HL Deb 01 July 1987 vol 488 cc260-338

3.41 p.m.

Viscount Whitelaw

My Lords, with the leave of the House I shall now repeat a Statement about the European Council meeting in Brussels which is being made in another place by my right honourable friend the Prime Minister. The Statement is as follows:

"With permission, Mr. Speaker, I should like to make a Statement about the European Council held in Brussels on 29th–30th June. I was accompanied by my right honourable and learned friend the Foreign and Commonwealth Secretary.

"The main issues before the Council concerned the future financing of the Community. These issues were: to improve budget discipline and management; to reform the operation of the common agricultural policy; the structure and size of the Community's resources; continued progress towards the completion of the single European market; and more effective use of the Regional and Social Funds.

"In addition, the Council dealt with three important immediate questions: the 1987 budget, the agricultural price package and the proposed oils and fats tax.

"The task of this Council was to agree on guidelines which would lead to the necessary decisions at the next meeting of the Council in December.

"There was a considerable measure of agreement on the steps which have to be taken if we are to resolve the problems of the Community's finances. There were two points, however, with which we could not agree. First, we were not prepared to accept that there should be a decision now on the size of Community resources.

"We have made clear throughout the discussions that it is necessary, before that question is addressed, to have agreement on effective and binding control over Community spending, including in particular agricultural spending. Secondly, we could not accept that the level from which we start to calculate agricultural spending for the future should be simply revised upwards to include every element of over-spending in the current year.

"These are substantive points, on which we have both to protect the taxpayer and to take sound and considered decisions for the long-term health of the Community. They also go to the root of whether or not the Community is really prepared to tackle the problem of agricultural over-spending.

"We agreed, however, first, that the use of the Community's resources should be subject to effective and binding budgetary discipline; and that this must apply to all expenditure and to all the institutions: the Council, the Commission and the European Parliament. Secondly, on agriculture, that additional measures are required to stop surplus production, and so to reduce costs and keep expenditure within the budget framework. These reforms could be accompanied by measures to ensure some setting aside of agricultural land, less intensive farming and in certain circumstances by selective financial aids within a Community framework. Thirdly, that arrangements for the United Kingdom to receive an abatement will continue. So far as we are concerned, they must be at least as favourable as those in effect now.

"During the rest of this year the Community has the opportunity—indeed the task—of translating the guidelines on budget discipline and on agriculture into draft decisions and regulations for our consideration at the December Council.

"The Council reaffirmed the importance which we attach to meeting the target of removing by 1992 the remaining barriers to trade within the Common Market.

"We should look for decisions by the end of 1988 on product standards; the wider opening of public contracts; the liberalisation of capital movements; insurance; and the mutual recognition of qualifications. These measures, by leading to a freer flow of goods and services and opening up a genuine single market, would help the creation of wealth and jobs.

"On reasearch and development, in order not to hinder work on agreed programmes, we agreed that spending could continue at present levels. The question of additional funds falls to be settled later, along with other decisions on future financing.

"I made clear that the United Kingdom would not agree to the new tax on oils and fats, proposed by the Commission and supported by France and others. I am glad to tell the House that it was not adopted.

"Some detailed, not to say abstruse, questions on monetary compensatory amounts on agricultural products were submitted to the Council.

"There was concern about how some aspects of these would operate in practice. It was therefore agreed that they should be re-examined by 1st July next year. My right honourable friend the Minister of Agriculture will deal with these matters more fully in his Statement.

"On the 1987 budget, the Council agreed to a solution on the lines we have advocated: Community funds for agricultural support, instead of being paid in advance will now be paid in arrears. The Commission's proposal for an Inter-Governmental Agreement to raise additional funds outside the Community budget was rejected.

"Mr. Speaker, we went to this Council determined to make progress in bringing Community spending under more effective control than in the past and thus to ensure that the Community lives within its means. There are now clear guidelines for better control of the Community's finances. The priority task is for the Community to do the detailed work necessary to make these guidelines enforceable. The United Kingdom, and especially this House, has been the driving force behind this approach. We shall continue our efforts to achieve the necessary decisions in the interests of a soundly-financed and strong Community."

My Lords, That concludes the Statement.

Lord Cledwyn of Penrhos

My Lords, the House will be grateful to the noble Viscount for repeating the Statement. I should say at once that we agree with much of it. There are two or three questions that I should like to put to the noble Viscount.

When the Fontainebleau agreement was reached in 1984, it was hoped that the economic problems of the Community, and most especially the common agricultural policy, would be tackled realistically thereafter. The contrary has proved to be the case. Unfortunately the Community is once again in a major economic crisis as it continues to support the burden of what is really an impracticable and impossible agricultural policy.

As I and others said in the debate on Monday, technically the Community became insolvent at the beginning of May and emergency measures have had to be agreed. First, can the noble Viscount clarify what agreement was reached to resolve the immediate economic problems? I did not see that emerging from the Statement. How is the £3.5 billion deficit for this year being financed? What settlement has been reached concerning the dispute on farm reforms and prices described in one newspaper this morning as weak and somewhat costly?

Secondly, despite the agreements reached to deal with the immediate problems for this financial year the right honourable lady the Prime Minister went against all the other member states on the programme for a long-term solution of the financial crisis. Can the noble Viscount state the sticking point that convinced the Prime Minister, despite the views of all other member states and the urgent need to resolve community finances, that it would not be in the interests of this country to agree with the proposals?

Will the 11 other member states now begin to implement the decision to discuss reform proposals? Where will Britain stand on these discussions; and what will be our involvement? It is very important that we should know that. Does the noble Viscount agree that the next summit which is to be held in Copenhagan in December will be certain to fail unless Britain continues to participate in the negotiations?

Thirdly, the Statement refers to the EC research and development programme. The Government have continued to refuse to agree the budget here. Were we also alone in this? Again, will the noble Viscount state the sticking point here? Is it not the case that up to now Britain has been a net beneficiary of the programme? What will happen to the research projects presently engaged in and financed by the EC research fundings?

Lastly, can the noble Viscount make some comment on the dispute with Spain over Gibraltar; and the agreement on air fares which members failed to achieve? Where does the Community go from here? What is the nature of the tax on food agreed at the summit early today? What will be the impact of this on British food prices?

Baroness Seear

My Lords, we on these Benches also wish to thank the noble Viscount the Leader of the House for repeating the Statement. We agree that something has urgently to be done to deal with the financial position of the Community. We are also glad that we resisted the propsoal for a tax on oils, which would be a further protectionist measure and would have an adverse impact on developing countries.

Having agreed with that, at the same time we deeply deplore the outcome of this session which has seen us once again as the anti-communautaire member of the Community; we have been one against 11. Although the Statement says that a number of agreements have been reached for control over budgetary matters, we have refused to go along with our partners. We have refused to continue negotiations and have therefore fallen out once again. In the gracious Speech it was said that we hoped to exercise leadership in the Community. This seems to be an extraordinary way to exercise leadership when we finish a session of this kind with 11 against one.

We particularly deplore the fact that the Government have not gone along with the additional payment for the framework agreement for research. The attitude reflected in this Statement is that of a narrow accountancy, rather than a political and economic, approach to the great achievements that full development of the Community can bring. That research programme is being held up because of us.

We need research at the level of the Community in order to hold our own against the Americans and the Japanese in developing technology. We are behind already and if we do not go on with this research we shall fall still further behind. This is the little Englander approach which we have deplored for so long and which is repeated again and again.

Viscount Whitelaw

My Lords, I am grateful to the noble Lord, Lord Cledwyn, and the noble Baroness, Lady Seear, for their comments on the Statement. I am also grateful to the noble Lord, Lord Cledwyn, for saying that he agreed with much of it.

First, he raised the question of what is to happen between now and the Copenhagen Summit. I understand that there will be substantive discussions in which this country will take a full part in trying to find a means whereby sensible control of the budget can be achieved. My right honourable friend the Prime Minister was not prepared to give a blank cheque at this stage until she appreciated exactly how the finances would be kept under control. She therefore did not give that blank cheque. But she is of course prepared to consider at Copenhagen the exact proposals which are then put forward as a result of the very substantive discussions that have to take place. I think I can give an absolute assurance that this country will be fully involved in all those discussions with the purpose and determination to achieve a sensible result.

I am surprised at the comments of the noble Baroness. It surely is in the long-term interests of the Community that anybody who is, to use her expression, communautaire, should wish to see that the Community has proper control over its own finances. If it fails to do that it will not continue. I should have thought that it was therefore wise to try to make sure that before we proceeded further we had a sensible control over our own finances. That implies control over the whole question of agricultural spending. I do not think that at this stage I can give the noble Lord any estimate of the exact position with regard to food prices. However, if there is anything I can say I shall be very pleased to do so.

I am grateful to the noble Baroness, Lady Seear, for what she said about the oils and fats tax. There can be no doubt that that would have been a very protectionist measure, very unsatisfactory for this country, and would therefore have been a very bad proposal if we had accepted it. Thank goodness it has now been put out of the way.

I do not think that I can accept the argument, for the reasons I have just given, about being anti-communautaire. I cannot believe that it is in the interests of the Community, or of any of its members to put off decisions time after time when seeking to control their own finances on a sound basis. There are many people who will believe that my right honourable friend the Prime Minister was right to stand out and to say that proper procedures must be taken and proper plans made before final decisions are taken. That is after all what she did on this occasion.

The R&D proposals were raised both by the noble Lord, Lord Cledwyn, and the noble Baroness, Lady Seear. I understand that the Government have said that we shall continue to provide the finance necessary for the present programmes to continue. We have made that perfectly clear. However, we also believe that if we are to provide the extra money in December which is asked of us it should be made perfectly clear to us exactly how this will be achieved, what are the budgetary plans concerned, and how it will all work. That is the basis on which we have gone forward.

Lord Harmar-Nicholls

My Lords, is my noble friend aware that one sentence in his reply to the last question could be a little disturbing? He used the phrase "not prepared to give a blank cheque at this stage". Does that mean that there may be a stage when we could give a blank cheque? The decision on this ought to have been taken before we weakened. When we agreed to give 1¼ per cent. instead of 1 per cent. to the contribution charge we weakened. If we had stood firm at that stage the Community might well have put its house in order and it would have saved the money which would have avoided the contributions. I should like an assurance that, whether it is in Copenhagen in December or beyond, until the Government have looked at their own concerns no blank cheque will be given.

Viscount Whitelaw

My Lords, if my words had the construction which the noble Lord chooses to put upon them I obviously said something which was incorrect. What I was trying to say—and perhaps my noble friend will appreciate it—was that if one gave an agreement at this stage, before all the necessary preparatory work had been done, and the exact arrangements for controlling the budget had been reached, then one would be giving a blank cheque. But of course at the moment that one comes to Copenhagan there should be clear plans, clear budgets and clear proposals. One is not then giving a blank cheque because they are clear proposals that are being put forward.

4 p.m.

The Earl of Onslow

My Lords, is my noble friend aware that some of us are concerned about the agricultural surplus problem, which if we are not extremely careful will get very much worse very quickly? Spanish and Portuguese agriculture are ripe for a revolution such as we have seen in Chinese and Punjabi agriculture. If the Russians get their growing deficit right, then God knows where the surpluses will go. If we go on increasing our own agricultural surpluses the Common Market will go absolutely bust, and that will be very serious indeed. Is my noble friend aware that my right honourable friend the Prime Minister is completely and utterly right to insist upon doing something about this, because if we do not do something that will be the end of the Common Market and other bad things will also flow from it?

Viscount Whitelaw

My Lords, without necessarily following all the various hypotheses put forward by my noble friend, I think there are very good reasons why it would be wrong at this stage to make clear commitments without having examined in great detail many of the problems, some of which arise from what he said.

Lord Gladwyn

My Lords, further to what my noble Leader said, does it not emerge from this deplorable incident that the Prime Minister is left in a minority of one on a highly important issue involving the whole future of the Community? Does it not emerge that it is her belief that the Community should be run on the lines of a successful shop, whereas in practice in a collection of 12 sovereign states common decisions can only be reached for the common good, provided they are reached at all, on the basis of hard fought political compromises some of which will not always be acceptable to other members of the Community?

Viscount Whitelaw

My Lords, in the first place I do not accept for one moment that this is a deplorable incident. I can imagine the views that would have been expressed from many parts of your Lordships' House and from many parts of the country if the Prime Minister had come back having accepted a whole lot of proposals which were thoroughly unsatisfactory and which would have put grave burdens on this country to the detriment of our economy. I cannot concede that a compromise of that nature, however pleasing it might be to the other countries or to anybody else, would have been in any way right in our national interest or indeed in the interests of the whole Community. I cannot understand how, with his great experience, the noble Lord can suggest that a Community which is totally broke is likely to be successful.

Lord Bruce of Donington

My Lords, is the noble Viscount aware, and will he agree, that to be in a minority does not necessarily mean that one is wrong? Will he accept our assurance that the Prime Minister's stand on this matter, provided it is not temporary, will receive support from most parts of the country and indeed most parts of this House? Will he inform the House in relation to the 1987 budget, preferably in pounds sterling, the extra cash burden that will fall on the United Kingdom as a result of the settlement to which the Prime Minister has agreed?

Viscount Whitelaw

My Lords, on the noble Lord's first point, I was trying to work out while he was speaking whether I have spent more of my time in politics in a minority or in a majority. I think that perhaps recent events have put me just on the winning side of being in a majority, but I still have clear memories of being in a minority and I shall never forget them. I hope that I can conduct my thoughts on that basis.

The noble Lord will be delighted to know that I am afraid I cannot give him an answer to his question about the 1987 budget. I do not expect he thought that I could, but I shall find the answer and write to him.

Lord Mackie of Benshie

My Lords, is the noble Viscount aware that some very severe measures to contain agricultural spending have been proposed by the Commission? I understand that some of them have been accepted. It is very difficult for us to judge whether the Prime Minister is absolutely right in what she says and that the other foolish profligate fellows, who are throwing about their citizens' money, are wrong without knowing which of these agricultural measures have been taken. If they are proposing to make some of the cuts, certainly that will save a great deal of money.

Viscount Whitelaw

My Lords, I think I am right in saying that my right honourable friend the Minister of Agriculture is making a Statement in another place some time in the near future in which he will outline the results of the agreements which were reached. This Statement was not taken in your Lordships' House but it will be repeated and will be available tomorrow.

Lord Stoddart of Swindon

My Lords, can the noble Viscount arrange for a message to be sent to Mr. Chirac informing him that in this country "housewife" is a term of respect and not one of abuse?

Viscount Whitelaw

My Lords, I am delighted to hear that from the noble Lord. Of course it always depends on what the housewife is doing as to whether it is a matter of satisfaction to the male occupant of the house.

Lord Banks

My Lords, do the Government accept that the completion of the internal market will increase the disparities among the different regions of the Community and that this will lead to the need for increased expenditure in order to help the poorer regions? Subject to the controls, which the noble Viscount says the Government want, are the Government ready to accept that increased expenditure is necessary beyond the present very low level of less than 1 per cent. of the gross domestic product of the Community?

Viscount Whitelaw

My Lords, I think I am right in saying that it was in order to study some of those questions—particularly the position of some of the countries that have recently acceded to the Community—which had not at that stage been fully worked out that it was necessary to proceed to the next summit at Copenhagen with a clear understanding of what was proposed as far as these matters were concerned.



Debate resumed on the Motion moved on Thursday last by the Baroness Young—namely, That a humble Address be presented to Her Majesty as follows:

"Most Gracious Sovereign—We, Your Majesty's most dutiful and loyal subjects, the Lords Spiritual and Temporal in Parliament assembled, beg leave to thank Your Majesty for the most gracious Speech which Your Majesty has addressed to both Houses of Parliament".

4.6 p.m.

Lord Young of Graffham

My Lords, this is the fourth year in which I have been privileged to speak in the debate on the Address: four years of continued consistency of purpose, four years of consistent policies and four years of economic success.

Two aims have been central to our strategy: first, to create a climate for steady growth with low inflation; secondly, to encourage enterprise in our society—and we have seen the results of that strategy.

Last year some noble Lords opposite thought that I was too optimistic; phrases such as "exceptionally euphoric" and the "usual glowing account of the state of the nation" were used. Events have proved the critics wrong. They underestimated the continued strength of the economy, they overstated the likely balance of payments deficit and their accusation that the Government wanted to maintain unemployment at 3 million was a misleading travesty.

We now see that the combination of steady growth and low inflation is set to continue. We see industry more confident and competitive than for many years. In short we see all the signs of a sound economy.

No one could be more delighted than I am that this growth in the economy has created jobs and has now reduced unemployment. We have seen more than a million extra jobs since 1983, the largest continuous growth in jobs for a generation. Now we have seen a substantial fall in unemployment, down by over a quarter of a million over the last 11 months. That fall in unemployment has been widespread, falling in all regions of Great Britain.

Last summer I departed from my usual caution and predicted that long-term unemployment would fall. Recent events which affected another place somewhat obscured the fact that we have seen a significant fall in long-term unemployment—a fall in the number of people unemployed over a year by more than 60,000 in the year to April. I am sure that here in this one fact all in your Lordships' House will join me in welcoming that news.

We have given a high priority in our employment programmes to the long-term unemployed. That priority reflects our recognition that the fruits of economic success may not go automatically to all members of our society. We recognise that we have a responsibility to people who suffer particular disadvantages and who are presently excluded from the process of wealth creation. The recognition of that responsibility underlies our approach to inner cities.

That approach is based on two fundamental philosophies. The first is that the process of wealth creation is the way to create the goods, services and jobs which people in the nation, and in the inner cities, need. The second is that the process of wealth creation comes from individuals, from their initiative and enterprise, and particularly from their ownership of their own destiny. For too long we have seen "solutions" handed down to the disadvantaged in our society. Yet those so called "solutions" seem to have passed them by.

Our response is not to offer ready-made solutions but to give people responsibility to help them equip themselves with skills and to help them to find the best way to use those skills. That response can be seen in a whole range of policies ranging from parental involvement in education, to home ownership and to the right of tenants to transfer in housing, to the enterprise elements of our employment programmes.

Our inner-city taskforces are essentially experimenting in new ways to encourage people in the inner cities to get involved in the whole process of wealth creation. We have just expanded those initiatives and will be looking at their effectiveness and whether lessons can be learnt which could be applied far more widely.

We must never forget that policies designed to help particular groups and particular areas make sense only if they are backed by a sound economy, just as we should not forget that the compassionate society which we all want to see depends on a strong and competitive economy.

We shall not let up in the fight against inflation, without which our other policies will have little value, and we shall continue to control the growth of public expenditure. The continued success of our economy depends on the world economy too. The possibility of slower growth in the world economy and the possible spread of protectionism remains a cloud on the horizon.

Free trade is vital to the health of the world economy. We are working with our Community partners in GATT in the Uruguay round of trade negotiations. We are pressing countries like Japan, whose markets are very hard to penetrate, to open their markets and bring a better balance of world trade. Free trade is vital within the European Community too. We will keep up the pressure to develop a more unified market following the record 48 measures introduced during our presidency last year. Such policies of financial stability and free trade provide the essential foundation for all that we do.

Policies to create the enterprise culture are much more diverse and long-term yet ultimately, I suspect, much more far-reaching. Fundamental to those policies is the need to encourage wealth creation. I see that as the central aim of my Department of Trade and Industry. Indeed I hope that we shall be seen as the "Department of Wealth Creation", not creating the wealth by our direct efforts but creating the climate in which wealth will be created. As part of that climate lower taxation is essential, for higher taxation reduces the stimulus of individual enterprise and commercial reality. We have already substantially reduced personal income tax and simplified business taxation. We will be bringing forward pension reforms to increase the freedom of choice of individuals.

An efficient but reduced role for the public sector in economic decisions is crucial too. How different is the role of the DTI compared to when I joined it back in 1979. Then British Steel was making a loss of £1.8 billion; now it is expected to make a profit—a profit of more than £170 million. Then Cable and Wireless was in the public sector; now it is in the private sector producing profits five times the size of those it then produced. Then British Telecom was a public monopoly; now it is in the private sector facing open competition from Mercury.

Since 1979 we have privatised more than one-third of what had become the state sector of industry. Those that were privatised have flourished from their new-found responsibility and freedom. Those that now remain in the public sector have become far more efficient. We shall continue to open more industries to economic reality and give employees and the public more opportunities to buy shares in British industry.

Efficient, enterprising industries need the co-operation and involvement of their employees as well as the wind of economic reality. I hope we shall soon see profit-related pay schemes on the statute book to help break down further the "them and us" culture which so bedevilled industry in past decades.

Competition and deregulation are important for they are essential in the process of wealth creation. Businesses which are competing strongly and concentrating on the needs of their customers will be able to adapt to change and to win markets. The benefits of greater competition have been seen in a number of sectors ranging from coach services to conveyancing, from spectacles to telecommunications. Encouraging greater competition by opening up markets will be a hallmark of our approach in the future. Cutting red tape too remains a vital part of the approach. The enterprise and deregulation unit has moved with me to the Department of Trade and Industry and I assure the House that we will keep up the momentum.

Deregulation has also played a vital role in the development of the City of London as one of the three international financial centres. The new framework for investor protection has helped to create an efficient, competitive financial market in which investors can have confidence. Deregulation must always be tempered by the need to protect the investor and the consumer. We have in the Financial Services Act the powers to give that protection. It is essential that we should not over-regulate and so keep London a growing international market; but it is essential that we regulate sufficiently to protect.

Innovation is yet another important element in creating wealth and competing in the world economy. The Select Committee on Science and Technology of your Lordships' House produced a most important report on civil research and development earlier this year. The Government will give their considered response shortly. It was an important report and I look forward to an opportunity of developing that reply.

Attitudes to industry and to the enterprise of our people are just as fundamental as the competitive structure of our industries. If we do not motivate young people in school we shall have real difficulties. We must train them in enterprise so that when they first enter the world of work they recognise what advantages and opportunities they have before them; and equally we must work to develop the enterprise of our managers. I greatly value the role my department is playing in linking the worlds of education and industry, in developing mini-enterprises in schools and in encouraging links with universities. I hope very much that we will see the further development of management education in our economy. I hope too that the training element and encouragement of management education is spread throughout the working structure of our industry and commerce.

If we are to establish the firm foundations of an enterprise culture which values industry and commerce, which sees wealth creation as the source of wealth consumption, then we must continue to tackle the education and training system in this country. And so we shall.

The last eight years have seen a transformation in the British economy. The performance of industry shows that we can achieve economic success. The recent fall in unemployment demonstrates that such economic success can and will create jobs. We hold firm to the belief that a sound economy is the essential foundation for all our policies.

Of course much more remains to be done. We are giving priority to the inner cities. We seek to ensure that all our citizens have the opportunity to enter the process of wealth creation. The last eight years have also seen a profound change in attitudes to wealth creation—a recognition that wealth creation is essential for the compassionate society which I know that all sides of your Lordships' House want to see created in our land.

It really is simple. Wealth creation was the basis of our past prosperity. Alas, our country lost sight of that. We will concentrate on wealth creation in the years ahead, and we will move towards a compassionate, caring society with the wealth we thus create.

4.21 p.m.

Lord Williams of Elvel

My Lords, the House will be grateful to the noble Lord, Lord Young, for introducing this part of our debate on the Address. He painted on a wide canvas in his speech and I hope he will forgive me if I do not follow him right across the whole picture. I would say, however, that what he said on the proposed government response to the research and development report is something that we would welcome if it is positive, and we hope that the Government will give a positive response.

We of course agree with what the noble Lord says about the regulation of the financial services industry. After all, we supported the Bill when it was in front of your Lordships' House. We agree with a lot of what he said on management training throughout the whole of industry and indeed the services. Lastly we agree with what he said about employee participation, because we believe that that is an important element in the future development of our industry.

Having said that, I must enter a slight note of scepticism about what the noble Lord said about the development of the economy in the future. He was good enough to say that there is perhaps a slight cloud on the horizon in the international context. I should like to look at that for a moment, and then I should like to examine the Government's proposals for the containment and reduction of inflation and to look at what the Government are proposing for different regions and localities in the United Kingdom, which we must now learn to refer to as inner cities. Then I shall again return to the measure of agreement, or disagreement, that may exist between ourselves and the Government on the proposals that they are putting forward.

I put it in this way because I believe that in the gracious Speech the agenda has been set out not just for this Session but for the whole of this Parliament. And it is on the policies that have been set out and that we are now debating that the Government will be judged when the reckoning comes round again, as it surely will.

The gracious Speech sets out the Government's aim to, continue to pursue policies of sound financial management designed further to reduce inflation and to promote enterprise and increased employment". Those are very laudable objectives and ones with which everybody is bound to agree. Unfortunately, as the noble Lord slightly hinted at but did not elaborate on, the circumstances in which these objectives are to be achieved have perceptibly changed for the worse over the last few months. The June economic outlook of the OECD notes that the general economic situation has deteriorated. The projections to the end of 1988 point to little improvement. Slow growth, high unemployment, large payment imbalances, it says, are likely to persist.

Furthermore, recent downward movements in the United States dollar have led to rising inflation expectations and higher interest rates in the United States. In other words, the risks of a worsening world economic situation, and perhaps even a world economic downturn, have increased. It is this heightened risk of course that has given the London money markets the jitters, from which they have been suffering since the general election.

Nor do the payment imbalances to which I have referred show much sign of correction. Banks are now having to provide enormous sums against their holdings of third world debt where a few months ago they were relatively sanguine. Officials action to resolve the international debt position seems now to be in a state of near paralysis.

So against this background, which is somewhat more sombre than the noble Lord described and which some believe—and they must be taken seriously—may well lead to some form of world recession, to achieve the objectives mentioned in the gracious Speech will need mechanisms which go beyond the mechanisms that the Government have adopted to date.

We can no longer talk about targeting monetary aggregates. That policy was thrown in the wastepaper basket a year or two ago. We cannot talk about shifting the balance between public and private expenditure. That only shifts a few pieces of furniture. The answer—and I suspect that this is the answer the Government would give—can only lie in the management of the exchange rate, because it is this above all which is the prime short-term factor in influencing the rate of inflation. Here we have the first contradiction in government policy.

The other part of the objective is to promote enterprise and increase employment—not, we notice, to reduce unemployment, which may be something different—but if the exchange rate, and inevitably interest rates, are to be kept at levels that reduce inflation, in the light of the world outlook there is little hope of a sustained increase in the level of employment, let alone of reducing unemployment. That, as the arithmetic seems to lead us, means that the rate of unemployment is going to stay more or less where it is for the time being, and that time may be a long one, which is not a happy prospect.

There is also facing the Government the problem of structural change, as would have faced any government, and particularly in the balance of payments. Between now and 1991, if we take the mean point of current Department of Energy forecasts for oil production from the North Sea, we are facing a decline in output of around one-third. Whatever the price gyrations that may take place between now and then, this is going to leave a gaping hole in our balance of payments.

Your Lordships will be aware that we have debated this matter many times since the publication of the report of your Lordships' Select Committee on Overseas Trade, but we have yet to be convinced in any way that the Government have recognised the arguments, or indeed developed any policies to counteract what will be a growing difficulty over the next few years. Therein lies the second problem with government policy. There appears to be no preparation for that adjustment. In short, on the general policy we are inclined to rather greater scepticism than the noble Lord, Lord Young. Whether this is justified or not time will tell.

Let me turn now to the Government's proposals at regional and local level—as it were, the topic of the moment—to which the noble Lord referred. After the general election it must now be quite clear even to previous doubters that there are major political and economic imbalances within the United Kingdom. Many of your Lordships will have been watching the BBC election results on 11th June and will have noticed that tall gentleman, whose name I cannot quite remember but who looks for all the world like Mr. John Cleese in a party political broadcast for the Social Democratic Party—and perhaps it would have been better for the Social Democratic Party if it had been Mr. John Cleese—in front of that great map where we saw Scotland, Wales and the North turning red and the South turning progressively more and more blue. In front of our eyes we saw the divided nation.

The Government have responded to this situation by proclaiming a programme for inner cities, and I shall come to that in a minute. But it seems odd, as I think the noble Lord, Lord Grimond, remarked yesterday, that Scotland is only mentioned in the gracious Speech almost in passing, with relatively minor measures on rented housing and the management of education. Wales of course is simply tagged along with England, but that has been the fate of the Welsh for many years.

But worse is to come. It was Mr. Kenneth Clarke who in Monday's debate in another place, commented on the general election campaign in Scotland. He remarked that an English visitor to Scottish platforms can have no doubt that the terms in which the economic and political debate is conducted in Scotland are still some years behind those that pertain in England. By any standards that is a provocative remark from a British Minister. Scotland, after all, has a powerful financial community—indeed, it was the birthplace of the investment trust movement; it has its own international banks; it has its own centres of learning and a healthy press. To suggest that the level of debate in Scotland is still some years behind that of England seems—and I put it at its mildest—somewhat insulting. It is also very illuminating, because it reflects certain attitudes of Ministers, particularly those who live and have their being in London.

I have no doubt that if Mr. Clarke had turned his attention to Wales he would probably have said the same about Wales, because the Conservatives were defeated almost as badly there. I suppose he would say that the level of debate in Wales was some years behind that pertaining in England. I have no claim to speak for Scotland; my noble friends from Scotland can speak for themselves. However, I have some claim to speak for Wales. In English eyes we may be people who cover ourselves with woad and dance on Plynlimon at the summer solstice, but we are people; we are a community, we are there as are the Scots, Yorkshiremen, Lancastrians and others. We do not like being patronised.

This is the first message that we have for the Government on their inner cities programme. The regeneration of local communities must come from, and indeed must be driven by, the communities themselves. There can be no suggestion that central government can work without the active co-operation of those local communities and the local authorities which democratically represent those communities. Whatever the razzmatazz, whatever name one gives to it—inner-city task forces, enterprise zones, urban development corporations or whatever—there must be a clear perception in Wales, in Scotland and in other communities that what is being done is being done to help people regain their self-confidence; to be part of life as it is and not as some London bureaucrat might like it to be.

The second message is, I devoutly hope, unnecessary and I hope that the noble Viscount the Leader of the House will tell me that it is when he comes to wind up. However, I must send it all the same. I am afraid that there is a deep and dark suspicion that the motive behind the inner cities programme is party political. I am afraid that the Prime Minister herself has encouraged that suspicion. The suspicion runs like this. The Conservatives have a problem in the inner cities. It is not just that Mr. Michael Heseltine came back from his visit to Liverpool in a state of catatonic shock; it is that the Conservatives have a roll call of cities in which they have no representation in the House of Commons at all: Liverpool, Manchester, Newcastle, Glasgow, Hull, Stoke, and they were marginalised in Sheffield and Edinburgh.

The suspicion is that the object of the inner cities exercise on this line of thinking is to try to regain the Conservative positions in those areas, and that foot soldiers from the Government will infiltrate to be followed quickly by the Panzer divisions of Conservative Central Office. If that is what it is all about the story is quite different. As I say, I hope that that is not the right interpretation and that the noble Viscount will assure me it is not. However, if that is the motive then I have to say that I fear there will be trouble not through our volition but because some situation somewhere, sometime, will go out of control with consequences that are unpredictable. This is something that we shall all deplore but it will occur unless the Government respect the rights, aspirations and economic needs of the communities that they are purporting to help.

The third message is more cheerful. Provided that the objective of the inner cities programme is genuinely to work with regional and local communities and their elected representatives of whatever colour, we shall support it and co-operate. It goes without saying of course that proper funding must be available. I agree that the problem of urban areas cannot be solved by throwing money at it. I think that the noble Lord and I would agree. Nevertheless, neither can it be solved by financial starvation. If the Government are prepared to allocate £60 million a year to London docklands and £30 million a year to the Merseyside Development Corporation, they presumably recognise this.

I am sorry that the Chief Secretary to the Treasury seems to be making rather difficult noises about the applications that certain Secretaries of State appear to be making, according to the press, for extra funds for the inner cities. I hope that if the Government recognise both facts, the need to work with regional and local communities and the need for public funds, they will also find that there are many organisations, from the Scottish and Welsh development agencies on a regional scale to local enterprise boards on a local scale, which are ready and willing to work with them. That is the way it should be and that is what we will support.

Before I conclude, the House may wish to know how the Opposition propose to conduct themselves in this Parliament in this House on the range of issues for which the noble Lord, Lord Young of Graffham, is responsible as Secretary of State for Trade and Industry. On a number of occasions since the general election it has been said that, because of the large and generally docile majority that the Conservatives have in the House of Commons, the main burden of opposition will fall on us. I am fully confident that my right honourable and honourable friends in another place will provide an effective and adequate opposition. However, if opposition is to rest with us, because the Secretary of State is a Member of our House, then so be it. In that case the opposition starts right now and right here.

Whatever the nature of the electoral mandate, we do not believe that there is a majority in the country for polarisation and division. There is no majority to dismantle the social services or to destroy local democracy. There is no majority for a systematic attack on the poorest and most disadvantaged in our society. In so far as we believe that the Government's economic trade and industry policies lead, whether by deliberation or through incompetence, in those directions, we shall oppose them root and branch.

However, there is a second level on which we shall conduct the opposition. We recognise that although we won in Scotland, although we won in Wales, we won in the North and in large parts of the Midlands, our policies were not accepted in the southern part of the North-South divide. Clearly during the course of this Parliament we shall be rethinking those policies in the light of events and of our experience. As this process takes place we shall as opposition and the only alternative government be countering government proposals as they come forward with ideas of what we would be doing were we in their place. Nevertheless, although we shall rethink the way in which our policies are articulated and presented there should be no doubt that our philosophy will not change. We shall continue to assert that economic efficiency can, should and indeed must march hand in hand with social justice.

Furthermore, it is an object of government at all levels to strive toward this objective. That was the philosophy of the Labour Party that I joined 30 years ago and it remains the philosophy of the Labour Party today. It was Martin Luther at another time, in another country and on another issue who said: "Ich kann nicht anders"—I can do no other. We echo those words. Here we stand. We can do no other.

4.40 p.m.

Lord Diamond

My Lords, I want to start by thanking the Secretary of State, the noble Lord, Lord Young of Graffham, for introducing this debate with such care and so fully. I understand very well that he is no longer able to be present in the Chamber. He has been good enough to send me a note of explanation. I am sure it is to the benefit of us all that there should be a Member of your Lordships' House who is such an important Cabinet Minister. It is of nett benefit to us and we have to take the disadvantages with the advantages. We understand that from time to time he has to withdraw from the Chamber when he would otherwise wish to be present.

Of course we welcome some of the improvements to which the noble Lord has alluded; but when he made some remarks about the state of the economy, although I imagine that he was referring to the economy of this country, I found it very difficult indeed to recognise. I shall come to that topic later on.

As we are now debating the Queen's Speech, which looks forward over a period of time, we too take the view that one is not limited to discussing individual items, and I want to glance at what would be the Government's stance. The noble Lord, Lord Williams, has wisely told us what would be the stance of the official Opposition and I should like to state what would be the stance of the Alliance.

There has been a general election and we recognise that a great number of the items that appear in the gracious Speech were set out in the manifesto. The Government therefore received a kind of national approval for what they are proposing. It is for that reason that after this recent general election we have not thought it wise, appropriate or wholly democratic to put down an amendment to the gracious Speech and to seek the views of your Lordships, albeit there are many parts of the speech that we find wholly unwelcome.

We recognise that at the end of the day the Government must have their way but that is after the Opposition has had their say. By "the Opposition" I mean the official Opposition and the unofficial opposition that we shall continue to provide. We hope to play our full part in a constructive way. As hitherto, on these Benches we shall be guided by the liberté of the Liberals, the égalité of the Social Democrats and the fraternité which characterises the relationships between the two parties.

With regard to the gracious Speech, we notice that for the eighth time running unemployment does not enjoy a position of first priority. Should there be any doubt about that, it should be noted that it is mentioned in the gracious Speech and was repeated with the greatest clarity by the Prime Minister when she opened the debate in another place on 25th June. In her Statement she said: Control of inflation through sound financial policies is and will remain our top priority".—[Official Report, Commons, 25/6/87: col. 53.] That has been the Government's case throughout. It is still the Government's case and we must not be surprised therefore if the hopes of the unemployed are less bright than they otherwise would have been. At no time have the Government been prepared to give unemployment the first priority that we think it should have.

The cost that has been incurred in order to enable the Government to give effect to their intention that the control of inflation should remain their main priority is simply enormous. I have recently been reminded of the figures for bankruptcies which have been rising year after year since the Government took office. In 1979 there were 4,500 insolvencies. Every year saw a new record total until 1985 when the total reached nearly 15,000. In 1986 by contrast the number fell to 14,400 and improvement continued in the first quarter of this year. We are still left with a figure for bankruptcies which is three times or 300 per cent. greater than was experienced by this country prior to the Government taking office. That has been part of the cost of achieving a modest level of inflation—not an enormously creditable level but a modestly successful level. It is not all that good by comparison with the figures for our main competitors, though I recognise immediately that it is somewhat better than the figure which the Government inherited.

I am glad to see the noble Lord, Lord Peston, in his place because, with his great academic and administrative authority and the authority of one who has advised Downing Street for many years he put the situation very well. I cannot remember his exact words but in a recent debate he referred to the way in which the Government had achieved a measure of success in dealing with inflation and expressed the view that had he been given the latitude of incurring an extra 2 million people unemployed, he thought that he could have done a great deal better. Putting it the other way around, a higher reduction in the level of unemployment could have been achieved without incurring any higher a level of inflation. The Government merit but little credit for what they have done in the field of holding down inflation.

The gracious Speech says nothing whatever to give us encouragement about the manufacturing sector. I am bound to dwell on this subject because the Secretary of State (who is not in his place at the moment) has made statements to this House that worry me greatly. They lead me to believe that he thinks that an increase in services is an equal alternative to the falling off of manufacturing capacity. It is no such thing. There is no way in which an increase in services, however much we welcome it—and we on these Benches do recognise and welcome it, as well as the increase in financial services and whatever the City can do—can make up for the drastic fall in the manufacturing sector. We hope that the Minister will take that knowledge on board. It is a very serious matter that has been repeated time and again in this Chamber but which seems to have made very little impact on the Government.

We are unhappy that the Statement on Europe, welcome as it is, does not go so far as to include the determination to integrate fully within the European Monetary System. When the noble Viscount winds up the debate, perhaps he will tell us the Government's plans in that regard.

There are two items in the Queen's speech which clearly will merit very careful examination indeed. First, I refer to privatisation measures and we all know that the Government rest their case for privatisation on the grounds of providing further competition and breaking down public monopolies, although I cannot recollect that they were very successful in establishing their argument when it came to the privatisation of gas. So we shall look and listen very carefully to the arguments that the Government will produce on establishing the benefits of competition in the disposal of sewage as being one of the reasons for privatising water supply and sewage disposal.

We shall also look extremely carefully at the proposals for replacing the domestic rates. Here I notice that the Prime Minister—again on the same occasion at col. 56 of the Official Report of 25th June—stated: We shall abolish the domestic rates—a grossly unfair tax—and replace them with a community charge". We are therefore led to expect that these will be replaced by a tax that is immensely fair. Far from that, they are proposed to be replaced by a tax which is nothing more nor less than a poll tax and you have to go back to the Middle Ages to find a precedent for such a proposal.

Not only does it offend all our feelings of what is right and fair, in the sense that the broadest shoulders and the narrowest shoulders are being asked to carry the identical burden, but it also offends against all the tenets of good taxation. It is estimated that it will cost twice as much as the rates to collect, it is estimated that the evasion will be 10 times as great as in the case of collecting rates and of course it is wholly regressive.

In those cases—although we are not able to oppose the principle in view of what I have said, and in view of our usual stance with regard to Second Readings of Bills introduced from another place—we shall want to participate in the "late evenings" to which the noble Lord, Lord Strathclyde, referred in his excellent speech, much to the pleasure of his Chief Whip. I do not know whether it was—I am sure it was not—an intentional rebuke, but I must say that my conscience pricked me and I took it to be a rebuke for the way in which some of us failed to attend to our duties adequately during the last Parliament.

I shall try to see to it in future that, so far as I am here, I am available to assist your Lordships, notwithstanding the lateness of the hour, throughout those late evenings which our previous experience has told us may only continue until the middle of the following morning, when the Leader of the House comes along and finds what we are up to. That deals with those matters.

But I hope that the noble Lord, Lord Young, will not mind my continuing to say in his absence—he said that he will be good enough to read the report of my speech when he sees Hansard tomorrow—that we shall continue to press for less propaganda and more facts, especially so far as he is concerned. We do not welcome the continual shifting of the goalposts; the continual use of starting dates for comparative purposes which are irrelevant; the continual mixing of cash and real expenditure; the continual confusion between full-time and part-time jobs and the continual attempted comparision of like with unlike and all the other paraphernalia of propaganda. If the Minister insists on continuing to give us that, at all events let him be kind enough—having regard to the intelligent audience which he is addressing and the ability which is spread among your Lordships' Benches—to give us the facts first and the propaganda afterwards.

One example which I put before your Lordships at the moment is the claim which the Government make once more for what is virtually inevitable, and they do this time and time again. At col. 54 of the Official Report in the same speech the Prime Minister said: Our policies have brought record living standards". That is a statement that could have been made by any government in any year. Of course living standards increase year after year. It was wholly exceptional until this Government came to office in 1979, and during 1980 and 1981, for there to be anything other than a growth in the national product and an increase in living standards. For the Government to claim that as a record is totally misleading and pure propaganda.

What the Government should have addressed their mind to is not whether there has been an increase, but how much the increase has been. What the Government should have pointed out is that the long-term trend over the past 30 years has been an average growth of 2.6 per cent. per annum in our national income, whereas during the Government's seven years from 1979 to 1986 the growth has been 1.4 per cent.—just over one-half of the average growth. I took all those figures from Written Answers given by the noble Lord and his department.

What the Prime Minister should have said was not: Our policies have brought record living standards", But, "If it had not been for our policies, the likelihood is that our living standards would have risen by pretty well twice what they have risen by during the whole period that this Government have been in office." We have only to compare with what was happening abroad to see how other countries have passed us by, other countries which had a standard of living markedly below ours and which now have a standard of living markedly ahead of ours. It is that kind of propaganda which we shall seek to highlight and oppose.

I shall certainly continue to oppose the Government's practice of selling the family silver to pay for the groceries. I appeal to any of your Lordships who are familiar with trusts or who are lawyers, to agree with me immediately that, if any trustee came along and asked for advice as to whether it was right for him to sell assets of a trust to realise the capital and use the proceeds for the benefit of the life tenants, he would have a very clear answer. He would be told no, it is quite unlawful. My Lords, why is that? It is because the duty of the trustees is to have regard to future generations as well, and the duty of the Government as trustees of the national assets is to have regard to the needs of future generations which they have totally failed to do.

Of course, there is nothing against a government selling assets and replacing them with other assets, and it is the same with trustees, but that is not what has happened. The Government sell their assets by way of privatisation, use the proceeds as a deduction from public expenditure or to enable reductions of taxation to be made, and there is nothing about the creation of new assets. Quite the contrary—they do not even see that the existing assets are maintained. We are told that there is a backlog of no fewer than £55 billion in the maintenance of our housing stock and that has to be made good before we can even think about increasing our assets.

I have two final points. The Queen's Speech refers to public expenditure and taxation in the following terms. It states of the Government: They will maintain firm control of public expenditure so that it continues to fall as a proportion of national income and permits further reductions in the burden of taxation. What that really means is that the Government will continue their policy of making the rich richer and the poor poorer, because the effect of reducing the burden of taxation in the way that the Government have done it is to help most those at the top levels of income, and the containment of public expenditure, so far as that affects welfare expenditure, results in harming the benefits to the poorest members of our society. It simply means continuing that trend to inequality which is the unique mark of this Government.

For virtually the whole of this century there has been a continual movement—sometimes very slow—towards greater equality in incomes. That has been reversed, and is acknowledged by the present Government to have been reversed, through the policies that they have taken.

The second point that we shall continually press on the Government is the lack of parliamentary democracy. To use those terms with regard to this Parliament, one Chamber of which depends mainly on heredity and exclusively male heredity at that, and the other Chamber depends—

Noble Lords


Lord Diamond

My Lords, did I say exclusively? I beg your Lordships' pardon. I meant to say that one Chamber depends mainly on heredity and almost exclusively on male heredity. The number of females entitled to be Members of your Lordships' House by virtue of heredity is minimal. A Chamber which is based on that principle and another Chamber which is based on disproportional representation can hardly be called the constituent parts of a democratic Parliament.

The present position is that, whereas it takes about 40,000 votes to produce a representative Member of Parliament if one votes either Conservative or Labour, it takes 16 times that number of votes to achieve a representative Member of Parliament if one votes Social Democrat. We bitterly resent being 16th class citizens. We feel that very strongly indeed and we shall continue to press on your Lordships as hard as we can that they should withdraw from the path of inequity in our financial affairs and iniquity in our parliamentary ones.

5.4 p.m.

Lord Harris of High Cross

My Lords, I am glad to join others in debating the merits of the gracious Speech, which I judge to be quite considerable. Unlike the noble Lord, Lord Diamond, I commend the opening commitment to sound financial policies aimed at reducing inflation and increasing employment. In particular I commend the extension of the youth training scheme in place of benefits for school-leavers under 18, at least as a first step. Here we are following the example of countries as different as socialist Sweden and capitalist Switzerland which offer lower inducements for their citizens to become unemployed and therefore have much lower unemployment figures. Thus in both those countries young people under 20 are offered not benefits but education, training or community work. Nor does either country contemplate for those aged over 20 benefits of unlimited duration, which in Britain have reinforced an unemployment culture of indefinite dependency which renders the often ill-educated victims increasingly unemployable.

I recently had good reason to study various statistics on unemployment in Britain and other countries and I must say that I became quite appalled at the nonsense we have talked ourselves into on this issue. My findings suggest an urgent need to prick the bubble of verbal compassion which in this and other aspects of policy has come to swamp rational discussion on how best we can help those least able to help themselves.

Let me proclaim my earnest belief that involuntary unemployment is a terrible scourge and indeed a personal tragedy. It certainly darkens the daily lives of hundreds of thousands of people who are today trapped in areas where jobs are not available, nor in early prospect. But I insist that the plight of such victims of industrial change is not helped but hindered by being lumped together with large and diverse groups of claimants who register as available for work when they are busy working at home, or in the black economy, or are better off on benefits, or are disabled, or have retired early, or are simply resting between jobs. Whatever the exact number of those categories the headline figure of 3 million unemployed is neither a true indication of social distress nor a useful measure of idle resources.

A lesson for the Government is that they should go on stubbornly resisting the temptation to stimulate demand, at least until more has been done to remove obstacles to mobility, flexibility and job seeking. The danger in my view remains that increasing spending beyond the Treasury's present targets will push up prices rather than increase real output and employment.

Unlike the noble Lord, Lord Diamond, I also welcome the Government's emphasis on continuing to cut income tax, which too often reduces the value of take-home pay to little if any more than that of social benefits. If taxes on earnings could be significantly cut each year, while inflation is kept edging downwards, everybody could share the gains of rising prosperity without agitating for wage and salary rises unearned by productivity. If we could thereby break the postwar habit of annual pay demands, we would not only hold down labour costs per unit of output and keep unemployment falling; we would also confine wage and salary negotiations to their proper economic function of periodically adjusting relative rewards to attract workers with skills in short supply.

I believe that a better functioning labour market would also be helped by early action to liberalise controls on rented accommodation. I hope that the brief reference in the gracious Speech means that the Government at long last propose to free all new lettings from the malignant veto of rent control and lifetime tenancy.

I urge Her Majesty's Government, in this one respect only, to display a little coalition spirit by adopting the ingenious Alliance device of allowing home owners and tenants to rent out a room or two and to keep up to £60 a week free of tax. Such an innovation would assist mobility and improve the deployment of labour as well as providing a welcome source of income for people with spare rooms but no spare cash.

I am also anxious to help the Government fend off opposition to what I regard as the laudable principle of a community charge for local services. To keep this new tax low, I suggest that they take a leaf out of the recent manifesto launched by the Committee for a Free Britain, with which I must declare some association. The question posed is whether or not we really need all the accumulated ragbag of local services. After all, councils do not run pet shops, holiday resorts, video libraries or many other valuable services. Why then should councillors neglect their families and gardens to read agendas that apparently block their letterboxes and attend endless meetings on schools, libraries, housing, swimming pools, allotments, residential care, harbours or abattoirs? I suspect that those could all be better managed in the market place and so be taken off the community charge.

I feel that the noble Lord, Lord Cledwyn, if he were here, would not be alone in thinking me overenthusiastic for privatisation. In opening our debate last Thursday, he lamented, at col. 17 of the Official Report, that: The concept of the mixed economy is fading fast". I think it would be more true to say that the concept of socialism has faded, is fading and ought to fade faster. Pretty well the entire world, outside Albania and darkest Africa, is turning away from government and towards markets to help solve problems of adjustment to unprecedented technical and structural change. It is no longer plausible to blame Thatcherism for turning Labour's old world upside down. The plain truth is, in the words of the old song, that everybody is doing it now. Mr. Gorbachev is doing it. China is doing it. Socialists in Australia and New Zealand are doing it. Even the EC has been trying to do it in farming and air fares.

What they are all trying to do is to escape from the fixing and faking of prices, the control of supply and the restriction of choice. I shall go so far as to say that a new consensus is being forged which accepts a larger role for markets, freer competition and dispersed initiative. I believe that this emerging consensus helps to explain the tensions in the Alliance, since Dr. Owen senses these trends better than the weary old Liberal leaders, with the honourable exception of the noble Lord, Lord Grimond. I suspect that this emerging consensus, before it is fully born, will, at least for a time, sharpen frictions in the Labour and Conservative Parties and even perhaps on these Cross-Benches. However, I believe that the emerging consensus will prevail, because markets can serve our changing times better than bureaucrats, councillors and party politicians. I congratulate Her Majesty's Government on leading the way and urge them to keep well in front of Mr. Gorbachev.

5.15 p.m.

Lord Boyd-Carpenter

My Lords, it is always encouraging to hear a highly Conservative speech from the Cross-Benches, just as it is sometimes discouraging to hear a Cross-Bench speech from the Conservative side of the House. I am sure that all your Lordships have enjoyed the robust common sense of the noble Lord, Lord Harris, and will reflect upon what he has said.

The noble Lord, Lord Diamond, has deprived me of ever again being surprised by what he says. I really thought that his mature and experienced intellect could go a little further than to trot out the old, overworked, overworn cliché about selling the family silver. The noble Lord himself would not claim originality for that phrase. Nor, I think, would he claim—

Lord Diamond

May I interrupt the noble Lord? I do. I anticipated the noble Earl whom the noble Lord no doubt has in mind.

Lord Boyd-Carpenter

My Lords, I am sure that the noble Lord has anticipated all sorts of things. I believe that he has also anticipated what I shall say about him. I hope that he has. That phrase has been trotted out for years and it has lost any validity that it ever had. It is said that we have sold those industries and not put the money back but used it to reduce taxation or, he might have added, to reduce borrowing.

The noble Lord omitted to refer to two aspects of the matter. The first is that the reduction, for example, in government borrowing has been facilitated and the greater availability of capital in the free market has contributed to the remarkable and satisfactory situation in which this country has the second largest body of overseas investment in the world, second only to that of Japan. I am sure that the noble Lord, with his experience at the Treasury, will reflect on the immense advantage that such investment has in case of any economic trouble or trouble with our balance of payments. If we have massive overseas investments, as we had before the war—and we had to liquidate them during the war—it gives our economy a strength and stability which nothing else can equal. The noble Lord did not mention that.

Nor did he mention that every one of the industries which has been privatised as a result of the process has done conspicuously better since privatisation. Those industries which were jogging along on a modest profit or a modest loss are all, without exception, highly profitable and contributing to the strength of our economy and the growth of employment. I hope that your Lordships' House will not have to listen in future to such vieux jeu remarks as the jibe about selling the family silver.

The noble Lord, Lord Williams of Elvel, who has left his place for the moment, made a speech full of gloom, which suits his oratorical style. Listening to him, I often feel that his style of speaking, elegant though it is, is largely appropriate to the kind of speech one would deliver at a memorial service for someone whose life had not been wholly satisfactory.

The noble Lord added to the gloom by foreseeing a world depression. If the noble Lord is right about that, and he is a merchant banker with, I accept at once, very considerable knowledge in the area, I suggest to your Lordships that that is an even stronger argument in favour of making our economy efficient and effective so as to be more able to resist the ill-effects of a world depression if it comes. I myself do not see many signs of that world depression. Perhaps my noble friend the Leader of the House may refer to that when, many hours hence, he winds up. However, surely the conclusion to be drawn, if the noble Lord, Lord Williams, is right, is that it is even more urgently important to make our economy efficient.

The noble Lord, Lord Williams, then indulged in a bit of rhetoric. He said (I should have thought wholly unnecessarily) that nobody had any mandate to dismantle the social services or to oppress the poor and weak. That is a comment on a government who, over the past eight years, have built up the social services, done their utmost for the relief of poverty and hardship and announced further policies to that end. Perhaps it is taxing your Lordships' patience a bit to think it necessary to make an observation of that kind. It may be the sort of observation one would make on an election platform. To make it to your Lordships' House seems an unnecessary use of your Lordships' time.

The noble Lord ended with the resounding platitude: Economic efficiency … must march hand in hand with social justice". He said that that had been the policy of Labour Governments. The trouble about that observation is that one did not get economic efficiency under Labour Governments. On the contrary, one got economic inefficiency and indeed the necessity, which your Lordships may well remember, about 10 years ago to call in the IMF to relieve our distressed economy. The truth of the matter, which the noble Lord, Lord Williams, was trying to dodge, is that we do not get the resources to maintain good social services, to relieve poverty and to cure hardship unless we have an economy which is efficient at wealth creation. That is the basis of all development, of all good social developments we want to see.

The late Iain Macleod put it so well when he said that money is proverbially the root of all evil, but it is also the root of everything else. That is true. You cannot maintain the standards of social services which all noble Lords wish to see sustained, namely the high level of relief for poverty, the highly expensive and expanding health service, a good level of pensions, unless your wealth creating machinery is efficient enough to create the wealth that is needed to sustain the ever-increasing financial load.

The noble Lord, Lord Williams of Elvel, referred rather bleakly to the fact that the Labour Party's policies had not been accepted by the electorate at the recent general election. However, he did not touch on—as indeed no one has, except for the noble Earl, Lord Longford in yesterday's debate—one of the reasons why those policies proved wholly unacceptable to the majority of the electorate. Basically, the reason is that those policies were based on a complete failure to understand the change in the structure of our society which has taken place over the past few years.

To a considerable extent the Government, and the Government's policy, have contributed to this change because we have had a government who have not only avowed Conservative policies (as many previous governments have done) but a government who have actually put them into effect.

Lord Graham of Edmonton

My Lords, perhaps the noble Lord will give way.

Lord Boyd-Carpenter

My Lords, I am not referring to the noble Lord at the moment. We have had a government who have applied Conservative policies and actually put them into effect. We have not produced the situation which caused Disraeli to comment on a government many years ago, as your Lordships may recall, when he said: A sound Conservative government. I see Tory men and Whig measures. We have seen a government who have applied Conservative measures and we have seen those measures having an enormous effect on the whole structure of our society. It is because, with respect, the party of noble Lords opposite fails to understand this tremendous change which has taken place in recent years that its election campaign—slickly and efficiently presented as it no doubt was—failed, and failed completely to achieve any substantial improvement in its electoral position over that in the previous Parliament.

It always seems to me that the Labour Party still sees the scene in a great deal of this country as being full of cloth-capped workers, living in grinding poverty, oppressed by hardhearted and brutal employers and only occasionally rescued by the gallant self-sacrificing efforts of trade union leaders. That is not what our society sees itself as. This is a society in which a very high proportion of the population have cars or motor bicycles. An even higher proportion have television sets, often colour. It is a society where they have washing machines, where two-thirds own their own home, where over one-fifth are shareholders and where more and more have holidays, not at Blackpool but in the Mediterranean. This society has achieved what used to be regarded as middle-class standards—or more than middle-class standards.

Therefore the electorate did not like or wish to support the kind of argument which the noble Lord's party opposite tried to put to them, particularly the suggestion which the noble Lord, Lord Williams of Elvel, did not refer to; namely, that the tax cuts proposed in this year's Budget should be reversed—

Lord Graham of Edmonton

My Lords, will the noble Lord give way?

Lord Boyd-Carpenter

My Lords, I will this time; the noble Lord is so persistent.

Lord Graham of Edmonton

My Lords, in referring to my noble friend Lord Williams, the noble Lord dismissed much of what he said on the basis that we had failed to get a majority of the people to support us. Will the noble Lord comment on the fact that for the third election running, although gaining more seats the party of the noble Lord has failed to secure a majority of the votes in the country? In other words, it is a minority government by any yardstick.

Will the noble Lord also deal with the point that if indeed the policies of the Conservative Party are so well received why they were utterly rejected in major regions of this country, not least in Scotland, Wales and great areas of the North? When the noble Lord talks in terms of all that the Government have done, will he also acknowledge that those who were poor when this Government came into office are poorer now after eight years?

Lord Boyd-Carpenter

My Lords, the noble Lord has enjoyed making that party political speech in the form of an intervention. I say to him only that we obtained a large majority in the House of Commons under the electoral system which this country has enjoyed for many years, and which noble Lords opposite have been only too happy to take advantage of when the larger part of the vote went to them. It is only when it happens to go this way that people like the noble Lord opposite develop a conscience about the matter.

I wish to return to my argument because the noble Lord interrupted me at the very point when I was talking about the majority of people in this country and the change which I beg the noble Lord, in his own interests, to try to understand. The change in the structure of our society has not applied throughout the country as a whole. There are areas which are still areas of distress, poverty and unemployment. It is no purpose of mine to try to get away from that fact.

Indeed, it is a purpose of mine to point out that, to a very considerable extent, the wounds of those areas are self-inflicted. Many such areas are presided over by local authorities that are anti-entrepreneurial and anti-employer. They have high rates and the prospect of even higher rates because as a result of borrowing in order to avoid government restrictions they are building up enormous financial obligations for the future. Their attitude to those who wish to introduce employment is by no means always helpful.

I put to your Lordships that the problem is that any businessman, however public spirited, who wants to introduce a new business somewhere, in justice to his shareholders really cannot place it in areas where he knows that they will encounter high rates, obstruction from the local authority and every sort of opposition. Therefore although I agree very much with what was said earlier today, that the reconstruction and rebuilding of these areas must involve local participation and local help, the problem is how to get local authorities that are prepared to co-operate and help in this situation, and are not content to indulge in the extreme doctrinal absurdities of the loony Left, regardless of the consequences which those policies have already visibly inflicted on their fellow citizens. That is the problem—just as, if I may say in parenthesis, I often feel in connection with overseas aid that the best thing we could give to countries such as Ethiopia and Mozambique is not so much food parcels as decent governments.

That is the problem which confronts my noble friends in dealing with our own depressed areas. In so far as noble Lords opposite have influence with those who control the local authorities, I hope that they will try to persuade such authorities to co-operate not only with the Government but also with the individual entrepreneur. They should give encouragement and a friendly welcome to entrepreneurs who want to set up business in those areas, and who know that the workforce there is basically able and efficient but who are deterred by the knowledge of the political atmosphere and the financial situation which they will find there.

I intended to devote the main point of my speech to another matter; that is, the question of taxation. My noble friend Lord Young of Graffham said rightly, I am sure, that wealth creation was what. mattered. Wealth creation, I suggest to your Lordships, can be very much assisted and encouraged by reductions in taxation, particularly in direct taxation. I know my noble friend will say, and your Lordships will say, that the last two budgets have reduced modestly the standard rate of income tax. It is only fair to set against that the increases which have been made in national insurance contributions which are collected—unhappily, I think, nowadays—by the Inland Revenue together with income tax.

In the days when I was responsible for these matters, which was a good many years ago, there was a separate system of collection. A book had to have stamps put in it and people realised that they were contributing to an insurance scheme which was of great benefit to them because they were obtaining, as a result of it, a heavily subsidised pension. Now that it is collected simply with income tax as a deduction from their pay there is very little such appreciation and therefore the welcome reductions in the standard rate of income tax are, I am afraid, in people's minds somewhat offset by the very high level of the national insurance contributions. It is unfortunate from the point of view I am trying to put forward about wealth creation that these reductions were applied only to the standard rate and have not applied to the higher rates of tax.

At Question Time today a Question related to the brain drain. It is surely clear that one of the factors that causes able young engineers, able young scientists, able young men or even middle-aged men of high earning capacity who have done a tour of duty, say, in the United States, to stay there rather than to return here in the knowledge that if they continue to work in the United States they will pay only up to 28 per cent. on the highest tranche of their earnings whereas in this country they will keep only 40 per cent. If you desire to keep those people here and encourage them to be here it is folly to impose these very high rates of taxation.

Lord Ezra

My Lords—

Lord Boyd-Carpenter

My Lords, to take 60 per cent. of any part of anybody's earnings is undoubtedly a form of confiscation. I am sorry; of course I will give way to the noble Lord if he wishes.

Lord Ezra

My Lords, the report on the brain drain which was published today pointed out that one of the major factors leading to it—in so far as it occurs; and apparently it occurs less than it was at one time thought—was the lack of career prospects and research facilities in this country. The question of taxation was not mentioned as a major factor.

Lord Boyd-Carpenter

My Lords, there are a number of factors and the noble Lord can quote as many reports as he likes. However, anyone with any knowledge of human nature will know that someone with a high earning capacity which he knows is not going to remain with him indefinitely, or for many years, and who knows that he has a period with a high capacity to earn and is therefore able to build up reserves for his old age, is going to be very much affected by the knowledge that a large proportion of his high earnings will be taken away in taxation. No reports which deal with other matters, no doubt perfectly sensibly, are really going to persuade thinking people that there is not a great deal of force in that argument. Of course it is not the only matter; there are half-a-dozen others. However, it is a factor that lies in the hands of Her Majesty's Government to remedy and to do so very easily.

If one is doubtful about this I quote from a leading article in The Times which refers to a radio phone-in undertaken by the Leader of Her Majesty's Opposition during the general election. Mr. Kinnock was spoken to by a small employer during one of these sessions. The article states: He pointed out to the Labour leader that higher taxation would inevitably reduce his profitability, restrict his investment and ultimately force him to cut his workforce. It would therefore not be employment-creating, but unemployment-creating. Mr. Kinnock's response was to say that his questioner surely did not run his business just in order to make money. The questioner insisted that he did not go through all the trouble for any other reason. Mr. Kinnock's incomprehension was complete. He did not seem to understand, or believe, that lessening the head of the firm's incentive to work also lessened the firm's contribution to employment. That, I am afraid, is characteristic of the attitude of noble Lords in the Labour Party. I have no idea what the attitudes are in the various amalgams of parties which sit above the Gangway. This is surely the point which your Lordships should consider. Do not high rates of taxation, particularly at the higher levels, discourage investment and discourage, therefore, the whole of the wealth creation which I think all your Lordships agree is the basis of future development and of future social services?

There is only one other tax point which I should be grateful for my noble friend to deal with. I refer to the very wrong treatment by the Inland Revenue of married women and their earnings. It seems to me quite outrageous that if a couple are married they receive a lower combined allowance than if they were living together unmarried. This is not merely theoretical. I happen to know, but I will not mention any names, a couple who lived in my own part of the world not long ago. She had inherited a considerable estate and he was a Queen's Counsel with a large practice. They lived together as an unmarried couple for many years. They went about together and they openly admitted that they could not afford to marry because if they did so it would cost them a considerable further amount in taxation.

Deliberately to discriminate against marriage in this way, in an age when a very large proportion of married women work and contribute to the household, really amounts to subsidising sin. I doubt whether even the right reverend Prelate the Bishop of Durham would necessarily agree with that. I ask my noble friend and his colleagues to consider two points. Are they going to give the lift to our economy which we need by substantial reductions on direct taxation, including the higher rates? I point out that when earlier reductions in taxation were made in the 1950s the same amount of reduction was applied and the same number of pennies were taken off at the higher rates as well as the basic rates. It is only on this occasion that the whole of the improvement has been concentrated on the basic rate. Secondly, I ask them to consider the extremely unfair treatment of married women and the need, therefore, to tidy up this situation.

I only add to this appeal, which again The Times points out in the leading article to which I have already referred, that high and penal rates of taxation encourage every sort of tax dodging. They encourage people to go abroad and to settle abroad. They encourage people with large investment incomes to go to the Channel Islands or elsewhere. They discourage people from settling here. They encourage every sort of device and, as The Times points out—and this should appeal to the noble Lord, Lord Bruce of Donington—if this can be abolished we should, create a new deprived class of out-of-work accountants and tax lawyers and encourage firms to pay their employees properly rather than giving them perks.

5.40 p.m.

Lord Lever of Manchester

My Lords, I shall not follow the noble Lord in detail, but I can at least congratulate him on an improvement on Dr. Johnson who said that marriages would probably turn out just as happily if they were made by the Lord Chancellor and not by the individuals concerned. The noble Lord's amendment is that the Chancellor of the Exchequer should be the major determinant of those unions. Although I am sometimes startled by the lack of realism shown by my colleagues on certain matters, I must confess that it is something new to me to suppose that the majority of marriages, even of those not endowed with large estates, proceed only with such impetuousness as their chartered accountants will permit. Although I am very much with the noble Lord on the principle that we should not be penalised by entering into that noble and I hope normally happy state of marriage, it shows the kind of imbalance of the noble Lord in relation to the problems of wealth taxation and wealth creation.

The air of continuous and agreeable self-congratulatory optimism which marked the noble Lord's speech puts me in mind of my younger days when, immediately after the war, I was a Back-Bench Member of the Labour Party in the other place where the noble Lord was also a Back-Bencher. I well remember his springy walk into the Chamber, confident that we were going to be displaced. I remember in 1945 and the years following, the enormous satisfaction felt by my colleagues that a wise, benign and skilful Labour Government had ensured the unprecedented experience of continuous full employment. It convinced them that from then on the Labour Party was inevitably the country's predicted government. Unhappily they were unaware that in the Bundestag there were Right Wing Members of Parliament going around equally convinced, as they saw continous high employment and growth on at least the scale that was taking place in Britain, that extreme Right Wing policies were the recipe for post-war prosperity.

Indeed, over the globe, in all kinds of areas, among all kinds of governments, a similar process of congratulation was going on. They were all blissfully unaware that we had moved into a new era in which our prosperity or misery is overwhelmingly determined by what happens in the global economy of which we are all a part.

I do not share the noble Lord's confident optimism about the international situation. On the contrary, the situation in the global economy, upon which our economic and political safety will depend, is in a state of financial and economic disequilibrium many times more severe and more dangerous than anything that has been experienced in the post-war period. That is not the fault of any one particular government, least of all that of the noble Viscount who is to reply on behalf of the Government. That is the fact; not the absence of anxiety that the noble Lord mentions.

As a result of that prolonged disequilibrium, we are suffering from unemployment; we are threatened by a black cloud of a near insoluble imbalance of trade, affecting the greatest of the Western economies—the American economy—and we see a drive for protectionism such as has not been seen in recent years. I am troubled about that. I hope that I can have your Lordships' indulgence when I focus exclusively on that, although I concede that the appetite for continuing the dialectical combat of a general election has not been abated even by the saturation of television and press coverage to which we have been subjected in recent weeks. If I exempt myself from it, I hope that it will not be thought to be a lack of party political piety or respect for the debating points which have been made on both sides of the House.

Why do we have what to me is the most menacing situation in the world economy of the post-war period? I shall say briefly why I think that that has happened and why we must put it right. As I said, every government were able to preen themselves on their triumph of social amelioration, wage standards, employment and the like. The global economy enjoyed that for 25 years after the war because there was a unique advance in wealth creation throughout the entire globe. That was because we were working a global economy with the minimum structures of co-operative discipline that are required to maintain it. We did so well under it, that the dominance of the United States, which had made that co-operation possible after the devastation of war, was eroded, and other countries started to chafe at the discipline required to enable that global economy to be viable. In particular, they assaulted the structure of co-operation at its most essential and crucial point—monetary co-operation. They broke down the Bretton Woods system.

That system had obviously come to need amendment and repair, and when it needed that repair nations were faced with a choice. They could make the benign choice which was to say, "Look, let us repair the system which has served us so well" or they could say, "Now is our chance to escape from the rigid disciplines imposed upon us by the system, and break it down." That was the malign choice. The nations' leaders pretended to make the benign choice. As they tore down Bretton Woods, they declared themselves urgently as being about to build the new monetary system which the world required. Of course, they never fulfilled that pledge or made any serious move to do so.

From then on, we were landed with a monetary system which turned every major currency into a yo-yo rather than a serious, solid means for investment and exchange. Although I have it here, I shall not recite to the House the extraordinary convolutions of the dollar against the deutschemark and the yen in the period after 1971. For the first few years the dollar went down by 35 per cent. Then for two and a half years it hovered about 10 per cent. up and down. It then dropped another 35 per cent. and, finally, from 1980 onwards it started its rapid ascent by doubling in value against the deutschemark, the yen and many other currencies. Since 1985, the dollar has halved against those other currencies.

How on earth do we expect to have reliable and sustained progress in the world economy when we have at its centre money as unstable as that? Needless to say, it threatens free trade. That, as the noble Lord rightly stressed, is one of the essentials of our welfare. How can we have liberal trade when it is undermined by the violent and capricious changing values of currencies? I named the absurd convolutions of currency values. Even more absurd are the explanations to which we have been treated for those changes by conventional wisdom. I do not have time to recite those to the House.

When we broke down Bretton Woods we moved from modest co-operative preservation of the global economy to unilateralism at its most central point—on currencies. The result is that we are now facing chronic unemployment, the serious improvement of which is not in prospect either in this country or on a world scale, and the grave danger of vast cataclysmic changes in the relationships between the United States, Japan, Europe and the like.

What is the remedy to protect against these dangers? The answer is that we need to co-operate again on the central point of money, and many other points on which I have not focused today. In other words, the model for us should be the EMS covering Europe. I very much hope that we will join the EMS in the near future although, judging from the Statement of the noble Lord this afternoon, the auguries are not immediately favourable. That is where we must go. It must be an EMS that is not inward-looking, not merely attempting to achieve an oasis of stability among the European currencies; it has to relate to the dollar and the yen. We need an EMS which is outward-looking—and it has a better chance of being outward-looking if we are in it—and which sees the protection of world trade and world politics from the world economy as being in effect an IMS, that is to say, the EMS speaking for Europe, America speaking for the dollar and the South American world and the Japanese yen speaking, as it were, for Asia. Unless that is brought about, far from sharing the noble Lord's optimism, I am deeply pessimistic that the world economic convolutions which we are witnessing, however well we may prepare ourselves here in our own country, will be inadequate to protect not only our standard of life but our whole social structure.

I said that I would refrain from continuing election combat. I acknowledge that we have a Prime Minister decided upon by the majority voting in our electoral system. However, I must disappoint my noble friend: Manchester did not vote in favour of the lady, but then Manchester has not voted in favour of anything but a Labour Government for the last half century. Much as I love the place of my birth, I do not think that we can claim the right to dictate to the rest of the country continuous government meeting with our approval. The Prime Minister and the Chancellor of the Exchequer, whatever differences we may have over their policies or pronouncements, are both persons of outstanding ability.

My real anxiety is this. Why can we not hear from them in a sustained and well articulated public sense their recognition of these dangers, and not just in the way that the Chancellor in his Budget speech referred to a saving fall-back position; that is, that, all these buoyant hopes will be endangered with a world recession? I want to know what he has done about avoiding that world recession. I know that we are not a great power in the way that we were, but Britain still is one of the great financial centres of the world; we still carry potentially an enormous intellectual weight in the deliberations of the world. I do not hear our voice raised in recognition of the points that I have been making today—and, by the way, not merely in currencies because, should I have the privilege to do so on another occasion, I could extend this debate to the whole question of international debt which is running up in the world and equally is threatening the economies of the world. It would be encouraging if the noble Lord could give me the assurance that we shall hear coherent and sustained articulation by the Prime Minister and the Chancellor of the Exchequer of Britain's willingness to make a contribution to solving these problems. I do not preach doom, but doom will come if we do not tackle these problems successfully. All these problems can be dealt with, but I have to say that they are not being dealt with.

Party differences apart, I admire both the Prime Minister and the Chancellor of the Exchequer. He is a very gifted Chancellor who knows his way round all these subjects. I am deeply disappointed that our role, instead of being a leading one in creating the repairs required to the international system, if anything has been a negative one. Britain and Germany have been the least constructive in contributing to thought on the subject of solving the debt problem, and so far I have not heard anything very reassuring about the contribution that we intend to make to stabilising the monetary system. It is true that, when the pound looked like falling through the floor in relation to the dollar, we temporarily took a favourable view of co-operation instead of merely parroting the market price—clearly an absurd series of market prices—as the one on which we should rely.

I hope that the noble Lord will be able to say that in future we shall hear positively from the Government about the role that they intend to have in these international questions of currency stabilisation and greater economic co-operation between nations on central policies. If everybody had done what the Germans and the British did, for example, at the time when the Americans were being accused of profligacy, we should have had a world slump. It could equally be said, to be fair, that if everyone had done what the Americans had done, we should have had a wild world boom followed by a crash. But that is a second question. I want to know whether we can hear something real and positive from the Government; or are we to have parrot cries that the market knows best even when the consequences of that are devastating?

I hope that I have not implied by my speech that I belittle the efforts made by colleagues on both sides of the House who have been looking to improve our domestic preparedness. I suppose that, had I been a passenger on the Titanic, even if I had had prevision of the danger of an iceberg, I should have been very much in favour of having excellent domestic sanitary arrangements so that we could have had our party political arguments about what they should be, but, of paramount importance. I should want the captain of the ship to look to the icebergs.

5.58 p.m.

Lord Ezra

My Lords, I believe it is the task of those in opposition to probe behind the glowing statements of Ministers. We have had such a glowing statement today from the noble Lord, Lord Young of Graffham, vigorously and eloquently supported by the noble Lord, Lord Harris of High Cross, and the noble Lord, Lord Boyd-Carpenter. I think that our most valid contributions could take the form of asking a few leading questions designed to see whether the statements made by the noble Lords who represent the Government at a particular time are justified in the event.

I start by following on the important remarks made by the noble Lord, Lord Lever of Manchester, who is acknowledged throughout the world as an expert in international financial affairs. He has rightly referred to the fundamental, critical situation now arising throughout the world in financial and, indeed, in economic matters, the massive unbalance through which we are living. As a major trading nation. as a leading nation in the world, we cannot just ignore that situation. We cannot just introduce it casually in speeches about our affairs and say "Of course, this is all subject to what might happen in the rest of the world and, if that goes wrong, it is too bad; all options are then off".

I do not think that we can just shrug these matters off in that way, given our status in world and European affairs. I therefore join with the noble Lord, Lord Lever, in hoping that the noble Viscount the Leader of the House in replying to the debate will tell us a little more about the Government's policies in regard to these deep-seated international problems.

However, there are not only basic problems, but very real, immediate difficulties facing us in the international scene. Those who have read the recent OECD report published on 18th June will have seen the rather discouraging statement referring to the OECD countries. It deals with the most wealthy countries in the world; it is not talking about the world as a whole. The OECD report states: the economic situation has deteriorated in recent months, and OECD projections to the end of 1988 point to little improvement. Slow growth, high unemployment and large payment imbalances are likely to persist". The same rather bleak report has come out of the Bank of International Settlements. It expresses its unease about, the continuing weakness of the dollar, whiffs of protectionism in the air, the Sovereign debt problem, rising unemployment and the spectre of world recession". Only today the World Bank came out with similar statements. Therefore if one puts all this together it looks as though, in addition to the underlying problems in world affairs to which the noble Lord, Lord Lever, referred, there is the possibility not only of a fairly rapid decline in the economic situation in the world at large—affecting the developing countries—but that major imbalances and difficulties are also likely to arise in the developed countries.

It must therefore be a matter of concern to us in this debate in this House to know the Government's attitude to these matters. Do they feel that it is something that we should just let happen and see what comes out of it? Do they feel that there are policies to be pursued and, if so, with what countries and with what ends?

I should like next to turn to our internal affairs and to probe a little there also. The Government always put great emphasis on financial viability. That is the test of all matters to which they turn their mind. Indeed, the Prime Minister in talking about the European Community has said words to the effect that one cannot put money into a bankrupt institution. In other words, financial viability was the test. By that test there is no doubt that we in Britain have in recent years achieved a degree of success. The internal books have been balanced; and the external books have been balanced.

However, when one probes behind that balancing process certain features emerge. We have been exceptionally aided by two items of receipts, of resources, which are unlikely to be repeated and which are of limited duration; namely, the benefits derived from the North Sea and the sale of assets, both of which are likely to be of short duration.

The noble Lord, Lord Williams, referred to the reports on the likely rundown of the reserves in the North Sea. It is certain that there is only a limited amount of public assets that can be sold. Whether the present rate of sale can be maintained for the next two, three or four years is a matter of uncertainty. But there is no doubt that beyond that kind of period, receipts from that source are bound to diminish. Yet it is resources from those two activities which have buoyed up our financial situation.

What is worrying, and what worried the Select Committee chaired by the noble Lord, Lord Aldington, is the longer term. In this country we seem to suffer from a short-term outlook. This has been referred to by many, including the Governor of the Bank of England and the Chancellor of the Exchequer himself. I believe that that short-term outlook has been very largely due to the position that is constantly taken up by the Treasury, which is seeking to balance the books from day to day and shows very little concern about the longer term growth of the economy.

In this country we very badly need a countervailing department. Whether the Department of Trade and Industry under its new leadership will be taking on that role remains to be seen. We need to have a countervailing Ministry which will take a longer-term view of the growth of the economy than that taken by the Treasury, whose main task appears to be day-to-day viability. That short-term approach has unfortunately translated itself into industrial affairs.

As many noble Lords no doubt are, I am involved in a number of aspects of business. Inevitably we are being driven into a short-term position with quarterly reports of our results, and with everyone in the City watching our pre-tax profit figure, and the earnings per share. Every boardroom before it announces results is concerned to show a good short-term position. This of course inevitably means that the build-up for the future in terms of investment, research expenditure and training tends to suffer.

There is very little doubt that when one makes comparisons about investment in this country with that of our competitors one finds that we have invested less. We are investing in industry about 20 per cent. of GDP compared with 30 per cent. in Japan, 25 per cent. in Germany, and so on. The fact is that we are still investing less in manufacturing industry today, in spite of recent increases, than we were in 1979. The capacity of manufacturing industry in Britain—exceptionally, compared with all other major industrialised countries—is less than it was in 1979.

The size of manufacturing has diminished. What is extremely worrying in looking at the longer term is the report in The Times of 29th June on this morning's meeting of the NEDC. No doubt the noble Lord, Lord Young, was present at that meeting and will therefore be able to tell us whether or not this occurred, but this was a foretaste of what was going to occur at that meeting. It was reported that Mr. John Cassels, the Director General of NEDO, was going to demonstrate that, due to the big redundancies and factory closures in recent years, the country may soon run out of capacity to fuel rising demand for British goods abroad. He has drawn attention to the diminution in our investment in industry which has resulted, according to his calculations, in the fact that we are now beginning to reach the limit of our productive capability, that we shall soon be losing potential export orders, and that increased home demand would have to be met from abroad. We should very much like to know whether that is the situation because that throws a slightly different slant on the situation from the impression that we were given earlier today.

If the country's financial affairs are as strong as the Government tell us they are—and I have no doubt that they are telling us exactly what the facts are—I should like to suggest that we have certain priorities for the use of those resources which we have been fortunate enough to accumulate.

While I fully support everything that the Government want to do about the inner cities, that does not solve the whole economic problem of Britain. To some degree I fear it might be a bit of a diversionary tactic to suggest that we should concentrate everything on the inner cities and that everything else will look after itself. But there are other things to be done. I should like to suggest that there are three priorities in particular for which we should be using the financial resources which we now have very clearly at our disposal. I do not only mean public resources, but I talk about private resources; the combined financial resources of the nation.

First, we should see whether we can stimulate greater investment in manufacturing industry, whether we can catch up with other countries in this respect. We have lagged behind for too long. There are ways of doing this. There can be fiscal incentives. There can be projects such as successfully worked in Docklands, which I hope will be repeated elsewhere, with substantial infrastructure, up-front expenditure by government, attracting more private sector investment. There could be joint developments of various sorts.

But this greater investment in industry should not only be taken as investment in hardware. We need to invest more in research and in training to make sure that we have available the people to do the skilled jobs as the economy improves. I have been involved in export promotion almost since the end of the war. I can only say that every time the British economy has turned up, we have run short of skilled labour. This has been quite exceptional among the countries of Western Europe. So I believe we should try to repair that omission.

Secondly, the time is now almost past when we should be seriously tackling the problem of repairing and renovating the built infrastructure. I am horrified at the estimates which I now see have been made—my noble friend Lord Diamond referred to some—of the totality of estimates, many of which emanate from government departments. They indicate the extent of the expenditure needed just to repair the physical fabric of the nation.

The last estimate I saw amounted to over £90 billion. I am perfectly willing to show it to the noble Lord, Lord Young, who expresses surprise. I have it all itemised but I shall not read it out. It comes from a valid source and involves houses, school buildings, hospital buildings, water supply systems, sewerage systems and main and secondary roads in many parts of the country. All that totalled up comes to something of that order. We cannot achieve that overnight, but we ought to make a start.

Thirdly—this I believe came out very clearly in the recent election campaign—we need to improve the state of our public services, particularly in education and health. The Government always tell us about all the money they are spending in these sectors, but I think what people now want to see are results. They want to see standards improved. If we can afford to do that now we should be doing it.

I conclude my remarks by saying that this is the time when we should be taking a wide view of the problems facing us. The facts as they stand today may appear as the noble Lord, Lord Young, has presented them. But we need to consider our affairs in the context of the wider world economy and also to consider our affairs in the context of the future. We should devise policies that take those two major aspects into account.

6.15 p.m.

Lord Campbell of Alloway

My Lords, I should like to introduce a new topic into your Lordships' discussions and to go down another road, for as yet in this important and highly informed debate on economic affairs your Lordships have considered aspects of the inter-action between wealth creation and employment at both international and national levels. One of the factors—not the only one, but an important one—affecting both wealth creation and employment at national level in our own back yard is the essential contribution which the trades unions have to make to the economy.

My noble friend Lord Boyd-Carpenter referred to the speech of the noble Lord, Lord Williams of Elvel—to which I do not refer because he did not mention the subject with which I deal and it is therefore not within my province to comment upon his speech. In the noble Lord's absence—it was a pity it was in his absence, because it was most amusing—my noble friend Lord Boyd-Carpenter made certain mild comments about the speech and it would be quite otiose for me to enter into that at all. My noble friend was making a point in that context about the importance of understanding the changes in the structure of society. This has a particular relevance to the changed status of trades unions.

What is to be the changed status? What are to be the changed functions of trades unions? Trades unions provide part of the motive power in the engine room of national wealth creation and employment—an important part, which needs some tuning to achieve full efficacy. The problem of the status of trades unions is not one of those divisible problems between North and South, between England and Scotland, or between England and Wales, such as the type of problem to which the noble Lord, Lord Williams referred. This problem is a general, indivisible problem. The gracious Speech heralds legislation within this Session of Parliament to establish a new fundamental freedom—the right of a trade union member to work as he wills—so as to shift the balance of power in the unions back to the individual members. My noble friend Lord Thorneycroft made this point the other day as only he can make a point. This is a mere extension of the policies already pursued by this administration. It is a policy wholly justified by past abuses of trade union power.

Stripped down to brass tacks, the establishment of this right to work involves no strike call without a secret ballot, no disciplinary action for refusal to strike and no legal immunity for industrial action to establish or maintain a closed shop, not as such rendered unlawful. Some 3 million workers work under this system, but it is a system which encourages a variety of restrictive practices which impinge upon the right to work. What work shall be undertaken or not undertaken? By whom? How many? In what manner may goods be produced or handled or services provided? Here, freedom of choice is to be given to each individual member as to whether he will obey that ordinance of the union. At present if he does not obey it he is exposed to sanctions. In future if he refuses to obey he may not be disciplined and if he is disciplined the commissioner as part of his wider functions will seek the protection of the courts.

If I may anticipate the speeches of the noble Lord, Lord Basnett, and the noble Baroness, Lady Turner of Camden, I say with respect to them that it is understood that in principle the Labour Party opposes any dilution of concentration of power in the hands of the trades unions. It is understood but it is not accepted on this side of the House. The problem is that this power in the hands of the unions, a divisive power which has all but rent the fabric of our society on more than one occasion in the past, has been massively abused. There is the block vote; there are the disciplinary sanctions; there are the victimisations; the rigged elections; there are restrictive labour practices, some of which even maintain ghost labour on the pay roll; there is the misuse of funds, and even recently, as one read in the newspapers, the misuse of pension funds—all this to the great distress of the membership, at great cost to the state and at times at great peril, as we have seen in the past, to the maintenance of law and order. Now it will be open to individual members to put their own house in order without fear of loss of jobs and indeed without fear of expulsion or any other form of direct or indirect pressure.

During the debate on the Green Paper, the noble Lords, Lord Basnett and Lord Murray, questioned—and I have taken this from their most impressive contributions—whether there was any need and any general support for this curb on the concentration of power. That question has since been answered by the electorate. As to the trade union vote, according to the MORI survey published in The Sunday Times, about 30 per cent. went to the Conservatives, about 40 per cent. to Labour and about 30 per cent. to the Alliance. I do not want to be unkind about the Alliance. All parties have difficulties at times. But it is fair to say that the Alliance vote in its composite or disparate form would not readily be transferable to Labour. Therefore it would seem that there is an impressive trade unionist vote in favour of the Conservative manifesto proposals.

During the debate on the Green Paper the noble Lord, Lord Rochester, who is to speak later, took a stance—and I assume he will take the same stance today—that was rather difficult to appreciate, because he supported all the Government proposals but he said that some of them did not go far enough and that anyway we had cribbed some from the Liberal Party. Then he said, supporting Labour, that this was not the time for legislation at all. Then, having taken a sideswipe at what was called speculative capitalism—although I do not know what sort of capitalism is not, or what that means—he concluded without reaching a conclusion. Perhaps the electorate failed to understand the approach on this. I certainly did, and I hope I do the noble Lord no injustice. The policy may be very plain at a later stage in this debate.

During that debate, the noble Lord, Lord Chapple, whose name I am sorry to say is not on the list of speakers, warned that the proposal might be seen as a punishment for past misconduct. In view of the activist threat of extra-parliamentary action—and there is a threat that is repeated daily and has been repeated daily since the result of the election—the proposal may also be seen perhaps as a reasonable measure of safeguard against future misconduct. Why? If the right to work is established with effective means of enforcement—and that is the proposal—there is scant prospect of any sufficient muster to man any viable boarding party to strand yet again the ship of state on the shoals of anarchy. This threat of confrontation with government by resort to extra-parliamentary action is not only unconstitutional but unlawful, even if concerted industrial action were to be dressed up in the trappings of a trade dispute.

This threat of extra-parliamentary action and confrontation with the Government was kept well under wraps by those in charge of the "red rose" campaign, but now the activists have slipped their muzzles and having paid the Labour Party, their piper for parliamentary purposes, that same ilk calls its old tune of extra-parliamentary action. It is anathema to the electorate, it is an insult to the trade union movement and it is wholly unacceptable to all noble Lords, irrespective of where they may sit.

If it takes a long spoon to sup with those who would confront any duly elected government, nonetheless sup we must. A bridge of understanding of sufficient strength must somehow be built to carry some of the stresses and strains of the design load of proposed legislation. Before the draftsman cuts his quills and the mould of the Bill is set, the hope must be that we may debate a White Paper in which views expressed as sought in the Green Paper are taken into account and that there shall be consultation, real consultation, not only on aspects of principle but on ways and means of implementation. Is it not essential to ensure that the lawful and responsible conduct of trade union activities of vital consequence to the well-being of the state shall not be inhibited? Legislative reform in this regard as envisaged by the gracious Speech is not only welcome but is requisite as relevant to the needs of modern society. But surely we ought to listen before we leap.

6.30 p.m.

Lord Peston

My Lords, let me start with a word of apology to the noble Viscount, Lord Whitelaw. I shall not be here to hear him reply to the debate. I hope that he will accept that it is an extension of my normal incompetence as an economics forecaster that I was unable to forecast that there was going to be an economics debate this evening. No discourtesy of any kind is intended to him.

By way of preliminary remarks, there are two rather acerbic statements I want to make. One concerns the subject of taxation and incentives. I have spoken on this before and I promise to impose on myself a self-denying ordinance and after today not to speak on it again this year. But I must repeat the point that analytically within economics there is no presumption that high rates of taxation are a disincentive. This is a subject which has been studied in enormous depth and extensively empirically, and no one has established empirically as a matter of fact that those disincentive effects exist.

Given the effort that has gone into this over something like 50 or 60 years, were there any truth in the blanket proposition of the disincentive effects of taxation, that would have been established by now. I say that but I promise not to say it again, at least until 1988.

My second acerbic remark is in response to my old friend Lord Harris of High Cross, who I am glad to see has returned to his seat so that I can say it to him while he is in your Lordships' House. I read his remarks on unemployment and his view of the figures in the paper a couple of weeks ago. I thought it was some kind of elaborate joke. But since he has repeated those views in your Lordships' House today I assume that he expects us to take them seriously. I think he is profoundly wrong on both the social aspects of unemployment and the economic, but more on the social.

My view of the unemployment figures is that, far from exaggerating the social cost and misery of the people involved, they underestimate it. The fact that, like most British people, the unemployed do the best they can in adverse circumstances should not lead them also to have to accept the insult that they are not really unemployed or that they are voluntarily unemployed. They do the best they can but they would rather be in work.

On the economic and resource side of course the problem of unemployment—and this is widely accepted—is that it is destructive of the individual as a producer—as, I think the expression is now, a wealth creator. Certainly I agree that 3 to 4 million men and women are not immediately available for productive work, but that is a measure of the costs of creating that unemployment.

It is also indicative of why those of us who have argued consistently for some time that we should not have done it in the first place but that we should get rid of it as rapidly as we possibly can are right. That is why many of us continue, despite our difficulties with other aspects of government policy, to support all the measures of retraining and increasing employability that the Secretary of State himself has been so involved with for so many years.

Mostly I wanted to speak this evening on the theme that the noble Lord, Lord Lever, introduced, which is the international context in which we must place economic policy. Increasingly not to place these matters in an international context is to be in danger of getting almost everything wrong. To refer to my point on forecasting, suppose when all the major institutions are warning us of a major slump in the world perhaps we ought to say that they are all consistently wrong, but at least we ought to take it seriously into account.

The key issue will be timing, and to some extent the other danger I see is that the Americans will take too seriously this proposition that they ought to put their house in order and get rid of their current account deficit. If they did that they would really place the Western world in peril. Happily I do not think this will happen before the next American election, and we can face that when we get there.

Let me say in this regard that one aspect of the speech of the noble Lord, Lord Young, which I particularly applauded—and of course, as he knows, I shall be moaning at him continuously for the next few years and even making the occasional acerbic remark—was his view (and I take it to be the view of Her Majesty's Government) that we would not go down a protectionist path in dealing with these international matters. I hope strongly that he sticks to the view that whatever the problems are we will not be a party to increasing protection in the world. There are too many other forces in that direction.

Having said that, I should like now to turn to the role of the EC and also go on to the question of the EMS. On the EC itself I should like to echo the remarks of the noble Lord, Lord Ardwick, in the debate on Monday. Those of us who have been in favour of the EC are somewhat disenchanted by its inability to take any kind of leadership role in the world. He was referring of course to political matters but I should like to refer to economic matters.

In the political field the EC leaders simply enjoy themselves blaming the Americans and the Russians for everything that is wrong in the world, and that somehow excuses them. But in the economic sphere, because the Russians are not that important, they simply concentrate on blaming the Americans for everything. The time has come to stop this squabbling. Certainly I should like to see our Government start to take a lead in simply saying that the EC ought to be a body for influence in the world and particularly in the world economy.

On that I should like to say a word on the EMS, and I suppose I ought to say that I am speaking entirely for myself as a Back-Bencher. The noble Lord, Lord Diamond, certainly said that he favoured an early move into the EMS, and the noble Lord, Lord Lever, said that as well.

I hope I am not embarrassing the Government. For all I know there may be subtle negotiations going on at this very minute and we shall get an announcement very soon that we are about to join. There is a major case for us to join at this time and to get out of the weaseling thing—and I am just as good as anybody else at weaseling—and say that we will join when conditions are right. My general view is that we would do almost anything when the conditions are right; the real point is to do it. In this case I think that the arguments are compelling that we ought to be in.

Obviously it will complete whatever moves we have in the European direction economically. It is a vital cog in the whole European economic movement. It will certainly help us towards policy co-ordination, which we certainly need in the first instance in Europe. If we cannot get it in Europe then how can we expect to get it worldwide? I emphasise that point. I very much favour the possibility of the encouragement of more central bank operations for stabilising, with the Bank of England playing an important part in this, and also, as it were, using our joint capital funds for those purposes.

Another aspect of this—I hope not too minor—in the gracious Speech is that reference was made to freeing the market for financial services, something that I strongly support if for no other reason than that I believe that we in this country have a comparative advantage in this area. If we can free such markets, there is money for us to make. Since we are quite open in creating freedom for the Europeans to get into our markets in some ways, I would very much support—and I take it the Government will press ahead strongly with this—the proposals for freeing financial service markets in this way. Surely we shall be aided in doing that if we are in the EMS rather than not in the EMS. I think that will undoubtedly help.

I add on a narrower view that in so far as sterling is one of the currencies which somehow we are not sure where it is, it will take the pressures off sterling that are likely to emerge if there is any other adverse economic international effect. I reiterate that I am speaking for myself but I favour our joining the EMS. I favour more generally internationally of course our moving back to a kind of fixed rate system within broad bands rather than the rather narrow Bretton Woods system, which is no longer applicable. But the EMS is the first step and would be an important one.

I turn lastly to the future of domestic policy just to make one or two remarks which I do not make in a critical spirit. The problem that the Secretary of State has to address is one that has been with us for quite some time. I raise one or two questions about it rather as the noble Lord, Lord Ezra, also asked questions.

I remember as a student that one of the standard examination questions was, "Do you take work to the workers or do you take the workers to work?". I suppose I got a reasonably good degree because I was able to answer, "Yes, but", to each bit. That suitably balanced answer is what used to score high marks at the London School of Economics. I then learnt to lecture in exactly the same way, to give both things. But the difference between being a student and an academic on the one hand and then being in government on the other is that you have to do something. You cannot say, "Yes, you do this, and you also do the opposite".

What concerns me—and I do not know the answer but we have to probe into this a bit more—is that, as I understand it, policy is in the direction (and I would support it) that on the whole we shall try to take work to the workers in this case. In other words, we are going to try to invigorate and reinvigorate the North, the inner cities and all those areas. If that is policy, on the whole I support it particularly because the reverse would be to intensify the divisions and pour everything down to the South.

The difficulty here is a clash between what one might call the broad interest and how the market mechanism would work. My guess is that markets left to themselves, in so far as they deal with the problem at all, would pour everything down to the South and in a sense make the problem worse rather than better. Therefore we have the curious problem—the paradox—that the Secretary of State must be somewhat of an interventionist, although he will also wish to use market forces to help him, if we are to take the work to the workers. If he does that I support him.

I make a final remark to the noble Lord. He is Secretary of State for Trade and Industry and nowadays it is an interesting department. It has been so for some time because, on the one hand, it is trade and some of his officials will be pushing market forces to him. On the other hand, those on the industry side tend to be much more interventionist. Perhaps we shall achieve the right balance if we put the two together. Whatever happens, the actual criterion by which we shall assess the noble Lord, and I hope eventually cease to moan, is if the workers get back to work.

6.41 p.m.

Lord Raglan

My Lords, I think that the Government have treated the post of Secretary of State for Trade and Industry rather cavalierly. I read somewhere that there have been six Secretaries of State in eight years and perhaps the noble Viscount the Leader of the House will put me right on that point when he winds up. Whatever the figure, the Government have shown a certain lack of awareness of the importance of the post. That seems odd in an administration which rightly proclaims the paramount importance of the good health of trade and industry.

I congratulate the noble Lord, Lord Young, on his appointment and I hope it signifies that government thinking has changed. I am glad that the noble Lord sees his department as wealth-creating. I hope that he will be left there for several years in order to show what he can do.

I know him as a practical man. Years ago he advised me on the sale of new town assets. Today I offer him some thoughts arising from my own experience in that new town. I remember that in the mid-1970s we in the new towns saw their momentum running down and we would discuss among ourselves how well the new town mechanism would be suited to inner city renovation. In due course our ideas became manifest in the London docklands and on Merseyside, but not through a Labour Government. The Labour Government was stymied by its own local councils.

Lewis Silkin, the architect of the original new town legislation, would have been perplexed by that. Here was a way of getting money and jobs into the run-down areas, and it was opposed just as this Government's latest inner-city corporations and task forces are being opposed. One of the reasons for that is fairly simple. There could be problems if a local councillor has become used to being the most important person on the patch, projecting himself as the one from whom all blessings flow; but the voter sees jobs and economic salvation coming through an inner city corporation task force, or other central government agency. It is important that those in charge of these agencies have a clear-eyed appreciation of that situation. While they will need firmness of purpose they will have no room for arrogance, quite a lot for diplomacy and a great deal of need for a philosophical attitude because in some circles nothing that the agency can do will be deemed to be right. Therefore, in my view, choosing who is to head these agencies needs to be undertaken with the greatest of care. A wrong choice will create unnecessary difficulties, while a good choice will enormously assist in opening the path to getting things done.

I also concur with the noble Lord's reported remarks that the best that the task forces or inner-city corporations can do is to help cities to help themselves. That in turn is not something which can come about in a short while. The process of our industrial decline has been a long one, much longer than many people think or perhaps care to think. It will take a long time to reverse. By 1970 in the town for which I was responsible the old staple industries of coal and coke, wire making, tin plating and brick manufacture had gone and newly introduced industries, such as nylon spinning and automotive brakes, were reducing their workforces. A year later in 1971 an iron foundry which had employed 1,000 men for 170 years was closed down.

It was lucky for us that the M.4 from London was completed by that time, so we in South Wales could look to the South East as a source of footloose industry rather than to the Midlands, which at that time was having difficulties. We built advanced factories to tempt firms to move and settle in with us. Some firms did so, and very good ones too. However, there were not enough to take up the increasing unemployment. We then began to do what a number of people declared would fail. I had been advised by the ministry that we should build small factories, but when I asked how big a small factory should be I was told that it should be about 10,000 square feet. At that time it was enough of an area to employ about 70 people. Yet I could not envisage from where firms of that size could possibly materialise so we built units of one-tenth that size or less. In that way we began to create the kind of facilities in which local people in their ones and twos could start businesses. That was 15 years ago. I may say that it made no difference which government was in power; we continued this policy with their full approval.

Now well over half the businesses in that town have originated locally. It is no longer so dependent upon a few large employers and therefore it is no longer so vulnerable to slump in one trade or another, for there are scores of different trades. We should make no mistake that there is still a lot of unemployment there but the town and the area are prosperous compared with many, and furthermore are well placed to take immediate advantage of any general improvement in the economy. In addition, the earlier feeling of utter hopelessness is not there. If your grandfather and your father have worked in the same firm and you also expect to do so but then suddenly it is closed down, the bottom falls out of your world. That has happened on a large scale in parts of the country and people there must be forgiven for believing that the world has forgotten them.

I have seen how, with the right kind of encouragement, that outlook can change, although I repeat that it is likely to change only slowly; there is no magic wand solution. It is only to a limited extent that the problem can be palliated by importing ready-made firms. Enough of them simply do not exist, and if they are free to come one also finds that they are equally free to go.

In my view the economy of a city or a region of a city must be based on the firm grounding of indigenous firms. That means one or two people starting to do or make anything that is honest or legal, with no pompous value judgments as to whether or not it is deemed useful. Through impatience or incomprehension there will be resistance to the Government's initiative. No doubt there will also be doctrinal opposition in some places, for much the same reason that Stalin liquidated the kulaks: because they were small businessmen of independent means and therefore of independent mind. However, in taking these initiatives the Government have themselves abandoned a doctrinal, free-wheeling, non-interventionist approach and are being positive. I see the whole economic prosperity and political wellbeing of the country as bound up with the encouragement of small business. It behoves the Government to encourage it in any way that they can, and it ill behoves big business to look down upon it, because they were all small once.

I have always been deeply interested in macro-economics, about which we have had several interesting speeches this afternoon. I have sometimes wondered why Marx called capitalism a system, because if it were a system, surely someone would have found out by now how it worked and we could all agree about what to do next. At such times my mind goes back to a man who occupied a factory unit in my town and who made toasted coconut squares. He devised the mix for the correct stickiness and bite, invented the toasting machinery, obtained some second-hand sweet wrapping machinery and fulfilled a number of orders. At one time he was despatching no fewer than seven tons a week of the stuff from that factory all round the country to places from Fortnum and Mason down. Who would have thought of it? He did. He found a niche in the market. He made a lot of people happy and himself moderately prosperous. Given the right conditions, many more such people will appear in what now seem to be run-down areas and as they do so more prosperity and better conditions will materialise around them. I hope that the Government will go ahead with great energy in encouraging those right conditions.

6.53 p.m.

Lord Simon of Glaisdale

My Lords, your Lordships have been favoured today with speeches from famous economists, former Treasury Ministers and persons accomplished and experienced in public and private affairs, and those are overlapping categories. I propose to address your Lordships on two matters only: first, regional policy, which I approach, as I have done on previous occasions, from the circumstances of the industrial constituency with which I was formerly associated; and, secondly, the alarming correlation which has now appeared between unemployment and illiteracy and innumeracy.

As I believe that the Government are open to criticism on both those matters, on the second one sharing it with a number of previous governments, I ought to set the matter in its proper perspective so far as I am concerned by saying that I think that the last government—the one that went to the election—and the previous one have run the economy very well indeed. If I may say so without seeming impertinent, I thought that the noble Lord who is now the Secretary of State for Trade and Industry produced resourcefully and vigorously precisely the kind of measures that were needed. I thought that the Government were right to put at the head of their priorities the reduction and containment of inflation. Inflation is still much too high and dangerously high for social justice and economic competitiveness. But if inflation is not contained, one has to rely immediately on higher interest rates.

The last time this Chamber seriously discussed these matters—and I say "seriously" because before the election we had some very entertaining knockabout from the noble Lord, Lord Williams, and the noble Lord, Lord Brabazon, in which statistics were hurled about rather like bouncers at a batsman's head—there was a general consensus, put with particular force by the noble Lord, Lord Ezra, that the great hampering element that was preventing growth and particularly re-growth in manufacturing industries was high interest rates. Of course if inflation is not kept under control, one of the specifics that historically and theoretically is required is a higher interest rate.

The other step that government took, quite rightly in my respectful opinion, was to set a firm control over public expenditure. They were repeatedly urged to borrow more money. Even today, before we began this debate, there were three issues on which clamant voices were raised praying for greater expenditure, which at the moment means more borrowing. During the debate, the noble Lord, Lord Ezra, produced a most attractive shopping list of items on which more could be spent. If money is borrowed by the Government from the public it can only be by virtue of rewarding the lenders through interest rates. So if the Government had not controlled expenditure, interest rates would have risen further, to the detriment of industry.

We all see it quite clearly in the American economy but we are rather reluctant to admit it to ourselves. If we are to eat bread and honey, a firm hand and a firm mind are needed in the counting house and that is what we have had from the First Lord of the Treasury and the Chancellor of the Exchequer.

I turn now to the matters on which I think the Government are open to criticism, the first of which is regional policy. When I last spoke on this subject I protested against the over-simplification which makes a division between North and South and I think that that view has been borne out by the results of the election.

The noble Lord, Lord Williams, taking up a theme that the noble Lord, Lord Cledwyn, adumbrated on the first day of this debate, drew a picture of the electoral map on television, showing blue in the South and red in the North, in Scotland and in Wales. That is not only an over-simplification but a dangerous one, because it leaves out of account specific areas in the South where there is economic stagnation—they are few but they exist—and leaves out of account areas in the North of economic expansion.

I live in the North of England and both south of where I live and north of where I live the Government actually won a seat. So it is quite wrong to say that there is this economic division between South and North. Nor is it true to say that Scotland is a case by itself as I think the noble Lord, Lord Graham, said in an intervention. Indeed I have heard it said, and have read it, that since the election the Government have no mandate to govern Scotland. With all respect that is nonsense. Between 1832 and 1922 there was only one election in which the Conservatives had a majority in Scotland, but nobody suggested that they had no mandate to govern Scotland. The mandate exists in the Act of Union which puts on your Lordships, as part of the Westminster Parliament, the duty of governing Scotland and the right to do so. What one wants to look at in detail is the particular regions where there is economic stagnation.

Let me start by saying that even the most non-interventionist government —and I think that this Government have been right in restricting intervention—intervene powerfully in the economy. One has only to think of the Channel Tunnel and the vast expenditure, both public and private, that that engenders in the South. One can think of the M.25 and the way that engendered more traffic, more business, until hardly had it been completed than it had to be increased and enhanced.

But, in fact, the Government's regional policy has compounded that drawing of North to South. There are signs already that there is a shortage of skilled labour in parts of the South of England—I think that the noble Lord, Lord Raglan, referred to this—with the result that trained skilled workers are actually commuting from the North to work in the South. That seems to me to be very dangerous. A boiling economy is just as inefficient as a stagnant one. One has only to think of the economic situation of this country in the late 'forties, when there was continual shortage of skilled labour, with the result that the popular catchword was "bottleneck".

What the Government have done—and the noble Lord, Lord Young, confirmed this the last time I raised the matter—is to try to relax planning procedures in the South to make it easier for new businesses to be established there. That, as I say, merely compounds the cyclical effect and it is precisely the wrong policy—directly contrary to what is required. What is required is the relaxation of planning procedures in such a way as will encourage the new businesses to open in the area where industry is stagnating.

I do not think that the policy of inner-city restoration, desirable as it is, is sufficient. It is not sufficient for the reason that was indicated by the noble Lord, Lord Williams, when he enumerated the towns likely to be affected. But they excluded a number of rare areas of very high unemployment indeed and of extreme stagnation. So though I welcome the policy as regards the inner cities, it is inadequate in itself as a proper regional policy.

I turn finally to the question of illiteracy, which is indeed alarming. The noble Lord, Lord Young, instituted the new Job Training Scheme. It was reported that of the applicants to that, 25 per cent. had difficulties in literacy and numeracy—one-quarter. Those are young people. So it is tempting to say that they were discouraged and inhibited by the various curious items that seem to have crept into the school curriculum at the expense, no doubt, of teaching reading, writing and arithmetic. But that is not so. It cannot be so, because that same figure of 25 per cent. illiteracy and innumeracy is found in applicants to the Restart programme which suggests that there is a long-standing problem.

Perhaps I may give an example from my own experience. When over a generation ago I became a Home Office Minister I was responsible for the fire service. I went down to the London Fire Brigade which had found that it was having to refuse a number of desirable recruits who had once learned to read and write but who had lost the skills in the short time since leaving school. In other words, they had not been soundly and thoroughly taught. In fact, the fire brigade instituted their own system of schooling. So I hope that the noble Viscount will tell us the Government's policy on that.

My own view is that one thing that ought to be considered is whether we can make English more easy to read and write. I know that the Department of Education and Science has an inveterate hatred of that and has refused even to allow it public discussion in the way of a royal commission or a departmental committee. But the figures of illiteracy in relation to unemployment, which I mentioned, reflect very adversely on that ministry and I see no reason why it should be allowed to carry the cause at the expense of the unemployed.

As I say, those are two areas of criticism. By and large, I found myself in agreement with my noble friend Lord Harris and the noble Lord, Lord Boyd-Carpenter, that the Government have managed the economy not only well intrinsically, but more favourably than comparable foreign economies. I trust however that the two particular matters that I have mentioned will have the specific attention of the Government as they now, to my mind deservedly, enter on their third term of office.

7.10 p.m.

Lord Sandford

My Lords, about this time a year ago I was concluding a correspondence with the Secretary of State at the Department of the Environment, Mr. Nicholas Ridley. (May I say incidentally what a welcome innovation it is to allow a Secretary of State for the Environment to survive across a general election). The correspondence that I was conducting with him was on behalf of the planning authorities of London and the South-East and has resulted in an up-to-date regional strategy for London and the South-East, the first since the Greater London Council disappeared from the scene and the only regional strategy that is in force in any part of the kingdom.

The strategy has three strands: fostering economic growth, which is the topic for our debate today; revitalising the older urban areas, which is the main strategy and priority for the Government throughout this Parliament; and accommodating development while conserving the countryside. The progress towards achieving the aims of that strategy has been monitored throughout the last year and I have today received the report of that monitoring process. That report will be considered by the planning authorities that make up the South-East regional planning conference on 15th July and I shall thereafter be able to draw the attention of Members of Parliament and other people concerned with the region to it.

I thought that I might share some parts of that report with your Lordships today. I begin by reminding your Lordships of some of the special characteristics of the South-East. It is one of the more prosperous areas of the kingdom, making a major contribution to the United Kingdom's reviving economy and enjoying the benefits of that. It contains the financial services, comprised in the City of London, and it provides homes and houses for those who work there. In the Thames Valley the South-East has probably the greatest concentration of the sunrise and service industries in the kingdom. It is the nearest part of the kingdom to the markets of Europe and it contains the world's busiest airport, so it is no wonder that it is thriving. But nevertheless it is like every other industrial region of the kingdom in that a large part of it is still engaged in a massive and arduous process of restructuring from the earlier industries that originally sustained it.

I should like from now on to invite your Lordships to concentrate with me on the problems and the opportunities remaining in that part of the South-East which can be described as East London and the Thames estuary below it. That area has already been subject to massive changes and these are still being encountered today. It is indeed an old urban area, far greater in extent than any other in the kingdom, stretching for 50 miles from Tower Bridge right down to Sheerness; and it is the revival of that part of the South-East which people in the other parts of the region regard as a matter of the highest priority. That is not just the docklands, not just the inner London boroughs but the whole Thames estuary, all 50 miles of it.

That area is still littered with phantoms from the past: early brickworks, chalk pits, cement works, power stations (some of them still in service, some of them derelict) decaying jetties, slips, wharves, docks—not just the commercial docks of London but the closed naval dockyards of Chatham and Sheerness. All those have gone. On top of that there was the pre-war slum clearance, the bombing during the war and the post-war reconstruction which led enormous amounts of talent to leave London and settle in the new towns surrounding it, such as Crawley, Stevenage, Hemel Hempstead, Harlow, and so on. Since then there has also been the collapse of the commercial docks in London.

There is in this area that I am now describing the highest concentration of joblessness in the whole kingdom. So do not let us talk about the North-South divide as though none of those problems existed in the South-East. They do exist, and where they exist they are more concentrated and severe than anywhere else.

But right athwart the Thames estuary now strides the M.25, providing enormous opportunities for regeneration. Right outside the estuary lie the huge markets of Europe. There has already been the spectacular success in the London Docklands under the urban development corporation there. That was a costly exercise and not I think exemplary in the sense that it could be adopted in many other places.

In Medway, where Chatham dockyard has been closed with a further huge increase in unemployment, there are now enterprise zones and business parks which are proceeding satisfactorily. I was pleased when I recently visited that area to see the church of the barracks which I remember well as a former naval officer now serving as the headquarters of the Medway towns enterprise agency—a thoroughly satisfactory conversion. The authorities both sides of the Thames downstream seem to me to be making considerable progress in establishing a better environmental image. Gillingham, for instance, is engaging consultants to help it change the appearance and attractions of the borough. Labour Thurrock on the other side of the river is using the Ground Work Trust which has helped so much in the North to improve the image of industrial dereliction, and Gravesend in Kent is engaged in an imaginative scheme with Kent County Council in improving its image.

All of them are attracting private sector building and private sector enterprise into their areas, and as a result since September of last year they have succeeded every month in reducing their unemployment figures by 500. That is not a large figure in the macro terms in which we have been discussing things earlier today but it means to say that one of the blackest spots of unemployment outside London in the South-East is now improving faster than many other areas in that thriving region.

So what about the prospects, policies and priorities for East London and the Thames estuary from now on? The South-East regional planning conference undertook a survey of that area, East London and the Thames estuary, in January last year. It identifies those areas which would be capable of commercial development but which are constrained by the existence of heavy dereliction, absence of roads and other environmental factors of that sort. Those factors are being overcome and the monitor to which I referred records that.

However, it is clear that the housing authorities must develop further strategies with private sector builders and enterprise agencies for providing good supplies of low-cost housing—a subject which received very full treatment in our debate yesterday—low-cost workshops for new productive capacity, and also develop co-operative schemes for improving their environmental image. It is necessary for the counties and the London boroughs, as highway and education authorities, to ensure that the lack of adequate road links and the lack of skills do not hinder economic growth as it begins to pick up in those areas.

That leads me to a question which I should like to put to my noble friend on the Front Bench. The Government must be ready to help adjust the priorities in departments in Whitehall, in bodies like regional water authorities, in British Rail, among health authorities and in bodies such as the Central-Electricity Generating Board, all of which have activities and hold land in those areas, to help make them conform more specifically to the regional strategy for the South-East (now that we have one), especially as it applies to East London and the Thames estuary where assistance is chiefly needed, where joblessness is greatest but where the potential is also greatest too. The bodies such as those I have mentioned should be required actively to support and not to hamper or to hinder the implementation of the strategy.

The question I should like to ask my noble friend is this: Can be confirm that there is going to be some new structure or machinery, either in the Cabinet or in Whitehall, which will be able to respond more effectively than it has, in my experience, in the past, in order to encourage and not to hamper the enterprise-led growth and development which we all want to see and are so glad to see emerging at last?

Lord Basnett

My Lords, a regrettable feature of our society and one mentioned by my noble friend Lord Williams of Elvel is its polarisation and division. That polarisation and division will widen if the Government fail to repair an omission or to reconsider a commitment made (despite the promise of consultation) in the gracious Speech. The commitment was to introduce—and I repeat the words for the benefit of the noble Lord, Lord Campbell—the unsought, unjustified and unnecessary legislation which can only be designed to harass the trade union movement. The omission is of any acknowledgement of even the word "unemployment" or any commitment to give priority to its reduction.

To the individual who is unemployed, that is both an economic and a social disability. During the course of last year, a series of articles appeared in the British Medical Journal on health and unemployment. The general thrust of those articles was that unemployment is not good for your health. In one of the articles there was a quote from an article in the British Medical Journal in the 1930s which said that an unemployed man was typically one who sat and stared out of his kitchen window at an untended garden. That lack of motivation and removal of social status which the absence of work brings divorces the unemployed from society and creates a source of polarisation and division.

That is a commonly held view and one which is certainly held collectively in industry. National employers' organisations, including the Confederation of British Industry, who are associated with the OECD—that is, all the representatives of all the employers in the world's industrial nations—hold that view. With the trade unions, they signed a statement supporting it. That statement, Full Employment and Growth as a Social and Economic Goal, presented to the OECD Finance Ministers, including Nigel Lawson, and reiterated in March of this year, said: Work provides dignity. A society that does not consistently offer meaningful, productive and remunerative job opportunities to all who are able and willing to work cannot avoid social instability.". Employers throughout Europe and throughout the industrial nations of the world acknowledge the dangers of unemployment. The gracious Speech does not. Nor does it contain any indication of the priority being given to its solution. That is against the background of certain knowledge that with current policies large-scale unemployment will continue. Even while some speakers during the election claimed success in the battle against unemployment, they knew that between 7,000 and 10,000 jobs would disappear from manufacturing industry during that period. They knew that reports being prepared or issued by the OECD and the London Business School would show that in real terms unemployment would not depart significantly from 3 million for the rest of this century.

That portrays a tragedy and poses a challenge to all of us to produce policies targeted at reducing unemployment. In the gracious Speech, such policies are curiously absent. On the part of industry, however, there is no doubt about what is needed. Among their proposals to the OECD which have particular applicability to the United Kingdom they say: A strengthening of the manufacturing base is in many countries essential. This will also provide better opportunities for the sustainable growth of services. Consequently, increased investment is of strategic importance.". For industry to undertake that investment, there must be a steady climate of confidence—a climate whose creation should be the responsibility of all of us, the Government, employers and trade unions. But the pattern must be set by Government. It is they who can more readily increase infrastructure investment, provide the educational and training facilities which overcome the bottlenecks and mismatches, ensure the reduction of uncertainty, introduce appropriate tax policy and, most of all, inspire a reduction in interest rates. For there to be involvement of the employers and trade unions in the creation of that climate, there must be confidence in the objectives of government policies and some consensus on how they are introduced. That consensus does not exist.

The only OECD countries with strong trade union movements which have achieved higher levels of growth over a long period and avoided our catastrophic levels of unemployment are those which have that consensus, from Germany to Japan and from Sweden to Holland.

The policies of which I have spoken are not those of any particular party, nor particularly those of the trade union movement. They are policies of both sides of industry throughout the world's industrial nations. They could provide a basis for confidence and success.

Perhaps I may briefly connect the issue of trade union legislation to the argument for consensus. Our society, whether between North and South, the employed and the unemployed, the rich and the poor, yearns for cohesion and consensus. It is a strange time to harass and unnecessarily discomfort the trade union movement with legislation for which the Government have been unable to demonstrate justification or need. Not only is this legislation unsought by concerned organisations, it is opposed—or supported only with reservations—by any of the concerned organisations. No concerned organisation, including the Conservative trade unionists in their conference, have sought this legislation. No concerned organisation welcomes, or wholeheartedly welcomes, it.

Our new ally, the Freedom Association, welcomes it only with reservations. The CBI has reservations and noble Lords can search in vain through the opinion polls and through the Green Paper for evidence of significant support from trade unionists. I am sure that the noble Lord, Lord Campbell, would have found it easier to find a needle in a haystack than a voter in the last election who voted for the Government simply to support these proposals. There is no justification for the proposals.

How can you justify proposals which are the antithesis of democracy? On the one hand, the Government insist on legislation which will give a majority vote before a strike. Now, they propose to support those who ignore that majority decision. I should like to remind noble Lords that immediately after the election the Prime Minister attacked (as has happened here) those who talked of extra parliamentary activity. I agree with her. But what she went on to say was that observance of majority decisions was a cornerstone of democracy. What is good enough for the Prime Minister is good enough for the trade union movement.

How can we justify requiring the trade union movement to have its books inspected by its members at any time, when at the same time a shareholder who invests his life savings in a company has no such right, or an employee who invests the whole of his working life in a company has no such right? How can we justify establishing a commission to advise and give legal support to trade unionists complaining against their union when no other members of any other organisations in this country have any such right? How can we justify further action on the closed shop? On this matter I should like evidence of statements during this debate of continuing abuse.

Closed shops are matters of agreement with protection for the individuals. They have industrial relations advantages. They provide a single channel of communication, and there is an absence of shop floor friction. But most of all, how do you justify the continued attack on that most precious freedom that affects the working people of this country, the collective freedom for which they have fought over the centuries?

The noble Lord, Lord Campbell, pointed out that I made my maiden speech on this subject. Then I had to be non-controversial. If I was to be controversial now I would say that these proposals were arrogant and vindictive. When we need to unify in order to conquer unemployment the Government divide us. When we need to conciliate they harass, when we need to concentrate they divert. The Government's failure to give priority to the solution of unemployment, and the attack on trade unions are not two aspects of policy they are one policy. It is that policy which will deepen the divisions in our nation.

Lord Campbell of Alloway

My Lords, before the noble Lord sits down perhaps I may say that I did not wish to interrupt his speech for I thought that it would be discourteous. He did in fact refer to me three times. How do I justify? I justify because of the history of massive abuse of power. That charge has not been answered in your Lordships' House tonight.

7.38 p.m.

Lord Rochester

My Lords, I should like to follow the noble Lords, Lord Campbell of Alloway and Lord Basnett, in commenting briefly on that part of the gracious Speech which deals with trade unions and their members. If I did not make my views plain to the noble Lord, Lord Campbell, in an earlier debate, I hope to do so now.

In the gracious Speech there is a single sentence which reads: Legislation will be introduced to improve the rights of individual members with respect to their unions and to provide further protection against trade union enforcement of closed shops.". The Conservative Party's election manifesto was not much more forthcoming, but the intention seems plain from what the newly appointed Secretary of State for Employment is reported to have said recently—namely, that the Government intend their legislation in this field to follow closely the proposals contained in the Green Paper Trade Unions and Their Members. Therefore, it is on that assumption that I should like to make a few comments this evening. I put it like that because, speaking on behalf of my noble friends in the debate on the Green Paper to which the noble Lord, Lord Campbell, earlier referred, I responded at some length to the Government's specific proposals.

I briefly remind your Lordships of our attitude to three of the most important of those proposals. On that occasion I welcomed the Government's belated conversion to our view that trade unions should use fully postal voting procedures under independent supervision for elections to their principal executive committees and that this should extend to the distribution, the receipt and the counting of ballot papers. I further said that we thought it right that the chief officers of the unions should be required to submit themselves for reappointment at regular intervals either by the same electoral means or at the very least by the votes of members of the principal executive committees who had themselves been properly elected.

I expressed sympathy with the Government's proposal that individual union members should be enabled to take legal action to restrain their unions from authorising or endorsing industrial action which had not been validated by a ballot. On the other hand I said that, like the CBI, my noble friends and I disagreed with the proposal that individual union members should be protected from disciplinary action by their unions if they refused to take industrial action even if that action had been endorsed by a prior secret ballot. This was largely because it could, in our view, undermine the balloting process itself in so far as it would be seen to provide a form of statutory protection for those refusing to be bound by the results of a ballot. A cynic might go further and say that the Government seem to be in favour of secret ballots only when they produce the result that the Government want.

In replying to that earlier debate, the noble Lord, Lord Young of Graffham, was honest enough, if I may say so, to acknowledge on this difficult question of the balance to be struck between individual and collective rights that what a number of us had said then stood up, save in one respect. He said: With a pre-entry closed shop, it is difficult to say to an individual who does not believe in a strike in which the majority does believe, 'If you go out on strike you run the risk of being dismissed but you can maintain your union card and perhaps try to get another job. However, if you go in to work to protect your job then you can lose you union card and not be permitted to work anywhere else'."—[Official Report, 29/4/87; cols. 1550–1]. The noble Lord recognised the problem, but he seemed to shrink from providing the answer, which surely is to work towards the elimination of the restrictive, illiberal and outdated practice of the pre-entry closed shop.

In our earlier debate I also expressed misgivings about the role envisaged for the new Commissioner for Trade Union Affairs whom the Government propose to appoint to assist individuals in pursuing complaints against their union. That is a matter to which the noble Lord, Lord Basnett, has just referred. Unlike existing commissions concerned with equal opportunities and racial equality, no limits appear to be set on the extent to which this new commission could be called in aid. I do not see why trade union members should be singled out from other citizens as recipients of this new kind of institutional help.

So much for the proposals themselves. Today my main purpose is again to challenge the Government's basic view that this is the time for a further round of union legislation. I say that as one who, on behalf of my noble friends, has given broad support to much that the Government have done in this field over the past eight years. Like the Institute of Personnel Management, we take the view that more time should be afforded to make a fair assessment of the present laws before adding to them. In a growing number of companies, employers, unions and their members have been developing initiatives to improve industrial relations. We believe that these should be allowed to progress further within the existing framework rather than embarking on new legislation which will be seen as unnecessarily controversial and indeed adversarial.

In our earlier debate I said that we fear that in planning to introduce further legislation the Government are less concerned with the need to encourage co-operation between management and employees than with a desire further to cripple the effectiveness of trade unions. On these Benches we believe in trade unions as an essential means of enabling employees to join together to protect themselves from unscrupulous employers and generally to keep management up to its job. Moreover, why are the Government so discriminatory in this matter?

If there is need now for further union legislation, surely there is no less need for more regulatory action in other fields; for example, for some further statutory limitation to be placed on the current excess of speculative activities—if the noble Lord, Lord Campbell, does not like the phrase "speculative capitalism"—in the City. These are activities which are too often directed towards short-term gain rather than to the long-term improvement of our industrial performance.

Again, if there is thought to be this immediate need for further detailed regulation of the conduct of trade unions, why do not the Government demonstrate their even-handedness by building at the same time on what is already the practice of our best employers and giving employees the statutory right to be informed on matters of concern to them and consulted in the making of decisions which affect their interests?

To sum up, we think there should now be a breathing space in which the trade union legislation of the past few years can be digested and management and employees can increasingly develop the interests that they have in common. Even at this late stage I take leave to urge the Government to heed the warnings of employers who speak for those bearing responsibility for handling human relations in the front line of industry. We have to recognise that the Government are now committed to introducing further legislation in this field, but let it at least be balanced in some of the ways I have ventured to suggest.

7.50 p.m.

The Earl of Onslow

My Lords, it may be possible to give the noble Lord, Lord Basnett, a little history lesson. In his previous existence as Prime Minister, the noble Lord, Lord Wilson of Rievaulx, is reputed to have said to the noble Lord, Lord Scanlon, "Get your tanks off my lawn, Hughie." That is why trade union legislation has been necessary. People should not be allowed to put metaphorical tanks on Prime Ministers' lawns. It is bad for everyone and above all it is bad for the economy. One could continue down that road of abuse, but there has been serious abuse of power, although not in an anti-citizen way, by the monolithic trade unions. However, that was not what I wanted to talk to your Lordships about.

I wish to complain about the 35 per cent. tax rate on low incomes. Before my noble friend leaps to his feet and says that it is not 35 per cent., but 27 per cent., he will be aware that a decree went forth from the other place that an 8 per cent. national insurance contribution should be added to the figure. There is no way in which one can avoid paying it. It may not call itself a tax, but it is a tax by another name, as my noble friend Lord Boyd-Carpenter pointed out.

I happen to know a young man of 19 or 20 who earns £90 a week. The deductions from his pay packet amount to just over £19 a week. That is the level of tax at which we should seriously complain. It is ridiculous to tax someone earning at that level at the rate of 35 per cent. My noble friend Lord Chelwood told me about one of his friend's employees who takes home £100 a week. His gross wage is £123. There is too much tax at that level. Why would anyone want to be a hospital porter, a lavatory cleaner in Dulwich or do such humble, fairly low paid jobs, when they are taxed at that rate? It is for those people that we should get at and reform the system.

There was an article in the Independent newspaper a week or so ago which said that there were tax shelters amounting to £13.5 billion. The greatest of those are obviously pension allowances and mortgage tax relief. For a Government who like to support the family, it has always struck me as ironic that two cohabiting homosexuals on high incomes can have a joint mortgage of £60,000 on a joint house whereas a perfectly respectable married man and his perfectly respectable hardworking wife can have a mortgage of only £30,000. That is not the policy of the family. If I may be slightly cynical, it seems to be the policy of AIDS.

The black economy takes a great deal of the strain, especially in the South-East. I accept that the position is different in northern parts of the country where there are wadges of serious unemployment. In the South-East it is much easier for a young man or woman to obtain a dead-endish job in a pub for four of five evenings or four of five days a week and go on the benefit. Their net spendable income is what counts. Their net spendable income for doing something "iffy" is the same. We know that it is sinful and illegal. We know that they will be prosecuted if they are caught, but I do not think that they regard it as morally wrong. It is an awfully silly tax system which allows them to do it.

"SS" should be taken out of the "DHSS" and put into the Treasury. The tax and benefit systems will then merge. We will then be looking at net spendable income, so that whatever someone earns he will always be better off than under the present system. We do not have that at the moment.

I have nothing else to say except to congratulate my right honourable friend the Prime Minister on following the excellent example set by Henry VIII who dissolved the monasteries. He took the church lands and sold them to his various supporters. The church lands then became more prosperous. What has my right honourable friend the Prime Minister done? She has dissolved the statute of Mortmain. The dead hand of the church, in the form of state industries, has been sold. Henry VIII became popular and his economy prospered. It seems that my right honourable friend has had the same effect.

It is nice to be speaking in a debate when one is not being convinced that we are facing an economic crisis. There are things wrong with this country at the moment. The noble Lord, Lord Basnett, said that it was a disunited country. He does not know what a disunited country is. He should try Sri Lanka or Ulster. This is a united country. It is a country with much greater social cohesion than any other country in Europe.

Lord Basnett

My Lords, will the noble Earl accept that I did not say "disunited".

The Earl of Onslow

My Lords, the noble Lord may not have said that, but I understood him to say that it was not united.

Lord Basnett

My Lords, no. I did not say that.

The Earl of Onslow

My Lords, if I am wrong, I apologise. I beg my noble friend on the Front Bench to draw the attention of the Chancellor of the Exchequer to the iniquities of the tax system at the bottom end of the market.

7.56 p.m.

Baroness Turner of Camden

My Lords, I welcome the opportunity to comment on this important debate, although I had hoped that I should not have to make the type of speech that I am making. When we discussed the Green Paper on trade unions in your Lordships' House on 29th April, it came under considerable criticism from all sides of the House. My recollection of that debate is somewhat different from that of the noble Lord, Lord Campbell of Alloway. A number of your Lordships said that there had been enough legislation and that we should let it all settle down.

I remember that the noble and learned Lord, Lord Denning, said: To sum up, as I said earlier, perhaps the hest way is not to interfere with the present legislation. Let it settle down and let us go into the next Parliament, whenever it is, without this again being made a subject for political controversy."—[Official Report, 29/4/87; col. 1526.] Unfortunately it would appear from the gracious Speech that that is not to be.

I had the opportunity recently to participate in a delegation from the TUC General Council which went to talk about the Government's proposals to the new Secretary of State for Employment. As is to be expected, the TUC is not in favour of them and said as much to the Secretary of State. However, we made an attempt to find out just how committed the Government are to the Green Paper. It appeared that they are very committed and intend to proceed because they have a mandate.

I regret to say that at that meeting there was no common ground or meeting of minds. The Government told us that they believed in individual rights and we said that we believed in collective representation. The Government had no perception that for poor and vulnerable people the only way in which they could enforce individual rights is through some form of collective representation, and that is what trade unions are there to provide.

Moreover, I do not think that the Government have a mandate for what amounts to another round of union bashing. Of course, it is not described as that. It is described as giving the unions back to their members. But that is the way it appears to those of us who are active in the trade union movement.

We have legislation, which is being widely obeyed, and which involves balloting members in advance of any industrial action. Unions are also bound to tell their members that they may be breaking their contracts of employment if they take industrial action. However, if a majority of members vote for strike or any other form of industrial action in a properly constituted ballot, it seems to me absurd that further legislation should permit those who are in a minority to get away with what may be a breach of their union rules by not complying with that majority decision.

There is nothing to stop such people from not participating. But why should the union not have powers under its own rules to deal with those who breach collective action? If people do not like the rules, they need not belong.

As my noble friend Lord Basnett has already said, why have ballots at all if the minority does not have to abide by the majority decision? Why bother to go through balloting in the first place? I raise these issues because I want to know from the Government how they now stand in relation to trade union legislation. Does the Green Paper represent the Government's considered view or are the Government willing to listen to those—and they are not only trade unionists—who say that the proposition to which I have referred is nonsensical? The people who have opposed it include the CBI and the Institute of Personnel Management. These are the people who are concerned about stable industrial relations and the sanctity of agreements. If the minority are to have some special sanction or privileges, it strikes at the root of these collective arrangements.

Secondly, why is it that protection should be given only to the minority who do not want to take industrial action? Why should not the majority, who have properly carried out the requirements of the legislation, not have equal protection against loss of employment if they abide by the majority decision? Why should action automatically terminate an employment contract? Why could we not at the very least have provision, as exists in some European countries, for the contract simply to be suspended if the proper actions have been carried out and there has been a properly constituted ballot?

However, the Government do not seem interested in that kind of protection for employees. We on this side of the House have repeatedly sought to raise the whole issue of employee rights relative to employers. Those are the kind of rights that matter most to employees, and they are the reason why people join unions in the first place.

We have accepted for many years in this country that collective bargaining is a right and proper way to deal with industrial issues. As long ago as 1968 the Donovan Commission reported that effect and indicated that even for people at managerial level collective representation was often desirable and better able to deal with their interests as employees. We now have a Government who appear to be against this whole concept. Legislation that existed prior to 1979 and that helped towards the orderly resolution of industrial disputes and differences has disappeared. We have said this many times from this side of the House.

Certain groups of public employees, as we know, have had their right to negotiate—teachers of course are a case in point—taken away from them. It is not therefore surprising that to many trade unionists and potential trade unionists the Government appear to be basically hostile to trade unionism, no matter how much they may claim that this is not the case and that they are only attempting to give unions back to their members. Moreover, to the ordinary member, the Government appear much more anxious to interfere in the way that Mr. Arthur Scargill is elected than to have concern about the unbridled power of newspaper tycoons, who do not have accountability to anybody. The Government in fact appear to be concerned to protect the right of employers to pay people at low rates of pay but are not concerned about the rights of employees to react against such sweatshop conditions.

The industrial relations policy of the Government can be summed up as follows: a pool of unemployment plus weak unions equals low wage costs. That is what I believe it to be about, and the talk of further reform or further democratisation of trade unions is simply a blind.

I have no doubt at all that it will be said from the government side that there are fewer industrial disputes now than at any time since 1979. We have heard this many times before in the House. However, surely no one can deny that there is widespread disaffection and discontent in the public services, for example. In manufacturing industry, particularly in Scotland and in the North of England, the workforce to some extent has been cowed because of unemployment, although even there there have been examples of action, for example, in the Caterpillar plant, where workers occupied the factory to try to save jobs. In the public services, as we have seen, teachers have had their nogotiating rights withdrawn and in the Civil Service there is discontent even though there may be differences of view among the unions as to the strategy to be followed.

In a situation of sullen discontent in the public services, with large sectors of the economy on very low wage rates—in particular those paid to women—and, on the other side, the Government attempting still further to weaken the ability of unions to respond to those conditions, I do not think that this is a reasonable or suitable industrial relations policy to be followed in the country.

I ask the Government whether they would be good enough in their reply to the debate to explain exactly where they stand in relation to the Green Paper. Is it a matter still for consultation, or are they absolutely committed to the provisions that it contains?

8.5 p.m.

Lord Wolfson

My Lords, the result of the general election demonstrated that the electorate wants a market economy based on enterprise and choice, one in which an ever-increasing number of people can participate as investors and owners of capital assets. There is a desire to see the creation of wealth that will bring broadly based personal benefits, with an enhanced and efficient investment programme in the National Health Service, education and housing.

Government policies have made a significant contribution to encouraging the modernisation and competitive improvements that have taken place in the business world, which itself has faced a period of unprecedented structural and technological change. While there is certainly no room for complacency, there is a more confident and positive spirit, and for the businessman the essential pre-requisites for long-term success are confidence and continuity. We now have a combination of sustainable growth and lower inflation and of rising profits and productivity, allied to the improved design of marketing techniques; and we have a climate to much better human relationships. We know from experience that stop-go policies in the past had a damaging effect on future business planning. It is demand-led expansion that in time reflects itself in a most appropriate and profitable form of investment.

British research work is renowned, but too much of its development has gone overseas. It is necessary for industry and the financial institutions to target more investment into research that has business potential both directly and through the universities. The Government have offered matching grants to promote this policy, and it is a powerful encouragement. I should like to see research teams participate as equity holders in their work, and perhaps a university investment agency might be established on business lines to seek research funds.

I should like to refer to four areas of official policy designed to strengthen the enterprise infrastructure which has been taking shape in the last eight years. First, as my noble friend Lord Boyd-Carpenter pointed out, there is the need to carry further a reform of the direct personal taxation system on lines similar to the corporation tax changes already enacted. These have enabled companies in the United Kingdom to be fully competitive in international terms.

Talented people in all aspects of creative life can use their skills anywhere in Western Europe or the English-speaking world. The United States in particular offers powerful incentives in providing better facilities and, as a result of its own recent reforms, much higher after-tax salaries. Yesterday's report by the Royal Society and the engineering policy unit demonstrates the international competition that we have to meet.

It has been shown that lower rates of tax can lead to higher revenue receipts, to the retention and attraction of talent and to the faster creation of wealth. This in turn would give the opportunity that we all wish to see for more capital investment in health and social services. The right incentives will motivate creative men and women in all facets of the national economy and the benefits will be widely spread.

Secondly, to generate the inner cities, they have to be made attractive for people to live in. This means gradually replacing badly designed concrete tower blocks with tasteful homes built on a human scale, where people feel less exposed to the criminal element in today's society. We should accelerate the marketing of empty homes and bring back to residential occupation houses and flats that were given temporary commercial use many years ago. A variety of schemes are required to provide tourist and recreational facilities, modern workplaces, improved access roads and parking facilities.

The broadly based programme contemplated in the gracious Speech, with all its multiplier potential, is based on the imaginative combination of urban development corporations in partnership with the private sector and local authorities. This partnership has already proved its worth. The policy outlined envisages a dynamic quickening of activity, which is good news indeed.

While I am not technical, I should imagine that the development corporations will consider the increasing use of industrial systems capable of modifying inadequate housing stock by the creation of new facades and the carrying out of essential internal repairs. Quite clearly the accelerating programme proposed is required urgently. It is one that can be financed responsibly and has to be based on durable quality standards. We must never again make the tragic error of replacing poor quality housing with a low standard equivalent or of putting experiments in social engineering above the natural aspirations of people who wish to live as part of a closely knit community.

As an important contribution to improving both employment and self-employment prospects in inner cities I welcome the concept of moving towards a uniform business rate, which should help to attract more investment in less prosperous regions of the country.

Thirdly, in addition to the improvements required in literacy and numeracy, there is a strong case for the expansion of business and vocational training courses in schools, which would be taken further in higher educational establishments. Of course we need an education system with a broadly based curriculum but, as my noble friend the Secretary of State pointed out, we have neglected for too long the skilled requirements associated with business expansion and widely based wealth creation.

Finally, I refer to the need for business managed central buying methods in the health, education and arts areas, for buildings and equipment and for supplies and services. I have experienced a number of relevant instances where the opportunity occurred to obtain better buying values and to invest in energy and other cost saving ventures with a rapid payback. Government matching loans or grants could act as a catalyst in stimulating the latter type of investment.

A number of important leading indicators and economic reviews show that the British economy is in good shape and expected to maintain a steady rate of growth. While we cannot fully control external forces—and I listened carefully to the expert warnings of the noble Lord, Lord Lever—the authorities must continue to emphasise the need for responsible lending policies and strong accountancy standards to guard against the kind of speculative and inflationary excesses that contributed to the undermining of previous growth initiatives.

Efficient manufacturing and service industries are of equal importance to the future prosperity of this country and there are many world leaders in both sectors. We have one of the world's largest portfolios of overseas investments, bringing a substantial contribution to the balance of payments. At the same time there is a growing desire to invest in this country by overseas companies, emphasising the beneficial aspect of two-way capital formation.

As the impetus of the consumer age gathers momentum, production has to be related even more closely to customer demand and product preference both at home and overseas. The world of yesterday has been transformed and cannot be brought back. Indeed, the Soviet Union has recognised that it has to change direction in order to cater for its own market demand.

The consumer society of the future, based on the inventive genius of those engaged in science and technology and the flair of the businessman, will provide splendid new opportunities for Great Britain to be in the forefront of the industrial and commercial countries of the world. There is a burgeoning spirit of enterprise in the United Kingdom. I am confident that among the nations with which we compete we shall play a leading role.

8.15 p.m.

Baroness Seear

My Lords, I should like to add my congratulations to the noble Lord the Secretary of State on his new appointment, should he regard it as promotion from the Department of Employment to Trade and Industry—or perhaps he regards it as new fields to conquer.

The noble Lord is a great optimist. There is nothing wrong with that if he can justify his optimism. Perhaps not surprisingly the gracious Speech reflected his optimism. However, we should not be too carried away by his optimism. There is another side that we should examine if we are attempting to make a serious assessment of the present economic position and the future problems that we shall encounter.

It is true that our growth rates have improved and are relatively better now than those of our competitors. However, we have to say if we are to be honest about it that we are improving from an extremely low level. During the last 10 years we have fallen behind our competitors in standards of living. We are now doing something to begin to improve on that. This is desirable but it is not a matter for great self-congratulation that we are now not falling behind, as we have for so long, and are slowly beginning to achieve a better position in growth rates.

However, growth rates are by no means the whole of the story. The noble Lord frequently tells us that unemployment is falling. Perhaps it is falling, but our level of unemployment is grossly high in comparison with that of our competitors. It is still in the region of 11 per cent. If he looks at our major competitors, there are very few of them who are in that category. The noble Lord shakes his head. He knows perfectly well that very few other countries have anything like that level of unemployment.

Furthermore, a considerable number of new jobs have been part-time. With the exception of Denmark, there is no country in which so much employment is concentrated at the part-time level. Although there is nothing wrong with that, and for many people it may be desirable, many others are part-time not because they wish to be but because they have no option. Part-time employment is unlikely to maintain as good a standard of living as satisfactorily as full-time employment. We should not rest satisfied with an employment improvement, slight though it is, which depends to such an extent on part-time employment.

Inflation has come down. But the Government should hesitate before claiming that so much of this is due to the policies that they have adopted. Inflation has come down in all countries. It has come down very largely because of the fall in commodity prices. Inflation has fallen but the fact remains that ours is higher than that of most of our competitors. The most recent report from the OECD, which came out only this week, shows that our inflation level is at least 1 per cent. higher than is anticipated in the OECD report for the OECD level generally. We then have considerable reason for anxiety about inflation and our competitive position. There is no question but that the rate of increase of hourly earnings, and therefore of level of costs, in this country is higher than that of our competitors.

Last but not least, our interest levels are still alarmingly high. When we talk about new development, investment, the establishment of new businesses and revival in inner cities and elsewhere, surely one of the outstandingly important questions is getting down the level of interest rates. If all those matters had been attended to the level of optimism of the noble Lord, and the optimism reflected in the gracious Speech, might well be justified. But as it is, it is difficult to see that this is so.

The anxiety is not only about what is going on in this country and in the economy here, but the fact is that today, and surely in the foreseeable future, the economy is global. It is only by accepting that it is a global economy and adapting to that that we shall improve our position and hold our own. The tendency today is that, while we have an economy which is global, we have economic and indeed political policies which are excessively and increasingly national and nationalistic.

Here I also join the noble Lord, Lord Basnett. There was one matter on which I entirely agreed with the noble Lord and very much hope that the Government will continue to support, as I am sure they will. It is the fight against protectionism in every form. Given the situation that we have in a global economy, given the shifts and changes that are going on and given the threats that beset many countries, the temptation to fall into protectionism (which would be a disaster) is perhaps one of the most important issues with which we are confronted. We give overwhelming and wholehearted support to all attempts to avoid that.

What I had hoped to see reflected in the gracious Speech was the realisation that this country should be taking a much more positive lead in international economic affairs. Unfortunately I was unable to be here—there are one or two little temporary difficulties going on inside the Alliance to which I belong—

Noble Lords


Baroness Seear

They are temporary difficulties, my Lords, temporary difficulties. I had to be away from here for a little while and sadly missed the speech of the noble Lord, Lord Lever, which I am sure from previous experiences would have been most illuminating. I had the opportunity to discuss with him some of the things he said and he undoubtedly reflected the point, put far better than I can, which greatly concerns me; that is, what is likely to happen in the international economy, which is of the greatest importance to what happens to our economy and in which we ought to be taking a leading part.

There is no question about it. But both the Bank of International Settlement and the OECD in their most recent reports do not reflect the optimism of the noble Lord the Secretary of State. They are throwing out a number of warning signs about what is likely to happen. As I think the noble Lord, Lord Lever, said—if I picked up correctly the point when we were discussing it later—the danger is that there might be a considerable collapse in the United States, which could lead to serious repercussions throughout the international economy from which we should not in any way be immune. I had hoped to see more signs that the Government would accept much greater responsibility for trying to see that the international economy was getting on to a healthier footing than it has been in the past.

There is at least one thing which the Government could do very easily and quickly. All the reports stress that nothing is more important at the moment—in the short run at any rate—than that we get greater equilibrium and greater stability of exchange rates. We talk about investment and its importance. Who will invest when there is so much uncertainty about exchange rates? It is in the Government's hands to do something towards the improvement and towards achieving greater stability of exchange rates by entering the EMS. I know we have said this again and again from these Benches, but again and again we have been right.

Again and again the Government have told us that when the time is ripe they will go in. Times have changed. The dollar has been up and the dollar has been down. Every conceivable element that one can think of has altered. Will the Government at least tell us today, if they cannot tell us that they are going in to the EMS to increase the stability of the exchange rate, by what criteria they will decide when the time is ripe? Surely after at least two years of pressing to know about this we are entitled to be told by what standard the Government arrive at their conclusions.

So much for the overall economic position. There are only two other points that I should like to make. Along with many other speakers I am sad that the attempts to tackle unemployment are seen in such slight terms in the gracious Speech. The noble Lord has a tendency to believe that by encouraging enterprise in the inner cities we shall make a great impact on unemployment. Of course this needs to be done, but it is one very small part of what needs to be undertaken. The noble Earl, Lord Onslow, said that we were not a disunited country. I agree with him that we have a tradition of unity, but if he had been around in the North of England during the election campaign as much as I was he would have been deeply concerned.

There is a great deal of hostility. There is a great deal of apathy. There is a strong belief that people do not care. I do not believe it is true that they do not care. But this is thought to be so. Unless the Government can show that they care in a practical way, in a way which produces results, the degree of disunity which is already too great will undoubtedly get greater. Of that there can be no doubt whatsoever. We need strong regional programmes with a great deal of local co-operation, with a great deal of grass roots input, encouragement and money. Encouraging investment in the inner cities is a nice idea, but I wonder how much of his own money the noble Lord would put into the inner cities. If I had any myself the answer would be none. The noble Lord knows much more about this than I do, but much more has to be done before people will voluntarily invest in the inner cities. That is part of the job but it is only a small part.

The other point I want to make—the noble Lord will not be surprised that I say this—is about training. He and I very much agree on the importance of training. But I make one specific point. I see in the gracious Speech that it is said that for 16 to 18 year-olds it will be made a condition of benefit that they should accept YTS training. If we had for all 16 to 18 year-olds a fully worked out and satisfactory scheme of training and education, with appropriate grants, so that we could move into a period of learning for up to 18 year-olds, whether training for skills or academic subjects, that would be one thing.

I am second to none in my belief that YTS is essential and that it is greatly improving. I believe that what is being done for the second year of YTS may be one of the most important changes to take place to give us at last a trained labour force. But it is not yet at the level at which you can put your hand on your heart and say that it can offer to everybody who goes into it the kind of training that they are entitled to have.

What also is the point of forcing someone to undertake training in something that they do not wish to go into? In my experience moreover employers do not want to be presented with people who do not want to be there. It is difficult enough to get employers to collaborate to give this training at the level needed. If they are to have conscripts sent in I think we shall find that their reluctance greatly increases. I beg the Government to think again about this. We must give every possible encouragement, yes, but compulsion, no.

8.29 p.m.

Lord Bruce of Donington

My Lords, I should like to take this opportunity to welcome the noble Lord, Lord Young of Graffham, to his new appointment. We have been fortunate enough over the past two or three years to have the occasional confrontation with him in his position of Secretary of State for Employment, and he comes to his new post with a reputation of statistical virtuosity.

Viscount Whitelaw


Lord Bruce of Donington

My Lords, he has been enabled by presentation and by redefinition to make the figures for the registered unemployed slightly more respectable than they otherwise would have been had they conformed more generally to the real state of unemployment in the country. When the noble Lord was appointed to his new post—we congratulate him on that—I wondered immediately what precautions we ought now to take when examining the DTI figures that are issued from the new Ministry.

Lord Young of Graffham

My Lords, the noble Lord will forgive me if I remind him very gently that the largest fall in unemployment recorded since records were first kept occurred some four or five days after I left my old post.

Lord Bruce of Donington

My Lords, I am not trying to deny the noble Lord his moment of triumph in that regard. I am merely indicating that, as a sensible precaution and bearing in mind what has happened to the ever-changing basis of the calculation of the registered unemployed, it will behove us to take extra care when examining the new figures that emanate from the Department of Trade and Industry.

Undoubtedly one of the most vulnerable figures from the political standpoint for the noble Lord will be the ever-increasing deficit on visible trade. I immediately looked at the definitions of visible trade and wondered how they could be altered by any modifications to them that may be presented to us in the next two to three months. For example, would the noble Lord decide to include tourism in our visible exports on the ground that tourists were visible? There are infinite possibilities for redefinition, even including the transmission of cash by optical cable; but we shall have to see how that goes on in due course.

I do not for one moment intend to underrate the importance of the decision at which the electorate recently arrived. The Government are secure in another place with a majority of more than a hundred. For the next four or possibly five years there is the prospect of Thatcherite as distinct from traditionally Conservative government. In those circumstances no responsibility can lie on the Opposition, on the Liberal Party or the Social Democratic Party for anything that happens in the country after the election. The Government are responsible. It is a good thing therefore that we take stock of where we are now.

As time unfolds I should not like the noble Lord, Lord Young of Graffham, to come up every now and again with the explanation, "Well of course in common with other countries we have since been blown off course. In common with other countries we have suffered from X, Y or Z". I would not want there to be any excuses for any shortcomings that occur which the Government cannot reasonably foresee.

According to the noble Lord this afternoon—and it was echoed from the Benches behind him—we now have a sound economy. I would not disagree for one moment that there are sections of our population who think that the economy is sound. For individuals who are getting regular salary increases of between 20 per cent., and in some case 180 per cent., who are living in very comfortable circumstances and who are assured of making speculative gains on privatisation issues, or for people who deal in the foreign exchange rooms of the City, the economy is sound. A sound economy for them means that their costs, particularly in terms of labour costs, are kept low and that their profits and incomes continuously rise. The power that accrues to them by the sheer possession of money and the privilege that attaches to it makes them feel very comfortable.

Of course the trade unions have been cowed; of course the rights of trade unionists have been limited; of course the working people now know their place; of course the right of management to manage without reference to anybody else has been established—the right to make their profits how they can, when they can and where they can. From that point of view soundness has been achieved.

The Earl of Onslow

My Lords, perhaps I may—

Lord Bruce of Donington

My Lords, if the noble Earl will excuse me, I did not interrupt him when he was speaking and my time is limited.

The Earl of Onslow

My Lords, the noble Lord left out one point. The wages of hourly-paid workers have increased by 7½ per cent. in the past year while inflation has risen by 4 per cent. Therefore those people have also done better.

Lord Bruce of Donnington

My Lords, I was talking in relative terms about what is sound. I am saying that in this modern age to talk of a sound economy with 3 million unemployed people, with about 10 million to 12 million people living under conditions of poverty, makes the use of the words "sound economy" almost obscene. The purpose of an economy is to ensure so far as is humanly possible that all the abilities and strengths of people who are able and willing to work are used. They should not be denied by caprice or by excess power in the hands of others. To call it a sound economy in those circumstances is a complete misuse of those words. Those of your Lordships who listened to what my noble friend Lord Basnett said about unemployment know it perfectly well in their own hearts of hearts.

It is quite unnecessary at this time to go through the pre-election speeches relating to the economy. I was hoping that the party political terms in which the pre-hustings debates were conducted would not be repeated this afternoon. I certainly do not intend to repeat them here. The responsibility for what happens is the Government's from now on, but perhaps I many venture to draw the attention of your Lordships to the last occasion when a serious and critical review of the economic position of the country was undertaken in your Lordships' House.

As your Lordships will recall, the Select Committee on Overseas Trade made its report on 18th July 1985 and it was debated in this Chamber in December 1985. The committee's conclusions were set out in pungent but non-controversial terms. It is very necessary to say that it was a report produced in unanimity by its members under the chairmanship of the noble Lord, Lord Aldington, and that it contained within it members of all the political parties and the independents represented in your Lordships' House. That was an objective review.

I want to suggest to your Lordships this evening that we may perhaps find it necessary to return to it, because it drew to the attention of the House and of the country the perilous state of the national predicament. I make no apology whatsoever for drawing your Lordships' attention to page 83 of the report and refreshing your Lordships on the conclusions to which your Lordships' Select Committee came.

It said this: Unless the climate is changed so that steps can be taken to enlarge the manufacturing base, combat import penetration and stimulate the export of manufactured goods, as oil revenues diminish the country will experience adverse effects which include:

  1. (i) a contraction of manufacturing to the point where the successful continuation of much of manufacturing activity is put at risk;
  2. (ii) an irreplaceable loss of GDP;
  3. (iii) an adverse balance of payments of such proportions that severely deflationary measures will be needed;
  4. (iv) lower tax revenue for public spending on welfare, defence and other areas;
  5. (v) higher unemployment, with little prospect of reducing it; and
  6. (vi) the economy stagnating and inflation rising, driven up by a falling exchange rate."
Those were the conclusions.

Lord Young of Graffbam

My Lords, will the noble Lord give way for just a moment? Within a matter of months of that report coming out we did lose about half of our oil revenues and not one of those forecasts came to pass.

Lord Bruce of Donington

My Lords, that was one of the factors that was mentioned in the report itself. But the prospect still remains, and is accentuated by the fact that in 1984, which was the year when the visible trade deficit was discussed, the deficit in manufactured goods was £6.2 billion. By 1986—last year—it was up to £8.6 billion, as against the favourable balance in 1979 of £1.86 billion.

Since that time—since the report was considered—import penetration, which at the time of the Select Committee's report was put at 31.4 per cent., rose by the end of 1986 to 34.5 per cent. When it comes to the output of manufactured production, it is still now 1.8 per cent. below what it was in 1979.

It is often said—and it has been said from the government Benches—that manufactures and our manufacturing industries have no longer the same importance as they had. There is one international comparison that the noble Lord, Lord Young of Graffham, has not been able, or has not seen fit, to make, and that is that manufacturing production in Japan has gone up by 30 per cent. since 1979, in the United States by 19 per cent., and in West Germany by 11 per cent.

Therefore, what is happening is that, although our requirements in manufactured goods in this country remain very much the same as they have always been as a percentage of our normal expenditure, what we have done is half destroy our manufacturing industrial capacity here and have imported substantially from Germany. I suggest that this presents a future menace on the lines described in the Select Committee's report to the future of our country over the next two or three years. Although unemployment may be marginally going down in certain areas, in manufacturing industry, as the noble Lord knows quite well, it is remaining reasonably stable.

What is really at stake over the next few years is how we regard the future of the nation state. When questions of national defence are concerned the Government always wrap themselves in the flag, as they are entitled to do, and take complete control of the whole question. Any question of national defence is a matter for governmental action, for governmental planning, and quite properly so. But what do the Government do when it comes to economic defence?—because economic defence is just as important to the United Kingdom as its military ability to defend itself.

Either all these stories about national defence and the vital part it should play in our country are bogus—in which case much of the expenditure on it is unnecessary—or they are real. If they are real, then who is taking care of the economic defence of the United Kingdom, which in every way is just as vital?

I listened to what was said this afternoon about the virtues of free trade and protectionism. I am in favour of the extension of free trade wherever this can be accomplished and under whatever fair conditions can be established. But what is the point of surrendering one's economic defence in favour of a principle that is not being widely adopted?

The fact is that the Government have completely abdicated from the economic defence of the country, because the economic affairs of the country are being left entirely to market forces. Market forces provide where money shall be invested; market forces ensure where capital flows go and from which countries they come. Blind market forces or informed market forces, it matters not. In fact the Government have emphasised many times their detachment in the matter. Many times from the government Benches the Government had disclaimed any responsibility for doing anything other than providing the climate in which free enterprise can flourish. Therefore, the fate of investment, the fate of movements of capital, the fate even of movements of trade, the fate of inter-company dealings within multi-national companies irrespective of any national interest that is involved, or irrespective of any country in which these take place, is deliberately outside the control of the Government. Moreover, the Government have (and they intend to continue the process) divested themselves even of the power of influencing wide sections of industry. The privatisation of companies originally undertaken with a view to increasing their efficiency, and all the rest of it, has involved the Government distancing themselves from being in any way involved in the making of decisions. These have become important in regard both to purchasing policy and pricing. Therefore the country is at the mercy of market forces.

"Market forces" is a very impersonal term for they are carried out in a very personal way. In practice it means that, instead of the country's economic destinies, instead of the country's industrial and manufacturing future, instead of the fullness or otherwise of employment being in any way influenced by a government who have washed their hands of the whole affair, the real decisions are made by a few hundred very wealthy and powerful individuals in the United Kingdom, most of them fortunate enough to have access from time to time to the Prime Minister. The Government have abdicated from their responsibilities of government in all these respects.

They believe in market forces except, once again, in the field of agriculture. In the field of agriculture all the market forces arguments go out of the window; all the protectionist arguments come in all over again. That of course is not entirely unconnected with the fact that their political interest in the rural constituencies in party terms is significant indeed.

This cannot go on for very much longer. It is all very well to say, "Well, we shall inject new life into the inner cities". The first reaction of the Prime Minister after winning the election was to say, "We must pay attention to the inner cities". I thought to myself that if one wants government attention the only thing that one has to do at present is to vote Labour in vast numbers and one is bound to get government finance. It is a moral which I am quite sure is not lost on the electorate.

We on this side of the House will support all the endeavours that have been made by the Government to regenerate the inner cities. We shall do all that we possibly can to facilitate any legislation dealing with increased trading and the like. We shall co-operate in all these things. However, in the case of the inner cities we have a suspicion. We have a suspicion that the resources made available to the noble Lord, Lord Young of Graffham—aside from those put in for purely information or propaganda purposes—will be very small. We have the feeling that there are divisions of opinion, particularly between his own department and the Department of the Environment which is concerned to bring in the local authorities as much as possible, whereas the right honourable lady the Prime Minister is determined, at the earliest opportunity, to get rid of as many Labour councils as she can on purely political grounds. What is required, and must be required, is a co-operation between all interests; between private firms, trade unions, the local authorities and the new development bodies that are formed. This is the way in which we shall proceed. I am hopeful that during the course of this Session, or perhaps of this Parliament, your Lordships' House may be able to play the same constructive part that it has on many occasions over the last three or four years, to the understandable occasional discomfiture of the Leader of the House, in getting the Government to pause and reflect more accurately the public will. I sincerely hope that those days will occur again, but in any case we on these Benches know precisely where our duty lies and we shall not hesitate to discharge it.

8.54 p.m.

Viscount Whitelaw

My Lords, I fully agree with the noble Lord, Lord Bruce of Donington, that this House should pursue a constructive position throughout the Sessions ahead. I know that we will and I know that he will do the same. As regards some of the points that he has raised, I should like a little time to digest them. I shall return to some of them when I have been through the rest of the debate because he has covered a very wide field. Being the accountant that he is, he is quicker at figures than I, so I shall take some time to appreciate it all.

In rising to wind up today's debate, it is right to look not only at today's speeches from all sides of the House but also at our debates earlier in the week on foreign affairs and defence, and on home affairs and the environment. I do so because I believe that the economic foundations we have laid—here I must apologise to the noble Lord, Lord Bruce of Donington, because I shall use words he does not like—through the sound policies of this Government are the basis of success. Indeed, they are a precondition of success in these other fields as well.

It is impossible to pursue successfully the foreign policy goals of this country unless we earn the respect of other countries. I believe that over the past few years we have gained a renewed respect in the world for the determined way in which we have addressed our past economic decline and taken measures—sometimes very difficult ones—which were necessary to reverse it. I claim that the results are clearly emerging. We are entering our seventh successive year of economic growth. At the end of this year we shall have registered the longest period of steady growth that we have known since the war, yet inflation remains low and unemployment, while still too high, continues to fall.

I come back to the points made by the noble Lord, Lord Basnett, and other noble Lords about references in the gracious Speech to unemployment, because I feel that we have a story to tell and there is no question of leaving it out of the many efforts in the many fields that we set out in the gracious Speech.

The economic success which I claim is also crucial, as my noble friend Lord Boyd-Carpenter has said, to the success of our social policies, policies for the health service, for education and for the social services, can only be pursued successfully if economic policies are followed which generate the resources needed and do so without undermining the very process of wealth creation on which these particular resources depend. I believe that the people of this country recognised the necessity for this balance and I think that they recognised it in our verdict at the election.

In our debate this afternoon from all sides of the House we have looked at how to maintain and build upon that economic performance. This time, contrary to what has happened in many of the other debates that I have had to wind up in your Lordships' House, I have had fewer speakers with whom to contend, if that is the right word. Therefore I hope to be able to deal in some detail, as I know noble Lords will wish, with those speeches that have been made in the debate.

First, the noble Lord, Lord Williams of Elvel, seemed to seize somewhat on any opportunity for gloom. I understand that. After all, I have had a very long experience of being in opposition, as I have of being in government. I know how difficult it is to make speeches in opposition—and this one does bring in a bit of gloom here and there. The only pity, I think, was—I am sorry if I provoke the noble Lord. I must give way to him.

Lord Williams of Elvel

My Lords, I am not provoked by the noble Viscount. I should just like to apologise to him and to the noble Lord, Lord Boyd-Carpenter, for not being in my place when the noble Lord made his speech. In expiation I repeat the advice, which I have preserved, that was given to me by one of the noble Viscount's noble friends on his side when I came into this House. It goes like this: "You will never make an impact in this House unless you get yourself attacked by the old sweats on our side".

Viscount Whitelaw

My Lords, I do not know whether the phrase "old sweats on our side" refers to my noble friend Lord Boyd-Carpenter or to me. I suppose that it could refer to either of us.

Before I broke off I was going on to say that my noble friend Lord Boyd-Carpenter made the points when, alas, quite understandably the noble Lord was not there. The noble Lord raised the question of the debate in Scotland and mentioned a phrase attributed to one of my friends in the other place that that debate had been behind that of England. I can only say to him that, while I am one of those strange Scotsmen about whom the Scots are always dubious now because we have moved to England, I went to Scotland during the election and certainly did not find the debate there behind that of England. I was given a thoroughly good going round the course, which was extremely good for me. I was dealt with very well. I could not accept for one moment any idea that the debate there was behind that of England.

The noble Lord raised the point about the inner cities programme and asked whether this was entirely a party political matter. It is a little unfair to suggest that. After all we had some inner city initiatives of considerable standing well before the election—for example, the initiative of my noble friend Lord Young and Mr. Clarke in the other place. We had over 100 projects approved in 1986–87. The total cost of all the Department of the Environment's inner city initiatives and the urban programme et cetera was some £650 million a year. That was all well before the election. To refer to them as simply party political initiatives would not be right.

I now turn to the remarks made by the noble Lord, Lord Diamond. He is very fond of a phrase which he now claims to be his: selling off the family silver. He is so fond of it that he rather forgets one other aspect of the privatisation programme to which he gives that phrase; namely, as my noble friend Lord Boyd-Carpenter said, many of those firms which have been privatised have been noticeably successful. My noble friend Lord Young also made that point. Therefore, whether or not it is a good thing to sell off the family silver, if the money obtained for it can be better employed and attract better service, there may be some value in doing it. So I am rather surprised that he takes that position.

As for his anxieties about inflation and his fear that we should concentrate too much on that aspect—he used a rather surprising phrase for someone who was Chief Secretary to the Treasury and if I may say so a very distinguished one—surely it must be true that keeping our costs down in this country enables our industries to compete in the world and therefore to provide jobs. If we do not keep down our costs we should very quickly lose the jobs. I am sure that the noble Lord, Lord Diamond, accepts that truth.

The noble Lord, Lord Harris of High Cross, referred in the main to what he described as the "escape from socialism" which was being undertaken with some considerable success all over the world. He gave some very good examples of countries which were turning from bureaucratic government controls towards market forces. He urged this country to continue with the tasks that have been undertaken and to show the way, as we have been doing, at the same time making quite certain that we kept ahead of Mr. Gorbachev. I think that that is very good advice for us indeed.

My noble friend Lord Boyd-Carpenter, apart from many other points that he made to which I have already referred, also raised the question of taxation and the need for wealth creation. He said that tax should continue to come down. In particular he referred to the problem of tax and the married woman's earnings. Those are clearly matters which I shall make perfectly certain are brought to the attention of my right honourable friend the Chancellor of the Exchequer. He will pay great attention to my noble friend—a good deal more than he would pay to me—so I shall make certain that he gets that message. At the same time my noble friend Lord Onslow referred to the taxation point in much the same terms and I give him the same assurance.

The noble Lord, Lord Lever of Manchester, made a very important speech about the international situation, the dangers to the global economy, the dangers of protectionism and in fact the fear that he had about monetary co-operation in the world. He speaks with such great authority and has been very instructive to me in so many ways over the years, so I found his account somewhat depressing, because I have come to a time when I believe what the noble Lord says. I hope he is wrong on this occasion. Still, I absolutely accept that there are dangers to which we must pay attention. But surely that underlines the need to make sure that our economy—and again I must use this phrase—is conducted on a sound basis. If it is not, we shall be far less able to meet such troubles if, alas, they were to come.

The noble Lord referred to our joining the EMS, as did the noble Baroness, Lady Seear, later in the debate. If I were to give an answer to either of them I would have to give the answer that has been given so often in the past by the Government. I think that they would prefer to be spared that answer so I shall not give it at all. I shall simply say that I appreciate what they have said and again I shall make certain that my right honourable friends are well aware that once again I have been put in the position of giving the answer which I have long since been prepared to give. I realise the strength of the feeling so far as that is concerned. Indeed, the noble Lord, Lord Lever, said that he believed in the value that would come from being outward-looking at the time of world dangers. Equally, I shall pass on that point to my noble friends.

The noble Lord, Lord Ezra, also joined the noble Lord, Lord Lever, in some of the rather gloomy reports on the world economy and on what he feared to be the short-term view of the Treasury. He believed that we should do more for investment in manufacturing industry, which is a point he has consistently taken for some time. I would claim to him that we are seeking to do a great deal in the training schemes, which he wished to see conducted, and also in the physical reconstruction of the nation and in standards of education and services, to all of which he referred.

The noble Lord, Lord Raglan, asked me how many Secretaries of State there had been in recent years and I think I am right in saying that there have been some five since 1983. But there are two Cabinet Ministers now, including my noble friend Lord Young, in that department. I am sure he will welcome that with his knowledge of the department, and equally his past association with my noble friend Lord Young, which seems to have been very successful from his point of view. He is not the only person who has had a successful association with my noble friend and no doubt will encourage him in that position.

The noble Lord spoke interestingly from his experience of the new towns and about the work which will be required in the inner cities. He made a point about which I think one must feel fear in certain cases, but I hope that noble Lords opposite will do everything—I am sure that they will—to make sure it does not happen. In many cases I do not think it will, but it might. I refer to the fact that some of the initiatives, particularly of development corporations and government agencies at the centre, can be and sometimes are stymied by local councillors.

On the other hand, I have heard recent reports which I trust are true from some areas where new development corporations, or enterprise zones, have been set up and where they have been welcomed by the local councillors. I very much hope that that will continue to be the case. It would be tragic if not, because many of these development corporations can do a great deal of work, provided that they have the co-operation of all the people on the spot. It should be up to us in this House, if we possibly can, to do everything possible to that end.

My noble and learned friend Lord Simon of Glaisdale made some generous remarks about the running of the economy by my right honourable friends. I am grateful to him for that, coming as they do from one who, as I very well remember, was a Treasury Minister, not long after I went into another place, which seems a very long time ago now. So words from him on the running of the economy are extremely welcome.

My noble friend mentioned the question of regional policy and said something on which I agree with him about the over-simplification of the North-South divide. I think there is some oversimplification. I have lived in the North of England myself. As noble Lords know, I had a constituency in the North of England for a very long time. It will no doubt be said, in order to debunk any arguments I might derive from it, that it was not a typical one because my successor there got more votes than I ever got throughout the entire time that I was there. That must prove something—I am not quite sure what—but at least it shows that people in that part of the world seem to be satisfied with a Conservative Government. So there are certain areas in the North which are doing well and some which must do better, in which we have a great deal to do.

My noble friend Lord Sandford made very much the same point about regional policies in the South and in some parts of Kent where unemployment is very high. I think one has to remember that. He also mentioned, as well as the points on regional policy of which I have taken note and which I shall certainly pass on, the job training schemes in which 20 per cent. of young people, and even those in the Restart programmes, are illiterate and innumerate. He thought that that was a very serious matter as regards getting jobs in the future. I hope he will feel when they are fully unveiled that the education plans we have, as outlined in the Queen's Speech, will be directed to this end, and I trust that we shall get his full support in carrying through what will undobutedly be some very major reforms, and in some cases some very controversial reforms as well.

My noble friend referred to the planning authorities in London and the South-East and the regional strategy which has been set out. He set out much of what had been done in Kent and the London docklands, and then said he hoped I could confirm that there would be studies and groups in Whitehall which would respond more effectively to the particular requirements in the South-East. He from his experience in government will know that I am not entitled altogether to say exactly what those particular agencies will be, but there will certainly be those who will work very closely in remedying those particular problems.

I now come to the questions on the trade union reforms which were raised by my noble friend Lord Campbell of Alloway, the noble Lords, Lord Basnett and Lady Rochester and the noble Baroness, Lady Turner. My noble friend Lord Campbell of Alloway was strongly in favour of the trade union reforms as set out in the Green Paper and wanted to see a further extension of the balance of power being given back to the individual member.

The noble Lord, Lord Basnett, on the other hand, believes that that legislation is unnecessary and will lead to polarisation and division and, therefore, he was very much against it. The noble Baroness, Lady Turner, took very much the same view and the noble Lord, Lord Rochester, took what, if I may say so, was a somewhat surprising view. He was strongly in favour of some of the proposals that were put forward but was not in favour of introducing them just yet. I can see the argument in that—

Lord Lever of Manchester

My Lords, like the EMS he is waiting for the time to be right.

Viscount Whitelaw

My Lords, it is always wise to take care with such wise people around one. That can only be described as an incautious remark of mine but I was well picked up on it and I accept that.

First, I say to the noble Baroness, Lady Turner, yes, the Government's commitment to legislate was set out in their manifesto. I must say to her, however, that exactly what will be in the legislation must await the publication of the Bill and I should be wrong to commit myself before that, even if I did know what it contained, which I do not. But we certainly shall legislate although I cannot tell the noble Baroness exactly what the legislation will be.

I hope that the noble Lord, Lord Basnett, and the noble Baroness, Lady Turner, will reflect a little on what I believe to have been the success of some of the measures taken over the years in trade union reform and indeed the welcome that has been given to them by many members of trade unions themselves. At a time of an election one does not care too much for the reasons why people vote as they do. It may have nothing to do with trade union reform, but I think that a good many trade union members voted for us in recent elections for the first time and the noble Lord and the noble Baroness would be wrong not to recognise that fact.

I should not like to say whether that fact had anything to do with the trade union reform, but I hope that they will reflect on that. If there are some measures which would seem to them reasonable, I hope that they will give them their support. I have known the noble Lord, Lord Basnett, for a very long time and I have known of his involvement in the trade union movement. I can well understand the anxieties which have been expressed; but I hope that the Bill will be looked at very carefully when it is published.

The noble Lord, Lord Wolfson, with his undoubted and immense experience in industry welcomed the enterprise that we have seen under this Government. He welcomed what had been done for the economy. He believed it was right. He had a great many obviously good and important ideas about the inner cities and he made the very valuable point that if we really want to regenerate them we must make them attractive places in which to live. A great deal of work needs to be done on that and I am sure that that work is very important. He welcomed the unified business rate. It is always good to hear someone welcoming some part of the proposals of the new rate reform and therefore I was very grateful for the welcome that he gave to that.

The noble Baroness, Lady Seear, gave one or two cheers to the Government for their various achievements in the economy but at least she went a little bit of the way towards praising the Government. She was modest in her praise and I am therefore modestly grateful to her for what she said. On the other hand, I very much welcomed what she said against protectionism. That was much appreciated and her support in that regard and indeed the support of the House, is extremely valuable.

I have now considered the speech of the noble Lord, Lord Bruce of Donington. He ranged over a very wide field. He said that as regards various aspects he did not wish to be grudging in his comments about my noble friend Lord Young. If I may say so, he did not sound absolutely full-hearted in his praise, but we have come to know him well and we know that sometimes praise which is not quite full-hearted is actually meant very kindly because he is, above everything else, an extremely kind man. Therefore when he says things, however he puts them, I always put the kindest possible construction that I can on them and that is what I most certainly did.

In conclusion, I return to where I began. During the debate your Lordships have made many important proposals about improving life in our inner cities, about developments in various industries, about trade union reform and about world economic problems and generally about the handling of the economy. That was very important and I think that we had a valuable debate. I am grateful for all the points that were made.

At the same time, I hope that the House will allow me one partisan and, as I find it, somewhat pleasing reflection. Your Lordships have been able to make these points and put them forward in a very important way in the sure knowledge that they were speaking, whether they admitted it altogether or not, from a firm base of a strong economy. It is an economy which has been transformed since 1979, an economy more firmly based than that of 1983 and an economy which provides us with great opportunities in the year ahead. That is the achievement of Conservative governments in the last eight years and it is an achievement which is clearly recognised and admired both in this country and throughout the world.

On Question, Motion agreed to nemine dissentiente: the said Address to be presented to Her Majesty by the Lords with White Staves.

House adjourned at twenty-two minutes past nine o'clock.