Lords Sitting of 29 November 1995

Preamble
The House met at half-past two of the clock: The LORD CHANCELLOR on the Woolsack.
Prayers—Read by the Lord Bishop of Exeter.

European Union: Enlargement
Lord Hooson Lord Hooson asked Her Majesty's Government:
Whether in the event of the European Union being expanded by the inclusion of certain eastern European countries they envisage that these countries will have full membership, including the benefits of the common agricultural policy or whether Her Majesty's Government envisage a status for these countries stopping short of full membership of the Union.
The Minister of State, Foreign and Commonwealth Office (Baroness Chalker of Wallasey): My Lords, in all previous enlargements of the European Union, new members have accepted the obligations and benefits of full membership. We expect the associated countries of central and eastern Europe to do the same on their accession. We are, however, pressing for major reform of the common agricultural policy before enlargement to the east takes place.
Lord Hooson: My Lords, is the Minister aware that all the indications are that the eastern European countries need a great deal more economic help and support before there can be any thought of them becoming full members? There is no indication from the full members of the present European Union that they are prepared to change the common agricultural policy. Therefore, was not Mr. Kinnock right when he said in a speech reported two days ago that the possibility of accession of the eastern European countries is remote?
Baroness Chalker of Wallasey: My Lords, Mr. Kinnock made an interesting speech but it is much too early to say whether his words will become reality. However, we have read his speech with interest and we shall certainly bear his thoughts in mind.
As regards help to the countries of central and eastern Europe in preparation for membership of the European Community, no country does as much as Britain through the know-how funds in helping them to privatise, to modernise their financial systems and to bring themselves into the new century. I believe that we are doing all that we can to help. It would also be of assistance if the European funds for the PHARE programme were put to the same ends.
564
I have said many times in this House that the common agricultural policy has to change for the sake not only of new members but of existing members too.
Lord Beloff: My Lords, does my noble friend agree that what these countries mainly want is access to western European markets for their goods, including agricultural products, and that there seems a total determination on the part of the French and Bavarian farmers to see that no such thing happens?
Baroness Chalker of Wallasey: My Lords, my noble friend has a point, but he knows full well that one of the reasons we were to the fore in the development of the single European market and why we have worked so hard for the completion of the Uruguay Round was exactly that: we want open trading. These countries want that open trading more than anything else and anyone who stands in the way of it will eventually impede their own economic progress.
Lord Bruce of Donington: My Lords, is it not the case that the common agricultural policy can be changed only by a unanimous vote of its members and there is not the remotest chance of the Franco-German axis agreeing to any radical change in it? Indeed, the story is exactly the same as it was 20 years ago when the Government stated that they hoped to be able to use their influence to change the CAP. It cannot be done with the axis as it is.
Baroness Chalker of Wallasey: My Lords, I believe that the noble Lord, Lord Bruce of Donington, is not looking as far ahead as some others. There has been a distinct change in the attitude of many member states but not as much change as we would like among the French or certain of the Germans. However, the German Finance Minister agrees with us that the common agricultural policy has to be changed. It may not happen immediately but it is happening gradually.
Baroness Robson of Kiddington: My Lords, in reply to the original Question the Minister said that nothing can happen until the CAP has been changed, although she did not go as far as the noble Lord, Lord Bruce of Donington. In view of the fact that it will take many years to change the CAP, has she any idea how long it will be before the eastern European countries are offered membership of the European Community?
Baroness Chalker of Wallasey: My Lords, it would be a foolish woman who sought to predict, even in your Lordships' House, when that will be. We have worked towards enlargement in an important way by providing these countries with the help which will put them in a better position to take the benefits of accession when that happens. However, as regards a timetable, I can give the noble Baroness no clear indication.
Baroness Elles: My Lords, has consideration been given to linking in particular the Visegrad countries

565
to, say, the CFSP? Although they would not become full members of the EC, some support for their fragile democracy might be considered to be supported by member states of the EC.
Baroness Chalker of Wallasey: My Lords, it has not happened in quite the way that my noble friend indicated, but many of these countries are proceeding apace with their changes to become members of NATO. That is different from membership of the CFSP but, if there were accession to a single pillar rather than to the Union as a whole, no doubt it would help them.
Lord Richard: My Lords, is the Minister aware that the aggressive pessimism about the future of the common agricultural policy of my noble friend Lord Bruce is, perhaps, somewhat overdrawn? Further, would the Minister agree that, in the past 20 years, there have indeed been considerable changes in the CAP? Will the noble Baroness also confirm that the percentage of the community budget now devoted to agriculture is considerably less now than it was 20 years ago? Finally, if the Minister has not already done so, would she kindly underline the enthusiasm that Her Majesty's Government have for the expansion of the Union so as to bring in the east European countries as soon as that may be feasible and possible?
Baroness Chalker of Wallasey: My Lords, I shall leave the noble Lord, Lord Richard, to deal with his noble friend. As regards changes, I would be quite wrong to say that there have not been any; indeed, there have been. The noble Lord is absolutely right. I wish that we could, between us, manage to explain them to his noble friend from time to time as he does not seem to follow them. It is perfectly true that there is a reduction in the common agricultural policy, but it is not declining in size as fast as anyone would wish.
So far as concerns the noble Lord's fourth question, of course we wish to see accession negotiations begin as soon as possible. I believe that the noble Lord knows that the Union is committed to negotiate with Cyprus and Malta six months after the IGC ends. That will probably be the first expansion as regards the Visegrad countries—that is, if they can so prepare themselves and we can get the changes that we need not only in the CAP but also in the structural funds.
Lord Hylton: My Lords, as long transitional periods will almost certainly be needed for the eastern European countries, is it not very desirable that that process should start as soon as possible for countries which have, after all, been victims of Stalinism?
Baroness Chalker of Wallasey: Yes, my Lords; I thoroughly agree with the noble Lord.
Lord Harmar-Nicholls: My Lords—
Noble Lords: Next Question!
Lord Harmar-Nicholls: My Lords, is my noble friend the Minister saying that, if there are weaknesses, we have to wait until Germany changes its mind before anything can be done about it?
Baroness Chalker of Wallasey: No, my Lords; I am saying that we have to work even harder to change the minds of France and Germany and of those who stand in the way of change in the CAP.

Rail Privatisation: Bidding
2.46 p.m.
Lord Haskel Lord Haskel asked Her Majesty's Government:
Why they are continuing to prevent British Rail from bidding for franchises in relation to the privatisation of the railways in view of the relevant provisions of the Railways Act 1993 that they should not be so debarred.
The Parliamentary Under-Secretary of State, Department of Transport (Viscount Goschen): My Lords, the Railways Act gives the Franchising Director the discretion to decide, after consultation with the British Railways Board and the Rail Regulator, whether the board or any subsidiary of the board shall be allowed to bid for franchises. In respect of the first seven franchises, the Franchising Director has decided that the board shall not be allowed to bid. He will consult the board and the regulator each time he proposes to invite tenders.
Lord Haskel: My Lords, I thank the Minister for that reply. However, is he aware that some people are concerned that British Rail has not been invited to bid because the Franchising Director believes that, in doing so, he is interpreting the wishes of the Government? Will the Minister now state clearly that it is the Government's policy to enable British Rail to bid for franchises and call upon the Franchising Director to encourage it to do so?
Viscount Goschen: My Lords, the Government's position is very clear. We support the detailed arrangements as made in the Railways Act, which are again extremely clear. British Rail is permitted to bid, except when the Franchising Director decides that that should not be the case—at his discretion—if it would be in the interests of promoting competition for franchisers; of promoting the award of franchises to companies in which qualifying rail employees have a substantial interest; and of encouraging new entry into the passenger railway industry. Those are the circumstances that are laid down in the Act. We support that.
Lord Taylor of Gryfe: My Lords, is the Minister aware that running the railways is a very complex and important part of our infrastructure? Is he also aware that the people who might bid for such franchises on behalf of British Rail are experienced operators of the railways? Therefore, is it wise to exclude those operators acting as bidders for the new franchise?
Viscount Goschen: My Lords, the Franchising Director must weigh up the very points that the noble Lord has made. However, the House should bear in mind that, as I mentioned, the Franchising Director also has a duty to promote the award of franchises to companies in which qualifying railway employees have a substantial interest—that is, the management buy-out type of situation. With that type of situation, it is very clear that existing management is able to put a substantial investment of its knowledge into the railway

567
franchising programme. The position on whether BR itself should be allowed to bid remains as stated in the Act.
Lord Peyton of Yeovil: My Lords, I would like to be clear that the Franchising Director is acting on his own discretion and without any guidance from the Government. In that case does it not appear that he is being a little wooden in the exercise of his discretion?
Viscount Goschen: My Lords, the Government and the Secretary of State are specifically prevented from giving the Franchising Director objectives, instructions and guidance on the exercise of his powers under Section 25 of the Act, which is the relevant section to do with allowing BR to bid. We are specifically prevented from giving the Franchising Director such directives, so it is up to him to make his own decision.
Lord Dean of Beswick: My Lords, is not the Minister aware that British Rail is on record as saying that it will bid for franchises and that it will win? Does not the Minister accept from me that as British Rail is to be excluded from the present clutch of franchises, whoever obtains those franchises may do so at a knock-down price which is against the interests of the public purse?
Viscount Goschen: My Lords, I do not agree with the noble Lord. There has been healthy competition for these franchises. However, the Franchising Director must assess each franchise on an individual basis. He must assess the circumstances and consider whether preventing the BR Board from bidding in accordance with the discretionary powers given to him under the Act coincides with the duties that he has been given by the Act.
Viscount Caldecote: My Lords, does not my noble friend agree that British Rail managers know as much about managing British railways as anyone and that when they are freed from the shackles of Treasury control they are most likely to make a success of running British Rail franchises? Will he not therefore do a little arm twisting and perhaps give a nod and a wink behind the scenes to the Franchising Director to persuade him to allow British Rail managers to bid for all franchises?
Viscount Goschen: My Lords, the answer is no to both questions. I have said that we are specifically prohibited from doing exactly what my noble friend asks. We will not and cannot do that. As regards the other point, I agree that those who manage the railways at the moment have a substantial body of knowledge about the railways and they of course will be considering whether to submit management buy-outs. If franchises are won by the British Railways Board, the members of the board will not be freed from the constraints of the public sector borrowing rules because they will still be part of the public sector.
Lord Harris of Greenwich: My Lords, is the noble Viscount aware that we accept what he has said about
568
the position of his department giving directives, but is it also clear that there is no informal advice being given by Ministers or officials?
Viscount Goschen: My Lords, it is not just a matter of specific directives but also of objectives, instructions and guidance. That is the wording contained within the Act and we are therefore prevented from giving those objectives, instructions and guidance. The matter cannot be clearer than that.
Lord Clinton-Davis: My Lords, is not the truth of the matter that when the Government introduced the Railways Bill they did not want to allow British Rail to bid? It was only as a result of the activities of this House and of the noble Lords, Lord Peyton and Lord Marsh, in particular—
Noble Lords: Oh!
Lord Clinton-Davis:—as well as the Opposition of course, that some common sense prevailed. The clear will of Parliament was that British Rail should be permitted to bid. The net result of the situation is the following, is it not? British Rail has not been permitted to bid and therefore the original will of the Government is being respected by the Franchising Director. Is that not an utter disgrace?
Viscount Goschen: My Lords, I believe that the noble Lord has misinterpreted the situation. The will of Parliament was indeed that British Rail should be allowed to bid; the will of Parliament was also that British Rail should be allowed to bid subject to the discretion of the Franchising Director. That point was also inserted into the Act at the will of Parliament. Parliament has agreed to the Bill, which is now an Act, as a whole, and we must follow it.
Lord Mackie of Benshie: My Lords, will not the Minister tell us who selected this wholly objective Franchising Director who has turned down seven bids? Surely it was the Government who selected him, and their criteria used in the selection must have been useful to them.
Viscount Goschen: My Lords, it was a government appointment but the Franchising Director's role and duties are clearly laid down in statute. He cannot breach those and we cannot breach ours.
Baroness Castle of Blackburn: If British Rail was allowed to tender for the franchise for the busy Chiltern line would passengers at High Wycombe station not have to stand—as I did this morning in a biting wind—outside what used to be, under British Rail administration, their waiting-room, which has now, in preparation for privatisation, become the area retail manager's office?
Viscount Goschen: My Lords, I am slightly at a loss. The noble Baroness is complaining about the service provided by British Rail yet at the same time she wants British Rail to continue to run the service. The process

569
of franchising as enacted by this Act will produce substantial benefits for the travelling public, including the noble Baroness.

Merchant Navy Cadet Recruitment
2.55 p.m.
Lord Clinton-Davis Lord Clinton-Davis asked Her Majesty's Government:
Whether they are satisfied with cadet recruitment for the British merchant navy and, if not, what steps they propose to take to extend such recruitment.
Viscount Goschen: My Lords, in seafaring, as with any industry, recruitment is primarily a matter for employers. Nevertheless we have introduced positive measures to assist recruitment such as the Government Assistance for Training (GAFT) scheme, which has helped over 2,500 officer cadets train for their first certificate of competency. We are reviewing the effectiveness of this and other merchant navy support schemes.
Lord Clinton-Davis: My Lords, does not the Minister agree that the tremendous shortage of skilled seafarers in the British merchant marine is likely to prejudice opportunities as regards the UK fleet in securing advantages from the increased world trade in cargo shipping that is projected? Does not the Minister also agree that a recruitment figure of 420 cadets per year is about one-third of the number of cadets that is required if we are to be able to make that sort of contribution? What are the Government proposing to do about that?
Viscount Goschen: My Lords, I agree with the noble Lord that there are, and will be, considerable opportunities within the merchant shipping sector. I also agree that there is a problem as regards the number of recruits entering merchant shipping. That is why we have put into place some good and effective training schemes whereby the Government assist cadets who are entering merchant shipping. The Government Assistance for Training scheme, for example, has never refused an applicant to the scheme on the basis of capacity. I agree with the noble Lord, Lord Clinton-Davis, that it is important to have a good flow of people coming into the industry, but his figure for those cadets corning in this year should be compared with that of 1987/88, when it was less than half that figure.
Lord Boyd-Carpenter: My Lords, is not my noble friend concerned at the fact that the British merchant navy has shrunk so much in recent years? What are the Government doing about that?
Viscount Goschen: My Lords, we are concerned about that but it has been a worldwide problem among all developed countries that shipowners have tended to flag out to other foreign registers. We are doing something about that on a wide range of fronts. We are attacking substandard shipping through port state
570
controls. We are preventing substandard ships from operating to our ports. We are supporting training through direct assistance, the Government Assistance for Training scheme and the docks scheme. We have put forward a number of other measures to enhance the competitiveness of the British Red Ensign.
Lord Murray of Epping Forest: My Lords, is the noble Viscount aware that my noble friend is a little optimistic as regards the present government cadet recruitment figure? It is 360, not 420. Is he further aware that there is a strong but unsatisfied demand from well qualified men and women for cadetships? One agency has received 1,000 applications for only 30 cadetships. Is he aware, on the other hand, that employers are not recruiting cadets because, although GAFT is in operation, the individual values of the grants are too low? Will the noble Viscount therefore consider making a substantial increase in the level of individual grants available under GAFT in the course of reviewing the future operation of this desirable innovation?
Viscount Goschen: My Lords, of course we will look carefully at the level of the grant. However, I think that the industry itself accepts that the scheme has been a considerable success in helping those who seek to enter the industry. The wider problem of employment within seafaring of UK officers is a much broader issue. As I have said, we are addressing that on a number of different fronts.
Baroness Strange: My Lords, can my noble friend tell us how many ships there are now in the British merchant navy and how many there were 50 years ago?
Viscount Goschen: My Lords, I do not believe that I can give the figure for 50 years ago. My figure for the number of UK-registered vessels over 500 gross tonnes which trade is 271.
Lord Molloy: My Lords, will the noble Viscount consider making representations on our behalf to those who are responsible for this matter to express our apprehension that not enough is being done to resolve the problem?
Viscount Goschen: My Lords, the problem can only be resolved as a result of co-operation and partnership between the industry itself and the Department of Transport. That partnership exists, and we are working very closely with the industry to address the problem through the schemes that I have mentioned.
Lord Campbell of Croy: My Lords, did the intake of cadets increase after the government assistance with training was introduced? Should this not be continued, with more publicity, at a time when international regulations are fortunately becoming stricter and therefore creating a demand for British maritime skills?
Viscount Goschen: Yes, my Lords. I agree that there is already substantial demand for qualified British officers. One of the main problems arises in the recruitment and training phase. My noble friend is quite correct that, as we have heard, since the introduction of

571
the scheme there has been a substantial increase in the numbers coming into the industry. The training scheme has helped. I agree that we still face a difficult problem.
Lord Greenway: My Lords, while the Government have taken some measures to alleviate the situation, does the noble Viscount not agree that, in the light of a forecast increase in world trade, as the result of which more ships will be needed, we shall need not only to train more seafarers but also to ensure that our shipping companies have the right ships for them to serve in? On the subject of manning, should we not also be looking very carefully at the future quality of life of seafarers, as reduced manning and long working hours have created a situation in which safety could well be compromised?
Viscount Goschen: My Lords, the noble Lord will know that the international community has acted strictly to address the problems of hours of work. I agree that historically that has been a problem. I hope that British companies and British ships have been better than most. I agree with the noble Lord that there are substantial opportunities for merchant shipping. We have already heard what those are. I believe that the British fleet will be able to play its full part in that industry.

Transport Research Laboratory Sale: Bids
3.2 p.m.
Baroness Castle of Blackburn Baroness Castle of Blackburn asked Her Majesty's Government:
Which of the bids they have received for the Transport Research Laboratory they have shortlisted; which of those shortlisted are non-profit distributing concerns and what is the amount of the bid in each case.
Viscount Goschen: My Lords, two bidders have been shortlisted in the sale of the Transport Research Laboratory. They are a consortium comprising Pell Frischmann Consulting Engineers Limited, Mouchel Associates Limited, the Automobile Association and the Royal Automobile Club; and the Transport Research Foundation, which includes members of TRL's existing management. The foundation is bidding to acquire TRL as a non-profit distributing company. The AA and RAC are non-profit distributing concerns. The amount of each bid is confidential.
Baroness Castle of Blackburn: Is the Minister really telling us that we are not to be allowed to know what has influenced the Government financially in the size of the different bids, in view of their overwhelming anxiety to get money at any cost or quality in order to prop up their tottering finances? When will we know what the Government's motives have been? Is it not a fact that the alternative bidder—the Pell Frischmann, Mouchel, AA, RAC consortium—consists of concerns that have vested interests in one side of transport—namely, road construction and car owners—and therefore is incapable of taking an overall view of what is required for research in the transport industry as a whole?
Viscount Goschen: My Lords, I certainly do not agree with the noble Baroness that because those concerns have interests in certain areas they are not capable of owning and running a company that produces independent research. One only has to look at all kinds of companies in the private sector which produce independent research, for which the Government are often a customer.
I have forgotten the first part of the question. Will the noble Baroness please repeat it?
Baroness Castle of Blackburn: Is the Minister serious? I thought that it was one of his evasions. I am glad to have the opportunity to repeat the question.
Is the Minister really telling us that this House is not entitled to know the price which has been offered by each of the concerns and therefore what has been the nature of the financial inducement to the Government to sacrifice quality to their desperate need to prop up their tottering finances?
Viscount Goschen: My Lords, I remember it now. As the noble Baroness will be very well aware, our finances are not tottering. They are in extremely good health. She should have listened to my right honourable friend the Chancellor of the Exchequer yesterday when he detailed exactly how they stand. We are in the middle of a competitive bidding process. It would not be in the interests of fair competition, which I am sure the noble Baroness wants, to disclose the amounts at this stage.
Lord Haskel: My Lords, in view of the fact that the National Engineering Laboratory was sold for minus £1.95 million, will the Minister tell us whether the Road Research Laboratory will be sold for a plus or minus amount?
Viscount Goschen: My Lords, where there have been instances of businesses being sold for a net minus sum, there have been considerable liabilities which have been taken over. I should not like to comment at this stage on the amount we expect to receive for the laboratory. The noble Lord will have to wait and see. I am sure that he will be very pleased when he finds out.
Lord Clinton-Davis: My Lords, is the Minister aware that we do not worry about his forgetting the questions; it is his answers that cause great anxiety? Will the Minister give the House some indication as to when this absurd process is likely to end? Can he also indicate to the House why it is that the Government are continuing with this illogical attempt to decimate an institution which has organised itself in such a way that the country can be wholly proud of its activities?
Viscount Goschen: My Lords, the country can be proud of the good quality research that has been produced by the laboratory. We believe that the country will continue to be proud of it in the future when the laboratory is fully in the private sector. To answer the noble Lord's question about the timetable, the shortlisted bidders have

573
been asked to submit their final bids by 21st December. We expect an announcement of the selected purchaser to follow early in the new year.
Baroness Castle of Blackburns: Has the Minister also forgotten the report of the Select Committee on Transport in another place, which said that it could not recommend privatisation to the Commons unless there were far greater guarantees that the independence and impartiality of the privatised concern would be safeguarded? Has not his evasiveness today proved that we can have no confidence whatsoever that his choice will safeguard that impartiality?
Viscount Goschen: My Lords, I hope that I have not been evasive today. I have sought to answer the questions that have been put to me. We will ensure that TRL's independence and impartiality are safeguarded when the institution is brought into the private sector. That is a commitment and it is one that we stand by.

Business
Lord Strathclyde: My Lords, at a convenient moment after 3.30 p.m. my noble friend the Leader of the House will, with the leave of the House, repeat a Statement that is to be made in another place on Northern Ireland. That will be followed by my noble friend Lord Mackay of Ardbrecknish, who will, again with the leave of the House, repeat a Statement on social security uprating.

Business of the House: Debate this Day
3.8 p.m.
The Lord Privy Seal (Viscount Cranborne): My Lords, I beg to move the Motion standing in my name on the Order Paper.
Moved, That the debate on the Motion in the name of the Lord Desai set down for today shall be limited to four and a half hours.—(The Lord Privy Seal.)
On Question, Motion agreed to.

Hybrid Instruments: Select Committee
The Chairman of Committees (Lord Boston of Faversham): My Lords, I beg to move the first Motion standing in my name on the Order Paper.
Moved, That a Select Committee be appointed to consider hybrid instruments and that as proposed by the Committee of Selection the following Lords together with the Chairman of Committees be named of the Committee:

L. Brougham and Vaux,

V. Craigavon,

L. Gallacher,

V. Oxfuird,

L. Wade of Chorlton.—(The Chairman of Committees.)

On Question, Motion agreed to.

Standing Orders (Private Bills): Select Committee
The Chairman of Committees: My Lords, I beg to move the second Motion standing in my name on the Order Paper.
Moved, That a Select Committee on the Standing Orders relating to Private Bills be appointed and that as proposed by the Committee of Selection the following Lords together with the Chairman of Committees be named of the Committee:

V. Falkland,

L. Gallacher,

V. Hood,

E. Lloyd-George of Dwyfor,

L. Renton,

L. Strabolgi,

L. Wade of Chorlton.—(The Chairman of Committees.)

On Question, Motion agreed to.

Personal Bills: Select Committee
The Chairman of Committees: My Lords, I beg to move the third Motion standing in my name on the Order Paper.
Moved, That a Select Committee be appointed to consider personal Bills and that as proposed by the Committee of Selection the following Lords together with the Chairman of Committees be named of the Committee:

L. Hooson,

B. Seccombe,

L. Strabolgi,

L. Templeman,

L. Wilberforce.—(The Chairman of Committees.)

On Question, Motion agreed to.

Economic Affairs
3.10 p.m.
Lord Desai Lord Desai rose to call attention to the economic state of the nation, and to the Budget statement of 28th November; and to move for Papers.
The noble Lord said: My Lords, last week in the debate on the gracious Speech we had an occasion to discuss the state of the economy and industry. Today I hope that we can take that discussion further because on that occasion some of us were constrained from speaking our mind because we awaited the details of the Budget announced yesterday.
All that one can say about the Budget is that it could have been much worse. With the permission of the House, after taking a broad look at the state of the economy, I wish to point out in a general way why I believe that the Budget could have been worse, why it fails to be better, and the ways in which I believe that it could have been improved.
As we have all seen, the Budget has been given a lukewarm welcome from the Back Benches of the ruling party and a hostile welcome from everywhere else in the country. It combines an immediate net giveaway of about £3 billion with arguments that there is room for having that moderate tax cut along with a small increase in spending on education, health and welfare. It argues that that somehow combines sound finances, low inflation and a tax cut.
Sound finances are obviously a matter of choice. One has to define them in the way that one will. Given the Government's own predictions last year, it is true that this year's predictions are more pessimistic about the path of the PSBR and how soon the Budget will balance. Paradise has been postponed. It has not only been postponed. On pages 75 and 76 of the Red Book, faced with a higher than predicted PSBR for 1995–96 and for 1996–97, the Chancellor has thought fit to lose £12.5 billion from revenue and to balance that by losing only about £4 billion from expenditure. Therefore £8.5 billion have been added to the PSBR relative to the prediction last year. That increases the ratio of PSBR to GDP and violates the Maastricht conditions; and we shall not get under the Maastricht conditions until after the election.
The election is the key to the way in which the Budget has been framed. One can only be thankful, as I implied before, that the wilder excesses of Tory populism have not had their day and we have not had what is called a scorched earth budget, as we had in 1992. Noble Lords will recall that in 1992, having spent a lot of money in order to win the last election—and to their surprise having won it—the Government were faced with the task of meeting the bill which went up to £50 billion. All our problems over the past four years are encompassed in the task of overcoming the effects of the profligacy which may have won the last election but did not do much good for the economy.
What we now have is another cautious little nudge at seeing whether the markets would bear a signal that the Government intend this year to loosen the reins of public spending a little, although not wildly—a little tax cut here; a little extra spending there. If the markets bear it, if the Chancellor is lucky, and interest rates then come down—and I shall argue later that interest rates will not come down as fast as would be beneficial to the economy—then perhaps next year enough will have been built into the projections to allow a bigger tax cut. Perhaps not only paradise has been postponed, but perhaps the scorched earth policy has been postponed by one year too. We shall see. We do not know what to make of the projections before us.
What we have, clearly in the interests of the electoral cycle, is a policy of relaxation of public spending when it might have been prudent not to have done so. I make no apology for being a fiscal hard man. Noble Lords know that I am no friend of lower taxation. I have never argued for lower taxation. I argue for the appropriate amount of spending to be undertaken and then financed properly. I believe in balancing the Budget and perhaps borrowing only for capital purposes.
However, capital spending has been quite severely cut and a smoke and mirrors element has been added to the Budget which is called the private finance initiative. The private finance initiative projections between this year and next year are the fastest growing item in the economy. We are expected to believe that next year the private finance initiative will net us in the region of £2 billion whereas so far we have hardly seen £0.5 billion.
Therefore the private finance initiative is an excuse for cutting capital spending without putting anything in its place. It is a straight cut in capital spending and nothing else. We should call things by their old names rather than their new names. No doubt at the end of a long evening the Minister will argue that that is not the intention and all kinds of things are in the offing; and perhaps many plans will materialise. We shall see. I have my doubts.
What is interesting in this respect is that much play has been made—and it was made by the Chancellor in his speech—about the Chief Secretary having been very tough on spending, how spending has been brought under control, and so on. A perusal of the Red Book tells us that that is not the case. I refer noble Lords to page 141. In considering the deviation from projections for 1996–97 your Lordships will see that the total amount is £3.2 billion—it is the size of the giveaway—which exactly matches the drawdown of reserves. The Minister may tell me that it is not true and that I have misunderstood the Red Book. However, it is absolutely clear on page 141 of the Red Book. The figure, under changes from previous plans, is minus £3.2 billion; the control total is minus £3.2 billion; and everything else is a little shuffling of the cards—give a little more to health and education, and a little less to defence or whatever it is. By and large, drawing down on the reserves makes possible this net giveaway. Whatever else that is, it is not prudent public finance. People should not pretend that since the Government have been in charge they have so improved the management of the public finances that somehow responsibility and prudence have prevailed.
What is true is that over the past 16 years, if anything, the debt:GDP ratio has worsened. When Labour gave up office, the debt:GDP ratio was 45 per cent. After the country endured much suffering, the ratio was brought down a little. But ever since the late 1980s we have seen a steady rise in the debt:GDP ratio. The Red Book projections show that the debt:GDP ratio will not fall until after the general election. After it, we shall see all kinds of nice things but in the run-up to it we shall see nothing but a little more of the spending habit, albeit clothed in the virtues and protestations of fiscal prudence.
In a sense, I am persuaded and should argue strongly that the economy needs a growth boost. I do not deny that the economy has slowed down and, as it has done so, by the Government's own projections the growth rates for 1995–96 are lower than they expected. The growth rates for 1996–97 are rather high, almost unbelievably high, but we will leave it at that. The economy needs a boost but the kind of boost it needs is, in my view, capital spending. If the Government meant

577
to revive, for example, the construction industry, if they seriously meant to do something about unemployment or about the growth rate of the economy, they would not have cut capital spending and relied on private finance initiatives, with a wave of the wand, to make up for the gap.
In principle, we have a cut in capital spending with a small increase in the current net stimulus to the economy, all financed by a drawing down of the reserves. It could have been done in exactly the other way: if one had the room and had £3 billion available, then one could have said: "All right, given that money, it ought to be put into capital spending. Capital spending should not be cut". Then we would have boosted that part of the economy. As it is, our borrowing is in excess of our capital spending, which is not fiscal prudence. Fiscal prudence requires that one borrows for capital spending purposes and for nothing else. I recognise that there are cyclical problems and that recessions cause a rise in the deficit, but the recession was made severe by wrong policies and we are suffering from them now.
Let us examine the likely effects of the Budget on the economy. Had the Chancellor resisted even the slightest temptation to which he has succumbed, it would have been possible to argue with the financial markets that interest rates could have come down drastically, perhaps three-quarters of a per cent. to 6 per cent. Had that happened, I believe that it would have had a widespread stimulating effect on the economy. We do not know how the gilt markets, the money markets, will react, but I feel that a rise in the PSBR, current and projected; a rise in the debt:GDP ratio, current and projected; the postponement of a balanced Budget for at least one year so that we will not see anything until the year 2000 will not please the gilt markets. I make no apology for putting that view forward because low interest rates are essential to the economy. We know that in the globalised world of today if you want low interest rates you must keep your nose clean and act fiscally in a responsible fashion. This Budget is not fiscal responsibility. It is not gross irresponsibility, as some people urge on the Chancellor, but it is certainly not, in any sense of the word, responsible behaviour.
Thus if interest rates are not going to fall as much as one would like, the stimulus must come from somewhere else. Capital spending would have been better as a stimulant than what we have. If we carefully examine the increase in expenditure in the three departments—education, health and law and order—in each case the total budget is being cut. Although there is some rise in health expenditur, once again there is a bit of the smoke and mirror stuff about capital spending. The private finance initiative will ride to the rescue and all kinds of other nice things will happen. It will be the same with education. All kinds of items are being taken out, such as student loans. We do not know, and perhaps the Minister can tell us in his reply, what assumptions are made about student loans and what amount of expenditure has been taken out of the Department for Education's spending funds in order to generate the extra spending that the Department for Education will have. All across the board, such increases in spending
578
as have been generated have been gross increases, whereas on the net side, because of the cut in capital spending, we have a peculiar situation.
In the end, one must discount the increase in expenditure which is obviously done for political popularity. I do not begrudge the increases in expenditure but I would have preferred them to be better financed. If we discount that, what is really going on is that the reserves are being drawn down to give back the tax. There is obviously a great need for the Government to regain their tax cutting image. I have never been convinced that cuts in income tax have any great incentive effect, as people argue they have; there is no scientific evidence for it. If there were any, we would have done much more to cut income tax at the bottom of the scale where people pay horrendously high actual rates of income tax, 80 per cent. or 85 per cent., if not more. Nothing much has been done to cut the income tax that people pay at the bottom, but some cuts have been made in income tax at the top.
Over the past three years, when the Government cut the effective rate of taxation they did so not by changing the basic rate but by altering allowances, not indexing them enough or restricting the rate at which they were deductible. Now, in addition to the 1p cut in the basic rate, we have all kinds of over-indexation of allowances. I have not quite worked out the final effective rate of taxation, but it is certainly not the 7p that it has been calculated has been imposed over the past three years.
At the end of the day, we have a half-hearted attempt at displaying fiscal prudence which does not bear careful examination. It is clear that all the numbers go the wrong way for a Chancellor who is asking for fiscal prudence. It will not be a great stimulant for the economy because it will fail to bring interest rates down as much as we would like, and it will not generate employment through capital spending which is clearly required for the economy. I am sorry to be churlish about it, but we must say that this is a phase of the cycle where stimulation was needed for a rapid cut in unemployment. That has not happened.
In that vein, let me say one more thing about the Budget. In the previous Budget, the Chancellor tried innovatively—and I acknowledged it when we discussed the Finance Bill—to do things in the labour market which would encourage the employment of people who were somehow restricted from it. This Budget has nothing to encourage employment. In that respect perhaps my noble friend Lord McCarthy will bear me out. We have nothing to encourage employment. What we have is a Budget which gives a relief for consumption. I am not sure that is what I should like to do, but there is little for employment. I should have preferred a cut in the national insurance contribution, especially creating a threshold at which it becomes applicable, rather than a cut in income tax or the 20p being given back. I have a penchant for higher taxation and balanced Budgets. The Government claim also to have that, but they do not succeed in delivering a balanced Budget. This is a weak Budget, and we shall learn the consequences soon enough. My Lords, I beg to move for Papers.
3.30 p.m.
Lord Clark of Kempston: My Lords, I am sure that the whole House is indebted to the noble Lord for giving us this opportunity to discuss the economic state of the nation and the Budget. Many of us on both sides of this House believe that finance and economics should be debated a little more frequently. It might be worth considering the tabling of a similar Motion every year immediately after the Budget so that we can regularly debate the state of the nation.
I should like to spend some time on the economic situation in this country, as the Motion seeks, before turning to the Budget. The economic state needs to be viewed over a long period; it cannot be done from year to year. Looking back at this Government's record—and presumably in this respect the Government are on trial—and turning our minds back to 1979, we see that the whole economy was then in a complete and utter shambles. We had strikes, rising unemployment, high inflation and so on. We need to look at what has been achieved since then, despite the gloom that I read into the noble Lord's remarks. As politicians we do not pay sufficient attention to the achievements of this Government; all we do is criticise, carp, denigrate and run down the country, which cannot be good.
For example, this country's record on inflation is absolutely superb. It is 3 per cent. or thereabouts. From its peak, unemployment has come down by over 700,000. As the noble Lord said, the basic bank interest rate is presently per cent. It has come down from 15 per cent. That is an achievement. Looking at inward investment, why do the Japanese and the Americans invest here? It is simply because they come in to a competitive nation and a competitive economy. Britain exports more per head than both Japan and the United States. That is not a bad record. We should talk about this sort of thing rather than ignoring it.
Let us take savings. (It is from savings that we get the capital and expenditure on which the noble Lord spent so much time.) In 1979 there were about 3 million shareholders. Today there are over 10 million. That must be an achievement. It must prove that the ordinary man and woman in the street is prepared to put money into ventures to an extent that they never did before—some 10 million people. Why do small businesses prosper? There are about 3.6 million small businesses in this country, 1 million up on 1979. That is an achievement. Only small businesses will bring about the reduction in unemployment that we so much desire.
I accept the fact that taxation has increased over the past few years because of the depth of a recession not envisaged to be so deep by all the pundits, from whichever part of the political spectrum they come. Even given the increase in taxation, comparing the standard of living today with the standard in 1979 the average family is £80 per week better off.
During the period in office of the last Labour Government—and this is probably my only political point until the next one—the standard of living increased by 0.06 per cent. That equals £1.50 a week. Therefore if we compare management by the two parties, it is obvious which one was successful. One has
580
reduced the basic rate of taxation from 33 per cent. to 24 per cent. Corporation tax is down from 52 per cent. to 33 per cent. For small businesses the rate was 42 per cent.; it is now down to 24 per cent. Last year the growth in manufacturing industry was up by 12 per cent. That is not a bad record. These are the sorts of statements we should be making, so that our competitors and potential customers and investors from abroad will come into this country.
The jewel in the economic policy of the British Government has been privatisation. Whereas at one time the taxpayer paid out some £50 million per week in subsidies, today my right honourable friend the Chancellor of the Exchequer receives some £55 billion every week. That is quite a good record.
I turn now to the Budget. It is well balanced and provides help for all. I particularly like, as I am sure do most noble Lords, the help that is given to the elderly. As well as the change to inheritance tax, which will take most people out of the inheritance tax bracket, the disallowance in regard to nursing home fees is of great benefit to the elderly; and, to return to the savings field, the retirement bond has given further help. The exemption of unquoted shares—that is, the unquoted securities market, now replaced by the alternate investment market—is bound to help both markets. The marriage allowance and the personal allowance have gone up, as the noble Lord said, more than inflation.
I do not agree with the noble Lord's remark that the reduction in taxation is not an incentive. I remind him that when tax on earned income-83 per cent. in the pound under a Labour Government—came down to 40 per cent., the top taxpayers were paying more tax than they were when it stood at 83 per cent. So an incentive must have been offered, and we should obviously not forget that. The new rate for personal savings, particularly for the basic rate payer, at 20 per cent. is also very good. The noble Lord said that no help has been given in regard to the national insurance contribution. My right honourable friend the Chancellor has decreased the national insurance contribution from employers. It is certainly by a small amount on each payment, but it adds up to £500 million, which is a direct incentive and help to business, and particularly to small businesses.
The noble Lord spoke about the public sector borrowing requirement. I agree with him. We can borrow to raise capital expenditure. I guess that capital expenditure in this Budget is somewhere in the region of £20 billion. Consequently, if we borrow £29 billion, we have overspent by £9 billion. I have always maintained that the change in government accounting from above and below the line was a mistake. One should differentiate between revenue expenditure and capital expenditure. If we do so, the position looks much better.
The Chancellor did not mention it, but we are to have a radical change in our taxation returns in 1997; namely, self-assessment. One thing I can never understand about the fiscal system is the use of 5th April. Why do we not set the date at 31st March? I do not know very many companies whose year ends in April.

581
This is a well balanced Budget. It will help those in need. It will help enterprise, and it will certainly help competitiveness. I am certain that it will help to make the UK the enterprise centre of Europe. Finally, I urge noble Lords to stop denigrating the economy of this country and to start talking it up.

Northern Ireland
3.40 p.m.
Viscount Cranborne: My Lords, with the leave of the House I shall now repeat a Statement on Northern Ireland made in another place by my right honourable friend the Prime Minister. The Statement is as follows:
"Yesterday evening, the Irish Prime Minister and I met at Downing Street to launch a new initiative in the Northern Ireland peace process. A copy of our joint communiqué has been placed in the Library of the House.
"In the 15 months since the first of the two ceasefires, there has been a dramatic improvement in daily life in Northern Ireland. People have enjoyed the freedom to go about their daily business without fear of terrorist attacks. Many new jobs have been created. New investment has come in. New opportunities have opened for people of all ages.
"We have responded positively—following advice from the Chief Constable and the General Officer Commanding—to the much reduced threat to security. By the end of this year half of the Army's emergency or roulement battalions will have left Northern Ireland. Security infrastructure has been dismantled. Remission rates for scheduled offenders have been returned to their pre-1989 levels.
"But, though we have a ceasefire, we are still far from a comprehensive political settlement. To work towards that, we must establish a negotiating process open to all democratic parties. That aim underlies the twin track initiative which we have now launched with the Irish Government.
"The first of the two tracks in the joint communiqué will involve invitations to the parties to intensive preparatory talks. These are not substantive negotiations on Northern Ireland's constitutional future. They are designed to prepare for such negotiations.
"There are many issues to be resolved if substantive negotiations are to take place successfully. The preparatory talks will consider the best structure and format for all-party negotiations, and how those negotiations can address all the relevant relationships in an interlocking three-stranded process.
"Several of the parties in Northern Ireland have suggested that an elected body could play an important part in all-party negotiations. Other parties disagree. As the communiqué makes clear, this is an idea which will be discussed in the preparatory talks.
"As I have indicated, meeting the requirements of paragraph 10 of the Downing Street Declaration will be an essential condition for any party claiming a seat at all-party negotiations. Not all of the parties yet do so. This too will be a valid subject for discussion in the preparatory talks.
"The format for these talks is intentionally flexible and permissive. We shall build on the exchanges and bilateral contacts which have already taken place. We shall treat each party equally. Exchanges can be bilateral or, where the parties so wish and where it will further the objectives of the preparatory talks, they could be multilateral.
"This new round of preparatory talks is an opportunity for each of the parties in Northern Ireland to express its view, in whatever format it chooses, on the best way of moving the political process forward. It is an opportunity for them to work together with one or other or both governments, according to their wishes. It is an opportunity to generate fresh momentum. It threatens no one, no interest and no party. I hope that all of the parties, in their own way, will take advantage of this opportunity. The objective of moving towards a just and comprehensive settlement will be of benefit to all.
"Let me turn now to the decommissioning of the weapons and explosives held in large number by paramilitary organisations linked to political parties in Northern Ireland.
"Before the Downing Street Declaration and the ceasefire, we recognised that the need to address this question was one of the practical consequences that had to follow the ending of violence. In a democratic society, political parties cannot be linked to private armies. In a society where parties are committed to exclusively peaceful methods, there can be no need and no justification for holding illegal weapons and explosives. In a democracy, parties and governments cannot be expected to negotiate under the duress of an implicit threat of a return to violence.
"For that reason, we have throughout this year sought to engage the representatives of both Sinn Fein and the Loyalists in an exploratory dialogue on how their weapons will be taken out of commission. In order to achieve more progress in that area we have now agreed with the Irish Government to establish an international body to provide an independent assessment of the decommissioning issue and have given it specific tasks.
"The body will consist of three members under the chairmanship of Senator George Mitchell from the United States. They will act in a personal capacity and on an advisory basis. The body has been asked: first, to identify and advise on a suitable and acceptable method for full and verifiable decommissioning; and, secondly, to report whether there is a clear commitment on the part of those in possession of such arms to work constructively to achieve that.
"We expect the body to invite relevant parties to submit their analysis of matters relevant to the decommissioning issue. The governments are not setting limits to the scope of the submissions which

583
may be made to it. It will be for the international body, in reaching conclusions within its remit, to consider such evidence on its merits.
"We will not be asking the international body to question the Government's position on what has become known as the third Washington criterion. The body has not been established to make recommendations on when decommissioning should start. That is a matter for a government decision; and, as I have indicated, it is properly a matter for discussion in the preparatory talks.
"To avoid any doubt, let me stress that the Government stand by the three criteria on decommissioning which my right honourable friend set out in Washington earlier this year. We cannot see a way of securing the necessary confidence to bring all parties to the negotiating table without a start being made to the decommissioning of illegal arms. This is not a matter of dogma but of practicality. It goes without saying that we, like the Irish Government, will consider constructively any practicable suggestions that could help bring all parties into negotiations on the basis of the Downing Street Declaration.
"It is no secret that yesterday's agreement between the two governments required long and difficult negotiations. The British and Irish Governments agree on the need for disarmament by the paramilitary organisations but have an acknowledged difference of opinion over its timing. We have decided not to allow that difference to stand in the way of forward movement along these twin tracks. That is a measure of our determination to continue working together.
"We have asked the international body to report by the middle of January. We hope that progress in both tracks will then enable the two governments to launch all-party negotiations by the end of February. That is our firm aim. I am confident it is attainable, but it will require a serious commitment by all concerned.
"We are ready to make that commitment. But let me make a crucial point. The British and Irish Governments cannot make peace in Northern Ireland. Our role in the process is to facilitate it.
"We have borne a great deal of the burden. We have been ready to take risks for peace. Now is the time for others to do so as well. Now is the time for all parties and groups to make a sincere and constructive contribution: for the paramilitaries on both sides to give not merely qualified verbal assurances but a real and tangible commitment to peace—if they mean peace, they do not need guns and semtex; for all political parties to enter the preparatory talks, not with rigid and irreconcilable postures, but with a will to make them work. Because ultimately a lasting and peaceful settlement is in their hands, not mine. Let them all have the courage to grasp it".
My Lords, that concludes the Statement.
3.50 p.m.
Lord Richards: My Lords, I start by thanking the noble Viscount the Lord Privy Seal for repeating the Statement made by his right honourable friend in
584
another place. Noble Lords on all sides of the House will wish to join me in paying tribute to the Prime Minister and to the Taoiseach for their commitment to the peace process and for the spirit of co-operation between the two governments which culminated in today's announcement.
The twin-track approach offers a real opportunity to help move forward the resolution of a conflict which has blighted the history of Northern Ireland for many years. We on these Benches sincerely hope that the proposal announced today will lead to further progress being made. We are all aware that the peace process will inevitably involve lengthy negotiation and that it has to deal with a number of difficult issues. The decision therefore to adopt the twin-track approach should be welcomed. We hope that such an approach will build up trust and confidence between the different parties to the negotiations. I entirely agree that that is vital if the peace process is to be successful and if the problems facing Northern Ireland are to be resolved.
Perhaps the noble Viscount will answer one or two specific questions to enable me to understand properly what is involved. As I understand it, there are to be two processes which will go ahead separately but be linked to the overall attempt to reach a peace settlement in Northern Ireland. First, in connection with the political negotiations, am I right that the talks about talks will take place before the international commission reports in mid-January; or, alternatively, will the international commission make its report on the decommissioning of arms before the talks about talks begin?
As I understand the position, the political talks will start immediately; then the decommissioning—I almost said "decommissioning commission", but that is perhaps not the happiest way of putting it—the Mitchell Commission will pursue its work and report in mid-January at a time when the talks about talks will still be continuing.
Secondly, is it possible for the Lord Privy Seal to give us an indication of who the other two members of the Mitchell Commission are to be? Will they be people drawn from outside or inside these islands? I am also a little unclear about the terms of reference of the Mitchell Commission. According to the Prime Minister it has been asked to,
"identify and advise on a suitable and acceptable method for full and verifiable decommissioning".
That means that the commission is to look at the way in which that can be achieved. It is then asked to report on,
"whether there is a clear commitment on the part of those in possession of such arms to work constructively to achieve that [decommissioning]".
As I understand it, the commission is not expected to say when such decommissioning shall take place, nor indeed to say how that commitment to decommissioning fits into the other negotiating process—that is, the talks about talks which one hopes will lead to all-party talks.
Those are questions on detailed procedure. But in this, as in many other issues, your Lordships will appreciate that they are critical to the way in which progress can be made. We give our full backing to the process. We hope that it will continue to gain momentum and

585
produce a settlement which will in the end bring peace, stability and reconciliation to the people of Northern Ireland.
Finally, I shall be grateful if the Lord Privy Seal can give us an indication of what the Government's attitude will be to the status of decisions made by the international body under Senator Mitchell. Can he say a little more about the timetable for creating that body? Subject to those questions, some of which are detailed, we support the Statement.
Lord Holme of Cheltenham: My Lords, from these Benches I add our support to that expressed by the noble Lord, Lord Richard, for the Statement and for the initiative that has been taken. Also, I express our warm congratulations to the Prime Minster and the Taoiseach for this agreement reached at the 59th second of the 11th hour before the visit of President Clinton. All of those who follow the affairs of Northern Ireland will know that we should not look for rapid progress. It is a long-standing, deeply rooted, historical dispute and nothing will happen suddenly. We must be prepared for a long haul. On the other hand, as the noble Viscount said in presenting the Statement to us, momentum and movement are essential, and the agreement represents momentum.
I am bound to say that in some ways that momentum was achieved by pushing the problem forward into some point in the future. As an agreement, it has some of the characteristics of the device much disliked by lawyers of an agreement to agree or, in this case, an agreement to disagree. But at the present juncture it is more helpful than not that we have momentum.
I do not suppose the Government feel particularly happy about the last minute alarms and excursions by which they arrived at this point. The great change in the past 12 months, from the time of the framework document, is the fact that in some ways Sinn Fein has drawn a wedge between the two governments. The most notable fact 12 months ago was that the two governments held together solidly and provided a centre for this difficult process. It can no longer be said that that is the case. To that extent I fear that Sinn Fein may have succeeded to some extent in its mission to drive a wedge in between the partners who must see the process through.
I hope that the noble Viscount will not find it too cynical if I ask whether the agreement would have been arrived at in this rather melodramatic way if it had not been for the visit of the US President. Like other noble Lords, I welcome the visit of President Clinton. I felt that he made an extraordinarily good speech this morning and believe that he and the United States have a constructive role to play in Ireland and Northern Ireland, not least in the matter of economic assistance. But we must not allow anybody to persuade us that anybody can solve this problem other than the British and the Irish Unionists and Nationalists working together. This is not, nor should it become, a Bosnia where we are dependent on the United States for leadership.
586
Perhaps the noble Viscount can answer two specific questions. The Statement and the communiquémentioned the elected body as a possibility. We on these Benches are in favour of an elected body in Northern Ireland; it will allow the opinions of the people of Northern Ireland to come into play and not simply the political leadership. For instance, if Sinn Fein were to fight an election for an elected body, it would have to answer questions on public platforms as to whether it has given up the use of violence for ever and is prepared to come to talks on a peaceful basis. There is therefore much to be said for an elected body. Do the Government contemplate, to the extent that this has been discussed, that that body must be an elected assembly or can it simply be an elected body constructed for the specific purpose of a short-term and specific brief?
My other question relates to the decommissioning point. There seems to be a difference of emphasis between the communiqué issued by the Prime Minister and the Taoiseach and the Statement we heard this afternoon. Is the Mitchell Commission—to use the description of the noble Lord, Lord Richard—free to make recommendations in respect of what we have all learnt to call Washington 3? Is it free to do so or not? I shall be grateful for the Minister's reply.
I hope that I have not appeared too grudging in my welcome. This is a difficult moment and it does advance the process. But does the noble Viscount agree that the key is to get the democratically elected representatives of the Unionist and Nationalist communities of Northern Ireland to start talking to each other? If they did that bilaterally, then the point of initiative would move. The great danger is that the initiative rests too much in the hands of terrorists or former terrorists and their associates and too little in the hands of the people and the elected politicians of Northern Ireland.
Viscount Cranborne: My Lords, I am most grateful to the noble Lord, Lord Richard, and to the noble Lord, Lord Holme of Cheltenham, for their most generous—I do not think the noble Lord, Lord Holme, was in the least bit grudging—welcome for the progress that was achieved late last night. In particular I shall pass on to my right honourable friend the Prime Minister the most eloquent tribute paid to him by the noble Lord, Lord Richard, for which I am very grateful and for which I know my right honourable friend will be grateful too. I welcome the wish of both noble Lords to see further progress. I am delighted that the noble Lord, Lord Holme, understands the need for trying to maintain a form of momentum—something which underlines this agreement. I am also grateful to both noble Lords for their welcome for the twin-track approach.
I was asked a number of specific questions. The noble Lord, Lord Richard, asked me about the precedence which each of the twin tracks would take over the other. The idea, which I think was touched on in the Statement, is that these two matters could and should proceed in parallel, that in a very few days indeed, in the wake of this agreement, exploratory talks should begin and that the international commission under the chairmanship of Senator Mitchell should be appointed and begin to sit.

587
The noble Lord, Lord Holme, asked me about the other two members of the commission. I hope he will forgive me if I do not trail any names at the moment. A number of names are being considered. I can confirm that both the other members of the commission will come from outside the British Isles.
With regard to the terms of reference, both noble Lords asked me in different ways about what has come to be known in the jargon as Washington 3. Perhaps I may trespass on the patience of the House for a moment by trying to make clear what the remit of the international body will be, particularly in relation to the third criterion enunciated in Washington. Both Governments have given the international body a remit to provide an independent assessment of the decommissioning issue. We have set down in paragraphs 6 and 7 of the communiqué the specific requirements for the body's report. It may be worth while if I once again repeat those requirements.
They are, first, to identify and advise on a suitable and acceptable method for full and verifiable decommissioning; and, secondly, to report whether there is a clear commitment on the part of those in possession of such arms to work constructively to achieve that. I ought to make it clear, as the communiqué makes clear, that it will be for the international body to determine its own procedures. The two governments expect it to consult widely and to invite relevant parties to submit their analysis of matters relevant to the decommissioning issue. Their analysis will go as wide as they like. But the commission itself, in reaching its conclusions within its remit, should consider such evidence on its merits and within the remit. It will be for the commission itself to make that judgment about what part of the evidence falls within its remit. I should emphasise that it is agreed between both governments that the body will not question our position on the third Washington criterion. It was not established to make recommendations on when decommissioning should start. We believe that that is properly a matter for discussion in the preparatory talks and for a government decision. Indeed, the communiqué issued by both Prime Ministers makes that perfectly clear.
The noble Lord, Lord Richard, asked about the status of the recommendations. I should emphasise that they are purely advisory. The timetable of February which has been agreed is one which we hope can be achieved, because momentum, as the noble Lord, Lord Holme, said, is important. But it is a target. It is not a deadline but a target and it is one which we shall certainly do our best to make sure is achieved.
The noble Lord, Lord Holme, asked whether there was a wedge between the governments. I think it is clear from the Statement that there was a difference of emphasis which was clearly acknowledged by both Prime Ministers. I do not think there is anything new in that. However, that difference of emphasis is, as the Statement said, one which both Prime Ministers—this was clearly so last night—wish to emphasise should not stand in the way of the momentum which the noble Lord himself emphasised is so important.
588
As to whether the agreement would have been arrived at if the President of the United States had not been due in London this morning, I leave for the House to judge. I would merely say that this agreement has been a very long time cooking. Progress has been made over the past months and weeks. We had hoped that an agreement might have been possible as long ago as September. I think both Dublin and London were hopeful that that might be possible. Unfortunately, there were some details which needed agreement and those details, fortunately, appeared to be capable of resolution over the past few weeks. It was clearly helpful and appropriate that if possible—it was not essential—that agreement could be arrived at for the President's visit. However, it was not, I think it is right to say, the catalyst which brought it about. There was good will from both sides of St. George's Channel.
Perhaps I may also take this opportunity to say how much I agree with the noble Lord, Lord Holme, in the welcome that he gave to the speech of the President of the United States this morning to the joint Session in the Royal Gallery. I am sure the whole House will agree that it was a magnificent occasion. We were honoured to hear a very fine speech in which, if I may say so, the President honoured us with a penetrating analysis of world problems and gave a very great deal of reassurance to all sides of your Lordships' House.
Finally, so far as concerns an elected body, the noble Lord, Lord Holme, will be aware that the United Unionist Party has for some time been interested in the question of an elected body. As the noble Lord said, no solution, including the device or mechanism of an elected body, can be imposed any more than any other kind of solution can be imposed. As the noble Lord so rightly said, these matters are for the people of Northern Ireland. If it is proposed that an elected body is a sensible way forward, whether it be by means of an assembly or what I might loosely call a convention, that is something for agreement. It is not something which Her Majesty's Government would in any way wish to stand in the way of if it appeared to be a way forward to which all parties could agree.
Viscount Whitelaw: My Lords, this is a very difficult moment for Ireland and indeed for all concerned in it. I therefore welcome very much the determination to try something which has to be tried because this problem cannot be allowed to go on and on. We have to make every effort to seek to achieve a solution. I believe that it can be achieved and therefore one ought to congratulate the Prime Minister for having taken a very difficult decision indeed. I also believe that the Taoiseach had a difficult decision, too; but probably the Prime Minister's decision was the more difficult of the two.
It is the right course to take because in Ireland everything is difficult. It is no good just saying, "it is difficult". If one wants to spend time arguing about petty views here and there, one will always be able to do so. That is never difficult, and one has a certain amount of experience of that. I very much welcome the fact, as the noble Lord, Lord Richard, said, that the Labour Party support the Government. I heard that in the other House they also support the Government, and that is right.

589
We have a chance to make a success on this issue and that is why I very much welcome what has been done although there are still very great anxieties ahead.
Viscount Cranborne: My Lords, I am most grateful to my noble friend for what he has said. He perhaps has as much experience as anyone in your Lordships' House on this intractable question. I am most grateful to him for his support. It is by no means certain that we shall succeed, but we should remember that the longer we are able to make progress, fewer people will die or be maimed both in the Province and on the mainland.
Lord Mason of Barnsley: My Lords, first, I join with my noble friend the Leader of the Opposition in congratulating the Prime Minister and the Northern Ireland Secretary for concentrating many efforts and many hours of endeavour in trying to maintain the peace process.
Secondly, in the press this morning a breakthrough was mentioned. I urge the House to treat that word with the utmost caution in this matter. Is the Minister aware that I note from what he said that an international body will be set up to advise on disarming the Provisional IRA and that the Provisional Sinn Fein will be allowed to take part in talks to set the agenda for full-scale discussions on the future of the Province—the twin-track approach?
Is the Minister further aware that as regards the first point the Provisional Sinn Fein will have to answer that a clear commitment exists to work constructively towards the decommissioning of arms, and then—and only then—will they be allowed to enter into the preparatory talks which may eventually lead to substantive talks? Is he also aware that they are not prepared to move on decommissioning—not now, and it is doubtful in the future? That is the major sticking point because to the Provisional IRA it is the signal of surrender and so far they see nothing in return. That is the major obstacle which has to be overcome.
Finally, on the twin-track approach, in previous discussions with the Prime Minister, have not the Unionist parties turned that down? Do I gather now that their views have changed or are changing?
Viscount Cranborne: My Lords, I am constantly reminded, in sessions of this kind in your Lordships' House, of the care with which I have to approach making statements because of the very large number of former Secretaries of State that there are about on any given subject, and the noble Lord is no exception.
I am grateful to him for the congratulations that he gave. I certainly agree with him about the indiscriminate use of the word "breakthrough". I would rather publicly expect little, and for those expectations to be exceeded rather than the other way round. Nevertheless, I believe that the word "breakthrough" was perhaps justifiable in one sense in that this has been a difficult negotiation, as many of your Lordships have acknowledged this afternoon. It looked at one moment as though it was going to be difficult to translate the goodwill of both sides into something concrete. To that extent I believe
590
that the word "breakthrough" is justified, but I certainly agree with the noble Lord's clear implication that we are not there yet and that the difficult part is still to come.
Perhaps I may change the emphasis of one part of what he said. The second part of the twin-track—the "talks about talks" as the noble Lord, Lord Richard, called them—does not allow Sinn Fein to set the agenda. They are exploratory talks to see whether we can agree on the agenda for the substantive round table talks which we hope will follow. Sinn Fein does not have a monopoly on setting that agenda; indeed, I suspect that unless, for instance, the present constitutional parties were all able to agree as well, the term "round table talks"—if Sinn Fein were to be the only people there—would be the ultimate misnomer. Therefore, I say to the noble Lord that for them to say that they will set the agenda is not strictly right.
Of course, decommissioning is a major obstacle. I should like to emphasise that Her Majesty's Government have in no way changed their stance on this matter. At the very beginning they made it clear that there will have to be clear and substantial progress towards the decommissioning of weapons before the parties who were identified with terrorist organisations can take part in round table talks for the reasons that my right honourable friend gave in his Statement. That position has in no way changed, and I hope that the noble Lord will be reassured by that.
Lord McConnells: My Lords, I also wish to welcome the Statement that has been made by the Lord Privy Seal. I believe it is true to say that virtually everyone in Northern Ireland has a burning desire for a permanent peace, and the Ulster Unionists are second to no one in that desire. I was glad to hear mention of an elected body. That is a suggestion which was made recently by the leader of the Ulster Unionists in the other place. I believe that that might be a useful move in securing a permanent peace because any peace must be a permanent one and on sound foundations.
I am also glad to hear that the Government are standing firm on the question of handing over private arsenals and decommissioning, not merely in the sense of armaments, but also as regards the personnel of some of these gangs because there may not be so much shooting going on, but there is still a great deal of beatings up, intimidation and terrorising people. Unless that stops we cannot have a real and permanent peace. That problem has to be addressed somewhere in the process.
I also welcome the establishment of a commission. I am glad to hear that the Government have not handed over their responsibility, but that this commission will be advisory and that the Government will, in the end, have to make the decisions. I look forward to a permanent peace, which I hope that we can achieve, that is fair to all parties and all people in Northern Ireland.
Viscount Cranborne: My Lords, I am most grateful to the noble Lord who of course speaks with obvious authority on these matters. Perhaps I may refer to the intervention of the noble Lord, Lord Mason, a moment ago. It is interesting that, as an Ulster Unionist, the noble Lord approved of the twin-track approach.

591
I believe that I was right in hearing the security spokesman for the Ulster Unionists imply on television last night that they were one of the original begetters of the idea of a twin-track approach. So it is clear that the noble Lord's party is behind that particular initiative. I am grateful for the confirmation that the noble Lord has given us today.
I am also grateful to the noble Lord for his acknowledgement that the elected body could be a useful move. Indeed, that idea has been very much promoted by Mr. Trimble, the leader of the Ulster Unionist Party. There is no doubt that that is something that cannot be imposed. As I said earlier, it must be done by negotiation.
I should like to emphasise how very much I agree with what the noble Lord said about the continuing violence in the Province. Shootings have decreased as, thank God, have bombings, but we should be aware that, far from diminishing since the cease-fire, the problem of punishment beatings has worsened. I am told that, in total over the past 16 months, Republican attacks have been running at almost twice the level of the equivalent period last year—about 150 as against about 85—and that Loyalist attacks are still occurring also. Such attacks are clearly designed to assert the terrorist gangs' control over what they term "their" communities. Therefore, there is a distinctly political element to those attacks. The brave individuals who have risked reprisals by daring to criticise that practice deserve our most fervent admiration.
Lord Merlyn-Rees: My Lords, I too congratulate the Government on the steps that they have taken and wish them well. However, I am not yet clear on one point. Yesterday evening I was watching the news and I then watched "Newsnight" and in came reports about what was happening between the Taoiseach and the Prime Minister. Eventually it got to midnight and I listened to the midnight news. I asked myself and my wife, "What's new about all this?" because the twin-track approach has been going on for weeks. Even when I went to sleep I was not clear about what was new. Is it the preparatory talks as opposed to the multilateral talks? Indeed, are the parties going to turn up for those preparatory talks? Have we asked the parties whether they will participate in those preparatory talks? I am still not clear.
On the election, I discussed that proposition with a number of Irish TDs and British Members of Parliament on the Border the other evening when we were looking at policing there. I cannot speak for them but, speaking for myself, there is a worry. There were convention elections in 1975 and I think that the statute is still in the law books. That did not succeed because, when people vote for a convention, they are not voting for a Christmas tree being lit up in Belfast; they will vote along these lines: "We are going to vote for our people on the Loyalist side" and similarly on the Nationalist and Republican side. Let us not run away with the idea that an election will bring sweetness and light simply because everybody is pleased that Northern Ireland is quiet. Some of us have held the view that that might harden the situation.
592
I am glad that the international body is to be independent, but I hope that its members know something about Northern Ireland and that they will not confuse it with Bosnia or Palestine, because it is a different place. What might be appropriate in another place may well not be appropriate in Northern Ireland. I hope that we shall ask that body to consider the question of the shootings in recent weeks which have involved illegal arms. The noble Viscount has given us evidence of the great growth in the number of such shootings in recent weeks. If there are illegal arms that we want to decommission, it would be just as well to ask the IRA—or Sinn Fein, its political wing—or the UVF—or its political wing: who is doing all those shootings? Where are the arms being held? We must ask those questions because there was a continuation of violence in 1922 and the same thing happened in Europe at the end of the war when there were great problems in bringing in arms from the Maquis. It is not nice and easy. Therefore, when I congratulate the Government, it is because they are still talking. I have grave doubts—not about what the Government are doing, but about what will come out of it.
Viscount Cranborne: My Lords, certainty in politics is an oxymoron, and particularly so in Irish politics. I am sure that the noble Lord is right on that point. The noble Lord asked what was new about the twin-track approach. That phrase now seems rather old hat because it has been so extensively trailed in the past few months. The "twin-track" idea has been in the air and has been commented on in the press for some time. What we have not had so far has been an agreement about how to proceed with it. That is what is new. We now have an agreement about how to proceed and some pretty detailed thoughts about the process.
I wholly take the noble Lord's point about the three commissioners and whether they will know anything about Northern Ireland. That could be an advantage as well as a disadvantage. Coming from outside the British Isles gives the three commissioners some distance from the problem. To take the name that we know, Senator Mitchell, I think that his record stands for itself. He is extremely knowledgable about Irish politics. Indeed, the fact that he comes from the north-east of the United States underlines that point.
I am grateful to the noble Lord for what he said about punishment beatings. I think that we are all aware of what has happened. I take very much to heart the noble Lord's view that success is far from a certainty, but I accept wholly that he thinks that it is well worth making the effort.
Lord Monkswell: My Lords, I too thank the Lord Privy Seal for repeating the Statement. We all wish and hope that positive progress will result from the new initiative, if I may describe it like that. My question is whether a novel approach to the problem of the decommissioning of illegal weapons—I use those words advisedly—might be acceptable to all the parties involved. Although the noble Lord, Lord Merlyn-Rees, pointed out that the situation in Northern Ireland is very different from that in Palestine or South Africa, I think that there are some similarities in the sense that people

593
with strongly held political convictions have felt it necessary to try to defend and to put forward those political principles by force of arms. As the noble Lord, Lord Merlyn-Rees, also pointed out, the problems did not go away in 1922 with what appeared to be a political solution.
The novel solution that I wonder whether we might advance is to consider whether the word "illegal" might be regarded as the significant word rather than the word "decommissioning". Could we consider the possibility that those arms that are currently considered to be illegal, bearing in mind that a great number of arms are held legally, might in some way be converted into legal holdings? Obviously, strict conditions would need to be applied. The fundamental question is whether the new commission will be able to put forward novel solutions to the problem.
Viscount Cranborne: My Lords, the phrase used is:
"decisions taken last summer and autumn by those organisations that previously supported the use of arms for political purposes",
which implies illegal weapons.
Lord Dubs: My Lords, I very much welcome the Statement, which referred to the possibility of setting up a new elected body. Of course, I am not against that, but may I urge caution about the speed with which we proceed? There may well be groups in Northern Ireland which will need time to prepare themselves in order to enter a democratic election. Rushing at it too quickly might debar some of those groups from a fair opportunity.
Viscount Cranborne: My Lords, I am sure that everybody will have noted what the noble Lord has said. It is clear that such agreements can proceed only by consensus. I am sure that we are all aware of the very real difficulties that are attendant on that potential course of action.

Social Security
4.30 p.m.
The Minister of State, Department of Social Security (Lord Mackay of Ardbrecknish): My Lords, with the leave of the House I should now like to repeat a Statement being made in another place by my right honourable friend the Secretary of State for Social Security. The Statement is as follows:
"With permission, Madam Speaker, I would like to make a statement on social security following my right honourable and learned friend's Budget Statement.
"When I became Secretary of State for Social Security, expenditure on social security had been growing on average 5 per cent. a year faster than inflation since the welfare state was founded. As a result it has taken an ever-growing share of national income. So it has been the engine for rising taxes. Social security now costs the average working person £15 every working day. That is why, when I became
594
Secretary of State for Social Security, I launched my programme of step-by-step reform. Those reforms are having an effect.
"Over the next three years, spending should grow by little over 1 per cent. per annum, well below the growth in the economy. So it will be a declining share of national income. It will leave scope for sustainable reductions in taxes. That in turn is the best of all ways to stimulate activity in the economy, to create employment and to reduce benefit dependency. Next year, planned spending on social security will be £90 billion. That is the figure I announced last year and is below the plans of two years ago. It includes nearly £3 billion to finance increased benefit rates. This is £600 million more than anticipated last year because it is based on the September inflation rate, which jumped to 3.9 per cent. and has since fallen back to 3.2 per cent. The measures I am announcing today will save nearly £500 million in 1996/97 and over £1 billion in 1998/99. Altogether, my reforms to date will save £3.5 billion next year. And by the turn of the century, they will save £5 billion a year.
"To be able to help those in need we have to stop fraud. Despite tough control on overall running costs I am channelling extra resources to the battle against fraud. Last year the Benefits Agency detected and stopped a record £700 million of fraud. And local authorities doubled their savings to £170 million. But prevention is better than detection. I am therefore pursuing an anti-fraud strategy based on prevention and deterrence. In total my anti-fraud measures across all benefits will save £2.5 billion by 1998/99.
"The Benefits Agency has just started deploying one of the most powerful data matching systems in the world to identify suspicious claims. The agency will investigate these and carry out over 1 million home visits and other checks. It will tackle employers who collude with people claiming unemployment benefits while working. And next year, we will start computerising post offices and launch the benefit payment card.
"Local authorities have responsibility for administering housing benefit. A recent study suggests housing benefit fraud costs almost £1 billion a year. So I will strengthen the financial incentives for local authorities to tackle fraud. I will invite local authorities to compete for challenge funding for innovative anti-fraud measures. And next year I will introduce a national computer record of housing benefit claimants. This will stop people claiming from more than one local authority.
"From October 1996 further changes in housing benefit will reduce abuse and waste. Some tenants abscond without making initial payments to landlords. So I shall enable local authorities to make the first giro payable to the landlord. Most other benefits are already paid in arrears. I shall align housing benefit with them. This will stop wrongful payments that can arise when housing benefit is paid in advance.
"In October, I announced proposals to limit asylum seekers' access to benefits; 70 per cent. of people claiming asylum do not arrive as refugees, but make

595
a claim some while after entering the UK illegally or as tourists, students or visitors. From next year, I intend to allow benefit only for people who claim asylum as they enter the UK. But when a claimant is found not to be a refugee, benefit will cease. My proposals will save £160 million next year. My right honourable and learned friend the Home Secretary is speeding up asylum decisions, which will further reduce the benefit cost. We will offer refugees a sanctuary, but not be a soft touch for social security.
"The past two decades have seen a huge increase both in the number of lone parents and their cost to the taxpayer, expected to be £9.4 billion this year. This is equivalent to over £1,500 a year extra tax on each working family with children of its own. The right approach is neither to penalise nor to promote lone parenthood. The benefit system gives special assistance for lone parents which couples do not have. In particular, two components of benefit for lone parents have no equivalent for couples. These are one parent benefit and lone parent premium. They cost around £600 million a year. To start bringing treatment of one parent families and two parent families more into line I propose no increase in either benefit next April. My intention over time is to continue to narrow the gap between the benefits which go to lone parents and those which go to couples. At the same time I intend to build on our existing measures to help lone parents back to work.
"Family credit has been of particular benefit to lone parents and I have greatly improved it. I have extended family credit to people working part-time. I have given an extra £10 a week to people working full-time. I have introduced a £40 a week allowance for the cost of childcare. And I now propose to increase the allowance to £60 a week. This will be of particular benefit to those who wish to return to full-time work and those with more than one child.
"The provision of nursery vouchers will be an additional help to parents of pre-school children. Maintenance is also an important stepping stone to work. Even absent parents on benefit should contribute to their child's support. So I propose to double the minimum payment of child maintenance to £4.80 a week from April 1996. In addition, from April 1997, I shall pilot a major new scheme. It will provide individual help for up to 25,000 lone parents to find jobs or training opportunities. Finally, my right honourable friend the Secretary of State for Education and Employment will extend the very successful scheme which has already created places to care for 50,000 children out of school hours, creating a further 18,000 places over the next three years.
"As a result of the reforms already implemented, the proportion of lone parents in work has increased. I believe the four measures I have announced today will help more lone parents be self-supporting.
"Most young people starting out in work either stay with their parents, share a flat or find a bedsit. But those who are without a job can claim housing benefit and can then choose to occupy better properties than they could afford in work. So for single people under
596
25 who are renting privately, I propose to limit housing benefit to the average cost of local shared accommodation. That will reduce disincentives to work; discourage young people from leaving home before they can afford to do so; and reduce the attraction of moving to seaside resorts. The changes will apply from next October.
"Couples, people with children and those exempted from the January housing benefit changes will not be affected. Local authorities will be given funds to prevent hardship in exceptional cases. The new scheme will save more than £100 million over three years. Last year, I announced a scheme to continue maximum help with housing benefit during the first four weeks of work. I am now extending it to people who have been on a government training course. In a separate measure I intend to increase non-dependant deductions for housing costs.
"The state system of social security provides decent help for those who need it. The voluntary and charitable sectors provide extra help to cope with unusual circumstances. Voluntary bodies and charities can already pay £10 a week without the recipient losing benefits. I propose to double that limit to £20 a week. I believe this change will be widely welcomed.
"I propose some smaller measures to remove anomalies. I shall amend the industrial injuries benefit scheme so that those who receive reduced earnings allowance to compensate for loss of earnings should normally transfer to retirement allowance when they reach pension age.
"Separately, I shall align the mobility component of disability living allowance more closely with similar benefits that are withdrawn during hospital stays. And I shall improve the information-gathering used to make assessments for disability living allowance.
"Britain already has one of the lowest non-wage labour costs in Europe. I intend to reduce them further. From April 1996, employers will qualify for one year's remission from employers' National Insurance contributions for each person they take on who has been out of work for two years or more. I am cutting National Insurance Class 4 contributions for self-employed people by 1.3 per cent. from April 1996. This outweighs the loss of tax relief on these contributions announced by my right honourable and learned friend the Chancellor. And, finally, I intend to cut the main rate of employers' National Insurance contributions by 0.2 per cent. from April 1997.
"One of the main financial concerns facing elderly people is the prospect of long-term care. Providing for their needs in old age is, of course, one of the reasons why people save. But Age Concern and others have argued that the capital limits applying to people in residential and nursing care are tougher than the rules for people who stay in their own homes. They have urged us to raise the capital limits for residential and nursing care to those applying to housing benefit. We have gone further than that, not just doubling the upper limit to £16,000 but more than tripling the lower limit.
"Under our proposals, people with up to £16,000 of assets will qualify for state help. And people with capital of less than £10,000 will not be required to make any contribution from their capital towards the cost of residential care. The new limits will apply from April 1996 at the latest to all people in long-term residential care or nursing homes. Around 50,000 people should benefit in the first year. We want to ensure that in future more people can afford care.
"One of this country's major successes has been encouraging more private pension provision than any other European country. The challenge facing us is to be equally successful in enabling people to make decent provision for long-term care. We are announcing three important proposals to stimulate the development of attractive savings and insurance schemes.
"First, benefits from long-term care insurance will be tax free. Secondly, my right honourable and learned friend the Chancellor is consulting on how occupational pension schemes can enable pensioners to defer some income early in retirement so that they have more income to help with the cost of long-term care. Thirdly, we will consult on partnership schemes. These would enable people to retain even more of their own assets in return for providing for a corresponding amount of their long-term care costs. This would encourage more people to make provision for themselves. It would help the insurance market develop new products, since their risks would be limited.
"Today's measures continue my step-by-step reforms of social security. I have protected the most vulnerable. And I am creating a fairer and more modern benefit system. But our aim is to help more people off benefit altogether. We are succeeding. We have fewer people out of work than in any other major European country. And more people in jobs. My reforms make a double contribution to this. They strengthen work incentives and encourage more people off welfare and into work. By controlling spending, they are easing the burden of taxes and helping to create a vibrant, free enterprise economy. This gives people a chance to find a job and provide for themselves, which is the best help we can give them. And it means that we can afford fair provision for those unable to work. My reforms give them a greater chance. I commend them to the House".
My Lords, that concludes the Statement.
4.44 p.m.
Baroness Hollis of Heigham: My Lords, I thank the Minister for repeating the Statement made to another place. The Statement was wide-ranging and, obviously, I, on behalf of these Benches, will be able to pick up only some of the points that were raised. Perhaps we may revisit others during Questions and debates at a later stage.
We are discussing the Social Security Uprating Statement in the context of yesterday's Budget. The basic question is, running the two together, who pays
598
and who gains? Looking at the Budget benefit package, any concept of fairness would ensure not only that such a package was progressive—that the rich paid more of their incomes—but that it was also appropriately redistributative—that the poor gained more.
What do we see? According to Social Trends, in 1979 local and central taxes took 31 per cent. of the incomes of the poorest one-fifth but 37 per cent. of the incomes of the richest one-fifth. One might think that that is fair. By 1993 the situation had been reversed. The poorest one-fifth were paying 39 per cent. of their income in taxes and the richest one-fifth were paying just 23 per cent. The consequence has been a widening of poverty and inequality and a divided Britain. The Budget confirms those trends.
As today's Financial Times showed, following yesterday's Budget the bottom 10 per cent. are worse off in real terms by about 50 pence per week, whereas the top 10 per cent. are better off in real terms by about £6.50 per week. Therefore, not only has the Budget failed to narrow the poverty and inequality gaps but it has actually widened them. Not only are the poor worse off as a result of the Budget but at each and every uprating Statement we are seeing their benefits being chiselled away, which is to the shame of us all.
A couple of years ago the uprating Statement chiselled away the benefits of the unemployed by taking them off insurance-related unemployment benefit and putting them speedily on to the means-tested JSA. It also took the sick and disabled off the more generous invalidity benefit and put them on to incapacity benefit. So those two groups were hit.
At last year's uprating Statement we heard an attack on those home owners who were trying to sustain their homes while being unemployed and on income support. They too have lost their benefits. At this uprating Statement, whom did the Minister single out a few minutes ago? It was those who are asylum seekers, those who are receiving housing benefit and those who are lone parents. That is where the cuts in social security will fall in order to achieve the tax handouts and the widening of inheritance privileges for the better off.
Perhaps I may deal first with asylum-seekers. The regulations to which the Minister referred will be introduced during the Christmas period, taking effect on 10th January. I hope that we shall have an opportunity to debate them in this House. They mean that approximately 70 per cent. of all asylum seekers—those who seek asylum once they are already in this country—will be denied income support. Between them they have approximately 5,000 children. If the parents of those children have no income, on what will the children live? The cost of giving Social Security at the reduced rate to an asylum family of four is something like £100 per week. To put one of those children into care costs something like £870 per week. Is that humane; is it decent; is it cost effective?
The reason why benefits for asylum seekers have risen is not because there are more bogus claims but because it takes the Home Office longer and longer to process them—in some cases up to seven years. Of

599
course, as Andrew Lansley, the Conservative's director of research, was reported as saying in the Observer on 3rd September 1995, which is a couple of months ago:
"Immigration, an issue we raised successfully in 1992 and again in the 1994 Euro-election, played particularly well in the tabloids".
I invite the Minister in his reply to dissociate himself from that view. It gives the impression that attacking the benefits of asylum seekers is an activity of the racist Right. I invite the Minister in his reply to dissociate himself from that impression and I am sure that he will want to.
The second area upon which the Minister focused was housing benefit. Back in 1988, the Government deregulated private sector rents, promising, in the words of Sir George Young, that housing benefit would "take the strain". The DoE cut its costs and the DSS picked up the bill—a further additional £8 billion in housing benefit since then. The Government insisted, as the Minister repeated only a couple of days ago, that it was better to subsidise the individual than bricks and mortar. Having said that, the Government then look very surprised that, in the process, they create what they like to call a "dependency culture", in which people find it hard to move out of benefit into work because they face a penal tax rate of something like 90 pence in the pound.
The Government have already made one set of changes to housing benefit which will come in in January. In today's uprating Statement, they are attacking a particular group; namely, young people. First, I should like to ask the Minister the following question. As I understand the Statement, in future all housing benefit recipients will only receive benefit four weeks in arrears. How then will people on income support find the money to pay the month's rent in advance which is now virtually a requirement in the private sector? Secondly, the Minster announced that, in future, young people would get housing benefit which would only cover the cost of shared accommodation—not for a self-contained flat, only shared accommodation. What will be the consequences? I put it to the Minister that four possible options may follow, all of which, I suggest, are highly undesirable.
I start with the first option. If the young person concerned is "go-getting", he or she will leave the self-contained flat and share a larger property with two or three people. Those young people will pool their income and rent a family sized house. In consequence, many families will find themselves squeezed out of renting that family home. That is already the case in university towns. The Government are structuring the benefit to extend the problem more widely. I am sure that that is undesirable.
Secondly, if the young person concerned is less energetic, he or she may get someone to share the accommodation, thus illegally overcrowding their small flat. As we know, that will have implications as regards health, fire and safety. Thirdly, if such a young person is less able to hold his or her own in the housing game, he or she may end up homeless. The Government may say that such young people should go home to their families, but what they know from their own research—and what they conveniently forget—is that many of those young people have come out of care, have been
600
abused at home and have no safe home to return to. The Government are refusing them the ability to afford an appropriate rent. Without a safe home, they may end up on the streets and, as we all know too well, in a vulnerable situation.
Of course, a few of those young people may return to their families. But what do we find? We find that in the very same uprating Statement the Government have substantially increased what is called adult "non-dependant deductions", which means that the parents of such a young person will lose an increased amount of their own housing benefit if their son or daughter of 22 or 23 returns home to live with them. They will not want him or her back—and this from the Government who claim to be the party of the family.
None of those outcomes is acceptable. The bill for housing benefit will only be cut when there is enough socially rented and cheaper property available on the one hand, and, on the other, rising incomes based on full employment. Until then, all we are seeing is a merry-go-round of government departments ducking responsibility for the social consequences of their budget cuts in the desperate hope that they can pass them on to someone else. Indeed, anyone else will do.
Finally, the Government's uprating Statement targets a third group. After asylum seekers and housing benefit recipients, it targets lone parents. The other day, when we were discussing earnings top-up, we congratulated the Government on using research. Why do they not do the same with lone parents? Let us remind ourselves that, despite what the Government suggest, lone parents are not idle like, unfortunately, some unemployed young men have to be. They are in work; indeed, rather important work. However, because it is unwaged, it is not visible. It is called bringing up children. I am not sure that it is wise social policy that the children, having lost one parent—usually the father—should now be expected to lose the other parent in order to cut the social security bill, especially when the mother is on poverty level income.
Let us also remind ourselves that the single parents who have been targeted are not feckless teenagers. The latter amount to something like 44,000 out of 1.3 million lone parents. The average age of a lone parent is 33. Most of them have come from broken marriages or separated partnerships. The average length of time that they spend on income support is less than three years. They are on income support and not in the labour market when their children are under five years of age. Only one-sixth of them with children under the age of five are attached to the labour market, but over half of them are in work when their youngest child reaches the age of five.
So what is the problem? The problem is not that such people are scrounging or that they are idle when they should be working: it has arisen because, for example, the lone parent is the mother who has been divorced late in life, perhaps in her fifties and, therefore, not regarded by prospective employers as an attractive proposition for employment, just as is the case with middle-aged men. Alternatively, such women may be ill-educated, untrained and have few skills for the labour market—

601
and we should help them to gain them—or, and this is increasingly the case, the lone parent or the child may be disabled and therefore in need of full-time care.
I wish that the Government would use some of the energy that they expend in moral panics in reading their own research. The real problem with social security is not lone parents: it is disinherited young men. Of course we must help lone parents with education, training, and childcare, working with the grain of choices that they want to make. However, in today's Statement, the Government propose to freeze and ultimately remove two benefits—that is, the lone parent premium on income support and the single parent benefit—and deliberately make those families poorer.
What such changes will not do is send single parents back into marriage. Similarly, they will not send those parents back into the labour market. What they will do is ensure that the 2.5 million children who live in single parent families will be poorer. Is the Government's line really that to make marriage stronger they must make those children poorer? That seems to be the implication. Those children are already living in poverty. Therefore, to make them poorer still so that they inherit deprivation in exactly the same way that other more fortunate children inherit wealth is vindictive, punitive and utterly wrong—and all to save just £13 million of benefits in the first year.
Over and beyond the issue of fraud—and we entirely agree on this side of the House that it is not to be tolerated—the Government are spending too much on social security. That is evidence not of abuse but of the Government's economic failure, because they are spending on the wrong things. Social security expenditure is driven by unemployment. We do not want to spend so much on unemployment, but that is because we intend to ensure that people are back in work. We do not think that we should spend so much on housing benefit, but that is because we do not believe that rents should be deregulated in the way that they have been. We do not want to spend so much on in-work benefits like family credit, but that is because we would establish a minimum wage to ensure that that was not necessary.
We want to cut social security spending, but we know that in a humane society it can only be done by investing in the employment and education of our people and not by chiselling away at benefits in order to hand tax cuts to the better off. We remain a divided Britain, and this Budget benefit package is yet another wasted opportunity.
5 p.m.
Earl Russell: My Lords, I think we understand that there is no such thing as a free tax cut, so we need to make some attempt to balance the cost of having tax cuts against the cost of not having them. Getting the information for that exercise out of the Department of Social Security is sometimes like getting blood out of a stone, but we have to try.
I heard the Minister's figure of £15 a day. I have heard it before. I should like to ask how exactly that figure is arrived at. Does it, for example, include
602
pensions, and, if so, is it perhaps rather cheap at the price? I understand that the social security budget is high but we must attempt international comparisons. I know those are extremely tricky because of the difficulty of getting a constant basis of comparison, but the National Association of Citizens Advice Bureaux has recently estimated that our social security bill is the lowest in Europe. No doubt the Minister has a different method of calculation and perhaps he will tell us about it.
I take, first, the case of under-25s and housing benefit—under-25s, as the Chancellor put it, not leaving home earlier than they should. I shall let the Minister into a secret. He will not win any votes from among the parents of those under-25s. Those under-25s are up to seven years past the age of majority. When one brings up children, one imagines that a time will come when they will launch themselves: they will leave home and be self-supporting. Most parents understand when their children do not have jobs that more blame rests on the state of the economy than on their children. It does not mean that they necessarily want to have them back at home for ever. They may find that the cost of doing so is a great deal higher than what they are receiving in their tax cuts—yet another case of there being no such thing as a free tax cut.
The Minister may by now be familiar with the MORI report on 16 and 17 year-olds published by his department. It found that a large number of parents who had thrown out 16 and 17 year-olds had done so because they could not afford to keep them, being themselves on benefit and because they could not keep the child unless the child was also on benefit. The measure we are discussing is likely to extend that pattern to those from 18 to 25. I cannot regard that as a great advance. I cannot regard it either—considering that the Government themselves are concerned about the cost of homelessness—as a great advantage to public saving. It will carry costs of its own.
Let us consider also the effect of people being induced to stay at home when they live in a remote place. There is not much work to be found in Woolfardisworthy, Devon. Therefore if one makes people from there stay at home, one will be keeping them out of the labour market and keeping them on benefit for a great deal longer than would otherwise have been the case. If they find work in such places it is likely to be work at rather lower wages than they might have found in a big city. Restricting the mobility of labour in some ways interferes with the operation of a free market. I take it that the Government have now finally thrown away and dismantled the bike of the noble Lord, Lord Tebbit. That is a pity because it was useful on occasion.
I am interested to note that there is an exemption here for marriage, which of course has created a colossal new incentive for marriage in this group. That means that sooner or later in the course of administering his drive against fraud the Minister will have to introduce a new primary purpose rule, with all the costs and administrative strains involved in administering that.

603
I entirely agree with what the noble Baroness said about health, fire and safety. In that context I ask the Minister—I hope to get an answer and I shall ask again if I do not—when he applied the Treasury guidelines as regards the policy and resource implications for other departments, what resource implications for other departments were identified, and how did the department decide that they were less than the amounts being saved? We need an answer to that question.
I ask him that question also as regards the costs of the changes for single parents. I am also interested in the assumption clearly made in the Statement that single parents should be assimilated to the same benefit base as married couples, because in the 1985 White Paper which introduced the current premium system that was introduced because of the extra costs of being a single parent. I ask the Minister whether the department was wrong in 1985; or has something changed since then, and, if so, what and when? There are extra costs in being a single parent. A great many of them remain on benefit a year or two years and often up till the time the child is two.
Those of your Lordships who remember the experiment by Mr. Matthew Parris of living on benefit may recall that he reported that one could do it all right for a week but as one went on doing it longer, one found that as one's shoes and coat wore out one ran up big expenses which made things much more burdensome. That is something which particularly affects single parents. In that context I must ask the Minister how much new money is going into the Social Fund this year. Is there any increase on the previous year and, if so, how much?
As the Edwards case—the sex discrimination case involving London Transport, reported in this morning's paper—illustrates, single parents have to face extra costs through having to be in several places at once. Any of us who have had a spouse ill for even as much as a day or two know perfectly well that that is true. There are extra costs and some account ought to be taken of them. I am glad about the extension of the disregard on family credit. In other circumstances I would have welcomed it warmly but here it is simply paying Peter for having robbed Paul. It simply gets us back to where we were before.
I am glad that there is some concession on savings limits for the cost of care, but as most people's houses are worth more than £16,000, the effect will, I think, be extremely limited. It is possible more could have been done. We are told about fraud every year. Of course we must combat fraud. What I want to hear is that the combating of fraud will be subject to proper legal standards of proof, because I strongly suspect a mentality that says that if fraud does not exist it is necessary to invent it. It always seems to come up when there is a tight public spending round.
In that context I am a little worried about the proposal for incentives for local authorities to find fraud. That seems like something which could possibly create a conflict of interest. I hope care will be taken with the administration of that provision.
604
I am also a little worried about the extension of home visits. There may be some people here who were unfortunate enough to face the noble Baroness, Lady Castle of Blackburn, holding forth about the old cohabiting rule. I say "unfortunate" only with reference to those who were on the other side of the House at the time. There is a danger here of abuse. It also gives me considerable anxiety that when the Benefits Agency in its review published totals of fraud, those totals were divided roughly 50:50 between confirmed fraud and suspected fraud. It is a little like the way they used to treat Roman Catholics in the 17th century. They said that they were vehemently suspected and slung them into prison. I do not regard that as compatible with the rule of law. There is a care to be taken here.
In the context of the increased deduction from income support for maintenance under the Child Support Act, I remind the Minister that this is directly a cut in income support levels. He knows the recent evidence from the National Consumer Council that those are not generous. It is difficult to have an adequate diet on full income support. Taking a further £2.50 out of it is taking out something that is not there. Medical costs may be attached to that provision, and I hope that in the use of the guidelines those were identified and calculated.
I am extremely dismayed that the youth training allowance has not been uprated. I am also dismayed that for the second time in two years it has taken me pretty well two full days to find anybody who knew whether it had been uprated. It does not seem to be the highest point in the attention of the Department for Education and Employment on Budget Day.
Costs are also identified for the Department of Social Security, which has to top up levels from income support. The Department for Education and Employment, which had a comparatively if not absolutely generous settlement, seems to be exporting its costs to the Department of Social Security. I hope that the Department of Social Security was consulted, and I hope that it minds.
The Minister knows that I do not believe in the current system of treating 16 and 17 year-olds, but I can think of better reasons for that system collapsing than simply that the Department for Education and Employment forgot to uprate the youth training allowance. If they continue to forget to uprate the youth training allowance it will very soon collapse. I hope not to have to make that point again in a year's time.
Finally—and I really mean finally—I want to touch on the regulations about asylum seekers. It has always been my rule that I am not prepared to use starvation as an instrument of policy. I am not prepared to use it here.
I want to raise two points. One is the exclusion of claims which are not made at the port of entry. That is like telling a drowning man who scrambles out of the sea on to a piece of land that you happen to own that he should have asked your permission before coming out of the sea and saving himself from drowning. It is not in the real world.
I also want to ask the Minister the precise interpretation of the words he used:

605
"When a claimant is found not to be a refugee, benefit will cease".
If that is an accurate use of language, that means that benefit will continue until an appeal is heard and the legal process has been determined. If it means that, I welcome it. If it does not mean that, it is a terminological inexactitude.
5.12 p.m.
Lord Mackay of Ardbrecknish: My Lords, I am conscious of the fact that speakers in the main debate today are limited to nine minutes. Therefore, I apologise to the noble Earl and the noble Baroness if I do not manage to cover all the points they raised, because I at least shall make sure that I do not exceed the nine minutes to which other speakers have to limit their speeches in the main debate.
I shall begin with the last point made by the noble Earl about asylum seekers. I should like to share with the House a few simple statistics which make my point more graphically than anything else I can say. In 1984 2,900 claims were received by the Home Office, and 24 per cent. of those were found to be valid. By 1994 there were 32,800 claims, plus 10,000 accompanying dependants. Only 4 per cent. of those claims were successful. In 1995 there have been 50,000 claims. If the same scoring rate applies as last year, your Lordships can easily see that a significant number of those claims will not be upheld.
I can tell the noble Earl that the position is that in the case of people who ask for refugee status at the port of entry, during the time their applications are being considered by the Home Office they will be eligible for benefit. If they are found not to fulfil the conditions for refugee status social security benefit will cease. That will put them on all fours with people in our country, who equally do not receive social security benefit while they are appealing. It is perfectly clear from any view of those figures that over 70 per cent. of people who come to this country as students, tourists or visitors, sometimes guaranteeing that they will ask for nothing from the British taxpayer, decide when their stay here comes to an end that they want asylum. We have to look seriously at the escalation in those numbers and the large number of people who apply for asylum who are found not to be genuine asylum seekers.
I turn now to the question of housing benefit for people under the age of 25. The noble Baroness asked about periodicity—if I can give it that rather longer name—in other words, housing benefit being paid in arrears. As I mentioned in the Statement, this is a way of countering fraud. People claim housing benefit and when they receive it they do not pass the money on to the landlord but disappear. We believe that one of the ways to stop that and to prevent overpayment, which is often very difficult to recover, is to pay in arrears.
The noble Baroness was anxious that landlords might tell people that if they cannot pay they cannot rent a property. I have made the point that we are going to make it possible for local authorities to pay benefit directly to the landlord. Therefore, a landlord will know
606
that if he takes on somebody who is on housing benefit he will be guaranteed the payment at the end of the four weeks directly from the local authority. I hope that that goes some way to meet the anxieties of the noble Baroness.
On the general question of those under 25, most young people under 25 live in the parental home. A fair number—about a third—do not live in the parental home. Many are owner-occupiers, and many live in local authority accommodation. In particular, we are concerned with those who live in the private rented sector. It was suggested to me that I am making young people stay at home. I am not making them stay at home. I am ensuring that if they take accommodation while on benefit they can afford that selfsame accommodation when they find work. The benefit system has not acted as a barrier to their finding work.
As I mentioned in my original Statement, there will be a number of safeguards. Married and unmarried couples, people with the care of children and others who are exempt from the January changes will not be covered by this provision. In addition, local authorities will be given some resources for a hardship discretionary fund which they can use if they think that somebody is suffering hardship and needs help of a discretionary nature.
I turn now to lone parents. Interestingly enough, when one-parent benefit was introduced in 1975 it was introduced on a temporary basis. The noble Baroness, Lady Castle, who was then the Secretary of State, said in May 1975 that the benefit was purely a temporary one. Mr Michael Meacher said that they were making an exception for the reasons that this was an interim benefit. It would only be for one year. It has done rather well to survive all these years, and it ill-becomes the Opposition to start complaining when a benefit that they introduced temporarily for only one year is changed by us after 20 years.
I want to reiterate the point that I made in the Statement. We believe that it is right that children, whether they be in one-parent families or in the traditional two parent families, appear to be treated the same and that we do not appear to favour one group over the other. I believe that what we propose will signal that we neither condemn nor are making it more attractive for people to be single parents as opposed to living in the traditional arrangement of a couple, which almost everyone in this House and the other place believes is the best arrangement for the bringing up of children. I was going to say young children, but that applies to all children. I believe that it is a sensible reform which will remove the distortion regarding the current situation. At the same time it will protect those who already receive benefit. They will not suffer any loss.
The noble Earl asked me once again whether we had consulted with others about costs. At the risk of sounding like the Prime Minister, I refer him to the reply I gave him the other day. I made it perfectly clear that

607
when proposals are made by one government department, all government departments are involved in the discussions.
Earl Russell: My Lords, with respect, the Minister is in trouble if he gives the same reply because it was not the same question. I asked what resource implications for other departments were identified.
Lord Mackay of Ardbrecknish: My Lords, I would need notice of that question if it relates to a specific benefit.
So far as I understand, the suggestions and proposals that we have made as regards housing have no read-across costs for other departments because we have taken into account the particularly difficult cases—I could list them—which were excluded from the January housing benefit changes, and any difficulties have been taken into consideration.
The noble Earl also asked me about the discretionary social fund budget. That is usually announced closer to the beginning of the next financial year, which will be in March, for the reason that the size of the budget relates to the performance in receiving back the social fund loans.
If I am to obey the strictures that I imposed on myself, I must now finish. However, what I found interesting about the statement of the noble Baroness is that it seemed to imply one extra expenditure piled on another.
Noble Lords: No, no!
Lord Mackay of Ardbrecknish: My Lords, as I understood the position of the party opposite, it does not want any increase in expenditure, I presume over the £90 billion that we are already spending on social security.
5.22 p.m.
Lord Dubs: My Lords, perhaps I may return to the question of asylum seekers. It was not clear whether the Minister had answered the questions put by the two noble Lords in reply to the Statement.
Will he explain what is to happen to an asylum seeker who does not claim asylum at Heathrow Airport or Dover but claims it some time later? As I understand it, the Minister answered that many of those claims were now being refused. However, that does not deal with whether an asylum seeker who is afraid of being sent into detention, and therefore does not claim asylum immediately but leaves it for some little while, should have any right to income support denied him. It is not just; and it does not make sense.
In the event of the Home Office refusing an asylum seeker, will the Minister explain whether or not the entitlement to income support will apply between that date and the date of an appeal before an adjudicator or an immigration appeal tribunal? It is a simple proposition. Will the Minister please answer?
Lord Mackay of Ardbrecknish: My Lords, the position is quite simply this. Those who enter the UK and apply for refugee status at the port of entry will be eligible for benefits until their position is decided. They
608
will not be eligible for benefits during the appeal proceedings because that puts them on all fours with the way in which citizens of the UK are treated—no better and no worse.
As regards people who enter the UK as visitors, tourists or students with the normal immigration clearance—they have limited leave to remain on the understanding that they do not become a burden on public funds—they will no longer be entitled to benefit if they subsequently claim asylum. I hope that that makes the position clear.
Lord Harris of Greenwich: My Lords, perhaps I may ask the noble Lord one question on that. If those people succeed in their appeal, do they receive back payment of benefit?
Lord Mackay of Ardbrecknish: My Lords, if they succeed in their appeal—as do a very small percentage of the considerable numbers that I mentioned—they will be eligible for benefit, I think, from that point. However, I shall check that I am right and write to the noble Lord.

Economic Affairs
Debate resumed.
5.25 p.m.
Lord Ezra: My Lords, I should like to join with the noble Lord, Lord Clark of Kempston, in expressing indebtedness to the noble Lord, Lord Desai, for introducing the Motion even though the economy was exhaustively debated a week ago. However, we can now consider the state of the economy in the light of the Budget. It is rate that we have been able to discuss the Budget so shorty after its presentation. I hope that this can become a precedent.
We need to consider the Budget in the light of the current economic trends. There is undoubtedly a slow-down, as the Chancellor accepted in his Statement yesterday. The question that needs to be asked is whether this i, a pause such as occurred in the mid-1980s or the precursor of a recession such as was experienced in the early 1990s. Let us hope that it is the former.
The facts are these. In the third quarter of 1994 the economy was rowing by 4.3 per cent. In the third quarter of this year, as recently announced, growth has come down to 2.1 per cent. Underlying that figure is the fact that there has been a substantial amount of industrial stock-building, and with the continued weakness in the market de-stocking could begin to take place. That would bear down further on the growth rate. Within the figure of 2.1 per cent. is an exceptional expansion of North Sea oil output. That indicates that the rest of the economy has been doing worse than the figures suggest.
Against that background it is not surprising that tax revenues are noticeably less than expected and that in consequence the public sector borrowing requirement has been higher. The Government had forecast that that

609
would amount to £23.5 billion for 1995 but it is likely to be £29 billion, as we learnt from the Chancellor yesterday.
Those are the current circumstances against which the Budget has to be judged. However, there are two longer-term problems. The first is the continued inadequacy of productive investment. The effect of that is that every time there is an upturn in demand, increased imports are required and there is an inflationary risk. The second long-term problem is unemployment. Even though the level in Britain is somewhat less than in a number of other European countries, it is still exceptionally high and represents an enormous drain on resources in the form of unemployment benefit, quite apart from the adverse social effects.
I suggest that in those circumstances, if the Budget were taking place in the political mid-term, the Chancellor could have been expected to be very cautious about tax reductions and to reserve what resources he had at his disposal to stimulate investment and create more job opportunities. The measures taken would need to be sustainable and to avoid any form of overheating.
However, the Budget has not come at mid-term but near the end of term. There have been considerable political pressures. We have to bear that in mind in considering the Budget. In the event there is no doubt that the Chancellor has resisted pressures from within his own party to introduce substantial direct tax reductions. He seems to have accepted that it is a year in which the priorities, while keeping inflation under control, are to stimulate investment and create job opportunities. However, the Chancellor has estimated that growth next year could be of the order of 3 per cent. That considerably exceeds other estimates and is certainly out of line with present trends. It is difficult to see how that could be achieved without a degree of stimulus.
There is little of such stimulus in the Budget. For example, nothing has been done to increase capital allowances as proposed by the CBI; and there is no hint as yet of reducing interest rates. Would it not have been more desirable at this stage to reduce interest rates rather than reduce direct tax? A reduction in interest rates would stimulate the lagging housing and construction market and boost industrial investment generally.
The Government appear to be relying to an increasing extent on the private finance initiative, as was mentioned by the noble Lord, Lord Desai. While this initiative, which we from these Benches fully support, was originally introduced as a means of adding to the level of public investment, it now seems to be intended to replace public investment. If that is the case, we ought to have a clear statement from the Government to that effect. The level of PFI investment so far has been below government estimates. Is there, therefore, not a risk that the overall level of public investment, including PFI projects, could fall at the very time when we need more capital formation in both the public and the private sectors?
There is a specific area of expenditure reduction to which I should like to refer. For many years I have been involved with NEA which operates the Home
610
Energy Efficiency Scheme. The reduction in the amount of funding of this scheme announced by the Department of the Environment in the context of the Budget yesterday is very disturbing. The total sum involved is £100 million, which was included in the Finance Bill last year. It was stated to be a funding which would last for three years. It has now been reduced by 30 per cent. Some 600,000 homes a year, inhabited by people on low incomes, particularly the elderly, are insulated as a result of the scheme. It is therefore creating much social benefit and reducing pollution from excessive use of energy. It is wholly desirable on those two counts. It is sad that, having decided on such an imaginative measure less than a year ago, the Government should now be going back on it.
I wish to conclude my views on the Budget by stating that I regret that more has not been done to deal with the long-term economic problems that we face; namely, the need for increased productive investment and job opportunities. While the Budget has been cautious, as befits present circumstances, it has not, in my opinion, sufficiently addressed those pressing priorities.
5.32 p.m.
Lord Monson: My Lords, I too am grateful to the noble Lord, Lord Desai, for giving us the chance to debate the Budget Statement—the first time ever, to my recollection. I congratulate him on his ingenuity in finding a formula whereby that can be done. I am not qualified to follow him in his economic analysis and will therefore concentrate on the Budget Statement.
There are things to applaud in the Budget: for example, the concessions on business rates, especially the concessions for small businesses; and the refusal to give more tax breaks to owner occupiers. We all know that the current flat housing market is not caused by lack of tax incentives but by job uncertainties. Once the present wave of "down-sizing", "delayering" and other ugly verbs has subsided, the market is sure to recover, given that house prices in real terms are the lowest for many years.
On a personal note, as the proud owner of a very modest classic car in which I never travel more than 250 miles a year, I am naturally delighted at the exemption from road fund tax, since I calculated that last year I paid more than 60p in road fund tax alone for every mile covered.
However, there are also things to deplore in the Budget. The cut in road building, particularly the building of bypasses round towns where pedestrians risk their lives every day of the year, is bound to lead to more costly and often fatal accidents, as well as adding to the costs of manufacturers, distributors and retailers. I also deplore the fact that the tyranny of the health fanatics has led to the poor smoker being clobbered yet again. I use "poor" in both senses of the word. The well-to-do smokers will not suffer much, but poor pensioners for whom tobacco is perhaps their only source of comfort will suffer. I declare an interest as a patron of FOREST, but not in my personal capacity. As

611
a light smoker I find I can acquire enough duty-free cigarettes on my trips abroad to cover all my yearly needs.
I am uneasy at the reduction in the standard rate. Would not a further extension of the 20 pence rate have been preferable? "A penny off tax" sounds dreadfully old-fashioned and patronising, but I suppose that for all Chancellors, whatever their political affiliation, hitting the headlines is a political necessity. That is why no government, I fear, will ever dare to amalgamate income tax and national insurance, as we all know ought to be done—given that national insurance is bogus; it is not a genuine insurance premium at all. The amalgamation cannot be done because it would look terrible in the headlines, which would shriek: "Basic rate raised to 34 per cent." or whatever.
Finance Bills are almost always amended fairly extensively in Committee, so I should like tentatively to put forward some suggestions to honourable Members and right honourable Members in another place. First, as regards beer duty, I do not believe that one can complain about the level of duty on the stronger beers and lagers. But the duty on low-strength beers is too high, particularly in relation to that prevailing on the Continent. A reduction in duty on lower strength beers, by helping to alter the drinking habits of young people, would pay for itself. There would be less smuggling and less criminal damage to people and property resulting from drunken hooliganism and vandalism.
Secondly, the Conservatives claim to be the party of the family. They claim, for example, to prefer men and women of the same generation living together to be married rather than unmarried, other things being equal. How strange, then, that the tax concession on gifts made in consideration of marriage has never been raised in the 27 years since it was first fixed at £5,000. It would now need to be more than quadrupled, in order to regain its former value. Even if circumstances make it impossible to do so this year, could it not at least be doubled for the time being?
Finally, capital gains tax: by leaving the rates unaltered, the Chancellor is missing a magnificent opportunity to raise more revenue—paradoxical though that may sound. Now that the dice have been loaded against the taxpayer by the withdrawal last year of indexation relief on capital losses, individuals like myself are not—on principle—going to realise gains taxable at 40 per cent. other than in emergencies. Short-term gains—by which I mean gains on assets held for less than a year or perhaps two years—should continue to be taxed as income. But if the rates on longer term gains were reduced from the proposed range of 24 per cent. to 40 per cent. to, let us say, 16 per cent. to 27 per cent.—a reduction of about one-third—one could guarantee that there would be massive realisations and an enormous increase in turnover, resulting in a greatly increased take for the Exchequer—particularly with the prospect of a government of a different political persuasion looming on the horizon. This would be one of those rare occasions when both the taxpayer and the Exchequer stand to gain. I urge the Chancellor to consider this very carefully over the next few weeks.
612
Finally, I turn to stamp duty. Ad valorem stamp duty, as opposed to the fussy 50p stamp duty, fulfils all the criteria for a good tax, if any tax can be considered good, in so far as it is almost impossible to avoid; the rate is low, thereby avoiding both hardship and the distortion of prices; and above all, it is extremely cheap to collect. However, it should surely be levied on the seller rather than the buyer, sellers normally being better off. This would enormously help first-time home buyers. Obviously it is too major a step to be taken this year, but I urge the Chancellor to consider this measure for the 1996 Budget.
5.40 p.m.
Lord Eatwell: My Lords, what we all looked for yesterday was a Budget that addresses the needs of the country. First and foremost this country needs, as the noble Lord, Lord Ezra, said, more high quality investment. Today, three years into the recovery, the level of business investment is only 4 per cent. higher than it was in the trough of the recession. We are informed in the Red Book that business investment will increase by only a further miserable 3.25 per cent. in 1995. Manufacturing investment is still, despite recent increases, 18 per cent. below the previous peak reached in 1989.
At the same stage of recovery from the Tory recession of 1981, investment was 28 per cent. higher than in the trough. Without investment we cannot prosper. Without new capacity we can neither compete nor create sustainable jobs. Without competitive investment we are horribly vulnerable to inflationary pressures whenever the economy grows at anything like a decent rate.
Yet despite the importance of investment to our economic future, the Budget does nothing for private investment. There are some business rate and corporation tax benefits for small firms; but these are offset by the failure to uprate the threshold for VAT registration in line with inflation, and by the bizarre proposal to alter the rules on capital gains to encourage our most successful small entrepreneurs to sell up and retire at 50, when they are in their prime.
For the large firms which undertake the bulk of Britain's investment, there is nothing. No wonder British business has no confidence in this Conservative Government. Why should it, when the Government cut investment in Britain's future? The road programme is cut by 15 per cent., piling congestion costs on industry. Hospital building and repairs are cut by 18 per cent., piling misery on the National Health Service. Housing is cut, piling more people on to the streets and prolonging the misery of the construction industry. And while the public infrastructure crumbles around us, Table 6.4 of the Red Book shows that public sector capital expenditure is projected to fall in real terms year after year into the future, even when the private finance initiative is included in the figures.
As noble Lords will probably know, the idea of the private finance initiative was invented back in 1991 by my honourable friend John Prescott, when he was Shadow Minister for Transport. Little could he have

613
realised that, in the hands of the Tory Party, the PFI would become in conception an exquisite illusion and in practice an administrative shambles.
Yesterday, Mr. Clarke relaunched the PFI, again, just as Tory Chancellors have relaunched it every year since 1992. The reality shown in Table 6.4 is that PFI-funded investment is running at a tenth of every projected figure. The PFI, as my noble friend Lord Desai suggested, is a fig leaf for cuts in government investment. The PFI is a dangerous illusion—PFI: probably fictitious investment.
Labour has put forward detailed proposals to make the PFI work effectively in the national interest. More generally, we have proposed a temporary increase in capital allowances to boost investment, together with measures to solve the key problem of long-term financing for small business and to encourage investment in the regions. And we have proposed a fundamental review of corporation tax and capital gains tax to encourage and reward long-term investment.
The Chancellor has not merely ignored those proposals. He has done something far more dangerous. He has pretended that the problem of low investment does not exist at all.
The second great need in Britain's economy today is a concerted attack on the growing inequality and outright poverty that defaces our country. Earlier this year, most Members of this House were shocked by the facts revealed in the Rowntree Inquiry into Income and Wealth. I say most Members, for we were treated to the distasteful spectacle of the noble Lord, Lord Mackay of Ardbrecknish, attempting to explain away the findings of the inquiry. Indeed, the Government put more effort into explaining away the facts of poverty than they have ever done into alleviating poverty.
Noble Lords will remember that the inquiry used government figures to show that around a fifth of our fellow citizens have enjoyed no increase at all in real income since 1979; that one in three children in this country are growing up in poverty (many of whom will be even more impoverished by the Government's shameful attack on the children of lone parents); and that one in five households now have no member working, compared with one in 12 in 1979.
The detailed analysis of the Budget by the Institute of Fiscal Studies, published in the Financial Times this morning, shows that once again the real incomes of the poorest 20 per cent. in Britain are to be cut by this Budget. That is the Tory way: take from the most vulnerable. I must ask the Minister: when are you going to pick on someone your own size for a change? Why are you always picking on the poorest and the weakest?
To attack poverty it is vital to get people off welfare and back into work. The Chancellor's uprating of personal allowances and his extension of the 20p band are therefore welcome; but it is still the case that most poor people taking up work will face a marginal tax rate, when loss of benefits is taken into account, of over 90 per cent.
614
Instead of adopting Labour's proposal for a 10p tax band to loosen the poverty trap, together with a concerted kick-start programme to get young people back into work, the Chancellor has cut housing benefit for young people. In an era in which flexibility and mobility are key elements in the efficient working of the labour market, this foolish Chancellor has encouraged the young unemployed to stay at home rather than going to look for work, thus reducing the likelihood that they will find work, and increasing the potential welfare burden. The noble Lord, Lord Mackay, demonstrated in his comments on the uprating statement that he just does not understand the mechanics of the poverty trap.
Indeed, there is little encouragement in this Budget for any of the unemployed. The cut in employers' national insurance contributions, which might help a little, is postponed to April 1997. Community Action, which helps people with learning difficulties into work, is to be abolished—attacking the vulnerable again.
There are no innovative schemes. Labour's idea of transferring benefits to employers to take on the long-term unemployed has but a pale echo in the reduction of employers' national insurance contributions. But the Red Book's projected slow-down in the overall growth of the economy also bodes ill for the labour market. And it bodes ill for the PSBR. Government borrowing is up—it was up £6.7 billion in 1995–96; there will be £8.5 billion more borrowing in 1996–97; and £10 billion more in 1997–98. We are talking serious money now. What could be more profligate than borrowing for tax cuts?
That increase in borrowing is a clear measure of economic failure—the failure to build an economy strong enough to sustain high non-inflationary levels of growth and employment, which would in turn result in healthy public finances.
And it is that failure to build a strong economy that also lies behind the relentless rise in taxation under this Government: 35.75 per cent. next year; up another half a per cent. the year after that; and another half a per cent. the year after that; and another half a per cent. the year after that, until we reach 37.25 per cent. of GDP in the year 2000. Upward and ever upward soars the Tory tax bill.
Of course, everyone knows that the Conservatives want to cut taxes. They are just not capable of doing it. And they are not capable of doing it because of the weakness of the real economy that their policies have produced.
To build that strong economy Labour has put forward detailed proposals for encouraging investment in new capacity and investment in the skills of the British people, loosening the short-termist tourniquet on the investment life-blood of our future. Labour has also put forward detailed proposals to reform the conduct of monetary policy, to aid the maintenance of macro-economic stability and low inflation. But the only guarantee of low inflation and macro-economic stability is a strong economy. That is the circle into which we have to break. High levels of investment are necessary to be competitive, to cut employment, to build a strong public sector, to secure the public finances and to fund sustainable cuts in taxation.

615
Nothing in yesterday's Budget suggests that this tired government have the faintest idea how to achieve those goals. Mr. Clarke was going through the motions without either enthusiasm or conviction. The Budget confirms, if confirmation were needed, that the sooner this decrepit government go and make way for a new Labour Government, the better for the wellbeing and prosperity of British business and the British people.
5.51 p.m.
Lord Boardman: My Lords, I hope that the noble Lord will forgive me if I do not follow him in the arguments that he put forward about the social services, but a time limit of nine minutes does not permit me to do so. However, I know that those arguments will be fully answered from this side on a future occasion.
Perhaps I may take up one point that the noble Lord made. He prayed in aid of his case the Institute of Fiscal Studies. Perhaps I may remind the noble Lord that that was the body which said that the proposed introduction by the shadow Chancellor, Mr. Gordon Brown, of a 10p tax band was a gimmick and that appearance seemed to matter more than truth. That is perhaps a side issue in the debate this afternoon.
I thank, as other noble Lords have done, the noble Lord, Lord Desai, for opening the debate. He has given us an opportunity that we have not had before to talk about the Budget. He is a very brave man for clearly he called this debate in anticipation of a Budget that he could attack. Indeed, he described in an article in the New Statesman at about the time that he must have decided to table this debate—an article entitled "No time for bribes"—what he confidently expected would be the Budget produced yesterday by the Chancellor. Obviously, he has been disappointed. It has not been such a Budget. Those of us on this side of the House did not expect that it would be. The press seemed to anticipate such a Budget but they, too, have had to retract. As the noble Lord said in opening, it might have been worse. That was the highest praise that he gave to it, although there were a number of elements in the Budget which he had hoped for but predicted would not be in it, such as publicly paid care. The concession made by the Chancellor was one for which the noble Lord had hoped though he had wanted it to be rather more generous than it was. It would have been nice had the noble Lord given some credit to the Chancellor for doing many of the things that the noble Lord feared he would not do. But so be it.
Much of the noble Lord's speech will prove a delight for economists. Perhaps he will forgive me if I do not devote my time and limited ability to trying to match it. I hope that others will do so. But in speaking of the Budget, he might have said something about the economy which supports it—the state of the economy which is the basis on which Budgets are built. He will have to concede—although he did not do so this evening—that the state of the economy is extremely good. My noble friend Lord Clark referred to it in his speech earlier. It includes factors such as low inflation, unemployment falling by 10,000 a month, exports per head, manufacturing output, faster growth and investment.
616
With regard to investment perhaps I may take up the point made by the noble Lord, Lord Eatwell, who was critical of the investment that we made in this country. But 40 per cent. of the investment in Europe from America and Japan comes to this country. That is a sign of confidence. Those who could choose any country in Europe have chosen this country. It is a sign of the confidence that they rightly have in this country.
Strikes over the past two years in this country have been lower than at any other time since records have been kept, which I believe is 1891. I cannot think of any other period in my political lifetime when this country has had a better economic future to look forward to or been economically stronger. At no other time in history has that been the case. Of course, many things can be and will be improved. But if any noble Lord can suggest a time when a government of the other side produced a stronger economy than this one, I shall happily give way to him.
Lord Eatwell: My Lords, I shall be delighted to answer the noble Lord. Is it not clear that the levels of unemployment were significantly lower, inflation was lower and growth was higher from 1964 to 1970?
Lord Boardman: My Lords, I shall be happy to challenge the noble Lord on all those points. But nobody has produced a state of the economy which is stronger, better and more strike-free than it is now. The noble Lord selected one or two points on which I should love to take issue with him, but the clock does not permit me to do so.
I suggest that the Budget was built on very sound foundations. It was not, as the noble Lord, Lord Desai, hoped that it might be, built on anticipating bribes to the electorate. It was described by the Chancellor of the Exchequer as concentrating on four fields: people will keep more of what they earn and save; more will be spent on schools, national health and police; public spending will be kept under firm control; and public borrowing will be kept on the downward path. Those are the themes that he put forward. I believe that most noble Lords in this House would strongly support them. The noble Lord, Lord Desai, said that they were issues that he supported.
The tax concessions contained in the Budget were more than covered by cuts in public expenditure. Again, that is a proper aim, consistent with the themes to which I referred.
I shall not speak further about the Budget, which was all clearly set out in the Chancellor's speech and is in the Red Book. Perhaps I may say just a few words about the Red Book and the way in which the Treasury produced its Budget statistics. Within a few minutes of the Chancellor sitting down in the Chamber, the Red Book and the press briefings were available in the Printed Paper Office. They are packed with matters which were of the highest secrecy and needed the highest security. We owe a great debt to all those who were concerned in putting together the Budget documents in the Treasury and for the way in which they managed to keep security. It is not general in most

617
departments of life today. However, in the Budget itself, there is much that we could debate and much to praise but I do not have the time to do so.
Perhaps I may spend a moment or two speculating on the kinds of provisions that we might have expected in a Labour Budget. Mr. Blair constantly says that his government would not be one that would tax and spend. His colleagues do not seem to be convinced; nor indeed do they intend to comply. They have made it quite clear. There was a statement a few days ago on Radio 4 by one of his colleagues, in which it was said that Gordon Brown can say anything that he likes if he thinks that it will win the election, but when Labour is in power it will be looking for other priorities apart from tax cuts. That shows how much reliance we can place upon statements which come from the other side about their proposals for a Budget.
Labour has failed to say where it stands on a whole range of key subjects: inflation, interest rates and public spending. We know that it has committed itself to a number of other matters such as the minimum wage, the Social Chapter, payroll tax and regional development agencies—a kind of glorified national enterprise board. We know where it stands on those issues. Those who took the trouble to read A New Economic Future for Britain in June of this year, no doubt read it and shuddered at it as I did. We know what Mr. Brown's windfall tax is intended to cover and the 11 different massive expenditures it is to meet. But today we have a sound developing economy; we have a sound Budget to deliver a sustained recovery and to take it forward. We are extremely fortunate.
6 p.m.
Lord Shepherd: My Lords, I suspect the noble Lord, Lord Boardman, may be guilty of some complacency in the way in which he described the present economy. And the noble Lord, Lord Clark, was beginning to enjoy himself in regard to the situation in which the Conservatives found themselves in 1979, but he forgot one factor. I refer to the grave financial situation with which we were faced on the day we took office in 1964.
In the days when I first came to this House, some 40 years ago, it was the practice that, if one spoke after 5.30, one apologised for speaking "at this late hour". I shall therefore put aside what I had intended to say and, as my Quaker friends say, I shall speak as the spirit moves me and hope to keep within my time.
I fully support what was said by my noble friend Lord Eatwell in terms of the need to recreate and rejuvenate our manufacturing base. That is essential if we are to create the prosperity which our people expect. We must do that, though in a sense it will be like climbing Mount Everest. We need a programme that is broadly acceptable and that will last at least three parliamentary terms.
There is an acceptance and belief that because we are within the European Community we can trade comfortably within the tariff borders of the Community. I suspect that in time, with the enlargement of the Community and the development of the countries within
618
the Asian basin plus the United States, great pressures—political and otherwise—will be brought to bear for the reduction of the tariff borders that surround the Community. If that happens—I suspect it will happen within one generation—it will be essential for this country, if we are not able to compete within the Community, to be able to compete throughout the world, particularly within the Asian basin.
We spoke of the prosperity league. I believe we are 18th on the list. I was not impressed with most of those at the top, but was conscious of two—Hong Kong and Singapore. I visited Singapore and Hong Kong in 1946. They were basically entrepôt ports. They had no industry or natural resources. Hong Kong had a population of 500,000 people. I remember water being rationed to two hours a day. Singapore had plenty of water because it had storage from Malaysia, but it had no industrial base. Today, both are major exporters. Their prosperity per head of the population is of the highest and is now above ours.
We should take all that into account in regard to what can be and will be achieved in the Asian basin, which we may have to confront, if we are not already confronting it. I sincerely believe that we must rejuvenate and expand our economic and manufacturing base. The noble Lord, Lord Boardman, said that we are doing well. But that depends from where one starts. We must recover what was once the manufacturing and economic base of this country. We are a long way from it today. I hope that the knowledge in regard to the potential competition that this country and other European countries may face is borne in mind.
In regard to the Budget, my understanding is that its object was limited. It was to make the economy more manageable and give it greater flexibility; it was to provide incentives for those who work in industry and trade; and it was to create new opportunities and protection for those who are retired or who have savings. That concept of the objects of the Budget is its basic weakness and sooner or later we shall need to find a new formula which gives us a longer term plan—I hesitate to use the term "national plan"—which will command the acceptance of all political parties.
I must say to my noble friends that I found yesterday's Budget extremely clever. It gave a little here and a little there. In terms of inheritance tax the move to £200,000 was about right. Why should the ordinary man be taxed twice? First, he is taxed on his earnings and, secondly, he is taxed on his savings. The reduction of the tax on savings is to be welcomed. Also, I support the concept that the workforce should be encouraged to buy shares within their companies, provided adequate safeguards exist.
I support all those elements of the Budget. But I turn to the 1 per cent. I do not support plebiscites, but if we had a plebiscite and put to the ordinary people of this country, "Will you accept a reduction of 1p in the pound on your tax or would you like that sum to be hypothecated, in addition to what is already paid by the state, to hospitals and schools?" most of us would be surprised at the response. I believe the ordinary man

619
would say that he attaches supreme importance to the quality of our medical service and schooling and that he may well forego what is, after all, a minute saving.
My anxiety concerns the forecasts. My noble friend Lord Diamond sits behind me. But I believe forecasts to be extremely dubious. They may be based on specific facts, but they are highly vulnerable, particularly at this moment in time. For instance, if the PSBR is to be reduced, it will require a major change. The Government know from their recent experience that what is forecast for the PSBR now is much higher than what was forecast 12 months ago. I understand that forecasts have to be made, but the danger lies in getting them wrong, particularly when one bears in mind the risks to ourselves and our currency and one takes into account the speed at which currencies fluctuate and the fact that that fluctuation is difficult to stop once it starts.
The Chancellor is to be congratulated on producing a prudent Budget and—I say this to the noble Lord, Lord Boardman—for his courage in withstanding the enormous pressures placed upon him for solely political reasons.
6.10 p.m.
Lord Skidelsky: My Lords, I very much regret that a prior engagement will stop me from being present for the whole of the debate. I am very sorry about that. I was delighted to hear the speech of the noble Lord, Lord Desai, and I congratulate him on his success in securing us the occasion to discuss the Budget Statement. The speeches so far fully justify that innovation and I hope that it will become permanent.
One of the noble Lord's most endearing qualities is his intellectual honesty, which I know has been a source of some embarrassment to his Front Bench in the past. He was honest enough to say this afternoon that he favours a high tax economy. How he squares that with his penetrating analysis of the dynamics of the global economy I am not quite sure, but at least he favours a high tax economy. I hope that I am honest enough to say that I favour a low tax economy. That is the nub of the difference between us, and I venture to suggest that it is the nub of the difference between the Opposition side of the House and our side of the House.
I wish I could persuade the noble Lord, Lord Bruce of Donington, that in taking up that position I am not betraying John Maynard Keynes. I believe that the only way you can get the Government's budget to work in favour of stabilisation is on the basis of sound public finances and the only way to make them sound is by cutting public spending; otherwise you face a continuing borrowing problem which turns the markets against you and prevents governments from doing even the necessary things that governments should do. But that is another debate for another occasion.
I welcome this week's Budget as, above all, a responsible Budget. The Chancellor has resisted the temptation to go electioneering. Modest tax cuts are balanced by modest spending cuts. That is the only strategy consistent with getting our interest rates down, which is the only basis of the boost to the economy which the noble Lord, Lord Desai, and all of us want.
620
The noble Lord, Lord Eatwell, said that the Budget has done nothing for investment. But if it is a Budget that enables interest rates to come down, then it will have done an enormous amount for investment. It is a very old-fashioned view that the only way you can get more investment is by increasing government spending on capital projects; the way you get more investment is by running your public finances in a way that enables you to have low interest rates. If you have low interest rates, you get durable recovery and an upsurge in growth.
I welcome this Budget as a further confirmation that we have renounced the bad old days of stop-go, the days when government deliberately created political business cycles in order to get re-elected—all go before the election, all stop after the election. We have turned that corner and I do not think that any Chancellor will do that in the future. I am glad that the Chancellor has rejected the advice of some Tory pessimists to leave the public finances in a mess for an incoming Labour Government. I read that proposition in a couple of articles by Conservative journalists. The Chancellor has rejected it.
This Chancellor and all of us on these Benches want and expect the Government to win the next election and inherit a strong fiscal position as a basis for their further reforms. You could say that the Chancellor has learnt from the whole experience of the post-war period that short-term highs are not worth the long-term lows and anyway no longer fool the public. Modesty is forced on governments nowadays as it is very hard for them to make people pay more taxes than they actually want to pay. That is the practical problem with the vision of the noble Lord, Lord Desai, of a high tax economy.
People have shown that they do not want a high tax economy and they do not vote for parties which promise to put up taxes. It is increasingly easy for people to arrange their affairs so that they avoid paying tax, whatever they may say in the plebiscite suggested by the noble Lord, Lord Shepherd. For example, it is estimated that the Government lost £100 million in alcohol duty revenue last year from people buying their drink abroad. These schemes are becoming increasingly possible. This lack of revenue buoyancy, incidentally, is reflected in the interesting resort to pre-modern methods of taxation like the national lottery. Nor can governments borrow any longer to their heart's desire from savers who have been fleeced too often in the past.
I especially welcome the Chancellor's help for long-term care and his tax encouragement for savings and employee share ownership. I am very pleased—here I must declare an interest as chairman of the Hands Off Reading campaign—that the Chancellor has maintained zero rating of VAT on the printed word. We now look to the Government to maintain that position in Brussels against the continual pressure to harmonise VAT rates across the Community.
All that seems to me admirable. My doubts about the Budget chiefly relate to its spending side. Some of the spending cuts look a little cosmetic to me. This year £500 million has come off the contingency fund. The noble Lord, Lord Desai, has implied that the tax cuts are

621
being paid for by a run-down in the reserves. I do not read the figures that way because according to page 131 of the Red Book falls in the reserves will be balanced by expected receipts. I do not know what the answer to that is. Perhaps my noble friend the Minister will elucidate this technical conundrum when he winds up.
There are also cuts of £1.5 billion in capital spending programmes. Those are supposed to be made up by the private sector through the private finance initiative. I tend to agree that these are likely to be spending cuts postponed rather than cut. It is difficult for hospital trusts to borrow on the strength of assets for which they are not allowed to charge and on the collateral of one year's guaranteed income alone. I wonder how successful the private finance initiative will actually be in raising capital investment.
My real question, and the one on which I want to end, is whether there is any real strategy underlying the Chancellor's prudent housekeeping. What is the Government's medium-term fiscal aim? Is it to balance the budget over the cycle? Is it to balance the budget by 1998? Is it to bring the PSBR into balance? Those are all phrases which have been on ministerial lips in recent weeks. I am none the wiser. All I know is that the PSBR is obstinately stuck at about £30 billion. That is too high and the date for its reduction seems to be put back year after year and, even now, depends on rather optimistic sets of judgments and assumptions both on the revenue side and on the side of economic growth. I am not quite clear what the medium-term strategy is.
Let us be clear. We on this side want to reduce taxes. Everyone is committed to that. But I do not see a clear strategy yet for reducing the burden of taxation. In fact, I see from the Red Book that government receipts are expected to be higher as a proportion of national income in the year 2000 than they are at the moment and that the tax burden is expected to be 4 or 5 per cent. higher than it was in 1990. It is true that by then spending is expected to be below 40 per cent. It may be, on good assumptions, that we shall get a rough balance between taxes and spending at about 40 per cent. of GDP by the end of the century. That is better than nothing, but it is hardly dramatic. Both William Waldegrave and Chris Patten have recently called for a public spending share well below 40 per cent. I missed that commitment in the Budget strategy. As yet there is no real commitment, yet I believe that that is the only plausible basis for long-term Conservative economic policy.
The trouble is that we shall not get those cuts unless we reduce the agenda of the state. A debate on a Budget is neither the time nor the place to start that deep discussion, but I have no doubt that we shall have to have it, and we have to win it. What is the welfare role of government in a privately wealthy economy? What goods should the state provide and what goods should the private sector provide? We have to start that debate from first principles. I hope that a coherent vision of where we want to get to and how we intend to get there will inform the Budget strategy of the next phase of Conservative Government. After all, we have seven years in which to work it out.
6.21 p.m.
Lord Merlyn-Rees: My Lords, the noble Lord, Lord Skidelsky, is always thought-provoking even though in his last words he was romancing. He referred to the fact that some Conservative journalists said that it would be a good idea to leave a mess for a Labour Government to clear up. The noble Lord should look at 1964 because it has happened before. As regards his view on the link between interest rates and investment, when I was a boy in the 1930s interest rates were at rock bottom, but there was no investment. The link between the two is not as easy as classical economists think.
Lord Skidelsky: My Lords, I do not want to go on any longer. The noble Lord will know that there was a big housing boom in the 1930s, which was driven by very low interest rates.
Lord Merlyn-Rees: My Lords, the noble Lord will also remember that that picked up at the end of the slump in 1931, 1932 and 1933. It occurred again in 1938 and was driven by the trade cycle and not by a link between investment and low interest rates because they had been low before. I said that the noble Lord is always thought-provoking, but he must not allow me to think too much or I shall go over my time.
I shall not refer to the Budget because everyone else has done so. I shall refer to the state of the nation. I am very sceptical about Chancellors who believe that there is vote catching in Budgets. If they do catch votes, then within a few months of getting back into office something has to be done about retrieving the situation. That has happened on two or three occasions in the past 20 years. In any event, the reasons for winning elections are manifold. I do not believe the idea that one can buy the electorate is true, whatever party is in power.
As regards the state of the nation, I want to devote my time to employment, as I usually do, or unemployment, which is the other side of the medal. There has not been much talk about employment; it is no longer the "in" word that it was after the war. Indeed, in my young days there was heavy structural unemployment and nobody bothered very much. It took the war to make people see the iniquities of unemployment when people were brought together in the Armed Forces.
People in work at the moment are not very worried about those who are unemployed. I have a vested interest in unemployment as a result of my past and because for 30 years I represented an area where there was heavy unemployment. I shall come to the particular in a moment. As regards the state of the nation, a typical family pays more tax now than it did in 1979. Indirect taxation cannot be removed from the equation. It affects the lower income groups far more than the likes of most of us in this Chamber. Indirect taxation is regressive. There has been low growth in this country despite the figures over a short period. They are lower than the figures I have here for the other countries of the Group of Seven. We wasted North Sea oil. We invest less than our competitors and that is a matter that we should think about.

623
In my native Wales, which I see more of now, there is enthusiasm for working for a Japanese firm. Japanese firms invest. They are in manufacturing and they do it better than most British firms. We have to ask ourselves why. The reasons stem from the nature of the way in which the Japanese raise capital and invest. The Japanese firms are in manufacturing and they go to areas such as the north-east coast. Our manufacturing base has disappeared: is that a good thing? We used to be the workshop of the world, but we are not now. The Japanese are very good at manufacturing, mainly as regards the motor car industry.
I turn to the trade balance. Even with a 25 per cent. devaluation of the pound, compared with the rate when John Major took us into the ERM, we still had a deficit in 1994 of £10.5 billion. The recovery and boom in exports is in spite of and not because of government policy. Is that not marvellous when one thinks of all the troubles and tribulations that we went through with devaluation! The pound has devalued by 25 per cent. Let us imagine what the situation would have been if we were on fixed exchange rates through the IMF. Devaluation is the order of the day.
I come now to employment. The figures I have for October show that the seasonally adjusted claimants for unemployment stood at 2.2 million, which is equivalent to one in 12. For men the figure is 10 per cent., which is much higher, and for women it is 4.4 per cent. We ought to direct our minds to the doubts about the way the employment figures are collected. There are many people and economists who believe that they do not give a true picture. We should look at that, particularly in this House. In 1995 unemployment fell by 331,000, but it is still far higher than it was in 1979. Since that year the fraction of the unemployed out of work for more than a year increased by 50 per cent. to just over 1 million. There is an increasing mismatch between the skills of the unemployed and of those needed in industry.
I suggest to your Lordships that we should look at unemployment. It is falling, but the current situation remains bleak for millions of jobless people. One million people have been unemployed for more than one year and half-a-million have been unemployed for more than two years. One in three people without any 0-levels are now out of work and unemployment rates are much higher for young people and members of ethnic minorities. The underlying state of the labour market for women, the poorly educated, low-paid and young people, is getting worse; with poverty increasingly concentrated among the low-paid and households with no work. One in five households have no working adult member. That figure is up from one in 15 in 1975. The gap between higher and lower paid workers is greater than it has been since records began. Economic generation creates part-time jobs. It may be that such jobs are good, but they are not good for me—someone who was brought up on the basis that the man of the house worked a 40, 45 or 50-hour week. In the constituency I represented that does not apply.
I do not live under those circumstances and neither do my children, but many of us who were Labour MPs saw that on a daily and weekly basis. Unemployment is
624
in my political blood and we should direct our minds to it. I fished out some figures from the Library, but they are not quite for the area that I represented because there has been a redistribution. In my area 60 per cent. of the population are of working age and of that number 16.5 per cent. are unemployed. In other parts the figure is between 25 and 30 per cent. There is nothing that the Government can do—I am trying to be non-political now—that will alter that fact. The idea that when the economy lifts they will be brought into work is not true. The unemployment situation varies from one part of the country to another. They are good people.
I have said in the House before that when I was in Northern Ireland I met the children of my constituency as soldiers in Northern Ireland. Nowadays the Army is so small, I regret to say, that that does not apply to the same degree as before. I was speaking about Leeds Central. There is unemployment at 8.8 per cent. in Leeds North East, which is a Conservative seat. The way in which people vote is determined not by whether they are caught by the Chancellor, but by the unemployment situation in the area by nature of social class. Those of us who have been absorbed in politics over the years know that to be so. I do not believe that the normal upturn will do very much for us.
The work of the Commission on Social Justice was published not long ago. We have to change our outlook. Our modern war on poverty must tackle the fundamental causes of inequality. High and persistent unemployment leaves people without income and with low and inadequate skills.
I have been putting my mind to this issue and the one thing that I should like to draw to the attention of the House is an article in The Political Quarterly by Professor Dore of LSE and MIT in which he states:
"the form of unemployment that we have in Europe today is … different from … the 1930s … there is only limited possibility of making a dent in the unemployment figures by macroeconomic demand management … there are equally limited possibilities of making much more impact on the employment intensity".
He referred also to the driving force of change on the Pacific Rim and to the changes in that part of the world. It is a gloomy prognosis. He has said, "People do not like me saying this" but is it true? Are we wasting our time with the modern analysis of unemployment in which we have been schooled?
There is something fundamentally wrong in this country. In my view, whatever party is in government some people in the kind of area that I represented will be unemployed. Whatever happens to the rate of interest, whatever happens in the banking system, there will be marginal changes, but more fundamental changes need to be made. At the moment, the important department of state in this country is the Department of Social Security and the reason is that we are paying out money because our system does not work and we have to keep people off the breadline.
6.31 p.m.
Baroness O'Cathain: My Lords, I too thank the noble Lord, Lord Desai, for tabling this Motion. The economic state of the nation is good. It is not the

625
greatest in the world, but it is considerably better than many of us had dared to hope, having been subjected to the endless drip-drip of negative comment emanating from both noble Lords opposite and the media.
With this Budget, I get the strong feeling that all is under control. That is most comforting. It really is a case of "steady as she goes". The temptation to tinker endlessly has been rejected. Naturally, there will be disappointment that some of the more absurd predictions which littered our newspapers in the days before the Budget have not materialised. On a personal level, there is one omission, on which I had placed some hope, but more of that anon.
As an aside, the noble Lord, Lord Desai, told us that the Budget had been given a lukewarm reception by the Tory Back Benches and a hostile reception everywhere else. When I heard that, I went straight to the Library, thinking that my croaking voice had also affected my brain and vision and that I had misread something in today's Financial Times, but when I looked at the comments from businessmen, they were all supportive. Perhaps the noble Lord does not think that the opinions of businessmen matter.
The management of an economy which has a turnover of nearly £800 billion is no small task. The enormous figures sometimes cloud the brain. We have heard about massive government expenditure and massive government debt, but in simple terms, the total government expenditure of £306 billion is well within the convergence criterion for joining EMU and, similarly, the plans are that the deficit meets the other convergence criterion of 3 per cent. long before EMU takes effect. Not that I am for one moment suggesting that we should positively aspire to EMU membership; I merely wanted to make the point that, whereas one is often led to believe that we are the poor man of Europe, a second-class citizen in EU economic management terms, the reality is that we are strong and healthy. As an aside, the IMF expects us to be at the top of the G7 growth league, along with Germany, next year. Does that indicate economic weakness?
We frequently hear of our declining position in the "wealth table" of the world. Indeed, the noble Lord, Lord Shepherd, referred to that earlier. We are 16th in terms of GDP per capita, but some of the countries that have overtaken us are the low tax, deregulated economies, particularly Hong Kong and Singapore. If we aspire to move up the league table, we must also adopt an even lower tax and deregulation strategy. I wonder whether the Opposition would go along with that. I have yet to discern a great move on those Benches for lower taxes and further deregulation.
But let us not be bemused by statistics. We should get behind some of the numbers; for example, four of the countries ahead of us in that wealth league table (Belgium, France, Germany and the Netherlands) have lower graduation rates. Do we want to reduce our graduation rates from their current level of 25 per cent.? We have the strategy to improve education standards and to increase the proportion of the population which will benefit from university education so that long term our international competitiveness will increase.
626
We require, above all, stable economic management which will ensure sustained economic growth and rising prosperity. I emphasise the word "stable". We do not want drastic turns one way or the other. To quote from the Red Book that we have all been using tonight:
"Economies work most efficiently when inflation is low and stable",
and that is precisely what we have got. Since inflation targets were first introduced, inflation has remained below 4 per cent. for the longest continuous period for almost 50 years. That is a huge achievement. That is the background that business requires in order to invest, grow and increase its competitiveness.
When we talk of the wealth league, let us not forget that it is business in the main that creates wealth. The voice of business is not heard loudly or often enough in your Lordships' House. It is perhaps useful to point out that the forecast income from corporation tax and business rates combined can fund more than total government expenditure on education; combined they can fund more than the budgets for defence and law and order together; combined they can fund more than 82 per cent. of the health and personal social services budget. That is why we have to encourage business and to help business, in turn, to prosper.
Therefore, I am delighted with the Chancellor's proposals for the relief of some business and agricultural assets from inheritance tax. Even more welcome is the change proposed in the relief from capital gains tax for more entrepreneurs and shareholders in family companies. That will result in skilled and successful businessmen—and women—finding it easier to release their capital into new business projects.
I said earlier that I was disappointed by one omission. I refer to the failure to abolish capital gains tax completely. Perhaps I may give my reason. There are millions of individual shareholders who invest in British business from the proceeds of their after-tax income who I am certain would increase that investment if the capital gains from that investment were not taxed. Gains from investment in premium bonds, which in my experience give a much better return than the National Lottery, are not taxed; neither are the gains from the so-called "investment" in the same lottery, so why are the gains from investment in the wealth-creating business sector singled out for continued taxation? Following what will undoubtedly be the positive increased growth resulting from this strategic economic policy, I hope that a tactical shift in taxation can be made in the next Budget and that we can say farewell to capital gains tax for ever.
All of us must be single-minded in our approach to encouraging business. To that end, I was delighted by the Chancellor's proposal to reduce the small companies rate of corporation tax to 24 per cent. from 1st April 1996. It is a staggering thought that about 350,000 companies will benefit from that reduction. It should prove to be a huge incentive to small businesses. Those 350,000 companies account for 85 per cent. of all companies that pay tax. With a wry smile I ask: how about the other 15 per cent. next time?

627
If I sound optimistic (albeit rather croakily), it is because I truly believe that the economic health of business is good. Many companies are operating at a level of efficiency and effectiveness that they have never reached before. Our best companies are among the best in the world, creating wealth to underpin a social structure which is equally among the best in the world. Those are the facts. They are not just feelings. Perhaps I may suggest that we drop the phrase "feel good factor". Feelings, according to the Oxford English Dictionary, are defined as,
"A generic term comprising sensation, desire and emotion but excluding perception".
Let us have more perception and thought. I do not want to feel good. I want to perceive that things are good. I do perceive that, and I think, too, that the Budget is good.
6.40 p.m.
Lord Bruce of Donington: My Lords, my own perceptions of the economic significance of the Budget have been expressed more eloquently by Mr. Matthew Parris on page 2 of The Times today, which I commend to your Lordships' attention. However, on a purely personal level I suppose we shall have the spectacle of more clapped-out bangers in the car park outside, and there is the remote possibility of my noble friend Lord Peston lowering the whisky prices in the bars here. That is roughly the significance of the Budget to which we have been treated.
I propose to deal with three short aspects only which are in continuation of the remarks I had the privilege to make in the debate last week. I was especially glad that my noble friend Lord Eatwell referred to the significance of investment, particularly in the field of replacing lost capacity. One of the achievements of Her Majesty's Government over the past 16 years has been to preside over an economy which started out with a balance of trade surplus of £7 million and which has ended up now with a trade deficit of £7 billion. There is considerable significance in that. What caused that is simple to understand. There has been a mass destruction of manufacturing capacity in this country which has been reflected in an ever-increasing import penetration into the UK. It is as simple as that.
Even when the country has a sporadic recovery due to an artificial injection every now and again from a nearly defunct government, that is lost immediately, because when demand revives domestically there is not the domestic capacity to meet domestic consumer demand. So increased imports arrive. That is something that noble Lords opposite cannot wish away. You started off with a trade surplus and you now have a massive trade deficit which you cannot escape.
We have to have more investment. Everyone is agreed on that. A variety of inducements has been produced for those in possession of capital to invest in UK industry. Noble Lords from time to time in their own self defence, to which of course they are entitled, quote the fact that, Japanese investors in particular—there are also others—have made massive investments in the UK. What they do not say is that their friends
628
who finance their own party invest most of their money outside the UK. They do not even have the confidence that their own political arm protests that they ought to have.
So, as my noble friend, Lord Haskel, pointed out in correction of my rough figures last week, for every £100 of investment invested here by countries like Japan in a vote of confidence, £160 is invested by British companies in America or in the Pacific Rim. We have to have some more investment.
Who possesses the funds? Clearly, the lower tenth of the population does not possess anything. It has no capital; its income is its capital. Who has the money? The wealthy and the institutions have the money. How can they be induced to invest? A variety of ways have been suggested: capital allowances; all kinds of hidden subsidies; all kinds of privileges; all kinds of regional grants, and so forth. All of them are very good, but what happens if they will not invest? That is a problem that Mr. Edward Heath addressed to the country in 1972, "and still you won't invest", he said to the financial interests in the City of London. Of course, investors are human. I hesitate to reproach the noble Lord, Lord Skidelsky, with Keynes's view on the subject, which I know may be unpopular. He says at page 162 of The General Theory of Employment:
"In estimating the prospects of investment, we must have regard, therefore, to the nerves and hysteria and even the digestions and reactions to the weather of those upon whose spontaneous activity it largely depends".
What was true then is true now.
I have to suggest, as was suggested in the White Paper on full employment published in 1944 by the Coalition Government, that where private investment does not find it convenient, or has no inclination to invest, then the state must. The state itself has to finance enterprises. That may not be popular to either side of the House, but it will recur time and time again over the years that lie ahead.
The noble Baroness, Lady O'Cathain, referred to small businesses and said how important they were. Indeed they are, because it is by investment in small businesses that the recovery, when it comes—if it comes—is largely likely to be propelled. What is the situation with small businesses at the moment? I can well remember the time when it was possible to go along to the manager of a small bank, have a friendly chat, discuss proposals with him, produce the necessary projection papers: cash flows, draft profit and loss accounts, and so on. Often on his own initiative he would make the necessary advance. But what happens today? One does not go to a manager any more, but to a computer operator who says in accordance with instructions from head office, "I am afraid it is quite impossible for that to be done".
Even where finance is provided by banks, it is accompanied by rates of interest and conditions which are part of a bank's plan to recoup from the small practitioners, the small businesses of this country, the losses incurred due to its own folly of investing in the South American states.

629
There was also a time when it was Conservative Party policy that some efforts should be made to get the larger companies, which frequently gobbled up small enterprises, to make prompt payments to their small suppliers. There was a plan to have interest charged on overdue accounts. It was put forward by the DTI, and yet when the President of the Board of Trade (as he then was) came into being after the last election we found that that did not happen. I wonder why.
The practice followed by large corporate firms is clear. A distinguished member of one of them has already recorded the following views:
"I remember a moment in my business life when every Friday the company finance director used to bring in the list of outstanding creditors. There were three columns headed: solicitors' letters, writs received and writs whose time limits for reply were about to expire. The bills in the last column we paid".
The author of that was none other than the right honourable Michael Heseltine who admits building his business upon that basis. We may possibly have to change that.
Time prevents me from embarrassing the Government any further. With those few parting words and pleasantries, I am pleased to resume my seat.
6.50 p.m.
Lord Birdwood: My Lords, it is no purpose of mine this evening to add to the avalanche of comment about yesterday's Budget. One of this country's niche growth industries is commenting about the Budget. What the ingenious and well-timed Motion of the noble Lord, Lord Desai, does yield is a rare chance to stand back and look at the relationship between the economy and the Government. Perhaps I ought to give that a more academic colour. Perhaps I ought to say the relationship between any economy and any government.
I wish to limit myself to making one point in the form of one question. Why do no government publicly acknowledge that there are in any and every developed economy two perpetually opposed forces? These forces are the search for efficiency and the employment of people. We do not need to tangle with the sophistry of Clause 4; we do not need to worship at the shrine of free market ideology. But we do need to recognise that the more efficient an enterprise the fewer people it will employ. It is painfully, transparently obvious to the ordinary citizen but seems to be quite outside the vocabulary of Westminster, or Washington, or Paris, or Berlin.
The special areas of interest to myself are the new ingredients of innovation and technology which have become the accelerators in the search for competitive advantage. More hard science has been deployed in commerce and industry with the object of greater efficiency in the past 15 years than in the previous 50. What is the end game of this process? Every advance in, say, manufacturing technology raises productivity, makes that company leaner, more profitable, more attractive an investment and needing fewer people. So the state picks up the responsibility for those human beings now outside the virtuous circle of the efficient
630
enterprise. The by-product of the efficient enterprise is taxable profit to feed a vicious circle of numerically unemployed and increasingly unemployable individuals.
The paradox is that technology is the lubricant for a country to get richer but for its people to be left staring at the prospect of the end of work. How peculiar. It is my belief that no component in the social fabric puts more strain on its stability than the universally experienced absence of work.
Following from those reflections, I am intensely interested in whether the UK economy is rugged or fragile. It seems to me that there are two expert views of the economic model and they are at odds with each other. The first is that a developed economy such as ours has built-in stabilisers so that the ship stays roughly level when the money storm strikes. The other model introduces mathematical catastrophe points where quite small variants can produce chaotic results. Personally, I lean to the latter because I think that it better mirrors the reality of political powerlessness. Some economic theorists still look for Kondratieff long cycles. Even if they were ever there, the speed with which capital moves around the world and the fine mesh of global information have consigned those ideas to history.
It is totally unoriginal to observe that markets are more powerful than governments. Companies are richer than governments and will be increasingly so. Of course we feel comfortable with these political rituals. They give all of us the chance to assess and calibrate the relationship between an economy and a government. What one perceives though in the veiled agendas of modern Budgets is the recognition of governments that more and more the moment of a Budget is an opportunity for a little social engineering rather than hauling on the levers of macro-economics. And even in social engineering, prudence is the watchword; not so much carrot and stick, more pea and twig.
Have any government cut a template for the millennium which other regimes can use as their patterns? I fear not. No, perhaps I should say that I hope not. Modern economies long ago escaped from their national boundaries. I am not saying that the future fate of future governments will be to become just a caring agency for the illiterate and the immobile. But I am saying that the time is right to bring into the open a new public debate about the relationship between government and the economy because new influences are shaping this relationship in ways undreamt of by Burke, or Adam Smith, or even Karl Marx.
6.57 p.m.
Lord Haskel: My Lords, tonight noble Lords opposite have referred to noble Lords on this side of the House as being people who run down the nation and the economy. The facts and figures on which we base these arguments come from a document called Competitiveness, Forging Ahead. It must be an accurate document because it is published by HMSO and the foreword states:
"It is a hard-headed assessment of our competitive position".
The foreword is signed by the Prime Minister.

631
Pages 12 to 15 list all the countries which are ahead of us in wealth. They were mentioned by the noble Baroness, Lady O'Cathain, and the noble Lord, Lord Shepherd. I believe that before noble Lords opposite accuse us of running down the Government and the economy they should look at this book, because all the data are contained in it at pages 12 to 15.
I wish to speak about investment, which was introduced by my noble friend Lord Eatwell. Yesterday the Chancellor told us that our future prosperity depended on achieving 3 per cent. growth. Central to that must be the investment that we spoke about; that is, investment in infrastructure, education, skills, technology, new products and new markets. That must be the key to growth.
It is fair to ask: what has the Budget done to encourage this investment? The answer, as other noble Lords have pointed out, is that the Government seem to be pinning their hopes on the private finance initiative. Perhaps we can debate that in more detail when we have seen the Treasury's handbook setting out the projects to be undertaken under the scheme. In the meantime, we shall need to be convinced that the scheme is in addition to government investment and not instead of it.
My noble friend Lord Eatwell pointed out that the private finance initiative should not be used as a means of disguising government's lack of interest in the real side of the economy. For the past two years the present Government's private finance initiative has been successful in attracting around £500 million from the private sector. However, during the same period the cut in government investment in precisely the same areas has been in the order of £2 billion. That is a net disinvestment of £1.5 billion. Clearly, the Government can cut public capital expenditure with certainty, but they cannot be certain on delivering private sector funds. In the past, those funds have not been delivered. Little wonder that bodies like the CBI are wondering whether they will be delivered this time round.
Industry will find it very frustrating if imaginative schemes are announced by the Minister while, at the same time, investment programmes are cut in anticipation of them. The new concept of "sponsored investment" seems to consist only of direct government spending. I share the concern of the noble Lord, Lord Skidelsky, on the matter. If the scheme of PFI is to be extended, many problems will have to be sorted out. For instance, the very high bidding costs make it prohibitive for all but a few very large companies. The complexity of the rules make it very difficult for most firms to get involved. The PFI initiative is to be welcomed but, as we have said in the past, it has to become much more flexible and more user friendly. However, perhaps a significant decrease in interest rates will help to secure the investment that is needed.
My noble friend Lord Merlyn-Rees raised the question of jobs. We are all worried about unemployment. We are worried about the economic cost and we are worried about the social cost in terms of crime, in terms of ill health (both physical and mental) and in terms of social unrest and how that contributes towards the racial and other tensions in our society.
632
The stubbornly high youth unemployment is both painful and worrying. We all know that the long-term consequences will be bad. It was with that in mind that the Shadow Chancellor proposed several ways to bring down youth unemployment. He also suggested ways of reducing the poverty trap and making the welfare system more of a pathway from welfare to work. But what has the Chancellor of the Exchequer done about it in his Budget? By reducing the tax thresholds, and reducing the basic rate by 1 per cent., he has helped smooth the passage from welfare to work, but that has to be combined with imaginative job creation schemes. What about these? We estimate that state-funded training budgets are being cut overall by 4 per cent. and the budgets of the TECs are facing cuts of some £200 million this year.
The abolition of the community action scheme next March will be a blow for many trying to get from benefit into work, particularly the long-term unemployed. It is hardly an encouragement to those many volunteers who now administer some of those schemes with such dedication.
I am not suggesting that the Government should become the employer of last resort with those schemes. But I am suggesting that the schemes and tax rules should work in harmony to get people from welfare into work. The Shadow Chancellor suggested that there should be a windfall tax on the privatised utilities to fund the passage from welfare to work, but that was ignored by the Chancellor of the Exchequer.
That neatly brings me to another matter which we discussed last week; namely, fairness in the tax system. The noble Lord, Lord Skidelsky, accused us of being the party of high tax. We are not the party of high tax; we are the party of fair tax—fairness in terms of who pays, who can afford to pay and who benefits.
I see that my time is running out and, therefore, I do not have much time to talk on the question of tax. However, on the matter of share options and the privatised utilities—where much of that unfairness lies—I should just like to say that what the Chancellor of the Exchequer has done is virtually to reintroduce the old discretionary option scheme which he found so unsatisfactory in July and call it the "company share option plan". That gives a welcome encouragement to staff share ownership having tax benefits on schemes up to £20,000. But it does nothing to stop senior executives benefiting under a non-approved scheme and is unlikely to make any difference to the amount of tax that they pay.
The Government have also ignored the Greenbury recommendations as regards publishing the full facts about pensions. Indeed, the whole business of regulating the newly privatised utilities needs urgent review. I hope that we will be told about this when the President of the Board of Trade speaks on the matter tomorrow in another place. Meanwhile, this morning we had another wonderful example of a private monopoly exploiting the public. Yorkshire Water announced a rise in its six months' profit, and increased its dividend by 10 per cent. I wonder what the results would have been if its

633
customers had been able to switch to another water company. This is not the politics of envy; it is the politics of fairness.
7.5 p.m.
Lord Monkswell: My Lords, I, too, should like to thank my noble friend Lord Desai for opening today's debate in such an elegant way. We are asked to debate,
"the economic state of the nation",
and the Budget Statement. I should like to talk a little about the economic state of the nation and then make a few comments about the Budget.
I believe that we need, first, to think in terms of what we mean by the economic state of the nation. I should like to follow my noble friend Lord Merlyn-Rees, who effectively suggested that one of the criterion we need to use is unemployment. We need to make a sensible comparison between what is happening now with the economy and the state of the nation and what the situation was in 1979. The noble Lord, Lord Clark of Kempston, made some comments about 1979, but I suggest that the facts are rather different from those that he stated.
If we look back to 1979, we can see that unemployment was less than 1 million and decreasing. We can also see that inflation was decreasing and that we had a positive balance of trade in manufactures. In fact, all those situations are now virtually reversed. Therefore, how do we judge the economic state of our nation as being at all satisfactory if we have over 2 million people unemployed? The noble Lord, Lord Birdwood, suggested that the more efficient an organisation became the fewer people it would employ. That is not my definition of efficiency. My definition of the word in terms of an organisation is where the best use of all resources is made. Effectively, just on the Government's figures, we have 2.2 million people unemployed. To have unemployed resources is surely not efficient.
I must admit that it is most interesting to listen to such debates, to pick up what noble Lords say and then to wonder just on what basis they make their remarks. Can it be satisfactory that a significant part of the productive investment in this country is actually financed from abroad? I was utterly astonished to hear the noble Baroness, Lady O'Cathain, suggest that investment—I believe that she was thinking in terms of investment in industry and commerce—is the same as a gamble or taking part in the lottery. I see that the noble Baroness wishes to respond.
Baroness O'Cathain: My Lords, I thank the noble Lord for giving way. I was just drawing attention to the fact that people can actually put their after-tax income into stocks and shares but, if they put it in Premium Bonds, they would still have their capital and would not be taxed on their winnings. Similarly—and it was a flip comment—I also mentioned the National Lottery. We do not tax those gains, so why tax the gains from investment in stocks and shares?
Lord Monkswell: My Lords, I maintain my astonishment that a comparison should be made between
634
investment and the other matters to which the noble Baroness has referred. However, perhaps investment on the Stock Exchange is a gamble.
As regards the Budget Statement, we need to consider the effect of the Budget. I suggest that it has carried on the Tory philosophy of reducing the tax burden of well-off people and increasing the tax burden of poor people; or rather, it is not a question of increasing the tax burden on the latter but of reducing benefits. The net effect is the same: poor people will become poorer and well-off people will become richer. I do not think that that is a recipe for improving the state of the nation. In practice it will make things worse because one injects the wrong sort of demand into the economy. One reduces the demand for locally produced goods and services when poor people have their incomes reduced. By increasing the incomes of relatively well-off people, the chances are that one will make the balance of trade and balance of payments worse.
There is one little ray of hope within the Budget but even that contains a problem. I refer to the private finance initiative. We can see that there is something like £7·5 billion of capital expenditure forecast for the next year. That is a significant amount of money for capital investment and it will generate a significant amount of economic activity. It will bring people into work and the multiplier effect will also be apparent. However, we need to recognise that there will be increased costs as regards raising capital investment on the basis of the private finance initiative rather than on public sector borrowing. Obviously the cost of capital raised by the Government directly or by local authorities directly will be less than if private firms have to raise the capital themselves.
I hope that when the Minister replies to the debate he will be able to answer my next question. I wish to ask him about the effect of the private finance initiative on local authorities. There has been reference to the fact that capital expenditure controls on local authorities will be relaxed to enable them to engage in what might be described as local PFI. My question is: is the total for the likely capital expenditure under that particular initiative included within the £7.5 billion or is that on top of the £7.5 billion that is projected in the Budget Statement?
My final question concerns Northern Ireland. I think we all understand that the situation there is fragile in terms of the peace process. We discussed that matter a little this afternoon following the Statement. As regards the Budget, what plans do the Government have for increasing capital expenditure in Northern Ireland? What plans do they have for capital investment through the private finance initiative in Northern Ireland? I think we can all accept that capital expenditure will be beneficial in that it will provide jobs and economic activity and so reduce the stresses and social tensions that lead to the breakdown of society that we have seen particularly in Northern Ireland but also within the major conurbations of mainland Britain. I hope that the Government can answer those two small questions.
I conclude by pointing out that the creative accounting that local authorities engaged in in the early and mid-1980s, prior to their being clamped down on

635
by central government, provided economic activity in this country at a time when, if it had not occurred, the social consequences of the problems society was facing because of government action would have been far greater.
7.15 p.m.
The Viscount of Oxfuird: My Lords, this is a timely Motion proposed by the noble Lord, Lord Desai, and we are fortunate that his, if I may say so, usual independence and skill have enabled us to take up the cudgels this evening.
It was Benjamin Disraeli who in a message to his constituents on 3rd October 1868 said:
"There can be no economy where there is no efficiency".
How well those historic words were proven by yesterday's Budget and by the sterling record of Her Majesty's Government.
Yesterday, and already to some extent in your Lordships' debate today, we have been bombarded with a variety of statistics. I must confess that, given the wealth of good news provided to us by the Treasury and others over recent weeks, I had to resist very hard the temptation of falling into the same trap or going down the same route. I find it exciting that the IMF now predicts that the United Kingdom will grow faster in 1995 and 1996 than the G7 average, just as we did in 1993 and 1994. I also find it exciting that the United Kingdom has more people in work and fewer unemployed than any other major European country.
It would not be in the spirit of your Lordships' debate this afternoon for me to fall into the same trap as European Commissioner Kinnock did this week and question the timing of EMU convergence. However, it gives me some satisfaction that the United Kingdom is one of the few countries in the European Union that meets all of the convergence criteria which would allow us to join if we wished.
In a limited time debate such as this it is possible to deal with only one or two points. Perhaps I could concentrate on that vitally important issue of exporting with which I have been concerned most of my professional life and which is one of the strongest influences on the economic state of our nation. It is indeed heartening that yesterday's Budget gave such a boost to exporters. I ask noble Lords please to forgive me, however, if I draw your Lordships' attention to one particular matter which concerns me as one who has a special interest in exporting, and not because—we must all be precise these days—I have any direct interest or involvement in the matter.
Having for many years travelled this globe marketing British engineering equipment I have some experience of the importance attached to the purchases made by our armed forces. Experience of operations worldwide has ensured that their judgment is greatly respected by those who are responsible for major military purchases overseas. I must say that our military are always prepared to back Britain and support British manufacturers when negotiating with foreign governments. I therefore find it somewhat alarming that
636
at present the Ministry of Defence is considering an alternative bid for the tender for Army field ambulances from the Steyr Company of Austria rather than the British-made Land-Rover which I am told fully complies with the tender specifications. What message would be sent out to the world if we bought other than the Land-Rover in such circumstances?
I am given to understand that the Steyr machine is of such sophistication that the driver has to be trained specially to handle the product safely on rough terrain. What happens if he is shot? Is there a spare driver immediately available? We all drive Land-Rovers, or many of us do. I am sure that there is a lesson here, particularly for the poor injured person on the battlefield. I thank your Lordships for allowing me to make that sincerely heartfelt point.
So far as concerns the thoughts of the noble Lord, Lord Bruce, on the ratio of £100 to £160—and I believe that the noble Lord, Lord Haskel, has been responsible for some of the figures in this field—that is a fascinating ratio. If we take inward investment as £100 and outward investment as £160, the profit seems to be £60, but perhaps my maths are not quite the same as those of noble Lords opposite.
That investment overseas is very important. It does not come cheap. I have had the experience of setting up companies not only in Sweden but also in the United States. You do not get something for nothing. You cannot go and borrow from the bank in Sweden. You have to put hard-earned profits on the counter, directly into the Swedish bank to establish your capital base. That costs money. That money has to come from the UK. Therefore, that £160 is good news.
Turning from the particular to the general, it is heartening to note that UK exports are currently running at record levels and are expected to grow further, helped by growth in world trade and the UK's strong competitive position.
Indeed, the UK economy as a whole is on a path of sustained steady growth and low inflation. The economy has been growing for over three years and output is now 6 per cent.—I hope your Lordships will forgive me for using a statistic—above its previous peak.
It is just not true, as some commentators have suggested in recent weeks, that our economy is heading for recession. Of course the rate of growth had to slow from the very rapid rate seen in 1994, but all the fundamentals are still in place for healthy growth. We have an enviable combination of circumstances which has already been mentioned: low inflation, sound public finances and competitive business.
Business surveys from distinguished bodies like the CBI and the EEF point to high export orders and strong investment intentions. Yesterday's Budget will underpin consumer confidence. In short, growth in the UK economy is set to continue.
We have all been bombarded for the past 24 hours with a variety of analyses of the effect that the Budget will have on each of us. It has been a field day for the economists, who have presented us with a dazzling array of often contradictory conclusions. The reality is that yesterday's Budget was steady and prudent. It was

637
deliberately honed to maintain our economy in its present sound shape. It was also a fair Budget, giving a welcome boost to health, education and the police.
I have been moving about the country a good deal in recent weeks, and I sense a new mood at the grass roots. As an election approaches it is clear that the average voter is beginning to take stock and compare the performance of our present Government with the promises that are being made by the Opposition. It is fascinating that if you ask somebody whether they would support an increase in government expenditure you will find that 70 per cent. will say yes and 30 per cent. will say no, but if you ask whether they would support a reduction in tax 70 per cent. will say yes and the other 30 per cent. will say no.
I believe that yesterday's Budget will help to reinforce the growing view that in the present Government we have a tried and tested team who can be trusted not to play ducks and drakes with our economy for short-term political gain.
7.24 p.m.
Lord Diamond: My Lords, having listened to every speech from this side of the House, and agreeing with them all, one is driven to the conclusion that there is very little left to say, particularly on the topic to which I wanted to devote my few remarks; namely, the need for greater investment. However, I shall do so, because I am convinced that we are not tackling the problem with sufficient vision and seriousness.
When we talk about increasing investment, we always compare investment in our economy in one year with investment in another year. That is not the appropriate comparison. The comparison should be between what we as a nation have tended to invest over the past century and what other nations have done. I agree with the noble Viscount that we should not flood the Chamber with statistics, but if there is one statistic which I implore all of us to bear in mind all the time it is that we as a nation have throughout this century eaten more of our seed corn than any comparable nation. The independent OECD figures show that today we are still at the bottom of the league in terms of the percentage of investment in relation to national income or GDP. Although, like others, I am grateful to the noble Lord, Lord Desai, for presenting us with the opportunity to discuss this matter, I am bound to repeat that we must do much more and be much more imaginative about investment.
Not only must we invest more, we must invest earlier. We must learn the arguments for contra-cyclical investment and take them on board. Not only must we invest more and earlier, we must invest more widely, not only in capital equipment but in research, development and new products. All these are essential to achieving a growth economy which will start to turn the unemployment figures into a very different state of affairs.
An example of what worries me is the way in which the media—our spokesmen—tend to welcome an increase in imports. They say that every upturn in the economy is preceded by an increase in imports, and
638
therefore we should welcome this as a sign that we are on the up and up. Instead, they should say "Here we go again", caught out once more with inadequate investment so that when the upturn comes domestic manufacturers cannot supply for the next 12 months so that we have to go abroad for something which is not necessarily better, but is delivered on time and available because overseas manufacturers have invested and we have not. They have the stocks and we have not. That is an example which I see time and time again of the way in which an increase in imports is often commented upon. It irritates me no end.
It is certainly not an easy matter to increase the level of investment in the way I have indicated. It is all very well for the large firms, which understand the need for contra-cyclical investment. It is a different matter for the medium-sized firms, which do not. It is a very different matter for the smaller firms, which cannot. They go to their bankers and say, "I want to invest in more plant, and so on. It will not be used for the time being". The manager replies, "Are you telling me that for the time being you cannot service a loan that you are asking for? You want me to wait three or four years until you receive the income from the investment to service the loan? There's the front door, my friend". So much for the help the smaller firm receives from its average bank manager, my Lords.
We and the Government have to do much more. For the life of me I cannot see why the Government are so hesitant about increasing capital allowances. Such a proposal is a direct invitation; it would be popular; it costs nothing in the long run. Of course, there is a cash-flow problem for the Government. If you give more now and less later it affects the cash flow, but overall it would cost nothing. Certainly for the small firm which is making no profits it costs nothing to set that increase against nil profits. Certainly for the new entrant which everyone is so keen to encourage it costs nothing. I should be perfectly happy to see us going straight to a 100 per cent. write off in the first year. That would be a real encouragement to firms to develop and invest. Alas, there is nothing in the Budget which encourages that or which, through greater investment and growth, would make the impact on unemployment that I regard as our first priority. Quite the opposite, my Lords. There is a slashing of government investment under the so-called formula of PFI, and the hope that someone else will pick up the balance that is needed. It is pure hope, pure speculation, and a resignation by the Government from their responsibilities.
I wish to talk about the unemployed. What I say now may not be as accurate as my normal statements. I am told that as a result yesterday of the Chancellor's enormous efforts, and no doubt the whisky as well, he fell asleep in his chair on his return to No. 11, and had a dream. He dreamt that outside was a huge line of unemployed workers carrying banners. As he read the banners he saw, "Three Cheers for Ken"; "Well done, Ken"; "Penny off standard rate"; and "No tax on your estates up to £200,000, Well done, Ken".
He thought, "This is delightful", and invited the three leaders of the delegation to come to his room in the Treasury to thank them. He said to the first, "What was

639
your express view?" The man said, "I wanted to bring with me one of the group who actually paid tax and could benefit from the penny in the pound but unfortunately there was no one there. Nevertheless, Mr. Chancellor, you must realise the sincerity of my gratitude to you for what you have done". The second unemployed leader said, "I, too, want to thank you for increasing the allowance on estates. We tried very hard to find someone in the delegation who had such an estate so that he could express his gratitude more precisely, but we could not find anyone. Indeed, Mr. Chancellor, they are all bankrupt. They cannot even pay their mortgage interest, never mind benefiting by having a £200,000 estate to leave". The third man said, "Since I am here, Mr. Chancellor, perhaps I could ask you whether you had in mind anything else to help the unemployed?".
The Chancellor said, "Yes, you're good fellows. Come to this window and share my magnificent view over the square and the Houses of Parliament. There you are". And that is about the sum total that this Chancellor has done for the unemployed. The unemployed family is the only family in all the standard family calculations published at this time of year which is worse off. Others are better off.
7.35 p.m.
Lord Stoddart of Swindon: My Lords, like other noble Lords, I should like to express my appreciation to my noble friend Lord Desai for introducing the debate, which has been good and well informed.
I had not intended to be provocative until I heard the noble Lord, Lord Boardman—he is in his seat but not paying attention—and was struck by his criticism of Labour Party Members, in particular the Shadow Chancellor who, he said, would say anything to gain power. I remind him that at the last election the Prime Minister promised the country that VAT would neither be increased nor extended. However, one of the first things that the Government did was to put VAT on domestic fuel. It would have been at 17.5 per cent. rather than 8 per cent. if the Opposition, joined by one or two brave Conservatives, had not prevented the Chancellor from raising it to 17.5 per cent.
I wish to talk about the Budget. It is a Budget which fails to meet the needs of Britain, in particular the need, as so many noble Lords have pointed out, for investment in productive industry. It is a Budget which has pleased few and angered many. Above all, it will not restore the feel-good factor in the British people. At the same time it has not cured the feel-bad among Tories.
I also believe that we are still experiencing the baleful effects of the disastrous experiment with the exchange rate mechanism. The economy is still depressed. Fear and insecurity still abound. This Budget, which should be about reviving confidence, will simply leave things as they were on Monday, before the Budget. Perhaps they will be even worse, because expectations were raised which have now been dashed.
The Chancellor's and the Government's concentration on low inflation and getting the PSBR down is causing great difficulty. He is trying to get it down; indeed, he is forecasting the public sector borrowing requirement down to zero or below by 1999—in time, I fear, for
640
this country to be frogmarched into a single European currency with all the harm that that will do to our economy and to the unemployed.
I want now to turn to one specific item in the Budget: the reduction of 27p. in the tax on spirits and the real reduction in all other alcoholic drinks except strong cider through the failure to increase the duty in line with inflation. Of course, a great cheer goes up for reducing tax on alcoholic liquor, but count me out of the cheering. Alcohol is a most potent drug and is the cause of enormous misery and indeed slaughter as well as ill health and sickness. One in five road traffic deaths and injuries is alcohol related. That means that two people a day are killed on the roads and every day thousands are injured due to drink driving. Millions of days are lost at work through alcohol consumption and accidents at work are often alcohol related. Vandalism, brawling, knifings and murders are often related to over-consumption of alcohol. It is also the cause of a huge proportion of wife and child battering.
Yet despite all that, which the Government know well because they have to pay for the social consequences, the Chancellor has seen fit to make the consumption of alcohol cheaper, thereby ensuring that consumption will go up. With it there will be an increase in the social evils relating to alcohol. It is morally corrupt and disgraceful that the message in this Budget has been sent out by the Government that alcohol is harmless. "Drink up and be merry", the Government say, "even if your merriment injures or kills others or results in child and wife battering". It is a great pity that it is I and not a Bishop who has to preach this evening the evils of the demon drink, but someone has to do it because it was a wrong decision. Perhaps the decision was related to the fact that the Tories have very few MPs in Scotland and many of those they have are in areas which distil whisky.
Let me turn to taxation. I agree with the Leader of the Labour Party and the Shadow Chancellor that we should aim for fair taxation. I believe that that also means reasonable, not excessive, taxation, but it should be a system where those on high and very high earnings should be expected to pay rather more than they do at present. I am not one of those who are enamoured of the slogan, "Let people keep all the money they can in their pockets and spend it as they wish". That usually means less taxation for those on very high earnings or incomes and much higher expenditure for those on low incomes. It is the latter who lose out.
The Shadow Chancellor has been criticised and even mocked for suggesting a 10 per cent. bottom rate of income tax to assist the low paid and to ease the transition from benefit to employment. In my view, that is an altogether laudable aim which should be supported and encouraged. Unfortunately, the Shadow Chancellor did not go far enough in his proposals for fair direct taxation. More needs to be done than simply proposing a new rate of 10 per cent. We need that, certainly, but it is quite absurd that people earning just over £30,000 per annum find that their tax rate at the margin jumps from 25 per cent., or 24 per cent. now, to 40 per cent. That is a huge jump and thus they pay the same rate as

641
people earning 10 or 100 times as much. As well as a lower bottom rate of tax, we need a higher top rate with a gentler progression to each band.
A top tax rate of 50 per cent. or even 55 per cent. would hardly be confiscatory, if applied to high earners. Indeed, in my own view, many of those high earners would welcome a direct tax system which was seen to be fairer than the present one. They could enjoy a warm glow of satisfaction, knowing that they were making a fair contribution towards the services that we all enjoy in this country. If the number of tax bands were increased in line with a lower bottom and higher top rate, it would then be possible to arrange movement from one tax band to another in gentler steps, thus easing the transition.
No doubt I shall be told that what I have suggested would cause administrative difficulties and would not be tax efficient. However, I believe that for the longer term those ideas should be considered.
I should have liked to talk about the family, but unfortunately my time is up, so I shall complete my speech. As I said at the beginning, the Budget failed to meet the needs of Britain. The only really good thing about it is that it has probably hammered the last nail in the coffin of this awful Government.
7.45 p.m.
Lord Astor of Hever: My Lords, despite what we have heard from the other side tonight, I am convinced that the Budget will help move the United Kingdom towards our goal of being the enterprise centre of Europe. The business climate could hardly be more favourable. The recovery is well established, the economy continues to strengthen, profitability remains high and companies are in a healthy financial position. We have low interest rates and low taxes. On this point, I was interested to read a recent survey by Tribune, in which two-thirds of the Labour MPs polled said that they wanted a new higher top rate of tax. Indeed, the last speaker would agree with that. Clearly, Labour still want to penalise success and pursue the politics of envy.
Obviously, Labour does not understand business. It wants to spend on increased capital allowances when investment is already growing. It wants to introduce the social chapter and a minimum wage which would cost jobs and hold business back. Just when our companies need lower costs and lighter regulation, Labour would burden them with extra red tape.
One of the industries that has really benefited from the business climate under this Government is the motor industry, which has literally been reborn. Ninety-nine per cent. of our motor industry is owned by foreigners. A noble Lord—not on this side of the House—remarked to me at lunch last week that this fact made him feel ashamed. Interestingly, later that day I saw him drive off in a French-built car. However, it is not a matter for shame; it is a matter for celebration and is a really substantial success story for this Government. Foreign ownership is a colossal advantage, since it has brought to Britain the world's best practices in car production and greatly improved export prospects.
642
Exports could account for a million cars a year by the end of the century. As production levels in British car factories rise—and both Honda and Toyota are planning significantly to increase their capacity by the end of the decade—a circle of prosperity comes into effect, both among the manufacturers themselves and in the component industry supplying them. It becomes more sensible to make all the major parts over here.
The component industry, including thousands of smaller British-owned companies, is reaping the rewards, having sharpened itself up to meet the more demanding specifications of the car makers. This in turn means that British firms are now better placed to sell abroad, although they will have to maintain their position of world-class competitiveness.
A perfect illustration of that turnaround was the announcement by Lucas Industries that they are to supply £1 billion-worth of electronic fuel injection systems for diesel engines to Volkswagen, a contract which in previous times could only have gone to the German supplier Bosch. Mercedes has invited several British companies to tender as suppliers for the first time.
The opt-out from Maastricht's social chapter is also helping the revival. Social costs here are much lower than on the Continent. A low-cost economy, union co-operation and sterling competitiveness mean few countries present so benign an economic environment for making cars. As a result, more than £1 billion of investment has been promised this year, with much more to come.
Ford is investing heavily, with plans for new Jaguar production in Coventry and engine programmes in Dagenham and Bridgend. Vauxhall has upgraded Luton with dramatic effect and Rover is still investing heavily in Birmingham to cope with booming Land Rover sales, which I hope will include field ambulances for the Ministry of Defence. Within the next six months, Ford and Vauxhall will be considering where to build the replacements for the Escort and the Astra, two of the most important models in Europe, raising hopes of further investment in Britain. There should be no contest.
7.50 p.m.
Lord Murray of Epping Forest: My Lords, one of the strong and welcome themes running through tonight's debate is the need to modernise British industry and to that end improve investment, both in physical assets and in training.
I agree very much with the noble Lord, Lord Desai, to whom we are all indebted for the debate tonight, that, while the economy above all needs a boost in capital spending, cuts in income tax have no great observable incentive effect in that direction. I agree, too, with the noble Lord, Lord Diamond, that, as history shows, most people are likely to spend their tax cuts on consumer goods, probably imported. There is certainly no assurance that the money will be invested in British industry.

643
The Government rightly encourage and indeed help particular industries to invest. To that end they offer financial inducements—dare I use the word "subsidies"?—to Japanese, German and Korean companies to set up shop here, if necessary outbidding other governments. I strongly agree with my noble friend Lord Merlyn-Rees and the noble Lord, Lord Astor, as to the great advantage that such inward investment has brought to this country.
But, if it is right to encourage inward investment in this way, surely it is equally right to encourage domestic companies which are important to our future to remain here and survive. I want to descend from the macro-economic peaks that have characterised the debate to the level of examining particular industry. I want to argue that it is right to encourage shipping companies not to continue flagging out abroad, with the consequent loss of trade and earnings for Britain, to say nothing of the implications for defence. The Budget Statement signally fails to do that. However, I want to argue that it is not too late and that this matter should be looked at again.
I declare an interest as a trustee of the National Union of Marine, Aviation and Shipping Transport Officers. But my greater interest is in halting and reversing the decline of what has been, could be and ought to be a major national asset.
Shipping is not a sunset industry. Britain depends on shipping for the carriage of 95 per cent. of the exports and imports referred to so often this evening. But four-fifths of those imports and exports are now carried in foreign ships, as the noble Lord, Lord Mackay, will remember from a previous incarnation, when he graced the office of Minister for shipping. Last year, world seaborne trade hit a record total of 41 billion tonnes. By the end of the decade it will be seven billion tonnes. World shipping earnings are £100 billion a year, of which Britain now receives only 4 per cent.
Even with reduced crewing on modern ships, the demand for seafarers is growing. There is expected to be a world-wide shortage of 350,000 officers by the end of the decade. British seamen are the best there is, but they are a threatened species. In 1980, 63,000 officers and ratings were employed on ships with the UK Chamber of Shipping. Today, there are less than 20,000. As we heard this afternoon, in 1980 nearly 1,300 cadets were in training; today there are less than 400.
The results are plain. They are characteristic of so much that has happened to this country over the past generation—not merely under this present Government but under previous governments as well. British shipping has traditionally been one of the biggest earners of invisibles. Now the balance has gone into the red. Less obviously, the fleet's decline is being felt in a wide range of related industries and services—shipbuilding, shipbrokering, marine insurance and so on. British owners can no longer afford to replace their ships with modern ones, so our ships are now on average 16 years old—twice as old as they were 15 years ago. That brings into focus and illustrates a point made by so many speakers in the debate, not only on this side of the Chamber but on the other Benches as well. It is a
644
challenge to us. If we could capture just one per cent. more of the world market, it would be worth £1 billion to us in terms of gross invisible earnings. But—and here's the rub—given the extent of support that foreign governments provide for their merchant fleets, the UK shipping industry cannot do it alone.
Japan is planning to extend its already big aid programme with a £300 million support package, including tax exemptions for seafarers, tax breaks for shipping companies, loans of up to £240 million for new ships. The Dutch Government introduced a shipbuilding scheme worth more than £20 million and this year is adding new special tax arrangements. Malaysia has established a £215 million fund for investment in shipping. France recently brought in new measures to encourage fleet modernisation, with a £55 million fund for shipowners and investment aids worth a further £17 million a year. I could go on.
When the Government are told what is happening and warned of the consequences, Ministers repeatedly take the line that they must work for the abolition of all aid packages. But the packages are increasing, not diminishing.
To be fair, the Government have offered a little assistance in recent years. There was the Government Assistance for Training Scheme for cadets and the Development of Certificated Seafarers' Scheme, giving grants to employers. But as we heard earlier today, the GAFT grants are not proving big enough to encourage employers to take on cadets. The Government also partially restored, in 1994, in the form of roll-over relief, part of the tax incentives withdrawn in 1984. And since 1991, deepsea seafarers have had the 183-day rule income tax concessions.
I welcome those concessions. However, the point is that, in introducing them, the Government have clearly acknowledged the need for support but they have set them at a minimal level which does not enable the British fleet to compete effectively. In other words, we are getting the worst of both worlds.
It is still not too late for the Government to have second thoughts—or for the Opposition in another place to put down amendments to achieve our national objectives. At the very least, if the Government are serious in their intention to persuade other governments to drop their subsidies, they should go in to the negotiating table armed with some bargaining counters in order to negotiate away the schemes if that is the long-term effect.
The industry does not ask for massive support. The support proposed would cost some £40 million. Less than half of 1 per cent. of the £6 billion transport budget is spent on ships and ports. The cost of doubling that to a modest 1 per cent would be minimal. The market is there and the opportunity is there, but the market is rigged against Britain. It is time we took some action to redress the balance. The Budget provides that opportunity still.
7.59 p.m.
Baroness Rawlings: My Lords, as neither an economist nor a businesswoman, I rise to speak in this debate with great reservation in a House not only filled

645
with so many Budget experts, such as the noble Lord, Lord Desai, but also containing no less than six ex-Chancellors of the Exchequer.
The practice of the House as I understand it is not to have on Wednesday a Motion that is in any way controversial; but I gather from what we have heard today that that does not mean that we do not have a controversial debate.
This Budget has been hailed for weeks, nay months, by most commentators as more of a political budget than an economic one. The Party opposite had already made its comments and given its briefing criticisms on the Budget last week, long before the Chancellor had even delivered his Speech. It is difficult to believe that it already had all the details last week. Were they perhaps leaked? I think not.
There has been strong criticism from the Benches opposite but I am loath just to negate all those criticisms by reeling off a mass of statistics which go on for hours, like the old Soviets used to do. Most of your Lordships know them all already. Probably that would not only send your Lordships to sleep but myself as well. But why, whenever noble Lords on the Benches opposite discuss the economy, do they knock it? They cannot admit that Britain, far from being left behind in the world economy, is doing very well. Like the old Soviets, they prefer to look at statistics instead of realising that the Government have been prospering in the real world.
It is a tough old world out there. Our competitors in Europe and the rest of the world constantly monitor the position in Britain. They know that our key industries are more competitive than ever before. They know that investment in our economy has grown faster than in any other major European country and six times faster than under the last Labour Government. Labour closes its eyes to that and only wants to run Britain down.
I know that it is difficult to accept that your opponents are successful and on the right track, but we can only look at the hard facts. Britain is the main country in Europe for overseas investment from the United States, Japan and Korea. That means thousands of jobs. We have the necessary stability for outside investment. That is vital for our economy. I am afraid that the only thing that Labour—even new Labour—with its rush to sign up to the social chapter, will attract to Britain is more European regulations. Now even the other European countries have admitted that the social chapter does not work. Europe is following Britain's lead today while Labour is following Europe's leaders of yesterday. I remember losing vote after vote in the European Parliament for five solid years in this area because we were in opposition. But, luckily, when the real decisions were taken in the Council, we had a sensible Minister, a Conservative Minister, who was not prepared to sell our industries down the river through even more of those damaging regulations.
Britain needs strong world-class companies to compete in global markets. It needs companies such as British Telecom, which is a privatisation success story with more than £25 billion invested in Britain. That is an investment which the Treasury could never have
646
afforded to give and makes BT one of the most advanced networks in the world. It considers Europe as its natural extended home market, which is critical to its globalisation plans. It is a British company operating in more than 40 countries around the world. It cannot operate successfully if it is hampered by petty rules, regulations and regulators. Its guidelines should be the competition policy set out by the GATT and the World Trade Organisation, not the constricting ropes of the social chapter. All companies, whatever their size, need a stable and sound economic environment in which to operate, where people feel secure. That is exactly what the Chancellor, in full command, has produced with this Budget.
Finally, I should like to touch on just two points in the Budget. First, there is the cut in income tax: basic rate has been cut by 1 p to 24p; that is a tax cut—the kindest cut of all; the 20p band has been widened by £700; there is the new 20 per cent tax rate on savings income. It means that 26 million taxpayers will be better off. Now, one in four taxpayers will pay tax at only the 20p rate. Secondly, at the same time, this Budget keeps public spending at 40 per cent. below GDP. That is essential for a lasting recovery. We all know that a lasting recovery will bring higher living standards and more jobs. Surely this is a responsible, sensible budget that will be proved a success not only now but, more importantly, in years to come. It is not a "quick fix" but a Budget for the long-term good of the British economy.
But the Labour Party calls this Budget "yet another failure". If it is a failure, then, remembering the great French composer Bizet, who died aged 37 broken-hearted over the supposed failure of his opera Carmen, so be it.
8.5 p.m.
Lord Rea: My Lords, most noble Lords so far have spoken about the health of the British economic situation and many have proffered remedies. I shall reverse those words and talk about the economics of the British health situation; by that I mean the health of the British people—the nation—rather than the National Health Service.
When the National Health Service was founded 47 years ago, it was expected, together with the other provisions of the so-called welfare state, based on the principles set out by Lord Beveridge, that it would level up and make equal the health status of "all sorts and conditions of men"—and by men I also mean women, even if the Book of Common Prayer from which the words are taken, along with Thomas Jefferson, did not do so, as Madam Speaker pointed out earlier today. It would do that by eliminating the five giants: want, idleness, ignorance, disease and squalor.
It is true that the expectation of life has risen. Many infections are no longer a major threat and infant and maternal mortality rates have fallen to a level which was undreamt of 47 years ago. Some of that is due to the ingenious discoveries of science as applied to medicine; but most of the improvement is due to the better nutritional and environmental conditions which have been experienced by the population, thanks to the

647
improvement in the social and economic situation of the majority of the British working class during almost 40 years of nearly full employment from 1940 to the late 1970s. However, even in the days of the government of the noble Lord, Lord Callaghan, uncomfortable evidence was appearing that some sections of the population were slipping behind. That led to my late and much missed friend Lord Ennals setting up the working party on Inequalities in Health chaired by Sir Douglas Black. His report, the Black Report, was published, rather reluctantly in small numbers, in a cyclostyled version by the then right honourable Patrick Jenkin, Minister for Health, who took no action on its recommendations; and nor did the Chancellor.
The report revealed that there was an increasing discrepancy between the best off, whose health status was racing ahead, and the worst off, who had higher sickness and mortality rates over almost the whole range of diseases. Since that report, much admired as it was for its academic thoroughness, a steady mass of evidence has accumulated to show that since 1979 the gap in health has been widening. For the first time, last year a report was published in the British Medical Journal showing that mortality rates among deprived population groups in the north of England were in fact increasing. Up to then, although the health gap was widening, even the least well off were showing some improvement.
In Britain it is not merely the health of the poorest 10 per cent or 20 per cent. that should give us concern but also that of the largest group in the population: the skilled working class, classified by the Registrar General as social class 3, non-manual and manual—the office workers, computer operators, fitters and electricians. Though their health is better than that of the unskilled, they suffer more illness and earlier deaths than those in professional and managerial work, who are setting the trend in high health status, even when lifestyles deleterious to health (smoking, physical inactivity and so forth) are allowed for. In fact, Professor Michael Marmot's study of the whole range of Whitehall civil servants, from cleaners to senior mandarins, showed that, starting from the top, there was a steady deterioration in levels of health and increasing incidence of illness as one came down the scale.
Incomes in the Civil Service range from £120,000 at the top to £6,000 at the bottom, a 20-fold discrepancy. There is little difficulty in understanding why those at the bottom are less happy and die younger than those at the top. But there is a linear relationship between health status and job status throughout the range.
Dr. Richard Wilkinson of Sussex University (a proper doctor with a PhD) showed a relationship between an improving life expectancy and the proportion of a country's GDP going to the least well off—70 per cent. of the population—when comparing countries which have a GDP of over 5,000 dollars per head of population. In other words, countries with the most egalitarian wealth distribution have in recent years shown the biggest gains in health.
During the past 16 years, while the distribution of wealth in the UK has become more and more unequal, Britain has fallen a long way down the international
648
league table of health statistics—that is, life expectancy and infant mortality rate—starting at No. 8 and now just passing No. 20. We have been passed by countries such as Eire and Spain and left standing by Hong Kong, Singapore and Japan, which is now the top of the league.
The Budget did nothing even to start to reverse that trend; indeed, it may even make it worse. One of the first tasks of a new Labour Government—or perhaps a government of new Labour, as the noble Baroness pointed out—must be and will be to start the process of redistributing income more fairly. A minimum wage is a start. Fairer progressive taxation is another. But, above all, by borrowing initially if necessary, we must have measures to help the unemployed back to work.
Nearly 90 years ago George Bernard Shaw wrote in Major Barbara that poverty is,
"The greatest of evils and the worst of crimes".
We may have eliminated absolute poverty in the United Kingdom—but sadly failed in the rest of the world; in fact our aid budget has stayed stable or gone down while we have reduced the price of whisky—but in Britain relative poverty is still rife. That can damage both the individual, as I have shown, and society as a whole. We tolerate it at our peril.
8.14 p.m.
Viscount Chandos: My Lords, if there were not already sufficient reasons for feeling a degree of nervousness in speaking for the first time from this Bench, on top of that I am faced with trying to wind up, on behalf of these Benches, a vigorous and stimulating debate with contributions from many of your Lordships' distinguished economists and economic specialists. As the proposer of today's debate, my noble friend Lord Desai and my noble friend Lord Eatwell, who opened, are, without doubt and without partisanship, among the most erudite economists of all. I feel as though I have been asked to sing "Nessun Dorma" equipped only with a packet of throat pastilles, in concert with two of the "Three Tenors".
When a friend heard that I was faced with this formidable task he said that he presumed, in the finest traditions of the Foreign Office, that I would speak on endogenous growth theory while my noble friends would speak on the subjects investment bankers are expert in—whatever they may be. In the result, my noble friends have shown not just their academic expertise, but also their mastery at analysing the real world in terms vividly and, sadly, painfully understandable to the layman. We should therefore be particularly grateful to my noble friend Lord Desai for introducing today's debate and enabling your Lordships' House to address the economic "State of the Nation" in the immediate aftermath of the Budget Statement.
In the limited time available I cannot respond to every noble Lord who has spoken today, let alone raise every aspect of our current economic situation or the Budget Statement's inadequate recognition of the economic mountain we have to climb. But, before I concentrate on my particular theme, I cannot help but join my noble friend Lord Eatwell in expressing my dismay at the mean-spirited foundation of the Government's Budget.

649
Despite evidence to the contrary, it cannot be only noble Lords on this side of the House who feel a repugnance towards measures which, however ostensibly prudent in macroeconomic terms—my noble friend Lord Desai exposed the questionable nature of that prudence—are in some cases viciously unfair in the way the burden of taxation is maintained or even increased on those with the lowest income, while the first steps of reversing the huge tax rises of recent years are so clearly for the benefit of the better off.
I should like to concentrate my remarks on the Government's objective of achieving sustainable non-inflationary growth—something to which every noble Lord aspires and which is, of course, the only way we can in the longer term achieve the resources and the opportunity to provide a significant improvement in the standard of living for those who have been so poorly treated by this Government, as well as continued steady progress for those more fortunate.
The noble Lord, Lord Astor of Hever, echoed the phrase of the Chancellor of the Exchequer in his Budget Statement,
"Britain is the enterprise centre of Europe".
That conjures up a variety of visions. I wonder whether the Chancellor really meant the "Enterprise Centre of Europe"; the latest supranational agency for whose location we need to compete with our European partners, no doubt to the disgust of the Chancellor's Euro-sceptic colleagues. In which case, like the British Library—another great construction disaster over which the Government have presided—this Enterprise Centre is sixteen and a half years behind schedule. Countless billions of pounds have been spent (£120 billion from North Sea oil revenue alone) with only so much to show for it. Or was the Chancellor thinking of a role in Europe akin to that of Hong Kong or Singapore in South East Asia—this sudden and simplistic discovery by the Conservative Party of the so called "tiger economies"? If so, I am afraid that the Government's policies over a decade and a half and the measures proposed in the Budget Statement will do no more than deliver an economy with the characteristics of a mangy old alley cat—in poor shape; inadequately housed; with insufficient investment behind it, but always on the prowl for a short-term opportunity.
My noble friends and our colleagues in another place have made it perfectly clear that we are centrally and fundamentally committed to an enterprise economy at the very heart of a market-based system. Professor Patrick Minford, who seems to think that his position as one of the three remaining so-called "wise men" advising the Treasury, is an appropriate platform for facile political invective, is quoted today as saying that our party's intentions towards a low tax, free-market economy are at best doubtful, at worst damagingly hostile. That is absolutely untrue, as Professor Minford will in due course find out, though I cannot hazard whether my right honourable friend Gordon Brown will have the benefit of Professor Minford's advice at that time. The noble Baroness, Lady O'Cathain, and the noble Lord, Lord Skidelsky, who should know from our
650
shared creation of the Social Market Foundation of my personal commitment to a market economy, can, I believe, likewise be reassured.
What we on these Benches are committed to is an enterprise economy in which the opportunity for enterprise and the benefits from enterprise are open to everyone, not just those whom the Government will now permit to avoid inheritance tax above the hugely increased threshold by acquiring shares on the Stock Exchange's alternative investment market, the latest in a long line of the Government's ill-advised and economically distorting tax shelters for the wealthy. I might add at this point that, whether or not there is a case for differentiating between the capital gains tax rate on short and long-term gains, it is both wrong and unrealistic to contemplate what the noble Baroness, Lady O'Cathain, and indeed the Prime Minister suggest—the outright abolition of capital gains tax.
We are committed to an enterprise economy in which, as my noble friend Lord Eatwell has argued, careful measures to stimulate productive capital investment by both the public and the private sector creates an atmosphere of confidence for industry and consumers alike—which in turn creates the sustainable, non-inflationary growth which this country needs and is entitled to. In the absence of the noble Lord, Lord Skidelsky, I will risk suggesting that, if low interest rates alone were sufficient to stimulate adequate levels of investment, the historically low interest rates of the past three years should not have allowed the serious shortfall in investment which is now apparent.
We are committed to a low-tax market economy, where the low taxes apply to those on low incomes and not just to those on high incomes. Last week, regrets were expressed in your Lordships' debate on the gracious Speech that the Labour Party had advocated a lower tax band, of 10 or 15p in the pound, thereby, in the eyes of some of your Lordships, creating a competitive bidding process for lower taxes. How odd. I thought competition was now accepted on all sides of the House to be good. And we were not competing to cut the taxes for those already well paid, well off and fully employed. We want, as my noble friend Lord Eatwell spelt out so clearly, to lower taxes and eliminate distortions in the benefits system and to remove the disincentives for those out of work or on welfare to take up employment and join the enterprise economy themselves. Sixteen years after this Government reduced the top rate of income tax to 60p in the pound, they have still left unchanged effective marginal tax rates for those out of work or on low earnings of 90p or more in the pound. Sixteen years, my Lords, the time from birth to school leaving age, and noble Lords opposite and their colleagues in government have learnt nothing, forgotten nothing.
Investment, as so many noble Lords on this side of the House have argued—none better than my noble and valued friend Lord Diamond—is the key to a more prosperous future than our Tory past; investment in education, investment in training, investment in technology, machinery and equipment. That is why, in the face of the relentless squeeze on productive public

651
sector investment over the past 16 years, my right honourable friend Mr. Prescott proposed the principles of private finance for the public sector and why we therefore support, as preferable to the alternative, the PFI. I should declare an interest at this stage, that a company of which I am a director has a subsidiary which acts as consultants to NHS trusts in seeking private sector finance. But, for the same reasons as those advanced by my noble friend Lord Eatwell, I have serious concerns that PFI is not the best long-term way of addressing the issue. How much better would it be to tackle the underlying inconsistencies in the country's public accounts and restore, as the noble Lord, Lord Clark of Kempston, proposed from the Benches opposite, a proper, updated distinction between capital and current expenditure, so that the appropriate financing of productive investment can then be gauged and implemented.
I cannot end without taking one further example of the Government's cock-eyed priorities, so requiring me to declare another interest, as a director of English National Opera, which, as a supplement to its buoyant box office revenue, depends on Arts Council grants. At the same time as proposing a cut of more than £60 million in the funding available to the Department of National Heritage, and hence a 3 per cent. cut to the Arts Council, this Government propose to exempt classic cars from road fund tax at a cost, estimated today by experts in this field, of at least £25 million per annum, without even allowing for the costs of ensuring by other means adequate standards of safety. I would not want to impose any financial hardship on the noble Lord, Lord Monson, and, with a lifelong interest in cars, bear no ill will towards other classic car owners. But can it really be right, in considering the quality of life for those in a position to enjoy life, that we should threaten our national heritage and culture in order to exempt cars of more than 25 years of age from tax—let alone freeze the lone parent's allowance, at a saving of only half what is handed to classic car owners?
My Lords, this is not a Budget whose immediate reception should give the Government much encouragement:
"Budget blues put f near record low",
reads today's Evening Standard headline. "You can't buck the markets", said the Prime Minister's predecessor. And is it surprising that the pound is weak when the Government's own forecasts in the Red Book (Tables 3.1 and 3.3) predict continued loss of market share in our export markets?
Nor do I believe that this Budget will be better regarded in six months' time, as some of the Government supporters try to find comfort in thinking. It is mean-minded and inadequate now, and it will be mean-minded and inadequate then, when the long-term problems in our economy will be ever more cruelly exposed.
The noble Baroness, Lady Rawlings, has cast her right honourable friend the Chancellor as a latter-day Bizet, the composer of one and a half successful operas. I look forward to the many future Budgets of the Verdi of prospective Chancellors, my right honourable friend
652
Gordon Brown, and the prospects then, despite the run-down and underinvested economy he will inherit from this Government, of sustainable, non-inflationary growth and progress towards full employment once more.
8.28 p.m.
The Minister of State, Department of Social Security (Lord Mackay of Ardbrecknish): My Lords, I welcome the noble Viscount, Lord Chandos, to the Front Bench. I hope he survives longer on the Front Bench than his noble friend Lord Desai, who thought a few unthinkable thoughts and found himself back on the Back-Benches. The debate has gone on perhaps a little later than many of your Lordships thought. I therefore appreciate that some noble Lords have had to go because they had planned their day on the basis that our debate would last for four and a half hours and would be over by 7.30 p.m. Therefore, I fully understand that some noble Lords have had to leave.
It has been a very interesting debate. I am always grateful when the noble Lord, Lord Desai, speaks. The noble Lord and I joined your Lordships' House at the same time and for many months we both found ourselves very much at the bottom of the batting order, usually fairly adjacent to each other in any debate in which we were involved. But I notice today that the noble Lord has managed to get himself at the top and myself at the bottom, so some progress has been made. I say also to the noble Lord, Lord Desai, that I always enjoy his speeches. He is an economics professor under whom I might have enjoyed being a student—not that I was ever a student of economics and, as some may say, that will be apparent shortly. Like most of the rest of the world, I did not study economics. However, I believe that I might have enjoyed studying under the noble Lord, Lord Desai. I am not sure whether I would have enjoyed studying under his noble friend Lord Eatwell. I might have found it a little uncomfortable. Nonetheless, I am sure that it would have been as equally interesting.
The overriding aim of this Budget is to maintain a healthy and sustainable rate of economic growth because without growth, there can be no prospect of improved public services, more jobs and higher living standards. The British economy is growing steadily. The recovery is now in its fourth year. Growth has been well balanced and output is at record levels. Exports have been strong; business investment has started to pick up and consumer expenditure has been on a steady upward trend. Unemployment has fallen by over 700,000. Businesses have created half a million new jobs and inflation remains low. It is no wonder that the OECD said that our performance last year was "impressive". It praised the pace-setting reforms that the Government have implemented since 1979, which have immeasurably improved our competitiveness.s
Although growth has indeed slowed in recent months, as some noble Lords have pointed out, it has not stopped in its tracks, as perhaps some have tried to suggest, but far from it. All the indications are that growth will continue at a healthy rate into next year and the year after. The fundamental ingredients are all there; namely,

653
low inflation, sound public finances and competitive businesses. Seldom can a Chancellor have delivered a Budget against such an encouraging background as my right honourable friend did yesterday.
It is not just the Government that expect the British economy to continue growing at a healthy rate, as my noble friend Lord Oxfuird said; it is also the view of independent forecasters. He drew our attention to the IMF and no less a body actually expects Britain to join Germany at the very top of the G7 growth league next year. Exports have very much led the recent phase of the recovery and they are at record levels. They are competitive, highly profitable and they are benefiting from expanding world markets.
I listened, as I always do, with great interest to the noble Lord, Lord Bruce of Donington, who talked about the mass destruction of manufacturing capacity. The noble Lord lives in an unreal world. I might agree with him if he had said that there have been massive changes in the nature of our manufacturing capacity, but to talk about "massive destruction" shows that the noble Lord, like many others, tends to think about manufacturing industry as the traditional manufacturing industries we had many years ago and not the new manufacturing industries. Exports of goods are up by 6.5 per cent. in volume terms over the past year. Export growth last year was the fastest for 20 years. United Kingdom exports in volume terms are indeed at record levels. We are now Europe's largest exporter of items such as computers and colour televisions. I suspect that one of the problems we have in this debate is that some noble Lords do not recognise these items as manufactured products. They are the modern manufactured products.
We must not forget the export of services and our investment income, the so-called invisible receipts, largely coming from work in the City of London. Taken together, these account for around one-half of all our overseas earnings. We are the only major country with substantial invisible surpluses. The success of our exporters has helped us to achieve current account surpluses with the rest of the G7 countries and with the four Asian tigers. The noble Lord, Lord Shepherd, rightly pointed out something that we always have to remember—that is to say, we have not only to compete in Europe, which is a very important market, but also around the world because we are a major trading nation. We depend not only on the European Union for our markets but also on the rest of the world. We have a current account surplus with these Asian tigers; namely, Hong Kong, South Korea, Singapore and Taiwan. Overall, our current account deficit remains very modest in relation to our GDP.
Investment is picking up where firms need to expand capacity and adapt and adopt new technology. The climate for investment is excellent. The recovery is well established and profitability is high. I say to the noble Lord, Lord Diamond, to whom I always listen with great interest, that it is much more important than giving investment allowances to ensure that companies have good, high profitability on which they can base sensible long-term investments. These company finances are strong. Company tax and
654
interest rates are low. Business surveys show strong investment intentions. Indeed, investment in the manufacturing sector is already 12 per cent. up over the past year to its highest level for four years.
I understand noble Lords who say that in the great tables of things the situation does not look as obvious as I am trying to make it. We are accused as a country, and more than just as a Government—the noble Lord, Lord Diamond, again spoke about over 50 years—of not investing enough. An interesting thing is that the noble Lord, Lord Desai, who introduced this debate, wrote in a recent article in the New Statesman:
"The United Kingdom notoriously invests a lower proportion of its GDP than, say, Japan or Germany, but the rate of growth of the UK economy is not that much lower. The British get bigger bangs for the bucks from investment than the rest. It is not fashionable to say this, but after all, it is outputs that matter and not inputs".
We ought to bear that in mind.
The story of investment is good. Total investment has grown faster since 1979 than in France, Germany and Italy and about six times faster than it did under the last Labour Government. The manufacturing productivity gap between us and our main Continental competitors has been narrowed substantially from between 30 per cent. and 50 per cent. in 1979 to just 10 per cent. now. The gap actually widened under the last Labour Government.
My noble friend Lord Boardman rightly pointed to inward investment, as a number of other noble Lords have done. That is very important. I say to the noble Lord, Lord Merlyn-Rees, that that inward investment has helped very many parts of the country which have had serious unemployment problems. He discussed Wales; I could discuss Scotland.
Without going on too long, perhaps I may list one or two of the most recent stories of inward investment in this country. Chunghwa Picture Tubes Ltd. from Taiwan has just announced a £260 million investment in Mossend in Lanarkshire, creating 3,300 jobs in manufacturing, which will go a long way to replace the unfortunate closure of the steelworks there. Lexmark International of the United States is going to Rosyth, Fife, to create 500 new jobs. To show that I am not looking just at Scotland, Fujitsu from Japan announced an £800 million expansion at its County Durham site, creating 500 new jobs. Nissan has a £250 million investment in the north-east. Siemens from Germany announced its decision in August to build a new £1.1 billion semi-conductor plant in North Tyneside, creating 1,800 new jobs. The whole House knows that I could go on with a number of other examples in recent times and, indeed, other examples where the factories are now up and running.
By keeping inflation low we have managed to keep interest rates low. I believe that that is very important from the point of view of investment and jobs. I thought that my noble friend Lord Birdwood was being unnecessarily pessimistic in the view that somehow or other improved technology and efficiency would inevitably lead to fewer jobs. I do not believe that that is necessarily true. Perhaps I may commend at least part of a speech by the noble Lord, Lord Peston, in the debate on the Address last Thursday, I believe, where,

655
from the point of view of an economist, the noble Lord addressed that problem. I shall perhaps address it in a more simple way and point out that countries like Japan and the United States, which are arguably the most technologically advanced societies, have kept unemployment low and they are still at the cutting edge of those changes. So I really do not think that we need to be pessimistic about it. However, we have to make sure that we are in a position to seize any opportunities for such new investment. Dare I say that as a cultural change we need to accept that those new products are manufactured products every bit as much as the ships or railway engines which the industrial areas of Tyneside and Clydeside once produced?
We should not be too pessimistic about employment. We should remember that we have more of our people in work than is the case in other European countries. I gave the figures the other day. Sixty-eight per cent. of our population of working age are in employment. The figure for Germany is 66 per cent., in Italy it is 51 per cent., in France 60 per cent. and in Spain 45 per cent. We should remember that that is the other side of the unemployment figures. I now live in Glasgow and although I did not represent that area when I was in the other place, I know about the pockets of serious unemployment. I do not minimise the difficulties for the people who live there. However, there is no point in trying to paint a picture of Britain as somewhere where there are only unemployed people. We should not paint a pessimistic picture of Britain, especially if we want to encourage people to buy from us or to come here and invest.
While I am giving comparative figures, perhaps I may look at this from the viewpoint of unemployment. On the ILO base—I am trying to be as reasonable as possible to noble Lords opposite—unemployment in the UK is 8·2 per cent. In Germany it is 8·4 per cent., in Italy 11·3 per cent., in France 11·4 per cent. and in Spain 22·2 per cent. All of your Lordships are rightly worried about the youth unemployment rate. In the UK it is 13·6 per cent. I think that we can all agree that that is far too high and, indeed, Germany is doing much better with only 8·3 per cent. However, the youth unemployment rate in Italy is 31·8 per cent., in France it is 27 per cent. and in Spain it is 40 per cent.
I am not too surprised that noble Lords opposite did not talk much about the social chapter and the minimum wage because one of the interesting things about the figures that I have just given is that the countries in almost the worst position among the major players in the European Union are France and Spain which have the lethal combination of the minimum wage and the social chapter. Those are the countries with horrendously high rates of youth unemployment, with general unemployment and with a much lower percentage of their population in work. So I do not think that we should paint too gloomy a picture of the position in this country when one looks at how our near neighbours are getting on in terms of their employment and unemployment figures.
Not many noble Lords mentioned inflation, although my noble friend Lord Boardman is an exception. I am not surprised by that because we are now enjoying the
656
best inflation performance for almost half a century. The underlying rate has been at or below 4 per cent. for 38 consecutive months. We have achieved that by setting an explicit inflation target and by putting in place some of the most open and transparent arrangements for monetary policy in the world. Thanks to the brave decision that was taken last year by my right honourable friend the Chancellor to increase interest rates when the economy was coming under pressure, we believe that inflation is now close to its peak. The cost pressures from higher commodity prices and the depreciation of sterling are now easing. Cost pressures in the labour market are also noticeably subdued. We expect underlying inflation to fall steadily.
I believe that with continued care we have broken through the psychological barrier that we have had in this country for far too long of accepting inflation as something with which we have to live. One of the great strengths of the German economy is that neither the politicians nor the people there have accepted that philosophy. I do not want to go too far in this aside, but I also think that living with high levels of inflation has meant that when we do come to a prolonged period of low inflation people do not feel as well off as they thought they used to feel because they thought that getting more money in their pockets, for their houses or in any other way was an indication of increasing wealth when, against a background of rising inflation, it certainly was not.
I turn now to government borrowing. Sound public finances are vitally important. The less the Government borrow, the easier it is to keep down interest rates. The noble Lord, Lord Desai, argued that point in his article of a fortnight ago and again in his speech today. That is good news for business, good news for investment, good news for home owners and good news for jobs. Sound public finances are essential to sustain economic growth. No country can expect to run a large budget deficit for long without getting into trouble. Under the last Labour Government, the PSBR reached nearly 10 per cent. of national income—and we all remember what happened. Inflation and interest rates soared. The economy collapsed, and eventually we had to call in the IMF. In doing so, we encountered the only time in the post-war period of the UK economy when real spending has been cut. It was cut by 7 per cent. and, in the words of the noble Lord, Lord Desai, it was a "traumatic experience" and it is an experience to which this Government have no intention of ever subjecting this country again.
We have to take tough decisions. Governments often have to do that. We often have to risk short-term unpopularity in order to get our public finances back on a sound footing. Borrowing always increases in a recession, but once the recession is over, as is ours, the Government need to make sure that borrowing comes down again. This Budget keeps government borrowing on a clear downward path by keeping tight control of public spending. The PSBR, which stood at £45 billion two years ago, will be reduced to £29 billion this year and will continue to fall in the years to come. Indeed, with government borrowing here falling faster than that of any other major European country, we are on track to achieve

657
a balanced budget by the end of the decade. We have managed to do it before and I am sure that we shall do it again.
The key to lower government borrowing has been tight control over public spending. In his three Budgets my right honourable friend the Chancellor of the Exchequer has succeeded in slashing £53 billion off previous expenditure plans. The new plans allow for real growth in public spending of just one-quarter of 1 per cent. per year. By 1997–98 we will have met our target of getting public spending below 40 per cent. of national income.
We have re-examined and refocused our spending priorities and there is more money for some of the key public sectors about which people care such as schools, hospitals and the police. I believe that people are offered a fundamentally flawed choice when it is suggested that we can either reduce taxation or spend more on health and education. I believe that with a healthy economy one can successfully do both.
We intend to spend more on education and to build on the considerable improvements that we have seen in the past 16 years in education and in the outputs of education. Today about one in three youngsters goes on to higher education; 16 years ago that figure was one in eight. The number of youngsters staying on at school today after the leaving age of 16 is markedly larger than 16 years ago. I am certain that we all applaud those improvements. Of course, we want to do better and, with the extra spending, I am sure that we shall do better.
The noble Lord, Lord Rea, rightly pointed to the importance of the health service. We have put more money into the health service in every year of our term of office and will do so again this year. Perhaps unfortunately for governments, the cleverness of doctors and the advances in medical technology create their own pressures for higher spending. Today many operations, procedures and medicines are available which were not available 16 years ago but—dare I say this wearing my Treasury hat—they all seem to cost a great deal more money. That is something that we must face up to. As I have said, we have put a lot more money into the health service and many new hospitals have been built and are now open throughout the country. One or two of them even bear my name on either the foundation stone or plaque.
We have put more money into those two important areas of government spending. We have done so to help young people in school and to help people when they require the National Health Service—
Lord Rea: My Lords, perhaps I may intervene because the point of my remarks was not to say that more money needs to be spent on the health service; it was to say that much of the ill health in this country is due to inequalities in income. The poorer people are, the less healthy they are. The best way to improve the health of the nation is not necessarily to improve the health service but to improve the economy and to make the distribution of income more equal.
Lord Mackay of Ardbrecknish: My Lords, we are, as I have been trying to argue, improving the country's
658
economy. We are seeing unemployment come down. We are seeing people finding jobs and having higher incomes. All those things do, indeed, count. However, I suspect that were Ito say to the noble Lord that we were cutting the NHS I would be hearing a slightly different story from him. One cannot just say that there are other factors. The improvement in health care and the cleverness of physicians and surgeons at childbirth, for example, have meant that the statistics for perinatal and neonatal mortality have come down hugely in all social classes, as I believe the noble Lord would accept.
I should like to turn to one aspect of the debate which was dealt with by the noble Lord, Lord Eatwell, and many others. It was about public spending. At about £22 billion, public sector capital spending, which includes the PH, will remain well above its 1980s levels, and the private finance is being mobilised on an increasing scale. We expect about £14 billion of PH projects to have been signed up by 1998–99. That goes well beyond any reductions in public sector capital spending. There are a number of projects, of which all of your Lordships are aware, which are being financed in that way: London Underground, parts of the road network and so on.
I was interested to hear confirmed today by two noble Lords opposite what I heard on television on Sunday: Mr. John Prescott claims to be the originator of the scheme for PH. I wish that he would tell the Labour Party in Scotland, and particularly his colleague Mr. Brian Wilson, who I believe is currently its transport spokesman, because one of the really exciting PH projects in Scotland has been the bridge "Over the Sea to Skye". It is being constantly attacked by the Labour Party largely because the word "private" is associated with it. The noble Viscount, Lord Chandos, suggested that the new Labour Party is interested in entrepreneurs. If he were to read the Scottish papers for a few days he might think that he was talking about a different Labour Party or that his colleagues north of the Border had not yet quite picked up the message that they approved of these entrepreneurial projects.
Lord Graham of Edmonton: My Lords, pie in the sky!
Lord Mackay of Ardbrecknish: My Lords, it is not pie in the sky, as the noble Lord says. The Skye bridge exists, so it is more than pie in the sky.
I was going to try to be 25 minutes, but I gather that we have some time in hand so I can turn to one last aspect of the debate. That is: why cut taxes? One of the reasons we cut taxes is to encourage people. The noble Lord, Lord Bruce of Donington, talked about the importance of small businesses. When I listened to him I thought to myself: what do my friends who are small businessmen complain about when I talk to them? They complain, not about the lack of hand-outs from the Government, but because they want the Government to take their hands off them in many ways, including taxes.
There is still a fundamental difference in principle between speakers on this side, who believe that the most successful economies of the future will be low-tax countries with small public sectors and deregulated economies, and those on the Benches opposite who

659
believe in high public spending. Fortunately, the tide of public opinion and history is on our side. That has been the message of the previous three general elections.
I make no apology for our Budget, which leaves ordinary people with more of what they earn and save; boosts incentives; encourages enterprise; and creates wealth and employment. My only regret is that because of the recession we were unable to do it sooner.
The Budget takes three more steps towards our goal of a 20p basic rate of income tax. Basic rate has now been cut to 24 per cent., the 20 per cent. band has been widened, and there is a new 20 per cent. tax rate on income from savings. That means that one quarter of taxpayers will pay income tax at the 20p in the pound rate only. A number of other people have been taken out of taxation by the increase in personal allowances. All those things help everyone: they help the low paid, because they will be helped by the widening of the 20p tax band and the increase in the bottom limit; and they help business in particular.
Perhaps I may turn to the noble Lord, Lord Desai, who started this interesting debate. He indicated—I do not believe that anyone dissents from this—that he would like to see interest rates down by 0.75 per cent. We shall not achieve those reductions in interest rates if one seeks a high tax/high spend economy. It will just not happen. I do not believe that the party opposite has changed its view on taxation. Indeed, in the article I quoted—I should have liked to have quoted a lot more of it, but time prevents me from doing so—the noble Lord said:
"All macho tax-cutting hype should be avoided. I want Gordon Brown not to match them"—
that is us—
"in this immoral exercise"—
that is tax cutting—
"but to keep his hair shirt on and make it clear that Labour will not match their tax cuts, but will reverse them".
So I shall be interested to see whether in the other place the party opposite votes against the tax reductions my right honourable friend has presented to us.
This Budget will leave people with more of what they earn and more of what they save. It is a Budget which spends more on the services about which people care, while keeping public spending as a whole under the tightest control. It is a Budget which keeps public borrowing on a clear downward path and takes no risk with inflation. It is a Budget which sustains economic recovery and helps make Britain the enterprise centre of Europe.
Lord Desai: My Lords, at this late hour I do not wish to say very much. I wish to thank all noble Lords who have taken part. In particular, I wish to congratulate and welcome my noble friend Lord Chandos on his first appearance on the Front Bench. The Minister wished him well and a longer stay on the Front Bench than I had. My only advice to him is not to write any articles in any Left-wing newspapers. Your friends will not read them, but the Government will read them and quote them. That has
660
been my sad experience, but I shall not learn from experience; I shall go on writing. I beg leave to withdraw my Motion for Papers.
Motion for Papers, by leave, withdrawn.

Western European Time Bill [H.L.]
8.57 p.m.
Viscount Montgomery of Alamein: My Lords, I beg to move that this Bill be now read a second time.
After the Budget debate and the Statements that we have had at some length, we move briefly to a subject which I hope will produce greater consensus. In bringing this matter to your Lordships for the second time in the same calendar year, I have two objectives in mind: first, to persuade Her Majesty's Government to take the matter seriously, and to stop sitting on the fence; and, secondly, to ensure that time to consider it properly is given in another place.
The Bill introduced by my noble friend Lord Mountgarret did not even start in the other place. I have had a number of conversations with Members of another place to see whether we cannot rectify that position. I have also had a great piece of fortune in that Mr. John Butterfill, the Member for Bournemouth West, who drew first place in the ballot, has decided to take this subject for his Private Member's Bill. In the event that we give the Bill a Second Reading tonight and that we pass it in due course, we can look forward to a twin-track approach to the subject in another place—twin-track is fashionable at the moment.
This is a short Bill, comprising eight lines only. The Bill differs from the Central European Time Bill, which was so ably presented by my noble friend Lord Mountgarret on 11th January, in three main aspects. The first is the title which I feel better represents the geographical area of which the UK is a part, comprising France, Germany, Italy, Spain, Portugal, the Benelux countries, and Switzerland. Those countries are normally considered to be part of western Europe. Secondly, it carries a clear definition in Clause 1 which explains what is intended—that is, that we would have what is normally called British summer time in winter and British double summer time in summer. Thirdly, it covers the whole of the United Kingdom. Even the most severe opponents of the proposal will agree that whatever we do the United Kingdom must remain in one time zone.
I do not believe that it is necessary to rehearse the arguments at any great length. They are set out in detail in the Second Reading debate which took place on 11 th January and which noble Lords can read in Hansard at col. 243. In summary, the objectives of the Bill are supported by all outside organisations concerned with transport, road safety, tourism, sport and leisure together with industry, commerce, banking and all the financial services of the City of London which contribute so much to the national well-being.
I believe also that there has been a groundswell of public opinion supporting the idea. For instance, the issue came up recently in the radio programme "Any

661
Questions?". After discussion, the programme presenter took a straw poll of the large audience. That produced a near unanimous vote in favour of the proposals. There has been a great deal of correspondence following on from that.
When the matter was previously discussed in this House in January my noble friend Lord Mountgarret was fobbed off by my noble friend Lady Trumpington—she is normally a most robust Lady—with a lengthy speech which regrettably signified little. As an aside, noble Lords may be aware that my noble friend Lady Trumpington is recovering from a knee operation. I am sure that it is the wish of the whole House that she makes a speedy recovery and returns to us in her normal full vigour.
Noble Lords: Hear, hear.
Viscount Montgomery of Alamein: My Lords, my noble friend Lady Trumpington made one comment which gave us slight encouragement. She said that the Government would continue to consider the matter. That indeed is what has been happening for a very long time. But as another 10 months have elapsed I hope that the Government will take a more positive line and I look forward to hearing what my noble friend Lord Courtown has to say about it tonight. Surely, what is now required is not consultation but decision and action. I beg to move.
Moved, That the Bill be now read a second time.—(Viscount Montgomery of Alamein.)
9.3 p.m.
Lord Howie of Troon: My Lords, I rise to speak on this subject with a certain amount of dismay. It is not long since we discussed it last January in a Bill which was, I said then, bizarre. I actually meant idiotic. It created a time zone between Scotland and England. This Bill is much more sensible and therefore has to be taken seriously. However, I must say with a certain amount of distress that the matter is to be raised in another place by a Member from one of the most extremely southern constituencies in the country. He will consider an amendment which allows for a separate time zone in Scotland as against England. Clearly, bizarre notions are not confined to this House. I hope that he pulls himself together before he introduces the Bill.
My objections to the Bill are well known to your Lordships and I do not need to go into them in any great detail—although I might if I am urged! They are simple and have appeared in Hansard on several occasions. Indeed, this is the third time in two years, which is quite preposterous. Perhaps I may say in parenthesis that I do not believe that this is a proper measure for a Private Member's Bill. It is a national matter and should be taken up, or rather left alone, by the Government.
The first objection is what we might call the Scottish dimension. It is a serious matter but has been dismissed in some parts of the press as being the objection of a minority. Some members of the press have said that the minority should yield to the majority. But in this case the minority are put to substantial inconvenience for the
662
convenience of another minority. It is not for the convenience of the entire English people, such as they are, but for a small group within them.
The question of time is not only a matter of north and south but of north and south combined with east and west. The globe is tipped over and the sun goes round it or it goes round the sun. I am not quite sure which but one or the other is right. It amounts to the same thing in the end. Not only that, but the country is tipped over so that Bristol, for example, is further east than Edinburgh. The east-west element is extremely important with the result that the real time in Glasgow is 45 minutes behind the real time in London. That 45 minutes is quite substantial, especially on a Glasgow morning in January or February. I have been there often at that time and I know that it is a dismal experience. It is not a happy time. It is cold, miserable and dank and it is also dangerous.
If we leave things as they are, in the dead of winter the dawn in Glasgow will be at about a quarter to ten. The noble Lord, Lord Tanlaw, quibbles about that and keeps producing the time in Inverness. But Glasgow is more important in that respect. I see that the noble Lord wishes to respond. I give way.
Lord Tanlaw: My Lords, is the noble Lord aware that, although he is quite right, the sun set today in Glasgow and in Inverness only a mere 15 or 16 minutes before it did here in London?
Lord Howie of Troon: My Lords, it is the word "mere" that bothers me. I am not talking about November; I am talking about January and February.
Lord Tanlaw: You said the same last time!
Lord Howie of Troon: My Lords, I take the point. I did not think that I would stir up the point quite so readily. I apologise to the House for so doing. Indeed, it was accidental. Had I meant to do so, I would have done it more seriously.
However, if we adopt the Bill, it means that dawn in Glasgow will not be at 8.45 but at 9.45. Let us think about it. It means going to work in the dark. It is bad enough going to work in the light, but it is infinitely worse to do so in the dark. You feel awful. It is dark, cold, miserable and dank. You need to think about it as though you were in Glasgow and not as though you were in Bournemouth, London or some such salubrious spot.
I have nothing further to say in that respect, except to point out that Belfast and Londonderry are on the same latitude as Glasgow but further west. So it is worse in Belfast and Londonderry, but it is even worse in Sligo because it suffers two disadvantages. The first is that it is further west than Londonderry but it is also in another country. If we are going to suggest that there should be a time difference between Sligo and Londonderry—in other words, between Northern Ireland and the Republic—I do not know what Gerry Adams would make of it. I do not believe that he would like it very much. Indeed, it would not help.
Perhaps I may turn to my second objection about which the House is already aware. I shall be very brief. I refer to the dangers and the technical difficulty which

663
would be experienced by the construction industry if such a change took place. I have explained the technical difficulty before; namely, that you can conduct concreting on a construction site at a temperature of about 3 degrees centigrade. On winter mornings, you do not get that at dawn; you get it much later. Therefore, what would happen in such a case is that the time at which concreting could be done would be thrown an hour further into the day, with damage to the construction industry. That damage has been calculated, but such calculations are always very subjective. Unfortunately, when we last debated the matter, the Official Report quoted me as saying that the damage to the industry would be £4 million a year, but it is actually £400 million. Nevertheless, the Government are doing damage to the construction industry every time they open their mouth, so perhaps that £400 million a year would be a minor—yet serious—matter.
The second consideration is the fact that big building construction sites are dangerous places. I say that because they are temporary. The temporary works which they contain are scaffolding, boarding, ladders and so on. They can be slippery because of frost and ice. That frost and ice is there in the early morning and people can be injured. They may fall and be hurt, and yet it is suggested that we add another hour which means that there will be an hour of further danger. It is not an insignificant point. I know that it involves a minority and that there are only about 1.5 million construction workers but, nevertheless, they are a significant body of people. So we have the cost problem to the construction industry and the danger problem.
I should like to say a few words about tourism. I know that my personal noble friend Lord Mountevans—although I am not sure whether that is how I should put it—is deeply involved in tourism. He will no doubt tell us about the advantages to tourism which the extra hour would provide. But I would like your Lordships to consider whether people really visit places as tourists because of the light. Indeed, do they? For example, if you go to Egypt, you will find that it gets dark round about 6 o'clock in the evening, but you do not go there for the light. You go to Egypt to look at the pyramids, or something of that nature. When it gets dark you can easily go and have a martini—and that is a very sound thing to do. That is what you do. You do not say "Oh, it is light in Egypt, let's go there", or, "It's going to be light in Britain, let's go there". That is absurd. Indeed, the argument is preposterous but, unfortunately, because of the politeness of this House, I shall have to sit and listen to it during the debate.
I shall finish by talking about business. I do not wish to irritate the noble Lord, Lord Tanlaw, again. Having done it once, it would be improper to do it twice. When I look back at the record of our previous debate in the Official Report I am staggered to note the amounts of money which the noble Lord conjured out of the air. He referred to millions; in fact I believe he referred to billions, although they were dollars which made the figures higher than if they had been pounds. He claimed that billions could be gained by implementing this change.
664
The CBI tells us that there is a two hour differential between business practice in London as compared with our overseas competitors. I have no doubt that that is true. If one considers that two hour differential, one discovers two facts. One hour is the time shift about which this Bill is concerned, but the other hour is due to the fact that our dynamic businessmen start work an hour later than their Continental competitors.
Let us assume for a moment that the billions referred to by the noble Lord, Lord Tanlaw, are correct. I have no idea whether that is the case, but one thing I do know is that during my 17 years in this House I have heard noble Lords suggest structural proposals such as the one we are discussing which they claim would result in this country gaining billions of pounds, but that has never happened. Over-optimism seems to be the basis of those calculations. But suppose the figures are correct and there is a two-hour differential, is it not a fact that half of that money could be earned if our dynamic businessmen got out of bed earlier and went to work to chase business in the way they tell us they are always doing? If that were so we would not have to bother about the matter.
As the noble Lord, Lord Tanlaw, says, this measure would be convenient for 700,000 people who are engaged in insurance and banking. However, the vast majority of those people are minions and it does not matter when they do their work. They constitute a small number of people. I believe he has chided me for saying they constitute a tiny number of people. They are important but we are talking about a small number of people who would stand to gain from the measure. There is no reason why a large number of people should be put to inconvenience to suit the convenience of a small number of people.
Let me finish because we do not want this debate to go on for too long. I sometimes wish it had started earlier and we could really have got into it. I leave noble Lords with a thought. As I said, the time variance across the globe is, to a large extent, a matter of east and west. Does it never cross the noble Viscount's mind that France is to the south of Britain, as are Spain and Portugal? Would it not be a better idea if his Bill did not ask us to adopt their time but rather asked them to adopt our time? I see that the noble Viscount looks stunned. I do not think that that is plausible, but it is a thought. The noble Viscount is proposing that we change to the wrong time whereas the other countries could join us.
Let me finish by giving advice to the Minister who is to reply to this debate. It is said that the Government have been considering this matter for a lengthy period of time. My advice is very simple: continue to consider it and consider it into infinity. I hope that the Bill is withdrawn.
9.18 p.m.
Lord Ezra: My Lords, it is always a pleasure to listen to the remarks of the noble Lord, Lord Howie of Troon. Of course those of us who have followed this subject knew exactly what he was going to say; it is just that he says it every time in such a vigorous and jovial manner.

665
I must say he brought tears to my eyes when he mentioned the poor Glaswegian going to work in the dark. As far as I can work out, he does that now anyway. I do not quite see why we should especially cry if he had to do that for another 20 minutes.
Lord Howie of Troon: Three-quarters of an hour; play the game!
Lord Ezra: My Lords, I stand corrected. As I said, the noble Lord brought tears to my eyes when he mentioned the Glaswegian who would suffer three-quarters of an hour more darkness whereas, as was made clear in the summertime consultation document which was published as long ago as June 1989, there are innumerable advantages in changing this measure. The noble Viscount, Lord Montgomery, referred to those when he introduced his Bill so succinctly. As far as one can gauge, the general opinion is moving very much in that direction and in favour of the change. That change could be made almost painlessly. It is merely a question of changing the clock for two hours instead of one on a particular occasion.
What puzzles me in all of this is not so much the views of the majority but the continuing uncertainty in Government circles. The noble Viscount referred to the fact that we had been told in this House earlier this year that the Government were still considering the matter. On 30th October this year in another place it was stated that:
"Our policy on future summer time arrangements remains under review, including whether or not it would be right to move to central European time".—[Official Report, Commons, 30/10/95; col. 711
Therefore, up to 30th October the Government's position was that they were still considering the matter, no doubt much to the satisfaction of the noble Lord, Lord Howie of Troon.
As usual, one has to go to the press in order to find out what is really going on in government circles. According to The Times of 24th November 1995, which is slightly later than 30th October, the Home Office has not yet decided whether to back the Bill of Mr. John Butterfill, and the Treasury is known to support the change, as is the Department of Trade and Industry. It adds that a large number of businessmen are also prepared to do so.
Lord Howie of Troon: My Lords, I wonder whether the noble Lord can tell us what were the views of the Scottish Office.
Lord Ezra: My Lords, I am always ready to oblige. The article states:
"However, the Scottish Office is extremely resistant to the idea".
We knew that anyway.
I should like to ask the noble Lord who is to respond when the various government departments are going to get together to reach a unified view on this matter. We can see why the Department of Trade and Industry should be in support. I am delighted that for once the Treasury should be in support of something as positive as this proposal. Why is the Home Office so reluctant to go ahead with this idea, bearing in mind that
666
according to the information in the Green Paper to which I referred there will be a reduction in crime because most crime is committed in the hours of evening darkness rather than morning darkness, and there will be a reduction in accidents and fatalities on the road and all the advantages to which the noble Viscount referred?
We need a little enlightenment as to the Government's thinking on this matter. The matter is continually debated. The arguments are advanced very firmly by a clear majority in favour, with a vocal but absent—the noble Lord has gone—minority opposed. We have now been through this process three or four times. Presumably they will also go through it in another place. Therefore, we should very much like some enlightenment from the Government tonight.
9.23 p.m.
Lord Tanlaw: My Lords, I am very pleased to be taking part in this debate, particularly as the noble Lord, Lord McIntosh of Haringey, seemed to doubt whether I should because on a previous occasion I had declared an interest as being a consultant to the British Horological Institute. I can inform the noble Lord that that is an honorary position. A number of other noble Lords also have that duty. I am not paid anything, but occasionally I award prizes.
Lord McIntosh of Haringey: My Lords, I am delighted to say to the noble Lord that I am sorry that I doubted that in any way. Of course, holding an honorary position, he is entitled to take part in the debate. Indeed, the debate is enriched by his contribution.
Lord Tanlaw: My Lords, it is very kind of the noble Lord to say so. In case other skeletons fall out of the cupboard, I can declare an interest. Twenty years ago my company was responsible for stopping and starting the great clock at Westminster, known wrongly as Big Ben. I also designed the timing devices that noble Lords have been using for the past 20 years. That may be unknown to your Lordships because I have never mentioned it before.
I should like to declare my interest because I wish to say that I know something about the subject. I am able to correct noble Lords such as the noble Lord, Lord Howie, by saying that the earth goes round the sun and not vice versa. That may be helpful in a debate on this subject, especially as we have covered the area a number of times before.
At this late hour I do not intend to repeat the facts and figures in what has now become almost an annual general meeting on the subject of Central European Time. The details can be found in past debates: the Unstarred Question of the noble Viscount, Lord Mountgarret, on 14th January 1994; the Summer Time Order debate on 18th October 1994; and the Central European Time Bill on 11th January of this year.
I have not changed the views expressed in those interventions, although I was hoping that this debate might give me an opportunity to withdraw a statement that I made when venturing briefly off script at col. 267

667
of Hansard on 11 th January when I described the attitude of Her Majesty's Government and Her Majesty's Opposition parties towards harmonisation of the time standard with Central European Time as "pathetic". I used this somewhat unparliamentary epithet at the time to express my frustration, combined with many others outside Parliament, about the total lack of progress in this area. The current situation is no different, as this Second Reading debate of yet another Private Member's Bill implies; and I see no reason to withdraw my statement at this stage but merely to underline it.
I therefore repeat the question, as I have done on other occasions to noble Lords who sit on the Government Benches, as to why this important issue was not included in the Queen's Speech and was purposely left, as it has been on previous occasions, to a noble Lord's Private Member's Bill which has little or no chance of reaching the statute book through lack of support and time allocated to it in another place. Exactly the same is true for the other identical Private Member's Bill under the name of John Butterfill to which I shall refer later and which I suspect will suffer precisely the same fate as the noble Viscount's Bill.
I must also ask noble Lords on the Opposition Benches why, in so far as I am aware, they have not remarked on this important omission in the Queen's Speech; and why, in so far as I am aware, they have not included Central European Time as an essential plank in their pro-European policies. Can it be that there has been some collusion between the two main party managers in letting the issue of Central European Time once again fall by default? Does the forthcoming general election have any bearing on the matter? Is there not, therefore, a serious defect in our parliamentary system of government when an issue such as the time standard, which affects every man, woman and child in the country, is deliberately and consistently not allowed proper time for inclusion in the Queen's Speech or in the Opposition parties' manifestos?
I can think of no other issue where the gap between party political expediency and the reality of everyday life is greater. Why is it apparently so difficult for active politicians to address themselves to real events which take place outside the Palace of Westminster? In the past debates on the subject in your Lordships' House the Government and the Opposition Front Benches have consistently proclaimed that Central European Time is not a political issue. The noble Baroness, Lady Blatch, so stated at col. 198 of Hansard in winding up the debate on 18th October 1994.
If that is so, why cannot Members of both Houses of Parliament obtain the much-needed update on the inconclusive and outdated consultative document of 1989? Could it be that the latest evidence is being withheld from us because it will clearly indicate the necessity of harmonisation of the time standard with Central European Time?
Could it be that both Her Majesty's Government and the Opposition parties do not wish to admit to the electorate just before a general election that harmonisation will be on the statute books—just in case
668
it affects voters at constituency level? I shall need a great deal of persuasion that the delay in addressing the issue by both main parties is not a "political issue". If it is not a political issue, is it some sort of party political fix?
By that I mean why has not more been done by both the Government and the Opposition parties to educate the electorate on this rather complicated subject? As there has been little or no enthusiasm to encourage a public discussion of the advantages or disadvantages of harmonisation with CET, is it surprising that there is an inevitable and natural hostility towards altering the status quo?
This is a genuine view which has been supported by some of my noble friends and other noble Lords in past debates, and no doubt they will do so in this debate. That in turn seems to reflect the national rather than rational attitudes in Scotland, combined with the misplaced patriotism of those who prefer to live in "little England" south of the Border. Whether those views have evolved out of ignorance of the true facts or simply by ignoring them, I do not pretend to know. But can anyone be in a position to say so until there has been a national referendum based on a trial period of actual harmonisation with Central European Time?
Perhaps noble Lords on the Opposition Benches can at least clarify part of the situation this evening. If they are in a position to deliver devolution for Scotland and Wales after the general election, can they say categorically that Standard British Time, regardless of whether it is harmonised with Central European Time, will continue to be controlled by Westminster and be applicable throughout the land, as it is now? Alternatively, will it become a devolved issue to be settled in Edinburgh or Cardiff, with the extraordinary possibilities and consequent anomalies that will be created by different English, Scottish and Welsh time standards? Have the party managers of the Opposition parties addressed themselves fully to the question? If so, what is their considered opinion?
I have read reports in the media on 24th November, thanks to our excellent Library service, about the good fortune of the Private Member's Bill of Mr. John Butterfill MP. It is identical to the noble Viscount's Bill in many ways, as I understand it. Apparently, the honourable gentleman will be allowed a free vote. But the chances of the Bill getting on to the statute book must surely be remote, unless the Government back it and insist on the support of the Scottish Office, which I understand is against the Bill. I ask the Minister to say whether the Government will support it. Can noble Lords on the Opposition Benches say whether the Scottish Opposition Members of Parliament will support the Bill as well on a free vote or will they vote against it? If they do support it, why then is harmonisation with Central European Time left to the chances of the ballot and not included in the Queen's Speech?
I suspect that the Butterfill Bill is no more and no less than an all-party delaying tactic. That is, unless the noble Earl who is to reply can persuade me otherwise, or noble Lords on the Opposition Benches.

669
What is Her Majesty's Government's excuse for not supporting Central European Time? Is it simply due to lack of foresight or just dogged implementation of laissez-faire on all policies connected with Europe? I suspect that it could be the latter. Has it not taken more than 15 years since the initiation of the Channel Tunnel for a high speed rail link Bill to be included in a Queen's Speech?
Therefore, how much longer will it take the Government or, for that matter, the Opposition party, if it becomes the Government, to recognise that it is equally necessary to eliminate the time differential currently acting to the detriment of the travelling public and the business communities in the City of London? Will it be 10 years or 20 years? Perhaps the noble Earl who is to reply can give us a proper explanation as to why a number of leading international banks have suddenly decided to abandon the City of London as their traditional financial base for Europe and have moved instead to Frankfurt. Is the air so much purer there than the motor-polluted atmosphere of London? Possibly. Or is it because they can enjoy a full day's trading on the financial market without the time and travel restrictions imposed by British Standard Time which can reduce their daily trading turnover by as much as 30 per cent.?
I shall not go back to answering the noble Lord, Lord Howie, on the point. The statistics were not mine; they were taken from the CBI and various other organisations. Therefore, he may argue with them. The Confederation of British Industry has in the past submitted papers showing that its members are in favour of harmonisation with CET. It has done so again—in fact in the same papers as it sent out last time in supporting the noble Viscount's Bill. However, I regret that some of the more recent papers which have been circulated by the CBI to noble Lords on European travel seem to have excluded the issue of Central European Time. I think that that is a pity. It is a rather strange exclusion when the travel industry will gain approximately more than £1 billion per year if harmonisation were in place.
I wonder whether the CBI should not start to be more aggressive in its support for Central European Time by representing its members in Scotland and England more forcefully. Should it not try to bring politicians more up to date than we are at the moment with the real statistics that operate in the business world? I hope that the CBI will cease sitting on the fence, especially in Scotland. If the main political parties are not prepared—for what can only be party political reasons—to give a commitment one way or another on the subject, and if, for the same party political reasons, the electorate is not allowed an opportunity to express its views through a referendum, what can be done?
Will the noble Earl who is to reply not agree that there is now a case for doing two things? The first would be to get all-party agreement to instigate a trial period of harmonisation with Central European Time. It has been done before; what is wrong with doing it again? For surely it would allow proper statistics, particularly in regard to road safety and crime figures, to be gathered scientifically. Is that not more preferable than using the
670
device of failed Private Members' Bills as an excuse for doing nothing? Secondly, would not an all-party agreement on a referendum be a correct basis for this controversial subject? The whole population would have experienced the effects of harmonisation with Central European Time in reality and would be in a position to judge it accordingly. Is that not a far more preferable and democratic input than the feeding out of doubtful, dated and possibly politically-biased statistics, which is what is happening now?
A referendum following a trial period would also scuttle once and for all the rather dubious arguments put forward by the Scottish NFU and the Scottish construction industry, which are against harmonisation with Central European Time. The NFU still seems to fail to recognise, first, that arable crops do not grow in winter but in spring, summer and autumn; and, secondly, that modern animal husbandry is undertaken mainly indoors in northern latitudes in a controlled environment. Animals left out on a hill do not feed until daylight and are quite oblivious as to the time on the face of the hill-farmer's clock.
The Scottish construction industry, on the other hand, makes what appears at first glance to be—I believe the noble Lord, Lord Howie, made this point on a number of occasions in the past—a good safety point against harmonisation with CET. Its owners indicate dangers to workers exposed to the elements on open scaffolding, as well as their having to ascend icy ladders in darkness during the winter months. But how is it that more modern construction industries in North America, Canada and Scandinavia can carry out their building work in far harsher winter conditions by protecting their workers in completely controlled environments?
Therefore, are not the poor conditions for workers described by the Scottish construction industry equivalent to those prevailing when boys were sent up to sweep chimneys in the time of Dickens? Should not these outdated practices be scrapped forthwith, regardless of whether the United Kingdom harmonises with Central European Time?
In conclusion, would not a trial period of Central European Time, followed by a national referendum based on experience throughout the United Kingdom, answer this question once and for all? The usual problem as to how referendum questions are to be posed fairly could be overcome by asking the electorate one very simple question: "After living in a trial period of CET, do you wish harmonisation with Central European Time to be permanent? Yes or no?".
Will the noble Earl who is to reply say what is wrong with this not entirely original suggestion, and why it was not put forward as a practical solution to this problem long before now? Will he say why he thinks that two identical Private Members' Bills, that originating in this House which is before us this evening and the other to be debated next month in the other place, will offer better solutions than the one I have proposed?
Lord Howie of Troon: My Lords, before the noble Lord sits down, I must say to him that I was not speaking for the Scottish construction industry. My

671
"Scottish" comments referred to Scotland as a whole; my comments on the construction industry referred to construction throughout the country.
I want to ask the noble Lord a question. He speaks of harmonising with Central European Time. That is not quite the phrase used by the noble Viscount, but we know that it means the same thing. He will realise that what one might call central Europe has three time zones in it. There is ours, the middle bit and the part where the Greeks reside. Does he suggest that we could harmonise the whole of that part which we might for convenience call central Europe into one time zone, which would be—the noble Lord, Lord Monson, will correct me later if I am wrong—perhaps the widest single time zone in the world with the exception of China?
Lord Tanlaw: My Lords, I feel that a step-by-step approach would be the answer; but basically the answer is yes.
Lord Chesham: My Lords, in view of the hour, I wonder whether it might be possible to make the discussion slightly shorter?
9.40 p.m.
Viscount Mountgarret: My Lords, I am grateful for that intervention. The arguments have been very well rehearsed before, a year ago. There is very little further to say.
We are very grateful to my noble friend Lord Montgomery for reminding the Government yet again that it is the wish of your Lordships' House—at least it was its wish last January—that this whole matter should be discussed. It has gone on for a long time. A question paper was sent out and we have the view of many organisations. It is time that Parliament is invited to give a view. After all, that is the function of Parliament. It is there to lead and enact legislation. It does not necessarily dictate legislation, unless it is a matter of government policy, and on a issue of this kind, it is a matter for the feeling of Members of Parliament and your Lordships.
I should like to refer to the suggestion of the noble Lord, Lord Tanlaw, that there should be a referendum. I am most opposed to that. It would be quite improper and wrong. Members of a club do not elect a committee to run it and then everlastingly have the committee ask its members how they feel about some matter. Only on an issue of major national or constitutional importance, such as joining the ERM, having a single currency or something of that nature, may there be a justification for having a referendum; not for something like this matter. It is up to Parliament to decide.
Last year, I was very upset when your Lordships were kind enough to give my Bill a Second Reading but unfortunately the Government—it was not unconstitutional but surely it was a little less than polite—seemed totally to ignore it. That was not very polite. The noble Lord, Lord Howie, suggested in his speech and also in correspondence recently in The Times, that my Bill was utterly bizarre and that is why your Lordships gave it a Second Reading. I find that
672
bizarre in itself. If I may say so, there is a certain amount of legislation which, with the benefit of hindsight, would have been called bizarre, anyway. I do not believe that that is a good enough excuse for the matter not to be discussed.
The main reason why my Bill was considered bizarre was that Scotland was left out of it. That is as may be. If the noble Lord, Lord Howie, had read my speech, he might have realised that I was happy for the Scots to be permitted to decide for themselves and consider opting into my Bill. However, my noble friend's Bill is now in front of us—I personally like its title much better than the title of my Bill because it is far more to the point—and it embraces Scotland. So all that is happening is that the Scots might be invited either to opt out of the Bill if they do not like it or to opt in to my Bill if they so wish. It is exactly the same thing but the other way around.
The noble Lord, Lord Howie, made some rather upsetting remarks, if I may say so. He said that it was bad enough going to work in the daylight. Some people actually enjoy their work. It is their life and what interests them. To suggest to them that it is bad to have to go to work even in the light is rather presumptuous. Many people who work outside think it is pretty awful to have to work in the dark, as they have to do in the winter months. Consideration should be given to them also.
The noble Lord went on to say that if businessmen, financiers, and so forth, want the same working hours as their counterparts in Europe, they should go to bed earlier so that they are fit enough to get up earlier. That is an appalling suggestion.
Lord Howie of Troon: My Lords, will the noble Viscount give way?
Viscount Mountgarret: My Lords, I shall not give way; I shall say why it is an appalling suggestion. Does not the noble Lord have a social life? If he had to go to bed earlier because he wanted to get up earlier, he would have to give dinner parties earlier.
Lord Howie of Troon: My Lords, I have been enjoying the noble Viscount's speech very much but cannot let it go on—I know the Chief Whip wants to get home and so do I. I did not say anything about when businessmen went to bed. I said that they should get up earlier to do their work. I do not care when they go to bed or indeed if they stay up all night.
Viscount Mountgarret: My Lords, I apologise if I misheard the noble Lord. But is he seriously suggesting that financiers, businessmen and the like should have to work a longer day than everyone else in order to satisfy the noble Lord's countrymen in the north of Scotland? That is a most selfish remark.
I do not know whether the noble Lord, Lord Howie, has been to Northern Ireland, as I have. I can assure him that though there is a difference in the light in winter, it is not substantially different from the light on the mainland. But the further north one goes—to Inverness or Fort William—then it is a longer night. It is not only

673
the further west one goes, it is also the further north one goes that must be taken into account. The noble Lord's arguments therefore do not add up.
I like the title of the Bill and hope that my noble friend on the Front Bench will take the message back to his colleagues in the Government that if the Bill is passed, as I sincerely hope it will be, the Government must take on board the fact that the Bill of the honourable Member for Bournemouth West, if he introduces it, must be given time. I do not say that they should support it or oppose it. But it must be a free vote and the Government should provide time for it. In the meantime, I wish my noble friend's Bill fair speed and a safe homecoming.
9.48 p.m.
Lord St. John of Bletso: My Lords, although I wholeheartedly support this Bill, I must admit to being a beneficiary of the current status quo today, having left Russia at around 2 o'clock this afternoon for Copenhagen, and then taken an onward flight to London, arriving some five hours later at 5 o'clock.
Before giving my reasons for supporting the Bill, most of which were extensively debated during the course of the Second Reading of the Central European Bill moved by the noble Viscount, Lord Mountgarret, I wish to raise one simple issue, summarised on textline following the recent gracious Speech. It read,
"Later Tory Viscount Montgomery of Alamein introduced his backbench Western European Time Bill, seeking to bring Britain in line with the Continent. It stands no chance of becoming law without Government support".
Surely in light of the Government's Green Paper on this subject in 1989—mentioned also by the noble Lord, Lord Ezra—atid with the results of the National Opinion Poll in October last year showing such strong public support from throughout the United Kingdom, now must be the time for this issue to be given serious consideration by the Government and at least a free vote in the other place. I was very pleased to hear that the Butterfill Bill, as it is called, will receive a free vote in the other place. As I am the sixth speaker in the debate, the noble Viscount, Lord Montgomery of Alamein, will be interested to see that the score is now 5:1.
As noble Lords will be aware, there have been two experiments with adopting permanent summertime. One was during the Second World War to ensure that children could get home from school before the blackout and also to save energy in munitions factories. The other was the experiment between 1968 and 1971. I understand that one of the main reasons for the 1968 to 1971 experiment ending was that at the time the tabloid press took up the cause of objectors—mainly builders, farmers, postmen and, of
674
course, the Scots. There was also a lot of slanted evidence with regard to statistics on child casualties from motor accidents in the mornings.
Lord Howie of Troons: My Lords, it was actually because a small group of children in, I think, Stornoway were massacred one morning in the dark. There was nothing slanted about it. They were dead.
Lord St. John of Bletso: My Lords, if the noble Lord looks at the statistics from the Transport Research Laboratory for that period he will soon realise that my figures are correct. There would be more casualties in the morning than in the afternoon if the experiment were to be tried again, which I hope, as the noble Lord, Lord Tanlaw, said, will be the case.
As a consultant to one of the stockbrokers in the City, I suppose I should be referring to myself as what the noble Lord, Lord Howie of Troon, mentioned when the issue was debated earlier in the year. He referred to,
"The noisy young men in red braces who transact the business in the City".—[Official Report, 11/1/95; col. 252.]
As a consultant, I am particularly concerned about the cost to British industry and commerce of resisting this legislation. I am sorry to pick on the noble Lord, Lord Howie, but he mentioned the time the average City yuppie, as I suppose one would call them, goes to work. The average time is eight o'clock in the morning, and for many eight o'clock is late. It should also be remembered that 58 per cent. of British exports go to European Union countries and that there would be, as the noble Lord, Lord Tanlaw, has already mentioned, almost a 20 per cent. increase in the daily turnover of foreign exchange and a similar increase in the insurance and stock markets as a result of an increase in trading hours with Europe. There would also be increased revenue from tourism. Those are all resounding fiscal reasons for supporting the Bill. I really ask what cogent reasons can the Government give to refute those statistics and refuse giving the legislation the go-ahead.
Mention has also been made in the past of the 1993 Policy Studies Institute conclusion that the move to harmonise British time with the rest of Europe would mean fewer road deaths and accidents, would reduce crime, would be a benefit to sport and tourism and would cut electricity bills by more than £250 million.
I wish to make two final points regarding children and the elderly. If the Bill is passed I believe that the major beneficiary will be the ability of many children to play sport in the longer afternoons, an issue which is very close to my heart. Children do not have nearly enough opportunity to play sport in the afternoons during the winter months. I am sure that the Bill would also be warmly welcomed by older people. I am not just referring to noble Lords but to the 9 million elderly people in Britain who have no need to rise early. Age Concern firmly believes that an extra hour of daylight in winter would enable millions of older people to travel, shop and socialise more easily, especially as many are worried about being mugged after dark. Both the Home Office and the Police Federation statistics suggest that the cover of darkness encourages greater

675
criminal activity, more specifically, burglaries, assault and vehicle theft. A Guardian leader of 17th October was headed,
"Stop turning back the clock—And thereby boost tourism, save energy and cut crime".
Let us see action, possibly a trial period, rather than further procrastination by the Government.
9.55 p.m.
Baroness O'Cathain: My Lords, it is now absolutely apparent that there is considerable and wide-ranging support for a common European time zone, and a recognition that it is this country which is out of step with its Continental colleagues. The Bill which my noble friend Lord Mountgarret sought to introduce in January of this year is very similar to the Bill which we are now considering. But he omitted Scotland which, I suppose, on reflection, was probably not a very good idea.
I am glad to see that my noble friend Lord Montgomery makes no such exception. As I recall saying in January of this year, ours should in all senses remain a United Kingdom. I understand well that in Scotland, where winter days are short and the nights already feel very long and cold, there is more opposition than elsewhere in the United Kingdom to the prospect of the sun rising even later in the morning. But in Scotland, even more than in the rest of the country, there are surely commensurate benefits to an hour's more daylight in the afternoon. These have been touched on already. There have been signs that in Scotland there is growing appreciation of this. An NOP survey a year ago showed that Scottish opinion was not so firmly set against harmonising our time with Europe as had been thought previously. On the contrary, 62 per cent. of Scots surveyed said that they thought it was a good idea. As an aside, I really do fear for the noble Lord, Lord Howie of Troon. Those involved in selling Glasgow either as a business centre or as a tourist destination will hardly take kindly to the pretty awful description of dark, dank, cold Glasgow.
However, for those accustomed to rise at unearthly hours in the morning far north in Scotland, the idea of waiting a further hour for daylight might appear bleak indeed. As someone who is familiar with London's 5 a.m. darkness, I believe that I understand how they feel from time to time.
But, for heaven's sake, even now we all adapt our habits by an hour every summer and spring. We get an extra hour in bed or we lose an hour and what difference does it make? Harmonisation will not greatly change the adjustments that we now have to make. If in Scotland it creates particular problems we should find ways of helping to overcome them rather than simply saying, "It is all too difficult, so let us forget it".
I am sure that your Lordships need no reminding of the commercial benefits that an extra hour's afternoon daylight would bring. Business supports it; tourism needs it and Scotland more than anywhere else should really be conscious of that. There are overwhelming economic reasons for providing an extra hour of
676
daylight in the afternoon when it can be used to best advantage, as the noble Lord, Lord St. John of Bletso, has just pointed out.
The sheer inconvenience of starting work later than our Continental colleagues, taking our lunchbreaks at different times from them, and calling them late in the afternoon to find that they have packed up for the day, will be all too familiar to anyone who does international business. Meetings on the Continent all too often involve the additional cost of hotel accommodation and the disruption of the previous day, simply in order to be there to make a 9 a.m. meeting, when we are constrained at this end by actually being unable to take off earlier on early flights because of noise restrictions.
Let us just pause for a moment and note how the Daylight Extra campaign, which has worked for several years to encourage the adoption of Central European Time, Single or Double Summertime, call it what you will, is not just supported by commerce. It is also supported by several large, reputable and national safety organisations such as RoSPA (the Royal Society for the Prevention of Accidents) the Child Accident Prevention Trust, the Suzy Lamplugh Trust and the Parliamentary Advisory Council for Transport Safety. I hardly believe that any of those need any introduction to your Lordships or require my recommendation to noble Lords. The Police Federation, too, supports the campaign and for very good reason. None of those organisations excludes Scotland from its support.
A friend of mine was a schoolgirl of 11 when the permanent summertime trial of 1968–71 started. She still remembers the road safety lessons that she attended to highlight the need for extra care, and still has the fluorescent armbands that were given to her and all her friends to wear over their dark winter gaberdine coats.
Yes, we must be responsible about such a move. We must ensure that the right support is given to all those who are affected and ensure that all children are well trained in the highway code. At present our children may make their way to school in daylight, but they return at dusk. Indeed, if they have extra curricular sports or drama interests which take place after school, they come home in the darkness. I am informed that three times as many children are injured in road accidents between the hours of 3 and 6 p.m. as between 7 and 10 a.m. I suspect also that children who are tired after their day at school and possibly distracted as they walk home with friends are more vulnerable than in the morning. It may be necessary to change the hours of the school day further north where daylight is generally in shorter supply, but I simply cannot understand the opposition to the principle of harmonisation.
However difficult this decision may appear to be, that is not a reason for failing to take it. We have spent many years and many parliamentary hours since 1971 avoiding any decision on this matter. It is time to make such a decision and we now have a double opportunity with a Bill in the other place and one here. We are unlikely to get such an advantageous situation again. Now is the time to make a sensible decision. I commend the noble Viscount's Bill.
10.1 p.m.
Lord Berkeley: My Lords, I should like first to declare an interest in Eurotunnel. I do not think that Eurotunnel has any strong views on Central European Time except that we believe that it is generally good for business. However, it does not have the same effect on our company as it would if we were running an airline or through trains. I have supported the Daylight Extra campaign for many years now in an unpaid capacity. I am supporting it today and hope that I may be of some assistance to Mr. John Butterfill and his Bill in another place. I congratulate the noble Viscount on introducing his Bill.
As we have all heard, this debate has been going on for 30 years and during the two world wars previously. This country achieved a single time zone only in late Victorian times with the coming of the railways. We have talked today about a "twin-track" approach so perhaps it is appropriate to say that, before that, this country had about 15 different time zones. I really cannot resist the thought that with rail privatisation comes the possibility of having 19 train operators in the future and that each may bring back its own time zone. We have talked about through ticketing at length in this place. Perhaps through journeys as well as through ticketing will become even more difficult and unreliable than at present if that happens. I hope that it does not. To me, Daylight Extra sums up what we are talking about. We are talking about more daylight in the afternoon and evening when most people need it.
I should like to concentrate in a little more detail on preventing road accidents, because I believe that that is the main, possibly the only, reason for supporting change. I should like to quote from the two reports of the Policy Studies Institute, which in turn drew heavily on studies conducted by the Transport and Road Research Laboratory, based on the accident statistics during the experimental double summertime period between 1968 and 1971. Projecting those figures forward to two years ago, it is estimated that the number of road fatalities in the UK would have been reduced by 140 per annum and that the number of serious injuries would have fallen by 520 per annum. The basis for that is that more accidents occur in darkness—I think that we can understand that—than in daylight. As we have heard, children make one journey to school in the morning but they may make several journeys after school for sport and leisure or to see friends. Therefore, they are much more exposed to traffic after school than before.
The report states that only 11 per cent. of child fatalities occur on school journeys. That confirms what I have just said. As we have also heard, in the afternoon children and other people tend to become more tired and less attentive. So it follows that, if time after school is in daylight, there will be many fewer accidents, although against that there will be a small increase in the number of accidents in the morning. There will be 140 fewer fatalities per annum in the UK if we change to Daylight Extra.
Perhaps I may turn to Scotland now. I am wary of saying too much and beating the competition for interventions by the noble Lord, Lord Howie of Troon,
678
but I will try. The problem in Scotland is that there is not much daylight around in the winter—six hours a day, I believe. I am an engineer like the noble Lord, Lord Howie, and in the late 1960s I spent two years working on a construction site just west of Glasgow. The problem was that the men wanted to be paid for at least eight hours a day, if not 10, and there was only six hours of daylight.
We managed to pour concrete by making the concrete with hot water and other things. We introduced this extraordinary idea of electric light on a construction site, which meant that we could work in the darkness. It did not matter if the electric light came on in the morning or the evening. In fact it was so dim and dull on some days that we had the lights on all day. The other thing I found in Scotland was that between about 20th December and somewhere near the middle of January, not a great deal of work went on anyway. Something called Hogmanay took place. So I do not really believe that the construction industry lost a great deal of time during that period when it is darkest. It could put on the lights and put up scaffolding boards to stop people falling off the scaffolding, and people could get on with their work like everyone else does.
I shall deal briefly with road safety in Scotland. It is interesting that there is lower vehicle ownership than in England and Wales but proportionately there are more road fatalities and injuries. This, it is said, is because more people walk. I assume that that is a good thing. Using the same arguments in Scotland, there is more to be gained in the road accident business by the change to Daylight Extra. The report estimates that Daylight Extra would cause an annual reduction of about 60 deaths and serious injuries in Scotland.
I do not know what the Scottish Office is doing with all these statistics. Perhaps we can hear from the Government later whether they are about to produce a report rubbishing what the Transport and Road Research Laboratory has produced. However, I hope that they will not, because that will get us into an English/Scottish debate, which would be pretty unhelpful.
In conclusion, the reduction in road accidents (140 fatalities a year) is the strongest argument for changing to Daylight Extra. It will not cost the taxpayer a penny. Perhaps that is why the Treasury is not opposing the proposal. Statistics and forecasts do not have faces attached to them, but there will be 140 faces attached to those fatalities—people who have died unnecessarily this year, next year and so on until we change. I strongly support the Bill.
10.3 p.m.
Lord Craigmyle: My Lords, a great deal of learning has been shown and a great many statistics quoted, some of which can probably be challenged, although I do not know, because I am not in the business of challenging statistics. No one seems to have got down to the basic principle of the matter: clocks are there to tell the time of day, and one expects the clock to tell the time of day where that clock happens to be. That is just the thing which the Bill will abolish.

679
When our clocks strike 12 in the summer under BST—if the Bill is adopted it will not be the summer only, it will be the winter—it will not be midnight or midday here in Britain, but in Bohemia. Again, if the Bill is adopted, in the summer when the clock strikes 12 we are supposed to imagine that it is midday. Will it be midday? Not a bit of it, it will be midday in St. Petersburg. One may for convenience abandon reality to a certain extent but certainly not to the extent of 30 degrees longitude. That is overdoing things.
Does it matter? Can we not all go about doing our own things in our own time and not be ruled by clock time? Yes, we can, but that defeats the purpose of the Bill, which is to urge us to do things not at what we have come to regard as standard time but an hour or two earlier than we want to.
That kind of ploy works for a time. It worked with double summer time in the Second World War. But it works only for a short time. In the longer run, people will do things when they feel like it and when it is natural for them to do so, because people have in-built body clocks just like animals. We have not heard much about animals tonight; they are usually spoken of a lot in these debates.
If the official clock time disagrees too greatly with our body clock we are increasingly inclined to ignore the official clocks and heed our body clocks. We are seeing that phenomenon already in the increasingly late hours being kept on the Continent. I am told that in, for example, Madrid the streets, cafés and restaurants are thronged with people well after midnight. I suspect that the people of Madrid like to be in their beds by midnight as much as most of us but that, by midnight, their bodies mean midnight in Madrid and not midnight in Cairo. Cairo is an awfully long way east of Madrid. So the apparently late hours of the people of Madrid are the consequence of having the clocks two hours away from reality.
We in this country have succeeded at least in part in keeping to natural time in winter. As the noble Lord, Lord Howie of Troon, observed, we mere offshore islanders have kept a better tradition. Why is it that we with the better tradition propose to desert it and go for the less sound tradition of our continental neighbours?
I am all in favour of having the same time zone but let it be a sensible time zone based upon reality and not merely for the sake of neighbourliness having Ljubljana time in the winter and Istanbul time in the summer.
One radical solution occurred to me only last night. I could not help laughing at myself because I thought that it was too daft. Then I began to wonder whether it was as daft as all that. Could we not do as all air navigators do; that is, to reduce everywhere all over the world to one time zone? Could we not have all the clocks throughout the world indicating the same time and everyone in different areas working their way around those clock times? It seems a sensible answer but I admit that it is radical and would require international agreement. I believe that clock time should be real time wherever possible. To get away from reality is artificial.
10.14 p.m.
Lord Monson: My Lords, I am pleased to follow the noble Lord, Lord Craigmyle. I agree with much of what he said. The noble Viscount, Lord Montgomery, is following in the well-trodden footsteps of his noble colleague, the noble Viscount, Lord Mountgarret. However, my noble friend, as he is in reality outside the four walls of this Chamber, has been cleverer in choosing the Short Title for this Bill. "Western European", with its connotations of plucky democracies standing firm against communist imperialism, is more user friendly than "Central European", with its traditionally murky connotations.
However, a time zone by any other name smells no sweeter. I must remind the noble Viscount that he is still proposing that we should harmonise our clocks with those of Berlin, Warsaw, Prague, Vienna, Bratislava, Budapest, Belgrade, Banja Luka, Sarajevo and so on—none of them exactly western European. Yes, of course, Paris, Rome and Madrid are also included. But the point is that the geographical centre of the time zone which the noble Viscount wishes us to join would appear to be Leipzig, and I do not think that Leipzig is exactly in western Europe.
The alleged benefits of the Bill for road safety, tourism and so on are speculative and unproven. My noble friend Lord Berkeley cited the statistics emanating from the experiment in 1968 to 1971 from which projections have been made as to what might happen today if that experiment had been continued. But I must remind my noble friend that it was during that period that the 70 mile-an-hour maximum speed limit and the breathalyser were introduced. Therefore, it is quite possible that those projections are based on a false assumption. I would only repeat that if daylight in the afternoon were really safer than daylight in the morning, then East Germany, Poland, Austria and so on would surely have switched to Eastern European Time decades ago.
As always, the business case has been pleaded. But American, Canadian and Australian businessmen are astonished at the apparent wimpishness of their European counterparts who moan at minor time differences that they—by which I mean the New World businessmen—take in their stride. There was an interesting letter in the Financial Times to that effect about a fortnight ago.
The noble Viscount, Lord Montgomery, is certainly the greatest expert on Latin America in your Lordships' House. He will, therefore, know that Latin America has four time zones; North America has eight; Australia has three; and the Russian Federation has no fewer than 11, all embracing, on average, approximately 15 degrees of longitude. Los Angeles lies 34 degrees west of Atlanta, Georgia, and is on approximately the same latitude. There is a three-hour time difference between the two, so that when it is 9 a.m. in Atlanta it is 6 a.m. in Los Angeles.
Significantly, Tralee in County Kerry also lies approximately 34 degrees west of another place, Brest Litovsk on the Polish/Russian border, and is also on approximately the same latitude. Yet if the Bill goes

681
through, both would be in the same time zone, even though the sun will rise in Tralee two hours and 17 minutes later than it will in Brest Litovsk. Yes, I know that Tralee is in the Republic of Ireland and not in the North, but if the North changes, the South is bound to follow suit before long.
The examples which most supporters of the Bill are unwittingly copying—and which my noble friend Lord Tanlaw, judging by his answer to the noble Lord, Lord Howie of Troon, is consciously copying—is that of communist China, where there is one single time zone spanning 61 degrees of longitude, so that if the sun rises at 8 a.m. in the east near Vladivostok, on the North Korean border, it will rise at 12 noon in the west near the border with Tadzhikistan. I would respectfully suggest to the noble Viscount that the Americans, the Canadians, the Australians and even his Latin American friends are better mentors than Chinese communists.
10.18 p.m.
Lord Mountevans: My Lords, I am delighted to support the Bill which would, if enacted, have significant benefits for the tourism and transport industries. In both those industries I do, as ever, declare an interest. My former colleagues in the British Tourist Authority support the Bill. They welcome the calculation of the Policy Studies Institute that enactment would add another £1 billion of spend to what is already a £36 billion per annum industry. A £1 billion increase in revenue would directly lead to an additional £100 million in Treasury, VAT and excise receipts. It would also lead, indirectly, to significantly new employment opportunities. Further, it would make our tourism product much more user friendly. Perhaps here I could pick up the idea of the noble Lord, Lord Howie of Troon, about not going to Egypt for the light. It could be argued that no one goes to Lapland at this time of year for the light either, and yet it is difficult to get a charter flight to Lapland at this moment in time.
Let me pursue that a little. The user friendliness would derive from the fact that many of our tourism attractions do not open before 10 in the morning and, particularly in the winter, they shut at dusk. At 10 in the morning the average recreational traveller is still taking life easy. That is part of what a holiday is all about. What he wants is to be active in the afternoons. Therefore, if we moved the daylight—we are not getting extra daylight, we are simply moving it—to some extent the traveller would have greater leisure opportunities which must be good for the many attractions which face the problems of the long winter evenings.
I believe that following the route proposed in this Bill would have advantages for Scotland because Scottish tourism to a certain extent finds itself in a vicious circle. As the noble Lord, Lord Howie, admitted to me earlier, tourists do not go to Scotland much after September because many of the attractions are shut for reasons that I have already explained. Why are many of the attractions shut? They are shut because tourists do not go to Scotland in October. If we stretched the day a little
682
and delayed the daylight a little, perhaps we could stretch the Scottish tourist season, and in particular the short break business which is important to that industry.
I also believe that transport would be a major beneficiary if we were to go down the route proposed in this Bill. Every carrier—maritime, air, the Tunnel—has problems in terms of having to run different timetables at different times of the year, but in particular—it has more or less disappeared now—because of the one hour difference. Eurostar still gets many Continental visitors turning up at Waterloo an hour early for a departing train. Many British visitors turn up an hour late, or even just 10 minutes late—there are recorded cases of Members of another place suffering from that—because, again, they have not quite absorbed the time difference.
I believe that the aviation carriers, the ferry companies, the Tunnel, and the passenger and freight operators through the Tunnel, would find that going into the European time zone would have a major benefit in terms of operations and, likewise, in terms of user friendliness. Of course there would be a safety element because whenever one changes the timetable, one leaves oneself at risk from a safety point of view.
As regards our railways, the scheduling of Channel Tunnel passenger and freight services, not to mention their integration with the domestic network which they still use, would be greatly simplified. A bonus would be the fact that international passenger services would conflict less with London's morning peak, whether that be a matter of arriving passengers at Waterloo, or perhaps one day, St. Pancras. Furthermore, the longer evenings would encourage leisure travel which must be good for the railways. Passenger perceptions of personal security would be improved and I gather from the British Transport Police that the change would lead to a reduction in crime.
In making my final point I take on board my noble friend's wish for us to be brief. At the outset I should say that this is an expression of experience and not an attack on the noble Lord, Lord Howie of Troon. Today in Tromso in arctic Norway the sun has set, not to rise again for some two months. Tromso schoolchildren will still go to school safely; motorists will still drive; pedestrians will still walk or ski; ships, planes and the construction industry will continue to function, as they must. If the Norwegians can cope with so much longer periods of darkness, let alone so much greater cold, surely our innovative Scottish friends can cope too. Rather than let them rule our councils, we should, indeed we must, push on with this Bill.
Lord Monson: My Lords, before the noble Lord, Lord Mountevans, sits down, does he agree that the tourist industry would benefit almost as much if Europe-wide agreement could be reached to start summertime in mid-March so that Easter always fell during summertime, and end summertime on the first Sunday in November when the weather is still pretty good in most European countries?
Lord Mountevans: My Lords, it is my understanding that we are working in that direction.
10.24 p.m.
Lord HolmPatrick: My Lords, I am grateful to my noble friend Lord Montgomery for introducing this Bill to the House.
Getting up early in the morning for many years and saddling up a pony to find a few sheep in the hills or getting into a freezing cold lorry to fetch some gravel from a quarry has led me to conclude that getting up in the dark knowing that daylight is just on its way is infinitely more pleasurable than the frustration of working on in fading light into total darkness.
I still get up early, to do the school run. By the time my son and I are suitably dressed in our motor cycle attire it is broad daylight, and we proceed to school at our leisure. On the way we meet school buses which have set out before us, and as they stop to drop off their charges we overtake with care knowing that one or more children may appear suddenly in our path. But that is not a problem because we are prepared and we can see the children because it is broad daylight.
The scene of road safety awareness I describe to your Lordships applies to all motorists. It is particularly relevant to drivers of heavy transport who are likely to be around in great numbers at that time of the morning. Good visibility is essential.
Under the present arrangement for winter time the light is fading at 4 o'clock in the afternoon, and the good visibility that we enjoy in the morning is not available in the afternoon to proceed with care. The risks are increased when our children are coming home. By 5 o'clock it is dark, and pedestrians on their way home are at risk. Motorists will know that people coming home from work tired and lacking concentration do not always use pedestrian crossings and observe the lights as they should.
We have adopted metrication, not without some grumbling. Would not coming into line with Western European Time reduce some of our commercial headaches?
Finally, if we accept that Western European Time would give us an extra available hour of daylight in the evening and not deprive us of daylight in the morning at the crucial times I have indicated, does that not mean that an extra hour of daylight on winter evenings would greatly increase the health, safety and leisure of our children and reduce the number of accidents on the road?
10.26 p.m.
Lord McIntosh of Haringey: My Lords, I am sorry to disappoint the noble Lord, Lord Tanlaw, but I shall express a personal view rather than the view of my party. When the noble Lord came to this House he was a member of a political party. Now that he has the luxury of being on the Cross-Benches he is free to criticise those of us who have other considerations to take into account, regardless of party.
I support the Bill, and I wish that my party supported the Bill. I do not expect that most of my colleagues will disagree with me, but they will speak, as I do, on a personal basis, both here and in another place.
684
There has been a certain amount of talk about the history of the matter, but no one has put it as well as my noble friend Lord Howie of Troon on the previous occasions when he urged the Government to continue procrastinating. That is certainly what has happened up until now. There was the experiment of 1968 to 1971. For what appeared to me to be inadequate reasons, that experiment was abandoned. Since that time there has been a fair amount of consultation and research, none of it as rigorous as I would have wished, all of which seems to lead to similar conclusions.
I shall not rehearse the arguments about road safety or sport and leisure, or indeed about business, although when we talk about the time that our business people are in contact with people in other countries surely it is far more important to be in contact for more of the day with Europe than it is to be an hour further away from New York, as we would be, or an hour closer to Tokyo, as we would be if the time were changed as proposed in the Bill. There are no doubt also arguments on the basis of energy, pollution and crime, and arguments for agriculture and construction.
However, we ought to come down to fundamentals about daylight and night time. Nothing in the Bill will increase the amount of daylight by one minute or one second. The sun will rise and set at the same time as now occurs and that will be different in different places. So none of this measure saves daylight in the absolute sense. What is true is that instead of having an infinitely adaptable series of time zones—I rather like the idea of the noble Lord, Lord Craigmyle, of having the same name for time throughout the world, but what happens when you reach the international dateline on his system?—with crude time zones set by every 60 minutes there will be 24 time zones around the world and light and darkness will be different at the edges of those time zones. That is a fact of life; and one cannot get round it.
Noble Lords have been speaking a great deal about midwinter and midsummer. However, our seasons, like our time zones, are a continuum. They are not the extremes. If it is darker in midwinter in the morning in any country, it will be lighter at midwinter and as spring and autumn proceed one will progressively gain or lose daylight. That, again, has nothing to do with how we keep our clocks or how we define our time zones.
I take it that none of us proposes to go back to the time before Bradshaw when you could take a train from Paddington and find differing times at Didcot, Oxford and Gloucester. I understand that Gloucester kept its own time for very much longer than anyone else.
No, my Lords, we shall not increase the amount of daylight. If we put ourselves more in the centre of a time zone, we can increase the amount of useful daylight. By useful daylight, I mean the time in which it is light and during which we are awake. The fact is that for most people in this country a very considerable amount of daylight through spring, summer and autumn is wasted in the morning before most of us get up. That is wasted daylight. If we change our time as the noble Viscount, Lord Montgomery, proposes, we should increase the hours of useful daylight. That is the best that we can do. I hope that we shall do so.
10.32 p.m.
The Earl of Courtown: My Lords, I congratulate my noble friend on his success in introducing a Bill on this subject. As we know from last year when my noble friend Lord Mountgarret introduced a similar Bill, the question of time zones continues to exercise the minds of many in this House and always produces a vigorous expression of views. The debate this evening has once again demonstrated the strength of opinion felt on both sides of the argument. I must apologise for the absence of my noble friend Lady Blatch on this occasion. She sends her sincere apologies for not being here this evening but she is addressing the annual general meeting of the Society of Voluntary Associates.
This is a Private Bill and the Government will not be opposing it. In the debate this evening many relevant questions have been raised and they have been answered in various ways. Your Lordships have heard most of the arguments before and I do not propose to run through them all again now, but there are a few comments I should like to make.
What my noble friend's Bill seeks to achieve is to move the United Kingdom from its present time zone to what is variously termed Central European Time, Single/Double Summer Time or now Western European Time. Whatever terminology we use, the effect would be to change from a system of GMT in the winter months and GMT plus one hour in the summer to GMT plus one in the winter and GMT plus two in the summer. I was grateful for the clear explanation by the noble Lord, Lord McIntosh of Haringey.
If I may, for the purpose of my comments this evening I shall refer to Single/Double Summer Time, or SDST, since this is the terminology used by the Government on previous occasions, although I understand why my noble friend Lord Montgomery has chosen this title.
The Government recognise that there are many who share my noble friend's opinion that the United Kingdom would derive great benefit from being in the same time zone as many other countries in continental Europe, both members and non-members of the European Union. However, it is only right to point out that there remain others in this House—and I note the words of the noble Lord, Lord Howie—and in the country at large who feel equally strongly that such a change would have significant disadvantages and that we are perfectly well served by the status quo.
From the correspondence which Ministers receive, it is clear that my noble friend is not alone in wishing to see a decision reached, although the various correspondents differ as to the conclusion they are looking for. Nevertheless, I have to say to your Lordships that nothing has changed in the past year to alter the Government's stance. We remain to be convinced that the time is ripe to conclude our deliberations.
We continue to listen to representations. For example, my noble friend Lady Blatch met representatives of the Parliamentary Advisory Council for Transport Safety earlier this year. Your Lordships may wish to know that, despite the obvious interest in
686
this House and the reference by my noble friend Lord Montgomery to a groundswell of opinion, the volume of ministerial correspondence on this topic is not large. There was a recent flurry of letters after the clocks were changed in October, but otherwise, since our last debate on this matter, the volume of letters has declined to only four or five a month.
There has been no recent large-scale test of public opinion on a proposed change to our time zone, but we are often told, as we have been told today by my noble friend Lord Montgomery, that public opinion is largely in favour of such a change. Whether or not this is so, the Government have a duty to consider wider issues than public opinion alone.
Lord McIntosh of Haringey: My Lords, will the noble Earl allow me to intervene? It is all very well to say that the Government have the duty to consider wider issues than public opinion, but surely they should do so having first found out what that public opinion is. Is there not an obligation on the Government to carry out some effective opinion poll on the views of ordinary people? At the moment, the statistics we have are about consultation, which is vastly inferior to proper social research.
The Earl of Courtown: My Lords, noble Lords will find that later in my speech there is something which will cover the point. If that is not the case, I shall no doubt write to the noble Lord.
We have heard today from my noble friend Lady O'Cathain, who referred to a 62 per cent. majority in favour of change in Scotland in last year's NOP survey. I must remind your Lordships that the survey result was based on just 92 persons interviewed in Scotland.
The Government have a duty to consider all the arguments on an issue which affects everyone living in this country. That is what we have been doing and I will undertake to bring the points made in the debate to the attention of my noble friend Lady Blatch.
We have heard what has been said by my noble friend Lord HolmPatrick and the noble Lords, Lord Berkeley, Lord Ezra and Lord St. John of Bletso, about road traffic accidents and the advantages of travelling home at the end of the day in daylight. The House is familiar with the estimates of the Transport Research Laboratory on the net savings in road traffic casualties which might result from moving the clocks forward by an hour, although the noble Lord, Lord Monson, suggested some reasons which might not have been taken into account in the calculations.
On the other hand, we know that there are some contrary concerns about the safety of certain groups of workers, for example, postal workers and those in the farming and construction industries, as the noble Lord, Lord Howie, set out for us. Their spokesmen believe that the increased risk of accidents could be considerable. It may be that some individuals could adjust their working day to take account of darker mornings if those prove dangerous, but it is difficult to alter such arrangements unilaterally. I note with interest what the noble Lord, Lord Tanlaw, had to say regarding the construction industry.

687
Another important consideration for the Government is the possible effect on crime of any change in the spread of daylight. It is clear that elderly people and women of all ages are anxious about being out alone after dark. Fear of crime is a serious problem and one which needs to be addressed on a wide front. Well-lit streets, concerned neighbours and better public awareness of the real dangers and how to avoid them can make a major contribution to reducing fear, but the extension of daylight by one hour in the evening could also help.
Fear of crime is, of course, an important element in people's sense of well-being. However, according to recent studies of crime patterns, the potential effects on the incidence of crime of a move to SDST are less clear than was suggested by the noble Lord, Lord St John of Bletso. Lighter evenings could reduce the number of thefts of or from cars, which take place more often in the dark. On the other hand, if longer evenings result in more people going out and leaving their house empty for longer, burglary rates could actually rise. Similarly, if lighter evenings encourage more people to go out, stay out later, and possibly drink more, then the number of assaults could increase. Changes in behaviour—in particular that of offenders—are difficult to predict, so that the net effect on crime figures is uncertain.
We heard from my noble friends Lady O'Cathain and Lord Mountevans, and the noble Lords, Lord St. John of Bletso and Lord McIntosh of Haringey, about the potential benefits of the proposed change for industry, tourism and transport. The noble Lord, Lord Mountevans, was indeed persuasive about the advantages for tourism, even in Scotland.
However, on the transport side, the most serious difficulty for the transport industry in recent years has not been adjusting timetables to different time zones in the UK and Europe—this, after all, is not a new problem or one that is confined to Europe—but rather the different dates hitherto adopted for the end of summer time. The industry has therefore welcomed the news that this year was the last one in which the periods of summer time will vary. Those noble Lords who are concerned that we may be too ready to harmonise our arrangements with others in Europe will be pleased to note that from next year our European partners are to harmonise with us. They have recognised the benefits of UK practice, and from 1996 will end summer time on the last Sunday in October.
While timetables might be further simplified if we were in the same time zone as much of Europe, as the noble Lord, Lord Mountevans, suggested, it has become apparent that this would also create some significant new problems for UK airlines. They would need to renegotiate their take-off and landing rights at many European and international airports and could also face difficulties in this country if the effect was to increase the number of night flights.
Business travellers are used to adjusting their watches when they travel, whether between the UK and Europe or, for example, crossing the United States, where this is not seen as a problem. The noble Lord, Lord Monson, also pointed out the multiple time zones in Russia and
688
elsewhere. Noble Lords may also wish to note that even within the European Union we are not alone in having a different time zone. The Republic of Ireland is, of course, at the same time as us; but two other members, Greece and the new member, Finland, occupy a different time zone, being two and three hours ahead of GMT in the winter and summer respectively.
The adoption of SDST would indeed bring the working hours of the United Kingdom more closely into line with those of our major trading partners in Continental Europe, as was mentioned by my noble friend Lady O'Cathain. It would at the same time deprive business of the one-hour overlap with the working day in North America. For much of international business, however, neither of these considerations is any longer important. In a global market, business and financial centres are open around the clock. Methods of communication are becoming faster and more flexible. Working hours in the City of London have for some time extended both earlier and later than in the past—as was referred to by the noble Lord, Lord St. John of Bletso—to link up with the Far East in the morning and North America in the evening.
We have heard from those in favour of change about its advantages. Defenders of the status quo point both to some specific disadvantages which would flow from the adoption of SDST and to the need for strong and compelling reasons to justify altering a system with which everyone is entirely familiar. As the Government made clear on the last occasion—and in this regard I agree with the noble Lord, Lord Howie of Troon—whatever decision is eventually reached must take into account the balance of advantage for different regions and groups in the country and must be applied to the United Kingdom as a whole.
I assure the noble Lord, Lord Tanlaw, that the Government have no intention to support separate time zones within the United Kingdom.
The Government would, of course, bring forward a Bill if and when they considered it right to do so. It will be clear from my earlier remarks, and indeed from the differing views expressed so emphatically in tonight's debate, that we do not think that the time has yet arrived. As to one report in The Times—
Lord Tanlaw: My Lords, I thank the noble Earl for giving way. Perhaps he will clarify one point, if he can. I asked whether the Government would consider a trial period continuing with Central European Time in order to obtain the statistics which the noble Lord, Lord McIntosh of Haringey, suggested. I hope that he will make some remark about that or give some consideration to that suggestion.
The Earl of Courtown: My Lords, I believe that I have some notes relating to that matter. My right honourable friend the Home Secretary co-ordinates policy on these matters and these are the only authoritative statements of policy made by or on behalf of the Government as a whole.
As to the Butterfill Bill, the noble Lord, Lord Tanlaw, asked what the Government's attitude would be. I remind him that the proposed Bill has yet to be

689
introduced. If it is, the Government will make their views known at the proper time. In any event it will be a matter for the other place.
My noble friend Lord Mountgarret raised the question of a free vote on Mr Butterfill's proposed Bill. I must point out that it is not the practice of the Government to make an announcement on procedure before the introduction of a Bill.
The noble Lords, Lord Tanlaw and Lord St. John of Bletso, asked why there had been no updated version of our 1989 Green Paper on the pros and cons of the various options. We have not received any such request, but I shall certainly invite my colleagues to consider the case for providing one.
Lord Tanlaw: I thank the noble Earl for giving way again. I raised this matter the last time that we debated the subject and asked why that consultative document was so out of date. So did many other noble Lords. I do not quite understand why he says that there has been no request made for it in your Lordships' House.
The Earl of Courtown: My Lords, I shall bring the views of the noble Lord to the attention of my noble friend Lady Blatch in due course.
We shall consider the suggestion of the noble Lord, Lord Tanlaw, about all-party agreement to an experiment, as we shall consider all suggestions. But it is not immediately evident that this is a party political matter suited to such an agreement.
The noble Lord, Lord Tanlaw, asked whether major banks have not moved to Frankfurt because of the present differences in time zones. I am not in a position to answer for the commercial decisions of individual banks. I imagine that such moves may have had to do not with time zones but with the fact that Frankfurt could be the home of a Central European Bank.
As to the suggestion of the noble Lord that there might be a referendum possibly following an experiment, your Lordships will know that successive governments have seen serious difficulties in reconciling the character of referendums with the proper functioning and authority of Parliament. That point was made with persuasive force, if I may say so, by my noble friend Lord Mountgarret.
As I said at the outset, no material change has occurred since your Lordships last debated the matter in January this year. I note that the Opposition have not altered their stance either, as was said by the noble Lord, Lord McIntosh of Haringey.
My noble friend Lady Trumpington remarked on that occasion that the Government do not look for an easy answer. I say to your Lordships now that the Government look for the right answer for the country as a whole. At that point I shall ensure that my noble friend Lady Trumpington receives a copy of Hansard to be able to note the kind words of her noble friend.
We continue to listen to representations. I have been listening carefully this evening and the Government will take note of all the arguments presented by your
690
Lordships during the proceedings of this Bill. The Government have not shut the door on change. It remains our position that we do not believe that now is the time to bring our deliberations to an end.
Viscount Montgomery of Alamein: My Lords, I must first thank all noble Lords who have participated in this debate. It has been extremely interesting and much more wide ranging than I expected. A number of different views have been expressed. I find myself with the great temptation to wish to continue the argument with the noble Lord, Lord Howie of Troon, whose knowledge of geography is somewhat eccentric, if not deplorable. But owing to the lateness of the hour, I shall not do so. That would extend matters. Anyway, some of the arguments that he produced were refuted very effectively by the noble Lords, Lord Berkeley and Lord Mountevans. I look forward to continuing the debate with my good friend, if he is not my noble friend, outside in another environment. That will be a great pleasure.
As I count the score, until we came to the Government it was 10 speeches in favour and three against. That is quite encouraging. But I must admit that the reply from my noble friend on the Front Bench was disappointing to say the least. I had hoped that in the intervening period we might have moved this cause forward and the Government would be prepared to take some kind of decision.
What was slightly surprising in one of the comments made by my noble friend was the mention of the number of letters that Ministers receive on this subject. It would be quite easy to organise "Rent-a-letter"—it has happened before—and then he could have as many letters as he liked on these subjects. But that is not the point. We are trying to achieve a quality argument, and that is what was displayed in this evening's debate. A number of ideas were suggested and I believe that the matter has been moved forward because this Bill has found more favour than that so cogently argued by my noble friend Lord Mountgarret earlier in the year.
I feel that we must continue with this Bill because, if it is passed in this House, it will go to another place and there will be an opportunity to discuss two Bills. As I said earlier, there is to be a twin-track approach, with this Bill as it is presently couched and another Bill couched in any way that the Member for Bournemouth decides. As my noble friend on the Front Bench said, that is not yet known. How it will be dealt with by the Government in another place remains to be seen. But at least we shall have a shot at the bird with both barrels, and that may be better than hitherto.
I hope therefore to conclude this matter today. I thank all noble Lords for their participation. I commend the Bill to the House and ask your Lordships to approve its Second Reading.
On Question, Bill read a second time, and committed to a Committee of the Whole House.
House adjourned at nine minutes before eleven o'clock.