Lords Sitting of 20 March 1996

Preamble
The House met at half-past two of the clock: The CHAIRMAN OF COMMITTEES on the Woolsack.
Prayers—Read by the Lord Bishop of Sheffield.

Iraq: Imprisoned Kuwaitis
Lord Molloy Lord Molloy asked Her Majesty's Government:
Whether they will make further representations to the United Nations to encourage the early release by Iraq of imprisoned Kuwaiti men, women and children.
The Minister of State, Foreign and Commonwealth Office (Baroness Chalker of Wallasey): My Lords, we most recently raised this issue at the UN when the Security Council reviewed sanctions against Iraq on 7th March. At all meetings of the Tripartite Commission we have repeatedly made clear to the Iraqis our concern at the lack of progress. We shall continue to press them to provide substantive information on individual cases.
Lord Molloy: My Lords, I thank the Minister for that Answer. Is she aware that in November Kuwaiti officials met to discuss the fate of hundreds of men, women and children and all that happened was that those people were put in gaol? I find it amazing that the only Government who are making endeavours to end this terrible farce are the British Government. It is not fair for Britain to have to do all the work, with some help from America and the Commonwealth countries. When a solution has been achieved so many countries will he cashing in to receive the honour. Is the Minister aware that I compliment our Government and hope that other Governments will give them aid?
Baroness Chalker of Wallasey: My Lords, I am grateful to the noble Lord for his comments and for the interest he takes in the matter. Perhaps he will not agree with me hut, in order to be fair, I must say that Iraq has been marginally more co-operative in the technical sub-committee which was set up by the Tripartite Commission to speed up the review of the ICRC case files. However, the fact that there is little substantive progress is due to delays in presenting information on the case files.
We shall support any measures that we can to speed that up. We shall continue to maintain the profile of the subject whenever the Security Council reviews the matter. It is critical that Iraq is brought to comply with the relevant UN Security Council resolutions.
Lord Hailsham of Saint Marylebone: My Lords, is it possible that there may he a more sinister explanation
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of the disappearance of those people? Does my noble friend have in her possession any information about their continued existence and safety?
Baroness Chalker of Wallasey: My Lords, sadly, my noble and learned friend may well be right. We have news of only two people on the original list. One is already known to be dead and the other is a Kuwaiti woman who is happy to stay in Iraq because she is married to an Iraqi. We have no knowledge of the rest. We shall continue to press the matter but there are grave problems in finding out the information from so tight and secretive a society as the Government of Iraq.
Lord Mayhew: My Lords, does the Minister agree that despite the brutal nature of the regime and Saddam's barbaric treatment of members of his own family, we must always work on the assumption that those unfortunate Kuwaitis are alive and that therefore it is our duty to help them? We congratulate the Government on what they are doing.
Baroness Chalker of Wallasey: My Lords, I thank the noble Lord, Lord Mayhew, who is absolutely right. Until we have sad knowledge to the contrary we must assume that all these people are alive. The recent deaths of the defector Hussein Kamel, the son-in-law of Saddam Hussein, and Kamel's brother and other family members underlines the total brutality of the Iraqi regime. It was yet another case of extra-judicial execution, which is all too commonplace in Iraq.
Baroness Blackstone: My Lords, I was not clear about the Minister's earlier answer to my noble friend. Do the Government support the lifting of sanctions in a limited way to allow for the export of some oil on condition that the proceeds are used for humanitarian purposes, or do they agree with the former President of the United States, Mr. George Bush, that there should be no lifting of sanctions even in a limited way until all the missing Kuwaitis are accounted for?
Baroness Chalker of Wallasey: My Lords, we welcomed the unanimous adoption of the Security Council's Resolution No. 986 which would allow Iraq to export some oil in return for humanitarian goods. It was designed to alleviate suffering and was not a relaxation of sanctions. But Iraq quickly rejected the scheme. Saddam Hussein is not prepared to accept terms for the distribution of help to northern Iraq, which is where the problem lies. We finished one set of discussions late last night and there will be further discussions on the matter in early April. We can only hope that light will dawn and Iraq will accept that it can export oil in return for humanitarian goods.
That does not mean that we do not help Iraqi people who are suffering. The noble Baroness may know that on Tuesday of this week I announced help in providing clean water to the Shi'ites in southern Iraq who are suffering desperately. That is no help to the regime but it helps the people who are suffering. We are trying to help, therefore, but it is Saddam Hussein who ought to be trying to help.
Lord Avebury: My Lords, while not denying the importance of the hundreds of people to whom the

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Question refers, does the Minister believe that there is any possibility of persuading Saddam Hussein to relent in the difficulties that he has raised in implementing Resolution No. 986 on the distribution of funds to the Kurdish people in northern Iraq who have been suffering the double embargo of the United Nations and the Saddam regime? In any such distribution, will the United Nations ensure that an even-handed approach is taken as regards the separate enclaves which are controlled by the two parties, the KDP and the PUK?
Baroness Chalker of Wallasey: My Lords, I am not sure that I can answer the noble Lord's last point. However, I hope that the whole House knows that neither food nor medicine are subject to sanctions. Of course we sympathise with the plight of the Iraqi people. We shall continue to support the efforts of the UN and, indeed, of the non-governmental organisations which are allowed to operate in Iraq.
It is notable that, since April 1991, the United Kingdom has contributed over £73 million worth of aid to those poor people. But the relaxation of the import embargo calls for compliance with the relevant resolutions. They relate to all the areas which concern the noble Lord, Lord Molloy—for example, Kuwaiti detainees, human rights, the treatment of Kurds in the north and of Shiahs in the south and the failure to return large amounts of stolen Kuwaiti property. Therefore, despite the complications, we are pressing for a resolution of those matters and we shall continue to do so in order to help the ordinary people of Iraq.
Lord Molloy: My Lords, is the Minister aware—as I was made aware when I visited some of these places, and was duly moved by what I saw—that many people of the Arab lands feel so much for Great Britain, which they say has done a great deal for them? Once again, I should like to ask whether it would be possible for our Commonwealth countries, as well as the United States of America and other countries, to get together to ensure that this brutal regime does not continue to cock a snook at justice and fair play?
Baroness Chalker of Wallasey: My Lords, that is exactly what we are trying to do through the United Nations Security Council. I believe that that is the way to do it. I do not believe that there is any other body which could have the same influence.

British Rail: Sale of Land Holdings
2.44 p.m.
Lord Berkeley Lord Berkeley asked Her Majesty's Government:
What is their policy in respect of the sale of former British Rail land holdings.
The Earl of Courtown The Earl of Courtown: My Lords, the Government's objectives for the British Rail Property Board are for British Rail to manage its property in accordance with
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best commercial practice and to identify and dispose of all its underused or surplus land and property at a proper commercial price.
Lord Berkeley: My Lords, I thank the Minister for that Answer, which in fact deals with just half of the property which was divided up when British Rail split from Railtrack. There is also the question of Railtrack's property. Is the Minister aware of the Government's statutory duty through the regulator to encourage rail freight? I have received complaints from both present and future rail operators around the country stating that the British Rail Property Board and Railtrack are thwarting their plans by selling off railway-connected land for supermarkets and so on, rather than leasing such property at what should be peppercorn rents for those operators. Is it not scandalous that short-term profit motives are preventing rail freight business from developing? Can the Minister please comment?
The Earl of Courtown: My Lords, as the noble Lord said, after the Railways Act 1993 was put into effect property was divided between Railtrack, which took on the operational property, and the British Rail Property Board for British Rail, which took on non-operational property. As regards the non-operational property, Railtrack was consulted over which areas of land would be placed on the list and they are being marketed as time goes by to gain the best possible price. If people in industry and in various other areas are concerned over the sale of such land, they should make their requests and desires known to the British Rail Property Board which can then notify them of any property being sold.
Lord Ewing of Kirkford: My Lords, is the Minister aware that his answer appears to be at least contrary to the terms of the legislation? The 94 strategic sites at issue in the Question that has been tabled were handed over to Railtrack to be held in trust for the future development of rail freight. Are the Government really prepared to sit back and allow such sales to continue in direct breach of their own legislation? Is it not about time that the Government, through the regulator, imposed the terms of their own Act?
The Earl of Courtown: My Lords, I do not know of the occasions where planning applications have been lodged as regards development on strategic sites for supermarkets and whatever else the noble Lord, Lord Berkeley, mentioned. However, there is protection for those strategic freight terminals in the future. As the noble Lord, Lord Ewing of Kirkford, said, there are roughly 100 such former sites owned by Railtrack which have been designated as strategic freight sites. Freight operators can call for a lease from Railtrack if they can return a strategic site to freight use. Railtrack has to consult significant freight operators before a site can be deleted from the list. That stems from the Government's desire to ensure that the sites with rail freight potential are kept available for freight use.
Lord Astor of Hever: My Lords, can my noble friend the Minister tell the House how much land is owned by British Rail?
The Earl of Courtown: My Lords, I believe that the British Rail Property Board actually looks after

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4,000 acres of land, which is 1,600 hectares, and roughly 500 redundant constructions such as bridges and various other structures.
Lord Wallace of Saltaire: My Lords, is the Minister familiar with the recent report from the Department of the Environment on the need to reverse the shift from rail to road in terms of transport? Further, is he convinced that enough care is, therefore, being taken to safeguard disused rail track that may now he needed to reinvent trains and tram tracks in urban areas?
The Earl of Courtown: My Lords, the noble Lord has made an important point. Yes, we are aware that those corridors should be protected, if necessary. British Rail will consult Railtrack, train operating companies and local authorities before proceeding with the disposal of disused track.
Lord Clinton-Davis: My Lords, does the Minister say that the department has received no complaints from freight companies about the way in which Railtrack and the British Rail Property Board have disposed and continue to dispose of land which has substantial commercial value? After all, those are public assets. Is it not clear from evidence that my noble friends, as well as I, have received that Railtrack and the British Rail Property Board are more concerned about the sale of such assets, to the detriment of freight interests, notwithstanding their statutory obligations? Since the regulator and the Minister are involved in the situation, should there not be an independent inquiry into what is happening to those public assets?
The Earl of Courtown: My Lords, no. We are referring here to different areas: Railtrack and the British Rail Property Board. The noble Lord asks for far too much.
The noble Lord spoke of complaints being made to the department. Perhaps he is referring to representations made by Rail Freight Group concerning a terminal at Holyhead which was not on the former freight site. I understand that the Piggyback Consortium was somewhat concerned that it did not have a chance to purchase it. It was advertised from the beginning of January, with the auction towards the end of February. Four and a half thousand particulars were sent out. As I said earlier to the noble Lord, Lord Berkeley, if companies are looking for property in this sector, they should go to the British Rail Property Board.
Lord Stallard: My Lords, can the Minister tell us about the consultative process which takes place between British Rail and freight companies? What process took place before the sale of those sites?
The Earl of Courtown: My Lords, I believe that I have already answered that question. I shall read Hansard. If I have not done so, I shall write to the noble Lord.

Nitrogen Vulnerable Zones: Designations
2.52 p.m.
Viscount Addison Viscount Addison asked Her Majesty's Government:
When the designation of the nitrogen vulnerable zones (NVZs), which must be in force by December 1999, will be announced and what information will be given to landlords and tenants on their obligations to comply.
Lord Lucas: My Lords, the Government are expected to announce very shortly the nitrate vulnerable zone designations in England and Wales following the review by the independent panel chaired by Mr. Terence Etherton QC, which reported to Ministers in October 1995.
Later this year the Government expect to make regulations establishing the action programme measures which will place obligations on farmers in the zones, and which must be in force by December 1999. The measures have been the subject of a recent consultation. The Government are taking account of the responses received and, following further consultation, the action programme regulations will be laid before the House. Guidance for farmers will be issued at the same time.
Viscount Addison: My Lords, I thank the Minister for that reply. Is he aware that catchments of some very low nitrate boreholes, amounting to several tens of thousands of acres, may be designated in order to assist water companies in blending with high nitrate water? Is it still the Government's intention to compensate farmers, where those measures go beyond the code of good agricultural practice?
Lord Lucas: My Lords, we believe that the proposed measures are based on good agricultural practice and will not, therefore, impose obligations on farmers who, in any event, should be subject to the polluter pays principle, as indeed is everyone else.
As regards the designation of low nitrate boreholes within NVZs, yes, some have been so designated. But they have been designated not for the convenience of water companies, but in order that nitrate vulnerable zones should have sensible boundaries and should not appear like a lace patchwork over the countryside.
Baroness Nicol: My Lords, will the Minister give any indication of the costs per pig or cow of setting aside secure areas for manure storage and of the losses caused to farmers by the lower stocking in those areas? Is he aware that many small farmers are on the edge of viability? Unless a sensible arrangement is reached on compensation, they will be forced out of business.
Lord Lucas: My Lords, I do not think that compensation enters into it. We believe that our proposals are based on good agricultural practice,

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involving such measures as not spreading manure on the land when the vegetation is in no condition to make good use of it.
As regards putting manure into storage so that it can be spread on the land at the right times, we estimate that the total cost including capital on an annualised basis for England and Wales will be £3 million a year. That is not excessive in the context of the industry as a whole.
Viscount Ullswater: My Lords, does my noble friend recall that for a number of years the World Health Organisation gave an advisory figure of some 100 milligrammes per litre? I believe that it has readdressed that figure. It was brought down to 50 milligrammes per litre in the late 1980s. Is my noble friend convinced that regulating for 50 milligrammes per litre as a maximum figure conforms with the best scientific advice?
Lord Lucas: My Lords, there is no perfection in these figures. They are based on scientific advice and scientific evidence, and, allowing for possible medical effects of high nitrate levels, a certain level of safety. We believe that 50 milligrammes is a reasonable figure. We also believe that it is a figure with which we shall have to live.
Lord Mackie of Benshie: My Lords, is my noble friend aware that I was pleased to hear the happy manner in which he threw away £3 million a year? However, if someone in a low nitrate area has to build a storage facility costing £100,000, the share of that figure may be considerable and rather unfair. If a farmer is forced to build storage facilities in order to preserve the water, there is an obligation at least to help in building such storage facilities.
Will the Minister ensure that his department will not act as it has in the past and exaggerate any directive from Brussels to fulfil its own particular prejudices?
Lord Lucas: My Lords, perhaps I may begin by addressing the last point and comfort the noble Lord. We have designated a quite small proportion of the land surface of England and Wales as nitrate vulnerable zones compared with some countries in Europe which have designated their entire territories as nitrate vulnerable zones. We have done our best not only in that regard but in other aspects to make sure that the way in which we implement this regulation is reasonable and right.
As regards help with the costs of waste storage facilities, I expect a grant scheme available from the Ministry of Agriculture to be announced shortly after the regulations are promulgated.
The Earl of Bradford: My Lords, does my noble friend accept the recent research findings from Aberdeen University, partly funded by the Ministry of Agriculture, which indicate that nitrates in diet and in
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drinking water are essential, beneficial and in no way injurious to health when they are at natural levels or at levels considerably higher?
Lord Lucas: My Lords, some years ago there was a scare that nitrates caused cancer. I think that we are quite clear that that is not true. We know of no particular reason why nitrates at ordinary levels should cause anyone any problems. At high levels they cause a blue baby syndrome, and considerable problems of eutrophication in rivers and coastal waters especially in continental countries. Those are the basic reasons that we are happy to pursue this directive.
Lord Williams of Elvel: My Lords, we are grateful to the noble Lord for telling us that the number of zones about to be designated—we do not know when—is relatively small. Does he accept that hill farmers in places such as mid Wales are more disadvantaged than others? Does he also accept that it takes about three years for a farmer to plan his business in such a way as to accommodate the regulations? Therefore, can we have the assurance that the Government will produce the regulations well before the end of 1996?
Lord Lucas: Yes, my Lords, we hope to have the regulations in good time. As regards Wales, I cannot give the noble Lord any comfort that there will not he a large number of zones generally. We have tried to exclude as much of the land surface as possible. That means that there will be a number of isolated patches around the country. So far as I know, only two are in Wales and neither is in what would be regarded as hill country. Hill country generally will not suffer from over-stocking by cattle and sheep in the way that the lowland country can, which causes the problem from excess manure per hectare. That is the way in which the problem is defined. I do not believe that problems will arise in Wales as they will, for example, in Norfolk.

Fish Quotas: Excess Catches
3.00 p.m.
Viscount Mountgarret Viscount Mountgarret asked Her Majesty's Government:
Why the common fisheries policy requires the dumping at sea of fish caught in excess of quotas rather than the reduction of future quotas.
Lord Lucas: My Lords, it is important to have effective deterrents to discourage overfishing in order to conserve stocks for future years. However, the Council of Ministers is currently considering a proposal which would allow national quotas for some stocks to be exceeded by up to 10 per cent., provided that the same quantity of fish is deducted from the following year's quota.
Viscount Mountgarret: My Lords, I am grateful to my noble friend for that reply. There seems to be a little light at the end of the tunnel. Is he aware that a short time ago a trawler skipper in north-cast Yorkshire accidentally caught too many sole when fishing for

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another species? He was required to dump perfectly good dead fish back into the sea when I believe that there is already a shortage of fish. If a skipper exceeds his quota on any occasion, why is it not possible to restrict the fishing boat's activities until such time as the equivalent quota would have been caught?
Lord Lucas: My Lords, I believe that we are pursuing something of that kind at the moment. We seek some way of allowing fish which are satisfactory for eating and which have been caught by mistake with other fish nonetheless to be landed and consumed by people rather than being dumped back in the sea. However, fishermen being of infinite resource and sagacity, if we give them a regulation they will doubtless find ways around it and will make more out of it than we thought they would. We must be careful that we have concern for the health of the fish stocks in the sea as a whole.
Lord Carter: My Lords, will the Minister agree with Mrs, Emma Bonino, the Fisheries Commissioner, that there is no connection between the ownership of fishing vessels, the recent judgment by the European Court of Justice and national quotas?
Lord Lucas: My Lords, I do not have the words spoken by Mrs. Bonino in my briefing. Indeed, from reports in newspapers or elsewhere I am not at all clear exactly what the lady said. She seems to have been pretty Delphic in her utterances. However, we are clear that she is seized of the problem that the common fisheries policy represents, not only from what she said when she was here but in the draft Commission report which was leaked yesterday. We are confident that the matter will be tackled with energy by a lady who has a great deal of that quality.
Lord Campbell of Croy: My Lords, can my noble friend comment on a similar wasteful practice required by regulations, the dumping of under-sized fish—wasteful because they do not survive? Can more be done to promote agreement on sizes and shapes of meshes of nets to enable more juvenile fish to escape before a catch is hauled on board?
Lord Lucas: My Lords, this is a worldwide problem because the dumping of juvenile and under-sized fish is generally done because there is no market for them. It is done by fishermen, whether or not they are under a quota system and whether they are in the United Kingdom, America or elsewhere. The principal way of dealing with the problem is to restore fish stocks to a level where fishermen will wish to discriminate and to concentrate on shoals which are mostly of large, high value fish rather than, as at the moment, going after whatever they can find.
We are also considering technical measures. There have been encouraging results in the shrimp and prawn fisheries in terms of mechanisms which let juvenile fish go. There have been proposals that we should use square mesh panels in trawls, but recent research indicates that
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even when such devices are used very few of the small round fish caught in such trawls survive, even if they escape from the net.
Viscount Waverley: My Lords, why not distribute the excess fish to other people's existing quotas?
Lord Lucas: My Lords, the problem is that the fishermen do not find it worth keeping and landing the fish.
Lord Willoughby de Broke: My Lords, British fishermen can sell their quotas to fishermen from other countries. Are fish quotas, unlike milk quotas, transferred internationally between countries of the European Union? Is this question associated with quota hoppers; that is, if the British fisherman wishes to sell his quota, he is able to do so to, say, a Spanish or Irish fisherman. Is that the case?
Lord Lucas: My Lords, clearly the Spaniard or Dutchman—those are the two principal nations involved—can fish against British quotas if they purchase British licences and the British quotas that go with them. That is one of the principal problems with the common fisheries policy at the moment. It is one which we are tackling through the IGC and any other route open to us.

Business
3.6 p.m.
Lord Strathclyde: My Lords, at a convenient moment after 4.15 p.m., my noble friend Lady Cumberlege will, with the leave of the House, repeat a Statement that is to be made in another place on the health aspects of BSE. This will be followed by my noble friend Lord Lindsay who will, again with the leave of the House, repeat a Statement on the agricultural aspects of BSE.
It may be that a convenient moment should take place after the speech of my noble friend Lord Oxfuird, so as to ensure that the Statements do not interfere with the maiden speaker, the noble Lord, Lord Sempill.

Business of the House: Debate this Day
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 Eatwell set down for today shall be limited to four hours.—(Viscount Cranborne.)
On Question, Motion agreed to.

Economic Strategy
3.7 p.m.
Lord Eatwell Lord Eatwell rose to call attention to the effect of the Government's economic strategy on the economic and social well-being of the British people, and to move for Papers.
The noble Lord said: My Lords, before I begin, perhaps I may say how much we look forward to the maiden speech of the noble Lord, Lord Sempill. As an expert in advertising and marketing, he may be able to convince the Government that they have a policy that will not sell.
We on this side of the House have called the debate today not for yet another examination of the immediate consequences of the Government's economic policies, but to go further: to consider the substance and objectives of those policies. I hope, therefore, that we will not hear from the Minister the usual dreary litany of statistics which supposedly demonstrates that the economic condition of Britain is the best of all possible worlds. Little information is provided, the House is bored and the Minister's credibility is damaged. Instead I hope—and I am sure the whole House hopes—that the Minister will address himself to more fundamental questions. I shall attempt to do just that myself.
I wish to address the issue of just what kind of society we have in Britain and what is the relationship between that society and our economic performance. I wish to consider the fundamentals of life at work, of relationships within firms and between firms and the role of government in the economy. In doing so, I shall draw heavily on important new work by the distinguished American economist, Professor David Gordon of the New School for Social Research in New York. At the beginning I acknowledge my debt to his innovative thinking.
We can approach the wider economic issues by a simple question which I hope the Minister will answer: namely, "What is the objective of the Government's economic policy?" It may seem odd that we need to ask that question. After all, this has been a government famously driven by a single big idea: that the market knows best. But how do the Government relate their obeisance to the market to the social fabric of Britain? Indeed, do they even care about the social fabric of Britain?
One obvious way of answering that question is to examine the relationship between government Ministers' Statements and their economic achievements. For example, Mr. Norman Lamont, when he was Chancellor of the Exchequer—and I suppose these days the Government try to forget that he was—told another place that unemployment is a price well worth paying. It must be admitted that the Government have indeed achieved that objective. The price of unemployment has indeed been paid by millions of British people. Even on Tory fiddled figures, more than twice as many people have been unemployed year after year than under any other administration since the war.
To take another example, the present Chancellor declared in his 1994 Mais lecture that the widening of pay differentials in Britain is "inevitable and probably desirable". Again, the Government have achieved their goal. In the past 17 years inequality in pay has increased faster in Britain than in any other G7 country, accompanied, as the Rowntree Report on income and wealth revealed last year, by growing poverty in employment.
Or what shall I say of the Deputy Prime Minister's recent professed desire to remove the employment rights of 10 million or so British citizens who work in small firms? His proposals may have been temporarily shelved as a political embarrassment, but look at what the Government have already achieved: wages councils have been abolished; workers' rights of representation have been curtailed; standards of environmental protection at work have been eroded; mortgage protection for those who lose their jobs has been slashed; and one in every 10 workers has lost his job at some time over the past three years.
The result of all that has been the creation of a labour force which is more fearful and more insecure than at any time since the war. Mr. Heseltine is determined to make it more fearful and more insecure. All that Mr. Ian Lang, the Secretary of State for Trade and Industry, can say is that insecurity is a state of mind. Of course, Mr. Lang has to dismiss fears of insecurity, because creating insecurity is this Government's one and only employment policy.
Their policy is to deregulate and privatise. They glory in the so-called downsizing of British industry and then—this is the clever part—they have the nerve to tell the British people that it is all for their own good. The insecurity, the temporary work and the loss of employment benefits and employment rights are not, we are told, the Government's fault at all. They are simply the Government's rational response to today's great threats to our national well-being: the advance of new technologies and competition from the Pacific Rim countries.
Is that true? Is it true that technical change and third world competition are destroying the employment security of the British people? If it is true, the Government may indeed have a point.
Let us begin with technical change. In fact, the rate of technical change today, whether in industry or services, is slower than it was in the 1960s when, under a Labour Government, there was sustained full employment. Moreover, detailed studies in the United States have shown that for the vast majority of workers the introduction of information technology has demanded no greater skill levels in the workplace. Indeed, the skill demands across the entire spectrum of employment have changed little in the past 15 years.
Of course, there are well publicised cases of computers replacing people. But, like all great technological changes in modern history, information technology has, on balance, been job-creating and not job-destroying. People may be changing their jobs, but the new technologies are creating jobs and the new jobs do not have excessive new skill requirements. The threat of the new technologies is a myth.
So, what about competition from the Pacific Rim? Is it the growth of imports from Pacific Tigers that is driving down British wages and eroding British security at work? Once again, careful examination shows the argument to be without foundation. Job losses and poverty wages are as much a characteristic of those sectors of the economy which are not exposed to competition from imports as those which are so

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exposed. Moreover, if we take all the Pacific Tigers together—Hong Kong, Singapore, Taiwan, Malaysia, South Korea and Thailand—combined they provide just 6.5 per cent. of our total imports. That is less than we import from the Netherlands alone. The truth is that our biggest trade deficits are not with third world countries but with the G7 industrial economies, in all of which wages are higher than they are in Britain.
So, deteriorating conditions of employment, low wages and employment insecurity cannot be attributed either to technological change or to competition from the Pacific Rim. In fact, they are substantially the result of concerted policies of the Government. It has been the Government's objective to wield the coercive big stick over the British labour force. Increased poverty and increased insecurity in employment have been the direct and indirect outcome of their concerted attack on the weaker sections of the labour force. It is no accident that some of the biggest cuts in real wages have been suffered by the poorest paid public sector workers.
In addition, government policies have actively fostered a policy of confrontation in industry. They have encouraged a corporate culture of threat and intimidation. All those who try to represent or support workers have been denounced virtually as enemies of the people. The Government have created the divisive adversarial climate which now characterises Britain's workplaces and which the Deputy Prime Minister wishes to enhance.
What has that strategy achieved? It has certainly not made the British people more happy or more secure. But has it, at the very least, created the lean and mean companies which can compete effectively in the tough, competitive markets of the modern world? After all, that was the declared objective.
Has, to take a random example, British Gas become lean and mean? Well, it is certainly mean. A third of the work force has been sacked since privatisation and the company has now admitted that so many workers have been fired that customer services have severely deteriorated. But is British Gas lean? In one vital sense, it is not. As everyone knows, while customers suffer, the executives of British Gas have paid themselves ever more exorbitant salaries. The company is over-burdened with managers and they are over-paid. British Gas is not lean and mean; it is fat and mean.
The same managerial excess is characteristic of our new market-driven health service, where spending on administrators has been the growth area in health spending. But in that respect, British Gas and the NHS are not atypical of British industry as a whole. In Britain, the ratio of supervisory and managerial staff to the production workers who do the work rose from a little over 10 per cent. in 1980 to over 15 per cent. at the end of the decade. By international standards that is a huge managerial and supervisory burden. The ratio of managerial and supervisory staff in the total labour force is just 4 per cent. in Japan, Germany and the Netherlands and only 3 per cent. in Sweden. In those economics, that figure remained unchanged throughout the 1980s.
The burden of excess supervisory workers in Britain is no accident. In a country characterised by adversarial relationships in the workplace and where the economy is based on conflict and insecurity more supervisors and more discipline is required. Those supervisors and managers have rewarded themselves with ever higher salaries for the onerous task of disciplining an increasingly alienated labour force. Corporate Britain has become bloated with ever more highly paid managerial staff. British companies have become fat and mean.
That has not happened in Japan, Germany, the Netherlands or Sweden. They do not suffer that burden of swollen bureaucracies or supervisory staff. They are countries in which society and economy are based on a commitment to consensus. They are societies and economies in which trust and co-operation are the norm, not conflict and insecurity. They typify one of the two dominant approaches to economic policy in the G7 today.
Two quite different philosophies of economic policy are competing in the modern industrial world. On the one hand, there are the "conflict economies", such as Britain and the US, economies based on adversarial relationships with the heavy burdens of highly paid managerial and supervisory staffs and with increasing inequality in living standards. On the other hand, there are the "co-operative" or "stakeholder economies", such as Germany and Japan, economies committed to consensus with huge savings in administrative burdens and with relatively egalitarian distribution of income.
Which works best? Will the Government's fat and mean strategy deliver the goods? The economic performance of the past decade provides an unambiguous answer. If we compare the stakeholder economies to the conflict economies, the stakeholder economies win every time. Stakeholder economies have a sustained record of higher productivity growth. That is underwritten by higher shares and investment in GDP. What is more, despite that high productivity growth, stakeholder economies have lower unemployment and lower inflation. To cap it all, they are typically more profitable, too. These clear empirical facts are confirmed by the well documented result that more egalitarian economies grow faster and have higher rates of productivity growth. Equality is efficient.
Why should that be? The answers are simple. First, co-operation is cheap. Not only is there no burden of bloated managerial and supervisory staff, but in stakeholder economies there is a closer identification of workers with the best interests of the firm, and management is trusted to pursue those best interests. That was confirmed in a radio broadcast just last week by the noble Lord, Lord Lawson. He argued:
"within the company co-operation is the very essence. No company is going to be successful if the various individuals in the company don't co-operate fully with each other".
Would he have said that when he was Chancellor of the Exchequer?
Secondly, co-operation fosters change. The conflict economies achieve change by the bludgeon of fear and coercion. That is just as true of relations between

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companies, where the ultimate sanction is the hostile takeover, as it is within companies, where the threat of dismissal creates an inbuilt fear of change. In the stakeholder economies, hostile takeovers are rare and active communication within companies promotes a flexible and creative approach to change.
Thirdly, co-operation encourages investment: not just investment in plant and equipment, but investment in skills and ideas. The conflict economies do not trust their workers enough to invest heavily in them. Low investment is the Achilles' heel of the British economy. As noble Lords will know, investment has simply failed to increase since the depths of the 1992 recession. Without investment, the competitive future of Britain can only be bleak.
Any paean of praise for co-operative economies such as Germany, Japan and Sweden has to face up to the fact that, despite their superior performance over the past decade, none of those economies is doing well this year. In the united Germany unemployment is higher than in Britain; in Japan output has been stagnant for nearly three years, though it is expected to grow vigorously this year; and in Sweden a large deficit inherited from a spendthrift conservative government has forced cuts in welfare benefits.
But it must be remembered that Germany has been severely weakened by the foolish macro-economic policies of the Bundesbank (policies, by the way, that the Bank of England wants to introduce here). Moreover, Germany has had to absorb millions of people accustomed to the debilitating life of a Communist regime and invest 100 billion dollars a year in rebuilding the east German economy from scratch. And even so, the German standard of living is significantly higher than ours, and German industry commands two-and-a-half times our share of world manufactured trade.
Equally, it must be remembered that Japanese growth has been severely restricted by the extraordinary revaluation of the yen against the dollar. And despite that burden, Japan is still an industrial pace-setter: income per head is higher than in Britain, and the Japanese share of world trade is well over double the size of ours.
So it would be folly to focus on these short-term troubles and ignore the medium-term success of the co-operative economies. If we are to achieve the same success in Britain, I am confident that we must work towards a new social and economic consensus, the consensus of a stakeholder economy.
The essence of the stakeholder economy is that all decisions are based on the recognition that a wide range of interests have a stake in the success of firms, communities and the economy as a whole. Management and workers may have differences over the rigours of work or the level of wages; but they have a mutual interest in the success of the firm. Firms have to make profits out of their customers. But firms and customers have a mutual interest in the customers being satisfied that they have been given a good deal.
Of course, in any stakeholder economy firms will fail or move away, people will lose their jobs and will need to adapt to new ones. That is the inevitable product of the continuous innovation that can be the genius of a market economy. But a stakeholder economy will not have to carry the dead weight of the supervisory burden which crushes the endeavours of the conflict economies. And the stakeholder economy can make a virtue of change. Firms know that they have a responsibility to prepare their workers for change and, in doing so, to prepare themselves for change.
But none of that will happen unless the Government are themselves committed to the ideals of a stakeholder economy. One or two firms may understand the advantages of a more consensual approach. Some of the very best firms in Britain, like United Biscuits, Coats Viyella, Pilkingtons, Nat West Bank and GKN have established works councils, as required by the social chapter of the Maastricht Treaty, and many British companies have fine trading records. But without the support and encouragement of government there is always the prospect that those who invest in their workforces will be undermined by those who poach skilled labour. Those who invest for the long term in new, high-quality products will be undermined by the short-term asset strippers. That is why only a government can provide the framework in which the stakeholder company can throw off the bureaucratic supervisory burden, build relationships of trust with workers, suppliers and customers, and thrive. Only a government can create a national commitment to consensus and trust. Trust is cheap, and it is efficient. But once it is lost, it is enormously difficult to recover.
I can quite understand that everything I have said is virtually incomprehensible to noble Lords on the Government Benches. Theirs is a world view of conflict. They understand only the adversarial economy of ever-growing inequality and ever-growing insecurity. To them, trust and co-operation are soft, weak, ineffectual notions, out of place in the rigours of the modern world. The Conservative Party is committed to a vision of the economy in which the workers are disciplined and directed by the largest managerial and supervisory staffs in the entire G7. That is their big idea. They are hopelessly stuck in the outdated mindset of the 1980s. They are hopelessly committed to the strategy of "fat and mean".
The Labour government which will take office some time in the next 14 months will face the formidable task of building trust in a new stakeholder economy to replace the scorched earth bitterness that the Tories will leave behind. That new economy will depend on the creation of a supportive institutional environment, on the encouragement of co-operation and discouragement of the use of the big stick. The most important task will be that of rebuilding trust among the social partners of the British economy. That means that new measures should not be imposed, but should be negotiated.
At the beginning of my remarks I asked what were the objectives of the Conservative Party's economic policy. I look forward to the Minister's reply. The economic objective of the Labour government will be clear. It will be the economic security and prosperity

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of all the people of this country, the fostering of opportunity and enterprise and the banishment of insecurity and fear. My Lords, I beg to move for Papers.
3.28 p.m.
Lord Dean of Harptree: My Lords, I am sure the whole House is grateful to the noble Lord, Lord Eatwell, for introducing such an interesting subject for this debate. I have always found his speeches stimulating, and today was no exception. Incidentally, it was not incomprehensible. The noble Lord very understandably, speaking from the Opposition Front Bench, concentrated on some of the bad features of the British economy. I hope in a few moments I shall be able somewhat to redress that balance.
The mark of a sound economy is stable prices and steady growth. Britain has both. There are other encouraging features, too. Unemployment is falling, manufacturing investment is rising, export volumes are up and the majority of people in the country are sharing in greater prosperity. The average family is £80 a week better off in real terms than it was in 1979. That is a very impressive figure. Pensioners have shared in that prosperity. Thanks to the Government's policy of generous tax relief on pension contributions, 66 per cent. of people now retiring have an occupational pension.
There was a time when Britain was the economic sick man of Europe. We are now leading the field. There is faster growth in this country than in all the other major competitive countries in Europe. We are rapidly becoming the enterprise centre of Europe. Why is that? What explains that transformation over a comparatively short period?
I believe that there are four main reasons. The first is good housekeeping on the part of the Government. Noble Lords opposite expect me to say that, but the facts and figures I quoted show clearly that that is the case. The second reason is privatisation. Britain was the first in the field to return the nationalised industries to the private sector. For years they were a drain on our resources. In saying that, I am not in any way criticising the noble Lord, Lord Ezra, who had a distinguished career as a chairman of a nationalised industry. Nor am I criticising my relative, who was at one time chairman of the Scottish Coal Board. The noble Lord and my relative had to work within the system as it was. However, since most of the industries have been returned to the private sector, they are making a big contribution to the revenue and prosperity of our country.
The third reason relates to our labour costs other than pay. We in this country have a big advantage over our major EU competitors. British employers hear extra labour costs of only £18 for every £100 in pay. In the case of German employers, they bear an extra £32 for every £100 in pay; in France it is £41 and in Italy £44. It is no wonder that, with those burdens, famous continental companies are going bankrupt or finding it difficult to keep their heads above water. That is an interesting commentary on the social chapter. I noticed that the noble Lord, Lord Eatwell, did not mention the social chapter this afternoon: it may he that he is getting cold feet on the subject.
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The fourth reason why our economy is doing so well comparatively is inward investment. Britain is now a magnet for inward investment from abroad. One third of all inward investment into the European Union now comes to this country; that includes 40 per cent. of investment from the United States and Japan.
It may be asked, if things are looking so good, why the feel-good factor is still so elusive. There are two main reasons for that. The noble Lord, Lord Eatwell, mentioned one; namely, job insecurity. Although unemployment has been falling, many people do not feel secure in their jobs. That applies just as much these days to financial services as to the manufacturing industries. The reason is that we are in the middle of another industrial revolution in which techniques and the way things are done are changing rapidly. We are also in an era of mergers and demergers. No longer can a man or woman expect to spend the whole of their working lives with one company. Those days are gone.
We are experiencing the same problems now that were experienced in the first industrial revolution. I am sure that the reaction of some people at that time, to be Luddite and break machinery, is not the answer. It is true that in the first industrial revolution, as in this one, social problems arose. However, to counterbalance that there was a big increase in prosperity and population. Therefore, we cannot afford to turn our backs on new methods; nor can we blame the Government for them. The Government can certainly do something to mitigate the problems, but they cannot hold back the tide of change if we are to remain a competitive country.
Another reason why the feel-good factor is slow in returning is negative equity in housing. The Government's policy of encouraging home ownership, including the sale of council houses, brought enormous benefits to millions of families. Many more families these days have a pride in ownership and a real stake in the country because they own their own homes. On the other hand, it is easy to see with the benefit of hindsight that in some cases lending was too generous. People were encouraged by had advice to over-extend themselves. As a consequence, we see the heartbreaking situation of people being turned out of their homes because they cannot afford the mortgage.
The Government must do whatever they can to help that situation without distorting the housing market. Heaven forbid that we should return to the bad old days when some bureaucrat told people whether they could have a cat, a dog or a budgerigar and what the colour of their front door should be. Heaven forbid too that we should follow the advice of those who advocate the phasing out of mortgage tax relief. Fortunately, there are now signs that the housing market is picking up. It is encouraging and another sign of the Government's good housekeeping that mortgage rates are now lower than they have been for 30 years.
In conclusion, of course there have been disappointments, failings and mistakes; it happens to all governments. Of course we are not immune from recessions and world conditions. But one can say, by and large—to use the words of the Motion of the noble

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Lord, Lord Eatwell—that the Government's economic strategy has been good for the economic and social well-being of the British people.
3.37 p.m.
Lord Ezra: My Lords, we are indebted to the noble Lord, Lord Eatwell, for introducing an economic debate in a wider context. He has explained, in his logical turn of phrase, exactly what he feels the economic strategy for the future should be. The noble Lord, Lord Dean of Harptree, as he indicated, sought to redress the balance somewhat. I am obliged to him for his kind remarks about my period at the Coal Board.
It is the nature of debates on the economy, as the noble Lord, Lord Eatwell, pointed out, that we tend to get from the government side, particularly government Ministers, a long list of achievements and an assumption that all that is needed on their part is to carry on as they are doing now and everything will turn out right. From the Opposition Benches we get a long list of weaknesses, all drawn from the same basic statistics. Perhaps on this occasion we could depart from that procedure, and some of the points that we raise, which we feel need to be addressed, could be accepted by the Government as serious issues not to be lightly thrust aside. That would make for a more balanced debate than we have had in the past.
I have not the slightest doubt that when the noble Lord, Lord Mackay of Ardbrecknish, responds to the debate he will say very much what his right honourable friends said in another place on 4th March when a similar debate took place. I took the trouble to read the two speeches and I am certain that the noble Lord will be saying much that they said. Indeed, I am convinced that what he will be saying this afternoon will he very similar to the remarks made on other occasions of this kind by the noble Lord, Lord Young of Graffham, when he was Secretary of State for Trade and Industry. We had debates on the economy in 1986, 1987 and 1988 in which some of us expressed concern about the way things were going but the Government were full of a list of their achievements and of their intention to carry on as they were doing. We know what happened subsequent to those years. So I think it is necessary to consider seriously the potential difficulties that we could be getting into rather than having just a list from the government side of all their achievements.
I should like therefore to look at one or two of the short-term issues which could throw the economy off course and one or two longer-term issues. Among the shorter-term issues are some objectives the Government have set themselves. For example, one objective is growth. In his Budget speech the Chancellor indicated that he expected growth this year to be 3 per cent. In fact, towards the end of last year it fell to under 2 per cent. and there is no indication that it is rising above that at the moment. Today, the Engineering Employers' Federation issued a report indicating that engineering recovery, which had been a large part of the recovery since the last recession, is now on a knife edge. So there is uncertainty about the growth factor.
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If growth is to achieve the 3 per cent. figure that the Chancellor has been talking about, even recently, there will clearly have to be a substantial increase in growth in the latter part of this year. In order to catch up, around 5 or 6 per cent. on an annualised basis will have to be achieved. That could lead in turn to some overheating in the economy, particularly if that growth were to be reflected in consumer expenditure, which is quite likely to be the case if we are to have that kind of growth. That would have serious implications for the economy.
A related issue which needs to be watched carefully at the present time is the money supply. Watching the money supply has rather gone out of fashion. When the Government came to power in 1979 they were all monetarists. They made it clear that they would seek to control the economy by controlling the flow of money. But, as they found that that was difficult to control, they gradually introduced more and more criteria for the purpose and finally abandoned the system altogether. Nonetheless it is true that the money supply is an important aspect of the stability of the economy of a nation.
At the present time both the narrow money, M0, which represents the cash in circulation, and broad money, M4, which includes deposits, have noticeably exceeded the Government's estimates. There are economists, including Professor Congdon, who is one of the "wise men" advising the Chancellor, who are saying that this is a dangerous sign and that, combined with the way in which the economy might be stimulated to achieve the growth objective, we could be heading for difficulty in the medium term. So it would be useful to hear from the Minister whether he considers that this is something that needs to be guarded against; and if so, how? It would be no good our hearing from him that the Government intend to continue blithely with present policies, which is what we were hearing consistently in the latter part of the 1980s, and then the time comes when the situation gets out of control and it is too late to take reasonable measures to deal with it. These are issues which need serious consideration.
The issue of public expenditure is still with us—the public sector borrowing requirement. It has become an essential part of the Government's short-term policy that the public sector borrowing requirement for 1995–96 shall not exceed £29 billion. But the latest estimates are that there could he an overshoot of around £2 billion to £3 billion. That could be quite serious for the Government's short- and medium-term policies. If that were to he the case it would be interesting for us to know from the Minister what position the Government would take to deal with it.
Taking a longer-term view, I entirely agree with the noble Lord, Lord Eatwell, when he said that relative lack of investment has been the Achilles' heel of the British economy. When we compare ourselves in investment terms with the other countries of the G7, and indeed of the European Union, we find that on almost every basis we are lagging. Unfortunately, we have in the private sector a combination of factors which lead inevitably to short-term thinking and to declaring higher dividends required by the institutions to meet their objectives on which the fund managers are judged by

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their quarterly results. As a result long-term investment is diminished. In the public sector we know that the Government are cutting back very substantially on investment. The private finance initiative was introduced initially in order to supplement public investment but it is now being used to replace it. Unfortunately, the conditions applied to much of the private finance initiative are such as to delay it coming forward. The net result is that we are falling behind in the investment that should be achieved both in the public and the private sectors.
Much has been made, and rightly, of our lack of investment in people—in education and training. What we need above all in looking to the future is to have a totally new investment strategy. That is easy to say but it will not be easy to achieve because it will require a cultural change. The reason the Japanese have been so successful in some of their major initiatives, whether in the car industry or in other technological fields, is that they have a structure which enables long-term investment to be made, investment which does not look for an instant return but is ready to go for a longer-term return, investment which does not insist on substantial dividends and is not conditioned by that approach. We have to do a great deal of work here—this is not a criticism of the Government but more a criticism of the culture that has built up—to create a long-term investment strategy.
In conclusion, I hope that this debate, so ably and vigorously introduced by the noble Lord, Lord Eatwell, can give us the opportunity on both sides of the House to try to identify some of the problems ahead and to give our views on how those might be dealt with both in the short term and particularly in the longer term.
3.50 p.m.
Lord Monkswell: My Lords, I, too, would like to thank my noble friend Lord Eatwell for introducing this debate in such an exemplary fashion. It gives me great pleasure to follow the measured and deliberative tones of the noble Lord, Lord Ezra. I suspect that my contribution may be slightly less measured, but I hope that it will be as deliberative.
We are discussing this afternoon the Government's economic strategy and its effect on the economic and social well-being of the British people. It is useful to look at some of those economic and social indicators such as crime, family breakdown, unemployment and poverty. I hope to try to emphasise the need for government policies, of whatever party, to have respect for the individuals who make up the population of this country. We should look at what we might do to ensure that we achieve full employment and improved living standards for all.
The Government's economic policies over the past 15 or 16 years, can be effectively summarised by considering two particular aspects. The first is the concept of what I would describe as "sound money". Enormous emphasis is being placed on reducing inflation to the extent that virtually everything else has been sacrificed, including vast numbers of the British people through mass unemployment and the degradation of human existence which has come about as a result.
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The second major aspect of government policy over the past few Parliaments has been their tax and benefit policies, which have effectively resulted in increases in taxation for poor people. Noble Lords will remember that VAT was doubled and there was also a reduction in the level of benefits for poor people. We should also look at the current rates of unemployment benefit and the basic old age pension. Both of those have effectively been reduced to half the value they had as a proportion of average incomes in 1979. Alongside that, there have been massive reductions in the tax burden for rich people. The top rate of tax has been reduced from 98p to 40p in the pound. Given the level of tax evasion, I believe that it is well recognised nowadays that rich people do not even pay the 40 per cent. that everyone expects of them.
What is the result of these policies in economic terms? First, there is the effect on individuals and their families and the population as a whole. At least one-third of the population is financially worse off than it was in the late 1970s. Another one-third of the population may have seen virtually no economic change in its circumstances, but it has witnessed an increase in insecurity. Those people cannot guarantee that they will be as well off next year and the year after as this year. It may be that less than one-third of the population is better off; namely, the rich, fat cats about whom the noble Lord, Lord Eatwell, spoke. They too are subject to the degradation of our society which has accompanied this Government's economic policies.
The other factor that we can see as a result of the Government's economic policies over the past decade and a half is the effect on what I describe as the basic economy and the ability of this country to manufacture goods. The result can be seen in the deterioration of our balance of payments. We have been running a deficit on our balance of payments for the first time in over 150 years. It is worth pointing out that that has resulted in a relative decline in our economy compared with our competitors. Year after year we are running a balance of payments deficit in manufactured goods. The goods that we import from overseas have to be paid for and the only way that can be done is by paying excessive interest rates on money borrowed to pay for them. That generates economic activity in our competitor nations and strengthens their economies compared with ours.
I now turn to the results of the Government's running of the economy in social terms. What has been the effect on individuals and how they relate to others; namely, the socialisation of our society? The first result is the alienation of what has been described as the "underclass". Whole swathes of our society are effectively divorced from normal society. They consider themselves as having no part in it. There has been a vast increase in crime. One of the saddest aspects of the results of this Government's economic policies has been the increase in family breakdown. The divorce statistics are only a part of that. The breakdown of family units and partnerships between men and women causes immense grief and suffering in real human terms, not only to the individuals involved but to their children and

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their wider circle of friends and families. That is one of the most horrifying indictments of this Government's economic policies.
I now turn to what we can do. I hope that some of what I, and I am sure other noble Lords, will say will begin to have some effect on the Government. I fear not, but it is only right that we should try because the stakes are so high. The first thing we should argue for is stimulation of the economy by direct government investment in what I would describe as non-importing, non-inflationary areas. If one looks at the state of our capital fabric such as schools, hospitals and housing there is an immense amount of investment required to bring those buildings in particular up to the state expected in the latter part of the 20th century.
It is worth pointing out that investment in these areas does not necessarily suck in imports. That may happen if the measures are not applied in the right way. Such provision also provides employment, usually in those areas of highest unemployment, and therefore relieves the social burden on individuals and the economic burden on the state.
The second factor that we might begin to address is relieving the disparity in income which has been alluded to before and which has increased under this Government. I hope that even this Government, at this late hour, might think in terms of increasing direct taxation for the very rich people who can afford it. At the same time the Government should reduce the tax burden. We have heard in previous debates that it can amount to 98p or 99p in the pound because of the poverty trap. That tax burden on the poorest members of society should be relieved. The Government should also begin making efforts to increase benefits as a proportion of average income for those who are unemployed and those on the minimum state pension.
It is worth pointing out that those measures—relieving the heavy tax burden on poor people while increasing benefits—will in themselves stimulate the economy in non-inflationary, non-importing ways. When we think of the spending patterns of the poorer members of our society we see that they are not the ones who buy BMW motor cars from Germany; they are not the ones who go on foreign holidays; they are not the ones who have second homes in France or the Low Countries. Improving their economic position therefore benefits the economy of the country.
It is also worth pointing out that the kind of economic scenario that I have painted for the UK economy and its effects on the social well-being of our society can be extrapolated across the world. The same policies that this Government have applied which have impoverished and reduced our society and the relationships between individuals in our society are, unfortunately, the same policies which the industrialised and rich part of this globe has imposed on the poorer and less well developed parts of the world economy. Therefore, if applied in an international dimension, the same actions that we might take in the UK to stimulate our economy in beneficial ways and to improve our society would also help the poorer members of our world economy.
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They would help to stimulate beneficial economic activity for the betterment of the whole of the world's population.
4.1 p.m.
Lord Sempill: My Lords, it was with a certain amount of awe and trepidation that I put down my name to speak to the Motion tabled by the noble Lord, Lord Eatwell: awe as I have only recently taken my seat, and I am acutely conscious of the traditions of your Lordships' House; and trepidation as I do not profess to be an economist or an expert on today's subject-matter.
I have had quite a varied career, mainly in the area of sales and marketing. I have experienced working for large companies and small businesses. I know what it is like to be unemployed; and I have arrived at an age when, for many companies in Britain, I am past my sell-by date. Therefore, not surprisingly, I am attempting to set up my own business, which is only marginally less frightening than addressing your Lordships.
I believe that credit should be given to Her Majesty's Government for their management of the economy throughout the 1980s and the 1990s. I returned to Britain only recently, having lived in South Africa since 1980 where I witnessed a dramatic political transformation, in part matched by an economic transformation here. The changes are very noticeable. The cities are much cleaner. Services are better and more efficient. There are many more motor cars, more restaurants, and a lot more people holidaying abroad. That has to mean that there is an improvement in the quality of life. There is no denying that Britain has transformed itself from a decaying industrial power into a modern service economy, and the City of London still remains the financial centre of the world.
However, the nation is not happy, and there is considerable discontent. Too many are mainlining on social welfare. Many would argue that politicians are losing the respect of their electorate; and, judging from the rising figures on juvenile crime, parents are losing control of their children. I have been particularly perturbed by the apparent lack of enthusiasm for the healthy economic climate which we are now enjoying. There is a negative attitude. Britain has become boorishly cynical.
During my 12 years in South Africa, I worked extensively in townships where the quality of life was non-existent. There was an oppressive political regime, no social welfare and appalling levels of violence, and yet a quite extraordinary level of goodwill and optimism existed. That may well change as the country struggles to bring about all the necessary social and economic reforms, but at least their mindset is right for the challenges that lie ahead—challenges far greater than those facing this country.
I suspect that one negative attitude is directly related to the missing feel-good factor among large sections of our population. So where are the economic successes? Not surprisingly, they are at the sharp end of the capitalist market. Look no further than the City of London and the boardrooms of corporate Britain: the level of incomes and bonuses is awesome by most

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management standards. The recent pay increases awarded to the heads of privatised utilities, some of whom are laying off staff, created a vitriolic outburst of criticism and indignation. I believe that the disparity in incomes between directors and employees has dampened morale in our workforce and that there needs to be a more equitable redistribution of corporate profits.
It is into that arena that the New Labour vision of a stakeholder economy has been proposed as a means of creating a more equitable and egalitarian society. I suggest that a closer examination of recent economic data from Japan and Germany be examined before we get too carried away by that argument. The hard truth is that a combination of high labour costs and strong currencies have made them susceptible to international competition. The German Employers Federation thinks that some 300,000 jobs have migrated abroad in the past five years, and the Nomura Research Institute of Japan predicts that by 1998 almost 40 per cent. of the production of Japan's five major electronics groups will he offshore. Those groups, most of which are household names, are part of a wide circle of truly global corporations, with profits which dwarf the GNPs of many third-world countries.
The growing inability of governments to control their own economies is becoming more evident as global market forces impact on investment and thereby on employment opportunities. I suspect that it is on the issue of employment that the battles of the next election will be fought. The debate of stakeholder versus shareholder is largely irrelevant to the aspirations and requirements of the lower paid.
I believe that what is needed is a far more radical solution, a solution which, on the one hand, breaks the dependency on social welfare and yet, on the other hand, creates an entrepreneurial environment in which people are "incentivised" to set up their own businesses and in which "having a go" is the norm. We need to nurture small businesses because it is they alone which are in the best position to stimulate local economies.
Over the years there has been strong government support for just that solution, but the reality shows that small businesses are fraught by two major obstacles. The first is the reluctance of the banks to loan the necessary capital without sufficient collateral. Any entrepreneurial society has to be prepared to take risks. People who start with nothing are hardly likely to have either the collateral or the experience. The second obstacle is red tape. There are too many regulations and too many inspections. Small businesses need a lot of room to breathe. Too much time is taken up complying with the requirements of banks and bureaucrats.
In conclusion, although I support much of the Government's economic strategy, I maintain that there needs to be a balance between an efficient and a cost-effective welfare state, as well as promoting smaller businesses with more incentives. The principles of self-determination are crucial in evolving a dynamic entrepreneurial society. Both investors and employers need to he incentivised to help to develop the small business environment. Let us allow hard work to be well-rewarded. When that happens, the feel-good factor will return.
4.10 p.m.
The Viscount of Oxfuird: My Lords, we can all agree that the noble Lord, Lord Sempill, is not past his sell-by date. This House looks forward to hearing him again and again on any subject that is associated with his own experience. His speech this afternoon was one that anyone would be privileged to follow. It was full of initiative. It was a wonderful start to the welcome that this House will give him. I knew both his mother and father. I can assure him that he is most welcome here. We thank him very much for his contribution.
The Motion on today's Order paper proposed by the noble Lord, Lord Eatwell, would have been manna to my friend the late Lord Joseph. Last evening I was minded to look at one of his speeches addressed to a university meeting of young students whose cone of recognition was possibly as wide as could be. One of the questions he set was:
"To consider how do societies escape from poverty, and where does prosperity come from"
His answer was that it comes from increasing the efficiency of the production of goods and services that customers want by raising average productivity. If you desire the escape of virtually everyone from poverty, and rising prosperity, high employment, good social and public services and individual freedom, then you should leave trade to free enterprise and capitalism, subject to the law and competition.
The reason is that business, in its pursuit of profit, subject to the law and competition, is more likely in its own interest to create the conditions that lead to all of those aims than any other system yet invented. Note the words "in its own interest". I do not say that there is necessarily more virtue in the business world than the world of the nationalised industries but that the former suffers from special constraints. It seeks to make a profit. But it can do so only by identifying goods and services that customers want and providing them competitively and relatively efficiently. The business world is thus led by its own interests continually to improve its efficiency. In so doing it raises the average productivity of its workers and managers and creates more jobs. Only if the workers are paid well enough to keep them and to render them effective customers, and if prices are kept low enough to sell what is provided, can profits be earned.
Therefore, built into the capitalist system are precisely those pressures—to seek out and satisfy customers at home and abroad and raise productivity—that will produce several of our aims: high employment and rising productivity and standards of living. A prosperous nation has money to provide good public and social services.
I quote the words of my late friend, who was possibly more sensitive than any other man I have met to the social needs of the disadvantaged in our society. He made particular mention of those who were temporarily or permanently unable to look after themselves. He stated that there must be safety nets. It is right to be as generous as practicable to those who cannot help themselves. It is destructive to help those who can support themselves. If you do so, you may

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unintentionally create increasingly large groups of people who have learned to depend on welfare rather than earn for themselves. This is good neither for them nor for those among whom they live. The last line of Lord Joseph's contribution quoted an article from The Times by Alan Ryan in October 1988:
"Democracy and Capitalism cannot do without each other".
We on this side of the House have had to listen to cries of misery, accusations of irresponsibility and slights about failure to provide for the nation since 1979. But it is of interest that when one delves into statistics one discovers that between 1979 and 1994 the Treasury outturn on government expenditure in four major fields of the service economy, namely, defence, education, health and social security, belies the miseries offered to us by the Opposition and media. Expenditure on defence has been minimal. Between 1979–80 and 1993–94 the outturn has been an increase of 1.3 per cent. Over the same period the outturn for education has been something like 30.5 per cent. The outturn for health between 1979 and 1994 has been 57.6 per cent. Over the same period, the outturn for social security has been 76.2 per cent. These figures stand testimony to a Government that have two points in their favour: common sense and control. I admit that the figure for social security brings to mind a quotation from Kipling's The Gods of the Copybook Headings:
"And that after this is accomplished, and the brave new world begins,
When all men are paid for existing, and no man must pay for his sins,
As surely as water will wet us, as surely as fire will burn
The Gods of the Copybook Headings with terror and slaughter return".
All the evidence shows that Conservative policies are succeeding in securing steady growth that can be sustained. With inflation and interest rates low and incomes rising, the prospects for the British economy remain the best for a generation.
Sadly, we do not promote ourselves. Despite all the pleadings of our industrial leaders, we forget that we are a success. It falls to foreign business leaders to acknowledge that our position today is the product of decisions that we took some time ago. It was Hans-Olaf Henkle, head of the German equivalent of the CBI, who said of Germany:
"We have too rigid labour laws, we have too high social costs and taxes, we work the shortest working week in Europe. The German Government spends 50 per cent. of GDP as opposed to 42 per cent. in Britain. No wonder we have a problem".
The economy of the United Kingdom is akin to a 500,000 tonne tanker: you cannot change its direction in less than seven to eight miles. But what does a mile at sea represent in terms of our position over the years, with all the impinging interests of international commercialism? It is a long time. Although it is said that 17 years for one government is enough, we need to remind ourselves that the tanker has changed direction. The objective of this Government is to double living standards over the next 25 years and to increase personal prosperity by making this country the enterprise centre
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of Europe. Central to that strategy is our resolve not to take risks with inflation and to end those days of boom and bust.
It is the ability of people to spend or save their own earnings which ensures the escape from poverty and the advent of prosperity. It is the Government's intent to reduce even further the burdens on business, to cut red tape, to cut state interference, and to increase further the competitiveness of British industry.
When we consider that unemployment has fallen by 770,300 men and women since its December 1992 peak, and that over the past six months it has fallen by nearly 600 people a day, then progress is the watchword. It is not merely the area of unemployment which is being overcome. There is the creation of new business, new investment. In the first nine months of last year 345,000 new businesses were set up, according to the estimate of Barclays Bank.
One of the figures that emerged from the recent inward investment debate that we had in your Lordships' House was the cost of employing a man with an equivalent take-home pay of £30,000 in this country and in Europe. It was interesting to note that the young man taking home £30,000 cost his company in this country £45,000 in benefits, taxation, national insurance and all the other non-wage costs which are part of our society. The most interesting comparison was made when that young man transferred to the same job with his company in Brussels. The cost to his employer was dramatic. It was no longer £45,000; it was £82,000—an increase of over 80 per cent.
The report by Dr. Eltis, Emeritus Fellow of Exeter College, Oxford, for the Foundation for Manufacturing Industry, dated 21st February, confirms that we in Britain are building the enterprise culture of Europe. It highlights the fact that higher business costs would mean less investment from overseas, and is convincing in its analysis. The Opposition's passion for the social chapter and the minimum wage would hit business and cost jobs.
It is no surprise that the stakeholder economy has been floated. This cloud of mystery and imagination is beginning to form. It is not some light cumulus on a summers day, it is a storm cloud—a cumulo nimbus—which has the violent currents within it of power to the unions, higher taxation, minimum wage, to say nothing of the perversion of the words "United Kingdom". It is nothing short of a tropical thunderstorm—the precursor to a typhoon.

BSE (Health)
4.23 p.m.
The Parliamentary Under-Secretary of State, Department of Health (Baroness Cumberlege): My Lords, with the leave of the House I should like to repeat the Statement made by my right honourable friend the Secretary of State for Health in another place. Before doing so I should like to declare an interest. My husband

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manages a dairy and beef producing farm. There have been cases of BSE, but we have no share in the farm's assets. The Statement is as follows:
"With permission, Madam Speaker, I would like to make a Statement about the latest advice which the Government have received from the Spongiform Encephalopathy Advisory Committee. The House will be aware that this committee which is chaired by Professor John Pattison was established in 1990 to bring together leading experts in neurology, epidemiology and microbiology to provide scientifically based advice on the implications for animal and human health of different forms of spongiform encephalopathy.
"The committee provides independent advice to government. Its members are not government scientists; they are leading practitioners in their field and the purpose of the committee is to provide advice not simply to government, but to the whole community on the scientific questions which arise in its field. The Government have always made it clear that it is our policy to base our decisions on the scientific advice provided by the advisory committee. The committee has today agreed new advice about the implications for animal and human health of the latest scientific evidence. Copies of the committee's advice, together with a statement from the Chief Medical Officer, which is based on that advice, have been placed in the Vote Office and the Printed Paper Office.
"The committee has considered the work being done by the Government surveillance unit in Edinburgh which specialises in Creutzfeldt-Jakob Disease. This work, which relates to the 10 cases of CJD which have been identified in people aged under 42, has led the committee to conclude that the unit has identified a previously unrecognised and consistent disease pattern. A review of patients' medical histories, genetic analysis, and consideration of other possible causes has failed to explain these cases adequately. There remains no scientific proof that BSE can be transmitted to man by beef, but the committee has concluded that the most likely explanation at present is that these cases are linked to exposure to BSE before the introduction of the specified bovine offal ban in 1989. Against the background of this new finding the committee has today agreed the series of recommendations which the Government are making public this afternoon.
"The committee's recommendations fall into two parts. First, it recommends a series of measures further to reduce the risk to human and animal health associated with BSE. My right honourable friend the Minister of Agriculture, Fisheries and Food will be making a Statement about those measures which fall within his department's responsibilities immediately after questions on this Statement have been concluded.
"In addition, the committee recommended that there should be urgent consideration of what further research is needed in this area and that the Health and Safety Executive and the Advisory Committee on
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Dangerous Pathogens should urgently review their advice. The Government intend to accept all the recommendations of the advisory committee in full; they will be put into effect as soon as possible.
"The second group of recommendations from the committee offers advice about food safety on the assumption that the further measures recommended by the committee are implemented. On that basis the committee has concluded that the risk from eating beef is now likely to be extremely small and there is no need for it to revise its advice on the safety of milk.
"The Chief Medical Officer will be writing today to all doctors to ensure that the latest scientific evidence is drawn to their attention. In the statement by the Chief Medical Officer, which we have placed in the Vote Office, Sir Kenneth Calman poses to himself the question whether he will continue to eat beef. I quote his answer. 'I will do so as part of a varied and balanced diet. The new measures and effective enforcement of existing measures will continue to ensure that the likely risk of developing CJD is extremely small'.
"A particular question has arisen about the possibility that children are more at risk of contracting CJD. There is at present no evidence for age sensitivity and the scientific evidence for the risks of developing CJD in those eating meat in childhood has not changed as a result of these new findings. However, parents will be concerned about implications for their children and I have asked the advisory committee to provide specific advice on this issue following its next meeting.
"Any further measures that the committee recommends will be given the most urgent consideration. As the Government have repeatedly made clear, new scientific evidence will be communicated to the public as soon as it becomes available".
My Lords, that concludes the Statement.
4.29 p.m.
Baroness Jay of Paddington: My Lords, I thank the Minister for repeating that disturbing Statement. It is an indication of the seriousness with which the Government now take the situation that there are to be two Statements this afternoon—one from the Department of Health, and one on agricultural matters to which my noble friend Lord Carter will respond.
It is unfortunate that the Government have now to tell Parliament that the possibility of a link between BSE and strains of CJD cannot be ruled out. That is after a decade of what one might describe as confident, sometimes almost dismissive, denials of all connections. I imagine that all noble Lords will remember the picture of the then Minister of Agriculture, Fisheries and Food, Mr. Gummer, feeding hamburgers to his daughter. I wonder whether he would do that so cheerfully today.
Perhaps I may remind your Lordships that at the end of February this year there were 158,277 confirmed cases of BSE in Great Britain and there are suspicions that many more have not been reported. By comparison,

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the number of cases of CJD is extremely small but the numbers have doubled in the past decade. Even someone with the most rudimentary understanding of medical statistics and epidemiology, such as myself, recognises that that kind of trend must be taken seriously. After all, cross species infection is not a figment of science fiction imagination. It is familiar and clearly recognised in conditions such as rabies contracted from infected dogs and the plague contracted from infected rats. I remind your Lordships that only last year there was a major outbreak of plague in India. Nearer to home, every year there are cases of bruscillosis caused by contact with cows who have undulant fever. The examples closest to BSE and CJD must be the human disease kuru and scrapie in infected animals. In those conditions, a serious viral illness develops slowly after exposure to infected products. Concern about the BSE/CJD link is obviously compounded by the very long incubation period before acute symptoms of human disease (CJD) may become apparent. I understand that the latent period of disease can be 10 years or more so that there may already be a large pool of people infected but not yet showing the symptoms of terminal disease.
As the Minister said in the Statement, it is only since 1989 that abattoirs have destroyed the parts of animals such as spinal cords and brains which were thought to be where the virus was most likely to be virulent if it entered the human food chain. At the end of November last year it was reported that the Minister would legislate to prevent the use of bovine vertebral column in the production of mechanically recovered meat.
Today the public needs information and reassurance. So far the BSE/CJD saga has been a public relations confusion and disaster. Facts have leaked out, scare stories have been spread, there have been scientific and medical challenges and too rapid political denials. Clear, authoritative, consistent information is important to enable people to understand and assess their own risks. It would be most helpful if the Minister could start by giving your Lordships answers to some specific questions today. If that is not possible perhaps she will give us an assurance that they will be rapidly forthcoming.
First, the Secretary of State said in the Statement which the Minister repeated that:
"There remains no scientific proof that BSE can be transmitted to man by beef, but the Committee has concluded that the most likely explanation at present is that those cases [of CJD in younger people] are linked to exposure to BSE before the introduction of the specified bovine offal ban in 1989".
Can the Government now give specific guidance on which offal products should he avoided today? Are they soups, sausages, pies and hamburgers? Are there any food manufacturers which the Government believe are particularly risky or are there any methods of preparing food which cause additional risk?
I am glad that the Government say that specific problems related to children will be the subject of specific advice later. We obviously welcome that because the Government are aware that there is grave concern about school meals and matters of that kind.
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Secondly, given the very long incubation period of CJD, can the Government give specific information on the potential risks to people who ate the products containing offal or similar products between 1986 when BSE was diagnosed and 1989 when the abattoir regulations came into force? While we welcome the Government, through the Chief Medical Officer, today sending scientific evidence to doctors, will they also make sure that specific guidance is given to the medical profession and local health authorities about identifying the early symptoms of CJD, including professional advice on early diagnosis?
Finally, we on these Benches had hoped that the Minister would tell us that there would be an inquiry into the whole affair and that we might all learn why such official complacency has been allowed to develop in the face of reputable scientific questions over a long period. Will the noble Baroness ask her right honourable friend to initiate such an inquiry and to make certain that those findings are reported to your Lordships' House?
The Statement announces a new research initiative and we welcome that. We are glad to hear that it will take place as soon as possible. Obviously, further knowledge in this field is absolutely vital. After all, we have no reason to be complacent about the appearance and spread of new diseases. The most notorious recent example is AIDS caused by the HIV virus. That lethal virus was not even identified until the early 1980s, yet today the Department of Health describes HIV infection as the greatest new threat to public health. Now public health may well be under a new and terrible threat. In spite of the commercial difficulties to the agricultural industry, which I know my noble friend Lord Carter will wish to address, and the political embarrassment to the Government, it is public health which must now be given the highest priority.
Baroness Robson of Kiddington: My Lords, I thank the Minister for repeating the Statement made in another place. I agree with everything that was said by the noble Baroness, Lady Jay, about the problem now facing us. I find most disconcerting the fact that the committee, when it considered the research work done at Edinburgh by the Government's surveillance unit relating to 10 cases of CJD which have been identified in people under the age of 42, recognises that this is a new strain of the disease and that the causes remain to be explained adequately. The committee states that those cases are likely to have been contracted before the 1989 ban. It states "likely" and there is no justification for that statement.
I, too, wish to ask the Minister some questions. The Minister in reading the Statement stated:
"Copies of the Committee's advice, together with a statement from the Chief Medical Officer which is based on that advice, have been placed in the Vote Office".
Until one minute before the Minister rose to address your Lordships I was hoping to obtain the Chief Medical Officer's advice. I have not yet been able to do so. Perhaps, therefore, we shall be asking unnecessary questions because we have not had the opportunity to read his suggestions.

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In relation in particular to the investigation in Edinburgh of the 42 cases, I am worried about the statement that those people must have been infected before 1989. That gives me no sense of security. The increase in the number of cases is worrying because in 1994 there were 55 new cases of CJD, which is 13 more than in 1993. The noble Baroness, Lady Jay, pointed out that the incubation period is long. I am told by medical friends that it is even longer than 10 years and can be 20 years.
The other self-satisfying part of the Statement is that the committee offers advice about food safety. On the basis that the new measures it is recommending are implemented, it concludes that the risk from eating beef is likely to be extremely small. The statement, "The risk is extremely small" has continually been made by the Government. It is not a new statement.
The other disturbing question is whether children are at greater risk than adults. They must inevitably be at greater risk when we think about the time lag of incubation. I am pretty old. If I ate some infected beef today, the odds are that I would be dead before I developed CJD. But young children who eat it will have many years before them during which they could run the risk of developing the disease. Surely parents will be most disturbed about the findings when they are reported in the press tomorrow.
I believe that the last part of the Statement is tragic. I refer to the part where the Minister mentioned the implications for children and parents and said that the advisory committee had been asked,
"to provide specific advice on the issue following its next meeting".
I have no idea when the committee's next meeting will take place. But, in the meantime, parents will be most concerned. In many ways we are discussing an interim report. What will happen in the meantime? Will the Chief Medical Officer, whose advice I have not seen, be making recommendations to local authorities on what to do about schools? Alternatively, are we going to allow local authorities to decide the matter, which means that some of them will serve beef in schools while others will decide not to do so?
Whatever we decide to do, the policy should have universal coverage. Moreover, what about health authorities and hospitals; and, above all, the general public? Many questions are raised in the Statement. It seems to me that, during the interim period before the new advice will be available, the disturbance among the general public will be very great.
Baroness Cumberlege: My Lords, I should like, first, to reply to the noble Baroness, Lady Jay. I really resent the comment that the Government are being complacent on the issue. We have always taken the matter most seriously since the disease was first discovered. The noble Baroness will know that we set up two scientific bodies in 1990 to safeguard public health—namely, the Spongiform Encephalopathy Advisory Committee and the National CJD Surveillance Unit. Both bodies have reported consistently to us; we have published reports; and we have tried to be as open as we possibly can on the issue. Of course, when one is open with the public, there will be some controversy.
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We know that research is not static and that it is always on the road to discovery. As new elements are discovered they are a subject of discussion.
The noble Baroness asked me about particular foods and what was and was not safe to eat. The best that I can do is to quote from the statement made by the Chief Medical Officer. I should like to apologise to your Lordships in that respect, and particularly to the noble Baroness. As she knows, I was in the Printed Paper Office trying to get that particular document released. I shall look into the matter and ascertain why that did not happen.
The message is consistent. There remains no scientific evidence that BSE can be transmitted to man by beef. In his statement, the Chief Medical Officer says that meat or meat products on the shelf or in carcass form do not need to be removed or destroyed. He goes on to say that there is nothing in the committee's advice to change the current advice on the safety of milk. As I quoted when repeating the Statement, perhaps one of the most testing questions is to ask the Chief Medical Officer whether he will continue himself to eat beef. As I quoted, he said that he,
"will do so as part of a varied and balanced diet".
The noble Baroness, Lady Robson, asked specifically about children. At present there is no evidence for age sensitivity. The scientific evidence for the risks of developing CJD in those eating meat in childhood has not changed as a result of the new findings. However, as the Chief Medical Officer says in his advice to us, parents will be concerned about the implications for their children. That is why the advisory committee has been asked to provide specific advice on the issue.
The noble Baroness also asked when the committee would be meeting and when people would receive the advice. The committee is meeting over the weekend, so we expect that advice to be available very soon. The noble Baroness asked about the incubation period. From the advice that we have, we believe that it is between five and 15 years.
The message is consistent. The noble Baroness seemed disappointed that, again, we are saying that the risks are very small. However, it is a consistent message. The reason for bringing it to your Lordships today is that there has been a discovery in that there are 10 cases which we believe are a different variant of the disease. In our spirit of openness, we wanted to make your Lordships aware of that fact.
4.45 p.m.
Lord Boyd-Carpenter: My Lords, I hope that my noble friend the Minister will be able to clear up what for me at any rate was not clear from the Statement. Can she say whether, as of now, the Government are advising parents and school caterers not to include beef or any other specific commodity in the diet of those for whom they are responsible? My noble friend indicated that there was an element of doubt, but is she aware that most parents are not prepared to risk doubtful commodities in the diet of their children? I suggest that it is up to the Government to indicate whether they

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would advise responsible parents and responsible headmasters not to include beef or any other article in the diet of those for whom they are responsible?
Baroness Cumberlege: My Lords, the Government do not wish to advise the general public in any way differently from the current advice; namely, that we advise schools that they should continue to serve beef for school meals. However, because an element of doubt is creeping in, we have asked the advisory committee to consider the matter. As I said, the committee will be doing so over the weekend. We expect further advice very shortly.
Lord Boyd-Carpenter: My Lords, will my noble friend the Minister answer the rest of my question about parents?
Baroness Cumberlege: My Lords, of course I understand the concern of parents. However, it would be totally wrong for the Government to issue some contrary advice—that is, advice that they do not give at present—without the scientific evidence to support it. We are searching for that evidence. As I said, we shall be advised very shortly. That advice will, of course, be given to parents.
Lord Winston: My Lords, with the greatest of respect, I do not want to say that the Government are necessarily being complacent hut, for several reasons, this strikes us as being a very complacent Statement. BSE and CJD are both puzzling disorders which are caused by a prion which is a curious particulate protein disorganisation which is not fully understood and, therefore, not easily traced in the usual way by looking, as one would, at other infections caused by viruses or bacteria.
However, one of the crucial questions—in fact, there are a number of questions which I believe are begged in the Statement—is that we need to know much more about the pattern of disease in the 10 cases which have just been reported. The highly significant fact is that they are under the age of 42. I believe that I am right in saying that CJD classically occurs in one or two per million of the population. It occurs mostly in older people, usually over the age of 60. What led us to recognise that the administration of growth hormone carried the disease to young children and what led scientists to recognise that there was a different disease was its sudden presentation between 10 and 20 years later in much younger people in their 30s and 40s.
The real question that we have to ask the Minister is: can she tell us whether or not the pattern of disease that has now been reported in Edinburgh is the pattern of disease seen in classic CJD, or is it the pattern of disease seen after the injection of growth hormone? Alternatively, are we seeing a new pattern of disease with a different kind of presentation and a different onset of dementia? If we are, I can tell your Lordships that we have a real problem. That is the essential issue. The problem is that the Statement does not give us information that we need.
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There are a number of matters that we need to know from the Minister. Have these patients had flu jabs? Have they been exposed to bovine serum albumen? Have they been exposed to hormones such as FSH or other exogenous proteins? We need the publication of the scientific evidence because that is how we shall judge whether or not it is a serious issue or a trivial one completely unconnected with offal or beef.
Baroness Cumberlege: My Lords, as a member of the medical profession, I am sure that the noble Lord will appreciate that the Government take advice from the medical and scientific community. We would not act without that.
As regards the individual cases, I do not have that detailed knowledge. However, I can tell the noble Lord that none of the 10 cases is the result of growth hormone or other medical interventions. These 10 cases come from the sporadic group. He will know that with this disease there are several groups, including iatrogenic, familial and GSS.
The committee and the other advisory committee which we set up, the National CJD Surveillance Unit, often submitted papers to the Lancet and to other learned medical journals. Perhaps they will do so in this case, but that is a matter for them; it is not a matter for me.
Lord Campbell of Alloway: My Lords, is there any recognisable symptom, apart from the onset of dementia, that a parent or anyone else can appreciate? Is there any effective antidote? If so, is the antidote or the treatment freely and generally available? I ask in ignorance; I really do not know.
Baroness Cumberlege: My Lords, this is, of course, a very rare conditions, As the noble Lord, Lord Winston, said, it is found in only one in a million; it is extremely rare. I am not sure whether it has ever been found in young children, but there have been cases in teenagers. The group being looked at involves those under 42. As my noble friend said, very often it is found in elderly people.
Not only dementia, but also an uncertain gait, and sight and speech impairment are physical symptoms of this disease. As regards an antidote, there is not one. There is not a test either. That is why it is a quite difficult disease to identify and to control.
Lord Ewing of Kirkford: My Lords, is the Minister aware that Sir Kenneth Calman, the Chief Medical Officer, is a man for whom I have the highest regard? However, it does no good for Sir Kenneth to say that he will continue to cat beef. That reflects shades of Edwina Currie saying that she will continue to have a boiled egg while telling the nation that eggs caused salmonella poisoning. I appeal to the Minister to use her not inconsiderable persuasive powers to stop public figures from making such statements which do not reassure the public. Millions of people will not rush into restaurants either tonight or Saturday night saying, "Sir Kenneth Caiman will have a steak so it must he all right for me to have one too". It does not work like that.

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Perhaps I may ask two practical questions. First, will the Government provide the resources necessary to fund additional research? Secondly, does the issue of food labelling have any implication for the consumer?
Baroness Cumberlege: My Lords, I really resent the comments made about the Chief Medical Officer. I share the noble Lord's view that he is a man of enormous integrity. However, the Chief Medical Officer on frequent occasions has been asked by the media whether he would eat beef. Therefore, as the media feel it an important question, it seemed appropriate that he should answer it straightforwardly in his statement.
The Government have set aside £4.5 million for research. That is in addition to the MRC and other funding bodies. It will be up to the research and development division to commission the research and to ensure that its protocols and submissions are speedily considered.
I do not believe that there are implications as regards food labelling. But that is a matter shared between the Department of Health and the Ministry of Agriculture.
Lord Harris of Greenwich: My Lords, first, perhaps I may return to the question asked by the noble Lord, Lord Boyd-Carpenter, about the position in relation to parents and local education authorities. What should a local education authority do tomorrow? Does it serve beef or not? As I understand the noble Baroness, so far as the Government are aware there is no particular risk as regards children. Notwithstanding that, the committee is having a weekend meeting to discuss that precise question. I do not wholly understand the logic of that position. Perhaps the noble Baroness will clear it up for us.
Secondly, the noble Baroness kindly said that she would look into the circumstances in which the statement of the Chief Medical Officer was not available in the Printed Paper Office. I hope that that will be done. I am sure that she will follow it up. It is very disturbing that a statement of this considerable public importance is not available to Members.
Baroness Cumberlege: My Lords, I agree with the noble Lord on the second point.
As regards advice to local authorities and parents, the scientific committee advising us has said that there is at present no evidence of age sensitivity. Those findings do not change the scientific evidence of developing CJD in those eating meat in childhood. The committee will, of course, provide further advice, as the noble Lord said. At this moment it sticks with its current advice.
Lord Lyell: My Lords, will my noble friend give me some advice on the plethora of figures? Do I understand that these cases involved people below the age of 42? Is there any significance in that specific age; and, if so, why?
Baroness Cumberlege: My Lords, most post mortems reveal a much greater incidence of Alzheimer's
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and other brain damage among older people. At present the research is with young people—the cases involved are under 42 years of age.
Lord Gladwin of Clee: Lords, it is not a question of whether the Chief Medical Officer will eat beef, or whether we will eat beef. Is not the question whether young children in schools should be given beef products and products made from offal? Is that not where the doubt arises?
Baroness Cumberlege: My Lords, I believe that I have answered that question several times this afternoon. There is at present no evidence of age sensitivity; and the findings do not change the scientific evidence of developing CJD in those eating meat in childhood. I think that that is quite clear. Clearly there is anxiety on this issue. That is why we have asked the scientific committee to consider the issue again and to come back to us with its findings. As I said, it will be meeting over the weekend.
Baroness O'Cathain: My Lords, will my noble friend clear up some confusion in my mind? The abattoir regulations were introduced in 1990. First, if those regulations have been strictly enforced from 1990 to the present day, should there be no worry for people eating beef now? Secondly, are the Government utterly convinced that the abattoir regulations are being strictly enforced?
Baroness Cumberlege: My Lords, the statement by the Spongiform Encephalopathy Advisory Committee is that the most likely explanation at the moment for the 10 cases .is that they are linked to exposure to BSE before the introduction of the ban in 1989. As to the second part of my noble friend's question, I shall leave it to my noble friend, who will pick up the agricultural issues in a moment.
Lord Blease: My Lords, has the Minister any information about the implications on the international scene? Has any information or have any statistics been brought forward on what is happening in EC countries or internationally? It is important for our business associations and for cross-Community relations that we should be aware of what is happening in other countries.
Baroness Cumberlege: My Lords, CJD is no more prevalent in this country than in other European countries. Indeed, it is no more prevalent in countries that do not have BSE. That is a telling statement.
Lord Bruce of Donington: My Lords, has the Minister any specific recommendation—I emphasise the words "specific recommendation"—as to the future use of beef offal?
Baroness Cumberlege: My Lords, the Government have taken action in removing the offal that was thought to be a carrier of the disease. As to my giving specific advice this afternoon, I would not do so. I want it to be based on the scientific evidence that we shall receive shortly.

BSE (Agriculture)
5 p.m.
The Parliamentary Under-Secretary of State, Scottish Office (The Earl of Lindsay): My Lords, with the leave of the House, I shall now repeat a Statement on BSE which is being made in another place by my right honourable friend the Minister of Agriculture, Fisheries and Food. The Statement is as follows:
"In view of the Statement which my right honourable friend the Secretary of State for Health has just made, the House will wish to know the action I propose to take to ensure the risk to the public is minimised.
"The additional recommendations just made by SEAC that most immediately affect agriculture departments are that carcasses from cattle aged over 30 months must he deboned in specially licensed plants supervised by the Meat Hygiene Service and the trimmings kept out of any food chain; and that the use of mammalian meat and bonemeal in feed for all farm animals be banned.
"The committee goes on to state that if these and its other recommendations are carried out the risk from eating beef is now likely to be extremely small.
"The Government have accepted these recommendations and I will put them into effect as soon as possible. Any further measures that SEAC may recommend will be given the most urgent consideration.
"Also, and with immediate effect, I have instructed that existing controls in slaughterhouses and other meat plants and in feed mills should be even more vigorously enforced.
"I do not believe that this information should damage consumer confidence and thus the beef market. But I should say that support mechanisms exist in the common agricultural policy and the Government will monitor the situation closely. I will naturally report developments to the House.
"I recognise that there will be public concern, but the Government's Chief Medical Officer advises us that there is no scientific evidence that BSE can be transmitted to man by beef. Indeed, he has stated that he will continue to eat beef as part of a varied and balanced diet, as indeed shall I. In view of what I have announced, we believe that British beef can be eaten with confidence."
My Lords, that concludes the Statement.
5.2 p.m.
Lord Carter: My Lords, I thank the Minister for repeating the Statement which was made by his right honourable friend in another place. In responding to it, I should declare an interest. The farming company of which I am a shareholder and director has dairy cattle in its farming. As the Minister said, it is a serious matter. The effect on the cattle industry is obviously grave, but immediately I must agree with the remarks of my noble friend Lady Jay that public health must come first.
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If the Government have changed their view on the possibility of a link between CJD and BSE, it is serious. There must be the fullest and most open publication of all new information that the Government have on the matter. When the Minister replies, perhaps he could tell us whether there is any further information to come.
There are three immediate steps that the Government should take. First, they must ensure that cattle that have BSE are not going into our food chain. That will mean ensuring that no animals displaying the symptoms of BSE are slaughtered for food and making sure that the controls are watertight. It will also mean redoubling their efforts to establish a reliable live test for BSE. It would be helpful if the Minister could tell us what is the state of play on research for establishing a live test for BSE. In that way we shall know which animals are carrying the agent before they start to display the symptoms and they can be slaughtered.
Secondly, the Government must make sure that none of the specified bovine offals and other organs that have been identified as being carriers of the BSE agent are getting into our food. The Minister had to accept last year that there had been a failure there and the control regime was tightened up. He must take an urgent look again at the efficacy of the controls.
Thirdly, the Minister must ban from human food the specified offals of calves under the age of six months. Calf brains are still allowed into our food. The House of Commons Select Committee on Agriculture recommended six years ago that those offals should be banned. The ban must be brought into force forthwith.
Have the Government considered the likely effects on our beef exports? I repeat the point that I made about the importance of research into a means of identifying BSE in cattle before the symptoms appear. I refer to research mentioned in the previous Statement:
"the Committee recommended that there should be urgent consideration of what further research is needed in this area and that the Health and Safety Executive and the Advisory Committee on Dangerous Pathogens should urgently review their advice".
Obviously, we agree with that; but what is the situation with agricultural research and the identification of the agent in live cattle?
The Government bear a direct responsibility for what happened between 1986 and 1989. The Minister will remember that for some considerable time the Government only paid half compensation, half the market value, on the infected animals. That led to a considerable risk of infected animals entering the food chain through farmers deciding that if the animal looked a hit groggy, they would send it to the cattle market and get the full value from the market rather than half compensation from the Government.
When I put down a Question for Written Answer about the saving to public funds of that policy, which was eventually changed, I was told that it was £4 million. That is disgraceful. The Treasury saved £4 million through that policy and undoubtedly the result was that infected animals reached the food chain.
It behoves all of us to do our best not to spread panic and alarm. Equally, the public must have their confidence restored. There are two specific points on the Minister's Statement. First, he said that,

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"the risk from eating beef is now likely to be extremely small."
I understand that a risk analysis has been carried out. How small is the risk? Can the Minister give us the figure shown by the risk analysis? Secondly, the Statement says:
"I do not believe that this information should damage consumer confidence and thus the beef market."
If the Minister believes that, he will believe anything. The way the Government have handled the matter today, with the joint Statements and other actions, can only damage consumer confidence and the beef market. I hope that the Minister can assure the House that all government departments involved—health, agriculture and so on—will make the restoration of public confidence paramount, through the fullest and most open publication of the relevant information.
Lord Mackie of Benshie: My Lords, from these Benches I thank the Minister for repeating the Statement. We very much agree with what the noble Lord, Lord Carter, said. Public health comes before the financial welfare of the beef industry, and of that there is no question. However, a number of actions could help. The first is that we had the reassuring statement from the committee that there is no need to change its advice on milk. That is useful to the industry.
However, the Statement contains a number of points which worry me. First, there is the fact that the use of mammalian meat and bonemeal will be banned. I thought that much of the use of mammalian meat and bonemeal had been banned. What new bans will be imposed? Certainly, any products resulting from the removal of spinal cords and other parts that are thought to be a possible source of infection should be totally banned and destroyed.
Another matter on which the Minister must respond is this. If the intention is to debone all cattle over 30 months in specially licensed plants, how soon will those plants be set up? How many plants can be set up in the United Kingdom so that cattle do not have to be sent immense distances before they can be treated?
Will the Minister assure the House that the suspicion of infection relates not to the good steaks and roasts of beef that come from our cattle, but to the offal and to certain other parts? Will it be made absolutely certain that those parts cannot enter the food chain? That would reassure people. I find an indication from the Chief Medical Officer that he will continue to eat beef quite reassuring. However, there is a lot more to this matter than his confidence.
Will the Minister tell the House what is the progress of the disease in cattle'? I understand that it has been falling, and falling fast. Will he give us the up-to-date figures for the reduction in BSE in the whole cattle stock in the country?
The Earl of Lindsay: My Lords, I am grateful for the interest and for the points raised by the noble Lords, Lord Carter and Lord Mackie of Benshie. Questions are being asked about today's developments and it is useful to air them here. I can assure both noble Lords, and especially the noble Lord, Lord Carter, who made this his first point, that the Government have always been,
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and will always be, open about BSE and any concerns that spring from it, such as a possible link to CJD. That has been the case for many years. We have been, and always will be, guided by the experts on this subject. We within government cannot pretend to be scientists. However, we know where the expertise is, and we shall be guided in policy by those experts.
The noble Lord, Lord Carter, asked if there was more information to come. Indeed there is. The SEAC committee will sit very soon to consider whether further measures might be needed. It will report to Ministers as soon as it has come up with those details. In turn, Ministers will place that information in the public domain. The major research programme that is being conducted behind SEAC will also deliver information when it is ready.
Funding for research into these areas is fairly substantial. For research into CJD and BSE together it totals about £9 million; for research into BSE alone it has gone up by nearly 20 per cent., from between £5 million and £6 million to between £6 million and £7 million. Therefore, there is considerable commitment to establishing necessary answers to the questions. There are some promising findings coming forward from that research. But the speed with which they are being developed and proven to the point when they can be incorporated into policy and farming practices is slow. One of the inevitable features of this kind of research is that early findings have to be developed sufficiently before they can be translated into farm practice.
The risk analysis that the noble Lord, Lord Carter, demanded is extremely difficult. The entire SEAC committee of experts has been fielding questions by Ministers and others regarding details of risk analysis. One essential problem lies at the heart of this whole issue. We are still dealing only with theoretical risk. There is still no proven link between BSE and CJD. There is still no evidence that man can get CJD from beef. Therefore, all that the scientists have to work with is theory. It is because they see the theoretical possibility of a link that they asked us to take this action, and we are taking it. If there was evidence of a proven link, risk analysis would be very much easier.
As my noble friend Lady O'Cathain mentioned, the SBO regulations led to much tighter practices within slaughterhouses and other meat processing plants. Those came into force in 1989. Some failings have been identified, many of which were of a fairly minor kind. For instance, if all offal has to be stained, the rule is that it is stained on all sides. It was not always the case, for instance, that every side of all the offal was properly stained. However, those regulations and practices have been progressively tightened. They will be tightened considerably further after today's announcements. I remind noble Lords that the Meat Hygiene Service has the major obligation to ensure compliance. The State Veterinary Service ensures that the Meat Hygiene Service is fulfilling that obligation.
The noble Lord, Lord Carter, complained about the fact that initially we offered only 50 per cent. compensation to farmers who had BSE-infected cattle.

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In fact, we have been offering them 100 per cent. for over six years now. In retrospect, we possibly unwittingly allowed a temptation to which some farmers may have succumbed. Since February 1990, that avenue has been closed to them. We pay farmers full market value compensation for BSE-infected cattle that have to be destroyed. It is also against the law for farmers not to report a BSE-infected cow to either MAFF in England or the Scottish Office in Scotland. So, quite apart from receiving full compensation, they are breaking the law if they fail to do so.
The noble Lord, Lord Carter, said that the House of Commons Select Committee called for a ban on access to the brains of calves under the age of six months. I point out that if SEAC, the committee of experts, tells us that that is what we should be doing, we will do it. I am absolutely certain that the committee will continue to examine this point. It has access to the research that has been done in this respect. Calves that have been deliberately infected with BSE, even when they reach the age of 18 months, still show no infection in the brain. Therefore, by allowing the sale of calf brains up to six months, there is a 12-month safety margin. If SEAC experts tell us that the use of brains of calves under six months should also be banned and destroyed, we will act on that advice immediately.
I turn quickly to a point made by the noble Lord, Lord Mackie of Benshie. Public health is paramount. I hope that there is no suggestion that we have ever put the beef industry and its livelihood ahead of public health. If anyone suspects that, it is a misunderstanding. I confirm that the safety of milk is absolutely undoubted. The SEAC committee has always said that milk is safe, and today it reiterated that advice to the nation.
On the point about meat and bonemeal, since 1988 it has been banned from being fed to ruminants. The pig and poultry world was, however, still able to gain access to meat and bonemeal. Today's announcement in effect bans even its supply to the poultry and pig markets. It therefore prevents any confusion on farms where, for instance, there are different animals being tended, and prevents meat and bonemeal supplies being fed to the wrong animals.
I hope I have answered most of the questions from the two spokesmen opposite. It is important to stress that in this matter we will always be guided by the scientists. Records show that the 1989 specified bovine offal order has produced a dramatic fall in recent years in the number of BSE cases being confirmed. There are now about 250 new suspected cases across the UK being confirmed each week. That is a dramatic fall from the very high figures of 1992–93. In Scotland, the figure has dropped to less than one a day. So the measures put in place in 1989 have begun to take effect. The measures that we have added today should speed up the total elimination of BSE.
5.20 p.m.
Lord Boyd-Carpenter: My Lords, in his original Statement, the Minister indicated what was being done
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in the case of beef created by slaughter in this country. Can the noble Earl say what steps are taken in respect of imported beef and offal?
The Earl of Lindsay: My Lords, both within UK regulations and European regulations there are extremely strict rules applying to all food products imported into this country. Although there is some incidence of BSE in other countries—Ireland, France and Switzerland spring to mind—in fact the extent to which this BSE has taken hold is very small indeed. I can assure my noble friend that the meat and other hygiene conditions which apply to all food products coming into the country are sufficiently tight, and the public buying imported beef can be reassured by that.
Baroness Seear: My Lords, can the noble Earl say whether the bone meal he spoke of is the same as the bonemeal that we throw on the garden to boost our vegetables? If so, could the disease get into them?
The Earl of Lindsay: My Lords, rather than assuming that I know the answer to that question, perhaps I may write to the noble Baroness and tell her exactly.
Lord Monkswell: My Lords, I thank the Minister for his Statement. Perhaps I may pick up one matter that was raised in the Statement and ask some questions about a point that has not so far been mentioned this afternoon.
The Chief Medical Officer's statement said that he would continue to eat beef. We need to beware of statements from people in what I might call high positions. We remember that the chief executive of Yorkshire Water said that he had not had a bath and it transpired that he had gone over the border and had a bath with friends and relations. That was not available to the population of Bradford. The Chief Medical Officer said that he will eat beef. Is he to continue to eat British beef or will he eat imported beef that may not be available to the rest of the British population?
I have two more serious questions, if I may put it that way. A large number of people in this country derive immense personal reassurance and a degree of assistance in leading their lives from their pets. Cases have been reported in the media of domestic cats that have succumbed to a disease similar to CJD and BSE. At this point, I suddenly remember that I must declare an interest because in my family we have two cats.
What advice will the Government give to pet owners? Secondly, what research is being conducted to ensure that pets are protected from the risk of contracting that kind of disease?
The Earl of Lindsay: My Lords, neither the noble Lord, Lord Monkswell, nor the noble Lord, Lord Ewing, should feel disturbed by the Chief Medical Officer broadcasting his decision to continue to eat beef. My informal understanding is that members of SEAC, who have been researching this topic in a more expert fashion than any others, are also of the opinion that beef remains a crucial part of a varied and balanced diet. They are very aware that it is only a theoretical risk.

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There is no firm evidence. Moreover, the theoretical risk is not between beef meat—the flesh or muscle that we buy in butchers' shops or on the bone—and CJD; but between bovine offal—specified offals which have been known to become infected by BSE—and CJD. So it is a theoretical risk between bovine offal and CJD that they are researching.
The Chief Medical Officer and others also know that the existing measures have already produced dramatic results in the decline of BSE, that the risk is extremely small and that the new measures, in addition to the existing measures, make an extremely small risk yet smaller.
When people in public life and such positions whose habits are subject to scrutiny decide to eat beef, they do so quite deliberately on the scientific information that is available to them. With regard to pets, the SEAC remit is without any restraint whatever. Wherever BSE exists or any of the concerns that spring from it, SEAC is able to investigate. I know that the pet food industry and pets generally are an area covered by SEAC which it will continue to look into.
Lord Harris of Greenwich: My Lords, the noble Earl referred to the work of the Meat Hygiene Service. In the Statement of his right honourable friend, there was reference to existing controls being even more vigorously enforced. That is reassuring, except that many of us would have assumed that the controls had been vigorously enforced for a substantial period of time. Can he say what specifically will change as a result of the Statement? Will more staff be employed, for instance, by the Meat Hygiene Service to make quite sure that the existing controls are fully implemented in slaughterhouses.
The Earl of Lindsay: My Lords, instructions have already gone out to the Meat Hygiene Service and the State Veterinary Service today that compliance with every control that has been in place since 1989, including the regulations from 1995, for instance, which tighten the 1989 regulations, must be absolutely and rigorously enforced.
Secondly, more continuous visible inspection is required at crucial moments in the slaughtering process, especially when a carcass is split, which involves the backbone potentially coming into close contact with open meat that could then be sold at a later date. We fully recognise that the Meat Hygiene Service must put in more hours in order to perform that duty. We shall fund the additional workload that we impose upon them.
Baroness O'Cathain: My Lords, I am absolutely convinced that my noble friend the Minister is right and that the risk is only theoretical. Otherwise, why would scientists say that? The effect on public confidence has been huge as has the effect on the standing of our farming in international circles. The epidemic of BSE has been here for 10 years. In 1967 there was a frightful epidemic of foot and mouth disease in our national herd. That was stamped out by burning all the diseased cattle.
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Is it not now time to take the radical decision to burn all infected animals and once and for all get rid of this disease?
The Earl of Lindsay: My Lords, I sympathise with the concern and frustration expressed by my noble friend. All BSE infected animals are destroyed and burned in incinerators. There is no chance of parts of such an animal entering the food chain in any way whatever. There is a danger, if we burn animals that do not have confirmed infectivity, that we begin to burn animals which do not suffer from BSE but from some other ailment.
Baroness O'Cathain: My Lords, my point is that, so far as I remember, in 1967 over two million cattle were destroyed because of foot and mouth disease. That got rid of the disease absolutely. We are speaking currently of around 167,000 cattle. I should have thought that the risk of burning animals that were not infected should be set against the advantage of ridding the country of BSE.
The Earl of Lindsay: My Lords, I understand the point that my noble friend made. As I said, the farmer who has a BSE-infected animal must report that animal. He will be paid full compensation for it. There is no incentive whatever for the farmer to keep that animal on his farm.
As I said before, the incidence of BSE is dropping quite fast. The total number of cases of BSE, which is just under 160,000, is the total number of cases recorded over a 10-year period. In fact, in 1995 the incidence of BSE was 40 per cent. lower than in 1994 and the numbers in 1994 were significantly lower than in 1993. On the graph, the line is extremely sharp in its downward curve.
My noble friend mentioned the issue of public confidence, which is vital. The noble Lord, Lord Carter, rather mocked me for my hope that public confidence would survive this incident. I know that there was a large and healthy degree of optimism in the Statement from my right honourable friend. However, one would hope that, because we are dealing with a theoretical risk of a connection between bovine offal and CJD where there is still no firm evidence of it, responsible scrutiny within the public domain and responsible reporting by the media will minimise the impact which will undoubtedly be felt. If we can minimise that impact and speed recovery back to normal beef-buying patterns, we will he doing everyone a favour.
Lord Winston: My Lords, I apologise that inexperience led me to be on my feet too long last time and I promise to be brief this time. I accept completely that part of the reason we have this problem is that we have such good public health surveillance and control in this country. That is to the credit of the Government and I want to make that point.
Perhaps the Minister can give me an assurance—nobody wants to damage our excellent beef industry—that there will be a continued search to make certain that no other exogenous proteins are involved in connection with the disease in those patients. For example, in medical research we use bovine serum albumen, derived

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from cattle, for the culture of viruses for immunisation. It was suggested that that may be a possible carrier for the disease. Similarly, we regularly use a number of hormones which are mammalian derived. I want to make sure that we obtain the fullest information in that regard as soon as possible.
The Earl of Lindsay: My Lords, I am grateful to the noble Lord, Lord Winston, for his recognition that surveillance on public safety matters is rigorous and, I hope, effective.
The search into all aspects of BSE and its theoretical link to CJD will continue with increasing funds being made available and therefore increasing research projects and jobs. SEAC will remain in a strategic position to gather in research and indicate where the research is needed. SEAC tells us what we must hear; we do not tell SEAC what we do and do not want to hear. I can therefore reassure the noble Lord that all areas, including those he mentioned, will be considered by SEAC as part of the research projects.
The noble Lord mentioned various special uses of bovine materials in the medical profession. I know that vaccines are completely safe and have been for some years. We anticipated that there may have been public anxiety in that regard. Both myself and my noble friend the Minister for Health made sure that we were equipped to reassure people that SEAC is absolutely certain that everything from gelatine and stock cubes to vaccines and cat gut are safe; that safety is not compromised in the making of any of those products. They are all composed from BSE-free sources or, in the case of gelatine, its production is such that any BSE infection is unable to survive.
Lord Ewing of Kirkford: My Lords, reverting to the question of the noble Baroness, Lady Seear, perhaps, in my usual way, I can be helpful to the Minister by asking him if he is aware that the bonemeal that we use on our gardens is sterilised at an extremely high temperature and is therefore quite safe? In the spirit of the exchanges perhaps I can announce that Lord Ewing of Kirkford, former winner of the Rose Bowl for the best garden in Leven and enthusiastic gardener, will continue to scatter bonemeal on his garden.
The Earl of Lindsay: My Lords, as a neighbour, give or take five miles, of the noble Lord, his horticultural prowess is well known over a wide radius. I am therefore grateful for the wisdom that the noble Lord brings to the discussion on horticultural bonemeal. However, I shall deliver the letter in case the noble Baroness wants a second opinion.
Lord Vinson: My Lords, does the Minister agree that there is some comfort to be drawn from the fact that this disease has been known to he present in sheep for over 200 years and there does not appear to have been any major health hazard in humans as a consequence? Perhaps we can draw deep comfort from that. In fact, we may he talking about a storm in a teacup.
The Earl of Lindsay: My Lords, my noble friend makes a good point that over a 200-year period some
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sheep have been diagnosed as having scrapie and there has never been any evidence of that entering the human food chain. However, the SEAC committee will continue to pursue any area where it believes that the theoretical risk to public safety justifies its exploration. Indeed, the area it identified today is one where, though there is no real evidence, it feels justified in alerting us to the possibilities.
Lord Mackie of Benshie: My Lords, perhaps I can ask a question from the Back Benches. The Statement states,
"I do not believe that this information should damage consumers' confidence and thus the beef market. But I should say that support mechanisms exist in the Common Agricultural Policy and the Government will monitor the situation closely".
That does not appear to me to be definite enough. If great damage is done to the beef industry, will the Government support it?
The Earl of Lindsay: My Lords, as I said when I repeated the words of my right honourable friend in another place, we will continue to monitor the situation. Nothing has been stated by the CMO or SEAC that can in any way justify a long-term or structural decline of the beef industry in this country. The risk is not proven; there is no evidence; the whole thing is theoretical.
Agricultural Ministers will continue to be concerned for the livelihood of farmers. For instance, the noble Lord will not be surprised to hear that beef makes up 30 per cent. of Scotland's entire agricultural output. The value to Scotland of its exports of beef is around £180 million per year. It has almost doubled in the past few years. It is a valuable commodity. If the farming industry .and the beef sector suffer unduly and disproportionately from events such as today, we will he monitoring the situation and seeking appropriate measures.
Lord Annan: My Lords, is this, like the decline in the male sperm count, a case of an issue being hyped up by the media? All the answers given by the noble Earl suggest that the risks are minimal, though the noble Lord, Lord Winston, made an extremely important point.
The Earl of Lindsay: My Lords, in some respects the noble Lord, Lord Annan, makes a good point; that is, that the response by the Government, by those in the public domain such as noble Lords in this House and by the media should he proportionate to the news delivered by the experts. It would he disproportionate and unjustified if they delivered today's announcement from SEAC and the CMO in a light that scaremongered beyond that justified by the evidence.
I have stressed many times the theoretical aspect of this case and that we are talking about a further reduction of an already small risk. There is considerable reassurance in that. In addition, SEAC feels that the most likely way in which the 10 people who are believed to have suffered from a new form of CJD may have been exposed to a possible BSE route or pathway arose from experiences that occurred 10 years ago, perhaps in the 1980s before the measures we took in

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1989. I therefore share the noble Lord's plea that the media and others deal with this whole issue realistically and in the proportion that it deserves.

Economic Strategy
5.40 p.m.
Debate resumed.
The Earl of Longford: My Lords, we have been discussing matters of great national urgency and for myself I am glad that I was not waiting to make my maiden speech. I console myself with the line of the poet that,
"even the weariest river
Winds somewhere safe to sea",
and I suppose that it happened on this occasion. I had the pleasure many moons ago to follow the noble Viscount, Lord Oxfuird, who in his speech recalled my earlier life in the Conservative Research Department. The arguments he was peddling, if I may put it that way, were the ones I was employed to peddle more than 60 years ago. Our favourite message came in a leading article in The Times which began:
"Unfortunately, wealth is like heat. It is only when it is unequally distributed that it performs what the physicists call work".
That was the argument we were taught to peddle then—the unequal society. I shall come back to that in a moment.
I am not presenting myself as any kind of economist these days, although I once taught at the London School of Economics. I shall leave economics to my noble friend Lord Chandos when he comes to wind up. I shall not present myself as a banker, although I was chairman of a hank for eight years. To console any Left wing people who think that I may have been corrupted then, I was blackballed by the City Club as a socialist, so I retain my virginity so to speak. I shall leave the economic arguments and assessments to the experts, including my noble friend who initiated the debate, and we have other economic experts on our Benches. I shall deal with the social side.
The social facts are surely beyond dispute. The statistical facts are, so far as I know, accepted. Wealth was more equally distributed steadily under various governments, Conservative and Labour, until 1979. Then Mrs. Thatcher came in. She was not solely responsible for what happened but she was the leader of her party. It produced a new philosophy and from then on until now wealth has been more unequally distributed. I do not know whether the noble Viscount, Lord Oxfuird, and others who support that line would be happy with that and would say that that is what they want—more and more unequal distribution. I do not know whether they are pleased with that unequal distribution. I say it is damnable. It is the opposite of social justice.
Despite my early start in the wrong direction, I must mention that I have been a member of the Labour Party for 60 years. I have been a Labour Peer in your Lordships' House speaking from the Front Bench and
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the Back Benches for 50 years. So I think I can call myself old Labour—certainly old and Labour. Therefore, I am entitled to say how much I welcome the New Labour of Mr. Tony Blair. I have long since given up the idea, if I ever entertained it, that all wisdom was delivered to Keir Hardie or indeed to the Webbs. I revere the memory of Clem Attlee, the leader of the party for 20 years, the greatest Englishman I have known. I shall not make a comparison with another hero, de Valera, as he was Irish. I feel confident—it is of course a matter of opinion: it cannot be proved in this life—that Clem Attlee would be very happy with Tony Blair as leader and with New Labour.
What does New Labour amount to apart from a successful vote winning formula? I have no doubt that at 34 points ahead in the opinion polls we shall win the next election. I have no doubt that it is a winning formula, but what does new Labour amount to in terms of social justice? In this House last summer I remember saying—I have said it before now; I said it when I joined the Labour Party 60 years ago—that I am a socialist because I am a Christian. You do not hear much about socialism today. I heard Tony Blair, a member of the Christian Socialist Group, as are several other members of the Shadow Cabinet, speak very eloquently and powerfully at Brighton twice last autumn—once at a TUC meeting and once at the Labour Party Conference. But socialism, so far as I know, was not mentioned. "Socialism" is not now used as a word, yet I have not altered my opinions since last summer when I said that I am a socialist and I am a strong supporter of Mr. Blair.
As I see it now, the real quest is for social justice. It must he a passionate quest, as it always has been, and there must be a total denial of the economics of the Conservative Party which takes pride in Thatcherism and an ever greater inequality of wealth. There is a terrible conflict. Many people occupy middle positions. But between the good loyal Conservative—one or two have spoken already—and the Labour Party there can be no meeting because one wants to see more and more inequality of wealth and the other wants to see more and more equality. There is no meeting point between those two positions.
How do I see the future? How do I approach it in my own mind? I hope we are moving forward with two commitments—one to social justice and the other to the greatest possible increase of wealth. I draw my text from Luke, Chapter 14:
"But when thou makest a feast, call the poor, the maimed, the lame, the blind: and thou shalt be blessed".
How is that to be combined with winning over the middle classes? It can be done, but it will take some doing. That is the problem and we must face it. The reverend Bishop Sheppard of Liverpool once wrote a book entitled Bias to the Poor. We must never lose sight of that.
We must somehow encourage those who give the employment to give employment; in other words, make business profitable. That means rejecting the idea that "profit" is a dirty word. I do not know whether it is used much now by our leaders. When I was a young socialist the thought of profit was anathema. I say that we must

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allow business to make profit but social justice must always come first. Because I believe that Tony Blair has the root of the matter in him I am very happy to think he will be our leader for years to come.
5.48 p.m.
Lord Acton: My Lords, I should like to congratulate my noble friend Lord Sempill on his splendid maiden speech. When he goes into his new business I am convinced that, if he is as good at business as he is at speaking, he will do very well indeed.
In 1906 Winston Churchill called unemployment,
"that great and hideous evil of insecurity by which our industrial population are harassed".
In 1996 unemployment remains an economic and social horror, and its current level in Britain is a cause for great concern.
However, the Government seem strangely complacent about unemployment. Again and again we hear from the Dispatch Box that, as the British rate of unemployment is lower than that in Germany or the still higher levels in France and Italy, Britain seems to be doing rather well.
What, then, is unemployment like in Germany? The Financial Times reported the answer on 7th March this year. The article was headed,
"German jobless total hits highest level since war".
The German Labour Office had given an unemployment rate for February of 11.1 per cent., seasonally adjusted to 10.3 per cent. That report prompted me to consult a book called International Historical Statistics Europe 1750–1988 by B.R. Mitchell. Its table on German unemployment had no statistics from 1941 to 1947. I found that the last year which recorded unemployment in Germany as being higher than today's seasonally adjusted figure was 1935. That is 60 years ago. Bafflingly, we are now told that Britain is doing rather well because its rate of unemployment is less bad than the truly appalling performance of Germany, whose rate now approaches the level seen just two years after the end of the Weimar Republic.
We live in a global economy and it is instructive to compare Britain's performance with that of the large industrialised countries outside Europe. In a Written Answer of 26th February, the Minister kindly furnished me with the then latest unemployment figures for the United Kingdom, the United States and Japan. These comparable unemployment figures, on the International Labour Organisation definition, were published by the OECD.
The rate of unemployment in the United Kingdom was 8.6 per cent.; in the United States, 5.5 per cent.; in Japan, 3.2 per cent. These statistics emphasise just how disturbingly high British unemployment is. I suggest that only when Britain gets down to the American level of 5.5 per cent. will it be time to heave a sigh of relief. But the ultimate goal should surely be a British rate comparable to the 3.2 per cent. of Japan.
When pondering the unemployment rates in the United States and Japan, do the Government really think that we are doing rather well?
5.52 p.m.
Lord Marlesford: My Lords, I would like to add my thanks to those of others to the noble Lord, Lord Eatwell, for giving us this debate this afternoon. I personally much enjoyed his speech: to me, it had a nostalgic charm. I was mystified at one point because he whetted my appetite greatly by referring to some academic whose name I do not remember. The noble Lord, Lord Eatwell, said that his speech owed much to that academic. I was waiting for these interesting new revelations of new thought from, I believe, the other side of the Atlantic. I was too dim to take them on board, but I shall read the noble Lord's speech carefully tomorrow. If I still fail to pick them up, perhaps he will kindly mark my copy of Hansard for me.
Things have moved on a great deal in the past few years. Perhaps one may take as a bench mark 1975, when Keith Joseph spoke to the Tory Party Conference. He described the middle ground as an object of suspicion. He said that it was a will-o'-the-wisp moving always to the left. Since that time we have something called "New Labour". That is undoubtedly a great deal more reassuring than was Old Labour because many of the aspects of the then middle ground have been discarded, apparently, by New Labour. The Labour Party is no longer divided about socialism, as far as New Labour is concerned. The Tory Party is therefore in a sense no longer united about fighting socialism. That makes matters harder. I believe that the Government will have quite a task in winning the next election because of New Labour.
But now I am not sure because, having heard the noble Lord, Lord Eatwell, we have heard from no less distinguished a place than the Front Bench opposite an example of the authentic voice of Old Labour. I only wish that we could have the noble Lord's speech made by the Shadow Chancellor of the Exchequer, Mr. Gordon Brown, or, better still, by Mr. Tony Blair. It would make the task of the Government in winning the next election a great deal easier.
In the speech of the noble Lord, Lord Eatwell, we had it all. We had all the stuff about the need for consensus; the need for a social contract; and the damage done by the supervisory levels in certain countries. He picked out those which had a low supervisory level as Japan and Germany. There is a conflict there because he went on to have a go at the Bundesbank for trying to control inflation. As regards Japan, one must admit—and I am sure the noble Lord is well aware—that Japan, with whose industry I have a certain amount of contact—is now beginning to face up to some very real problems about its industrial structure. Many leading Japanese industrialists believe that they will need to shed many jobs in traditional Japanese industries. Germany itself, as we have just heard from the noble Lord, Lord Acton, has particular problems.
As I heard about the evils of the supervisory levels, I was reminded of that wonderful invention of Old Labour, with which the noble Lord will be much more familiar than I—perhaps he was one of its backroom architects—namely the selective employment tax, which was introduced by another famous Cambridge

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economist, Professor Kaldor. Noble Lords will remember that that tax was all part of the attack on the candyfloss society. It was said that only those who made things were desirable and that those who performed services were not desirable and that there should be a differential tax. That went on for a few years until it was given up completely.
We had all the stuff about egalitarian societies being better and that equality is efficient. We even heard about our old friend Sweden. That country has had financial difficulties of the greatest magnitude for about a decade now. Quite frankly, I felt that the voice we were hearing was the astonishingly unreconstructed voice of Old Labour. I suppose that one should not be too surprised because the noble Lord, for whom I have great personal esteem, was adviser and economic architect to the last Leader of the Labour Party but two, Mr. Neil Kinnock. I had not realised that the noble Lord was quite such a Bourbon. I much enjoyed his speech and we are very grateful to him for it.
Perhaps I may spend a moment or two on some of the fundamentals. The noble Lord asked whether the Government have a big idea and whether there is a real objective. I believe that the real objective of government is to see that—and I underline those words—all citizens can live in security and in growing prosperity in a way which is sustainable for future generations. I believe that that is the task that government have: not to do, but to see that the conditions are right for it to happen. I do not believe that it is something government can do.
There are certain fundamentals which are very important, and they are part of that framework. I wish to refer to inflation to a much greater extent than did the noble Lord, Lord Eatwell. Inflation is a very great evil. It is only since 1979 that it has been put at the top of the agenda. Despite the fact that inflation is now so low relatively—it is under 3 per cent.—it is interesting that long-term interest rates are so high. I do not know quite what one would take as the equivalent of the 30-year bond in Britain. I believe that War Loan is a good example to take because the interest is paid gross and therefore there is no tax complication. The yield on War Loan is currently about 8.5 per cent., which is remarkably high. Normally, a very big differential between long-term rates and inflation says something about the anticipation of the market concerning future rates of inflation.
I believe that the present Government have succeeded, with one or two little difficulties along the way—
Noble Lords: Oh!
Lord Marlesford: Yes, they have! Inflation went up at the beginning for reasons that we know about. There was an increase some four or five years ago. However, recently inflation has been well down. I carry a table of figures in my pocket at all times which shows the retail prices index linked back to 1935. I find it fascinating and helpful in resolving disputes.
The market must he saying that it does not have much confidence that the present Government will he in power—I recognise that—and that it is concerned that
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Old Labour, represented by the noble Lord, Lord Eatwell, may well have a future role to play which puts our inflation gains in doubt.
Perhaps I may move on to unemployment. In my view, dealing with unemployment must remain subsidiary to dealing with inflation. That is what the Bundesbank has always tried to do, so we know that that is not something with which the noble Lord, Lord Eatwell, agrees.
As we have heard, the unemployment figures are improving greatly. I have always found the green research publication which is produced monthly by the House of Commons Library entitled Unemployment by Constituency very useful because it gives a snapshot picture of unemployment in every constituency. Therefore, instead of seeing just the general figures, one can see the unemployment position in 650 discrete parts of the country. Indeed, it makes matters even easier by ranking the 25 constituencies with the lowest unemployment and the 25 constituencies with the highest unemployment. Unemployment currently stands at under 4 per cent. in the 25 constituencies with the lowest unemployment in this country while in five constituencies the proportion is under 3 per cent., which is the old Beveridge definition of "full employment". The proportion in the 25 constituencies with the highest unemployment is over 17 per cent., but only 6 constituencies now have over 20 per cent. unemployment. The figures are continuing to decrease even now. Thirteen of the constituencies with the highest unemployment are in London, including five of the six with the worst figures. Of course, our inner cities have special problems with unemployment and while that can never be acceptable, it must be made tolerable.
What we have to do—what has been done—is to ensure that the jobs that we do have are real jobs. I believe that our economy is structurally more sound than the economies of other countries in the EU because we have faced up to the need for structural change. The country that has most obviously failed to do that is France, where people are once again talking about the changes that are needed. But I wonder whether the French Government will be able to get those changes through. Only this morning I heard, as no doubt did other noble Lords, that the unions there are planning a campaign against those necessary changes.
One of the interesting differences between France and England is that if the Government in Britain try to do something sensible but there is direct action against it on the streets, on the whole the public support the Government. However, strangely in France—I cannot give a reason but I raise the matter because it is a fascinating paradox—when there is direct action on the streets, on the whole public opinion swings behind that action irrespective of who is taking it, be it farmers, nurses, civil servants, fishermen or Air France workers.
The tax structure is crucial to enterprise. I believe that we now have a very good tax structure. I hope that we shall be able to keep that although I doubt whether a Labour government would be able to keep it as it is.
We are also free from the constraints of fixed exchange rates. One must remember that the history of this country ever since the war has been one of political

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constraints caused by fixed exchange rates. That has been the case ever since Bretton Woods. The first big crisis was in 1949 when the then Labour Government were forced into devaluation, causing great trauma. As we all know, we had a debacle with the ERM. Thank goodness that we are now free from the shackles of fixed exchange rates. That will be a major issue for the IGC in the future. Perhaps I may say briefly that my own solution is not that we should move towards a single currency as such, but that we should make the European currency—whatever it is called: the ecu, the Euro or whatever—legal tender in all European Union countries. People could then use it if they wanted to and we could then see whether there was any real desire for it. If it was not used, nothing would be lost. I am in favour of such a gradualist approach. That is something of a variation on Michael Butler's hard ecu, but is even more modest.
Perhaps I may now turn to what I regard as the single biggest achievement of this Government. Historically in this country the middle classes have had a better deal out of life than the working classes, but for the past 15 years or so this Government have made Britain a much more bourgeois society. It is much more individualistic. Far more people are self-employed. We now have fewer union members and so we have fewer labour disputes. The 1996 issue of Social Trends, which I read carefully before the debate, shows the days lost to strikes at their lowest level since records began.
We now have more home owners, with owner-occupation standing at 66 per cent. We have heard about negative equity, but let us bear in mind that of those 66 per cent. owner occupiers, 42 per cent. have a mortgage while 25 per cent. own their homes outright without a mortgage. The Rowntree research in Social Trends shows that over 90 per cent. of those with a mortgage do not have negative equity—that is to say, they do not owe a sum greater than the value of their home.
One of the biggest changes that is coming—I believe that whether or not they remain in power the Government will be greatly praised for this in the future—lies in the enormous resources that will be released by a new generation of people who will own a house without being encumbered by any debt. They will have resources to spend and invest. That will make a tremendous contribution to our economy and to our wealth and prosperity.
Finally, we must have the environment in mind in relation to all of our policies. We cannot sacrifice today the needs and the rights of our children and our children's children. That is a constraint upon what can be done and what can be afforded. I believe that the Government have taken good account of that. On balance, I am extremely optimistic about the future and I think that the Government deserve great credit for the foundations that they have laid.
6.7 p.m.
Lord Bruce of Donington: My Lords, those of us who have been in politics for some time—I have had
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the honour to be a member of the Labour Party since 1935, some 61 years or so ago—
The Earl of Longford: The year before I joined.
Lord Bruce of Donington:—will have noticed over the years the tendency of politicians, sometimes singly and sometimes in their corporate capacity, to self-deception. Few of us are immune from occasional bouts of it, but I have been sitting opposite the Government Benches now for 17 years and I am bound to say that I have never experienced such sustained corporate self-deception as that from which this Government appear to suffer practically all the time. I believe that Ministers are honourable men and that this is not a pose, but something that they really believe. Perhaps the first illusion from which they suffer is that if anything adverse happens to the English economy or to the country, they say that it is due to outside forces. If we have a depression or suffer any mishap, outside forces are to blame; it is nothing to do with the Government. It is only when something goes right—and that sometimes happens accidentally, as in September 1992—that the Government claim the whole of the credit for it. All of the debits go to the rest of the world and all of the credits go to the Government. I do not think that that position can be sustained.
A similar illusion seems to animate the Government from time to time when they talk about the recovery and the soundness of the recovery. Mind you, they have had two depressions—not self-induced and not in any way their responsibility—since they took office in 1979. Two depressions in 20 years is not bad going. When they talk of the soundness of recovery they assume that it is all-pervasive, that they speak for the country as a whole and that their view is shared by all members of the British economy. Everybody who lives in these islands is part of the British economy and the Government assume that they speak for the lot. Oh dear, oh dear!
We learned yesterday—we saw the press reports this morning—from the very impressive gathering organised by the Church Action on Poverty (of whom the chairwoman is Hilary Russell) that 4 million of our citizens live below the level of income support. We learned that nearly 10 million were in families which relied on income support. We know from other sources—the figures have not been controverted in any way—that the bottom tenth of the population are 17 per cent. worse off than before this Government came into office. There is not much to show as far as that section of the population is concerned. They are not singing hosannas about sound recovery or jumping for joy because of the benefits that have come from what is euphemistically called the sustained recovery. From the Government's point of view, they do not exist at all when they come to consider the economic situation.
My noble friend Lord Eatwell in his very impressive speech spoke of unemployment in this country. It is now referred to as claimant unemployment. Six weeks ago it was referred to as unemployed and claiming benefit. In 1979 they were referred to plainly as the unemployed, but things have shifted. I remember well that in 1979 when the Government took office I was sitting here

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minding my own business for the time being. The Government were returned to office on the basis of the philosophy described in that famous poster "Labour isn't working". Unemployment at that time was about one and a quarter million. Even on the basis of a claimant count, and after 17 years in office, the figure is double that today. Following the publication of an excellent report by the Royal Statistical Society, the real figure today is one and a half million more than that. The figure approaches between three and four million. It puts it almost in the same league as the German Government. If my memory recalls—I have a very good one—10 years ago the German economy was held up as an example that we should follow.
Who has recovered and participated in the benefits of that so-called recovery? For example, we know that the banks have benefited. Those of us who read the papers know perfectly well that bank profits are at an all-time high. The fat cats have benefited. The holders of government appointments in the hundreds of quangos have benefited. They have prosperity and a share in the recovery, but they do not speak for the country as a whole. Only yesterday we learnt that two employees of the NHS Executive had been given a total of £700,000 by way of severance pay. What the Government have done—they have been quite honest and have not endeavoured to conceal it—is to plant their own nominees in every quango that they can at very high salaries which put the incomes of ordinary persons, let alone the poorest in our community, completely in the shade.
The idea that there is a recovery which is all-pervasive throughout the country is a load of nonsense, and the Government ought to know it. If they did not know it before I rammed it down their throats, they know it now. They cannot argue about it. I shall be very interested to hear the response of the noble Lord, Lord Mackay, to the facts that I have addressed to him. In reality, there has been a growth of an insecure economy, not on a sustainable basis, which has brought an all-persuasive fear into the whole of the country.
The noble Lord, Lord Marlesford—whose contributions I always admire, because he has a sense of humour—points out that the feel-good factor is somehow absent. Now the noble Lord knows why it is absent. There is no feel-good factor, sense of optimism or hope, save that ultimately, either in the short term or long term, we get rid of this government. Even in their economic philosophy, when they deign to examine the minutiae of the written or printed word—something of which the Chancellor of the Exchequer cannot be accused—they do not understand what they read. I give your Lordships an illustration. The Government are under the illusion that the present rate of inflation—which they have driven down by the deliberate creation of fear and unemployment—is at a uniquely low level. In the 15 to 20 years that followed the period 1945 to 1948 the inflation rate was lower than it is now. That was achieved under a Labour Government, a Conservative Government and then a Labour Government. It remained low until the famous oil price crisis in the OPEC countries in the early 1970s. Low inflation is not unique.
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The mistake that the Government make—on the assumption that it is a mistake and it is not deliberate—is that unemployment can be cured on a sustainable basis only by seeking to drive down even further the rate of inflation. That is a load of nonsense. In a way, they know it. They face a paradox. On the one hand, they had a very large owner-occupier section of support in the United Kingdom. They encouraged home ownership. At the same time as they call for inflation to be driven down, they hope that house prices will rise. That is the level of the paradox. They advocate higher house prices but lower prices in all other spheres. That is the intellectual level to which they have debased the argument. They have no answer for it. In fact, on the housing front their record is even more disgraceful.
Only last night, if the Minister in his relaxed way was looking at the television, he would have heard the story of Mr. Fletcher, one of his leading supporters charged with the task of letting out MoD properties that had remained uninhabited for five years. The Conservative Party's 1992 manifesto made a specific promise that it would see off the MoD on that question. It was wicked that all those properties—some 13,598, because I have the figures—were left untenanted for all that time. It was going to let them to the homeless. It was a scandal that the properties remained uninhabited, and all the rest of it. So last night Mr. Fletcher announced his resignation from the Conservative Party on the grounds that the promise had been reneged upon. That is not the only time that it has happened.
The Conservative Party does not have the remotest intention of keeping any promises that it finds inconvenient to fulfil when the time for it to be done arises. It does it openly. The Prime Minister did it in the 1992 election campaign when he said that he would not raise indirect taxation, particularly VAT, because he could not see the necessity for it or the possibility of it arising. Within a few months, that was cast off.
The Government are getting tired. When they contradict themselves in those ways it is not funny any more. One can get a little humour out of it, because we sometimes take ourselves too seriously here, and a little laughter is occasionally permissible to enliven our proceedings, but it is now past a joke. Now they are committed even further in that direction, because in common with others whom I will not mention, they are now driving towards a single currency. They are bound by the Maastricht Treaty to continue the constricting and deflationary policies of holding down government deficits and debt to the level prescribed in Article 5 of the Maastricht Treaty, and they are bound by the others as well. Others are not altogether incisive in their rejection of it either, but that is another story. At least in that regard we shall have the noble Lord, Lord Marlesford, on our side.
6.23 p.m.
Lord St. John of Bletso: My Lords, it was almost like a timewarp—I was waiting for the noble Lord, Lord Bruce of Donington, to come up with his normal rhetoric about EMU and ecu. I have airways had enormous admiration for his uncanny ability to quote facts and figures, but when he opened his speech by

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mentioning his background in your Lordships' House and telling us how long he has spent in politics, I am afraid that I found it difficult to agree with much of what he had to say. It was a very political speech. The noble Lord, Lord Ezra, was right when he said that he hoped the debate would not just be a political one, but would be balanced and one in which we would be able to get some constructive criticisms over to the Government for future action, whichever government we have in the future.
Unlike the noble Lord, Lord Eatwell, with his distinguished academic background as an economist, my contribution to the debate comes from my background as a meagre UK equities researcher and salesman in the City. So much of what I shall say will come from the perspective of inward investors, both domestic and international. As is customary in your Lordships' House, I wish to declare an interest as a consultant to Merrill Lynch.
Before outlining my brief contribution to the debate, I should like to join in congratulating my noble friend Lord Sempill on his excellent maiden speech. I have known him for many years—from the days when he and I lived in Cape Town. We shared many a laugh and many a long discussion on the future of the House of Lords, and, particularly, on the role of hereditary Peers in the workings and effectiveness of your Lordships' House—an issue which I am sure will become all the more of a hot potato in the run-up to the next election. I am obviously delighted that he has opened his innings, and I am sure that we all look forward to hearing many more contributions from him in the months and years to come.
I should like to approach the debate by discussing my views on the Government's economic strategy from a past, present and future perspective. The Minister will no doubt do exactly that in his wind-up speech. I shall touch briefly on the successes of the Government's economic strategy. It is important to mention more positively the successes. There is no doubt that there have been enormous successes.
One of the great successes has been inflation. Inflation, in line with the global trend, has come down from the lofty heights of 23 per cent. in 1980 to currently just under 3 per cent. That, to a large degree, has been the beneficiary of tight government fiscal policy. There is no doubt that that success in controlling inflation has been achieved to a large degree by the Government's strategy to break the stranglehold that the trade union movement had in the past over much of the economy. Union membership has fallen from 13 million to just under 9 million, for better or for worse, but, more importantly, there has, as a result, been a far more effective and flexible labour market. That has been evidenced by, and has brought enormous dividends in, the dramatic improvement in manufacturing activity per person. It has also had a major impact on promoting more international inward investment into the UK—a point made by the noble Lord, Lord Dean of Harptree.
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I was interested to read in yesterday's Financial Times that a recent survey of 2,500 international business leaders showed that the UK came third after the USA and Singapore in its attractiveness to business, coming ahead of Malaysia, Switzerland and Germany.
The Director-General of the CBI, in his leading article in the CBI News last month, put it aptly:
"we were once a country renowned for its strike record, double digit wage settlements and inflation rates. We were all too familiar with the boom and bust of the UK economy. In recovery, unemployment would fall, but prices and wages would rise at an accelerating pace. In any recession, unemployment would rise, but moderation of wage rises would come only slowly".
However, even though the Government can be proud of their achievements, their policy to promote home ownership to all echelons of the British people, particularly in the 1980s, giving them, as the noble Lord, Lord Dean, said, a secure stake in society, has in many cases backfired severely, despite mortgage rates being in nominal terms at their lowest levels for decades. The figures vary, but I understand that more than 1.5 million people remain trapped by negative equity in their homes, in consequence, to a large degree, of the house price collapse in 1989, and of the banks giving loans too easily without sufficient collateral. Sadly, the pain of negative equity has been borne mostly by those in poorer areas, and they were not assisted by the reduction in mortgage interest relief.
My second point is more of a concern about the Government's economic strategy, which was highlighted by the noble Lords, Lord Eatwell and Lord Ezra. It is the low amount of government investment in industry. In the words of the noble Lord, Lord Eatwell, it is the Achilles' heel of the British economy. All too often the lack of capital assistance given to British industry has resulted in great British inventions—I include many of the biotechnology breakthroughs—being exploited in other parts of the world. Perhaps the Minister will elaborate on the assistance that the Government are giving to business to promote education and training.
I wish to touch briefly on a point raised by my noble friend Lord Acton; the issue of unemployment. Even though unemployment has fallen for the past 29 months, the reality is that in 1979 the unemployment rate was just over 1 million and today it remains at more than 2 million. However, the rise in unemployment in the 1980s cannot be blamed solely on the Government's economic policy. There has been a major rationalisation in many industries, including the profession in which I work, where Big Bang in 1985 and more recently Big Bang 2 resulted in major losses of jobs in the financial services sector. Furthermore, as a result of the loss of jobs and many corporate takeovers there is now job insecurity. It has been the issue of job insecurity which many people have given as their reluctance to become involved in buying their own homes or, for that matter, moving from their existing homes, which would help to stimulate the housing market. I do not wish to elaborate further on the unemployment issue, except to acknowledge that on a relative basis the United Kingdom has suffered a lower increase in unemployment than our European partners.

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In the past, poverty used to hit older people particularly hard, but that has improved a great deal. Between 1974 and 1991 the number of older people living on social security fell by 25 per cent. However, during the same period the number of children over the age of 16 who have become dependent on benefits has quadrupled. I mention that statistic because I believe that it is an important consideration in addressing the Motion tabled by the noble Lord, Lord Eatwell.
To bring the Government's economic policy into focus for the present, especially now in the run-up to the next general election, the key phrase that everyone has mentioned today is the "feelgood factor" for the British people. Many argue that the growth in the present economic upturn has gone into cutting government borrowing and raising corporate profits and that there has not been enough redistribution of profits to employees. That is a debatable issue. However, recent statistics clearly show a growing trend and more firm evidence of rising real incomes undiluted by higher taxes. Recent figures from the Halifax Building Society show that there is at long last activity in the housing market, which is rising, assisted by the current low mortgage rates. Therefore, I do not agree with the noble Lord, Lord Bruce of Donington, that there is no feelgood factor. Much of the population believes that it is limited but there is a certain amount and credit should be given for that.
In 1997 the private sector will receive almost £16 billion from building society flotations as well as billions of pounds of maturing TESSAs. That will all contribute to a substantial wealth boost, which will have an extremely positive flow-through to consumer spending growth later this year and, more particularly, next year.
In my introduction, I alluded to endeavouring to be specific in this general debate. Instead, I have veered to addressing too many issues. However, in conclusion, while the debate focuses on the effect of the Government's economic strategy on the economic and social wellbeing of the British people, it is my hope that there will not be a relaxation of economic policy simply to suit the voters ahead of the forthcoming general election. Such a relaxation could lead to excessive economic growth later this year—a point made by the noble Lord, Lord Ezra—and in 1997. That in turn could eventually generate an upturn in inflation by late 1997 and in 1998. I hope that the noble Viscount, Lord Oxfuird, is right in saying that it takes six to seven miles for a tanker to change direction. I trust that this and future Governments will not change tack on their commitment to keep inflation low.
6.35 p.m.
Lord Haskel: My Lords, on 7th March we had an interesting insight into the thinking of the Government. A leaked letter from the Deputy Prime Minister suggested that he wanted to remove from those people working for small companies the right to seek damages for unfair dismissal. The Trade and Industry Secretary, Mr. Ian Lang, rejected that suggestion because it would he too controversial.
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What I found interesting about the exchange was that neither suggested that removing those rights would improve the performance of the economy. The implication seemed to be that Mr. Lang was worried that helping one sector of society to pursue its own economic ends at the expense of another would make the Government more unpopular. That unpopularity would arise from adding to the insecurity which people already feel about their work.
The attitude revealed in that exchange of correspondence speaks volumes and I am grateful to my noble friend Lord Eatwell for providing this opportunity to discuss it. As my noble friend reminded us, it is a cornerstone of the Government's economic strategy that giving people security is too expensive. We can no longer afford it. It increases costs and it makes our businesses less competitive compared with businesses in those countries where the social costs do not exist. To prove their point, the Government's finger is pointed to the current situation in Germany. The noble Viscount, Lord Oxfuird, and the noble Lord, Lord Dean, gave us the numbers. What they ignored was the strength of the German currency, the absorption of East Germany and the high productivity and efficiency of its economy.
Noble Lords opposite would like us to believe that as a result of that strategy we have become the enterprise centre of Europe but, not surprisingly, the strategy has not been successful. The Government's own Competitiveness Report states as much on page 13. It reads:
"Despite its recent rapid growth, GDP has grown more slowly than in most of our major competitors since 1990. Our GDP per head remains below that of other major industrial countries".
That is accompanied by a chart on page 13 showing how we have slipped from 13th place to 18th in the world prosperity league.
I hope that noble Lords opposite will not accuse me of running down the country. I am quoting from a document with an introduction by the Prime Minister.
The real result of the strategy is that we as a nation have become much more divided socially and economically and at enormous cost, as the Rowntree Report pointed out. This economic division manifests itself in the fact that we have some wonderful world-class businesses which understand that unit costs are important, not the hourly wage rate. Their employment policies are entirely contrary to the Government's strategy of low wages. They are the companies which have carried out the investment about which the noble Lord, Lord Ezra, told us. They know that job insecurity threatens productivity and the quality of the people whom they can attract. The noble Viscount, Lord Oxfuird, told us that prosperity comes from productivity—and such companies know it. Thanks to their superb management, those companies need no government support, whereas companies on the other side of the divide pay poor wages knowing that they will be topped up by the Government through the benefit system. It is part of the Government strategy to encourage those practices instead of encouraging the investment. Hence the deputy Prime Minister's letter to Mr. Lang.

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Similarly, the social results of that economic strategy also divide the country. On the one side, there are people in secure employment who are continuously increasing their performance, skills and knowledge so that their companies can remain competitive. On the other side of the divide are the 2.3 million unemployed, the million lone parents on benefit and the 1.7 million people receiving long-term sickness and disability benefits. In 1979, one in 12 people lived in households dependent on income support. Today the figure is one in six. Does that demonstrate the success of a low pay strategy, or just its result? Is that the prosperity that the noble Lord, Lord Marlesford, said should be the objective of the Government? That is what worries my noble friend Lord Bruce.
Nor is insecurity limited to those groups of people alone. Since the last election, something like one-third of the workforce—some 8.7 million people—have experienced one or more spells of unemployment. From that insecurity comes the waste about which my noble friend Lord Eatwell spoke. A good example of that waste comes from a study carried out by your Lordships' Select Committee on Science and Technology. The committee studied the increase in scientific research staff at universities, and found that virtually all these new scientists were on short-term contracts. After a few years of that insecurity, they were leaving the profession.
Happily, to stem the flow, a proper career structure is now being put in place. The Minister will not be surprised to hear that Scotland is leading the way. Of course it may be in the narrow financial interest of the university to employ such scientists on short-term contracts, but it is not in the national interest to lose those scientists from the profession. The noble Lord, Lord Dean, told us about inward investment. However, I would remind him that a major reason for inward investment into the UK is the quality and excellence of the scientific research which goes on in our colleges and universities.
The Government's strategy is to reduce employment rights to make the labour market more flexible. The proper strategy is to ensure that people, who are no longer needed for one job, have the ability to be trained for and placed in a new job. Surely that is what makes the economy as a whole more flexible and productive. It makes sense for our economy for the Government to encourage firms to do this; and our good firms now find that it does benefit them to try to eliminate that insecurity by going beyond the training required in a particular job. Continuous training and personal development make people feel more secure in themselves. They perform better and they have more loyalty to their employers.
Another important part of the Government's economic strategy is that we can remain competitive by devaluation and financial engineering. The strategy of relying on devaluation, low labour costs and financial engineering has been ignored by our best companies. But for the others, and for the country as a whole, that strategy has led to much shorter and more violent business cycles which discourage the long-term view.
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As a result, if noble Lords opposite think that things are looking promising at the moment, business is wondering if this is just another short-term cycle in the boom or bust sequence. Perhaps that is the explanation to the noble Lord, Lord Marlesford, who wondered why long-term business rates are standing at 8.5 per cent.
Those economic strategies have created a divided economy with an underclass, as described by my noble friend Lord Monkswell. That underclass not only contains people who have no skills, but also, as your Lordships' Select Committee found, people trained as scientists. It is among that underclass that there is a churning of jobs which the Government welcome as a sign of a flexible labour market.
However, a seminal study by Paul Gregg and Jonathan Wadsworth showed that the expected duration of unemployment in the recent recession was certainly 25 per cent. less than in the 1980s recession, but that that was entirely due to people going from unemployment into inactivity rather than from unemployment into jobs. Perhaps that explains the report from the Royal Statistical Society to which my noble friend Lord Bruce referred.
The right economic strategy is to prepare people better at schools and colleges, to train people better so that they are more flexible and can work more intelligently and to improve management performance. That will enable us to improve the quality of our investment and make the best possible use of it. Businesses and institutions need to be encouraged to provide continuous training and personal development so that people will feel more secure in themselves and require less support from government.
All those elements.are factored into Labour's policies. Indeed, there are cross-party constructive proposals. The noble Lord, Lord Ezra, exhorted us to be more constructive. Well, I shall be more constructive and point out that there is Gordon Brown's plan for the under-25s; there is Sir Ralph Howell's right to work Bill which enables the unemployed to be paid for taking part in socially useful community projects; and there is Frank Field's benefit to work scheme. They are positive schemes which will be welcomed by both the long-term unemployed and the serial redundant. That is what is required for an economic strategy for the 1990s.
Perhaps I may conclude by telling your Lordships about a recent study from Cornell University. All the non-financial companies that went public in the USA in 1988 were studied. The research showed that companies which treated their workers as stakeholders were far more likely than other new companies still to be doing business five years later. How did I come across that research? I wish I could tell noble Lords that I got it through reading a learned journal. In fact, it was sent to me by a New York stockbroker who advised me to invest in companies with those policies, as they were likely to be more successful. Obviously Wall Street has picked up that insecurity does not work. I hope that the Government will also learn that lesson.
6.47 p.m.
Baroness Seear: My Lords, I should like to thank the noble Lord, Lord Eatwell, for explaining to us in much more detail—and we have been waiting for an explanation—what is meant by stakeholding. It was indeed a very welcome explanation. It was particularly welcome and good hearing on these Benches, since the stakeholding organisation is something which the Liberal Democrats, and the Liberal Party beforehand, have advocated almost since the beginning of time. In his study of such matters, I dare say that the noble Lord, Lord Eatwell, has at least glanced at Britain's Industrial Future (the Liberal Yellow Book, to which such people as Keynes contributed), which was published in 1928. I sometimes think that a little recognition of such important sources would not come amiss. But repentance, however late, is always welcome. I am most grateful to the noble Lord, Lord Eatwell, for putting the policy on the map.
The noble Lord, Lord Marlesford, said that the noble Lord, Lord Eatwell, represented Old Labour. Perhaps I was not listening, but I did not hear a great deal of "Old Labour" in the noble Lord's speech. I wonder what that not inconsiderable number of members of his party who still support Old Labour—at heart at any rate, and sometimes not only at heart—would make of what the noble Lord said. The picture that he forecasts, and the speeches from New Labour tonight, are in sharp contrast with the Britain under Old Labour that some of us remember all too well—a Britain that was strike-ridden, with high inflation and gross overmanning in industry. I remember well a study in the Philips company comparing its operations in the Netherlands and this country. The evidence of overmanning here was incontrovertible; and it arose not only in the Philips company.
With regard to the exhortations to train, which I shall echo again, I have to remind New Labour that, when Old Labour came out of office in 1979, 40 per cent. of school leavers were either unemployed or went into jobs with no training. The comparable figure in France was 19 per cent. and in Germany 9 per cent. Those figures tell an important story about why this country is so far behind its competitors in continental Europe and elsewhere. We are paying the price for the failure of both parties in those years to invest in training. That 40 per cent. of youngsters who left school in 1979 are now part of the adult labour force, few of them having advanced their position from the days in 1979 when those opportunities were lost.
We welcome these confessions and the recognition of the importance of co-operative working. The noble Lord, Lord Eatwell, was a little hard about a great many managements. Of course, there are some tough, shortsighted and foolish managements. But there are and have been for a long time some wise and far-sighted managements. We talk about works councils. I was management secretary of a works council a mere 50 years ago. I rather like achieving the position where I can cite evidence from half a century ago. At that time a large number of managers were wise and farsighted. We should not forget that. Better companies have continued to act in that way.
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Co-operative working is necessary. Co-operation and greater consensus across political parties is also necessary, but it is not sufficient. We need a great deal more than that if we are to face the future. I endorse many of the criticisms raised about the effect of this Government's policies. I do not wish to repeat what has been said by many previous speakers. But, in referring to social consequences, I underline the Folly—less has been made of it today than I would have expected—of not allowing local authorities to spend the money that they gained from capital sales in order to build properties to house people. The worst condemnation of the Government's policy is the sight—we never used to see it in days gone by—of people sleeping rough. It should surely have been possible to allow houses to be built. Such a policy would have encouraged people off the streets and cased the housing problems of a large number of people. It would also have got the construction industry working again. The construction industry is an engine for getting many other industries working. It would have had a substantial effect on unemployment.
We have yet to see whether any other government will improve on this position. My main criticism of the Government is that they are not facing the long-term problems of this country. The noble Lord, Lord Eatwell, played down the problems of competition from the Asian rim and elsewhere. It may be that at present competition from those countries is not so serious as is sometimes represented. But those countries will become a great deal stronger in the future.
When the sleeping giant of China really wakes up, with all the ability, skill and capacity for hard work that we know exist in that country, it will present an example of great competition and great opportunities. We should surely be considering the long-term problems that we are up against and the policies that we ought to adopt to meet those long-term problems and to seize those long-term opportunities. I do not believe that the Government are thinking long term. Some of their short-term measures have been useful, some disastrous. But where is the long-term thinking that will meet those very real challenges in the two vast areas that matter most? I refer to economic growth, and economic opportunities. If those two problems can be solved, one will be well on the way to solving many of the other problems.
My noble friend Lord Ezra spoke of the failure to invest sufficiently. We still hear siren voices stating that what this country needs is a consumer-led recovery. We need a consumer-led recovery like a hole in the head. We need an investment-led recovery. The Government should be getting that message over. One may have short-term benefits before or after an election. What does it matter? In the long term they will hinder, not help, us. People may have to learn that they must live within their means; that we cannot have all the things we want; and that if one wants a decent society one has to plan, invest and pay for it. That is the doctrine that the Government should be getting across if we are to meet the problems that face us in the future and not minimise the nature of the problems, as to some extent did the noble Lord, Lord Eatwell.

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The noble Viscount, Lord Oxfuird, is not in his seat. But it is not good enough to suggest, as he did, that the market will adjust; the market will find a way of getting things right. We on these Benches have always believed that for all normal commercial purposes the market probably is the best way to deal with development of the economy. But one cannot develop the economy satisfactorily unless one deals with the social problems that are brought about by changes in the economy. The market does not deal with those social problems; the market does not know about social problems. It is not in the nature of the market to consider social issues, in particular as regards employment and the kind of people who will or will not be able to obtain jobs.
When we refer to unemployment and availability for employment, let us remember that there is no single labour market. There are many different labour markets in this country. Some will recover by responding to the change in the market. We are already running short of skilled labour in some parts of the country and in some industries. When one has skilled people, the operation of the market will probably get many, if not all of them, back into work.
I referred to the failure to train people in the past. In this country we have a large number of people who do not have the educational background or the skilled training to enable them to take advantage of the jobs that will evolve in a recovering economy. That is on the assumption that the economy recovers, as it is beginning to do, which I fully accept.
I hate the word "underclass" but we understand all too well what it means. We have this hideous problem of people who now feel themselves outside society because they are not in jobs; they have not had jobs. If they have little education and few skills they will not he in employment. The position will not improve under any government; it will become more and more difficult. What are we going to do about such people? That is the heart of the real social problem in this country. We need drastic changes in the tax, benefit and training systems if we are to get anywhere in dealing with the underclass. It will bedevil our society and the system will be grossly unjust to such people unless we cope with it.
Our benefit system encourages people not to take action to get out of unemployment. The department of applied economics at Cambridge came out with figures which showed that, if a man and wife with two children at school started work, they had to earn £170 in order to increase the family income by £20. No one in your Lordships' House would go to the trouble of working for £170 in order to receive £20. That is a nonsense of a benefit system.
We must also ensure that, when people obtain a job, when they have taken training and felt it worth while to apply and to get out of the black market of labour—and there is a great deal of that, as we all know—they do not wish to run into levels of tax which discourage them in their efforts. We need a drastic overhaul of the training, benefit and tax systems. When we start to pull out of the recession, as we are doing, and go on to a better future, we shall still, if we do not take the
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necessary steps, leave a disastrous section of our society behind. That will be appalling, not only for them but for society as a whole.
7.1 p.m.
Viscount Chandos: My Lords, my noble friend Lord Eatwell has earned your Lordships' gratitude for both his initiation of the debate on the economy and for his usual penetrating contribution to the argument. He sets the rest of your Lordships' House a challenging standard to uphold. However, the speeches that have followed his have been stimulating and interesting, not least that by the noble Lord, Lord Sempill. Any anxiety that the noble Lord felt was entirely hidden. Like the noble Lord, Lord Acton, I hope that the maiden speaker enjoys comparable success in his entrepreneurial endeavours.
As a number of your Lordships have observed, there is always a risk in a debate on the economy that your Lordships will suffer from a surfeit of statistics, some used more for support than for illumination. Thus we leave the Chamber gorged and bloated with confusing and contradictory claims. I have no doubt that the Minister will advance his favourite selection of figures to encourage your Lordships to believe that the Government's economic strategy has been beneficial to everyone.
Re-reading the other day the diaries of Mr. Alan Clark (who wrote them while Minister of State for Defence Procurement, in response to the latest economic figures released in May 1990), I was struck by the following:
"Ten, eleven years of endeavour (or however we call all those deprivations to life and family) and nothing to show for it but the passage of time and the intrusion of age".
Your Lordships will not recall, I suspect, that being the line taken by Mr. Clark's colleagues in this House or another place at that time. The noble Lord, Lord Ezra, remembered the noble Lord, Lord Young of Graffham, not presenting that line. Nor do I expect that the Minister will come to that conclusion today, even though the intervening six years have brought an unprecedented recession and only a painfully slow recovery from that. However, perhaps we may look forward to diaries in the future as revealing and riveting as Mr. Clark's, if not from the Minister himself, then from some of his colleagues.
I shall not burden your Lordships with any more statistics but shall comment briefly on some of the points that have been raised and offer a solution to a question which, above all else, haunts the Government.
If we take a limited period in isolation—the last two years or so—the combination of modest growth and inflation (low by historical UK standards, in statistical macroeconomic terms, ignoring the acute social stress and deprivation that still lie behind those figures) might gain a tentative beta-plus. One of my noble friends has already acknowledged that in a magazine article which Conservative Central Office has grasped, as perhaps the Minister will, like drowning men for comfort, while ignoring the long list of areas—lack of investment, the skills shortage, crises in housing, the National Health

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Service, public transport and the inner cities—where my noble friend identifies the Government's continuing and disastrous failures.
This short-term record could be attributed to the economic equivalent of the random walk investment theory or even the well-established principle that enough monkeys at typewriters could write the collective works of Shakespeare. After 15 or more years, after abandoning the last central plank to their economic policy, after imposing countless new taxes against their manifesto commitments, the Government may have hit, accidentally, a smooth patch of economic water.
As the noble Lord, Lord Ezra, outlined, there are already threats to that short-term stability from a loosely controlled money supply—so vividly highlighted by the eventual publication of the minutes of the meetings between the Chancellor and the Governor of the Bank of England—and the risk of overheating arising from the Government's anxious stimulation of pre-electoral growth. Those are the storm clouds gathering over the economy, to which the noble Viscount, Lord Oxfuird, referred, not the prospects of a Labour Government and the introduction of legislation that would create a fair balance between the interests of employees and employers.
However, even if the Government are cavalier about the short-term threats or blind to them, they have been wrestling with another desperate question. It is one which has been asked by the noble Lords, Lord Dean of Harptree, Lord Sempill and others: "Where is the feel-good factor?" It is clear that the concern on the Government's part relates not so much to any consideration of the country's economic prosperity and social well-being as to the crude electoral prospects of the Conservative Party. Well may they be concerned about them. So concerned are they that I read in a newspaper this week that a summit meeting of key Cabinet Ministers was being held to explore exhaustively the mystery of the missing feel-good factor. The Minister regularly admonishes your Lordships not to believe everything that we read in the newspapers. In the light of that, I do not presume to suggest that the meeting is necessarily taking place, not least because I should like to imagine it not as a pressured meeting at No. 10, Downing Street or at Smith Square, squeezed into busy diaries during the week; but a leisurely exploration of the intractable problem one weekend at Chequers.
One of the traditions of British country house weekends is the party game on Saturday night. The game might be diplomacy, Monopoly, charades or beating a fellow guest with a rolled up newspaper in "Are you there, Moriarty?" Can you imagine the dismay that would be felt as the ministerial cars arrived in Buckinghamshire for Ministers to find that on that particular weekend the game in question was: "Hunt the feel-good factor"?
However, this is a serious question, since confidence—or the lack of it—is at the heart of the immediate problem with the UK economy, as my noble friend Lord Eatwell so powerfully demonstrated. Your Lordships' House does not have to concern itself—or at
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least not all of us—about forlorn attempts to retrieve the Conservative Party's electoral position. But all your Lordships wish to see higher, sustainable, non-inflationary growth and improved employment prospects. The writer Edward Luttwak reinforces what my noble friend Lord Eatwell said when he writes:
"Structural change, with all its personal upheaval and social disruptions, is now quite rapid even when there is zero growth, becoming that much faster when economies do grow. The engine turns, grinding lives and grinding down established human relationships … [It is] the central problem of our days: the completely unprecedented personal economic insecurity of working people, from industrial workers and white-collar clerks to medium-high managers".
That problem is at the heart of the Government's problem. After promoting a conflict economy for 17 painful years, that overwhelming sense of insecurity towers over every other emotion of working people—another thick, black cloud so vividly imagined by the noble Viscount, Lord Oxfuird, which is again attributable to the Government's policies, but which stands at least some chance of eventual dispersal under a future Labour Government.
I do not wish to suggest that security, the complacency that goes with that and matching financial protection, can be achieved—or at least, not for everybody, since clearly, as the noble Lord, Lord Sempill, and others strikingly highlighted, that is a privilege which only the senior directors of the privatised utilities and a few other fortunate folk can enjoy.
Of course, there is a healthy level of realism, a lack of complacency, a drive to succeed which should motivate everybody in their working life; and comparable levels of pressure should apply from chairman to trainee, from businessman to teacher. But the policies, the attitude, the culture and the words of this Government in creating a conflict economy have moved so far from that healthy level that they should not be in the least bit surprised at the stubborn continuation of the "feel cautious" factor.
That is the appalling problem that the Government face. It is one which, even with the assistance of my undoubtedly clever, but politically misguided friend (in what I would describe as a non-technical use of that word in this House), Mr. Danny Finkelstein, the Conservative Party cannot solve. And why? Because the country no longer trusts the Conservatives. We have all had one Pavlovian electric shock too many. We know the nature of the Conservative beast. We have suffered too much from the roller-coaster ride of the Conservatives' version of a market—a hypermarket—economy.
That presents an economic threat in the short term, as the noble Lord, Lord Ezra, pointed out. The less the economy responds to the Government's stimulation, the more anxious the Government will be, and the more likely they will be to over-react, desperate to encourage consumers to spend. But consumers can remember only too clearly in many cases the painful hangover that has resulted from this Government's erratic past direction of economic policy.
Therefore, I should like to extend my sympathy to the new head of the Conservative research department as he forms up to the Prime Minister, the Deputy Prime

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Minister, Dr. Mawhinney and the other right honourable gentlemen and tells them—as his intellectual rigour will surely drive him to conclude—that, yes, Ministers, the feel good factor can be revived—but only with a change of government.
The new government will he formed by Labour—New Labour. As a recent Member on these Benches, I believe that I am undoubtedly a member of New Labour. I value most highly the support and advice of my noble friend Lord Longford, as well as the kind words of encouragement from the noble Baroness, Lady Seear. To the noble Lord, Lord Marlesford, I say that the long and distinguished service that my noble friend Lord Eatwell has given to the Labour Party, old and new, in no way—
Baroness Seear: My Lords, I am sorry to interrupt the noble Lord. I was not aware that I was encouraging him.
Viscount Chandos: My Lords, I am sorry for misunderstanding the noble Baroness.
The long and distinguished service that my noble friend has given to the Labour Party, old and new, in no way diminishes the freshness and importance of his ideas, or my admiration for them. I am sure that the noble Lord, Lord Marlesford, after reading Hansard and perhaps an introduction to the works of Professor Gordon, will indeed appreciate the vigour that my noble friend brings to Labour's new policies.
The new Labour government will pursue the policies of a competitive market economy: competitive to prevent the abuse of market power and monopoly positions, as this Government have so regularly failed to do; competitive to support the small business sector, as my right honourable friend the Leader of the Opposition set out in a speech today.
The new Labour Government will be guided not just by the absolute level of public expenditure, which each contender to succeed the Prime Minister as Leader of the Conservative Party now bids down, but by the value and effectiveness of expenditure on the provision of services by the public sector in comparison with its provision by the private sector.
These and other measures, short- and long-term, such as those set out by my noble friend Lord Haskel, will directly strengthen the British economy and the social fabric. At the same time, the resulting restoration of confidence and trust in government and in government's competence will in time alleviate the insecurity that dampens and constrains the inherent resilience of the economy. Then, this country can enjoy a high growth, low inflation economy, with fair opportunities and fair rewards. Let us hope that, in the meantime, the actions of this Government between now and the general
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election, as they desperately try to stimulate the appetite of the jaded patient, do not further damage the economy that the new government will inherit.
The Viscount of Oxfuird: My Lords, will the noble Lord say when in history the Labour Government have not left office leaving the country facing bankruptcy?
Viscount Chandos: My Lords, I think the noble Viscount will find that in 1970 the Conservative Party inherited a strong economy and left it, in 1974, in bankruptcy and with a three-day week.
7.17 p.m.
The Minister of State, Department of Social Security (Lord Mackay of Ardbrecknish): My Lords, I noticed that the noble Viscount, Lord Chandos, certainly did not refer to 1979. In my recollection, it was rather a dreadful year with a dreadful winter. We saw all the splendid policies of the Labour Government at that time coming to a disastrous end in the winter of discontent. I do not think this Government need any lessons from the party opposite on how to run an economy when one remembers 1979 and what we inherited.
However, we are grateful for the opportunity to have this debate. I was certainly interested to hear the speech of the noble Lord, Lord Eatwell. Two messages were conveyed to me. One was the word "stakeholder". I stopped counting after the 12th mention that I logged at the top of my piece of paper. I think I now have that message on board. It is "New Labour" and "stakeholder". There is not much else, but those two words seem to be the flesh, bones and brains, indeed the whole body, of the Labour Party's policy at the moment.
In addition, I did get the message that the noble Lord, Lord Eatwell, was-very critical about the highly adversarial nature of British politics. He said so in a very consensual and measured speech, with no adversarial sentences in it, let alone paragraphs. I suggest to the noble Lord that if he wants to persuade us all to be less adversarial, he might attempt to introduce a less adversarial tone in his own speeches—and certainly not just when it comes to the Government; I am used to that from this Dispatch Box. When his adversarial tone went beyond the government and embraced the whole of British industry and British managers in the same adversarial attack, I think British industry and managers might read with some interest the views that the noble Lord holds. If they are an indication of the actions of a potential future Labour Government, British industry and British managers might decide to run the proverbial 1,000 miles rather than have that kind of government.
The noble Viscount, Lord Chandos, redefined "not adversarial" to "no conflict". He accused us of creating a conflict economy. Given that the days lost to labour disputes in 1994–95 are the lowest since records began in 1891, I do not think we can be accused of running an adversarial economy. At risk of harking back to 1979, I remember the sweetness and light of the economy then as the poor Prime Minister and Chancellor were closeted in Downing Street with the warring trade union leaders.

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But perhaps I should not go on about that because the party opposite has decided that that is Old Labour and I ought to remember the new words New Labour and stakeholders.
We have had a very interesting debate. I shall come shortly to the various points that were made. First, I want to congratulate the noble Lord, Lord Sempill, on his maiden speech. He comes to us with a very distinguished old Scottish title, created in 1489. So he follows in a long traditional line. He also follows the old Scottish tradition of taking his entrepreneurial skills overseas, in his case to South Africa, and putting them to very good effect there for the benefit of that economy. I am happy to see that he has come back to live in Edinburgh, where he works for a company that I had better not advertise—but it makes quite splendid products, which some of us at least enjoy sampling.
The noble Lord will know that the Scottish economy—he mentioned it in his speech about the UK economy—has changed out of all recognition from what we used to have; namely, an economy in which we were traditionally used to our unemployment rate being above the UK average. For the past four years, the unemployment rate in the Scottish economy has been below the UK average. That is a measure of the considerable success that this Government have had in an area which has had the difficulties of serious areas of unemployment, which the noble Lord, Lord Bruce of Donington, continues to draw to my attention. We are making progress in the Scottish economy. It is certainly the first time for a very long time that we see Scottish unemployment rates below the United Kingdom rates.
I have just one last word to say about the noble Lord, Lord Sempill, before I start to look at the whole range of the debate. I was pleased—and I am sure that all your Lordships were pleased—to hear him suggest that the mindset of the people in South Africa was very much right for the challenges which lie ahead. I am sure that we all very much hope that his analysis of the situation in South Africa is correct and that we shall see some of the enormous problems which the government there have inherited being resolved, though I feel that it would be foolish to expect them to be resolved in the short term.
The British economy—I apologise to the noble Lord, Lord Eatwell; I shall just mention a few facts—is enjoying a stronger recovery than any other major European country. Output is at record levels, with exports, investment and consumer expenditure all growing in a balanced way. Unemployment has fallen by three-quarters of a million in the past three years and remains on a downward trend. Over half a million new jobs have been created since the recovery began.
We have had the longest run of low inflation for almost 50 years. My noble friend Lord Marlesford pointed out that "inflation is a very great evil". The noble Lord, Lord St. John of Bletso, also referred to the problems that arise because of high inflation. We have inflation down at a historically low level. We have the longest running level of low inflation for 50 years. Interest rates have been reduced three times since December, taking mortgage rates down to their lowest level for a generation.
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Living standards are rising. A family on average earnings should be £450 better off this year than last year, after both tax and inflation; and £4,500, which is about 40 per cent., better off than in 1979.
The noble Lord, Lord Eatwell, asked: what are the objectives of the Government's economic policy? I am surprised that he asked me that question. I thought he would know. It is found on page 15 of the Red Book, in the chapter headed "The Medium Term Financial Strategy". The objective of the Government's economic policy is:
"to promote sustained economic growth and rising economic prosperity. This requires structural policies to improve the long-term performance of the economy and a stable macro-economic environment".
The document goes on to say:
"This chapter describes the macroeconomic policy framework. Monetary and fiscal policies are directed at maintaining low inflation on a permanent basis and sound public finances".
That is the Government's objective.
What we see is output rising, unemployment down, low inflation, declining borrowing and rising living standards. It is no wonder—the noble Viscount, Lord Chandos, will not be disappointed to hear me refer to it—that the noble Lord Desai, a former economic policy adviser to the Labour Party, had to warn his Front Bench colleagues, in an article in the New Statesman earlier this month, that the economy was looking in rattling good shape.
Part of the reason for that, as my noble friend Lord Dean of Harptree mentioned, is the success of the privatised industries, a success which is in contrast to the failure that many of those industries had when the dead hand of socialism and nationalisation enveloped them. I found it interesting that the noble Lord, Lord Eatwell, in a passing phrase, seemed to be very critical of privatisation. Yet for all the criticism of privatisation, there is not a single Labour spokesman who ever mentions the word "renationalisation" or ever suggests that they might reverse the privatisations.
Privatisation has brought huge benefit to consumers. British Telecom's main prices are down more than 35 per cent. in real terms. Domestic gas prices are down 10 per cent. in real terms in the past five years. Domestic electricity prices are down 8 per cent. in real terms in the past two years. Over 95 per cent. of British Telecom's phoneboxes, which were once the butt of every music hall joke in our country, now work; and there are 50 per cent. more of them than there were on privatisation. Gas disconnections are down '70 per cent. since 1987, and electricity disconnections are down more than 95 per cent. since 1990. I could go on about the very considerable successes of those privatised companies which now help the British economy instead of hindering it, as they often did in the past.
The noble Lord, Lord Desai, is right about the British economy. As I accepted the other day in a Question put by the noble Lord, Lord Ezra, all the major economies slowed down during the last half of last year, and Britain was no exception. But we have proved much more resilient. In the final quarter of 1995, the British economy grew faster then the United States and Canada, while output actually fell in Germany, France and Italy.

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First, businesses are in the process of unwinding some of the unplanned stocks that they accumulated last year. Secondly, business investment should grow strongly. Thirdly, consumer expenditure should gain momentum. I do not share the worry of the noble Lord, Lord Ezra, about consumer expenditure. So long as one is careful with inflation targets—my right honourable friend the Chancellor and the Governor of the Bank of England will certainly be that at their monthly meetings—I do not believe that we should be frightened of people coming into the market place and spending more of their own money. That generates growth and production in our own industries. That must be what we want to see.
But it is not just the Government who expect growth to pick up. That is the view of most independent forecasters. Meanwhile, in its latest inflation report, the Bank of England said that underlying inflation was:
"more likely than not to be somewhat below 2½ per cent. in two years' time",
putting the Government on track to meet its inflation target.
Our vision of Britain is as the enterprise centre of Europe. That is rapidly becoming a reality. I think it was the noble Lord, Lord Haskel, who drew my attention to the competitive White Paper and read out from paragraph 120 of it that the GDP in this country has grown more slowly than in most of our major competitors since 1990. He did not in fact read out the next part:
"reflecting the timing of the economic cycle".
If one looks at the last European economic cycle, from 1981 to 1993, our GDP per person grew at the same rate as Germany's and faster than in France and Italy. Since 1993, we have enjoyed a stronger recovery than any other major European country. Indeed, anyone who remembers Britain of yesteryear, with its militant unions, inefficient nationalised industries and high tax rates, will gladly confirm that.
According to the Financial Times, Britain now has the lion's share of Europe's most successful companies. We are the number one destination in Europe for inward investment. Both my noble friends Lord Dean of Harptree and Lord Oxfuird mentioned the success in inward investment that we are having as an economy. We have taken over 40 per cent. of the United States and Japanese investment in the European Union. I say to the noble Lord, Lord Bruce of Donington, that I believe that that inward investment can be of huge benefit in some of the most difficult areas of this country when it comes to unemployment problems. For example, QPL International in Newport, a microchip manufacturer, announced that 770 jobs will come on line there this year; TRW Incorporated, an American engineering company, is to create 275 new jobs at a £24 million factory development in Peterlee, County Durham, and the Chung Hwa Picture Tube Company, a Taiwanese-based company, is planning to build a factory at Mossend in Lanarkshire, Scotland, where I know considerable employment problems exist. Up to 3,300 jobs are likely to arise there.
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Those inward investments not only benefit the whole of the United Kingdom, but also they often benefit where—as the noble Lord, Lord Bruce of Donington, and I agree—serious problems relating to high levels of unemployment exist, largely because traditional industries have declined in those areas. Those inward investments are coming to this country. We approve of them. They come here because we have one of the lowest burdens of public spending and taxation in Europe. We have deregulated markets and low overheads. As a result, we have the lowest rate of unemployment of any major European country and a higher proportion of our people are in work. It is no wonder that the OECD praised the Government's structural reforms and that other countries are increasingly being encouraged to emulate them.
The last time I used these figures I was chided; I was told I was not using comparable figures. But I was. I was using standard ILO definitions, seasonally-adjusted unemployment rates sourced from the OECD and Eurostat. On the last day for which I have figures, the German unemployment rate, for example, in December was 8.6 per cent.; in January the UK rate was 8.4 per cent; the Italian rate was 12.6; the Canadian rate was 9.4 and the French rate was 11.8. I fully accept the point made by the noble Lord, Lord Acton, that I should look at the United States and Japan, and I do that. The rate of unemployment in the United States in January was 5.7 per cent. and in Japan 3.4 per cent. We must look to those economies as doing better than Europe has done with unemployment. But it is not something that we alone should be looking at; it is something at which our European partners should be looking also. Perhaps issues like the social chapter and the like are one of the reasons why Europe is in danger of not being competitive in the modern world.
We intend to ensure that Britain turns in a world-beating performance in future. That is why we have set inflation targets that will give us an inflation performance to match the best. That is why we intend to reduce public spending and taxation to meet the competitive challenge of the Asian tigers and the emerging economies of Eastern Europe and Latin America. I agree with the noble Baroness, Lady Seear, that the noble Lord, Lord Eatwell, far too readily dismissed those economies in the Far East as challenges. As the noble Baroness said, we must bear them in mind not only as great markets for the future, as China will undoubtedly be, as long as we are competitive, but also as rivals in world markets.
We have placed emphasis on re-skilling the workforce. We have looked at improving education and training. We shall shortly be publishing our third annual competitiveness White Paper, taking another hard-headed look at our competitive position against our trading rivals.
That combination of steady growth, low inflation and rising prosperity is no accident. It is the direct result of the Government's economic policies; of tough decisions taken on taxation, public spending and interest rates and the structural reforms we have pursued since 1979 to improve Britain's competitiveness. As I sat and listened to noble Lords opposite I wondered where they stood

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on public spending and taxation. For example, I wonder whether the noble Lord, Lord Monkswell, speaks for the Labour Party. I understood from him that he was in favour of considerable increases in social security payments, pensions, unemployment benefit and increased taxation. If he speaks for the Labour Party, that is the first time that it has committed itself to anything very much for a long time. The noble Lord is either going to say that he does or does not.
Lord Monkswell: My Lords, I thank the Minister for giving way. In fact, I suggested a policy whereby taxation for rich people should be increased and the tax burden for poorer people should be decreased. That could encompass a balancing situation where the level of overall taxation went neither up nor down.
Lord Mackay of Ardbrecknish: My Lords, if the noble Lord thinks that he can increase pensions and unemployment benefit, at the kind of level he indicated in his contribution, by soaking the rich, I suggest he studies how deeply he would have to tax in order to raise the money. He would need to tax the rich at 98 per cent.—I assume that is all right—but, as the Labour Party found at the last election, his party will need to tax people on average incomes to raise the kind of money he wants in order to realise the promises he was making.
The noble Lord, Lord Eatwell, went a bit further when it came to inflation. I was so surprised that I wrote down his words. He referred to the "foolish policies" of the Bundesbank. That contrasts with the usual view that people have of the Bundesbank; that is, that it has impeccable anti-inflationary credentials. I do not like to intrude on internal quarrels in the Labour Party, but one of the great arguments put forward by some of the proponents in the party opposite of going hell-for-leather into everything the European Community wants, including the single currency, is that we would then be controlled by the Bundesbank at large. Clearly, if it is now felt that its policies are foolish, we are beginning to see a change.
Perhaps I can mention that the Bundesbank is an independent central bank. Occasionally I had the impression that the party opposite was keen on an independent central bank. Perhaps that has changed and it is going off that policy as it has gone off so many policies that the Labour Party has flown in the past few years and decided to change a month or two later.
I turn to the serious question of investment raised by the noble Lord, Lord Ezra, the noble Baroness, Lady Seear, and others. First, since 1979 whole economy investment in Britain has grown faster than in any other major European country and is around double the average rate that it was in the 1970s. Indeed, I hold a paper from James Capel which contains an interesting graph. It shows—noble Lords make much of this—that investment in plant and machinery as a percentage of GDP, now standing at about 7 per cent., is down from a high of just over 8 per cent. at the beginning of the 1990s. It also shows that, for almost all the time of this Government's tenure in office since 1979, investment in plan' and machinery as a percentage of GDP has been higher than at any time in the five preceding years under the party opposite.
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We therefore do not need any lessons from the party opposite about investment. Indeed, investment as a proportion of output in 1994 was 10.1 per cent. in the United Kingdom. That contrasts with 5.5 per cent. in France for the first, second and third quarters of last year; 9.6 per cent. in Germany; 6.7 per cent. in Italy (those are 1993 figures; Italy must be slow in bringing its figures forward); 10 per cent. in the US and 10.4 per cent. in Canada. Again underlining a point made by the noble Lord, Lord Acton, the figure is 17 per cent. for Japan. I suspect that those figures suggest that the position is not quite as bleak as noble Lords sometimes suggest. Business investment has been higher than it was in the 1970s as a percentage of GDP.
Baroness Seear: My Lords, does the noble Lord agree that those figures are from a low base of what went before?
Lord Mackay of Ardbrecknish: My Lords, I believe I made that point. That low base came immediately before 1979. It arose under a government presided over by the party opposite and sustained in office by the party of the noble Baroness, if memory serves me right—it was a long time ago.
The figures show that investment is not so bad as it is sometimes painted. I do not say that we would not like to see it higher, but it is not so dismal a picture as many people try to paint. My noble friend Lord Lawson, when he was Chancellor, reformed the corporation tax regime in the mid-1980s to encourage business to invest efficiently and profitably according to commercial criteria and not just because they wanted to reduce their tax bills. All too often in the past investment came forward for the wrong reasons. Business ought to invest because it sees business opportunities. That is what we are determined to continue to do.
Another key aspect of investment that is often ignored but that was picked up by the noble Lords, Lord St. John of Bletso and Lord Ezra, is the question of investment in people. We have given a high priority to improving education and training. The proportion of 16 and 17 year-olds staying on in full-time education has increased dramatically. Standards have improved at all levels of education, GCSE and A-levels. Almost one in three people enters higher education and we have one of the highest graduation rates in Europe. We believe that that is important.
I was amazed by one point in the speech of the noble Lord, Lord Eatwell, and if I have got it wrong I apologise. In discussing whether or not unemployment comes from structural reasons and from uses of new technology, he said that new jobs do not have excessive skill requirements. I wrote that down, and the noble Lord confirms it. If new jobs do not have excessive skill requirements, why does his honourable friend Mr. Gordon Brown continue to say that the way to get growth in our economy is to have more training and to get people off unemployment so that they can take up new jobs? I really am puzzled. Indeed, his noble friend Lord Haskel did not seem to agree with that—he mentioned skills as an important aspect—and his noble friend Lord Chandos did not agree.

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He is probably not too anxious about them but I shall perhaps worry him a little when I say that I do not think the leader of his party agrees. In his article in the Daily Telegraph on 11th January 1996, Mr. Blair said:
"We live in a new global economy. Technological and economic change is occurring at extraordinary speed".
Yet I heard the noble Lord, Lord Eatwell, say that it was not. Mr Blair went on to say:
"Jobs, even industries, become obsolete overnight".
It is important that we react to those things. Even though the noble Lord, Lord Eatwell, does not seem to think it is important, I certainly do, and the Government do. We have to look not just at our investment in plant, machinery and so on but also at our investment in people. Perhaps I may refer again, sparing, I trust, too much embarrassment, to the noble Lord, Lord Desai, who, in another of his New Statesman articles, said in describing the position of British investment:
"The British get bigger bangs for the buck for their investment than the rest of the world".
We have heard a good deal about job insecurity. I notice that the Labour Party is moving away from talking about unemployment—presumably because unemployment is going down by 750,000—and is now talking about job insecurity. Apparently, the Labour Party has just discovered, although in his article in the Daily Telegraph its leader seems to know, that in a modern market economy, millions of people will change jobs every year and some will experience a short spell of unemployment in between. What noble Lords forget is that most people leave the unemployment register very quickly: a quarter within a month, half within three months, and two-thirds within six months.
Clearly, the combination of modern technology and free trade are bringing about massive changes to traditional patterns of employment. No government can change that. Fewer people will have jobs for life. But there is little evidence that jobs have become less secure, despite people's perceptions. The 1994 Labour Force Survey showed that almost two-thirds of men aged 30 to 49 had held their present job for more than five years—a figure that was little changed from 10 years before. The duration of jobs has not changed markedly since the 1970s and 1980s. The proportion of the population making at least one unemployment claim in the previous five years has been fairly stable since the late 1980s.
The key to reducing job insecurity is to reduce unemployment, and that is exactly what we are doing. The real threat to job security will come from the Labour Party. Not only has it opposed almost every measure we have taken to create a more competitive and job-creating economy, but, given the chance, it would smother business with red tape and new regulations, sign up to the social chapter, and introduce a minimum wage as well.
I wish to round up by saying a few words about the speeches of the noble Earl, Lord Longford, the noble Lord, Lord Bruce of Donington, and the noble Baroness, Lady Seear. The noble Baroness dwelt a little on, as she described it herself in that not, as she said, very elegant phrase, the underclass—the problem of people who are
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in the bottom decile. It is a mathematical fact that we shall always have a bottom decile. The important question is whether people can move in and out of that bottom decile. A number of recent studies suggest that there is a great deal more movement than many people seem to think.
The Earl of Longford: My Lords, in my speech I put a question directly to the noble Lord. However, he has a lot of questions to answer and this one may have slipped his mind. Since 1979, reversing the previous trend, there has been a steady increase in inequality of income. Is the noble Lord proud of that?
Lord Mackay of Ardbrecknish: My Lords, it is rather late in the day to have a long debate about that. The noble Earl will know, as he has attended some of the other debates, that, with the increased amount of participation by women in the labour force, many families have two incomes, some families have one income, and, regrettably, some families have no income. That inevitably means that there will be variations of household incomes in a big way. So I think there are some factors there with which even the noble Earl, short of punitive taxation, will not be able to deal.
An interesting point—the noble Lord, Lord St. John of Bletso, mentioned this—is that pensioners' average incomes have increased by 50 per cent. since 1979. Average incomes for the unemployed and for others not in work have also risen. Independent research shows that the least well off—the bottom decile—have also shared in the country's increasing prosperity. The Institute of Fiscal Studies showed that the standard of living, measured by expenditure by the lowest decile, has increased by 14 per cent. since 1979. The lowest income decile has seen a big increase in ownership of consumer durables; for example, 90 per cent. have washing machines, up from 69 per cent. in 1979, and 75 per cent. have telephones, up from 47 per cent. in 1979.
We have given considerable extra help to vulnerable groups—more than £1 billion a year to low income families and £1.2 billion a year to poorer pensioners since 1988. In the past two years, we have introduced help with child care, announced the jobseeker's agreement and a back-to-work bonus, and a package of work incentives worth around £700 million, in order to try to tackle the problems identified by the noble Lords, Lord Acton and Lord Sempill, of unemployment and people needing to find a way back into work.
We have heard two contrasting approaches to the economy. From the party opposite, we have heard the usual interventionism dressed up by the new phrase "a stakeholder economy", but with plenty of aggravation put in the direction of those people who run British industry and who manage it. At best, the kind of policies the Labour Party advocates would retard our economic renaissance. At worst, they would take us right back to the cul-de-sac we were in in 1979.
From this side—from my noble friends and from the Cross Benches—we have heard a confident vision of a dynamic and competitive enterprise economy, generating jobs, rising prosperity and the resources for

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the better public services which we all want to see. Fortunately, our vision is the reality and the one that people will increasingly see as the reality.
7.47 p.m.
Lord Eatwell: My Lords, I am enormously grateful to those noble Lords who have taken part in the debate. I have been greatly heartened that, virtually without exception—indeed the only exception was the Minister—noble Lords have addressed carefully the substantive changes in the fabric of society and in the economy that have occurred over the past 17 years. I apologise to the noble Lords, Lord Dean of Harptree and Lord Ezra, for the fact that I was called away and missed their contributions. I look forward to reading them in Hansard tomorrow.
This is not the time to answer the issues raised in the debate. However, I should like to make one or two comments. First, I congratulate the noble Lord, Lord Sempill, whose speech I anticipated. I feel I anticipated it appropriately because I enjoyed it very much. I notice that the noble Lord lists as one of his recreations watching rugby football. Now he has joined your Lordships' House perhaps he will consider joining the Commons and Lords Rugby Union Football Club and return to playing rugby football. I know that his neighbour, the noble Lord, Lord St. John of Bletso, will be happy to provide him with a membership form. Do come and join us!
I wish also to comment on the most warm remarks of the noble Baroness, Lady Seear. I have indeed studied the Liberal Yellow Book of 1928. I happen to own a copy. I also own, and would recommend to noble Lords, a copy of another Liberal pamphlet by Keynes entitled Can Lloyd George Do It? I assure noble Lords that the pamphlet is about employment policy.
As regards a couple of substantive matters in the debate, I would like to refer to the comments of the noble Lord, Lord Marlesford, who questioned the relationship between efficiency and equality. He was puzzled by the view that I advanced about the supervisory and managerial burden in British industry. The point I was making is that Professor David Gordon has shown that whereas in Germany 96 per cent. of the labour force is actually doing the job, while 4 per cent. is supervising those who do it, in the United Kingdom only 85 per cent. of the labour force does the work and 15 per cent. of the employees supervise those who do the work. This burden is the product of the adversarial relationship which characterises so much of British industry, but not all.
I made clear—and the Minister misrepresented me on this point—that several British companies do indeed follow what could be called, "a stakeholder approach". The European Works Council, as defined by the Social Chapter of the Maastricht Treaty, has been introduced by, among others, United Biscuits, which is a
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company well-known as a supporter of the Conservative Party; by Coats Viyella, Courtaulds, ICI, Pilkington and many others.
Lord Marlesford: My Lords, I am grateful to the noble Lord for making it clear that he believes that managers do not do work.
Lord Eatwell: My Lords, on the contrary: I was suggesting that we need only an appropriate number of them. Given the adversarial relationships in Britain which this Government have created, we have far too many. Given all those matters, I reiterate my thanks to the many noble Lords who have contributed to what I found to be an excellent debate. I am grateful to those noble Lords. I beg leave to withdraw the Motion.
Motion for Papers, by leave, withdrawn.

Nursery Education and Grant-Maintained Schools Bill
Brought from the Commons; read a first time, and to be printed.

Restaurants (Service and Cover Charges) Bill [H.L.]
7.52 p.m.
The Earl of Bradford: My Lords, I beg to move that the House do now resolve itself into Committee on this Bill.
Moved, That the House do now resolve itself into Committee.—(The Earl of Bradford.)
On Question, Motion agreed to.
House in Committee accordingly.
[The DEPUTY CHAIRMAN OF COMMITTEES (Lord Burnham) in the Chair.]
Clause 1 [Service and cover charges]:
Viscount Mountgarret Viscount Mountgarret moved Amendment No. 1:
Page 1, line 7, leave out from ("above,") to end of line 14 and insert ("no charges shall be made in addition to the price advertised to any consumer of food or drink that is for sale by retail for consumption on any restaurant premises or premises offering similar services other than any charges which must be shown separately in respect of entertainment.").
The noble Viscount said: I beg to move this small amendment, which is self-explanatory. The clause, as drafted by my noble friend—and I hope that he will not mind too much if I suggest this—is somewhat verbose, rather ambiguous and convoluted. I believe that the amendment, as drafted, and shown on the Marshalled List, is a better way of putting it. It is clearer and more concise. I very much hope that my noble friend will feel able to accept that point.
Lord Monson: I believe Amendment No. 1 to be much clearer, more concise and less open to

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misinterpretation than the wording of the Bill, as currently drafted. That is why I am pleased to add my name to this amendment.
Viscount Thurso: I, too, would like to add my name to this amendment. My principal concern about the Bill is the effect on remuneration of waiting staff and to see that, as far as possible, their remuneration is protected. I am advised that the effect of this clause, as originally drafted, could possibly include tips and gratuities, which would have a negative effect on their remuneration. Therefore, I prefer the amendment as I believe it tidies up that point and helps to make clear that gratuities and tips cannot also be drawn in.
Lord Rathcavan: I add my support to Amendment No. 1. Perhaps I may also add my support to Amendment No. 3 while I am on my feet. I totally agree with the noble Viscount, Lord Thurso, that the existing wording of the clause confuses the difference between a compulsory service charge and an optional gratuity or tip. I know that the staff prefer to retain the troncmaster. The restaurant owners prefer it and also the British Hospitality Association. I strongly support the rewording suggested in Amendment No. 1.
The Minister of State, Department of Trade and Industry (Lord Fraser of Carmyllie): It may be helpful if I briefly intervene at this point to indicate that the position the Government take on this Bill is unchanged, believing that further regulation in this area is not necessary. Accordingly, it will be noted that we do not propose to move any Government amendments either to this clause or indeed to any other part of the Bill.
I appreciate that the amendment is designed to overcome the flaw that my noble friend identified at Second Reading, that price indications which indicate that a separate service or cover charge is payable are not at all misleading, and that it is contradictory for the Bill to define them as such. I fully agree with my noble friend on that point.
The solution which he proposes is to replace the offending drafting by a provision which would prohibit the levying of any charges in addition to the advertised meal price, except where such a charge was made for the provision of entertainment. I have to say that I understand the support that has been offered for that proposal, but the provision itself suffers from a number of drawbacks.
We are concerned that it does, in some respects, obscure rather than make clear to consumers what elements are in fact included in the cost of a meal. It would also effectively nullify the requirements of the Price Marking (Food and Drink on Premises) Order 1979, to which reference has been made at earlier stages of this Bill, which requires non-optional charges to be clearly and legibly displayed at or near restaurant entrances.
Most fundamental of all—and it is an important point—is that the amendment would in our view be outside the scope of Part III of the Consumer Protection
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Act 1987. This extends only to making provision with respect to the giving of price indications, but not to what charges may or may not be made. I offer that advice to the Committee. But as I have already indicated, the Government's opposition to this Bill remains.
The Earl of Bradford: While I accept that the purpose behind this amendment is to simplify, the advice that I was given as regards its wording was that it had to fit in with the Consumer Protection Act 1987, and if it was going to be added to that Act, it needed to be phrased and tabled in this way. The purpose of the amendment is certainly not totally to discourage tips.
Basically, there are two purposes here: first, that a service charge should not be levied and, secondly, a cover charge should not be levied except in respect of entertainment. The Minister has advised us that we are all deficient in our drafting and that we may have to rethink this matter at a later date. I very much hope that he will accept that those are the two purposes behind the wording and not tipping.
8 p.m.
Viscount Mountgarret: I listened to my noble friend with interest. I am a little disappointed that the Government are not supportive of the Bill because I think that consumers should be protected in restaurants. There may well be the Consumer Protection Act, but nonetheless at numerous establishments all kinds of sums are added to bills and people can become very confused. However, having said that it is fairly clear from what my noble friend said that this falls outside the Consumer Protection Act and I would not like to suggest anything that will make life more difficult. Although I agree with the noble Viscount, Lord Thurso, it seems that it may be better to leave the provisions as they stand in the clause.
However, the point has been made. If the Consumer Protection Act can he improved, perhaps we are better to follow that course. On that basis, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 1 agreed to.
Clause 2 [Code of practice]:
Lord Monson Lord Monson moved Amendment No. 2:
Page 1, leave out lines 21 and 22.
The noble Lord said: Paragraph (b) of Clause 2 is surely excessively restrictive and paternalistic. Why should not people be free to decide at the last moment to add a tip via their credit card if they so wish? Not everybody carries enough cash around with them to constitute a tip and if they do have enough cash, it may well be of the wrong denomination. Anyone in the income bracket which makes them eligible for a credit card must be supposed to have sufficient nous not to be thrown or intimidated by a blank space on the credit card slip which he or she is perfectly free to complete or to ignore. I beg to move.
Lord Cadman: Although I appreciate the sentiments behind the amendment, I think that we should resist it.

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Apart from the implicit suggestion contained in the practice, in many cases the money raised in this way does not get into the pockets of the staff; rather, it is applied for their benefit. The provision of coffee and drinks machines in staff rooms is one such application. I am informed that free transport to, say, staff sporting events or staff outings is another. I am sure that restaurant staff would be much happier if they could receive any gratuities personally rather than at the behest of their employers. Also, if the customer is careless and neglects to fill in the total, as is quite common, there is a possibility that fraud may he encouraged.
Lord Bramall: I should first declare my interest in that for six years I was chairman of the Dorchester Hotel and still keep in close touch with the hotel. That has enabled me to carry out some research there recently. I must confess that I see no problem with the clause as drafted. I think that we are all agreed that people should be able to go into a restaurant, look at the menu and see exactly what they will pay for a particular course without having to take into account a lot of hidden charges.
It is not a question of whether or not the staff actually get the tips. They get some tips anyhow because the service charge is included in the price. The point is that unless the customer particularly wants to do so, he should not have to pay twice for service.
Many people pay by credit card. When a customer is given his bill he has an opportunity to say whether he wants to give anything in addition. He is not expected to do so because it is all included in the price, but he has that opportunity. The customer can either give an extra tip in cash or, when he is giving his credit card to the waiter, he can say, "Now, go and make out the credit card form and put in x per cent. (or £x), bring it back and I will sign it". That is perfectly proper. However, if the customer does not want to give anything extra and the debit slip is returned with a gap, the total box not having been filled in, that is putting a pistol to his head and saying, "Service charges are indeed included, but, as you can see from the gap, you are expected to pay something else as well". That seems to me to be putting undue pressure on the customer.
I find the provisions as drafted acceptable. I know that establishments such as the Dorchester Hotel and others of that calibre follow that practice already. Their menus make it perfectly clear that the price includes all cover charges (if there are any), VAT and the service charge. If a customer does not specify to the contrary, the debit slip for the credit card is returned completed. If the customer then makes up his mind that he wants to give something extra, there is a third alternative: he can say to the waiter, "Will you go away and tear up the debit slip and make out a new one?" The customer can do that, but it is easier if he pays the tip in cash or tells the waiter of his intentions in advance when he gives him his credit card. I can see no objection to the provisions.
The Earl of Lindsey and Abingdon: I too would like to see the clause retained in the Bill. Perhaps I may give as an example what happened to me last night.
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I shall not give the name of the restaurant, but the menu made it absolutely plain that service and cover charges were included. However, when I asked for my bill and sought to pay by credit card, a gap for gratuities was left at the bottom of the slip. That invites double-tipping. I raised that matter on Second Reading because I think that it is entirely wrong. I put a line through the gap and tipped the waiter cash as I left because, as has been said, we do not know where the gratuities go. They do not necessarily go to the waiter concerned. The money goes into a pot and we do not know whether it goes to the management. It is all right if the place is properly run, but that is not always the case. That is why I should like the clause to be retained in the Bill.
Viscount Mountgarret: My Lords, perhaps for a moment I may take issue with the noble and gallant Lord, Lord Bramall, who said that if you wanted to add a little more by way of your debit card, it would not be difficult to ask the waiter to tear up the first slip and to start again. I do not know what other noble Lords think, but it seems to take long enough to be given one credit card slip to sign at the end of a meal in a restaurant, let alone having to ask someone to tear that up and to bring back another.
We are presupposing that the service charge to which noble Lords are referring as inclusive in the price is actually specified. One restaurant may decide to put, say, 5 per cent. on to the price of a steak while another restaurant decides to add on 10 per cent. However, in that case the consumer does not know one way or the other what the service charge is on his bill. The customer will simply go to where he receives the best value at the best price, whatever the restaurant.
Diners 'must be entirely free to give tips. As has been said, one sometimes wonders just what happens to the gratuities that one may add to a credit card slip. On that basis, I think that the amendment is flawed. I believe that my noble friend has it about right and the amendment should not be supported.
Lord Bramall: I did not suggest that the tearing up of the credit card slip was a standard procedure. That is only for the benefit of those who have not made up their minds earlier. Normally, they will do it in advance or will pay cash. As far as getting the best value for money is concerned, the Dorchester has no difficulty in getting clients, even though it adopts that particular procedure.
Viscount Thurso: I put one point to the noble Lord, Lord Cadman. I believe that as a matter of law gratuities left by clients, as opposed to service charges, are the property of the staff for whom they are left. Therefore, it is illegal for that money to be used in any way other than for the benefit of the staff. That is not so in the case of the service charge which Clause 1 seeks to abolish.
Lord Fraser of Carmyllie: I have listened keenly to this interesting debate. However, I wish to be clear that at the moment we are dealing with Amendment No. 2 rather than Clause 2 in its totality. For the benefit of a number of Members of the Committee who have shown an interest in this matter but did not have an opportunity to participate at Second Reading, perhaps I may repeat

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the follo0wing to set the matter in context. The Government have undertaken to revise the guidance on restaurant service charges given in the current code of practice for traders on price indications when the code is reviewed. When that review takes place we shall consult widely with all interested parties on the advice which it will be appropriate to include. No doubt the issues addressed both by the clause and the amendments proposed to it will be considered.
As I hope I made clear on Second Reading, however, the approach adopted in the Bill of seeking to regulate a specific sector through primary legislation, which has application to price indications for virtually all goods and services, is fundamentally unacceptable. To seek to change the scope of the provisions of Part III of the Consumer Protection Act 1987 to include regulation of practices within a specific sector can have the effect of casting doubt on the application of that part of the Act to all price indications. While I understand what is sought to be done—whether those who participate are in favour of the clause or wish to restrict it—I am concerned that in a broader legal context it will have some seriously undesirable effects.
As regards this particular clause, a further objection is that it will produce the impracticality of requiring any code of practice approved under Section 25 of the Consumer Protection Act 1987 to include the three matters specified in the clause, regardless of the subject matter of that code. Therefore, the deletion proposed in Amendment No. 2 will in some respects overcome the objection to which I have made reference. In that respect the amendment will be a welcome one. I say for the convenience of the Committee that that applies equally to Amendment No. 3.
As far as concerns Amendment No. 2, I agree with the noble Lord, Lord Monson, that it is not appropriate for the Bill to deal with the non-closure of credit card slips. The issues around this practice were debated on Second Reading. If a further remedy is needed—it is clear from the debate that there is a widespread view that something ought to be done to attack this extremely undesirable practice—I regret to say that I cannot indicate to the Committee that this is an appropriate vehicle to bring about such a change.
The Earl of Bradford: I was delighted that my noble and learned friend the Minister felt that this subject needed to be looked at and considered in a code of conduct in the future. It is there to protect the public. Sadly, at the moment there are practices, all too rife in the restaurant industry, which try to persuade the customer to part with more money than he should have to. Recently, a noble Baroness asked me about a certain restaurant to which she intended to go. She asked me what she should do. I said that when the bill arrived she would find that the restaurant had added on 12½ per cent. for service and that her credit card slip would be left open. The following week she thanked me fulsomely and said that without the advice I had given she would have added an extra tip in the place indicated.
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The noble and gallant Lord, Lord Bramall, made some cogent points. When somebody is paying a bill and wishes to leave a tip it is easy for him to request that so much should be added to it and that it should be put on his credit card, or he could leave it in cash. I accept what my noble and learned friend the Minister said; namely, that it is inappropriate for this provision to be included. Therefore, if there are strong objections to it and the amendment is supported I shall have to withdraw the clause.
Lord Monson: I am grateful to all noble Lords who have spoken and for the wide range of views expressed. I agree with the noble Lord who spoke immediately after me. All too often service charges go in whole or in part into the pocket of management rather than the staff. This is a deplorable practice. I tabled an amendment to the Bill to outlaw that practice but was told that it was inconsistent with the Long Title and therefore had to withdraw it.
The noble Earl, Lord Lindsey and Abingdon, told us of his experience last night. I suggest that what he has said justifies my amendment. He did what anybody else would do in similar circumstances: he put a line through the credit card and paid cash. He was exercising his judgment and was perfectly free to do so. But he might not have had any cash with him and have preferred to add something to the credit card slip in lieu. As the noble Viscount has told us, by law that must go to the staff and not the management.
I have received support from the Government and the noble Earl, Lord Bradford. If the Government's view is that this is not an appropriate Bill in which to abolish the practice of leaving open credit card slips it may be right for the amendment to be accepted. I am in the hands of the Committee. If it is the Government's wish, perhaps the view of the Committee can be tested.
On Question, amendment agreed to.
The Deputy Chairman of Committees: If Amendment No. 3 is agreed to, I cannot call Amendments Nos. 4 to 7.
Viscount Thurso Viscount Thurso moved Amendment No. 3:
Page 1, leave out lines 23 to 25.
The noble Viscount said: In moving Amendment No. 3 I should like to speak also to Amendments Nos. 4 to 7 and Amendments Nos. 8 and 10. The effect of Clause I is to abolish service charges. For the benefit of noble Lords who are not familiar with the industry, perhaps I may make clear the difference between service charges and tips or gratuities. Service charges are obligatory or optional charges that are applied by the management, managed by them and handed out to the staff. As the noble Lord, Lord Cadman, pointed out, those charges may be used for their benefit. That has now been abolished. Tips and gratuities are entirely at the discretion of the client. The client may or may not leave them, as he thinks fit. The purpose of Amendments Nos. 3, 8 and 10 is to ensure that tips and gratuities are not actively discouraged.
The amendment proposed by the noble Earl, which he will move if this amendment is not agreed to, would mean that VAT and service would he stated to be

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inclusive. If one has just abolished service, it is impossible then to state on a bill that service is included. It would make clients think that some form of payment was going to the staff, when in fact the effect of the Bill is to remove service charges. To say, "inclusive of service" is more misleading than the current situation.
Secondly, to state "inclusive of VAT" brings into the Bill an element which was not present on Second Reading. Furthermore, as the Minister said, it cuts across a great deal of other legislation. I am grateful to the Minister for pointing out the effect of the clause. So, rather than go through all the arguments I had rehearsed, I shall say that a code of practice is set up by Clause 2. If a code of practice is set up with Amendments Nos. 8 and 9, which require the Secretary of State to consult the industry, any point can be considered and included in the code of practice. However, if paragraph (c) is allowed to remain, then the Secretary of State will be obliged to do so. Therefore what the noble Earl seeks can still be achieved if the amendment is agreed to. If it is not agreed to, what I seek cannot be achieved. I beg to move.
Lord Bramall: Perhaps I may ask the noble Viscount a question. He may know something that I do not know. When talking about the service charge, he used the words, "that has now been abolished". As I understand it, the service charge has not been abolished. It is still there, but it is merely included in the price. So the customers will know when they are ordering their Dover sole, or whatever it is, that the price is inclusive. Included in the price is the service charge which is still passed on to the staff.
Viscount Thurso: I am sure that the noble Lord is aware that there is a difference between an optional service charge and a compulsory one. An optional service charge suffers from neither national insurance nor VAT. So, when it is given to the staff, it is of greater benefit to them. By making the service charge fully inclusive, by definition, it is no longer optional. It is then an obligatory service charge. Whether it is said to he included or not, it is obligatory. At that point, national insurance and VAT come into play.
I cannot see proprietors becoming suddenly more generous and paying their staff more. There is enough pressure on customers to pay. I do not see the prices going up. The only effect would be to cause earnings, effectively, to go down. If the service charge is compulsory, it does not exist. One pays a set amount of money for one's dish of Dover sole. Whether the management chooses to pay a commission, which is effectively what a service charge has become, is another matter. The customer does not want to know that, any more than he wants to know whether there is a commission when he purchases an item of clothing in a shop.
Viscount Mountgarret: I support the amendment so ably moved by the noble Viscount. With the leave of the Committee, I shall refer to Amendment No. 10, which contains the important point. As the noble Viscount said, that amendment requires the code of practice to take
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account of the numerous issues which will arise in people's minds, and not just what is on the Marshalled List. There may be other factors.
The point was made on Second Reading that this is not a matter for government or legislation. It is not right for this place or the other place, or this government or any other government, to lay down the law as to how a certain industry conducts its affairs. It would be far better to require the Secretary of State to look at the whole problem of people being deceived, intentionally or accidentally, in restaurants. We recognise that there is a problem. So let us have the Bill with the requirement that the Secretary of State shall set up a code of practice.
As the noble Viscount rightly said, if we include in the Bill specific points which the code of practice must take on board, that takes away freedom of judgment and flexibility. It would be helpful for the Bill in its future stages to incorporate the amendment. Everything else should be included in the code of practice.
Lord Cadman: We should resist the amendment. My noble friend has recognised that the wording of the clause needs attention. He has tabled amendments to address the point. The Government have indicated that legislation in this area is inappropriate. In that, I am inclined to agree. However, the restaurant trade has failed to address itself to the fact that those of its members who are fortunate enough, in a competitive world, to get away with imposing a charge for the service of a meal has encouraged my noble friend to promote the Bill. The amendment would allow them to indulge in the practice without informing their customers of their intentions. Under the circumstances, I leave the Committee to draw its own conclusions.
Lord Fraser of Carmyllie: I can address the matter briefly. My objection to paragraph (c) of Clause 2 is the same as the objection I indicated in relation to paragraph (b), and my broader concern is that any code of practice, whether or not it related to a different range of goods and services, would have to include this provision. There are some fundamental problems with it. I cannot elaborate, but the one point that I should make clear is that, if the amendment were agreed to, for better or for worse, Amendments Nos. 4 to 7 could not then be moved.
The Earl of Bradford: To outline briefly what underlies the Bill, we must be the only country in the world where our restaurateurs confuse the public in the way that they do. If one goes to America, one knows clearly what is the standard procedure. One tips somewhere around 15 per cent. to 17.5 per cent. That is common to all restaurants. If one goes to France, everything is inclusive nowadays. If one goes to Japan, they would be insulted if one offered a tip.
In this country, some restaurants have tipping; some add service charges of between 10 per cent. and 15 per cent.; some have suggested service charges or gratuities, generally between 10 per cent. and 15 per cent.; and some restaurants charge all-inclusive prices. One should try explaining to tourists coming to this country what is expected of them when they go to

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a restaurant. All one can say is that they will be totally confused; they will have to study the fine print themselves to discover what they will be charged for.
All I am attempting to do in paragraph (c) is to make it clear that, if we have all-inclusive prices, that is what the customer can expect. However, I fully accept that to go ahead with the phrase:
"and staff do not expect a tip or gratuity",
is going too far. I therefore propose to amend the paragraph so that we follow the French practice of saying that tax and service are included. I hear what the noble Viscount says: we cannot have service if service has been abolished. However, I believe that in such circumstances one has to make that clear to the customer, otherwise he will remain confused about the restaurant's policy.
I cannot agree to the amendment. I realise that there are deficiencies in the drafting of my amendment and I should be happy if the Minister were to assure me that a code of conduct will be introduced in the near future which applies to all restaurants in this country. However, codes of practice have been attempted many times. The other day I had a highly dispiriting experience when sitting in a committee meeting of the Restaurateurs Association of Great Britain listening to intelligent restaurateurs arguing but producing no consensus view whatever. I tried to stay out of the argument.
The industry is fragmented. We are alienating the customer and upsetting tourists in particular. All I seek to do is to put everyone on the same fair footing. Clause 2 would seek to create for the customer a clear understanding of the way that he is charged.
Viscount Thurso: I am sympathetic to the noble Earl's objectives but I do not believe that the clause achieves them. He said that we have a code of practice that is not working but he seeks to put another code of practice before us. Why should this code of practice work if the other does not?
The Earl of Bradford: The codes of practice which were introduced in the past were not backed by statute. They were voluntary codes of conduct or were put forward by Her Majesty's Government. We are seeking to establish a code of conduct to which everyone must abide. It is easy for people to say, "Yes, that sounds like a good idea but I am not going to let it apply to me". I should like to see a code of conduct apply to everyone.
Viscount Thurso: I thank the noble Earl for making the point that I was trying to make; that the previous codes of conduct were voluntary but that this is statutory. Therefore, one would be imposing on the industry an obligation with which by no means everyone in the industry agrees or has been consulted about.
If the clause remains in the Bill it must appear in the code of practice. If, on the other hand, the amendment is agreed to and the clause is removed from the Bill there is nothing to stop a code of practice making some reference to it. I ask the noble Earl to save his firepower for that stage.
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As the noble Earl referred to other countries I must tell him that there is a huge difference between the law of this country and that of others. Having spent five years in France running a hotel, I am aware of the raft of social legislation behind the whole management of service. I believe that it is the Loi Goddard, which was passed in the 1930s. That makes clear exactly what goes to the staff, how it goes to the staff and the way in which it is taxed. With great respect to the noble Earl, it is not as simple as saying that if a procedure works in France it should work here.
As the noble and learned Lord the Minister has advised that the provision in the Bill would not be acceptable, I feel that the amendment should be put forward and I wish to test the opinion of the Committee.
On Question, amendment agreed to.
[Amendments Nos. 4 to 7 not moved.]
Clause 2, as amended, agreed to.
8.30 p.m.
Clause 3 [Short title, commencement and extent]:
The Deputy Chairman of Committees: If Amendment No. 8 is agreed to I cannot call Amendment No. 9.
Viscount Thurso Viscount Thurso moved Amendment No. 8:
Page 2, line 3, leave out from ("Act") to end of line 4 and insert (", other than this section, shall come into force on such day as the Secretary of State may by order appoint.").
The noble Viscount said: In moving Amendment No. 8 I shall speak also to Amendment No. 10. They provide for a consultative process for the trade. I have spoken at length about why the trade needs a consultative process. I understand that the noble Earl has no philosophical objection or objection in principle to the amendments. The hour being late, I shall rest my case. I beg to move.
Lord Monson: My Amendment No. 9 could have been advantageously grouped with Amendments Nos. 8 and 10. The noble Viscount and I are at one in believing that three months is an insufficient period in which to prepare for the major changes that the Bill would entail if enacted. The advantage of Amendment No. 9 is that a fixed time limit may galvanise the parties concerned to get their act together more speedily than they would if the matter were left on a more flexible basis. On the other hand, if the noble Viscount, with his great experience in the hotel and catering trade, believes that such flexibility is essential I am entirely happy to accept his judgment and I shall not move my Amendment No. 9.
Lord Fraser of Carmyllie: I have some sympathy with the principle behind Amendments Nos. 8 and 10. As I noted on Second Reading, a further objection to the Bill is that it would override the discretionary powers available to the Secretary of State under Section 26 of the 1987 Act to make regulations relating to the circumstances and manner in which particular price indications may be given and the requirement in that provision for consultation before any such regulations are made.

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The formulation of the noble Viscount's proposals, however, does not fit well with the existing provisions of the 1987 Act. In particular, Section 25 of the Act, which sets out the provisions for issuing a code of practice, already obliges the Secretary of State to consult the Director-General of Fair Trading and such other persons as he considers appropriate before he can make any order approving, modifying or withdrawing a code.
These amendments do, however, highlight another aspect in which the Bill is defective, in that since the existing code of practice approved by order does not meet the requirements of the clause, it would infringe the provisions of the Bill once they had come into effect. Transitional provisions would be needed.
In view of the Government's position on the Bill, I have no comment on Amendment No. 9. As regards Amendment No. 11, the disapplication of the Bill to Northern Ireland would be technically correct because Part III of the Consumer Protection Act 1987 itself does not apply in the Province.
The Earl of Bradford: After 17 years of discussion within the industry and of trying to bring restaurants into line in order to stop confusing the public, whether the time limit is three or six months, or however long the Secretary of State may deem fit, is irrelevant. My noble and learned friend the Minister has made it clear that we shall not proceed too much further with the Bill. However, I urge upon him the absolute necessity of getting together all sections of our industry in order to agree a consensus of the way in which we charge customers in restaurants in this country.
That is vital because we are doing harm to an industry that has made enormous strides forward in the past 20 years. I believe that everyone accepts that today London is counted among the culinary capitals of the world. We have a choice of restaurants and a tremendous enthusiasm among young British chefs. We are offering a product that is vastly better than that offered 20 years ago.
Sadly, we are still doing harm to ourselves. Whatever decisions are made regarding my Private Member's Bill, I urge the industry, with the encouragement of the Government, to try to reach a voluntary consensus view of the right way forward. In that way, we shall all gain
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because staff will be treated differently and in a more professional manner and waiting staff will be properly rewarded. Therefore, so far as concerns time, I shall leave the matter to the Committee.
Viscount Thurso: In view of the advice offered by the Minister, I believe that it is only correct for me to beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Monson Lord Monson moved Amendment No. 9:
Page 2, line 3, leave out ("three") and insert ("six").
The noble Lord said: I am sorry that Amendments Nos. 8 and 10 which were tabled by the noble Viscount were shot down. Having heard the noble Viscount speak, I believe that his amendments were probably superior to mine. However, Amendment No. 9 is second best in my view and is certainly preferable from the practical point of view to the Bill as it stands. I do not believe that any technical objections could possibly be raised against it. Therefore, even if the Bill has a very poor chance of going ahead, I wonder whether it might be accepted so as to give everyone a little more time for preparation. But, of course, that is a matter for the Committee to decide. I beg to move.
Viscount Mountgarret: I believe that it would perhaps be better if the noble Lord, Lord Monson, refrained from taking his amendment any further. We have heard the advice from my noble and learned friend the Minister and, indeed, what my noble friend Lord Bradford had to say as regards ambivalence about the actual timing, and so on. Moreover, following my noble and learned friend's advice, the noble Viscount said that we should let the matter rest. Therefore, I very much hope that the noble Lord, Lord Monson, will feel likewise.
Lord Monson: In the absence of any support, I can only beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 10 and 11 not moved.]
Clause 3 agreed to.
House resumed: Bill reported with an amendment.
House adjourned at seventeen minutes before nine o'clock.