting. I remember in the debate we had on the first Green Paper—which I think was on trade union immunities—asking that the Secretary of State at the time should hurry up and produce one. I think the time has now arrived and I should like to commend this idea to the Government. It could spell out the requirements and the procedures in much more detail than the Act.
It could, for instance, deal with how to make members aware that there was to be a ballot; and we have heard much about that lately. It could include a requirement that any ballot, whether it be at the workplace or by post, should be subject to independent scrutiny—something that the Act did not mention and something that I hope your Lordships will agree is absolutely fundamental.
I am aware that the certification officer is at this moment talking to unions about model rules to do with the political votes, but that is not at all the same thing as a code of practice by the Secretary of State. That is the first point that I want to raise. My second point deals with Section 4 of the 1984 Act, which requires that each union shall prepare and keep up to date a register of the names and addresses of its members; and, moreover, it must be ready and complete by the time the Secretary of State triggers Part I of that Act. I believe, though I am not sure, that that is due to be on 1st October this year.
This is a crucial part of this whole legislation, if only for the simple reason: no registers, no postal ballots. It just is not possible if you do not know who are your members. Indeed, I would say that unions need to have registers, in any case. I have often thought it was monstrous, in companies with which I had to deal and where the workforce was well split, that the local secretary had to go to my own general manager to find out who were his members. The general manager liked it; I thought it was a monstrosity.
What I want to draw to the Government's attention is that this requirement came in very late. It came in at Report stage when the Bill was in this House. That is about four-fifths of the way through. Very few people know about it. No publicity was given to it. I should like to know just how much the unions are doing in order to get ready. I inquired this morning from a friend of mine who is very near the top of the EEPTU—a union that knows much about these things—as to what his information was. He said, "Well, some of them are doing it, but they are doing it with feet of lead". I should hope that the Government, using the ways that are open to them, would he quietly urging the unions to get on with this job, which they will jolly well have to do, and to get on with it quickly.
I hope that when this part of the Act is triggered and becomes law the Government will use all the techniques of publicity that are at their command to make sure that trade union members, and indeed the whole public, know of the existence of this crucial little section. It is an integral part of the whole matter and it must be seen so to be.
I therefore hope very much that the Government will feel that they can take on board the various suggestions that I have tried to make today. Much has 754 to be done still on all sides of industry to revive our competitive edge. Employers must do far more by way of consultation and the unions must curb their wild men. Then, and only then, shall we have industrial relations of the quality which is necessary for the further creation of wealth.
§ 6.48 p.m.
§ Lord Orr-Ewing
My Lords, I should like to follow other noble Lords in thanking the noble Lord, Lord Boardman, for introducing so succinctly—in 14 minutes—this particular subject. It is time for us to consider what obstacles there are and what can be done to reduce them. I was disappointed in the opening of the noble Lord, Lord Bruce. I timed it as 19 minutes of abuse and, at the end, a maximum of three minutes of little pinpoints which were not very constructive. I am sure he will realise that the Labour Party is coming to the stage where it really must start putting some constructive thoughts before the electorate if it is to have a hope in the next election.
He poured abuse on the Burdens on Business paper. It was not very thoroughly done, but it is a good idea to get people to look afresh at some of the obstructions. You can go on talking about them. It was a good initiative which was prepared quite quickly. It was asked for last October and in 90 days a worthwiile summary was produced. It did not deal with one of the subjects with which I wish to deal. A leader in The Times, commenting on this White Paper on 29th March, said:Very late in the day the Government seems to have discovered that the structure and rigidities of the British economy are the cause".I want to deal with one of those rigidities, of lack of flexibility, and in fact lack of mobility for the workforce.
Secondly, too many regulations—with which my noble friend Lord Boardman dealt so adequately; and I have a few more examples—are injuring the growth or even the start-up of small companies and particularly the self-employed. It is even worse if you are by yourself and faced with this vast amount of newsprint, which I shall detail later. Lastly, there is the need to press on with a more thorough technical and vocational training. If there is one good thing to come out of unemployment—we all deplore it at this totally unacceptable level—it is that it has made us think about whether we are handling our young people correctly when they leave school between the rather abortive years of 16 and 18.
At one time, national service very aptly filled that gap. It does not do so now. The fact that we are now making training available is a plus. Even if there were no unemployment, it would be a plus for the future of our nation and the people who undertake it. It could be argued that we have more flexibility than is apparent. Every month 400,000 people come off the unemployment register and go into jobs. That is quite a big turnover. It means that over 4 million people in a year change jobs. The figure put around of 3.3 million unemployed people does not represent a standing army. It is a turning-over army, although it involves of course young people at the receiving end in many cases of a frustrated future.
755 I wish to draw attention to the difficulties of young people who go to find work in areas where unemployment is relatively low and jobs more forthcoming than in some places in the North of England. In the old days it was quite easy to rent rooms. Now, rented rooms are very difficult to find. I recall that in my former constituency of North Hendon, where I served as Member of Parliament for 20 years, there were people who had moved into houses big enough to accommodate themselves and their children during the years when the children were at play school, primary school and secondary school. When the children had grown up and left home, those people, who perhaps found themselves rather hard up, tended either to put their house on the market or live in some penury or—shall I say?—hardship in a large house with many empty rooms where they were perhaps very lonely.
Is it beyond the wit of man somehow to make an allowance so that young people can take rooms in areas where jobs are available? Landladies and owners are still reluctant to let. They fear that tenants may be noisy, unpleasant and also perhaps slow payers, and that they may have got themselves a lodger for life. I cannot believe that it is impossible to devise a solution. I would urge my noble friend the Minister to examine this among the many issues that have to be considered. I also feel that the Rent Acts have to a great extent frozen people in accommodation. There is no need for this to be so. Such people would probably like to move if they did not have to pay so much more than they are currently paying. Surely, again, the Rent Acts were invented for a time when people stayed in an area and probably the same job for the whole of their lives. It is now a different economy. It is a moving and flexible economy. It has to be so if we are to reduce unemployment. Surely, when new accommodation is rented it should not be controlled. This would enable people to obtain a decent return for the help that they are offering someone.
We heard at Question Time yesterday that there are 30,000 empty council houses in London; 9,000 of them have been empty for a year. There are also many empty council houses in the North. I wonder again what has happened to landladies. Surely there are widows and elderly couples who, given enough incentive and some support by the Government, would take in students and tenants. It is difficult even in Oxbridge areas these days to find digs. One does not like to see empty houses and rooms not used. Every incentive should be given for young men to go to areas where there are jobs.
I should also like my noble friend to examine the exchange scheme for council houses. We have moved into the computer age. It must surely be easier than in my day for someone in a council house to arrange a swap in an area where there are jobs. It would probably be found that people who are retired do not wish to stay forever in the area where they have lived. Now that we have a house-owning democracy—60 per cent. of the nation are now houseowners—we should look for a system under which it is easier to buy and sell houses. The knock-on, domino theory acts in the housing market in a most irritating manner. You think you have sold your house but then find it difficult to 756 exchange contracts. Eventually, they are perhaps exchanged on one side, but not on the other. The Scots, who have set the example in many fields, have a much better system. On acceptance of the first letter of intent, both sides have entered into a form of contract and are thereafter bound by it. I hope that my noble friend will also consider this proposal. The sale of houses in different areas would help mobility, and I believe the creation of jobs.
I come now to bureaucracy. As stated so many times, small firms starting up should surely be exempt from some of the existing restrictions—planning controls, VAT, health and safety at work regulations and other millstones around their necks. I have seen the list from which my noble friend was, I believe, quoting in his admirable opening speech. My copy was printed in the Free Nation in its March issue. It listed 27 documents totalling 269,000 words which had to be read by someone wanting to set up a company employing two people and wanting to ensure that he was reasonably on-side. Health and safety at work reading amounted to 10,000 words, Offices, Shops and Railway Premises Act reading to 36,000 words and the Employers' Guide to PAYE 50,000 words. The Employers' Guide to SSP—that is sick pay—amounted to 39,000 words. Is this really necessary, especially for one-person or two-person firms? I would also mention the tremendous expansion of self-employment. Self-employment is the start of the two-man, the 10 man and the 100 man firm. There has been expansion amounting to 1 million extra people in the past three years. An increase from 1.5 million to 2.5 million self-employed shows that enterprise exists. It needs, however, to be made easier and less burdensome.
I wish finally to deal with education and vocational education for the job. Before doing so, there is the issue of licences. It is staggering to discover that one needs a licence to sell game, to sell milk, to sell petrol, to run a hairdressers, to breed dogs and to run a pet shop. Is this really necessary in this day and age? I believe that Michael Grylls, the Member of Parliament, put it well when he said in an admirable article in the Sunday Telegraph:—Surely at a stroke many of these could be abolished".I hope that my noble friend will take this on board.
Lastly, I urge the Government to double and redouble their efforts to provide better and longer education and to make it match the needs particularly in the electrical and electronic engineering areas. My noble friend Lord Vinson dealt with this in his admirable speech. Much has been done especially in the computer field which was a brave and imaginative initiative. We have increased the output of our graduate scientists and engineers—but too slowly. The gap between ourselves and our main competitors, the United States and Japan, is growing. It is not getting narrower. It is widening. I would point out that education in Japan is compulsory from the age of six to 15, and that thereafter parents have to pay for all further education between the ages of 15 and 18. There are no student grants. The cost falls on the parents. Alternatively, they can get loans. Or the student can be sponsored by a company. Yet the fact is that 94 per cent. of Japanese young people stay in 757 education until they are 18 years old. The equivalent figure in this country is 21.6 per cent. That is a glaring difference. Surely, we have something to learn.
In Japan 37.5 per cent. go to places of higher education, universities and polytechnics; but in our country only 12 per cent. do so. Therefore, in this country only one-third of the people go to universities and polytechnics. The Japanese are turning out eight times as many graduates as we are, and the American figures are very similar. I urge the Government to keep up the pressure on universities to increase the availability of engineering places. I know that in the Budget they granted another £43 million to be spent on more technological education, which is good. Since 1982 the Government's information technology initiative has added an extra 5,000 higher education places, and that is good.
However, how different the situation is today from the day in 1930 when I went up to Oxford. I had to obtain credits in the school certificate in divinity and Latin, and among other subjects maths and physics because they were my specialty. Now of course compulsory divinity has gone, perhaps regrettably so. Latin has gone; and what is so strange is that maths has gone. Surely if we are looking at the future curriculum at least people should be trained with some numeracy if we are living in the information technology era. I ask my noble friend to look at this matter. One engineering graduate gives job opportunities to 20 others, so it is important that we have the engineers if we are to create jobs. I ask my noble friend to carry on with the good work that he is doing. I ask him to look at the housing situation, which is far too rigid, to encourage engineering places to be created at places of advanced learning, and above all to try to get rid of some of the bureaucracy which many of us have mocked.
§ 7.2 p.m.
§ Lord Kagan
My Lords, bureaucracy is common to all administrations—democracies and dictatorships. But to a democracy it is a handicap and a yoke. That is not the case as regards a dictatorship. After all, a dictatorship's primary object is the retention of power and exacting of obedience, and bureaucracy is a helpful tool by which to achieve that. In fact, a dictatorship thrives with the help of bureaucracy. It helps to control; it relies on coercion. In short, everything is forbidden that is not allowed. Law and regulation control every activity and every aspect of life. The wider the net, the more effective the control. I recall a statement by a very powerful bureaucrat who said:Give me a name, and we will find something to pin on him".With that knowledge no one escapes fear or would risk disobedience.
After all, dictatorship is safe as long as the privileged few have affluence and as long as the masses do not fall below the threshold which leads them to despair. It is not accountable. That is not the case with democracy. The primary objective is the well being of the people in freedom. It relies on consent, and not fear; on persuasion and not coercion. Yet law in a civilised democracy is unavoidable, and the power of law is massive. The resources of law are almost unlimited. The law-makers and administrators at the highest 758 level in a democracy are well aware of this and they match power with responsibility. They are aware of the aims and they are aware of the side effects.
However, for administration and enforcement the law has to be handed down the line to minor officials, and that is where the problems arise. Law is rigid; it operates with full force at every level; it is inflexible. The minor official at a citizen's level or at the small businessman's level is purely concerned with literal interpretation not with aims and not with effects. With the massive power at his disposal he can be subject to heady temptation. It may lead to arbitrariness, to abuse and even an opportunity for pompous power assertion and eventually, to quote from "Hamlet" to:the insolence of office".When enough people feel discouraged, disheartened and disillusioned, the economy suffers and democracy is in danger. We need less law and very careful scrutiny as to whether law is necessary. Perhaps I may quote Yasuhiro Nakasone, the present Prime Minister of Japan, who only a few days ago declared:Freedom in principle; restrictions as exceptions".The noble Lord, Lord Boardman, suggested a Select Committee to scrutinise methods and systems. Perhaps I may suggest an extension of the ombudsman's activities. He has wide powers and is in a position to have access to departments and to documents, and he could use his powers to remove obstruction and to clear log-jams. This would he a great contribution, particularly because, through the ombudsman, the average citizen can more forcefully bring his grievance to attention.
§ 7.8 p.m.
§ Lord Campbell of Alloway
My Lords, I hope that your Lordships will accept my apology for not having been able to be present when the opening speeches were made. I was detained in the courts; but I shall read those speeches in Hansard. In particular, I am extremely sad to have missed the maiden speech of my noble friend Lord Vinson, about which, while I have been present in your Lordships' House, I have heard so many complimentary observations.
In the last month we have had the White Papers, Employment—the Challenge to the Nation and Education and Training for Young People, and the Statement by my noble friend Lord Young of Graffham on these two White Papers; and we have had a debate on the Budget proposals on unemployment. For my part, with your Lordships' leave, may I take all that as read, including the consultative paper on wages councils?
However, there was one crucial contribution in all that from my noble friend Lord Young of Graffham, in which, in a sense, he set the scene for today's debate with a report of the Department of Trade, Burdens on Business. I suggest that it is not so much the content of the report as the concept which lies behind the report which is so commendable. The concept shows that the Government accept that certain burdens are a major drain on the resources of industry, especially on the small firms which are the seed-corn of our future. In that debate my noble friend said that he would be leading an initiative to follow up this report, to build on deregulation and to consider deregulation more 759 widely in the light of current circumstances. That is excellent, and it is necessary.
One has to bear in mind that it was not so very long ago that the noble Lord, Lord Scanlon, drawing on his wealth of practical experience, warned your Lordships' House that there would be a shortfall of about 40,000 skilled technicians. I think that that was the figure he gave. There are on offer about 60,000 such vacancies today, and it will take about two years to find the men and women to take up these jobs. If only Her Majesty's Government can count on the goodwill and co-operation of the trade unions, on employers, and on our educational resources, we can make progress in this regard. It cannot, however, be done overnight. If these policies of Her Majesty's Government are intrinsically sound they ought surely to be supported broadly in this regard beyond the plane of party politics.
We as a nation shall not only survive but shall return to dominate the commerce of the world if only in this connection we can make some measure of common cause behind the essential concept. But alongside the employment policies of the Government, far more far-reaching than those ever devised anywhere in the world, so long overdue, we must also take this initiative to ease the burdens of business and to implement a policy of balanced and pragmatic deregulation. The importance of the Motion is that it recognises the essential link between the creation of wealth and opportunities for employment in the high technology of this new industrial revolution.
Under this Administration, thank heavens, there is to be no fudging, and we have to face the economic facts of life in the world in which we live. Setting the people free was no mere political gimmick or catchword. It is basic Government policy, and, having been heralded by prior enactments, it is now going to be pursued with even greater vigour—a policy of gradual decentralisation, a policy of deregulation. Surely the old Clause 4 dogma of control and regulation of all sources of wealth, of production, of employment and of much else besides is the antithesis of what is requisite for the country and for any Administration which would presume to govern this country.
The conservative approach of this Government is such that it upholds the virtues of self-reliance and the incentive of individual initiative alongside substantial means of state subsidy to create sufficient wealth to balance the books. The pursuit of profit in this regard, the creation of wealth, put it how you will, is not only laudable, it is requisite.
The Motion is cast for the present time and well into the future; but it is perhaps permissible to say just a word about the recent past, about the anti-inflationary Budget, because it cut personal taxation and national insurance contributions, which affect lower-paid employment. There is the major expansion of these training schemes; there is direct help for the long-term unemployed; there are schemes to help the unemployed set up in business; and there is the job release scheme to encourage premature retirement.
However, the Budget preceded this debate on a Motion which demands attention to obstacles, and so one comes to the future. The Budget heralded two 760 important aspects of deregulation which inhibited, and inhibit, opportunities for employment. There are, first, the wages councils. Noble Lords have spoken about these. There are 26 wages councils and 2.75 million workers, mainly in the service industries. These councils set legally enforceable minimum rates by wages orders. I do not know whether any of your Lordships have ever seen them, but they are prolix, incomprehensible and rigid, and at times they even have retrospective effect. The whole concept fails to recognise the link between pay and jobs.
In practice, they in no way prevent the East End sweatshops and other wage abuses. They no longer provide, as they did at one time, a minimum basic figure upon which bargaining takes place only on the increment. They make it illegal for employers to take on staff at prices they can afford, and the sooner they are abolished the better.
Then there is the problem of unfair dismissal. Is it not much to be doubted that merely increasing the qualifying period for unfair dismissal to two years, bringing it into line with the position of firms with less than 20 employees, is perhaps tinkering? One wonders whether the whole system of unfair dismissal and redundancy, as dealt with by the industrial tribunals, subject to appeal to the Employment Appeal Tribunal, is not now ripe for review and reconsideration, which brings one right into the middle ground of this debate.
This body of legislation was inherited from In Place of Strife. It is open to the most serious abuse. The law is complex and technical. The proceedings are time-consuming and protracted. In the ordinary way there is no power to award costs. The provisions as to reinstatement are onerous and largely impracticable. The competence of many who sit on these industrial tribunals leaves much to be desired, as the reported appeals to the Employment Appeal Tribunal bear witness.
It has afforded a bargaining weapon in the hands of any unscrupulous employee to force unjustified out-of-court settlements. It hangs like an albatross around the necks of employers, and serves to inhibit employers from engaging new employment. This is the only part of the Act of 1971 which was left standing by Labour, and now we have got it. Consideration might well be given as to whether the regime should not be replaced by a new regime based primarily on common law wrongful dismissal with such modifications as might be deemed appropriate, and that it should be dealt with in the courts in the old way and the ordinary way.
Another inhibition which prevents employees from seeking new employment is want of accommodation. My noble friend Lord On-Ewing has dealt with this. Here there is no doubt that the Rent Restriction Acts kept much-needed accommodation in cold storage. Again, ought one not to consider whether the old legislation should not perhaps be replaced with legislation which imposes minimum duties on landlords, but also enables them to charge fair open market rents to tenants only having limited security of tenure?
There are other issues arising, such as raising the VAT threshold (I would suggest to £50,000); whether capital gains tax operates as an obstacle to mobility of 761 funds for investment; to what extent it inhibits the creation of wealth; whether at the end of the day the tax gain is worth the legislative and administrative candle; whether, having regard to the abolition of the old Prices Commission, references to the Monopolies and Mergers Commission, where there is no evidence of any restrictive trade practice, serve any useful purpose, and whether that is in accordance with Conservative philosophy. Indeed, is the definition of public interest under Section 84 of the 1973 Act not, as indeed my noble friend Lord Cockfield thought on more than one occasion, long overdue for revision?
We should consider whether the whole legislative and administrative regime affecting restrictive trade practices, as it affects the creation of jobs, is satisfactory. In this we have the Office of Fair Trading, the Director General of Fair Trading, the Secretary of State, the Monopolies and Mergers Commission and the Restrictive Practices Court, now more or less moribund. We have the Commission in Brussels and the Court of Justice in Luxembourg. Is this not really totally out of hand, and ought we not to see whether this does not impose an unacceptable burden on industry?
In conclusion, is it not time—and this takes and develops a point made by other noble Lords—for some arbitral machinery to be set up to deal with the restrictive labour practices such as overmanning, demarcation and so forth? The shameful acquiescence to which the noble Lord, Lord Harris of High Cross, referred was the heritage of compromise in an age when our world trading situation was sufficiently strong to accommodate wasteful and uneconomic compromise. Arbitral machinery, with the co-operation of the unions sitting as members on the arbitral board, contributing as they do to the employment appeal tribunals, is something that ought to be considered. If such machinery were to be set up it could also be used for the settlement of inter-union recognitions.
It is not within the spirit of this debate to seek any answer to these questions or, indeed, on some of the very contentious points that I have raised, to seek any reply from my noble friend the Minister. The only hope is that they may receive consideration; and I, too, must express my gratitude to my noble friend Lord Boardman of having afforded the opportunity for what I hope your Lordships will agree has been an essential and constructive discussion.
§ 7.24 p.m.
§ Lord Marshall of Leeds
My Lords, I bring up the rear, but first I apologise to the House as I was not present in the Chamber when my noble friend Lord Boardman introduced this Motion. This was due to an inescapable engagement arranged long before I knew I would be speaking in this debate, so I hope your Lordships will excuse me. I also missed the maiden speech of my noble friend Lord Vinson, but I have it on the highest authority that it is in order for me to congratulate him on that maiden speech. I do so most sincerely.
The whole House will be indebted to my noble friend Lord Boardman for initiating this debate and thus affording the opportunity for concerns to be 762 expressed regarding the obstacles and inhibitions to which the Motion draws attention and which were referred to in the scrutiny that the Prime Minister announced in August 1984. There was never a more appropriate time to consider these burdens which militate against small businesses and act as a serious brake on enterprise and employment. This is all the more important if we consider that it is estimated that small businesses account for at least one-third of private sector employment. This is even more important if we acknowledge that in 1984 a record was set with nearly 100,000 new companies starting up.
It is a daunting challenge for anyone wishing to set up his own business and perhaps employ a handful of people in that enterprise. First, he will have to persuade his bank manager to assist him. In this context I cannot but mention that a certain institution which refers to itself as the "Action Bank" in its television advertisement claims already to have loaned to small businesses some £500 million.
§ Lord Marshall of Leeds
My Lords, I am sorry; it is £5,000 million. I find it difficult to deal in astronomical sums of money. The figure is £5,000 million—more money than was spent on putting a man on the moon, I believe. That is a wholly worthy and I hope rewarding exercise.
Having received his financial backing the entrepreneur has to realise at the outset that he is required by law to be an honorary tax collector for pay as you earn. He has, according to the nature of his business, the strictest obligations in the fields of value added tax, national insurance, sick pay and so on. If he has to adapt premises he will have to obtain planning permission. That in never easy and it is almost always a tedious process. If he has to build or convert premises he has to comply with the building regulations. He will be visited by the most reasonable inspector from the fire brigade, who will then proceed to make some very unreasonable recommendations about fire precautions. His premises will have to comply with the health and safety at work regulations.
He will have to ensure that he offers the appropriately acceptable terms and conditions of employment and, where relevant, comply with company law, consumer law and very soon the new insolvency law. He will have to avoid the pitfalls which await the unwary in the thickets of sex discrimination, equal opportunities and race relations legislation, to name but three. All these and the cost of compliance is likely to make all but the most bullish of aspiring entrepreneurs blanch. In fact, what is of more concern is that it may turn an entrepreneur towards the black economy as the easy way out of not complying with tedious regulations. It may also induce an aspiring entrepreneur to employ only part-time labour, with all the implications that that has.
If he wishes to proceed, he will proceed with caution and, if costs allow, he will be wise to employ someone back at the office, a Man Friday who, while the employer is away getting business and putting the business on its feet, will be in the office able to cope with the fiscal, regulatory and other statutory burdens that I have described. But what a price to pay! The 763 price is higher production costs and lower profits. I need not quote from page 3 of the Government Blue Book, Burdens on Business, which describes the most precious time of the entrepreneur in building up his business and having to cope with the impediments of regulations at the same time.
If Government, by deregulation, can achieve a significant reduction in compliance costs this will mean more profit and in the end will lead to a higher level of employment. If, on the other hand, Government cannot achieve a significant reduction then many a small business aspirant will opt for self-employment; and, however laudable, self-employment cannot have the same implications for employment potential as the small business. This is not to say that we must spurn the cottage industries which grew up in the Victorian age and particularly in my part of the world in the textile industry. Nor must we spurn the current, modern cottage industries where many a computer program is written by a girl who is a married woman, has had her first baby and is doing part-time computer work at home.
My noble friend the Minister was right when he recently drew attention to the major obstacles to enterprise, particularly for small firms, when he called for concerted action to minimise that regulatory burden. Certainly when I retired from practice I had an overhang of company directorships which I took into retirement, as it were. My accountant said, "You are a pluralist". When I found out that he was not being offensive, he said, "You should be a company". I said, "I am an individual". He said, "You should be a company. Then you could put your expenses against your company directorship fees". I said, "What else?" He said, "You will have to do VAT—charge it and pay it. If you were to use any part of your house for your work, then that part of the house will be exempted from the capital gains exemptions of your principal residence, if you sold it". So I said, "Well, it may be nice to be a pluralist but I think I'll just remain an individual". This was because I was daunted by the duties of having to deal with VAT, to keep books, and things like that. Now I am probably paying rather more income tax than I might have been otherwise.
But there is huge scope for deregulation, without prejudice to the necessary protection of the employees, the consumers and the general public, which cannot be denied. Again, Burdens on Business identifies 10 options for change which I need not rehearse but which are very encouraging. What a shame it is that we cannot persuade large firms to stop taking normal credit against the small firms with which they do business. This is a cause of the failure of many small firms. I fear that the current multiplicity of local and central controls does not automatically suggest that our party in government is not interventionist. There has to be the political will to get rid of the overhang of years of inhibition; and entrenched mini-bureaucracies, many of them with self-perpetuating propensities, need radical re-examination now as to what useful purpose they serve.
There is a world of difference between the many enforcement agencies which now exist and agencies which might be created to advise and encourage small businesses by offering comprehensive packages of 764 advice and assistance which will be readily available to (and would ease the compliance burden on) those who are starting up small businesses; in other words, guidance to self-starters. So one hopes that the words on "One Stop Shops" in Appendix 7 of Burdens on Business, recommending that the Department of Trade should take the lead in co-ordinating action, will not be regarded within the various departments as just one more administrative chore to be performed merely in the course of duty; because the small businessman is waiting for relief and I do not believe that my noble friend Lord Young would be either satisfied or inactive if they did. I believe he would want it done with the enthusiasm and the vigour which he displays himself. This is why I believe that the Secretary of State and the Government and my noble friend are to be congratulated for taking this initiative.
We must not forget that many people are now no longer in work as employees. Certainly with the mobility that the motor car allows you are getting the peripatetic hairdresser who does not have a shop; and a very good service it is, too, I may say. You do not have to wait for an hour to get your hair cut; he comes to your home. This is done for both male and female hairdressing and is a kind of enterprise which in my view should be encouraged. But this is possibly a rather irrelevant aside. I conclude by repeating that my noble friend Lord Boardman has earned our appreciation by enabling us to debate our concerns by bringing forward this Motion today.
§ 7.38 p.m.
§ Lord Ezra
My Lords, we are all indebted to the noble Lord, Lord Boardman, for introducing this very important and timely subject for our debate today. I think that we would all agree with the principle that we should all forever be vigilant against obstacles, hindrances and regulations which impede our normal activities. I think that the proposal that he has put forward for a standing committee of both Houses with all parties represented and with provision in the legislative programme each year for amendment or removal of or changes to regulations is a good one, and I am delighted that the noble Lord, Lord Young, has said that this will be studied with interest.
My industrial experience suggests to me that regulations and procedures often develop a life of their own. When I was engaged in the management of a large scale enterprise—which I hesitate to name because it may lead to a tirade from the noble Lord, Lord Harris of High Cross; however, he is not in his place—one of the things that I did was to ask for a regular review of all the forms that we issued. One could ask for information on a particular occasion to met a particular need and without one knowing it this would go on being provided for years afterwards. I believe that there are many regulations and procedures which have developed this sort of life long after they are required; so I must say that the idea of a permanent and regular review finds very much favour in my case.
Having said that, however, I believe that we have to look at the other side of the coin. I was glad that the noble Lord, Lord Young, said that the fact that the Government were now examining what obstacles and regulations to remove did not mean that they were 765 totally against regulations, and that some are essential, as he put it, for the basic freedoms and to safeguard the basic feature in our social and economic life.
Therefore there could be a good deal of discussion about which of these regulations and obstacles ought to be removed and which ought not to be removed. Indeed, as our society and our economy become more and more sophisticated we may well find ourselves having to introduce new regulations to deal with that new sophistication; and some of the things that may be removed may in turn lead to a necessity for introducing other regulations. For example, the noble Lord, Lord Young, referred to the impact that the deregulation of long-distance coaches has had—and that was also referred to by the noble Earl, Lord De La Warr. I am delighted to hear that this has served the long-distance coach-travelling public so well, but I happen to reside in a part of London which is suffering as a result of this. I do not know what the collective noun is for lots of coaches—perhaps a herd—but herds of coaches go thundering down Ebury Street, and those of your Lordships who live in that vicinity will be aware of the problem. I should have thought—and I hope we shall be discussing this when the Transport Bill comes up in the proper way—that we should be giving some attention to that aspect. In other words, deregulation in one respect can lead to problems in another respect; and my noble friend Lady Seear also referred to this problem.
Indeed, one could go wider than the mere question of regulations. There are many ways of dealing with our affairs which could merit examination on the basis of the Motion that has been proposed, and the noble Lord, Lord Bruce, in his characteristically vigorous manner, referred to some of those at the end of his speech. It is a very wide-ranging issue, and one which I think we must take very seriously on board. I believe that many very interesting propositions have been made today and I hope they will be fully considered as part of the inquiry which the Government have now launched as a result of the recently-issued discussion document.
If, I may, I should like to refer to one kind of obstacle which I believe has impeded us at the other end of the economy. We have tended to concentrate on small enterprises—the one-man or two-man business—and to consider the major obstacles that they have to face. But at the other end of the scale of operations, I think we may have saddled ourselves in respect of major capital projects with a very complex and expensive form of public inquiry.
I should like briefly to refer to three recent public inquiries which have raised many questions as to the way in which we deal with these matters. There was one in which I was personally involved, concerning the Vale of Belvoir. That took a long time, was very costly and aroused quite a lot of local opposition. At the end of the day the inspector found in favour of the proposal. Nevertheless, the Secretary of State, as he is wholly entitled to do, rejected it, but in my opinion he rejected it on grounds which could just as easily have been stated right at the beginning of the costly process. Therefore it seems to me that in these major inquiries we should perhaps operate in two parts. The broad principles should first of all be discussed and either agreed or disagreed before the full cost of the planning 766 application is launched into. If we take the third London airport, which seems to be pretty well a never-ending saga, it is a sad commentary to think that when we started talking about a third London airport in 1968, with the Roskill Inquiry, the French did the same; but they have now had their "third Paris airport" (De Gaulle) operating for the best part of a decade and it is now one of the leading airports in the world. When will it be that we shall finally make up our minds if and where we should have such an airport?
Finally, there is the famous Sizewell Inquiry, which is about the longest-running inquiry that we have had. Indeed, during the course of its very important deliberations and the hearing of evidence, the situation changed fundamentally because the AGR system then began to work very satisfactorily and raised an issue which was not in fact part of the inquiry itself and which no doubt the Secretary of State, when he comes to consider the report, will properly evaluate. Therefore I do believe that we need to recognise that the question of obstacles, so properly raised by the noble Lord, Lord Boardman, and so properly dealt with by all the noble Lords who have spoken, also affects activities at the other end of the economic scale. I very much hope, in that connection, that, now that the broad guidelines for the cross-Channel link have been agreed between the two Governments, when the proposals come forward and one is finally selected by the two Governments, there will not be undue planning delays involved in putting it into operation, because these major projects, although few and far between, do offer massive employment opportunities, not only for those involved in the construction but also for those involved in the supply of equipment.
I should like to conclude by thanking the noble Lord, Lord Boardman, for introducing this Motion. I was very privileged, as the rest of us have been, to hear the maiden speech of the noble Lord, Lord Vinson. I was much struck by the stalwart statement that he made on behalf of manufacturing industry. We need more and more voices of that sort in this Chamber, and I hope he will frequently come back to that theme. I believe that we have had a very useful day's debate.
§ 7.46 p.m.
§ Lord Stoddart of Swindon
My Lords, I, too, should like to thank the noble Lord, Lord Boardman, for introducing this debate, which has been very wide-ranging and very interesting. I should like to join with other noble Lords in congratulating the noble Lord, Lord Vinson, on a most excellent maiden speech. His background and experience in commerce and industry are of course well known and they showed through in the speech he made today. I, too, like the noble Lord, Lord Ezra, was particularly pleased at the accent he placed on the need to retain and increase our manufacturing sector, and his recognition that service industries, though important, cannot substitute for manufacturing. I enjoyed his speech, which was an excellent one, and I look forward to hearing more such speeches from him in the future.
The noble Lord, Lord Harmar-Nicholls, rose to ask my noble friend Lord Bruce of Donington whether we believed in getting rid of unnecessary legislative controls and what-have-you. Let me say straight away 767 that the Labour Party is in favour of getting rid of all unnecessary administrative and legislative controls, but not if that means that people in industry are going to work in unsafe, unsure conditions at low, "coolie" wages. That is certainly no part of the Labour Party policy in getting rid of controls. Many of these regulations, let us not forget, were introduced because of the scandal of conditions in our factories and places of work. That is why they were introduced, and we should not easily get rid of them unless we are sure that those abuses will not return and give rise once more to scandal throughout the nation.
The noble Lord, Lord Boardman, in his opening remarks, said that wages councils and the employment protection Acts had been the greatest obstacle to job creation. I should therefore like to begin by dealing briefly with those two aspects. But before I do so, perhaps I may also take him up on his remarks about local authority rates, which he said are a burden on industry; and I agree. But he and the noble Lord, Lord Ellenborough, are blaming the wrong people for the increased burden of rates. I am not at all sure that it is Mr. Livingstone and Mr. Blunkett who are to blame. After all, the present Government have reduced the rate support grant in their period of office from 61 per cent. to 48 per cent. this year, taking away from local authorities no less than £12,000 million. That is why industry and commerce are paying additional rates and why the burden of rates has increased so much. I hope the noble Lord will take that on board, because with his experience and great authority he needs to tell the Government that they are responsible for placing this additional burden on industry.
The Chancellor has given an indication that the Government will be either scrapping the wages councils or modifying and amending them very seriously indeed. These councils set a legal minimum rate of pay for nearly 3 million people. They are the poorest and most vulnerable workers in shops, catering establishments, clothing, the licensed trade, laundries and hairdressing. The abolition of wages councils, or removing young workers from their scope, would require deratification of the International Labour Organisation Convention, which provides that each country shall maintain some minimum protection for the most vulnerable workers. So we should have to rewrite our international obligations in this respect if we scrapped wages councils.
Almost all the countries in the world now operate some sort of minimum wage system. None, to my knowledge, excludes young workers. So why should this country set itself up to be so different? Why is it that we alone wish to abolish the minimum wage system and to penalise young workers? The level of protection is, in any event, very low. For example, an adult shop worker gets £71 per week. I am sure that everybody in this Chamber will know how difficult it would be to live on £71 per week if we had to do so. A fully qualified hairdresser gets £65 per week and a bartender gets £70 per week, compared with the average earnings for men and women of £172 per week. That is the sort of minimum that we are trying to protect—not £100 or £120 a week.
There is no credible evidence at all that abolishing wages councils will make any significant contribution to tackling unemployment. I have seen no such 768 evidence. Indeed, commissioned research, carried out for the Department of Employment, demonstrated that no new jobs would be created if wages councils were abolished. But abolition would be likely to result in falling wages and lower standards of efficiency.
I have seen one estimate from the Low Pay Unit, based on the Treasury's own economic model, that abolition would create no more than 8,000 jobs over the next five years. Good heavens, my Lords, we have lost far more jobs than that every month since the present Government came into office! The CBI is not in favour of abolition though, to be fair, it favours some reform in their operation. The Institute of Directors, in a survey of its members, seemed to be little interested, because 93.5 per cent. failed even to respond to the questionnaire.
Employers who are, in the main, pretty sensible and responsible people, are concerned that abolition will lead to a spiral of wages undercutting, leading, first, to lower standards of efficiency and instability and, secondly, to destruction of well-run businesses and jobs. When Sir Winston Churchill introduced wages councils in 1909, he recognised their worth and said that without some form of wages regulation,the good employer will be undercut by the bad and the bad employer will be undercut by the worst".and that still applies.
But even if the Government's theories are correct and the abolition of wages councils would create more jobs in the trades covered by them, is that really what we want and need as a country? Do we really need more bartenders and kitchenhands on coolie wages? Is it Government policy to concentrate on low skill, low tech, low pay industries, rather than on the high skill, high tech, high pay industries of the present and future? If this country is to succeed in a highly competitive world, it is the latter course which must be followed.
Investment must take place in high technology, high skill and high pay economies. It does not take place in the backward peasant low wage areas. That is why investment is high in the United States, Japan and Germany and low in, for example, Ethiopia. Jobs are created by firms that are thrusting, forward-looking, competitive, efficient and well-managed, and from this follows the requirement of a highly skilled, well-paid work force that is reliable, adaptable and motivated. The sweatshop mentality is the last thing we need now, when our world trading position has deteriorated to its present dismal level.
Let me turn to unfair dismissal. We all talk about the need to motivate workers. We need to get better co-operation between management and workers on the shop floor. The best way of achieving that—and I speak with experience—is to give security. That is the best thing you can do to get the co-operation of workers, and that is why it is most unfortunate that the Government are now to reduce the protection given by the unfair dismissal legislation. It is unfortunate and, in any event, the two-year qualifying period is hardly likely to have much impact on the creation of wealth or on the improvement of employment opportunities.
Certainly, in the past, Employment Ministers have recognised this, and I am really sorry that the present Minister is prepared to countenance the 769 weakening of employees' rights now, when there are over 3¼ million unemployed. The noble Lord, Lord Young, must know that only a tiny proportion of dismissals are contested. Only one-third go to a hearing and less than one-third of these are won by the employee. Only one case in 100 results in reinstatement and one year ought be adequate for the assessment of an employee's ability and work.
In this connection also, the University of Manchester Institute of Science and Technology, in research for the Department of Employment, found that very few small employers were deterred from employing workers for fear that they would go to tribunals. The incidence of claims was so small that employers could expect on average one every 20 years, and a successful claim once every 40 years. Hardly a deterrent, my Lords. These findings back up a previous Department of Employment study by Opinion Research Centre which was undertaken in 1979. It found that only 2 per cent. mentioned unfair dismissal legislation as one of the main difficulties, and 88 per cent. found none of the legislative restrictions troublesome at all.
But evidence even from their own commissioned research does not alter the Government's apparent determination to restrict employees' rights. As John Lloyd, the industrial correspondent of the Financial Times, wrote on 23rd March 1985:In short, never mind the contradictory research findings, letting small employers fire people really makes them feel good".I would not make that accusation against noble Lords in this Chamber, nor, indeed, against the Minister, because I do not think they feel that way. But I would urge the noble Lord to ask his colleagues to have second thoughts on this item because employee protection is necessary and essential if we are to have the better relationships within industry that we so badly need.
I do not believe that legislative and administrative obstacles are the main reasons for the loss of jobs and for the failure to create wealth. It is not those burdens which have led to the loss of jobs and 3¼ million unemployed over the past five years. Indeed, the noble Lord, Lord Young, in his speech talked about creating a climate in which business can survive, but in 1984 13,600 company liquidations took place, the highest ever recorded and three times the number in 1979. Is it suggested that administrative and legislative burdens have caused such an increase? Surely not. The real obstacles to creating wealth and opportunities for employment lie elsewhere, and many of them have to do with Government economic policy.
Noble Lords on all sides of the House know perfectly well that massive cuts in public expenditure and adherence to monetarist dogma have had far more to do with restricted opportunities for the creation of wealth and the growth of unemployment than any regulations, administrative or legislative. The Government's complacency in the face of a declining manufacturing base and an ever-widening visible trade gap is frightening.
The noble Lord, Lord Ezra, will agree with me on this point—we are extremely worried about what is to happen to this country when the oil revenues run out, 770 or begin to run out, if by then we have not repaired the ravages done to our manufacturing base as a result of Government policy. The last Budget, which should have been concerned with a mild expansion of purchasing power and with infrastructure creation and renewal was instead a restrictive Budget. The public sector borrowing requirement was set at £7 billion and the Chancellor added £3 billion to reserves.
What has that achieved and what will that achieve for British manufacturing industry? The immediate result has been to appreciate the pound by 20 per cent., and that will mean increasing difficulties for our manufacturers who wish to export their goods abroad. The issue that has been mentioned most of all to the Select Committee on Overseas Trade by manufacturers who wish to export is the high rate and the fluctuating rate of the pound. Yet, by the last Budget and by his restrictive policies the Chancellor has now put manufacturing industry in danger of going back on the slide.
There are all sorts of things we can do; there are all sorts of things we need to do. We are training too few engineers. The Japanese train six times as many engineers as we do. There is too little investment in industry and the investment that takes place is not necessarily of the best. The noble Lord, Lord Boardman, who is an expert in these matters, will know, and I am sure will agree, that the British financial institutions take far too short a view of investment in industry in this country. One of the reasons why we do not progress, one of the reasons why our inventions are not taken up—I say this in particular to the noble Lord, Lord Vinson—is because our financial institutions will take, are taking and have taken too short a view of investment possibilities. In other words, they want to make too much money in too short a time, whereas the Japanese, for example, take a very long view.
§ Lord Boardman
My Lords, I am grateful to the noble Lord for giving way. I do not want to enter into a debate at this stage but I must, in view of what the noble Lord said, refute very strongly what he said about the British financial institutions, which give loans and financial services now which are equal to those anywhere else in the world.
§ Lord Stoddart of Swindon
My Lords, certainly they may give good services in many respects, but all the evidence shows that it is necessary for investment to take place over a very much longer period, that a much longer view should be taken of investment and that British financial institutions are not meeting that need at the present itme.
We have had a very good and far-ranging debate. We ought perhaps on another occasion to go even wider than we have today. As I said earlier, we will welcome any measures to get rid of administrative and legislative obstacles to business, provided they are reasonable and provided they do not put working people in this country in a worse position than they already are in. I repeat that we need to deal not only with the administrative and legislative obstacles but with the whole economic policy of the Government, which has brought restriction in industry and has brought about the present level of unemployment.
771 Until that economic policy is altered, until the Prime Minister realises that there is an alternative and grasps that alternative, I rather fear that our wealth creation and employment creation will be far below what it could otherwise be.
§ 8.9 p.m.
§ Lord Young of Graffham
My Lords, I am indeed grateful to the noble Lord, Lord Stoddart of Swindon, for referring in his concluding remarks to the title of our debate this evening because I had begun to feel that we had strayed so far from the title itself, which is to call attention to theobstacles imposed by legislative and administrative actions".I am quite happy to debate this Government's economic record at any time but I thought that this evening we should at least keep to the matter under debate.
I said earlier that I was looking forward to hearing the noble Lord, Lord Vinson; and I was not disappointed by what he had to say. In the past we have spent many hours discussing all kinds of matters. I am sure he would not take the slightest objection if I was merely to say that from my perspective, while I accept that manufacturing is of the utmost importance in the creation of wealth, it is in all probability the service sector itself in which employment will come. The vital and very valuable work which the noble Lord has performed in CoSIRA in the past few years is beginning to show that.
The debate has been wide-ranging and many of the matters discussed were only on the fringes of legislative or administrative burdens. The noble Lord, Lord Henderson of Brompton, referred to a matter with which I was very familiar in an earlier incarnation; that is, the difficult situation in respect of disabled persons in this country, and the quota of 3 per cent. I remember from my time in the Manpower Services Commission the fact that the percentage of registered disabled is but 1.9 per cent. There are very human reasons why many people do not wish to register themselves as being disabled. The code of practice is a new regulation which I for one greatly welcome. I believe it represents a great step forward in the treatment of disabled people in the workplace. It does go to show that this Government are not against regulations and that indeed they welcome regulations where they are proper and where there is a place for them.
The noble Lord, Lord Ellenborough, talked much, and correctly, about small firms—and, I fear, took a little against the Chancellor's proposals in the Budget on national insurance. Indeed, if I recall the noble Lord's words correctly, he said that we have taken three steps forward and perhaps two steps back. Even my elementary arithmetic suggests that at least that still makes one step forward. I hope that it will be seen as a step in the right direction. It is the consequence of national insurance on people entering the labour market which I believe has had the greatest deterrent effect. I hope that in October, and in the year that follows, we shall see that there is a positive effect and that there will be no disincentive on employment of those in the higher income groups.
I welcome the contribution of my noble friend Lord Thomas of Swynnerton. I perhaps listened to his 772 disinterested plea for authors—perhaps. I am lost in admiration for his ability to fill in VAT forms. I must confess that in my past I did attempt to do this but I failed the course. Should the occasion arise again, I shall go to see my noble friend. Indeed, his comments did indicate what problems there are for people who wish legitimately to declare earned income, to declare other sources of income, and to become registered for VAT—and the obstacles which we put in the way of many people.
My noble friend asked me to change my title to Minister for Enterprise. I am quite proud of not having a portfolio. It is not for me to say what I am called. I chose my name when I entered this House and that is the only choosing I am allowed to do. At least my noble friend should be satisfied that I run something called the Enterprise Unit and that my initials are still DIY. I hope that will be enough for him.
I want to give my noble friend an assurance on one matter. It has been my privilege in the past year or two to visit many universities and schools. I must tell my noble friend that so far as enterprise is concerned, and so far as the desire of young people to work for themselves is concerned, I cannot help admiring the great change that has overcome many young people. I have referred before in this House to the graduate enterprise programme funded partly by the Manpower Services Commission. Indeed, not long ago I was at Stirling University to see graduates emerging fired with enthusiasm and with the ability to work for themselves. I believe that we are seeing the start of many new enterprises for the future. This is happening not only at Stirling but also at Durham, Manchester, and the London Business School. There are many of them.
My noble friend referred also to the Liverpool of two centuries ago and to the effects of today's situation on that city. I wonder how much of the blame for that we can lay on Government intervention. Liverpool was once a thriving city—a service sector city—and I suspect that Governments in the past turned it into something else; but that is another matter.
When I heard the speech of my noble friend Lady Carnegy of Lour I was taken back immediately to my days at the Manpower Services Commission because she asked a number of many penetrating questions, as was always her wont; the kind of questions I have listened to before. I undertake to give my noble friend's questions very full consideration particularly as I see my task today as being much more to listen than to say anything. After all, I am at the start of a process which I hope will lead to something sensible coming forward before the summer.
My noble friend Lady Carnegy drew attention also to the benefit regulations and—as many other noble Lords did this afternoon—to the difficulties which local authorities operating council housing can place on permitting people to work in their own homes. That difficulty may be partly to do with planning. I suspect that we may even be able to overcome it. What we may not be able to overcome so easily is the attitude of local authorities as landlords and the restrictions they impose as landlords on people's business activities. That is a point we shall have to examine. There is a perfectly proper and well 773 developed law of tort and nuisance which stops people being a nuisance to their neighbours. I hope that we may rely upon that law.
I welcomed the very forward-looking speech made by my noble friend Lord Ferrers and his realisation that unemployment is not inevitable. He referred to the lack of incentive in the system that we have today. This was something that was accepted very much by Beveridge in his report, by the Webbs, and by many others who, in years past, warned us about the difficulty of setting our safety net so high that we robbed individuals of incentives. I hope that throughout this process we can look—and the Government are looking in the context of a social services review—at the very difficult balance between the desire to make sure that no one in our society should suffer, and at the same time the difficulty of not taking away too much incentive from individuals to do things for themselves.
The noble Lord, Lord Harris of High Cross, at whose feet I have sat in the past and to whom I always listen with interest, contributed a brilliant analysis of the origin of regulations. I had that rather sinking feeling which I sometimes have when I realise that what is being said to me is true. I hope he will not be disappointed by what we actually produce. I know that he will be watching me and prodding me from time to time.
The noble Earl, Lord Dundee, made some very interesting suggestions and I hope he will forgive me if I do not reply immediately but wait until the end of this process. I too have been to America; I too went to Washington. I have seen the steps which the Americans are taking and I believe there is a great deal of merit in some of them. The noble Earl also suggested that the VAT threshold should be increased to £100,000; the noble Lord, Lord Campbell of Alloway, suggested it should be £50,000. This is a matter for my right honourable friend the Chancellor of the Exchequer, but I remind your Lordships that we have the highest VAT threshold in Europe. Indeed, there are those in Europe who would like to see us lower our present threshold rather than raise it.
My noble friend Lord De La Wan has my gratitude for raising the issue of trade union elections by ballot. Although this is not a matter of primary concern to us today, I share the anxiety that has been expressed about the very serious allegations of ballot rigging in our largest union—the Transport and General Workers' Union. Events of this kind only underline the important of the legislation that we have introduced. It is not for me to comment on what has been going on; but I note that the general secretary of the union and both the main candidates in the election concerned are now talking about a new ballot. Mr. Ron Todd, the winning candidate, has been reported as saying that he would back a new ballot because union leaders require (and I quote his own words),the full confidence of the membership".So far as my noble friend's other points are concerned, I shall of course draw them to the attention of my right honourable friend the Secretary of State for Employment.
I would add only that returning trade unions to their members is of course what our trade union legislation is all about. Although the provisions of the Trade 774 Union Act on union election ballots do not come into force until 1st October 1985, we are already seeing the profound effect they are having on trade union attitudes and practices.
My noble friend Lord Orr-Ewing raised three important matters. He raised the question of rigidities in the rented accommodation market. I am afraid that municipal landlords have not been too good, perhaps, or too flexible in their approach to accommodation; but it is difficult to see the effect on mobility of labour of an exchange scheme working. I suspect there are many people who would desire to move to that part of the country where jobs are more plentiful. I do not necessarily see an equal number wishing to move in the opposite direction.
The noble Lord then took the Government to task about licensing. I have already said this afternoon that we must get the right balance between licence and liberty. I will include licences in that as well! It is true that there are many steps, I suspect, which we still have to take so as to see our way clear to keeping that balance and to allowing the economy and individual liberty to develop with freedom.
The noble Lord also talked, as did some other noble Lords, about graduate engineers and our problems within our educational system. This Government have done as much as (and in fact more than) any for many years about helping to improve the supply of engineers. Only in the last Budget, to which the noble Lord referred, there was some £43 million allocated towards the production of more engineers and electronic engineers. But with our present system it takes some nine years to produce a new electronic engineer. It is not the bare fact of a degree. It is the A-levels, and before that the O-levels; and we go back to the age of 12 or 13, at which point choices have to be made as to which course one is going to follow through one's career. I believe it is of the utmost importance that we develop a more flexible educational system, and one which can cater for a world which is changing faster than any of us can really contemplate.
My noble friend Lord Campbell of Alloway referred to another aspect of the same matter—the warning on skill shortage. Of course, I understand that very clearly. It was a matter of great concern through my time on the Manpower Services Commission. There are other rigidities not imposed by Government that have an effect on that; and we all know, or have heard, perhaps, of the difficulties which are experienced in some unions in regard to engineers. I hope very much that practices as far as apprenticeships may yet be able to change and that we can increase the number of apprentices so that we have the technicians and can make ourselves flexible for the future. The electricians have shown the way. I hope very much that in due course the engineers will follow.
The noble Lord, Lord Campbell of Alloway, in his trenchant manner as a lawyer, also drew attention to many matters on wages councils. All I can say is that I do not see the purpose of having a consultative tier of wages councils. I think it is a time when Ministers should listen. I have listened to everything that has been said this afternoon, and I hope that your Lordships will forgive me if I do not go too much into 775 the issue of wages councils save for one or two small matters of economics. My noble friend Lord Marshall of Leeds drew attention to the effect of bureaucracy on the "black economy". I sometimes wonder whether the "black economy" is not just the plain man's answer to too much bureaucracy—if we do not actually create it ourselves.
I am sorry in many ways that the noble Lord did not become a new company himself and incorporate himself, because he could then, perhaps, have told us of many more problems which I suspect may exist. For example, is it absolutely necessary that every company in the land should have its annual accounts audited by a chartered accountant? I think that that is a question we can look at. There is a balance between the rights of a protected creditor of a company. There is also the burden of imposing this, and I know many accountants—a majority of accountants—would much rather give more profitable advice to their clients than merely auditing their accounts. That is a matter at which I hope we can look in the fullness of time.
I was greatly indebted to the noble Lord, Lord Ezra, for his support on the deregulation principle, with his vast experience in industry. He drew attention in words which I shall remember to the consequential effects of deregulation and the difficulties which that might bring to us. I think we will get this balance right. I take very seriously his remarks about planning inquiries. That is probably outside the aspect of this debate, but at times I look across the water at France and see the way that they have developed and the way it has gone there and at times I look and see where we have gone. I see how many years it took for the M.25 to come into existence, and how many years, if ever, before Archway has its bypass, and I wonder.
Changing our system would, of course, remove an enormous sport from our activities. It has become an activity which keeps many people happily engaged for many hours, but I do not really know that it contributes to the sound economic development of this country.
Then we come to the contribution made this evening by the noble Lord, Lord Stoddart of Swindon.
§ Lord Dean of Beswick
My Lords, I hope the noble Lord will forgive me for intervening, but may I ask him why he has neglected to reply to the comments that were made by one of the few speakers from this side of the House, the noble Lord, Lord Kagan, whose record as a successful business entrepreneur stands comparison with that of anybody in this House? Why has the noble Lord omitted to reply to him?
§ Lord Young of Graffham
My Lords, I accept the reproof. I apologise for that omission. I will look with interest at the noble Lord's suggestion about the ombudsman. That I will take seriously, as indeed I will look seriously at every suggestion made this afternoon. I wished to reply simply to those points to which I thought an immediate reply would be necessary.
I must also say immediately that I do not think that anybody who lives in London can actually look at the GLC and say the rate level is the effect of any variation of the rate support grant. The GLC does not get the rate support grant. It does not; and the level of 776 expenditure which is incurred in London is a direct result of the many expenditures which have been incurred by authorities. I remember only too clearly, at an earlier time when I was working within the Department of Industry, the great difficulty which rate levels meant to the provision of small workshops in certain areas of London where rates were so high that it was simply impossible to get new businesses and new employment started; and that has been crucial. I would much rather that we let individuals start their own businesses and pay low rates than have excessively high rates and then have these enterprise trusts creating new businesses which often do not last very long.
I said that I would not wish to comment on the question of wages councils but there is one area where I think I am qualified to do so, and that is the effect of wages councils on young people. A noble Lord asked this evening, "Why is it that only we want to do something about wages councils for young people? No other country seems to". In fact, we are taking more energetic steps than any other of our competitor countries about the employment of young people, about the training of young people and about getting ourselves out of a difficulty which exists in almost every industrialised country in western Europe. I would remind your Lordships that America, which has unemployment down to 7.3 per cent., has youth unemployment—that is, unemployment among those between 16 and 19 years old—at 19 per cent. It is a phenomenon caused as much, I believe, by the steps the world has taken in many cases in its education systems.
I have seen jobs for young people destroyed by wages councils. I shall listen very carefully to the comments and representations that are made, but I shall require a lot of convincing. Happily for noble Lords opposite, it is not my decision, but I, for one, will require a lot of convincing that wages councils do not destroy jobs for young people.
§ Lord Stoddart of Swindon
My Lords, I am most obliged to the noble Lord for giving way. I believe there have not been any consultations yet with the trade unions. If that is so, can I have the noble Lord's assurance that the trade unions will be included in the consultative process?
§ Lord Young of Graffham
My Lords, the matter falls properly under the responsibility of my right honourable friend the Secretary of State for Employment. I seem to recall reading in the newspapers only yesterday or today that the TUC was making some comment on this matter. I am sure that they are going to respond during the period of consultation and representation, but I will certainly inquire of my right honourable friend.
The noble Lord also said that in 1909 Winston Churchill saw the great need for wages councils. Of course he did. Winston Churchill was a far-seeing man, and he was Prime Minister when Beveridge produced his report. What Beveridge said in his report and the social security system we created out of that report has in my view fundamentally changed the position. It is not that people have to work for starvation wages any more.
777 I believe we should look at all aspects of this, but there is one matter which I take slightly amiss. A noble Lord opposite twice referred to "coolie wages". I have just returned from China, and I must tell your Lordships that China is a country which has in the last few years seen the supreme virtue of setting its people free and releasing the intelligence, the vigour and the entrepreneurship of its own citizens. That is the reason why today China has a surplus of grain and rice, and you have only to go there to see the enormous differences. No, I do not wish us to work for any description of wages. I want us to have good wages, but I want us to have good jobs. I must tell your Lordships that the world of tomorrow—and we are getting on to economic matters now—is not a high-tech world. It is a no-tech world; it is a low-tech world; it is a world of personal services. The high-tech will create the wealth but the employment will come elsewhere.
We have had a wide-ranging debate. I am sure that we will find that economic matters will be solved quite satisfactorily by this Government following their current economic course; but what we need to do, in addition to the vast amount of investment which is being generated, is to release the energy and the enthusiasm and the entrepreneurship of our people. I believe that one way we can do that, with safety and with propriety, is by deregulating ourselves. I hope the process will continue.
§ Lord Boardman
My Lords, as my noble friend said, is has been a wide-ranging debate and it has been particularly refreshing to find that in winding up the debate my noble friend Lord Young has taken on board the many points which have come from all parts of the House. I have every confidence that they will be pursued with great vigour. With that, I thank all my noble friends and noble Lords who have taken part in this debate for their contributions and ask leave to withdraw my Motion.
§ Motion for Papers, by leave, withdrawn.