§ 3.9 p.m.
§ Debate resumed on the Motion moved on Wednesday last by the Baroness Pitkeathley—namely, That an humble Address be presented to Her Majesty as follows—
§ "Most Gracious Sovereign—We, Your Majesty's most dutiful and loyal subjects, the Lords Spiritual and Temporal in Parliament assembled, beg leave to thank Your Majesty for the most gracious Speech which Your Majesty has addressed to both Houses of Parliament",
§ and on the amendment moved by the Lord Strathclyde, at the end of the Address to insert,
§ "but regret the failure of Your Majesty's Government to reduce the burden of taxation and regulation and deplore the incoherence and the lack of vision of the measures proposed by Your Majesty's Government for the coming Session of Parliament".
§ The Minister for Science, Department of Trade and Industry (Lord Sainsbury of Turville)
My Lords, the challenges facing industry are as great as they have ever been. The Government are determined to provide industry with the most beneficial environment possible, an environment that stimulates competition while encouraging the building of capabilities and co-operation where this increases competitiveness. Our policies are designed to create an economy which combines enterprise and fairness.
325 The impact of increased demand for services, technology and globalisation means that we are entering a new industrial world—the knowledge-driven economy. In that world Britain cannot compete solely on labour costs, raw materials or land. With unskilled physical work increasingly going to newly industrialised countries with low labour costs, our success will depend more than ever on our knowledge, skills and creativity. The most important responsibility for government in this context is to create a stable framework to allow business to plan ahead with confidence. Stability matters more than ever in the new economy because only in that environment will business invest in knowledge and take risks to stay ahead in fast-moving markets.
This Government's first priority on coming into office was to secure long-term economic stability and put an end to the damaging cycle of boom and bust which, in the late 1980s and early 1990s, saw interest rates rise to 15 per cent for a whole year. Since then we have put in place a new macro-economic framework to deliver and sustain long-term economic stability. We have damped down the inflationary pressures which were building up when we took office without sending the economy into recession. As a result, we now have a sound and credible platform of stability. We must now use this opportunity to create a high-investment, high-productivity and high-growth economy. No economy can grow sustainably unless its productivity improves. We still have a serious productivity lag compared to our main competitors. The Government have set out a clear strategy to meet the productivity challenge.
In addition to establishing macro-economic stability and improving educational standards, the Government have a key role in acting as a catalyst, investor and regulator to strengthen the supply side of the economy. We have already put in place a significant number of measures to provide the best possible environment for UK industry. We have cut corporation tax rates to 30, 20 and 10 per cent, their lowest ever level and the lowest among our major competitors, allowing companies to retain more of their profits for reinvestment and growth. Moreover, we have provided added certainty for firms taking long-term investment decisions by committing not to raise corporation tax rates for the lifetime of this Parliament.
Further measure; were included in the Chancellor's pre-Budget report. These included a widely welcomed reform of capital gains tax, building on the 1998 Budget changes, to encourage investment. The Chancellor and my right honourable friend the Secretary of State for Trade and Industry also announced decisions on proposals to boost enterprise and innovation. Corporate venturing tax relief, enterprise management incentives, the new all-employee share scheme and a research and development tax credit for SM Es will all contribute to a policy environment which encourages enterprise.
The new knowledge-driven economy depends critically on the creation of world-class ideas, breakthrough technology and high-value businesses 326 coming out of the science base. So last year the Chancellor set up the highly successful University Challenge Fund to capitalise on the excellent ideas being put forward by science and engineering researchers in our universities and help turn these into viable business prospects. Awards were announced in March totalling £45 million to 15 university-based consortia spread across the country. The Government have recently made an extra £10 million available towards a follow-up competition.
A second important initiative we have taken is the £25 million Science Enterprise Challenge. Eight new centres of expertise, including a consortium of Sheffield, Leeds and York universities, have been endowed to bring the new teaching of entrepreneurship and business skills into the science curriculum, helping to inspire and equip scientists and engineers to commercialise their knowledge. These centres will also benefit from the new Cambridge-MIT initiative recently announced by the Chancellor.
The Conservative Budget of 1995 imposed swingeing cuts across the science base. Capital funding for university research was cut by 30 per cent in 1996, projected to become 50 per cent in 1998. On entering office, Labour inherited a science budget that was clue to fall by 5 per cent over the next two years. One of our priorities was to reverse that trend.
Increasingly, R&D is a key component of the innovation process, leading to new and innovative products, services and processes. In recognition of this, the Government are, in partnership with the Wellcome Trust, providing an extra £1.4 billion for research and infrastructure over three years. Taking the government contribution alone, this represents a science budget increase of some 15 per cent in real terms by 2001–02. In addition, the DTI will increase its innovation budget by some 20 per cent to nearly £230 million in 2001–02 to help support R&D.
In addition, we are establishing the small business service to create a single gateway for access to government information for small businesses—including start-ups and micro-businesses.
The Government are also determined to play their part by promoting greater competition, principally by empowering consumers but through regulation where necessary. One example is the promotion of more competition in energy markets. We shall be taking further steps to enhance such competition in the utilities Bill this Session. The Government will also provide the Office of Fair Trading with an extra £15 million over three years to enforce new regulation and will enable the OFT to exercise stronger powers.
Getting employment relations right is central to our determination to promote fairness as well as enterprise. The Employment Relations Act, which received Royal Assent in July, establishes a balanced framework of rights and duties. It provides minimum standards of fair treatment for workers while at the same time recognising the need to minimise the burdens on business, including small firms. Successful businesses require a flexible labour market in order to 327 adapt to change and work more efficiently. But this flexibility should not be achieved by removing all rights from the workforce.
It is with this in mind that the Government are building a framework of minimum standards for employees. We have implemented the working time and young workers directive, giving workers for the first time minimum holiday entitlements and rest periods. We have introduced the national minimum wage, which the CBI has commended as being set at a prudent level and effectively enforced, a concrete example of the Government's light-touch approach to implementing employment legislation. We have brought in the New Deal to ensure that everyone in our society has the opportunity to realise their potential.
We have created rights for 6 million part-time workers, parental leave for over 3 million people, and paid holiday for 2.5 million workers. From today, over 3 million workers will benefit when the right to paid annual leave is increased from three to four weeks. We have achieved a great deal, but more remains to be done.
We are continuing to take steps to reduce the tax burden. The tax/GDP ratio as published in the Red Book is falling—from 37.2 per cent in 1998–99 to 36.6 per cent in 1999–00. The 1999 Budget cut taxes by £4 billion, making the average family £380 better off a year.
We are also determined to tackle the burden of regulation, which can pose a serious problem for small businesses. That is one of the main reasons for setting up the new small business service which will help small firms with regulation and ensure that small firms' interests are properly considered in future regulation.
We announced a tougher approach to regulatory control in the Modernising Government White Paper in March. Our aim is to eliminate unnecessary regulation and minimise the burdens imposed by that regulation which is necessary. We have now strengthened the regulatory control systems still further by setting up a panel, chaired by my right honourable friend the Minister for the Cabinet Office, to call Ministers to account for a department's regulatory performance.
We shall also bring forward legislation this Session to extend the deregulation order-making power, enabling more burdens to be removed without the need for primary legislation.
The challenges of the knowledge economy are not limited to high-tech start-ups and the south-east. Its challenges and opportunities will affect every business in every region, including manufacturing. Manufacturing is a crucial part of the knowledge-driven economy. Successful manufacturing today, as much as any other sector, uses the knowledge, skills and creativity of the workforce, business partners and the science base to keep ahead of the competition. That is why the Department of Trade and Industry published yesterday a report on Manufacturing in the knowledge driven economy. This celebrates the success of some of our leading manufacturers and announces 328 an "Agenda for action" setting out what the Government are doing and plan to do, working with others, to help manufacturing compete in the future.
In addition, through the Foresight process and in particular the work of the Manufacturing 2020 Panel, we are identifying the key issues that will shape the future of UK manufacturing and the action that we—business and government—should be taking to address them.
Another key component of our ability to succeed as a knowledge-driven economy is the part that universities can play in raising our competitiveness. We see universities as being at the heart of the knowledge-driven economy, not as an irrelevance to the productive economy as the previous government did.
The UK has a world-class research base in the areas of science, engineering and design. In some industries, such as pharmaceuticals, aerospace and biotechnology, which depend on elite science, we have translated that excellence into world-class competitiveness. But there are clearly many more industries that could benefit from closer ties with our science and technology base. The challenge is to tackle the weaknesses in exploitation while maintaining, and indeed improving, the excellence of the research outputs. Basic research must continue to flourish, but the UK also needs to excel at knowledge transfer.
We are also determined that all regions participate in our increasing prosperity. That is why we shall be working closely with all the RDAs to stimulate innovation in their regions and ensure that prosperity is shared by the many, not the few. Regional development agencies are identifying the regions' particular strengths in the knowledge-driven economy and building strategies around them. We will work with them in taking those strategies forward.
Based on action to secure a platform of economic stability and steady growth, we will continue to deliver on our pledges with Bills on enterprise and on fairness. The measures we introduce in this Parliament will constitute a radical and reforming programme, creating a modern Britain.
The Government are committed to modernising markets and getting regulation right for new and developing markets. We are determined to make the UK the best place in the world for electronic commerce by 2002. As part of our programme of legislation this Session we have introduced the Electronic Communications Bill to promote e-commerce and modernise the statute book. The Bill also underpins our Modernising Government agenda by helping to meet the Prime Minister's target of 25 per cent of government services available electronically by 2002, rising to 100 per cent by 2008.
The Bill has been developed in close consultation with industry and has been widely welcomed. It will create confidence in doing business and communicating with government electronically. Under the legislation, users will be able to place greater reliance on electronic signatures because it will be clear that the courts can recognise such signatures. The Bill 329 will give the Government the ability to sweep away obstacles in existing laws which insist on the use of paper and other formalities, such as sealing, wherever it makes sense to do so, to give people an electronic Option.
The Government are working closely with the Alliance for Electronic Business on a self-regulatory scheme, bringing together providers and users, including consumers, to ensure minimum standards of quality and service. The Government's strong preference is for self-regulation, and we intend to hold the statutory powers in the Bill in reserve in case self-regulation fails. These powers are subject to a sunset clause and will lapse if not used within five years.
I have spoken of our commitment to promoting fairness and the importance we attach to competition. Water, energy and telecommunications are among the essentials of everyday life. Consumers must have an efficient supply of these services on fair terms and, wherever possible, with a choice of supplier.
The Government intend to bring forward a utilities Bill to establish a modern, transparent and accountable framework for the regulation of the gas, electricity, telecom and water sectors, with the interests of consumers at its heart. The utilities Bill will demonstrate our commitment to consumers and to competition by giving the regulators a new primary duty to protect the consumer interest, wherever possible and appropriate through promoting effective competition. By this legislation, we will bring the regulatory framework up to date. To ensure that it remains so it will be made flexible enough to encourage, and adapt to, future market developments.
The liberalisation of energy markets has delivered real benefits to consumers in lower prices. But there are concerns that the disadvantaged may have benefited less than others. The Government are alert to those concerns. Competition must bring benefits for all. At the Government' s behest, the energy regulator is finalising a social action plan designed to ensure efficiency, choice and fairness in the provision of gas and electricity to disadvantaged consumers.
The Bill will provide a framework which ensures a fairer balance between the needs of consumers and the legitimate interests of utility companies. It will ensure high-quality services for consumers and exert downward pressure on prices; it will promote further and more effective competition in utility markets.
We need to encourage enterprise in all sectors of our economy. The Government are bringing forward a Bill to enable the Post Office to improve its services and compete more effectively at home and abroad. The reforms fulfil the Government's manifesto commitment to pr wide greater commercial freedom for the Post Office while retaining it in public ownership and, a t the same time, delivering an effective postal service that meets the commercial and social needs of the country.
The Government have no plans to privatise the Post Office. The Bill will make clear our intention that there will be no disposal of shares in the Post Office plc without further primary legislation except in 330 circumstances where the Post Office may wish to cement a strategic alliance or joint venture through an exchange of equity or limited sale of shares.
§ Lord Mackay of Ardbrecknish
My Lords, I am grateful to the noble Lord for giving way. How can he possibly expect us to believe what he has just said in the light of the assurances from the party opposite when they were in opposition that they would never privatise National Air Traffic Services?
§ Lord Sainsbury of Turville
My Lords, I just made a simple statement that the Bill will include a very clear situation in which it will not be possible to do that without primary legislation. In that case we are not saying that it will never happen; we are saying clearly that it will not happen without primary legislation. Therefore, the matter will have to come back for a full debate. We are not saying that it will never happen: no government can sensibly say that.
In the case of an exchange of equity or limited sale of shares, it would not be sensible or practical to seek parliamentary approval through a separate Act of Parliament, but the Bill will make provision that such a proposal will be debated and voted upon in both Houses of Parliament. The reforms are a balanced package that will give the Post Office the greater commercial freedom that it needs while introducing more competition and better regulation into the UK market. This will mean better services for individual consumers and businesses.
To further our commitment to maintaining an up-to-date legal framework for business, we shall introduce the Limited Liability Partnerships Bill to allow firms to incorporate with limited liability while retaining the organisational flexibility of a partnership. The Bill takes account of the changing commercial environment by adding to the choice of business entities available to all firms.
The provisions that we propose for the Insolvency Bill will complement the Government's determination to encourage enterprise. What we propose will assist the rescue of businesses which are in short-term difficulties but are otherwise viable. We shall also improve the procedure for disqualifying those who have shown themselves unfit to run a company.
We shall also bring forward legislation to modernise the framework under which companies are registered and deliver documents that are placed on the public record. The measures proposed will benefit all those who use the services provided by the Registrar of Companies.
The Government have included a Nuclear Safeguards Bill in their programme for this Session. This Bill is needed to allow the entry into force of a new agreement made with the International Atomic Energy Agency and the European Atomic Energy Community. The agreement is part of an international effort to strengthen nuclear safeguards. The Bill will contain the legislation necessary to ensure that we can fulfil our international obligations and we hope that it will be supported by all sides of the House.
331 The Government are committed to promoting enterprise and fairness not only in the UK but in global markets and, above all, in Europe. We are unabashed European reformers. But Britain cannot influence others in Europe from the periphery. Only by working closely with our European partners and the Commission have we been able to pioneer new approaches aimed at strengthening Europe's competitiveness. The Government are winning support across Europe for their agenda to deliver a positive environment for entrepreneurs to enable Europe to become the most advanced knowledge-driven economy in the 21st century.
In March next year there will be a special European summit in Lisbon with the theme of employment, economic reform and social cohesion. It gives us a key opportunity to chart a new strategy for Europe and drive forward our agenda. We hope that the summit will enable us to draw a line under the old approach of governments telling business what to do through a mass of red tape and regulation, to shift the focus to governments working together to identify best practice in developing the environment within which businesses can succeed and to concentrate our minds on what creates new jobs rather than protecting old ones.
We shall work to support the Portuguese presidency in making economic reform, employment and the knowledge-based economy the central themes of the Lisbon summit. We shall push for a commitment to action for small firms. We can do that only by being at the heart of Europe. At home and abroad the aim of our policies is to combine enterprise and fairness. We have made great strides in our time in government, and the legislation we are introducing in this Parliament will take forward our agenda of modernisation and reform.
§ 3.34 p.m.
§ Lord Saatchi
My Lords, on behalf of these Benches it is a privilege to open this debate on those aspects of Her Majesty's gracious Speech that touch on industry and social and economic affairs. I very much look forward to the debate on these issues and to the contributions from the many speakers on all sides of the House, especially from the nine maiden speakers, which the Table tells me may be a record. I know that many of my noble friends and other noble Lords have particular points to raise on different aspects of the 28 Bills under consideration. Therefore, I thought that it would be most helpful if I attempted to draw your Lordships' attention to what the gracious Speech tells us about the Government's overall approach.
I am afraid that I shall be unable to follow the injunction of the noble Lord, Lord Peston, against too great a party political approach. I do not have the strength of character to apply that self-denying ordinance to my response. I hope that the noble Lord accepts that, as the Government have just carried out what some would say is the most brazen party political 332 act in the 600 years of your Lordships' house; namely, the expulsion of half its Members. As my noble friend Lord Strathclyde said,it is high time to subject this Government's performance to far more critical scrutiny in this House".—[Official Report, 18/11/99; col. 34.]
§ Earl Russell
My Lords, does the noble Lord suggest that the expulsion of half our Members is a more brazen political act than the expulsion of all of them in 1649?
§ Lord Saatchi
My Lords, that is a very good point. I thank the noble Earl. In that context, we should remember that Her Majesty's gracious Speech was made on behalf of a government led by a Prime Minister whose first reported meeting of the week is with his pollster—a meeting which is said to last longer than his meetings with his Queen, his Cabinet or Parliament.
In the gracious Speech the words "modernisation", "new", "reform" and "change" were used 17 times, which is almost one a minute. The noble Baroness, Lady Symons, in opening the debates on the gracious Speech, confirmed that we all needed to modernise. Why does our Prime Minister oblige everyone from Her Majesty the Queen to the members of the Front Bench opposite to repeat the word "modernisation"? Psychologists would tell us it is because the Prime Minister may be one of those persons who feel that they have to alter the landscape to prove that they exist. In the words of the editor of the Guardian, they have a "messianic instinct". Persons like our Prime Minister feel the need to interfere with human affairs and refuse to accept the existing state of things. They are attracted by Karl Marx's famous exhortation to activism:Philosophers have only interpreted the world … the point is to change it".The philosophical root of Marxism is the concept of historical inevitability—the march of history—which it is senseless to criticise and against which we fight to our certain doom. In Marx's writing only the brightest and most gifted are ever aware of these forces of modernisation. These are Marx's "world-historical figures" who tower over, and are contemptuous of, their puny contemporaries. As these omniscient beings contemplate the discomfiture and destruction of the Philistines, they believe that they have some crucial insight into the nature of the universe. Professor Popper described it as follows:Whatever is on the side of change is just and wise; whatever is on the other side, on the side of the world that is doomed to destruction by the working of the forces of history, is foolish, ignorant, retrograde, wicked".They suspect anyone who does not share their attitude towards change as a daring and revolutionary challenge to traditional thought. Is this beginning to sound like anyone we know? For Karl Marx and our Prime Minister "the forces of conservatism" are a feeble symbol of a creed that is no longer relevant to the new realities of their blueprint for a new order. They both believe—what else could their deification of 333 modernisation permit—that their own brand of change is the latest and boldest achievement of the human mind. The achievement is so staggeringly novel that only a few people are sufficiently advanced to grasp it.
Do the Benches opposite doubt my analogy? I urge them to consider the following description by Isaiah Berlin and ask themselves of whom they are reminded:Like the astrologers and soothsayers whom they have succeeded, they cast up their eyes to the clouds, and speak in immense, unsubstantiated images and similes, in deeply misleading metaphors and allegories, and make use of hypnotic formulae with little regard for experience, or rational argument, or tests of proven reliability. Thereby they throw dust in their own eyes as well as in ours, obstruct our vision of the real world, and further confuse an already sufficiently bewildered public".Let us consider some of the dust that this Government throw in our eyes. They are shown the OECD figures on tax and say that they are,not up-to-date information".They are shown the ONS figures on tax and they say that they,do not relate to the tax burden".They are shown tax figures provided by the House of Commons Library and say,We have never accepted the figures produced by the House of Commons Library".—[Official Report, 11/11/99; cols. 1446–1447.]They are shown the BMA's figures on health service spending which indicate that £18 billion is only £9 billion and they say—nothing. What sort of people are we dealing with? The only figures they accept are the figures that they produce themselves.
We should remove some other dust from our eyes, too. This is a government which, at a drop of a hat, will, as they did in the preamble to the gracious Speech, joyfully praise their achievement in overcoming the malign inheritance from the previous government. I believe the Minister did that today. But all talk of inheritance ceases when they hear that they inherited the lowest taxes in Europe, the lowest unemployment level of any major European country and the longest period of low inflation for 50 years. Professor Mervyn King recently reminded me that there have now been 29 consecutive quarters of real economic growth—a post-war record. Unless my maths fail me that means that only nine of the 29 fell under this Labour Government.
Does not dust get in one's eyes, too, when one contemplates the contradiction between a Prime Minister who said,We have no plans to increase tax at alland a Chancellor who now says this month,We've always been clear that the tax burden had to rise"?Is it true, or not, that Britain's tax burden is now the fastest growing in Europe? Is it true, or not, that tax revenues have risen in every quarter since Labour came to power? Is it true, or not, that Britain is paying more tax than Germany for the first time in a generation? If it is not true, then have all these independent institutions gone mad? Perhaps they should be "modernised."
334 When the former Permanent Secretary to the Treasury and Mr Ken Livingstone agree on something we had all better take notice. Sir Peter Kemp said that the Labour Government had committed "heresies" in their tax presentation. Mr Livingstone elaborated. He said,We haven't increased the top rate of tax and the standard rate of tax, but we have increased a lot of other taxes …We have done it with all these stealth taxes. I just think it would have been better to have honestly told people beforehand".The fact is that there have been many debates in your Lordships' House on the subject of tax, the tax burden and the tax figures. In order to try to resolve the issue once and for all I asked the House of Commons Library a very simple question: whether it could compare the increase in prices over the life of this Government according to their own figures with the increase in taxes. I received the answer just before I came into the Chamber for this debate. I was astounded by the figures. Between 1996–97 and 2001–02—in other words the life of this Government—tax revenues are expected to rise by nearly 35 per cent compared with increases in prices of a little over 13 per cent
The Library's analysis of tax revenues is based on the Treasury's preferred measure of net taxes and social security contributions. The Library's calculation of inflation is measured by two means: the GDP deflator or RPIS, which are both Government accepted measures. So the fact is that taxes are rising by nearly treble the rate of inflation. The cost of tomatoes is up 13 per cent, of cars 13 per cent and of Mars bars 13 per cent, but the cost of taxes is up 35 per cent. In other words—and I say again—taxes are rising about three times as fast as inflation.
As Mr Blair himself said,If people don't trust you to look after their money, they won't trust you on anything".He need look no further for an explanation of his own and the Government's weaker poll ratings.
It is to focus on that point about the tax figures that my noble friend Lord Strathclyde has tabled his historic amendment to the gracious Speech.
§ Lord Jacobs
My Lords, I thank the noble Lord for giving way. Does he agree that if the economy is rising at a rapid rate, then without any increase in the rate of taxes the tax revenue will be increasing?
§ Lord Saatchi
My Lords, that may be true, but it would not explain a threefold difference in the rate.
I shall now try to be as non-political as I can manage just for a moment. Does not our sophisticated, intelligent electorate now want to be treated with the respect it deserves? Does that not mean governments being required to report on their progress, and lack of it, in a consistent, open and transparent manner? In the absence of that, government are left with the freedom of misinformation.
The new resources and accounting Bill mentioned in the gracious Speech could have been a way of addressing this by providing the public with clear 335 definitions, a clear income statement, balance sheet, etc. But as the Bill and the manual which preceded it specifically will not cover 43 items of government activity, including such trivial matters as tax, national insurance, local government and whole tracts of the NHS, one has to ask whether there is much point in the Bill as it stands. This defect may in the end be addressed by the Shadow Chancellor's initiative in forming a national accounts commission, chaired by a leading practitioner in the accounting world, who will attempt to bring some logic to the presentation of the Government accounts.
How are we to judge the,continued modernising of the economydescribed in the gracious Speech? I suppose that must have something to do with increasing productivity and reducing regulation, as in the Government's manifesto pledges. Unfortunately, so far most government measures have resulted in increased bureaucracy and an increasingly tangled web of red tape. Research carried out by the Institute of Chartered Accountants published last week shows that the annual cost of implementing new legislation is £4,700 for small firms and £10,000 for medium-sized firms. According to the IoD, since coming to power the Government have introduced new red tape costing business £5 billion a year.
The Government's answer is presumably the deregulation Bill mentioned in the gracious Speech. There is certainly a clear need for that to stem the flow of government statutory instruments. There were 3,114 in 1997 and 3,232 in 1998. As the Government's Chief Secretary recently said,Excessive regulation gets in the way of good business".That brings me to the statement in the gracious Speech that,Financial services lie at the heart of a modern economy".That is probably why so many people in the City have concerns about the new Financial Services and Markets Bill. It is Bill that is highly technical and complicated. While there is cross-party consensus on the underlying principle of a single over-arching regulatory authority, there remains considerable controversy over the current drafting of the Bill.
While we welcome the Government's extensive consultations, I hope that they can agree that this process has exposed many problems with the original formulation of the Bill. We find it hard to understand why the Government have rejected so many of the key recommendations of the committee so expertly led by the noble Lord, Lord Burns.
That will inevitably mean a number of amendments are left to be made when the Bill comes before your Lordships' House in the new year, particularly concerning precise legal definitions, the combined role of the chairman and CEO of the FSA, and generally questions concerning the accountability and scrutiny of the FSA to ensure that it does not use its formidable powers in an oppressive way.
336 If a related objective of the gracious Speech, as symbolised by the e-commerce Bill—is, as the Chancellor said,To increase the number of entrepreneursandremove fiscal and regulatory barriers",one has to wonder why the Government ever tried to impose the provisions of IR35 on an industry which is at the forefront of UK entrepreneurship in the most exciting areas of new technology.
The gracious Speech talks of the,modernisation of the welfare system".Presumably, the aim is to deliver,the radical reform of the welfare state",described in the Labour manifesto. Instead, it appears to some of us—perhaps we are too unsophisticated—that the pensions regime is becoming more complicated every day. I confess that I am unclear. There are the basic state pension, SERPS, personal pensions, stakeholder pensions and now the new state second pension. It all leaves people confused and insecure. Are not the Government's proposals for a second state pension in danger of creating two classes of future pensioners? Does not their proposed reform mean thousands more future pensioners relying on means-tested benefits?
Would it not have been a better approach to welfare reform if instead of playing word games to see how many mentions of "modernisation" they could cram into the gracious Speech, the Government had recognised that people today have real, basic economic concerns? For example, "How will I protect my parents in old age?" "How will my children's university fees be paid?" "Who will pay for my family's best medical care?" "How do I pay the mortgage when my taxes are always going up?" "Will there be a proper pension left for me?"
When the Prime Minister lavished praise on "modernisation" and struck out against "the forces of conservatism", he made a strategic miscalculation of the highest importance. His aim was to bury the Conservative Party for ever so that wicked conservatism and the wicked Conservative Party would go down together. Instead, he sent Conservatives, current and past, scurrying to their Thesaurus to remind themselves why they had ever been attracted to this wicked creed. They liked what they saw: "conservatism", meaning in character; natural; familiar; accepted; settled; established; to stand fast; to refuse to budge; dig one's toes in; dig one's heels in; endure; stand one's ground; keep one's footing; stand firm. In other words, the Prime Minister reminded Conservatives why they were proud of their conservatism and all it has achieved; what a good cause they had believed in. He reminded them why they did not like Marxist-style sweeping, radical changes, because it meant Mao Tse Tung's Red Revolution, Stalin's purges and Madame Renard's zeal at the guillotine.
At Christmas time in the Middle Ages, it was customary for great households to choose a lord of misrule who would preside over revels, who briefly 337 reversed the conventional social and economic hierarchies. When the brief reign of misrule was over, the customary order of things would be restored. However, sometimes a lord of misrule would be overcome by the dizzying possibilities inherent in turning more and more things upside down. Then the lord of misrule could not be deflected by criticism because his own sense of omniscience had grown too strong for that. But that could never happen in the modern age, could it, my Lords?
§ 3.50 p.m.
§ Lord Taverne
My Lords, perhaps I may say, first, that I, too, look forward to the maiden speeches particularly as some will be made by people whom I have known for a long time. I am absolutely delighted to see them in this House and I hope to see a lot of them.
I do not intend to follow the noble Lord, Lord Sainsbury of Turville, in the tour d'horizon of the legislative programme because, with so many speakers, I wish to keep my speech reasonably short and to concentrate mainly on the economy. This is one of the few opportunities we have to debate economic issues.
When one is looking at government strategy, there is always a temptation to criticise for its own sake. Having listened to the speech of the noble Lord, Lord Saatchi, the Opposition's attitude seems to be to criticise everything that the Government do whatever it may be; and to make somewhat unreal points of criticism. With the greatest respect, to describe the Government's style as "Marxist" is to be a little out of touch with reality. I should have thought that it was also unwise to criticise to such a degree. The Chancellor's Statement last year forecast a low rate of growth this year but not a recession. The Conservatives went completely overboard. Francis Maude appeared on television day after day saying, "This is a depress ion made in Downing Street". And what is he left with?—egg all over his face. I should have thought that the Conservatives should be a little more judicious.
We did not do that. When the Chancellor made his speech last year, on the whole we treated it with respect. The noble Lord, Lord McIntosh, will remember that on the whole, with the Government's record for forecasting being reasonably good, we gave the Chancellor the benefit of the doubt. We are critical in many respects of the overall management of the economy, but by and large, on the record so far there is probably more to approve than regret. Making the Bank of England independent was clearly an important step—of course long recommended by the Liberal Democrats.
The Chancellor has pursued a very prudent fiscal course. My criticism has been that he concentrated his tough measures rather more on companies than on consumers. If he had concentrated more on consumers, interest rates might conceivably be somewhat lower today. That is a matter for the past. The outlook today is reasonably good. The public finances are in a very healthy state.
338 I want to make two main criticisms this afternoon. The first is the Government's apparent indifference to the high level of the pound. There may he some evidence that it is not hurting manufacturing industry as much as one might expect. I agree very much with what the noble Lord, Lord Sainsbury of Turville, said: manufacturing must still be considered a crucial part of our economy. But there is plenty of anecdotal evidence to contradict some of the rather uncertain statistical evidence. Many of the figures are often revised. The anecdotal evidence is that the pound is really hurting a large stretch of manufacturing industry, and our exports. I should have thought that there was no doubt whatever that the outlook would be very much better if the pound were lower.
One has only to look at the example of France which is now making a rapid recovery. It has a forecast rate of growth—if anything rather higher than ours—which is benefiting greatly from the relatively low value of the franc inside EMU. Indeed, I suspect that if we were to join the euro today it would be at too high a rate. But the argument is that we can do nothing about that: one can only have an inflation target and if one has several targets none of them becomes meaningful.
I do not believe it is right that there is nothing we can do. I have two answers one of which is more theoretical. First, we should look more carefully at the possibility of so-called sterilised intervention by the Bank of England. I know that propping up a currency by intervening when the market believes that the currency will drop is a recipe for losing a very large part of one's reserves, but that is not necessarily true of intervening in order to cap a currency or to seek to depress a currency. Indeed, in the past the Bundesbank has used such a policy quite successfully. It has also contained the inflationary effects by the judicious issue of bonds. I believe that that is something that the Government should examine.
My second answer is more practical. The Government could set a target date—it would be an important measure for a number of reasons—for entry into the euro. I do not suggest that they should have an absolutely fixed date, come what may, because circumstances might preclude that date. There has to be a measure of economic convergence. I think that most of the Government's five so-called economic tests are just a delaying device. They are almost entirely subjective. The only one that matters is economic convergence. Even that is subjective to a large extent. At present one cannot say that all the economies of the EMU bloc converge. But if the Government said, "We will enter at such-and-such a date subject to there being no unforeseen circumstances in economic development, and of course subject to the outcome of a referendum", it would almost certainly have a lowering effect on the pound. The markets would believe it. They already think that we shall go in in the longer term. Look at long-term interest rates. If we set a specific date, the impact on the pound would be entirely salutary for our economy.
339 Such a commitment is becoming more urgent all the time. Only last week the monetary committee of the European Parliament was expecting to approve the e-commerce directive. It was suddenly withdrawn. Why? Because the 11 members of EMU decided that they wanted to think about it again. They met by themselves. They made their decision; and then they faced the rest with the decision that they had taken. That is a pattern which will be repeated time and again. A great deal of important legislation is coming up. For example, there is the financial services action programme. The noble Lord, Lord Sainsbury, referred to a number of firms which we wish to help by co-operating with our European partners within the context of the European Union. Vitally important directives are coming up in the field of financial services. Those will be subject to qualified majority voting. What will happen? The 11 will meet; they will decide on their way of dealing with these directives; and then they will face the non-members with the fait accompli. And who will those non-members be? Denmark is likely to hold a referendum early next year. In Sweden, the Government have said that it is only a question of when, not whether, Denmark and Sweden are likely to join. Greece is likely to be a member within a few years. The only member who will have no say whatever in the future of those financial services directives will be the country which has most to gain and most to lose; that is, us.
My second criticism relates to tax. The noble Lord, Lord Saatchi, said that this country has the fastest rate of tax increases as a proportion of GDP of any country in the European Union. Again, I should have thought that he might be a little unwise to commit himself so certainly. By the end of this Parliament it is likely that the share of tax as a proportion of GDP will be going down—not that we on this side of the House necessarily wish it to be. I shall come to that. But the forecast is unwise.
I have two criticisms relating to tax. One is technical. I believe that the Government are trying to do too much and there is too much detail. The measures announced by the noble Lord, Lord Sainsbury—I have forgotten them all, but I have read the Queen's Speech—go into a great deal of detail. The record shows not only that such measures create a great deal of bureaucracy and work, but that they have no effect. Such special, detailed tax incentives are not often effective.
We wholeheartedly approve of one measure which he announced; that is, the 15 per cent increase in the science budget. But such fiddling around with the tax system disregards the fact that there is a great deal to be said for keeping the system simple and not messing about with it too much.
My other substantial criticism relates to what the Government are likely to do with their surplus. In order, in part, to confound critics such as the noble Lord, Lord Saatchi, I believe that in the Budget the Government will take another penny off income tax. They will probably take another penny off in the 340 following Budget so that at the time of the next election there will be a 20 per cent basic rate. And what will the Conservatives say then?
To reduce income tax is tempting politically, but it is wrong. It is contrary to our most urgent needs. It is true that the Government have increased spending on schools and the NHS to a level higher than that under the previous government—4 to 5 per cent—but the demands are enormous. I do not believe that they will have much to show for it at the next election. I do not believe that they will be able to show that class sizes have significantly improved; and they certainly will not be able to show that hospital waiting lists have improved. They will still be rationing the health service.
Our health service compares poorly with that of France. There are no waiting lists in France. Our health service does not compare well with that of Germany, but, of course, they both spend much more on the health service. That should be our priority; not tax cuts. We need every penny for schools and hospitals. As regards quality of life, it is more important to improve the quality of the provision of public service than to cut tax by another penny. That is an issue on which we on this side of the House are agreed and I hope that the Government will take the issue on board.
§ 4.2 p.m.
§ Baroness Wilkins
My Lords, it is a great privilege to address your Lordships for the first time in this House. I warmly echo the thanks expressed by fellow maiden speakers for the generous welcome and unstinting help I have received both from your Lordships and from the staff of the House.
I welcome the announcement in the gracious Speech that, as part of their drive against social exclusion, the Government are to introduce a Bill to help young people leaving local authority care. Their recent consultation paper pointed out that many young people in care are forced into independence at the age of 16 or 17, which is far too young for most of them, resulting in high levels of homelessness and unemployment. The Government propose to ensure that young people are looked after until they are ready to leave care and that when they do leave they continue to have personal and financial support to fall back on—the same support that other young people can expect from their parents.
Today, I want to focus on the situation of disabled young people in care. Over a quarter of all children in care are disabled; and disabled children are eight times more likely to be put into care than non-disabled children. I was fortunate to conduct some of the interviews for the research carried out by Dr. Jenny Morris on the experiences of disabled young people living away from home, published as Still Missing?. As one young man who was sent to stay in a children's home from the age of eight said to me, "I remember crying a lot and asking why should I leave and not my brothers and sisters … I'm resentful towards my mum because I was in a wheelchair and I was the one who had to come here".
341 Disabled children are far less likely to be placed with foster parents and end up in the residential care of children's homes and boarding schools. An increasing number remain at school for 52 weeks of the year. The danger for many young disabled people is not that they will be forced to become independent and leave care too early; rather, for them, adulthood just means exchanging one form of residential care for another. The spectre that haunts them is not of being thrown out on the streets but of lack of any personal concern and expectation that they could do more sentencing them to a lifelong experience of institutional care—a lifetime of having no choice or control over their lives: of when they get up; who they live with; and how they spend their day.
It is now 30 years since a group of disabled students with high support needs found themselves in this situation in California. They were getting an education but had no prospect other than to live out their days in a nursing home, at the mercy of others. Then, with a simple, radical idea, they spawned a revolution. If they were given the money spent on their care, they could hire their own personal assistance and, with accessible housing and transport, gain full control over their lives. When, 10 years later, I filmed one of them, a man dependent on a ventilator to breathe, he was responsible for running the state's rehabilitation service throughout California and had a staff of thousands. That was the start of what is now an international Independent Living Movement. Its central idea is that independence is not about doing everything for yourself, but in having control over how the help you need is provided.
Since the early 1980s this idea has taken hold in Britain. Centres for independent living, controlled by disabled people, have sprung up around the country, giving advice and support to enable disabled people to emerge from institutional life. One of the earliest was formed in Hampshire by a group of disabled adults in long-term residential care. They supported each other in finding the solutions to move into their own houses, get the money to finance their personal assistance and live ordinary lives in the community. Together they found the strength to make it happen, and their continuing mutual support has ensured that their independent living arrangements have not broken down.
The introduction of the Bill provides a real opportunity to extend the gains of the Independent Living Movement to young people who have spent most of their lives segregated and separated from family and community. Like all young people, they need access to positive role models. Many disabled children never meet a disabled adult, particularly if they are in care, which makes their sense of isolation even more acute. If it is tough for a non-disabled child to face leaving care without support, it is all the more so for a disabled young person facing the innumerable obstacles which society places in his or her way.
342 The Independent Living Movement has already started to address this need for support. One example is a mentoring project run by the West of England Coalition of Disabled People which links disabled children with disabled adults living independently. Another is the advocacy project run by the Greater Manchester Coalition of Disabled People which worked with young people in residential care. As the report of the project stated,Young disabled people do not often see older disabled people working, having relationships, being parents or living independently. They come to believe that these things are not possible for themselves".Local disabled people's organisations are well placed to provide the kind of advice, assistance and encouragement that young disabled people in care so desperately need if they are to achieve independent living, have choices and control their lives. The Government have done much to ensure that the building blocks of independent living are put in place. Since October, all new housing must be accessible and the Government have given strong encouragement to the spread of direct payments and the funding of personal assistance support schemes throughout the country. I welcome particularly the commitment to extend direct payments to 16 and 17 year-olds, which is important for care leavers, and hope that a date will soon be set for its implementation.
I urge the Government to ensure that the Bill also promotes the social inclusion of disabled young people leaving care. To this end, it is very important that the young people's advisers and the pathway plans recommended in the consultation paper draw on the experience and resources of the Independent Living Movement. The advisers will have a key role to play in addressing the needs of young disabled people for housing and support, and their needs for inclusion in their local community.
This is an opportunity to prevent yet another generation of disabled people having to experience separation, segregation and dependency in institutional care. It is an opportunity to extend both basic human rights and the rights of citizenship to many young people currently at risk of remaining excluded from society as they enter adulthood.
§ 4.10 p.m.
§ Baroness Sharp of Guildford
My Lords, it is with great pleasure that I rise to congratulate the noble Baroness, Lady Wilkins, on her excellent maiden speech. She has had a distinguished career as a campaigner for disability rights. She has worked for some time for the National Centre for Independent Living, about which she spoke in her maiden speech and about which we had an interesting exchange at Question Time earlier today. She has also advised the Prince of Wales on disability issues. She knows that in this House she has many friends. But, as her spirited speech suggested, there are still other issues where much more needs to be done. We welcome her for her knowledge and expertise, for her vitality and for 343 her obvious fairness of mind. We look forward to her active participation in many debates on many different issues.
As we have heard many times, the two themes of the gracious Speech were enterprise and fairness. Our debate today reflects that well. It is about industry and the economy and about social proposals put forward in the Speech. The noble Baroness, Lady Wilkins, concentrated on a fairness issue—the problems of disabled young people and independent living. In my speech, I wish to concentrate on the enterprise issue.
As we heard from the Minister, in the gracious Speech there are proposals for many measures to encourage in particular small and medium-sized businesses. There are proposals to promote venture capital, to grant rights to share options and to extend employee share ownership. Those proposals are of a piece with many of the measures introduced in the Budget earlier this year which sought to encourage the setting up and development of small high-technology enterprises and, in particular, the closer linkage between university science and the industrial community.
It is worth while to probe behind those initiatives. Why is there today all that emphasis on the enterprise economy? The answer lies in what has been one of the perpetual problems of the British economy throughout the whole of the post-war period: productivity. The pre-Budget report issued only two weeks ago by the Chancellor of the Exchequer contained a chapter entitled "The Productivity Gap"; so did the Budget; so did last year's pre-Budget report; and so too did all those competitiveness reports issued by John Major's governments. But, however successful our economy may appear to be, output per worker in the United States is 35 per cent above that of Britain; in France it is 25 per cent above that of Britain; and in Germany, which is pulled down by the very low levels of productivity in the former East Germany, it is 15 per cent higher than here.
We may pour scorn on the inflexibility of the German economy or on the social security provisions in France but the fact is that in terms of output per hour worked, France and Germany are both 25 per cent above UK levels. In the US, from which we have acquired the long-hours culture which some of us do not necessarily believe is as good as all that, it is 20 per cent better than in Britain.
The most galling aspect of all that is that, for all that we think things have changed in Britain and that the trend rates for growth in productivity are moving forward, the fact remains that, if we take a 10-year span, over the course of the past 10 years both France and Germany have kept pace with what has been happening in the UK. So the gap is not growing smaller.
The reasons for Britain's poor productivity performance have been rehearsed many times. They relate to low levels of investment, both in physical capital and in research and development, low levels of skills and the lack of risk taking and enterprise. We 344 have pondered the paradox that, while we are good at science and discovery, we never seem successfully to exploit those discoveries. We used to blame the City of London and the banking system for short-termism. Now, the focus is on entrepreneurship. We do not grow entrepreneurs from their cradles as they do in America. Our scientists prefer the safety of a tenured job to the uncertainties of the marketplace. Our small businesses prefer to play safe with a tried and tested product rather than to branch out to new markets. The banks prefer to back well-established firms in preference to those seeking to establish themselves afresh in the market.
The new measures which are being introduced seek to break those habits and to turn us into a race of entrepreneurs like the Americans. The model is American and I call it the star-and-cluster model. It has emerged in the biotechnology industry, which the Minister knows well. Rich universities in the United States buy in, rather along the lines that football teams do, star scientists who, in turn, attract other stars to work alongside them in their laboratories. In turn, they are approached by venture capitalists to set up small firms, exploiting their expertise. Graduate students from their laboratories are hired as researchers. If successful, those students in turn set up their own enterprises, perhaps supplying specialist products or specialist services required by the parent company. Therefore, over time, a cluster of small firms emerges. The firms complement each other's expertise; are highly competitive with each other; are linked closely with the academic world and engage with the academics in helping to push forward the frontiers of science and technology.
It is an exciting world in which to be. Something of that sort of clustering has emerged in Britain, around Cambridge. It is known as the Cambridge phenomenon. The Government are anxious to see the same thing happen around other star universities—Oxford, London, Bristol, Manchester, Sheffield, Warwick and Southampton. There are about 20 of them. The Government are concentrating resources on those universities.
It is an attractive idea. It provides a way of capturing what we are good at—namely, science, which is fundamental to the knowledge economy—and exploiting it in a creative and dynamic way. Those small high-tech firms have provided the impetus behind the spurt of the US economy over the past decade. We are hoping that they will do the same for Britain.
Perhaps I may sow just a few seeds of doubt as to whether that is necessarily the right way forward for Britain. First, are the Government perhaps not in danger of putting too many eggs into one basket? Can the small high-tech firms really carry the whole weight of the revolution which we are seeking to effect?
At most, small high-tech firms constitute 5 per cent of the population of small firms, if that. It is well known that Britain's problems lie not with that 5 per cent but with the under-performing tail of the 345 remaining 95 per cent of small firms. Our problem is as much with "high-teching" low-tech businesses as it is with creating new high-tech small businesses.
The American star-and-cluster model works but it is complemented by a much more comprehensive framework of support, often organised at state or local level, which networks together small local businesses with local colleges and universities to provide bottom-up support services. In Germany, the Länder, which run the university system in that country, likewise co-ordinate with local chambers of commerce, the Frauenhofer societies and with other specialist support and technical services to meet the needs of local business.
Are we doing enough to provide these "bottom-up" services here in Britain? The idea is that the regional development agencies should assume that responsibility. Are we giving them enough resources to do that? In England, the total budget for the eight regional development agencies is £700 million per year. That is under £100 million each. Much of that is dedicated to physical infrastructure projects. Only 2 per cent is scheduled for innovation.
If we are talking about enterprise, it is high time we lifted the dead hand of the Treasury from our local authorities in England and Wales. If they are to act as regional development authorities should, to promote the development reeds of their regions, they need more resources and, above all, much greater discretion as to how they raise and use such resources.
Such a development would logically argue for the regional development agencies to be not, as they are now, glorified quangos, but, as we Liberal Democrats argued when the Bill was before this House, answerable to a directly elected regional authority. Our answer to the PFI and the PPP is to go the American route; unhinge the local and regional authorities from the Treasury guarantee and give them the right to go directly to the bond market to raise funds on their own credit rating.
Such a move would unlock a wealth of creativity in our regions. It would help to leverage resources available from Brussels which at present go uncollected because local authorities cannot raise matching funds. It would help to counter the over-heating of the economy in the South East with all that that entails in terms of house prices and pressures for development. It is high time we challenged the "control freakery" of the Treasury.
Secondly, I wonder whether the concentration on small firms ignores the root of the problem in Britain. It is now well known that for a company to prosper, it must be both enterprising and innovative. Spending on research and development provides a rough measure of innovative performance. The DTI makes it easy for us to examine the record of British companies by publishing annual league tables (we benchmark everything these days). They reveal a shocking record on the part of British business. There is only one industry—the pharmaceutical industry—which meets its competitors in terms of R&D spending. If we subtract that industry from the figures, British 346 business as a whole is spending less on R&D today in real terms than it was in 1990. Even including the pharmaceutical industry, business investment in R&D as a proportion of GDP has fallen from 1.4 to 1.2 per cent over that period. We are not standing up and meeting what our competitors are doing.
The reason why this is such a worrying trend is that it is increasingly recognised that, in order to make use of the new, state-of-the-art technologies, companies must have within their research departments people who can understand and apply such leading edge techniques. The danger with cutting back and outsourcing R&D, as many of our major firms have been doing, is that they lock themselves out of the new technologies. They do not have the in-house capabilities to translate the new developments into applications.
I have no answer to the problem. I am appalled when I look at the R&D league tables and the patenting record of some of our major companies. They cannot hold their own in the global marketplace in which they have to operate. In the short run, acquisitions and mergers can hide such deficiencies. However, in the long run, they make companies vulnerable to take-over, which has happened. The evidence here is incontrovertible. Globalisation or non-globalisation, the fact remains that multinationals tend to keep R&D close to home. Sadly, foreign owners mean that we shall not be exploiting to the full one of Britain's greatest assets, its science base.
Enterprise is an important issue. I applaud the Government for their many initiatives aimed at promoting a more enterprising and entrepreneurial society. However, we should not kid ourselves that these will solve some of the more fundamental problems we face. I am not convinced that the Government have yet done enough to tackle some of the trickier and deeper problems.
§ 4.24 p.m.
§ Lord Bagri
My Lords, in addressing this House for the first time, and doing so during this debate on the subjects of industrial, social and economic affairs, where the expertise of Your Lordships is so justly renowned, I am profoundly conscious of the meaning of the word "daunting". I am grateful to those noble Lords who have given me encouragement, and I warmly thank the officials of the House for their unfailing courtesy and helpfulness.
The gracious Speech always contains proposals for legislative change. This year the sense of change seems more than ever in the air. In this House it is more acute than for many, many years. The whole country is more aware than usual of the change and new beginnings, as the century closes and the third millennium beckons.
Change is the currency of every-day life in business. Readiness to innovate and adapt are essential to success in international competition. The capacity to absorb and lead change has always been a strength of the City of London. It must always remain so.
347 My business life has largely revolved around metals. It was this country, with its trading and financial importance, that gave me the opportunities to build my career. The City of London offered me a base. The London Metal Exchange provided the cornerstone. The LME, which I am proud to have served as its chairman for some seven years, is pre-eminent in the world of non-ferrous metals. It is by far the largest metal futures exchange in the world. Every day its market provides prices that are relied upon globally. Its contracts help to reduce the risk of future price uncertainty. In terms of its influence and relevance to the underlying trade and industry, it is unique in the world.
I would like to suggest that the LME and some other leading markets in the City of London are an enormously valuable resource in this country. Such institutions are worth nurturing. It was authoritatively estimated earlier this year that the work of the LME alone contributes some £250 million to invisible earnings each year. This is why I regard my work with the London Metal Exchange as a privilege and a service.
In what is the most fiercely competitive environment I have seen for 40 years, we must not take it for granted that the City of London will automatically remain a world force in trade and commerce. That position has to be worked for every day. Each day we have to try, and we try hard.
That the City remains at the cutting edge of the global financial markets is due in great part to a high concentration of financial skills which need to be continuously augmented. Thus, our future increasingly rests on developing the talents of young people. It is profoundly important, therefore, to encourage them. That, and a determination to break down barriers, is why I devote some time, among other things, to the work of the School of Oriental and African Studies.
The openness of the young mind is a wonderful thing. Encouraging cross-cultural experience is a most potent weapon in attacking prejudice and breaking down barriers of fear and misunderstanding wherever they occur. In turn that is also beneficial for trade and commerce; a truly virtuous circle.
I am often asked about prejudice and discrimination. Of course, a certain degree of bigotry and prejudice exists everywhere. We have a share of it in this country. But, by and large, we live in a tolerant and caring society. I am extremely appreciative of all the courtesies I have received. I remember that when I first set up in London, the managing director of a large British company with interests in India greeted me. "Ah, Mr Bagri", he said, "you have come to drive us out of England". "No more", I replied, "than you are driving us out of India". I am still here. I am glad that they are still in India, and doing well. Such give and take—taken in good humour—is part of a tolerant and enlightened society. So I would like to say to young people of every background, "Persevere. Prove you have it in yourself to stand up and be counted".
348 There are a number of measures in the gracious Speech that will touch the life of the City of London. I am absolutely certain that good regulation is vital for good business. But it is essential that the regulatory and legal framework is right. I look forward, for example, to the detailed consideration of the Bill on electronic commerce. While the world is littered with the remains of fashion and fad, it is already clear that electronic trading has the potential to bring about enormous and beneficial change. We must be vigilant about abuse and fraud, but we must facilitate that change.
Catering for change is also a facet of the Financial Services and Markets Bill. I must declare a clear interest by virtue of my position at the London Metal Exchange. I strongly welcome the agreement of my honourable and noble friends and the Government that this complex legislation should be carried over. I believe it is vitally important that the FSA is put on a firm legal footing as soon as possible, and that the new regulatory framework is introduced speedily. Here I should like to pay tribute to the work of the noble Lord, Lord Burns, and the other members of his committee from this House and the other place who scrutinised this Bill in draft.
There are, of course, issues in the Bill which must be examined further in detail, particularly in the light of the government response to the recommendations. But that is for another time. I hope that I shall have an opportunity to contribute positively to that scrutiny in your Lordships' House.
In closing, I should like to thank your Lordships for your patience in hearing me out. This House has recently undergone dramatic change in many respects. I earnestly hope that the long-established tradition of courtesy in debate will remain intact. Today I have particular reason to be grateful for that.
§ 4.31 p.m.
§ Baroness Lockwood
My Lords, I congratulate the noble Lord, Lord Bagri, on his maiden speech, which was so appropriate today given his distinguished background of a business career and his valuable public and social work, especially with young people. Having launched himself, I hope that he will share his experiences with us on many more occasions during our debates.
I want to speak in support of the Motion and against the amendment in the name of the Opposition, which could be judged ill informed were it not so blatantly party political, as the noble Lord, Lord Saatchi, indicated in his speech. I want to concentrate on those aspects of the gracious Speech that are concerned with industry and enterprise.
A few days before Prorogation, the Secretary of State for the DTI spoke to the All-party Manufacturing Group. He recalled visiting a state-of-the-art factory in Rotherham—previously the heart of UK heavy industry—which was manufacturing mechanical pumps. He was amazed to find much of the business being conducted over the electronic wires in Japanese by local linguists. Last spring I was asked to 349 award NVQs at Chase Advanced Technologies in Bradford. What I saw was not like a factory at all. There were no long assembly lines. It was clinically clean. People in white coats were grouped together to work on their specific assignment.
I do not share the pessimism of the noble Baroness, Lady Sharp, in relation to today's factories. Those two factories have three things in common. First, they are the face of the new manufacturing industry and we should all adjust our minds to this new process of manufacturing, particularly parents, teachers and career officers who, in the past, have discouraged young people from taking up jobs in manufacturing. Secondly, no matter what they are manufacturing, they rely on up-to-the-minute technology and IT structures. Thirdly, those in turn rely on the teaching and research of our universities—a theme to which I shall return in a few minutes.
Chase Advanced Technologies has a high ratio of qualified staff—some linked with research within the university—but it also recruits and trains previously unqualified staff. The NVQs I awarded were at levels one, two and three. The training scheme was developed by the company in conjunction with Bradford Virtual College as a pilot training scheme in electronics for the University for Industry—and highly successful it has been, as the Minister for Science will know from his visit to Bradford. It demonstrates the value of incremental training, allowing individuals to advance at their own pace. I hope that it will be a valuable pilot for the projected training and skills councils outlined in the gracious Speech.
Bradford Virtual College is now a private company. It started out as a European-funded project three years ago with the support of the city council, the university and other partners in the city, to service the cluster of electronic factories in the Bradford district. It now markets its tailor-made training packages far and wide. Those two factories and the Virtual College are the kind of enterprises that will benefit from the new measures in the gracious Speech and from the fiscal measures outlined by the Chancellor in his pre-Budget Statement. I greatly welcome them.
The measures will also assist the regional development agencies to implement their strategies. For example, Yorkshire Forward's economic strategy for Yorkshire and the Humber includes among its priorities, first, developing an e-business region; secondly, creating new, lasting, competitive businesses through a business birth-rate strategy, including setting up centres of excellence clustered around the region's universities. Those priority areas are certainly in the centre of the Government's sights, but they are also relevant to my third theme; that is, the links between universities and industries, to which I shall now return.
The University of Bradford—I here declare an interest as chancellor—is hoping to support and help the RDA to carry out its strategies. In fact, one such centre of excellence already exists in the University of Bradford which, together with the Art and Design Faculty of Brad ford College and the National 350 Museum of Film, Photography and Television, has an ambitious undergraduate, postgraduate and research programme centred on electronic imaging and digital media.
The demand for undergraduate places is very buoyant and cannot be satisfied. The programme is of world-class standard. I suggest that it needs to be recognised as part of a national, as well as of a regional, strategy. But it is in danger of being damaged by the difficulties in recruiting staff and developing postgraduate support. The head of department recently told me that very few of his students would stay on to do research because they can earn higher salaries—salaries higher than his own staff—at the age of 21, or they move to start up their own business. For example, a 1994 class student is already managing director of a leading Internet company and a major shareholder. Starting salaries for the students in this department at the age of 21 are £24,000 to £26,000 per annum, plus—bang in the middle of the lecturer scale which runs from £17,000 to £29,000 or the senior lecturer scale which is £30,000 to £34,000. An academic career, he says, is not even contemplated by 99 per cent of his students.
Without postgraduate students, there is no future research and we shall lose our current advantage. Without adequate teaching staff, the demand for undergraduate places cannot be met and the subsequent stream into industry will dry up. This is not just a Bradford problem; indeed, all universities face the same obstacles. A glance at advertisements for university appointments—today's Guardian provides examples—indicates that about one-third of the vacancies are for computing staff, with some institutions advertising for unprecedented numbers of six or even 10 posts. Many of those posts cannot be filled. There are neither applicants in sufficient quantity or of sufficient quality to do so; nor are those who are available prepared to stay for long for the rewards available in British higher education.
The problem is now reaching crisis dimensions. Unless something is done about it at national level, the enterprise and entrepreneurship which the Government are rightly seeking to promote and which the gracious Speech envisages will founder.
The Government's injection of new funding into science over the past two years has given great encouragement to universities, which had seen the science base and the unit of resource within the universities eroded during the period of the previous administration. The DTI and Treasury initiatives referred to by my noble friend Lord Sainsbury have also been welcomed by the universities and have prompted closer liaison with business. I would urge the Government to be equally generous in joining with the universities to tackle this desperate problem which carries such important implications for the future success of British industry.
§ 4.43 p.m.
§ The Earl of Listowel
My Lords, I intend to continue the theme of experience of the real world begun by the noble Baroness, Lady Pitkeathley, and the noble Lord, 351 Lord Bragg, in their eloquent and entertaining proposal and seconding of the gracious Speech. I do this as someone who has, over several years, organised activities for young people on housing estates during their school holidays and has acted as a teaching assistant in two inner-London primary schools.
My father first began working in your Lordships' House in the early 1930s. He told me that after the war the House was dying. Daily attendance was down to a handful of hereditary Peers. The Life Peerages Act did, indeed, introduce new life into the House. It is thanks to the introduction of these new life Peers that our country has developed an upper House which, if not widely understood by the public, is admired by those who are familiar with politics and can see how useful it is in using its threat of delay to oblige governments to think more carefully and produce better legislation.
Among the life Peers are secondary school teachers, social workers, Muslims, women, open homosexuals, Afro-Caribbeans and Asians—people from social groups whose experience had previously been poorly represented in your Lordships' House.
I feel passionately that, if we are to make a difference to the Asian boy sitting alone in the primary school classroom because he cannot communicate in English with his classmates; if we are to make a difference to the boy who has no father and is searching for a man to model himself upon; if we are to make a difference to the many children who have been sexually or physically abused or simply been neglected by their parents or guardians, those who legislate for them must have direct personal experience of their lives. I believe that this is the only way to ensure both that appropriate action is taken and that there is the will among legislators to see the resources made available for legislation to succeed.
Of course, legislators need also to be informed by thorough research. That is why the reports of the Social Exclusion Unit and the policy action teams, which this Government so wisely commissioned, are welcome. But these have to complement the experience born of working directly with the socially excluded and reflecting upon that experience. If we are not to go the way of the United States, our politicians need to set the example of engaging with those at the margins of society—not in a merely symbolic way, but by making a commitment of, say, at least six months of regular voluntary work with the same group of socially excluded people. If we can develop a culture of engagement between those with the most influence and those who are most powerless, then the good sought by this Government may continue for generations to come.
The years of abuse of those in local authority care shows us exactly what happens if we do not fully understand the needs of the vulnerable. The Government's proposed Bill to eliminate abuse by those who care for children away from home is very welcome. But it is overshadowed today by the imprisonment, for abusing children in his care, of Derek Brushett, formerly a respected member of the Social Services Inspectorate. An expert who began life 352 as a manager of a local authority care home, moved on to the study of child development and has helped to pioneer one of the most effective therapeutic communities for homeless young people who have been abused or neglected by their parents, argues most convincingly that it is the very rules provided by previous legislation that has made local authority care a haven for abusers.
So I believe passionately in bringing relevant experience from the real world into your Lordships' House. I agree with the noble Baroness, Lady Pitkeathley, that we should not overestimate the importance of Westminster. However, I also believe that if Westminster does not work it is the poorest and most vulnerable who will suffer the worst.
I hope that the noble Baroness will forgive me when I say that it is indeed ironic to be enjoined by her not to think too much of the upper House when threat of redundancy and the experience of mass redundancy among one's colleagues is so fresh. Relevant experience is to be valued. I do not think it too far fetched to imagine that a member of a family with several generations of experience in politics might have useful experience to offer Parliament. I think it a waste that so many experienced Peers have now been lost to the House—
§ The Earl of Listowel
My Lords, may I say that I hope those who have a different experience from those who have traditionally worked here will be able to respect the different but equally important experience of their peers. Those of your Lordships who dislike our system might care to reflect upon the United States upper house, in which a principal requirement for entry is wealth. Sadly, there are not many teachers or social workers or those with direct experience of working with the socially excluded there.
I hope the noble Lord the Minister will forgive my asking a question for which I have not prepared him and I would be pleased to have a written reply from him, if that is more convenient. Is there an audit kept of voluntary work experience with the socially excluded among those in the Civil Service and in government who are responsible for developing and implementing policy for the socially excluded? Is such experience recognised as an important factor in deciding on promotion within the Government and the Civil Service? I have learned much by spending a few hours a week in a hostel for the homeless and I now have a deeper understanding of the issues behind homelessness. Is it too much to ask of someone already loaded with responsibilities to spend two hours a week for six months or more teaching a prison inmate to read, working with the homeless or assisting in our schools? Nothing can replace personal experience.
§ 4.51 p.m.
§ Lord Grabiner
My Lords, this is my maiden speech, but it is not the first time I have had the opportunity of speaking in this magnificent Chamber. As some of your Lordships may know, on those occasions during the 353 legal term when this House is not sitting, appeal cases may be argued at the Bar of the House, which is at the opposite end to the Throne and the Woolsack. For the advocate, especially if he or she is a Queen's Counsel, it is a daunting and extremely uncomfortable experience.
There are at least three reasons. First, your view of the House from the Bar is like stepping on to the set of "Iolanthe". It is quite a shock first time round, and you never really get used to it.
Secondly, you have to wear a full-bottomed wig, which also doubles up as a set of earmuffs. As a result, you cannot hear any of what would otherwise be the devastating questions fired at you by one or other of the five Law Lords seated at small coffee tables on one side of the Bar. Thus the advocate has a plausible excuse for dodging the difficulties in the case. That is, I suppose, a justification for retaining this particular form of headgear. I must not be controversial, but some would say that it is the only justification for the advocate's full-bottomed wig.
The third reason is that you make your oral arguments from a narrow raised plinth, which inhibits the wandering advocate from marching about as he warms to his task for fear of falling and breaking his neck.
As to the substance of today's debate, I wish to say a brief word about one or two aspects of regulation. For many people, a mortgage and a pension are the most important and complex financial transactions they will ever undertake. The combination of consumer need on the one hand and the financial rewards for the seller on the other creates significant opportunities for abuse. This manifested itself in pensions mis-selling scandals, of which we are all aware. In the mortgage context, the Council of Mortgage Lenders is calling for statutory regulation, which would represent a significant move away from the voluntary mortgage code.
Until now, the approach to regulation in the United Kingdom has been to legislate by statute and subordinate instruments and to appoint a director with an agency to police the relevant legislation. It is usually the case that the emphasis of the work of the agency is post facto—after the event—when the damage has been done.
Perhaps we should now be looking more critically at the position of the lender or broker at the point of sale. Why should he not have a positive duty to advise the consumer? Why should he not have a positive duty of good faith to provide the consumer with all relevant information which would enable the consumer to make a balanced and informed judgment about the proposed transaction? It may come as a surprise to members of the public, or even to some of your Lordships, to learn that the common law has always set its face against the imposition of such duties. If the seller makes no statement which is factually misleading, he is not guilty of any misrepresentation. If the buyer fails to ask the right questions, the response of the common law is fierce: "Let the buyer beware".
354 The classic common law position was succinctly and memorably summarised by the noble and learned Lord, Lord Templeman, in a slightly different context, in 1990 in a case called Banque Financière v. Westgate Insurance Company. What he said, characteristically cogently and concisely, was:A professional should wear a halo but need not wear a hair shirt".The point I make is that in the context of home mortgages and when it comes to making provision for old age, the time has perhaps come to consider the imposition of more stringent, non-excludable duties on providers who are always more sophisticated and knowledgeable than their customers. As expert professionals, they either know, or ought to know, the pitfalls which may present themselves to the unwary. Perhaps the time has come to oblige the professionals positively to speak up about those pitfalls at the point of sale.
Still in the context of regulation, there is another distinct point I would like to mention. It relates to the position of small to medium-sized businesses which find themselves bound to comply with the minutiae of very complex rules. The burden of compliance can be extremely onerous and is becoming increasingly expensive.
The Financial Times of 17th November published the results of a survey conducted by the Institute of Chartered Accountants. It was mentioned, I believe, by the noble Lord, Lord Saatchi. The survey revealed significant increases in the cost to small businesses of complying with regulations. If you take account of the costs and the benefits, it is not always clear that the extra burdens can be justified. Indeed, on seeing the occasional 50-page closely typed foolscap memorandum addressed to a provider client, I have wondered whether the purpose of the document was in large part for the protection of the regulator's office rather than the customers of the relevant business. There is a very strong case in favour of the Government's proposal in the gracious Speech to provide machinery which in appropriate cases will have the effect of removing, or at least significantly reducing, some of this unnecessary paperwork.
In conclusion, may I say that making a speech within the Chamber is a much more comfortable experience than doing it from the other side of the Bar, and it is a very great privilege to have had both opportunities.
§ 5 p.m.
§ Lord Boardman
My Lords, on behalf of the whole House it is my pleasant responsibility to congratulate the noble Lord, Lord Grabiner, on his maiden speech. He has a distinguished legal record. I was particularly interested in his comment that when the Law Lords are sitting they face the wrong way, as it were. That may explain some of the less understandable judgments! However, that may be speculation. I am sure that we look forward to hearing the noble Lord speak on many occasions in the future. With his great knowledge and experience, he will make a tremendous contribution to this House.
355 Some 28 new Bills are proposed in the gracious Speech. A substantial programme of work is mentioned that will—it is claimed—help the country,to meet the challenges of the new millennium".I regret that despite the number of Bills hardly any of them seem to be directed at the objective which the gracious Speech appears to claim for them. There were some references to past achievements, which could be queried. For example, although I welcome the claim that 700,000 more people are in employment, it might have been fairer to acknowledge that that was due to the growing prosperity in this country, and hence the fall in unemployment, which the Government inherited.
I am delighted to note that 145,000 young people have been helped to enter employment. However, again, it would have been somewhat more modest—although that is not a feature of this Government—to have acknowledged the major contribution of many voluntary organisations in getting young people into work. I am particularly sad that the noble Lord, Lord Sainsbury of Turville, is not present because I am sure that he would endorse my remarks on this matter. I refer in this connection to the Prince's Youth Business Trust, as it was—it is now the Prince's Trust—and many other voluntary organisations which have contributed to the reduction in unemployment, particularly of the young.
The gracious Speech praises the,new system of monetary policy-making".That refers, presumably, to the Monetary Policy Committee. I pay tribute to that committee, but at the same time I retain the reservations that I have always held with regard to it. I believe that it is the responsibility of government, through the Chancellor of the Exchequer, to control interest rates, just as it is to control tax rates. They are part of an economic package and, like Darby and Joan, you cannot have one without the other. Those who belong to the eurozone are fast beginning to learn that lesson.
By all means, let the Chancellor of the Exchequer have all the advice that the Bank of England and the experts can give him, but the ultimate sanction and control must lie with the Chancellor. The Chief of the Defence Staff who is responsible for all our Armed Forces would not take a decision as to whether or not we should declare war. Therefore, I fail to see why the Governor of the Bank of England and his committee should have power over our economic future without the sanction or blessing of the Chancellor of the Exchequer, any more than the Chief of the Defence Staff should be able to declare war without the acceptance of government. I know that not everyone on both sides of the House agrees with my views, but I deprecate leaving the MPC to decide this important aspect of our national economy. Perhaps the economic "weather" has made the decisions of the MPC somewhat easier of late, but when the financial storms come—as they will—we shall hear a rather different story.
356 I read that there is a rather strange problem now as regards the MPC. I thought that it was intended that the independent members of the MPC should have some experience of economics and a wide knowledge of external affairs to enable a balanced view to be provided. However, apparently, the independent members want economists and researchers attached to their own staffs. I believe that at present the Bank of England has 180 economists who advise the Governor and the members of the MPC on all these matters. The prospect of the independent members having staffs of economists and researchers fills me with horror. Whatever is decided on that matter, I remain of the opinion that responsibility for these matters must rest with the Chancellor of the Exchequer who is accountable to the Government, to Parliament and, ultimately, to the electorate.
I turn to the Financial Services and Markets Bill which is now in the other place. This Bill fills me with some horror if it is to come to us in anything like the form in which it was presented in the other place. It has produced a mass of regulations and bureaucracy. It seems inconsistent to refer to this in the same context as the deregulation legislation which is also mentioned in the gracious Speech. Why should a financial services authority have statutory immunity from negligence and recklessness? Why should firms that are dealt with incompetently by a financial services authority not be able to get compensation? The damage that a firm may suffer through a ruling given by such an authority in a reckless, incompetent or negligent manner could be vast. I hope that when the Bill reaches this House, those matters will have been put right.
The Government have said in the gracious Speech that they are determined to maintain and advance the UK's position in financial services. I wonder how they reconcile that attitude with their attitude as regards a withholding tax. As we have debated this matter before, I shall not speak at length on it. The Government have, rightly, rejected the European Union's policy on this, but they have now attempted to reach a compromise. Whatever compromise is reached will be bound to result in the loss of thousands of jobs and will cost this country millions of pounds. Business will move outside the European Union and will go to Switzerland, America or a convenient island which does not treat it in this way. As regards this matter, I urge the Government to tell the European Union "to get lost". The problem is that the Germans are unable to collect their own taxes. They are not prepared to reject banking secrecy to control their taxes. Therefore, they try to impose on others the duty of collecting their taxes and handing them over. That is not our game. They should put their own affairs in order.
My noble friend Lord Saatchi has dealt with the main points as regards taxation. There are many points to raise. He outlined the tax punishments which are being imposed on the people of this country. Contrary to all the promises which have been made, the tax burden is growing more quickly here than anywhere else in Europe. The Government have tried to deny that. The House of Commons Library, the 357 CBI, the Institute for Fiscal Studies—my noble friend mentioned many other such bodies—confirm that the present taxation burden is correct. They also confirm that the Government are likely to take 39.6 per cent of GDP in taxation. That is a rising trend. My noble friend mentioned something which has just been disclosed; namely, that taxes have risen three times as fast as prices during this Government's administration. I believe that that is a scandal. The Minister may find a way in which he can explain it. I wait with interest for him to do so.
The increase in taxes has not yet been widely recognised. There have not been increases in taxes such as income tax and so on—which would be seen straightaway—but there have been discrete stealth taxes, as they are called. For example, if pensioners have their money invested in companies, they do not realise that dividends are paid less tax and that they cannot now recover the taxation. Pension companies have to reduce the amount of pension they are able to provide, and so on.
A retired pensioner, with modest savings and an annual pension of £5,750, will now pay an additional £1,300 per annum in taxation under this Government. People have not fully recognised this yet, but, my goodness, they will shortly. It is no consolation to turn round to pensioners and say, "You will get your £100 winter heating allowance", or whatever it is. Compared to the £1,300 in the case I quoted, that will not go very far.
There are many other examples of stealth taxes. The tax on insurance premiums has gone up from 2.5 per cent to 5 per cent. When people read that, they may not think too much about it; they may think that it is not very much. But when one thinks of the insurance premiums they pay on their house, their car, their life, their health and all the rest of it, it amounts to a considerable sum. All this has been slipped in as one of the stealth taxes.
I wonder with some concern what is being planned by the Paymaster General in her Code of Conduct Committee. She has committed the Government unanimously to agree whatever is decided in that committee, but no one has told us what it is deciding or what it has decided. I find that rather disturbing.
The gracious Speech contains a depressing message. The burden of tax is rising; more bureaucracy and regulation is being introduced despite the Bill which is expected to abolish it. It contains a mixed bag of measures which d o not give encouragement,to meet the challenges of the new millennium",as is stated at the beginning of the gracious Speech.
§ 5.12 p.m.
§ Baroness Whitaker
My Lords, I rise with diffidence as a new Member of your Lordships' House, although I am much encouraged by the warm welcome from all sides and by the helpfulness of staff and colleagues, to which many others in my position have testified. I am particularly impressed by the mentoring system adopted by my noble friends, whereby an experienced Member takes a new Member personally under his or 358 her wing—an example, perhaps, of how your Lordships' House can develop a modern system, if I may use the adjective again, under a very old name like mentor. I take this as a symbol of the way the new House, which I am privileged to join, adapts to the modern world.
In this spirit I should like to devote my maiden speech—I hope in the tradition of being non-controversial—to those parts of the gracious Speech which relate the development of a modern economy to a more inclusive social order, particularly in respect of race.
I begin with the proposals aimed at making the Race Relations Act apply to public authorities in all their functions. I am reminded of a work of history which I fear lingers with me more than some more serious ones but which, nevertheless, contains some good reforming sentiments. I refer to 1066 and All That by Sellar and Yeatman, in which they reported that one of Magna Carta's key principles was that,everything should be of the same weight and measure (except the Common People)"—who, of course, being the great majority outside the predecessors of your Lordships' House, remained serfs, villeins and so on.
We could say that the new race provisions will be an advance on Magna Carta because police enforcements and other actions by public authorities will then give an equal weight and value to all our systems in a way in which it did not before. I hope, though, that these provisions will apply not only to public authorities but to all those who carry out a public function, so that privatised services under contract to public authorities are also made fully accountable.
I hope, too, for an apparently small change to be made in the powers of employment tribunals in race discrimination cases, obliging them to draw an inference from an employer's refusal to fill in the questionnaire prescribed by the Race Relations Act—known to those who sit through such cases, as I have, as the RR65, a term which I am sure will be widely familiar to your Lordships. This modest questionnaire has a fundamental importance. Race discrimination is hard to prove in law. Employers who do not act in good faith—there are, regrettably, still some—or those who do not realise what the culture of their company amounts to, can conceal what has come to be called "institutional racism" in their own internal processes which it is almost impossible for the applicant—particularly the applicant without professional representation—to bring to light. Refusing to respond to the questionnaire often means that there is something to hide. So it is surely right that tribunals should have the backing of the statute in drawing their own conclusions from that refusal. I hope very much that all your Lordships, of all party backgrounds or none, would support this view.
I should like briefly to welcome another future development. Later this week the European Commission will be in a position to adopt a draft directive aimed at outlawing race discrimination in 359 employment and in goods and services— including such important ones as education and social security—throughout the European Union.
A fair chance in education and in earning a living are central to full participation in our society, as our law in the United Kingdom recognises. It is because our law in this area is developed that the United Kingdom has an opportunity to take a lead within the European Union; to use its immense diplomatic capability, which I know well from previous work, and its rather more newly found prestige in Europe to help ensure acceptance of the draft directive by the Council of Ministers; and to negotiate the text thereafter—to the benefit not only of our fellow Europeans with their many minorities such as the persecuted Roma people, but also to help our citizens who go to the European mainland to train or to work and who in many, if not most, states of the Union, have no redress against the discrimination they meet on the grounds of race, ethnicity or religion.
Race discrimination also constitutes a barrier to free movement, as in the case of which I heard of a black architect who refused an important post in a European member state because of the difficulties he knew he would encounter.
Perhaps I may be permitted a brief snapshot from the past. When my grandfather arrived in this country from Poland— think as an economic migrant, although his family had also suffered persecution; anyway, I am glad he was let in—Nottingham, the city where he made his home and where I went to school, offered opportunities, acceptance and diversity such that he was able to bring up his new English family in peace and make a full contribution to society.
In later decades Nottingham was not always so kind to people of all races. Indeed, it was one of the first—if not the first—city to endure and perpetrate race riots. At that time, from where I was at university in the United States, it looked as if this country was poised to become polarised on racial difference.
But the risk was eventually halted, I believe, by a counter-movement—a determination on the part of some energetic people. Here I pay tribute to the late Jim Rose, one of the founders of the Runnymede Trust, of which I am a trustee. With Members of your Lordships' House past and present, and others, Jim helped the government of the day—and there was not just one government involved—to create a momentum for change and set up those legal frameworks and institutions which now go some way (not yet all the way) to safeguard human rights in respect of race discrimination.
That is the national scene as it appears to me. However, on our continent there is now just such a need to halt destructive and life-threatening attitudes to the diverse background of the people who live and work there. There is a new power in the European Union, derived from the Treaty of Amsterdam, to deal with racism. Hence the planned directive. It offers an opportunity to create conditions of acceptance and encouragement for a multicultural society of 360 enormous talent and potential. Those opportunities are becoming more available in this country. They have an economic as well as a social importance. We now have a chance to foster them in Europe as a whole. Our Government, who are respected for their support for the rule of international law and human rights, will be well placed for this task.
But enough of the future. I now look forward to the rest of the debate and, eventually, bearing in mind what the noble Lord, Lord Marlesford, said to me was important to remember about your Lordships' friendly reception of newcomers: "It's not what they say, it's what they think", I look forward to learning more of what is in your Lordships' minds.
§ 5.22 p.m.
§ Lord Jacobs
My Lords, on behalf of the whole House I am delighted to congratulate the noble Baroness, Lady Whitaker, on a very fine maiden speech. Her expertise is already self-evident. She has experience, so I understand, as a consultant to the United Kingdom on racial equality. As we all know, this House thrives on expertise and there is always room for at least one more expert, if not many more. On behalf of the House, I thank her very much and offer our congratulations.
It is just under two years ago this week that I made my maiden speech. That is why I was a little over-awed by this occasion. Then, I said:The Labour Government have come to power at a time when Britain is economically the strongest country in Europe: low inflation, falling unemployment, steady growth in the economy, a rapidly diminishing PSBR. altogether a veritable honeypot of a situation".—[Official Report, 3/12/97: col. 1383.]When Labour came to power there was a justified fear, based upon its previous performance in government, that it would rapidly increase public expenditure and that very quickly the economy would go out of control. Five years ago we were facing a fiscal deficit of £46 billion. Today, we have a fiscal surplus of £2 billion, probably rising to £10 billion within three years. Unemployment is low and falling, inflation is under control and, although the strength of sterling has caused severe problems to exporting manufacturers, nevertheless there is evidence that by rigorous cost control manufacturers are managing to increase exports, although no doubt at very low profit margins. Of course, if we had joined the euro from the start then sterling would effectively have been 10 per cent lower than it is today. That perhaps explains why most of manufacturing industry strongly supports joining the single currency.
It is disappointing that the gracious Speech made no mention of the single currency, for joining will raise the standard of living of everyone in this country. Low euro interest rates mean low borrowing costs for industry. Low rates make marginal new investment projects profitable. Low rates reduce the cost of mortgages. Finally, price transparency between Europe and Britain will bring down the price of consumer goods in the UK.
361 The Chancellor's GDP forecast last year was derided by every economist in the UK. I say nothing of political parties which may have done so. They derided it for being politically self-serving and grossly exaggerated. With few apologies, most economists accept that they were wrong and are now showing a new respect for Treasury forecasts. In fact, the belief now is that the forecast growth of GDP of 2¼ per cent is probably on the low side, which means that fiscal surpluses will be even greater.
The Government have a programme to improve both education and the National Health Service, which is why my party strongly endorses it. But it has a further objective, which is to improve the lot of the least well off in the community. One way of doing that has been to bring in a minimum wage, which was my own party's policy for many, many years. Great fears were expressed by the Conservative Party that that would increase unemployment, increase industrial costs and, generally speaking, reduce the growth in the British economy. That has not happened. The most successful economy in the world—that of the United States—has for many years had a minimum wage, yet this fact in no way influenced the Opposition in their fight against the minimum wage. From their Benches there comes no expression of surprise that they were mistaken in their views.
Everyone accepts that those on the minimum wage are among the least well off in the community. In reality, the minimum wage is not much above subsistence level. Its introduction is nevertheless very welcome. However, one would expect that on a minimum wage one would be allowed to keep one's weekly wage. Perhaps it would surprise your Lordships to learn that on a minimum wage, working a 40-hour week, one would be taxed on about 40 per cent of one's income. The tax rate would not just be the lower rate of 10 pence; a substantial element would also be taxed at 23 pence in the pound. As if that was not enough, there is also a charge to bear of employee national insurance contributions so that the marginal rate is 33 pence in the pound.
If we believe in a fairer society, surely we can ensure that those with the very lowest wages in Britain can be allowed to keep 100 per cent of what they earn. Is there any wonder that so many hesitate before moving from unemployment into full-time work? This issue is particularly relevant at a time when the Government are set on reducing the standard rate of tax from 23 pence in the pound. I venture to suggest that by the general election it will be headed for 20 pence. Surely the Government have at this moment got their priorities wrong. Those on minimum wage deserve to have no deductions for income tax or national insurance.
The Government's decision to bring in last year a new system of capital gains tax was applauded by us. When CGT was first introduced in the 1970s, my own submission to the Inland Revenue on behalf of the Liberal Party was against indexation and in favour of something called "taper relief". Now at last we have such a system, and for relief of business assets the five-year taper, which gives an effective rate of 10 per cent, 362 is a great incentive to entrepreneurs. For non-business assets, a taper over 10 years would be reasonable if the starting rate were 30 per cent and not 40 cent. In the United States the rate of capital gains tax without any reliefs is 20 per cent. I believe that 40 per cent is the highest capital gains tax rate anywhere in the western world.
Finally, I should like to address another issue which would improve the standard of living of everybody in this country. The issue should be well known to your Lordships, although it did not feature at all in the gracious Speech. Yet it is promoted strongly by the Chancellor of the Exchequer, the Secretary of State for Trade and Industry and the Minister with responsibility for consumer affairs. The subject is consumer prices in the UK.
Credit here must be given to the Sunday Times for having carried out numerous investigations over the years to demonstrate beyond any possible doubt that in Britain we pay higher prices for practically everything compared with our neighbours across the Channel and even our neighbours across the Atlantic. The colloquial term given to this phenomenon is "Rip-Off Britain". Certainly the issue is gathering strength because leading manufacturers and retailers in their private meetings with Ministers are saying how unjust they think this attack is. They claim that the facts are wrong or, alternatively, that the reasons for higher prices are exclusive to the UK. As a former industrialist, I would have argued the same thing, but the explanations for the most part are grossly exaggerated.
Many surveys have proved incontrovertibly that we are paying excessive prices for cars, pharmaceuticals, electrical goods and food. The prize of lower prices and a higher standard of living for everyone is surely worth some adverse criticism from large manufacturers and retailers. Lower prices would certainly not be welcomed by Ford, Glaxo Wellcome, Sony or Tesco. The public are just beginning to be aware that they are being overcharged for almost everything, but they do not have the power or the organisation to put their views strongly to the Government, notwithstanding the good work done by some consumer organisations.
What is argued is that the cost of production in retailing is higher in the UK. Retailers claim that rents in London are higher than elsewhere, yet in reality they are no higher than in New York. They claim that transport costs are higher due to the heavy taxation of petrol, particularly as compared with the United States. But what they omit to mention is that in the United States the distances between cities are tremendous while here in Britain they are very small indeed. We are a compact and densely populated island which is ideal for distribution. They say also that sterling is very strong which distorts prices. That is hardly a persuasive argument, because a strong sterling means low import prices which should, if anything, mean lower prices in the UK.
Now I have no difficulty in supporting the Government in their campaign to deal with these issues. They rightly claim that they have referred many 363 of these areas to the Office of Fair Trading and the Competition Commission. These references include electrical goods, supermarkets, cars and now even soft drinks sold by pubs. They clearly are pro-active about this matter. Where I remain concerned is that the Government appear to be advised that these references will in the main be successful and that nothing more need be done. For the references to be successful, those being investigated must have done something illegal or severely against the public interest. High gross margins of themselves are not an offence unless, of course, they were illegally agreed between competitors.
Many of the high retail prices are not necessarily the fault of retailers. Very often it is the international manufacturers which charge the retailers very much higher prices in the UK than elsewhere. We are not known as Treasure Island for nothing. I think it will be difficult to find fault with the supermarkets and I am not confident that the Competition Commission's investigation of car prices will come up with a good result because it is faced with a very unusual situation where 50 per cent of the cars are sold at prices that are lower than anywhere else in Europe, to fleet buyers, and consequently manufacturers cannot afford to reduce retail prices unless they illegally agree to raise fleet prices first. I mention that to show that the issues are much more complex than the media would have you believe.
Yet again I urge the Government to talk directly to manufacturers because it may be possible to obtain lower retail prices in many areas by agreement. Of course competition is the main weapon to achieve lower prices and I believe that the arrival of Wal-Mart may achieve lower prices in supermarkets even if the Competition Commission fails.
§ 5.33 p.m.
§ Lord Millett
My Lords, it is a great privilege to contribute to this debate. Like the noble Lord, Lord Grabiner, I have an advantage which is not given to most maiden speakers. As a member of the House's Appellate Committee, I have also addressed your Lordships' House before, though I was able to do so from the Front Bench. So, while the noble Lord has gone up in the world, I suppose I have gone down.
My purpose today is to give a cautious welcome to the statement in the gracious Speech that legislation will be introduced,to assist the rescue of viable businesses in short term difficulties".No one will quarrel with that objective, least of all myself. Twenty years ago I was a member of the Cork Committee on whose report our present Insolvency Act is based. That Act was responsible for introducing the rescue culture into our insolvency law. The Act has worked well, but it has some defects. One became apparent almost at once. The company voluntary arrangement, which should provide a simple and inexpensive procedure for companies to co-operate with their creditors, has proved virtually a dead letter. That is because we failed to provide for a short 364 moratorium in order to allow the company to reach agreement with its creditors. I understand that the Bill will remedy this. If so, it will be very welcome.
The Bill is to be introduced against the background of a continuing review of our insolvency law. There is an unfortunate tendency in this country to look across the Atlantic and to consider that Americans do everything rather better than we do. Thus it is that our insolvency procedures are often compared unfavourably with Chapter 11. The Cork Committee examined Chapter 11 with great care. We did not like what we saw. We preferred to devise our own procedure, the administration order. Later, the Australians were able to compare both systems in practice. They chose to adopt ours.
Chapter 11 is usually thought to have the great advantage of what is called "the debtor in possession". It is generally assumed that this means that the directors stay in office and that they are therefore encouraged to file for insolvency at an earlier stage than happens here. That is a misconception. The debtor in Chapter 11 does not mean the directors; it means the company. In well over 80 per cent of all Chapter 11 proceedings, senior management is replaced almost immediately.
The real difference between the American system and ours is that they use lawyers and we use accountants. Now, I am the last person to be against lawyers being gainfully employed. But the result is that Chapter 11 is hugely confrontational. Each interest is separately represented—secured creditors, unsecured creditors, shareholders, directors and employees. An expensive bun fight follows in which each party fights its own corner and the court presides over a series of plea-bargaining sessions. Chapter 11 is very expensive—far more expensive than our administration order procedure—and in practice is really available only for very large companies. We do not need to go down that route because we enjoy the great advantage, which the Americans lack, of a highly professional body of insolvency practitioners drawn from the accountancy profession who are experienced in managing and rescuing businesses in trouble. They bring a commercial rather than a legal approach to what is after all a commercial problem.
When I saw press reports of the Government's consultative document, I was astonished to read that we have the most creditor-friendly insolvency system in the world. I was astonished because that is quite untrue. The ordinary trade creditors get a very raw deal in this country. On reading the actual document, I saw that it said something rather different. It said that we have the most secured creditor-friendly system in the world. That is true. It is true because of the floating charge. In an English insolvency, the Inland Revenue comes first, the lending institutions with their floating charge come next, and the ordinary unsecured trade creditors take whatever is left, which is very often nothing. Trade creditors have learnt from bitter experience not to expect anything out of the insolvency process. They simply write off the debt as a bad debt. 365 It also increases I he domino effect of insolvency. Apart from incompetence, more businesses fail because of bad debts than from any other single cause.
The Cork Committee was determined to do something for the unsecured creditors. We recommended a reduction in the Revenue's preferential debts, but we did not want the money released by that to go to the lending institutions. We wanted it to bypass the floating charge and go straight to the trade creditors. We put forward a package. To our surprise the Government accepted a reduction in the preferential status of the Revenue but rejected the rest of the package. The result was very beneficial to the banks, but in most cases it did nothing for the trade creditors.
I understand that the Government are now considering a further reduction in the Revenue's preferential status. If so, that will he very welcome. However, I hope that we do not make the same mistake again.
§ 5.40 p.m.
§ Lord Fraser of Carmyllie
My Lords, the noble and learned Lord, Lord Millett, is the second distinguished lawyer to make a maiden speech today. As a fellow bencher at Lincoln's Inn, it is a particular privilege to have the opportunity to follow the noble and learned Lord and to congratulate him on his speech. After a very distinguished career at the Bar, he is now a Lord of Appeal in Ordinary. The noble Lord, Lord Grabiner, pointed out some of the absurdities of an appearance before your Lordships' House in a legal capacity. However, I wonder whether to the layman there is anything more absurd than when someone of the calibre of the noble and learned Lord, Lord Millett, who has reached the pinnacle of judicial office, then comes to be described as "in Ordinary".
For me, a particular pleasure of the noble and learned Lord's speech was when he clearly indicated that he will contribute when we come to deal with matters of insolvency. There have been occasions when some noble and learned Lords holding his office have been somewhat circumspect in their contributions to oar debates. However, I hope that the noble and learned Lord will not feel in any way restrained about contributing.
I also extend my congratulations to my noble friend Lord Bagri. I confess that I provoked him to make his maiden speech during this debate and I make no apology for that. Unfortunately, during the election of hereditary Peers to this side of the House, neither of my noble friends Lord Poole and Lord Trenchard was elected. That is particularly unfortunate. They served with me on the Filancial Services and Markets Joint Committee chaired by the noble Lord, Lord Burns, and their contributions were significant and worth while. I hope that in some measure my noble friend Lord Bagri, having been persuaded to contribute to this debate, will participate on the Financial Services and Markets Bill to make up for the deficit that we have regrettably suffered.
366 The gracious Speech contained some interesting paradoxes. We have been told repeatedly that the core of government policy is, "Education, education, education". However, for the first time in history, into the mouth of the Sovereign was put a split infinitive. Knowing the effort that goes into the preparation of the Queen's Speech, I do not believe that this was a flaw on the part of the Civil Service and it must: have been intended by Ministers. I suppose that in a modernised Britain, what is good enough for "Star Trek" is good enough for the Sovereign.
§ Lord McIntosh of Haringey
My Lords, what is good enough for Sir Ernest Gowers is good enough for the Sovereign.
§ Lord Fraser of Carmyllie
My Lords, the noble Lord may say that, but it is the first time that a split infinitive has appeared and I am happy, if nothing else, to record that change in our modernised Britain.
The more dismaying and perplexing paradox is what is said in the gracious Speech about regulation. The Government indicate their drive against inappropriate and overly complex regulation. However, if the Government really go at that with a will, they will not encounter much opposition either in this House or beyond it. But if it is genuinely the desire of the Government to see a reduction in regulation, would not the obvious starting point be to be economic when granting regulation-making powers to Secretaries of State? If they are given such powers, you must anticipate that they will use them. Indeed, one might go further and say that if they are given such powers, you must expect them to use those powers. I noted with interest the words of the noble Lord, Lord Sainsbury, when he said that at least in one provision we can anticipate that there will be a sunset clause in relation to regulation-making powers. That is welcome, but I doubt whether it will be the complete answer to the problems that such additional powers always bring.
Furthermore, I am curious to know this: in aggregate, how many new regulation-making powers are contained in the 28 or so Bills that will be introduced during this Session? When I examine the character of the Bills, I can only predict that there is going to be a massive raft of new regulation-making powers and nowhere will that be more obvious than in the Deputy Prime Minister's beloved transport Bill. As we have already seen, he has decided to funk on taking responsibility for alienating the motorist. If any charges are to be levied on motorists, that will be left to local authorities. If they need to do that, it is possible to bring it about only by the use of regulation-making powers.
It has been reported that Mo Mowlam has said that there is to be a "Star Chamber" for regulation. I do not know what that comment conveys to others, but it strikes me as a rather unfortunate way of declaring one's intention to attack regulation.
However, what has troubled me even more than that infelicity is the indication that the noble Lord, Lord Haskins, is to be "on a ministerial panel at the heart of 367 government". Not only that, but as he sits in the Cabinet Office presiding over meetings in Conference Room A, which is where all Cabinet committees meet, I understand that he also has something of the order of 50 staff who are answerable to him. So far as I am aware, the noble Lord, Lord Haskins, is not a Minister in the Government; but he looks like a Minister, he sounds like a Minister and he appears to have the powers of a Minister. If that is the situation, in those circumstances I believe that we should have an opportunity to explore exactly what is the noble Lord's role and exactly what he does. I suspect that in large measure much of what he wants to do are steps of which I would approve, but it is becoming a troublesome matter when an individual holds so much power—I quote again, "at the heart of government"—without being answerable to this House or to another place.
It also particularly troubles me that the majority in another place appears to have abandoned scrutiny in favour of sycophancy. With that abdication of responsibility, it is both our right and duty to take up the task of scrutiny of all regulation.
I do not know exactly what is intended by the statement in the gracious Speech that steps will be taken,to increase the effectiveness of the power to remove regulatory burdens.I wonder whether what is being suggested is that, in the future, it may be possible to repeal primary legislation by means of secondary legislation. If that is what is intended, I shall be interested to know about it. The idea has certainly been floated in the past, but I am sure that those sitting on the Government Benches would anticipate that any such measure, if proposed, would no doubt incur a significant degree of hostility from your Lordships' House. I shall be grateful if the noble Lord who is to respond to the debate at the end of the evening can give me a categorical undertaking that no such proposal is lurking anywhere within the government machine.
I shall turn briefly to the Financial Services and Markets Bill. I agree with my noble friend Lord Bagri that the Opposition are to be complimented on agreeing—uniquely—that this Bill should be carried over from the previous Session. I very much appreciated serving with the noble Lord, Lord Burns, on the Joint Committee. He chaired that committee so successfully that it serves him right that he has now been given the responsibility of looking into the economic impact of banning fox hunting. I believe that in future he will appreciate the danger of success in chairing a committee of both Houses.
As I understand it, the Government were minded to accept a very significant number, if not all, of our recommendations. As that Bill trudges through its Committee stage in another place, it is difficult to grasp whether all or only part of what we recommended has been acknowledged. In common with many others, I hope that before the Bill reaches your Lordships' House it will be in the best possible shape. I do not want to waste unnecessary time. As my 368 noble friend Lord Saatchi said, there is broad agreement that the Financial Services and Markets Bill should work effectively. Although I do not want to waste time, I hope that given the vital importance of the legislation not only to the City of London but to the wider financial community on this side of the Border and north of it—your Lordships will not be surprised to hear me to say that—it will not be suggested that a Moses Room procedure is appropriate for proper consideration of that measure.
I am extremely keen to see the Bill on the statute book in good shape in the near future. From my involvement which is set out in the Register of Interests, I have become aware that from Canary Wharf has emanated a wide range of requests for information which essentially seem to be of a commercial character. It appears to be unnecessary beyond any proper regulatory requirement. That troubles me, not least because it appears that a number of those who might otherwise have been favourably disposed towards such legislation are becoming concerned by what they see as an unnecessary increase in the burdens placed upon them.
I do not believe that those within the Financial Services Authority are to be blamed for this. For too long they have sought to establish a single regulatory regime essentially on shifting sand. As they try to fix best practice, all they can do is give it a best guess. I believe that at the earliest possible time it is necessary to give Mr Howard Davies and his senior team at the Financial Services Authority an opportunity to examine exactly what Parliament requires of them so that they can go forward with a self-assured, confident gait and ensure that, while sound regulation is good for business as was pointed out earlier, there is not imposed on financial services in the United Kingdom a degree of unnecessary burdensome regulation which, far from helping the reputation of the City and those services, simply has the effect of driving them away to other financial centres in Europe and elsewhere.
It is with all those considerations that I particularly look forward to the Financial Services and Markets Bill coming before your Lordships' House. I believe that given the expertise in this House, we shall be able to send it away in an improved form.
§ 5.53 p.m.
§ Lord Harrison
My Lords, it is an enormous privilege to pass through the Norman Porch of the House of Lords and join noble Lords from my previous chamber—the European Parliament. It is also a pleasure, for several reasons. First, I can speak and be understood in my native tongue, which is English. Secondly, I can dispense with headphones which were my habitual headgear in Brussels and Strasbourg through which I listened to instant interpretation, which sometimes had comic consequences. I recall that on one occasion in the middle of the Gulf War crisis the Leader of the House, a Frenchman from Normandy—whose people are renowned for their prudence and sagacity—rose to address the European Parliament with Gallic gravitas. 369Nous avons besoin de la sagesse normande pour trouver une solution a cette crise",said the interlocutor. At that moment, much to his astonishment, the British MEPs, Tory and Labour, burst out laughing, for over their headphones they had received the translation:In order to solve the Gulf War crisis we need Norman Wisdom".My third reason for warming to your Lordships' Chamber is the recognition that, surprisingly, the Lords and the European Parliament have much in common, despite the enormous difference in ages. Each is a second chamber concerned with revising and improving legislation and each is characterised by a consensual and co-operative way of working. I have been enormously heartened by the friendliness and fraternity meted out in all quarters of this House. Further, each is the senior House charged with scrutinising legislation from the European Commission. Perhaps we should build on this consanguinity. The House of Lords and the European Parliament should be blood brothers in enhancing citizens' interests.
For the past 20 years I have had the pleasure of representing the unique city of Chester in the beautiful county of Cheshire in both the European Parliament and previously on Cheshire County Council. Five industries predominate in our area: tourism associated with Roman Deva, retailing and, more latterly, financial services in modern Chester. The automobile industry boasts Vauxhall Motors at Ellesmere Port and Rolls-Royce Motor Cars at Crewe—all within my former Euro constituency of Cheshire West and Wirral. Finally, firming in the form of beef and dairy cattle sweeps the plains of Cheshire. It is the best of British. But all of these industries are dependent on the single European market, which is something that we know feelingly in the case of British beef. Likewise, that most quintessential of British-made products, the Rolls-Royce car, is now reliant on German owners for its future development. Far from being despondent, I welcome such European collaboration.
The burden of my speech today is that we in Britain must come to terms with Europe. Most urgently, we must realise, in both senses of the word, the enormous potential of the world's biggest single market of 370 million people, soon to become 500 million strong as the market migrates to absorb the applicant countries of the beckoning east. It is a market which, imperfect though it is, has generated 900,000 new jobs, according to Commissioner Mario Monti's single market report for 1997. I was greatly encouraged when the same year, and during the British presidency of the European Union, the Government made as their priority the completion of the single market. I fervently believe that the fastest way to divest ourselves of unemployment and poverty is to embrace the full Monty of a vibrant and dynamic market in Europe.
My optimism is further galvanised by the emphasis in the gracious Speech on,promoting economic reform in Europe … more open markets, greater economic growth and new job creation".370 In particular, the Bill that promotes e-commerce will provide the elasticity to elongate and elevate this market. This Bill can stretch trade, commerce and business across the whole of the Continent to the distinct advantage of British entrepreneurs. But it is imperative that in fostering e-commerce we ensure that British and European Union legislation is complementary. In future we must view all single market legislation application and enforcement as something that happens in Britain's backyard, not as something that is over-taxed, over-regulated and over there.
I conclude with a practical example of where Britain is ahead of the field in clearing the undergrowth which ensnares business. Recently, the Government, with your Lordships' help, enacted legislation to combat late payment of commercial debt by introducing a statutory right of interest for small firms—and quite right, too. The Cheshire-based Forum of Private Business has computed that, at any one time, £20,000 million is owed to British firms in the form of late debt. That is a real burden on business, and a disincentive to invest and grow.
But what about businesses trading in the single market? Do they enjoy the same protection? No, not yet. A small businesswoman told me in Chester one day, "As an entrepreneur in the single market, I suffer the double whammy of having to pay my Swedish supplier early, while receiving payment late from the big firm down the road".
I am pleased to say, as former rapporteur on this vexed issue in the European Parliament, that legislation is being formulated to right that wrong. This practical piece of legislation tackling late payment is an essential jigsaw piece in the wider picture of the single market. Our task now and in the future will be to prepare for that changing and developing market, so that British firms can be like the buccaneers of old, plying new and charted seas.
It is time for us, as a nation, to absorb the consequences of the Norman Conquest long ago: to appreciate that Britain was always an integral part of Europe; and, as the gracious Speech does, to lay a belated down-payment on Britain's future in the expanding Europe of the 21st century. We are not alone, and we never have been.
§ 6.1 p.m.
§ The Earl of Selborne
My Lords, it is an enormous pleasure to follow the maiden speech of the noble Lord, Lord Harrison. He brings to this House his great experience of serving on the county council in Cheshire and then representing the county in the European Parliament. He is clearly well informed on a wide range of European issues. The noble Lord is absolutely right to remind us of the job creation potential in Europe, and that there are 900,000 new jobs in what we must now look upon as our home market. I assure the noble Lord that he will never need any interpretation in this House. He is a model of clarity.
We have noted from the previous speech the need for job creation at an ever-increasing speed. It has been the nature of industry since the Industrial Revolution, or 371 before, that we have to work hard at job creation if we are simply to stay where we are. Of course, we cannot afford to stay where we are given the degree of under-employment or unemployment and the industries where early retirement is the norm. Taking the coal-mining industry as an example, the figures are massaged—I use the word clearly—to give the best possible interpretation, and always have been. That is simply because, as mining communities lose jobs, a great many people will be placed on the long-term sickness register. When jobs reappear in the sector, rather surprisingly one might think, the number of people on the register will go down, because jobs will be available to those who would rather work than be registered sick or unemployed.
Mining is an example of an industry that has moved into completely new fields, leaving people who are highly trained in one sector ill equipped for some of the new industries. It might be seen as a model for what is required from our science and technology base. It is obvious that if we are to create new jobs—from markets in Europe or production in this country, or both—they can be underpinned only by the relevant science and technology. In this country we have been very good at creating jobs ahead of our competitors by applying science and technology from our own science base at a rapid pace.
I am alarmed, therefore, to see that the British public is, at a certain level, ambivalent about the opportunities that science and technology can offer—sometimes for reasons that are clear. It is obvious that if there is a disaster such as Chernobyl, there will be grave concern about the nuclear industry sector. Likewise, as a result of the BSE crisis, we see grave concern about many aspects of the food industry and agricultural production. Understandably and perhaps rightly, that is manifested in concern about genetically modified products.
However, the biotechnology industry, particularly in the field of medicine, is one of the industries where we must look for job creation, and indeed improvements in the quality of life. Whether we think that genetically modified food will be relevant to our own markets is open to doubt. However, it is clear that in the pharmaceutical sector, in vaccines and the like, genetically modified products will certainly be of great importance.
Therefore, it is astonishing that there is widespread applause for those who, having demanded extensive trials of genetically modified crops, then go out of their way to disrupt those very trials. Just a moment's thought suggests that it is a denial of all logical demonstration and research—the very background to the job creation for which we must look in the future. So I strongly hope that we understand that job creation and improvements in the quality of life in this country can be achieved only by means of objective and well-tested research and the experimentation that goes with it. It is then for the policy-maker to determine whether the new technology is appropriate.
372 The businesses referred to—the 900,000 new jobs in Europe and others—will frequently be generated by those who will be starting again for the second or even third time in their working career. Lifelong learning is very much the norm now, with many people—possibly many noble Lords in this Chamber—returning to university or college more than once in their career. I was pleased, therefore, to see mention in the gracious Speech of an e-commerce Bill. It is from precisely such sectors as these that we all have so much to learn, be it as employers, universities or colleges, about implementing the new opportunities for job creation.
One of the best White Papers produced during the past 10 years was Realising our potential. It set out the base for the future organisation of science. It was uncontentious, and was supported by both sides of the House. It gave us the Foresight exercise, which led to the collaboration of industry, scientists, policy-makers and consumers. That precedent is running well. It is perhaps a truism to say that in this country we are poor at implementing research although very good at doing it. Much has changed over the past 10 years. Many initiatives have been followed through from universities and science parks to small businesses, creating half a dozen jobs which can lead rapidly to many more. Those are the jobs for which we shall be looking in the future. I earnestly hope that any tendency in this country to be disparaging about our science base and to dismiss the objectivity of our publicly funded science can be well and truly quashed.
§ 6.8 p.m.
§ Lord Elder
My Lords, it is with what I am sure is the traditional degree of trepidation that I rise to address the House for the first time. However, I suspect that like many before me, I find my task made a good deal less daunting by the helpful and friendly welcome that I have received from your Lordships and from members of staff since arriving here. Whatever other reforms are in store, I very much hope that one thing that will not be reformed is the welcoming civility with which Members of this House accept newcomers.
I arrive here after almost 20 years' involvement in politics. I worked for two Members of this House when they were in another place: the noble Lords, Lord Healey and Lord Merlyn-Rees. I worked for the Labour Party in Scotland, latterly as General Secretary and was then John Smith's chief of staff when he was Labour leader.
However, I have always been very grateful for the eight years I spent in what I shall risk describing as the "real world"—that well-known nationalised institution, the Bank of England. I went there immediately after leaving university, where I had studied some, but not much, economics. I believe that I was at the Bank long enough to realise that what economics I had learnt at university had probably been wrong, without being there long enough to learn anything very certain in its stead. That is perhaps as well as recent certainties in economics have not always proved long lasting. Certainly, I was never made aware, from the experience of the 1960s and 1970s or 373 indeed from most of the 1980s and 1990s, that the present combination of low inflation, sound finance, growth and falling unemployment were even possible.
Those years away from politics, along with a brief spell more recently in a consultancy where I was able to continue my interest in financial services and in the energy sector, have been most useful in providing some kind of a sense of perspective which is not always easy to retain in the concentrated environment of the political world.
I have come to Westminster just as the Scottish Parliament has been set up, after many years of debate, in the latter stages of which I played a small part. To those who regard it as curious that I should do so and who would like to portray Westminster as irrelevant to Scotland's future, I simply restate my belief that we are, and should remain, part of the United Kingdom. Like many others, I believe in devolution, with Scotland having a proper level of its own government, but very much within the UK and the European Union. That was certainly the belief of John Smith, for whom I had the privilege to work both early in the 1980s and later when he was Labour leader. He had a great commitment to devolution and an even greater commitment to, and belief in, social justice.
He believed that social justice and economic efficiency, far from being incompatible, in fact worked together: that one could not achieve the efficient working of the economy if one had vast unused resources. Social justice was not just about giving financial support to the unproductive, but also about getting all back into productive work. It was the pursuit of those ideas that lay behind the setting up of the Smith Institute, with the activities of which in Scotland I remain somewhat involved, and which is doing much good work in looking to set that agenda. I wholly support that view. Prosperity, the steady increase in the standard of living in an efficient and productive economy, is not only consistent with a socially just and caring society, but in a truly civilised society, prosperity and social justice reinforce each other.
I therefore especially welcome the Government's commitment as set out in the gracious Speech, which shows that the social justice agenda is very much at the core of the Government's actions. While John might have spoken of "economic efficiency" and "social justice", the gracious Speech talks of "fairness" and "enterprise", but the essential truth is that the two are inseparable.
These ideas are now at the very heart of government. It is interesting to note that when they were set out in the United States by Kuttner in The Economic Illusion in the early 1980s, they were seen to be running very much against the tide of Thatcherite Reaganomics of the time.
Measures such as the introduction of the second pension and the continued development of the New Deal are just some elements of the gracious Speech which sit very well with the record of a government who, through the New Deal, the national minimum 374 wage, the increase in child benefit and the investment in education are working to transform the chances of all.
But there is much more than that to welcome in the gracious Speech. As a special adviser in the Scottish Office in the first two years of this Government, I had the pleasure of serving on the working party in Scotland on land reform. It is good to note that progress is to be made on the right to roam in England and Wales.
As regards transport, as a person who does not now drive, and therefore has more than just a theoretical interest in the quality of the public transport network, I especially welcome the commitment to the development of that network which is to be so much a feature of the work before us in the year ahead.
It is my intention to support my Government in the Divisions ahead. I say that fully aware that this has been, and rather often in the past few weeks, the sort of introductory remark which was usually followed by an explanation as to why it would not be possible to do so in that particular case.
However, I have been asked to come here by the elected Government, not just to help to provide a contribution to the scrutiny that this House gives to legislation, but also to ensure that the Government's declared programme should be accepted by Westminster. I regard that as a mandate more than equal to any other in this House.
I look forward to supporting the Government's programme for social justice in the United Kingdom, based on fairness and enterprise, and to participating in your Lordships' deliberations on these and other matters in the months ahead.
§ 6.14 p.m.
§ Lord Cooke of Islandreagh
My Lords, it is my pleasure and privilege to congratulate the noble Lord, Lord Elder, on his maiden speech. He spoke with clarity and good sense. The noble Lord obviously has a sound background. Being a close associate of John Smith and secretary of the Scottish Labour Party was a good start. I understand that the noble Lord is also a hill climber and continues to be so despite a heart transplant. I am sure that he will continue to climb. I know that your Lordships will welcome contributions from the noble Lord in future.
The noble Lord, Lord Sainsbury of Turville, gave us a wide review of the economic situation. I noted with pleasure that he emphasised the importance of competition in the provision of energy with fair prices. I wish to speak on energy and electricity prices because we have a particular problem in Northern Ireland. I suggest to your Lordships that it is even more important that the economy prospers and expands there in the next few years so that jobs will be available for all, which will reduce the temptation for some to engage in anti-social activities.
The development of the economy is handicapped at the moment by remarkably high electricity prices. Northern Ireland currently has the highest priced electricity in Europe. Large industrial users pay more 375 than 40 per cent in excess of equivalent plants in Great Britain. Obviously, that handicaps business development and obstructs inward investment for activities which require electrical power. The handicap of the high cost of electricity in Northern Ireland has recently been highlighted by the CBI, the Institute of Directors and in particular by the report of the energy working group led by Sir George Quigley. Each made recommendations to Strategy 2000. A draft document was prepared by the Department of Economic Development. It is now out for consultation.
Most of the price disadvantage to Northern Ireland electricity users is caused by the manner in which the electricity generating stations were privatised in 1992. They were not sold in a straightforward manner as happened in Great Britain. The long-term contracts which were offered extending to the year 2010, and some to 2020, required plant to be made available for supplying power. It is against availability that payment is made.
These availability payments, which increase with the percentage of plant made available, are sufficient to cover all costs except those for fuel and include profit. When power is delivered the fuel required is paid for under an agreed formula. The companies which accepted these contracts to operate the generating stations paid cash for a guaranteed cash stream against availability until 2020. The size of the availability payments require Northern Ireland electricity users to pay £40 million a year above the costs of generation. The money paid to the Treasury in 1992 for these contracts amounted to twice the sum per kilowatt installed compared with the amount paid in Great Britain. That accounts for the high availability payments which the Northern Ireland Electricity Power Procurement Business must pay to the generators.
Almost as serious is the fact that the long-term contracts tie in elderly and relatively inefficient generating plants to the end of the contracts. In Great Britain, many aged coal and oil fired stations have been replaced by very efficient combined cycle gas turbine generators which have brought about steadily reducing power costs. Similar modern generators in Northern Ireland could save electricity consumers another £40 million per annum. But the path to modern efficient generators is effectively blocked because if independent power generation reduced the load on the contracted generators the availability payments would remain unchanged and the price per unit from the contracted stations would increase.
Under the European Union energy liberalisation directive, an increasing percentage of power must be thrown open to competition. During the second half of this year, we have had a form of competition available to 26 per cent of the large users, and due to ingenious work by the director-general of OFREG savings of about 10 per cent have been enjoyed by the large users. Unfortunately, the regulator has no power to question the high availability payments made to the contracted 376 generators as these are established by government contracts, a fact which makes genuine competition in Northern Ireland impossible.
Sir George Quigley's working party and the other interested parties have made clear that there is only one solution. Those contracts with the generators must be bought out by government without delay; first, to permit true competition, and, secondly, to encourage building of new efficient generating stations to start now.
A gas pipeline from Scotland to Northern Ireland has recently come into use. Ballylumford power station is now fired with gas and available to the city of Belfast. There is a proposal to extend gas to Londonderry and the north-west, but private investment will cover only part of the cost. Government, I believe, should get involved as that pipeline has strategic implications. Lower cost energy in the north-west would encourage industrial development and employment in that region.
The energy scene in Northern Ireland could really open up next year. Cross-border competition in both electricity and gas could be a reality. There is exciting news of a new and very large gas field off the west coast of Ireland which could bring a large gas main from the west to Great Britain through Northern Ireland. This should and could be very exciting, but the road block caused by the contracts with the generators must first be removed. Why should Northern Ireland be so handicapped compared with Great Britain and the Republic of Ireland as a direct result of government action in 1992 which was based on predictions which have proved very wrong.
I do not blame this Government for anything to do with those contracts. Nevertheless, I believe that it is their duty to look immediately into the matter and to remove this major obstacle to development of the economy in Northern Ireland. I do not ask the Minister who will respond to give a reply. The matter needs to be studied thoroughly by the Secretary of State for Northern Ireland.
§ 6.23 p.m.
§ Lord Gavron
My Lords, I should like to start with an apology. Many noble Lords may think that I have already made my maiden speech. My name was indeed put down on my third day in this House by a noble Lord who is also a longstanding and dear friend. He did not consult me. He saw a suitable opportunity for me and felt confident that without any preparation I could "wing" it. I failed. I could not do so; I was not quite up to it. But such is the kindness and support given to new Members of this House that, to my surprise and delight, I was later congratulated on having made my maiden speech so early. The warmth and encouragement that I have received from everyone in this House—from noble Lords, and the expert and sympathetic members of staff—have been a revelation to me and must be remarked upon.
There were references in the gracious Speech to enterprise and job creation. Those were given further emphasis by the noble Lord, Lord Sainsbury of 377 Turville, today. I should like to talk about a new development to protect business start-ups and to reduce their mortality rate in their early years.
Business incubation units are protected environments in each of which a dozen or so new businesses can spend their early years. They were first invented to raise chickens. Day-old chicks were put into incubators which kept them warm and dry and safe from predators until they could fend for themselves. Business start-ups have a great deal in common with day-old chicks. They are vulnerable, inexperienced, with a high mortality rate. They stand alone among the predators, who are not cats and foxes but bankers, accountants, lawyers, public relations people, consultants, office suppliers, and so on. All those people, who can be such wonderful allies when you know how to work with them, can be dangerous bedfellows when you are a day-old chick.
When I started my business there were no such things as incubator units. My life was dominated by loneliness. I scarcely met another entrepreneur engaged in a start-up, either in my business or any other business. I made a series of awe-inspiring mistakes which in retrospect were hideously elementary. They nearly put me out of business. In fact, my business was technically bankrupt for quite a long time. Luckily, I did not know enough to spot it. I knew something was wrong and I eventually took some figures I had cobbled together to show an older and more experienced friend. He studied them for a long time and then looked up. "I have only one solution for you", he said in sombre tones. I waited anxiously. "South America"!
I looked for a second opinion. Medical second opinions have done me well in the past. This second opinion saved my business. "What you need", said my second guru, "is a good accountant". He helped me to find one and I remained closely attached to the one he found for the next 30 years. He introduced me to concepts hitherto unknown to me, such as monthly profit and loss statements and, above all, the importance of cash flow. Healthy businesses need profits, it hardly needs to be said. But cash flow, I discovered, is like oxygen: we never talk about it but without it we are dead in three minutes.
The companionship of an incubator unit would have dealt with my loneliness, which was depressing. We could have discussed together the mistakes we had made, and possibly have avoided the mistakes we were about to make. Those of us who had no business people in our families would have had the equivalent of a business family in the same or adjacent building. The mere proximity of other day-old chicks generates warmth and moral support. The sharing of facilities creates great economies.
There are about 80 business incubators currently operating in the UK with about another 20 being planned. There are between 15 and 20 start-up businesses in each unit: 1,660 overall, employing a total of 6,800 people. The survival rate of start-ups in incubators is almost 80 per cent compared with around 35 per cent in the outside world. Businesses spend on 378 average three years in an incubator unit. On the 'whole, high technology businesses and commercial businesses can pay for themselves in incubator units. The London Business School's incubation unit, which I helped to found, provides fully serviced units for £400 per person per month. All heating, lighting, cleaning and security is included and each tenant is provided with a desk, a telephone and a personal computer.
Another important function of incubators, apart from launching the Microsofts of the future, is to help start-up businesses in deprived areas. Those incubators, or the people in them, cannot quite pay for themselves and they have to be subsidised. But it is an economical way of developing businesses, and thereby employment, among the socially excluded, who are also mentioned in the gracious Speech. In the USA, with government support, 5 per cent of all incubators are focused on ethnic minorities, women entrepreneurs and disadvantaged workers. They are also used to help to redevelop areas in industrial decline.
The DTI has shown great interest in the incubation movement, but as yet given only modest, but valuable, funding. We must hope that this will develop into more substantial support for incubators in areas of special need. Business start-ups are hugely important in our economy. I applaud the encouragement given to entrepreneurs by our Chancellor. We need the entrepreneurial culture to be encouraged in our business schools—and in our businesses, in our universities and in our secondary schools and even in our communities and our families.
If any noble Lords have young people in their families or among their acquaintances who show signs of wanting to start businesses, I hope they will encourage them. If we can foster and nurture the entrepreneurial spirit in our country we will be able to look forward to a brighter economic future.
§ 6.31 p.m.
§ Baroness O'Cathain
My Lords, it is truly a great pleasure to thank the noble Lord, Lord Gavron, for an excellent maiden speech, although in view of his comments about having received his congratulations previously on his non-maiden speech I am somewhat worried about doing so!
I am not at all surprised by the quality and content of his speech, opening the eyes of all of us to the idea of business incubators. I have been impressed, ever since I met the noble Lord long after he made what he so openly described as those hideous mistakes. His publishing and printing interests have significantly raised standards in those sectors to the benefit not only of consumers but the country as a whole. His quiet determination in the pursuit of excellence in his business interests, and his unselfish giving of time, talents and sponsorship money to the arts, have all made me a long-time admirer. I am sure that I can confidently say on behalf of the whole House, "Welcome, congratulations, thank you, and we sincerely look forward to your future contributions".
The gracious Speech reiterated the central economic objectives of the Government as being, 379high and stable levels of economic growth and employment".Nobody could, or should, quarrel with that. However, inevitably there will be differing views as to how these objectives can be achieved. I am, however, concerned that the objectives are not sustainable in the long term. Above all, we must ensure that we take the longer-term view in all the issues over which we have, or think we have, influence.
Two particular measures which have been introduced by the Government strike me as making the attainment of these objectives very difficult indeed. The first is the apparent disregard of the impact of high real interest rates and the high exchange rate on industry, particularly manufacturing and other industry sectors operating outside the mega-successful pharmaceutical, software and telecommunications sectors.
The Minister, in his opening speech, reiterated the string of measures in the gracious Speech which would support the knowledge-driven industries, but studiously avoided mentioning the impact of high interest rates on the bedrock of British industry. I hope that the noble Lord will have time to read in the Official Report the speeches, particularly the maiden speeches, in this debate which he has missed in the past one and three-quarter hours.
The second measure introduced by the Government which makes me fear for the attainment of the objectives is the impact of the two year-old decision vis-à-vis ACT and pension funds. My noble friend Lord Boardman mentioned that. I make no apology for mentioning the ACT and pension funds issue yet again, but shall not dwell on it in my contribution today. I mention it only because I hope that some time can be made available for a full-scale debate on the issue in the not too distant future. An audit of the actual impact of the decision, some two and a half years on, should not be seen as a hostile suggestion. Any business worth its salt undertakes such audits on past investment or other strategic decision. Such a debate could put some minds to rest or even cause the Government to look again at the issue with the benefit of hindsight and two and a half years' data.
So back to my major concern about the situation of British industry—and commerce, too—and its ability to play its part in the achievement of the objectives of high and stable levels of economic growth and employment; namely, the high level of real interest rates. One can infer from the latest minutes of the Monetary Policy Committee (relating to its meeting on 3rd and 4th November) that the committee is concerned about the rise in house prices at a level which is higher than the rise in mortgage interest rates. This can be,thought of as expected real capital gains more than offsetting the real cost of borrowing",measured by the mortgage interest rates less expected consumer price inflation. Viewed from the relatively affluent south-east, where many of us are based—and where all of us work—such a situation could lull us into a false sense of security about the future 380 performance of the economy and its ability to meet the two objectives. Because of the cushioning effect of capital appreciation on the major asset that most people possess—namely, a house—little attention is paid to the effect of high interest rates on other parts of the economy.
The cost of borrowing for investment (which is vital in order to maintain and increase our competitiveness as an industrial economy) is very high in real terms. Indeed, the nominal cost of borrowing for manufacturing companies is considerably higher than manufacturing output inflation. It is not only manufacturing companies which have such a problem. In the retail sector, there is significant deflation in practically all products, other than those effectively controlled by the Government; namely, tobacco and petrol. In the grocery distribution sector, there has been an increase in deflation month on month for about 12 months now and prices are some 2.5 per cent below the level pertaining 12 months ago. I hope that the noble Lord, Lord Jacobs, takes some comfort from that—and it is not due to the company he admires so much and has mentioned not only today but on previous occasions.
Of course, this is great news for consumers and for the economy as a whole in the short term, but how can future investment be financed and how can dividends be either maintained or increased to ensure that shareholders continue to hold their shares rather than rushing off to subscribe to a flotation of a company which has yet to produce anything?
Many of the companies at the heart of the British economy are probably looking at scenarios where the cost of borrowing in real terms could be in double-digit figures when the underlying rate of inflation hovers around the 2.5 per cent level. If one uses the EU inflation formula of the harmonised index of consumer prices, the real level of interest rates is much higher. The inflation level in September, based on the harmonised index of consumer prices, was 1.2 per cent, exactly the same level of inflation as in the euro area. As an aside, we seem to have achieved one of the desired effects of being members of EMU without membership, but another desired effect escapes us; namely, low interest rates. I hope that your Lordships will recognise how even-handed I am on this issue!
Although I am on record in my support of the Monetary Policy Committee and the decision to give limited independence to the Bank of England, I am very concerned that inflexibility regarding the target set by the Chancellor constrains the committee's ability to react to the sectoral and geographical imbalances in the economy. I fear that if this is not tackled, the objectives of high and stable levels of economic growth and employment will not be met.
In a further section of the gracious Speech, it was stated that,The new system of monetary policy-making ensures that interest rate decisions are taken in the best long-term interests of the economy".381 I really am not so sure. I wish I were. I fear that the imbalances are getting worse and it is sadly true that the industry sectors worst affected by high interest rates and the high exchange rate are those which employ the greatest number of people.
We have seen recently that a major clothing retailer has decided to source its products increasingly from the Far East and has served notice on no fewer than three major UK suppliers which, in turn, have had to make many thousands of staff redundant. The high exchange rate, which of course benefits imports from such an area, was certainly a major factor in this. The people affected must have smiled a wry smile when they heard that the Government's objective included high and stable levels of employment.
Of course, there are other factors—factors over which no UK government can have any effect. Although the gracious Speech contained many expressions of confidence which can be explained only by the belief that they can achieve miracles, such as,My Government will seek to modernise the United Nations'",the Government cannot effect a return to normality of price and other indicators in countries such as Thailand, which has a year-on-year deflation rate of 0.5 per cent and an industrial production level increase of 15.4 per cent, or Korea, which has an industrial production growth of 18.1 per cent.
Those are the harsh realities of extreme competition from the Far East facing our manufacturing and other industrial sectors in supplying our home market and the export markets where we compete. I am not a Cassandra, but I believe that the Government are not paying enough attention to the huge problems caused by high interest rates and the high exchange rate. Sadly, the objectives of high and stable levels of economic growth and employment are at risk.
Finally, I hope that the somewhat self-congratulatory attitude concerning the workings of the Monetary Policy Committee, which is easy to detect in the gracious Speech, will not become an unquestioning mantra of praise for the operations of the committee. I repeat what I stated earlier: I support both the concept and workings to date of the committee, but there is widespread concern about its selection and composition. That concern has been heightened by the spectacle of the internal squabbles being played out in public, which is also somewhat unedifying. I understand from the newspapers that the issue of adequate research facilities being provided for the independent members has been solved, but concern remains over the two matters that I have just mentioned: the selection and composition of the committee.
At the conclusion of the debate in your Lordships' House on 4th November, there was little or no acknowledgement of the seriousness of those concerns. The Government should respond to those concerns, and give an undertaking that they will not be ignored.
§ 6.41 p.m.
§ Lord King of West Bromwich
My Lords, it is a privilege to be a Member of this House, a fact of which 382 I am very conscious as I make my maiden speech. I am also the first Member of this noble House from the Sikh community. Incidentally, today happens to be the birthday of Guru Nanak, the founder of Sikhism. I wish to take this opportunity to congratulate the Sikh community world-wide on this special day.
I am extremely proud of the Sikh community and of all the communities of multicultural Sandwell whom I have the honour to serve as leader of their local authority. I wish also to thank all noble Lords and the staff of the House for making me feel so welcome and looking after me so kindly. I welcome the opportunity today to speak about industry, social and economic affairs. The relationship between those issues is fundamental to areas such as Sandwell.
Sandwell lies at the heart of the Black Country in the West Midlands and has one of the most heavy manufacturing- based local economies in Great Britain. During 1996–97, a total of 38.6 per cent of all jobs in the borough were in manufacturing. It is therefore obvious that manufacturing remains a major provider of jobs in Sandwell. We take pride in that and in our ability to come up with the goods that the country needs. We take pride, too, in Sandwell's skilled and dedicated workforce.
We cannot, however, hide from the fact that over recent decades manufacturing has suffered in successive recessions and that, inevitably, deprivation has been left behind in the wake of industry's downturns. Sandwell Council—which I have the honour to lead—is therefore committed to leading the regeneration of the area in order to tackle the scars of deprivation. There can be no doubt that a number of measures outlined in the Queen's Speech will give impetus to the initiatives that Sandwell is promoting to boost local industry and the Black Country economy. As a local businessman put it recently,Sandwell has got to do what it already does. but better".Our base of manufacturing must broaden over time to ensure sustainable regeneration of our community. However, our health inequalities are significant also. As one of the Government's health action zones, we are working in partnership to tackle those inequalities, but our task is substantial. Our health has a direct impact on our ability to work productively. All of those factors influence our economic success and our ability to respond to the challenges of life in the new millennium.
In his pre-Budget statement, the Chancellor set out his proposals for "Enterprise for All". In places such as Sandwell we welcome his commitment to breaking out of the closed circle which has restricted enterprise to a few. This Government have made clear their resolve to extend the opportunities of enterprise to people and places which the economy has too long forgotten.
Sandwell is a pathfinder for the New Deal for communities. All members of the civic partnership—the council itself, Sandwell Training and Enterprise Council, the health services, the police, the chamber of commerce, Sandwell College and the voluntary sector—have embraced the principles of the new 383 commitment and are working in partnership to make the change a reality. The Government are calling on all sectors to work in partnership and our experience would support that. Joined-up thinking and planning are the first stage; we need to ensure joined-up impact. It is through that partnership approach that we have had considerable success locally in attracting business into the area, creating about 1,500 jobs in 1998—a figure almost double that of the next best achieving borough in the area.
We welcome, then, the announcement in the Queen's Speech that a Bill will be brought forward to allow firms to incorporate with limited liability while organising themselves as partnerships. We are addressing also local skill shortages in the construction industry where council spending is the highest. That project was recognised as best practice by both the Department of the Environment, Transport and the Regions and the Audit Commission.
As council leader I am acutely aware that the local chamber of commerce has strong views on the regulation of businesses. It is concerned that the high level of costs from spiralling bureaucracy are anti-competitive and can potentially damage the flexible labour market in promoting inward investment. At a recent meeting, the view of my local chamber of commerce was that urgent action was needed to address the current burden of regulation. Together we welcomed the Government's new approach announced recently by Ministers visiting the Black Country. The package of important changes designed to modernise and simplify government regulations and to make them easier for people to understand was good news indeed.
As a director of a local manufacturing company, I am all too aware of the burden of regulations. As council leader, I welcome the fact that a new team has been set up to look explicitly at the burden central government imposes on local authorities. I am determined also that the local council itself will play its part in lifting the burden through changes to our regulatory functions.
However, neither industry nor the public sector can achieve real joined-up impact alone. I welcome the idea of a single first point of contact for all regulatory information and advice proposed in the new small business service's business link with the franchise network. We have a small business service at Black Country level which is part of the national network. It is just one example of a growing sub-regional framework to help improve the advice and support infrastructure.
However, the Government could greatly assist economic regeneration in areas such as Sandwell and the Black Country by encouraging some government departments and national agencies to locate regionally. That would have the twin impact of assisting regeneration efforts in areas like my own and helping to stabilise overheating of the economy in other regions and its impact on the living costs of many people.
384 Traditionally, business links have concentrated on high growth, team-managed businesses. This focus is now broadening with greater support and assistance for micro-businesses and community enterprise development. This is welcome news for those running small businesses, and even more welcome for those developing community based enterprises, including co-operatives, which will help us to build the social capital which is essential for tackling social exclusion.
The announcement in the Queen's Speech that the Government will bring forward legislation to assist the rescue of viable businesses in short-term difficulties is particularly positive. In Sandwell, the survival rate of VAT registered companies is comparatively low. In Sandwell again, the local authority will work at a local level to support this change and to consult local business on further improvements.
The package of measures assisting businesses to emerge from the burden of regulation, work in innovative and creative partnerships with the public sector to maximise the impact of all our resources, and measures to ensure a healthy and skilled workforce and reduce the risk of crime will be of significant importance to areas such as Sandwell.
The Chancellor has highlighted the need to escape from a volatile economic climate. His endeavours to ensure that we operate within a smoother economic cycle with more stable inflation will help businesses to develop steadily and reduce the number that fail to succeed.
None of these measures will alone deliver the environment for local people and local industry to thrive. The Sandwell experience shows us that the only way to deliver integrated and sustainable success is through partnership working. Then, and only then, can we hope to achieve joined-up impact.
§ 6.52 p.m.
§ Lord Roberts of Conwy
My Lords, I am sure that the whole House would wish to join me in congratulating the noble Lord, Lord King of West Bromwich, on his maiden speech. It is the ninth that we have heard today. He is to be congratulated on his fortitude in surviving to make the speech. He has had a great deal of experience of local government, particularly in the West Midlands, and of business. Quite rightly, he drew upon that extensive experience for his speech.
It is as well to remind ourselves that the noble Lord is the leader of Sandwell Borough Council. However, his great claim to fame is to be the first member of the Sikh community to become a Peer. I am bound to say that his presence here certainly reminds me of the respect due to the Sikh religion. I am sure that his presence and utterances here will remind many of us of that in the days and years to come.
It is clear that many different minds were concerned in the preparation of the Queen's Speech. That probably accounts for the variability of its style, including some of the verbal infelicities which have been the subject of critical comment. The impression of incoherence, which is featured in the amendment 385 tabled by my noble friend Lord Strathclyde, may spring from the same source, the "too many cooks" syndrome. However, I suspect that the incoherence and lack of vision rises from a greater depth; from some unresolved conflicts and contradictions, typical of the party opposite's state of mind in this post-socialist, new Labour era. I shall give some examples of the contradictions and paradoxes which concern me. Having listened to my noble friend Lord Fraser of Carmyllie, I know that he is equally concerned about these matters.
We are all now well aware of the damaging effects of excessive regulation on business. Regulations have grown substantially in number under this Government, in spite of the efforts, of which I read, by the noble Lord, Lord Haskins, who heads a better regulation task force in the Cabinet Office. Perhaps we can thank the noble Lord for the concern which exists within government and for the commitment on the first page of the Speech to introduce legislation to increase the effectiveness of the power to remove regulatory burdens as part of the Government's drive to address inappropriate and over-complex regulation.
All that sounds fine, but there are other commitments in the Speech which will provide enormous scope for yet more regulation. Even on the first page there is a commendable promise to modernise the utility regulation system. That was referred to by the Minister when opening this debate. I sincerely hope that when that promise is translated into practice we shall not have cause to regret our commendation and that modernisation of the regulatory system means less regulation, not more.
I utter these words of caution about regulations because I once had the experience of sitting on a government deregulation committee. I have to tell your Lordships that as quickly as we eliminated unnecessary, British-made regulations, a tidal wave of similar but grossly inferior regulations flowed in from Brussels. We could get rid of our own home-made regulations. However, there was little we could do about those garbled little monstrosities coming in from the Commission.
It is always a temptation to regulate. I am sure that the Government will find it so in the future as they have in the past. However, once the regulation is in place it is difficult to get rid of it. It has a life of its own. It builds up its own vested interest and clings tenaciously to its existence.
I turn to the subject of transport, which will clearly occupy a great deal of parliamentary time. The Bill sounds as if it will be the Old Testament of this Session. It does not seem to me that the Government have really grasped the essential truth that there is a direct connection between economic growth and growth in traffic. I refer to road traffic, in particular. Every percentage point growth in the economy is matched by a slightly higher percentage growth in traffic.
I hope that the Government will give close attention to the question of what happens to economic growth when traffic growth is artificially suppressed and 386 stifled by tolls and other measures. I do not think that we are enjoying or likely to enjoy such a high rate of growth that we can afford to ignore this issue.
As my noble friend Lord Crickhowell knows—I am glad to see him in his place—I once had some responsibility for roads in Wales. We never found an adequate answer to costly congestion and well-justified genuine industrial and commercial needs that did not involve major road improvements or substantial new building. Most of our capital works were in response to pressing existing need or imminent anticipation of it. And of course it is undeniable that new roads bring prosperity in their train. I fear the worst if we do not build new roads to meet genuine needs.
I want to say a brief word on devolution. Would it be wrong to say that the Government have lost none of their enthusiasm for devolution outside Scotland and Wales? It would seem to be so. There is a clear commitment in the Queen's Speech to,making devolution in Scotland and Wales work".But there appeared to be an unwritten implication that there is some way to go before the measures of devolution already granted are seen and proven to be of such worth and value as to be beyond doubt and unquestionably right.
There are problems ahead for the Scottish Parliament and the National Assembly for Wales, not least in the financial field. The Welsh Assembly in particular is still not at all clear about how it will be able to take full advantage of the Objective One status that has been gained for a substantial part of the country. In addition, Wales is governed in the Assembly by a minority Labour government. which will come under increasing threat from Plaid Cymru et al as time passes and the Labour Party's pleas for an inclusive approach to politics and government wear ever thinner.
There appears to be an argument currently within the Labour Party in Wales about the nature of devolution itself. Is it static or dynamic, a settled position or a developing process? I am a pragmatist in these matters and my real concern is whether the people of Wales will be better or worse off under the devolutionary system. Will they be gainers or losers? That is the question. It is early days, of course, and no one can give a credible answer as yet. But the question will remain and be asked time and again. If there is no satisfactory answer, if the Welsh are not doing better under the devolution system than before, then the mad bark of separatism will be heard outside the gate.
Against that background, against the rightful apathy of so many English regions and the disarray of the current London metropolitan scene, one cannot but marvel at the Government's continuing faith in what the Speech describes as,the process of decentralising Government in the interests of all the people".Decentralisation in practice under this Government seems to mean more interference from the centre, but I am sure the Government will say that that is a passing phase. One cannot but wonder what the effect of the new arrangements will be on the new forms of local 387 government proposed for the future. Will the mayoral-cabinet system really be more innovative and accountable to electors, or more amenable to central direction and control?
We have heard often that there are 28 measures in the Speech, and it is indeed a substantial programme for a Session, possibly rather more than Parliament can conveniently cope with. I have no consolation to offer the noble Lord the Captain of the Gentlemen at Arms except to remind him of a saying I heard from the mouth of the noble and learned Lord, Lord Hailsham of St Marylebone, that nothing discredits a government more than failure to get their legislation. I am sure the point will not be lost on the noble Lord the Chief Whip.
§ 7.4 p.m.
§ Lord Rix
My Lords, autumn has brought a windfall of reports on services and opportunities for people with learning disabilities: Facing the Facts from the Department of Health; Building Expectations—Three years on from the Foundation for People with Learning Disabilities; and An Ordinary Home from the Local Government Association. And this morning I had the pleasure of chairing a conference on London's Learning Disability Strategy at the Barbican. A common theme, which runs also through the Health Secretary's announcement of a strategic review of learning disability services, is the need for joined up government at central and local level. In the all too joined up days of the old mental handicap hospitals, such slender rights as might be enjoyed by all came from the same source—or were generally denied, backed by that same source. Today, with a better life in the community, our fellow citizens with learning disabilities can benefit from a whole range of separate departmental policies affected by the gracious Speech.
I have had some difficulty selecting my day and my target, as select I must, though loss of voice and antibiotics until last night, and a fund-raising dinner for MENCAP tomorrow rather limited my choice. I trust your Lordships will forgive my occasional lapse into lateral thinking.
I begin by saying how delighted I am that Ministers are to look at learning disability support and opportunities across the breadth of Whitehall—education, healthcare, social care, transport, housing, employment, social security, civil rights, protection against crime, access to justice, and so on ad infinitum. I intend to speak on the broad issue of social inclusion, not focusing on the needs of people with learning disabilities but rather on the rights that should be conferred upon them as upon all citizens.
The primary right of any citizen must be to be valued and respected as an individual first and foremost. A necessary corollary is the right to protection from discrimination. We have seen much progress by the Government to bringing people with learning disabilities within their vision of a more cohesive society. We have seen sterling work in setting up the Disability Rights Commission aimed at eliminating the raw, direct discrimination faced, generally day by 388 day, by people with learning disabilities, and the more latent but equally pernicious forms of discrimination experienced through lack of access to a range of goods and services. I wish the commission every success in its first year. I am confident that it will deliver results under the experienced chair of Bert Massie, formerly of RADAR.
I welcome also the commitment in the gracious Speech to continue to build upon the work of the commission and in particular to extend civil rights to disabled children in education. At present disabled children have the protection of the law against discrimination while shopping or visiting the cinema but not while in school where they should be spending most of the week. It is abundantly clear that that situation should be rectified at the earliest possible opportunity.
For those starting out in life, the right to an appropriate education is paramount. I fully support the right of parents of children to have a genuine choice in education and look forward to working with government to ensure that amendments to the statutory framework for inclusion proposed in the special education Bill strengthen the rights of children and their families.
The right to an appropriate education should not be confined to children alone. On many occasions this House has heard government talk of the primacy of life-long learning, making the most of life, throughout life, developing skills, engaging in work-based training and extending one's capabilities. I am proud to be Chancellor of the University of East London which boasts over 70 per cent of mature students studying particularly in the faculties of science, business and engineering. We have seen those life-long learning aims reflected in the gracious Speech through the announcement of legislation to reform post-16 education and training. I fully support any expansion that that may bring in vocational and non-vocational opportunities for adults with learning disabilities. Both are important for economic and social gains. Provision is currently patchy and quality varies enormously.
On a personal note, I look forward to the forthcoming debates because I feel rather well qualified in the field of lifelong learning from actor to actor/manager, to writer, to secretary-general, chairman and president of Mencap, and now a Member of your Lordships' House. Indeed, I look forward to many more incarnations to come, although "bent old age with silent foot" may be something of a determining factor.
It is also fundamental to address the education and welfare rights of those who are particularly deprived of opportunity. Young people leaving local authority care often face multiple barriers to accessing the kind of support they need for a successful start in life. Young people with learning disabilities are three times more likely than other youngsters to be living away from home. I therefore welcome the pledge in the gracious Speech for more help for care leavers who have lacked opportunities because of failures in joint 389 working between local health, housing, social and educational services. It is vital for young disabled people that the transition to adult services is well planned and implemented and that it takes full account of another basic right—the right to express one's own views and have them taken into account.
The proposal to introduce a care standards Bill should help to advance two more important rights—the right to services that support an ordinary life and the right to be protected from harm. The Government have demonstrated a real commitment to improving services for people with learning disabilities and to making independent living a reality. As I noted earlier, the Department of Health has set in train plans to devise a national learning disability strategy to try to eliminate some of the variation and inequalities which exist in local service provision. This is something my colleagues at Mencap have been calling for over a number of years. We are delighted that a proper review now appears to be under way. However, the right to services that support an ordinary life will not be fully realised until charging structures for non-residential services are made more equitable right across the country.
In the care standards Bill I warmly welcome the introduction of a new registration and inspection framework which, while long overdue, should make a real difference to the safety and protection of people with learning disabilities who often live in situations where they are vulnerable to abuse. The scope of inspection will be broadened to include the well-being of individuals. I look forward to a future of improved service quality, filling in the gaps in what was previously an incomplete and a patchy regulatory framework.
However, I am disappointed that the Government have chosen to omit one of the key services from the new framework; namely, day services. Abuse is not confined to residential settings and the Government cannot ignore the right to protection which should be afforded to people who regularly use day services. The Barbican conference this morning was entitled, "From words into action". I trust that noble Lords are conscious that virtue is not a matter of honourable intentions but of sound achievements. We should remember the little boy who ordered jelly at a party but left it on a plate, saying to the hostess, "I do like jelly but not to eat."
I hope that my brief comments today reflect my support for the Government's attempts truly to join up rights and services for people with learning disabilities. As we look forward to the Human Rights Act coming into force in British law, rights cannot be viewed as an isolated concept but must be integral to delivering a difference and to empowering members of our society who have hitherto had fundamental rights compromised or denied.
§ 7.13 p.m.
§ Lord Haskel
My Lords, noble Lords may remember that when my noble friend Lord Bragg was seconding the Motion for the humble Address, he invited us to: 390Go north and see the gutted fortresses of what once were great citadels of old success".—[Official Report, 17/11/99; col. 11]That was very nicely put. My noble friend was speaking of the way that industry has changed. He was speaking of the way that factories were built on the old certainties: the certainties of capital investment and tried equipment; on the well-tried ways of bringing products and services to market; and on the certainties of the old financial systems. But those factories became citadels to past success because our certainties became doubts. As the noble Lord, Lord Bagri, said in his excellent maiden speech, change entered our lives. Instead of investing in equipment, we had to invest in brain power. We thought we knew how to bring products to market. Then along came e-commerce to change all that. My noble friend Lady Lockwood described that very well.
We thought we knew how to cost and price our products and services. Then along came an era of low inflation and single currencies. We thought that there would be continuity in our basic financial markets, but along came NASDAQ with a 24-hour screen-based financial market; and who knows what the result of that will be. These are the tides that swamped our old industries, and as my noble friend Lord Bragg pointed out, they could just as easily swamp our new industries.
Such basic changes are unsettling. But what is particularly unsettling is the increasingly rapid rate at which they are taking place. The speed at which ideas and knowledge are translated into real business and wealth has increased enormously. As a result, the speed at which people earn money and the speed at which they lose money has also increased dramatically. I spent 30 years in the textile industry. In my time, it took years to bring a company to the stock market. Today it happens in months.
So what should a government do? How should a government react? I am sorry to see that the noble Lord, Lord Saatchi, is no longer in his place. Perhaps he would react with a further lecture on Karl Marx and Isaiah Berlin, such as he gave us earlier today. However, the rest of us live in the real world.
My noble friend Lord Bragg welcomed the Government's proposals to increase the nation's skills in order to adapt to these changes. I, too, welcome this approach. But a government's ambitions should go much further. I want us to be beneficiaries of these changes, not the victims. The only way to achieve this is to take competition and enterprise seriously, while at the same time creating a fairer society. There is no conflict in this vision of enterprise and fairness going hand in hand. It is not a new vision. Many of us have shared it for years. My noble friend Lord Elder reminded us that John Smith also shared it with us.
Therefore, when the noble Lord, Lord Strathclyde, in his amendment deplores the "lack of vision" in the measures proposed by the Government, I wonder why. To me, the vision is obvious. Perhaps noble Lords opposite have difficulty because they do not believe in the need to prepare and plan for the future. My noble friend Lady Lockwood told us how they certainly 391 believe in this in Humberside and Yorkshire; and, indeed, what they are doing to prepare for it. We believe in preparing for the future.
I say to the noble Lord, Lord Saatchi, that there is so much mention of "modernisation" in the gracious Speech because of the need to prepare and plan for the future. That is why we are talking about "modernisation". If you are happy to leave it to the market to decide who will be the victims and who will be the beneficiaries of change, you do not need vision; but if you are ambitious for the many, not the few, to be beneficiaries of change, vision is required. So what do we need?
The answer is foresight—making the future work for you. Indeed, Foresight is the name of a well thought-out programme to help companies to arrive at a vision of their future. The noble Earl, Lord Selborne, referred to it. The Government and many sectors of business and industry have got together to produce Foresight. The November brief from the CBI about technology and innovation explained it rather well:We live in a world of change. The need to anticipate and prepare for the future is crucial. This is Foresight".To assist noble Lords opposite, I thought it might be helpful if I took them through a quick Foresight exercise. The first stage in the Foresight process is to look at existing plans for the future. My noble friend Lord Sainsbury told us that the economy will be modernised, with Bills on e-commerce and postal services competition. Welfare reform will make it more efficient and will give those on benefits greater security.
The public will be protected with changes to care for children and the elderly. Leasehold laws and the Race Relations Act will contribute to fairness, and so will an efficient transport system. My noble friend Lord Sainsbury told us that there are to be enterprise incentives for managers, together with research and development tax credits. Venture capital funds are to be set up in every region, particularly targeted at small businesses. There are to be scholarships for business people in poor areas to learn new management skills—perhaps potential tenants for the incubator units mentioned by the noble Lord, Lord Gavron.
The e-commerce Bill is admittedly a little late, but it will make Britain an easier place in which to trade electronically. Very importantly, people will be helped to cope with change by extending the New Deal to the over-25s. We shall have a fairer society by regulators for gas, electricity and water being required to promote yet more competition. The planning system and the Financial Services Authority will also have to look after consumers; yet more fairness.
My noble friend Lady Pitkeathley, when moving the humble Address, drew our attention to how some of the Bills mentioned in the gracious Speech which are of particular interest to her will help to create a fairer society. She mentioned welfare reform, race relations and freedom of information. She could also have mentioned how particular attention is to be given to encourage women to play a fuller role in the economy.
392 Earlier this month I had the privilege of attending a Smith Institute seminar at No. 11 Downing Street about how women could play a bigger role in the economy. Here I must declare an interest as chairman of the trustees of the Smith Institute. We were told that many women would like to start their own businesses so that they can balance family and work. As an American delegate put it—rather well, I thought—they will not be frustrated by being between the sticky floor and the glass ceiling. Helping women to start businesses is another good example of combining a fair society with enterprise.
To return to our Foresight exercise, that is the data. The next steps take one through the challenges that we face: the needs, the opportunities and the threats that are out there. This will lead one to the knowledge and resources required for an effective response which, in turn, leads on to a vision of the future. There is excellent work being done by many national Foresight panels dealing with different sectors of business and themes in society. The panels bring together the worlds of business and academia, together with the public and voluntary sectors, to create a pool of knowledge on which we can all draw. They have a vision of the future: the vision is there. I invite noble Lords to share it. I also invite the noble Lord, Lord Strathclyde, to give some encouragement to the Foresight exercise and to withdraw his amendment.
§ 7.23 p.m.
§ Baroness Carnegy of Lour
My Lords, my noble friend Lord Roberts of Conwy has reminded the House of what the Government had to say in the Queen's speech about devolution to Scotland and Wales. The Government are committed to it; and so say all of us. Everything—the social, political and economic future of the Union—depends upon that, the very future of the Union itself.
It is interesting that devolution is raising all kinds of new questions, some anticipated during the passage of the legislation through Parliament, and some not. So far as Scotland is concerned, it is interesting to read in today's press that the Labour Party's National Economic Council has produced an internal paper about the structural implications of devolution. It includes the suggestion—it will be a very interesting suggestion for Scotland—that in the next general election campaign it will be the Secretary of State for Scotland who takes the lead rather than the First Minister of the Scots Parliament.
I want to draw attention to one issue which has only recently begun to arise so far as concerns Scotland. It is an issue of considerable importance, I suggest, to this House because it presents the opportunity for noble Lords and Ministers in this House to play an important part in assisting the smooth operation of devolution to Scotland in particular. It is increasingly clear that when scrutinising Westminster legislation which relates to Scotland, Parliament must identify any proposals in that legislation which impinge on devolved matters and which alter the responsibilities of the Scots Parliament.
393 Having identified those proposals, it seems to me that the Westminster Parliament must ensure that those proposals have been agreed by Ministers of the Scots Parliament, that they have at least been reported to Members of the Scots Parliament and that any implied additional expenditure will in due course be added to Scots Parliament funding. Nothing will threaten the smooth working of devolution to Scotland more than financial arrangements which are perceived, or suspected, to be unfair. It would be divisive indeed for Westminster to impose new responsibilities on the Scots Parliament without paying for them.
In ensuring that Westminster legislation is fair to the Scots Parliament, I believe that this Westminster Parliament, and particularly this House of Lords, with its line-by-line, unguillotined scrutiny, could do much to ensure that legislation here is fair and is seen to be fair. The noble Lord, Lord McIntosh of Haringey, is aware, I think, of the need for this kind of vigilance over Bills. He was on the Government Front Bench during the passage of the Immigration and Asylum Bill through this House. It was a Westminster Bill relating to Scotland, dealing with a matter reserved to Westminster, but of necessity it made changes to the operation of the Scottish courts, to the operation of Scottish local government social work departments; and indeed it amended the Scottish Education Act regarding school meals.
When I asked whether these measures had been agreed by the Scots Parliament, it was clear that the matter was not as yet uppermost in the minds of government Ministers in this House. That is not entirely surprising. Until recently we had a Scottish Minister on the Front Bench: we do not have that any more. The noble Lord, Lord McIntosh, gave me an extremely kind reply. It was in fact, I think, only half a reply but he did what he could, based on the information that he got from his advisers. The noble Lord, Lord Bassam, was also kind enough to promise to write a letter, which I look forward to receiving in due course.
However, it is to the coming Session that we must now look. We are told that 18 of the 28 Bills to be put forward will apply in some way, wholly or in part, to Scotland, as no doubt will a mass of secondary legislation and some Private Members" Bills. Members of another place, especially those from Scottish constituencies, will doubtless be on the lookout for implications for their colleagues in the Scots Parliament. However, I suggest that it will be in this House of Lords, with its line-by-line, unguillotined scrutiny, that the best opportunities will arise.
Those opportunities will enable noble Lords to identify such provisions in a Bill and seek clarification. Government Ministers will be able to come prepared to apprise this House as to which measures affect the responsibilities of the Scots Parliament, what consultations have taken place and what necessary adjustments to Scots Parliament funding are proposed.
394 Vigilance by noble Lords on this matter is all the more important because of the way Westminster and Scottish Executive Ministers are proposing to settle the awkwardnesses of legislation which crosses devolutionary boundaries and the question of who pays for it. We see from Command Paper 4444, published last month by the noble and learned Lord the Lord Chancellor, that there is now a joint ministerial committee chaired by the Prime Minister or his representative, with sub-committees as required, that will have the remit of agreeing these matters and resolving disputes. This document is entitled A Memorandum of Understanding and Supplementary Agreements. It has no legal basis and it has had no public discussion. It is simply what the Ministers at Westminster and the two devolved Parliaments have decided. It tells us on page 10 that although there may be occasions when the joint ministerial committee will wish to make a public statement on the outcome of one of its meetings, its proceedings will usually be confidential.
At some point I hope that this House will debate the document and question Ministers upon it. It contains a number of rather surprising statements, one of which certainly will limit the ability of the Scots Parliament to be enterprising in the way the noble Lord who introduced the debate advocated. In the meantime we must simply note that any new Westminster legislation which impinges on devolved matters will have been discussed and agreed behind the scenes.
This House must, I suggest, see as one of its most important functions now the need to bring parts of Bills agreed behind closed doors into the open so that the Government can be held properly to account as to the way they intend to relate to the Scots Parliament on those particular matters. I believe that there is much noble Lords can do to assist the Government in their commitment to make devolution work. I believe that Ministers will have to do more than they have done up to now. It would be extremely helpful if in his reply to this debate the noble Lord, Lord McIntosh, could undertake to study what I have said—it is not a great speech, but I believe that I am saying something important—and perhaps draw the attention of his ministerial colleagues to it so that when we discuss the Bills it will be possible for this House to sort out the matters and so contribute to devolution.
§ 7.33 p.m.
§ Lord Lofthouse of Pontefract
My Lords, I welcome the commitment within the gracious Speech that the Government will continue to work with others to promote economic reform in Europe and will work for more open markets and greater economic growth and job creation.
I am sure that I have no need to remind the House that in 1992 the Conservative government took a decision to diversify the country's fuel supply for energy generation and to close down the British coal-mining industry. As recently as Wednesday 10th November 1999, a debate was held in the other place in which Members of Parliament with coal-mining interests warned that the UK coal industry was now 395 "at a crossroads" and added that the future existence of the English coalfields is threatened, and that critical mass may well be lost.
Although the UK coal industry is the most efficient in Europe and has reduced prices to consumers dramatically since privatisation, it is still faced with unfair competition from imported coals, many subsidised, alternative fuels and, of course, the influence of the strong pound.
The Government promised relief from the "dash for gas" by imposing a stricter consents policy on all gas-fired power station applications, at least until the promised review of electricity trading arrangements had been introduced and had had a chance to influence the situation.
During the debate to which I have referred, the Minister of State at the Department of Trade and Industry, Helen Liddell, advised MPs that the Government would not walk away from the mining communities and that the stricter consents policy already in place had resulted in the temporary postponement of new gas-fired plants with a coal equivalent of some 10 million tonnes. This, the Minister suggested, was "help indeed for the coal industry"! Although I recognise the Minister's support for the coal industry, what did not form part of that ministerial statement was the fact that some 2,000 MW of gas-fired generation had been sanctioned since the stricter consents policy was introduced. That is equivalent to 5 million tonnes of coal per annum, a figure that negates 50 per cent of the "savings" mentioned by the Minister.
During that debate mention was made of the French Interconnector; the cross-Channel submarine power transmission system that was originally constructed as a two-way installation to enable surplus power from the UK and France to be redirected as demand dictated. However, since this link was commissioned it has been used exclusively by the French and has operated in their favour to the tune of some 7 million tonnes of coal equivalent each year. This is comparable with the total output from four major UK collieries! Although I know that the Minister, Mrs Liddell, is keen to correct the position, it is a situation that should never have been allowed to develop, and one that must be regulated by government action now and, I suggest, without further delay. I am aware that the matter is covered by treaty, but that should not inhibit action.
Electricity transmission between member states of the European Union has now been liberalised and there should be no restrictions on exchange transactions. Recent examples of French intransigence may not warrant a trade war, but the situation that allows Electricity de France to enjoy a virtual monopoly over the interconnector should be tolerated no longer.
It may be helpful if I draw the attention of your Lordships to a situation that arose from the rundown, and the threatened further rundown, of the coal industry. The Association of British Mining 396 Equipment Companies represents the interests of over 44 of the UK's major companies producing underground mining equipment. They employ 8,000 people and have an annual turnover of £550 million. As equipment manufacturers, they owe their success and international reputation for technical excellence to the continuous association and supply of equipment into the British coal-mining industry. Because of their long-standing relationship, the British mining equipment industry has designed, developed and manufactured products which are now exported to every coal-producing country in the world. It has contributed over £2 billion to the UK balance of trade in the past five years and continues to export a growing £300 million-worth of equipment each year.
As those companies develop further their export trade, there are compelling arguments in favour of manufacturing equipment overseas in the countries which they supply. They already manufacture in South Africa, Australia and the USA where there are mature, expanding coal industries. They do not manufacture in countries such as India and China, or in the Pacific Rim, eastern Europe and Russia. However, they are aware that the mining industries there are less sophisticated and therefore offer huge commercial opportunities. Although they are under constant pressure to produce an indigenous content, it makes better sense to stay in the UK. Control of design in the developing world is difficult and it is almost impossible to protect intellectual property.
In Britain, we enjoy the lowest manufacturing costs in western Europe. There may be advantageous variations between costs in the less developed parts of the world and the UK, but they are more than offset by the quality of manufacture, the available skill base and access to technical development and support programmes. If, on the other hand, the British coal industry is reduced yet again, and demand for equipment falls below current levels, your Lordships will appreciate that it would weaken considerably the case for maintaining a UK manufacture. Ultimately, it would leave them no option other than to move their manufacturing base overseas.
The Association of British Mining Equipment Companies has shown itself in recent years to be flexible and responsive. Member companies have reacted swiftly and positively to the radical changes within the industry. To meet the requirements of the restructured industry, there have been mergers, acquisitions, diversification and development of new products. Such moves have secured their individual positions and, at the same time, guaranteed continued technical support and supply to the UK coal industry in its current form.
If they are to operate effectively as world-class manufacturers of mining equipment, it is absolutely crucial that they maintain a substantial home-based industry. I say again: they need a clear and explicit strategy to meet the UK's future energy requirements, inclusive of coal, which, in essence, is mandatory. The ability to forecast rationally is as crucial to the future of this sector as to any other. That industry is at the crossroads yet again. Member companies are 397 concerned that the Government have taken the narrow view and that they have failed to recognise the strategic value of the coal industry as a whole. At present, the equipment manufacturers feel that the UK coal industry has no certainty as to its future. I can well understand that.
That prevents those equipment manufacturers forming their own strategic plan. They cannot continue as global suppliers from a UK base without a determined future. if they are forced into moving manufacture overseas, the immediate outcome would be: a loss of thousands of manufacturing jobs in the UK equipment and engineering sections; a minimum loss to the balance of trade from equipment sales over the next five years of more than £2 billion; and a further drain of irreplaceable technical and engineering design skills.
In conclusion, I want to make the following observations concerning the fiscal aspects of UK coal. It was evident that MPs believe that the major player in the current debate, and possible beneficiary from alleged profits, is the only one on the field. This is not so. It must be clearly understood that the UK coal producers stand together as an integrated industry.
The Minister believes that it is unjust for pressure to be placed on the Government to pick up coal industry costs when the private sector pockets the profits. I can understand that. But does that mean that if it were in financial difficulties, subsidies would be appropriate? Without profit, how would a company like RJB be able to invest £350 million in new equipment and £1 billion in accessing and developing new coal reserves?
An integrated industry can have many parts, and the UK coal industry is no exception. It is true that it has a major player which provides, on average, 65 per cent of the total UK coal production, but the companies contributing the remaining 35 per cent are not insignificant, and without their support the current situation would he untenable.
In the past four years, RJB Mining has produced some 130 million tonnes of coal, and not one ounce of that has received outside support. During the same period, the remaining companies engaged in coal production have added a further 63 million tonnes—a not inconsiderable volume, your Lordships will agree—again, without subsidy of any kind. Your Lordships will appreciate that none of this production can be achieved and sustained unless a profit element is present; otherwise, the consequences are self-evident. In fact, some 10 medium and small producers have ceased trading since privatisation.
I am aware of the time and that other noble Lords want to speak, but I must emphasise that a way must be found to assist the coal industry to maintain even its present size. Although it was largely wiped out by the previous government, we still have a small coal industry which is essential to this country's needs. I emphasise that other private industries have been assisted to maintain their business and jobs. I hope that in replying to the debate my noble friend will be able to give me some assurance and confirm that the Government are sympathetic to the current needs of 398 the coal-mining industry, and that they believe that it should receive protection in order to maintain it at its present size.
§ 7.47 p.m.
§ Baroness Barker
My Lords, I am very pleased to be taking part in this debate, in which there have been so many outstanding maiden speeches. I should like particularly to congratulate the noble Baroness, Lady Wilkins, on her eloquent reminder of the rights of disabled people to exercise independence and choice in the same way as the rest of us. I should also like to congratulate warmly the noble Lord, Lord King, on his contribution. He touched on a favourite theme of mine—the need for proper partnership between government at all levels and the voluntary sector. I look forward to having many discussions with him about that in the future. I should also like to echo the sentiments of the noble Lord, Lord Rix, when he spoke particularly about the needs of people with learning difficulties.
This has been a somewhat strange debate. Earlier, we had some strange references to Karl Marx and to Isaiah Berlin; at times I feared that before the night was over we might have worked our way through to Irving Berlin.
Over the past few days, many Peers have found the gracious Speech a curate's egg. Contributions from a range of different speakers have all arrived at the conclusion that the legislative programme set before us is good in parts and awful in others. I share that view. In joining with the distinguished previous speakers, I want to concentrate on just one of the social aspects of the legislative programme in today's debate; namely, the care standards Bill.
It has long been recognised that there are good and bad residential homes, and that good and bad homes exist in each of the different sectors—private, public and voluntary. A Bill which aims to raise and implement standards across all sectors and to eradicate bad practice wherever it occurs will be welcomed by all those who share a concern for children, disabled people and older people who need care in a residential setting.
If it is ultimately the case when the details of the Bill become known, the approach which the Government are being urged to take of having standards based upon principles will also be welcome. The paper by the Centre for Policy on Ageing, Fit for the Future, advocates the setting of standards based on the principles of dignity, privacy, choice and respect. When the consultation period for that paper ends in December, I strongly urge the Government not to shy away from the relatively complex task of setting and monitoring qualitative standards based upon those principles. In the past, residential care, like healthcare, has often been assessed largely in terms of the physical state of buildings. That is a poor method of analysis because a home, wherever it is, is more than bricks and mortar. The real focus should be the quality of service and the treatment which individuals experience, regardless of the surroundings.
399 While I welcome the care standards Bill, there are a number of reservations about the Bill to which I believe the Government's attention should be drawn. In doing so, I should point out that much of what I have to say is based upon my experience of working with local voluntary organisations and, in particular, organisations which have been involved in lay assessor schemes.
Clearly, the main aim of the Bill is to eradicate abuse within residential settings and to dispense with providers of bad care. Laudable as that is, there is also an opportunity before us to enable providers of services which are not bad, merely mediocre, to learn and to develop good practice. Definitions of what is good practice and best practice change over time. Therefore, when the Government determine what care standards are, I urge them not only to make them explicit but to make sure that they are regularly and frequently updated.
No one, least of all the majority of care home owners, could or would argue that independent inspection is anything other than desirable. However, if inspections are carried out infrequently by remote, regional inspectors, the work may turn out to be simply reactive. Experience of lay assessor schemes shows that much constructive and preventative work can be done when inspection is carried out within a context of trust, familiarity and respect. Furthermore, more frequent, but not, I stress, regular, inspection can be more revealing because residents feel more able to be open about what their life is like in the place where they live. Let us not forget that we are talking about people's homes. If any one of us had a problem in our home, I doubt that we would choose to discuss it in detail with a complete stranger. So why should they?
In addition, home owners and staff, even those who initially are reluctant to be involved in inspections, can come to view inspection not as a major threat but as a constructive means of addressing issues and problems. But they will do so only if they have the time and if they meet inspectors frequently enough to build a relationship of trust.
The Government's proposal to implement a training qualification for home owners is to be welcomed, as is the setting up of a general social care council and the expressed intention to raise standards of training and qualification throughout the field of care and social work. However, within the residential care economy there must be sufficient resources—by resources I mean both time and money—to allow ongoing training of all staff to become a basic feature of any care home. Training costs money; good training costs a lot. And I hope that in the implementation of this Bill the Government will take that into account and consider provision of a care standards training fund. We all want the end result of training to be significantly higher standards of care, not just faded diplomas hanging on the office walls of senior staff.
Implementation of new care standards will not require primary legislation. I would strongly urge the Government not to delay the implementation of this 400 Bill. Vulnerable people in care homes do not have the time to wait for improved services and for protection. There is no reason why the implementation of this Bill should be delayed and I strongly urge the Government not to do so.
Finally, the passing of this proposed legislation will do much to reduce the anxiety of people who enter residential care and their relatives. The knowledge that one's new home will be safe and that one's dignity will be respected will be an enormous relief. However, as long as the Government give no response to the findings of the Royal Commission on Long-term Care, the biggest fear of many disabled and older people remains. Being confident that the quality of care is good is little consolation if one's ability to afford it is in doubt. The gracious Speech contains nothing on the future of long-term care and, therefore, I conclude that it is well and truly a curate's egg.
§ 7.56 p.m.
§ The Earl of Longford
My Lords, the noble Baroness, Lady Barker, made a number of important points based on what was evidently deep personal experience. The noble Baroness will forgive me if I approach the matter from a different angle.
I want to put one fundamental question to the Government. It is one that cannot be put too often, but I do not expect a positive answer this evening. Is the Labour Party still committed to some redistribution of wealth between the rich and the poor? There is no one to whom I enjoy listening more on that subject than my noble friend who is to reply. He is a Treasury spokesman. In my time I was a Treasury spokesman for six years. We were not free agents; we could not say everything we wanted to say. My noble friend is restricted but I know that he will do the best he possibly can in the circumstances.
Is the Labour Party still committed to any substantial redistribution of wealth or, possibly a better word, income between the rich and the poor? Recently there was an important article in The Times which stated that the present Chancellor of the Exchequer is the best since Nigel Lawson. The noble Lord, Lord Lawson, was my last pupil at Oxford when I went back as a don. I do not suppose he recognises that fact. I do not want to take all the credit for his achievements, but I am very pleased that he was my pupil and that for a few moments he was in my hands. However, our present Chancellor has been compared to him in a very favourable sense. We Labour men must ask ourselves whether we are pleased that our Chancellor of the Exchequer is more or less identical in some eyes to the great Conservative Chancellor of the Exchequer. I put the original question: is there any fundamental difference today between Labour economic policy, however intelligently interpreted, and Conservative economic policy?
When I became a socialist over 63 years ago, having worked in the Conservative research department for a couple of years, I announced boldly, "I am a socialist because I am a Christian." That is what I felt at the time. I am still a Christian. I am not sure whether 401 socialism is considered a relevant subject today, so I leave that aside for the moment. However, my approach is not quite the same today.
Recently I read a most interesting article in the Spectator by Charles Moore, the gifted young editor. He is a very Conservative type who says he is a Thatcherite. He argued that Christianity in itself—religious belief—does not lead directly to any political conclusions. I am inclined to agree. It is possible to be a good man and a good Christian and to be a Conservative. I hope that I am not being patronising if I say that. As to the Liberals, the noble Earl, Lord Russell, can perhaps pronounce on the topic. After all, the greatest philosopher of our period was his father. I shall say no more. I could get into deep complications.
It is possible to be a Conservative, a good Christian and a good and sensible man. I did not think so at one time. In the 1930s we did not think so, but I am bound to say that I think so now. If you are a Christian, you presumably think a good deal about the poor. "Look after the poor, the maimed, the lame and the blind, and you shall be blessed". The Conservative view is that the poor benefit more when that party is in government. Years ago, when I worked in the Conservative research department, a famous leading article in The Times said, "Wealth is like heat. When it is unequally distributed, it performs what the physicists call work." That is one view which is still held. When people make large fortunes, inequality, as we saw in the Thatcherite period, goes up and up. Society becomes more and more unequal and, it can be argued, richer and richer. So that is one argument.
However, you cannot call yourself Labour and believe that sort of nonsense. You have to believe that Labour concentrates on social justice. That is surely bound to mean some increase of equality between the rich and the poor. For the past week or two I have been trying to discover how things have moved in that direction since we have been in office. I do not think anyone can say at the moment. At any rate, during the Thatcherite years things moved very much the other way. So I hope that we are setting out to reverse the trend.
There is a problem. I am old Labour in the sense that I admire Clem Attlee more than any British politician. Of course, De Valera remains my hero in Ireland, but that is a slightly different question. Clem Attlee is my idea of a great British statesman. But he was what is now called old Labour. What he would have been today, who can tell? In my eyes, and speaking as one of the members of that world, old Labour lacked one thing. It did not encourage business enough. The present Government, new Labour, deserve full credit—I give them full credit—for encouraging business and providing more of an incentive for business. We must 'welcome that. When all is said and done, do we still at the same time believe in any redistribution of wealth? The matter is as simple as that.
§ 8.3 p.m.
The Viscount of Oxfuird
My Lords, following the noble Earl, Lord Longford, is a test. I feel that that was 402 perhaps his third maiden speech. He has ever been erudite and comfortable in your Lordships' Chamber and there is no reason to change that. Perhaps modernisation is not something which he particularly enjoys, but we benefit, as always, from his presence.
I would like to make a very short intervention to the economic part of this important debate from the perspective of the engineering manufacturing community within which I have spent most of my working life, mainly as an exporter. The first point that I make is to acknowledge that, even after more than two years of Labour Government, our economy is still in pretty good shape. It would be churlish of us on this side of the House not to acknowledge that. I have to say that for those of my generation who lived through a number of post-war Labour administrations this has come as an immense relief. It may have something to do with inheritance.
The prime purpose of my intervention is to make a plea for that poor old fellow, the exporter, who has been so strongly affected by interest rates and the strength or otherwise of sterling. I personally do not agree with the City and others who have praised the decision of the Chancellor of the Exchequer to hand over responsibility for decisions on interest rates to the Bank of England. I actually see that as a fudge to avoid responsibility for the political fall-out that arises from any interest rate change, either up or down. Like my noble friend Lord Boardman, I believe that so many of the consequences of the decisions that result from interest rate changes affect the whole of our community that the Government should not duck the issue in this important area.
As we saw in the newspapers at the weekend, to my great delight, the manufacturing sector is not doing too badly at the moment. According to a new survey by KPMG Consulting, manufacturing productivity is rising sharply, easily outstripping the increase in the service sector and in competitor countries. That is excellent news and a real credit to the sector.
Another study, published jointly by the Engineering and Marine Training Authority and the Engineering Employers Federation, indicates that our leading engineering companies—large, medium and small—are making real investment in the future by investing in the training of their staff. The People Skills Scoreboard, published by them last month, shows that there is a significant correlation between commitment to the objectives of the Investors in People standard and business success. I suspect that part of the recent success of the manufacturing sector is associated with the higher than average commitment of the manufacturing sector to the Investors in People standard.
Let me conclude with a final plea for our British exporters. I particularly noted the words of the noble Lord, Lord Lofthouse, on the mining industry. I spent some time in India. I spent a long time in Calcutta and even in Ranchi, which is north of Calcutta. There we had great success supplying the Indian mining industry with hydraulic pit props. Our success was based on the 403 fact that we could show them machinery operating in British mines and doing a really first-rate job. You cannot beat that for export promotion.
Given the current state of our economy, there is little doubt that interest rates are set to rise. The terms of reference given to the committee make that almost inevitable. So given that inescapable fact, may I plead with the Government to do everything else that is still within their control to help exporters? There are other parameters that they can still apply—perhaps a review of capital allowances; that would do a bit to help.
I thank your Lordships for your attention. Long may our manufacturing industry in the UK continue to flourish.
§ 8.10 p.m.
§ Lord Shore of Stepney
My Lords, I shall listen with great interest to the Minister's response to the speech of my noble friend Lord Longford. However, that is not the subject of my remarks tonight. I shall direct my comments to the problem identified by the noble Viscount, Lord Oxfuird, who has just spoken. I am concerned about our exports and the state of our manufacturing industry. That was a point made by my noble friend Lord King of West Bromwich in his excellent maiden speech, and by my noble friend Lord Lofthouse.
The present state of the economy is a puzzle. Two entirely contradictory trends can be identified. We have a thriving and booming service economy of an extent, force and vigour that I have never seen before. Inevitably, that boom is focused on London and the south-east. While that is forging ahead, at the same time there is in fact a decline in the Midlands and the north of England. A recession has gripped those areas. Despite recent figures showing some increase in productivity, manufacturing industry in the north is suffering a major recession. That has coincided with expansion in the south. In terms of economic management, that is almost a unique problem.
The situation has serious implications for the Government's economic strategy which was elegantly and helpfully described by my noble friend on the Front Bench who opened the debate today. Even more helpfully, that strategy has been elaborated not only by the Chancellor's pre-Budget report on 9th November, but also in the Mais Lecture on 19th October. In the lecture and the pre-Budget report, the Chancellor set out the whole strategy of the Government, an unusual step for an administration in mid term. The strategy can be broken down into four themes: first, stability is the principal means to the end, and above all, price stability and virtually a balanced Budget; secondly, the need for an active labour market, encouraging more education and training, retraining and so forth; thirdly, measures to raise productivity; and fourthly, what I interpreted as the first signs of a recognition that a form of voluntary pay policy is necessary if we want to reach the Chancellor's twin goals. He restated those goals in the Mais Lecture and subsequently in other speeches: a 404 return to full employment—not the present low level of unemployment but something more substantial—alongside a competitive economy.
I shall use my short time to offer an opinion on this strategy and to ask those questions that ought to be asked about how it is working. I have mentioned four points. The Chancellor's second point concerned an active labour market and his fourth point concerned new forms of genuine incomes restraint—not necessarily an old-fashioned incomes policy but the more interesting and innovative proposed share distribution scheme which may well be an alternative method of rewarding workers without increasing economic pressures to the point where they become inflationary. I believe that those two parts of the Chancellor's strategy are excellent.
However, what of the other two points? The word "stability" has become something of a mantra. Is that really consistent with raising productivity; namely, fulfilling both the Chancellor's first and third policy principles? On the whole, I believe that the evidence shows that it is not. In trying to achieve stability, we have given too much attention to controlling inflation. In my view, the Chancellor has wrongly abandoned his control over interest rate policy. He has handed it over to the Bank of England and, even worse, has given it and the Monetary Policy Committee very restrictive terms of reference. Their guiding purpose and aim must be to achieve price stability up to 2.5 per cent inflation a year.
Of course, the Monetary Policy Committee is properly and dutifully carrying out the Chancellor's mandate. But is it surprising that we have interest rates that are substantially higher than those in many other competing centres? We know very well that on the continent of Europe interest rates are significantly lower. I refer here to short-term interest rates. Long-term rates do not present a serious problem and are almost ad idem with those of our continental neighbours, but those of the short term are between 2.5 and 3 per cent higher than those available in Europe.
Over the past decade or so we have seen almost unbelievably massive movements of short-term capital, with people trying to secure a small margin here and there with overnight shifts of money. Billions of pounds flood in and out. And then what happens? Up goes the exchange rate, of course. Since the beginning of 1997, it has risen to an extent that is now really damaging—this is the gravamen of my argument. The exchange rate has risen by something of the order of 24 per cent against the deutschmark and now against the euro. That is an unbelievable figure. Although I agree that some 10 per cent of that rise took place before May 1997 when my honourable and right honourable friends took office, they have not since checked it in any way. Indeed, the decision to hand over interest rate policy matters to the Bank of England with restricted terms of reference has allowed a further acceleration of the exchange rate and a consequent loss of competitiveness.
405 What is the point of talking about a platform of stability for industry? What about a platform of stability for our exporters? They have been undermined in the domestic market and in the export market by a 24 per cent rise in the exchange rate in two years. That is incredible and has never happened before. The Government must stop being complacent about it, or frankly they will bankrupt large sections of industry and devastate large areas of this country.
I shall turn now to the reasons why I am so worried about this situation. The evidence is overwhelming and is more than the huge rise in the exchange rate. Investment, which is the crux of making our industry more competitive and successful in the medium term, is falling in the manufacturing sector. It is not even static. The figures published yesterday showed that third-quarter investment in manufacturing industry is 16 per cent down in volume over the third quarter of last year, and rather over 20 per cent over the two-year period. That is terribly damaging.
I am sure that I can also say almost without contradiction that this year we shall have chalked up the largest trade deficit in manufactured goods and the general visible balance that we have had in the whole of our history. Fortunately we can get away with that situation because of the buoyancy of the service sector and other invisible earnings. However, we have beaten the all-time record for a trade deficit—£24 billion in manufactured goods is now a reasonable estimate for this year.
I say to my noble friend who will reply from the Front Bench that I hope that the Government will think much more deeply about the problems of this sector. I know that it is not easy to manage the economy. Heaven knows, we have all had goes at it and have not been all that successful. But do not ignore the manufacturing sector. Please try to ensure that the terms of reference of the Bank of England are changed so that they can take account of exchange rate competitiveness, or surely the Chancellor will have to think up a whole new package of measures to rescue our manufacturing industry from its present dilemma. I give way to my noble friend.
§ Lord Lea of Crondall
My Lords, I thank my noble friend for allowing me to intervene before he sits down. His analysis was impeccable. He set out the problem of our rates being well out of line with those in the rest of Europe and of "hot money" coming to London and having these effects. I was waiting for a possible conversion on the road to Damascus. Perhaps that was too much to hope for. In parenthesis I would mention the red herring of the Bank of England and the European Bank. But is not the essential conclusion that most people would reach from hearing this impeccable analysis that it would be much better for our economy, given hot money and so forth, if we had an arrangement to bring interest rates much more into line with those in the rest of European Union?
§ Lord Shore of Stepney
My Lords, I rather expected my noble friend to make that point. It was made to some extent in the speech of the noble Lord, Lord 406 Taverne, whose answer to the whole problem was for us to go plunging into joining the single currency so that we could enjoy the benefit of somewhat reduced interest rates. What a nonsense that is when you think about it. The nonsense is that if we have, as the Chancellor made plain in his Mais Lecture, an annual productivity gap against France and Germany of something like 1.2 to 1.4 per cent per annum, being in that situation in a few years' time—before we have raised our competitiveness to equal performance with France and Germany—would simply be a recipe for disaster.
§ 8.22 p.m.
§ Lord Cavendish of Furness
My Lords, it is always stimulating to hear the noble Lord, Lord Shore of Stepney. I was not disappointed this time.
The gracious Speech opens with the assertion that the Government seek to modernise the country and its institutions. Sadly, I find little or nothing in what follows, or in what I have heard from the Minister, to suggest that the Government intend to do anything of the kind. The purpose of my intervention is to focus on some of the institutions that could be the target for reform and to demonstrate where and how they most conspicuously fail the citizen and the taxpayer.
Recent history points to the fact that there is not much argument between political parties as to the approximate volume of money needed to fund front-line services. Thus far, one has identified the consensus spoken of by the noble Earl, Lord Longford. Perhaps more accurately, there is an unspoken understanding in the modern world that, beyond a certain level of taxation, the Exchequer receipts begin to diminish and public expenditure is sensibly planned with that in mind.
There is, however, a widely held assumption, shared by the Government and by the noble Lord, Lord Taverne, speaking for the Liberal Democrats, that there exists an immutable relationship between the quality of a public service and its cost. Of course, as the vastly improved performance of industries coming out of state control has shown again and again, that assumption is wrong. Furthermore, in recent years the private sector has had to improve its performance in terms of the deal it offers to the shareholder, the customer and the workforce.
Since I remain cynical about the Government's real intentions, I might add that those of us who operate in the medium to small sector of industry have also had to shoulder a significant burden in terms of largely needless regulation. If we can do more with less, if we can make year-on-year gains through efficiency, I simply cannot understand why we have such low expectations of government, or why Ministers have such low expectations of themselves and their departments.
In the delivery of all public services, notwithstanding some obvious heroic successes, there are grotesque shortcomings, which could only begin to be addressed by a radicalism which I find wholly and utterly absent from the gracious Speech.
407 If, as I believe, the political process in this country is becoming to a large extent discredited, and politicians are held in contempt, a significant contributory factor must be the degradation and decay of the institutions of government. If that is true, then Ministers past and present have to accept responsibility. It is Ministers, not officials, who cause these problems, and it is for Ministers to solve them.
Let us look at one area of national life. It must occur to any thoughtful person, as it has to a number of speakers in this debate, that it is a strange thing to be sure that, by any measurement, Britain is poorer than many, if not most, other industrial nations. The noble Baroness, Lady Sharp of Guildford, analysed with skill and authority the reasons for under-performance, although I reach rather different conclusions.
Of the reasons advanced for this sorry state of affairs, I find the most compelling one to be that we are less well educated. Why should that be so? Although I once served for some time on an LEA, I am not currently involved with education beyond the experience I have as an employer. I can tell the noble Lord, Lord Shore, that I am at present happily bucking the trend as a northern industrialist and still prospering in many markets around the world. From that perspective, it is clear to me that the education establishment fails comprehensively to understand how this country earns its keep.
Could it not at last be faced up to that providing good education for our young people, along with the welfare and health services that we all acknowledge are important, involves hugely complex and subtle executive functions? It requires financial and strategic sophistication which it seems to me is wholly at odds with current public sector management practice.
Yes, the institutions of government need radical reform, but what are we getting? What is the great modernising "big idea"? Sticking with education, we are getting a "learning and skills council". It will need to be better by several magnitudes than it sounds.
One sentence in the Queen's Speech caught my eye as being potentially significant; namely, that a Bill will be brought forward,to introduce the latest accounting methods to improve value for money in Whitehall and generate more investment in public infrastructure and front line services".If by "latest accounting methods" the Government mean that the Treasury is to learn the distinction between revenue and capital, the measure will deserve everyone's support.
I know that it is not new to joke about the absence of numeracy within the Treasury; but it has become a tired joke when a government institution speaks a financial language that no one else either speaks or understands. It may well be that Treasury folk are cleverer than anyone else on earth. But much good that does us if they bring us no closer to understanding the intricacies and subtleties of investment in the UK and round the world. If, for example, the Treasury views a new school or hospital as an inroad into current 408 account rather than as a capital investment, Ministers are denied the means of knowing the true worth of what they can offer or deny the taxpayer.
It remains the case that a crucial Treasury tool in controlling expenditure is simply instructing and delaying payment of funds approved by Parliament. Again, for example, in another place £1 billion may be approved for, say, training. The Treasury sets about making sure that the money is difficult to find and therefore is not spent, and it regards that as a success.
Of course government expenditure has to be controlled. Everyone understands that. We do it both in our businesses and in our private lives. But there is something unpleasant and immoral about a powerful government department, much given to second-guessing everyone and everything, preventing by any means at its disposal the payment of money voted by Parliament.
These may be small things, but cumulatively they discredit the whole process of government. If great and small companies can control expenditure, often in difficult circumstances, so too should government without resorting to pilfering from the taxpayer.
I like to believe that the standards of our Civil Service are as high as ever and that by and large the traditions by which it sets such store are sound. What has changed is the nature of our political class. I sense that Minister and official need to work together in an atmosphere of constructive tension. Minister needs to be able to challenge official based on his or her life experience. As it becomes harder and harder to find anyone in another place who has had a career outside politics, that crucial relationship between Minister and official is undermined, and it will become worse. Ministers rely increasingly on experts. Experts with their own narrow agendas, and often an inability to see where the balance of advantage lies, are almost invariably wrong. While it may be unfair to say that economists are always wrong, it is fair to say that no one knows which 50 per cent of economists are right and which are wrong.
Another unacceptable practice of government which Ministers allow, and which degrades the quality of advice that they receive, is the collusion between departments and agencies. I saw an example only last week when, representing a small fishery, I spoke to someone in the Environment Agency. The young scientist agreed with us about a course of action but said that it could not be promoted because it was against the Ministry of Agriculture. Here is collusion that smacks of dishonesty which now runs right through the government machine.
The prognosis is poor and solutions are elusive, but of one thing I am absolutely sure: the time has come when we must draw on the vast reservoir of energy and talent that is at present excluded from our public life for a myriad of reasons. How to do this requires radical thought and a massive cultural shift. This Government are not radical but wordy. In the opening sentence of the gracious Speech institutional failure is acknowledged. Having identified that reform is necessary to sustain vital services, they devote months 409 of parliamentary time and a huge amount of energy to destroying the one institution which, by their own account, works perfectly well. New Labour is really old Labour recycled to win votes. It retains a vindictive streak and is more comfortable destroying than building. Politics to new Labour seem to be an end rather than a means to an end. In its lack of vision it looks prematurely old and reminds one of a sentence without a verb.
§ 8.32 p.m.
§ Lord Harris of High Cross
My Lords, since there are not too many noble Lords present during the dinner hour I propose to start with a modest confession. After all, the noble Earl, Lord Longford, admitted that as a younger man he worked for the Conservative Party. My confession is that after 40 years as a professional economist, and 10 years into retirement, I no longer feel obliged to read all of the official statistics with which we are daily deluged. I now ignore most of the oft-revised figures for growth, investment and even taxes. To keep track of the Government's creative accounting, particularly their spending, could turn out to be a full-time job. The latest Gallup poll published in the Daily Telegraph was a good warning to the Government. It showed that 80 per cent of those asked agreed that Ministers tried to mislead the public with repeated talk of "new money".
I have an example of New Labour's modern maths which I picked u p from a television programme the other day. Suppose that one wants to increase spending on education or the National Health Service by £15 billion over three years. One can easily turn that into £30 billion with the same figures. I understand that the optical illusion is achieved by taking an announced increase in the first year of £5 billion, then £10 billion in the second year and £15 billion in the third year. That is an increase of £15 billion over the three years. However, one adds the £5 billion, £10 billion and £15 billion to arrive at an increase of £30 billion.
If one plays the same trick on the Chancellor, whom I normally wish well, one can reinterpret his proud boast that he has held inflation down to 2 per cent a year over three years by accumulating the 2 per cent and saying that he is guilty of 6 per cent inflation over the three years; that is, 2 per cent, plus 2 per cent plus 2 per cent. I hope that the Government will try to resist these temptations.
Happily, I do not need to look at all of these statistics in order to congratulate New Labour on turning its back on the old inflationary ways when, as I remind the noble Lord, Lord Shore, prices rose by 10 and 20 per cent a year in the Heath-Wilson era. I positively rejoice when I hear the Chancellor endlessly repeat that we mint never go back to the bad old days of the stop-go-boom-and-bust cycle. Unlike many of my friends in this House whom I respect, including the noble Lord, Lord Boardman, and the noble Baroness, Lady O'Cathain, I give Her Majesty's Government full marks for their conversion to stable money.
410 For the third year running I offer a warm welcome from the Cross-Benches to that part of the gracious Speech that promises not just to curb inflation—we have had all that before—but to maintain a credible mechanism in the form of the independent Monetary Policy Committee to ensure a more stable monetary environment. In a moment I shall return to a rather uncomfortable lesson for the Chancellor from this success, because it conflicts with the instability of his frequent fiddling tax changes. For the moment I wish to be in constructive mode.
I fear that the noble Lord, Lord Shore, will he rather shocked if I argue the following proposal. At the present time, the Monetary Policy Committee has a central inflation target which, as a brave start, was set in 1997 at 2.5 per cent. On a short view, that is pretty good and is a lot better than we have had in the past. The question is whether it is really good enough for New Labour. Why do we not set an example to others and take a longer view? On the back of an envelope I have calculated that even at 2.5 per cent the value of every pound of saving would fall to about 12p over a full lifetime, which we all confidently expect in this place, of 80 to 84 years.
Thus, if the present Chancellor's salary and perks are worth, say, £100,000 a year, his unborn successor in the new millennium will require almost £1 million a year. I therefore suggest that the success of the Monetary Policy Committee should encourage the Government to consider shaving the 2.5 per cent target by half a per cent every second year, which would make it zero after 10 years. What confidence that would bespeak, what a boon for people on fixed incomes and what a boost for the lower interest rates which bothered the noble Lord, Lord Shore, but which would no longer carry a premium for the inflationary expectations which still have to be worked out of our system.
§ Lord Shore of Stepney
My Lords, I am grateful to the noble Lord for giving way. I understand his emphasis on price stability generally, but it is not enough. One considers the state of the Japanese economy. If economic management was simply about controlling inflation, with a bank rate of 0.5 per cent and an inflation rate of 1 per cent, it should be paradise, but it is not.
§ Lord Harris of High Cross
My Lords, I shall not be drawn from my main argument by a trip to the Far East and back. I have been encouraged to hear from various speakers in this debate about the way in which the high exchange rate has compelled business to be more efficient and effective in its exporting. In his reply I ask the Minister whether he will indicate at least a preliminary view on my serious proposal for future policy.
The central importance of the Government's success on inflation—which, it has to be admitted, has been helped by a non-inflationary global climate— is that the economy has avoided a major source of the post-war economic instability of output and employment. An interesting question is whether anything can be 411 learned from the success of the Monetary Policy Committee which could be applied elsewhere to reinforce that stability.
Let us recall that Mr Brown's reason for re-privatising the Bank of England was to rescue monetary policy and interest rates from the hands of the shortsighted party politician who, as I never tire of reminding your Lordships, was described by Adam Smith as,that insidious and crafty animal, vulgarly called a statesman or politician, whose counsels are directed by the momentary fluctuation of affairs".That was in the 18th century before politicians had turned professional!
Gordon Brown's solution to that dilemma was to contract-out monetary policy into the steadier hands of independent professionals and in effect to purge our monetary system of party politics. Yet the other main elements in a stabilisation policy—namely, taxation and spending—are still controlled by those "insidious and crafty animals" on the Treasury Bench. That is why we still have the Chancellor ceaselessly fiddling and disrupting expectations with his budgetary changes.
On the model of the Monetary Policy Committee, how about an independent tax commission to advise on a five-year programme of drastic simplification and reduction of taxation? I have a name to propose for the chairman, and that is the noble Lord, Lord Taverne, on the Liberal Democrat Benches.
Having congratulated the Chancellor, I just have time briefly to deplore his most disappointing colleague—a cross between Pooh-Bah in The Mikado and Mr Toad of Toad Hall. I refer to the amiable road hog now presiding over our environment, regions, transport and, as deputy Prime Minister, sundry other global distractions. It appears that his trendy advisers have told him—presumably through his car window—that the only way to force other people out of their cars is to let the roads clog up. So he mindlessly repeats that one must not build more roads for fear of attracting more motorists to use them. The same logic would dictate that we should not build more hospitals because more people would then queue up for more prompt treatment! That is what is meant by consumer choice.
Now that the Chancellor has thought again about the escalation of fuel taxes, might he allow Mr Prescott to spend a little more on the congested roads? Then we motorists could enjoy more freedom and more safety. In return we could fortify the Revenue by accepting the sensible, civilised economic case for road pricing and congestion charges.
§ 8.43 p.m.
§ Lord Davies of Coity
My Lords, I start by expressing a welcome for the contents of the gracious Speech. That, of course, is only to be expected. But I emphasise the point because Her Majesty's Official Opposition have seen fit to table an amendment about which I must express grave disappointment. That 412 disappointment is not simply because the amendment seeks to score narrow political points, but more because of the shallowness it reflects.
The amendment deplores,the incoherence and the lack of vision of the measures proposed".That is indeed rich coming from a party with its record. Today we are debating industry, economic and social affairs. The gracious Speech clearly spells out the intention of the Government to build on a programme of reform and to promote both fairness and enterprise.
In view of the Official Opposition's amendment, I believe that it is worth looking at what the Labour Government have done in their two and a half years in office and contrast that with what the opposition party did when it was in power for a long 18 years. The justification for what I am about to say is reinforced by the opening comments of the noble Lord, Lord Saatchi, when he likened the approach of the Labour Government to that of Marx and Stalin.
I refer to low wages. In the past two-and-a half years the Labour Government have introduced a national minimum wage thereby raising the standards of millions of low-paid workers. In attacking such a policy the Tories said that such a measure would result in lost jobs and in small businesses going to the wall—none of which has happened. That is confirmed by no less a body than the CBI.
In contrast, the Conservative government abolished the wages councils set up by none other than Winston Churchill. In justifying their action the Tories claimed that more jobs would be created. But that never happened. The only thing abolition of the wages councils achieved was to enable the most unscrupulous of employers to exploit the low paid and the most vulnerable workers even more.
I turn to employment. The present Government have taken measures to ensure high levels of employment as well as high levels of economic growth. There are more people in work in Britain today than ever before, with employment up by nearly 750,000. The New Deal has helped nearly 150,000 young people into employment. The number of long-term unemployed has been halved. In contrast, unemployment rose dramatically under successive Tory governments. Where once there had been industrial heartlands of Britain, deserts of mass unemployment were created, bringing with them agony and heartache for many families. As I recall, in order to massage the figures of the growing masses of unemployed, the Tory government changed the system of calculating the unemployment figures more than 20 times.
I turn now to industrial relations. In all that the Labour Government have done in the past two-and-a-half years, they have built a partnership in industry pulling the two sides of industry together and not driving them apart. They have talked meaningfully with both sides of industry. They have encouraged both sides to talk to each other more meaningfully and to work together more effectively. That is happening with new partnerships being forged.
413 This Government have gained the respect, the trust and the confidence of both sides of industry. They believe, as I do, that what we do together is much more successful than what we do separately. That is reflected in the employment relations legislation. In contrast, the Conservatives did all that they could to make the workers' side of industry as ineffectual as possible. That is not to say—before someone intervenes—that all the trade union legislation introduced by the Conservatives Was unnecessary. Some was needed, but they went much too far.
When the Tories attacked the trade union contribution through deduction from wages scheme, which even the employers could not understand, their motives became very clear. They did nothing to reduce or remove conflict in the field of industrial relations.
I refer to the economy. As a major industrial and trading country, it is never easy to handle the factors that come into play and impact on the economy such as inflation, interest rates, the strength of the pound and balance of payments problems, all of which have to be addressed. But in the two-and-half years that this Government have been in office they have shown their determination not to be deflected from their goal of maintaining economic stability. This Government will not be pressurised or bullied into taking any short-term, easy route such as those which have plagued us so damagingly in the past. In contrast, we know all too well the result of the stop-go, boom-and-bust economics which eventually led to the fiasco to which the noble Lord, Lord Lamont, can so clearly testify. In my view the Opposition have not earned the right to charge this Government's programme as being either incoherent or lacking in vision.
For well over 40 years I have been involved in industrial relations and politics. At an early age I became aware of one fundamental difference between the party I support and the party opposite—and nothing has happened since to change my view. It may sound harsh, but the difference is this. In practice, the Tories seem to do things despite people whereas the Labour Party does things because of people. For me that reflects a difference of vision and of value.
The Conservative Party always claims that it is the guardian of the economy, although that claim was more than dented during 18 years in power. Its measures in respect of the economy always resulted in people having to sink or swim, depending on how strong or weak they were. That approach was epitomised by the noble Lord, Lord Tebbit, when he said, "Get on your bike".
The difference with the Labour Party is that it sees economic growth, social justice and environmental protection not as competing forces but as integral strands of the same programme, policy and vision. However, I suppose that to a greater or lesser extent we are all products of our environment, and perhaps our concept of coherence and vision stems from that.
When I was a small boy during the last war, I used to spend the summer months with my grandparents in Mardy, a village in the Rhondda Valley. They lived in a small terraced he use built by the coalmasters. It had 414 no hot water, no bath, and a toilet at the bottom of the garden called ty bach (small house). Every Sunday evening after chapel, members of the family and friends would congregate in my grandparents' house with all the men, in their Sunday best, seated in the front room. I would be sitting with them and listening to what they had to say. Their conversation was interspersed with bouts of coughing brought on by pneumoconiosis and silicosis. But they had a vision. They were not educated in the academic sense. They were miners or ex-miners. But they had a vision. It was not a vision about putting the "Great" in Britain. It was not a vision about the empire which dominated and exploited millions throughout the world. It was a vision about freeing people from poverty, a vision about giving every man, woman and child a fair and just opportunity in the society in which they were born and in which they lived.
That was their vision. That is my vision; and that is the vision of the party to which I am so proud to belong. The Government are doing all in their power to make that vision a reality, and the British people are supporting them in that endeavour.
I say in conclusion to noble Lords opposite: this amendment is neither scrutinising nor revising, so think long and hard before you press it to a vote. If you do not, you may forever have ringing in your ears the immortal words of Oscar Wilde:They know the price of everything but the value of nothing".
§ 8.53 p.m.
§ Lord Blackwell
My Lords, in making my contribution to the debate I should like to deal with one general point and one specific point. On the general point, despite the glowing picture of this Government's record conjured up by the noble Lord, Lord Davies of Coity, I have to express my disappointment at the failure of the programme, and of the Government to live up to their rhetoric, on enterprise. I shall expand on why I believe that. On the specific point, I want to deal with the forthcoming Bill on electronic commerce. I declare an interest as an executive of a financial institution with specific responsibility for e-commerce.
Few would dispute that electronic commerce will be seen in years to come as one of the major industrial and social revolutions that this country has experienced, on a par with the development of factory systems, railways and computers. People marvel at the stock market valuations that some of the new Internet companies have achieved. Companies that did not exist a year or two years ago are now worth billions of pounds or dollars. That reflects the fact that the electronic commerce revolution that is hitting us is a major source of new wealth creation. I would not justify every one of those valuations, but the extent to which in many cases those companies are worth more than old established companies reflects not just displacement but the real wealth creation which will be brought about by this revolution.
It is in its infancy, but in the next couple of years the value of electronic transactions is likely to go through 1 per cent of GDP. Within five years, it is estimated 415 that it will be over 10 per cent of GDP, and at that point it will be transforming the economy. We shall no longer have Internet usage and electronic commerce usage regarded as something for specialists sitting at their PCs in their studies. All of us will be in virtually daily full-time contact with the online world through mobile telephones, pagers, interactive TV, and so on. In the world of business, most businesses will have had to reconstruct their business systems to take account of the impact of electronic procurement on the way in which they trade.
We all recognise that because of the way in which electronic commerce will develop over the next few years, it is not just another trend or a small development. It will be revolutionary in its impact and a major source of wealth creation.
Fortunately, as with the first industrial revolution, the UK potentially has the opportunity to be one of the national leaders in electronic commerce. It is an industry based on inventiveness, creativity and the knowledge industry, as the Minister said in his introduction. The US will dominate, as it has many of the new knowledge industries, but the UK is out there in front, with 17 per cent penetration of Internet usage in the UK as opposed to, for example, 10 per cent in Germany and 6 per cent in France. The fact that the Government have not intervened has been an advantage. The government emphasis on Minitel in France has probably been one of the factors which has constrained the development of electronic commerce and the Internet in that country.
How has this come about? How have we reached this enviable position? It is because over the past 20 years government in the UK have got out of the way. They privatised BT, deregulated telecommunications and stopped protecting national champions. They did not have grand national investment programmes in infrastructure such as Minitel, to which I have referred, which fossilised old technology. We succeeded in achieving this position by allowing market forces to work. I welcome the electronic commerce Bill—although it is perhaps 12 months later than most of us would have liked—because it drives one of the key elements that is needed: the legal construct as regards legality of digital signatures.
I recognise that much of what I have said appears in statements made by the Government. However, I am concerned that their professed enthusiasm sits alongside a raft of policies which in their impact are anti-business and anti-enterprise. They work against the objective of higher productivity, to which many speakers have referred.
Many initiatives in the gracious Speech are aimed at productivity or innovation: innovation funds and centres of innovation. But productivity and innovation are not a consequence of what government do; they are a consequence of government getting out of the way and allowing initiative and enterprise to work. In the 1980s and 1990s, productivity growth in the UK put us in the top tier of our industrial 416 competitors around the world because government were deregulating, reducing taxes and removing barriers in the way of enterprise.
If we are to succeed in the new world of electronic trading, we need more than ever a true enterprise culture. The scale of the e-commerce revolution will need the raw power of market forces to make it happen, with the potential to create millionaires and, more importantly, the potential to drive established businesses to the wall when they do not adapt and change. Such a revolution will not come about in a protected environment. It will come about rapidly only if the full forces of market power are unleashed.
I believe that the Government, by their actions, have shown that, whatever is said, they do not like business or markets. Today, many noble Lords have spoken of the layers of red tape in regulations introduced in the past couple of years. Perhaps I may give a few examples. I refer first to the Working Time Directive, with the bureaucracy of record-keeping for small firms that that has imposed. Secondly, the new employment rights act as disincentives to taking on new staff if there is a risk that they will have to be laid off, such as exists in most e-commerce ventures. I refer thirdly to the whole panoply of stakeholder pensions, family tax credit and other measures where the burden of implementation falls on businesses. Finally, there is the IR35 regulation which this House recently debated. The imposition of such regulations work against innovation, enterprise and productivity.
Why do the Government have that dichotomy in their policies? I do not believe that it is malevolent. It must be that, despite the presence of distinguished and experienced business leaders on their Front Bench in this House, the Government as a whole do not understand business because few people in their leadership come from business. They are, for the most part, planners, not entrepreneurs. Apart, as I said, from some distinguished Members in this House, the leadership of the Government comes largely from professions where a few clever people sit down and sort things out and lay down the rules.
The notion of leaving things to raw market forces is an alien concept to the Government and to the party to which they belong. So they intervene and regulate. Because the Government have never really come to terms with profit as a good thing, Ministers have no qualms about loading all kinds of hidden taxes and burdens on business to try to achieve their social objectives without having to face up to the costs by imposing taxes through the front door. My only conclusion is that the Government are loading the burdens on business and, despite their rhetoric, are denying the opportunity for enterprise because at heart they do not like, understand or value enterprise except as an abstract, somewhat theoretical concept.
That does not fit with making Britain a world leader in electronic commerce. As I said, electronic commerce is a revolution which needs raw market power to drive it at the speed at which it must go. As much as anything else, and perhaps more so, electronic commerce is dependent on small businesses which are starting up and making the new initiatives work.
417 So, what is the answer? The best would be for the Government to live up to the words in the gracious Speech about deregulation and to repeal regulations on business generally. I should like to believe in the concept of a deregulation Bill. Against the background of a deregulation task force, a better regulation task force, a regulation star chamber, 2,700 regulations since the election, and an average compliance cost which over the past two years has risen by some 20 per cent, adding £4,000 to £5,000 a year to the costs for small firms, somehow I am not convinced that legislating for deregulation will be the answer. However, I wait in hope to see the Bill; it will be an interesting debate.
If it does not work, I suggest that the Government consider whether measures which help deregulation specifically associated with electronic commerce may be a way through. Part of that must be low-cost telephone access. Competition, if it is allowed, will get us there, but we need to ensure that telecomms' regulation and the social obligations placed on telephone companies do not get in the way. That includes mobile telephony as well as land lines. I note that measures are to be brought forward and we look forward to seeing whether they will achieve the required results.
The second suggestion that I want to put forward is that the Government should pick up on ideas relating to enterprise zones, but in this case have electronic commerce virtual enterprise zones. Rather than physical locations where businesses can be brought together and given special freedom from regulation, what about allowing businesses which qualify by being largely dependent for their income and business on the Internet to be exempted from a large range of government measures? I refer, for instance, to freedom from the regulations that I mentioned in the labour market; freedom from capital gains tax, freedom from IR35 and to the freedom to develop in the way in which those businesses need to develop.
Despite the Government's enthusiasm for electronic commerce, I do not believe that they have yet fully grasped the scale of the revolution, its potential for wealth creation and its impact on many areas in terms of the destruction of the established industrial order. I genuinely believe that they do not understand how damaging their bias towards regulation and imposing burdens on business is to the revolution that is taking place. Far from being modern, I have come to the conclusion that the Government, in their approach to regulation and burdens on business, are clinging to old-fashioned notions that government initiatives, regulations and intervention are the way to shape a new industrial order. In the world of electronic commerce, that would be the way to fossilise the past rather than to succeed in the future.
§ 9.6 p.m.
§ Baroness Hogg
My Lords, I am particularly sorry that I was unable to hear all the maiden speeches in the debate because those I heard were of an exceptionally high standard. We are all being given the opportunity to become expert judges. However, I am extremely 418 pleased that the noble Lord, Lord McIntosh of Haringey, is to reply to the debate because he is always so helpful to me in explaining the Chancellor's interesting documents. As I want to touch on some of the Government's business measures, perhaps I should declare a number of business interests. I am the director of three major UK companies; the chairman of an investment trust; director of two other financial institutions; and a member of the council of the Institute for Fiscal Studies.
Perhaps I may begin with the Chancellor's pre-Budget report. The first conclusion one must draw is that there is scope for serious de-manning in government. For it is quite clear that the Chancellor is now responsible for everything. On page 98 of the report, one discovers that he has even become Minister for the weather. There is a helpful little chart showing the average temperature since 1860. On page 82 he tells us about the Disability Rights Commission and, on page 70, the National Learning and Skills Council. The Social Exclusion Unit seems mysteriously to come under the Treasury wing. Management, education, environmental policy, equal opportunity for women and special initiatives to support teenage parents in health action zones—all seem suddenly to be run by the Treasury.
Chancellors have always liked to announce anything requiring the spending of taxpayers' money, but much of the report's content has nothing to do with Budgets. The Minister may wish to assure me that that is merely packaging—a way of bulking out an otherwise rather uninformative set of public accounts. If so, I should refer him to page 110, since it seems that the Chancellor is now responsible for waste. That passage states that over 10 million tonnes of packaging entered the waste stream in 1998, and that the top priority of the new EC directive is to reduce that figure.
I am sure that the Chancellor would like to prove himself a good European by cutting those documents back to their previous modest scale and simple structure. That would certainly help to make them more transparent. The space-consuming habit of pre-announcing and re-announcing measures does not help. Nor is it entirely obvious why, for example, one should find technical details of the air passenger duty under the heading "Fairness to families". Nor do I understand why, in this lengthy report, the Chancellor could not find space for the usual table detailing the specific effect of each measure on public revenue and expenditure.
However, I believe that this bulk is more than mere padding. It is important evidence of the Chancellor's promotion to chief executive. Fair enough: our constitution is infinitely flexible. But then we must ask why the taxpayer needs to pay for all these other Ministers and departments. I am sure the noble Lord, Lord Sainsbury, would agree that that should allow layers of middle ministerial management elsewhere to be stripped out, but not, of course, in Downing Street. Every chief executive needs a chairman—preferably a non-executive one. But the streamlining of management that follows from Treasury imperialism must surely provide scope for de-manning elsewhere.
419 I hear some small voices whispering that things are not always best run by the Treasury. Of course I am not inclined to listen; some of my best friends are Treasury people. But even on taxation, which has always been and must remain a Treasury responsibility, this Chancellor could still do with a little outside help. I say at once that his pre-Budget statement shows some excellent intentions. I applaud the emphasis on business formation and growth, but he does have an unfortunate taste for complexity. The trouble is that that in itself imposes a burden on businesses, which have to waste time discovering whether they fit the precise shape of the Chancellor's loophole, and working out how they will have to distort their business plans to squeeze through. For example, while I greatly welcome his willingness to look again at CGT, the caveats and complications that sneaked out after his Commons speech have caused disappointment and some scepticism.
Moreover, complexity leads to contempt; contempt to evasion. I listened with some amazement to the noble Lord, Lord Sainsbury, explaining how smoothly the working time directive had been implemented. What is in fact happening is that those regulations are "Europeanising" us in the worst possible sense; that is, teaching business to ignore the unworkable even if it is the law of the land. The other problem with that kind of intervention is that markets move faster than governments. I cannot, for example, really understand why the Chancellor believes that he needs to kick-start a high-technology investment fund with taxpayers' money at a time when the markets are brimming over with money in search of high-technology investments.
The other slight defect seems to be a certain myopia with respect to the tax figures themselves. I have learned to read these documents from the back, because that is where officialdom still produces decent figures; perhaps the Minister never got quite that far. From Annex B to the pre-Budget report it is still just about possible to learn what is happening to tax revenue. It is absolutely clear that it is going up faster than the Government said it would in the Red Book in the spring. I fully recognise that that is in part because the economy is growing faster; but not all of it. On any consistent measure of current receipts, they are a higher proportion of national income today than before the Government took office, and they are expected to account for a still higher share of national income by 2001–02. Perhaps I may help the Minister with the page references.
I take a particular example. The Chancellor is now expecting income tax revenue to rise by about £6½ billion next year, clearly increasing its share of national income. That is £4 billion more than the Chancellor expected in the spring, and he now expects an even sharper increase in 2001–02. There is one particular element of that increase on which I should be grateful for guidance from the Minister. Higher interest rates this autumn have apparently added £1 billion to the personal tax burden. That of course is coming from savers. There used to be a 420 counterbalancing effect in the shape of mortgage holders' tax relief on interest, but the Chancellor is to abolish this next spring. He is doing so at precisely the moment when it will hurt most; that is, when interest rates are going up. If the Chancellor really wanted to be "fair to families" he could have announced how he intended to hand back that windfall. I hope that the Minister will assure me that he will do so, and that the burden of income tax will not be allowed to rise.
§ 9.15 p.m.
§ Lord Wade of Chorlton
My Lords, I come to this debate with a fairly pre-conceived idea of the importance of wealth creation. To me, that is the most important thing that any government can generate. It is the responsibility of any government. There are many elements of wealth creation that only governments can do. Those things which only governments can do, governments must do.
I believe in that not only because wealth creation is the driver of so many things from which others can benefit but, as the noble Lord, Lord Elder, stated, it also creates a background to provide social benefits, social security, the health service and all such matters that need to be paid for by those who generate the wealth. That is where I come from.
As I listened to the debate I was reminded of the story of the ancient king in his castle. One evening, over dinner, he heard a hammering on his front door. He went to see what it was. One of his knights collapsed in the doorway in front of him cut about the face, exhausted and in a terrible state. The king said, "By God, what have you been doing?" He said, "I've been out raping and pillaging your enemies in the north". The king said, "But I don't have any enemies in the north". He replied, "By God, you have now".
I cannot help but relate that story to some of the arguments we have heard. On the one hand the Government see the actions they are taking as having the support of everybody in the country in at least generating wealth. However, I am aware that there is concern in the north about the attitude of the Government to regulation and concern over control and interference. My noble friend Lord Blackwell referred to that.
There is a great danger that if we interfere too quickly and dramatically, the consumer will lose out. The flexibility of the market will always ultimately adapt to what the consumer most wants. If it is interfered with, there would not be the driving forward of certain businesses. The e-commerce sector has been referred to. That is now driven by the marketplace. The Government must be conscious of the fact that they are seen outside this place as a government which interferes too much; over-regulates and is anxious to have their hands on so many aspects of wealth creation.
I refer in particular to planning. I was pleased to see a report in the newspaper—how true it is, I do not know—stating that there is a view within the DTI and the Treasury that the planning system can be of great 421 benefit to competition and the opening up of markets. I am a great believer in that. I have said previously in this House that there should be a responsibility upon the planning authorities to ensure that the economic aspect of their work should be at least of equal importance as, if not greater than, their environmental responsibilities.
I hear from my friends involved in development that many planning systems are seriously held up and investment held back because of delays in developing planning opportunities and getting the system working. I refer to commercial development, not housing.
I am pleased that the Government had a look at deregulation. However, the previous Government also passed a Bill to deregulate which did not have much impact then. What happens is that although the Government might want to deregulate, the army of people employed to regulate fights so hard against it that little happens. At the same time as we deregulate, we have to ensure that we have sufficient control over those who regulate to change their views.
The Minister referred in opening, as did others, to the fact that the manufacturing industry has been badly hit. Undoubtedly, that has happened. Many aspects of our manufacturing industry in the north-west have seen much unemployment. One company with which I was personally involved had to make many redundancies. That is a sad and unnecessary state of affairs. We were very much involved in export. The impact of the pound seriously undermined that business. That happened in many other manufacturing industries. That is something with which we have to live. We have to adjust and create other businesses.
However, the key to the future is that as one manufacturing system dies, we must generate a continuous flow of new business to take its place. I was delighted to hear the maiden speech of the noble Lord, Lord Gavron, and congratulate him on it. I endorse all he said about incubation and the development of new hi-tech businesses. Like him, I am involved in that area. I was the first chairman of Campus Ventures, which is our incubation unit in Manchester. I am now President of that organisation. But I am still quite involved as chairman of a number of companies we are creating in that incubation unit. I should like to take this last few minutes to offer the Government one or two ideas as to how we might improve that system.
The issue is that a business starts with a man with an idea. He may have no money and has probably been surviving on an income. Therefore when he starts up his business and the income stops, he takes a tremendous risk. Because he has no money, he has to find somebody to support him. That will no doubt be a seedcorn capital organisation of some kind or a wealthy individual who is willing to invest in his idea; invariably it will be a small amount of money.
The problem arises from the fact that a seedcorn capital company providing £25,000 to £50,000 is not a viable enterprise; it cannot make a profit out of that level of investment. As a result, the seedcorn capital sector is not growing big enough to support the level of 422 new companies coming on stream from the incubation units referred to by the noble Lord, Lord Gavron, and of which I have experience but merely in the north-west.
I should like to see a situation where we could link in with larger venture capital companies which can provide follow-on finance as the company grows, but at the same time create what I call a venture capital trust. The trust would provide support to encourage a flow of new investment opportunities; to encourage people to become entrepreneurs; and to encourage the movement of IPR out of universities, making it available for people to promote—that is an important aspect. But the trust would also be able to provide support to the venture capital company itself, to carry those costs it cannot carry out of its own profits because those profits are so small.
I feel that this is an important concept. I am working on it now and am in the process of establishing such a trust with a number of leading people in the north-west. However, at some stage we will need support from government organisations either in terms of finance or something similar. I wanted to take this opportunity to tell the Government what we are doing so that when I come knocking on their door saying, "My dear Lord I should like some support from you. I am a poor knight who has been beaten to death in the north", they will respond to me with a certain amount of hospitality and generosity in this particular instance.
§ 9.22 p.m.
§ Earl Russell
My Lords, a debate with nine maidens in succession is like watching a procession of all of the Muses. I cannot possibly at this time congratulate all the maiden speakers individually. It has been a pleasure to listen to them and a number of images from what they said will remain in my mind for a long time. But for the debate as a whole, it has been like Winston Churchill's pudding: it has had no theme.
The noble Lord, Lord Wade of Chorlton, in the last few minutes, recalled us to what should have been the central theme of the debate. It was billed as a debate on industry, economic and social affairs. We always have trouble dividing the debate on the gracious Speech. Today we chose a new experiment which has not worked; I hope one day it may.
The noble Lord, Lord Wade of Chorlton, called our attention to the relationship between wealth creation and social spending. The link between the "getters" and the "spenders" is the gearbox of politics, and this debate has been running in neutral. On the one hand we heard a number of excellent speeches, many of them of high quality and extremely interesting about the need for competitiveness, efficiency, productivity and being able to sell our goods cheaply enough to compete in the global market. Those arguments are sound; the global market will not go away.
However, when I heard the noble Lord, Lord Blackwell, speaking with, perhaps, the purist vision of the competitive market of all the people to whom we have listened today, I was reminded of a remark of my 423 father's that I read recently about Richard Cobden, whose claims to be a believer in the market I believe the noble Lord will allow. He said, "Richard Cobden believed in free competition, but it was competition according to rules, like cricket." The point about competition is that it has to be competition on reasonably level terms. It has to be competition which also counts the costs created to society by its exercise.
The year my great-grandfather became a father while in 10 Downing Street was also the year when he over-ruled the Treasury to drive through the Public Health Board because of the urgent necessity of combating cholera. That is a very good example of the principle that you cannot ignore social costs if you want to consider economic competitiveness. After all, labour is one of the raw materials of business. Like other raw materials, when not in use it must be warehoused. If not warehoused, it deteriorates at a very alarming rate and the subsequent cost to the economy is considerable.
I wonder whether it is a coincidence that both the Prime Ministers to have become fathers while in office have done so immediately after putting through regulations limiting working hours.
§ Earl Russell
My Lords, the link between shorter working hours and better family life is more than just symbolic. I have been looking today at the report of the Children's Society, Still Running, which is about teenagers running away from home and to which I shall return later. It illustrates that the costs of family breakdown to the state and, therefore, to the economy may be very considerable. So if we have a measure of totally free abstract competition which does not count the social cost, we will have something which is an economic as much as a social handicap.
If one looks at the way the global market has developed over the past 10 years or so, one sees that it is a market which is leaving out a vast proportion of the world's population. It is an economy with far too long a tail in terms of demand, carrying far too many passengers. That must limit the purchasing power of the world. It must, therefore, limit the profits which capitalists are capable of making; and it must also have a detrimental economic, as well as social, effect. But equally it is true—and those of us who tend to speak from the perspective of spending ministries must remember it clearly—that any social spending which our productivity cannot sustain will be a detriment to the economy. There is a balance to be struck here. As with all other see-saws, that balance may tip too far one way or the other.
At this stage of the Government's life, as we begin what may be the last full Session of Parliament before a general election, it is time to consider at least a halftime report and to consider how different things might look when we come to the next election. We certainly have a more benign economic climate. I welcome that and congratulate those responsible. But how the responsibility is divided among Gordon Brown, 424 Kenneth Clarke, Wim Duisenberg and Alan Greenspan is a question which I really cannot fathom. All I am certain of is that some share of the responsibility should go to all four of them. Therefore, we are probably a little unwise to be making competitive claims across the Chamber. Let us enjoy it while it lasts and hope that that may be a reasonable length of time.
However, in my own immediate field of social security, I do not get the sense that very much has changed. We are being offered a new welfare reform Bill. Ever since 1996 I have been trying to understand what are the general outlines of the concept of welfare reform. I have not succeeded. I have now decided that I have not succeeded because there was in the end nothing there: the welfare reform emperor had no clothes. It is in fact, as came out very clearly in our debates on occupational pensions and incapacity benefit, simply a matter of the Treasury doing business as usual.
Before the last election, when I was not certain what this party would be like in office, I had in my mind a list. It is not only Mr Peter Lilley who is capable of making lists. This was a list of things which I thought any worthwhile government would change in social security. Almost all of them this Government either have not changed or have changed for the worse. In benefits for 16 and 17 year-olds, there has been no change. As regards benefits for asylum seekers, I think on balance the situation is now worse than it was in 1997. As regards the habitual residence test, there have been small changes which are little better than cosmetic and not a substantial improvement.
Regarding the element of conscription that came in with JSA, there has been no change. In fact recently there was a case, which I believe is still unresolved, of a man who was disentitled to benefit because, being a life-long supporter of the Labour Party, he refused to take a job pulling pints at the Conservative club in Cardiff. I do believe in the free market. I think it is the responsibility of an employer in a free market, and part of what makes that market work, that they should have the responsibility to make a job sufficiently attractive to an applicant as to make him want to take it.
Regarding housing benefit for shared residence to those under 25—one of the most stupid things the last government did—there has been no change. The only change was extending the shared residence in housing benefit to people over 25. And that was only because we managed to get a Prayer down against it the day before Prorogation; so it was already there. I must thank my honourable friend Mr Kirkwood and the noble Baroness, Lady Hollis of Heigham, for a great deal of skilled diplomacy about that. I welcome it. As regards single parents, that is worse.
I received a letter yesterday from a disabled pensioner who lives in a Swansea council flat and who follows our proceedings on cable television—with, I may say, a great deal of care. She has written to me many times before. She tells me that she now feels rather more insecure under Blair than she did under 425 Major. I am afraid that I could not tell her that she is wrong. The things I was counting on being put right have not been.
There are a lot of things I do not find in the gracious Speech which I would have liked to see. The whole thrust of government policy in social security has been towards removing barriers to work, but where there are really serious barriers they are still very often not addressed. For example, I regret that the EOC's proposals for new legislation on equal pay, which seemed very carefully thought out, were not brought in before the cutbacks in the bereavement allowance with which we have just been dealing. I regret very much that legislation against age discrimination was not brought in before the new changes in rules on the incapacity benefit contribution record.
I regret very much—and this is where I come back to the Children's Society's report, Still Running—that nothing has been done to provide more refuges under Section 51 of the Children Act for children under 16 who leave home. The estimate of the study, which is a serious academic piece of work, is that the number amounts to no less than 11 per cent of the age group. That is a significant figure by any calculation. The estimate is that in any year 14,000 left home not voluntarily but because they were thrown out. It is in that context that I have misgivings about proposals such as parenting orders. When one thinks of the cost of what may happen to these people if they stay on the streets, the money spent on having rather more than two children's refuges under Section 51 of the Children Act would. I think, be cheap at the price.
I agree with my noble friend Lady Barker. I am disappointed that there is nothing in the gracious Speech on long-term care. It seems to me that there is a strong tendency in this Government to look to coercion rather than constructive opportunity, and that I regret.
I am also concerned that in the new welfare reform Bill, which is promised, we are told that we shall find people disentitled to benefit if they do not obey court community service orders. There must be concern about people not obeying court orders. On the other hand I am reminded of an occasion when Reading town council said that members of the Aldermaston march were not allowed to use the public lavatories in the town for fear they might make a mess. Canon Collins pointed out that they might make an even greater mess if they did not use them!
The question is, of course, what people with a criminal record deprived of any legal means of subsidence may do. We on these Benches have repeatedly called for research on the effects of disentitlement to benefit, what people actually do, and how they make a living. We now say that until this research is done—and that is a commitment of the party—we shall oppose further measures to disentitlement to benefit. When the research is done we shall study it with care and reach a decision on the evidence, but we are not buying any more pigs in pokes.
426 The centrepiece of the Bill is likely to be the CSA. I really feel that I am coming in for another performance of "The Mousetrap". I believe that I am the longest serving social security spokesman of any party in either House. I go right back to the statement in 1990 when the CSA was first announced. To my shame I did not see through it instantly. I was beginning to by the time we got to the Report stage of the 1991 Bill. Others, notably my noble friend Lord Meston and the noble Lord, Lord Mishcon, were way ahead. This Government are correcting the mistakes of 1995, but only by going back to the mistakes of 1991. In terms of the effects, I think that those were the more serious.
I shall not take the noble Baroness, Lady Hollis of Heigham, through my arguments about the formula. I am sure that she and I can recount that debate in our sleep, and before the Bill is through I fear we may be doing it. I shall try to avoid that if I can. I have heard the Minister criticise the previous performance of the courts. Much of what she said about the courts being essentially adversarial in child matters is out of date since the Children Act of 1989. The other thing is that the courts have been criticised for their success in enforcement. First, the record is actually better than that of the CSA. It would be quite a job to make it worse! Secondly, a small amount of extra funding, and even a small amount of extra powers, even one more member of staff for each court, would have improved the courts' performance immeasurably. Doing that would have been far, far cheaper than setting up the whole cumbrous machinery of the CSA.
The other thing the CSA takes no account of is that we are dealing here constantly with disputes between the parties concerned. Ann Chant is not usually a hero among those who criticise the CSA, but in reply to the ombudsman she had some sensible things to say. She stated:The Agency has a unique position amongst government operations in that … it has to balance the (often conflicting) interests of the three potential providers of child maintenance: the mother, the father and the taxpayer. It is precisely the nature of having to strike such a balance that can give rise to some complaints. The Agency enters people's lives at what is usually an exceptionally difficult and upsetting time and has to deal with the parents who may already be involved in an adversarial situation".There is no mechanism for resolving disagreement. That puts the CSA in the position of a medieval court, constantly issuing a series of interim injunctions and never getting to a final resolution.
The CSA rests in a world of bureaucratic imagination where everything is fact. But it is part of the price of a flexible labour market that a person's income is not fact. I recall what the noble Lord, Lord Harris of High Cross, said about the use of figures. With an income that varies every week, the base one takes makes an enormous difference to what the income is. There needs to be a way of resolving disputes of that kind.
I am sure that the Minister has studied the Rowntree survey by Ann Coram and others, which compares child support and child maintenance in this country and on the continent of Europe. They found two rough general patterns: one is a system of fixed rules, without discretion, and levying fairly low levels of support; the 427 other is a system of discretion, weighing individual cases, and levying a rather higher level of support. Anyone used to the British Treasury would guess what we did with that: we went for the high level of support and the absence of discretion. That really will not work. I admit that this time the Government are lowering the level of support in order to do away with discretion, but that is an economy in the wrong place and many children will be the worse for it.
I do not know yet whether the Bill will include anything to do with housing benefit; we are getting slightly conflicting hints. But if it does, I hope that the Government will study the evidence from the application of the single room rent—works such as the Centrepoint study of the single room rent in Devon, the CAB study of it in Somerset. Shelter, which has summed up, is as convinced as I am that attempts to limit housing benefit do not lead to a reduction in rents. They lead instead to people paying their rent out of their income support, already at a level argued to be too low to be compatible with good health.
The Government's poverty audit is welcome so far as it goes. It might do something to reassure the noble Earl, Lord Longford. But it goes only for relative figures; it is below half average income. So one millionaire coming to this country can plunge a lot of people into poverty without their being any worse off.
I hope that the Government will look also at absolute levels of poverty, which are shown by indicators such as malnutrition and hypothermia. It is in those indicators that we will see the effect of attempts to cap housing benefit. I wish that the Government knew the answer to that question. I hope that before the Bill passes through the House they will.
§ 9.43 p.m.
§ Lord Kingsland
My Lords, I echo the comments of the noble Earl, Lord Russell, about all nine maiden speeches made by noble Lords. For some weeks, I have much admired the skill with which the noble Baroness, Lady Wilkins, manoeuvres down the labyrinthine corridors of your Lordships' House. On listening to her, I have now discovered that her navigational skills are well reflected in her intellectual abilities. I thought that her speech was not only delivered with great feeling but also contained many innovative ideas about her special subject. I know that your Lordships will look forward eagerly to the noble Baroness's contributions in the coming years.
As I understand that I am to play a role in the financial services Bill when it comes to your Lordships' House, I was particularly pleased to hear the contribution of my noble friend Lord Bagri. From his unique vantage point as chairman of the London Metal Exchange, he was in an excellent position to remind your Lordships that, meticulous though your Lordships will undoubtedly be in scrutinising the Bill when it comes to your Lordships' House, technological innovation in this world is likely to be several steps further down the line by the time the Bill becomes an Act. I hope that my noble friend will find 428 time in his busy life to come to your Lordships' House when those parts of the Bill relevant to that matter come before us.
The noble Lord, Lord Grabiner, brings to this House the highest reputation as an advocate. I quite understand the noble Lord's relief at finding himself able to sit in the House without wearing his full-bottomed wig. I believe that the noble Lord explained that it was particularly gratifying because it meant that at last he could hear what your Lordships said. As someone who has sat in this House a little longer than the noble Lord, perhaps I should remind him that there are occasions—rare though they may be, especially when your Lordships are listening to the Judicial Committee of the House—when it is even advantageous not to hear what a noble Lord is saying. However, I know that the noble Lord, Lord Grabiner, will agree with me that on this occasion it was quite right not to wear his wig because the debate has been of the highest quality.
The noble Baroness, Lady Whitaker, left us in no doubt whatever that she is a complete master of the topic of race relations. I am quite sure that she will ensure that, when the Bill to which she spoke most eloquently goes through your Lordships' House, the Government will be firmly on the bit.
The noble and learned Lord, Lord Millett, spoke to us with great authority on the subject of insolvency. My first memory of the noble and learned Lord was when I was a very humble junior barrister and happened to find myself in the Chancery Division Court in which he appeared on the first day after he had taken Silk. If my memory serves me rightly, I believe that Mr Justice Plowman was the judge; but no doubt the noble and learned Lord will correct me either now or later if I am wrong. I recall, at the time, that the noble and learned Lord made a most impressive opening. He has exceeded even the high standard which he set himself on that occasion with his contribution to your Lordships' House today. I hope that in his busy life, as a member of the Judicial Committee, he will find time to come to this Chamber to contribute to the debate on the Insolvency Bill.
The noble Lord, Lord Harrison, and I have met in another world. Indeed, the most amusing story that he told about "la sagesse normande" is absolutely true—because I happened to be present in that chamber at the time. I believe that your Lordships will all agree that he made a most powerful speech today. His expertise on the European Community, and on matters pertaining to local government in Cheshire, will prove enormously valuable to your Lordships' House.
The noble Lord, Lord Elder, told us that he spent the first eight years of his working life with the Bank of England—before spending the next 20 years working for the Labour Party. It must have been a dramatic transition going from the Bank to the Labour Party, particularly in those years, but he gives all the appearances of having survived the experience without any obvious damage either to his intellect or to his 429 ideological convictions. I know that your Lordships will very much look forward to the noble Lord's future contributions.
We understand that the noble Lord, Lord Gavron, made his second maiden speech today. It was a speech of such quality that the noble Lord who heard his first speech must have had an extremely vivid imagination. I know that your Lordships will be delighted not not to have heard his maiden speech today! Perhaps I may say that his speech contained, for me at any rate, some extremely original ideas on the topic of enterprise, to which I hope that the Government Front Bench listens carefully.
Last, but certainly not least, was the maiden speech of the noble Lord, Lord King of West Bromwich, who has done so much for the Black Country in general and for the area of Sandwell in particular. I travel by train every weekend from London to Shrewsbury and I always pass through Sandwell station. In recent years much has been done for the Black Country; but the station at Sandwell is still somewhat bleak in appearance. I am quite sure that, in the not too distant future, that station too will benefit from all the physical and economic improvements that have been going on in that area.
I must declare an interest in the debate in that I was a supporter of the previous government. I am, of course, now a supporter of the existing Opposition.
§ Lord McIntosh of Haringey
My Lords, that is not a general interest. It is a very, very particular and rare interest.
My Lords, it is indeed a rare interest, but one of high value, as most rare matters are.
I declare that interest because I do not want to see squandered the legacy that the previous government bequeathed to the nation. On reading the Labour Party's manifesto, I received some reassurances. When one reads that manifesto and sees the promises that were made in it about taxation, productivity, savings and regulation, one might think that the Government, who came into office in May 1997, are simply a continuation of the previous government.
And what an excellent record the previous government had! Between 1992 and 1997, they had the fastest growth of any major economy in the world; there were constantly falling unemployment figures—around 1.5 million people came out of unemployment during those years; 40 per cent of total external investment in the European Community came into the United Kingdom because of the attractiveness of the low tax, enterprise-inclined economy; and a low rate of inflation. There was much there of value.
Let us look at what has happened to those manifesto promises since May 1997. On the first, taxation, your Lordships are aware of the statements made by the Prime Minister about taxation and the right honourable gentleman's intentions with respect to it before the Labour Government came to office. As late 430 as 29th March 1999, Barbara Roche MP, at that time the Financial Secretary to the Treasury, said in a speech at the CISCO conference:We are cutting taxes so that more businesses large and small will invest, grow and prosper".Noble Lords will have heard on a number of occasions my noble friend Lord Saatchi go over the record of the Government on taxation over the past two years. The burden of taxation has been going up steadily. By the time when we expect the general election to take place, it will be no less than 37.5 per cent of the total GDP created in the nation.
Your Lordships will be fully aware of the £5 billion increase in tax that resulted from the attack by the Government on the pensions industry. Your Lordships will be aware of the increasing taxes on fuel. Your Lordships will be aware of the increasing taxation of the family. Your Lordships will be aware of the increasing taxation on housing transactions. Indeed, throughout the expected life of the Government there will have been no less than a £40 billion increase. That is the scale of the tax bill that we shall face. That must be measured against the promise the Government gave before the election and the statement made by Mrs Roche not so long ago.
I turn to the question of savings. On 3rd December 1997, the right honourable Alistair Darling spoke at the Pro-Share annual awards dinner in London. He said that,We want to encourage people to save and invest. We want to build a savings culture. That is good for individuals, good for business, and is therefore good for the country as a whole".Over the past two-and-a-half years the savings ratio of households has dropped from 10.5 to 5 per cent. It has halved. What kind of encouragement is it to the culture of saving when we see the attack launched on the pensions industry right at the beginning of this Government? What is the point of attacking private savings on the one hand when welfare policy is supposed to be encouraging private savings on the other? The drop in the savings ratio is one of the most damning indictments of the economic policy of the Government.
Then there is the question of productivity. In the Chancellor's speech to the CBI on 20th May 1997, the right honourable gentleman said:We will identify the barriers to growth and productivity and then we will relentlessly work to remove them".Over two years later, in the Mais Lecture on 19th October 1999, we hear the Chancellor saying that,Policies to encourage higher productivity will be the theme of the Government's pre-Budget report on 9th November".Some noble Lords may be aware that productivity is now running at one-third of the level at which it was running during the term of office of the previous government. The United Kingdom's position in the productivity league table is dropping steadily.
I turn finally to the question of regulation. Before the election, the right honourable gentleman the Chancellor of the Exchequer stated in the Labour business manifesto of April 1997 that Labour would,not impose burdensome regulations on business".431 Yet noble Lords will be well aware that the increase in red tape in the past two-and-a-half years has been manifest, and that the extra costs on business have been authoritatively measured at at least £5 billion, no less than £4,500 for each small business.
Those are the facts that have to be measured against the promises made by the Government at the beginning of their term of office. Perhaps noble Lords should not be surprised at this record because it is clear to me—and I trust to your Lordships as well—that the Government brought with it into its term of office a great deal of ideological baggage. I listened with great interest to the speech of the noble Lord, Lord Harrison, about the single market, its benefits and the powerful cutting edge that the single market would apply to the entrepreneurial performance of the United Kingdom. But never forget that, when the Single European Act came before another place in 1986, the Labour Party voted against it.
The great problem that the Labour Party and the Government still have is that they cannot come to terms with the effect that international capital markets have on social justice. Although their policy may seem like the Conservative policy, the attitude of those members of the Government who formulate that policy is still ambiguous. A graphic illustration is the debate that we had on the IR 35 tax in the previous Session. In theory, the Government like enterprise, but in practice they cannot bear to see the fruits of enterprise kept by those who are entrepreneurial.
That ambiguity is manifest in the gracious Speech. On the one hand we find measures such as the trustees Bill, the Post Office Bill, the limited liability partnerships Bill and the insolvency Bill, all seeming to open up the market and underline the importance of entrepreneurship. But then, by contrast, we find the regulation of utilities Bill, the financial services and markets Bill, and the Bill which bears on rail regulation, all of which move in the other direction.
So which side of the fence are the Government going to fall when the chips are finally down? Are they going to go for enterprise and international competition? Are they going to go for all those things about which the noble Lord, Lord Harrison, spoke so eloquently? Or are we going to see the Government go back into their previous incarnation? It is very hard to discern from the gracious Speech in which direction the Government are going. But, on the record of the past two and a half years, my predictions are extremely pessimistic.
§ 10.2 p.m.
§ Lord McIntosh of Haringey
My Lords, I was stung momentarily by the noble Lord, Lord Saatchi, when in his opening speech he teased us about the use of the word "modernise". So I looked through my speaking notes—realising as the debate went on that I should use fewer and fewer of them—and found the word five times. I believe I have eliminated it without any difficulty. In other words, as so often, the noble Lord 432 is tilting at an Aunt Sally. There really is no significance in the change of wording in New Labour; it is the ideas that we must look at.
I agree with the noble Earl, Lord Russell, that there is real difficulty in bringing together the three parts of this debate: industrial, economic and social affairs. My noble friend Lord Longford challenged me to do that, and at the end of my remarks I shall try to do so, foolhardy though that may be. The noble Earl is right. The debate has been wide-ranging and it has been very difficult to find a single theme—the noble Earl described it as being "in neutral". I do not know that I have been able to do that, although I believe there is a single theme in the way the Government are approaching these matters in the three departments with which the debate is concerned.
I shall not spend a great deal of time repeating what my noble friend Lord Sainsbury, in opening the debate, said so ably about the progress that we have made in the past two and a half years in the reform of the British economy. We have established a platform of economic stability, although some people do not like the phrase. That is evident because of the fruits of that platform in low and stable inflation and record levels of employment. But it is clear that we still have challenges ahead with which the gracious Speech is concerned, and it is upon those that I shall concentrate my remarks this evening.
Before I turn to the specific legislation which it is my duty to expound, it is necessary to respond to as many of the points raised in debate as I can. I begin with the issues raised by the noble Lord, Lord Taverne. In a generally supportive speech, he expressed concern about the high pound and, curiously, high interest rates. The slick answer to the high pound is that most of the rise that has taken place in recent years occurred under the previous government. I do not rely on that answer. There has been a rise in the value of the pound, but a look at the most recent quarterly figures indicates both that manufacturing output has risen over the period—it is the fastest quarterly rise for almost five years—and that the export of manufactured goods rose by 8 per cent in the third quarter of this year. That is a significant rise. Where manufacturing industry has had difficulties, which I do not underestimate in any way, the figures show that they have been based more on failures in overseas demand—which are now being rectified as the world economy recovers from some of the problems of recent years—than on the high pound or high interest rates.
I do not underestimate the problems in Sandwell, to which my noble friend Lord King of West Bromwich referred, and they apply also in many other parts of the country. My noble friend Lord Shore, the noble Viscount, Lord Oxfuird, and the noble Baroness, Lady O'Cathain, all spoke to this point eloquently. I described the attack on interest rates by the noble Lord, Lord Taverne, as curious because they are at a historically low level. In particular, as he acknowledged, long-term interest rates, which are the real determinants of investment, are at their lowest for 433 30 years and are very close to those in the European Union. Even for short-term interest rates the gap between this country and Europe is narrowing.
The noble Lord, Lord Wade, and others referred to variations in employment and development in different regions of the country. I agree that matters are still worse in many other parts of the country, but the differences in levels of employment between regions are less than they were and are declining rather than increasing. The main reason I want to challenge the view that we are not doing anything for manufacturing industry is because of the changes that we have made in business taxation particularly for small and medium enterprises. Corporation tax is, after all, at the lowest level ever. There have been so many competitive advantages given to business by government policy that I find it difficult to sustain the criticisms that I have heard from noble Lords.
The platform of stability that we have established and maintained on the past two and a half years has sought to put an end to the cycle of boom and bust which damaged our economy in the past. Surely, it is recognised by the many noble Lords on both sides of the House who have been in business—I make no party political point—that it is instability and insecurity about the future which is most damaging for business investment and decisions.
The noble Baroness, Lady O'Cathain, said that she was not a Cassandra, and I agree. Cassandra was always right. But the noble Baroness has fears for the future, which I respect. I respect her views a good deal more than those of Mr Maude, Mr Hague and Mr Redwood, who said only a year ago that we were engaging in Peter Pan economics, that this was a downturn made in Downing Street and that everything was heading for hell in a handcart. Unlike the noble Baroness, Lady O'Cathain, they opposed the independence of the Bank of England. They were wrong. I believe that the noble Baroness, too, is wrong, but only time will tell whether the measures that we have put in place work out in the long term. Surely, even the noble Baroness, Lady O'Cathain, will agree that the framework for monetary and fiscal policy which we have established and which is based on clear objectives, well-understood procedural rules and a greater degree of openness, has the capability of continuing to develop a platform for economic stability to which we have referred.
I have to return to the accusations about the tax burden. I was interested to hear the way in which the accusers have changed their tactic. The noble Lords, Lord Saatchi and Lord Boardman, both described the tax burden as being the fastest growing in Europe. I assume that both were relying on the OECD report which was published within the last month. They both appear to have forgotten that that report was based on 1997 figures—a year in which their government was in charge for four months out of the 12—and only on preliminary estimates for 1998. What is much more significant is that as a result of the last Budget the tax-GDP ratio is lower this year than last year. The tax ratio in the two following years will also be lower than last year. Under the plans of the previous government 434 these rates would have been higher than the latest projections for this year and for the next two years. The average household will be £380 a year better off as a result of the last Budget. As I have said, we have introduced the 10p rate of tax and cut the basic rate to 20p. Business tax rates have been cut to the lowest level ever.
I was slightly confused by the noble Lord, Lord Saatchi, who introduced a new measure of tax burden. He believes that the relevant criterion is taxes against prices against inflation. Is he saying that if inflation were to rise and the percentage were to change, we would be doing well? It is a very curious argument that we should seek to measure the tax burden against inflation rather than against the more normal criterion of GDP.
While I am on that subject, I take issue with what a number of noble Lords have said about regulations.
§ Baroness Hogg
My Lords, the noble Lord may recall that I offered the page references earlier. Will he therefore accept from me the figures in the pre-Budget report which show that net tax and social security as a proportion of GDP in the last year of the previous government was 35.3 per cent; that this year it is 37 per cent and that by the end of this Parliament it will be 37.2 per cent?
§ Lord McIntosh of Haringey
My Lords, I have already made the comparison with the figures for the previous government. Of course the figures in the pre-Budget report are correct, and I have never attempted to say otherwise. This is becoming a theological argument. I am very serious. The differences between 35 per cent and 40 per cent of GDP are much more vulnerable to change through the GDP than through taxation measures, let alone as regards the taxation burden, which is much more affected by fiscal drag than by changes in tax rates.
I am not in any way saying that the accusations made by the Opposition are true but even if they were, the kind of figures being talked about—namely, the difference between 36.8 per cent and 37.2 per cent, or whatever—are of no fundamental economic significance. Economists who look at these issues and are concerned by the effect on economic behaviour know that expectations are the important consideration. They know that expectations of tax burdens have not changed significantly.
However, I do not wish to leave the noble Baroness, Lady Hogg, the noble Lord, Lord Cavendish, or the noble Lord, Lord Blackwell, who was most vehement, without a word on regulation. The figures simply do not bear out what was said. One can take the gross number of regulations. The statutory instrument register shows that the last government introduced over 10,000 statutory instruments between 1994 and 1996 compared with 8,500 in the two years from May 1997. But I do not claim that that has any real significance. Of our 8,500 regulations, only 384—it is 4.5 per cent—imposed any costs on business. The vast majority have no cost impact. Some are road closure orders. Some are 435 regulations which either reduce costs or are beneficial. For example, the DTI has made 48 orders licensing companies as public telecommunications operators.
I do not think that we should pay too much attention to the claims that are made about the number of regulations. I believe that we have to take very seriously what is inevitably a continuing battle against over-regulation of business and in particular of small and medium enterprises. That is why we give such weight to the work of my noble friend Lord Haskins and his deregulation task force.
I could not quite understand the drift of the complaint about him by the noble and learned Lord, Lord Fraser. It seems that he is doing a rather good job in the Cabinet Office without being paid as a Minister. Everything he does is accountable to Parliament through Ministers in the Cabinet Office. If he is working well, as I think that he is, I do not see what complaint noble Lords can have.
§ Lord Fraser of Carmyllie
My Lords, the Minister took the time to intervene in the limited time I had to speak. I ask him to respond to the specific point I put to him. There is a reference in the gracious Speech to what the Government propose to do with regard to regulation. I put a specific point to him about what I understood lay behind the proposal. The noble Lord has now had about four hours to discover whether or not what I suggested was accurate. Could he now please respond to me?
If the Government intend to deregulate, is the proposal that they will take the opportunity through secondary legislation to reform primary legislation?
§ Lord McIntosh of Haringey
My Lords, I thought that I was being kind in not responding to the noble and learned Lord. He suggests that there is something wrong in using secondary legislation to remove regulations imposed by primary legislation. I remind him of the Deregulation and Contracting Out Bill 1994 in which Mr Michael Heseltine, of his party, made a virtue of using secondary legislation to change primary legislation which was damaging. Does the noble and learned Lord suggest that we should not continue with that policy?
§ Lord Fraser of Carmyllie
My Lords, I seek to discover from the Minister the Government's policy on the matter. At this point he is being extraordinarily evasive about it. If the noble Lord wishes to say that he will pursue further what we intended, let him say so. Alternatively, if there is some further extension will he please explain what is meant by the expression to be found in the gracious Speech?
§ Lord McIntosh of Haringey
My Lords, what an extraordinary intervention. Of course we shall continue with the deregulation—
§ Lord McIntosh of Haringey
My Lords, I am answering the question. We shall continue with the 436 deregulation using the powers given to us by the Deregulation and Contracting Out Act 1994. If that proves to be insufficient we shall seek further powers in primary legislation. There is no concealment and no difficulty whatsoever about that. However, the noble and learned Lord has kindly let me off one problem.
I also had difficulty with the argument about capital gains tax and business start-ups. My noble friend Lord Gavron, in his excellent maiden speech, made the point clearly, but I did not understand the argument of the noble Lord, Lord Jacobs, for a cut in capital gains tax for non-business assets. The whole point about singling out business assets for cuts in capital gains tax is to concentrate tax cuts precisely in response to the points made by my noble friend Lord Gavron, the noble Baroness, Lady Sharp, and others. The real need is for positive help for small businesses starting up, particularly high-tech businesses. We are establishing R&D tax credits to meet exactly the point the noble Baroness made. But to change capital gains tax in general, other than for business assets, as the noble Lord, Lord Jacobs, and the noble Baroness, Lady Hogg, appeared to demand, would be wide of the purpose and, I believe, a great mistake.
My noble friend Lord Lofthouse made a powerful plea for the mining and mining equipment industries. I can give him the undertaking for which he asked; that we shall study his speech carefully. However, I hope that to some extent he will be reassured if I reaffirm our commitment to a diverse energy base. That is the basis on which the much diminished coal industry carried on and it is an important issue for us in considering the matters he raised.
Several noble Lords commented on the DTI Bills, which were introduced by my noble friend Lord Sainsbury. I am pleased to say that many noble Lords were supportive. The noble and learned Lord, Lord Millen, in a particularly well informed maiden speech, welcomed the insolvency Bill and spoke about bad debts. As a businessman who was almost brought to bankruptcy by the bad debts incurred by others, I am cautious about changes to insolvency provisions. However, the report of the committee with which the noble and learned Lord was involved made a major contribution to our thinking on the subject.
My noble friends Lord Harrison and Lord Haskel, the noble Earl, Lord Selborne, and the noble Lord, Lord Blackwell, welcomed the e-commerce legislation. I thought that the noble Lord, Lord Blackwell, gave 0.3 of a cheer rather than three cheers in the context in which he properly set e-commerce. I hope that he is right about the opportunities it creates; I hope that he is wrong about our attitude to them. I hope and believe that he is wrong in suggesting that our general attitude towards business would inhibit the beneficial growth of e-commerce. The noble Lord complained that the Bill is a year late. That is true, but perhaps he will agree that the effect of consultation required us to think again about a number of key aspects. We have done so and the Bill is better as a result.
437 The noble Lord, Lord Cooke of Islandreagh, referred to the utilities Bill in the context of Northern Ireland. I am grateful to him for his comments, which we shall certainly bear in mind.
My noble friend Lord King was kind enough to refer to the Limited Liabilities Partnership Bill, which I introduced last week and which will have its Second Reading next week. I hope that noble Lords will feel ready to take part in that debate.
Before referring to particular Bills, I want to respond to the point made by the noble Lord, Lord Cavendish, about the delivery of public services. That is most relevant to the e-commerce Bill. I do not know whether he appreciates the significance of the Prime Minister's dedication to the cause and the pledge which the Prime Minister gave. The noble Lord called it a modernising big idea; I do not know that we call it that particularly as I am not using the word "modernising" in this speech. The Prime Minister is certainly dedicated to the idea of electronic government; of opening up all the possibilities of electronic communication between government, taxpayers, citizens and all who have to deal with government in any respect.
I shall quickly race through the three important Bills which I must introduce to your Lordships. The first is the Government Resources and Accounts Bill, which is the implementation of resource accounting and budgeting—the biggest reform programme in the management of public finances since the time of Gladstone.
The noble Lord, Lord Cavendish, asked whether that meant that the Treasury had finally understood the difference between capital and revenue. The Treasury will not like my saying so, but the answer is "yes". The Bill will enable the full implementation of resource accounting and budgeting. It will improve the way in which Parliament votes and scrutinises public spending. Departments will produce the equivalent of the main financial statements as in commercial accounts, in particular, a balance sheet and the equivalent of a profit and loss statement. That does not mean that the Treasury is wrong to ignore cash accounting. As my noble friend Lord Gavron said, cash flow is important to a small business. It is important also to the Treasury. Large amounts of interest money are dependent on it. Therefore the two forms of accounting will be run concurrently for a considerable time. We shall be able to use those as the means by which public spending is planned and controlled.
The Financial Services and Markets Bill has properly attracted a great deal of comment. As stated in the gracious Speech, financial services lie at the heart of a modern economy. The financial services industry is one of our country's greatest success stories. It accounts for 7 per cent of our national income, employing over one million people. The City of London is one of the three leading global financial centres. It owes its success to its reputation for innovation and integrity. The noble Lord, Lord Bagri, with his distinguished service at the London Metal 438 Exchange, bore witness to that. It is home to hundreds of foreign banks. It is a major insurance centre. It is the global leader in foreign exchange dealing, not only the City of London. I shall not be able to respond in detail to the noble Baroness, Lady Carnegy, but Edinburgh is after all the UK's second financial centre and the Bill will provide advantages for Edinburgh, Manchester, Leeds and others as well as London.
The Bill establishes a single statutory regulator—the Financial Services Authority—which will be a world class regulator for a world class economy. It will have a coherent set of powers, clear lines of accountability and clarity of purpose. We want to have light-touch regulation where possible and consumer protection where necessary. The FSA will have statutory responsibilities to maintain market confidence, protect customers, promote consumer awareness and reduce financial crime. Whether it will provide the positive duties which my noble friend Lord Grabiner, in an excellent maiden speech, described as being against the common law, I do not quite know. I do not believe that what I have said is an answer to him. However, we have made a lot of progress in the Bill. It was published in July 1998. The noble Lord, Lord Burns, and his joint committee published their excellent report. In response to the comments made, I believe that it is fair to say—as would the noble Lord, Lord Burns, if he were here—that although we have been accused of ignoring him, we have accepted almost all of the recommendations and have agreed still more of them in principle. There are a few areas where we have reasoned and reasonable disagreements with him or where decisions are yet to be made. One of those areas is in relation to mortgages, to which my noble friend Lord Grabiner again referred. I was going to reply to the noble and learned Lord, Lord Fraser, but I see that he has gone so I shall not answer him. Therefore, we have taken account of the interests of both the City and of consumers in the formulation of the Bill.
The noble Lord, Lord Boardman, suggested that somehow there was unreasonable statutory immunity for the FSA. The only immunity is for civil action for damages for actions in good faith. That immunity was supported by the Burns Committee. In every other respect there is a great deal of accountability by the committee. The financial community will have access to an independent tribunal. There will be an independent complaints investigator. The FSA will be subject to judicial review. The arrangements in the Bill fully reflect the requirements of the European Convention on Human Rights. Consumers will be protected by a single, one-stop shop ombudsman.
I miss the noble and learned Lord, Lord Fraser. I want to make a point to him and I shall. Exactly what he asked for will be provided in a code of market conduct to demonstrate clearly what is considered acceptable practice by practitioners.
The third Bill I turn to is the child support, pensions and social security Bill. However, before I do that, perhaps I may say to my noble friend Lady Wilkins, who made an impressive maiden speech, that the issue she raises of young people leaving care and living 439 independently are matters for the Department of Health. My noble friend Lord Hunt will refer to them when he intervenes in tomorrow's debate. It is better if I do not overlap with him. The same applies to the Care Standards Bill which was referred to by the noble Baroness, Lady Barker and the noble Lord, Lord Listowel. Yes, it is important that we should emphasise the quality of service as well as the physical conditions. The noble Lord, Lord Hunt, will refer to that.
Again trespassing to some extent on Department of Health matters, the noble Lord, Lord Rix, urged the rights of people with learning disabilities. Perhaps he will not mind my saying that he reminds me of the Trotskyists I used to know in the Labour Party who gain one victory and want something else. They are quite right. Good luck to the noble Lord.
I find myself in great disagreement about the Bill with the noble Earl, Lord Russell. I believe he misunderstands the Bill to a considerable extent. The noble Earl states that instead of reforming the Child Support Agency, we should go back to the courts. Apart from anything else, that was not the conclusion of the Commons Select Committee, chaired by his honourable friend Archy Kirkwood, which unanimously took the view that we should not go back to the courts. Apart from anything else, the courts only dealt with cases involving divorce and property. Even then their enforcement record was not all that good. Three-quarters of the cases with which the Child Support Agency has to deal do not involve divorce or property. They involve issues of compliance rather than enforcement. I urge the noble Earl to bear that in mind when he debates the Bill with my noble friend Lady Hollis.
An important change being brought about in the Bill—
§ Earl Russell
My Lords, is the Minister provided with an answer to the points made by the Magistrates' Association about the costs the courts were able to devote to enforcement? Have the Government given any thought to what could have been done if that power had been strengthened?
§ Lord McIntosh of Haringey
My Lords, the Government always gives consideration to the views of the Magistrates' Association. It is always true that, if unlimited resources were available, we could improve the record of enforcement. That does not mean that we could deal with the four-fold increase in the number of cases which have to be covered by the present Child Support Agency.
By this Bill we are creating a more easily understood system. The current system is extremely difficult for both parents and Child Support Agency staff to understand. It results in the CSA spending 90 per cent of its time chasing information and only 10 per cent of its time chasing payments. We will simplify the system by applying a new, simple formula based on the 440 percentage of net income: 15, 20 or 25 per cent according to whether there are one, two or three children.
More importantly, because of the £10 disregard, there will be an incentive for the absent parent to co-operate because he knows that the child will benefit. The present parent—perhaps that is not the correct term—
§ Lord McIntosh of Haringey
There will be an incentive for the parent with care to seek the support of the Child Support Agency because the child will benefit. That is a huge change which my noble friend Lady Hollis has achieved and it will transform the work of the Child Support Agency. At the present time 30 per cent of parents using the CSA pay nothing whatever towards the upkeep of their children. We cannot allow that to continue.
Perhaps the noble Lord, Lord Saatchi, who was the only noble Lord to refer to pensions, will forgive me if I pass over that in view of the time.
On the issue of community punishments, to which the noble Earl, Lord Russell, referred, it is a fact that one in five of the 125,000 offenders given community sentences each year are subject to breach action. Those convicted of a criminal offence cannot expect to receive public money when they fail to meet their obligations to society. We are piloting benefit sanctions for offenders who do not comply with their sentence. I fail to see how we can have any research without the kind of pilot projects we are discussing.
§ Earl Russell
My Lords, I am most grateful to the Minister for giving way. Could those pilots include provision for finding out what happens to those who are disentitled? That would be a legitimate way of meeting my point.
§ Lord McIntosh of Haringey
My Lords, I cannot conceive how anybody could carry out a pilot without doing exactly that.
I want to respond now to my noble friend Lord Longford who asked, in genuine puzzlement, what the difference was between the Labour and Conservative Parties with regard to fairness and enterprise. The straightforward answer is that in a large way we are putting money in the pockets of the poor. Seven million families will benefit from the increase in child benefit; 2 million individuals will benefit from the minimum wage; all pensioners in need will benefit from the minimum income guarantee; 1.5 million will benefit from the working families' tax credit. By that simple criterion of putting money in the pockets of the poor, we are certainly doing something very different.
My noble friend seems to feel that we have to do that by increasing tax. But despite what my noble friend Lord Healey said many years ago about making the pips squeak, we see increasing taxes on the rich as tackling the symptom rather than the cause; nor do we see the kind of benefits seen by the noble Lord, Lord 441 Kingsland. Surely the right approach is to deal with the unemployment trap and the poverty trap. At the heart of this is creating a society in which no group or individual is trapped in poverty or socially excluded. We recognise that while those who work have a responsibility to do so; those who cannot work have a right to security and support. Work, where it is an option, provides the best route out of poverty and social exclusion and this Government, through reforms of tax and benefit, are making work pay. This is the first Chancellor for many years who has dared to speak of full employment—and I assure the House that he means it.
The legislative programme for the coming Session will further reform the welfare state, giving a better deal to families and pensioners; ensure a better deal for consumers; reform the management of public finances, and help to create the right atmosphere in which 442 innovative investment can flourish. In looking up "Conservatism" in his thesaurus, the noble Lord, Lord Saatchi, described it as digging in his toes and digging in his heels. If he does those two at the same time, he will never move.
§ The Earl of Longford
My Lords, I congratulate my noble friend on a brilliant speech, but is he aware that he has not begun to answer my question?
§ Moved, That the debate be now adjourned until tomorrow.—(Lord Bach.)
§ On Question, Motion agreed to, and debate adjourned accordingly until tomorrow.
§ House adjourned at twenty-one minutes before eleven o'clock.