Sitting of 1 December 1998

Preamble
The House met at half-past Two o'clock
PRAYERS
[MADAM SPEAKER in the Chair]
WAYS AND MEANS

  SESSIONAL RETURNS
  Ordered,
  That there be laid before the House Returns for Session 1997–98 of information and statistics relating to—

  (1) Business of the House;

  (2) Closure of Debate, Proposal of Question and Allocation of Time (including Programme Motions);

  (3) Sittings of the House;

  (4) Private Bills and Private Business;

  (5) Public Bills;

  (6) Delegated Legislation and Deregulation Orders;

  (7) European Legislation, etc;

  (8) Grand Committees;

  (9) Chairman's Panel; and

  (10) Select Committees.—[The First Deputy Chairman of Ways and Means.]

Oral Answers to Questions
  FOREIGN AND COMMONWEALTH AFFAIRS
  The Secretary of State was asked—
  FOREIGN AND COMMONWEALTH AFFAIRS

    New Zealand
    Mr. Dafydd Wigley: What representations he has received from the New Zealand Government on matters relating to trade between New Zealand and the United Kingdom. [61419]
    The Minister of State, Foreign and Commonwealth Office (Mr. Derek Fatchett): There have been no formal recent representations from the New Zealand Government on trade-related matters, but the New Zealand and United Kingdom Governments regularly co-operate on various matters, including trade.
    Mr. Wigley: I am grateful for that answer and glad to understand that the New Zealand Government have not become over-enthusiastic about the difficulties with trade in sheep that arise from our domestic problems in the sheep sector. Will the Minister keep the New Zealand Government abreast of developments in that sector, so that they understand the difficulties under which farmers
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    have been labouring in the United Kingdom? Hopefully, within a year or so, we may be able to withstand the full rigours of trade once again.
    Mr. Fatchett: I am happy to give the right hon. Gentleman that commitment. We continue to discuss a range of trading issues with the New Zealand Government, including the trade in lamb, and we will certainly take up the points to which he referred.
    Dr. Julian Lewis: Will the Minister confirm that there is no prospect of this country trading its successful first-past-the-post electoral system for the disastrous proportional representation system, which has done so much to undermine parliamentary democracy in New Zealand?
    Mr. Fatchett: I congratulate the hon. Gentleman on a very wise question. From my own perspective, I would say that we had a great deal to learn from New Zealand on that issue.

    Middle East Peace Process
    Mr. Lawrie Quinn: When he next expects to meet President Arafat to discuss the implementation of the Wye agreement; and if he will make a statement. [61420]
    Mr. Neil Gerrard: If he will make a statement on the current situation regarding the middle east peace process. [61382]
    The Secretary of State for Foreign and Commonwealth Affairs (Mr. Robin Cook): We will be doing everything we can to build on the breakthrough in the middle east peace process secured at Wye Plantation. Yesterday, the Minister of State, Foreign and Commonwealth Office, my right hon. Friend the Member for Leeds, Central (Mr. Fatchett), who has responsibility for middle eastern affairs, attended the donors' conference in Washington, and he has flown through the night to be with us today. He announced a package of assistance to the Palestinian authority and the United Nations Relief and Works Agency for Palestine refugees in the near east totalling more than £100 million, both bilateral and European Union.
    My right hon. Friend the Prime Minister met President Arafat in London immediately before the Wye talks and we both met Mr. Netanyahu last week. We have congratulated both President Arafat and Mr. Netanyahu on their statesmanship in achieving the Wye agreement and on their courage on the start to implementing it.
    Mr. Quinn: I thank my right hon. Friend for that statement. Does he agree that both the Prime Minister of Israel and President Arafat have shown considerable courage in concluding the Wye agreement? Will he tell us how the Government, with their European partners, will ensure that both sides show the same resolve after this period of negotiation to move to a final and lasting peace in the middle east?
    Mr. Cook: I very much share the sentiments behind my hon. Friend's question. As I announced, Britain is

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    committed to major financial support for the peace process and is the largest donor to UNRWA, which deals with so many of the Palestinian social issues. One way in which Europe can greatly assist in taking forward the peace process is by achieving momentum on economic issues. I am delighted that we have secured the opening of Gaza airport and we must now achieve the same for the Gaza seaport. If we want peace to be deeply rooted, we must prove to ordinary Palestinians in Gaza and the west bank that they will also benefit in material terms from the peace process.
    Mr. Gerrard: Does my right hon. Friend agree that, important though the Wye agreement may be, the fundamental foundation for lasting peace must be the Oslo accords and UN resolutions, some of which have still not been implemented, and which recognise the illegality of the occupation of the west bank and of the continued expansion of settlements there? Will he do what he can to emphasise to both sides, but in particular to the Government of Israel, that lasting peace and real security can be achieved only through honouring the promises made at Oslo?
    Mr. Cook: My hon. Friend is right to draw attention to the fact that, although the Wye Plantation agreement is an important step, we have a long way to go. The significance of that agreement is that it is a step in the right direction, and it gives us an opportunity to build momentum to take us towards the final stages talks that were envisaged at Oslo. On the settlements, I said last week when Mr. Netanyahu was here, and have said on many occasions, that we would not want either side to take any provocative unilateral action that made it difficult to make progress on peace negotiations.

    Zimbabwe
    Mr. Graham Brady: What recent representations his Department has made on the issue of land reform in Zimbabwe; and if he will make a statement. [61421]
    The Minister of State, Foreign and Commonwealth Office (Mr. Tony Lloyd): We have expressed our concern to the Zimbabwe Government about their decision to issue 841 acquisition orders. In our view, the Zimbabwe Government's actions represent a major step back from the position agreed by all sides at the land conference in September. We will continue to press the Zimbabwe Government to follow the due process of law, including the right of appeal against acquisition and for fair compensation.
    Mr. Brady: I am grateful to the Minister for making clear the Government's opposition to the policy of the Zimbabwe Government in seeking to confiscate land, which is illegal, as he said, as well as racist. Will he make it clear that that condemnation extends to ceasing British Government aid to Zimbabwe should confiscation proceed?
    Mr. Lloyd: No, because British aid to Zimbabwe is not programme aid. It is not Government-to-Government aid, but aid tied to projects that are designed to help the poorest people in Zimbabwe. It would be irresponsible to
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    say that we wanted to pursue—as we do—co-operation with the Zimbabwean Government that would have the effect of distributing land in a way that favoured the poor of Zimbabwe while threatening to cut off aid designed to help precisely those poor Zimbabweans.
    Mr. Ian Davidson: Although I have criticisms of the way in which the Zimbabwean Government have proceeded, does the Minister accept that inequality of land ownership and control must be addressed? Will he undertake that the British Government will do all that they can to ensure that the severe difficulties faced by many ordinary Zimbabwean citizens are addressed?
    Mr. Lloyd: Yes, consistent with what I have already told the House, the British Government have always made it clear that we would support a process of land acquisition that had certain features. The process must be transparent; at the moment, we do not have that certainty. It must be fair, which means that there must be an adequate compensation package and an adequate challenge regime. In particular, the land transfer must favour the very poorest people in Zimbabwe, not those who seek to better their own already well-funded personal circumstances. Within that, we will help the Zimbabweans, but not on the basis of their present proposals.
    Mr. Michael Howard: Does not the project aid of which the Minister spoke enable the Government of Zimbabwe to spend huge sums on prosecuting a war in the Congo? Is there not a case for reconsidering that aid in the light of that expenditure and of their land expropriation proposals?
    Mr. Lloyd: No. That is not the effect of our assistance, which, whether the right hon. and learned Gentleman likes it or not, goes to the poorest people in Zimbabwe. If he believes that the Zimbabwean Government would replace British project aid with Zimbabwean Government assistance, he is wrong. It is in those circumstances that we will continue our policies for poverty eradication in Zimbabwe. We call upon not only the Zimbabweans, but all parties to the war in the Congo, to operate an effective ceasefire, get round the conference table and end the conflict.

    Cuba
    Mr. Colin Pickthall: When he next intends to visit Cuba to discuss the state of its economy. [61383]
    The Minister of State, Foreign and Commonwealth Office (Mr. Tony Lloyd): My right hon. Friend the Foreign Secretary has no plans to visit Cuba. However, my noble Friend the Under-Secretary made the first ministerial visit to Cuba under this Government in October, followed in November by my hon. Friend the Minister for Trade. Both discussed with their Cuban interlocutors, among other things, the prospects for the Cuban economy.
    Mr. Pickthall: Does my hon. Friend share my dismay that, last month, the United States stepped up its trade

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    sanctions against Cuba? Does he agree that there is much to be gained by Britain and Cuba stepping up their trade relationships a gear, for example, in respect of food and engineering equipment exports? Cuba is desperate for both. Is there any way in which Britain can help Cuba in the development and marketing of the meningitis vaccine that it has produced, which would greatly benefit Britain and the world?
    Mr. Lloyd: My hon. Friend knows that it has been the policy of successive Governments that constructive engagement with Cuba will be more helpful in bringing it to acceptance of basic democratic standards and human rights than the process pursued by the United States. He is right to point out that we already have many exchanges, in terms of both trade and science. A team from Imperial college will shortly make a third visit to Cuba to conduct a further assay and to follow up clinical tests in connection with the meningitis vaccine pioneered in Cuba. That vaccine is significant, and I met the research team who developed it some time ago. It may become the world's first and only effective vaccine against meningitis B. If the Imperial college team concludes accordingly, it will be put to the Medicines Control Agency for approval for licensing within the United Kingdom. That will be a great step forward, not only in the fight against meningitis, but for Cuban medical research.
    Mr. John Wilkinson: Is the Minister aware that Latin America will perceive Her Majesty's Government's policy toward Cuba as selective and partial, in that no fewer than six of Her Majesty's Ministers have visited that tiny island, whereas a comparable number have not visited other Latin American countries? The economy of Cuba is, to be candid, a basket case. Is the Minister aware that our exports to Cuba went down last year, from £24 million to a mere £19 million; that our exports to Chile, which has a population similar to that of Cuba, went up to £210 million—a rise of £44 million; and that our imports from Chile went up by £220 million, whereas imports from Cuba fell by £4 million? Is that a good investment on the part of Her Majesty's Government?
    Mr. Lloyd: I am genuinely astonished if the Opposition believe that we should denigrate Cuba in particular and the Caribbean in general. If that is the import of the hon. Gentleman's comments, he is seriously wrong. We want to have strong relations, not only with Cuba and the Caribbean as a whole, but, beyond that, with Latin America. Our relations with Latin America have improved enormously in recent years and are continuing to improve. There has been, and will continue to be, a steady flow of ministerial visits, not only to Cuba, but to other parts of Latin America. That is good for Britain and good for Latin America. I am sorry that the hon. Gentleman does not share that view.

    Western Sahara
    Mr. Jeremy Corbyn: When he expects the UN to be able to conduct a referendum on the future of the western Sahara. [61385]
    The Minister of State, Foreign and Commonwealth Office (Mr. Derek Fatchett): The UN has proposed to Morocco and the Polisario that a referendum should take place in December 1999. We hope that that deadline can be met.
    Mr. Corbyn: Does the Minister share my disappointment that the Secretary-General of the United Nations should have proposed yet another delay, for a further year, to the referendum? Is not the real reason for that delay Morocco's obstruction of the process of registering refugees living in the camps and other people living in the region? Is not the UN being seriously obstructed in its desire to hold the referendum, which should have been held many years ago?
    Is there anything my hon. Friend can do to ensure that MINURSO—the United Nations mission for the referendum in Western Sahara—carries on and is fully funded, and that the refugee camps are fully supported and funded? Above all, will he do what he can to ensure that the date of the referendum—currently December 1999—is significantly brought forward? If it is not, the UN will be brought into disrepute. I fear that Morocco will try to delay the referendum beyond that date and that the people of the western Sahara will be denied the opportunity to decide their own future.
    Mr. Fatchett: It is important that the referendum should take place and that it should take place as early as possible. I share my hon. Friend's concern about the further delay. He is right to say that the referendum must be fair and be seen to be fair, and that it must have the confidence of all the parties. He is also right to conclude that the best way forward for the western Sahara is for the referendum to take place, because that is the only way in which we shall be able to determine the feelings and aspirations of the local people.

    EU Enlargement
    Mr. Bernard Jenkin: If he will state his objectives for the Austrian EU presidency in respect of EU enlargement. [61386]
    The Secretary of State for Foreign and Commonwealth Affairs (Mr. Robin Cook): The screening process for the first six candidate countries has now been completed for half of all the chapters of European law. Substantive negotiations have now begun on a quarter of them. At the Vienna European Council, we shall review the recent report of the Commission on all the dozen candidate countries, which concluded that most candidates were making good progress with their preparations for membership.
    We must not underestimate the real problems in achieving the biggest-ever enlargement in the history of the European Union. Nevertheless, the Government firmly believe that the problems of enlargement are much less important than the benefits from strengthened prosperity, stability and democracy in central and eastern Europe.
    Mr. Jenkin: It is now nine years since the Berlin wall came down; since then, some 20 to 30 former Soviet bloc states have been crying out for full inclusion in the institutions of western democracy. Has the EU not failed those countries, which are struggling to emerge from

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    poverty and misrule, by continuing to apply protectionist policies? Is it not clear that the European Union's real agenda is not enlargement, but monetary union, tax harmonisation and the Franco-German agenda of a single European state? A date is still to be set for the admission of a single former Soviet bloc state.
    Mr. Cook: I gently remind the hon. Gentleman that I can take ministerial responsibility only for the last 18 months of those nine years. He might like to address his remarks to those who served on the previous Conservative Government's Front Bench. If he wishes to draw a parallel, he should look at what occurred during the last enlargement involving Austria, Finland and Sweden. It took three years to negotiate enlargement for only three countries, all of which were wealthy and were net contributors to the European budget. It is a bit rich for the hon. Gentleman to complain that we have not completed enlargement in nine months for 12 countries, all of which are poor and will be net recipients from the European budget.
    Ms Rachel Squire: Does my right hon. Friend agree that this Government have demonstrated a far more positive commitment to Europe in the past 18 months than the previous Government demonstrated in 18 years? As a result, this Government have far more credibility in arguing for progress on European enlargement than the previous Government who, for 18 years, adopted a narrow, isolationist approach to everything European.
    Mr. Cook: The proof of my hon. Friend's point is borne out precisely by the fact that this Government have managed to start beef exports to Europe while the previous Government started a beef war with Europe.
    However, there is room for further improvement. I can report to the House that the Minister of State, Foreign and Commonwealth Office, my right hon. Friend the Member for Gateshead, East and Washington, West (Ms Quin), is convening a new ministerial group to co-ordinate our policies on Europe. It will tomorrow hold its first meeting, which will be chaired by my right hon. Friend, and is an excellent advertisement for joined-up government.
    Mr. Menzies Campbell: Will the Foreign Secretary take this opportunity to state to candidates for membership of Europe and to existing members that the Government have no intention of proceeding down the road of tax harmonisation and that there is everything to be gained, and nothing to be lost, from concerted European-wide action against tax evasion?
    Mr. Cook: The hon. and learned Gentleman will be aware that a Treasury Minister is leading the work within ECOFIN to take action on unfair tax breaks, which attract industry and investment from our country as well as from others in the European Union, in areas where we have a clear national interest in ensuring that there is a level playing field.
    There are no proposals to harmonise either the zero rate on value added tax or income tax, for that matter. I do not believe that any such proposals could muster majority, never mind unanimous, support. We should all try to deal with the reality of Europe rather than with the fantasies that some people are trying to sell.
    Dr. Norman A. Godman: Does my right hon. Friend agree that reform must precede
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    enlargement? For example, there can surely be no enlargement before the common agricultural policy and the common fisheries policy are reformed. We should perhaps also examine the modus operandi of the European Parliament and the European Court of Justice.
    Mr. Cook: My hon. Friend is absolutely correct: the onus for preparing for enlargement does not rest entirely with the candidate countries. The European Union must also do its work. A particularly important part of that work is reform of the CAP, which the European Union is committed to completing by next March. We believe that the 30 per cent. cut in intervention prices on beef, the 20 per cent. cut on cereals and the 15 per cent. reduction in milk quotas will have a major impact on the CAP and will save British consumers £1 billion a year. That is a prize well worth fighting for in the interests of Britain and of enlargement.

    Qualified Majority Voting
    Mr. John Bercow: If he will make a statement on the extension of qualified majority voting as a result of the treaty of Amsterdam. [61387]
    The Minister of State, Foreign and Commonwealth Office (Ms Joyce Quin): As the hon. Gentleman will be aware from the parliamentary ratification of the Amsterdam treaty, qualified majority voting was extended in several areas, including the fight against fraud and promoting transparency. The Government believe that those extensions are very much in Britain's interests.
    Mr. Bercow: Now that the Foreign Secretary's German counterpart, Joschka Fischer, has admitted that the creation of a single European state is the decisive task of our time, how can the right hon. Lady guarantee that qualified majority voting will never be used to introduce measures that would force this country to be a mere province of a single European state?
    Ms Quin: It is clear from what was agreed at Amsterdam and in previous treaties that unanimity remains the rule in important areas, including institutional and treaty changes, and we are in favour of that. I remind the hon. Gentleman that significant extensions of qualified majority voting took place under the Maastricht treaty and probably the most significant extension was introduced by the Single European Act passed by Lady Thatcher's Government.
    Mr. Mike Gapes: Does my right hon. Friend agree that to make the European Union more democratic and functionally efficient, any EU enlargement will necessitate an extension of some forms of qualified majority voting? It is palpably absurd for the Conservative party, on the one hand, to call for enlargement seemingly without restrictions and, on the other hand, to oppose any extension of qualified majority voting.
    Ms Quin: We are keen to make enlargement a success. As was made clear at Amsterdam, we shall have to consider the institutional arrangements foreseen in that

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    treaty to prepare for enlargement. We believe that we can do that while safeguarding the important areas that can progress only if all countries are in agreement.
    Mr. Michael Howard: First, I congratulate the right hon. Lady on her new, co-ordinating responsibilities, which the Foreign Secretary announced a few moments ago. I thank the Foreign Secretary for his astonishing admission that, for the past 18 months, the Government's European policies have not been properly co-ordinated.
    In view of the apparent importance now attached by the Government to the veto, does the right hon. Lady now accept that the extension of majority voting at Amsterdam was a mistake? Is it not undeniable that she and her colleagues will now be utterly helpless in the face of measures that they claim to oppose, such as the extension of works councils?
    Ms Quin: It is difficult to take seriously the right hon. and learned Gentleman's point about co-ordination because he was a member of a Government who were disunited on European issues. The purpose of the co-ordinating committee, which I shall chair, is simply to build on the success achieved by the Government during the British presidency, when Departments worked together effectively.
    I am sorry that the right hon. and learned Gentleman insists on repeating completely unjustified scare stories which have been substantially aired during the past few days. The measures agreed under the Amsterdam treaty were very much in Britain's interests and do not affect the policy areas to which the right hon. and learned Gentleman referred.

    Kosovo
    Ms Gisela Stuart: What discussions he has had with countries bordering the Former Republic of Yugoslavia about Kosovo. [61388]
    The Secretary of State for Foreign and Commonwealth Affairs (Mr. Robin Cook): I visited Bulgaria, Macedonia and Romania in late October and Slovenia last week. Kosovo was one of the key elements of my discussions in all four countries. In Macedonia, I met Professor Agani, the leader of the Kosovar negotiating team, who expressed the thanks of the Kosovar people for Britain's efforts to secure an end to the conflict.
    All four countries are developing closer ties with the European Union. So long as President Milosevic pursues policies of ethnic confrontation, he will condemn Serbia to be left further behind in the modern Europe.
    Ms Stuart: Will my right hon. Friend assure me that the Government will continue to do everything to support those in Kosovo who seek a peaceful, negotiated solution to the problem? More specifically, what are the Government doing to support the development of independent media in the area?
    Mr. Cook: I assure my hon. Friend that we are very much in the lead on the ground in Kosovo, making a reality of the Holbrooke package. As from this week,
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    73 British personnel will be attached to the Kosovo verification mission—one of the largest contributions from any European or international state. Media repression is a matter of grave concern, especially in view of the media law that was passed in October, which prevents all Serbian broadcasters from rebroadcasting foreign news agencies, including the BBC World Service. I have, therefore, asked my officials to investigate the feasibility and funding of a transmitter in the region which can rebroadcast those foreign news agencies. President Milosevic may not want his people to hear the truth, but it is important that we do not let his ban prevent them from doing so.
    Mr. Michael Trend: In the light of recent discussions on Kosovo, have the Government decided to send extra troops to Macedonia to join the NATO extraction force—troops, one supposes, which may be called on to operate in Kosovo? There was a report to that effect in yesterday's edition of The Daily Telegraph, and one on the BBC today, although I understand that no announcement has been made. Surely in this matter of potentially far-reaching consequences, the House is entitled to know what is going on.
    Mr. Cook: There have been repeated statements on Kosovo; I made one only a couple of weeks ago. Indeed, preparations with regard to Macedonia, about which there have been questions, have been no secret. We have repeatedly said that we are willing to support the quadripartite unit in Macedonia; it flows from our discussions with Germany. We will be the second largest contingent in that force. Of course, we fully intend to hold President Milosevic to his assurance that the verification mission will not in any way be intimidated or hampered by the Serbian security forces, although it is important for reassurance that our capability is near at hand.
    Mr. Ernie Ross: How will Her Majesty's Government ensure that the plight of refugees and displaced people is improved as winter approaches, so that we do not see again horrific scenes of them in the mountains or under inadequate shelter?
    Mr. Cook: I am pleased to say that we have achieved substantial progress in removing refugees from the open hillside and that, over the past two months since the Holbrooke package, the numbers have fallen from 50,000 to a few hundred. Nevertheless, my hon. Friend is quite right to express concern about the continuing position of refugees. Although they have returned to their former villages, many of their homes have been shelled. It is, therefore, essential that we continue the humanitarian effort to ensure that they are sheltered, fed and, with proper health support, are able to survive throughout the winter. Britain is very much in the lead in supporting that effort, and will continue to do so.

    Myanmar
    Rev. Martin Smyth: What recent representations he has made to the Government of Myanmar concerning treatment of the Karen population. [61389]
    The Minister of State, Foreign and Commonwealth Office (Mr. Derek Fatchett): We regularly make representations to the Burmese authorities on the treatment of ethnic minorities, including the Karen—most recently on 25 November.
    Rev. Martin Smyth: I welcome the Minister's response. Does he agree that the State Peace and Development Council has perpetrated one of the most tragic scenarios of ethnic cleansing and genocide? What can be done internationally to stop such events, prevent further atrocities and aid victims, bearing in mind that hundreds of thousands of Karen and others have been so eliminated?
    Mr. Fatchett: What has happened to the ethnic minorities in Burma is a true but sad reflection of the regime's nature. That is why we constantly argue for the international community to be vigilant, to maintain the pressure and to work for a restoration of democracy and a respect for human rights. We have provided £250,000 of humanitarian aid in the 1997–98 financial year. I also discussed the issue in Thailand earlier this year in order to ensure some co-ordination in providing support for ethnic minorities.
    Mr. David Heath: Given the uniquely abhorrent nature of the regime in Myanmar and the quite uncalled-for action against the Karen, Karenni and other peoples, will the Minister give an absolute assurance that the Government and the European Union will do everything possible to put pressure on the Myanmar authorities? To that end, will he explain why Mr. Win Aung, Foreign Secretary designate of Myanmar, was admitted to this country last week?
    Mr. Fatchett: The answer to the hon. Gentleman's first question is yes, we shall continue to give that commitment.
    The second question refers to the Burmese ambassador, who returned to the United Kingdom as ambassador, not as Foreign Secretary. When he becomes Foreign Secretary he will enjoy no right to enter the United Kingdom because of the European Union's common position. We shall certainly safeguard it; indeed, the United Kingdom strengthened that position at the most recent meeting of the General Affairs Council.
    My position on Burma is now so strong that I have been told today that the Burmese authorities will not allow me to visit Burma. I see that as an accolade for the work that we have done and for our fight for human rights and democracy in Burma.
    Mrs. Maria Fyfe: One of the Government's first actions was to stop financing trade missions to Burma, and many human rights activists throughout the world were very pleased about that. However, does my right hon. Friend agree that the campaign must be stepped up—that the destruction of human rights in Burma is so severe that we need a campaign on the scale of that mounted against apartheid in South Africa? What action is being taken by European Union states to advance that cause?
    Mr. Fatchett: The European Union toughened its position in October 1998. We have strengthened our
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    position against the regime on visa issues. We have also issued a statement advising people not to go to Burma as tourists. The position is strong. At the General Assembly of the United Nations on 12 November 1998, we co-sponsored a resolution again condemning the Burmese regime for its violation of human rights.
    I very much share my hon. Friend's views. This issue should unite the House in condemnation of a regime that is unique in the atrocities that it commits against its own people.

    Iraq
    Mr. Stephen Day: If he will make a statement on the United Kingdom's relations with Iraq. [61390]
    Mr. Dale Campbell-Savours: If he will discuss with his American counterpart future policy towards Iraq. [61391]
    Mr. Christopher Fraser: What recent representations he has made to the Government of Iraq concerning the status of United Nations Security Council resolutions. [61392]
    The Secretary of State for Foreign and Commonwealth Affairs (Mr. Robin Cook): We have made it clear to Saddam Hussein that our forces remain in the Gulf and remain on alert. If he breaks his undertaking to allow UNSCOM to resume inspections, we are prepared to take military action without further negotiation.
    There will be no let-up in our pressure on Saddam Hussein until we are satisfied that he no longer has weapons of mass destruction with which to inflict on neighbouring countries the terror tactics that he uses to oppress his own people.
    Mr. Day: The right hon. Gentleman will be aware that, at a recent Prime Minister's Question Time, my right hon. Friend the Leader of the Opposition suggested to the Prime Minister that it should be a prime objective of British policy to remove Saddam Hussein from power, and the Prime Minister appeared to agree with that suggestion. In the light of BBC reports that imply that the Government do not agree that removing Saddam Hussein is their prime objective, will the right hon. Gentleman please tell the House the exact position?
    Mr. Cook: I do not know which BBC programmes the hon. Gentleman has been watching, but I have repeatedly said on the BBC that the whole world, including the Government, would welcome the removal of Saddam Hussein. That is why my right hon. Friend the Member for Leeds, Central (Mr. Fatchett), the Minister with responsibility for matters in the region, recently met representatives of all the opposition groups in Iraq and explored with them how we might help them. However, if they are to succeed, those groups must work together more closely.
    Mr. Campbell-Savours: On the same question—my question having been asked earlier—is it not true that the American Administration has gone further? Following

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    passage through Congress of the Iraqi Liberation Act, effectively American foreign policy is now to engage more openly in the removal of Saddam Hussein, and America is helping that process by allocating $90-odd million to the Iraqi National Congress. Is there not a marginal distinction between our policy and American policy, and cannot we be more robust and adopt what I believe to be a better American position?
    Mr. Cook: I am sorry to say that, as my hon. Friend's question has already been asked, it has already been answered. However, to respond to his last point, I do not think that it would be possible to find a country that has been more robust than the United States and the United Kingdom on the issue of Iraq. During the recent crisis, we gave authority for our pilots to take off unless Saddam backed down, which he did there and then.
    We have shown great robustness on this issue and we shall certainly continue to do everything possible to assist those who wish to return Iraq to a more accountable system of government, and one that would engage with the international community. In the meantime, we shall continue our work to ensure, as best we can, that we provide the assistance that is required—humanitarian relief for the people of Iraq to spare them from the consequences of the way in which they have been oppressed by Saddam Hussein.
    Mr. Fraser: What part does the fate of Kuwaiti prisoners play in assessing Iraq's compliance with United Nations resolutions?
    Mr. Cook: The 600 people who were removed from Kuwait and are currently believed to be detained, or who were certainly detained for a time in Iraq, feature in United Nations Security Council resolutions. Therefore, if Iraq wishes fully to comply with those resolutions, which is a condition for the lifting of sanctions, it has either to produce those 600 people or to give a clear account both to Kuwait and to the international community of what has become of them.
    Mr. Tam Dalyell: What would be the objective of bombing Baghdad, a city of 4.5 million people with two ambulances, neither of which has oxygen, and a fire engine that possibly does not work—Dresden, perhaps?
    Mr. Cook: The House would not expect me to disclose specific targeting plans, but I can say—
    Mr. Dalyell: If my right hon. Friend talked to them properly, it would help.
    Mr. Cook: My hon. Friend is very free with his allegations, so perhaps he will allow me to respond to them.
    The plans that have developed take very careful account of the need to minimise casualties as far as possible, and especially civilian casualties. There is therefore no question of a mass bombing of Baghdad on the scale that my hon. Friend suggests.
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    I am sorry to hear that Baghdad has only two ambulances. There is absolutely no sanction to prevent Iraq from importing all the ambulances that it requires. Thanks to a resolution pioneered by the United Kingdom, Saddam Hussein can export $10 billion-worth of oil to pay for the import of food, medicines and humanitarian goods. If he is so short of ambulances, we would be delighted to assist, through the Sanctions Committee, in ascertaining how many ambulances he needs—if he would choose to put them on the list that he submits in place of some of the other claims for humanitarian goods that he has made, such as glass ashtrays, cigarettes, alcohol and plastic surgery.
    Mr. Edward Leigh: How do the Government envisage Saddam Hussein will be removed?
    Mr. Cook: As I have said to the House, we have already met the Iraqi Opposition. We shall continue to work with them. We have no legal base for using force for the removal of Saddam Hussein, but we will use force to make sure that Security Council resolutions are implemented.
    Mr. Harry Barnes: Do the Government share the Pentagon's estimate that 10,000 people would be killed in any bombing of Iraq? If not, what is the Government's estimate? Do they think that, whatever the number, it is a price worth paying?
    Mr. Cook: First, I do not recognise that figure. We do not share that figure. Secondly, undoubtedly the price for Iraq's behaviour and Saddam Hussein's Government is being paid by the Iraqi people. I urge my hon. Friend to read the reports of the United Nations on human rights in Iraq, one of which was published only last month. He will see from them that, every year, thousands of people in Iraq pay with their lives for being ruled by Saddam Hussein.
    Mr. Andrew Robathan: Will the Foreign Secretary publicly express his support for the campaign of INDICT set up by the hon. Member for Cynon Valley (Ann Clwyd)? Will he act as best he may in international circles to have Saddam Hussein and others arraigned before either an international tribunal or an international criminal court as soon as possible, and thereby give hope to the many millions of people in Iraq who are terrorised by Saddam Hussein and want to see the international community to take action against him and split him from the peoples of Iraq?
    Mr. Cook: I am pleased to say to the hon. Gentleman that the Government fully support INDICT. My right hon. Friend the Prime Minister is sending a message to the press conference today expressing that support on behalf of the Government. We are ready to look at any means by which Saddam Hussein may be brought before any international tribunal, but the Government's immediate priority is to ensure that we succeed in the establishment of an international criminal court, which would be very relevant to Saddam Hussein and to any future Saddam Hussein.

    International Criminal Tribunals
    Ms Helen Southworth: If he will make a statement on his Department's support for the international criminal tribunals in Rwanda and the former Yugoslavia. [61393]
    The Minister of State, Foreign and Commonwealth Office (Mr. Tony Lloyd): We strongly support the work of both tribunals and have given substantial assistance to both of them, in addition to our mandatory contributions.
    Ms Southworth: What steps will the Government will take to ensure that President Milosevic complies with the UN resolutions and provides support for the Yugoslav tribunal's investigations into alleged crimes? Will my hon. Friend undertake that the British Government will consistently take a lead in making it clear to those who commit crimes against humanity—such as torture, murder and the taking of hostages—that they will find no hiding place anywhere in the civilised world?
    Mr. Lloyd: We deplore the fact that President Milosevic has so far refused to co-operate with the international criminal tribunal on Yugoslavia, particularly with respect to Prosecutor Judge Arbour's desire to investigate recent events in Kosovo. There is no doubt that, under Security Council resolutions, he is as much liable to co-operate with the tribunal as he is to play a constructive role in, for example, political dialogue with the Kosovo Albanians or in humanitarian relief. That is not negotiable. The international community will continue to insist that the tribunal's work should not be interrupted by Milosevic or by any of those acting in his name.
    On the more general issue, the clearest signal that we can give of the need for international justice in the modern world is the fact that yesterday the permanent representative of the United Kingdom at the United Nations signed the international criminal court's treaty, which means that Britain has committed itself to the long process of ratification of the treaty and to it becoming an effective instrument against the Milosevics, Pol Pots and Saddam Husseins of the future.
    Mr. Geoffrey Clifton-Brown: Does the Minister think that, if crimes against humanity are to be dealt with, an international criminal tribunal is the way forward, whether for Yugoslavia or Rwanda? Would that not also be the correct way to view crimes against humanity in Chile? Should not the former President Pinochet be allowed to return to Chile so that the Chilean authorities can prosecute him, if that is their wish? Should there not be a properly constituted international court if such crimes are to be dealt with?
    Mr. Lloyd: I shall pass over the inconsistency in the hon. Gentleman's comments. Of course we support the internationalisation of the process. That is why, as I told the House, Britain signed the documents relating to the international criminal court yesterday in New York. That is an important step forward in the internationalisation of justice and a strong signal to the Pinochets of the future that their actions will not be tolerated anywhere on this planet. However, the hon. Gentleman knows as well as I do that, at present, responsibility for Mr. Pinochet lies with my right hon. Friend the Home Secretary, who will make his views known in the fulness of time.

    Private Military Companies
    Mr. Andrew Mackinlay: What assessment he has made of the impact of the activities of private military companies operating wholly or in part from the United Kingdom on the implementation of UK foreign policy objectives. [61394]
    The Minister of State, Foreign and Commonwealth Office (Mr. Tony Lloyd): Our concerns relate principally to private military companies which are involved in the supply of military equipment or other controlled goods and services in breach of the UK's national commitments, or which supply, or offer to supply, mercenaries or related military services. The activities of such companies could have—and, in some cases, clearly would have—an adverse impact on the implementation of the Government's foreign policy objectives.
    Mr. Mackinlay: Is not one of the lessons of the Sandline affair that such private mercenary companies can cause acute embarrassment to the UK? Many people in this country find it repugnant that private military firmsmercenaries—can operate in the UK. Will my hon. Friend consider advancing within the United Nations a convention to control and monitor such outfits? Will he also consider bringing legislation before the House of Commons so that we can monitor, control and police those outfits? As we license the sale of arms, why do we not license and control those people who organise armies? It is time that we addressed ourselves to legislating to control them.
    Mr. Lloyd: There is no doubt that the Government deplore the action of mercenaries. In a few weeks, I shall meet the United Nations special rapporteur on mercenaries, Mr. Ballesteros, whose mandate is to examine the use of mercenaries as a means of violating human rights and impeding the exercise of people's right to self-determination. That is the usual way in which mercenaries operate.
    I must say to my hon. Friend that we have a problem. He referred obliquely to the UN convention on mercenaries, which we think is unworkable for legal reasons. The definition of mercenaries is not one that would get through a British court, and cases would simply fail. We are presently examining with other Departments the experience in South Africa, and in other countries that have looked at the legislative route, to find out what lessons that holds for Britain and whether it would offer a way forward to control those unacceptable activities.

    Nigeria
    Mr. John Smith: What discussions he has had with EU member states about Nigeria. [61395]
    The Minister of State, Foreign and Commonwealth Office (Mr. Tony Lloyd): We have frequent contact with our European Union partners about Nigeria, at all levels. In response to the improved political and economic

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    climate, the EU agreed a new common position on Nigeria on 1 November. That lifts most of the measures that had been in place since 1993. It will be reviewed no later than 1 June 1999, with a view to lifting the sanctions once the democratically elected civilian Government are installed. A copy of the text has been placed in the Library.
    Mr. Smith: I am grateful to my hon. Friend for that reply. While I recognise the role that Britain has played, and is playing, in ensuring a return to democracy in Nigeria, can he assure the House that he, in conjunction with our European partners, will ensure that the Government do everything they can to make sure that next year's elections in Nigeria are successful?
    Mr. Lloyd: There is no doubt that the electoral process, which kicks off this weekend with the local elections, is a seminal moment in the modern history of Nigeria. All Nigeria's friends would recognise that. Britain has been as closely involved as any friendly country, and we have been entirely supportive of the practical steps taken by the Head of State, General Abubakar, in moving his country towards a properly democratically elected Government. We will continue to support that process. Clearly, the House would also expect us to be vigilant to make sure that those who would derail the process are deterred from that. We want a civilian president and a civilian Government.

    EU Enlargement
    Mr. Dennis Skinner: When he expects to meet other EU Foreign Ministers to discuss enlargement. [61396]
    The Minister of State, Foreign and Commonwealth Office (Ms Joyce Quin): My right hon. Friend the Foreign Secretary and I will attend the General Affairs Council in Brussels next Monday, which will discuss enlargement.
    Mr. Skinner: Now that Germany is beginning to throw its weight around again, does it not worry my right hon. Friend the Minister, and other Ministers on the Treasury Bench, that some of the countries that are due to become applicants for the Common Market could be little more than satellites of Germany, based upon the fact that, geographically and in trading and economic terms, they are much nearer to Germany than to Britain?
    There has been a position that has been long held—it was evinced by Mrs. Thatcher—that more countries joining the Common Market would result in its weakness. There is a possibility, now that the position is changing on the continent, that the opposite could be the case. The net result for our Chancellor of the Exchequer—whom we want to use his veto on any harmonisation of tax plans—could be that more qualified majority voting is the order of the day because of those satellite countries.
    Ms Quin: Having talked with many of my counterparts in the countries that are applying to join the EU, I am conscious that they are proud that they now have their independence and that they are in an era that is different from the domination that they had to endure during the
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    cold war. They are not keen to become satellites of any country, but they are keen to participate in the European Union of the future.
    My hon. Friend mentioned trade, which is an important aspect. Germany is probably the country that does most trade with those countries, but I am keen for Britain to improve its trade—both exports and imports—with them. It is important for us to work closely with them in the years ahead leading up to the enlargement of the EU.
    Mr. Patrick Nicholls: Can the Minister say what effect enlargement will have on the work reported in this week's edition of The Week, which says that "valuable progress" has been made in regard to tax competition? It especially commends the work of the committee chaired by the Financial Secretary to the Treasury, which has been considering measures to bring about "tax levels significantly lower" than those applying in other countries.
    Ms Quin: I, too, pay tribute to the work of the committee chaired by my hon. Friend the Financial Secretary, especially its efforts to tackle the tax evasion and competition that damage industry and chances of employment. I also applaud my hon. Friend's work in respect of the code of conduct, and on the way in which she has chaired the committee.
    Mr. Robert N. Wareing: Will next week's discussions include Cyprus's application to join the European Union? What has been the attitude of the Foreign Secretary's counterpart in the EU to that application, given that the Turkish Cypriots do not wish to take part in the negotiations?
    Ms Quin: The position on Cyprus is as outlined in a recent debate in the House. The Government feel strongly that the application should be supported and that it should be seen as an important catalyst in the efforts to bring about reunification of the island and a settlement of its problems. We believe that that view is shared throughout the European Union. We want to make progress with the application, while at the same time promoting efforts—including those of the United Nations—to bring about reunification in a way that will give both the Turkish and the Greek Cypriot communities a sense of security and financial and economic prosperity for the future.
    Miss Anne McIntosh: The Minister has emphasised the importance of trade with the applicant countries. Does she share my concern about rumours currently circulating in Brussels that the Czechs, Hungarians and Poles will unilaterally operate outside the Europe agreement, reject preferential rates of duty on exports of pigmeat from the European Union and apply the higher rate of duty within the World Trade Organisation? Will the Government take action in European circles to quash such moves?
    Ms Quin: I am always reluctant to respond to rumours, but there are many ways in which those issues can be discussed with the applicant countries. We meet them regularly, and when we do so we discuss a range of trading issues with the aim of achieving a fair balance between the interests of the European Union and the very real interests of the applicant countries.

    Indonesia
    Jane Griffiths: If he will make a statement about the United Kingdom's relations with Indonesia. [61398]
    The Minister of State, Foreign and Commonwealth Office (Mr. Derek Fatchett): We have substantial bilateral ties with Indonesia. We look forward to continuing to work with the Government of Indonesia in their efforts to bring about peaceful democratic reform and economic recovery.
    Jane Griffiths: What steps are the Government taking to help Indonesia with political reform? What assistance will they offer the Indonesian Government in that regard and also to support the Indonesian economy?
    Mr. Fatchett: We have encouraged the process of democratic reform because we think that it is the only way in which to build a new, stable Indonesia and to bring about economic recovery. When I was in Indonesia last month, I told President Habibie that we would help it to introduce democratic reforms, either bilaterally or through the European Union, by working on the procedures for elections. President Habibie acknowledged the nature of the offer, and I think we can say that we can look forward to working with the Indonesian Government on those issues and on human rights. I recognise, as does President Habibie, that progress can be made only through democratic reform.

    Ron Arad
    Mr. Frank Roy: What assessment he has made of the whereabouts of missing in action Israeli airman Ron Arad. [61400]
    The Minister of State, Foreign and Commonwealth Office (Mr. Derek Fatchett): There is no conclusive evidence of the fate of Ron Arad. We cannot be sure where he is, who is holding him or, indeed, whether he is still alive. I met the family of Ron Arad when I visited Israel in January. It is important that the missing service men are not forgotten.
    Mr. Roy: I thank my hon. Friend for his answer. Ron Arad was captured in the Lebanon in 1986—12 long years ago. While encouraging the more moderate elements of the Iranian Government, when my hon. Friend next speaks to that Government, will he ask them what they know about the whereabouts of the airman and the other Israeli service men who have been missing since the early 1980s? I am sure that he agrees that 12 years is a long time for families not to know the whereabouts of their loved ones.
    Mr. Fatchett: I have no difficulty in agreeing with my hon. Friend. When I met members of Ron Arad's family earlier this year, I could see the suffering that they had undergone over all those years. We will take every opportunity to raise the issue with anyone who can provide information on the whereabouts of Ron Arad and other missing service men.

Points of Order
3.31 pm
Mrs. Theresa May: On a point of order, Madam Speaker. I wish to seek your guidance on a statement that was made by the Minister for School Standards to hon. Members in a Standing Committee, and on the record of that statement. I have informed the Minister of this point of order.
On 18 November, in the Eighth Standing Committee on Delegated Legislation debating the Education (Infant Class Sizes) (England) Regulations, I referred to the fact that the regulations had been laid and had come into force during the parliamentary recess, thus ensuring that there could be no debate on them before they came into force. The Minister responded by saying that I should have spoken to Baroness Blatch, as the regulations had been announced on 27 April and discussed in the other place on 5 May. Column 21 of the Official Report of that Standing Committee debate refers to those statements.
I have spoken to Baroness Blatch. She has made inquiries in another place into the matter and I gather that the Minister's statement was false. The regulations were not announced on 27 April and were not discussed in the other place on 5 May. Indeed, I understand that, as the primary legislation was still going through the House, it would not have been possible to discuss the regulations, which were in the form of secondary legislation.
The Minister's comments to the Standing Committee were obviously misleading; I can assume only that she was given incorrect information by her officials. Madam Speaker, I seek your guidance on how the record on the matter can be set straight.
Madam Speaker: Neither I nor any occupant of the Chair in Committee can be responsible for the accuracy, or otherwise, of ministerial statements. I refer the hon. Lady to the Order Paper. Perhaps she will find ways of pursuing the matter. I am afraid that, in this instance, I cannot help her. I am not responsible for ministerial statements.

Orders of the Day

  Debate on the Address
  [SIXTH DAY]
  Order read for resuming adjourned debate on Question [24 November],
  That an humble Address be presented to Her Majesty, as follows:—
  Most Gracious Sovereign,
  We, Your Majesty's most dutiful and loyal subjects, the Commons of the United Kingdom of Great Britain and Northern Ireland in Parliament assembled, beg leave to offer our humble thanks to Your Majesty for the Gracious Speech which Your Majesty has addressed to both Houses of Parliament.—[Mr. Ashton.]
  Question again proposed.

  The Economy
  Madam Speaker: We now come to the main business. I have selected the amendment standing in the name of the Leader of the Opposition. Just after 10 o'clock, I shall ask for the amendment standing in the name of the right hon. Member for Yeovil (Mr. Ashdown) to be moved formally. I have had to impose a 15-minute limit on speeches by Back Benchers between the hours of 7 and 9 pm.
  3.33 pm
  Mr. Francis Maude: I beg to move, as an amendment to the Address, at the end of the Question to add:
  "But humbly regret that the Gracious Speech contains no proposals to save jobs or help businesses, but instead continues the policies that are pushing Britain's economy into a sharper downturn than is forecast for any other major EU economy; call on the Government instead to pursue policies of maintaining Britain's competitiveness by reversing its proposals which increase costs on business and to return to the policies conducted by the previous Government which left a golden economic legacy of low inflation, steady and sustainable growth and falling unemployment; and also urge the Government to make a clear statement of its position on the question of European tax harmonisation."
  The second Session of any Government should be a period of maximum purposeful activity. The Government have had the chance to play themselves in, to prepare major plans and to act in a genuinely long-term way. Instead, they have squandered the opportunity to make real and needed changes and to make genuine improvements to health and education; most reprehensibly of all, they have missed the chance to mitigate the effects of the economic downturn that Britain now faces, a downturn that was triggered by the Government's blunders and will be prolonged and deepened by their refusal to recognise their mistakes.
  Mr. James Plaskitt: Will the right hon. Gentleman give way?
  Mr. Maude: In a little while.
  The House will be surprised that the Chief Secretary to the Treasury has been entrusted with the debate. Last time he led for the Government, he got into seriously hot water for using his speech to bully the Bank of England's Monetary Policy Committee. "Major gaffe," the newspapers reported. "Chief Secretary on the Chancellor's carpet," they said, so it is surprising that the Chancellor of the Exchequer has let him out again.
  That is why we have heard so much from the Economic Secretary to the Treasury recently. This is the first Treasury event in the House for some time that has not been fronted by her. She is the Minister who steps in where her colleagues are forbidden to tread.
  Several hon. Members rose—
  Mr. Maude: I am overcome with these blandishments, but I give way to my hon. Friend the Member for Arundel and South Downs (Mr. Flight).
  Mr. Howard Flight: I thank my right hon. Friend. The Government have become control freaks to such an extent that they seem to
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  have circulated to Opposition Members their 10 questions to ask the shadow Chancellor today. To help them on their way, may I begin by asking the shadow Chancellor
  "why he is opposing the extra £40 billion for our public services"
  that the Government have guaranteed?
  Mr. Maude: The House will be grateful to my hon. Friend for saving a Government Back Bencher the trouble of having to read out that prepared intervention. As he knows, of course we are not opposing £40 billion extra for health and education. We are opposing the Government's failure to implement their own pledges on welfare reform, and their reversal of the fall in welfare spending as a proportion of national income spending, putting it back on an upwards path.
  Mr. Plaskitt: The right hon. Gentleman, within seconds of starting his speech, used the word "downturn". May I draw his attention to paragraph 9 of the minutes of the Bank of England's Monetary Policy Committee meeting of November 4 and 5, which state:
  "the tone of some public comment had moved from predicting a slowdown through a downturn ߪ That was extreme"?
  Is the right hon. Gentleman satisfied to have joined the extremists?
  Mr. Maude: The hon. Gentleman is off-message already, showing dangerous signs of thinking for himself. This may be shattering news to him, but the Treasury's own figures and the consensus view of outside forecasters demonstrate disbelief in the Chancellor's comments on the course of the economy. Outside forecasters are predicting a downturn. Although the hon. Gentleman undoubtedly thinks that he knows better, the Bank of England, the Confederation of British Industry and the Organisation for Economic Co-operation and Development do not believe the Chancellor's forecast. The hon. Gentleman may believe the forecast, but that may say more about him than it does about the others.
  The Chief Secretary to the Treasury is standing in today for the Chancellor. It is surprising that he has been allowed out on his own, but probably every other Treasury Minister is too busy harmonising. The Financial Secretary to the Treasury is busy chairing the European Union code of conduct on harmonising business taxes in the European Union. The Chancellor is even busier today, at the Economic and Finance Council, harmonising other taxes. It is lovely to see the Paymaster General in the Chamber—welcome back to him. He is busy deciding how to harmonise his business past with the requirements of the Companies Acts and of the House.
  Mr. Christopher Leslie: On a point of order, Madam Speaker. Earlier today, I was looking at page 421 of "Erskine May", which states:
  "In debate a Member is required to declare 'any relevant pecuniary interest or benefit of whatever nature, whether direct or indirect, that he may have had, may have or may be expecting to have'."

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  I notice, from the Register of Members' Interests, that the right hon. Member for Horsham (Mr. Maude) said that he undertakes remunerated advisory work for Morgan Stanley investment bankers. As we are debating the economy, should he not have declared that interest at the beginning of his speech?
  Madam Speaker: I cannot deal from the Chair with an interest if an hon. Member has already declared it in the Register of Members' Interests.
  Mr. Tony McNulty: Further to that point of order, Madam Speaker.
  Madam Speaker: I have dealt with it.
  Mr. Maude: The hon. Member for Shipley (Mr. Leslie), in his slavish desire to ingratiate himself with his masters, gets it wrong again. I stated in the Register of Members' Interests that I may from time to time undertake such work. He will be delighted and reassured to know that I have not done so. He has therefore missed the mark once again, as we are coming to expect from him.
  We support some things in the Queen's Speech. As my right hon. Friend the Leader of the Opposition said last Tuesday, we welcome partial privatisation of the Commonwealth Development Corporation. It will now become free to build on the valuable work that it has done previously with developing countries without being hamstrung by Treasury rules. Of course we welcome the conversion of the Secretary of State for International Development to the idea of privatisation and look forward with keen anticipation to hearing her arguing the case.
  I should now like to say a word about the financial services and markets Bill. Let me reassure the hon. Member for Shipley (Mr. Leslie) that I am on the boards of two companies that will fall to be regulated under that measure. Those interests are fully disclosed in the Register of Members' Interests. There is, therefore, a serious danger of my knowing something about the subject.
  The financial services industry is a British world-beating success story. Having it properly regulated so that the confidence of investors that their interests are adequately protected is not outweighed by the costs and burdens of the regulatory system is crucial, but the Government's handling of the Bill has been lamentable. They rushed clumsily into their plans last May, renaming the Securities and Investments Board and nearly precipitating the resignation of the Governor of the Bank of England. Having created turmoil, they then took 14 months to produce a draft Bill, which is quite simply a mess and has been widely criticised. It gives sweeping and ill-defined powers to the Financial Services Authority and probably breaches the European convention on human rights. It threatens huge extra compliance costs for firms, leading to more expense for savers and weakening the competitive position of the City in international markets.
  The Bill ran into a hail of opposition and criticism and the Government now admit that it cannot be introduced in anything like its present draft form. The Chancellor blames the instability of the global market on the lack of proper regulation, yet at home he cannot produce a Bill on time. The Financial Services Authority continues to
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  operate without proper statutory cover and there is continuing uncertainty and alarm in the City about the powers, scope and structure of the Government's regulatory regime.
  We shall be constructive in our criticism in order to get a better Bill on the statute book. We do not see the need to delay the Bill further into the next Session and we do not agree that it is appropriate for the carry-over procedure.
  Ms Sally Keeble: The right hon. Gentleman has declared his jobs in the sector which clearly give him an understanding of it, but does he accept that his interpretation will be from the producer side and not from the consumer side? He should not forget that the Bill aims to protect consumers and investors and to regulate the market.
  Mr. Maude: The hon. Lady misses the point that consumers have an interest in investment products being made available competitively in a way that gives them free choice. Consumers are not served by a system that places such heavy costs on the financial services industry, as they will suffer from a lack of choice and excessive costs. In this, as in any other sector, the cost of over-heavy regulation eventually falls on the consumer, as the hon. Lady ought to understand.
  Mr. Geraint Davies: How does the right hon. Gentleman square his argument for clarity in the regulatory regime with his declared view on the media that the Bank of England is either too independent or not independent enough? Which should it be—independent or not?
  Mr. Maude: The hon. Gentleman has done well. He has skipped one to nine and gone straight to 10. It is a pretty feeble question and he has asked it several times. The Chancellor of the Exchequer could not answer that question until three days after the election. I am not prepared to answer it three years before the next election.
  The economy should dominate the Government's thoughts and actions as Britain stands on the brink of the most severe downturn—[Interruption.] I am using that word—anywhere in Europe and north America. Incredibly, at a time when people's jobs and businesses are on the line, the Queen's Speech contained not a single measure to make it easier for anyone to get a job.
  Mr. Steve McCabe rose—
  Mr. Maude: I am going to make some progress now.
  By their decision not to include even one Bill that would make it easier for people to get a job or keep the one that they have, the Labour Government have made their priorities abundantly clear to the whole country.
  Mr. Dale Campbell-Savours: Perhaps I can further develop No. 8 on the list. The right hon. Gentleman cannot say that he does not know the answer, because he has been given notice of the question. Constituents of mine have asked me to ask the right hon. Gentleman a simple question. They say that they earn very low pay and are pleased that, after all these years, a Labour Government are introducing a national minimum

  681
  wage. The Conservatives want to block that and then remove it, I understand. Will the right hon. Gentleman confirm that, at the next general election, the Conservative party will stand on a platform of ending the national minimum wage and reducing the pay of many thousands of people in my constituency—yes or no?
  Mr. Maude: I have a high regard for the hon. Gentleman and I am sorry that he could not think of his own question instead of taking a handout from the Whips. The Leader of the Opposition said:
  "I think it would in fact be very foolish, and most people in the party accept it, if the party started writing its … plans now."
  That was the Leader of the Opposition—in 1995.
  Mr. Campbell-Savours: I have not asked what we said; I have asked the right hon. Gentleman what he thinks and what the Conservatives believe. Will their policy at the next election be to end the national minimum wage? If so, let us have a yes or no answer now, with no dithering.
  Mr. Maude: I admire the hon. Gentleman's persistence, but what was good enough for the then Leader of the Opposition, now the Prime Minister—[Interruption.] Labour Members are very much out of order now. They are criticising their leader. It is not acceptable for him to have said that he would not announce his plans then. That is what he said in 1995, but it is not good enough for them. I am surprised that they did not express their criticism at the time.
  Dr. George Turner: The amendment on the Order Paper, for which I assume that we are asked to vote, calls for a
  "return to the policies conducted by the previous Government".
  Surely the right hon. Gentleman will tell us to which policies he wants to return. Does he mean abolishing the changes that have taken place under this Government, such as the minimum wage? How can he expect the House to vote for a motion if he will not tell us what it means?
  Mr. Maude: The amendment means returning to policies that created high growth, low inflation, falling unemployment and rising living standards.
  Several hon. Members rose—
  Mr. Maude: It is a delight to see so many Labour Members wanting to intervene. I do not know whether all their pagers went off at once to make them all spring up at the same time. Perhaps they are being given a new line that has not yet been printed.
  Ms Helen Southworth: Does the right hon. Gentleman want to return to one of the dearly held policies of the past—interest rates of 15 per cent?
  Mr. Maude: That is No. 6. I shall let the hon. Lady into a secret: her party is in government now; we ask the questions.
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  Although the CBI reports that business confidence is at an all-time low, Government complacency is at an all-time high. Every time a Labour Back Bencher stands up to intervene, their arrogant complacency and refusal to answer basic questions about the Government's policies illustrate my point.
  Several hon. Members rose—
  Mr. Maude: I want to make a little progress now. I have been very generous in giving way and I think that we have almost gone through the list of 10 questions.
  Mr. Ivan Lewis rose—
  Mr. Maude: Perhaps the hon. Gentleman will ask the remaining questions together, which would save time.
  Mr. Lewis: The right hon. Gentleman cannot define the policies to which he wants to return because, at general elections, the electorate vote primarily on economic competence. The reason for the biggest landslide in living memory on 1 May 1997 was primarily the Conservative party's economic record of boom and bust. That is why the British people will not allow the right hon. Gentleman back into office to implement his policies.
  Mr. Maude: I think that the hon. Gentleman could have done a better job in clearing up the remaining questions. Again, I quote what the Prime Minister said when he was Leader of the Opposition:
  "I don't believe people do expect us to say well by such and such a date there will be X hundreds of thousands of jobs, we will tell you exactly what the minimum wage is now, we'll write our budget in advance of getting into power".
  If that was good enough then, it should be good enough now.
  Several hon. Members rose—
  Mr. Maude: I am going to make progress.
  Dr. Nick Palmer: On a point of order, Madam Speaker.
  Madam Speaker: I think that there will be a point of frustration if the hon. Gentleman is not able to intervene.
  Dr. Palmer: I am puzzled as to why the right hon. Gentleman is unwilling to deal with the points in the motion that he tabled. As a new Member, I am not clear whether it is in order for him to refuse to address the points in a motion that he tabled.
  Madam Speaker: That is not a point of order.
  Mr. Maude: I have been keen to give all Labour Members the opportunity to ask the prepared questions to earn their colours and to ingratiate themselves with the control-freak tendency, but I think that the patience of the House will soon diminish if that process continues.
  The arrogant complacency—[Interruption.] Every response that Labour Members make and every note in their braying voices illustrate their arrogant complacency and their refusal to accept that there are any problems.
  Dr. Desmond Turner: Will the right hon. Gentleman give way?
  Mr. Maude: No. I have said that I propose to proceed.

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  The Government have blamed everyone but themselves for the economic downturn. They have blamed the Asians, the Russians, Britain's managers and greedy workers; the Chief Secretary has blamed the Bank of England. No one can pretend that Britain is immune from international economic difficulties, but global turbulence makes it doubly important that policies are right at home. Britain's economy started to turn down before the Russian and Latin American problems surfaced. Most countries around the world are not sliding towards recession, yet every day there is more evidence that things are going wrong in Britain.
  The CBI survey shows that confidence in the service sector is slipping yet further. The Institute of Purchasing Management monthly survey shows that manufacturing output has fallen at its sharpest rate for seven years and that manufacturing industry has contracted for eight consecutive months. Is it any wonder that barely anyone believes the Chancellor's fantasy forecasts for economic growth? The Bank of England does not believe him, nor do the CBI or the Organisation for Economic Co-operation and Development—
  Mr. Martin Salter: Will the right hon. Gentleman give way?
  Mr. Maude: No. I am going to make progress.
  Even a Treasury publication shows that the consensus of outside forecasts is well below the Chancellor's forecast—for next year, the year after and the year after that. Only a handful of old faithfuls, headed by the chief economist at the Trades Union Congress, believe the complacent nonsense that the Chancellor hands out.
  The downturn was triggered by Government policy blunders and has been prolonged by their refusal to acknowledge the problems that they created. They made four basic blunders: the reckless spending spree—
  Several hon. Members rose—
  Mr. Maude: I think that Labour Members are all on question No. 2, which I have already answered. Social security spending is set to increase by £37 billion over the next three years, which is almost as much as the increases in health and education spending put together.
  Mr. Derek Twigg rose—
  Mr. Maude: The Labour party committed itself in its manifesto to cutting social security bills and the Prime Minister said the same immediately after the general election. Perhaps the hon. Gentleman will explain what went wrong. Why has the Prime Minister's clear pledge in absolute terms to cut social security bills resulted in an increase in social security spending of £37 billion?
  Mr. Twigg: The right hon. Gentleman has been asked this question many times. Will he tell us what the Conservative party would cut out of the £40 billion if they were in government?
  Mr. Maude: None of it. We have said so many times. I am sorry that the hon. Gentleman could not answer my question, which was: what went wrong with the Prime
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  Minister's clear pledge to cut social security bills and how has it turned into a £37 billion increase? He cannot answer it.
  The second blunder was the attack on savings, which fuelled spending and kept interest rates higher than they need have been, and the 17 tax rises, which have stoked inflation and put up interest rates. The Government have piled new costs on to businesses when they are least able to cope. Interest rates are higher than they need be and businesses are less able to withstand the downturn. What of the £40 billion in extra taxes and costs—no less than £1,500 per person employed?
  Mr. Salter rose—
  Mr. Maude: I will not give way, as I must make some progress.
  The Government's measures are also boosting inflation, as the Bank of England has said. The problems in the economy are getting worse and the Government simply will not accept them. Their new favourite topic is productivity. The Prime Minister, like the Chancellor and the Secretary of State for Trade and Industry, without a day's—
  Mr. Barry Sheerman rose—
  Mr. Maude: I will not give way. I intend to make progress.
  The Prime Minister, the Chancellor and the Secretary of State for Trade and Industry, without a day's business experience between them, have even had the impertinence to lecture business. The Prime Minister has said, "Be honest. Your fundamental problem is not high interest rates or a high pound; it is too few first-class managers." There is Labour's scapegoat, productivity and bad management.
  What does the Chief Secretary to the Treasury think that the chairman of BMW meant—I raised this in our last debate on the subject, but did not receive an answer—when he said in 1995:
  "Great Britain is currently the most attractive country among all European locations for producing cars"?
  What has changed since then? Now, BMW is having to be bribed by the Department of Trade and Industry to keep Longbridge open. It is the same plant, management and work force, but a different Government, and that is what has changed. They are a Government who have increased costs on business and made productivity worse. That is why barely a day goes by without more jobs lost and more business failures—[Interruption.]
  Madam Speaker: Order. The right hon. Member for Horsham (Mr. Maude) has made it clear that he will not give way for a while, so hon. Members should not persist in trying to intervene for the time being.
  Mr. Maude: Last Friday—black Friday—no fewer than 4,200 job losses were announced, including job losses in BMW, which was lauding Britain's productivity to the skies barely three years ago. Today, it has been announced that 1,250 jobs are to go at Courtaulds Textiles. That is what is going on in the economy. The Government should admit it and take steps to mitigate the effects.

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  The Queen's Speech was curiously silent on another important subject—
  Several hon. Members rose—
  Mr. Maude: No. I am making progress. The Speech contained much about the Government helping to prepare the European Union for historic challenges—talk of working with European partners to promote economic reforms and of preparations for the introduction of the euro—but nothing about the principal European issue of the day. If it were not so damaging to the country, a certain innocent pleasure could be had from the spectacle of the Chancellor tying himself in ever-tighter knots over European tax harmonisation. On that issue, as on so many before, the Government are trying to have it both ways and to be all things to all men.
  When the right hon. Gentleman is in Britain, he says that tax harmonisation is not the way forward for Europe and that Britain's tax decisions will be made in Britain. However, according to "The New European Way", which he has signed and which, apparently, was not drafted a million miles away from him,
  "We must make further progress in tax and benefit reform by co-ordinating savings and corporate taxation."
  In Britain, he says that no one is proposing any change in value added tax, but the European Commission has published a policy document entitled "A Common System of VAT", which states that the present system has to be replaced and advocates the abolition of the VAT-free circulation of goods, so there is such a proposal.
  The Chief Secretary to the Treasury (Mr. Stephen Byers): I regret the fact that the right hon. Gentleman did not read out the paragraph to which he referred, because he omitted some important words. For the record, I draw his attention to the words that he missed out. The document clearly states:
  "We must make further progress in tax and benefit reform to help safeguard and create jobs in Europe by implementing an effective code of conduct."
  I regret his failure to mention why that was necessary.
  Mr. Maude: I am grateful to the right hon. Gentleman for amplifying and confirming my point: there is a clear commitment in Labour policy documents to taking further a process of tax co-ordination and harmonisation that can only increase Britain's taxes to continental levels.
  Mr. Paul Marsden: Will the right hon. Gentleman give way?
  Mr. Maude: I am not giving way now, but I shall in a little while.
  In Britain, the Chancellor says that the central issue for Europe is not tax harmonisation. However, Mr. Monti, the European tax Commissioner, says:
  "As far as taxation is concerned, we have the UK fully on board."
  The Government cannot continue to have it both ways. Why cannot the Chief Secretary make an unequivocal statement on where the Government stand? The
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  Government seem to inhabit a parallel universe, where they have not done what they have done and where they did not say what they said.
  I would like the Chief Secretary to answer three key questions. First, does he agree with his colleagues on the continent that the single currency will tend to lead to tax harmonisation? The German Finance Minister thinks so. Mr. Lafontaine said:
  "It is necessary to harmonise tax policy. A unified currency area needs a fair and equal tax framework."
  The Austrian Finance Minister thinks so, too. He said:
  "EMU will make it imperative to start co-ordinating the sphere of taxation. The Social Democrat Governments will also have to look at harmonising price and wage policy."
  The French Finance Minister thinks so. He is confident about it; I do not know who has been tipping him the wink. He said that Britain would be
  "won round to tax harmonisation by the end of the German presidency"
  in the middle of next year.
  That is what the Chancellor's continental colleagues think. They have a clear opinion on the issue. What does the British Finance Minister think? Does he agree with them that the road to economic and monetary union also tends to lead to tax harmonisation—yes or no? A simple nod or shake of the head will do. The Chief Secretary nods; he agrees. [Interruption.] He is being particularly helpful and illustrates my point perfectly. Asked whether he agrees, first he nods and then he shakes his head.
  Mr. Byers: The right hon. Gentleman will have to wait for my speech, in which I shall address specifically the questions that he has raised in his.
  Mr. Maude: It is all things to all men: a nod one moment, a shake the next; yes to one side, no to the other. No wonder the Government are in chaos.
  I come to my second question. If the Chief Secretary cannot comment on the proposals from Europe—we wait with keen anticipation to hear what he will say—perhaps he can comment on Labour's policy paper. This revealing document states:
  "The single currency is bound to lead to closer integration in some areas for those member states that participate, though Labour believes member states must retain their own control over public spending levels and personal tax rates."
  What about the rest? Why is it Labour's policy only to protect personal tax rates? What about business tax rates, savings rates, savings taxes and stamp duty? Are they all up for grabs? Is the game up already?
  Mr. Paul Marsden: Will the right hon. Gentleman give way?
  Mr. Maude: I would give way to the Chief Secretary if he were prepared to answer my question. The Prime Minister has done the same thing and protected Britain's position on personal taxes only, with everything else left up for grabs. Will the Chief Secretary explain why? if he cannot, will he answer my third question and give us some

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  guidance on specific taxes? Will he give a binding commitment not to raise Britain's rates of stamp duty on house purchases to the level of our partners?
  Ms Keeble: Will the right hon. Gentleman give way?
  Ms Claire Ward: Will the right hon. Gentleman give way?
  Mr. Maude: I will give way to the Chief Secretary if he wishes to respond to my question. Will the rate be raised to the level of our partners—yes or no? He could again shake his head, nod or do both as before; at least we would have some idea. Will he veto the imposition of the withholding tax on savings, which will put 10,000 jobs at risk in the financial services industry? Will he use the veto to protect Britain's rates of value added tax—yes or no? Will he veto any European energy taxes—yes or no? Will he veto the harmonisation of corporation tax—yes or no?
  Perhaps the most ridiculous spectacle of all is cut by the Financial Secretary to the Treasury. In Britain, she introduced a tax break for the British film industry; we were told that it was a flagship measure, designed to promote employment, investment and opportunities. The hon. Lady and her friends were pretty pleased with themselves, but they reckoned without the chairperson of the European Union working group set up to eliminate harmful tax competition, who is busy clamping down on unfair tax breaks to particular industries, such as film making. The chairperson of the working group will come to the Treasury to demand action from the Financial Secretary and there will be an angry confrontation.
  Who will win that battle of the titans? Will it be the chairperson of the working group, or the Financial Secretary? Well, it turns out that they are one and the same person. The hon. Lady is going to face herself across the table, look herself in the eye and tell herself that such tax breaks are totally unacceptable and must be stopped immediately. Will she face herself down and insist on fighting for Britain's tax sovereignty against her European alter ego? Will she keep in with Britain, or cave in to Europe? Will she stand up for Britain, or speak up for Europe? The choice is hers. The Government are split down the middle and the Financial Secretary is as well.
  The Government are spinning out of control, saying one thing one day and another the next. Yesterday, in a story in the Financial Times which was clearly briefed from No. 10, the Prime Minister was all for some tax harmonisation. It said:
  "There is a growing realisation among ministers that some forms of tax harmonisation in the EU could be beneficial to the UK … Tony Blair, the Prime Minister, has instructed officials that they should not dogmatically oppose all EU tax initiatives."
  It continued:
  "the government is determined not to block the proposal to impose an EU-wide withholding tax on savings and investments."
  That was yesterday, but what about today? On the front page of The Daily Telegraph today, we read:
  "Tony Blair broke ranks with fellow socialist leaders"—
  he certainly would not like that—
  "last night to open the way for a showdown with France and Germany over their plans for Europe-wide taxes."
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  Today in The Daily Telegraph the Prime Minister is dead against harmonisation, but yesterday in the Financial Times he was all for it. Which Prime Minister does the Chief Secretary support? Does he support yesterday's Prime Minister, or today's? Perhaps he supports both. Will the real Government at last stand up?
  Sometimes, the Government do not even wait until the next day to spin the opposite story. This very morning, some useful light was cast on the Government's attitude to duty free—[Interruption.] Labour Members might want to hear what I have to say, because the issue is of considerable importance to many of their constituents. In the Financial Times today, we read:
  "Mr. Brown is today expected to offer support to France and Germany over plans to postpone the scrapping of duty-free shopping. At a meeting of EU finance ministers in Brussels, Mr. Brown is expected to back … calls for a five-year delay while the issue is reviewed."
  That was reassuring: the Chancellor had read my letter and taken my advice—sensible fellow, we thought. However, we then opened another of today's newspapers and read:
  "Gordon Brown will back the abolition of duty-free shopping at a meeting of EU finance ministers in Brussels today."
  Are the Government keeping duty free, or scrapping it?
  The Government are in a mess. They cannot work out where they are heading in Europe. They are fiddling while Britain's economy slides down, refusing in their arrogant complacency to admit that there is a problem facing them. The Queen's Speech is a missed opportunity. I commend the amendment to the House.
  4.10 pm
  The Chief Secretary to the Treasury (Mr. Stephen Byers): There is a common theme running through the measures in the Queen's Speech. That theme is modernisation. For our country, our public services, our system of government and the economy, the status quo is simply not an option. Change must come, as that is what people voted for on 1 May last year. The people had had enough of a Tory Government who were drifting with no coherent programme and who allowed political dogma to triumph over reason and common sense. Judging from the speech that we have heard this afternoon from the shadow Chancellor, the right hon. Member for Horsham (Mr. Maude), nothing has changed on the Conservative Front Bench.
  The contrast with this Government could not be clearer. We have adopted a pragmatic approach that has allowed us to act in the national interest, not for narrow party political advantage. Our new Labour Government are not an old-fashioned state interventionist Government; nor are we saddled with an equally outdated adherence to the free market. The Government have a new sense of direction that has allowed us to cut corporation tax, introduce a national minimum wage, give independence to the Bank of England, find radical new ways of combating social exclusion, crack down on juvenile crime while launching the most ambitious programme to slash youth unemployment that our country has ever seen, reform student finance and deliver a record increase in the level of child benefit. In this, our second Queen's Speech, we build on our first programme by pushing forward our modernisation agenda.
  In our first Session, we delivered no fewer than 52 Acts, including four education Acts—all of which I had the pleasure and the privilege of taking through

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  Committee. In this more time-limited Session, we are promising nearly 20 Bills. In addition, draft Bills will cover important areas such as freedom of information, the food standards agency and the funding of political parties. Our modernisation agenda is based on fairness and enterprise. The debate since the Queen's Speech was delivered a week ago shows that our principles, values and ideals give coherence to our programme of legislation.
  Mr. Nick Hawkins: Will the right hon. Gentleman give way?
  Mr. Byers: I will give way when I have finished my introduction.
  As we saw this afternoon, the Conservative party wants to turn the clock back. It has no vision for the future—just a return to all our yesterdays. That poverty of ambition for our country has been rejected by the British people. This Government will lead our country into the next century. That carries a heavy responsibility, but we intend to discharge it in the interests of the many, not the few. In doing so, we will tackle those vested interests that stand in the way of the national interest, whether they are ermine-clad hereditaries from the House of Lords or professionals who block the radical reform of our public services.
  Several specific proposals in the Queen's Speech are directly relevant to the economy and the financial markets. The shadow Chancellor referred to the financial services and markets Bill, and I wish to say a few words about that important legislation.
  Mr. Hawkins: The Chief Secretary talks about fairness. What was fair about the unforeshadowed smash-and-grab raid on people's pensions? How many more taxes—which the electorate certainly did not vote for—will his Government impose on the British people?
  Mr. Byers: The hon. Gentleman likes to use phrases such as "smash and grab".
  Mr. John Bercow: Answer the question.
  Mr. Byers: I will answer in due course. I urge the hon. Member for Buckingham (Mr. Bercow) to calm down, and I look forward to a speech from him in due course. I hope that it will be up to his usual standard—which would be extremely helpful. We believe that our tax proposals are fair and just and that the British people will agree with us.
  The financial services industry is a highly successful and important part of the United Kingdom economy. It accounts for 7 per cent. of gross domestic product and employs more than 1 million people. An efficient and effective financial services industry is vital for our prosperity and stability. Millions of people depend on the availability of modern financial services and fair and honest markets and advice. The City of London is one of the foremost financial centres in the world. We are determined to secure the future of the City and financial services in the United Kingdom. We want the UK to be a good place to do business, and that is why we are introducing the financial services and markets Bill.
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  The Bill will create a single regulator with a single authorisation process, a single compensation scheme, a single ombudsman and a single appeals tribunal. In doing so, it will reduce regulation and provide for greater accountability. The Bill will do away with the increasingly blurred distinction between the nine existing regulators and the complex division of responsibility. The new regulator will have, for the first time, clear statutory objectives and a single coherent set of functions and powers.
  Excessive regulation gets in the way of good business and is to no one's advantage. The Bill will therefore provide for the Financial Services Authority to consult on costs and benefits arising from any regulations that it proposes to introduce. There will be a statutory requirement for regulation to be proportionate. The Bill will reduce the potential for confusion and duplication. It will enable the Financial Services Authority to deliver high standards of supervision and investor protection. It will create transparency and fairness for providers and consumers of financial services.
  As the shadow Chancellor said, a draft Bill was introduced at the end of July. The consultation process has now ended. In the light of that consultation, we can bring an improved Bill before the House next year. I am keen to learn from experience and I therefore propose to establish in the new year a joint committee of the House of Commons and the House of Lords to scrutinise the Bill before it begins its usual parliamentary process. Our consultation shows that there is strong support for plans to overhaul financial regulation, but I want to ensure that the details are right, and I am sure that the establishment of the joint committee will help us to achieve that. I am grateful to the Treasury Select Committee, which will conduct a short inquiry in December into certain aspects of the Bill.
  This is an opportunity for hon. Members on all sides of the House to recognise the need for improved regulation in the City and to join us in ensuring that the Bill is in the best possible form to meet what I hope are our shared objectives.
  The Queen's Speech confirmed that a Bill would be introduced for the working families tax credit and disabled persons tax credit. Many people on low income are trapped in poverty. The tax and benefit system stands in the way of people trying to get out of poverty. That trap frustrates ambitions and locks people into poverty. The Government believe that work is the best route out of poverty and a life on benefits. That is why we are introducing measures to help to make work pay: reforms of the tax and benefit system, a national minimum wage and the working families and disabled persons tax credits. The link with the tax system and payment through the wage packet will demonstrate the reward of work over welfare.
  Mr. Steve Webb: The Chief Secretary mentioned the centrality to the working families tax credit of payment through the pay packet but, as a concession, it has been agreed that couples can decide whether the person with the pay packet or the person with the children gets the money. If parents opt en masse for payment to those with children, would not his vision be undermined?
  Mr. Byers: I think not. The Government have no problem with people being able to exercise choice in this

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  very important matter. The principle underpinning the working families tax credit is that people can see that work pays. That means going out, getting a job and ensuring that people get more money in work than they would on benefits.
  The working families tax credit will ensure that work pays and is not punished. It encourages people to work by allowing them to keep more of what they earn, and it provides two specific guarantees. First, it guarantees a minimum income of £190 a week for families with one member in full-time work earning the national minimum wage. Secondly, families earning less than £220 a week will no longer pay any net income tax. A child care tax credit will also be introduced as an integral part of the working families tax credit, replacing the failed disregard in family credit. It will ensure that no family is denied the opportunity to work by being unable to access affordable, quality child care.
  Those measures are part of our radical agenda to modernise the welfare system. They will provide a fairer and better deal for up to 1.5 million families. In its first year, the working families tax credit will give up to £1.5 billion more to those families than would have been available under family credit. The disabled persons tax credit will help disabled people who want to get back to work. It will be more generous than the existing benefit, so ensuring that disabled people can take and keep work.
  I understand that the Opposition have made it clear that they will oppose the working families tax credit and retain family credit. The shadow Chancellor said that it was not for him to answer questions. I understand that the decision to abolish the working families tax credit and return to family credit has already been taken. The shadow Social Security Secretary made that announcement in Social Security questions a month ago. Will the shadow Chancellor confirm that that is the Conservative Opposition's policy?
  Mr. Maude: Does the Chief Secretary recognise these words:
  "the whole of the Working Families Tax Credit venture is fraught with great dangers: it offers huge bonuses for dishonesty; it strengthens the employers' hold over working people; it pulls employees into a spider's web of dishonesty and corruption"?
  Those were the words of his right hon. Friend the Member for Birkenhead (Mr. Field).
  Mr. Byers: They were, and the simple reality is that my right hon. Friend was wrong. It is probably one of the reasons why he is no longer a social security Minister. The working families tax credit will work. I notice that we have had no confirmation of Conservative policy one way or the other from the shadow Chancellor. It is interesting that the shadow Social Security Secretary is on record as saying that the working families tax credit would be abolished, yet the shadow Chancellor cannot say one way or the other. Perhaps he will now.
  Mr. Maude: The right hon. Gentleman is getting frightfully excited about this. We have said it so many times that this is one thing on which he is right: we will oppose the abolition of family credit. Does the Chief Secretary remember his right hon. Friend the Prime Minister, when shadow Employment Secretary some
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  years back, arguing that the introduction of a minimum wage would reduce the cost of in-work benefits? That idea seems to have gone out of the window.
  Mr. Byers: I am grateful to the shadow Chancellor for answering a question, confirming that the Opposition would abolish the working families tax credit. I can understand why he feels uncomfortable admitting that; he probably knows the consequences of such a policy. For those 1.5 million people receiving the working families tax credit, it would mean an average tax rise of £17 a week.
  Ms Diane Abbott rose—
  Mr. Campbell-Savours rose—
  Mr. Byers: I shall give way to my hon. Friend the Member for Workington (Mr. Campbell-Savours).
  Mr. Campbell-Savours: Will my right hon. Friend press the shadow Chancellor again? The shadow Chancellor answered a specific question on policy, telling us what the Conservative position at the next general election would be on the arrangement that we were discussing. Why cannot we get a clear answer on the national minimum wage? If he is prepared on one, why not on the other? Is it Conservative Members' policy to dither, and perhaps even to support us in the longer term?
  Mr. Byers: I look forward to the Conservative Opposition's support for a national minimum wage. We may have to wait a long time for that support, but we live in hope.
  Later, I shall speak about the national minimum wage and—
  Ms Abbott: Will my right hon. Friend give way?
  Mr. Byers: I want to make progress. [HON. MEMBERS: "Give way."] I always give way to my hon. Friend, and I shall do so in due course, but I want to make some progress, specifically on the working families tax credit.
  If the Conservative Opposition decide that they wish to retain family credit but not working families tax credit, they will go into the next general election with a commitment to a tax increase of £17 a week for the million people who will benefit from the working families tax credit. I look forward to campaigning against the shadow Chancellor on those issues.
  I have concluded what I want to say about the working families tax credit. It may be an opportune moment to give way to my hon. Friend the Member for Hackney, South and Stoke Newington (Ms Abbott).
  Ms Abbott: The entire House agrees with my right hon. Friend that the best way out of poverty is work, but does he accept that some groups—especially the elderly, and mothers with very young babies—cannot take that route out of poverty? Does he agree with the recommendation of Sir Donald Acheson's report on inequalities in health that the way to bring the elderly and mothers with very young babies out of poverty is to increase the level of benefits?
  Mr. Byers: Unfortunately, the Acheson report was published before the announcement of some of the

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  policies that the Government are introducing. In particular, the large increase that will take place in child benefit will address many of the concerns raised in the report. For the record, the Government's policy is clear. We want work to be available for those who can work, and we want support and help to be made available for those who cannot. Those policies are clear, but we take the view that the way out of poverty for the people whom I represent, and those whom my hon. Friend represents, is work and having a job.
  We also need to ensure that work pays. At the moment, for many people in my constituency and throughout the country, work simply does not pay. The working families tax credit will go a long way to ensure that people are not effectively punished financially for going out to work.
  Mr. Bernard Jenkin: Will the right hon. Gentleman give way?
  Mr. Byers: I must give way to the hon. Gentleman because he used to be Member of Parliament in my mother's constituency, and when I told him that she had managed to recruit several 80-year-olds to the Labour party, he went off to another constituency.
  Mr. Jenkin: I fear that the right hon. Gentleman may be a little misinformed; but how comfortable is he, having campaigned before the general election for a reduction in means-testing in the benefits and tax system, now to be presiding over substantial increases in means-testing?
  Mr. Byers: I was only slightly misinformed. My mother has not moved; there may have been a boundary change. Anyway, she was very disappointed no longer to be able to lock horns with the hon. Gentleman as her constituency Member of Parliament.
  There is no inconsistency whatever between the commitments that we made on welfare reform before the general election, and the proposals and policies that we are implementing, and shall continue to implement.
  The Queen's Speech says that we are committed to investing £40 billion in education and health over the next three years. We are able to do so because the Government have been prudent with public finances. We have taken tough decisions and cut borrowing by £20 billion in our first year in office. In the first half of this year, borrowing is £10 billion lower than last year. We have set out our spending plans for the next three years, and among the central features of our new spending regime are built-in margins to cover uncertainties, including the risk of slower growth and its effect on revenues.
  I was intrigued by the comments that the shadow Chancellor made this afternoon about the Conservatives' approach to the extra spending of £40 billion for schools and hospitals. He is on the record as saying that our spending plans, which include schools and hospitals, were reckless and foolish. Interestingly, he now seems to be conducting a U-turn on his previous statements. The record will show that, during various interviews that the right hon. Gentleman has given on "Today" and on television, he has said that our spending plans are reckless and foolish. The record is there.
  Mr. Maude: I challenge the right hon. Gentleman to produce the transcript of an interview or anything that I have said where I have stated that we oppose the £40 billion extra on health and education. The right hon. Gentleman can send his Parliamentary Private Secretary across to his officials to get them to hunt through the files. I am sure that the right hon. Gentleman would not have made this allegation without having chapter and verse to hand. Let him get them now to prove what he says.
  Mr. Byers: I shall write to the right hon. Gentleman with the exact reference. I stand by what I have said. I shall write in my own time.
  Mr. Maude: Will the right hon. Gentleman give way?
  Mr. Byers: I am not giving way.
  Mr. Maude rose—
  Mr. Deputy Speaker(Mr. Michael J. Martin): Order. There can be only one Member on his feet at the same time.
  Mr. Maude: On a point of order, Mr. Deputy Speaker. The Chief Secretary has made an assertion which I feel sure he would not have made without having chapter and verse to back it up. It must surely be possible for him to procure that chapter and verse so that we can ascertain whether he is justified in what he says. Alternatively, he can withdraw his assertion. He has the alternative of withdrawing his latest gaffe, if he is man enough to do it.
  Mr. Byers rose—
  Mr. Deputy Speaker: Order. The Minister's speech so far has been in proper order, so there is nothing that he needs to withdraw. There is an opportunity for Opposition Members to rebut any case that the right hon. Gentleman has advanced.
  Mr. Byers rose—[Interruption.]
  Mr. Deputy Speaker: Order. Let us start as we mean to finish this evening. The hon. Member for East Worthing and Shoreham (Mr. Loughton) should not be making any comments from a sedentary position.
  Mr. Byers: We have clearly touched a raw nerve in the right hon. Gentleman. We need to know exactly what Conservative policies are. On spending on hospitals, time will tell whether the Conservatives will support our extra spending on education and health. It is a responsibility that we certainly intend to deliver. It is what the public want and what they will get.
  Mr. Phil Woolas: I think that I can answer the point that has been made. The Observer printed an interview with the right hon. Member for Horsham (Mr. Maude) on 22 November. The right hon. Gentleman was asked specifically about cutting spending. The interviewer asked:
  "But would not cutting spending make the slowdown worse?"
  The right hon. Gentleman replied:
  "Fiscal policy cannot be set to a demand regulator."

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  In a classic exposition of current Conservative policy, the right hon. Gentleman said:
  "Perhaps I am being very naive about this."
  He continued to talk about the so-called black hole. The Observer asked him:
  "You think, therefore, that you could have lower interest rates if you cut spending?"
  The right hon. Gentleman replied:
  "Yes, that is precisely what I mean."
  The right hon. Gentleman's policy is clear.
  Mr. Byers: There are a number of references that might be prayed in aid. The extra money that we intend to spend on schools and hospitals is not following the old approach of proposing the spending of money for a particular problem and hoping that the problem will go away. In the next fortnight, we shall be publishing public service agreements that will show clearly the improvements that the public will get from the extra money that we shall be spending.
  Mr. Nick St. Aubyn: Will the Minister give way?
  Mr. Byers: I wanted to move on to Europe, which I know the House has been waiting for. I do not know whether the hon. Gentleman will be very popular if he delays me in moving on to Europe.
  Mr. St. Aubyn: The Opposition are concerned about schools and hospitals. Will the Minister answer this question: if the Chancellor of the Exchequer's projections of Government revenue prove wildly optimistic, as many fear, will the Government cut their promises of extra spending on schools and hospitals, or will they increase taxes or raise borrowing? Which will they do?
  Mr. Byers: The hon. Gentleman came in slightly late and may have missed my comment that we have built in a margin on the current Budget to cover those eventualities. The £40 billion for schools and hospitals will be spent. I can guarantee that that is a commitment from the Government. [Interruption.] The heckling from those on the Opposition Front Bench suggests that they do not support the extra £40 billion for schools and hospitals, but I shall not delay the House further.
  With reference to Europe—an issue that interests many hon. Members—I shall deal with three aspects: the abatement, the single currency and tax harmonisation, which is specifically mentioned in the amendment.
  The Queen's Speech states clearly that we will retain the United Kingdom's abatement. That budget rebate from the European Union remains fully justified. Enlargement of the EU does not alter the justification for the abatement, as it will not change the UK's position relative to existing member states. Any proposed changes to the own resource decision requires all member states to agree, and the Queen's Speech makes it clear that we will not accept any adverse changes to the UK's abatement.
  On the single currency, we have said clearly that our policy is to prepare and decide, with the final decision being taken by the British people in a referendum. What does the Conservative party think? More specifically,
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  what does the shadow Chancellor think of the single European currency? Does he believe that a principled position needs to be adopted? His leader said:
  "I am against a single currency in principle."
  Or is he pragmatic about it, as is the Conservatives' deputy leader, who said:
  "Our instinct is to say, 'Show me it works.' That is the sensible approach, a pragmatic policy based on a hard-headed assessment of the facts"?
  How can the deputy leader's approach be reconciled with that of the shadow Chancellor? In the interview in The Observer that was mentioned earlier, when the shadow Chancellor was asked:
  "What you are saying is that even if the single currency were a success, you could not use that to decide whether or not to join?",
  he replied, "Absolutely." It is impossible to reconcile that approach with the view expressed by the Conservatives' deputy leader.
  The Conservatives have held a ballot of their party members and have ruled out the single currency for 10 years, even if it is in Britain's national interest to join. However, the Conservatives must answer some fundamental questions. Is their hostility to a single currency based on principle? Is that the position of the shadow Chancellor? Does he believe that, as a matter of principle, joining the single currency should be ruled out—yes or no? He is not answering. If it is a principled position, why not rule it out for ever? If it is pragmatic opposition, how can the Conservatives rule it out for 10 years, even if it is in Britain's national interest?
  Ms Keeble: Does my right hon. Friend agree that, given that most of the big financial institutions will be dealing in euros next year, and that many Opposition Members have interests in, or are employed by, those institutions, if those hon. Members were truly principled, they would say whether or not they intend to advise people to deal in euros next year, and to hold euro accounts themselves? They should be honest with the public about the relationship of the financial institutions for which many of them work to the single currency.
  Mr. Byers: It will be interesting to see what advice Opposition Members give to their clients in the other jobs that many of them hold.
  For the Tories, no decision for a decade is the only option. The single currency reveals a fundamental flaw that divides the Conservative party. As a result, they have adopted a policy that puts party before national interest.
  Mr. Jenkin rose—
  Mr. Ian Taylor rose—
  Sir Peter Tapsell rose—
  Mr. Byers: I am spoilt for choice. I am not sure whether to give way to the pro-European wing or the anti-European wing. There are so few pro-Europeans left in the Tory party that I shall give way to the hon. Member for Esher and Walton (Mr. Taylor).
  Mr. Taylor: I am grateful indeed to the right hon. Gentleman. I am a pro-European, but the point is that he

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  is Chief Secretary and the one who has to decide the policy. Can he answer for the Government the question whether this vague intention that they will join if the economic circumstances are right will be translated into positive political will to ensure that Government policy makes the circumstances right for entry? That is the challenge that he has to grasp. The trouble is that, by throwing all the questions around to others, he is evading the central question, to which many business men in this country need the answer.
  Mr. Byers: That went down badly with some Conservative Members.
  The Government's position is clear, and I know that the hon. Gentleman takes a close interest in matters European. Provided that the five economic tests were satisfied, we would be in a situation in which the Government would consider the position, there would be a decision of the Cabinet and of the Government and then there would be a recommendation. It will be for the British people to decide in a referendum—it will be their decision, and we have made that position absolutely clear.
  Sir Peter Tapsell: Will the right hon. Gentleman give way?
  Mr. Byers: I want to move on. [HON. MEMBERS: "Give way."] Well, we should have both sides of the argument. Of course I will give way.
  Sir Peter Tapsell: Although the Government's five criteria to be met before a referendum are perfectly acceptable—so far as it goes—on the technical side, do not the recent statements by the German Finance and Foreign Ministers make it perfectly clear, as a matter of constitutional practicality, that, if we were to join the single European currency and all that is clearly linked to that, we would cease to be an independent, self-governing, democratic nation state?
  Mr. Byers: I do not accept that argument at all, and there are many other people who will agree with me in that position.
  On tax harmonisation, I want to address a number of concerns that have been raised, and a good degree of scaremongering that has occurred, over the past few days. I also want to set out the principles that we will apply and apply them to a number of specific cases that have been raised in the past few days.
  The Government have made it clear that they will not support any action at European level that will threaten jobs or the competitive position of British business, so any tax proposals will need to pass that acid test. Questions of tax of course require a unanimous decision, so there is no question of tax changes that we do not support being imposed on us by Brussels. The test has to be whether, in any particular case, the proposal delivers economic or financial benefits for the United Kingdom. If it does not, we will oppose it and argue our case. If necessary, we will be prepared to use our veto to protect the national interest.
  Mr. Malcolm Bruce: Will the right hon. Gentleman give way?
  Mr. Byers: No. I want to make these points.
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  Having outlined the principles that we will apply, let me consider three areas which have been the subject of recent speculation: value added tax, corporation tax and the withholding tax.
  On VAT, let the House be clear that there are no detailed proposals to change the existing rates. We were elected with a clear pledge to maintain zero rates of VAT on food, children's clothes, books, newspapers and public transport fares. The United Kingdom's zero rates are fully safeguarded under existing European Community agreements.
  All European Community VAT matters are subject to agreement by all member states. We can therefore guarantee that we will honour our manifesto pledge on VAT, and that VAT on food, children's clothes, books and newspapers and public transport fares will remain zero rated. Unlike the Conservative party, we will stick to our pledge. I remind the House that the Conservatives introduced VAT on domestic fuel and sought to increase it from 8 to 17.5 per cent.
  On corporation tax, there are no Community proposals on the table in respect of harmonisation. Indeed, no one proposed minimum rates of corporation tax at today's Economic and Finance Council meeting. The political reality is that harmonisation of corporation tax across Europe is a non-starter. Rates start at 10 per cent. in Ireland and at 28 per cent. in Finland. In the United Kingdom, rates will start at 30 per cent. from next year. In Germany, the rate is more than 40 per cent. It is increasingly being realised that raising corporate tax rates would harm the competitive position of the European Union economy. We would simply not allow corporation tax rates to be raised to the existing levels of some other countries.
  On the specific issue of the withholding tax, the motive behind the measure is one that I hope all hon. Members would be able to support—the prevention of tax evasion. It is aimed chiefly at Belgian and German citizens who place funds in the highly secretive banking system in Luxembourg and do not make a declaration to their own tax authorities. The Chancellor called today at ECOFIN for other countries to tackle the problems of banking secrecy.
  Having studied the draft directive on the withholding tax, we believe that it is fundamentally flawed. In particular, it would be very damaging to the Eurobond industry. The British Eurobond market has earnings of £5 billion a year and employs nearly 11,000 people. Clearly the withholding tax, as presently proposed, is unacceptable.
  Mr. Tim Loughton: Will the right hon. Gentleman give way?
  Mr. Byers: No. I want to finish that point.
  The Chancellor has made it clear today that exchange of information between banks and tax authorities is a much better solution. We would not accept the directive in its present form, which includes Eurobonds.

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  The Chancellor has made that clear in Brussels today. If the draft directive is not changed from its present form, we will use our veto to block it.
  Mr. Loughton rose—
  Mr. Malcolm Bruce rose—
  Mr. Byers: I shall give way first to the hon. Member for East Worthing and Shoreham (Mr. Loughton).
  Mr. Loughton: I am grateful to the Minister for giving way. On that specific point, will he therefore say why Jacques Santer said only last week that the code of conduct meant that Britain could not veto measures such as the withholding tax? Will he also condemn out of hand those members of the European Commission who have been talking about harmful tax competition? When does the right hon. Gentleman think that tax competition is harmful to the interests of the United Kingdom?
  Mr. Byers: The position is very clear, as far as the Government are concerned. Legally, the withholding tax is a matter that would have to be decided on the basis of all member states agreeing. Therefore, we have made our position clear and I am happy to confirm it: if the draft directive on the withholding tax remains in its present form, we will veto that directive.
  Mr. Bruce rose—
  Mr. John Burnett rose—
  Mr. Byers: I want to make progress. My speech has been longer than I intended.
  The Government's approach to Europe is clear. It is far better to be there, shaping and engaging in the debate, than sitting powerless on the sidelines. The issues for Europe are jobs and economic prosperity.
  Mr. Bruce: Will the right hon. Gentleman give way?
  Mr. Byers: I will give way, for the final time.
  Mr. Bruce: I am grateful to the right hon. Gentleman. On the point about jobs and economic prosperity, does he agree—given that the Government are, in principle, in favour of joining the single currency—that the stability pact should allow for flexibility on borrowing for capital purposes in accordance with the established fiscal rules? Does he agree that that would be a beneficial objective—for Europe as a whole and especially for the United Kingdom, given our low borrowing levels?
  Mr. Byers: There are issues that need to be addressed in Europe, and we believe that jobs and economic prosperity are the key issues.
  In respect of harmful tax practices and tax havens, it is right that Europe should deal with those, but tax—
  Mr. Burnett rose—
  Sir Teddy Taylor rose—
  Mr. Byers: I shall not give way; I want to make progress.
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  I want to make it clear that tax harmonisation is not the way forward. We must deal with harmful tax practices and tax havens.
  Sir Teddy Taylor: Will the right hon. Gentleman give way on that point?
  Mr. Byers: I will not give way at this stage. Businesses throughout the European Union do not want it—as is shown by a report produced by the European employers federation—and we share their view.
  Our agenda for modernisation and reform applies not just to the United Kingdom, but to Europe. For Europe, as for the United Kingdom, there can be no turning the clock back.
  Sir Teddy Taylor: Will the Chief Secretary give way?
  Mr. Byers: No, I will not.
  The shadow Chancellor, as we know, is the man who signed the Maastricht treaty. He is now the man who likes to say no. He says no to the new deal for the young unemployed; 160,000 have entered that scheme, and 30,000 have now found work. He says no to the working families tax credit, which will make work pay for up to 1.5 million of our fellow citizens. He says no to the national minimum wage, which will benefit nearly 2 million people from April.
  We need not only listen to the shadow Chancellor. In the early 1990s, the right hon. Gentleman was Financial Secretary to the Treasury. He did not just sign the Maastricht treaty; he did other things as well. During his period in office, interest rates never fell below 10 per cent., and reached 15 per cent. The public sector deficit was rising to £50 billion. This is the shadow Chancellor's record as Financial Secretary: unemployment rose by 1 million, manufacturing output fell by 7 per cent., and inflation rose to nearly 10 per cent.
  We are not going back to those bad old Tory days. The Queen's Speech looks to the future; the Tories are stuck in the past. This Government's priority is fairness for all our people; the Tories defend the privileges of the few. We will not be diverted from the real issues that affect the British people: jobs, the economy, crime, schools, hospitals and, yes, our relationship with Europe.
  We have established an economic strategy to ensure that we can steer a course of stability in an uncertain and unstable world. Our programme reflects the needs of our people and their aspirations—for themselves, their families and their communities. Together, we can look forward with confidence to the years ahead.
  4.52 pm
  Mr. Malcolm Bruce: Our debates have focused on a Queen's Speech which should have shown us that the Government were getting up a head of steam for radical reform but which, in fact, has been celebrated more for what it does not contain than for what it contains.
  Listening to what I suppose the Conservatives would describe as an attack, I wondered when we would receive an apology for the fact that they signed the Single European Act and the Maastricht treaty. They now denounce those actions, consider them to have been a fatal mistake, but have not yet admitted that they should not

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  have done what they did. The truth is that this is a party that has made up its mind that it likes being in opposition and intends to stay there. It does not wish to deal with the question of how a country is to work in an expanding European Union in which it must advance its national interests in concert with other countries that are trying to do the same.
  I commend the Chief Secretary's clear statement towards the end of his speech about tax and revenue co-ordination. As they stand, the treaties are unequivocal. It is no good quoting officials who may wish that they were different; they have been negotiated, and they are clear.
  Many of us—many Liberal Democrats, certainly—who support the principle of British participation in the single currency, and support the idea of a single currency, believe that the corollary of a single bank setting a single interest rate is fiscal flexibility on the part of individual Governments, enabling such a system to be accommodated within their different national entities. It makes no difference what one member state says; we must all agree. The measure cannot be rammed through against our will. We retain that democratic right, and it is worth our saying as much to those who believe that we have given it up.
  Mr. William Cash: Will the hon. Gentleman give way?
  Mr. Bruce: Not at this stage.
  Mr. Cash: It is at this stage that I wish to intervene.
  Mr. Bruce: That is a good reason for me not to give way.
  Let me deal with some of the measures that do feature in the Queen's Speech. My hon. Friend the Member for Northavon (Mr. Webb) will lead our party's scrutiny of the working families tax credit. He is generally accepted to be an expert on the subject, and I am sure that, if he catches your eye, Mr. Deputy Speaker, he will give us the benefit of further insight.
  My hon. Friend the Member for Twickenham (Dr. Cable) will be following the progress of the Bill regulating the financial services. I shall not say much about the Bill, but, in principle, we have no difficulty in supporting its objective. The devil will, of course, be in the detail. I was interested by the Chief Secretary's suggestion that a joint scrutinising Committee should be set up before the presentation of the Bill: the idea has merit. The right hon. Gentleman also acknowledged that, in financial regulation, it is essential to get the balance right. The argument will centre on whether over-regulation will suppress creativity in the market, or whether under-regulation will damage consumer confidence—especially in a climate in which the Government have, in my party's view, ducked the expansion of the private sector into public-provision pensions. They will need to address that sooner rather than later.
  Mr. Cash: Will the hon. Gentleman give way now?
  Mr. Bruce: I will not give way to the hon. Gentleman, who has only just come into the Chamber with the sole purpose of intervening.
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  At the risk of provoking the hon. Gentleman yet again, I want to talk about European issues and policies. I must tell the hon. Gentleman that he does not have a monopoly of interest in that subject, or the right to assume that he can automatically intervene every time it is mentioned, no matter how Pavlovian his reactions may be. I also want to talk about the new public service agreements.
  The Liberal Democrats were disappointed, but not surprised, by the fact that the Gracious Speech contained no measures designed to pave the way towards joining a successful single currency. We have argued—we commend the proposal to the Government—for the publication of a six-monthly joint Treasury and Bank of England report on the extent to which our economy is converging with those of our continental partners. Such a report would not only inform but co-ordinate monetary and fiscal policy in the run-up to euro membership.
  As I have said on a number of occasions, the Government seem to be saying, "In principle, we see no objection to joining. The private spin is that we are very much in favour of joining, but we are waiting for things to settle down." I do not think that an undertaking of this importance can be secured on a wing and a prayer; it requires a strategy, and practical action. I would go further, and say that the Prime Minister and his senior Cabinet colleagues will have to come out of the closet.
  I understand that, in his previous cloak-and-dagger incarnation, the Secretary of State for Trade and Industry believed that the Government—who were all privately committed to British membership of a single currency at the earliest practical opportunity—should wait for public opinion, and the opinion polls, to come round to it. But if they wait, it simply will not happen. When the Murdoch press and its allies are in full cry—when they are organising the argument on one side, and there is nothing but silence from Downing street and the Treasury—are we surprised that the opinion polls are saying what they are saying? We need leadership, we need a timetable and we need a strategy. We cannot simply drift.
  If we are to trade within the single currency—regardless of whether we join sooner rather than later—we must address the fact that, within the single market, we suffer from a pound and interest rates that are too high for our current trading competitiveness. Those who look at the trade-weighted value of the pound may think that it is only a little above the May 1997 level, but if they look at the real, effective sterling exchange rate, using the OECD index, they will see that it is some 8 per cent. higher than the May 1997 level, and 26 per cent. above that of May 1996. That takes account of differential rates of inflation. In other words, sterling is clearly over-valued, and, as a consequence, life will remain tough for exporters. That is not just my opinion. For example, a report by economists Goldman Sachs in this week's economic update—that company is not that far away from the Government, so I do not think that its views are greeted with total indifference at the Treasury—says that DM2.50 would be about the fair value; that is 30 pfennigs lower than the current rate. Okay, interest rates have come down a bit, but 6.75 per cent. is slightly more than double the 3.3 per cent. average in the euro zone; I hope that we agree about that. Even if hon. Members are totally committed to having nothing to do with British membership of the euro zone, that differential is a problem that we should at least try to address.

  703
  Even pre-Christmas, the retail side of the British economy looks a bit soft. Against that background, the Bank of England may cut interest rates by a further 0.25 per cent. next Thursday, but that still leaves a yawning gap. I am not tempting the Chief Secretary to intervene—indeed, I do not think that I will succeed—but even if there is a cut, I do not think that the Government can pop out of the woodwork on Friday and say, "There you go: the gap is narrowing." It is still huge.
  Mr. Bercow: Can the hon. Gentleman offer a single historical example of a single currency zone that has been formed without either formal tax harmonisation, or increased transfer payments from the centre?
  Mr. Bruce: Harmonisation is not necessary. For example, it does not occur in the United Kingdom and Ireland; it does not even occur in the United States. I accept that there is an argument about transfer payments, but such payments were not made on the creation of the UK when there was a huge movement of people. However, the fact that something has not happened is not a reason for not attempting it, but then the hon. Gentleman is a Conservative and I am a Liberal: I believe in radical change and he, presumably, does not. Of course I accept that there are difficulties, but, when 11 countries have embarked on an enterprise of this type, we should not assume that it cannot happen because it has not happened before.
  If the Government's true position is that they are in favour of joining a single currency, they should make that clear because that would, in itself, help to bring about a degree of convergence and enable people to start to make the preparations that the Government are urging on them, without offering them any clear timetable. It is not realistic to expect businesses to spend millions of pounds—indeed, tens of millions—preparing for something that may not happen, let alone if they have no idea when it will happen.
  Mr. Woolas rose—
  Sir Teddy Taylor: Will the hon. Gentleman give way?
  Mr. Bruce: No. I want to proceed because of the pressure on time.
  In the meantime, because of current problems, and as part of our preparations for eventual membership of the single currency, there is a requirement on the Government to do something to take the pressure off the hard-pressed manufacturing, farming and tourism sectors. Manufacturing faces an almost certain recession in 1999; whatever the Treasury forecast may say, that seems highly likely.
  There is a discrepancy between what the Government have been saying publicly about their European economic policy and what apparently is being said on the quiet in Brussels—and not in the House. I am talking about "The New European Way"—about which I intervened in the Chief Secretary's speech—which has been published in the name of the party that calls itself the European Socialists—which I suspect sends a shudder through new Labour—but which most of us know was written by Ed Balls, although its authorship is now disowned. It was certainly put into the pot with the Chancellor's blessing and support.
  704
  Because it is a Euro-report, it contains quite a lot of mumbo-jumbo which is open to interpretation, according to people's opinions, but it addresses two crucial issues: monetary openness and fiscal flexibility, and tax harmonisation. The Tory amendment is on the mark at least in one respect: we do require a clear Government statement on those issues to the House. I accept that the Chief Secretary has gone some way towards giving us that statement, which was genuinely helpful and timely, and I commend him for his clarity. On the whole, it was also about right. It is high time that the debate centred on what the law is, rather than what certain motivated journalists wish it were, or wish people to believe it to be.
  The Chancellor appears to want a more open and accountable European central bank than that set out in the Maastricht treaty. I agree that that is sensible. That is one of the reasons why the sooner we get in and can bring some influence to bear, the better. That does not mean interfering in the decisions of the European central bank, or carrying out the megaphone monetary policy adopted by the newly elected politicians in Germany—I suspect that they will learn a thing or two in a fairly short time—but it is about arguing that the British model of central bank independence, which I know does not command total support in the House, has something to commend itself to the continental model. It would provide for operational independence, but would make the European central bank much more open and accountable to public scrutiny—not open enough for the hon. Member for Hackney, North and Stoke Newington (Ms Abbott), but I am sure that she would agree that such transparency would be better than that which it offers.
  I do not expect the Tories to have a view on that. Indeed, I do not know when they will review their policy given that the shadow Secretary of State for Trade and Industry has said that 2002 will be early enough for the Tories to make up their mind whether the Bank of England should stay independent. As has already been quoted, however, the shadow Chancellor has certainly said that either we should have complete political control, or the Bank should be completely independent. He has not made up his mind which, but he is wrong.
  The Government have rightly been criticised for the shortness of the contracts that were given to the members of the Monetary Policy Committee. Even if it does not mean that they are less independent, it creates the wrong impression—that they can be reappointed by the same Government who appointed them in the first place. We would like that to be changed, but we need a proper balance between operational independence and public accountability.
  If we could export that model to the continent, rather than take on its arrogant and somewhat bureaucratic mode, we might be doing a service to other member states, and the peoples of those member states, who feel that they have to have some input, without interfering in the way in which the European central bank works. That would increase public confidence in the belief that it would be a force for stability and low inflation, and would not compromise on the anti-inflationary drive. Some people imply that it would do the latter—usually those who do not support the idea of operational independence in the first place.

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  I get the slight feeling—a vibration—that the Government might like a little more fiscal flexibility, particularly with regard to borrowing for capital spending. At the moment, that is not allowed for in the stability pact, but there have been enough noises, both formally and informally, from British Government sources to suggest that the Government believe that it perhaps should be.
  Alastair Campbell is on record—he is not officially a Government spokesman, but, by God, when he speaks, most people listen; I think Labour Members listen even more closely—as saying that the Government do not want any watering down of the fiscal rules. The question is: why do not the Government want any modification? Surely we should look at our model and suggest that that commends itself to the continent, and that our rule is more reasonable and more generous on the capital spending front. We should surely fight for maximum fiscal subsidiarity in Europe.
  I am sometimes puzzled by the Chancellor, who makes some robust statements, echoed by the Chief Secretary today, about the need for fiscal independence, but who seems unwilling to use the very fiscal independence that he has to help to manage the economy in a way that would bring about convergence. At least he agrees that such independence should be retained.
  Lloyds bank does not have any agreement regulating the borrowing of National Westminster bank; nor should it, even though one's intervention in the market affects the other. They just adjust their behaviour accordingly.
  I am not suggesting that sanctions should not be imposed on countries with unsustainable debts. However, within a disciplined framework, there should be maximum flexibility, particularly for countries such as Britain that have a very low debt-to-GDP ratio. For countries whose ratio is either above or close to the limit, achieving such flexibility should be an incentive to reduce it and, in goods times, to try to get it below that limit. They could therefore achieve flexibility in a revised stability pact. I should have thought that that would commend itself to both sides of the House, as it is about allowing a more flexible approach to economic management.
  It is essential that we have tax harmonisation. It is also true that our tax rates must be competitive internationally and not only in Europe. In many ways, tax competition is helpful and more appropriate than harmonisation. The Government have made it clear that they will retain the veto and use it; their intention is as clear and unequivocal as anyone could wish.
  I certainly do not believe that we should be signing up to Euro-uniformity simply for the sake of it. It will have to have merit and benefits, and offer added value and added advantage. However, let us not go to the extreme that we are not prepared even to discuss it or to explore the possibility that there are tax anomalies that disadvantage us in the single market or in third markets. It really is unhelpful if, every time a sensible discussion of the matter is proposed, Euro-sceptics foam at the mouth and say, "There you go again—you're about to sell your country short." Surely we can examine whether there are ways in which we can co-operate while retaining our right not to accept imposed tax policies. If so, we must be prepared to say no.
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  The Government will introduce public service agreements, on which there will be an announcement sometime this month. My colleagues and I have a particular interest in such agreements, as we made a study of how one system operated in New Zealand, which demonstrated commendable aspects of performance delivery. However, I should tell Ministers that, when I spoke to politicians and civil servants in New Zealand, it was made absolutely clear to me that the system could not work without freedom of information legislation. They said that that was central to ensuring that the system operated in the open and that the public knew the basis of the agreements and bargains which had been struck.
  Liberal Democrat Members should therefore like to know whether the new agreements will contain clear, concrete and measurable targets for improving public services. If so, has there been consultation on the targets? If so, what type of consultation was it? If not, will there be consultation? I believe that the matter should be open to wide consultation.
  The fundamental question is why the agreements are with the Treasury. If the agreements are to be about public administration, should they not be with Parliament and the representatives of the people? What independent measures will monitor performance against contracts? How can we ensure that contracts between Ministers and civil servants are fair and equal rather than one-sided? They will have to be equal if civil servants are to fulfil the contracts honestly. What action will be taken to ensure that targets are met? In New Zealand, contracts contain an element of performance-related pay for chief executives. I feel that that should apply also to Ministers, so that the bargain is equal.
  Those issues are real ones. The introduction of service agreements is a radical, very important step which could fundamentally change the way in which services are delivered in the United Kingdom. However, if they are to work, they will require openness, clear targeting, clear objectives and independent monitoring, so that everyone may know what was undertaken and of any changes.
  Some of the Government's actions—some of which I have previously used as examples—would have been different if there had been agreements according to the necessary terms that I have outlined. The Prime Minister, for example, said that our priority is education, education, education. The reply should have been, "Fine; but specifically what will you do each year to deliver improvements in education? What contracts have been signed to deliver detailed action?" I say constructively—not negatively—that that type of public service agreement means something and is not mere sloganising.
  Similarly, when waiting lists shot up, the Health Secretary announced on the "Today" programme that he was responsible for the rise because he had decided that he wanted to deal with accident and emergency priorities before reducing waiting lists. Regardless of whether that was the right decision, had he made a contract to deliver lower waiting lists, he would have had to admit publicly—and not after the event—that the contract had been changed, and there would have been a debate about it. Contracts seem to offer a genuine means of involving Parliament and the public in the delivery of policy. Such changes may be dangerous and uncomfortable for Government, but, if Ministers are serious about modernisation and openness in government, such radical

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  thinking is required. I applaud the Government's initiative on agreements, but am unsure whether it will be as radical and farsighted as the Government claim.
  My right hon. Friend the Member for Yeovil (Mr. Ashdown) said in his opening speech in the debate on the Loyal Address that we would never have achieved the welfare state and the national health service if Lloyd George and Nye Bevan had been as timid in the second Sessions of their radical reforming Parliaments as the current Government have been. That observation may come back to haunt the Government. Nevertheless, the contents of the Queen's Speech are only part of the programme, and the Government may introduce other measures. I hope that the radical will to make progress has not disappeared entirely from the Government.
  On a constituency and important personal note, I should like to add that, during this Session of Parliament, there will be elections to a Parliament for Scotland and an Assembly for Wales, which will have a fundamental impact on how the House is run and on how the United Kingdom develops. I say that as someone who believes that the United Kingdom has enormous strengths, from which we all draw and which greatly benefit us all. However, that benefit requires a recognition of the distinctive character of the component parts of the United Kingdom. There will have to be an English dimension to how things are done.
  Mr. Deputy Speaker: Order. So that the House is aware of how we will conduct this debate, I should tell the hon. Gentleman that it is strictly on the economy, not on constitutional matters that could have been debated earlier.
  Mr. Bruce: Thank you, Mr. Deputy Speaker; I thought that the debate was on the Queen's Speech, but entirely accept that stricture from the Chair.
  The economic relationships between the House and the new Parliament and Assembly will be crucial. I simply urge a recognition that, initially, there will be tensions that will have to be resolved.
  Mr. Bercow: Will the hon. Gentleman be standing for the Scottish Parliament?
  Mr. Bruce: That is irrelevant.
  Perhaps you will help me on this, Mr. Deputy Speaker. There was a suggestion that, by next June, Scottish Members will have nothing to do in the House, which is why the Queen's Speech proposed no Scottish legislation. The fact is that 90 per cent. of the Bills in the Queen's Speech will apply to Scotland, and Scottish Members, who have been elected to the House, have a real interest in their progress. The House and the public should understand that point.
  The Government have introduced reforms, not all of which they themselves fully understand. It will require some understanding, flexibility and tolerance if those reforms are to succeed. In that spirit of understanding and tolerance, I believe that what has been set in train will create a much stronger United Kingdom.
  The House is debating Europe and Westminster, and I have just discussed Scotland. I believe that we shall require all those levels of government, and that we shall have to take appropriate decisions at the appropriate level.
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  As a Scottish Member, I am delighted that there will be a Scottish Parliament. I am equally delighted that Scots will continue to play a full participating part in the United Kingdom Parliament. I also look forward to the day when the United Kingdom is a fully paid-up member of the European Union, rather than a part-time observer on the touchlines.
  5.19 pm
  Mr. Robert Sheldon: The hon. Member for Gordon (Mr. Bruce) concentrated much of his speech on the single currency. I am sure that he shares my belief that our main economic task in this Parliament is to prepare for entry into the single currency. However, preparation appears to be missing.
  I have always thought that the move towards a single currency was too hurried and that a longer timetable would have been much more sensible; however, a decision has been made. We are fortunate to have my right hon. Friend the Chancellor of the Exchequer and his predecessor, two of the most able Chancellors in recent times, who have had a close identity of view on some of the most essential aspects of our future. Nevertheless, we have paid a high price for not joining the single currency at the outset. Only yesterday the merger between the Deutsche bank and the Bankers Trust resulted in the reduction of their involvement in the City of London. That was in part a consequence of our not having joined the single currency.
  There has been a terrible catalogue of missed opportunities year after year and decade after decade. The Government's first economic decisions, which devolved some of their powers, should have made closer integration into Europe far more acceptable. Control over exchange rates went to the markets and control over interest rates to the Bank of England. Income tax—that great engine of Government finance—was circumscribed by Government promises before the election. All those changes should have been a precursor to our entry into economic and monetary union and the single currency. We may still be paying the price.
  In the Financial Times yesterday, Sirkka Hämäläinen, one of the six executive board members of the European central bank, said:
  "Exactly where the eurozone's monetary system will concentrate, however, is impossible to forecast … It can concentrate on certain national central banks near large financial centres, or it could be centralised in the ECB."
  That is a danger to us. I am quoting her not as authoritative, but as having some understanding of the matter.
  In the 1950s, we missed taking the leadership of Europe, although it was offered to us on a plate. Then we missed taking our place as one of the three leading players and then we missed being the headquarters of the European central bank, instead of Frankfurt. Now, as my right hon. Friend the Chief Secretary to the Treasury said, we are even risking London's position as the overwhelmingly dominant financial centre of Europe. Only recently, we have lost the Bankers Trust, through a merger, and the entire German Government bond market to Frankfurt. That would never have happened had we joined European monetary union and the single currency at the outset.
  Mr. St. Aubyn: Perhaps the right hon. Gentleman should clarify the issue. It was surprising that the German

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  bond market came to London in the first place. It came because of technological advance here; innovation and technological advance in the German market has won it back. What we are discussing is far more important. Our financial market will be restrained in Europe if we are over-burdened and over-regulated, and we are under threat of that from Europe.
  Mr. Sheldon: The German bond market did go back to Frankfurt, however—that is the top and bottom of it. Had we been closer to the European central bank, that might not have happened.
  The most important issue relates to decisions that will be taken early next year. The most crucial decisions of any institution are taken at its commencement. Despite the high standing of our Chancellor, those decisions will be taken by the single currency adherents. The decisions will be theirs, although they may affect us.
  What should we do? I believe that, without making the final decision of setting a date, we should state our firm intention of joining the single currency. That would have an enormous effect immediately. It would reduce interest rates and exchange rates would become more realistic. It would improve inward investment. It would also strengthen the position of the Chancellor. It would not be as good as being a member of the club, but it would represent a delayed but certain application and put us in a better position to argue our case. We do not seem to understand that there is a big battle ahead. Entry on our terms is not a foregone conclusion. We seem to lose sight of the work that is needed to meet not just our requirements for entry into the single currency, but our partners' requirements from us.
  One of the biggest issues is the level of the pound at entry. It has to be negotiated and the negotiations will not be easy. The longer we delay, the longer the other countries will have settled down to their new arrangements making it more difficult for us to obtain the conditions that we want. The longer we delay, the more conditions we shall be expected to fulfil and the more difficult it will be to find an easy passage into the euro. How will we get the exchange rate that we really need? In what used to be considered normal times, the recent decline in our balance of payments would have resulted in an automatic decline in the level of the pound, but capital movements and other factors have helped to offset that.
  With my interest in the manufacturing industry, I would wish a rate nearer the lower end of what is being suggested. The prospects for manufacturing industry have been deteriorating. The pre-Budget report predicts an increase of 0.25 per cent. this year. Next year, it should be in the range of minus 0.25 per cent. to plus 0.25 per cent. More recent estimates are even more pessimistic. One important component is the level of the pound. Considerable time lags are involved. Profits can be squeezed in the short term and customers may remain loyal for a while, but sooner or later time runs out and manufacturers have to raise their prices to stay in business and their customers look elsewhere. The pound has been too high for too long. On entry into the single currency, we shall need to fix a more realistic rate.
  We all have our views on the right level for the pound. The desirable level seems to be somewhere between DM2.30 and DM2.70. As I said, I would want a level
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  towards the lower end of that. Whatever is the right rate for us, how will we be in a position to negotiate the rate we want when we are seen as Johnny-come-lately—only wanting to join when the success of the union is assured? The others have taken a risk. We are waiting to see whether it is successful and only then shall we say, "Yes, it is a good club. You have done all the hard work and made it work well. Now we are going to give you the privilege of having us join you." That does not appear to be a good negotiating stance. We should not be surprised if the others resent our attitude. The danger for us is that that resentment could lead to economic disadvantages for us. In particular, it could limit the range of the value of the pound at which we may wish to enter.
  We keep saying that, once we are members of the new club, we will be able to use our veto more effectively. Threatening to use the veto even before we enter is unlikely to make the rest of the EU anxious to have us in. We need to consider much more closely the costs of delay in joining the single currency and the need to take decisions that will improve our prospects on entry.
  I should like to say a little about the Monetary Policy Committee. It has only one goal—controlling the level of inflation. Only after that goal has been met can it consider the other factors of economic management, such as growth and investment. It would be better if we learned the lesson of the United States Federal Reserve. Alan Greenspan considers the level of inflation in determining his monetary policy stance, but he also takes the economy into account. His remarkable success might have given us second thoughts on how the more limiting criteria that the Monetary Policy Committee has to observe might be broadened, at least up to the level of those of the United States Federal Reserve.
  An amendment was tabled to the Bank of England Bill in another place that would have required the Monetary Policy Committee to take wider issues into account. Perhaps we should return to that. In the meantime, we can consider broadening the committee. My right hon. Friend the Chancellor cannot be expected to pack the committee with representatives of every interest group. However, he can get a better mix. Now that we have some experience, perhaps those wider considerations might be taken into account when a vacancy arises.
  My final point is on the cost of earning a living. There was a time when everybody lived near to his place of work, be it the mill, the engineering factory or the pit. People's clothes were working clothes and everybody knew what working clothes were. They all took a jam butty, or whatever, and had no travel expenses because they walked to work.
  Now, the cost of earning a living is very large and growing. In almost all walks of life, people have to spend a bit of money on their clothes. They certainly have to have something better for their meals. Most importantly, they have to travel. We do not have the London weighting allowance in the north-west—we have to pay for our transport. It is expensive and the distances covered are becoming greater. I know people from Ashton-under-Lyne who work in Bradford or Eccles. It is quite common for people in all parts of the country to travel 20 or 30 miles to work—distances that used to be the prerogative of London. That has to be paid for out of taxed income. Those costs are wholly, exclusively and

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  necessarily incurred, whatever the Inland Revenue may say, because people cannot earn a living otherwise. However, the costs are not deductible.
  I sympathise with the difficulty that the Inland Revenue would have in trying to control such enormous expenditure. It would have to ask questions of every taxpayer. However, it is a manifest injustice that people spend so much of their after-tax income on the essential task of getting to work.
  There used to be an earned income allowance. I supported such an allowance and regret its passing. In the early years of this century, the justification for it was that unearned income from dividends or interest was more secure and did not have the vagaries of employment or other forms of income, so it could be taxed more highly. That argument diminished as savings became more widespread. However, the costs of earning a living have increased greatly. I know that there is little enthusiasm for income tax changes, but when such changes become respectable again—when income tax becomes a more acceptable form of taxation than I fear it has been recently—that anomaly will have to be looked at.
  As I said at the outset, the prime economic task of the Government is to prepare for entry to the single currency. I should like there to be a programme that set that out as our highest economic priority.
  5.34 pm
  Sir Peter Tapsell: It is always a particular pleasure to follow the right hon. Member for Ashton-under-Lyne (Mr. Sheldon) in an economic debate. We have debated the economy across the Floor of the House for many years and I have a high regard for him. When he was a Treasury Minister, he had a magnificent record in trying to restore fiscal prudence to a Labour Government when fiscal matters had got out of control. He will not be surprised to hear that I did not agree with the main thrust of his speech about Europe, but I certainly agreed with his remarks about Mr. Greenspan and the fact that the United States Federal Reserve does not take a narrow view about inflation, but takes a wider view that embraces growth, employment and other social factors.
  I welcome the Chief Secretary's carefully worded statement, giving the most categorical assurance to the House and the nation that the Labour Government will veto any attempt by the European Union to impose tax harmonisation on this country. I am sure that he will have the almost unanimous support of Conservative Members in honouring that pledge. However, history has proved that Ministers who give such assurances in all good faith can find it more difficult than they had supposed to fulfil their undertakings.
  While the Chief Secretary was speaking, I was handed a piece of paper from the Press Association tape from Brussels, reporting events of only a few hours ago. It said:
  "German Finance Minister Oskar Lafontaine today called for majority voting on tax harmonisation in Europe—removing Britain's veto."
  Mr. Lafontaine is quoted as saying:
  "The principle of unanimity must be broken."
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  I am sure that that sounds even more impressive in German.
  Mr. Byers: Will the hon. Gentleman confirm that that was a personal statement by Mr. Lafontaine, rather than a statement on behalf of the German Government?
  Sir Peter Tapsell: Yes, Mr. Lafontaine said that. However, when Finance Ministers say, "This is a personal statement and that is a Government statement," I become somewhat anxious. I hope that the Chief Secretary's statement to the House about tax harmonisation was a Government statement rather than a personal one. I am reminded of Harold Wilson's habit, when he had made some great announcement to the country on television or elsewhere, of saying, "This is not just a pledge; it is a promise." Sometimes, he would say, "This is not just a promise; it is a pledge."
  I hope that Ministers here and in Europe will not become too schizophrenic and will not think that some public statements can be passed off as just a personal point of view while others count as ministerial statements. All the Finance Ministers of Europe are meeting today. It is such a crucial meeting that our Chancellor feels that it is more important to attend that meeting than the economic debate on the Queen's Speech. In all my years in the House, I cannot remember a Chancellor not being present at this debate. This is the day that the Finance Minister of Germany—the most powerful economy in Europe—has chosen to say that the principle of unanimity on harmonisation of taxation must be broken. Ministers should take that statement seriously.
  The Gracious Speech says:
  "My Government believe the historic decision to give the Bank of England the power to set interest rates has been crucial to the meeting of its inflation target and credibility in the system."
  I hope that it will not sound ungracious if I point out that inflation today is approximately the same rate that the Government inherited from their predecessors and that the credibility of the Bank of England's inflation forecasting machinery has never been lower. It has been difficult in recent months to meet, anywhere in the country, any industrialist of experience—certainly anyone who has worked in the exporting industries—who believes that the Bank of England has been getting its monetary policy right.
  The Chancellor is clearly anxious about his hasty and furtive decision to give independence to the Bank of England a few days after the general election and to abandon his ministerial responsibility for monetary policy. That was not in the Labour party's manifesto and it was not agreed with the then shadow Cabinet before the general election. We are told that it was not even put to the full Cabinet for discussion before the announcement.
  As I have said in the House before, that decision was one of the most important that the Government have taken; I believe that it will prove to be an albatross around their neck and the neck of the nation for many years to come. The whole project was very much the Chancellor's baby, which is why he keeps saying that it has been a huge success. As its unwisdom becomes ever more evident, we must not forget that he is the man to blame.

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  Lord Healey has pointed out, in his usual frank and genial way, that
  "an independent Central Bank is a gimmick to be used as an apologia by failed Chancellors to shuffle off their failures on to the Bank of England."
  He speaks with some authority on these matters. The failure of the experiment has already become evident and the shuffling off has already begun. As soon as it became evident to everyone that the Bank of England had pushed up interest rates too far, Ministers scurried around briefing everyone, on and off the record, saying that they favoured a cut in interest rates. By then, however, the damage had been done.
  For a year, the academic economists—none of whom has had much experience in industry or any form of business—have been fighting the battle on the wrong front, looking over their shoulders at past inflationary problems rather than forward to the darkening skies of what will almost certainly be the most serious world recession since the war.
  Six increases in the bank rate—making our interest rates the highest in the developed world—produced a seriously over-valued pound for a prolonged period. The speculators were happy to take the enhanced income that was offered to them, but the price was paid by our export manufacturers and farmers, for whom this monetary mismanagement has been a disaster.
  The Bank of England and those on the Treasury Bench cannot accuse their critics of being wise after the event. For more than a year, some of us have been warning the Chancellor that 1999 would be a year not of inflation but of recession, or worse. On each occasion I have put that point to the Chancellor in the House—when one can catch him here on one of his flying visits from Europe—he has invariably dismissed it with his usual cocky bombast. He has uttered the meaningless slogan that he had no intention of pursuing a policy of boom and bust—as though anyone had asked him to do so. Now the penny has finally dropped, even for him. Boom is no longer on the British economic agenda, even as a slogan, but bust most certainly may be.
  The academic economists have now cut interest rates and will doubtless cut them again, if not on their own initiative at least every time that Mr. Greenspan gives them the lead. The damage has already been done, however. There is always a time lag before changes in monetary policy are felt throughout an economy—it may be 12 or 15 months or longer. The damage caused by the Government's mistaken monetary policy—they cannot shuffle off the ultimate responsibility, certainly not in the eyes of the electorate—will be felt for a long time. Some exporters and farmers will never recover, but will be forced out of business.
  The decision to give independence to the Bank of England has been a disastrous failure so far. The Chancellor is looking more and more like Philip Snowden and less and less like Maynard Keynes. As hon. Members from both sides of the House have pointed out in the past 18 months, if one puts a central bank in sole charge of monetary policy and gives it a target for inflation but not for growth or employment, one is bound to end up with an excessively tight monetary policy and rising unemployment.
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  That is exactly what happened in continental Europe, which was the main reason why Chancellor Kohl lost the German election on 27 September and why President Chirac lost his conservative parliamentary majority in the French Assembly. Mr. Lafontaine, the new German Finance Minister, seems to understand that well. In recent years, the record of the previous German and French Governments, whether of the left or of the right, has been disgraceful in the crucial matter of employment.
  At a conference in Berlin at the beginning of the year, I pointed that out in a private conversation with a senior Minister in the previous German Government. I asked him whether he was concerned that unemployment in Germany was approaching the level that brought Hitler to power. He replied, "The situation today is quite different. Our social benefits are now so good that many Germans, particularly in the east, are better off out of work than in work and many of them don't want to work anyhow." No doubt that reply was realistic, but it represents a lamentable way to run an economy. That approach will eventually produce a lack of international competitiveness, which will be a threat to the welfare budget as well as to employment.
  That is exactly what is likely to happen when fiscal and monetary policies are separated. Governments run an even laxer fiscal policy to cope with social discontent and the independent central bank tightens monetary policy to offset the lax fiscal policy. One ends up simultaneously with a monetary policy that is too tight and a fiscal policy that is too loose. That is the almost inevitable consequence of putting responsibility for the control of those two levers of economic management in different hands. The result is bound to be higher unemployment than is necessary to maintain a reasonably stable currency.
  As Aneurin Bevan was fond of saying, "You do not have to look into the crystal ball when you can read the book." Turn to almost any page of that book in recent years and the writing is clear—it is set out in capital letters. In the 1980s, the United States Administration ran a lax fiscal policy, the Fed responded by running a tight monetary policy and American unemployment soared. In Germany, in the 1990s, the German Government ran a lax fiscal policy, the Bundesbank responded with a tight monetary policy and unemployment soared. In Britain, while we were members of the exchange rate mechanism, we followed the same policy mix, with the same dismal result.
  In opposition, one of the most intellectually attractive aspects of new Labour thinking was that it appeared to have grasped the message that there must be a close correlation between monetary and fiscal policy. As soon as the new Chancellor, on his fourth day in office, announced that he was abandoning his personal responsibility for the difficult and politically burdensome task of fixing interest rates—a vital decision, which he had hidden from the electorate and, apparently, from most of his colleagues throughout the election campaign—I realised that the self-proclaimed iron Chancellor was clad in tin. So it has proved. After one year of boasting about his fiscal prudence, and as the Bank of England pushed interest rates higher, the right hon. Gentleman suddenly announced a popular and much looser fiscal policy and increased expenditure substantially over previous levels on assumptions about future growth that no one but he thinks are attainable. New Labour had transformed itself into the new Bourbons.

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  Mr.Lafontaine is a highly intelligent, outspoken man, full of interesting ideas. He is clearly destined to be a left-wing Newt Gingrich in Europe in the years to come, which will be tremendous fun. For all our sakes, we must wish him well, not least because of his declared intention to run our economy and tax system as well as his own. However much he may favour his general approach to Europe, our Chancellor is already jealous of Mr. Lafontaine because he is a real intellectual as well as being a real socialist. When I first entered the House, there were many people like that around and I rather miss them, so at this stage I feel well disposed towards Mr. Lafontaine, so long as he confines his activities to a purely German context. He clearly agrees with me about central banks, and he has made it clear that the lack of democratic accountability of the European central bank is unacceptable and that it must have obligations about employment and growth as well as inflation.
  I seem to remember some of us—including, dare I say, my honoured Whip, my hon. Friend the Member for Beverley and Holderness (Mr. Cran), who is sitting on the Opposition Front Bench—pointing that out during debates on the Maastricht treaty and being much scorned by those on the Labour Front Bench for doing so. Of course, Mr. Lafontaine's suggestions for clipping the wings of central banks have produced howls of protest from bank governors everywhere. I cannot recall an occasion on which there has been such unanimity between governors. When they attend International Monetary Fund meetings in Washington every September, they are usually at each other's throats.
  Mr. Lafontaine is also right to put the reduction in unemployment in Germany and Europe as his top priority. The political class in the European Community has shamefully betrayed its people on that issue for too long. At last, we seem to have a European Finance Minister who is determined to reverse the process, and all power to his elbow. Unfortunately, and this is where Britain must be careful, he seems so far to be less preoccupied with reducing supply-side rigidities in Germany and Europe than with emphasising the social chapter aspects of economic policy as his method of reducing unemployment. That would be a serious error if it were continued—an error into which the British Government are already falling. Like Britain, Europe needs—particularly if the world is heading for a deep recession, as I believe it is—flexible labour markets, enhanced skills and the encouragement of entrepreneurship to maintain competitiveness.
  Attractive though they may superficially appear, shorter working hours, minimum wages, longer statutory holidays and extra social provisions are ultimately a direct threat to high levels of employment, as Germany and France have been demonstrating for some time. It is bad news for Britain that Labour seems to be going down that road and throwing away the benefits of some of our opt-outs from the Maastricht treaty.
  Finally, contrary to what many hon. Members may expect, if there has to be a single European currency, I hope that it will be a success. It is in everyone's interests that it should be. A Europe in economic, social and political chaos would be bad for Britain. The fact that the single currency was a success in the continental sense would not be a reason for Britain joining it—but I will not develop my reasons for that now, as it would take too long and I hope to say something on the subject on a future occasion.
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  The nightmare scenario for the euro will be one of Governments pursuing lax fiscal policies while the European central bank counterbalances them by a tight monetary policy. However, that seems to be the most likely prospect for 1999 in our part of the world as those all around us move towards recession and, perhaps, to slump.
  5.57 pm
  Mr. Giles Radice: I am glad to follow the hon. Member for Louth and Horncastle (Sir P. Tapsell), who always speaks with great style and brio. Indeed, he made a much better speech, or certainly a much more thoughtful speech, than the shadow Chancellor.
  Dr. George Turner: Not very difficult.
  Mr. Radice: Being a naturally polite person, I would not put it like that, but I congratulate the hon. Member for Louth and Horncastle on his speech although I do not agree with some of his views, as he knows. However, I agree that this Queen's Speech takes place against an uncertain world economic situation after the events in the far east and Russia, although it is perhaps slightly less uncertain than it was a month ago, thanks to decisive action by the Federal Reserve. In his praise for the Federal Reserve, I agree with the hon. Gentleman.
  The world economic situation creates difficult problems for all western policy makers, but it is a particular problem for the United Kingdom given the fact that we were already deliberately slowing down our economy because of the dangers of overheating when we first came to power. The trick is to continue that slowdown without tipping over into recession.
  The Opposition charge is that the pre-Budget report is far too optimistic in its forecasts and has left a black hole in public finances. No serious commentator agrees with the black hole argument; forecasts are always slightly suspect because no one knows the future, although I note that the Bank of England forecast is almost the same as that of the Government. Also, the Monetary Policy Committee has cut interest rates, for which it is to be congratulated. Incidentally, a distinction must be drawn between the Bank of England and the European central bank, in that the former has an inflation target and, if there is a danger of undershooting the target, the MPC is obliged to cut rates. That provides some defence against a recession, which I do not think that the hon. Member for Louth and Horncastle acknowledged.
  It would be absurd for the Government to start to cut public spending on the flimsy ground that they got their forecast wrong. No responsible Government would do that. It is precisely when the dangers of recession are evident that public spending should not be cut. On the contrary, the automatic stabilisers must be allowed to work. The Government are following a sensible policy. With luck and good judgment, we will manage to avoid a recession in this country.
  I agree with my right hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon), with whose speech I concurred almost completely, that the big economic event—only a month away—is the coming of the euro. The euro is enormously important not only for the 11 members who are joining in the first wave but for

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  the United Kingdom, which is staying out for the time being. We may have decided not to join the euro for the moment, but there is no way in which we can keep the euro out of the UK. That is the reality. It is bound to impact, one way or another, on the value of sterling. So far, sterling may have benefited from being used as a hedge against volatility in the euro, but if—as many people, including the Governor of the Bank of England, believe—the euro proves to be a strong and stable currency, sterling may experience a bumpy ride, going down as well as up. We do not know what will happen to the pound, but it could well be volatile.
  There is also the impact on business. The Government are right to stress the need for preparation. Earlier this year, the Treasury Select Committee held hearings on the preparations for economic and monetary union. My hon. Friend the Member for Bolton, West (Ms Kelly), before she was translated into a Parliamentary Private Secretary, was there. Leading British firms such as ICI, British Steel and Vauxhall told us how they would be using the euro widely and expected their suppliers to do likewise. As Dr. Sykes of ICI told us,
  "Euro liquidity will naturally spread throughout the economy".
  That will happen whether people like or not.
  Of course, there will be a major impact on the City. As I learned from the Bank of England's third euro symposium at the end of October, the City believes that it is ready for the coming of the euro. It expects to become the
  "international financial centre for the euro".
  The euro is that important for us.
  I strongly support the Government's changeover plan, which will be published in the new year and will set out for business the steps that need to be taken to prepare for entry when we decide. The Government's policy of prepare and decide is a vast improvement on the wait and see of the Tory Government, let alone the 10-year delay of the Tory Opposition. The question is whether the Government's policy goes far enough.
  Business leaders have told me and others that, although they much appreciate what the Government are doing, and although some are prepared to go ahead on the basis of risk, they would much prefer, and would welcome, a clearer sign than the Government have given so far that they will decide to join the euro once economic convergence is achieved.
  Ms Abbott: Does my hon. Friend think that the Government's timidity about going into economic and monetary union is based on a technical objection, or on being terrified of the Murdoch press?
  Mr. Radice: I think that the five conditions are very important, but it is also clear that the Government are realistic: they have to win a referendum. They must be certain, or pretty certain, before they call it that they will win it. That is only common prudence, because it would be a disaster not only for the Government but for the country if it were lost.
  At the beginning of last week, more than 100 business leaders, from firms whose turnover represents more than
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  a quarter of gross domestic product, signed a statement in the Financial Times. They concluded:
  "Britain's best economic interest is likely to involve joining soon after EMU is established, and the best policy for Britain is one based on the assumption that we will join".
  Since then, a further 150 business leaders have signed the statement.
  On Monday, the officers and members of the advisory committee of the European Movement—including the hon. Member for Esher and Walton (Mr. Taylor)—the all-party group that was founded by Winston Churchill, of which I have the honour to be chairman, published a letter in The Independent. Its concluding paragraph stated:
  "The best course for our country is to prepare now to be able to join EMU when the economics are right. The government's policy of commitment in principle to UK entry is welcome. We now need an unequivocal statement by the government of its intention to join EMU as soon as proper convergence of our economic cycles is achieved, matched by an assurance that pursuing such convergence will be a key element of domestic policy in coming years."
  We are not asking for a specific date but, like my right hon. Friend the Member for Ashton-under-Lyne, we ask the Government to move from if to when.
  In the concluding part of my speech, I want to comment on tax, because we have heard some extraordinary scare stories on it in the British press, and an echo of them from the shadow Chancellor this afternoon. To believe what we read in the Daily Mail, The Daily Telegraph or The Sun, we would have to believe that the British will have to put up their income tax at the behest of Brussels, that the UK is forced to put VAT on children's clothes, food and newsprint and that it is forced to adopt German rates of corporation tax. I need not bother to comment on the income tax scare, because no evidence whatsoever has been produced for that.
  Mr. St. Aubyn: I am grateful to the hon. Gentleman for inviting evidence on the fact that income tax would have to go up. Is he aware of the publication "UK Economic Prospects", printed last December by Oxford Economic Forecasting, based on a well-known economic model? It said that income tax would have to rise if we entered the single currency.
  Mr. Radice: That is a prediction by a forecasting body, and good luck to it. It is not a firm proposal from Brussels or anyone else.
  Mr. Cash: Will the hon. Gentleman give way?
  Mr. Radice: No. The hon. Gentleman has not been sitting in the body of the kirk and he came in late. On that basis, I am not prepared to give way to him.
  It is worth commenting on The Sun story on VAT, which was a collector's item, because newspapers should not be allowed to get away with barefaced lies. I realised that even The Sun knew that it was treading on thin ice when its political editor, Mr. Trevor Kavanagh, was sent to make the rounds of the television studios last night. If the going gets rough, "Send Kavanagh" seems to be the newspaper's line. Its headline yesterday was "Euro tax on kids' clothes—We reveal secret VAT stitch up." It said:
  "The tax grab plan was signed and sealed behind closed doors at the 1996 EU summit in Dublin … and Britain must agree if we join the single currency. The scheme is spelled out in EC document (96)328. The Sun has seen a copy."

  719
  So have I.
  It is hardly surprising that The Sun has seen a copy, because the so-called "secret" VAT document was a Commission White Paper published in 1996. Perhaps it was not brought to Mr. Kavanagh's attention then. Obviously no one told him that the proposals in the document were not accepted by the Council of the European Union.
  What The Sun did not say is that there are no EU proposals to get rid of zero-rating of VAT. That was confirmed on Radio 4 three days ago by Mario Monti, the Commissioner in charge of taxation. If there were any such proposals, they would have to be agreed unanimously by all member states. The United Kingdom is not alone in that respect: there are six other countries with zero-rating—Belgium, Denmark, Ireland, Italy, Finland and Sweden. Therefore, it is extremely unlikely that there will be any agreement to get rid of zero-rating. Certainly, that issue has nothing to do with the single currency or with UK entry into the single currency.
  Mr. Michael Jack: Will the hon. Gentleman give way?
  Mr. Bercow: Will the hon. Gentleman give way?
  Mr. Radice: I shall give way, for the last time, to the right hon. Member for Fylde (Mr. Jack).
  Mr. Jack: Given the hon. Gentleman's anger about Mr. Kavanagh's misreporting, does he propose, as Chairman of the Select Committee on the Treasury, to invite that journalist to give evidence to his Committee and to explain that misreporting, so that we may all understand a little better how The Sun operates?
  Mr. Radice: I think that The Sun has had quite enough publicity for that barefaced lie, so I certainly shall not do as the hon. Gentleman suggests.
  It is absolutely true that Oskar Lafontaine, who has been so heralded by the hon. Member for Louth and Horncastle—never was a socialist so praised by a Conservative; normally one has to be dead to be praised, but apparently in this case one has to be German and a Keynesian—has said that he thinks that there should be a minimum rate of corporation tax. However, that is not yet a proposal of his own Government. I can state quite categorically that there is no question of Britain adopting German rates of corporation tax. Any proposal would have to be agreed unanimously and seven member states—not just Britain—have low corporation tax regimes, so it is hardly likely that those seven countries would agree to put up their corporation tax to German levels.
  A code of conduct for business taxation was signed last December, a fact not commented on by those who criticised it—[Interruption.] Well, one person may have mentioned it, but no one else has. My hon. Friend the Financial Secretary chairs the group on the subject, which will be reporting soon. The so-called tax harmonisation scare has little to do with the single currency, but everything to do with the single market, which emerged from the Single European Act. The Conservative party introduced that legislation and the vast majority of Euro-sceptics voted for it, so let us not hear too many complaints from them when those issues are raised.
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  The United States model is of one country with a single currency but many tax rates, especially business tax rates. I welcome the Government's statement on taxes today. If there is tax harmonisation over the next 20, 30 or 40 years, it will happen because all countries, including the United Kingdom, want it. I predict that any harmonisation will be downwards, not upwards. That is why the comments that we have heard this evening are so misplaced. I shall vote for the Queen's Speech with especial confidence tonight, because of the Government's sensible policies on the economy and on Europe.
  6.14 pm
  Sir Raymond Whitney: I am sure that the hon. Member for North Durham (Mr. Radice) will not be surprised to learn that the passages of his speech with which I had the most difficulty were those dealing with the domestic economy. He suggested that the statistics on the likely growth rate of the economy over the next few years are flimsy and should therefore be disregarded.
  Mr. Radice: I did not say that.
  Sir Raymond Whitney: If I have misrepresented the hon. Gentleman, I beg his pardon. I understood him to say that the statistics were flimsy.
  Mr. Radice: I said that all forecasts are just that—forecasts. We cannot foretell the future.
  Sir Raymond Whitney: We certainly agree that forecasts are forecasts and that we have to handle them carefully, but we also have to govern the economy and I would suggest that the way not to govern the economy is to rely on the forecasts put forward by the Chancellor of the Exchequer. The hon. Member for North Durham also referred to spending and I understood him to say that he wants even more spending—again, I hope that I do not misrepresent him—although he is happy with the Chancellor's spending proposals. It seems to me that the spirit of Keynesianism is alive and well on the Labour Benches, although my hon. Friend the Member for Louth and Horncastle (Sir P. Tapsell) might have something to say about that.
  I am sorry that the Chancellor of the Exchequer is unable to be here and I endorse the point made by my hon. Friend the Member for Louth and Horncastle that the right hon. Gentleman's absence is quite extraordinary. In my experience, which is rather shorter than my hon. Friend's, it is a unique omission that we do not have the benefit of the Chancellor's presence. Because the economy is at such a delicate and important juncture, it is crucial that the Chancellor should come to the nation and, indeed, the House, tell us what is going wrong, and give his explanation for it.
  Preparing for the debate, I did a little research into the years running up to the election in May last year, and what a different song the gentleman who is now the Chancellor of the Exchequer sang then. In one famous—even notorious—speech, we were told about new ideas and the "new economic approach" to be vouchsafed to us.
  He spoke about
  "the growth of post-neo-classical endogenous growth theory and the symbiotic relationships between growth and investment in people and infrastructure".

  721
  We were promised
  "a new understanding of how labour markets really work",
  and he referred to
  "a new agenda for the future".
  That future has now arrived and it is a fairly worrying state of affairs. The Conservatives' legacy has been squandered. I know how sensitive Labour Members are to reminders of that economic legacy, but it is important that they should be reminded regularly of it. They inherited the longest period of low inflation for 50 years and faster growth and lower unemployment than any other economy in western Europe, but the forecast for next year is that we shall be at the bottom of the growth cycle.
  The Government's forgetfulness of the realities of 1 to 2 May 1997 was echoed today by the Chief Secretary, as it was in the Gracious Speech, when we heard that the Government had
  "reduced … borrowing by £20 billion in its first year".
  What do they think happened on 2 May 1997? Do they think that a bonanza occurred, that a tree covered with lollipops and bananas was suddenly produced and down fell borrowing? That £20 billion reduction reflects the success of the economy and the legacy from the previous Government that the present Government constantly deride. That is the reason why Treasury receipts are riding so high and how that £20 billion reduction in Government borrowing, about which we have heard time and again, was achieved. I hope that all Ministers will be prepared to recognise that reality in future.
  The growth forecasts are a serious embarrassment, even to the Chancellor of the Exchequer, who as we all know does not embarrass easily. Nevertheless, he still insists that growth, which will clearly be less than 1 per cent. next year, will somehow and miraculously have risen to—I must get it right, as I do not want to do the right hon. Gentleman an injustice—2.25 per cent. in 2000. As one leading international bank said, that forecast is "hopelessly optimistic". Not even the Prime Minister believes that forecast—as he demonstrated in his speech at the Lord Mayor's banquet and, it is reported, in his speech to the parliamentary Labour party.
  It becomes increasingly clear that the Government's promises—about which we hear daily—about the growth in public sector spending over the Parliament cannot be met. The Government allege that growth will continue at 2.75 per cent., year on year, throughout the Parliament. As my right hon. and hon. Friends have pointed out, something has to give. It will mean either higher taxation or massive inflation, and that is the real challenge facing the Government. It is bad news for the economy, particularly when we are facing turbulence, which is an international phenomenon.
  One of the tragedies of this Government's record is that £37 billion of that increased spending—almost as much as the combined increase in the health and education budgets—will be allocated to social services. Meanwhile, the pressures on industry and the manufacturing and commercial sectors—which create the wealth on which the growth will be built—will increase as a result of the Government's actions. Increased taxation and the so-called "fairness at work" legislation will create further pressures. We all want fairness at work, but we know
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  from bitter experience that trade union powers can be easily misused. Ensuring the rights of one worker may mean putting another out of a job. Industry is facing that and other existing pressures.
  The pressures on individuals have been well documented. Most notable is the damage that the Chancellor of the Exchequer has done to pensions. I believe that the penny has yet to drop with the British public. When it does, it will have a serious political impact—as it should. It is particularly ironic that that attack on pensions and thrift has occurred at a time when Ministers are stressing the importance of personal private pensions. The lacuna in the Gracious Speech is what the Government plan to do about personal pensions. There was very little information about that in the Gracious Speech, and none at all in Ministers' speeches during the series of debates about it.
  I take no pleasure in offering this gloomy perspective of the state of the economy, but it is undoubtedly true. Even more alarming is the bigoted complacency of the Government—most notably, of the Chancellor of the Exchequer. Receiverships and bankruptcies are increasing and the recession is in prospect. Barclays bank's latest briefing states:
  "Forward-looking survey data are pointing to a deep recession".
  During the Queen's Speech debates, the Government have offered no solutions and demonstrated the emptiness and vacuity of new Labour and the third way, about which we know nothing. The theories that the Chancellor of the Exchequer offered before the election—his endogenous theories to which I referred—have been shown to be empty and naive offerings. The Chancellor must come to the House and acknowledge and accept the reality facing us in the coming year.
  6.25 pm
  Mr. Denzil Davies: I expected the hon. Member for Wycombe (Sir R. Whitney) to speak about the euro, and hon. Members probably expect me to refer to that subject. However, like the hon. Gentleman, I will not. I have been mildly surprised by, and taken some pleasure in, the four speeches—including that of the Chief Secretary and those from the Labour and Liberal Benches—about the euro in this debate. The European movement is clearly in a bit of a panic.
  It has been a bad week for euro enthusiasts. I know that because they have come to this place and co-ordinated or harmonised—I hate to say "orchestrated", as I am sure that that is too strong a word—their views. That is what we have heard today. I do not need to say anything about the euro because panic has clearly set in. I await with interest further debates about the veto, which will no doubt occur after the Chief Secretary has been liberal with Britain's use of it. I shall wait and see what happens.
  I intend to speak about the Gracious Speech and the Government's reiteration of their commitment to an economic orthodoxy that prevailed for much of the 1980s and throughout the whole of the 1990s. That orthodoxy is now apparently summed up in one word. The word is stability and stability is the word. As I understand it, "stability" encapsulates three separate economic strands: price stability, balanced budgets and the oligarchy of the central bankers. Those three create a kind of economic trinity. So the word becomes three and the three become the word.

  723
  In his recent speech to the City, my right hon. Friend the Prime Minister is reported to have said—I only read the headlines these days—that stability is "sexy". As a Welsh Calvinist, I am not quite sure what he meant. However, I cannot help thinking that sex sometimes unleashes powerful forces that can make a mess of stability. So I am not sure whether the two always go together. To extend that analogy to the economy, there are powerful forces at work in the global economy and they are the antithesis of the powerful forces that begat the present economic orthodoxy.
  The powerful forces that begat the economic trinity were the forces of inflation. However, the powerful forces that we see at work in the economy now are the forces of deflation. Therefore, the danger as I see it—nobody can foretell the future—is that stability and the present orthodoxy not only are unable to provide any bulwark against global deflation, but will give a fresh impetus to global deflation, driving prices even lower.
  It is difficult to predict the future and to analyse the present. However, most people would agree that prices—not their general level, but the rate of inflation—are falling in most western countries. Farmers are getting less money for their produce. Hon. Members will be interested to learn that a newspaper states today that the price of hogs on the Chicago merchandise mart is at its lowest level in 27 years. The pig cycle is really loose in the land. I do not know about the economic cycle, about which Treasury Ministers talk. I do not know whether that lasts for seven years, 14 years or what. Clearly the pig or hog cycle is still with us.
  The price of crude oil is now $10.30 a barrel, which is its lowest price for a long time. The prices of manufactured goods are falling in most western countries. In September, in euroland—the area encompassing the 11 countries that will join the single currency on 1 January—the retail price index or its equivalent was 1 per cent., so prices were rising generally by 1 per cent. In Germany, price inflation is close to zero, and in France, it is not much higher.
  There is no need for me to go into detail about why there has been a fall in prices. Most hon. Members understand that global economic forces, the freedom of trade and capital and a lack of barriers have brought us back to a pre-1914 world where trade and capital move freely. The technological changes of the past 20 or 30 years have brought about a reduction in costs and greater efficiency and made it easier for other countries to compete with western nations. Enormous global competitive pressure, quite apart from macro-economic policy, is pushing prices down. To maintain their profit margins, larger companies increase their capacity. They produce more goods at the lower prices. We have an industrial hog cycle, as prices are driven down even further.
  We tend to forget that the first country that suffered from all that—Japan—is the second most powerful in the world. That was some time ago. Whatever we think of price stability, Japan has plenty of it. I do not know whether the Japanese are enjoying it, but they do not need it. With the fall in prices in Japan came a fall in interest rates. I do not know whether interest rates automatically follow prices or whether the Japanese central bank reduces interest rates as a result of a fall in prices, but the two are connected. The bank rate of interest, or its equivalent, in Japan is now about 0.5 per cent.
  724
  Low interest rates did not stop the fall in prices because there is now general deflation in Japan as price rises fall below zero.
  The fall in interest rates had two consequences. First, it reduced banks' profits. Banks are certainly not popular on Government Benches and perhaps they are not popular in the country as a whole, but even banks have to make profits. If interest rates fall to 0.5 per cent., there is not much room for banks to make profits. No doubt, banks can charge more for cashing cheques or other services, but, in the main, bankers make their money by borrowing at one rate and lending at another. An interest rate of 0.5 per cent. did not give Japanese banks much of an opportunity to make profits, and that had an effect on the Japanese economy.
  Secondly, and more importantly, low interest rates led to asset inflation. Retail prices may have fallen but being able to borrow at such low interest rates meant that the Japanese were able to purchase shares. More importantly in Japan, they were able to purchase more land and property. That asset boom eventually went bust, and the Japanese economy is still in a terrible state.
  I shall deal now with the largest and most important economy in the world—that of the United States. We have heard in this debate and read in the newspapers what a wizard Dr. Alan Greenspan is. I am sure that he is, but let us, on these Government Benches, be radical for a change and dare to criticise him. I heard a sharp intake of breath from one of my hon. Friends, but I shall chance it.
  Dr. Alan Greenspan, the chairman of the Federal Reserve, is not a happy bunny. I do not know whether one should call chairmen of central banks bunnies, but he is certainly not happy. For some time, I have detected panic in his pronouncements. Before the Russian crisis, Wall street was soaring to dizzy heights. Dr. Greenspan could do nothing. He went before Congress; he wrung his hands. Sometimes he sounded more like an amateur psychologist than the governor of a central bank when he deplored the irrational exuberance of Wall street. I do not know whether exuberance can ever be rational. He was worried, but the Russians gave him an escape route, at least for a short time. He did not have to put up interest rates to stop asset inflation on Wall street because the Russian crisis meant that there was deflation anyway.
  Dr. Greenspan panicked again. He tried to save a ropy secondary bank, which is now called a hedge fund, and reduced interest rates three times in two weeks. Things were all right for a while, but share prices in the United States are rising again. They did not go up today or yesterday, but they are almost back to the pre-Russian crisis levels. Why? Because the costs of borrowing have been reduced and people can again borrow to buy shares.
  Dr. Greenspan is worried about his constituency. He may be a central banker, but he has a constituency—Wall street. American consumers are not saving money and are using asset inflation on Wall street to buy goods. They are also almost totally dependent on share prices in Wall street for their retirement pensions. Dr. Greenspan is therefore locked into his constituency of Wall street. He is desperate and he is afraid to put up interest rates in case he brings down share prices. That affects American consumption, which affects most of the world.

  725
  Dr. Greenspan is not a happy bunny, but one central banker—Mr. Duisenberg—is a very happy bunny. I hope that I have pronounced his name correctly.
  Mr. Radice: It is pronounced Doysenberg.
  Mr. Davies: My colleague from the European Movement tells me that it is Doysenberg.
  Mr. Duisenberg is a happy bunny. He is the happiest central banker in the world. He has a job that will last eight years; nobody can sack him. He is accountable to no person, only to a treaty, which must be nice because there is nothing behind the treaty apart from the European Court of Justice. He does not have to worry about a single Government or a powerful stock market, as does poor Dr. Greenspan. There is no Wall street to worry about when Mr. Duisenberg makes decisions. All he has to do is ensure price stability, and he is getting there. Inflation is down to 1 per cent. One more heave and Mr. Duisenberg will have achieved zero price inflation in western Europe. He is indeed a happy bunny.
  There may be 16 million or 17 million unemployed people in western Europe. I do not know how many there are in euroland, but the figure is probably about 15 million. Mr. Duisenberg does not have to worry about that. He is accountable to the treaty, which includes only a few bland words about high employment.
  What about the Bank of England? I do not know whether steady Eddie is a happy bunny. He is probably fairly happy because he has not done too badly. He has hit the 2.5 per cent. inflation target three times. As the hon. Member for Louth and Horncastle (Sir P. Tapsell) mentioned, there used to be leads and lags. I do not know what has happened to them these days. I wonder whether the hitting of the target three times is due to the brilliance of the Monetary Policy Committee or to a fluke. Perhaps we will never know.
  As we have been reminded, the target is 2.5 per cent. My hon. Friend the Member for North Durham (Mr. Radice), Chairman of the Treasury Committee, nods in agreement. If inflation falls below 2.5 per cent., we can push it up again. We need some inflation—not for us zero price stability. In the British system, inflation must be 2.5 per cent.—not more, not less. Apparently, interest rates will be reduced in order to bring inflation back up. If it goes down to 2.4 per cent., we cut interest rates by a quarter of 1 per cent., and up goes inflation again to 2.5 per cent.
  I am amazed that those who believe in the ideology of the free market and who condemn Government intervention also believe, somehow, in the ability of centralised banks to control an economy such as ours merely by pushing up or bringing down interest rates. My right hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) probably remembers that, in the 1970s, we were considerably criticised for fine tuning the economy.
  Mr. Richard Shepherd: I suffer great confusion about all those measurements. Under the standardised European measure of inflation, as used for the Maastricht criteria, inflation in this country is only 1.5 per cent. I appreciate that that is higher than the average in euroland, which is—I think—1.1 per cent. How does
  726
  that affect the burden of the right hon. Gentleman's speech, given that he is considering an inflation rate of 2.5 per cent., which is set by the Bank of England? Does that not magnify the effect of his point?
  Mr. Davies: In this part of my speech, I am being a little Englander. I am looking just at the retail prices index and the Bank of England. Obviously, different figures have different consequences.
  I was trying to make the point that there is remarkable control of the economy—this fine tuning. I gather from The Times this morning that we should call such control not fine tuning but monetary activism—fine tuning bad, monetary activism good. These fashions come and go, and now monetary activism is fashionable. A member of the Soviet Union would be delighted to hear that the Governor of the Bank of England is able, in this western capitalist economy, to control the economy in such a way merely by reducing or increasing interest rates by a quarter of 1 per cent. The danger is to believe that we can stop the fall in prices merely by reducing interest rates. It might not work; inflation might fall to 1.2 or 1 per cent. The problem is that interest rates would have to follow, and then banks would be affected.
  I cannot foretell the future, but I believe that a transition may have to be engineered from the present orthodoxy, which is based on inflationary forces, to a new one, which takes account of deflationary forces. Whether western Governments, Finance Ministers and central bank governors have any longer the will to engineer such a transition—indeed, whether Governments have the leverage and power to do so—I do not know. But, if we cannot engineer such a transition, the industrial economies of the west will be greatly endangered. To paraphrase poor old Tacitus, who has been paraphrased so often, if we do not engineer a transition from one orthodoxy to the other, there is a very great danger that we will create a desert but continue to preach and advocate stability.
  6.45 pm
  Mr. Michael Jack: It is a pleasure to follow the right hon. Member for Llanelli (Mr. Davies), who made a thoughtful and witty speech in which he may have sowed the odd seed of destabilisation in his Front-Bench team. I studied economics by reading Samuelson—one of the text books of the day—and recall that he talked much of the hog cycle. A useful addition to the next edition would be to incorporate the right hon. Gentleman's concept of sexy stability.
  It is right and proper that the Opposition probe, question and, indeed, criticise Government economic policy in this debate on the Loyal Address. The Chief Secretary's speech mirrored the absolute complacency of the Gracious Speech's treatment of the economy. One would not think that there were a great deal to trouble the economic waters of the world. All we heard were some words straight from a BBC weather forecast: that the Government are
  "making the United Kingdom well placed not just to weather the international financial storms but to emerge stronger from them."
  That is no-problem-at-all language.
  The Government's central domestic economic objectives in the Queen's Speech, which were reflected in the Chief Secretary's entirely complacent speech, are:
  "high and stable levels of economic growth and employment".

  727
  That is never mind the fact that, potentially, we are heading for zero growth, rising unemployment, economic uncertainty and a mis-reading of what is happening in the world economy.
  I spoke recently to bankers and retailers who have been to the far east, who say that we have mis-read the depth of economic activity in that part of the world, that it will visit itself on us in no uncertain terms and that, as right hon. and hon. Members have said, the Government's and the Chancellor's assumptions of growth are way out. I therefore regard the words in the Queen's Speech as a complacent approach to the economy.
  Why is it important that the Government are more accurate in their forecasting and more realistic in what they say about the economy? I attended the agricultural show at Smithfield market earlier today, where I talked to an agricultural machinery manufacturer who has seen a 40 per cent. drop in sales as a result of the Government's economic policies. [Interruption.] No Labour Members were where it was at—where British manufacturing was trying to sell its products. The manufacturer pointed out that, when people in the agriculture business heard that things would become bad, even those who were planning to make an investment decided not to do so.
  Such forecasts engender strong precautionary motives on investment. The Government do not seem to understand that numbers in economic forecasting are important, but that just as important is the psychological frame of mind of industrialists. If the Government are over-ambitious with their target for growth, and it is missed, as all independent forecasters predict, the message will go out that the Government have got it wrong, and seeds of doubt will be sown once more in the minds of potential investors, as they wonder exactly which way the economy is going.
  It is important to be honest and straightforward with the economy. Having been in the Treasury, I know what goes on. Officials present a gloomy or difficult set of figures, which the Chancellor of the Exchequer says he cannot possibly sell politically in the wide world. Under the new regime in the Treasury, a few of his mates get together—officials are removed from the room—to work out what they will sell politically. They ask, "What numbers can we create to make all this sound terribly respectable and saleable?" They emerge with the kind of rubbish that we have heard in Government economic forecasting. That is what happens. It is an attempt to put political spin on the situation but ignore the real world.
  Mr. Sheerman: The right hon. Gentleman has spent a long time in the House, and today he has witnessed a typical example of the Opposition's attempts to talk up doom and disaster, and to exaggerate the problems in our economy and in the European and world economy. The Leader of the Opposition, in what he said the other day, and the shadow Chancellor, in what he said today—not to mention many other Conservative Members—have been irresponsible.
  Mr. Jack: If that is the best that the hon. Gentleman can do, obviously he has not read the average growth forecast of the group of independent advisers who advised the Treasury. They talk about 0.8 per cent. growth in 1999 and 1.6 per cent. growth in 2000. The latter figure is well below the Chancellor's forecasts of between 2.25 and
  728
  2.75 per cent. growth in 2000. Obviously, the hon. Gentleman also has not looked at table A7 in the Budget report, which points out that even the Chancellor admits that there is error to the tune of 1.5 per cent. of GDP in his own forecast. If one applies that scope for error to the figures for the current financial year, one is down to 0 per cent. growth.
  I am asking only for honesty and proper language in dealing with these matters, because of the psychology of potential investors. I return to what I said earlier. In the real world of agriculture, people are influenced by the mood of what is happening, and over-optimistic statements by Ministers will do the country's future investment decisions no good.
  Mr. Lindsay Hoyle: Will the right hon. Gentleman give way?
  Mr. Jack: No; I want to make a little progress, if I may.
  In terms of transparency of thought, I believe that an implication of the over-optimistic growth forecasts will be an under-recovery in tax revenues. I should like an answer tonight to the following question: why are Treasury Ministers stalwartly unwilling to publish, on a monthly basis, forecasts of receipts for taxes in this country? We should have that information, to enable us to monitor carefully a key element of economic activity. The Treasury publishes figures for the actual receipts, but we have no idea how the flow of taxes—something that is an important monitoring point for future tax revenue—and, therefore, Government borrowing are going. In this day and age of open government, it is time that the Financial Secretary stopped making excuses in parliamentary answers to me, and provided that information.
  While we are considering the performance of the economy, I have a chance to put the Government straight on some aspects of the previous Government's record. First, the Prime Minister triumphs in the fact that, in his judgment, it was the previous Government who had interest rates at 15 per cent. I remind him and his right hon. and hon. Friends that the previous Labour Government, before 1979, had interest rates at a similar level. Secondly, I remind him that, in the 1992 to 1997 Government, interest rates were not officially imposed at 15 per cent.
  Thirdly, the Prime Minister triumphs in the present 2.5 per cent. inflation rate, but at the same time his right hon. Friend the Chancellor is fond of telling us that interest rate decisions taken 18 months ago affect the inflationary position now. I remind Treasury Ministers that my right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke) set the interest rates that got us the present inflation rate. It is a triumph not for the new Labour Government but for his expertise in blending together data from the Treasury and the Bank of England and—most important—the touch and feel of the real-world economy. The latter is lacking under the current regime.
  Ms Keeble: Does the right hon. Gentleman accept that, since the general election, the rate on index-linked Government bonds has decreased from 4 per cent. to 2.5 per cent., which, in the real world, means that the

  729
  price of building a hospital has reduced by about £1 million? That is the real world of inflation and interest rates.
  Mr. Jack: That bears out the point that I have been making—that the previous Government were set on reducing inflation, and that the present Government have continued in the same mould.
  Finally, I reiterate the point made by my hon. Friend the Member for Wycombe (Sir R. Whitney). The reduction in borrowing for which the Government take all the credit had started under the previous Conservative Government. The fact that the new Government inherited our spending plans, combined with the strength of the economy and rising tax revenues, is the reason that borrowing has reached the present level.
  The position on inflation and borrowing, which has been good news for the economy, has been achieved at a price. Although interest rates are now falling, we should always remind our citizens that they have paid a price for the Labour Government's approach on interest rate setting. Taking into account MIRAS reductions, the average mortgage of £40,000 now costs some £32 a month more than it did at the time of the general election. That payment, by those people, is a price that will haunt the Government when they go to the ballot box.
  Setting interest rates is not a scientific activity; it requires real-world touch and judgment. I am disappointed that, in the Queen's Speech, there is no hint that the Government have considered reviewing section 11 of the Bank of England Act 1998. That section says that
  "the objectives of the Bank of England"
  are
  "to maintain price stability, and subject to that"—
  as the right hon. Member for Llanelli said—
  "to support the economic policy of Her Majesty's Government, including its objectives for growth and employment."
  The fact that the Bank's most important objective is to maintain price stability is one of the main reasons why interest rates have not been used more sensitively. Although interest rates have an important long-term effect on inflation, they also have a profound short-term effect. In the short term, the effect of interest rate decisions was to drive up sterling, decimating the prospects of manufacturing industry and sending agricultural activity well and truly into recession.
  The fact that Barclays bank, in its forecasts, talks about unemployment rising by 500,000 in the next three years may be a sign of the real-world damage of the lack of sensitivity and touch. That is where my right hon. and learned Friend the former Chancellor got it right. He listened to what the real world was saying. The one thing lacking from those who currently set interest rates is a large dollop of real-world common sense.
  It should be incumbent on the Government to produce a review of section 11 of the Bank of England Act 1998, to see whether it might be modified to give the Bank—if its independent stance is to be maintained—an opportunity to take into account wider issues. Another part of the 1998 Act gives the Chancellor the opportunity to intervene if situations merit such intervention. The
  730
  Bank should be able to take into account the facts that we shall miss the growth forecast; that we have the biggest trade gap ever; and that, if the growth forecast is 1 per cent. adrift, another £7 billion of borrowing will be needed.
  The Queen's Speech gives us no clues as to the Government's philosophy on, and approaches to, taxation. Previous Treasury documents contain a lot of waffly nonsense about fairness in the tax system, without defining "fairness". We get the idea that it has something to do with spending more public money and redistribution, but we do not know the Government's tax philosophy.
  The previous Government made things clear. They aimed at a policy of low marginal rates; they aimed to encourage work—an objective that the present Government claim to share. However, I am not sure where the Government stand on overall tax policy.
  In the "Financial Statement and Budget Report" for July 1997, tax receipts were forecast to be £382 billion. In the latest Treasury publication, for the financial year 2001–02, that figure has increased to £390 billion. The present Government have introduced 17 new forms of tax increase. Their total extra tax take in the 1999–2000 tax year will be an additional £7.135 billion, and all the data clearly show that tax, as a percentage of GDP, is rising under this Labour Government.
  What statistical evidence is before the House that sets out the Government's philosophy and approach towards tax? I do not know, but it is about time that the Chancellor of the Exchequer and his ministerial colleagues produced the evidence. We need to know what the Government are doing. We are not certain whether they are trying to broaden the tax base. There are signs that taxes on aggregates, pesticides and car parking—small taxation measures that will produce £200 million, £300 million or £400 million in the winnowing of extra tax—are the way in which the Government will proceed. We certainly know that they will continue with the tax assault on the motorist. This will be done to maintain the only thing that we know about Government tax policy—the maintenance of the basic and the higher rates of tax.
  It is about time that the Chancellor of the Exchequer made a clear speech on his tax philosophy. Apart from more tax in cash terms and as a percentage of gross domestic product, we are seeing a growing reliance on Inland Revenue tax as a source of revenue for the economy. In 1998–99, 55.7 per cent. of revenue will come from that source. It is important that we understand where the Government are going in that respect.
  More people are paying tax under the Labour Government, even against the background of a start in an increase in unemployment. The previous Government tried hard to take people out of paying tax but the Labour Government have not made clear their objectives.
  On many occasions, the Government have advertised the introduction of the 10p tax. It is Labour's big idea to try to give an incentive to work through the tax system. Again, unfortunately, the Government have not come clean. They will not tell us what the lop tax will look like in reality. Let us explore some of the real-world implications. A 10p tax to replace the 20p tax would cost roughly £10 billion. I do not think that anyone on either

  731
  side of the House would suggest that the Government have £10 billion to spend on a 10p tax, so let us look at the proposal in another way.
  If the Government decided that they wanted to spend on the introduction of a 10p tax the equivalent of 1p off the basic rate of tax, that would mean spending £1.8 billion. If, at the same time, they scrapped the existing 20p band, we would find that the Government could afford a 10p rate of tax on the first £1,400 of taxable income. That is a far less exciting prospect than all of the blandishments about a 10p tax.
  It is interesting to recall the number of ways in which the lop tax proposal has been recycled. In November 1992, it was advertised as a measure to "maximise the rewards from work". By the time that we reached the March 1998 Budget it was advertised as follows:
  "When it is right for the economy, I will introduce a 10p starting rate of tax".—[Official Report, 17 March 1998; Vol. 308, c. 1104.]
  That was with no other blandishments. By 23 April, we are told:
  "When it is economically right to do so, and so that work pays more, we will introduce the 10p starting rate of income tax."
  Mr. Oliver Letwin: My right hon. Friend is making a most interesting point. Does he agree that there is another slight oddity about the 10p rate of tax in addition to the oddities that he has mentioned? It is that the Chancellor of the Exchequer has brought it about through the working families tax credit that those who would be affected by the 10p marginal rate will be paying a 69p per cent. marginal rate in any event.
  Mr. Jack: My hon. Friend makes a telling point. He is illustrating another key technical feature, which again the Chancellor of the Exchequer has not talked about. There is a crucial interaction, for example, with the married couple's allowance, which will cause great problems. The result would be that those on a 10p rate would not get the benefit of it. It is about time that the Government came clean and set out clearly the framework of the proposed tax.
  I appreciate that the Chancellor of the Exchequer cannot tell us exactly about the timing of any tax change, but at least he should be honest with the British people and stop conning the people into believing that everyone will benefit from a 10p rate of tax. That will not happen. The right hon. Gentleman should make it clear whether he will restrict the 10p rate, for example, to those who are on basic rate or to those who are currently on the lower rate. Let us make it clear and let us stop, once and for all, the endless recycling of the same announcement, which so typifies much of what the Government do.
  Let us come clean and make it clear that the 10p tax will do nothing to improve the work incentive. The Government say that the working families tax credit will have that effect. The Government must either get rid of the 10p tax rate or introduce it. If they do introduce a 10p rate of tax, there will be the problem of 10p, 20p, 23p and 40p rates of tax. That is complexity. We have nothing in the Queen's Speech about removing complexity from the tax system. We have heard nothing about the work that is taking place to improve clarity and further the reform of tax law. Where is the reference in the Queen's Speech to a Bill that reflects the work of the tax law re-write committee? There is nothing about that
  732
  in the Queen's Speech, and it is about time that on this aspect of tax policy, and on others, the Government came clean.
  Several hon. Members rose
  Mr. Deputy Speaker (Mr. Michael Lord): Order. I remind the House that Madam Speaker has put a limit of 15 minutes on Back-Bench speeches between 7 and 9 o'clock.
  7.6 pm
  Mr. Tom Clarke: Two weeks ago, in his Mansion House speech, my right hon. Friend the Prime Minister spelt out his views on the state of the British economy in the face of the global meltdown. What began last year as a local and regional crisis has spread from Asia to Europe and north and south America, becoming what is now a global crisis that is affecting us all. Against that background is the intention to steer a course of stability. My right hon. Friend then said that he wished to
  "combat social exclusion and create a society of opportunity extended to all."
  I fully endorse such a commitment and I commend the measures to achieve that in the Queen's Speech. I congratulate my right hon. Friend on his commitment to help some of the poorest. I want to apply the same logic and commitment to the wider world, more particularly, to some of the poorest countries. I fear that, unless there is significant change in the international financial framework, progress will be made much more difficult.
  Over the past few months, we have heard much about the world financial system running out of control. For many this has not been a surprise—financial markets wield enormous influence in a precarious setting. Such is their influence that adjusting to the international economy—above all, to global financial markets—has become a fixed point of orientation in economic policy. Much of the activity of financial markets is speculative. It is often driven by short-term economic considerations and based, above all, on extracting gain from expansion and the velocity of financial turnover in currency, shares, options, futures and the rest. By watching capital look for the highest return, Governments have raised its price and inadvertently caused investment to shrink. There has been a race to the top for the highest short-term return.
  It is held that Governments cannot successfully second guess market decisions, and it is implied that they should not try. That view might be defensible if financial market operators had a monopoly of market expertise, but they do not. The consequences of letting the market take the lead without a clearly defined global strategy are very serious.
  It is true that there has been huge growth in consumption, but that does not tell us the full story. There is no doubt that current policies on trade and investment have been accompanied by increasing disparities between rich and poor, both between and within countries.
  The recent tragedies in Honduras and Nicaragua were natural disasters and no single person was to blame. Nevertheless, we can see how aspects of the global market played a part in the disaster. Many aid agencies say that, economically, it was an accident waiting to happen.

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  Structural adjustment programmes, sometimes naively enforced by external agencies to develop export industries such as forestry to enable the country to pay off debt, mean that 30 per cent. of Honduras's forest has been lost since 1960.
  According to United Nations figures, more than 70 per cent. of the Nicaraguan population was already living in conditions of poverty before Hurricane Mitch—a situation aggravated by the application of structural adjustment policies which dictate, among other things, acute cuts in public spending. Tragically, from the lakeside communities of Managua to the country's rural communities, it is precisely the poorer sectors that have been most affected by the recent disaster. The damage inflicted on a developing country, still struggling to pay off the crippling foreign debt while it emerges from a war and a long economic crisis, could prove to be devastating.
  The already insufficient infrastructure has been badly battered, with roads, bridges and basic services terribly damaged. The Nicaraguan President claims that Nicaraguan development has been set back at least 30 years, although even before the hurricane struck the country had fallen 20 or 30 years behind the 1977 growth levels as a result of a war and the economic problems of the 1980s.
  Structural adjustment programmes are precarious because they are blanket approaches which ignore the enormous differences between debtor countries, and do not always give priority to social and political contexts. If democracy is to mean anything, it is surely right to permit countries to shape their economies and societies, rather than to abandon the process to the dictates of the market alone.
  The claim is often advanced that Governments can do little to alter the twists and turns of world markets, but that is wrong. Globalisation is not like the weather; it is not a natural phenomenon that we are unable to change. It is a systematic framework, which we have created and which can and should now be changed. We have global problems that will require global solutions. In short, we need greater change to harness extremes.
  We must examine the volatility of international financial markets and their speculative pursuit of short-term gain and profit, over and above the welfare of some of the world's poorest regions. Some have suggested that a global tax on currency speculation, such as that proposed by the economist James Tobin, may be an example of the regulation that could render world markets more stable and productive. There may be huge difficulties, but the idea at least deserves discussion—I put it no higher.
  New forms of economic co-ordination are crucial and worthy of debate. Organisations such as the International Monetary Fund, the World bank and the G7 often operate with separate agendas. Policy making is fragmented. That is not as fanciful as it may seem; we need only to think of the establishment of new multilateral bodies such as the World Trade Organisation.
  By linking such bodies to measures aimed at alleviating avoidable economic suffering—by radically reducing the debt of many developing countries, and by generating new economic facilities at organisations such as the IMF and the World bank for development purposes—we would
  734
  create the basis for entrenching global economics in a set of humanitarian and democratic mechanisms and procedures. The fundamental challenge is to improve the flows of high-quality investment that make a positive contribution to the host country's development path. That must include long-term commitment to the communities most affected by that investment.
  The less-developed world needs more buying power, more aid transfers on generous terms and more intelligent support in its efforts to alleviate chronic poverty. Jubilee 2000 asserts that
  "for every one dollar in aid given to developing countries, eight dollars comes back in debt service."
  According to the 1997 United Nations Development Programme human development report,
  "relieved of their annual debt repayments, the severely indebted countries could use the funds for investment that in Africa alone would save the lives of about 21 million children by 2000 and provide 90 million girls and women with access to basic services."
  That is a powerful challenge to us all. Thus far, the global economy has excluded far too many. This year's UNDP human development report tells us that the poorest 20 per cent. of the world's people have been left out of the consumption explosion. Globally, the 20 per cent. of the world's people in the highest income countries account for a massive 86 per cent. of total private consumption expenditure. The poorest 20 per cent. account for a minuscule 1.3 per cent. Moreover, the least-developed countries account for about only 0.5 per cent. of world trade and investment. If that is not global exclusion, I do not know what it is.
  Until the poor are brought into the international system with real influence, the global economy cannot be stable for long. The G7 countries plus the rest of the European Union represent a mere 14 per cent. of the world's population, yet those countries have 56 per cent. of the votes on the IMF executive board.
  Change will not be easy, but come it must. Kofi Annan, the Secretary-General of the United Nations, has already called for a UN role in financial reform. I believe passionately that that is possible and that we must make speedy progress. For the good of the world, we need a dialogue of rich and poor, working in partnership.
  My right hon. Friend the Prime Minister was right when he told us of the new role for Government in economic management, which I applaud, and measures that combat social exclusion and create a society of opportunity extended to all. We should employ the potential of all our people because we cannot tolerate a society that writes off its potential work force through poor education or social exclusion. There still remains an economic case for tackling poverty and unemployment at home and abroad.
  I know that the Government recognise that we have a moral and economic duty to project and apply those arguments at a global level. We must acknowledge that it is in our own interest to offer hope to the poorest people of the poorest countries, by working towards a genuine practical solution encompassing the resources that they currently transfer. Without change, the global financial system will not lead to the prosperity that we want for developing nations and will never be realised. Hope, above all, must triumph over disenchantment.
  7.20 pm
  Mr. Ian Taylor: The right hon. Member for Coatbridge and Chryston (Mr. Clarke) has obviously worked hard on his speech and thought the issues through. In respect of the Gracious Speech, he was clearly referring to the privatisation of the Commonwealth Development Corporation as one of the measures that he welcomes.
  Mr. Tom Clarke: Will the hon. Gentleman give way?
  Mr. Taylor: I should be grateful to the right hon. Gentleman if I could get under way.
  Mr. Clarke: Will the hon. Gentleman give way?
  Mr. Taylor: Of course.
  Mr. Clarke: I am extremely grateful to the hon. Gentleman. First, I thank him for his kind remarks, but, secondly, all my remarks related to the third paragraph of Her Majesty's Gracious Speech.
  Mr. Taylor: I am grateful to the right hon. Gentleman for that clarification, as is the House. Nevertheless, I hope that he welcomes the privatisation of the CDC, the proposal for which I was delighted to see in the Gracious Speech.
  When I was a Minister at the Department of Trade and Industry I did quite a bit to achieve a leap forward for the CDC. On a visit to Havana, I was face to face with President Castro. CDC negotiations to do something to help Cuba—that exemplaire of potential capitalism under President Castro—had run into the sand. I decided to push them through as best I could, and I persuaded President Castro to remove the only remaining obstacle to the agreement with the CDC, which was the reduction of some taxes. President Castro said, "Is that what you recommend?" I said yes, and he turned to his Finance Minister and said, "Reduce taxation; we are going to sign this deal tomorrow."
  That is the way that things can be done in an enlightened regime, and the CDC is still active on the island of Cuba. I hope that its new-found freedom, which was referred to in the Gracious Speech, will give it even more power to do deals. I genuinely think that the CDC does some excellent work around the world, and is clearly no longer confined to the territory of the Commonwealth.
  I was not minded to refer too much to the euro, but I was galvanised by the now-absent right hon. Member for Llanelli (Mr. Davies), who decided that the European Movement was in a state of agitation because we seemed to be co-ordinated. I was also inspired, in the opposite way than he intended, by the Chief Secretary, who failed to respond to my intervention.
  The reality is that it is not the European Movement that is becoming agitated; as usual, those of us who are part of it are calm and collected as we approach the first day of the euro. The people who are agitated are those who have suddenly realised that the euro is a serious, practical currency which is about to be dealt in within what is effectively 80 per cent. of the single market—the single market that we created as Conservatives, under the great leadership of Baroness Thatcher.
  736
  We created the single market, and 80 per cent. of it will have a single currency within a matter of days, yet too many people seem to think that that is something that we do not need to bother about because it is only another foreign currency, or they believe—even more alarmingly—that it is something that we have to froth at the mouth about.
  Unlike the hon. Member for North Durham (Mr. Radice), I am not referring to The Sun, but to that real third-rate broadsheet, The Sunday Telegraph. It not only frothed at the mouth, but, so weak are the grounds for its argument for opposition to the euro, it decided that it had to put on the front page of last Sunday's edition an opinion poll that was largely conducted between January and April 1997. That is hardly something that would usually be contemporary enough to get on to the front page of what used to be a quality newspaper.
  Far from The Sunday Telegraph headline being accurate, it revealed that, even on the terms that it expressed about its own opinion poll, opposition to the euro had reached its lowest level for quite some time. In other words, opinion was gradually moving in favour of at least considering the euro.
  I know that public opinion is still against by a larger factor than I care to contemplate, but let us ask ourselves why. For a start, very few of the positive arguments about the euro have been put forward. Secondly, the Government—to be fair—are saying that they could conceive of entry and that it is a possibility, and that they have a few criteria—five, at the moment—which, although they are subjective rather than objective, could be met at any stage. Those criteria give them a fig leaf that enables them to say, "Perhaps we have to watch this for a little bit longer."
  Although they are at least doing that, the Government refused to state explicitly in the Queen's Speech or in the debate—so did the Chief Secretary, when challenged by me—that their policies on the economy are designed to enable this country to make the decision to join the euro, if the other economic conditions and circumstances are correct.
  Whether one is for or against the euro, we can all agree that entry will not occur by accident. There must be clear political will for it to occur, and the policies that will enable us to converge. We must prepare not only industry—which is at least mentioned in the Gracious Speech—to start dealing immediately in what will be one of the most powerful reserve currencies in the world and something that will rapidly condition the way that our domestic economy is run, but the technical aspects, which are part of conversion and preparedness.
  Many companies are saying to hon. Members on the Conservative Benches—and to hon. Members on other Benches as well—that they want a clearer steer from the Government. They do not want nice, comfortable waffle and they do not want the Government to say, "Perhaps industry should take the lead, because we do not want to offend the Murdoch press." Companies want the Government to be explicit about their intentions and how they will deliver them.
  How will the Government so change their fiscal policy to accommodate the fact that, if they are serious about entering the euro within a matter of years, interest rates are likely to fall? Indeed, they will have to, unless continental rates converge towards ours, something that

  737
  Oskar Lafontaine may provoke. I am afraid that my hon. Friend the Member for Louth and Horncastle (Sir P. Tapsell) has left the Chamber. He concentrated on the role of Oskar Lafontaine in the European debate, but I am referring to practical matters. If interest rates in the United Kingdom are to fall, what fiscal measures will be put in place so that the economy can deliver growth and stability, which the Government have said are their benchmarks for economic management?
  The other vital factor—
  Sir Teddy Taylor: Will my hon. Friend give way?
  Mr. Taylor: We have a 15-minute limit on speeches, but bearing in mind our long-standing friendship, of course I shall give way to my hon. Friend.
  Sir Teddy Taylor: Is it not the case that there are low interest rates in Europe and rather higher ones in Britain because unemployment is high in Europe and not so high in Britain? Is that untrue?
  Mr. Taylor: I am grateful to my hon. Friend, who leads me right into my next point. The euro is not destined automatically to succeed. Those of us who are prepared to contemplate entry do not also say that it must succeed because we would like it to succeed. That would require a series of clear political decisions which could influence its ability to succeed. Perhaps the euro will drift sideways, or perhaps it will fail. Failure is widely understood by those on the Conservative Benches not to be in Britain's national interest.
  My hon. Friend the Member for Rochford and Southend, East (Sir T. Taylor) is right: some key decisions will be made. How will the economic and stability committee—the Euro XI—make up its mind about how management of the fiscal elements of policy should be set alongside the European central bank's management of monetary affairs? What signals will be given? Will the central bank decide that it will target an external exchange rate for the euro?
  Those are big questions, and there are many more. How will labour flexibility be used? What adjustments will be made between regions and countries within a single monetary policy zone? Those of us who are in favour of the euro do not deny that those questions exist. We are saying to the Government, "What is your position on each of those issues?" If we intend to join, we must make sure that the character of the euro is something with which we are comfortable. We must make our voice and our views heard in the European Union, although we are not part of the Euro XI committee.
  There will, of course, be differences between Opposition Members and Labour Members in regard to the answers to some of those questions. In what must inevitably be a short speech, I shall not go into what those differences might be; but, regardless of whether differences arise over the way in which the economy, the Euro XI committee and the central bank should govern themselves, we must contribute to the debate. A letter published in The Independent on 30 November,
  738
  which I signed, along with the Chairman of the Civil Service Select Committee—who also chairs the European Movement—states:
  "On the key issues now emerging—whether to adopt an external exchange-rate policy for the euro, how to operate the growth and stability pact and whether or not tax approximation may be desirable in a single currency zone—Britain's voice must be at the centre, not the margin, of policy formation."
  The possibility of such an influence is a much clearer indication that the Government intend to join the currency. I urge Ministers not just to say, "Here is a positive European in the Conservative party: we can pat him on the head", but to give me—a Conservative who is also a positive European—some concrete answers. Some of us are anxious to be given such answers. If others are not prepared to ask the questions, I am. They are difficult questions, and they need careful consideration.
  Over the next day or two, the European issue will continue to bubble, but by the beginning of January many people in this country will realise that something that will increasingly influence the way in which they conduct their business, and the way in which we conduct our domestic economy, is something that the British Government are fudging, in terms of commitment. Perhaps I am wrong; perhaps the Secretary of State for Trade and Industry was right to tell the Confederation of British Industry that it was "only a question of when". I should like the Minister who replies to tell me that the Secretary of State was right.
  Perhaps the Secretary of State's predecessor is anxious to intervene and tell me that now, given the loyalty that exists between Ministers and their successors. I hope, however, that a clearer commitment will be given. The only reference to the euro in the Gracious Speech is a reference to the need to prepare British industry for it—and, as we have seen from an advertisement in the Financial Times last week relating to more than 100 business men and the 150 who have followed, British industry wants a good deal more from the Government than it is currently receiving. If it does not receive more, there will be considerable tensions during the next few months. Moreover, as ICI's chief economist has pointed out, if we are likely to be out of the euro for a protracted period, that will have a severe effect on British investment decisions, which can mean only one thing: more British companies will decide to locate within 80 per cent. of the European single market, rather than in the United Kingdom.
  I would have liked to say more about the role of technology. The Government have done a constructive job in highlighting some of the issues that I tried to highlight when I was a DTI Minister, relating to the role of technology in the economy. Electronic commerce is incredibly important, and, if we do not do what is necessary to provide the right framework, the nation will suffer economically—in terms of every aspect of the economy. I know that Conservative Front Benchers are a little more hesitant, but I welcome the move to try to provide a framework for digital encryption and digital signatures. Without those, we shall not benefit from the advances that may be made by the United States and other competing economies.
  The development of electronic commerce will be monumental. At present, at least 100 million people are connected to the internet; only 40 million were connected in 1996. That rapid expansion demonstrates

  739
  the importance of the internet to the United Kingdom economy. I hope that the Government will continue to concentrate on the issue, and will give us further details.
  7.35 pm
  Ms Ruth Kelly: It is always an honour to speak in one of the debates on the Gracious Speech, especially when the Gracious Speech features such an ambitious agenda.
  The right hon. Member for Horsham (Mr. Maude) said that the second Gracious Speech of a new Government should involve the maximum purposeful activity. I asked myself what he meant, and, having looked at the Gracious Speech, could only conclude that it involved precisely that. In what other way could we describe a programme that introduces, for the first time, a working families tax credit that will make work pay for thousands of families? How else could we describe a programme that will introduce a minimum wage that will set a floor for earnings, and will end the scandal of in-work poverty pay? The new deal has already created opportunities for thousands of young people, and I am delighted that it is to be extended to cover even more groups.
  I consider the macro-economic agenda equally impressive. The Government are taking action to create an economy that is capable of sustained and steady growth. It is essential, over the next year, for them to build on what they have already achieved, steering a careful course even when growth in world trade has fallen by two thirds.
  I welcome the Government's commitment to new fiscal rules and to more transparency in our national policy-making, but I believe that vigilance in national economic policies must be matched by a willingness to reform the international financial system to secure greater international stability. The Opposition may argue that the slowdown forecast for Britain was made in Downing street, but it is clear to all but a few that the impact of the crisis in east Asia has reverberated across the developed world. We ignore at our peril the fact that a quarter of the world economy is now in recession, including the economy of Japan. The right hon. Member for Horsham mocked the Chancellor's attempt to forge a new financial infrastructure for the global economy. In that, too, he is isolated and increasingly extreme.
  I was very interested by the speech of my right hon. Friend the Member for Coatbridge and Chryston (Mr. Clarke), and intend to build on some of what he said.
  A key challenge for the Government over the next year must be the devising of new international rules of the game to build confidence and credibility in the global system. It is worth recalling the remarkable growth that has taken place in the foreign exchange markets over the past 25 years. Since 1973, the foreign exchange market has grown fourteenfold, thriving in a world free of capital controls. The $1.3 trillion traded daily in the foreign exchange market that was registered in 1995 represents an increase of 50 per cent. since 1992. Unfortunately, however, the global financial infrastructure has become increasingly outdated.
  The events of the past few months have demonstrated the deep-rooted inadequacies of our understanding of the relationships between financial markets and between countries—especially in regard to developing, emerging market economies, the quality of risk assessment and gaps
  740
  in the international regulatory structure. That is why it is particularly appropriate for the Chancellor to be at the forefront of international attempts to rethink the financial institutions. I accept that capital market liberalisation can bring enormous benefits to developing countries. The theory is that freer capital markets can give developing countries access to global savings, so that they can invest more in order to grow faster. Until recently, Asia seemed to prove that case.
  Mr. Shaun Woodward: I recognise the efforts that the Chancellor may be making outside the United Kingdom. However, as we heard today from my right hon. Friend the Member for Horsham (Mr. Maude), 1,200 jobs were lost today at the Courtauld textiles factory, and only last week—on black Friday—4,000 jobs were lost. What does the hon. Lady think should be done to protect jobs at home?
  Ms Kelly: The hon. Gentleman completely misses the point. Does he not realise that 400,000 jobs have been created since the Government came to power, that interest rates are falling and that the inflation rate is on target for the third time? It is time to look at our domestic economic policies to see how that transparency can be injected into the global financial system.
  It is clear that capital liberalisation can bring important benefits to developing countries, giving them access to savings that they might not otherwise have had. As east Asian countries erased capital controls during the 1990s, they enjoyed inflows of money amounting to between 5 and 10 per cent. of gross domestic product. That went hand in hand with faster growth, but fast liberalisation of capital markets can have its dangers. The 1990s witnessed a movement of capital to emerging market economies on a scale relative to GDP not seen since the gold standard era of the late 1880s to early 1900s.
  Let us take the five countries that have been most damaged by the recent crisis—Indonesia, Malaysia, South Korea, Thailand and the Philippines. Between them, they had net inflows of $41 billion in 1994. By 1996, that had jumped to $93 billion. Over the years, inflows substantially exceeded the current account deficit, allowing Governments to accumulate $37 billion in additional reserves.
  When panic hit last year, the net inflow turned into an estimated outflow of $12 billion. The swing in the net supply of private capital was a staggering 10 per cent. of the combined pre-crisis GDP of the five economies.
  The response has been dramatic. Countries have had to slash domestic spending and rein back trade deficits, sometimes sharply. Malaysia has so far been alone in reimposing capital controls to shield itself from the frenzy of the markets and to buy itself some breathing space, but, by doing so, it deepened the crisis in other parts of the region, and undermined confidence among international investors in east Asia even further.
  Many commentators, including the International Monetary Fund, have blamed the emerging market economies themselves for their problems. They have argued that any international help should be accompanied by even greater capital liberalisation and yet harsher economic policies, policies that the eminent United States economist, Paul Krugman, describes as "playing the confidence game"—trying to win back the confidence of the international markets.

  741
  Of course, the IMF is right in some respects. Some of the problems were home-grown and valuable lessons have been learnt. The evidence suggests that the extent to which capital movements are destabilising depends largely on the strength of a country's financial system and the soundness of its economic policies, but how on earth can anyone argue that the punishment that those countries face fits the crime? What the crisis has exposed far more than any policy "crimes" is the inadequacy of the international financial system in the face of an increasingly interdependent global economy, in which capital flows are virtually instantaneous.
  For 50 years, our policies for regulation, supervision, transparency and—yes, I will say it—stability have been devised and developed for a world of relatively sheltered national economies, with limited capital markets. Now that markets transcend national boundaries, that system needs to be completely rethought. I congratulate the Chancellor on playing his part in international forums that are trying to do that.
  What is now called for is a new Bretton Woods—not a system of fixed exchange rates, like the old system, but a new financial infrastructure. The Chancellor was right to underline the need for greater transparency and openness, including the implementation of codes of practice and conduct in monetary and fiscal policy and corporate governance. Those should strengthen incentives on Governments to pursue sound economic policies and enable market participants to price risk more effectively.
  Financial supervision and regulation must also be improved and early warning mechanisms put in place to help to prevent further crises. Short-term mechanisms must exist in case crises do strike, with the international community able to mobilise capital quickly to underpin economies of countries whose policies are clearly sound.
  Although we should recognise the benefits of free capital movements, international leaders and developing economies need to approach the concept of capital market liberalisation with a little more caution. As long as countries are open to massive movements of hot money, there will be problems. As long as capital flows freely, nations will be vulnerable to speculative attack and policy makers will be forced to play the confidence game.
  Of course, it is not easy to limit the movement of international capital, at least not without threatening the strangulation of international trade, but we cannot sanction a system that allows developing countries to be exploited by foreign capital that they do not need and which then forces them to resort to panic controls on capital outflows when crisis hits.
  I have been an advocate of a small tax, devised by the Nobel laureate, James Tobin, on foreign exchange transactions. That would make speculation more costly, while having little effect on long-term investment, but I accept some of the criticisms of the tax. Enforcement would be difficult and it would not necessarily solve problems such as have arisen in east Asia, where the biggest sellers of local currencies were not speculators; they were local firms desperately trying to hedge or to repay debts denominated in dollars. However, we could act to protect developing markets from the sort of onslaught that we have recently witnessed by encouraging
  742
  them to liberalise their capital markets more slowly and cautiously. There are encouraging examples of the dividends that can be reaped from caution.
  Take Chile, for example. In 1982, it had a crisis strikingly similar to that in east Asia. Since then, despite being a robust supporter of the free market, it has actively sought to discourage short-term inflows of foreign capital. All loans and bank deposits from abroad are, effectively, taxed. When a company borrows abroad, for example, 30 per cent. of the loan must be deposited for one year in a non-interest-bearing account at the central bank. The controls are likely to explain partly why Chile has enjoyed steadier growth than most other emerging economies over the past decade.
  Would it not have been preferable if Thailand and Indonesia had restricted borrowing from abroad in a like manner, rather than encouraged it? Perhaps South Korea might have avoided such a run on its reserves if controls on short-term borrowing had limited its exposure to foreign banks.
  Once financial and regulatory systems are well established, capital markets can be opened fully, perhaps with a new world financial authority standing ready to police global capital flows, ensuring that the necessary international standards are in place. In the event of a crisis and where a country adopts good policies, I would like a world financial authority to sanction temporary debt standstills by lending into arrears.
  As Jean-Michel Camdessus, the IMF managing director, has put it, the IMF's goal should be to ensure that the world has adequate protection against the risks of globalisation, together with the chance to embrace the opportunities it provides. That should be our goal too.
  7.48 pm
  Mr. John Horam: I was interested in the remarks of the hon. Member for Bolton, West (Ms Kelly), but may I bring the House back to the broader canvas of the immediate problems that are addressed by the Queen's Speech?
  The Chief Secretary to the Treasury attempted to give his remarks some sort of theme by using the word "modernisation". Modernisation is a totally empty concept. It can include anything that we say has changed. It does not address the Labour party's traditional problem of finding a way in which to improve the mechanisms for delivering economic growth.
  When Jim Callaghan, now Lord Callaghan, was Chancellor of the Exchequer and addressed the Labour party conference—the President of the Council and Leader of the House of Commons may recall this—Hugh Scanlon, no less, stood up in the middle of his peroration and said, "Aye, but Jim, where's the mechanism?" Callaghan reached behind the podium and, with a rather oratorical flourish, waved a document and said, "Here, Hugh. Here's the mechanism." It was the national plan, which lasted about another three months. That is the Labour party's traditional problem in addressing economic problems.
  Mr. Woolas: Will the hon. Gentleman give way?
  Mr. Horam: We are on a time limit. I am sure that the hon. Gentleman will forgive me.

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  The Labour party does not understand the need to address continuously the mechanisms for delivering economic growth. The Queen's Speech shows its lack of thought in that respect.
  The great strength of Conservative Governments in the 1980s and 1990s was that they understood the importance of addressing and readdressing the supply side problems of the economy and coming forward with specific measures to help. Thus it was that we denationalised, deregulated and lowered taxes, all of which had a strong positive effect on economic performance, such that Paul Ormerod—no defender of the Conservative party—was able to say in his recent book that a great triumph of those Conservative Governments was to establish a framework for enterprise. That is precisely what we did.
  The enterprise framework created by the Conservative Government was widely admired abroad, and other economies adopted the privatisation methods pioneered by that Government. The hon. Member for Bolton, West was talking about international economics. The Indian economy, for example, has been released totally by finally forsaking London school of economics-Fabian-socialist economics and adopting a sensible market approach.
  The Conservative Government of those years tackled not only the private sector but the public sector. That reform, indeed, was modernisation and creation of a method of delivering services that was recognised around the world as pioneering. When I was a Minister in that Government, we reckoned on reducing public sector costs by at least 30 per cent. every time we put something out to competitive tender. Equally, over 10 years, using those means, public sector costs were reduced by £1 billion. Over 10 years, the number of civil servants was reduced from 1 million to 750,000.
  We did not stop that work even when a general election was imminent. When I was at the Cabinet Office, for example, we continued—within a year of the previous general election—to privatise Her Majesty's Stationery Office, the Recruitment and Assessment Service and the occupational health service. When I was a Health Minister, we managed to get the NHS supplies company to a point at which it could be privatised. In only the last year of the previous Government, my right hon. Friend the Member for Henley (Mr. Heseltine) continued with his deregulation, abolishing 1,000 regulations.
  Politically, perhaps all that was done foolishly, as we were accused of trying to do too much while electoral defeat might have been staring us in the face. At least it showed that that Conservative Government were committed to using the power they had for positive purposes, and for the good of the economy and of the British people. I was proud to be associated with that record, which I should be happy to defend.
  I was appalled by the Queen's Speech because of its absence of such a drive to make improvements, which seem to have dried up to a trickle. However, there is one exception. I congratulate the Government on one rather technical matter that no hon. Member has mentioned in the debate. The Queen's Speech states:
  "A Bill will be introduced to transfer the Contributions Agency to the Inland Revenue, paving the way for better and simpler collection of National Insurance Contributions and tax."
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  I warmly welcome that very good measure and simplification. Labour Members may not be aware—even Ministers, as they do not see the papers of the previous Government, may not be aware of it—that I myself spent three years at work on the matter. Undoubtedly, a similar measure would have been introduced had a Conservative Government remained in office. However, I unreservedly welcome that part of the Queen's Speech.
  Most of the other paragraphs in the Queen's Speech—such as that on new trade union legislation—will have a retrograde effect. The Speech states that the Government
  "will bring forward measures to establish a forward-looking balance of rights and responsibilities".
  "Forward-looking" is an interesting spin on a measure that is precisely backward looking, in bringing back measures that had been abolished to help the economy. Nevertheless, in an astonishing piece of pedantry, Ministers call it forward looking.
  The Queen's Speech states:
  "My Government will introduce legislation to modernise local government in England and Wales and secure delivery of high quality local services on a sound financial footing."
  Of course that means dropping competitive tendering, which is called something different now—value for money or something like that. The fact is that the drive to reduce costs and to outsource properly and sensibly in local authorities will go. The commitment to reduce costs will be eliminated.
  The Queen's Speech states:
  "Regional Development Agencies will be established in England, decentralising decision-taking to the English regions."
  It is another piece of bureaucracy and interference in the planning mechanism. The other day, the Secretary of State for Trade and Industry was making much of the McKinsey report on productivity and efficiency. However, one of the points in the report was precisely that the planning mechanism inhibits enterprise. Now Ministers are introducing another element into current United Kingdom planning mechanisms. It is very strange proposal to promote economic growth.
  The Queen's Speech states:
  "Legislation will be introduced to create a new Greater London Authority … There will be a range of powers to make London a world class city".
  There will also be an industrial development agency for London—what nonsense! We need such an agency like we need a hole in the head—as if we do not already have enough support for industry in our capital city. It will simply complicate the business of releasing enterprise.
  Like other hon. Members, I welcome legislation to create a financial services authority. We go around that course again every 12 years or so, but it is very important that we get the legislation right. I support other Conservative Members in saying that, so far, there has been scant evidence that the draft legislation either is finished or will deal with many of the problems.
  I should like to draw an important point to the attention of the House. I have a report from the Real Time Club, entitled "Funding Technology-Based SMEs—Key issues to be resolved in the 1998/9 Financial Services Act", which states:
  "Following a series of investigations by the Bank of England and others, it is now generally agreed that technology-based SMEs, particularly in their early stages, have considerable difficulty in

  745
  obtaining adequate funding. As a consequence the UK economy loses out in the creation of wealth, in new jobs, in the balance of payments, and in forgoing tax revenues … The paper therefore proposes that the current review being undertaken in the context of the forthcoming 1999 Financial Services Act should be used to remedy these deficiencies."
  All the information that I have from sources close to the current negotiations and discussions reveal that Ministers have taken on board none of the points made by those who are well versed in that extremely important issue. I hope that the Paymaster General is listening to the comments on the issue—rather than reading a rather extensive tome—because he can do something about it.
  Technology-based small and medium enterprises in the United Kingdom are not receiving the right funding. In providing funding, we are well behind the United States, and we are increasingly falling behind many countries in Europe. If the Paymaster General would like to address those issues before the financial services authority Bill is introduced, the House should be grateful to him. Some progress must be made on the issue. However, from the information that I have, I believe that there is scant evidence that any is being made. The Government are not listening to the serious points being made by people who know a great deal about the matter.
  The sad thing about the Queen's Speech is that it does not deal with the United Kingdom's fundamental economic problems—which is what we are debating today—or command confidence. I agree that many of the measures that I have mentioned—like an increase in interest rates or taxation—will not come into effect and have consequences for the economy immediately. However, over time, the failure to keep up with the drive to continue making improvements in the supply side of the economy, and the introduction of measures to restrict and impose costs on the supply side, will insidiously erode the enterprise culture so successfully established by the previous Government. Therefore, despite all that the Prime Minister would like us to believe, I do not think that they are a modern and reforming Government.
  7.59 pm
  Mr. Mark Fisher: I am grateful for the opportunity to speak in tonight's debate. I hope that the hon. Member for Orpington (Mr. Horam) will forgive me if I do not follow him down the curious byways of his selective memory and his interesting political career.
  Between 1983 and 1985, I was a member of the Treasury Select Committee, but having spent 13 years on the Front Bench developing policy on just one issue—the arts—I welcome the opportunity to resume my contribution from the Back Benches to the somewhat wider debate on the economy. However, I wish that it were taking place in happier circumstances.
  There is too much evidence, which has been rehearsed by hon. Members on both sides of the House, that economic storm clouds are gathering around the world. The reasons for this darkening situation are beyond the control of any one nation, even the United States, but that makes it all the more important that we do all that we can by way of economic and fiscal policies to put our national economy in the best possible state to withstand any
  746
  damage. That is why my right hon. Friend the Chancellor is absolutely right to press for reform of international economic institutions, not to cut public expenditure, to work as closely as possible with other European Finance Ministers and to do as much as he can to prepare for economic and monetary union.
  As my right hon. Friend the Chief Secretary to the Treasury said at the start of his speech, the main theme of the Queen's Speech is modernisation—as essential a contribution as any to preparing the economy for the hard times ahead. Indeed, the word "modernise" appears no fewer than 11 times in the text. It is used to describe the Government's approach to the law, the welfare state, local government, parliamentary and constitutional reform and industry. After 18 years of poor government, it is vital that we tackle the neglect of our predecessors, but using one word in so many contexts is not necessarily an aid to clarity.
  What do we mean by modernisation, particularly in relation to industry and the economy? In our first Session, we cut corporation tax, introduced a national minimum wage and gave independence to the Bank of England—all modernising and very necessary initiatives.
  Mr. Woodward: Will the hon. Gentleman give way?
  Mr. Fisher: I am limited to 15 minutes. I am sure that the hon. Gentleman will be able to make his own speech.
  In this Queen's Speech, the Government address the growth of electronic commerce. On Wednesday, my right hon. Friend the Secretary of State for Trade and Industry told the House that we had to adapt our legal and regulatory environment from one that addressed the needs of trade and material goods to one that met the requirements of electronic commerce. He called for a national crusade to make us world leaders in internet business. I welcome that.
  At last the Government recognise the commercial importance of information in a way that quite eluded Ministers in the previous Administration, with the honourable exception of the hon. Member for Esher and Walton (Mr. Taylor), who spoke earlier. His Cassandra-like warnings that we were being left behind in the race to develop new technologies were ignored by his ministerial colleagues. That market, which is conducted in the English language, is growing every day, is already generating substantial profits and can play a major part in reducing costs. For example, the electronic booking of an airline ticket can reduce the cost of the transaction from $8 to $1. However, I hope that we are not so glamorised by the thrill of the new star, electronic commerce, that we allow the old trouper, manufacturing industry, to shuffle off the stage. That there could or should be a choice between them is a delusion.
  Although it is not a fashionable view, I believe that manufacturing remains of great importance to our economy. Lady Thatcher and Lord Lawson refused to accept that. They looked at the statistics and pronounced the terminal decline of manufacturing, declaring that we were a service economy. That was a simplistic judgment which we must not repeat in our pursuit of modernisation.
  It is true that, partly as a result of the policies of the previous Government, manufacturing jobs fell from 6.75 million in 1979 to 4.8 million in 1986 and to just over 4 million today. It is also true that growth in

  747
  manufacturing, which, on average, has been 1.8 per cent. a year since 1986, is well behind growth in services of 3 per cent. a year and growth in the general economy of 2.5 per cent. and that the contribution to general domestic product of production industries of 25.4 per cent. compares unfavourably with that of the service industries at 67.9 per cent. However, the figures conceal a more complicated and, I believe, more positive picture.
  The service sector is not, as it may appear, a coherent whole. It is made up of a number of disparate parts: transport, communications, leisure, catering and financial services. Our economy continues to comprise three major players: finance and the financial sector, at 22.4 per cent.; public administration, at 22.2 per cent.; and manufacturing, at 20.6 per cent. We cannot afford to ignore the importance of manufacturing industry. Crucially, manufacturing remains central to our balance of trade and export performance as it contributes 63 per cent. of total exports. That percentage has been constant over the past decade, compared with the contribution of services of between 20 and 30 per cent—last year, it was 24 per cent.
  To maintain that export performance, manufacturing industries, such as ceramics in my constituency, have not waited for the Government's call to modernise.
  Mr. Woodward: Will the hon. Gentleman give way?
  Mr. Fisher: I am sure that the hon. Gentleman will have the opportunity to make his own speech. I would have been happy to give way had it not been for the 15-minutes rule.
  Manufacturing industries have done much to modernise products, develop new markets and harness new technologies such as robotics in production and computer-aided design to improve productivity.
  What role is there for the Government to support the modernisation that is already taking place? In recent months, the CBI, employers' organisations, such as the Engineering Employers Federation, and almost all the trade unions have called for a cut in interest rates to reduce the level of the pound. Although the recent cuts are welcome, they are not sufficient. I believe that more would be beneficial, and they will come. The reason for caution that the Governor of the Bank of England consistently gave throughout the summer was the desire to avoid overheating the economy. Sadly, that is no longer a problem. Nor would a cut in interest rates be an artificial help to manufacturing industry; it would be good sense. It is in our national interest that the goods that we produce, as long as they are well designed, well marketed and competitive in every other way, should be able to compete, particularly in Germany, France and Italy, without being inhibited by the level of the pound.
  The economy generally and manufacturing industry in particular would be helped if the Government widened the remit given to the Bank of England as part of its new independence to consider factors such as growth and employment as well as inflation. As hon. Members have said, Dr. Alan Greenspan's remit at the Federal Reserve bank is considerable wider than that of Mr. Eddie George.
  Perhaps of even greater general importance to manufacturing industry is the Government's attitude. If they can bring the same concern, energy and
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  imagination to manufacturing industry as they are undoubtedly bringing to electronic commerce and new technologies, that will be a huge improvement.
  I would have liked to relate the theme of modernisation in the Queen's Speech to one piece of legislation that will not be introduced this year—a freedom of information Bill. It is a crucial element in modernisation and could be important in helping industry and therefore the economy. Freedom of information legislation could have helped the previous Government to identify some of the problems of bovine spongiform encephalopathy far earlier, thus avoiding much of the consequent damage to agriculture. However, the 15-minutes rule is against me and I look forward to plenty of opportunities in this Session to participate in the scrutiny of the draft freedom of information legislation that the Queen's Speech promises. I welcome that as an imaginative and important way of airing the difficult choices that lie behind the introduction of such legislation.
  I look forward to the Government's implementation of the Queen's Speech and to a Queen's Speech next year that includes legislation on freedom of information and, I hope, some evidence of a sustained revival in manufacturing industry. Both contribute to the modernisation of society that my right hon. Friend the Prime Minister has set as our goal and both will demonstrate that modernisation is not a catch-all or a mantra, but a complex process with many facets through which we can and will enrich our society and our economy if we learn the lessons of the past as well as looking to the future. I believe that it will prove to be the best bulwark against the hard economic times whose shadow is, I fear, spreading across the globe.
  8.10 pm
  Mr. Steve Webb: The majority of speeches so far have concentrated on the macro-economy and the euro. I want to concentrate on a central plank of the Government's economic policy that has been mentioned, only briefly, by the hon. Member for Bolton, West (Ms Kelly) and the right hon. Member for Fylde (Mr. Jack), who is no longer in his seat: the working families tax credit.
  The working families tax credit puts me in a quandary. It is £1.5 billion for the low paid. Perhaps low paid is stretching it a bit, given that it will reach higher rate taxpayers, but in principle it is for the lower paid. On the whole, I tend to favour extra money for the poor and the low paid. However, that is about the only good thing that I can say about the scheme, because it is incredible how little evidence there is for the Government's views on how that £1.5 billion should be spent.
  It is said that the working families tax credit will make work pay. That sounds laudable. It is said to be good for work incentives. Whom is it supposed to encourage into work? It applies to only two groups—lone parents and working couples or couples with children. The biggest barriers for lone parents are not primarily low pay or the incentive structure, but the availability of child care and jobs. In the debate some months ago on cutting lone parent benefit, the hon. Member for Cynon Valley (Ann Clwyd) said that there were barely any vacancies at her local job centre, but there were dozens of lone parents looking for work. The failure to tackle the supply of jobs will not help incentives.

  749
  There is a more fundamental issue. The Chancellor has cut the taper in the working families tax credit. Clearly, that will mean that fewer people will lose 70p in the pound at the margin, but more people will lose 50p in the pound at the margin. Is that unambiguously good for incentives? Where is the evidence? The Chancellor has not put any forward and I do not suppose that there is any. It is an act of faith.
  What about the argument that paying the benefit through the pay packet rather than through the social security system will reduce stigma? Where is the evidence for that? The money will still have to be claimed. Where is the evidence that the take-up of the working families tax credit will be greater than the high take-up of family credit? There is none.
  The key evidence that we have is that, when people on income support are asked what the biggest barriers are to moving off income support, they talk not about child care or the lack of in-work benefits for being a family, but about the lack of help with housing costs. If they take a low-paid job, they lose help with their mortgage or their rent rebate falls rapidly. The Government have missed a golden opportunity to address that. Those who take a low-paid job will lose all help with their mortgage. That is why people in my constituency tell me that they cannot afford to take a job. They will get a little extra help through the tax credit, but that will not come anywhere near covering mortgage repayments of, say, £400 a month.
  What about child care? The child care subsidy seems to have been structured bizarrely. It will take us right up to the reaches of higher rate taxpayers. How can it be rational for state subsidy to reduce the cost of child care for higher rate taxpayers? The state will pay up to £100 a week towards the child care costs of children being looked after by their grandparents, provided that the grandparents jump through the hoop of becoming registered child minders. That is insulting on two grounds. First, why should the state be involved in subsidising grandparents looking after their grandchildren and, secondly, why should grandparents have to show that they are any good at bringing up children? It is bizarre for the state to be involved.
  One of the key issues of the working families tax credit is paying it through the pay packet, typically to the man in a couple. In 80 per cent. of family credit cases, the principal breadwinner in the couple is the man. The Government were embarrassed about that initially and conceded that there would be choice for families, but there are fundamental problems. It will be in the families in which men are not good at passing on money to their wives that the women will have difficulty exercising the choice for the money not to be paid through the pay packet. I predict that the Government will weight the dice to ensure that the system discourages people from opting for anything other than payment through the pay packet. If large numbers of mothers opt to have the money paid through the benefit system rather than the pay packet, will not the Government's fundamental argument—that the big point about the tax credit is that it is better for incentives because there is no stigma because the money goes through the pay packet—be undermined? I intervened on the Chief Secretary on that point, but he did not really respond.
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  If most of the money does not go through the pay packet, why bother with the administrative mess of the tax credit? We could have the extra money, the lower tapers and the child care assistance through family credit. The key difference between family credit and the tax credit is the use of the pay packet, which the Government are letting people opt out of, so what is the point?
  When fraud was mentioned, the Chief Secretary was dismissive of the right hon. Member for Birkenhead (Mr. Field)—rather rudely, I thought. The right hon. Member for Birkenhead has a strong reputation for pursuing fraud in the benefit system and the tax system. The key issue is to design systems so that fraud is not an integral part of them. The American evidence on fraud is embarrassing. There was a huge fraud industry associated with the American tax credit scheme. There is every possibility that the same could happen with the British tax credit scheme. For a Treasury Minister to dismiss the issue as the rambling of a has-been is outrageous.
  A thought that might be dearer to the heart of the Paymaster General, who is on the Treasury Bench, is the cost to business of administering the working families tax credit. Many small firms will have perhaps one or two employees on relatively low pay. They will have to pay out more on the working families tax credit than they hand over to the Treasury in income tax and national insurance. It has been said that they can claim the money back, but how far in advance can they do that? When will they know how much they have to pay? Wages go up and down as people join firms and others leave. How can small businesses know in advance how much tax credit they will have to pay if the amount keeps changing? Will they have to predict a month in advance to ensure that there is time for the money to come through? How will the cash flow problems of small businesses be addressed? The problem for small businesses is one of the many issues on which we have not yet had an answer. I hope that the Leader of the House will tell us when she sums up that, when the Bill is presented to the House, some of those issues will be addressed rather than brushed under the carpet.
  My final point on the tax credit is the way in which it will work during periods of relationship and family breakdown. Family credit goes almost exclusively to the mother in a couple, who is typically the person with responsibility for the children. That is right. Suppose that the Government get their way and the tax credit is paid principally to the father through the pay packet. What happens when a relationship breaks down? We are not necessarily talking about marriage—although marriages also break down—but about any form of cohabiting relationship. Presumably the woman, who may have been a victim of domestic violence, has to contact the authorities to say that she is no longer living with her partner. The authorities then have to contact the employer, who tells the man that he will not be paid any tax credit that month. When he is told why, he says that he is still living with his partner. What happens then, how long will it take and what will the woman live off in the mean time?
  The working families tax credit is dogma. It is American, so it sounds good, it sounds new, it sounds modern. It uses the tax system. A negative tax sounds good whereas dreadful old welfare sounds bad. There is precious little evidence to back up the suggestion that it will be any better than similar improvements to family credit would have been. Putting more money into family

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  credit with lower tapers and a better structure of child care would have been admirable. Why all this nonsense about paying it through the pay packet, paying it to men and putting burdens on business? It has not been thought through. I hope that the new Bill will be an improvement on what we have heard so far.
  8.19 pm
  Mr. Alan W. Williams: I welcome the content of the Gracious Speech, including the proposed legislation on the working families tax credit. I have not looked at it in detail, but I am fully aware that it is targeted on low-paid workers and will provide up to £220 a week free of tax. That will mean a minimum of £5.50 an hour for a low-paid worker with one child and of £6.40 an hour for an adult with two children, and that will help to make work pay and to eliminate the poverty trap. I very much welcome those measures.
  In the economic arena, I welcome the Bill on financial services and the markets. We know that much better regulation is needed in the City—in the stock exchange and in Lloyd's—and I am sure that the Bill will accomplish that.
  The debate has been general, covering many aspects of the British and world economies. I shall direct most of my comments to the prospects for our economy over the next few years. We are all aware that a difficult year lies ahead, partly because of the high pound which we inherited but which went even higher as interest rates were increased and as sterling became a safe haven for those speculating against the euro and the Asian currencies. However, we are now recovering from those problems. Interest rates are falling and the pound has dropped 10 per cent. from its peak value back to the level that we inherited.
  Global problems—in Asia, particularly Japan, in Russia and to some extent in south America—mean that the growth forecast for next year has been revised down to 1 to 1.5 per cent. We all hope that that growth will be achieved but other forecasts challenge whether it will be—we shall have to wait and see.
  I am pleased that, in the thick of things next year, there will be a large reflationary package at the very time that one is needed—the £40 billion for health and education will come on stream from next April. That will involve capital expenditure, which will be a big boost for the construction industry and those who manufacture health care equipment, for example. It will also involve labour intensive employment, as more teachers, nurses and health care workers will be needed. It will inject demand into the economy at a time when manufacturing continues to face problems.
  The minimum wage will also take effect from next April, and that will help hundreds of thousands of low-paid workers. The £2.95 extra in child benefit will particularly help young people with families, who are among the poorest in the community. Those measures will be socially progressive and redistributive; by giving greater spending power to poorer people, they will also help to sustain the economy.
  Looking further ahead, I think that interest rates will unquestionably fall, first to 6.75 per cent. Labour Members and people outside the House—from industry and from the trade unions—are calling for further reductions.
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  In his comments to the TUC last September, Eddie George made it clear that the 2.5 per cent. inflation target was symmetrical—when inflation is more than 2.5 per cent., the Monetary Policy Committee must raise interest rates, but when it seems as though it will in 12 or 18 months be less than 2.5 per cent., the judgment must be to lower interest rates. The system contains an automatic stabiliser. Opposition Members have magnified the doom and gloom this evening; they have tried to talk us into deep recession. However, if what Eddie George says is true, we can look forward to interest rates reducing to 6 or even 5 per cent. by the end of next year.
  As interest rates fall, there will be a boost to economic growth. I am sure that Treasury forecasts for 2000–01 are based on the underlying assumption—it cannot be spelt out, as the Chancellor may not reveal market-sensitive figures—that interest rates will fall to below 5 per cent. in one or two years, and that will stimulate growth.
  Mr. David Ruffley: Will the hon. Gentleman give way?
  Mr. Williams: I will not, as so many Labour Members want to speak and I want to confine my remarks.
  The fact that the 2.5 per cent. inflation target is symmetrical makes it much wiser than the target of the European central bank. The European economy generally is suffering. One of the dangers for the euro is that the European target is for an inflation rate of less than 2.5 per cent. There is no automatic mechanism whereby, when inflation is at 1.5 or 1 per cent., interest rates will be reduced. In Germany, for example, interest rates are holding up despite the fact that inflation is not a problem—it is virtually zero—whereas unemployment certainly is one.
  I hope that, over the next few years, through the influence of Oskar Lafontaine and eventually ourselves, the European central bank will operate on the same terms as the Bank of England, so that interest rates are automatically reduced to stimulate demand when the rate of inflation falls below its 2.5 per cent.
  I believe that, in three to five years, the problem will be how to control the boom. Interest rates are destined to fall to 6 or even 5 per cent., but we want Britain to be able to join the euro by the time of the next general election, so interest rates must have fallen not only to 4 or 3 per cent. but to whatever level European interest rates are in 2001.
  If the Bank of England reduces interest rates too rapidly, there is a real danger of an uncontrolled boom in property and land prices. However, we have dealt with the problems that may arise in the next 12 months very well thanks to the package of public expenditure that will come into effect next April. The problem at the time of the next general election will be how to control the demand that will be injected into the economy when interest rates fall to 4 and 3 per cent.
  On the euro, there is no question but that the European economy needs massive reflation and a co-ordinated expansion. On the world scene, Europe has a balance of payments surplus of $100 billion, whereas the United States carries a deficit of $200 billion—and thank goodness for that, as it is propping up the world economy. We need expansion in Europe not only to absorb Asian goods and the exports of countries that are drifting into deeper recession, but to provide employment for our people.

  753
  I know that the Government's policy is to encourage at European summits a strategy for jobs, growth and economic expansion. The slack exists for that and the world economy requires it. I feel that 1998–99 will be difficult but, beyond that, I am very optimistic that the Government are on track for solid growth and achievement in Britain's economy.
  8.30 pm
  Mr. Peter Viggers: I hope that the hon. Member for East Carmarthen and Dinefwr (Mr. Williams) is right in his positive approach to the economy, but I take the gloomy end of expectations. No former Soviet Union country has yet got back to its gross domestic product of 1989, and their targets mean, if they are successful, that they will return to such levels in about 2002. Similarly, Indonesia, where we are the largest investor, is at a standstill and Japan's problems remain unresolved. The particular importance of all this to the United Kingdom is that we are proportionately the largest exporter among all the major countries. If other countries cannot afford to import, we will be proportionately the heaviest losers. The Chancellor of the Exchequer is not responsible for economies overseas but he is responsible for his forecasts, for sticking to one that no one else believes and, above all, for the blunder of fixing public expenditure for three years in his first Budget. He will live with that for the next two years.
  I want to restrict myself to the matter in respect of which the Government probably raised the highest hopes about thinking the unthinkable: pension provision. The right hon. Member for Birkenhead (Mr. Field) was given the brief of following through the Labour party manifesto pledge to
  "lay the foundations for a modern welfare state in pensions and community care."
  After an unhappy 18 months, he found it necessary to leave. This is a crucial, much misunderstood sector. I have a declarable interest in that I am chairman of a pension fund. I am not a beneficiary but it gives me an interest in the subject.
  The issue is urgent. A recent NatWest survey showed that a weekly income of £179 a week per person is needed to provide what was defined as "financial contentment" in retirement. A pensioner with less than £106 a week would face financial difficulties. On that basis, one in five people currently working are heading for a comfortable retirement, half are heading for financial difficulty, and a third will be entirely reliant on state benefits. If we compare the figure of £179 for a comfortable retirement with the single pension of rather more than £70 and the couple's pension of rather more than £110, plus income support if relevant—if that is paid, council tax and rent will also be paid—we are way off the level necessary for comfortable retirement.
  The half of the population that is funded in pension schemes is well funded. Britain has about £850 billion in pension assets, which is equivalent to 77 per cent. of GDP, compared with a tiny 7 per cent. in France and 14 per cent. in Germany. There is a growing gap in pension provision that the Government, if they were compassionate, would deal with.
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  I am sure that there is a significant lack of understanding among people about pension provision, partly because it is a long way off and not something that they can really grasp and partly because the sums of money involved are very large. Take the single pension of £70 and consider how much it would cost to increase it to the amount deemed by NatWest to provide comfortable retirement: another £100 a week. To fund that, we need to apply a multiplier of about 16, so £80,000 would be required to yield the necessary £5,000 a year to make someone up from current pension provision to the amount deemed to be comfortable. The amounts are large.
  What have the Government done? What could they do? I recognise that this is not the policy of either party, but I believe that it is necessary to increase the basic state pension. When the Conservative Government linked the basic state pension to prices rather than incomes, it was necessary because it was a crucial ingredient in our fight against inflation. However, the comparative diminution of the state retirement pension has gone too far and an integral part of pension planning should be to increase it.
  Secondly, we must help those with the lowest incomes to enable them to provide for their own pensions. Significant amounts are involved: something like 15 per cent. of income is necessary to build up that sort of funding. The first tranche of support that an individual at the lowest level gives to his pension merely raises him to the means-tested benefit and so is completely wasted. He would get nothing back for it if his contribution did not take him comfortably above the means-tested level. Compulsion is clearly a necessary element, or there would no reason for the poorest to save for retirement.
  In dealing with this conundrum and planning the way ahead, the Government are committed to
  "deliver significant savings over the longer term"
  from the social security budget. We have a conflict: better pensions versus significant savings—how to square the circle. I believe that it can be done. The authority that I quote, rather to my surprise, is Lady Castle, who wrote with Professor Peter Townsend a booklet entitled, "We can afford the Welfare State". The three principles that she spells out are correct. First she says:
  "If we want to encourage people to move from welfare to work, we must reduce the area of means-testing, not extend it."
  The right hon. Member for Birkenhead understood that, Lady Castle does and I certainly do. It is disappointing that the Government are going down the means-testing road.
  Secondly, the booklet states:
  "We must resurrect the state basic pension as the foundation of security in old age for everyone."
  I agree. Thirdly, it states:
  "It should be compulsory for everyone to contribute an adequate second pension."
  I agree with that, too.
  The Government have gone for the opposite route and run for cover by resorting to means-testing. That is the coward's way out and is unfair. It gives benefit to those in the greatest need, but where does it leave those who have made substantial sacrifices to provide for themselves? It erodes incentive and is socially corrosive. It is also very expensive. A universal benefit costs 2.5 per cent. of the total cost to administer but a means-tested one costs about 7 per cent.

  755
  In response to parliamentary questions, I have elicited the fact that heating allowances cost 10 per cent. of their total cost to administer. Those are very large amounts that result in substantial bureaucracy. The basic state pension can be administered for 45p a week while income support costs £5.45 a week. Those differences are so enormous that they must be taken into account with the argument of fairness.
  What have the Government done so far on pensions? They have achieved one major act—the abolition of advance corporation tax relief for pension funds. That will reduce the amount available to pension funds by £3.9 billion this year and £5.4 billion next year. As an article in The Economist said on 6 December 1997,
  "A Government keener on redistributive clobbering of the middle classes without breaking its pledge not to raise income tax rates might have dreamed up something exactly like this."
  It has caused damage to pension funds and those who benefit from them.
  The way that it works through means that Kensington and Chelsea has estimated that the changes to advance corporation tax provision mean that it will have to find a further £1 million a year, the equivalent of £12 on the average council tax bill for bands B to D. The Chancellor has cost pension funds over the next 10 years £50 billion. As has been pointed out, Robert Maxwell took only £400 million.
  The Government promised legislation on pensions without specifying its content. They have promised a Green Paper. So far, their influence on pensions has been entirely malign and damaging. I urge the Government to do their duty to pensioners, and I urge present and future pensioners to wake up to what the Government are doing to them.
  8.40 pm
  Mr. Jim Cunningham: To hear the hon. Member for Gosport (Mr. Viggers) talk, one would not think that a Tory Government had plundered pension funds and, in the 1980s, encouraged people to go into private pension schemes. He seems to forget that the Labour Government have reduced value added tax to help pensioners, whereas the previous Government increased VAT, thereby punishing pensioners and one-parent families. I am sure that he is well aware that the Labour Government have been considering not only pensions, and will make proposals in that respect at some time in the future, but have at least tried to do something for pensioners in the meantime.
  Many pensioners find it difficult to afford their winter fuel bills, so the Government have reduced VAT on fuel and made winter payments to pensioners to help them. I remember that, when we sat on the Opposition Benches, time after time at about this time of year, many of my hon. Friends raised the question of winter chill payments. Year after year, the then Conservative Government turned down my hon. Friends' requests.
  I welcome the fact that the Government have put in £250 million to help the national health service deal with winter problems. That, too, will help pensioners, as it is the elderly population in particular that suffers from the general increase in illness this time of year. Despite all the doom and gloom that we have been hearing, I welcome the £40 billion that the Government are to put into health and education over a three-year period.
  756
  The Government are doing that despite the economic position that we inherited from the previous Government. The economic measures outlined by my right hon. Friend the Chancellor will deal with long-term instabilities in the British economy, while allowing us to steer a stable course through the difficult times that we are experiencing. We are addressing the long-term economic problems that we inherited from the previous Government. I remind Opposition Members that we inherited a 20 per cent. productivity gap between the UK and France and Germany, and one of 40 per cent. between the UK and the United States of America.
  Before Opposition Members rush to the barricades, I should say that I am not criticising the workers. Let me make it clear that I am not talking about the average factory worker; I am talking about low levels of investment, which mean that, no matter how hard an individual works, the lack of adequate machinery, tools and technology lowers his productivity. When we look further into the previous Government's record, we find that, when they left office, one in five households had no one working, up from one in 10 in 1979 when the Labour Government left office. We also find lower levels of basic skills in literacy and numeracy than those of other major economies.
  No one would deny that we are experiencing a downturn in the world economy. The problem in 1979 was that, when the downturn occurred, the Tories refused to recognise it, preferring to blame the previous Labour Government, just as they blame the current Labour Government now. United Kingdom exports to Indonesia and Malaysia have fallen by 50 per cent.; to South Korea by 55 per cent.; and to Thailand and Philippines by 60 per cent. The crisis affects the whole world, but, to listen to Opposition Members, one would think that it started in May 1997, when the Labour Government took office.
  To set the international context, the International Monetary Fund has revised its forecasts for world growth downward, from 4 to 2.5 per cent. That could fall further as the economic situation changes. World trade growth is set to fall by two thirds. Given those problems, we welcome the Government's determination to get things right and address the weaknesses in our system, which was so neglected by the previous Government.
  We welcome the new monetary framework for monetary policy, with the Monetary Policy Committee setting interest rates to reach Government targets free from political control. Also welcome are the long-term targets for interest rates, which bring stability to economic planning. Although interest rates have risen, at 6.75 per cent. they are at their lowest for 30 years, and inflation is hitting its 2.5 per cent. target. I remember when, under the Tories, the public sector borrowing requirement grew to £400 billion. They managed by slashing public spending and getting the receipts from privatisation.
  The public understand the need for fiscal tightening equal to 3.5 per cent. of gross domestic product over the years 1996–97 to 1999–2000. They also understand why a reduction in borrowing—by £20 billion last year—and tight control over spending are needed to ensure that spending grows at a slower rate during the lifetime of this Parliament. In less than two years, we have achieved a balanced budget, which is something that the Tories did not do in 18 years.

  757
  Although I acknowledge manufacturers' short-term concerns, which are of particular concern to me, I welcome the Government's long-term view and determination to avoid boom and bust, which can affect and erode our industrial base. Instability could and would have been worse had the Government not taken the decisions that they took. As manufacturers have pointed out, the recession can be put down to the downturn in the global economy.
  Despite all that, the number of jobs continues to grow: 400,000 new jobs have been created since the election; 250,000 people leave the claimant count each month; and 200,000 new vacancies are notified to job centres each month. In addition, the Government have set up rapid reduction units to deal with redundancies and provide localised help where job losses have occurred. They will be welcome in many parts of the country, providing temporary job centres and job advisers, fast-track help with benefits claims, immediate eligibility for training and travel costs for interviews. That demonstrates the benefit of having a Government with a progressive agenda, as opposed to a reactionary Conservative one, with Ministers preaching from on high about problems that they have never had to experience.
  Another issue on which the Tories failed was youth unemployment, so I am delighted that the Labour Government have decided to tackle long-term, youth and single-parent unemployment head on. There are 125,000 people on the new deal, with 23,000 already having found work. In addition, the number of lone parents on benefits is falling and many young people have been given hope. We are helping the most vulnerable instead of throwing them to the wolves of uncertainty and helplessness. That will also play a part in tackling crime and disorder.
  The wider reforms to the tax and benefits system announced in the Queen's Speech will be well received in many parts of the country. The reduction in national insurance, the new working families tax credit and the minimum wage will help those in greatest need. Although the economic problems that we face are international, the Government have done much to stabilise our economy while, at the same time, protecting the most vulnerable.
  8.48 pm
  Mr. William Thompson: We have listened to many speeches tonight, some from former Ministers and hon. Members who have Treasury experience and many from those who are economics experts. If one speaker has argued one case, the next has argued the opposite—that is certainly true of the speeches referring to the single currency and economic and monetary union.
  I am a Euro-sceptic. I remember our going into the Common Market, as it then was. We were told that every member state had a veto and that, if one member state disagreed with a policy, nothing would happen. Of course, after we had entered, if we disagreed we were told that we were not good partners. After some time, changes were made and majority or weighted voting was introduced. Over the years, we have seen the effect of that in the issuing of a large number of directives, many of which are neither prudent nor necessary, but over which we have had little or no control.
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  We have now moved towards political union. There is no doubt that many in the European Union are looking forward to political union, and the single currency is the first necessary step towards that union. If one controls the money and the finances, one has, in effect, political union. Those who are enthusiastic about political union at least now acknowledge that public opinion does not favour it. In fact, we have been told—even tonight—that there is no guarantee that political union will work. I think that it would be dangerous to enter an arrangement that has no guarantee of success without some fallback position, or even an idea of what we will do if that arrangement fails. I believe that there are many dangers inherent in the new single currency.
  I have no doubt that the Government intend, sooner or later, to take us into economic and monetary union and the single currency. Efforts are being made to prepare us for entry, and no doubt the Government will seek to change public opinion in the referendum that decides our course. When preparations for entry are made, we will be told that we have gone too far and cannot turn back. I believe that the Government's policies are geared to that end. That is dangerous as it will weaken our means of determining our own policies.
  I refer hon. Members to the events of the past two years and to our experiences of the beef crisis. When we consider how our European colleagues have acted, we can have no confidence that we would have much say over our affairs in the context of European political union. This Parliament would eventually become powerless.
  Northern Ireland benefits greatly from being part of the United Kingdom. Our economy benefits particularly from subventions of about £3 billion or £4 billion a year. We acknowledge and appreciate that advantage. We live beside the Irish Republic, which wishes eventually to take us over. There have been many arguments in the past few months about agreements and the future of Northern Ireland, but little has been said about how we benefit from being part of the United Kingdom. We need to discuss that subject, which must be at the forefront of debates in the days and months ahead. Those who advocate a united Ireland must tell us where they will get the money to finance it.
  The Northern Ireland economy is very dependent on agriculture. Some 60,000 people are employed in the agri-food industry, which represents 25 per cent. of our manufacturing base. We welcomed the early lifting of the beef ban, especially in relation to the date-based scheme. We hope that other measures will be taken soon so that more animals and more beef may be exported and our economy will no longer be affected by that great crisis that has hindered us in the past few years.
  8.54 pm
  Ms Diane Abbott: I am grateful for the opportunity to speak in this debate on the Queen's Speech. I wish to touch upon the effects that the economic policy outlined in the Queen's Speech will have on the poorest. Hon. Members will know that I represent in Hackney, North and Stoke Newington one of the poorest constituencies in the country, which has one of the highest levels of unemployment in the south-east. I shall examine the Government's economic policy in the light of a very important report about inequalities in health that was published last week. The inquiry was chaired by Sir Donald Acheson.

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  Earlier this evening, we heard the Chief Secretary advance what has become the Government's mantra: the best route out of poverty is work. Like many of the Government's mantras, that is a truism—the best route out of poverty is work. However, the Government must address, because they have yet to do so with sufficient clarity, what they will do for those sections of society who, with the best will in the world, cannot enter or re-enter the labour market. Sir Donald Acheson put it clearly in his report. He said:
  "For the least well-off members of society, it is the benefit system which is the principal determinant of living standards."
  When I tried to put to the Chief Secretary Sir Donald Acheson's proposition that certain basic benefits must increase, he said that the report was written before the Government's Budget and our wonderful, progressive child benefit measures. That is quite wrong. Page 34 of the report discusses the Government's Budget measures in full. In the context of those measures, the report says that benefits must increase for the poorest groups. The report states:
  "We believe it is important that over time benefits and pensions levels are set at a level sufficient to pay for items and services necessary for health and for participation in society."
  Acheson singles out two of the very poorest groups: pensioners and women with very young children.
  The Labour party once had a policy of restoring the link between pensions and earnings. It was a sad day when that policy was dropped. Means-tested benefits—which is what the Treasury Bench is offering instead—are not a viable alternative for pensioners, in particular. More than 1 million pensioners fail to claim the means-tested benefits to which they are entitled. More than one in four pensioners who are eligible to claim extra means-tested benefits do not do so. It is not because they are silly or do not understand, it is because they are from a generation that finds claiming such benefits degrading, difficult and humiliating.
  The only way to raise standards of living for the poorest pensioners in communities such as Hackney is to increase the level of the basic pension. As for encouraging people of all generations to put more money into the private pensions industry, before the Government press people to secure objectives that were once secured by the welfare state—whether it is security in unemployment, health insurance or private pensions—they must look to regulating the financial services industry. The private pensions mis-selling scandals of the 1980s revealed the structural problems in the financial services area, with commission-driven salesmen and a lack of transparency.
  I come now to mothers with young children. The Government seem to be saying to mothers with pre-school-age children that, if they want to raise their standard of living and rise out of poverty, they must go to work. I am a single mother. I was back here voting and playing my part in the work of the House when my son was eight days old. It is precisely because I am a single mother and I know how hard it is to leave a small baby that I would not insist that mothers with children under school age should have to go out to work to secure a decent standard of living. At present, they do not have to make themselves eligible to work, but the trend of Government rhetoric and thinking on that matter worries me.
  Despite the many good things that are being done in the name of the working families tax credit—there was a very interesting speech about that earlier—the
  760
  Government must address the fact that there are people, such as pensioners and women with young children, who will not lift themselves out of poverty by going into the workplace. We need to secure at least for those groups a decent standard of living through the benefit system.
  The Government's professed goals on raising standards of living for the poor and lifting people out of poverty are admirable, but none of the measures in the Queen's Speech, including the working families tax credit and the on-going new deal programme, can be effective in the absence of growth. Those who talk about prospects for growth tend to be shouted down by Labour Members and accused of talking down the economy. It is not a question of talk; it is a question of figures. We do not need to look into a crystal ball—we need only to read the book.
  Manufacturing sectors are in recession or are about to go into recession. Over time, the sectors that have a problem with the over-valued pound and interest rates will take the entire economy to the bottom of the recessionary cycle. In a recession, it is no good saying that work is the route out of poverty or talking about the new deal.
  My next point relates to Europe. I am not hostile to Europe and I deplore the scarcely veiled xenophobia in the tabloid press, but it is important that we begin to have an honest debate about Europe. There may well be a political case for greater European integration and, in my son's lifetime, there may well be something approaching a federal Europe, but I deplore the dishonest debate on Europe in British politics.
  Anybody who pretends that we can proceed towards monetary convergence and integration without fiscal convergence and integration following as night follows day is fooling the British public. There may be a political case for that level of economic integration and for moving towards a federal Europe, but it is wrong to pretend to the British public that there can be monetary convergence while different economies in the European Union have free-standing fiscal policies. That cannot happen. The sooner we have a more transparent and honest debate about what the move towards economic and monetary union means for the totality of economic policy, the better that will be for politics and the good name of this House.
  There is much to support in the Queen's Speech, but my concern remains what it has been for the 10 years in which I have been in the House—how will the measures of the Government of the day help my constituents in Hackney? I am concerned about the lack of focus on the importance of raising basic benefits for pensioners and the poorest people.
  I am also concerned about monetary policy. It is driven by a great man—Eddie George—but he should never have been let loose untrammelled on monetary policy. I am concerned about the deflationary tendency of monetary policy and prospects for growth. I am concerned about the lack of honesty about the big issue facing us at the end of the millennium—what economic and monetary union means and the price that ordinary people such as my constituents might have to pay if we go into EMU without sufficient thought and understanding.
  9.3 pm
  Mr. David Ruffley: I am grateful for the chance to contribute to a debate on the Gracious Speech, which has at its core a commitment to delivering economic stability.

  761
  One of the central elements of economic stability is the Treasury's ability to set an independent tax policy. Therefore, I was particularly interested to hear the Chief Secretary say earlier that he would be tough about using the veto to prevent any harmonised tax proposals being imposed on this country. We have heard warm words from Ministers over the past couple of days in the face of a backlash from the press and public about the threat to the country's economic management arising from remarks by EU Finance Ministers and Commission officials.
  Conservative Members are staggered by Ministers' complacency. They said that such comments were just a Euro-sceptic invention and that, somehow, the people on the continent who were making them were of little significance and of no consequence.
  We know that there is a threat of tax harmonisation from Brussels because the Prime Minister says one thing in No. 10 briefings to the press, but Treasury Ministers say another. In the Financial Times this week, the Prime Minister said that he wanted all proposals on tax harmonisation to be considered pragmatically. He is worried that we may be left out of the game as EU partners harmonise more quickly in a headlong rush to make headway in launching the European single currency.
  A gentleman called Mario Monti is the EU Commissioner for the single market. I should like to expose the "Full Monty" of a set of proposals referred to as the draft code of conduct for business taxation, to which the Government signed up in October 1997. This draft code is very interesting because, as a result of discussions about it, instead of being in her place, the Financial Secretary is chairing a meeting at which no fewer than 85 tax breaks and reliefs will be abolished. At least 10 of them are enjoyed in this country. They include tax breaks for the British film industry, shipbuilding, small and medium enterprises in Northern Ireland and much else besides.
  The Financial Secretary is bargaining away tax breaks, which were certainly enjoyed in this country until the election, because the Government are harmonising tax reliefs. If that is not creeping harmonisation, we on the Opposition Benches do not know what is. Creeping harmonisation is a threat. The press knows it, the public know it and the Opposition will never let Ministers forget it—up to the next election and beyond.
  9.7 pm
  Ms Sally Keeble: I am grateful to be called in this debate.
  In their amendment, the Opposition have set out to criticised the Government for failing to take steps to protect jobs and help businesses. In doing so, they are exercising selective amnesia. They cannot stand only on their six-month record in the run-up to the election. They must stand on the record of their entire 18 years in government, which was not a golden era for the British economy.
  In the 1980s, an enormous recession forced the collapse of manufacturing. I saw a steel foundry in Birmingham stripped down and sent off to the third world, and virtually the entire work force of the car industry put on the dole. Unemployment rose so fast that the welfare state
  762
  collapsed and all Department of Health and Social Security offices shut. It was not the then Tory Government who saved jobs or helped businesses, but a Labour city council, which met the challenge of regenerating the local economy.
  In the 1990s, recession in inner London, we saw unemployment rise to 35, 40 and 50 per cent. in key areas, and the creation of a divide between rich and poor that was a disgrace to this city. Measures on unemployment introduced by the Tory Government were aimed at producing headline figures and did not deal with long-term structural problems in inner cities. That is why the new deal is so right.
  The new deal targets attention—money and personnel—at the real problems: the long-term unemployed and young people who grew up as a second generation of unemployed in what we call the Tories' golden legacy. Any such legacy went to the selected few and not the many, which is why the economic measures in the Queen's Speech are so important. In conjunction with the steps that the Government have already taken, they will ensure not just stable growth but that the benefits of that growth will be extended to the many.
  Our policies for education will give people the skills that they need to participate in the economy; the working families tax credit will ensure that work pays; and the child care tax credit will give many women the first chance to go out to work. In particular, I emphasise the reforms that the Government are making to financial services regulation, which will ensure that more people are empowered to benefit from the economy.
  Mrs. Thatcher wanted more people to invest, but she failed to provide the security that people needed to do so with confidence. The Government are encouraging investment by the public—for example, by extending employee share ownership and introducing individual savings accounts—and providing more security by, among other things, passing the financial services and markets Bill.
  Let me consider just two forthcoming measures. I am sure that the ability to take civil proceedings in cases of market abuse will help to restore confidence in the probity of the City, which, in turn, can only help to encourage people to invest. A second measure to place the various forms of financial regulation under a single umbrella will benefit the interests of the public by making it easier for them to obtain redress when things go wrong.
  The biggest financial commitment that most of my constituents will ever make is the purchase of a home. In the dying days—literally—of the previous Government, I toured housing estates in my constituency to study the problem of repossession. House after house was boarded up—another sad testament to the so-called golden legacy of Tory Britain. By unifying and simplifying regulation, and by providing more safeguards for that most basic of investments, the Government will protect people's long-term financial security, and the long-term future of the financial services industry.
  The drive behind the Queen's Speech is to build a sound economy; ultimately, that is what my constituents will judge the Government by. Measures set out in this year's Queen's Speech will ensure that those benefits are extended to the majority of people in our communities. I commend it to the House.
  9.11 pm
  Mr. Christopher Fraser: Tonight's debate has been rehearsed many times and we have discussed the economy many times, but this time the debate is vital, because our country's future depends on getting the economy right. The debate also affords us the opportunity to examine the Gracious Speech, and to anticipate the effects of the Government's proposals for our economy for the next year—so it is very timely.
  It is important to pose a series of questions relating to the Government's handling of the economy, and specifically their guiding principles of economic management. Does the Government's approach—and the proposals in the Queen's Speech—make it easier for firms to produce goods at lower cost? Does it make it easier for companies to invest? Does it reduce the tax burden on individuals and companies? Does it make it easier and cheaper for firms to take on staff? Does it make it easier for individuals to invest in their own future?
  I fear that all those questions must be answered in the negative. The raid on pension funds; the increased regulation of financial services; the flunked welfare reforms; the increased trade union recognition; the extension of maternity leave to 18 weeks; and the introduction of the working families tax credit add up to a package of damage which can only increase costs and regulation and destroy the competitiveness of the British economy—the economy that the previous Government fought so hard to maintain. All that before we even address the minimum wage and the social chapter.
  I believe that most members of the Treasury team have never run a business—except, of course, the Paymaster General; at times, he must wish that he had run several fewer businesses. I have run a business: I know what it is like to run one in hard times. It has been difficult on occasions—difficult for small and medium businesses, which must now face the current economic climate. Those businesses were the backbone of the country's economic success in the 1980s.
  The Government must ensure that small business is at the forefront of their economic policy. Let me tell Labour Members that the smaller companies, which represent the bulk of employment and economic activity, are voicing grave concern. As we know, business confidence is at its lowest for 18 years. People and businesses are extremely nervous—in my judgment, rightly so—because times have been tough for them. The international economy has, of course, been a factor, but they have suffered from high interest rates and the high pound and they have suffered in many other ways, as a result of the Government's so-called social legislation.
  The Government tell us that the minimum wage and the social chapter are good for those who are in work. Perhaps that is right, but not if the effect of the Government's measures is to pile on costs, make the company uncompetitive, lead to closure and put workers out of a job. The minimum wage and the social chapter are useless for those who are out of work and for those who are seeking to enter employment. The policies that they need are ones that help companies grow through efficiency and by exporting successfully through deregulation and low tax. In short, these are policies that would build on the success that the economy was enjoying before Labour Members got their hands on the levers of power.
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  Labour has given away one of the levers—the control of interest rates—to the Bank of England. We hear this every Wednesday when the Prime Minister comes here to answer questions. The right hon. Gentleman tells the House each week that the Opposition are against independence for the Bank of England. Each week, he invites my right hon. Friend the Leader of the Opposition to answer his questions. One wonders sometimes whether the Prime Minister would prefer to be on the Opposition Benches asking questions rather than having to suffer the inconvenience of answering questions.
  The point of Bank independence is not whether the Opposition are in favour or against it, but that the Government have created a mess of their own making. It was their decision to give independence to the Bank, as it was their decision to set the Bank a narrow remit. It is their choice to pack the Monetary Policy Committee with people with no real experience of the sharp end of business. A serious consequence of their actions is the current state of the economy. It is a cop-out for the Government continually to question the Conservative position on this issue. It is the Government who have to answer for their actions.
  To compound the situation, the Chancellor of the Exchequer signed up to the "The New European Way", which commits the Government to the harmonisation of European Union tax policies. By doing so, the right hon. Gentleman has thrown in his hat with the new German Government, who are pledged to take forward economic harmonisation during their European presidency. Having signed that document, how can the Chancellor of the Exchequer declare himself opposed to the harmonisation that it advocates? It does not wash to declare a common system of value added tax and a withholding tax on cross-border savings as being no more than scare stories invented by the Opposition.
  We are told that the Chancellor of the Exchequer will use the veto to protect British interests. As has already been said, however, the Financial Secretary to the Treasury chairs a working group of EU Finance Ministers which is drawing up plans to end so-called powerful tax competition among member states. How are we to believe the Chancellor of the Exchequer's protestations when the interim report is said to include more than 80 measures to address what has been described as unfair tax competition, and when some of which, if reports are true, are measures introduced by the Government? The Chancellor cannot have it both ways. He must now make very clear to his colleagues in Europe the promises that he has made to the British electorate that
  " tax harmonisation is not the way forward for Europe. Britain's tax decisions will be made in Britain."
  The Chancellor of the Exchequer must make clear how he sees the future for personal taxes and for corporate and business taxes. After all, the European tax Commissioner believes that the United Kingdom is "fully on board."
  The more economically astute Government Members are beginning to realise that soundbites and spin do not run an economy. A task force here, consultation there and a denial when expedient are no substitute for a clear tax policy and a drive for competitiveness in the British economy. Warm words are little comfort against a background of job losses and fear for the future. For so many years, when in opposition, the Chancellor of the

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  Exchequer predicted recessions, downturns and busts. The right hon. Gentleman may now be about to fulfil his predictions through his own actions.
  I have referred before to the fact that my constituency is truly the enterprise centre of Dorset. We have many businesses and a high level of employment. However, 18 months into the Labour Government, the mood of optimism in Dorset is giving way to a degree of concern and pessimism. Businesses in my constituency do not see coherence or substance in the Government's economic policies. They do not believe that the Government have enough understanding of business to create an environment that is friendly to it. The Government are leading the economy into a dark alley. The British people will pay a heavy price for the Government's folly. In turn, they will ensure that the Government pay a price for what they are doing to an economy which was, such a short time ago, the enterprise centre of Europe.
  9.19 pm
  Sir George Young: It is my privilege, for the second year in succession, to wind up for the Opposition in the debate on the Queen's Speech. More than 120 hon. Members have taken part in the debate, including a Prime Minister, a former Prime Minister, a former Deputy Prime Minister, a former Chancellor and a large number of right hon. and hon. Members.
  It seems a long time since the Queen's Speech left Bassetlaw and Edinburgh, Pentlands a week ago, but it got off to a cracking pace thanks to my right hon. Friend the Leader of the Opposition, whose parliamentary performances were rightly recognised by the judges of The Spectator parliamentarian of the year award the following day. Those of us at the ceremony witnessed the pride with which my right hon. Friend accepted that award, and the pleasure that it gave the Deputy Prime Minister to present it to him.
  To be impartial, I shall congratulate the Leader of the House on her recent Variety performance in aid of charity, which attracted some colourful, if mixed, comments. One newspaper reporter, a braver man than I am, described her voice as having the potential to "stun charging bullocks" and "keep mosquitoes at bay".
  I remind the right hon. Lady of some words that she used not on that occasion, but five years ago when she was shadow Leader of the House, speaking as I am now at the end of the debate on the Address. She said:
  "The Government's programme, as embodied in the Queen's Speech, was rightly described by my right hon. and learned Friend the Leader of the Opposition as thin. Tonight, after six days of debate, we know clearly why… The purpose of this Queen's Speech has been … to fob us off with rhetoric, sound bites and scapegoats."—[Official Report, 25 November 1993; Vol. 233, c. 662.]
  Those words seem more appropriate tonight than when the right hon. Lady originally spoke them.
  Our debate this afternoon was opened by the Chief Secretary. He took some risks by making an assertion in his speech that he was unable to substantiate. We expect him to produce chapter and verse for his assertion that my right hon. Friend the Member for Horsham (Mr. Maude) has opposed the £40 billion on health and education. If he cannot produce that substantiation, I know that, as an hon. Member, he would want to withdraw his assertion.
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  The Chief Secretary sounded more and more like Baroness Thatcher as he outlined with relish how he would use the veto if certain European policies developed in a certain direction. However, he did not answer all the questions posed by my right hon. Friend. Having listened to the Chancellor of the Exchequer in a rather defensive performance on the "Today" programme this morning, and having listened to the Chief Secretary this afternoon, I am not wholly reassured about the Government's policies on tax harmonisation. It is a subject to which we shall want to return on many future occasions.
  The hon. Member for Gordon (Mr. Bruce) made some kind remarks about the Opposition's amendment. I hope that that means that the Liberal Democrats will vote for it. I am sorry to see hon. Members shaking their head, as the hon. Gentleman said that the Opposition amendment was spot on. It is disappointing that the Liberal Democrats will not support us in the Lobby. The hon. Member for Gordon accused the Government of drift on Europe, implying rightly that, behind the facade, there are tensions, pulling the Government in opposite directions and inducing paralysis.
  The next speech in the debate, that of the right hon. Member for Ashton-under-Lyne (Mr. Sheldon), brought to light some of those tensions on the Government Benches. In a brave speech that was somewhat off-message, he made it clear that he believed that we should be in the first wave when it comes to joining the euro. He referred to some of the risks that would confront the City of London if certain measures went ahead, and he took the House with him on that. He made some eminently sensible comments about the composition of the Monetary Policy Committee.
  My hon. Friend the Member for Louth and Horncastle (Sir P. Tapsell) said that we would hold the Government to the commitments that they gave today, and we will. He pointed out that we pay a price in terms of growth and employment if we delegate to the Bank an inflation target, with no other economic targets to go with it.
  The hon. Member for North Durham (Mr. Radice) made a good Keynesian speech, gently chiding the Government for a lack of clarity on policy on EMU. He made a brave attack on The Sun—the sort of attack that an hon. Member can make only if he has a blameless personal life.
  My hon. Friend the Member for Wycombe (Sir R. Whitney) reasserted that we left the economy in good shape. He rightly pointed out that the reduction of £20 billion in the public sector borrowing requirement was due to policies that the Government inherited, rather than policies that they implemented. He queried, as did a number of hon. Members, some of the more optimistic growth forecasts from the Treasury Benches.
  I enjoyed the speech of the right hon. Member for Llanelli (Mr. Davies). It was a thoughtful speech that put the economy in a broader context—not just a European, but an international context. He explained economics in words that a child could understand, and his speech should be widely read.
  From basic economics to advanced psychology: my right hon. Friend the Member for Fylde (Mr. Jack) was right to point out that climate, mood, confidence and the feel-good factor are important to economic success. At the moment, as he rightly pointed out, they are not

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  there. He also expressed the hope that the Government would maintain the momentum on streamlining the tax system, into which he invested a lot of effort.
  The right hon. Member for Coatbridge and Chryston (Mr. Clarke) was one of the few speakers to focus on the less-developed countries and on the economic problems that confront them. He criticised the short-term approach, which can often harm the long-term development of those countries. He wanted to refocus globalisation to help rather than harm those countries, and he spoke with feeling and knowledge on an important issue.
  My hon. Friend the Member for Esher and Walton (Mr. Taylor) described how he came face to face with President Castro—face to beard would be a better description of that encounter. My hon. Friend gave a cool assessment of the issues surrounding the launch of the euro and the terms of trade on the debate about the euro. He posed a number of questions, to which I hope that, at some point, the Government will be good enough to reply.
  The hon. Member for Bolton, West (Ms Kelly) focused on the international system and made some perceptive comments about the need for reform of the international monetary system to take account of today's markets. She carried the House with her on that.
  My hon. Friend the Member for Orpington (Mr. Horam) criticised the lack of vision in the Queen's Speech and outlined some retrograde steps that have been portrayed as forward looking.
  The hon. Member for Stoke-on-Trent, Central (Mr. Fisher) lifted his eyes beyond the horizon of the arts world, which has preoccupied him for so long, and made a thoughtful contribution—based on a realistic assessment of the economy—focusing on electronic trading and its potential. He rightly urged the House not to forget the importance of manufacturing industry.
  The hon. Member for Northavon (Mr. Webb) gave some warnings about the working families tax credit. Every Member on the Treasury Bench should read what he said, reinforcing points made by my hon. Friend the Member for Chingford and Woodford Green (Mr. Duncan Smith). The criticisms that he made about the working families tax credit demand a reply.
  The hon. Member for East Carmarthen and Dinefwr (Mr. Williams) welcomed the reflationary impact of the expenditure on health and education, but in so doing he slightly undermined the case that the Government have made by implying that reflation will be necessary in three years, when the Chancellor has been predicting some robust growth.
  My hon. Friend the Member for Gosport (Mr. Viggers) described the impact of the world downturn on our economy and exports, and then spoke about the impact of the economy on pensions. He was the only hon. Member to focus specifically on pensions. He identified the Government's failure to answer a number of pension questions, after some false starts, and some possible solutions, quoting Baroness Castle as an ally.
  The hon. Member for West Tyrone (Mr. Thompson) made a robust, Euro-sceptic speech. The hon. Member for Hackney, North and Stoke Newington (Ms Abbott) picked up on the Acheson report and focused on those who cannot work. She invited the Government to come up with a more credible strategy for those for whom work is not an option. It was one of the most supportive speeches that
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  I have heard the hon. Lady make in the House. For that reason, it was a slight disappointment to have to listen to it.
  My hon. Friend the Member for Bury St. Edmunds (Mr. Ruffley) talked about tax harmonisation and rightly pointed out that a number of issues have not been resolved. Even as the debate is taking place, there are threats to the United Kingdom film and shipbuilding industries, to which we shall want to return.
  I commend the hon. Member for Northampton, North (Ms Keeble) for her patience in sitting all the way through the debate. I listened to what she said about the inner city, drawing on her time as leader of Southwark council. I remember working with her on regenerating some of the difficult estates in Peckham and Camberwell, and I hope that she exempted from her critical remarks the work of the Department of the Environment in the mid-1990s.
  My hon. Friend the Member for Mid-Dorset and North Poole (Mr. Fraser) focused on the supply side of the economy and rightly reminded us of the need to make sure that our industry remains competitive by looking at supply side measures.
  Re-reading the Queen's Speech last night, and looking out for rhetoric and soundbites, I noticed that the word "modernise" appeared 12 times—10 times in the first two pages. It appeared 11 times in a much shorter article on the Queen's Speech written by the Prime Minister for this week's issue of The House Magazine.
  That has been the spin—the Chief Secretary referred to that in his opening remarks—but what does it mean? When one considers the measures in the Queen's Speech, I do not think that it means a lot. Forcing GPs into a new relationship about which many of them are unhappy is, apparently, to
  "continue to build a modem National Health Service".
  Taking cash away from some potential claimants on modest incomes is "to modernise legal aid". Saving £500 million from women whose husbands die young is "modernising benefits for widows". Removing incentives from the town hall to improve efficiency and quality of service is
  "to modernise local government in England and Wales".
  Even this Government, however, are unable to describe their proposals for London, involving the appointment of a mayor—a post that dates back several hundred years—as "modernising", using instead the word "new". That shows the absurdity of trying to brand a speech or programme by applying one adjective to it: the verbal elastic simply snaps. Once we take off the label and look at the contents, we see that the Queen's Speech lacks coherence, shape and momentum—a point well made in The Times yesterday by Peter Riddell.
  That leads me to my second point. Spending two or three days in my constituency in the middle of a six-day debate on the Queen's Speech demonstrated to me the difference between two worlds: the modernised world of the Queen's Speech, elegantly spun and crafted by wordsmiths—although, sadly, someone overlooked the need to equip the Prime Minister with the decent speech to which he was entitled—and the real world in which we and our constituents lead our daily lives.
  In Labour's world, local government will be more efficient and more responsive. In the real world—given tomorrow's revenue support grant statement—all that the

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  public in my constituency and, I suspect, elsewhere will get will be higher council taxes and more pressure on social services, aggravated by the need to make good the shortfall in pension funds caused by the raid in last year's Budget. Without a full local government Bill, the grand strategy for democratic renewal that the Deputy Prime Minister has been trumpeting will have to wait another year.
  In Labour's world, on the very day of the Queen's Speech, the Deputy Prime Minister dreamt of bringing back the dawn chorus and the linnet. The Queen's Speech refers to protecting the environment, but, in the real world, the Deputy Prime Minister overrules county councils and makes them develop green-field sites that they do not want to develop. Hampshire county council's structure plan faces the threat of being overruled by the Government; in West Sussex, that has already happened.
  In London—Labour's capital—the Government have promised
  "a range of powers to help make London a world class city".
  Some of us would assert that London was a world-class city long before the people's party arrived on the scene, but, apparently, it is not yet resilient enough to be entrusted to the hon. Member for Brent, East (Mr. Livingstone). I must tell the Deputy Prime Minister that, until he implements a policy that will secure resources for London Transport, his strategy will lack credibility. We have heard some tough talk from the Government about improving rail services, but if the Deputy Prime Minister cannot make his Bills run on time, what chance has he of making the trains run on time?
  In Labour's world, we are promised "strong arrangements for defence". In the real world, the defence budget has been cut—at a time of growing international uncertainty—and the Territorial Army has been savaged, in the teeth of opposition from the Defence Select Committee. In Labour's world, the wait for operations becomes shorter—if we believe Government figures—but, in the real world, my constituents must wait before even getting on to the waiting list. It has been necessary to wait 37 weeks for an out-patient appointment for treatment for varicose veins, and 31 weeks for endocrinology treatment at North Hampshire Hospitals NHS trust. I do not claim that those are life-threatening illnesses, but the figures show how misleading it is to refer to waiting times for operations when they are only part of the total waiting time.
  In Labour's world, GPs will be enfranchised and put in charge of primary care groups. In the real world, doctors fear that they will be short-changed by the reforms, distracted from their professional commitments and turned into reluctant accountants and administrators.
  Ms Keeble: Will the right hon. Gentleman give way?
  Sir George Young: I will give way once; then I must make progress.
  Ms Keeble: Will the right hon. Gentleman accept my account of what is happening in the real world in my constituency, where GPs piloted GP commissioning? That has produced, for example, emergency pelvic scanning for women, which has probably saved lives and has certainly
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  prevented serious conditions. Does the right hon. Gentleman accept that GP commissioning is a powerful tool?
  Sir George Young: In Andover in my constituency, there was a pilot for primary care groups—a pilot for stage 4—but, having talked to GPs locally, I know that there is concern that they will not receive Government back-up for the administrative support that they need, and they will be distracted from their primary job of looking after patients.
  In Labour's world of industry, the Government talk of partnership. When she was Secretary of State for Trade and Industry, the Leader of the House of Commons said that the proposals for union recognition were a new culture of partnership, but, in the real world, we have compulsion. On the economy, the subject of today's debate, the Queen's Speech talks about
  "high and stable levels of economic growth and employment … and greater job opportunities",
  but, in the real world, Rover has announced 2,500 job losses and people are losing jobs throughout the country—one job is being lost every 10 minutes. Last Friday, 4,200 jobs went in a single day, as firms grappled with the consequences of a high pound and high interest rates. Today, it was announced that another 1,000 jobs are to be lost at Courtaulds.
  In Labour's world of education, teachers will be retrained and class sizes reduced, but, in the real world, the Government's pledge to cut class sizes for five to seven-years-olds is having an adverse effect. Class sizes for seven to 11-year-olds are shooting up. Teachers' independence and flexibility is being eroded and their hands are being tied. Successful grammar schools are threatened. In time, people will form their own conclusions as to whether Labour's world corresponds to the real world.
  It is usual for the Leader of the House and the shadow leader to say a word about House of Commons matters. The House will know that the Modernisation Committee has been meeting, usually twice a week, grappling with matters of reform. We will be as constructive as we can, but we need to remember that our duties to hold the Government to account, to scrutinise legislation and to represent our constituents should come first, and that some personal inconvenience may be inevitable if that job is to be done properly.
  To produce a manageable programme—not least to make way for House of Lords reform—many Bills have been ditched. That proposal will weaken, rather than improve, the scrutiny of legislation and the second Chamber's independence will be reduced.
  The decision to abolish the voting rights of hereditary peers is the political equivalent of some French or German emperor who is poised to conquer Europe suddenly deciding to invade Russia. It is not just a diversion from the main objective; it will prejudice its attainment. The Government will get deeper and deeper into strange territory. They will run out of food and ammunition. Winter will close in and take its toll.
  I can see only one benefit in rushing to abolish the hereditary peers. It might improve the chances of this House winning the annual tug of war once the upper House loses its fit, well-nourished and virile younger peers.

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  To compensate for the dearth of new measures in the Queen's Speech, the Government have reannounced some old ones; we are all familiar with the Government's habit of making the same announcements again and again. I understand that they have set a new target for next year: to save scarce resources, 60 per cent. of all new announcements will use recycled money.
  In this great debate, what about the Liberal Democrats? It is an interesting phenomenon that, the higher the number of Liberal Democrat Members, the lower their enthusiasm to remain an independent party. If that paradox continued to its logical conclusion and they ever became the largest party, they would immediately apply to join a smaller one.
  If I were a Liberal Democrat Member, I would be worried by the latest opinion poll. It shows not only that the Liberal Democrats are losing ground to the Conservatives, but that their leader's status is improving. I invite Liberal Democrat Members to reflect on that for a moment because, if that trends continues, he may be a popular general, but he will not have any troops.
  The only real opposition to the Government is the Conservative Opposition. The Liberal Democrats do not oppose the Government; they urge them to go faster, to tax more, to spend more, to regulate and to intervene more.
  During the Session, we will explain to our constituents the difference between the world of the spin merchants and the real world. We will explain that the measures in the Queen's Speech do not address the problems of the real world, ignore the priorities of Britain's people and instead pursue the Labour party's narrow, sectional interests.
  We shall hold the Government to account. We shall do so, first, in Parliament—an institution that the Government seek to marginalise and sideline and that we Conservatives shall continue to defend. Having won the arguments in the House, we shall carry the arguments to a wider public, and bring about the ultimate defeat of this opportunistic and unprincipled Administration.
  9.40 pm
  The President of the Council and Leader of the House of Commons (Mrs. Margaret Beckett): The Gracious Speech—the second one of this Labour Administration—provides us with the opportunity of looking ahead to the coming year from the vantage point of 18 months of solid achievement. Although few could deny that achievement, many Opposition Members have tried to do so in this debate. Class sizes for five, six and seven-year-olds are coming down so sharply that we hope to fulfil our pledge on class sizes ahead of time. Hospital waiting lists have been falling monthly. Action is being taken to bring young offenders more speedily before the courts, and the new deal is in place and contributing to increased employment.
  Mr. Simon Burns: Will the right hon. Lady give way?
  Mrs. Beckett: No.
  Over 50 pieces of legislation have been enacted, including legislation on modernisation of our constitution and the historic step of setting the first-ever national
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  minimum wage. That action is important on its own, but it is not on its own. It stands in the context of proposals made by my right hon. Friend the Chancellor of the Exchequer for a working families tax credit, for a disabled persons tax credit and for the largest-ever increase in child benefit.
  Before the general election, our widespread consultations with the business community produced some key concerns: economic stability; ending boom and bust; and, hence, a stable and consistent approach to economic policy. Placing control of interest rates in the hands of the Bank of England—which the Opposition threaten to reverse—was only the first of more widespread measures that contribute to sound management and good government.
  Mr. Ruffley: Will the right hon. Lady give way?
  Mrs. Beckett: If the hon. Gentleman will forgive me, I have much to say and not much time. I shall give way later, if I can.
  Using the public spending programme that we inherited gave us time to assess across government how public funds can best be used to pursue the people's priorities. Our decision was massively to increase investment in education and in health—£40 billion in total in those services over the next three years. That decision, our investment in transport and our decision to make the largest-ever investment in science policy rightly commanded both headlines and public attention.
  As significant in the long term will be our action on reforming the management of public spending, setting a firm programme over three years so that Departments and agencies have more freedom sensibly to manage their money in those years, and our decision to ensure that investment of public money is matched by a commitment to both modernisation and reform. Our most difficult, but most crucial, decision was to establish a process whereby we judge the worth of the investment of public money on the outcome—on performance, and on what is delivered—rather than on the amount of money provided initially. All those actions are fundamental and long-overdue changes to the way in which we approach the management of public funds and the uses to which they are put.
  The investment itself is made possible by sound economic management. Repayment last year of £20 billion of debt that we inherited from the Conservative Government, the firm grip that we have taken on inflation and—despite recent difficulties around the world—continued employment growth are all clear signs of a Government who know where they are going and how they intend to get there.
  Mr. Ruffley: Will the right hon. Lady explain why the European Commission is predicting that, next year, UK economic growth will put us at the bottom of the European Union growth league?
  Mrs. Beckett: The average of forecasts of the economy—of 44 independent forecasters—ties in with the forecasts made by my right hon. Friend the Chancellor.
  Mr. Ruffley: That does not answer the question.
  Mrs. Beckett: Yes, it does. I assume that the hon. Gentleman, who presumes to be economically literate,

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  realises that we are at a different stage in the economic cycle from the rest of Europe, as we were under the previous Government.
  Mr. Bercow: Will the right hon. Lady give way?
  Mrs. Beckett: No; I must get on.
  As we lay the basis for economic prosperity, we take action to ensure that that prosperity and the opportunity that it brings are fairly shared—not because doing so is right in itself, although it is, but because it is in the interests of all. Britain can no longer afford for our people to be ill-trained and under-equipped. We can no longer afford a damaging and deteriorating transport infrastructure. We can no longer afford merely to wring our hands over the numbers of discoveries made in Britain but turned to economic advantage across the world by the economies of our competitors. To this Government has fallen the herculean task of changing those, Britain's historic weaknesses. Just as our management of the economy and public finances sets a long-term context in this Parliament and beyond, so too does our approach to legislation.
  The proposals for constitutional reform in last year's and this year's Queen's Speech create a new democratic settlement in the United Kingdom. In our approach to health service reform, we seek a new and enduring direction for the delivery of health care, just as we seek to create a fresh balance—a fairer balance—that will contribute to improving Britain's competitiveness by our proposals for fairness in the workplace. In all those areas, we seek a fresh settlement which we hope will endure for years.
  Last year, my right hon. Friend the Parliamentary Secretary to the Treasury, my predecessor in this post, brought to the House proposals to improve the way in which we work. I hope to take that process forward.
  This coming year, we will publish more Bills in draft. We will submit more of those draft Bills to various methods of pre-legislative scrutiny. Pension sharing on divorce has already been examined by the Social Security Committee. Both Houses of Parliament will be asked to appoint a joint committee to examine the financial services and markets Bill and we hope that, next year, the Administration Committee will have an opportunity to report on our draft freedom of information Bill. The asylum and immigration Bill will go to a Special Standing Committee, allowing the taking of evidence.
  From the start of this Session, every Government Bill will be accompanied by a statement as to whether it is compatible with the European convention on human rights and all Bills will be accompanied by new-style and better explanatory notes.
  The House has also recently agreed to improve the scrutiny of European Union legislation and we will certainly seek agreement to bring into effect another procedure recently agreed—to start one or two Bills in the Commons late this Session and carry them over into the third Session to allow proper scrutiny.
  Mr. Bercow: I am grateful to the Leader of the House for giving way. In disowning tax harmonisation this afternoon, should not the Chief Secretary also have
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  disowned its euphemism, tax co-ordination, which, regrettably, has been enthusiastically supported by the German Finance Minister, Oskar Lafontaine?
  Mrs. Beckett: As Mr. Lafontaine said this evening, he was speaking personally. He certainly was not speaking for the Government, as my right hon. Friend the Chief Secretary made crystal clear earlier. Mr. Lafontaine did not even claim to speak for the German Government, let alone ours.
  My right hon. Friend the Prime Minister set the scene for the debates on the Queen's Speech, drawing on our commitment to modernise and reform to meet the priorities that we set ourselves and the people endorsed in the last general election. He set out how this year's Queen's Speech takes forward that programme. He drew attention to the strides already made on our first priority—education—the four pieces of legislation passed last Session, the additional £19 billion of expenditure allocated to our schools over the next three years and the series of programmes that those resources make possible that will allow us to pursue our aim that every child in every school in every part of the country will get a decent education. We shall continue to make proposals such as the Green Paper which will be shortly published on the teaching profession—a further building block in providing an improved education service.
  Alongside our programme to improve standards in education is our drive to develop and strengthen our health service, not merely to care for those who fall sick, but to tackle the problems that create or foster ill health. We will invest in our health service some £21 billion over the next three years, with the biggest hospital-building programme in the history of the health service—certainly one far larger than the Liberal Democrats promised at the general election or since. Most important of all, and key to the Queen's Speech, we will be able to ensure that the money that is made available goes into patient care rather than bureaucracy.
  I was astonished to hear the Leader of the Opposition say that our NHS Bill would increase bureaucracy. No British Government have ever weighed down the health service with bureaucracy as the Conservatives did. We will reverse that trend.
  Cross-departmental working should deliver care geared to people's needs rather than to the boundaries of health or social care. [Interruption.]
  Mr. Deputy Speaker (Mr. Michael J. Martin): Order. There are far too many private conversations going on in the House. The House must settle down.
  Mrs. Beckett: We shall promote an approach to clinical excellence and high standards of health care that builds on the best of the well-deserved reputation of our NHS.
  In the week of the publication of the Acheson report, commissioned by this Government, which highlights the widening divide created by the Conservatives between the quality of life of the less-well-off and that of the wealthiest in our society, it is appropriate that we debated the health service and welfare reform on the same day. As my right hon. Friend the Secretary of State for Social Security pointed out, the anticipated rate of increase in social security spending in this Parliament is half that

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  of the previous Parliament. In part, that is a consequence of growing employment and the Government's policies of getting people into work, but it is also a consequence of our gradual reforms to provide work for those who can and real security for those who cannot.
  Crucially, we shall make work pay. I am astonished—I suspect that it will become a source of grief to the Conservatives—that their social security spokesman and their leader have committed them to rejecting the working families tax credit and with it, presumably, the disabled persons tax credit. The single gateway to the benefit system should create a better, more meaningful service for those who need support. It is 50 years since the Beveridge proposals were drawn up—years during which patterns of work—
  Mr. Jack: On a point of order, Mr. Deputy Speaker. In his response to the debate, my right hon. Friend the Member for North-West Hampshire (Sir G. Young) followed the precedents and courtesies of the House in picking up on the contributions made by individual right hon. and hon. Members. The Leader of the House has not mentioned any contribution by any right hon. or hon. Member. Is she in order?
  Mr. Deputy Speaker: The debate on the Queen's Speech has gone on over many days. The right hon. Lady is allowed to answer the debate as she sees fit. She has been in perfect order. Had she been otherwise, I should have said so.
  Mrs. Beckett: I recall the right hon. Gentleman's contribution. I thought that I was doing him a favour by not drawing attention to it.
  It is 50 years since the Beveridge proposals were drawn up—years during which patterns of work and family life have been transformed out of recognition, yet the benefit system still assumes a single breadwinner working for the same employer for more than 40 years without sustained interruption or ill health. A fundamental reassessment of that structure is long overdue. The improvements that we have already announced are welcome.
  Tough measures were introduced during the previous Session to combat crime. That process will continue with the strengthening of the youth courts and the modernisation of many of our justice procedures. Little has been said about that during the debate on the Loyal Address, because the Opposition chose, bizarrely, not to debate home affairs in general, but to concentrate all their attention on the constitutional outrage that they detect in the Government's determination to take the Conservative party at its word and abolish the hereditary principle in the House of Lords. I do not want to be unfair to the Conservative party. I recognise that the word in question was not given by this generation of politicians. Politically, if not personally—at least not in this House—it was their fathers and grandfathers who, 87 years ago, accepted on behalf of the Conservative party—[Interruption.]
  Mr. Deputy Speaker: Order. I am sorry to interrupt the right hon. Lady once again, but the House must come to order and allow her to respond to the debate.
  Mrs. Beckett: I suspect that the Conservative party does not want to hear anything further about reform of the House of Lords.
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  As I was saying, 87 years ago, Conservative Members' fathers and grandfathers politically accepted that the retention of power in a legislature dominated by hereditary peers could no longer be defended by the Conservative party.
  Conservative Members gave way on the principle then, but in the 87 years since, they have not lifted a finger to advance it. They have considered with great care all the proposals put forward by other Governments, but they have never managed to find one that suits them better. That is the nub of the matter—to have the second Chamber of our legislature permanently in the hands of their party with a 3:1 majority suits them right down to the ground.
  It has been evident throughout the debate—it is evident now in the behaviour of Conservative Members—that the Conservative party feels that it has the right to rule, irrespective of the will of the people. In the other place, of course, that is exactly what it does—it rules irrespective of the will of the people with a 3:1 majority over the Labour party. It would continue to have a majority in the other place even if we abolished the voting right of every hereditary peer tomorrow. That is what Conservative Members call independence—people who agree with them.
  Today, the debate has focused on economic issues. I would say that we had focused on them afresh were it not for the fact that everything that Conservative Members said was boringly familiar. They pretend that the Government inherited an economy without problems and that all the problems that we do face are a result of the personal doings of the Chancellor or the Prime Minister.
  That is, of course, the world in which they would prefer to live; sadly for them, it bears little relation to the world in which we actually live—a world in which they doubled public debt and ignored the dangers of increasing inflation to avoid electoral unpopularity by raising interest rates.
  Mr. Maude: Where are the Chancellor and the Prime Minister?
  Mrs. Beckett: The shadow Chancellor, who is heckling from the Front Bench, knows perfectly well that the Chancellor is attending an Economic and Financial Council meeting in Brussels. The shadow Chancellor rejected our offer to have this debate yesterday so that the Chancellor could be here, so I want to hear no more from him.
  Since the Labour party came to power, public debt has been massively repaid and our sound programme for investment in much-needed public services has been announced. We have cut corporation taxes and done much else to strengthen the country's productive potential. Inflation is under control and long-term interest rates are at their lowest level for 35 years.
  We have taken on the problems that our predecessors shirked and set the economy on the right course for the long term. That has been a consistent theme of all our work, from the Prime Minster's decision to secure a fresh settlement in Northern Ireland all the way through to the economic and social programme that we are pursuing.
  There has also been a consistent pattern in the Opposition's behaviour. Sadly, it has been one of snap judgments and misjudgments. They oppose our programme for investment in health and education.

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  The shadow Chancellor challenged us to say when he had called that investment reckless. On Friday 24 July, the Conservative party issued a press release in which he said:
  "The Chancellor announced last week he is to embark on a reckless spending spree".
  Those are the shadow Chancellor's words, issued by his party office.
  The Conservatives have opposed the investment that we propose to make, they oppose the national minimum wage and they oppose the working families tax credit. They are against everything that the Government have proposed—the new deal, health service and welfare reforms and reform of the other place.
  The Gracious Speech is work in progress in this Parliament. It outlines work to deliver on the priorities of the people at the general election, today and in the future. Those were the Government's priorities then and they our priorities now; that is our programme and the programme of the Gracious Speech.
  Question put, That the amendment be made:—
  The House divided: Ayes 134, Noes 373.

  Division No. 2]

  [10 pm

  AYES

  Ainsworth, Peter (E Surrey)

  Goodlad, Rt Hon Sir Alastair

  Ancram, Rt Hon Michael

  Gorman, Mrs Teresa

  Arbuthnot, Rt Hon James

  Gray, James

  Atkinson, Peter (Hexham)

  Green, Damian

  Beggs, Roy

  Greenway, John

  Bercow, John

  Grieve, Dominic

  Beresford, Sir Paul

  Gummer, Rt Hon John

  Blunt, Crispin

  Hamilton, Rt Hon Sir Archie

  Boswell, Tim

  Hammond, Philip

  Bottomley, Peter (Worthing W)

  Hawkins, Nick

  Bottomley, Rt Hon Mrs Virginia

  Hayes, John

  Brady, Graham

  Heald, Oliver

  Brazier, Julian

  Heath, Rt Hon Sir Edward

  Brooke, Rt Hon Peter

  Horam, John

  Browning, Mrs Angela

  Howard, Rt Hon Michael

  Bruce, Ian (S Dorset)

  Howarth, Gerald (Aldershot)

  Burns, Simon

  Hunter, Andrew

  Butterfill, John

  Jack, Rt Hon Michael

  Cash, William

  Jackson, Robert (Wantage)

  Chope, Christopher

  Jenkin, Bernard

  Clappison, James

  King, Rt Hon Tom (Bridgwater)

  Clark, Rt Hon Alan (Kensington)

  Kirkbride, Miss Julie

  Clarke, Rt Hon Kenneth (Rushcliffe)

  Laing, Mrs Eleanor

  Lait, Mrs Jacqui

  Clifton-Brown, Geoffrey

  Lansley, Andrew

  Collins, Tim

  Leigh, Edward

  Cormack, Sir Patrick

  Letwin, Oliver

  Cran, James

  Lewis, Dr Julian (New Forest E)

  Curry, Rt Hon David

  Lidington, David

  Davies, Quentin (Grantham)

  Lloyd, Rt Hon Sir Peter (Fareham)

  Day, Stephen

  Loughton, Tim

  Dorrell, Rt Hon Stephen

  Luff, Peter

  Duncan, Alan

  Lyell, Rt Hon Sir Nicholas

  Duncan Smith, Iain

  MacGregor, Rt Hon John

  Evans, Nigel

  McIntosh, Miss Anne

  Faber, David

  MacKay, Rt Hon Andrew

  Fallon, Michael

  Maclean, Rt Hon David

  Flight, Howard

  McLoughlin, Patrick

  Forth, Rt Hon Eric

  Malins, Humfrey

  Fowler, Rt Hon Sir Norman

  Maples, John

  Fraser, Christopher

  Mates, Michael

  Gale, Roger

  Maude, Rt Hon Francis

  Garnier, Edward

  May, Mrs Theresa

  Gibb, Nick

  Moss, Malcolm

  778

  Nicholls, Patrick

  Syms, Robert

  Norman, Archie

  Tapsell, Sir Peter

  Page, Richard

  Taylor, Ian (Esher & Walton)

  Paice, James

  Taylor, John M (Solihull)

  Paisley, Rev Ian

  Taylor, Sir Teddy

  Paterson, Owen

  Thompson, William

  Pickles, Eric

  Tredinnick, David

  Prior, David

  Trend, Michael

  Redwood, Rt Hon John

  Tyrie, Andrew

  Robathan, Andrew

  Viggers, Peter

  Robertson, Laurence (Tewk'b'ry)

  Wardle, Charles

  Roe, Mrs Marion (Broxbourne)

  Waterson, Nigel

  Ross, William (E Lond'y)

  Wells, Bowen

  Rowe, Andrew (Faversham)

  Whitney, Sir Raymond

  Whittingdale, John

  Ruffley, David

  Widdecombe, Rt Hon Miss Ann

  St Aubyn, Nick

  Wilkinson, John

  Sayeed, Jonathan

  Winterton, Mrs Ann (Congleton)

  Shepherd, Richard

  Winterton, Nicholas (Macclesfield)

  Smyth, Rev Martin (Belfast S)

  Woodward, Shaun

  Soames, Nicholas

  Yeo, Tim

  Spring, Richard

  Young, Rt Hon Sir George

  Stanley, Rt Hon Sir John

  Steen, Anthony

  Tellers for the Ayes:

  Streeter, Gary

  Sir David Madel and Mrs. Caroline Spelman.

  Swayne, Desmond

  NOES

  Abbott, Ms Diane

  Burstow, Paul

  Ainger, Nick

  Byers, Rt Hon Stephen

  Ainsworth, Robert (Cov'try NE)

  Cable, Dr Vincent

  Alexander, Douglas

  Caborn, Richard

  Allan, Richard

  Campbell, Alan (Tynemouth)

  Allen, Graham

  Campbell, Mrs Anne (C'bridge)

  Anderson, Donald (Swansea E)

  Campbell, Menzies (NE Fife)

  Anderson, Janet (Rossendale)

  Campbell, Ronnie (Blyth V)

  Armstrong, Ms Hilary

  Campbell-Savours, Dale

  Ashton, Joe

  Canavan, Dennis

  Atherton, Ms Candy

  Caplin, Ivor

  Atkins, Charlotte

  Casale, Roger

  Baker, Norman

  Caton, Martin

  Ballard, Jackie

  Chapman, Ben (Wirral S)

  Barnes, Harry

  Chaytor, David

  Barron, Kevin

  Chidgey, David

  Battle, John

  Clapham, Michael

  Bayley, Hugh

  Clark, Rt Hon Dr David (S Shields)

  Beard, Nigel

  Clark, Dr Lynda (Edinburgh Pentlands)

  Beckett, Rt Hon Mrs Margaret

  Begg, Miss Anne

  Clark, Paul (Gillingham)

  Beith, Rt Hon A J

  Clarke, Charles (Norwich S)

  Bell, Martin (Tatton)

  Clarke, Eric (Midlothian)

  Bell, Stuart (Middlesbrough)

  Clarke, Rt Hon Tom (Coatbridge)

  Benn, Rt Hon Tony

  Clarke, Tony (Northampton S)

  Berry, Roger

  Clelland, David

  Best, Harold

  Clwyd, Ann

  Betts, Clive

  Coffey, Ms Ann

  Blackman, Liz

  Cohen, Harry

  Blears, Ms Hazel

  Coleman, Iain

  Blizzard, Bob

  Connarty, Michael

  Blunkett, Rt Hon David

  Cook, Frank (Stockton N)

  Boateng, Paul

  Cooper, Yvette

  Borrow, David

  Corbett, Robin

  Bradley, Keith (Withington)

  Corbyn, Jeremy

  Bradshaw, Ben

  Corston, Ms Jean

  Brake, Tom

  Cotter, Brian

  Brand, Dr Peter

  Cousins, Jim

  Breed, Colin

  Cranston, Ross

  Brinton, Mrs Helen

  Crausby, David

  Brown, Rt Hon Nick (Newcastle E)

  Cryer, John (Hornchurch)

  Brown, Russell (Dumfries)

  Cummings, John

  Browne, Desmond

  Cunningham, Jim (Cov'try S)

  Bruce, Malcolm (Gordon)

  Curtis-Thomas, Mrs Claire

  Buck, Ms Karen

  Dafis, Cynog

  Burden, Richard

  Dalyell, Tam

  Burgon, Colin

  Darling, Rt Hon Alistair

  Burnett, John

  Darvill, Keith

  779

  Davey, Edward (Kingston)

  Hopkins, Kelvin

  Davey, Valerie (Bristol W)

  Howarth, Alan (Newport E)

  Davidson, Ian

  Howarth, George (Knowsley N)

  Davies, Rt Hon Denzil (Llanelli)

  Hoyle, Lindsay

  Davies, Geraint (Croydon C)

  Hughes, Kevin (DoncasterN)

  Davies, Rt Hon Ron (Caerphilly)

  Hughes, Simon (Southwark N)

  Dean, Mrs Janet

  Humble, Mrs Joan

  Denham, John

  Hurst, Alan

  Dewar, Rt Hon Donald

  Hutton, John

  Dismore, Andrew

  Iddon, Dr Brian

  Dobbin, Jim

  Illsley, Eric

  Dobson, Rt Hon Frank

  Jackson, Helen (Hillsborough)

  Donohoe, Brian H

  Jamieson, David

  Doran, Frank

  Jenkins, Brian

  Dowd, Jim

  Johnson, Alan (Hull W & Hessle)

  Drew, David

  Johnson, Miss Melanie (Welwyn Hatfield)

  Eagle, Angela (Wallasey)

  Edwards, Huw

  Jones, Barry (Alyn & Deeside)

  Efford, Clive

  Jones, Mrs Fiona (Newark)

  Ennis, Jeff

  Jones, Helen (Warrington N)

  Ewing, Mrs Margaret

  Jones, Ieuan Wyn (Ynys Môn)

  Fatchett, Derek

  Jones, Jon Owen (Cardiff C)

  Fearn, Ronnie

  Jones, Dr Lynne (Selly Oak)

  Field, Rt Hon Frank

  Jones, Martyn (Clwyd S)

  Fisher, Mark

  Jones, Nigel (Cheltenham)

  Fitzpatrick, Jim

  Keeble, Ms Sally

  Fitzsimons, Lorna

  Keen, Alan (Feltham & Heston)

  Flint, Caroline

  Keen, Ann (Brentford & Isleworth)

  Follett, Barbara

  Keetch, Paul

  Foster, Rt Hon Derek

  Kemp, Fraser

  Foster, Don (Bath)

  Kennedy, Charles (Ross Skye)

  Foster, Michael Jabez (Hastings)

  Kennedy, Jane (Wavertree)

  Foster, Michael J (Worcester)

  Khabra, Piara S

  Fyfe, Maria

  Kidney, David

  Galloway, George

  Kilfoyle, Peter

  Gapes, Mike

  King, Andy (Rugby & Kenilworth)

  Gardiner, Barry

  King, Ms Oona (Bethnal Green)

  George, Andrew (St Ives)

  Kingham, Ms Tess

  George, Bruce (Walsall S)

  Kirkwood, Archy

  Gerrard, Neil

  Kumar, Dr Ashok

  Gibson, Dr Ian

  Ladyman, Dr Stephen

  Gilroy, Mrs Linda

  Lawrence, Ms Jackie

  Godman, Dr Norman A

  Laxton, Bob

  Godsiff, Roger

  Lepper, David

  Goggins, Paul

  Leslie, Christopher

  Golding, Mrs Llin

  Levitt, Tom

  Gordon, Mrs Eileen

  Lewis, Ivan (Bury S)

  Gorrie, Donald

  Lewis, Terry (Worsley)

  Griffiths, Jane (Reading E)

  Linton, Martin

  Griffiths, Nigel (Edinburgh S)

  Livingstone, Ken

  Griffiths, Win (Bridgend)

  Livsey, Richard

  Grocott, Bruce

  Llwyd, Elfyn

  Grogan, John

  Lock, David

  Gunnell, John

  Love, Andrew

  Hain, Peter

  McAvoy, Thomas

  Hall, Patrick (Bedford)

  McCabe, Steve

  Hamilton, Fabian (Leeds NE)

  McCafferty, Ms Chris

  Hancock, Mike

  McDonagh, Siobhain

  Hanson, David

  McDonnell, John

  Harman, Rt Hon Ms Harriet

  McFall, John

  Harris, Dr Evan

  McIsaac, Shona

  Harvey, Nick

  McKenna, Mrs Rosemary

  Heal, Mrs Sylvia

  Mackinlay, Andrew

  Healey, John

  McLeish, Henry

  Heath, David (Somerton & Frome)

  McNulty, Tony

  Henderson, Ivan (Harwich)

  McWilliam, John

  Hepburn, Stephen

  Mahon, Mrs Alice

  Heppell, John

  Mallaber, Judy

  Hesford, Stephen

  Mandelson, Rt Hon Peter

  Hill, Keith

  Marsden, Gordon (Blackpool S)

  Hinchliffe, David

  Marsden, Paul (Shrewsbury)

  Hodge, Ms Margaret

  Marshall, David (Shettleston)

  Hoey, Kate

  Marshall-Andrews, Robert

  Home Robertson, John

  Martlew, Eric

  Hoon, Geoffrey

  Maxton, John

  Hope, Phil

  Meacher, Rt Hon Michael

  780

  Michael, Alun

  Singh, Marsha

  Michie, Bill (Shefl'd Heeley)

  Skinner, Dennis

  Michie, Mrs Ray (Argyll & Bute)

  Smith, Jacqui (Redditch)

  Milburn, Alan

  Smith, John (Glamorgan)

  Miller, Andrew

  Smith, Llew (Blaenau Gwent)

  Mitchell, Austin

  Smith, Sir Robert (W Ab'd'ns)

  Moffatt, Laura

  Snape, Peter

  Moonie, Dr Lewis

  Soley, Clive

  Moore, Michael

  Southworth, Ms Helen

  Moran, Ms Margaret

  Spellar, John

  Morgan, Ms Julie (Cardiff N)

  Squire, Ms Rachel

  Morgan, Rhodri (Cardiff W)

  Starkey, Dr Phyllis

  Morley, Elliot

  Steinberg, Gerry

  Morris, Ms Estelle (B'ham Yardley)

  Stewart, David (Inverness E)

  Murphy, Denis (Wansbeck)

  Stewart, Ian (Eccles)

  Norris, Dan

  Stinchcombe, Paul

  Oaten, Mark

  Stoate, Dr Howard

  O'Brien, Bill (Normanton)

  Stott, Roger

  O'Brien, Mike (N Warks)

  Strang, Rt Hon Dr Gavin

  O'Hara, Eddie

  Stuart, Ms Gisela

  O'Neill, Martin

  Stunell, Andrew

  Öpik, Lembit

  Sutcliffe, Gerry

  Organ, Mrs Diana

  Swinney, John

  Osborne, Ms Sandra

  Taylor, Rt Hon Mrs Ann

  Palmer, Dr Nick

  (Dewsbury)

  Pearson, Ian

  Taylor, Ms Dari (Stockton S)

  Pendry, Tom

  Taylor, David (NW Leics)

  Perham, Ms Linda

  Taylor, Matthew (Truro)

  Pickthall, Colin

  Temple-Morris, Peter

  Plaskitt, James

  Thomas, Gareth (Clwyd W)

  Pollard, Kerry

  Timms, Stephen

  Pond, Chris

  Tipping, Paddy

  Pope, Greg

  Todd, Mark

  Pound, Stephen

  Tonge, Dr Jenny

  Powell, Sir Raymond

  Touhig, Don

  Prentice, Ms Bridget (Lewisham E)

  Trickett, Jon

  Truswell, Paul

  Prentice, Gordon (Pendle)

  Turner, Dennis (Wolverh'ton SE)

  Prescott, Rt Hon John

  Prosser, Gwyn

  Turner, Dr Desmond (Kemptown)

  Purchase, Ken

  Turner, Dr George (NW Norfolk)

  Quinn, Lawrie

  Twigg, Derek (Halton)

  Rammell, Bill

  Tyler, Paul

  Wallace, James

  Raynsford, Nick

  Walley, Ms Joan

  Reed, Andrew (Loughborough)

  Ward, Ms Claire

  Reid, Rt Hon Dr John (Hamilton N)

  Rendel, David

  Wareing, Robert N

  Watts, David

  Robinson, Geoffrey (Cov'try NW)

  Webb, Steve

  Roche, Mrs Barbara

  Welsh, Andrew

  Rooker, Jeff

  White, Brian

  Rooney, Terry

  Wigley, Rt Hon Dafydd

  Ross, Ernie (Dundee W)

  Williams, Rt Hon Alan (Swansea W)

  Rowlands, Ted

  Roy, Frank

  Williams, Alan W (E Carmarthen)

  Ruddock, Ms Joan

  Willis, Phil

  Russell, Bob (Colchester)

  Wills, Michael

  Salmond, Alex

  Winnick, David

  Salter, Martin

  Winterton, Ms Rosie (Doncaster C)

  Sanders, Adrian

  Wise, Audrey

  Sarwar, Mohammad

  Woolas, Phil

  Savidge, Malcolm

  Worthington, Tony

  Sawford, Phil

  Wright, Anthony D (Gt Yarmouth)

  Sedgemore, Brian

  Wyatt, Derek

  Shaw, Jonathan

  Sheerman, Barry

  Tellers for the Noes:

  Sheldon, Rt Hon Robert

  Mr. Mike Hall and Mrs. Anne McGuire.

  Simpson, Alan (Nottingham S)

  Question accordingly negatived.
  Amendment proposed, at the end of the Question, to add,
  But humbly regret, while supporting some proposals in the Gracious Speech, such as those which address the issues of ending the voting rights of hereditary peers and improving the administration of the tax and national insurance system, the absence

  781
  of key measures in the Gracious Speech to modernise the United Kingdom, including a comprehensive package of environmental policies to tackle pollution, reduce car journeys and switch travel to public transport, a second tier pension scheme, a judicial process to replace the Child Support Agency and the introduction of a parliamentary committee to scrutinise arms exports; believe that additional measures to improve public health, reduce class sizes, abolish tuition fees, widen the provision of early years education and to tackle age discrimination and other forms of inequality should have been brought forward; call for urgent measures to pave the way for Britain's membership of a successful single currency and to grant proper financial independence and a fair and proportional voting system to local government; further regret any delays in introducing a Food Standards Agency; deprecate the absence of rapid progress on measures to ensure a wide-ranging Freedom of Information Act, to pave the way for a referendum on a fair voting system for the House of Commons and to deliver a fully reformed and predominantly elected Second Chamber; and support all possible early steps to speed the passage of the European Parliamentary Elections Bill in order to allow the 1999 European parliamentary elections to be held under a fairer, proportional, voting system.—[Mr. Beith.]
  Question put forthwith, pursuant to Standing Order No. 33 (Calling of amendments at end of debate), That the amendment be made:—
  The House divided: Ayes 51, Noes 317.

  Division No. 3]

  [10.15 pm

  AYES

  Allan, Richard

  Jones, Nigel (Cheltenham)

  Baker, Norman

  Keetch, Paul

  Ballard, Jackie

  Kennedy, Charles (Ross Skye)

  Beith, Rt Hon A J

  Kirkwood, Archy

  Bell, Martin (Tatton)

  Livsey, Richard

  Brake, Tom

  Llwyd, Elfyn

  Brand, Dr Peter

  Michie, Mrs Ray (Argyll & Bute)

  Breed, Colin

  Moore, Michael

  Bruce, Malcolm (Gordon)

  Oaten, Mark

  Burnett, John

  Öpik, Lembit

  Burstow, Paul

  Rendel, David

  Cable, Dr Vincent

  Russell, Bob (Colchester)

  Campbell, Menzies (NE Fife)

  Salmond, Alex

  Sanders, Adrian

  Chidgey, David

  Smith, Sir Robert (W Ab'd'ns)

  Cotter, Brian

  Swinney, John

  Dafis, Cynog

  Taylor, Matthew (Truro)

  Davey, Edward (Kingston)

  Tonge, Dr Jenny

  Ewing, Mrs Margaret

  Tyler, Paul

  Fearn, Ronnie

  Wallace, James

  Foster, Don (Bath)

  Webb, Steve

  George, Andrew (St Ives)

  Welsh, Andrew

  Hancock, Mike

  Wigley, Rt Hon Dafydd

  Harris, Dr Evan

  Willis, Phil

  Harvey, Nick

  Heath, David (Somerton & Frome)

  Tellers for the Ayes:

  Hughes, Simon (Southwark N)

  Mr. Andrew Stunell and Mr. Donald Gorrie.

  Jones, Ieuan Wyn (Ynys MÖn)

  NOES

  Abbott, Ms Diane

  Beard, Nigel

  Ainger, Nick

  Beckett, Rt Hon Mrs Margaret

  Ainsworth, Robert (Cov'try NE)

  Begg, Miss Anne

  Alexander, Douglas

  Bell, Stuart (Middlesbrough)

  Allen, Graham

  Benn, Rt Hon Tony

  Anderson, Donald (Swansea E)

  Berry, Roger

  Anderson, Janet (Rossendale)

  Best, Harold

  Armstrong, Ms Hilary

  Betts, Clive

  Ashton, Joe

  Blackman, Liz

  Atherton, Ms Candy

  Blears, Ms Hazel

  Atkins, Charlotte

  Blizzard, Bob

  Barnes, Harry

  Blunkett, Rt Hon David

  Barron, Kevin

  Boateng, Paul

  Battle, John

  Borrow, David

  Bayley, Hugh

  Bradley, Keith (Withington)

  782

  Bradshaw, Ben

  Foster, Rt Hon Derek

  Brinton, Mrs Helen

  Foster, Michael Jabez (Hastings)

  Brown, Rt Hon Nick (Newcastle E)

  Foster, Michael J (Worcester)

  Brown, Russell (Dumfries)

  Fyfe, Maria

  Browne, Desmond

  Galloway, George

  Buck, Ms Karen

  Gapes, Mike

  Burden, Richard

  Gardiner, Barry

  Burgon, Colin

  George, Bruce (Walsall S)

  Byers, Rt Hon Stephen

  Gerrard, Neil

  Caborn, Richard

  Gibson, Dr Ian

  Campbell, Alan (Tynemouth)

  Gilroy, Mrs Linda

  Campbell, Mrs Anne (C'bridge)

  Godman, Dr Norman A

  Campbell, Ronnie (Blyth V)

  Godsiff, Roger

  Campbell-Savours, Dale

  Goggins, Paul

  Canavan, Dennis

  Golding, Mrs Llin

  Caplin, Ivor

  Gordon, Mrs Eileen

  Casale, Roger

  Griffiths, Jane (Reading E)

  Caton, Martin

  Griffiths, Nigel (Edinburgh S)

  Chapman, Ben (Wirral S)

  Griffiths, Win (Bridgend)

  Chaytor, David

  Grocott, Bruce

  Clapham, Michael

  Grogan, John

  Clark, Rt Hon Dr David (S Shields)

  Gunnell, John

  Clark, Dr Lynda (Edinburgh Pentlands)

  Hain, Peter

  Hall, Patrick (Bedford)

  Clark, Paul (Gillingham)

  Hamilton, Fabian (Leeds NE)

  Clarke, Charles (Norwich S)

  Hanson, David

  Clarke, Eric (Midlothian)

  Harman, Rt Hon Ms Harriet

  Clarke, Rt Hon Tom (Coatbridge)

  Heal, Mrs Sylvia

  Clarke, Tony (Northampton S)

  Healey, John

  Clelland, David

  Henderson, Ivan (Harwich)

  Clwyd, Ann

  Hepburn, Stephen

  Coffey, Ms Ann

  Heppell, John

  Cohen, Harry

  Hesford, Stephen

  Coleman, Iain

  Hill, Keith

  Connarty, Michael

  Hinchliffe, David

  Cook, Frank (Stockton N)

  Hodge, Ms Margaret

  Cooper, Yvette

  Hoey, Kate

  Corbett, Robin

  Home Robertson, John

  Corbyn, Jeremy

  Hoon, Geoffrey

  Corston, Ms Jean

  Hope, Phil

  Cousins, Jim

  Hopkins, Kelvin

  Cranston, Ross

  Howarth, Alan (Newport E)

  Crausby, David

  Howarth, George (Knowsley N)

  Cryer, John (Hornchurch)

  Hoyle, Lindsay

  Cummings, John

  Hughes, Kevin (Doncaster N)

  Cunningham, Jim (Cov'try S)

  Humble, Mrs Joan

  Curtis-Thomas, Mrs Claire

  Hurst, Alan

  Dalyell, Tam

  Hutton, John

  Darling, Rt Hon Alistair

  Iddon, Dr Brian

  Darvill, Keith

  Illsley, Eric

  Davey, Valerie (Bristol W)

  Jackson, Helen (Hillsborough)

  Davidson, Ian

  Jamieson, David

  Davies, Rt Hon Denzil (Llanelli)

  Jenkins, Brian

  Davies, Geraint (Croydon C)

  Johnson, Alan (Hull W & Hessle)

  Davies, Rt Hon Ron (Caerphilly)

  Johnson, Miss Melanie (Welwyn Hatfield)

  Dean, Mrs Janet

  Denham, John

  Jones, Barry (Alyn & Deeside)

  Dewar, Rt Hon Donald

  Jones, Mrs Fiona (Newark)

  Dismore, Andrew

  Jones, Helen (Warrington N)

  Dobbin, Jim

  Jones, Jon Owen (Cardiff C)

  Dobson, Rt Hon Frank

  Jones, Dr Lynne (Selly Oak)

  Donohoe, Brian H

  Jones, Martyn (Clwyd S)

  Doran, Frank

  Keeble, Ms Sally

  Dowd, Jim

  Keen, Alan (Feltham & Heston)

  Drew, David

  Keen, Ann (Brentford & Isleworth)

  Eagle, Angela (Wallasey)

  Kemp, Fraser

  Edwards, Huw

  Kennedy, Jane (Wavertree)

  Efford, Clive

  Khabra, Piara S

  Ennis, Jeff

  Kidney, David

  Fatchett, Derek

  Kilfoyle, Peter

  Field, Rt Hon Frank

  King, Andy (Rugby & Kenilworth)

  Fisher, Mark

  King, Ms Oona (Bethnal Green)

  Fitzpatrick, Jim

  Kingham, Ms Tess

  Fitzsimons, Lorna

  Kumar, Dr Ashok

  Flint, Caroline

  Ladyman, Dr Stephen

  Follett, Barbara

  Laxton, Bob

  783

  Lepper, David

  Reid, Rt Hon Dr John (Hamilton N)

  Leslie, Christopher

  Robinson, Geoffrey (Cov'try NW)

  Levitt, Tom

  Roche, Mrs Barbara

  Lewis, Ivan (Bury S)

  Rooker, Jeff

  Lewis, Terry (Worsley)

  Rooney, Terry

  Linton, Martin

  Ross, Ernie (Dundee W)

  Livingstone, Ken

  Rowlands, Ted

  Lock, David

  Roy, Frank

  Love, Andrew

  Ruddock, Ms Joan

  McAvoy, Thomas

  Salter, Martin

  McCabe, Steve

  Savidge, Malcolm

  McCafferty, Ms Chris

  Sawford, Phil

  McDonagh, Siobhain

  Sedgemore, Brian

  McDonnell, John

  Shaw, Jonathan

  McFall, John

  Sheerman, Barry

  McIsaac, Shona

  Sheldon, Rt Hon Robert

  McKenna, Mrs Rosemary

  Simpson, Alan (Nottingham S)

  Mackinlay, Andrew

  Singh, Marsha

  McLeish, Henry

  Skinner, Dennis

  McNulty, Tony

  Smith, Jacqui (Redditch)

  McWilliam, John

  Smith, Llew (Blaenau Gwent)

  Mahon, Mrs Alice

  Snape, Peter

  Mallaber, Judy

  Soley, Clive

  Mandelson, Rt Hon Peter

  Southworth, Ms Helen

  Marsden, Gordon (Blackpool S)

  Spellar, John

  Marsden, Paul (Shrewsbury)

  Squire, Ms Rachel

  Marshall, David (Shettleston)

  Starkey, Dr Phyllis

  Marshall-Andrews, Robert

  Steinberg, Gerry

  Martlew, Eric

  Stewart, David (Inverness E)

  Maxton, John

  Stewart, Ian (Eccles)

  Meacher, Rt Hon Michael

  Stinchcombe, Paul

  Michael, Alun

  Stoate, Dr Howard

  Michie, Bill (Shef'ld Heeley)

  Stott, Roger

  Milburn, Alan

  Strang, Rt Hon Dr Gavin

  Miller, Andrew

  Stuart, Ms Gisela

  Mitchell, Austin

  Sutcliffe, Gerry

  Moffatt, Laura

  Taylor, Rt Hon Mrs Ann (Dewsbury)

  Moonie, Dr Lewis

  Moran, Ms Margaret

  Taylor, Ms Dari (Stockton S)

  Morgan, Ms Julie (Cardiff N)

  Taylor, David (NW Leics)

  Morgan, Rhodri (Cardiff W)

  Temple-Morris Peter

  Morley, Elliot

  Thomas, Gareth (Clwyd W)

  Morris, Ms Estelle (B'ham Yardley)

  Timms, Stephen

  Murphy, Denis (Wansbeck)

  Tipping, Paddy

  Norris, Dan

  Todd, Mark

  O'Brien, Bill (Normanton)

  Touhig, Don

  Trickett, Jon

  O'Brien, Mike (N Warks)

  Truswell, Paul

  O'Hara, Eddie

  Turner, Dennis (Wolverh'ton SE)

  O'Neill, Martin

  Turner, Dr Desmond (Kemptown)

  Organ, Mrs Diana

  Turner, Dr George (NW Norfolk)

  Osborne, Ms Sandra

  Twigg, Derek (Halton)

  Palmer, Dr Nick

  Walley, Ms Joan

  Pearson, Ian

  Ward, Ms Claire

  Pendry, Tom

  Wareing, Robert N

  Perham, Ms Linda

  Watts, David

  Pickthall, Colin

  White, Brian

  Plaskitt, James

  Williams, Rt Hon Alan (Swansea W)

  Pollard, Kerry

  Pond, Chris

  Williams, Alan W (E Carmarthen)

  Pope, Greg

  Wills, Michael

  Pound, Stephen

  Winnick, David

  Powell, Sir Raymond

  Winterton, Ms Rosie (Doncaster C)

  Prentice, Ms Bridget (Lewisham E)

  Wise, Audrey

  Prentice, Gordon (Pendle)

  Woolas, Phil

  Prescott, Rt Hon John

  Worthington, Tony

  Prosser, Gwyn

  Wright, Anthony D (Gt Yarmouth)

  Purchase, Ken

  Wyatt, Derek

  Quinn, Lawrie

  Rammell, Bill

  Tellers for the Noes:

  Raynsford, Nick

  Mrs. Anne McGuire and Mr. Mike Hall.

  Reed, Andrew (Loughborough)

  Question accordingly negatived.
  Main Question put:—
  The House divided: Ayes 317, Noes 168.

  Division No. 4]

  [10.28 pm

  AYES

  Abbott, Ms Diane

  Crausby, David

  Ainger, Nick

  Cryer, John (Hornchurch)

  Ainsworth, Robert (Cov'try NE)

  Cummings, John

  Alexander, Douglas

  Cunningham, Jim (Cov'try S)

  Allen, Graham

  Curtis-Thomas, Mrs Claire

  Anderson, Donald (Swansea E)

  Dalyell, Tam

  Anderson, Janet (Rossendale)

  Darling, Rt Hon Alistair

  Armstrong, Ms Hilary

  Darvill, Keith

  Ashton, Joe

  Davey, Valerie (Bristol W)

  Atherton, Ms Candy

  Davidson, Ian

  Atkins, Charlotte

  Davies, Rt Hon Denzil (Llanelli)

  Barnes, Harry

  Davies, Geraint (Croydon C)

  Barron, Kevin

  Dean, Mrs Janet

  Battle, John

  Denham, John

  Bayley, Hugh

  Dewar, Rt Hon Donald

  Beard, Nigel

  Dismore, Andrew

  Beckett, Rt Hon Mrs Margaret

  Dobbin, Jim

  Begg, Miss Anne

  Dobson, Rt Hon Frank

  Bell, Martin (Tatton)

  Donohoe, Brian H

  Bell, Stuart (Middlesbrough)

  Doran, Frank

  Benn, Rt Hon Tony

  Dowd, Jim

  Berry, Roger

  Drew, David

  Best, Harold

  Eagle, Angela (Wallasey)

  Betts, Clive

  Edwards, Huw

  Blackman, Liz

  Efford, Clive

  Blears, Ms Hazel

  Ennis, Jeff

  Blizzard, Bob

  Fatchett, Derek

  Blunkett, Rt Hon David

  Field, Rt Hon Frank

  Boateng, Paul

  Fisher, Mark

  Borrow, David

  Fitzpatrick, Jim

  Bradley, Keith (Withington)

  Fitzsimons, Lorna

  Bradshaw, Ben

  Flint, Caroline

  Brinton, Mrs Helen

  Follett, Barbara

  Brown, Rt Hon Nick (Newcastle E)

  Foster, Rt Hon Derek

  Brown, Russell (Dumfries)

  Foster, Michael Jabez (Hastings)

  Browne, Desmond

  Foster, Michael J (Worcester)

  Buck, Ms Karen

  Fyfe, Maria

  Burden, Richard

  Galloway, George

  Burgon, Colin

  Byers, Rt Hon Stephen

  Gapes, Mike

  Caborn, Richard

  Gardiner, Barry

  Campbell, Alan (Tynemouth)

  George, Bruce (Walsall S)

  Campbell, Mrs Anne (C'bridge)

  Gerrard, Neil

  Campbell, Ronnie (Blyth V)

  Gibson, Dr Ian

  Campbell-Savours, Dale

  Gilroy, Mrs Linda

  Canavan, Dennis

  Godman, Dr Norman A

  Caplin, Ivor

  Godsiff, Roger

  Casale, Roger

  Goggins, Paul

  Caton, Martin

  Golding, Mrs Llin

  Chapman, Ben (Wirral S)

  Gordon, Mrs Eileen

  Chaytor, David

  Griffiths, Jane (Reading E)

  Clapham, Michael

  Griffiths, Nigel (Edinburgh S)

  Clark, Rt Hon Dr David (S Shields)

  Griffiths, Win (Bridgend)

  Clark, Dr Lynda (Edinburgh Pentlands)

  Grocott, Bruce

  Grogan, John

  Clark, Paul (Gillingham)

  Gunnell, John

  Clarke, Charles (Norwich S)

  Hain, Peter

  Clarke, Eric (Midlothian)

  Hall, Patrick (Bedford)

  Clarke, Rt Hon Tom (Coatbridge)

  Hamilton, Fabian (Leeds NE)

  Clarke, Tony (Northampton S)

  Hanson, David

  Clelland, David

  Harman, Rt Hon Ms Harriet

  Clwyd, Ann

  Heal, Mrs Sylvia

  Coffey, Ms Ann

  Healey, John

  Cohen, Harry

  Henderson, Ivan (Harwich)

  Coleman, Iain

  Heppell, John

  Connarty, Michael

  Hesford, Stephen

  Cook, Frank (Stockton N)

  Hill, Keith

  Cooper, Yvette

  Hinchliffe, David

  Corbett, Robin

  Hodge, Ms Margaret

  Corbyn, Jeremy

  Hoey, Kate

  Corston, Ms Jean

  Home Robertson, John

  Cousins, Jim

  Hoon, Geoffrey

  Cranston, Ross

  Hope, Phil

  785

  Hopkins, Kelvin

  Morgan, Ms Julie (Cardiff N)

  Howarth, Alan (Newport E)

  Morgan, Rhodri (Cardiff W)

  Howarth, George (Knowsley N)

  Morley, Elliot

  Hoyle, Lindsay

  Morris, Ms Estelle (B'ham Yardley)

  Hughes, Kevin (Doncaster N)

  Murphy, Denis (Wansbeck)

  Humble, Mrs Joan

  Norris, Dan

  Hurst, Alan

  O'Brien, Bill (Normanton)

  Hutton, John

  O'Brien, Mike (N Warks)

  Iddon, Dr Brian

  O'Hara, Eddie

  Illsley, Eric

  O'Neill, Martin

  Jackson, Helen (Hillsborough)

  Organ, Mrs Diana

  Jamieson, David

  Osborne, Ms Sandra

  Jenkins, Brian

  Palmer, Dr Nick

  Johnson, Alan (Hull W& Hessle)

  Pearson, Ian

  Johnson, Miss Melanie (Welwyn Hatfield)

  Pendry, Tom

  Perham, Ms Linda

  Jones, Barry (Alyn & Deeside)

  Pickthall, Colin

  Jones, Mrs Fiona (Newark)

  Plaskitt, James

  Jones, Helen (Warrington N)

  Pollard, Kerry Pond, Chris

  Jones, Jon Owen (Cardiff C)

  Jones, Dr Lynne (Selly Oak)

  Jones, Martyn (Clwyd S)

  Pope, Greg

  Keeble, Ms Sally

  Pound, Stephen

  Keen, Alan (Feltham & Heston)

  Prentice, Ms Bridget (Lewisham E)

  Keen, Ann (Brentford & Isleworth)

  Prentice, Gordon (Pendle)

  Kemp, Fraser

  Prescott, Rt Hon John

  Kennedy, Jane (Wavertree)

  Prosser, Gwyn

  Khabra, Piara S

  Purchase, Ken

  Kidney, David

  Quinn, Lawrie

  Kilfoyle, Peter

  Rammell, Bill

  King, Andy (Rugby & Kenilworth)

  Raynsford, Nick

  King, Ms Oona (Bethnal Green)

  Reed, Andrew (Loughborough)

  Kingham, Ms Tess

  Reid, Rt Hon Dr John (Hamilton N)

  Kumar, Dr Ashok

  Robinson, Geoffrey (Cov'tryNW)

  Ladyman, Dr Stephen

  Roche, Mrs Barbara

  Lawrence, Ms Jackie

  Rooker, Jeff

  Laxton, Bob

  Rooney, Terry

  Lepper, David

  Ross, Ernie (Dundee W)

  Leslie, Christopher

  Rowlands, Ted

  Levitt, Tom

  Roy, Frank

  Lewis, Ivan (Bury S)

  Ruddock, Ms Joan

  Lewis, Terry (Worsley)

  Salter, Martin

  Linton, Martin

  Savidge, Malcolm

  Livingstone, Ken

  Sawford, Phil

  Lock, David

  Sedgemore, Brian

  Love, Andrew

  Shaw, Jonathan

  McAvoy, Thomas

  Sheerman, Barry

  McCabe, Steve

  Simpson, Alan (Nottingham S)

  McCafferty, Ms Chris

  Singh, Marsha

  McDonagh, Siobhain

  Skinner, Dennis

  McDonnell, John

  Smith, Jacqui (Redditch)

  McFall, John McIsaac, Shona

  Smith, John (Glamorgan)

  McKenna, Mrs Rosemary

  Smith, Llew (Blaenau Gwent)

  Mackinlay, Andrew

  Snape, Peter

  Soley, Clive

  McLeish, Henry

  Southworth, Ms Helen

  McNulty, Tony

  Spellar, John

  McWilliam, John

  Mahon, Mrs Alice

  Squire, Ms Rachel

  Mallaber, Judy

  Starkey, Dr Phyllis

  Mandelson, Fit Hon Peter

  Steinberg, Gerry

  Marsden, Gordon (Blackpool S)

  Stewart, David (Inverness E)

  Marsden, Paul (Shrewsbury)

  Stewart, Ian (Ecoles)

  Marshall, David (Shettleston)

  Stinchcombe, Paul

  Marshall-Andrews, Robert

  Stoate, Dr Howard

  Martlew, Eric

  Stott, Roger

  Maxton, John

  Strang, Rt Hon Dr Gavin

  Meacher, Rt Hon Michael

  Stuart, Ms Gisela

  Michael, Alun

  Sutcliffe, Gerry

  Michie, Bill (Shef'ld Heeley)

  Taylor, Rt Hon Mrs Ann (Dewsbury)

  Milburn, Alan

  Miller, Andrew

  Taylor, Ms Dari (Stockton S)

  Mitchell, Austin

  Taylor, David (NW Leics)

  Moffatt, Laura

  Temple-Morris, Peter

  Moonie, Dr Lewis

  Thomas, Gareth (Clwyd W)

  Moran, Ms Margaret

  Timms, Stephen

  786

  Tipping, Paddy

  Williams, Rt Hon Alan (Swansea W)

  Todd, Mark

  Touhig, Don

  Williams, Alan W (E Carmarthen)

  Trickett, Jon

  Wills, Michael

  Truswell, Paul

  Winnick, David

  Turner, Dennis (Wolverh'ton SE)

  Winterton, Ms Rosie (Doncaster C)

  Turner, Dr Desmond (Kemptown)

  Wise, Audrey

  Turner, Dr George (NW Norfolk)

  Woolas, Phil

  Twigg, Derek (Halton)

  Worthington, Tony

  Walley, Ms Joan

  Wright, Anthony D (Gt Yarmouth)

  Ward, Ms Claire

  Wyatt, Derek

  Wareing, Robert N

  Watts, David

  Tellers for the Ayes:

  White, Brian

  Mrs. Anne McGuire and Mr. Mike Hall.

  Wicks, Malcolm

  NOES

  Ainsworth, Peter (E Surrey)

  Gorman, Mrs Teresa

  Allan, Richard

  Gorrie, Donald

  Ancram, Rt Hon Michael

  Gray, James

  Arbuthnot, Rt Hon James

  Green, Damian

  Atkinson, Peter (Hexham)

  Greenway, John

  Baker, Norman

  Gummer, Rt Hon John

  Ballard, Jackie

  Hamilton, Rt Hon Sir Archie

  Beith, Rt Hon A J

  Hammond, Philip

  Bercow, John

  Hancock, Mike

  Beresford, Sir Paul

  Harris, Dr Evan

  Blunt, Crispin

  Harvey, Nick

  Boswell, Tim

  Hawkins, Nick

  Bottomley, Peter (Worthing W)

  Hayes, John

  Bottomley, Rt Hon Mrs Virginia

  Heald, Oliver

  Brady, Graham

  Heath, David (Somerton & Frome)

  Brake, Tom

  Horam, John

  Brand, Dr Peter

  Howard, Rt Hon Michael

  Brazier, Julian

  Howarth, Gerald (Aldershot)

  Breed, Colin

  Hughes, Simon (Southwark N)

  Brooke, Rt Hon Peter

  Hunter, Andrew

  Browning, Mrs Angela

  Jack, Rt Hon Michael

  Bruce, Ian (S Dorset)

  Jenkin, Bernard

  Bruce, Malcolm (Gordon)

  Keetch, Paul

  Burnett, John

  Kennedy, Charles (Ross Skye)

  Burns, Simon

  King, Rt Hon Tom (Bridgwater)

  Burstow, Paul

  Kirkbride, Miss Julie

  Butterfill, John

  Kirkwood, Archy

  Campbell, Menzies (NE Fife)

  Laing, Mrs Eleanor

  Cash, William

  Lait, Mrs Jacqui

  Chidgey, David

  Lansley, Andrew

  Chope, Christopher

  Leigh, Edward

  Clappison, James

  Letwin, Oliver

  Clarke, Rt Hon Kenneth (Rushcliffe)

  Lewis, Dr Julian (New Forest E)

  Lidington, David

  Clifton-Brown, Geoffrey

  Livsey, Richard

  Collins, Tim

  Lloyd, Rt Hon Sir Peter (Fareham)

  Cormack, Sir Patrick

  Loughton, Tim

  Cotter, Brian

  Luff, Peter

  Cran, James

  Lyell, Rt Hon Sir Nicholas

  Curry, Rt Hon David

  MacGregor, Rt Hon John

  Davey, Edward (Kingston)

  McIntosh, Miss Anne

  Davies, Quentin (Grantham)

  MacKay, Rt Hon Andrew

  Day, Stephen

  Maclean, Rt Hon David

  Dorrell, Rt Hon Stephen

  McLoughlin, Patrick

  Duncan, Alan

  Malins, Humfrey

  Duncan Smith, Iain

  Maples, John

  Evans, Nigel

  Mates, Michael

  Faber, David

  Maude, Rt Hon Francis

  Fallon, Michael

  May, Mrs Theresa

  Fearn, Ronnie

  Michie, Mrs Ray (Argyll & Bute)

  Flight, Howard

  Moore, Michael

  Forth, Rt Hon Eric

  Moss, Malcolm

  Foster, Don (Bath)

  Nicholls, Patrick

  Fowler, Rt Hon Sir Norman

  Norman, Archie

  Fraser, Christopher

  Oaten, Mark

  Gale, Roger

  Öpik, Lembit

  Garnier, Edward

  Page, Richard

  George, Andrew (St Ives)

  Paice, James

  Gibb, Nick

  Paisley, Rev Ian

  787

  Paterson, Owen

  Taylor, Matthew (Truro)

  Pickles, Eric

  Taylor, Sir Teddy

  Prior, David

  Tonge, Dr Jenny

  Redwood, Rt Hon John

  Tredinnick, David

  Rendel, David

  Trend, Michael

  Robathan, Andrew

  Tyler, Paul

  Robertson, Laurence (Tewk'b'ry)

  Tyrie, Andrew

  Roe, Mrs Marion (Broxbourne)

  Viggers, Peter

  Rowe, Andrew (Faversham)

  Wallace, James

  Ruffley, David

  Wardle, Charles

  Russell, Bob (Colchester)

  Waterson, Nigel

  St Aubyn, Nick

  Webb, Steve

  Sanders, Adrian

  Wells, Bowen

  Sayeed, Jonathan

  Whitney, Sir Raymond

  Shepherd, Richard

  Whittingdale, John

  Smith, Sir Robert (W Ab'd'ns)

  Widdecombe, Rt Hon Miss Ann

  Soames, Nicholas

  Wilkinson, John

  Spring, Richard

  Willis, Phil

  Stanley, Rt Hon Sir John

  Winterton, Mrs Ann (Congleton)

  Steen, Anthony

  Winterton, Nicholas (Macclesfield)

  Streeter, Gary

  Woodward, Shaun

  Stunell, Andrew

  Yeo, Tim

  Swayne, Desmond

  Young, Rt Hon Sir George

  Syms, Robert

  Tapsell, Sir Peter

  Tellers for the Noes:

  Taylor, Ian (Esher & Walton)

  Mrs. Caroline Spelman and Sir David Madel.

  Taylor, John M (Solihull)

  Question accordingly agreed to.
  Resolved,
  That an humble Address be presented to Her Majesty, as follows:
  Most Gracious Sovereign,
  We, Your Majesty's most dutiful and loyal subjects, the Commons of the United Kingdom of Great Britain and Northern Ireland, in Parliament assembled, beg leave to offer our humble thanks to Your Majesty for the Gracious Speech which Your Majesty has addressed to both Houses of Parliament.

  EUROPEAN COMMUNITY DOCUMENTS
  Mr. Deputy Speaker (Mr. Michael J. Martin): With permission, I shall put together the motions relating to European Community documents.
  Motion made, and Question put forthwith, pursuant to Standing Order No. 119(9) (European Standing Committees),

  AGRIMONETARY ARRANGEMENTS
  That this House takes note of European Community Document No. 9597/98, two draft Council Regulations establishing agrimonetary arrangements and the transitional arrangements to be applied under the Common Agricultural Policy with a view to the introduction of the euro; and supports the Government's intention to support the proposals which simplify the current agrimonetary arrangements by moving to a system which more closely reflects market realities, reducing the costs to taxpayers, consumers and businesses, and also the scope for distortions of competition whilst respecting UK international obligations without discriminating against those Member States not participating in the euro.

  EC DEVELOPMENT AID (SOUTH AFRICA)
  That this House takes note of European Community Document No. 9690/98, the European Court of Auditors Special Report No. 7/98 on the European Development Aid Programme for South Africa (1986–1996) and its recommendations to the Commission; and supports the Government's position that these recommendations are practical and sensible and that the Government will work with Member States and other partners in all European Community
  788
  development assistance programmes, and particularly in detailed arrangements to succeed the present EPRD in South Africa, after 1999, to ensure that these recommendations are fully implemented.—[Mr. Pope.]
  Question agreed to.

PETITIONS

  Bus Service (York)
  10.40 pm
  Miss Anne McIntosh: With permission, I shall present a petition from the residents of Wheatfield lane in the city of York area of the Vale of York. The petition has 200 signatures—petitioners who are residents of Wheatfield lane and who are deeply concerned by the withdrawal of the local bus service operated by First York for a number of years. They are especially concerned that the service is not fitting in with the Government's promise to improve public transport.
  It gives me great pleasure to present the petition of the residents to the House of Commons. The petition states:
  The Petition of the residents of Wheatfield Lane,
  Declares that we are concerned at the decision to alter the Wigginton, Haxby, York bus service so that it no longer serves Wheatfield Lane, thus inconveniencing many residents, the elderly in particular.
  The Petitioners therefore request that the House of Commons urge the Secretary of State for the Environment, Transport and the Regions to require increased services and better standards from bus operators.
  All the petitioners remain faithfully yours.
  To lie upon the Table.

  Bootlegging
  10.41 pm
  Mrs. Jacqui Lait: On the day that tobacco duties rise and we look forward to an increase in duty on alcohol—which will reduce revenues to the Treasury, undermine the rule of law and subvert the health policies of reducing the consumption of tobacco and of alcohol—it is a great honour to present to the House of Commons the petition of 1,000 signatures from Independent Retail News, store owners and customers. The petition reads:
  Declares that the bootlegging of hand-rolling tobacco, cigarettes and alcohol has reached crisis levels.
  Honest shop owners are being driven out of business by bootleggers, who are also robbing the Exchequer of £1 billion per year.
  The Petitioners therefore request that the House of Commons should urge the Chancellor of the Exchequer to work with HM Customs and Excise in taking further measures to ensure the relevant legislation prohibiting this illegal trade is vigorously enforced.
  And the petitioners remain, etc.
  To lie upon the Table.

  Gas Supply (Consumer Protection)
  Motion made, and Question proposed, That this House do now adjourn.—[Mr. Pope.]
  10.42 pm
  Mr. Ken Purchase: I am pleased to have the opportunity to bring to the attention of the House what I believe to be a denial of justice for my constituent—Mr. Neil Bailey, from the Wednesfield area of my constituency—by an arm of British Gas known as British Gas Trading, post-privatisation and subsequent reorganisation.
  Mr. Bailey became an innocent victim following the digging up of the pavement outside his home by Transco, to repair gas pipes. Transco is another former part of British Gas. It carried out the work and, on completion, the Transco engineer knocked on the door of my constituent's house and asked that he may be allowed into the garage to bleed the system of air, after putting the gas supply back on.
  Unfortunately, my constituent's wife, Mrs. Bailey, was unable to give access to the engineer: the meter was located in the garage, to which she did not have access while her husband was away at his work in Birmingham. She was unable to convince the engineer that she had no access, and, in the end, telephoned for Mr. Bailey to leave his work in Birmingham to come to Wolverhampton to allow the engineer into the garage.
  I should explain that Mrs. Bailey has a bone disease, which makes life very difficult for her, as well as arthritis and a heart condition, for which she will shortly undergo a double bypass operation.
  On Mr. Bailey's return, he not only gave access to the engineer, but loaned him the tools necessary to do the job. He also explained how the engineer might find the person next door to gain access to his premises.
  A short while later, when Mr. Bailey was about to return to work, the engineer came up the path again and asked if he could have access once more, through the garage, to the meters. My constituent explained that there was a secure door, which would require a little work, and that in any event it was now time for him to go back to Birmingham and resume his work. He could not put up with further delays.
  When Mr. Bailey came home, late in the afternoon, he was met by three people. One was a policeman; the others were from the gas companies. The policeman had a warrant to search the premises, on the ground that Mr. Bailey was suspected of stealing gas from British Gas Trading. It was alleged that he put in and took out a second meter according to the time of arrival of the quarterly bill, this gaining access to gas that he should not have had. That was alleged by the Transco man, who said that he had seen the meter earlier.
  A thorough search of the premises was carried out by the police officer and the gas company employees, who—surprise, surprise—found no sign of another meter. End of story, the House may think, perhaps rounded off by an apology; but no—the gas meter was removed, and Mr. Bailey was arrested, taken to the police station and charged with stealing gas.
  The forensic examination found nothing wrong, and the Crown Prosecution Service decided not to prosecute by reason of insufficient evidence, there being only the word of the Transco engineer.
  790
  End of story now, the House may think. Again, an apology would have helped—but no: British Gas Trading decided that Mr. Bailey was guilty, and told him that it calculated that he had stolen gas from it to the value of £189. To be reconnected, he would need to repay that amount, as well as paying a reconnection charge of £39.
  Hon. Members can imagine the exasperation felt by my constituent. He had been arrested, charged and taken to a police station; no evidence had been found. The Crown Prosecution Service had said, "Don't take it any further," but British Gas Trading decided to charge him, try him and find him guilty, without any evidence worth talking about.
  This has been going on for nearly 12 months. The incident happened in January. Hon. Members should bear in mind the great distress caused to my constituent and his disabled wife.
  Mr. Bailey engaged a solicitor to take on the case, but with no success. The gas company simply cited its decision, and justified it under its powers to protect its revenue. I do not oppose such powers; it is right and proper for the industry to be able to protect its revenue. I merely ask it do so in a proper and sensible way, by referring as fully as possible to evidence that it may have.
  My own correspondence on the matter has produced no better result. I have written, on behalf of Mr. Bailey, to every big noise in each of the companies—Transco, Centrica, British Gas Home Energy, British Gas Trading and the Gas Consumers Council—to no avail. The defence of the gas companies was repeated like a mantra, ad nauseam, by the chairmen and their understrappers. I believe that the chairmen should take the blame for not responding to a reasoned and sensible series of letters from a Member of Parliament, and should have taken it on themselves to investigate the matter properly and thoroughly. They knew all the circumstances; they were left in no doubt of the position. None the less, they chose merely to repeat the mantra, "We have the powers; we will protect our revenue."
  My constituent has two killer pieces of evidence on his side. First, he has retained all his gas bills for the 20 years during which he has lived in the house—gas bills relating to when the meter was first read, stating "zero, zero, zero". He also has his rates bill, his water bill, his electricity bill and all the household bills that so many of us always manage to mislay somewhere or other. He is the perfect book-keeper. They show a consistency in the use of gas over the years, and the gas companies in a better light in the past four years, when the increase in gas bills has been relatively stable because of the falling gas price. The gas companies knew he had all those bills. I believe that the Gas Consumers Council saw the bills.
  When my constituent said to me, "I have all my bills," I said, "I am sure you do. I believe you." He was not satisfied that I believed him. The next week, he brought the gas bills to my surgery for me to see, so he was determined to show me that everything that he had was above board and available for any one to inspect any time they wanted.
  The second piece of killer evidence is that the chap who has been reading my constituent's gas meter all these years lives a few doors away. He said to my constituent in the local social club, "I have seen your meter over all the years. I can swear on oath that that is the gas meter that has always been there."

  791
  Bearing in mind that my constituent had perhaps up to half an hour to change his gas meter on the first call, and perhaps another half an hour when he returned from work, it stretches credibility to believe that he would change the gas meter, but, there we are, the chap who has been reading the meter for years lives close by. He and my constituent socialise anyway, meeting occasionally in the local social club. He would say under oath that this is the meter that he has always been used to reading.
  The gas authorities know both those things, but even that has not moved British Gas Trading—that is, hon. Members will be pleased know, until my Adjournment debate was announced. I am sure that it is an absolute and total coincidence that an offer has now been made—an offer that, frankly, is almost as bad as the initial problems that British Gas Trading has caused for my constituent.
  The offer calls for my constituent to make a deposit of £250, which is more than it would have cost him to have the thing reconnected, but of course he would have been accused of being guilty had he met those unjust and unjustified bills. I assure the authorities that he will not settle for that. He needs to have the thing settled properly: to have an apology, with the whole thing reconnected without any further charges.
  Much of this has been caused by the nature of the organisation and the apparent continual reorganisation that it has been undergoing. There has also been an element of stubbornness not to recognise that this was a matter that could have been resolved by someone visiting my constituent, looking at the evidence and understanding that, almost certainly, when the Transco engineer looked at the meter, there was a haze: a simple, honourable mistake, none the less compounded in the engineer's mind by the fact that my constituent, having left Birmingham and arrived in Wolverhampton, then wanted to return to his work—that was reasonable and fair in the circumstances—and did not want to open the garage the second time.
  Ofgas has powers to intervene, but they are not sufficient. My constituent and his disabled wife could say, "Please investigate my case," but, in the meantime, his gas would remain unreconnected; it would probably be unreconnected well past Christmas while investigations took place. Indeed, it may be a difficult case to investigate, but the whole raft of difficulties could have been resolved by an early intervention.
  When reviewing these matters, the Minister may consider whether a duty should be placed on gas companies—more than one is involved throughout the country—to refer to, and consult with, Ofgas to avoid what has become a Winslow Boy-type affair, which none of us wants, and which has deprived my constituent and his disabled wife of the fuel that they need to heat their house. I ask that the matter be investigated properly and thoroughly.
  I hope that British Gas Trading—having heard the matter articulated in this debate, not simply reading about it—will understand that it is incumbent on it to make a proper, sensible and final offer that will absolve my constituent Mr. Bailey and reconnect his gas supply.
  10.55 pm
  The Minister for Energy and Industry (Mr. John Battle): I thank my hon. Friend the Member for Wolverhampton, North-East (Mr. Purchase) for raising his
  792
  constituent's case. Although some may say that it is inappropriate to deal with individuals' problems in the House, I do not agree with them. Quite often, we discover in our constituency cases and surgeries how laws, Budgets and the practices of private companies impact on individuals. It is certainly appropriate that we should stand up in the House for those whom we feel have been treated unjustly, speak out for them and raise their cases. I therefore welcome the fact that my hon. Friend has dealt with his constituent's case, and the way in which he has done so.
  My hon. Friend said that his constituent kept careful accounts and old bills. How often do people do so? Nevertheless, I should say that generally—I shall comment in a moment on the individual case—many of our constituents do their homework, have been conscientious in dealing with matters and deserve to be treated with the utmost respect and seriousness. If the word "customer" is to mean anything, customers have to be treated with absolute respect and be treated as companies' first priority.
  The purpose of the Government's proposals in our fair deal for consumers is to renew and refresh regulation and to put consumers at the heart of the process, so that they really do come first. The law states that not people but establishing competition should be the first priority, but competition should benefit people. If it does not work for people, why have it?
  I cannot go into the details of the individual case raised by my hon. Friend. It would be inappropriate for me to do so, especially as the case between the parties is unresolved. The case went to the Gas Consumers Council, which did not refer it—as, perhaps, it should have—to Ofgas, as the case was to go to court. The council perhaps felt that it should not act further on the matter.
  Mr. Purchase: The case did not get to court.
  Mr. Battle: Perhaps the appropriate course would have been for the Gas Consumers Council to have referred the case to Ofgas. Those at Ofgas were seemingly unaware of the case until my officials alerted them to it, because of this debate. It does seem a bit odd that, before Ofgas would take the case seriously, my hon. Friend had to go to the effort of writing to Madam Speaker to request an Adjournment debate. There seems to be a gap in the system.
  We shall fill that gap by giving power to the Gas Consumers Council to be the sole point of contact when we change the regulatory rules, so that people know clearly where to go, and so that the council will champion cases right the way through the system and take on the companies.
  I hope that the case will be resolved by a revised offer by the supplier. I have been informed that the parties will be meeting, when the matter can perhaps be resolved. Ofgas can use its formal powers to resolve such disputes. Gas companies and suppliers are obligated to use their licences to ensure that customers' domestic properties are supplied with gas. Should Ofgas—having considered the evidence from all parties in a dispute—decide that a disconnection is unjustified, the Director General of Gas Supply, the regulator of Ofgas, can use enforcement powers to require a reconnection. Mr. Bailey could have asked—he still could ask—Ofgas to use those legal powers.

  793
  Gas competition was opened up under the previous Administration and the process was completed on 23 May. There has now been a roll-out of 10 other suppliers which compete with British Gas. In the past year, that has resulted in consumer-related problems, including doorstep selling. I raised the matter with the Director General of Gas Supply last year, soon after taking office, and insisted on the introduction of a marketing licence condition that regulates the practices of companies involved in doorstep selling.
  There is now a clear code of conduct and companies risk losing their licences and being fined if they abuse their customers—our constituents—in that way. We consider improper marketing tactics and doorstep sales unacceptable and we will not tolerate them. The Department is currently consulting on modifications to strengthen the Consumer Protection (Cancellation of Contracts Concluded Away from Business Premises) 1987 Regulations.
  It is clear that some consumers continue to experience problems when they switch gas supplier. In that respect, some gas suppliers are proving worse than others. Problems can range from delays in transferring to a new supplier to disputes about billing. We should be aware of the distress caused to consumers, particularly the elderly and disadvantaged, if they are billed wrongly and suddenly receive a huge bill. They are then told that they are in dispute with their supplier. When they dealt with one nationalised company, consumers did not face the difficulties that inevitably arise now that there are more than 20 companies. Ofgas is aware of the switching problems and is working with the industry to get it right.
  Customers are also experiencing erroneous transfer because of doorstep selling or administrative problems. They can be switched to a new supplier without having requested a transfer. That is unacceptable and Ofgas is tightening up the transfer procedures.
  Since April 1996, the number of competing suppliers has doubled to about 20 and some 3 million out of 19 million households have switched supplier. There is great turmoil in the marketplace. The introduction of competition on such a scale and in such a time scale has been a considerable achievement and problems were inevitable.
  Following my expressions of concern, the Association of Energy Suppliers has put together a code of practice revising the practice of doorstep selling so that companies have to hand over clear written information about their tariffs—they can no longer sign up people on the doorstep. We hope that the practice will now be jettisoned. All members of the association have signed up to the revised code and I have made it clear to the gas and electricity regulators that I expect them to take action in respect of companies that do not adhere to the new code.
  All gas suppliers have a duty to establish procedures to handle disconnection complaints. If a consumer cannot resolve a problem with a gas supplier, the first port of call should be the Gas Consumers Council. If the GCC cannot resolve a problem on behalf of a consumer, it should be referred to Ofgas for arbitration.
  794
  It would be wrong and misleading to pretend that the regulatory framework was perfect when we took office. The hon. Member for Daventry (Mr. Boswell), the shadow spokesman on energy issues, is in his place and he would concede that.
  Our Green Paper "A Fair Deal for Consumers: Modernising the Framework for Utility Regulation" proposes changes to utility regulation. We want to put consumers at the heart of regulation. We set out many proposals, including the merger of Offer and Ofgas, new powers for Ministers to issue statutory guidance on social obligations and environmental objectives and measures to improve the transparency of regulation of the energy industries and decisions to replace energy and telecoms regulators with small boards. We propose a new primary duty on regulators to protect and promote the interests of consumers wherever possible, through promoting competition but ensuring that the Government establish consumer councils for each of the utilities. A consumer council for energy will be established on a fully independent and statutory basis, backed up by resources. We envisage that consumer council playing a key role in articulating a strategic and independent view of consumer interests to the regulators, companies, Parliament and the media. It will be the single point of contact for people and it will have to take action.
  We also want to strengthen the position of consumers by ensuring that all the regulators have the powers already held by some to impose financial penalties on companies for breaches of overall and individual customer service standards. Companies will be fined in retrospect if they get it wrong. That should strengthen the system.
  We plan to encourage stronger links between customer service standards and the price caps on energy and directors' pay, to tie it in more rigorously than has been the case. We did not inherit a perfect system. We have had to overhaul the regulatory framework. We have put forward proposals on that and are looking for support to take those proposals that require legislation through the House. The new regulator will be the first energy regulator to bring together gas and electricity and build in our new guidelines.
  The independent regulator will have a statutory duty to investigate and take enforcement action to prevent licence breaches. Ofgas is already working closely with the industry to solve the problems that consumers are experiencing and to tighten up the codes of practice and the licence conditions. The Gas Consumers Council, which is an independent statutory body set up to deal with consumer complaints, will be strengthened as the first point of contact. We are also reviewing utility regulation with the key aim of building into law that the consumer should be at the heart of the regulatory framework and should take precedence. The law that we inherited says that setting competition in train should be the primary duty of the regulators. That will be changed to make the primary duty protecting the consumer. If consumers do not like the service that they receive, they can and should demonstrate their concerns. They can change to other suppliers, but it is important that their supplier delivers the right quality of service.

  795
  Price is important in regulation and people naturally want lower bills, but they deserve quality and back-up in their service. That is paramount. If gas companies talk about consumer service, they ought to take their customers seriously and treat them with ultimate respect. We shall ensure that the law backs that up.
  There will be a single point of contact. There is a competitive market for energy, but we shall ensure that the marketplace is regulated. We shall ensure that the poor are not priced out—that is imperative—that
  796
  environmental responsibilities are taken seriously and that when there are breaches of licence conditions, action is taken against the companies concerned.
  I thank my hon. Friend for raising the subject. The individual case that he has mentioned shows that we have to ensure that the structure exists to deal with future cases so that people get full justice.
  Question put and agreed to.
  Adjourned accordingly at eight minutes past Eleven o' clock.

ENVIRONMENT, TRANSPORT AND THE REGIONS

  Planning Inspectors (Charges)
  Sir Nicholas Lyell
  To ask the Secretary of State for the Environment, Transport and the Regions what recent percentage increases there have been in the daily rates charged for planning inspectors conducting inquiries into local plans and other planning inquiries; and if he will make a statement. [61188]

  Mr. Raynsford
  I have asked the Planning Inspectorate's Chief Executive, Mr. Chris Shepley, to write to the right hon. and learned Member.

  Letter from David Hanchet to Sir Nicholas Lyell, dated 1 December 1998:

  The Secretary of State has asked Chris Shepley to reply to your Question about the daily rates charged for Planning Inspectors. I am replying in his absence today on official business.

  The Planning Inspectorate makes charges for two categories of inquiry held by our Inspectors. The fee for conducting local plan inquiries was set at £340 per day in February 1996, and the fee for conducting other planning inquiries under various items of legislation was set at £350 per day in October 1994.

  A review of the fees has shown that under our previous methodology the full costs of the service were not being recovered. As a result, new fees of £430 per day for local plan inquiries and £492 for the other recoverable inquiries are now planned (increases of 26.5% and 40.6% respectively).

  Although these are significant it is important to remember that

  a. the service was effectively being subsided in the past;

  b. there have been no increases for nearly 3 years in one case and over 4 in the other;

  c. although the daily rate has increased, the service provided has become steadily more efficient through a variety of management measures taken by the Planning Inspectorate. As a result, the actual duration of inquiries, and therefore the number of chargeable days, has reduced.

  Sites of Special Scientific Interest
  Mr. Randall
  To ask the Secretary of State for the Environment, Transport and the Regions if the policies applied by English Partnerships when deciding whether to fund development proposals affecting sites of special scientific interest are to be reviewed following the release of the consultation paper on better protection and management of SSSIs. [61006]

  Mr. Meale
  English Partnerships is currently reviewing all aspects of its environmental policy, including that on development proposals affecting SSSIs. This review is taking account of the commitments set out in my department's consultation document "Better Protection and Management of SSSIs", that Government Departments and agencies publish statements of commitment, or sign appropriate memoranda of understanding with DETR, in 112
  relation to the obligation to secure the protection and positive management of special sites for which they are responsible.

  The review will result in the production of new internal guidance, which will include more specific advice on how the Agency operates on land close to, or within, SSSIs and other environmentally sensitive areas. A copy of this will be placed in the Library of the House when available.

  Housing Sounding Board
  Dr. Lynne Jones
  To ask the Secretary of State for the Environment, Transport and the Regions how many tenant representatives there are on the Housing Sounding Board. [61427]

  Ms Armstrong
  I established the Housing Sounding Board in December last year to discuss a number of housing issues. Members of the Board have a wide range of experience in housing and related issues and serve in a personal capacity. The current members are:

  Chris Holmes, Shelter

  Alan Kilburn, formerly of Home Housing Association

  Steve Mycio, Manchester City Council

  Mike Ockenden, Barclays

  Anne Power, London School of Economics

  Heather Rabbatts, Lambeth Borough Council

  Steve Wilcox, University of York and HACAS

  Neale Coleman, Paddington Consultancy Partnership

  Steve Hilditch, Paddington Consultancy Partnership.

  As the Board nears the end of its first year, I am reviewing its future purposes and membership. As part of that review, I will be considering tenant and other representation.

  Council Tax
  Mr. O'Hara
  To ask the Secretary of State for the Environment, Transport and the Regions what would have been the additional increase in the council tax at Band D of each local authority in 1998–99 if the proposed council tax limitation scheme had been introduced this year, assuming the limit had been set at five per cent. over 1997–98. [61666]

  Ms Armstrong
  We have abolished crude and universal capping and have not proposed a council tax limitation scheme for 1999–2000 or subsequent years. We will be taking reserve powers to limit council taxes in the Local Government Bill published on 1 December 1998.

  Local Government (Honorary Freedoms)
  Mr. Keetch
  To ask the Secretary of State for the Environment, Transport and the Regions if he will confer upon charter trustees and town councils the powers contained in section 249 of the Local Government Act 1972 in respect to the conferring of honorary freedoms. [61833]

  Mr. Raynsford
  No. I am advised that for my right hon. Friend to extend the powers in section 249 of the Local Government Act 1972 to include charter trustees and town councils would he unusual, unexpected and inappropriate. We have no plans for further legislation in this field.

  Train Operating Companies
  Mr. Burstow
  To ask the Secretary of State for the Environment, Transport and the Regions if he will make a statement on the outcome of his meeting with train operating companies. [61938]

  Dr. Reid
  The Deputy Prime Minister, the Minister for Transport in London and I met representatives from the rail franchisees and Railtrack on November 26. The meeting was frank and constructive. It represented a significant first step aimed at delivering improvements to passengers.

  The Government believe, and the industry accepts, that the target must be progressive, year-on-year improvement in performance. Measures identified to improve service in the short term included the recruitment and training of 800 drivers and the introduction over the next year of 500 new vehicles, of which about half will be additional to the current fleet. There will be a wider-ranging National Railways Summit next February to build on measures and actions identified at this first meeting.

  Aircraft Noise
  Mrs. May
  To ask the Secretary of State for the Environment, Transport and the Regions if he will make a statement on the research on the effect of aircraft noise on sleep disturbance which his Department has commissioned, indicating sites chosen for noise trials. [61974]

  Ms Glenda Jackson
  We have commissioned a research trial on the effect of aircraft noise on sleep disturbance. This trial is to assess analytical techniques and methodology, and their limitations, to help us decide whether to proceed with a full-scale study either of sleep prevention or of total sleep loss, and to determine what should be included in any such study. The trial will involve taking measurements of people sleeping in their own homes and will be based at Manchester Airport, which provides a suitable combination of densely populated communities close to the airport with a spread of aircraft noise throughout the night. It may be extended to Heathrow if actual noise levels in the early morning at Manchester prove insufficient for the purposes of the trial. No specific sites have been selected yet. The steering group for the study includes representatives of the consultative committees from Manchester, Heathrow, Gatwick and Stansted, along with the airport management, airlines and environmentalists.

  Tourism
  Mr. Laurence Robertson
  To ask the Secretary of State for the Environment, Transport and the Regions what plans he has to include provision for spending on tourism in the Standard Spending Assessment. [61086]

  Ms Armstrong
  The element of the Standard Spending Assessments for Environmental, Protective and Cultural Services (formerly known as "Other Services"), makes allowance for spending on a group of services which includes tourism.

  Small and Medium Businesses
  Mr. Singh
  To ask the Secretary of State for the Environment, Transport and the Regions what steps 114
  the Government are taking to help small and medium businesses improve their environmental performance. [62215]

  Mr. Meacher
  By setting up a single environment and energy helpline (0800 58 57 94), the Government are making it very much easier for SMEs to find out how they can improve their environmental performance. The Helpline, which will be run under the auspices of the Government's Energy Efficiency and Environmental Technology Best Practice Programmes, will come into operation today. It will provide callers with free access to:impartial best practice information
  up to two hours telephone assistance from an energy or environment expert; and, where it would be beneficial
  on-site technical advice, where this would be beneficial and worthwhile.

  Small and medium businesses are an important part of the UK economy. There are about 3M firms, 80,000 of which employ 20 to 250 people. They employ around 4 million people and have a turnover of £4 billion. They are also responsible for one-third of the carbon dioxide emissions from business and a significant proportion of other waste. Smaller companies therefore have a significant role to play to help meet our climate change targets.

  There can be significant benefits in improving environmental performance for companies of all sizes. On average, a fifth of energy and a quarter of a company's waste can be avoided cost-effectively. Saving resources saves money and improves competitiveness—gain, not pain. The Government's two Best Practice Programmes provide authoritative advice on how to improve environmental and energy efficiency performance. For business, there are competitiveness advantage. And, for everyone, there are environmental advantages. The Energy Efficiency Best Practice Programme, for example, has helped to save energy worth around £650 million a year and consequently 3.25 million tonnes of carbon—across the nation.

  To ensure this new initiative is a success, the helpline will be closely co-ordinated with Government Office Regional Energy and Environmental Management Contacts (REEMCs), Business Links, green business clubs, the Energy Saving Trust's Energy Efficiency Advice Centres, the Environment Agency's regional offices, Training and Enterprise Councils and local authorities.

  Millennium Dome (Transport)
  Mr. Peter Ainsworth
  To ask the Secretary of State for the Environment, Transport and the Regions what discussions he has held with(a) Greenwich Council, (b) London Underground and (c) the Port of London Authority over contingency plans for transport to the Millennium Dome. [61980]

  Dr. Reid
  My hon. Friend the Minister for Transport in London, through her Millennium Access Co-ordination Group, asked London Underground Limited to lead the production of contingency plans for transport to the Millennium Dome, and keep the group informed of progress. Progress was presented to the group in October, at which time there was discussions on how the work was progressing and next steps.
  115
  My hon. Friend has had no discussions with the Borough of Greenwich or the Port of London Authority on contingency planning. The Borough of Greenwich has, however, recently become a member of the Millennium Access group and will therefore participate in future discussions on this work.

  Connex
  Mr. Burstow
  To ask the Secretary of State for the Environment, Transport and the Regions what steps the Franchise Director has taken to involve the train rolling stock companies in supplying Connex's rolling stock replacement needs. [61877]

  Dr. Reid
  The two train operating companies franchised to Connex will have to replace or modify certain trains to meet their commitments to the Franchising Director and any requirements of the Health and Safety Executive. How they achieve this is a matter for the companies.

ATTORNEY-GENERAL

  Silent Suspects
  Mr. Savidge
  To ask the Attorney-General what approach prosecutors take to reliance on inferences which may be drawn from silence during police questioning at a time when the suspect is denied access to legal advice, having regard to the judgment of the European Court of Human Rights in John Murray v United Kingdom. [62217]

  The Attorney-General
  The Government intend to introduce the necessary legislation in the forthcoming Youth Justice and Criminal Evidence Bill and this legislation will be extended to Northern Ireland, by way of negative resolution Order in Council, to ensure that the domestic law which was at issue in Murray v United Kingdom is fully compatible with our obligations under the European Convention on Human Rights. As an interim measure, I have today promulgated to prosecuting authorities guidance about the handling of cases where the evidence available to the prosecution would include such inferences as might be drawn from the accused's silence in the circumstances covered by Sections 34, 36 and 37 of the Criminal Justice and Public Order Act 1994 (and corresponding provisions in Northern Ireland) when the suspect has been denied access to legal advice at the time of questioning.

  A copy of the guidance has been placed in the Libraries of both Houses. Its effect is that the prosecution should not seek to rely on inferences drawn from silence before access to legal advice had been granted. In the event that a court, of its own volition, indicates an intention to draw any such inferences, its attention would be drawn to the judgment in the John Murray case.

DEFENCE

  Security Activities (Expenditure)
  Mr. Salmond
  To ask the Secretary of State for Defence how much expenditure in 1996–1997 can be 116
  associated directly with security activities in (a) Northern Ireland, (b) the Falklands and (c) the remaining United Kingdom dependent territories. [61696]

  Mr. George Robertson
  Expenditure directly associated with security activities cannot be distinguished from that on other activities. The following costs of the military presence provide a broad guide to the overall level of commitment in 1996–97:

  (a) Northern Ireland £505 million.

  This figure relates to the costs incurred by the General Officer Commanding, Northern Ireland. It thus excludes related elements of expenditure, incurred elsewhere within Class I Votes, which are not separately identified.

  (b) Falklands £81 million.

  This figure relates to the costs incurred by the Commander, British Forces Falkland Islands (CBFFI) only. It does not thus include the costs of the RAF airbridge to the Falkland Islands, nor the cost of naval deployments to the South Atlantic. These costs fall to other budgets and are not separately identified.

  (c) UK dependent territories (excluding Falkland Islands) Gibraltar £63 million.

  Costs incurred in the support of the remaining dependent territories are not separately identified and are relatively small. Expenditure is principally on the operation of the West Indies Guardship which supports UK dependent territories throughout the Caribbean, among other tasks. Otherwise, support generally relates to the provision of a small number of Loan Service Personnel to assist with training. The cost of the military presence in South Georgia and the Sandwich Islands is included in CBFFI' s budget.

  Territorial Army
  Mr. Bob Russell
  To ask the Secretary of State for Defence what the approved complement was of the Territorial Army Reserve in(a) May 1979 and (b) May 1997. [60859]

  Mr. Doug Henderson
  The Territorial Army established as of 1 May 1997 was 59,000 posts, excluding Non Regular Permanent Staff. Establishment figures for the year 1979 are not available as records of that time only detail the strength of the TA, which was 59,400 in May 1979.

  Mr. Burns
  To ask the Secretary of State for Defence if he will make a statement on the impact his announcement on the future of the TA will have on manpower levels in Chelmsford. [61887]

  Mr. Doug Henderson
  There are currently 136 Territorial Army posts in Chelmsford. The restructuring of the TA will reduce this figure to 120.

  Hepatitis A
  Mr. Duncan
  To ask the Secretary of State for Defence (1) what precautions are available to(a) forces personnel, (b) officials and (c) Ministers in his Department travelling overseas and facing the risk of hepatitis A infection; [61053]
  117
  (2) what advice is offered to (a) forces personnel, (b) officials and (c) Ministers in his Department travelling overseas and facing the risk of hepatitis A infection, with regard to deciding whether to receive (i) y- (gamma-) globulin or (ii) the alternative hepatitis A vaccine. [61054]

  Mr. Doug Henderson
  [holding answer 27 November 1998]: Members of the Armed Forces, Defence Ministers and officials travelling overseas and facing the risk of hepatitis A infection are offered immunisation against the disease in accordance with advice issued by the Department of Health. Gamma globulin (Known as human normal immunoglobulin) would be offered, in addition to hepatitis A vaccination, for short notice visits to areas of significant risk when protection is required within 10 days of the first dose of hepatitis A vaccine. Advice on appropriate immunisation is available from MOD medical staff.

  Defence Industry Seminar, Rome
  Mr. Key
  To ask the Secretary of State for Defence if he will list the British participants in the defence industry seminar organised by the Italian presidency of the Western European Union in conjunction with the Rome ministerial meeting; and if he will make a statement. [60978]

  Mr. George Robertson
  [holding answer 27 November 1998]: My hon. Friend the Under-Secretary of State for Defence, accompanied by officials from the MOD and one from the Department of Trade and Industry, attended the seminar in Rome on 17 November. Representatives of the British defence industry were also present. The seminar considered the issues surrounding the restructuring of European defence industry, both within Europe and in relation to the global market. Among those present were members and observer countries of the Western European Armaments Group and representatives of the European defence industry and European Commission.

  Faslane and Coulport
  Mrs. Ewing
  To ask the Secretary of State for Defence how many(a) civil and (b) military personnel are employed at (i) the Clyde Submarine Base, Faslane and (ii) the Royal Naval Armaments Depot, Coulport. [61844]

  Mr. Doug Henderson
  I will write to the hon. Member and a copy of my letter will be placed in the Library of the House.

  Trident
  Mrs. Ewing
  To ask the Secretary of State for Defence if he will estimate how many(a) direct and (b) indirect civilian jobs rely upon the Trident programme currently; and how many will in (i) 2000, (ii) 2010 and (iii) 2020. [61846]

  Mr. George Robertson
  I will write to the hon. Member and a copy of my letter will be placed in the Library of the House.

  Atomic Weapons Establishments
  Mrs. Ewing
  To ask the Secretary of State for Defence how many people are employed by the atomic weapons establishments at(a) Aldermaston, (b) Burghfield and (c) Blacknest. [61845]
  118
  Mr. Spellar
  AWE plc currently employ 4,055 staff at Aldermaston, 544 at Burghfield and 13 at Blacknest. These figures exclude Hunting-BRAE staff, contractors and sub-contractors, Ministry of Defence Police and other MOD employees.

  Royal Dockyards
  Mrs. Ewing
  To ask the Secretary of State for Defence how many(a) civilian and (b) military personnel are employed at (i) the Royal Dockyard, Rosyth and (ii) the Royal Dockyard, Devonport. [61847]

  Mr. Spellar
  The Royal Dockyards at Rosyth and Devonport were privatised in January 1997 and are now owned by Babcock Rosyth Defence Limited and Devonport Management Limited, respectively.

  In addition to the Dockyard companies' workforce, the following Ministry of Defence employed personnel also work at the Royal Dockyards (based on the latest information available):

  Civilian

  Military

  Rosyth Royal Dockyard

  459.5

  50

  Devonport Royal Dockyard

  208.5

  15

PRIME MINISTER

  Iraq
  Mr. Dalyell
  To ask the Prime Minister what assessment he has made of the statement by Mr. Denis Halliday, the former United Nations Humanitarian Co-ordinator in Iraq, in Middle East International of 13 November, a copy of which has been given to him, that the policy of the United Kingdom and United States of America towards Iraq is incompatible with the Charter of the United Nations. [61694]

  The Prime Minister
  [holding answer 30 November 1998]: Sanctions on Iraq were imposed under and in accordance with the UN Charter.

  The latest report by the UN Secretary General on the "oil for food" programme, published on 19 November, notes that the programme continues to have a positive effect on the living conditions of the Iraqi people.

  Cabinet Committee
  Mr. Corbett
  To ask the Prime Minister what the composition and terms of reference are of the Cabinet Committee on Productivity and Competitiveness mentioned in the Pre-Budget report. [62254]

  The Prime Minister
  I have asked my right hon. Friend the Chancellor of the Exchequer to chair a
  119
  new Cabinet Sub-Committee on Productivity and Competitiveness. The composition and terms of reference for this Committee are:

  Ministerial Sub-Committee on Productivity and Competitiveness EA(PC)

  Composition

  Chancellor of the Exchequer (Chair)

  Deputy Prime Minister and Secretary of State for the Environment, Transport and the Regions

  Secretary of State for the Home Department

  Secretary of State for Education and Employment

  Minister for the Cabinet Office

  Secretary of State for Scotland

  Secretary of State for Northern Ireland

  Secretary of State for Trade and Industry

  Secretary of State for Wales

  Terms of Reference

  "To consider measures to improve the productivity and competitiveness of the United Kingdom economy".

  Closed-list System
  Mr. Hayes
  To ask the Prime Minister when the Government first announced that they planned to introduce a closed-list system in respect of elections to the European Parliament. [61841]

  The Prime Minister
  When the European Parliamentary Elections Bill was published and introduced on 29 October 1997, it set out the precise nature of the proposed system.

AGRICULTURE, FISHERIES AND FOOD

  Fisheries (Licensing)
  Mr. Quinn
  To ask the Minister of Agriculture, Fisheries and Food what arrangements are being made for the registration and licensing of the maximum continuous engine power of fishing vessels; and if he will make a statement. [62219]

  Mr. Morley
  On 17 December 1997,Official Report, columns 345–46, I announced that Fisheries Departments planned to introduce from 1 January 1999 phased arrangements for recording maximum continuous engine power on fishing vessel licences.

  Following that announcement, the arrangements for the recording of maximum continuous engine power have been the subject of detailed consideration by Fisheries Departments, the Department of the Environment, Transport and the Regions, and the Maritime and Coastguard Agency (MCA). Since the fishing vessel licensing regime operated by Fisheries Departments is dependent on vessel characteristics as registered by the Registrar of Shipping and Seamen, part of MCA, parallel changes will be introduced in the arrangements for registering fishing vessel engine power. These changes have also been discussed with representatives of the National Federation of Fishermen's Organisations, the Northern Ireland Fishermen's Federation and the Scottish Fishermen's Federation as part of a wider review of UK fishing vessel licensing.

  We are now writing to advise all fishing vessel owners and licence holders of the new arrangements.
  120
  From 1 July 1999, new registrations, re-registrations, and changes in existing registrations affecting ownership or vessel characteristics (engine power, length or breadth), and the licensing of such vessels, are to be based on the declaration and recording of maximum continuous engine power. The permanent derating of engines will be permitted but vessel owners will have to provide a signed statement or certificate from the engine manufacturer or a suitably qualified marine engineer setting out the steps that have been taken to achieve such a modification. De-rated engine power will be registered and licensed only where the MCA and Fisheries Departments are satisfied that the modifications are permanent.

  The Merchant Shipping (Registration of Ships) Regulations 1993 will be amended to provide specifically for the registration of maximum continuous or permanently modified engine power.

  From 1 January 2000, the maximum continuous or permanently derated engine power of vessels registered before 1 July 1999 will be taken to be that declared on the Certificate of Registry and shown on the fishing vessel licence. When vessels are registered between 1 January and 30 June 1999, owners will wish to take appropriate action to ensure that they declare the full power of their vessels (maximum continuous or permanently derated engine power) because this is the basis on which subsequent enforcement will take place.

  Checks will be undertaken from 1 January 2000 to ensure that the apparent installed engine power of fishing vessels is consistent with the registered and licensed engine power. Where the apparent installed power is greater than the registered and licensed power, a fishing vessel's licence will become invalid and a new licence will not be issued until the owner acquires additional vessel capacity units (VCUs) to cover the deficit in engine power or undertakes permanent de-rating of the vessel's engine. However, the owners of vessels registered before 1 January 1999 will have until 31 December 2004 to rectify any anomalies in their registered engine power if they provide a written undertaking specifying the steps they are taking.

  To assist the implementation of the new arrangements, a capacity penalty will be payable only on the additional VCUs needed to cover the discrepancy between apparent installed and registered engine power provided no other changes are made to the characteristics of the vessel. A 20 per cent. capacity penalty will operate unless the adjustment to engine power is made before 31 December 2001 in which circumstances the penalty will be 10 per cent. For this purpose, it will be permissible for vessel owners to split VCUs and licences between two or more vessels.

  The arrangements will apply to the licensing of fishing vessels wherever they operate. However, from 1 January 1999, vessels applying for licences for the first time in respect of fishing opportunities in external and other waters will be expected to satisfy Fisheries Departments that the maximum continuous or permanently derated engine power has been declared and appropriately licensed.

  Finally, as announced last December, the current licensing arrangements for fishing vessels are being

  121
  reviewed jointly by Fisheries Departments and representatives of the fishing industry. This announcement is, therefore, without prejudice to any further changes that are recommended in licensing including capacity penalties for licence transfers and aggregations.

  Mr. Quinn
  To ask the Minister of Agriculture, Fisheries and Food what changes he proposes to make in the arrangements for the licensing of pelagic freezer trawlers and pair trawling; and if he will make a statement. [62218]

  Mr. Morley
  In July 1998, Fisheries Departments issued a consultation document seeking comments on proposals to assist pelagic freezer trawling including the aggregation of whitefish with pelagic licences and pair trawling with vessels from other Member States. The proposals attracted wide-ranging comments from the fishing industry.

  After careful consideration, it has been decided to introduce a time-limited scheme for the introduction or replacement of pelagic freezer trawlers. Any person may introduce a pelagic freezer trawler into the UK fleet by aggregating Category A whitefish licences and/or category A pelagic trawler licences with existing Category A pelagic freezer trawler or purse seine licences or licence entitlements, provided:

  (i) proposals to introduce or replace a pelagic freezer trawler are notified in writing to Fisheries Departments by 28 February 1999;

  (ii) at least 40 per cent. of the vessel capacity units (VCUs) of the incoming vessel are covered by licences or licence entitlements from pelagic freezer trawlers or purse seiners;

  (iii) the tonnage and engine power of any incoming vessel must be no greater than the total tonnage and the total engine power of the vessels from which its licence entitlements derive;

  (iv) the incoming vessel is registered by the Registrar of Shipping and Seamen and licensed by one of the Fisheries Departments by 30 June 2001.

  A capacity penalty will be payable only on that part of the capacity of the incoming vessel which is not covered by Category A pelagic freezer or purse seine licences: that penalty will be 20 per cent.

  In submitting proposals to introduce or replace a pelagic freezer trawler, the prospective owner will have to demonstrate, to the satisfaction of Fisheries Departments, a genuine intention to pursue pelagic freezer trawling and access to sufficient fishing opportunities to support the operation of the incoming vessel. Any effort expended by the new vessel would count towards existing effort targets. Consequently, any pelagic effort allocated to producer organisations or other groups to cover an incoming vessel's activities could amount only to the allocation for the existing freezer vessel it replaced and/or the fishing opportunities linked to any other pelagic licences used in the licence transaction. No additional effort would be available as a result of the aggregation of whitefish licences.

  For the time being, the prohibition on pair trawling with vessels from other Member States will remain in place. The prohibition will, however, be reviewed in the light of the new rules to regulate transhipment and joint fishing operations which the Commission are expected to draw up following changes in the EU's control regulation for fisheries.
  122
  These arrangements, which take effect immediately, are being notified to all holders of pelagic freezer trawler and purse seine licences.

TRADE AND INDUSTRY

  Arms Trade
  Mr. Reed
  To ask the Secretary of State for Trade and Industry what plans he has to ensure that the European Code of Conduct on the arms trade is adopted into UK law; and what plans he has to make arms brokering to arms embargoed countries a crime. [61492]

  Mrs. Roche
  The EU Code of Conduct on Arms Exports, which was an Anglo-French initiative, was adopted by the EU General Affairs Council on 8 June. However, as our own national arms export criteria are not legally binding, the UK Government felt that it would not have been appropriate or realistic to press our partners to sign up to a legally binding instrument to give effect to similar criteria at the EU level.

  The Government already impose controls on trafficking and brokering under the United Nations Act 1946 where this is necessary to implement a binding United Nations decision. In addition, the White Paper on Strategic Export Controls, which was published on 1 July, contains proposals to extend controls on trafficking and brokering in several areas, including to countries subject to other types of embargo, whether as a result of non-binding decisions of the UN or decisions of the EU, Organisation for Security and Co-operation in Europe or the UK Government. This would mean that, as is already the case for binding UN arms embargoes, it would be an offence for persons in the UK or UK persons abroad to be involved in trafficking or brokering in controlled goods to countries subject to these other types of embargo, without a valid licence. The use of a licensing system, rather than imposing an outright ban, would enable the Government to sanction such transfers on the rare occasions that they are desirable (e.g. the transfer of equipment to peacekeeping forces in an embargoed destination).

  Mr. Reed
  To ask the Secretary of State for Trade and Industry what steps he intends to take to ensure that the Council of Ministers Working Group on arms exports agrees a common list of items be controlled by the EU Code. [61495]

  Mr. Tony Lloyd
  I have been asked to reply.

  The CFSP Working Group on Conventional Arms Exports is taking forward work to agree a common list of military equipment covered by the EU Code of Conduct on Arms Exports. The UK is playing an active role in this work with a view to ensuring its successful conclusion.

  Mr. Reed
  To ask the Secretary of State for Trade and Industry what steps he intends to take to ensure that there is clear and transparent annual reporting of the different types and amounts of weapons covered by arms export licences granted and denied by(a) the UK and (b) other European Union countries. [61493]

  Mr. Tony Lloyd
  I have been asked to reply.
  123
  The Government are preparing a report on UK strategic exports, which we will publish as soon as is possible. On the question of the content of the report, I refer my hon. Friend to the answer I gave to my hon. Friend the Member for Birmingham, Selly Oak (Dr. Jones) on 14 July 1998, Official Report, column 149.

  Most other EU Member States already publish annual reports on their own defence exports. Once our own report has been published, we will consider how best to achieve similar levels of transparency in the information released by other Member States.

  Afro-Caribbean Businesses
  Mr. Cotter
  To ask the Secretary of State for Trade and Industry what initiatives he has taken to encourage the start-up and growth of Afro-Caribbean-owned businesses. [61177]

  Mrs. Roche
  The Government seek to provide a stable economic environment which encourages the start-up and growth of businesses from all sectors of the population.

  Business Link Services are aimed at the needs of the local business community. In areas where there is a high proportion of Afro-Caribbean businesses, issues of particular concern to them must be addressed.

  As part of the Enhanced Accreditation Criteria (launched April 1998) Business Link partnerships must now demonstrate that Business Link advisers have the appropriate background for dealing with their client base and that the Business Link Board is representative of the business community.

  Internet Sales
  Mr. Chidgey
  To ask the Secretary of State for Trade and Industry what measures he proposes to ensure future participation by United Kingdom companies in the projected market increase for software and other digital product sales over the Internet. [61832]

  Mrs. Roche
  The department is building on existing mechanisms such as the Software Business Network (SBN), Trade UK and the Northern Ireland Growth Challenge (NIGC) which currently support companies in these emerging areas. Our intention is to create in the UK the best environment in the world in which to trade electronically by 2002. We will introduce legislation during this session of Parliament to help to build confidence in electronic commerce.

  Further measures will be announced in the forthcoming White Paper on Competitiveness.

  Dual-use Goods (Exports)
  Mr. Grogan
  To ask the Secretary of State for Trade and Industry what arrangements are in place to authorise the export of controlled dual-use goods by the United Kingdom Government. [62290]

  Mrs. Roche
  On 27 November, the Export Control Organisation of my Department issued an Open Licence which permits the export to any destination, subject to the conditions of the licence, all dual-use goods specified in any entry in Annexe I to Council Decision 94/942/CFSP or in Schedule 2 to the Dual-Use and Related Goods 124
  (Export Control) Regulations, where the export is by the Crown. A copy of the licence has been placed in the Library of the House.

  Minewater Pollution
  Mr. Grogan
  To ask the Secretary of State for Trade and Industry what progress the Government have made in reviewing their policy on minewater pollution from abandoned mines. [62291]

  Mr. Battle
  The Government have reviewed their policy on water pollution from abandoned coal mines. I have written to the Chairman of the Authority setting out my views, and my commitment to the Authority's programme of preventing and treating significant water pollution from long-abandoned mines.

  The Authority should also give a high priority to carrying out appropriate research, monitoring and preventive work and early treatment into pollution from more recently abandoned mines. These activities will be carried out in close collaboration with the Environment Agency and the Scottish Environment Protection Agency. The Coal Authority will have a separate minewater budget within its Grant-in-Aid to ensure that the Authority's other activities do not adversely affect its minewater programme, and that any emergencies can be dealt with.

  The Department of the Environment, Transport and the Regions, the Welsh Office and the Environment Agency, and the Scottish Office and the Scottish Environment Protection Agency are monitoring recently abandoned non-coal mines where there is a risk of pollution, with a view to taking appropriate action where no private operator is legally liable.

  Copies of my letter to the Chairman of the Authority have been placed in the Libraries of both Houses.

  Information Warfare
  Mrs. Lait
  To ask the Secretary of State for Trade and Industry what plans he has to introduce security standards to meet the challenge posed by information warfare techniques to United Kingdom telecommunications. [61671]

  Mrs. Roche
  Information warfare, like all criminal behaviour, impacts upon any organisation or business which makes use of information technology. The development of a British Standard BS 7799, which focuses on the Code of Practice for Information Security Management, introduced in 1994 was spearheaded by the Department to promote good information security management. The DTI is currently developing, with BSUDISC and industry, c:cure, a scheme which will allow organisations, of all sizes and sectors, to measure and demonstrate that their information security management system is compliant against BS 7799.

  Standards will also be an integral part of the EU's Electronic Signature Directive, and of the proposed UK legislation to support our policy on cryptography, but, of course, no matter what is made available, the use of these standards and the adoption of appropriate security controls is a commercial decision for businesses to make.

  Petroleum Licensing
  Mr. Grogan
  To ask the Secretary of State for Trade and Industry what awards have been made in the 18 Seaward Round of Petroleum Licensing; and what plans he has for future licensing rounds. [62292]

  Mr. Battle
  Creative and innovative proposals are key features in the award of licences on 78 of the 82 blocks applied for in the 18th Round of Seaward Petroleum Licensing. The awards are made to a total of 44 companies, of which 22 are operators of one or more of the blocks.

  The applications received showed that companies are still thinking creatively and generating innovative proposals to identify significant new prospects in the North Sea. Despite more than 30 years of exploration activity in the area, there was strong competition for attractive blocks and clear evidence that companies are prepared to look beyond traditional areas and the tested strata to find new resources.

  The willingness of companies to test innovative thinking with both further technical analysis and early drilling where appropriate confirms that the industry still sees the North Sea as an exploration area with significant potential in undiscovered reserves. I believe that the open basis of this round—the first to allow companies to bid for almost any unlicensed blocks in mature areas of the United Kingdom Continental Shelf—encouraged companies to develop innovative ideas and bring them forward as licence applications.

  When the 18th Round was launched in June this year, our expectation was that most applications would focus on acreage close to existing developments or infrastructure, where any discoveries were likely to be brought on stream as rapidly as possible in order to prolong the life of current assets.

  In the event, a majority of the applications received reflected this pattern, and there was strong competition for several blocks, but an unexpected—and very pleasing—number of other applications were received which identified strata and structures with previously unrecognised hydrocarbon potential.

  Some of these concepts were developed in blocks which have been licensed and explored for conventional targets before. Twelve of the blocks awarded have not previously been licensed. Eight of these are granted to the Shell/Esso partnership whose application stood out for its creative approach.

  Two of the blocks applied for—48/19d and 210/20c—have been divided between competing applicants. This will allow presumed extensions of adjacent fields—Anglia and Otter respectively—into the new acreage to be appraised and brought into production as soon as possible, while at the same time maximising exploration of the remaining area.

  I look forward to seeing the successful applicants moving forward to explore their new holdings, and to develop any new reserves they may discover.

  I expect to make a further announcement about a 19th Seaward Round next year.

  Euro
  Mr. Robathan
  To ask the Secretary of State for Trade and Industry what is the cost of the current advertising campaign urging business to prepare for the euro. [61017]

  Ms Hewitt
  I have been asked to reply.

  The Euro Preparations Unit's communication campaign on the euro is specifically targeted at ensuring that UK businesses especially small and medium enterprises (SMEs), are aware of the implications of the introduction of the single currency from 1 January 1999. The campaign involved press advertising in July, direct mailing to 1.6 million SMEs, supported by TV commercials in September, and further press and radio advertising in October.

  The television, press and radio elements of the campaign cost approximately £4.75 million. This figure does not include VAT.

  National Minimum Wage
  Mr. Ruane
  To ask the Secretary of State for Trade and Industry if he will list the number of people likely to benefit from the introduction of the national minimum wage in each parliamentary constituency. [61804]

  Ms Hewitt
  I have been asked to reply.

  The information requested falls within the responsibility of the Director of the Office for National Statistics. I have asked him to reply.

  Letter from Tim Holt to Mr. Chris Ruane, dated 1 December 1998:

  As the Director of the Office for National Statistics (ONS), I have been asked to reply to your recent parliamentary question on the number of people likely to benefit from the introduction of the national minimum wage.

  It is ONS policy to reply to statistical PQs, where possible, by referring to published results. Information from the 1998 New Earnings Survey (NES) required to answer this question is not comprehensively published. but is included in special tables recently placed in the House of Commons Library.

INTERNATIONAL DEVELOPMENT

  Zimbabwe
  Mrs. Gillan
  To ask the Secretary of State for International Development how much the United Kingdom's contribution is to multilateral donor projects in Zimbabwe in(a) 1998–99 and (b) 1999–2000. [61852]

  Clare Short
  The total multilateral official development assistance received by Zimbabwe in 1996, the last year for which figures are available, was £61.6 million. The UK's imputed share was £6.9 million.

  Mrs. Gillan
  To ask the Secretary of State for International Development if she will list the projects sponsored by her Department in Zimbabwe for(a) 1998–99 and (b) 1999–2000, giving their value and expected expiration date. [61851]

  Clare Short
  Projects where the Department for International Development's commitment is over £0.5 million are listed. Figures for expenditure in 1998–99 and 1999–2000 are not available.
  127

  Project name/sector

  Commitment £ million

  Expiry date

  Parastatal Reform and Privatisation

  Privatisation Agency

  2.1

  2000

  Civil Service Reform

  Judicial Training

  1.6

  1999

  Zimbabwe Republic Police

  6.5

  2001

  Landrovers for Zimbabwe Republic Police

  8.5

  2002

  Women's Civil Education

  1.0

  2001

  Capacity Building within Local Government

  Rural District Council Institutional Development Project

  10.6

  2002

  Health

  Sexual Health

  9.2

  1999

  Support to Health Policy Development and Planning Department

  0.75

  1999

  Social Marketing of Condoms

  2.0

  2001

  Interim Health Management Strengthening

  3.0

  1998

  Water and Sanitation

  Water Quality Analysis Laboratory

  0.9

  1999

  Bikita Integrated Rural Water Supply and Sanitation

  2.3

  2000

  Lupane Integrated Rural Water Supply and Sanitation

  3.5

  2002

  Water Point Upgrading/Rehabilitation

  0.9

  2000

  National Water Resources Strategy

  0.5

  1999

  CARE Small Dams Rehabilitation

  2.0

  2001

  Renewable Natural Resources

  Crop Post Harvest Programme

  0.75

  1999

  Assistance to Department of Veterinary Services

  0.9

  1999

  Private Sector Development

  Credit for the Informal Sector

  1.3

  2000

  Takura Investments

  0.5

  2000

  Agribusiness Entrepreneur Network and Training Development

  0.5

  2000

  Assistance to Developing Enterprises Project Team

  1.4

  2000

  Mrs. Gillan
  To ask the Secretary of State for International Development if she will make a statement on the IMF's decision to suspend aid to Zimbabwe. [61853]

  Clare Short
  We understand that the IMF are seeking clarification of the Government of Zimbabwe's budget commitments before the IMF Board considers release of further tranches of the Standby Arrangement.

  Mrs. Gillan
  To ask the Secretary of State for International Development what discussions she has had with the Foreign Secretary concerning the provision of aid to Zimbabwe. [61858]

  Clare Short
  I have regular meetings with the Foreign Secretary on a range of issues including events in Zimbabwe.

  Mrs. Gillan
  To ask the Secretary of State for International Development if she will list the good governance criteria the Government have for assessing Zimbabwe's eligibility for assistance from her Department. [61854]

  Clare Short
  Our approach to good government is set out in the White Paper 'Eliminating World Poverty', and embraces democratic accountability, the protection of human rights and the rule of law.

  Mrs. Gillan
  To ask the Secretary of State for International Development if she will make a statement on the Zimbabwe Government's land reform programme up to 1 December 1997. [61855]
  128
  Clare Short
  The Government of Zimbabwe's land reform programme began after Independence in 1980. So far, the programme has benefited some 70,000 families. An evaluation by the then ODA in 1988 showed that the resettlement had shown a good rate of return, but had little impact on the poverty in the communal areas. Poverty also exists in the new resettlement areas. The Government of Zimbabwe established a Commission of Inquiry into Appropriate Agricultural Land Tenure Systems (the 'Rukuni Commission') which in 1994 made recommendations on tenure, subdivision, administrative decentralisation, and land taxation, among other issues. These recommendations are for consideration as part of the second phase of the Government's Land Reform and Resettlement Programme. In November 1997, the Government of Zimbabwe notified 1,471 landowners of their intention compulsorily to acquire further land.

  Her Majesty's Government have made it clear since May 1997 that there is a strong case for land redistribution in Zimbabwe but that we will provide support only if the programme is part of a wider poverty reduction strategy, is transparent and pro-poor and complies with Zimbabwean law on land acquisition and compensation.

  Mozambique
  Mrs. Gillan
  To ask the Secretary of State for International Development how much the United Kingdom's contribution is to multilateral donor projects in Mozambique in(a) 1998–99 and (b) 1999–2000. [61857]
  129
  Clare Short
  The total multilateral official development assistance received by Mozambique in 1996, the last year for which figures are available, was £236 million. The UK's imputed share was £18.6 million.

  Mrs. Gillan
  To ask the Secretary of State for International Development if she will list the projects sponsored by her Department in Mozambique for(a) 1998–99 and (b) 1999–2000, giving their value and expected expiration dates. [61856]

  Clare Short
  The details requested are as follows:

  Project

  Commitment (£ million)

  Expiry date

  Zambezia Agricultural Development Project

  7.75

  2001

  Zambezia Feeder Roads

  7.06

  2000

  NGO '70:30' Scheme

  2.00

  2000

  Programme Aid

  20.00

  1999

  Assistance for Customs

  9.30

  1999

  Secondary English Teaching

  2.36

  2002

  Figures for expenditure in 1998/9 and 1999/2000 are not available. I will send the hon. Member a copy of DFID's recently published Country Strategy Paper for Mozambique.

  Hurricane Mitch
  Mr. Chaytor
  To ask the Secretary of State for International Development if she will make a statement on the progress of the emergency relief operation in the countries affected by Hurricane Mitch. [61417]

  Clare Short
  The immediate life-saving phase of the emergency operation is over. However, there are continuing relief needs. We are helping with the response as part of the internationally co-ordinated relief effort. Our contribution to date has been well received.

  We will continue to monitor closely the situation in the region through our Embassies and the United Nations. We are also keeping in touch with the UK based representatives of those countries affected by Hurricane Mitch and with the non-governmental organisations providing assistance. I have sent an expert team from my Department to the region to review the relief effort and consider what further support we might provide for continuing emergency assistance. They will report back to me later this week.

  The needs of the region for immediate and medium-term reconstruction will be discussed at an emergency Consultative Group meeting, convened by the Inter-American Development Bank in Washington on 10–11 December, involving all the key donors, both multilateral and bilateral. My Department will be represented. We are currently considering how to refocus our development assistance programme for Central America to address the needs of recovery and reconstruction.

  Kosovo
  Dr. Tonge
  To ask the Secretary of State for International Development if she will make a statement on the current humanitarian situation in Kosovo. [61414]
  130
  Clare Short
  A Department for International Development mission visited Federal Republic of Yugoslavia and Albania between 16–26 November to assess conditions on the ground and the state of aid co-ordination. A humanitarian disaster has been averted, but the situation remains serious and must be monitored carefully. The internally displaced persons who were living out of doors are now back under shelter. The international response is generally adequate to meet current emergency needs of displaced people and refugees for food, blankets, stoves, mattresses and fuels. It is vital that the current level of humanitarian operations is maintained over the winter.

CULTURE, MEDIA AND SPORT

  Protection of Wrecks Act 1973
  Mr. Kidney
  To ask the Secretary of State for Culture, Media and Sport if he will encourage the use of designated police liaison officers to complement the provisions for the protection of sites of wrecks under the Protection of Wrecks Act 1973. [60867]

  Mr. Alan Howarth
  As a result of recent allegations of offences under the Protection of Wrecks Act 1973, my Department will be writing to all relevant local constabularies clarifying the legal position in relation to the 1973 Act, and giving details of existing designated sites within their area of responsibility.

  We welcome the proposal for local constabularies to set up designated police liaison officers, and are examining how this can best be taken forward.

  Mr. Kidney
  To ask the Secretary of State for Culture, Media and Sport what changes he is planning to the Protection of Wrecks Act 1973. [60866]

  Mr. Alan Howarth
  There are no plans to amend the Protection of Wrecks Act 1973 before the proposed transfer of responsibility for underwater archaeology to English Heritage announced in my Department's Departmental Spending Review. English Heritage may carry out a review of the operation of the 1973 Act after the transfer of responsibility has been carried out.

HOME DEPARTMENT

  John Murray
  Mr. Dismore
  To ask the Secretary of State for the Home Department if he will announce the Government's response to the judgment of the European Court of Human Rights in the case of John Murray v. the United Kingdom; and if he will make a statement. [62171]

  Mr. Straw
  In the case of John Murray v. the United Kingdom, the European Court of Human Rights held that it was a breach of Article 6 of the Convention to deny the applicant access to legal advice in circumstances where inferences could be drawn from his silence during questioning. The Government have concluded that the only sure way to prevent a repetition of the circumstances which prevailed in the Murray case is to amend the relevant legislation and the Codes of Practice made under the Police and Criminal Evidence Act 1984, the Police
  131
  and Criminal Evidence (Northern Ireland) Order 1989 and the Northern Ireland (Emergency Provisions) Act 1996, so as to prohibit the drawing of inferences from silence when a suspect is questioned at a police station while denied access to legal advice. The Government therefore intend to introduce the necessary legislation in the forthcoming Youth Justice and Criminal Evidence Bill, and this legislation will be extended to Northern Ireland by way of Negative Resolution Order in Council.

  In the interim, the Government will take such steps that are possible, without legislation, to ensure that no one is put in the same position which arose in the Murray case. My right hon. and learned Friend the Attorney-General will shortly be issuing guidance to prosecutors and, in parallel, my Department and the Northern Ireland Office will shortly be issuing a circular to the police. This guidance will seek to ensure that the usual practice will be for suspects to have access to legal advice before being interviewed at a police station. Where access to legal advice is denied, the police will be encouraged to put inference-bearing questions again after the suspect has been given the opportunity to obtain such advice. Additionally, prosecutors will be advised not to seek reliance on inferences drawn from silence before access to legal advice was granted. I am arranging for a copy of the guidance to the police to be placed in the Library.

  Immigration
  Mr. Chope
  To ask the Secretary of State for the Home Department in how many cases since his appointment he has exercised his discretion to grant leave to remain in the United Kingdom to foreign nationals resident in the United Kingdom on the grounds of compassionate circumstances. [61992]

  Mr. Mike O'Brien
  I regret that information on this particular reason for granting leave to remain is not collected separately. Applications for leave to remain on compassionate grounds are considered in the light of the particular circumstances at that time and of any concessionary policy under which the original leave may have been given.

  Passports and Visas
  Mr. Gorrie
  To ask the Secretary of State for the Home Department what plans he has to(a) speed up his Department's handling of applications for passports and visas and subsequent appeals and (b) to improve the handling of related complaints from hon. Members. [61085]

  Mr. Mike O'Brien
  The UK Passport Agency provides passport services for British nationals in the United Kingdom, and I have set the following service standard target for 1998–99:To process properly completed straightforward applications within a maximum of 15 working days in April, and 10 working days for the remainder of the year.
  In seeking to meet this target, the Agency will give priority to customers' travel needs, aiming to meet declared travel dates for at least 99.99 per cent. of passports issued.
  132
  The Agency's turnround times have slipped beyond this target on a number of occasions this year, but customers' urgent travel needs have been met.

  The Passport Agency has an internal target of dealing with correspondence, including complaints from hon. Members, in a maximum of 10 working days, and this target has been met on 90 per cent. of occasions.

  As regards applications for British citizenship, these are currently taking longer to consider than I would wish. Unfortunately, the spending plans we inherited from the previous Government, together with the increased pressures on the Immigration and Nationality Directorate, arising from increased passenger numbers arriving at our sea and airports and the numbers claiming asylum, mean that we do not have the financial resources to devote greater effort to citizenship work. This will change next year when we start to put into effect our plans for immigration and nationality work, which should result in twice as many decisions being taken and waiting times coming down significantly.

  In relation to immigration appeals, the Immigration and Nationality Directorate published a consultation paper on the appeals system on 13 July. We are now considering responses and will bring forward our legislative proposals for accelerating procedures in the current session of Parliament.

  On visas, the Foreign and Commonwealth Office, which is responsible for the operation of the Entry Clearance service overseas, is committed to providing a fair, fast and firm entry clearance service to all visa applicants. Entry clearance officers in overseas posts are required to take decisions on as many straightforward non-residence visa applications as they can within 24 hours. The target set for this in 1998–99 is 87 per cent. rising to 90 per cent. by 2001–2.

  Within the Foreign and Commonwealth Office, the Migration and Visa Correspondence Unit (MVCU) handle complaints from hon. Members about visa matters. I understand that the staffing of MVCU has been reinforced over the last year, and improvements made to their procedures, in an effort to provide a better service.

  Extradition
  Mr. Clappison
  To ask the Secretary of State for the Home Department what representations, other than those made by or on behalf of a person awaiting a decision, he can take into account in the exercise of his discretion in extradition cases. [61866]

  Mr. Straw
  Section 13(4) of the Extradition Act 1989 places a duty on the Secretary of State to consider any representations made to him by a person who has received notice that the Secretary of State is contemplating making an order for his return to a foreign state under section 12 of the Act.

  There is no equivalent provision in the Act for representations before the issuing of an Authority to Proceed: I shall be guided in my handling of representations, made for and against the issue of an Authority to Proceed, by general principles of fairness.
  133
  Mr. Gordon Prentice
  To ask the Secretary of State for the Home Department what is his role in extradition procedures; and what factors he takes into account in deciding whether or not to exercise his discretion. [61848]

  Mr. Straw
  Section 7(4) of the Extradition Act 1989 provides that, on receipt of an extradition request:"the Secretary of State may issue an authority to proceed unless it appears to him that an order for the return of the person concerned could not lawfully be made, or would not in fact be made, in accordance with the provisions of this Act".

  Factors which the Secretary of State takes into account when deciding whether to issue an authority to proceed are therefore the relevant extradition arrangements with a foreign state, the general restrictions on return provided for in section 6 of the 1989 Act in respect of his discretion as to whether he would ultimately make an order for the return of any person who has been committed by the court under section 9 of the Act.

  Senator Pinochet
  Mr. Clappison
  To ask the Secretary of State for the Home Department what requests he has received for the exercise of his discretionary powers in the case of Augusto Pinochet; and when he received them. [61865]

  Mr. Straw
  On 21 October, the Extradition Section received a request from Senator Pinochet's legal representatives to exercise my discretion under section 8(4) of the Extradition Act 1989. Since 25 November, the Extradition Section at the Home Office has received a number of representations, for and against the issuing of an Authority to Proceed.

  Mr. Clappison
  To ask the Secretary of State for the Home Department what representations he has made to the Bow Street Magistrates regarding the timetable of proceedings in the case of Augusto Pinochet. [61863]

  Mr. Straw
  One of my officials wrote to the Deputy Chief Clerk of Bow Street Magistrates' Court on 20 November and on 26 November. The letter of 26 November asked the Magistrate, when setting a date for receipt of an Authority to Proceed, to take into account the fact that I had received notice that I would be receiving representations for and against the issue of an Authority to Proceed.

  Mr. Clappison
  To ask the Secretary of State for the Home Department what is the timetable for the exercise of his discretion in the case of Augusto Pinochet. [61864]

  Mr. Straw
  The Bow Street Magistrate, under section 9(5) of the Extradition Act 1989, has fixed Friday 11 December as the date by which I should decide whether to issue an Authority to Proceed.

  Mr. Clappison
  To ask the Secretary of State for the Home Department what representations he has received regarding Augusto Pinochet following the judgment of the House of Lords in Regina v. Burtle and Commissioner of Police on 25 November. [61867]
  134
  Mr. Straw
  By the end of Monday 30 November, the Extradition Section at the Home Office had received a number of representations, for and against the issue of an Authority to Proceed.

  Mental Illness
  Mr. Beith
  To ask the Secretary of State for the Home Department on how many occasions he has consulted the Secretary of State for Health on the issue of mentally disordered offenders and mentally ill patients who are a potential threat to the community and themselves; and if he will make a statement. [61156]

  Mr. George Howarth
  My right hon. Friend and I discuss this matter regularly and our Departments have together been closely examining the opportunity for developing a new framework of law and management for both the mentally ill and those with personality disorders. This is a complex and difficult area, but we hope to make an announcement shortly.

  Campsfield House
  Mr. Beith
  To ask the Secretary of State for the Home Department on how many occasions the contract points requirements have been exceeded at Campsfield House detention centre in each year since its establishment; and if fines(a) have been imposed and (b) are currently being considered. [61158]

  Mr. Mike O'Brien
  Unlike contracts between the Home Office and the private sector for the management of some prisons, neither the present contract nor previous contracts for the management and operation of Campsfield House immigration detention centre contain any provision relating to the award of points for contractual performance. Therefore, there has not been, and presently cannot be, any question of exceeding a points requirement at Campsfield House, nor has there at any time been any question of points-related financial penalties.

  Dancing (Sundays)
  Mr. Blizzard
  To ask the Secretary of State for the Home Department what plans he has to reform the law relating to dancing on Sundays. [60998]

  Mr. George Howarth
  I am considering proposals, put to me on behalf of the industry concerned, for relaxing the constraints imposed by the Sunday Observance Act 1780 on commercially organised dancing on Sundays. I hope to be able to announce the outcome before too long now.

  Prison Mother and Baby Units
  Dr. Vis
  To ask the Secretary of State for the Home Department how many women were refused admission to a mother and baby unit in (i) 1998, (ii) 1997 and (iii) 1996; and if he will list the prisons and the racial origin of the women. [61020]

  Mr. George Howarth
  The information requested is given in the table.
  135

  Women prisoners refused admission to a mother and baby unit

  Refused

  1998

  1997

  1996

  Holloway

  6 (3 white, 2 black, 1 unknown

  7 (4 black, 3 white)

  8 (racial origin not known)

  New Hall

  2 (1 black, 1 white)

  Not known1

  Not known1

  Styal

  2 (1 black, 1 white)

  0

  0

  Askham Grange

  0

  1 (white)

  0

  1 Records not available

  Criminal Cases Review Commission
  Mr. Singh
  To ask the Secretary of State for the Home Department how many cases are awaiting determination by the Criminal Cases Review Commission. [61488]

  Mr. Boateng
  I understand that, at the end of October, 1,015 cases were awaiting review by the Criminal Cases Review Commission, and 456 cases were under active review.

WALES

  Fluoridation
  Mr. Wigley
  To ask the Secretary of State for Wales what assessment he has made of the impact on young children's dental health of introducing water fluoridation in Wales. [61479]

  Mr. Jon Owen Jones
  The Welsh Office is well aware of oral health benefits conferred by topping up the existing fluoride levels in public water supplies to 1 part per million. The dental decay rate of children aged five years in Anglesey was reduced by 50 per cent. after fluoridation was introduced there in the mid fifties. However, since withdrawal of the last of the Anglesey fluoridation schemes in 1991, there has been a 168 per cent. increase in tooth decay.

  Dental decay is increasingly recognised as a disease of childhood and deprivation, and water fluoridation is an ideal and simple way in which to improve oral health.

  The recent consultation on the Green Paper 'Better Health, Better Wales' drew considerable support for fluoridation and the Welsh Office is considering the responses in conjunction with other UK Health Departments.

  New Deal (Drop-out Rates)
  Mr. Wigley
  To ask the Secretary of State for Wales what has been the drop-out rate for participants in the New Deal in Wales. [61471]

  Mr. Hain
  The New Deal offers a flexible package of support which can last from a few days to over a year, according to individual need. The latest revised information provided by the Employment Service shows that 10,800 young people joined the New Deal in Wales between January and September, of whom nearly 2,700 had left by the end of September.

  Almost 1,600 young people left the New Deal to take up unsubsidised jobs (59 per cent. of all leavers). Just under 500 others had left for a range of other reasons (for example to transfer onto other more appropriate benefits; to move from their localities; or to enter other training
  136
  programmes or full-time education). The remaining 590 left for initially unknown destinations, although follow-up surveys by the Employment Service have revealed that many of these young people have actually found work without informing their New Deal Personal Advisers.

  Agri-environment Scheme
  Ms Lawrence
  To ask the Secretary of State for Wales what his plans are for the new Welsh agri-environment scheme, Tir Gofal. [62216]

  Mr. Michael
  I am submitting a formal application to the European Commission for approval by the Rural Structures Committee. This contains the technical details of the scheme and budget projections for the first five years.

  In the light of the Comprehensive Spending Review (CSR), I have made provision of £1.4 million in 1999–2000, £4 million in 2000–01 and £7 million in 2001–02. This allows for 600 new agreements each year at an average cost of just over £5,000 a year per agreement. Payments to farmers are expected to begin in 2000–01.

EDUCATION AND EMPLOYMENT

  New Deal (Public Information Campaign)
  Mr. Rammell
  To ask the Secretary of State for Education and Employment what were(a) the target number and (b) the actual number of responses to his Department's New Deal public information campaign; and if he will make a statement. [61689]

  Mr. Andrew Smith
  The marketing campaign is designed to raise employer awareness of New Deal and their willingness to take on unemployed people rather than to achieve a given number of responses. Neverthelesss, the New Deal Information Line and Website have received almost 150,000 responses as well as many more directly to local Jobcentres. Employer awareness of New Deal has been driven up from 34 per cent. pre-campaign to 83 per cent. now.

  Mr. Rammell
  To ask the Secretary of State for Education and Employment what has been the total expenditure and the breakdown of expenditure on(a) public opinion research, (b) television, radio and newspaper advertising and (c) direct mail incurred by his Department and agencies on the New Deal Public information campaign; and if he will make a statement. [61688]

  Mr. Andrew Smith
  Expenditure on the national New Deal advertising campaign to 30 November 1998 totalled £11,854,032. Of that, £203,738 has been spent on public opinion research, £9,376,206 on television, radio and newspaper advertising and £325,890 on direct mail.

  New Deal (Television Companies)
  Mr. Rowlands
  To ask the Secretary of State for Education and Employment what estimate his Department has made of the number of jobs provided under the New Deal arrangements by(a) the BBC, (b) the ITV companies and (c) S4C. [61613]

  Mr. Andrew Smith
  Specific information concerning individual employers' job vacancies and recruitment practices is a matter for those employers; but we are actively encouraging television and radio companies, like others, to recruit through the New Deals.

  New Deal (Claimant Representatives)
  Dr. Lynne Jones
  To ask the Secretary of State for Education and Employment how many claimant representatives there are on each of the New Deal task forces and advisory groups. [61428]

  Mr. Andrew Smith
  There are no claimants on the national New Deal Task Forces or the Advisory Group to the UK Task Force, but there are representatives of bodies who have campaigned on behalf of claimants and unemployed people.

  There are claimant representatives on some local New Deal strategic partnerships but comprehensive information on the people involved is not held centrally.

  Service Development Fund
  Mr. Burstow
  To ask the Secretary of State for Education and Employment if he will make a statement on the purpose of the Service Development Fund included in the Comprehensive Spending Review. [61878]

  Mr. Blunkett
  Within the total Comprehensive Spending Review settlement for MEE and local government Education Standard Spending, the Government have created the Service Development Fund to ensure the right balance of funding between the existing agenda and those areas where policy is still being developed. Allocations from this Fund will be conditional on agreement to initiatives which build on essential reforms and offer the best value for money.

  Education Standards
  Mrs. May
  To ask the Secretary of State for Education and Employment what guidance he has given to local education authorities on the relative merits of three tier and two tier systems; and if he will make a statement. [61660]

  Ms Estelle Morris
  We have not given any guidance to local education authorities on the relative merits of three tier and two tier systems. Schools should be organised to deliver the highest possible standards of education and to reflect parental preference. Local Education Authorities and school governing bodies are best placed to decide on the most effective pattern of provision within their areas, taking account of local circumstances.

  Special Educational Needs
  Mrs. May
  To ask the Secretary of State for Education and Employment if he will list those local education authorities which are failing to process draft statements of SEN within the legally required period;138
  and if he will set out the action taken by his Department with each such authority and list the responses of each authority. [61975]

  Mr. Charles Clarke
  Figures showing the time taken by all education authorities to produce draft statements in 1996–97 were published by the Audit Commission in March this year. These showed that most LEAs were failing to produce a significant proportion of their statements within the statutory time limits. The Government's Programme of Action for meeting special educational needs, published last month, made it clear that we are committed to achieving a substantial improvement in LEAs' performance and will continue to challenge under-performing LEAs; and that we intend to require LEAs to publish information about the time taken to complete statutory assessments and statements. In addition, we will shortly be providing LEAs with guidance on good practice in this area.

  Disability Task Force
  Mr. Burstow
  To ask the Secretary of State for Education and Employment how many people have accessed the Disability Task Force web page since its launch. [61876]

  Ms Hodge
  Since the Disability Rights Task Force web page was launched in February this year, it has been visited by just over 7,000 people.

  Lone Parents
  Mr. Rendel
  To ask the Secretary of State for Education and Employment if he will list the expenditure on the New Deal for lone parents in each employment service region. [61963]

  Ms Hodge
  The total regional expenditure that has been brought to account for the delivery of the New Deal for lone parents up to 31 October 1998 is £4.94 million. This is broken down by the nine ES regions as follows:

  Employment Service regions

  £

  Northern

  311,364

  Yorkshire and the Humber

  436,657

  East Midlands and Eastern

  394,299

  London and South East

  1,194,803

  South West

  565,457

  Office for Wales

  424,430

  West Midlands

  433,962

  North West

  691,453

  Office for Scotland

  491,717

  Total

  4,944,142

  Scottish Fee Support Review Committee
  Mr. Jim Murphy
  To ask the Secretary of State for Education and Employment if he will announce the full membership and terms of reference of the Scottish Fee Support Review Committee to be appointed under the Teaching and Higher Education Act 1998. [62172]

  Mr. Blunkett
  Further to my reply of 23 July 1998,Official Report, column 658, I and my right hon. Friends, the Secretaries of State for Scotland for Wales and for Northern Ireland are pleased to announce the membership of the Scottish Fee Support Review Committee.

  139
  The Chairman will be Sir George Quigley, as already announced. Lord Bums, Professor Michael Hamlin and Sir Philip Jones have also agreed to serve as members. Terms of reference for the Committee have been placed in the Library.

  The evidence on admissions this year shows an increase in the number of students from England, Wales and Northern Ireland entering Scottish institutions this autumn.

  Scottish Fee Support Review: Terms of Reference

  In fulfilment of the statutory requirements in section 25(4) of the Teaching and Higher Education Act 1998 and Article 6(4) of the Education (Student Support) (Northern Ireland) Order 1998:
  to review the arrangements for England, Wales and Northern Ireland for paying grants for students' fees for the final honours year of first-degree courses at higher education institutions in Scotland, which are generally one year longer than comparable courses elsewhere in the UK;
  to consider the impact of those arrangements, taking into account the evidence on admissions in 1998 and applications in 1999 to Scottish higher education institutions, and to consider the need for any change; and
  to report to the Secretary of State for Education and Employment, the First Secretary of the National Assembly for Wales, the Scottish Ministers and the Department of Education for Northern Ireland by summer 1999, bearing in mind that the Committee's report is to be laid before each House of the Westminster Parliament and before the Northern Ireland Assembly not later than 1 April 2000.

  The Committee's report will be placed in the National Assembly for Wales and the Scottish Parliament at the same time as it is laid before the Westminster Parliament and the Northern Ireland Assembly.

  The Committee should take evidence from:
  the Committee of Scottish Higher Education Principals, the Committee of Vice-Chancellors and Principals, and the Committee of Heads of Welsh Higher Education Institutions;
  such other bodies as the Secretaries of State for Education and Employment, for Wales and for Scotland and the Department of Education for Northern Ireland may invite to make representations; and
  any others who may wish to offer evidence.

  Scottish Fee Support Review: Membership
  Sir George Quigley (Chairman)—Chairman of Ulster Bank (since 1989) and Member of the Qualifications and Curriculum Authority; formerly Permanent Secretary to the Department of Finance and Personnel for Northern Ireland (1982–88), Chairman of the Northern Ireland Economic Council, and member of the National Committee of Inquiry into Higher Education (1996–97).
  Lord Burns—formerly Permanent Secretary to HM Treasury (1991–98), and Chief Economic Adviser to the Treasury and Head of the Government Economic Service (1980–91).
  Professor Michael Hamlin—formerly Principal and Vice-Chancellor of the University of Dundee (1987–94), Vice-Principal of the University of Birmingham (1986–87) and President of the British Hydrological Society (1995–97); Fellow of the Royal Academy of Engineering.
  Sir Philip Jones—Chairman of the Higher Education Funding Council for Wales; formerly Chairman of Total Oil Holdings (1991–98) and Chairman of the Electricity Council (1983–90).

  Dyslexia
  Mr. Corbyn
  To ask the Secretary of State for Education and Employment if he will publish information 140
  held by his Department on the number of (a) further education and (b) university students, broken down by institution, who are diagnosed as dyslexic. [60959]

  Mr. Mudie
  The available data for higher education students in each higher education institution in the UK are shown in the table. These data are based on self-assessment by students and may differ from the number of students diagnosed as dyslexic. Information on further education students, broken down by institution, who are diagnosed as dyslexic is not held centrally.

  Full-time and part-time HE students in the UK as at December 1997

  Students who reported themselves as having dyslexia

  Institution

  Number of students

  The Open University

  404

  Cranfield University

  30

  Royal College of Art

  6

  College of Guidance Studies

  0

  Institute of Advanced Nursing Education

  0

  Bishop Grosscreste College

  15

  Bretton Hall College of Higher Education

  17

  Buckinghamshire College of Higher Education

  138

  Central School of Speech and Drama

  13

  Chester College of Higher Education

  30

  Canterbury Christ Church College of Higher Education

  49

  University College of Ripon and York St. John, North Yorkshire

  34

  College of St. Mark and St. John

  30

  Darlington College of Arts

  16

  Edge Hill College of Higher Education

  33

  Falmouth College of Arts

  53

  Harper Adams Agricultural College

  55

  Homerton College

  15

  Kent Institute of Art and Design

  74

  King Alfred's College, Winchester

  64

  Liverpool Institute of Higher Education

  60

  The London Institute

  78

  Loughborough College of Art and Design

  6

  University of Luton

  211

  Nene College

  69

  Newman College

  3

  North Riding College

  12

  Ravensbourne College of Design and Communication

  5

  Roehampton Institute of Higher Education

  99

  Rose Bruford College of Speech and Drama

  14

  Royal Academy of Music

  4

  Royal College of Music

  7

  Royal Northern College of Music

  3

  Southampton Institute

  235

  St. Martin's College

  35

  St. Mary's College

  16

  Trinity and All Saints College

  1

  Trinity College of Music

  1

  Westminster College

  19

  Surrey Institute of Art and Design

  36

  Worcester College of Higher Education

  31

  Anglia Polytechnic University

  71

  Bath College of Higher Education

  34

  Bolton Institute of Higher Education

  72

  Bournemouth University

  155

  The University of Brighton

  148

  The University of Central England in Birmingham

  161

  The University of Central Lancashire

  49

  Cheltenham and Gloucester College of Higher Education

  117

  London Guildhall University

  139

  Coventry University

  192

  University of Derby

  233

  The University of East London

  39

  The University of Greenwich

  154

  The University of Hertfordshire

  242

  The University of Huddersfield

  38

  The University of Humberside

  117

  Kingston University

  133

  Leeds Metropolitan University

  165

  141

  Full-time and part-time HE students in the UK as at December 1997

  Students who reported themselves as having dyslexia

  Institution

  Number of students

  Liverpool John Moores University

  150

  Manchester Metropolitan University

  170

  Middlesex University

  188

  De Montfort University

  77

  The University of Northumbria at Newcastle

  134

  The University of North London

  134

  Nottingham Trent University

  215

  Oxford Brookes University

  245

  University of Plymouth

  230

  University of Portsmouth

  171

  Sheffield Hallam

  175

  South Bank University

  75

  Staffordshire University

  33

  The University of Sunderland

  87

  The University of Teesside

  122

  Thames Valley University

  54

  The University of the West of England, Bristol

  291

  Chichester Institute of Higher Education

  47

  The University of Westminster

  66

  Wimbledon School of Art

  22

  The University of Wolverhampton

  109

  Gwent College of Higher Education

  61

  The North-East Wales Institute of Higher Education

  14

  Cardiff Institute of Higher Education

  63

  University of Glamorgan

  50

  Swansea Institute of Higher Education

  24

  Trinity College, Carmarthen

  0

  University of Abertay, Dundee

  21

  Edinburgh College of Art

  36

  Glasgow School of Art

  32

  Moray House Institute of Education

  12

  Northern College of Education

  4

  Queen Margaret College

  33

  Royal Scottish Academy of Music and Drama

  9

  St. Andrew's College of Education

  4

  The Scottish College of Textiles

  10

  The Robert Gordon University

  57

  University of Paisley

  63

  Glasgow Caledonian University

  57

  Napier University

  95

  Aston University

  45

  The University of Bath

  40

  The University of Birmingham

  112

  The University of Bradford

  65

  The University of Bristol

  43

  Brunei University

  124

  The University of Cambridge

  57

  City University

  88

  The University of Durham

  79

  The University of East Anglia

  82

  The University of Essex

  56

  The University of Exeter

  125

  The University of Hull

  72

  The University of Keele

  31

  The University of Kent at Canterbury

  120

  The University of Lancaster

  36

  University of Leeds

  255

  University of Leicester

  76

  The University of Liverpool

  98

  Birkbeck College

  59

  Goldsmith's College

  61

  Imperial College of Science, Technology and Medicine

  26

  Institute of Education

  0

  Kings College London

  104

  London Business School

  1

  London School of Economics and Political Science

  9

  London School of Hygiene and Tropical Medicine

  1

  Queen Mary and Westfield College

  57

  Royal Free Hospital School of Medicine

  6

  Royal Holloway, University of London

  48

  The Royal Veterinary College

  3

  St. George's Hospital Medical School

  1

  The School of Oriental and African Studies

  12

  142

  Full-time and part-time HE students in the UK as at December 1997

  Students who reported themselves as having dyslexia

  Institution

  Number of students

  The School of Pharmacy

  0

  United Medical and Dental Schools of Guy's and St. Thomas's

  20

  University College London

  84

  Wye College

  17

  London University—Senate institutes

  1

  Loughborough University of Technology

  117

  The University of Manchester

  90

  The University of Newcastle-upon-Tyne

  128

  The University of Nottingham

  166

  The University of Oxford

  103

  The University of Reading

  113

  The University of Salford

  116

  The University of Sheffield

  91

  The University of Southampton

  241

  The University of Surrey

  69

  The University of Sussex

  57

  The University of Warwick

  62

  The University of York

  48

  University of Manchester Institute of Science and Technology

  44

  University of Edinburgh

  262

  University of Glasgow

  122

  University of Strathclyde

  90

  University of Aberdeen

  110

  Heriot-Watt University

  62

  University of Dundee

  106

  University of St. Andrews

  73

  The University of Stirling

  8

  Scottish Agricultural College

  36

  St. David's University

  61

  The University College of Wales, Aberystwyth

  71

  University College of North Wales, Bangor

  177

  University of Wales College of Cardiff

  81

  University College of Swansea

  36

  University of Wales College of Medicine

  11

  Welsh College of Music and drama

  16

  Queen's University of Belfast

  44

  The University of Ulster

  98

  The University of Wales, Registry

  0

  Westhill College

  23

  Writtle College

  44

  Northern School of Art and Design

  35

  Northern School of Contemporary Dance

  12

  Cumbria College of Art and Design

  3

  Total

  12,860

SCOTLAND

  Retirement Flats
  Mr. Gorrie
  To ask the Secretary of State for Scotland for what reasons his Department is proposing a voluntary code of practice for the management of complexes of retirement flats owned by their occupants. [61083]

  Mr. Macdonald
  Following representations to Ministers about the management of some owner occupied sheltered housing developments, the Scottish Office convened a meeting of interested parties in July 1996. At the meeting, representatives of developers, management companies, owners and other organisations such as Age Concern Scotland and the Scottish Consumer Council, agreed that a working group should be established to consider a voluntary code that would set out a framework for good practice in the management of owner occupied sheltered housing developments.
  143
  Mr. Gorrie
  To ask the Secretary of State for Scotland if the voluntary code of practice for the management of complexes of retirement flats owned by their occupants will include provisions relating to(a) major repair funds, (b) complaint procedures, (c) terms in deeds of conditions, (d) adherence to these conditions and (e) the implementation of an arbiter's award by managing agents. [61084]

  Mr. Macdonald
  The detailed provisions of the proposed voluntary code of management practice are still under consideration by the working group established by the Scottish Office. However, it is currently envisaged that there would be clauses relating to major repair funds and complaints procedures. The terms of deeds of conditions, adherence to these conditions and the implementation of awards by arbiters are essentially legal matters to be resolved between the parties concerned.

  Groundwater Regulations
  Mr. Maclennan
  To ask the Secretary of State for Scotland what assessment he has made of the impact upon crofters and other small producers of the costs of disposing of spent sheep dip as proposed under the Groundwater Regulations; and if he will make a statement. [61849]

  Mr. Macdonald
  A copy of the Regulatory Impact Assessment in respect of the Groundwater Regulations 1998 was placed in the Library of the Houses of Parliament on 11 November. The Assessment notes that, in England and Wales, compliance costs for a typical farmer are likely to be £100 recurring costs per annum with non-recurring costs of £85. Broadly similar costs are expected for Scotland.

  On 26 November, the Scottish Environment Protection Agency issued for public consultation their proposals for charges under the Regulations. Under the terms of section 42 of the Environment Act 1995, the approval of the Secretary of State must be obtained before a charging scheme is made. In determining whether or not to approve the scheme the Secretary of State must consider any representations or objections duly made to him and not withdrawn. He must also have regard to the desirability of ensuring that the amounts recovered by the Agency by way of the prescribed charges are the amounts which taking one year with another, need to be recovered by the Agency to meet such of the costs and expenses which it incurs in carrying out its functions as he may consider appropriate.

  Dornoch Academy
  Mr. Maclennan
  To ask the Secretary of State for Scotland what recent discussions the Government have had with(a) Highland Council and (b) Dornoch Academy about bringing the school back into local authority control; and if he will make a statement. [61850]

  Mrs. Liddell
  The Scottish Office has had continuing constructive discussions with both Dornoch Academy and Highland Council, particularly in relation to the school's annual grant. The Government remain committed to repealing the self-governing schools legislation. This, however, will now be a matter for the Scottish Parliament.
  144

  Student Hostels
  Mr. Welsh
  To ask the Secretary of State for Scotland what representations he has received regarding the transfer to Moray House College of Education of the East Suffolk Road student hostels; what investigation he has made of the events surrounding this transfer and the accounting procedures involved; and if he will make a statement. [61703]

  Mrs. Liddell
  I have received representations concerning the transfer to Moray House College of Education of the East Suffolk Road student hostels. A comprehensive reply has already been provided. In October, the Scottish Office Education and Industry Department received further representations, on the issue that the transfer of the student hostels to Moray House in 1979 was not correctly undertaken. Since then, officials have received numerous further representations from the same person, as have the Scottish Higher Education Funding Council.

  Officials are looking into the matters raised in the recent allegations. I shall write to the hon. Member when their consideration of this is complete.

  Housing Partnerships Initiative
  Mr. Welsh
  To ask the Secretary of State for Scotland for what reasons the new Housing Partnerships Initiative precludes local authorities in Scotland from investing the funding available in local authority owned stock without transferring ownership of this stock outside the local authority. [61678]

  Mr. Macdonald
  The new Housing Partnerships Initiative aims to promote community ownership and secure private sector finance for affordable housing. Local authorities receive separate capital allocations for works to their own stock.

  Tuition Fees
  Mr. Welsh
  To ask the Secretary of State for Scotland how his figure for the cost of abolishing tuition fees in Scotland was arrived at; over what period it applies; what the annual figures are; and what assumptions underlie the calculation. [61710]

  Mrs. Liddell
  I am not entirely clear which figure is the subject of the question. The Scottish Office Education and Industry Department has commissioned independent research on the long term savings arising from the recent changes in policy on student support, including the introduction of a means-tested private contribution towards the cost of tuition and the replacement of grants by loans. I have arranged for a copy of an abstract of the results to be placed in the House of Commons Library.

  Nitrates Directive
  Mr. Welsh
  To ask the Secretary of State for Scotland what plans he has to implement the Nitrates Directive in respect of water bodies, rivers and their catchments which exceed the limit of 50mg/1 of dissolved nitrates; and if he will make a statement. [61699]

  Mr. Macdonald
  This Directive is being implemented and we already monitor at all surface water and groundwater locations used for drinking water abstraction.
  145
  The Scottish Environment Protection Agency is extending this monitoring network to be representative of all Scottish inland surface waters. This will be used to identify where there are exceedances of the 50 mg/1 concentration limit value for nitrate. From this information SEPA will undertake a further review to determine if revised or new Nitrate Vulnerable Zones should be designated.

  Before an extended network can be identified for groundwater monitoring it will be necessary to carry out a preliminary study of existing abstraction. I am asking SEPA to set up a groundwater monitoring network by the end of 1999.

  Barnacle Geese
  Mr. Welsh
  To ask the Secretary of State for Scotland what advice he has received from Scottish Natural Heritage in respect of applications for licences for the killing of barnacle geese on the Island of Islay; and if licences will be issued for land within areas designated as special protection areas under EU Directive 79/409/EEC. [61700]

  Mr. Macdonald
  Advice has been given by Scottish Natural Heritage on the likely effect of limited licences to shoot barnacle geese in specified areas on Islay. Two licences to prevent serious agricultural damage have been issued for a limited period where no other satisfactory solution was available. These licences allow a maximum of 50 barnacle geese to be shot in areas designated as Special Protection Areas under EU Directive 74/409/EEC. The effect of the licensed shooting on the farms and the goose populations will be carefully monitored, and the results will be taken into account before any further licences are issued to farmers on Islay.

  Mr. Welsh
  To ask the Secretary of State for Scotland what recommendations he has received from the National Goose Forum relating to geese on Islay. [61701]

  Mr. Macdonald
  None. The National Goose Forum is not due to report on a national policy framework for managing potential conflicts between geese and agriculture until Summer 1999.

SOCIAL SECURITY

  Benefit Integrity Project
  Mrs. May
  To ask the Secretary of State for Social Security (1) if the actual and estimated savings quoted by his Department for the Benefit Integrity Project are savings that incorporate the full costs of the investment and running costs of the Project; [60982]

  (2) if he will make a statement on the accounting procedures used by his Department in calculating the savings generated by the Benefit Integrity Project. [60981]

  Mr. Timms
  The administration of the Benefit Integrity Project is a matter for Peter Mathison, the Chief Executive of the Benefits Agency. He will write to the hon. Member.
  146
  Letter from Peter Mathison to Mrs. Theresa May, dated 30 November 1998:

  The Secretary of State has asked me to reply to your recent Parliamentary Questions asking if the actual and estimated savings quoted by his Department for the Benefit Integrity Project (BIP) are savings that incorporate the full costs of the investment and running costs of the Project, and if he will make a statement on the accounting procedures used by his Department in calculating the savings generated by BIP.

  Estimates of benefit savings from BIP assume that cases with a changed award would have remained on their original level of benefit for 32 weeks. This is an assumption common to Benefits Agency activity. A proportion of total savings for cases reviewed in any particular year are allocated to the two subsequent years. This takes account of some benefit recipients being reviewed towards the end of the financial year, and the variation in the length of time recipients with a changed award would have remained on their original level of benefit. Estimated benefit savings relate solely to programme expenditure and is accounted for in the annual Vote 1 Appropriation Accounts.

  The estimate includes the cost of reviews and appeals. It also takes account of additional savings from some cases losing premiums in the income related benefits, some carers losing Invalid Care Allowance, and losing access to free road tax through the loss of entitlement to the Disability Living Allowance Higher Rate Mobility Component. The cost of investment and the running costs for the project are not included in the estimate of benefit savings but form part of the Agency's overall running costs, set out in the Vote 3 Appropriation Accounts.

  I hope you find this reply useful.

  Mrs. May
  To ask the Secretary of State for Social Security what(a) the original assumptions were and (b) the current savings assumptions are for the Benefit Integrity Project in (i) 1997–98 and (ii) 1998–99; what factors were taken into account in the revision of savings assumptions for the Benefit Integrity Project for 1997–98 and 1998–99; and if the costs of the Benefit Integrity Project include the costs of appeals following decisions made under the scheme. [60983]

  Mr. Timms
  The administration of the Benefit Integrity Project is a matter for Peter Mathison, the Chief Executive of the Benefits Agency. He will write to the hon. Member.

  Letter from Peter Mathison to Mrs. Theresa May, dated 27 November 1998:

  The Secretary of State has asked me to reply to your recent Parliamentary Question asking what (a) the original assumptions were and (b) the current savings assumptions are for the Benefit Integrity Project (BIP) in (i) 1997–98 and (ii) 1998–99; what factors were taken into account in the revision of savings assumptions for BIP for 1997–98 and 1998–99; and if the costs of BIP for 1997–98 and 1998–99 include the costs of appeals following decisions made under the scheme.

  The original estimate of benefit expenditure savings from BIP was £20m in 1997–98 and £30m in 1998–99. It was based on the results of the Disability Living Allowance Benefit Review, published February 1997. The current estimate of savings are £8m in 1997–98 and £30m in 1998–99. It is based on monitoring information from BIP and reflects the delayed start of the project in 1997 and subsequent changes to the range of people included in the exercise. The estimate takes account of the cost of reviews and appeals. It also takes account of additional savings from some cases losing premiums in the income related benefits, some carers losing Invalid Care Allowance, and losing access to free road tax through the loss of entitlement to the Disability Living Allowance Higher Rate Mobility Component.

  Both estimates assume that cases with a changed award would have remained on their original level of benefit for 32 weeks. This is an assumption common to Benefits Agency activity. A proportion

  147
  of total savings for cases reviewed in any particular year are allocated to the two subsequent years. This takes account of some benefit recipients being reviewed towards the end of the financial year, and the variation in the length of time recipients with a changed award would have remained on their original level of benefit.

  I hope you find this reply useful.

  Child Support Agency
  Mr. Rendel
  To ask the Secretary of State for Social Security (1) what are the achieved levels of accuracy of the CSA for each region; [61449]

  (2) for each region, what are the levels of outstanding debt in the CSA; and what percentage of that debt is classed as unrecoverable; [61448]

  (3) for each region what is the current backlog of cases at the CSA; and how many of those have been outstanding for over one year; [61446]

  (4) what percentage of debt balances calculated by the CSA contain errors, for each region; [61450]

  (5) what is the average amount of time taken between the referral of a case for assessment by the CSA, the making of a maintenance assessment, and the first maintenance sum paid, for each region; [61452]

  (6) when the current backlog of cases within the CSA is expected to be cleared, for each region; [61447]

  (7) what is the current rate of non-compliance with payment of maintenance assessments by the CSA, for each region; [61445]

  (8) what is the average time taken to transfer collected maintenance to parents with care, for each region. [61453]

  Angela Eagle
  We expect the Child Support Agency to provide a consistent, fair and efficient service to all its clients. We have set out proposals for radical reform in our Green Paper "Children First: a new approach to child support" (Cm 3992).

  The administration of the Child Support Agency is a matter for the Chief Executive, Mrs. Faith Boardman. She will write to the hon. Member.

  Letter from Faith Boardman to Mr. David Bendel, dated 30 November 1998:

  I am replying to your Parliamentary Questions to the Secretary of State for Social Security about the Child Support Agency.

  I cannot provide precisely all the information that you have requested, but have provided as much as possible from the most recent information available.

  The Agency has six front-line Business Units; each of these consists of a Child Support Agency Centre and associated Field Offices. Information has been provided for each Business Unit.

  The Agency measures the accuracy of maintenance assessments against targets set by the Secretary of State. For 1997/98, the target was for the cash value of all maintenance assessments checked in the year to be correct to the last penny in at least 85%of cases. The Agency met this target scoring an accuracy rate of 86%.

  In 1998/99, the Agency is measuring the accuracy more stringently by examining the last full assessment rather than just the last work carried out, which could have been a simplified review not requiring a full assessment. The revised methodology is closer to that used by the National Audit Office. The checks will be more reliable, measuring accuracy of assessments to the last penny in earlier years as well as more recent changes to assessments.
  148
  However, this may result in a larger number of inaccurate assessments being identified in the short term because it will reflect earlier periods in which the accuracy of assessments was lower than it now is. As a result the accuracy target is lower for 1998/99, and requires the cash value of all assessments checked in the year to be correct in at least 75% of cases. The Agency will be looking to improve on the accuracy target in 1999/2000 and following years.

  At 31 October 1998 the accuracy level (against this revised criteria) achieved by the Agency was 75%. The levels achieved by each Business Unit are shown in the attached table.

  The report of the Comptroller and Auditor General to the House of Commons which was published as part of the Agency's Annual Report for 1997/98 noted that when examining non-resident parents' maintenance balances, National Audit Office staff had identified that some error had occurred at some point in the history of the account in 79% (85% in 1996/97) of the cases examined. In the large majority of cases these inaccuracies had a relatively small monetary effect, and need to be put in the context that on average cases require to be worked at about 3 times a year. This assessment was based on a sample of cases going back to the start of the Agency, but it is a matter of public record that during its first two years the Agency frequently made errors when assessing maintenance. We recognise the legacy of this problem and aim to tackle this by getting cases right firsu time and will review older cases as the opportunity arises. We estimate that by the end of 1998/99 we will have had the chance in our normal course of work and through periodic reviews to look at many of those individual accounts which stem from the start of the Agency.

  The Agency has been concerned that the full maintenance debt reported previously was not a true reflection of the amount ever likely to be collected. Following a Debt Analysis Exercise we have therefore identified that part of the debt which is probably uncollectable and removed it to show a more realistic debt position. This change was introduced in the Agency's Annual Report and Accounts for 1997/98. This revised format is in response to the Committee of Public Accounts recommendation that the Agency "…examine the scope for eliminating a significant amount of this debt, since it is unlikely ever to be collected …".

  At 31 October 1998 the amount of child support full maintenance assessment debt was £480,340,622. This can be broken down further to £280,038,583 (58.3%) collectable debt, £186,852,502 (38.9%) possibly uncollectable debt and £13,449,537 (2.8%) deferred debt. Deferred debt is where the Agency has deferred the debt indefinitely, provided non-resident parents meet certain conditions on payment of regular maintenance and any remaining debt. Where appropriate the parent with care will be compensated for the loss of this money. Details for each Business Unit are shown in the attached table.

  To further increase the flow of maintenance and to help non-resident parents pay the arrears that they owe, wherever possible the Agency makes every effort to re-schedule debts; re-scheduled debts are those where the Agency has negotiated a closely monitored agreement with the non-resident parent to pay arrears by instalments. The amount of debt re-scheduled included in the £480,340,622 at 31 October 1998 was £374,392,076.

  The Agency does not collect information on average processing times for the clearance of maintenance assessments. The Agency measures the clearance of maintenance assessments against targets set by the Secretary of State. The age at clearance is measured from the date of the initial application. In Income Support cases where the Benefits Agency have conducted a pre-adjudication visit as part of the Closer Working arrangement, the date of initial application is the date of the visit.

  The Agency does not currently measure the time between application and payment due to the several factors that have an influence on when a payment is due (the payment preferences of the parent with care and the non-resident parent, and the non-resident parent's pay frequency) and in turn actually made. The speed with which assessments can be cleared is constrained by the complexities

  149
  of the current legislation which can require up to 104 separate pieces of information to be collected and verified before an assessment can be made, however the Agency is steadily reducing the time taken and is clearing the backlog of applications from the early years.

  For 1997/98, the Secretary of State target required 525,000 maintenance applications to be cleared; 60 per cent. of new applications to be cleared within 26 weeks and on 31 March 1998 no more than 5 per cent. of all maintenance applications to be over 52 weeks old. The Agency met this target with 595,000 clearances (13 per cent. above target), 72 per cent. of new applications cleared within 26 weeks and reduced the maintenance assessment backlog (i.e. cases which are over 52 weeks old and have not yet been assessed) to less than 5 per cent of applications received.

  The 1998/99 target is even more challenging; 65 per cent. of cases to be cleared within 22 weeks and on 31 March 1999 there to be no application outstanding over 52 weeks old. At 31 October 1998 the Agency was clearing 65 per cent of cases within 22 weeks. The levels achieved by each Business Unit are shown in the attached table.

  At 31 March 1998 the Agency had approximately 306,900 maintenance assessment cases on hand; approximately 110,000 of these were over 52 weeks old. To achieve the target to have no applications outstanding over 52 weeks old at 31 March 1999 all these 306,900 cases need to be cleared during 1998/99. At 31 October 1998 108,695 of these cases are outstanding; it is not possible to state how many of these cases are currently outstanding over 52 weeks, however we are ahead of profile to achieve the target by March. Details for each Business Unit are shown in the attached table. From 1 April we expect to have no applications outstanding over 52 weeks old.

  As the older cases are cleared some non resident parents will inevitably be assessed as owing arrears for periods dating back a number of years. As recently announced by Ministers, the temporary scheme limiting the collection of initial payment period arrears to six months as long as the non resident parent is fully compliant for a period of 12 months has recently been extended.

  Child Support Agency—operational statistical information by Business Unit 31 October 1998

  Midlands

  South Eastern

  Scotland and North East

  South West

  Wales and North West

  Eastern

  Accuracy1

  73%

  70%

  76%

  81%

  77%

  70%

  Full maintenance assessment debt

  £93,160,638

  £55,398,436

  £83,710,444

  £90,149,318

  £67,284,354

  £90,637,432

  —collectable

  £54,312,652

  £32,297,288

  £48,803,189

  £52,557,052

  £39,226,778

  £52,841,623

  —possibly uncollectable

  £36.239,488

  £21,549,992

  £32,563,363

  £35.068,085

  £26,173,614

  £35,257,961

  —deferred

  £2,608,498

  £1,551,156

  £2,343,892

  £2,524,181

  £1,883,962

  £2,537,848

  Maintenance assessment clearances within 22 weeks

  57%

  62%

  75%

  61%

  70%

  64%

  Cases with potential to be over 52 weeks old on 31 March 19992

  16,503

  23,785

  14,105

  10,554

  18,094

  25,654

  Non-compliance

  21.75%

  22.82%

  17.55%

  18.88%

  18.13%

  23.88%

  Speed of payment to parent with care

  98%

  97%

  98%

  98%

  98%

  94%

  1 The Agency is measuring the accuracy more stringently by examining the last full assessment rather than just the last work carried out, which could have been a simplified review not requiring a full assessment—as a result the accuracy target is lower for 1998/99.

  2 The Agency forecast there will be no maintenance assessments over 52 weeks old by 31 March 1999 and are ahead of profile to achieve this.

  Mr. Rendel
  To ask the Secretary of State for Social Security when his Department intends to publish the draft Bill on reform of the Child Support Agency. [61962]

  Angela Eagle
  The consultation period on the Green Paper finished on 30 November 1998. Final decisions on the shape of the reformed child support scheme and the associated legislative process will be announced in due course.

  Housing Benefit
  Mr. Webb
  To ask the Secretary of State for Social Security if he will list the length of time taken in issuing housing benefit for each local authority in the United Kingdom. [61869]
  150
  Additionally, from Monday 30 November, the scheme will be extended to include cases where arrears have arisen due to delays in reviews carried out on change of circumstance and in the periodic reviews carried out every two years.

  The Agency currently has a nil-compliance rate of 20.38%. Details of each Business Unit are shown in the attached table.

  We do not collect average processing times to transfer collected maintenance to parents with care. We measure the speed of payment to parents with care against a Secretary of State Target. The Agency exceeded the 1997/98 target which required that 97% of payments be passed to the parent with care within ten working days of receipt from the non-resident parent. At 31 October 1998 97%. of payments made to the parent with care were made within 10 working days of receipt from the non-resident parent. Details for individual Business Units are included in the attached table.

  1997/98 saw a significant improvement in the Agency's performance. Through the hard work and dedication of the Agency's staff, for the first time in our five year history we met or bettered all of our Secretary of State targets. Letters of complaint to the Agency and to MPs continued to fall as a percentage of our caseload. But we accepted the need to improve our all-round performance in line with concerns expressed by Parliamentary Committees and Stakeholder Groups, rather than just our performance against formal targets.

  In the short term, we are looking at the ways that we can change the way we deliver our service to address customers immediate concerns; to this end we have reviewed the way that we handle complaints and we have increased resources for our Client Helplines and the National Enquiry Line, extended our hours of opening to cover 8.00am to 8.00pm Monday to Friday and 9.00am to 5.00pm on Saturdays and begun pilots to greatly improve and increase clients' opportunities to secure a face to face service. For the longer term, we are looking at the ways that we measure our performance to ensure that our focus is on providing a service that meets our clients' qualitative needs as well as achieving formal numerical targets.

  I hope this is helpful.

  Angela Eagle
  The latest available data on local authority performance are for 1996–97. This is published in "Council Services Compendium" by the Audit Commission for England and Wales, and "Comparing the Performance of Scottish Councils" by the Accounts Commission for Scotland. These publications are available in the Library.

  Mr. Webb
  To ask the Secretary of State for Social Security what plans his Department has to prevent local reference rent rules resulting in landlords refusing to let to claimants of housing benefit. [61870]

  Angela Eagle
  We are currently reviewing the Housing Benefit rules with the Local Authority Associations to ascertain what changes, if any, are necessary to improve
  151
  the way the benefit is administered and remove anomalies from the system. The impact of the rent restriction rules is part of that review which is due to end early next year.

  Pensioners' Incomes Series
  Mr. Webb
  To ask the Secretary of State for Social Security for what reasons there has been a delay in the publication of the Pensioners' Incomes Series for 1996–97; and when he expects to publish the report. [61873]

  Mr. Denham
  The Pensioners' Incomes Series 1996–97 will be published on 10 December 1998, rather than 26 November. The delay was caused by further work being necessary to ensure the accuracy of the publication.

  Habitual Residence Test
  Mr. Rendel
  To ask the Secretary of State for Social Security when he expects to publish the review of the Habitual Residence Test. [61875]

  Angela Eagle
  Work on the review of the Habitual Residence Test is ongoing. However, we wish to take account of all relevant evidence and information before drawing any conclusions. This clearly needs to include the outcome of litigation which could have a significant impact on the scope for reform of the test, such as the case of Mr. Robin Swaddling currently under the deliberation of the European Court of Justice. We will therefore bring forward our recommendations once we have received and considered the judgment of the European Court in this case.

  Benefits Agency Medical Services
  Mr. Field
  To ask the Secretary of State for Social Security if he will make a statement on the current operating difficulties in the Benefits Agency Medical Services. [61874]

  Angela Eagle
  The provision of Medical Services was contracted out to Sema Group on 1 September 1998. One of the objectives of contracting out medical services was to improve service provision. With this in mind the targets that have been set in the contract reflect the improvements the Department is seeking. Sema, however, are not yet achieving the targets that have been set for Incapacity Benefit, Disability Living Allowance, and Industrial Injuries. The contract recognises that service improvements cannot be achieved overnight and allows a six month period before remedies are applied for failure to deliver to contract levels.

  Sema Group have developed a Service Improvement Plan which demonstrates how continuous improvements will be made to the service. This is being closely monitored by the Contract Management Team and we are regularly apprised of progress.

  In addition there have been some difficulties in respect of payment of fees to doctors for the work they have performed since 1 September 1998. As a result of new procedures some payments have been delayed or wrongly calculated. Sema have acted quickly and made additional payments where errors have been identified. They are also improving procedures to ensure that errors do not occur in the future.

  We are monitoring the situation closely.

  Disability Benefits
  Mr. Duncan Smith
  To ask the Secretary of State for Social Security how many of the representations from disability groups received by the Government during the consultation period before they proposed their changes to disability benefits advocated the abolition of severe disablement allowance. [61695]

  Mr. Timms
  [Holding answer 30 November 1998]: The Green Paper "New ambitions for our country: a new contract for welfare" set out the general principles for welfare reform rather than specific proposals for reforming individual benefits.

  We consulted widely following the publication of the paper in March. Over 1,050 responses were received from numerous organisations including organisations of and for disabled people, most of which welcomed our approach.

  In October we published a consultation Paper "A new contract for welfare—Support for Disabled People" which contains proposals for the reform of Severe Disablement Allowance. We are consulting on these proposals and we will consider all comments and alternative proposals made as part of the consultation process. The consultation period ends on 8 January 1999.

TREASURY

  Euro
  Mr. Rammell
  To ask the Chancellor of the Exchequer what plans he has for a public information campaign on preparing for the euro; and if he will make a statement. [61685]

  Ms Hewitt
  The Euro Preparations Unit's (EPU) communication campaign on the euro is not a general public information campaign but is specifically targeted at ensuring that UK businesses, especially small and medium enterprises (SMEs), are aware of the implications of the introduction of the single currency from 1 January 1999 and have the information they need to address the issues arising from this.

  The EPU's business communication campaign on the euro has proved highly effective in reaching its target audience of SMEs. Since the beginning of May. there have been requests for over 300,000 "business preparations for the euro" factsheet packs from businesses and key intermediary bodies.

  Mr. Rammell
  To ask the Chancellor of the Exchequer what has been the total expenditure and the breakdown of the expenditure on(a) public opinion research, (b) television, radio and newspaper advertising and (c) direct mail by the Euro Preparations Unit; and if he will make a statement. [61687]

  Ms Hewitt
  The Euro Preparations Unit's (EPU) business communication campaign on the euro has proved highly effective in reaching its target audience of small and medium enterprises (SMEs). Since the beginning of May, there have been requests for over 300,000 "business preparations for the euro" factsheet packs from businesses and key intermediary bodies.
  153
  The EPU received Summer Supplementary Estimate provision of £7.5 million for 1998–99. Spend to date has been approximately £0.5 million for direct mailing to 1.6 million UK SMEs, and £4.75 million for the costs of the television, press and radio elements of the campaign. The EPU has not conducted any public opinion research, but has conducted two statistical business survey reports costing approximately £75,000. These surveys track overall euro awareness and preparations amongst UK SMEs as well as measuring the success of the EPU's communications campaign. These figures do not include VAT or postage.

  Petroleum Products (Cross-border Smuggling)
  Mr. Donaldson
  To ask the Chancellor of the Exchequer if he will make a statement about the smuggling of petroleum products into Northern Ireland from the Irish Republic. [61925]

  Ms Hewitt
  Both the Government and Customs are aware of the situation with the illegal importation of road fuel into Northern Ireland for resale and recognise that it is a serious problem which disadvantages legitimate traders. Customs are deploying resources and actively mounting investigations against those involved to counter the threat posed to the revenue and to the Northern Ireland business community. Customs are taking the lead on this issue but are acting in conjunction with other authorities, including the Royal Ulster Constabulary, to make seizures of oil tankers and vehicles carrying oil tanks filled with illegally imported fuel for resale. Whenever possible, cases are progressed with a view to criminal prosecution of the individuals involved.

  Developing Countries (Debt)
  Mr. Canavan
  To ask the Chancellor of the Exchequer what recent discussions he has had with the World Bank and the IMF about the debt problems of developing countries; and if he will make a statement. [61720]

  Ms Hewitt
  The Chancellor spoke about debt relief at the Annual Meetings of the IMF and World Bank in October, calling for: a comprehensive review of the H1PC initiative to take place prior to the 1999 Annual meetings; the IMF and World Bank to take forward urgently work on how to help post-conflict countries, especially those with large arrears to the IFIs; the international community to aim to ensure that 22 countries could have reached their decision points by the end of 1999. The first two issues have now been agreed by the IMF and World Bank.

  Following the devastation caused in Central America by hurricane Mitch, the Chancellor and the Secretary of State for International Development wrote to the IMF, World Bank and Inter-American Development Bank on 10 November, urging these institutions to consider various measures for reducing the debt burdens of the countries worst hit, especially Honduras and Nicaragua. Amongst other things, they suggested setting up a Trust Fund to help pay the debt service that these countries owe the IFIs. The UK has donated £10 million to the Trust Fund, which is presently being set up by the World Bank.

  At a recent meeting in London with the President of the World Bank, the Chancellor discussed how the HIPC initiative could be used to help secure further debt relief for Honduras and Nicaragua—the poorest countries in the region.

  Budget Council
  Mr. Hood
  To ask the Chancellor of the Exchequer what was the outcome of the Budget Council held in Brussels on 24 November; and if he will make a statement. [61650]

  Ms Hewitt
  On 24 November, the Budget Council gave its second reading of the draft 1999 EC budget setting commitments at some 97 billion euros (£67 billion) and payments at 85 billion euros (£59 billion). This represents an increase of some 6.6 per cent. in commitments and 2.5 per cent. in payments compared to the 1998 budget, almost all of which is accounted for by unavoidable increases in structural funds appropriations required under the terms of the Edinburgh agreement of 1992. The Council's second reading leaves a margin of some 6.4 billion euros below the ceiling on the financial perspectives. A detailed description of the Council's second reading of the budget is given in an explanatory memorandum which the Government are submitting to the European Scrutiny Committee.

  Individual Savings Accounts
  Mr. Sayeed
  To ask the Chancellor of the Exchequer if he will list those consulted and the comments made by them in the consultation process, on the basis of which the Inland Revenue estimated that the start up costs of ISAs would be £250 million. [61184]

  Ms Hewitt
  The Revenue received almost 300 responses to the original ISA consultation, and over 100 to the later consultation on the draft ISA regulations, from trade bodies or firms. Officials attended a large number of meetings with industry bodies, and took part in several industry conferences between January and July. Detailed questions about compliance costs were followed up with a number of organisations. Details of these discussions cannot be released for reasons of commercial confidentiality.

  Mr. Sayeed
  To ask the Chancellor of the Exchequer what information is required by his Department to provide a breakdown of the costs incurred for new computer installation, staff and sales force re-training and administration for the start-up of ISAs; and what steps he intends to take to(a) acquire that information and (b) make such estimates. [61183]

  Ms Hewitt
  We shall monitor the ISA scheme as it develops, and this will include compliance cost issues.

  Alcohol Smuggling
  Mrs. Dean
  To ask the Chancellor of the Exchequer what progress has been made in reducing the amount of alcohol illegally imported into Britain. [61535]

  Dawn Primarolo
  In July 1997, the Government announced a review of alcohol and tobacco smuggling and fraud, which was carried out by Customs & Excise in consultation with the trade. Customs & Excise has been allocated an extra £35 million over the next 3 years to tackle this problem. Over 100 additional frontline staff are currently being appointed. In the first 6 months of the current financial year, the revenue detected has been more than the amount for the same period last year.

  National Debt
  Mr. Salmond
  To ask the Chancellor of the Exchequer what proportion of the current United Kingdom national debt was built up over the period 1978–79 to 1994–95; and what proportion of the current interest payments on debt are associated with the debt built up over that period. [61704]

  Ms Hewitt
  The National Debt rose by £270.3 billion between 31 March 1978 and 31 March 1995, and stood at £419.2 billion at 31 March 1998. Hence the proportion built up over this period is 64.5 per cent. Net public sector debt rose by £206 billion between 31 March 1978 and 31 March 1995 and stood at £352 billion at 31 March 1998. The proportion built up over the period is 58.5 per cent. The proportion of total debt interest payments incurred over the period can be estimated precisely but should be roughly similar to the proportion of debt.

  Labour-intensive Services (VAT)
  Mr. Whittingdale
  To ask the Chancellor of the Exchequer what discussions his Department has held on a reduced VAT rate on labour intensive services; and if he will make a statement. [61886]

  Dawn Primarolo
  The European Commission's suggestion that Member States should be allowed to apply a reduced VAT rate on an experimental basis to certain local labour-intensive services was discussed at the Council of Finance Ministers on 16 February 1998. It has also been discussed in meetings of the Council Working Party on Financial Questions. However, the Commission has not yet brought forward any formal proposals on this subject.

  Electronic Commerce (Taxation)
  Mr. Whittingdale
  To ask the Chancellor of the Exchequer what is his policy on the taxation of electronic commerce; and if he will make a statement. [61881]

  Dawn Primarolo
  The Inland Revenue and Customs and Excise published a joint policy paper setting out the UK's policy on the taxation of electronic commerce on 6 October 1998.

  Pre-Budget Report
  Mr. Gibb
  To ask the Chancellor of the Exchequer (1) if he asked the National Audit Office to audit the key assumptions and conventions underpinning the fiscal projections in the Pre-Budget report; [61035]

  (2) for what reason no Audit of Assumptions for the Pre-Budget report was published. [61034]

  Ms Hewitt
  [holding answer 27 November 1998]: The Code for Fiscal Stability requires the Treasury to invite the National Audit Office to audit any changes to the key assumptions and conventions underpinning the fiscal projections. The assumptions and conventions used for the projections in the Pre-Budget Report were unchanged from those used in the March Budget.

  Mr. Gibb
  To ask the Chancellor of the Exchequer if the Government have asked the National Audit Office to review the change of assumptions in unemployment from 156
  1.65 million as set out in the Audit of Assumptions for the July 1997 Budget Projection to 1.3 million in the 1998 Pre-Budget report. [61036]

  Ms Hewitt
  [holding answer 27 November 1998]: In its report to Parliament dated 19 June 1997 (Cm 3693), the National Audit Office audited a flat planning assumption for unemployment. The use of a flat assumption is a long-standing convention that has been used in all subsequent published Treasury forecasts.

  Shamrock Case
  Mr. Gibb
  To ask the Chancellor of the Exchequer if he will make a statement on the Shamrock case. [61043]

  Dawn Primarolo
  [holding answer 27 November 1998]: If the hon. Member would let me know what aspect of this case concerns him, I will reply as soon as possible.

  Commercial HP Leasing
  Mr. Gibb
  To ask the Chancellor of the Exchequer what the total value was of commercial HP leasing arrangements in(a) 1995–96, (b) 1996–97 and (c) 1997–98. [61044]

  Ms Hewitt
  [holding answer 27 November 1998]: The information requested falls within the responsibility of the Director of the Office for National Statistics. I have asked him to reply.

  Letter from Tim Holt to Mr. Nick Gibb, dated 1 December 1998:

  As Director of the Office for National Statistics (ONS), I have been asked to reply to your recent parliamentary question on commercial HP leasing arrangements.

  The information sought is not available from official statistics. Information collected by government statisticians on lending by financial institutions to businesses in the UK does not distinguish between products, except to the extent that these coincide with aggregates used in national accounting or other systems. In official statistics finance leasing is separate from other forms of credit extended to business but no distinction is made between hire purchase loans and other loans and advances.

  The Finance and Leasing Association, the trade association of the industry, publishes comprehensive data on business transacted by its member firms, analysed inter alia by product type (including lease/hire purchase). These data are compiled by a private organisation and are not used in official statistics. The Association is at 15–19 Kingsway London WC2B 6UN; telephone 0171 836 6511.

  Jobseeker's Allowance
  Mr. Don Foster
  To ask the Chancellor of the Exchequer if he will list for(a) each delivery unit for which the figures are available and (b) for each month from January to April 1998, the rate at which 18 to 24 year olds ceased jobseeker's allowance claims and went into jobs in non-pathfinder areas broken down by (i) men, (ii) women, (iii) people with disabilities and (iv) those from ethnic minority groups. [61080]

  Ms Hewitt
  [holding answer 30 November 1998]: The information requested falls within the responsibility of the Director of the Office for National Statistics. I have asked him to reply.
  157
  Letter from Tim Holt to Mr. Don Foster, dated 1 December 1998:

  As Director of the Office for National Statistics (ONS), I have been asked to reply to your recent parliamentary question on the rate at which 18 to 24 year olds ceased jobseeker's allowance claims and went into jobs in non-pathfinder areas.

  ONS does not collect data on the disability or ethnicity of claimants, or the location of jobs people take up on leaving the claimant count. Delivery Units are not standard geographies, but from early in the New Year, best-fit data for delivery units for the number of claimants split by age and sex will be available from the Nomis database that can be accessed by the House of Commons Library.

  Wages
  Mr. Boswell
  To ask the Chancellor of the Exchequer how many workers in the United Kingdom currently(a) earn under £8,000 per annum, (b) earn between £8,000 and £10,000 per annum, (c) earn between £10,000 and £12,000 per annum and (d) earn over £12,000 per annum. [61933]

  Ms Hewitt
  The information requested falls within the responsibility of the Director of the Office for National Statistics. I have asked him to reply.

  Letter from Tim Holt to Mr. Tim Boswell, dated 1 December 1998:

  As the Director of the Office for National Statistics (ONS), I have been asked to reply to your recent parliamentary question on earnings.

  The latest available information, from the New Earnings Survey April 1998, is contained in the following table.

  Employees (in the same job as last year) on adult rates, including those whose pay for the survey period was affected by absence—New Earnings Survey, April 1998 United Kingdom

  Percentage with gross annual earnings

  Full-time

  Part-time

  All

  Less than £8,000

  6.3

  76.4

  23.2

  £8,000 to £10,000

  8.1

  8.6

  8.2

  £10,000 to £12,000

  11.2

  5.1

  9.7

  £12,000 or more

  74.4

  9.9

  58.9

  Source:

  New Earnings Survey, Office for National Statistics

FOREIGN AND COMMONWEALTH AFFAIRS

  Agenda 2000
  Mr. Paice
  To ask the Secretary of State for Foreign and Commonwealth Affairs when he expects the completion of the Agenda 2000 proposals. [61401]

  Ms Quin
  At the Cardiff European Council in March this year, Heads of State or Government agreed that political agreement to the Agenda 2000 package should be reached no later than March 1999. Both Austria, who hold the Presidency now, and Germany, who will hold the Presidency for the first 6 months of 1999, have expressed their commitment to that timetable.

  Mr. Watts
  To ask the Secretary of State for Foreign and Commonwealth Affairs if he will make a statement about progress on Agenda 2000. [61404]
  158
  Ms Quin
  Steady progress has been made in the past month or two. The Vienna European Council on 11–12 December will not take final decisions, but the Presidency are preparing a report identifying the key political issues that need to be resolved as part of the overall agreement, and also a compendium of negotiating texts reflecting the current state of discussion. Agreement no later than March 1999, in line with the Cardiff European Council conclusions, is achievable.

  Canada
  Mr. Illsley
  To ask the Secretary of State for Foreign and Commonwealth Affairs if he will visit Canada to discuss the creation of the new territory of Nunavut. [61402]

  Mr. Tony Lloyd
  We have no plans to visit Canada to discuss the creation of the new territory of Nunavut.

  UN Finances
  Mr. Jack
  To ask the Secretary of State for Foreign and Commonwealth Affairs when he last addressed the General Assembly of the United Nations; and what aspects of reform of United Nations finances were covered. [61403]

  Mr. Tony Lloyd
  In his address to the General Assembly on 23 September 1997, my right hon. Friend the Foreign Secretary argued for reform of UN finances to put them on a sound and equitable basis. My right hon. Friend the Prime Minister told this year's General Assembly that all parts of the UN system needed secure funding.

  Iran
  Mr. Gapes
  To ask the Secretary of State for Foreign and Commonwealth Affairs what assessment he has made of the implications for regional and international security of recent Iranian tests of long-range missiles. [61405]

  Mr. Tony Lloyd
  We were extremely concerned by Iran's flight test of its Shahab 3 ballistic missile in July. Although the system is still in its development phase, its approximate range of 1300km means that the possibility of its future deployment threatens the stability of the whole of the Middle East.

  Whilst we understand Iran's legitimate security concerns, we have repeatedly urged the Iranian authorities to refrain from developing ballistic missiles. It is in nobody's interest for an arms race to develop in this already volatile region.

  Mr. Dismore
  To ask the Secretary of State for Foreign and Commonwealth Affairs what representations he has made to the Government of Iran on the funding of(a) Hezbollah and (b) Hamas. [61408]

  Mr. Fatchett
  We and our EU colleagues have frequently raised with the Iranians our concerns about their support for groups who use violent methods to oppose the Middle East peace process, and will continue to do so.

  However, during my right hon. Friend the Foreign Secretary's meeting with the Iranian Foreign Minister on 24 September, Dr. Kharrazi reaffirmed his Government's

  159
  strong condemnation of terrorism in all its forms. Iran has strongly condemned terrorist attacks in Egypt and Algeria and rejected attacks upon civilians anywhere. We welcome these positive developments.

  Middle East Peace Process
  Dr. Starkey
  To ask the Secretary of State for Foreign and Commonwealth Affairs when he next expects to meet the Prime Minister of Israel to discuss the middle east peace process; and if he will make a statement. [61406]

  Mr. Robin Cook
  I refer my hon. Friend to the answer I gave earlier in the House today to my hon. Friend the Member for Scarborough and Whitby (Mr. Quinn),Official Report, column 656.

  Burma
  Mrs. Fyfe
  To ask the Secretary of State for Foreign and Commonwealth Affairs if he will make a statement on UK relations with Burma. [61407]

  Mr. David Heath
  To ask the Secretary of State for Foreign and Commonwealth Affairs if he will make a statement on his policy in respect of Myanmar. [61410]

  Mr. Fatchett
  We deplore the Burmese authorities' disregard for human rights and democracy. We are working for an end to these abuses and the start of substantive political dialogue with NLD, including Aung San Suu Kyi, and ethnic minority groups.

  Cyprus
  Mr. Love
  To ask the Secretary of State for Foreign and Commonwealth Affairs what action is being taken to sponsor dialogue between the two communities in Cyprus. [61411]

  Ms Quin
  We remain committed to supporting the UN Secretary-General's efforts to reach a comprehensive political settlement in Cyprus through direct negotiations between the leaders of the two communities.

  We and international partners continue to promote activities at all levels which foster dialogue between the Greek Cypriot and Turkish Cypriot communities in Cyprus.

  Iraq
  Mr. Pearson
  To ask the Secretary of State for Foreign and Commonwealth Affairs what assessment he has made of Iraq's compliance with United Nations resolutions. [61412]

  Mr. Fatchett
  It is the unanimous view of the Security Council that Iraq has not fulfilled its obligations under the relevant UN resolutions.

  Mr. Dalyell
  To ask the Secretary of State for Foreign and Commonwealth Affairs if he will make a statement on his meeting with the 16 dissident Iraqi groups on 23 November. [61415]

  Mr. Fatchett
  I met London representatives of various Iraqi opposition groups on 23 November.

  Lockerbie
  Sir Teddy Taylor
  To ask the Secretary of State for Foreign and Commonwealth Affairs what progress has been made in resolving the issue of the proposed trial in The Hague of the alleged Lockerbie suspects. [61413]

  Mr. Tony Lloyd
  We have provided comprehensive clarification on issues raised by Libya through the UN on the terms of the initiative. These answers demonstrate that we are acting in good faith. We are in close touch with the UN Secretary-General, who is mandated by the UN Security Council resolutions to seek Libyan compliance. We now look to Libya for a prompt and positive response.

  Democratic Republic of Congo
  Ms Oona King
  To ask the Secretary of State for Foreign and Commonwealth Affairs if he will make a statement on the situation in the Democratic Republic of Congo. [61416]

  Mr. Tony Lloyd
  Britain is working hard for peace. We are actively encouraging all states involved in the fighting in the Democratic Republic of Congo to pursue a negotiated settlement. We have made it clear that there can be no military solution. Only a process of dialogue and negotiation can bring about a settlement that will last.

  China
  Mr. Bill O'Brien
  To ask the Secretary of State for Foreign and Commonwealth Affairs if he will make a statement on the current relations between China and the United Kingdom. [61418]

  Mr. Fatchett
  As the visit to China of my right hon. Friend the Prime Minister in October demonstrated, a new chapter has opened in our bilateral relations. We are working for a broader relationship, including increased political, commercial, educational and cultural contacts. We will continue to address difficult subjects, such as human rights, through an approach based on dialogue.

  EU Enlargement
  Mr. Rammell
  To ask the Secretary of State for Foreign and Commonwealth Affairs if he will make a statement on the progress of EU enlargement. [61397]

  Ms Quin
  I refer my hon. Friend to the answer my right hon. Friend the Foreign Secretary gave earlier in the House today to the hon. Member for North Essex, (Mr. Jenkin),Official Report, column 660.

  St. Helena
  Mr. Bob Russell
  To ask the Secretary of State for Foreign and Commonwealth Affairs what plans he has to restore full British citizenship to residents of the island of St. Helena. [61399]

  Mr. Tony Lloyd
  The issue of British citizenship for residents of all UK Overseas Territories who do not already have it is a complex one. It is being considered sympathetically in the context of the current Review of UK Overseas Territories and the result will be published in the White Paper. We expect to publish the Paper early in the current session of Parliament.

  European Elections
  Mr. Mitchell
  To ask the Secretary of State for Foreign and Commonwealth Affairs what the remit is of the working group concerning proposed common principles for European elections; and if he will place in the Library the documentation relating to it. [61719]

  Ms Quin
  The General Affairs Group is the standing Council working group responsible for institutional affairs. It was given a mandate to consider the European Parliament's proposed common principles for European parliamentary elections by the Committee of Permanent Representatives on 10 September 1998. I have placed a copy of the European Parliament's proposal in the Libraries of the House.

  Gibraltar
  Mr. Gordon Prentice
  To ask the Secretary of State for Foreign and Commonwealth Affairs when he last discussed with his Spanish counterpart the claim by Spain for sovereignty over Gibraltar. [61641]

  Ms Quin
  The Brussels Process Communiqué of 27 November 1984 provides for the discussion of sovereignty over Gibraltar. The last Brussels Process talks took place in December 1997. The next meeting is due to be held early next year.

  Falklands
  Mr. Gordon Prentice
  To ask the Secretary of State for Foreign and Commonwealth Affairs what representations he has received from Argentina concerning its claim for sovereignty over the Falklands. [61640]

  Mr. Tony Lloyd
  The Government of Argentina have repeatedly asserted their view that Argentina has a claim to sovereignty over the Falkland Islands, and have called on us to enter into negotiations. In response, we have made it clear that the United Kingdom has no doubt about its sovereignty over the Falklands and does not regard this as negotiable. It remains our position that there will be no change in the status of the Falklands unless that is the wish of the Islanders themselves.

  Arms Embargoes
  Mr. Wigley
  To ask the Secretary of State for Foreign and Commonwealth Affairs what steps the Government have taken in the last year to strengthen the implementation and enforcement of existing arms embargoes. [61484]

  Mr. Tony Lloyd
  In his statement to the House on 27 July 1998,Official Report, columns 19–22, my right hon. Friend the Foreign Secretary announced the establishment of a Sanctions Enforcement Unit in the Foreign and Commonwealth Office, with responsibility for co-ordinating FCO action with respect to the enforcement of all sanctions, including arms embargoes. The Sanctions Enforcement Unit also issues guidance to FCO departments and overseas missions on the scope of UN sanctions resolutions and the Orders in Council implementing them in UK legislation.

  Defence Exports
  Mr. Wigley
  To ask the Secretary of State for Foreign and Commonwealth Affairs if the next annual report on defence exports will contain a breakdown of licences refused. [61470]

  Mr. Tony Lloyd
  I refer the right hon. Member to the reply I gave to my hon. Friend the Member for Birmingham, Selly Oak (Dr. Jones) on 14 July 1998,Official Report, column 149.

  North Korea
  Mrs. Gillan
  To ask the Secretary of State for Foreign and Commonwealth Affairs if he will make a statement on the talks between the United States and North Korea concerning the latter' s nuclear programme. [61860]

  Mr. Tony Lloyd
  The United States and North Korea meet regularly to discuss a range of issues, including North Korea's nuclear programme. The details of their discussions are a matter for the governments concerned.

  Mrs. Gillan
  To ask the Secretary of State for Foreign and Commonwealth Affairs what representations he has made to the Governments of(a) North Korea, (b) South Korea and (c) the United States concerning North Korea's nuclear programme. [61859]

  Mr. Tony Lloyd
  We regularly discuss North Korean nuclear issues with the US and South Korea, at both Ministerial and official level, bilaterally and collectively at meetings of the Korean Peninsula Energy Development Organisation. The UK does not have diplomatic relations with North Korea and no Ministerial talks have been held. Nuclear issues were discussed at official level in November 1997. The UK also intends to raise them in EU Troika and bilateral talks with North Korea on 2 and 3 December respectively.

  Mrs. Gillan
  To ask the Secretary of State for Foreign and Commonwealth Affairs what assistance the United Kingdom has offered to monitor the North Korean nuclear programme. [61861]

  Mr. Tony Lloyd
  The International Atomic Energy Agency (IAEA) is responsible for monitoring North Korea's adherence to its obligations under the Non-Proliferation Treaty. The UK fully supports the work of the IAEA through its contribution to that organisation.

  In addition, the UK, through the EU, is strongly committed to the Korean Peninsula Energy Development Organisation (KEDO), as the best means of resolving the issue of nuclear proliferation on the Korean Peninsula. The EU is a member of the KEDO Executive Board, making a substantial contribution of 15 million ecu a year for five years, of which the UK share is some £1.7 million a year.

  Zimbabwe
  Mrs. Gillan
  To ask the Secretary of State for Foreign and Commonwealth Affairs what discussions he has had with the Secretary of State for International Development concerning the continued provision of aid to Zimbabwe. [61862]
  163
  Mr. Tony Lloyd
  My right hon. Friend the Foreign Secretary has regular meetings with my right hon. Friend the Secretary of State for International Development on a range of issues of mutual interest to our departments.

  Pakistan
  Mr. Randall
  To ask the Secretary of State for Foreign and Commonwealth Affairs what discussions he has had with the Government of Pakistan concerning the status of Christians in that country. [61409]

  Mr. Fatchett
  We and our EU partners regularly raise the status of Christians in Pakistan with the Government of Pakistan, most recently at a meeting of the EU Troika and Pakistan on 25 November. I raised our concerns for all religious minorities in Pakistan with the Interior Minister when I visited Pakistan last year, as did my noble Friend the Under Secretary in January of this year. As EU Presidency, we led a demarche on Pakistan's blasphemy laws on 14 May. and participated in a further demarche on 19 October.

  Alcoholic Drinks Purchases
  Mr. Salmond
  To ask the Secretary of State for Foreign and Commonwealth Affairs how much was spent on the purchase of alcoholic drinks by the United Kingdom embassy in France in 1996–97. [61698]

  Ms Quin
  The Embassy itself does not purchase alcoholic drinks: they are bought by Embassy staff on an individual basis. Annual expenditure by individual members of staff on official entertainment does not distinguish between alcoholic and non-alcoholic drinks and food. It is therefore not possible to say how much was spent on alcoholic drinks in any one year.

  Chile
  Mr. Syms
  To ask the Secretary of State for Foreign and Commonwealth Affairs what advice on security measures he intends to give to British Scouts, Guides and leaders who are to attend the World Scout Jamboree in Chile starting on 20 December. [61880]

  Mr. Fatchett
  As of 1 December 1998 we advise against all non-essential travel to Chile. Our advice is intended for all British nationals.

  British nationals making essential visits to Chile for more than a brief period are advised to register at the British Embassy, Santiago (tel: 231 3737, fax: 2342566) on arrival.

  British nationals in Chile should keep a low profile, avoid crowds, meetings, demonstrations and areas where the English-speaking community usually gather.

  Travel advice is reviewed daily.

  Nigeria
  Mr. Mitchell
  To ask the Secretary of State for Foreign and Commonwealth Affairs when he expects to restore full diplomatic relations with Nigeria. [61384]

  Mr. Tony Lloyd
  I refer my hon. Friend to the answer I gave earlier in the House today to my hon. Friend the Member for Vale of Glamorgan (Mr. Smith),Official Report, columns 670–71.

HEALTH

  Condoms (Homeless People)
  Mr. Crausby
  To ask the Secretary of State for Health if he will make free provision of condoms to homeless people. [60995]

  Ms Jowell
  There are no plans to introduce a separate condom distribution service for homeless people. Homeless people can obtain free condoms from open access family planning and genito-urinary medicine clinics.

  Hospital Admissions
  Mr. Crausby
  To ask the Secretary of State for Health (1) what percentage of the population aged between 16 and 65 years use the accident and emergency departments at least once a year; [61012]

  (2) what percentage of the population aged between 16 and 65 years was admitted to hospital on at least one occasion in the last 12 months for which figures are available. [61011]

  Mr. Hutton
  The information is not available centrally in the form requested.

  It is not currently possible to provide a count of the number of occasions an individual is admitted to hospital, although development work is under way to enable such counts to be made in the future. In 1997–98, there were 10,368,844 hospital admissions, of whom 5,720,065 were aged between 16 and 65.

  Information on the number of new and follow-up attendances at accident and emergency departments is not broken down by age groups. The most recent information is set out in the Departmental publication, "Outpatients and ward attenders, England, Financial Year 1997–98", copies of which are available in the Library.

  Royal Commission on Long-term Care of the Elderly

  Dr. Lynne Jones
  To ask the Secretary of State for Health how many pensioner representatives there are on the Royal Commission on Long-term Care of the Elderly. [61426]

  Mr. Hutton
  The membership of the Royal Commission on Long-Term Care of the Elderly includes people with knowledge of the public and independent sectors, health and social care, housing, finance and consumer affairs. They were chosen for their skills and experience, rather than to represent particular interests. Age Concern, Help the Aged and the National Pensioners Convention are members of the commission's reference group, which includes charities and other organisations representing people who may find themselves in long-term care; the financial services sector; the NHS; local government and other service provider bodies; and representatives of the major faiths in the United Kingdom. By this means, the commission is drawing on the most up-to-date experience of users and carers.

  Women's Boxing
  Mr. Gordon Prentice
  To ask the Secretary of State for Health what assessment he has made of the risks associated with women's boxing. [61007]
  165
  Ms Jowell
  Although the Department has not conducted specific research into the hazards associated with women's boxing, the health risks of the sport in general are well documented. These risks are highlighted in "The Boxing Debate" published by the British Medical Association in 1993, and include acute and chronic brain damage, and injuries to the eye.

  Food Poisoning
  Ms Shipley
  To ask the Secretary of State for Health what plans he has to publish statistics on the rates of food poisoning in the constituent parts in the United Kingdom. [61192]

  Ms Jowell
  Food poisoning notification data for England and Wales are published each week by the Public Health Laboratory Service Communicable Disease Surveillance Centre in "Communicable Disease Report Weekly", copies of which are available in the Library.

  Information for Scotland and Northern Ireland is the responsibility of my right hon. Friends the Secretaries of State for Scotland and for Northern Ireland.

  Health Statistics
  Mr. Crausby
  To ask the Secretary of State for Health what percentage of the population aged between 16 and 65 years have(a) asthma, (b) eczema, (c) abscesses, (d) hepatitis C, (e) hepatitis B and (f) HIV. [60992]

  Ms Jowell
  The available information is summarised in the table.

  Condition

  Estimated prevalence in adults in the general population

  Asthma

  1 Asthma is estimated to affect about 4 per cent, of adults sufficiently severely to require medical supervision

  Eczema

  2 The Health Survey for England 1996 reported that 13 per cent, of adults stated that a doctor had at some stage in their life diagnosed them as having eczema

  Abscesses

  The information requested is not available

  Hepatitis C

  Studies suggest that the prevalence of chronic carriage may be around 0.5 per cent.

  Hepatitis B

  Available data indicate that the prevalence of chronic hepatitis B infection is around 0.3 per cent.

  HIV

  3 The current best estimate for diagnosed and undiagnosed HIV infections in England and Wales for 16–65 year olds is 0.07 per cent.

  1 This estimate is drawn from Asthma: An Epidemiological Overview published by the Department of Health in 1995.

  2 The Health Survey for England 1996 was carried out on behalf of the Department of Health by the Joint Health Surveys Unit and published earlier this year.

  Source:

  3 Public Health Laboratory Service

  Traffic Levels (Health Effects)
  Mr. Brake
  To ask the Secretary of State for Health what research he has(a) commissioned and (b) evaluated on the relationship between increases in traffic levels and health costs; and if he will make a statement. [61489]

  Ms Jowell
  The Department of Health funds, jointly with the Department of the Environment, Transport and the Regions and the Medical Research Council, a166
  programme of research into the effects of air pollutants on health. A study looking at the effects on health of relieving traffic congestion by building a bypass has been funded. This study is being done in Queensferry. Results are expected in 1999. The Department has assessed the impact of air pollution on health and has published a report: Quantification of the Effects of Air Pollution on Health in the United Kingdom. Copies are available in the Library. The Department has been examining the costs associated with these effects as a part of the accelerated review of the National Air Quality Strategy. A report will be published early in the new year.

  Hospitals (Felixstowe)
  Mr. Gummer
  To ask the Secretary of State for Health (1) if he will request Suffolk Health Authority to reconsider their proposals to close the Bartlett Hospital, and to review the provision of hospital care in(a) Felixstowe and (b) the surrounding area; [61973]

  (2) when he will announce a decision on the Bartlett Hospital in Felixstowe. [61972]

  Mr. Dobson
  I shall announce my decision about the future of the Bartlett Hospital in Felixstowe shortly.

  Human Fertilisation and Embryology Authority

  Mr. Derek Twigg
  To ask the Secretary of State for Health if he will announce changes in membership of the Human Fertilisation and Embryology Authority. [62173]

  Ms Jowell
  I am pleased to announce the following appointments made on behalf of the United Kingdom Health Ministers:Mrs. Jane Denton—Nursing Director of the Multiple Births Foundation, reappointed as Deputy Chairman until 6 November 2001;
  Dr. Anne McLaren—Principal Research Associate, Wellcome Cancer Research Campaign Institute, reappointed as a member until 6 November 2001;
  Mr. John Williams—Dean at the Faculty of Economic and Social Studies at the University of Wales, Aberystwyth, reappointed as a member until 6 November 1999;
  Ms Sara Nathan—until recently Editor Channel 4 News, appointed as a member until 6 November 2001;
  Professor Brenda Almond—Professor of Moral and Social Philosophy at the University of Hull, appointed as a member until 6 November 2001;
  Ms Sharmila Nebhrajani—Head of Corporate Planning at the British Broadcasting Corporation, a Chartered Accountant and former Management Consultant, appointed as a member until 6 November 2001;
  Professor Henry Leese—Professor of Biology at the University of York, appointed as a member until 6 November 2001;
  Dr. Sadia Muhammed—General Medical Practitioner in York and Forensic Medical Examiner to the North Yorkshire Police, appointed as a member until 6 November 2001.

  I am very grateful to Ms Elizabeth Forgan, Mr. Richard Jones, Mr. David Greggains and Professor Anthony Thiselton who are retiring from the Authority this year. I also wish to thank Dr. Ruth Chambers who left the Authority on 6 November at her request.

  These appointments were made in accordance with the guidance issued by the Commissioner for Public Appointments.

  Local Authorities (Co-operation)
  Mr. Burstow
  To ask the Secretary of State for Health what evaluation his Department has made of the effectiveness of section 22(1) of the National Health Services Act 1977. [61868]

  Mr. Hutton
  A number of studies looking at the effectiveness of joint working have been commissioned by the Department in recent years. This is in addition to the joint monitoring undertaken by the regional offices of the National Health Service Executive and Social Services Inspectorate.

  Intensive Care
  Mrs. Dean
  To ask the Secretary of State for Health if the Government's review of the number of NHS beds needed satisfactorily to treat patients will also assess whether there are sufficient intensive care beds. [61534]

  Mr. Hutton
  Action is already in hand to address this issue. We have commissioned the health care needs assessment of intensive care and will be carrying out a census of intensive care beds next spring. This work will run in parallel with and, where appropriate, feed into, the national beds inquiry.

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

Disability Rights Commission: Funding
Lord Ashley of Stoke Lord Ashley of Stoke asked Her Majesty's Government:
What level of funding is planned for the disability rights commission.
Lord Hunt of Kings Heath: My Lords, last week Her Majesty the Queen announced our intention to bring forward legislation this Session to create a disability rights commission. We hope to introduce the Bill in the near future. We are committed to ensuring that when the disability rights commission is established it will be adequately funded to do its job effectively. In line with the usual procedure, the estimated cost of the disability rights commission will be made available in the explanatory note when the Bill is introduced.
Lord Ashley of Stoke: My Lords, does my noble friend agree that the setting up of this commission is a great historic step towards ending discrimination against Britain's 8 million disabled people? Their new champion, opposed by the Tory Government for so long, will ensure civil rights for disabled people better than any other single act any government could have carried out. But it will require adequate funding. As the new commission's functions will be complex and go much wider than race and gender because of the great variability of discrimination, can the Minister ensure that the funding will be proportionately larger? Can that be borne in mind?
Lord Hunt of Kings Heath: Yes, my Lords. I agree that this is a great historic decision which I am confident will promote the equalisation of opportunities for disabled people.
As regards funding, as I have already explained, estimated costs will be included in the explanatory note when the Bill is introduced. It is obviously essential that the commission is funded adequately to do the job, has high quality leadership and employs high quality staff. Of course, there are lessons to be learnt from both the CRE and the EOC in relation to budgets and I shall bear those in mind.
Lord Campbell of Croy: My Lords, will the noble Lord take very seriously the matter raised by his noble friend Lord Ashley? The consultation document issued in July said absolutely nothing about financing the commission. Does he agree that new money on a considerable scale will be needed if the commission is
354
to have substantially more powers and functions than the present council on disability which was established during the last Parliament?
Lord Hunt of Kings Heath: My Lords, I am quite clear that adequate funding needs to be provided for the commission to do its important job. I cannot go into the specific details of the amount of funding to be given, but noble Lords can be assured that in calculating the budget we shall take into close account the functions that the commission will have to carry out.
Baroness Masham of Ilton: My Lords, if disabled people have to take matters through the courts, will they receive funding for it?
Lord Hunt of Kings Heath: My Lords, in terms of the remit of the disability rights commission to which the noble Baroness refers, the commission will be able to assist disabled people in individual cases according to criteria to be set out when the commission comes into being.
Lord Morris of Manchester: My Lords, my noble friend will know why I, too, am grateful for his reply and delighted by the carrying into effect of this further manifesto commitment. Approximately when does he expect the Bill to receive a Second Reading in the House and when does he think education and training will be fully included in the legislation on discrimination against disabled people?
Lord Hunt of Kings Heath: My Lords, as to the Second Reading, all I can say at this stage is "very shortly". We hope that the commission will be established by the year 2000.
On the wider issue, I can tell my noble friend that the ministerial disability task force is now looking at the whole issue of comprehensive civil rights for disabled people and what is necessary to achieve that. The task force will report in July 1999.
Earl Russell: My Lords, on behalf of these Benches I extend a welcome to the proposal for a disability rights commission. I also include the noble Lord, Lord Ashley of Stoke, in those congratulations.
The Minister is no doubt aware that some of the most successful commissions—notably the Equal Opportunities Commission and the Commission for Racial Equality—have scored some of their greatest successes through the bringing of cases. Can the Minister assure the House that the budget for that purpose will be adequate for the needs it has to meet, and that should there be any problem in that area, it will be reviewed?
Further, will the Minister consider a remark made by the Lord Chancellor in 1563 that making good laws without implementing them is like buying a set of new garden tools and not using them? Does he agree that that judgment has stood the test of time?
Lord Hunt of Kings Heath: My Lords, there is much in that. I thank the noble Earl for the welcome that he

355
has given to this decision. I also join him in congratulating my noble friend Lord Ashley. I agree with the substance of the point he makes. Clearly, the disability rights commission will have an important role to play. I reiterate that it is our intention to ensure that the commission is adequately funded for the responsibilities that we ask it to assume.
Lord Higgins: My Lords, is the Minister aware that the British Council for Disabled People while it welcomes the establishment of the commission believes that further back-up legislation that was promised when the present Government were in opposition has been forgotten? Can he give an assurance that that legislation is still in the Government's programme?
Lord Hunt of Kings Heath: My Lords, the Government will consider the comments of the organisation to which the noble Lord refers. There can be no doubt at all about the Government's commitment to fight discrimination in relation to disabled people.
Baroness Gould of Potternewton: My Lords, can my noble friend indicate whether the commission will also have within its remit the right to look at the definition of disability which at the moment appears to be rather narrow and complex and excludes a large number of disabled people?
Lord Hunt of Kings Heath: My Lords, a person has a disability for the purposes of the DDA if he has a physical or mental impairment that has a substantial and long-term adverse effect on his ability to carry out normal day-to-day activities. The Government believe that the definition is wider than many people believe. Nevertheless, the ministerial disability task force is reviewing the definition. If my noble friend wishes, I shall be happy to pass on her comments to that ministerial task force.

LT Fare Increases and the Environment
2.44 p.m.
Baroness Ludford Baroness Ludford asked Her Majesty's Government:
How fare rises of up to 16.7 per cent. on London Transport further their policies on combating global warming and encouraging brownfield development.
The Parliamentary Under-Secretary of State, Department of the Environment, Transport and the Regions (Lord Whitty): My Lords, the overall package of revised fares amounts to an average increase of 4.5 per cent.—1 per cent. above the rate of inflation. No single Underground or bus fare will rise by more than 10 pence. Fares income provides a steady source of revenue for London Transport to allow it to invest in the system and to improve services to passengers. This will encourage public transport use which in turn will contribute towards our broader objectives for the environment and sustainable development.
Baroness Ludford: My Lords, while I thank the Minister for his reply does he accept that the average
356
which he cites conceals a 10 per cent. rise for a zone 1 travelcard and a 16.7 per cent. rise for a short hop bus fare? Does the noble Lord agree that Londoners have borne price increases over the past 15 years of 50 per cent. in real terms while motoring costs have fallen? How does that provide an incentive for Londoners to leave their cars at home and use public transport and thus achieve the goal of cutting carbon dioxide emissions? Further, how does it provide an incentive to people to reside in London and not to move out and cause greenfield development which spoils the countryside?
Lord Whitty: My Lords, the shift to public transport that we need to achieve in London will comprise a package of measures, including the improvement of London Transport services which requires investment and funds. It is true that within that package some increases are significantly higher than 4.5 per cent. That is the average increase. There are some areas—for example, the carnet of 10 zone 1 tickets—where prices will be frozen to encourage commitment to the long-term use of the Underground system. As to the encouragement of people to move out, I am not sure that a 10 pence increase in Underground fares will encourage people to go and live in Reigate.
Lord Hylton: My Lords, will the noble Lord draw to the attention of London Transport the track problems that affected the Circle Line yesterday? Will he ascertain from LT its long-term plans to improve the southern section of the Circle Line where there is intense competition between at least three or four lines?
Lord Whitty: My Lords, essentially those are operational problems for the management of London Transport. However, I shall make inquiries about the noble Lord's point in relation to the Circle Line. Our strategy is to provide additional investment for London Transport which has been so sadly neglected in recent decades.
Lord Brabazon of Tara: My Lords, the noble Lord refers to additional investment in London Transport. Can the Minister say what is to happen after 2000, or whenever the mayor of London takes over responsibility for London Transport, when I understand that all government subsidy will cease? Will the future burden then rest upon the London fare-payer or ratepayer? Many people believe that all of the extra money that the Government have offered to London Transport so far will be used to complete the Jubilee Line extension.
Lord Whitty: My Lords, noble Lords will be aware that the Government are looking to a public-private partnership. London Transport is considering that matter at the moment and is due to report shortly to my right honourable friend the Deputy Prime Minister. No decision on the situation beyond 2000 will be made before that report is considered. As regards fare income, clearly that will make a contribution towards the

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investment programme, but there will also be a need for new funds, which is what the PPP discussions are all about.
Earl Russell: My Lords, I declare an interest in asking the Minister whether he is aware that one of the factors that encourages travellers to use cars instead of the Underground is the increasing unreliability of the service. Is he aware that major tube breakdowns are no longer regularly reported even in the Evening Standard? But does he agree that in this case no news is bad news?
Lord Whitty: My Lords, I certainly agree that an increase in the number of breakdowns is bad news and that London Transport has an obligation to address that problem. To do so requires a long-term investment programme which the Government will back.
Lord Blackwell: My Lords, the Minister refers to public-private partnership and the creation of money for investment. The noble Lord may remember that the former government proposed to raise over £1 billion by selling the assets of London Transport and re-investing that money in better services. Unless the Government have better proposals, will they reconsider that proposition?
Lord Whitty: My Lords, the Deputy Prime Minister and his colleagues considered that proposition and drew the conclusion that the way they are proceeding would be the better approach in terms of mobilising funds and delivering the service to Londoners.
Baroness Ludford: My Lords, the Minister jokes about people having an incentive to move out to Reigate. Does the noble Lord accept that the whole quality of life is important in London? It is important to ensure that our towns and cities are good places in which to live and that we keep cities dense and do not spoil the countryside by unnecessary new development.
Lord Whitty: My Lords, I agree with the noble Baroness to that extent. She will know that we would not wish to spoil the countryside by engaging in substantial development, in particular in the crowded areas of the south-east.

Steel Industry and Wales
2.50 p.m.
Lord Roberts of Conwy Lord Roberts of Conwy asked Her Majesty's Government:
What are the anticipated effects, especially in Wales, of the proposed changes in the steel industry.
The Parliamentary Under-Secretary of State, Department of Trade and Industry (Lord Sainsbury of Turville): My Lords, the British steel industry is undergoing a period of extended restructuring to retain its competitiveness in the face of difficult international trading conditions. This will result in the closure of uneconomic plant, together with job losses: some
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2,700 of those have been announced since April. The effect will be to ensure that British steel companies continue to be among the most productive in the world. Although 1,600 of those job losses are in Wales, there are also some encouraging developments in the Welsh economy. From May 1997 to the end of October of this year, the Welsh Development Authority recorded 184 projects, which forecast 14,227 new jobs and safeguarded 4,865 others. Over 6,000 of those new jobs relate to projects recorded in the past seven months alone.
Lord Roberts of Conwy: My Lords, I am grateful to the Minister for that frank and honest reply, depressing though it may be with regard to job losses envisaged. However, can he tell me what is the root problem of the industry? Is it the strong pound, a fall in demand for steel or over-production of steel worldwide? Can he assure us that everything that can properly be done is being done to safeguard the export trade in steel, to stop the dumping of steel in Europe in particular and to preserve jobs not only in the steel industry but in the many manufacturing industries that use steel?
Lord Sainsbury of Turville: My Lords, the industry's present difficulties have many causes. The economic crisis in Asia has contributed to rapidly falling world steel prices—up to 30 per cent. in specific cases. There is global overcapacity. The high exchange rate has also had an impact, although we believe that it is at the right level from the general economic position. The noble Lord can be entirely assured that we are doing everything we can to protect our industry, making certain that subsidies do not take place in other countries.
Lord Bruce of Donington: My Lords, will the Minister give an assurance that the practice of subsidising continental steel companies, at present permitted by the Commission, is rectified with a minimum of delay?
Lord Sainsbury of Turville: My Lords, we are determined that the UK steel industry should not be disadvantaged by illegally subsidised competition. We have consistently pressed for strict rules on subsidies to the steel sector, in particular the rigorous enforcement of the steel aid code by member states, and the stringent monitoring of enforcement by the Commission. I think that that has contributed to a climate in which legal state aids have significantly declined in importance for the UK steel industry.
We are pressing also for equally strict controls for state aid to the steel industry to be incorporated in a successor regime to the steel aid code which expires in the year 2002. We shall be vigilant in ensuring that the British industry is not disadvantaged. We shall investigate quickly any evidence put forward of illegal subsidies. We shall consider what action might be appropriate.
Lord Hooson: My Lords, does the Minister agree that while we are losing 1,700 real jobs in steel in Wales, we are and have been spending hundreds of millions of pounds encouraging inward investment, often from companies from abroad which close outlying factories

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down as soon as any recession appears? Would it not be better for this country to spend a little more time encouraging domestic industry?
Lord Sainsbury of Turville: My Lords, we shall do everything right and proper to encourage inward investment and British companies. We are doing everything we can within the permitted rules to support the British steel industry.
Lord Islwyn: My Lords, does the Minister appreciate—
Lord Renton of Mount Harry: My Lords, perhaps I may—
The Lord Privy Seal (Baroness Jay of Paddington): My Lords, I think that it is the turn of this side to ask a question. There is plenty of time to take all the questions.
Lord Islwyn: My Lords, does the Minister appreciate that the Welsh steel industry is efficient, well managed and has a well motivated, highly trained labour force? It is at present bedevilled by the high value of the pound which has led to a flood of cheap foreign imports into this country. What measures are the Government taking to improve that situation, bearing in mind how vital the future of the industry is to the Welsh economy?
Lord Sainsbury of Turville: My Lords, British steel is to be congratulated on the fact that it has increased productivity per man by nearly 10 per cent. a year for 20 years. Nearly 70 per cent. of UK steel types available today have been developed in the past 10 years to meet demands for stronger, lighter materials. It means that we have a competitive world-class steel industry.
We are taking specific measures to help the industry. The Department of Trade and Industry is supporting a range of activities to improve the steel sector's competitiveness. It has provided grant support through the UK Steel Association and Steel Training Ltd. for a range of products involving bench-marking, education and training. We are currently supporting a sector's challenge project on the training and development needs of steel industry managers into the 21st century; and have funded a recently completed study of the wire and reinforcement sector.
Lord Renton of Mount Harry: My Lords, while I fully endorse what the Minister says about action against dumping, is it not clear that steel is an internationally traded commodity? The British Steel Corporation has announced the intention to move some parts of its steel production from the United Kingdom into other parts of the world in order to achieve cheaper basic production costs.
Lord Sainsbury of Turville: My Lords, there is a clear difference between dumping and taking a decision to move production to an area where the cost structure will be more favourable. Those are quite separate issues.
Lord Hardy of Wath: My Lords, will the Minister make clear that the British steel industry is internationally
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competitive? My noble friend also commented on fair trading in Europe and on being vigilant. Is he aware that the former government in periods of difficulty promised to be vigilant but did nothing in the face of clear evidence of unfair trading? If the vigilance results in observance of unfairness, will very firm action be taken?
Lord Sainsbury of Turville: My Lords, I can assure the House that we shall be vigilant and will take action if there are any cases of illegal state aid.
As regards unfair trading, it is a matter for the industries concerned to take action. The European representative body for the steel industry lodged a complaint with the Commission on 23rd November on hot rolled coil imports from India, Iran, Taiwan, Bulgaria, South Africa and Yugoslavia.
Lord Ezra: My Lords, as the steel industry is notoriously subject to cyclical movements, does the noble Lord feel that the industry in the UK at present may have over-reacted to what may be a temporary market difficulty? To what extent would that impair its ability to react when the market improves?
Lord Sainsbury of Turville: My Lords, I should not wish to second-guess the decisions of the industry. I should point out that one of the principal changes in Wales has been the opening of a new continuous annealing process line at the British Steel plant at Port Talbot. That cost £120 million and is the company's single largest investment since privatisation. That is a massive vote of confidence in the future of the Welsh steel industry.

Scottish Fee Support Review Committee
3 p.m.
Lord Selkirk of Douglas Lord Selkirk of Douglas asked Her Majesty's Government:
What progress has been made with the formation of the commission to look into the effects of the decision that English, Welsh and Northern Irish students should pay £1,000 more for attending a four-year degree course in Scotland than Scottish and other European Union students.
Lord Hunt of Kings Heath: My Lords, my right honourable friends the Secretaries of State for Education and Employment, Scotland, Wales and Northern Ireland are today announcing the membership of the Scottish Fee Support Review Committee. The chairman will be Sir George Quigley, as already announced. The noble Lord, Lord Burns, Professor Michael Hamlin and Sir Philip Jones have also agreed to serve as members. Terms of reference for the committee have been placed in the Library.
Lord Selkirk of Douglas: My Lords, I thank the Minister for that reply. Will he say definitely whether or

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not a future Scottish parliament could reverse the original decision in order to place students attending the same courses in Scottish universities on the same footing?
Lord Hunt of Kings Heath: My Lords, that issue will come under the competence of the Scottish parliament. It is hoped that the committee that is being set up will publish its report by the summer of 1999. It will then be reported to both the Westminster Parliament and the Scottish parliament.
Lord Dean of Beswick: My Lords, if the future Scottish parliament reverses that decision, does the Minister believe that it will want to pick up the bill and pay it because it is usually foisted on to us?
Lord Hunt of Kings Heath: My Lords, it is clear that that funding, both in terms of the original concession and then in terms of the arguments of those who have said that the concession should be extended to the rest of the UK, will represent a significant financial figure which will need to be taken into account.
Lord Mackay of Ardbrecknish: My Lords, has the Minister noted the results of the European by-election in the north-east of Scotland in which his party was forced into a humiliating third place? Does he believe that the collapse of the Labour vote in the university towns of Aberdeen and Dundee might just be related to what is seen in those university towns as the total unfairness of that system, not only for the students involved but also for the Scottish universities?
Lord Hunt of Kings Heath: My Lords, no. The fact is that according to the figures which the department holds, there has been no adverse impact on admissions to Scottish universities this year.
Lord Ewing of Kirkford: My Lords, the result of the European by-elections in the university towns of Aberdeen and Dundee was, quite frankly, a disastrous result. No one should hide from that. However, analysis has shown that the electors in Aberdeen and Dundee did not bother to vote. The turn-out in both Aberdeen and Dundee was well under 10 per cent. and there was more interest in the rectorial election at Aberdeen university than there was in a European parliamentary by-election.
Lord Hunt of Kings Heath: My Lords, I am most grateful to my noble friend for that information. I am sure that when it comes to the election of a Scottish parliament, the turn-out will be much higher. However, I doubt whether the party opposite will draw much comfort from the results.
Baroness Blatch: My Lords, will the Minister please tell the House why it is that a student from Carlisle should pay more to attend a Scottish university than a student from Paris?
Lord Hunt of Kings Heath: My Lords, we are covering old ground. Of course, the whole purpose of setting up the independent review committee is to look
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into those matters and to take evidence. The noble Baroness will know that the issue in relation to people coming from EU states other than the UK is covered by treaty requirements. She will know also that we are talking about a very small number of people—350 in the fourth year.
Lord Addington: My Lords, is the Minister prepared to give a guarantee that there will be no pressure to introduce an A-level or higher plus style examination which will affect the four-year degree course and drive it more towards the English model, which does not have the advantage of allowing people to study their best subject at university?
Lord Hunt of Kings Heath: My Lords, I am not aware of any pressure and I acknowledge the strength of the Scottish education system.
Lord Selkirk of Douglas: My Lords, I thank the Minister for his replies on this thorny issue. Does he accept that it is a matter of principle and an issue of fairness rather than of numbers? Is it not the case that in future, the Scottish parliament will wish to consider such issues just as much as this Parliament?
Lord Hunt of Kings Heath: My Lords, I am sure that the Scottish parliament will wish to consider that. I agree that it is a matter of principle. I believe that the Government have taken a principled decision; it has been the subject of much debate; and we should now allow the matter to be considered by the independent review body.

Statutory Instruments: Joint Committee
3.5 p.m.
The Chairman of Committees (Lord Boston of Faversham): My Lords, I beg to move the Motion standing in my name on the Order Paper.
Moved, pursuant to Standing Order 70A and the resolution of the House of 16th December 1997, That as proposed by the Committee of Selection the following Lords be appointed to join with a Committee of the Commons as the Joint Committee on Statutory Instruments:

V. Addison,

V. Exmouth,

L. Hardy of Wath,

L. Meston,

L. Skelmersdale,

L. Vivian,

L. Walker of Doncaster;

and that the Committee do meet with any Committee appointed by the Commons this day at a quarter past four o'clock.—(The Chairman of Committees.)
On Question, Motion agreed to, and a message was sent to the Commons to acquaint them therewith.

Address in Reply to Her Majesty's Most Gracious Speech
3.6 p.m.
Debate resumed on the Motion moved on Tuesday last by Lord Clinton-Davis—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".
The Parliamentary Under-Secretary of State, Department of Social Security (Baroness Hollis of Heigham): My Lords, our debate today will focus on industrial, economic and social affairs. We are making excellent progress on all those fronts. The Government's legislative programme includes a range of measures aimed at further modernisation of the economy, strengthening our industrial base, promoting long-term, stable growth and increased productivity and competitiveness.
I am delighted to open this debate which may be one of the longer debates on the Queen's Speech. I shall focus on the contribution our continuing modernisation programme for the welfare system is making to our goal of long-term economic stability. My noble friend Lord Simon of Highbury will have much more to say about the Government's programme for industry and the economy when he closes the debate.
In particular, I look forward to the maiden speeches of my noble friends Lord Evans of Watford, Lord Clarke of Hampstead, Lord Brookman and Lord Christopher and the noble Lord, Lord Craigmyle. Their industrial and trade union backgrounds—rich, varied and deeply expert—will give a dimension to the debate on industry and the economy in particular, which is the more welcome because that voice has not always been heard in its fullness in this House.
There are three essential features for this country's long-term economic strength and success: first, a consistent long-term framework for both monetary and fiscal policy; secondly, tackling our long-term productivity gap by working with business, investing in education and innovation and encouraging enterprise and competition; and, finally, welfare reform based on work and security.
I turn to the first of those; namely, sound economic policy. We need to put an end to the stop-go, boom-bust of the past 20 years. We need to allow individuals, families and businesses to plan ahead with confidence. For the first time, Britain has a consistent framework in both monetary and fiscal policy which will build for us sturdy and sustainable growth. Prudent fiscal planning means that even allowing for slower world economic growth, the Government will deliver their commitment—£40 billion of extra money for health and education—without risk to public finances.
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The second challenge the Government face is that of productivity because our long-term prosperity depends on the productivity of UK business and its employees. Our policy is therefore geared to getting the best out of all people and making sure that everyone has the opportunity to fulfil their potential. For too long this country's productivity has lagged behind its competitors. At present—and these are startling statistics—the UK has a productivity gap of around 40 per cent. with the United States and 20 per cent. with France and Germany, even though both their wage bills and non-labour wage costs are much higher than this country.
In most sectors of the economy, Britain is far short of the best in the world. We need to invest in plant and in research and development; we need to invest in people. We need a well-educated, well-trained, high-productivity labour force, hence our investment in education—£19 billion more. Also, we need to invest in a minimum wage because we know that the lowest paying employers have the lowest productivity in our economy.
I repeat that my noble friend Lord Simon will be enlarging on those points in winding up. But, just as we need to ensure a sound and stable economy and just as we need to build for long-term productive growth, so, too, we need a social security system that underpins our investment in people and does not subvert it. In other words, we need to rebuild an effective welfare state.
In the past 50 years the structure of the economy has changed; industrial patterns and working conditions are very different. Our spending on social security has moved upwards; it is now 1p in every 3p of government spending compared with 1p in every 5p in 1979. Yet the system is failing. Inequality has grown; poverty has grown; more and more has been spent; less and less has been achieved.
We must have a fundamental shift of emphasis. We must use the welfare state to create opportunities and incentives for people. Earlier this year our welfare reform Green Paper set out our principles for reform and they were overwhelmingly endorsed by those who responded to that Green Paper. We are now putting those principles into practice. We have already done a lot through earlier announcements this year. But with the proposals in the Queen's Speech for a welfare reform Bill, we will be setting out measures to modernise the system and deliver on our central welfare reform objective—work for those who can; security for those who cannot.
The welfare state for too long has been a passive distributor of benefits doing little or nothing to help people move from welfare to work. Almost one in five working-age households have no breadwinner compared to less than one in 10 in 1979. Nearly 3 million children are growing up in workless households. I remember the story told by my right honourable friend in another place, Mr. Frank Field, that he visited a Birkenhead school and asked a 10 year-old what he was going to do when he grew up. He expected the answer "train driver", "airline pilot" or whatever; but the child said, "When I grow up I am going to draw my Giro".

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For those who can, work is the best route out of poverty. It facilitates social inclusion; it gives status. It strengthens independence. It is the gateway to economic advancement, the foundation of a secure future and a role model that we in turn can hand on to our children. We cannot afford to have a society of three-generation workless families. But the system fails to provide enough help to get people into work, consigning too many people to the twilight of the margins of our society and to an inadequate and unfulfilling life on benefit. We fail together to ensure that work pays. Too often we reduce the choice for people to one of subsistence benefits and, to our shame, subsistence wages. And too often there are barriers to getting people into work, even in the benefit rules themselves which focus on and reward people for what they cannot do rather than encourage them to risk-take and see what they can do.
We have been attacking worklessness consistently and I hope effectively since coming to office. We have a threefold strategy to tackle each of those failings. We want to refocus welfare on helping people develop their potential and move from welfare to work through the New Deal. We want to make work pay through the minimum wage and the working families tax credit system. We want to remove barriers to work.
First, the New Deal is the biggest ever investment by government in jobs and training. It represents partnership between government and business; a joint investment in Britain. The New Deal for young people and the long-term unemployed is already producing encouraging results—170,000 people have already joined; nearly 40,000 have already found work and two-thirds of those are in unsubsidised jobs. By next April we expect 300,000 people to have benefited. And the New Deal is now being extended to all lone parents and disabled people so that they, too, have the opportunities they say they wish to have.
An uncertain economic outlook makes it even more difficult to invest in helping people into work rather than leaving them on welfare. The stable course for growth set out in the pre-Budget Report provides the platform for the New Deal to succeed. Employment has risen by 400,000 since the election. The economy is still expanding and creating new jobs. Around 2 million people either move into employment or change jobs each quarter and 250,000 leave the claimant count each month. Over 200,000 new vacancies are being notified to Jobcentres every month. That is in response to those who ask: if we are training people through the New Deal, are the jobs there? The evidence and the statistics exist to support it.
We are also refocusing the new system on work right from the outset with the Single Gateway. That will redesign the way in which working-age people claiming benefit enter the benefit system. All those who can work will be helped to do so and everyone will be given a more professional, more personalised and flexible service. To coin a cliché, it is a "something-for-something" deal. It is only reasonable to ask people who are claiming benefit to participate in an interview to hear about the opportunities open to them before they start on benefit. Young people will not have the option to remain on benefit; but for
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lone parents and disabled people we want the interview to ensure that they have the empowerment of the information so that they can make the appropriate decision, balancing their domestic responsibilities and the like with what seems to them to be their best choices. That measure will be included in the welfare reform Bill.
The welfare reform Bill will also include reform of the "All Work Test" for benefits for people with long-term illness or disability. The present test focuses exclusively on what people cannot do—for example, they cannot carry a bag of potatoes; they cannot put a hat on their head—rather than finding out whether they can, with training, operate a word processor. We have proposed a new test which provides information about what people are capable of as well as about their incapacity and physical or mental health frailties. The aim will be to help those with long-term illness or disability to understand how they can match their skills and abilities with a range of support which is available to help them into suitable work. It is what disabled people tell us they want and society cannot afford to continue to neglect their very real talent.
Incapacity benefit was never intended to top-up the incomes of those who retire early. We are proposing to take some account of occupational and personal pensions above £50 per week when paying incapacity benefit. That will achieve a fairer balance between private and state provision. Our proposals for IB will also modernise the contributory principle, strengthening the link between recent work and earning entitlement to benefits; restoring the benefit's original purpose as a source of income for those who have recently paid national insurance contributions—not paid them some 20 or 30 years ago—and who have had to give up their work through illness or disability.
We are making work pay by introducing tax and benefit reform as well as the minimum wage, help with childcare and promoting family-friendly employment practice. From April all employees will receive a tax cut of £66 a year as a result of cutting the entry fee to national insurance; employers will not pay NI on earnings below £83 per week. The Chancellor will bring in a 10 pence starting rate of income tax when economic conditions are appropriate. The minimum wage from April will benefit 1.9 million employees and, in turn, encourage employers to invest in them and in their training. That will now be worth their while.
This Session, the tax credits Bill will bring in the working families tax credit and disabled person's tax credit. Working families will be guaranteed an income of £190 a week. A single disabled person will be guaranteed at least £150 a week in work, and a working disabled person and a couple with one child, £220 a week. Both tax credits will include help with childcare costs, which we know are one of the biggest hurdles particularly for single parents. We are also investing directly in quality childcare provision through the national childcare strategy. The Government's consultation paper on the family is seeking views from employees and employers about the best ways to

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introduce family friendly employment policies to help both parents, husband and wife, to balance work and family life as both of them surely want to do.
We will reduce burdens on employers, particularly those with small businesses, in the Bill already introduced into your Lordships' House which we shall start to debate soon. It merges the Inland Revenue with the Contributions Agency, allowing small businesses to sort out their taxes and contributions through a single organisation.
We are removing barriers to work. We have already acted to change the rules to allow people on incapacity benefit to take a job without losing benefit if they fall ill again within 12 months. In other words, we can encourage people to take a risk, knowing that if they need to return to benefit, either because their health falters or the job folds, they will not have lost higher levels of benefit.
We have also changed the benefit rules so that disabled people can do as much voluntary work as they wish without fearing any loss of benefit. As many of your Lordships will know from first-hand experience, voluntary work is not only valuable in itself but is often a good first step in returning to the labour market. We are acting to remove the barriers of prejudice by introducing legislation this Session to assist disabled people, through a disability rights commission, to secure comprehensive civil rights, as well as helping employers to meet their obligations. That is a reform rightly highlighted by my noble friends Lord Ashley and Lord Morris.
As well as reforming the welfare state so that we help people into work and remove the barriers to work, we also need to modernise our system. On another occasion I adapted George Eliot to claim that the happiest nations have no history. We are not in that happy state. Social security has a past. The welfare state we have inherited was shaped largely in the 1940s. Indeed, two-thirds of our legislation is still shaped by the Beveridge rules, yet in Beveridge's day, the matters were very different.
Women's work was predominantly in the home while men—their husbands—earned a wage. Today, two women in three of working age have a job while, on the other hand, few men have the prospect of a 40-hour, 40-year job, as in Beveridge's day. Equally, because so many women are now in waged work, we have an increasing need for caring to be done by the fewer and fewer people available in the unwaged labour market.
In Beveridge's day, people insured against the risk of old age. The average mortality age was 66. Today people save, not insure, in the certainty of, on average, at least 10 years of retirement. Welfare has changed. The state no longer has a monopoly on welfare. For example, occupational pensions have played a huge part in enriching the older generation. Equally, family structures have changed. In Beveridge's day, there were fewer single parents and they were mostly widows. Now there are nearly 2 million lone parents bringing up their children.
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For all those reasons—the changes in women's work, men's work, caring responsibilities, old age and family structure—we need to bring the welfare state up to date to deal not only with the challenges of today's world but those we face over the next half century. In the past, the welfare state has struggled to reflect the needs of a changing economy, changing work practices and changing industry. We need to ensure that we can meet those needs in future.
The New Deal is a good example of how we are rebuilding the system to make it responsive to the needs of the labour market. We are also proposing measures to be included in the welfare reform Bill to bring contributory benefits up to date; for instance, our proposals for support for people in bereavement.
Those reforms will provide new widows—and for the first time widowers—who satisfy the qualifying conditions with a lump sum payment of £2,000 paid at the time of bereavement when help is most needed. At present, the sum is £1,000. That will be followed by a weekly bereavement benefit payable for six months where there are no dependent children, but continuing for widowed parents—men and women alike—until their youngest child ceases to be dependent, perhaps until the age of 16 or 18.
Equally important as work for those who can is security for those who cannot work. However, the system here fails too many people. We need to channel help to those most in need. That is what we are doing, helping families, disabled people and pensioners.
We are increasing child benefit by the largest ever amount from April 1999. That will go up £2.95 per week to £14.40 per week for the first child. Extra increases are already in place from this November for children in families on income-related benefits. We have announced plans for disability income guarantee for those aged under 60 on income support with the highest care needs, which will give single disabled people a guaranteed income of at least £128 a week and couples £169 per week. There will be a similar guarantee for severely disabled children in families on income support so that a couple with one severely disabled child with caring needs will receive at least £199 per week.
I turn to our proposed reforms for severe disablement allowance. Reform will focus the benefit on people disabled before age 20 who have not had the chance to work. Perhaps they were born with Down's Syndrome or cerebral palsy. That extra help could be worth up to £25.60 per week after a year on benefit. Young people who have had no opportunity to work and pay contributions will be entitled to a level of benefit which, for the first time ever, will float almost all of them off means-tested benefits.
For the first time, too, we are proposing to help three year-old and four year-old severely disabled children by extending to them the higher mobility rate in disability living allowance, currently worth nearly £36 a week. That will greatly increase the help we are able to give to families with children who have very severe motability problems. For example, their parents will be able to obtain a car to carry around large and cumbersome equipment such as oxygen tents or whatever else may

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be necessary to meet the child's needs. That will particularly help families of young children where a child has, for instance, severe cerebral palsy, severe limb or spinal defects or severe neurological disorders.
The well-being of future pensioners depends upon their ability to take up adequately rewarded employment. The best way we can help future pensioners is to ensure that they have adequate, well-paid jobs in their 20s, 30s and 40s on the basis of which they can build up contributions towards their retirement income. But, as the House will know, we also need to do more to ensure security for many of today's pensioners, particularly older single women—that is, widowed women for the most part—who have not had an opportunity to make adequate provision for their retirement.
That is why we are introducing a minimum income guarantee for pensioners from April 1999 of £75 per week for single pensioners and £116.60 per week for couples, plus an annual payment to help with winter fuel bills. We are also identifying pensioners who do not claim the cash help to which they are entitled and are encouraging them to do so. That is important because too many pensioners miss, on average, £17 per week of benefit. That could really make a difference between a cold and a less cold winter for them. We are getting rid of eye test charges for the over 60s from April 1999 and widening travel concessions.
This Government are determined to address the long-term needs of Britain. That includes the need for long-term reform of pension provision. The welfare reform Bill, which we expect to see in this House perhaps around next spring, will start pensions reform by providing for fairer divorce settlements and greater security, especially for women in retirement. As this House determined the policy framework of what was then called pension splitting—what we now call pension sharing—I am sure that that measure in particular will receive a warm welcome when it comes to this Chamber.
The Bill will also provide a new framework of secure, flexible and value-for-money stakeholder pension schemes for people who cannot join an occupational scheme, because they do not exist, and for whom personal pensions are unsuitable. Further proposals for long-term reform of the pension system will be set out in the forthcoming pensions Green Paper.
To conclude, we are making good progress towards our long-term goals for the economy; namely, to secure economic stability, to encourage work, to raise productivity and to create a fairer society. In other words, an end to the boom and bust, stop/go policies of the 1980s and early 1990s. But we cannot have a fully effective economy without a modern welfare state to support and sustain it. The system needs reform. Doing nothing is not an option: simply increasing benefit levels modestly is hugely expensive and still leaves people marginalised and relatively poor. We are determined to modernise the welfare state by providing opportunities for people to work where they can and providing decent levels of benefit where they cannot. We believe that we will be delivering a welfare state fit to face the challenges ahead.
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I commend to the House the measures contained in the Queen's Speech.
3.31 p.m.
Lord Fraser of Carmyllie: My Lords, it is always a pleasure to listen to the noble Baroness opening a debate. On a day which will highlight industry, as well as economic and social affairs, I am not surprised that she has focused most particularly on social affairs, being expert, if not somewhat repetitive, on the subject as she undoubtedly is. But, even more so, I am a little surprised that she gave no particular focus to either industrial or economic affairs. Indeed, since this debate on the gracious Speech first began just over a week ago, the Government's position has fallen into further disarray.
I shall pass over that incomprehensible explanation from the Chancellor of the Exchequer when giving his position on harmonisation of taxation within the European Union. Suffice it to say that, when the EU Commissioner gave him a coherent and restricted line on what he intended, he rather tellingly failed to follow it through. However, if I do the Chancellor of the Exchequer any injustice as regards the explanation that he has sought to give to the nation, I very much look forward to the noble Lord, Lord Simon, correcting me. It would certainly do the country a great favour if it had some lucid explanation of what the Government intend in this vexed area. It would also be helpful if the noble Lord could explain how that approach will be of benefit to our national economy.
The first of the two events which lead me to conclude that the Government's position has fallen into further disarray was the outcome of the Euro election in north-east Scotland at the end of last week. Until the last European election, the Labour Party actually held that Euro seat and within that seat it still holds five parliamentary constituencies. However, on Thursday it was reduced to third place behind the Tories in Scotland; indeed, that is a part of Scotland where, I regret to say, we do not even hold a single seat. Mrs. Helen Liddell is reported as saying:
"It would be dangerous for any party to draw conclusions from this result".
At least in one economic sense, to which I shall turn later, there is one very obvious conclusion that we should all draw from that result.
However, it was a doubly curious conclusion because, uniquely in a by-election of that character, the Prime Minister and four Cabinet Ministers appeared to support the Labour Party candidate. I acknowledge that their task was probably a hopeless one because the candidate initially claimed that she had been born in Aberdeen. Then, when it was established that she had not been and had in fact been born in Staffordshire, she fell back on the less provable event that she had been conceived in Aberdeen!
The significance of that electoral event is that I hope it may at long last bring to an end the deeply unattractive blend that has characterised the Government's approach both in the last debate on the gracious Speech and in this one. I have in mind that blend of vindictiveness and triumphalism. I doubt that it will ever get through to

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those pager-controlled clones in another place, but it would infinitely enhance the quality of debates in this House if we were to be freed of that characteristic and were prepared to engage in more reflective debate.
The second event since this debate began, which must have been truly alarming to the Government, was the publication by the Office for National Statistics of UK trade figures for September 1998. When we were in office we were accused of fiddling every set of figures that there ever were—from inflation through to unemployment. Being instinctively a rather more generous-spirited party in opposition, I have no intention whatever of challenging the basis for those statistics. I have no doubt that Mr. David Ruffles, who was the statistician in charge of the trade and goods statistics, is a professional of unimpeachable integrity. His problem is that he has a rough old job. In September 1998 he had to record that the UK deficit in goods is estimated at a record monthly level of £2.5 billion. That is not a record over the past five years, nor is it a record for the 1990s: it is a record since these statistics were first kept.
However, despite that catastrophic decline, the Government accept no responsibility. Instead, the South-East Asians are certainly to be blamed and it also appears that the Russians have made their contribution. In fact, anyone is to blame except the Government. At the same time, the Chancellor of the Exchequer repeats his rather lame mantra, which I noticed the noble Baroness picked up; namely, that there is to be no return to boom or bust. If the Chancellor of the Exchequer were to turn to his economic bed-mate "prudence", whose name he so frequently invokes, I am sure that she would offer him the following reassurance. There was no return to bust because, so far as concerns trade and goods, we are already there.
Before the debate is over, I hope that the Government will tell us by what yardstick we are to judge whether in fact we have returned to bust and whether, in the face of these alarming economic figures, the Chancellor of the Exchequer will revise downwards his growth figures of a few weeks ago, as every responsible commentator in the country recognises is now undoubtedly necessary.
The curiosity of the Government's position is further this: it is never their fault when things go wrong. When everything has failed it is someone else's fault. So when Siemens in the north-east of England had to announce the proposed closure of its remarkable semi-conductor plant in Newcastle, it was not their fault. I actually have some sympathy with the Government over that position because there had indeed been a massive plunge in the worldwide price of semi-conductors. However, I am now pleased to see that there is at least some glimmer of hope that someone may be prepared to take on this factory, continue the semi-conductor production there and provide employment. It is not those who are going to provide the jobs who are to take the credit; indeed, even before the deal has been settled, we have already been told that it is either to the credit of the Prime Minister or Mr. Peter Mandelson that this is to be achieved.
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It might be too much to hope, but if there are results beyond the economic control of the Government, modesty might allow them to acknowledge that they should not seek to take the credit for it if those events correct themselves. On the contrary, a better, more realistic and responsible approach would be to face up to what might be the economic consequences of their own actions.
The noble Baroness made mention of the minimum wage. After what we went through last year, I have no intention of returning to the issue. But it would be helpful, at a time when there are economic problems in this country, if we had at long last some true estimate from the Government of what they believe will be the consequences for those seeking employment. Now that we are to have fairness at work in this Session of Parliament, it would be interesting to know to what extent there is any acknowledgement made that some people may lose their jobs or others may find it much more difficult to secure employment—particularly as it is clear that it will affect a large number of smaller firms, in respect of whom the Government frequently claim to have a real regard. The Government ought to face up to their responsibility for that.
I said that after the north-east of Scotland by-election there was one economic conclusion that we might draw. As the noble Lord, Lord Simon, will certainly have noticed, this past week the price of a barrel of oil descended to a 13-year low in real terms. That has been the lowest price that it has reached. But for anybody watching the price of oil over the past year, it must have been very obvious indeed that that price was certainly not going to firm and that there was every risk it would collapse in the way that it has done.
In spite of that, following on the general election, the Chancellor of the Exchequer announced that there was to be a review of oil taxation. That oil taxation review bumbled on for month after month after month, and it was only with a sort of adolescent petulance that the indication was given in the early summer that this review would not take place after all. But the Government failed to indicate whether they would be returning to a review of that taxation.
This is not simply a matter of remote interest to those who are keen on taxation matters. It has had a direct knock-on effect on those people who are employed in the fabrication and supply business to the oil industry. Although there is a clear focus on such activities in the north-east of Scotland, there is also a very real focus on that activity all the way up the east coast of the United Kingdom. I would anticipate, as this unhappy downturn occurs in supply and fabrication activity, that regrettably the north-east of England is likely to suffer quite as much as any other part of the country.
I hope that we might at long last get some realisation that it is not only the policies that the Government introduce that might do damage to our economy but that when they are as careless as they were over the oil taxation review they so damaged the confidence of those people who might otherwise have found jobs, or continued in jobs that they had found, that they lost that opportunity.

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Up to this point I have focused my remarks on goods. There was a time when certainly old Labour would have regarded themselves as the jealous guardians of the manufacturing sector in the United Kingdom—a voice that is more muted, certainly in another place, than it once was. I do not want to focus simply on those issues, alarming as they are for the United Kingdom as a whole. But before I conclude I would like to turn to the matter of services. I want to recognise most particularly how important financial services are to the United Kingdom. Something like 1 million people in the City of London work in financial services. What they achieve represents about 7 per cent. of our gross domestic product.
As the gracious Speech unfolded and the debate on it began, we anticipated that we would hear what would happen to the Financial Services Bill. It is a Bill of undoubted complexity. I have no doubt that the Government certainly began on the right course by embarking on extensive consultation. It is troubling that when the Leader of the House rose in the immediate aftermath of the gracious Speech she did not indicate—as we had anticipated and as press reports had led us to believe—that the Bill would be shortly introduced in this House, where there is a wealth of experience which would have significantly improved the Bill before it went to another place. That is not going to happen.
We have been advised that this Bill will not be introduced, as I understand it, at any time before the spring of next year. It will not be subjected to careful, expert scrutiny in your Lordships' House first, as one might have anticipated. The indications to date are that it will be introduced in another place. The other place might deal with it more superficially than your Lordships, but, nevertheless, if it is introduced in the spring it will undoubtedly take many weeks before the Bill has been properly considered in another place. We are then left with the alarming question of when are we to have the opportunity to scrutinise the Bill in the fashion which is undoubtedly required. There are a number of points of principle that we will need to discuss, and there is certainly a myriad of details we will want to examine carefully.
On points of principle, for example, we would wish to see a clear objective contained within the Bill that it is to be part of the responsibilities of that new single super regulator to ensure an international competitiveness for the United Kingdom. I fear that, as consultation has progressed there is growing unease in the financial sector that, far from there being simply an issue of regulation here, there may be the alarming risk that the Bill will contain a rather anti-competitive characteristic. Given the responsibilities of the noble Lord, Lord Simon, for competitiveness, I hope that he will reassure us that a clear regard will be had to that particular issue.
Lord Renton: My Lords, I am grateful to my noble and learned friend for giving way. He has raised a very important point. Is it being suggested by the
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Government that this is to be treated as a revenue Bill, which therefore limits the powers of your Lordships' House?
Lord Fraser of Carmyllie: My Lords, I do not know. But I certainly understand the proposed timetable. I suppose that I am leading towards a rather bleak realisation that possibly the Government are anticipating that this Bill might in some way be carried over into the next Session. If that is the proposal, it raises some very difficult considerations—not for your Lordships—undesirable as it is that the timetable for considering such a Bill should not be unduly extended.
But let us get away from issues of our own responsibilities and our own convenience. It concerns me that this vital sector of our economy—an absolutely crucial one which, if anything, we would wish to see grow rather than contract in any way—will effectively be in limbo for something over a year. I cannot believe that it is to the advantage or the good health of the financial institutions—be they in the City of London, Edinburgh or any other place where they provide such valuable employment and give us such a worldwide pre-eminence—that that extended period of limbo should exist. I very much hope that before we get to the end of this debate we will understand exactly what is intended. We have every intention of scrutinising the Bill as constructively and carefully as we possibly can. However, we will not be prepared to participate in a shoddy, unduly protracted legislative process. I hope the Government appreciate that it cannot be expected that this House will nod through such an important piece of legislation.
I conclude by saying, in harmony with the noble Baroness, Lady Hollis, that I, too, look forward to the maiden speeches which are to be made during today's debate. I hope that the Government will understand the realities of the economy of this country and, now that we are well into their period of office, will at long last accept some responsibility for it.
3.50 p.m.
Lord Razzall: My Lords, the Minister indicated in her opening remarks that today's debate extends across a number of areas: industry, the economy and social affairs. In my opening remarks I will be touching on industrial and economic matters and will be helped and assisted by various of my noble friends. My noble friend Lord Russell, in winding up, will respond to many of the points raised by the Minister on social issues.
I am afraid that from these Benches we did not allocate any of my noble friends to the unscheduled amendment introduced by the noble and learned Lord, Lord Fraser, regarding the results of the north-east Scotland European Parliament by-election. Perhaps it would be better if I left it to the noble Lord, Lord Simon, to deal with the points he made in what I calculate was 20 per cent. of his speech. From these Benches we do not draw any conclusion from an election in which approximately 79 per cent. of the electorate voted against the Conservative Party and in which, on turnout, under 4 per cent. of the adult population of that constituency voted for it.

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The noble Baroness indicated in her opening remarks that the first touchstone of the Government's economic policy must be to endeavour to create a sound economy. She indicated that there will be a departure from the boom and bust policy which she regards as having occurred under previous administrations. I will not attempt to follow the lead of my noble friend Lord Rodgers of Quarry Bank on the first day of the debate on the gracious Speech in attempting to give marks out of 10 to the Government for their handling of the economy. Suffice it to say, broadly from these Benches, and from our Benches in another place, we have agreed with the Government's overall macro-economic position.
We believe that the public finances are sounder than they have been for some years. The Conservative Opposition might well say that that is the result of the Government's inheritance from them. However, there is some inconsistency in that statement which is sometimes made from the Conservative Benches with the statement from their Benches that the population of this country has been subject to many new taxes. There is a little inconsistency between, on the one hand, claiming credit for the inheritance and on the other hand blaming the Government for what they have done since. Be that as it may, we would say that the public finances are sound.
As noble Lords will be aware, we strongly welcomed the initial decision of the Government to give independence to the Bank of England in relation to monetary policy. The Liberal Democrats had advocated that for many years. We support the Government's policy in that area. We note with interest that even economic writers, such as Anatole Kaletsky in The Times, who were extremely sceptical at the time are now beginning to come round to the view that the policy is working, is the correct one and is a model for the kind of independent central bank that we look to see.
On the technical side, we have welcomed the decision of the Treasury, in calculating public expenditure, to separate capital expenditure from revenue expenditure. We regard that as a significant development in the management of our public finances. It has long been regarded by people in business as silly that social services expenditure and expenditure on unemployment benefits should, for public expenditure purposes, be calculated in exactly the same way as capital expenditure on roads, hospitals and schools. We very much welcome the Government's ability to persuade the Treasury mandarins to convert to that view.
However, having said that, in two areas we are clear that we would not have started from here were we in government. First, although we welcome the public expenditure increases announced by the Chancellor of the Exchequer, we remain critical of the Government's policy of sticking to the Conservative Government's expenditure plans for the first two years of their period in office. We believe that that was an imprudent exercise of the power of the Treasury in relation to the needs of social services, education and the National Health Service. We regard it as an unnecessary and draconian
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policy imposed by the Treasury. As noble Lords will be well aware, we would have increased taxation, if necessary, to absorb that public expenditure.
Secondly, we believe that the Chancellor of the Exchequer made a significant mistake by not putting up taxes for the consumer immediately the Government came into office. Most economic commentators now agree that the previous administration, presumably in an attempt to win the last election, allowed consumer spending to run too far ahead of where it should have been. While understanding the political constraints on the Government, we believe that a mistake was made by not damping down consumer expenditure at that point. As a result of the failure to take that decision, we believe that the reduction in growth in the economy has been greater than it otherwise would have been. Therefore, in those two areas, we criticise the Government. As I said, we would not have started from here.
We find the position of the Conservative Opposition somewhat puzzling. I note that of the 60 to 65 commentators who comment on the economy not one is currently indicating that he believes that the economy is heading for recession. The argument is about whether the growth rate will be 1 per cent., 1.5 per cent. or 0.5 per cent. But not one significant academic or economic commentator is actually forecasting a recession. I thought that the only person who was doing so was the Shadow Chancellor of the Exchequer in another place. However, I now know that two people are doing so. There is the Shadow Chancellor of the Exchequer in another place and the noble and learned Lord, Lord Fraser of Carmyllie, who in his speech today indicated that he believed that the economy—
Lord Fraser of Carmyllie: My Lords, I know that my speech may have been uninteresting to the noble Lord but he might at least quote me accurately. I said that as far as I was aware every responsible commentator in the country is revising his figures downwards.
Lord Razzall: My Lords, it is correct that those were the words that were used. Nevertheless, the tenor of the Conservative Party's opposition to the Government's economic policy has been that the Chancellor is driving the economy into a recession which he is refusing to forecast and is therefore over-optimistic. The main reason I think that is an inadvisable position for the Conservative Opposition to take—I would welcome the Minister's confirmation of this when he replies to the debate—is that the Treasury has indicated, and indeed the Prime Minister has indicated in press comment, that were the economic statistics to prove to be worse than the Government currently forecast, nevertheless borrowing would be allowed to rise to maintain the public expenditure plans that the Government have announced.
Those students of the economy who have not been bedazzled by the monetary policy mumbo-jumbo of the 1980s will know that that is classic Keynesian economics. I think this House would welcome a confirmation from the Minister when he replies to the

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debate that that is exactly what the Government's policy is and that there is no intention of their being blown off course with regard to their public expenditure plans, and, if necessary, they will allow public spending to rise and enable it to absorb the recessionary pressures.
I now turn to manufacturing industry. The noble and learned Lord, Lord Fraser of Carmyllie, has a point here. Clearly the issue of manufacturing closures and manufacturing activity in this country is a significant one. The problem that the Government and all of us who comment on these issues are faced with is that manufacturing industry these days probably affects only about 20 per cent. of the economy of this country, and probably half of that 20 per cent. is not involved in manufacturing as we have traditionally known it, but is involved in the assembly of components which are often brought in from overseas. Nevertheless it is the case that manufacturing industry in this country is suffering. We see factory closures and unemployment rising in that sector. Without going as far as the Conservative Opposition, we think it is disappointing that the gracious Speech has not produced any measures to deal with the downturn and the problems of manufacturing industry.
There are two obvious areas where we need confirmation that action will be taken. First of all, there is nothing in the gracious Speech about cutting red tape and reducing bureaucracy. That would have a significant impact on small manufacturing companies. Secondly, the Minister indicated in her earlier remarks that productivity was at the heart of the problems of industry. There is nothing in the gracious Speech to tackle those problems of productivity. It would be helpful if the Minister who is to reply to the debate could comment on what the Government intend to do with regard to announcements and plans. We are aware of possible studies by the Treasury and possible action. However, as regards any debate on our current industrial position, it is important that, if possible, those plans should be spelt out.
I turn to the industrial policy measures set out in the gracious Speech. The promotion of the right honourable Member for Hartlepool has enabled the DTI to rise up the Queen's Speech pecking order in terms of the number of Bills that we have before us. We obviously welcome in principle the legislation to promote electronic commerce. It will be interesting to see what that legislation contains. Apart from giving it a broad welcome there is nothing more that we can say at this stage. However, we have some reservations about press reports that some kind of Internet "tsar" will be created, on a par with the drugs tsar, to try to promote the Internet because it seems to us that that rather belies the way in which the Internet is supposed to work; namely, "bottom up" rather than hierarchically "top down". Nevertheless, we look forward to seeing the Bill.
We also look forward to the implementation of the fairness at work legislation. We wait with interest to see whether the Government's initial proposals have been developed further following the consultation exercise. Should that be the case, we on these Benches will not wish to intrude into the private grief of the Government and the trade union movement as to what may or may not have happened. I say as an aside to the noble and
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learned Lord, Lord Fraser of Carmyllie, who also touched on the minimum wage in his remarks, that I think it is true to say that not one of the European countries that has a stronger economy than ours and a greater GDP per head than ours and a greater growth rate over the past 10 to 15 years than ours, does not also have fairness at work proposals and minimum wage legislation at least as strong as the measures that will be proposed here. Some lesson should be drawn from that.
There are three major areas in which the Government should be criticised in relation to the implications of the gracious Speech for industry and the economy. First of all, it is extremely disappointing that there is no real provision for anything to be done about the "green agenda". The Deputy Prime Minister has striven nobly from Kyoto to Buenos Aires to bring the Government into the forefront on these issues. Yet nowhere do we see any proposals to tackle carbon taxes, pollution, and the green taxes that we were promised by the Government in the run-up to the election. We note with horror that the Government appear to be backing down as a result of pressure from the motor industry in relation to the whole area of motor car control, inner city pricing, and taxes on large cars. We feel that this is a significant omission which lies right at the heart of what should be a major plank of the Government's industrial policy.
Secondly, we feel that the Government and the gracious Speech are weak on what I would describe as the rights of the consumer. In the press, in this House and in another place there has been consistent questioning of the Government with regard to what is now emerging as a potential major scandal for the consumer in this country. By and large people pay more in this country for similar products than anywhere else in the European Union. There are all kinds of reasons for that but I believe the evidence is now consistent enough to show that that is the case. I know that when the Minister replies to the debate he will say that he introduced the Competition Act to give the OFT the power to do something about that situation. Time will tell. I believe there is a significant omission in the gracious Speech with regard to the Government's commitment to ensure that this matter is tackled. Whenever we raise this issue we are told that a campaign has been run by the Daily Express, as if that makes everything all right. However, the Sunday Times has also run a campaign on this issue and many people have produced evidence of what is happening. It is vital that the consumer interest in this country is protected. We wait with great interest to hear whether the Minister will confirm that he will ensure the necessary steps are taken following action by the Office of Fair Trading.
The third and final area I wish to discuss constitutes from our point of view the most glaring omission from the gracious Speech; namely, the question of the euro. Were a Liberal Democrat government in power and were this our gracious Speech, we would now bring into effect legislation to enable a referendum to be held. There is no doubt about that. We believe that it was a significant mistake on the part of the Government not to take steps immediately after the election to hold the referendum on joining the euro, and not to take steps

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immediately following such a referendum to join the euro at its inception. We believe that is a mistake that the Government will regret.
Notwithstanding the attempts by newspapers such as the Sunday Telegraph, which last Sunday falsified figures to indicate that there is some movement against the euro, we believe that the population of this country is moving away from, "Should we join the euro?" and towards, "When should we join the euro?". While recognising that we shall not have enabling legislation this Session which would allow us to hold the referendum or legislation that will enable us to join the euro, it would be extremely helpful if the Minister would give some indication of the timetable, and some indication that the Government's thinking has moved on, so that the question is now no longer "if' but "when". We believe that failure to decide on when to join the euro bedevils our economy.
4.10 p.m.
The Lord Bishop of Oxford: My Lords, this debate is obviously a special one, with no less than five maiden speeches. I look forward to learning from the wealth of experience that they will bring of industry and economic and social affairs.
Over the past 15 years I have had a number of opportunities to address gatherings of business leaders. I always enjoy such occasions because business brings an important element of realism into any discussion. In the end, business has to work or it goes bust. In that spirit of respect for business, I want to refer to the statement in the gracious Speech that the Government,
"will continue with economic policies designed to build stability for the long term".
Talking to business people 15 years ago, one was aware of a spirited defence of the position that the shareholder always reigned supreme. Today it is widely accepted that the shareholder is one among a number of stakeholders: the employee, the customer, the supplier and the wider community, including the environment. It is recognised that each of those stakeholders has a legitimate claim and that the long-term success of the company depends upon that being worked out in practice. The mission statements of most modern companies will contain an expression of that commitment to the stakeholder concept. That is a remarkable change in the way in which our best companies view themselves and want others to view them. Of course, it is possible to be cynical and to regard mission statements as no more than window dressing, an attempt to look good on the front page of a glossy annual report. Even that may not be entirely worthless if you agree with the Duc de la Rochefoucauld that,
"Hypocrisy is a tribute which vice pays to virtue".
Nevertheless, in our best companies there is an ethos that is undergirded by, and suffused with, a definite set of values. Nor is that just pure idealism unrelated to the hard facts of the financial world. The "Tomorrow's Company" project, sponsored by a number of our
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leading companies, shows that the stakeholder concept is fundamental to the long-term prosperity of a company. In short, ethics and profits go together.
I focus on this point for two reasons. First, the stated intention of the Government in the gracious Speech is,
"the modernisation of the country, its institutions, its public services and its economy".
I believe that that modernisation is linked integrally with a revaluing of our national life; that is, a rediscovery and a reaffirmation of the values without which there can be no long-term well-being or prosperity. By values I do not primarily mean a set of principles urged by religious bodies. I mean teasing out, articulating, affirming and strengthening those values already implicit in our best institutions which lie somewhere in every human heart.
There are many modes of being modern—some superficial, some merely fashionable and some actually dangerous. True modernisation is inseparable from a greater emphasis on the shared values which not only bind our society together but which are also essential for its long-term well-being and prosperity.
My second reason for focusing on the point is that industry and commercial life generally have a crucially important role to play in this endeavour. As the gracious Speech put it, the Government are committed,
"to work in partnership with business, and welcome the improved relations between business and trade unions".
I believe it important to affirm the continuing role of trade unions. It has been fashionable in recent years to knock them or try to marginalise them. Historically, trade unions have played a vital role in pressing for the basic values in industry and commercial life that today we take for granted. Often they have had to struggle against powerful vested interests in the name of a basic humanity. They still have an important role to play.
It is all too easy to confine values to a special debate on the subject or to associate them only with issues of personal morality or so-called "family values". However, values are fundamental to every aspect of our national life. That is why what has happened in our best companies in recent years has been so significant. They have publicly recognised the role of values in their long-term prosperity. That is shown not only by their method of operation but also by the way in which they have supported inner-city regeneration and many worthwhile social projects and through the lending of expertise as much as financial support.
Today's debate is about industry, economic and social affairs. We rightly associate social affairs with values, ensuring that the disabled are properly cared for, helping people into work, and so on. As the Minister put it, "Work for those who can, security for those who cannot." The problem is that debate of that kind is so often polarised between those who support issues of social welfare and social concern, which are traditionally associated with values, and those who like to speak on economic and industrial affairs, which traditionally have been regarded somehow as "value-free zones". There is no such thing as a value-free zone.

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Part of my thesis is that the kind of values that commercial and industrial life today are rediscovering and reaffirming are crucially important for the whole of our society. Values run, and need to run, right through all aspects of our lives, the public and economic aspects just as much as the social aspect. Business, both companies and trade unions, have played and continue to play an important role, helping to modernise our society in such a way that the core values, on which society as a whole depends, inform and shape our industrial, economic and social life.
4.19 p.m.
Lord Evans of Watford: My Lords, beware, I am a printer. Because I am a printer, it was with great anticipation that I ventured into your Lordships' Library. Books give me great pleasure. I delight in fine printing, good typography and elegant works. But, as I said, beware, I am a printer. If we are to believe Thomas Carlyle, my democratic trade is capable of dismissing hired armies and cashiering senates, but I promise that I have nothing so drastic in mind.
However, my reason for making an early visit to the Library was not simply for the pleasure of handling its fine volumes. Faced with the disconcerting prospect of this maiden speech in your Lordships' House, I wanted to discover what some of my new colleagues had said upon their introduction. It confirmed for me what a cosmopolitan collection, from many varied walks of life, this House is.
My apprenticeship began when I was 15. Luckily, I came to love the produce of my labours, but looking back I realise that formal apprenticeships were not as good as nostalgia would have us believe. Often, the institution encouraged what amounted to indentured slavery when boys were forced to do skilled men's work for a fraction of the proper wage. Gladly, those times have changed.
When I started, everyone believed that an apprenticeship meant a trade for life and that the skills learned would provide for an entire career. How vastly different it is today. Such is the speed of change that only continuous learning ensures that a person continues to be a valuable skilled provider; and it is now quite likely that a distinct change of career will occur two or three times during an individual's working life.
I was fortunate. By my mid-20s I had gained experience in sales and marketing within the printing industry and at 29, having saved a few thousand pounds, decided to start my own business. Some noble Lords will have personal experience of the trials and tribulations of starting and running a small enterprise. They will know how difficult it is to survive, how much one depends on customers and suppliers and, above all, on the loyalty of staff.
Cash flow is always the main concern of small and medium-sized enterprises—or SMEs as we are now collectively known. For this reason I was delighted when the Late Payment of Commercial Debts (Interest) Act received Royal Assent in the summer. As noble Lords will know, the Act seeks to ensure that large firms do not use their muscle unfairly to delay payments to smaller suppliers.
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The Act has yet to have much effect. Fear of recession, whether justified or not, is currently prompting some large firms to become sticky-fingered with cash which rightfully belongs to their suppliers. I hope that the intention of the Act is not to be thwarted by corporate bullying tactics, such as pretending invoices are not received, or the wilful abuse of procurement procedures as an excuse to delay settlement. These are not commonplace in well run companies.
SMEs provide 50 per cent. of this country's economic growth but also suffer a 50 per cent. failure rate within four years of inception. Many are hampered by unfair and now illegal withholding of their money by larger corporations. Eighty per cent. of this country's working population is employed by companies with fewer than 200 staff. Small and medium-sized businesses are a vital part of our economy and must be treated fairly.
Today, 27 years after I started, my business has grown to employ 180 people. We work in printing, publishing and graphic communications globally and are proud to be part of the United Kingdom's fifth largest manufacturing industry. Printing employs around 170,000 people in over 12,000 companies with a combined annual turnover of about £13 billion.
As noble Lords consider the gracious Speech and its particular relevance to industry, economics and social affairs, it occurs to me that my experience in building up a small company from scratch may be of some relevance. So I asked myself: what more could be done to help small firms? I have said that training has become a life-time activity. As the Government have made very clear, they believe strongly that education is the key investment for ensuring that Britain maintains and improves its economic position in the world. Despite this, few companies provide ongoing training for their staff, for the simple reason that they feel they cannot afford the time or the money. They are probably wrong, but any encouragement of, or assistance for, personnel development that could be offered to SMEs would, I believe, be both welcome and cost-effective. Its vital importance has been brought home to me during a 15-year happy association with the Institute of Personnel and Development in a joint enterprise to publish its highly regarded fortnightly magazine, People Management.
The ability of small firms to provide secure jobs so that people can develop their skills cries out for economic stability, a need clearly identified by the Prime Minister. So the Government's attempts to steady our economic ship in the choppy waters of globalisation, as evidenced by lower interest rates and corporation tax, are very welcome.
Our banks also have an important role to play in helping companies to weather the economic storms and, in turn, help to stabilise the economy. Like many others, I was dismayed to observe how, without warning, some British banks brutally brought down the shutters on small firms during the last recession. Whether they like it or not, banks have a social responsibility to our community which is wider than mere shareholder accountability. That said, it is welcome news indeed that

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the Government are considering legislation to provide companies in financial difficulty with a period of creditor respite for the purposes of reorganisation. I hope that the banking community will appreciate how helpful such legislation has proved to be in building the United States' economy and will consider its response to the proposed changes to insolvency law very carefully and positively.
Finally, one contribution that the Government could make to improve the prospects of small firms in this country would be to review the way that government departments and public institutions conduct their procurement policies. Human nature is such that long-established supplier/customer relationships are comfortable but this can be anti-competitive and, in the long run, economically damaging to society. It also leads to complacency. I believe there is still considerable room here for improvement in the way that public money is spent.
I thank your Lordships for giving me the time to say a few words on behalf of small and medium-sized businesses—and in particular, those in printing. The economic future lies in the hands of those who have the courage to be entrepreneurs. I see no shortage of potential candidates and I urge the Government to do all that they can to assist them.
4.27 p.m.
Baroness O'Cathain: My Lords, I am honoured to have been selected to congratulate on behalf of the whole House the noble Lord, Lord Evans of Watford, on his fascinating maiden speech. The noble Lord has had, and is still having, a brilliant career. As he said, he started his apprenticeship as a printer at the age of 15 and rose to launch one of Europe's leading print companies with an annual turnover, I am told, in excess of £50 million. That progression, which could not have been achieved without a huge commitment to part-time study, continuous learning and sheer hard work, is what we all admire. Although the noble Lord has achieved such success in business, he has still had the time and energy to develop his interests in a number of charities and political organisations. As a fellow Fellow of the Chartered Institute of Marketing, I am delighted to thank him for a memorable and relevant maiden speech. I truly look forward to his future contributions to our deliberations.
Like the right reverend Prelate the Bishop of Oxford I noted in the gracious Speech the phrase,
"My Government will continue with economic policies designed to build stability for the long term".
When I heard the gracious Speech, I momentarily breathed a sigh of relief—but only momentarily. I was unable to stop my mind racing back to last year and to one of the first economic policies introduced by this Government, which was doubtless designed to build stability for the long term but, sadly, in the short term has proved to be anything but stable. I refer to the decision to change the ACT rules. I hope that in relation to the welfare reform Bill that is to be introduced we may have an opportunity to look at the matter afresh.
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A new government run by a party that had not been in power for 18 years were almost bound to make some errors. I cannot remember who said, "A man who does not make a mistake does not make anything," but I shall give the Government the benefit of the doubt and suggest that the ACT issue has had genuinely unintended consequences. I hope that in the interests of formulating policies designed to build stability for the long term the Government may change their mind.
Today's debate on the gracious Speech deals with industry and economic and social affairs. The consequences of the ACT policy change have been serious in terms of additional cost burdens on industry, the effect on the economy, and the implications for social affairs.
The annual cost of the change to the British Telecommunications Pension Fund is estimated by Lane, Clark and Peacock to be £166 million. In the case of British Gas the amount is £92 million, and for the Railways Pension Fund, £30 million. These are annual charges. They are figures I have picked out at random. The position is serious, particularly at a time when there is genuine worry about an economic slow-down. I hope that the noble Lord, Lord Razzall, will note that I did not mention the word "recession"—merely a slow-down in growth.
However, my plea to the Government is not based solely on the cost to industry. It seems we are dealing with a difficult situation. The Department of Social Security is giving broad hints—and more—that pensions are an area of ever-escalating cost pressure on the Exchequer and that perhaps more people should provide pensions for themselves and rely less on the state pension. I applaud the move. However, the very act of changing the ACT rules has made that alternative much less attractive. It was in effect a double hit—a hit in terms of business costs and a disincentive to follow the laudable suggestion that people should seriously consider planning to provide additional pensions for their third age, the current euphemism for old age.
I assure the House that company boards up and down the country, including those on which I sit, are now looking hard at changing their pension schemes to move towards money purchase schemes instead of final salary schemes. I have received information from the National Association of Pension Funds indicating that my experience is by no means unique. J. Sainsbury, for example, according to NAPF, has estimated the cost of the change to be £10 million per annum. It has had to pay additional contributions and has taken steps towards a money purchase scheme.
As I am sure everyone knows, money purchase schemes are nothing like as attractive as schemes based on final salaries. I shall not bore the House by detailing the reasons. Suffice it to say that it would be a sensible and welcome move if the Government could see their way to changing the policy now. In my personal experience of business one receives many more Brownie points by admitting that one was wrong in the first place and changing course than by sticking rigidly to an approach that had had unintended consequences.

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Having got that off my chest, I should now like to congratulate the Government on their radical decision to introduce a Bill to transfer the Contributions Agency to the Inland Revenue. I have a very high regard for the staff of the Inland Revenue, who have to be the least loved members of society. General reaction to tax collectors, tax inspectors et al has always been negative, right from the time of Christ when they were among the most despised of people. In those days, tax collectors operated on a "commission" basis and probably merited some sort of ignominy. In my book the Inland Revenue is probably the most dedicated, efficient and trustworthy band of civil servants I have ever dealt with—but I guess I would say that, being the daughter of an inspector of taxes.
The decision to amalgamate the Contributions Agency with the Inland Revenue should result in significant savings in administration—dead costs, as I usually describe administration charges. It should eliminate a great deal of the hassle of trying to get answers about one's deductions, be they income tax or national insurance. Let us face it: national insurance contributions are income tax under another name. I am sure that amalgamating the two will lead to greater efficiency. It is a good move. Indeed, I wonder why it has not happened before.
Thinking about the proposal—and it is quite radical—I wonder whether the Government care to be tempted to be even more radical and add to the Inland Revenue both the Benefits Agency and Customs and Excise. I am aware that the Benefits Agency is vast, and doubtless people will say, "Oh no, we couldn't possibly do that." But let us think about it a little longer before dismissing it out of hand.
The efficiencies in administration (dead costs) could be huge and—and it is an important point—having the Inland Revenue, the Contributions Agency and the Benefits Agency under one administrative system would almost certainly give power to discover and act upon benefit fraud. It would in effect result in a one-stop shop for the gathering and spending of the largest amount of money handled by government agencies.
Continuing in the spirit of radicalism, perhaps I may suggest that the whole question of negative income tax could also be considered. Just because it was the suggestion, I believe, of Milton Friedman is no reason for not revisiting the proposition. It is just a thought. I ask your Lordships to remember that you heard it first here, and from the Opposition Back-Benches!
All economists fall into the trap of analysing everything ad infinitum. I am not decrying analysis, but very often we fall into the trap of sifting out analytical results that do not conform to our long-held, if unstated, views about a particular issue.
The Government have undertaken analysis as to why industry in this country is relatively uncompetitive, and we have all heard the major reason—productivity. The noble Baroness the Minister majored on that in her opening remarks, quoting the productivity gap between the UK and the US as being 40 per cent. and that between the UK and France and Germany, 20 per cent.
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Analyses of productivity are very seldom what they seem at a first, superficial glance. The reflex action when faced with a diagnosis of productivity shortfalls is to hammer industry or employers for low productivity. I fear that we have heard that again today. It leads to a demoralised industrial sector, all the more demoralised because the sector is aware that in much of what it does it cannot change much.
The McKinsey Report, Driving productivity and growth in the UK economy, is probably the catalyst for this emphasis on productivity. Of course we must improve productivity. However, having read the McKinsey Report, I was slightly taken aback to see that selectivity had once more come into play and that one of the major reasons for our relatively inadequate performance in the productivity stakes does not get mentioned by government spokesmen or by the media; namely, the stultifying regulatory environment in which we operate.
The regulatory system in this country seems to be expanding all the time. We in this House have tried to halt the pace of expansion. At every turn, yet more regulation appears. All of us seem powerless to halt it. I fear that I have personally fallen into the trap on many occasions when I have said, "Why don't we legislate for X, Y or Z?" But the McKinsey Report makes it clear that the regulatory barriers in the economy are a significant hindrance to our competitiveness.
A few points raised by the McKinsey Report bear stating here. All are direct quotations from the report. The first is:
"Product market and land use regulations create harriers to the entry of new firms and hinder the domestic expansion of the most productive UK companies. As a result, the best operators tend to focus their efforts elsewhere, on increasing domestic margins or expanding internationally. Because of this, unproductive businesses are able to generate reasonable profit margins and stay in business long after they would otherwise have been forced out".
Secondly,
"The CAP has severely limited the supply of milk to UK dairy producers … as a result UK dairy producers have faced supply constraints in developing more productive dairy products such as cheese and yoghurt. Countries less disadvantaged by regulation have been able to build much stronger and more productive dairy processing industries which in some cases now export their produce to the UK".
Thirdly,
"Strict building codes have prevented the development of a productive hotel industry".
Fourthly,
"Regulations governing pricing and competition have artificially constrained the productivity of the UK's fixed telecoms network".
So it goes on. Finally, from my batch of selected quotations, I offer this:
"High street banks and other retailers located in listed buildings encounter difficulties in modernising their branches to improve customer services".
I do not point a "guilty" finger at anyone or any government but we should all be aware, when we criticise British industry for its lack of competitiveness, that as legislators we should examine our own actions first and establish whether or not we have to shoulder some of the blame.

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We all anxiously await publication of the competitiveness White Paper and hope that the regulations point is both exposed and dealt with. To use the in word, we need to modernise our whole plethora of regulations in a root and branch way, not just tinker with the twigs.
I wish to comment briefly on two other issues highlighted in the gracious Speech. The first concerns the promise to introduce legislation to improve the regulation of financial services and markets. I look forward to the consideration we shall give the Bill. Much of the draft Bill is to be welcomed, but there are areas which need further attention, including consumer compensation, an enhanced international role for the FSA and the need to continue consultation.
The second issue relates to the fact that legislation will be brought forward to provide a fair basis for water charging in England and Wales. I declare an interest as a director of a water company and look forward to contributing to the debate, based on my experience from the coalface, or should I say from the pipeline.
All of us in this House have the shared objective with the Government that, whatever we determine in the months to come, we hope that it will contribute to building stability for our economy in the long term. I look forward to the months ahead and hope that we are all successful in achieving that objective.
4.41 p.m.
Lord Christopher: My Lords, for me it is a pleasant happenstance that I follow the noble Baroness, Lady O'Cathain. She illustrates very well for me one of the first impressions I had when I came into this House a few weeks ago. It is how often many of your Lordships have crossed my path, and I yours, over the course of the past quarter of a century. The noble Baroness, Lady O'Cathain, is one. That leads me to say that the lasting impression I have is of the friendliness and help which my new colleagues and I have received from everyone in this House. That is certainly true of noble Lords, and particularly of all the officers and staff. I hope that there is some mechanism for conveying to them that such remarks are made about them, not as a matter of form but most sincerely.
It was a considerable surprise to me at my age to be invited to come here, but there are a number of possible reasons for it. If credit is due to anyone, it is the late Lord Houghton of Sowerby, who was the general secretary of the Inland Revenue Staff Federation, from whence I came. I very much appreciated remarks about the Inland Revenue and support them entirely. Lord Houghton established a culture which has done a great deal of good for many people. He believed in matters mentioned yesterday: training, fitness and productivity. Although he never used the word, he almost invented the concept of "stakeholders". Therefore it is a great privilege to me to come into the House and find the noble Lord, Lord Callaghan, here. I have wondered several times what would have happened both in the federation and in other quarters if he had not gone into the Navy. He and Douglas greatly supported
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me with their advice, and that is so of Douglas particularly from the time when he and I had our first clash at my first conference in 1953. He won, but it somehow led to a friendship which lasted until he died a couple of years ago.
Lord Plant of Benenden followed Douglas as general secretary. I now join two colleagues, the noble Lord, Lord Brooke of Alverthorpe—and noble Lords will join me in wishing him a speedy recovery from his illness—and my noble friend Lady Symons of Vernham Dean, who has already found herself on a distinguished Front Bench.
I reflected on what Douglas would have expected me to talk about. He believed very much in lateral thinking and in being radical. I do not think he would have wanted me to spend the time without making suggestions for change. So I hope he would be content that my maiden speech in your Lordships' House should be about the so-called "stakeholder" pensions on which we await a Green Paper.
Here I had better declare an interest. I am the executive chairman of Trade Union Fund Managers—a small unit trust company—and of the trustees of the charitable trust which owns it. We just might have a small interest in what happens in the future.
I understand why the Green Paper has been so long delayed. I am even a little encouraged by that delay and glad that it will be green and not white, since neither Lloyd George nor any government since have put the ultimate pensions system in place.
Therefore, I wish to question the wisdom of a conventional approach of a stakeholder pension scheme per se. I ask my noble friend Lady Hollis of Heigham, the Minister, to consider instead provision for retirement age through an individual retirement savings fund—an IRSF. I shall explain.
What—at least as I see them—are our objectives and perhaps the tests by which any scheme will be judged? First, whatever is done, whether or not it is compulsory—and my own belief is that any change is likely to be unworkable without compulsion—must not be or even look like more taxation or higher national insurance contributions. The global economy, anyway, pushes us towards lower taxes to sustain growth and work.
Secondly, I believe we must look towards personal ownership of whatever results. It is good psychology, but it also offers the prospect of maximum long-term benefit and, most importantly, provides absolute portability, certainly within the EU and probably worldwide. On that score, I am uneasy about the fashion for group and industry schemes.
Thirdly, we must look for rock-bottom charges. Fourthly, combined with that, we must look for top quality value for money.
Fifthly, the history of pensions suggests that we need to ensure that there is flexibility for governments to alter regulations to meet social and economic changes over time.

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Sixthly, we need a scheme which does not openly encourage employers to wind up good existing pension schemes or shift to schemes such as those to which the noble Baroness, Lady O'Cathain, referred.
How could it be done differently if it is not literally a pension scheme? I believe that it could be by means of a fund—an IRSF—invested for, say, 30 years in equities and, perhaps afterwards, progressively in less volatile securities. It could be a fund reported upon regularly by the manager to its personal owner.
What I see as important, if we are contemplating a period of a full working life—as I now do by way of illustration—is this. Over 40 years to the end of 1997, £1,000 invested in the equivalent of the all-share index, with net income re-invested, would be worth £173,000 today.
An objection to equities, oft repeated, was described in a pensions pamphlet which I recently received as,
"the fluctuations of the rocky world of stock markets".
There is, of course, volatility in all market places, but this is not a valid reason for not using equity investment. The year 1992 saw the UK leave the ERM. The Financial Times/Stock Exchange all-share index dropped more than 15 per cent. over three months. What happened afterwards? One thousand pounds invested in June 1992, just before the ERM affair, would now be worth £2,200; £1,000 invested immediately after the crash would now be worth £2,600. But if the investment had been delayed until June 1993, the outcome would be £1,980. For different reasons, 1998 has witnessed similar phenomena—thus far anyway.
As I have said, taking a prudent view of 40 years is more likely to provide greater benefits on my basis than any likely pension scheme, and at much lower annual charges.
I have asked myself why the only thing that one should be allowed to do with such a fund is to purchase an annuity. Goodness knows why it is still demanded today. The objective of the state is to avoid burdens falling upon it. I imagine that it will be possible, annually, to calculate the minimum additional pension that any of us requires beyond the state or any other pension we may have so that we are not eligible for other state benefits. There are options that are not exclusive.
First, if the fund is large enough to provide income above the minimum requirement one can put the fund into "trust", by which I mean escrow, and draw income. On death, subject perhaps to a special tax after a reasonable exemption limit of, say, 15 per cent. in current terms to take account of the fund's origins, the fund could be part of a deceased's estate.
Secondly, one could require everyone to pay to the state whatever was required to purchase the minimum extra pension. Anyone would be free to use any balance as he wished, perhaps subject to a requirement to provide additionally for old age care. The Government would accept responsibility for paying this supplementary pension and for inflation-proofing it. This means that the Government would be assured as to the citizen's minimum income. Because the state would be both insurer and payer there would be no regulation
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costs, no private sector profits to be met and, assuming that payment was with the basic state pension, no extra payment costs.
Thirdly, another option would be to purchase at least the minimum annuity in the market. One would be free to use any balance as one wished, again subject perhaps to the need to provide for old age care.
I believe that this proposal, perforce outlined but briefly, goes a very long way towards meeting flexibly, perhaps in a popular way, the long-term aims of the Government. It could even become effective, albeit modestly, in contributing to individual retirement needs quite some time earlier than a narrow pension proposal. What is more, the owners receive all that is put into the fund both by themselves and their employers and the growth that has accrued over the period of time.
I make only one request of the Minister today. I am confident that the response will not be quite as bleak as that which Lord Houghton of Sowerby received in his early days when he made proposals for a pay-as-you-earn system. The Inland Revenue Staff Federation invented the pay-as-you-earn system. He was told by the then Chancellor, who I believe was Sir Kingsley Wood, to keep his nose out of the Government's business. The Government introduced pay-as-you-earn a short while afterwards. I simply ask my noble friend to think about what I have suggested. I thank the House for listening to me so patiently.
4.53 p.m.
Lord Levene of Portsoken: My Lords, it gives me particular pleasure to have the privilege of congratulating the noble Lord, Lord Christopher, on his perceptive contribution to this debate in his maiden speech today. His experience in the Inland Revenue both as a civil servant and latterly as general secretary of the staff federation brings a particular insight to your Lordships' proceedings in this House. His work and concern for many of the less fortunate members of society will also be of great value in your Lordships' consideration of these issues. We all look forward to hearing more from him in future.
I must declare two interests and make one apology. My interests are as chairman of Bankers Trust International and this year as Lord Mayor of the City of London. My apology is that my duties as Lord Mayor require me to leave the debate before it is over to attend the Queen's state banquet for the President of Germany.
My responsibilities as Lord Mayor cover two areas in the gracious Speech: the governance of London and the proposals for reform of the regulation of the financial services industry. The governance of London was dealt with in yesterday's debate, but I should like to place on record two points. First, your Lordships should note that in due course they will receive a Private Bill sponsored by the Corporation of London which will set in hand its own reforms, designed to modernise its electoral system and to give the world's international financial centre the best and most efficient local government, catering for the special needs of the industry, to be found anywhere in the world. Secondly, London governance and financial services are interrelated in this way: the

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success of our financial services contributes to the stature of London as a genuinely world city. The better London as a whole is run the more attractive it becomes as a location for the companies and individuals who make up the financial services industry.
The City of London, which I represent, has become one of the strongest brand names that this country has. It is now recognised around the globe as the world's greatest international financial centre, as the noble and learned Lord, Lord Fraser, observed. But, like Wall Street in New York, which is used as a metaphor for that country's financial services industry, the same industry in London has now spread well beyond the City's and London's boundaries. But it is that industry which is called "the City", as its core activities are still concentrated in the Square Mile, and doubtless always will be. Today over 1 million people in Greater London work in financial services. The national figure is 4 million, which is the same as for the entire manufacturing sector.
The next Session of Parliament will be a very busy one. Despite that, we must guard against anything that creeps into the legislative programme here or elsewhere which will harm this asset; it is vital not only to the UK but to the whole of Europe.
The City has given the UK a huge competitive advantage throughout history. But today, all the nations of Europe can benefit from that same competitive advantage. The number of overseas banks and other financial services firms in London is the clearest evidence of that. It is one of the most important messages that the City needs to convey in Europe during the coming year, especially in the context of economic and monetary union. The euro will certainly bring huge changes and the City is well prepared; indeed, it is better prepared than many others. Throughout the New Year bank holiday weekend, when most of London is either revelling or asleep, some 30,000 people will be working in the City in order to prepare for the first day of trading in the euro on 4th January 1999.
The single currency will not rob London of its importance in the European time zone overnight. On the contrary, the deep, liquid markets in the City will be essential for the euro's birth and effective operation next year and in the future irrespective of whether or not the United Kingdom joins. While the United Kingdom is outside the first wave of the euro, the City of London is very firmly in and will trade the new currency from day one almost certainly to a greater extent than the rest of Europe's markets put together. The euro, however, may not even be the most important challenge. Other issues will profoundly shape the City's future. One is the role of financial services in modern society. Will financial institutions take on responsibilities allocated to the state over the past half century? What are the responsibilities of fund managers? Does greater private provision for personal financial security mean that the City will be subject to greater public accountability?
Technology is another challenge. New nimble providers will emerge. Borrowers and savers have already found innumerable and ingenious ways to cut out traditional intermediaries as many City markets have
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discovered, sometimes uncomfortably. We are even treated to a vision of banking being conducted by satellites orbiting miles above the earth, conveniently free from inquisition by any government or tax collector.
Intense and intensifying competition within and between financial centres partly stems from relentless technological innovation. But the long history of the City suggests that it has little to fear from competition. That is why the City generally has always welcomed the creation of a single market in financial services in the European Union. The completion of the single market is vital to the prosperity of the whole of the European Union.
However, the rules for the single market must be drawn up so that Europe's financial business generally is not driven offshore and outside Europe altogether. The Commission's plans for a withholding tax to apply across the European Union to savings, income and, in particular, the huge euro bond market, concentrated in London but an asset to the whole Continent, will be highly damaging to Europe's standing in world financial markets. Elimination of harmful tax competition is fine, but it becomes self-defeating if the effect is to send business to other countries; and who is the winner then?
The Government have rightly taken a firm position against these plans. But I urge the Commission and the European Union presidency, both Austria now and Germany next year, to work through the OECD to seek world-wide agreement on such changes first instead of seeking to bring them into Europe alone. That is the only way to avoid the damage across Europe that they would otherwise bring.
This afternoon I have talked about a genuine British success story. The success of the City of London brings jobs and prosperity not only to London and the United Kingdom but to Europe as a whole. We promote standards of excellence which are generally the envy of the world. We act as hosts to an international community which affects the global nature of our world economy. It is vitally important that in implementing this Queen's Speech, and others in the future, Parliament and government are mindful of that, and nurture it as such to the benefit of London, Britain, Europe and the world.
5.1 p.m.
Lord Brookman: My Lords, it gives me personal pleasure in this maiden speech to have the opportunity to talk about a subject close to my heart: the manufacturing industry.
I welcome the measures set out in the gracious Speech which I believe will continue to form the basis for a fairer society in this country. All my working life has been spent, in one way or another, in the steel industry, an industry which was given much support earlier today. I started at the Ebbw Vale steelworks in south-east Wales in 1953, following the footsteps of my grandfather, father and brothers. Those were the days when one expected to begin and end one's working life with the same employer. It was one of the periods when Welsh rugby reigned supreme. How times have changed!

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At that time, my steelworks employed some 13,000 people. Today, that figure is reduced to 1,250 and continues to decline with rationalisation and so on. The scale of change in the steel industry is clearly illustrated by a statistic that I uncovered recently. When I began work in 1953, the steel industry in the UK employed 450,000 people producing over 17.5 million tonnes. Last year, 18.5 million tonnes were produced by fewer than 50,000 people. The changes that I and many others have witnessed at first hand have been staggering and painful for those communities like my home town of Ebbw Vale.
Yet today the UK steel industry, despite its current difficulties, is a success, with £4 billion a year being earned in exports, which is a fivefold increase over the past 15 years. I suggest that that is not an inconsiderable sum.
One of the current difficulties faced by manufacturing—and the steel industry is one of the most badly affected sectors—is the high exchange rate, which was mentioned earlier today. I am sure that that has been discussed many times in this House. There are those who are unhappy about the Government's decision to give the Monetary Policy Committee responsibility for setting interest rates, and in that respect I very much welcome the statement made by the noble Baroness the Leader of the House regarding the appointment of a Select Committee to consider its operation and to make recommendations.
From my perspective, a crucial question that needs to be asked is: how does the MPC's decision affect manufacturing? I believe that there is a need for the MPC to be given a wider remit which gives equal weight to employment and output as well as the control of inflation.
There have been suggestions, most notably from the TUC, for an exchange rate target. That may seem unfashionable in some quarters, but it would, if set at a sensible level, greatly assist our manufacturing industries.
I give one example of the consequences of too high an exchange rate. British Steel plc has claimed that every 10 pfennig increase in the value of the pound against the deutschmark results in £100 million lost profits. I am sure that noble Lords agree that it is a cause of great concern. However, I must say that in my view the Government have made a very good start in addressing the supply side of the economy and focusing on Britain's productivity problems, although it will undoubtedly be some time before the measures to address investment and training start to bear fruit.
It must be right for the productivity issue to be given top priority. The recent McKinsey Report, already touched on by the noble Baroness, Lady O'Cathain, showed that in many areas Britain is lagging behind its competitors in terms of productivity, although we must be careful, I suggest, to compare like with like. For example, the United States of America has higher prosperity per head, but that is partly as a result of longer working hours and higher employment rates. Moreover, productivity growth in the United States has been less. One disturbing fact is the growth in America
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of the "working poor". Significantly, according to the McKinsey Report the world leaders in manufacturing workplace productivity are France and Germany.
I suggest that it is quite clear from analysing that report that the deregulations of the 1980s did nothing to create a more productive society. What these statistics seem to imply to me is that there is a positive correlation between the levels of investment, research and development, and growth and productivity. Here again, I would say that the UK steel industry is an exception, having increased its productivity by 10 per cent. per annum over the past 15 years. In fact, the UK steel industry is, by common consent, among the most efficient in the world. That is a tribute to the joint efforts of management and the workers in the industry. That is why the current difficulties that our domestic steel industry faces are a cause for concern.
The steel industry has invested in training and new technology and has introduced new working practices to improve quality and increase productivity. Yet the resulting benefits are under threat due to circumstances which many would suggest and some would agree are beyond the industry's control.
In my opinion the key to the continuing successful introduction of measures to improve the performance of our manufacturing industry is to ensure the involvement of social partners. We need to continue to develop a culture in this country between employers and the workers which is based on trust and mutual respect, one which recognises that workers and their elected representatives have a legitimate role to play in improving the performance of the companies for which they work.
For all my working life as a trade union official, whether locally or at national level, I sought to develop a relationship with employers, including industrialists such as my good and noble friend Lord Paul, who sits on the Benches below me today, which was based on trust and mutual respect. That is why I wholeheartedly endorse the Government's commitment in the gracious Speech to continue to work in partnership with business, and their welcoming of the improved relations between business and trade unions. I am personally delighted that the Government are to bring forward measures to establish a forward-looking balance of rights and responsibilities for employers and employees and will promote partnership at work.
There may have been an argument—indeed, a strong view held by many—that trade unions were obstructive to change in the past. But my experiences demonstrate otherwise. I shall use what influence I have to encourage unions to work with employers on the basis of such social partnership. In my opinion, the measures in the gracious Speech lay the foundation for such partnership and fairness at work, as well as promoting competitive success. I am delighted to support the Government's programme.
Finally, I thank everyone—and I genuinely mean everyone—for the warmth and friendship shown to me and the new Peers who have joined me in your Lordships' House. It is indeed a privilege to be here.
5.11 p.m.
Lord Wade of Chorlton: My Lords, it gives me immense pleasure on behalf of the whole House to congratulate the noble Lord, Lord Brookman, on his maiden speech. As we gathered, he is a Welshman of steel, a formidable combination. On reading a little about him, what impressed me most was that one of his pastimes is keeping fit. I must admit that that is one aspect of life which I have never been able to put at the top of my agenda. In fact, I always carry a telephone number in my pocket so that should I get the urge to jog I can ring the number and the lady on the other end will talk me out of it. Therefore, I have great admiration for the noble Lord's iron discipline that has allowed him to go to the gym rather than to be seduced away by his trade union activities. It has been a privilege to listen to his maiden speech; it is a privilege that he should join us in your Lordships' House. We wish him well and look forward to the many other opportunities which we shall have to hear his views on a whole range of subjects.
In discussing industry and the economy, it must be said that within the United Kingdom we have some of the finest and most efficient companies in the world, companies which produce the finest products in the world. We have some of the best managers and some of the leading employees with skills and a range of enthusiasms which are difficult to beat.
The noble Baroness, Lady Hollis, referred to the fact that our productivity needs to improve. Clearly, when one looks at the demands on society and government, we need to see a steady increase in the economic growth of this country if we are to have a hope of ever meeting the demands that society is continually putting upon us. Therefore, it is right that we should address the issues which are preventing that necessary development and growth.
My noble friend Lady O'Cathain referred to the McKinsey Report, as did the noble Lord, Lord Brookman. It was my intention to make that the basis of my remarks. Therefore, I shall now be able to shorten them, which will be in the interests of all.
The gracious Speech states:
"At home, the central economic objectives of my Government are high and stable levels of economic growth and employment, enabling everyone to share in higher living standards and greater job opportunities".
That is extremely important. I read with some interest the comments of Peter Mandelson when speaking at the CBI national conference recently. He said:
"Businesses' overriding responsibilities are to win markets and to make profits; government's to concentrate on getting the business environment right. Competition drives innovation, customer service and competitiveness. My ambition at the DTI is simple: to create a world-class environment for business, bringing business into the heart of policy making in Whitehall, in the regions and in Europe".
I agree strongly with those sentiments. But one is sometimes doubtful whether the implementation fits in with other aspects of government policy.
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I agree also with the part of the gracious Speech which refers to regional development agencies. It confirms that they,
"will be established in England, decentralising decision-taking to the English regions. They will have a remit to serve both rural and urban areas".
I hope that they will be responsible for business growth.
The underlying point of the McKinsey Report is to draw attention to the fact that we need to look again at some of the critical trade-offs in the United Kingdom between social and economic objectives. The balance between the two has probably gone more towards social and environmental aspects and has forgotten the important economic objectives for which any European policy and government policy must be responsible. Wide productivity gaps will ultimately be unsustainable in a global marketplace in which customers have their pick of goods and services from anywhere in the world and while best practice customers seek to extend their advantage into more and more national markets. In such an environment, companies which are not up to the standard of the global benchmark for productivity will eventually become non-viable.
Those arguments do not propose the wholesale lifting of land and property regulations. Many other matters must be brought into consideration. What matters is that planning decisions and regulations are made on the basis of full and accurate information and properly balanced objectives and that when choices are made, everyone understands the possible economic consequences.
Product market and land use regulations create barriers to the entry of new firms and hinder the domestic expansion of the most productive of our companies. I am extremely grateful to my noble friend for citing some of the quotations which I intended to give because that has made life much easier for me.
Let us look at some of the proposals. To reform product market and land use regulation, there needs to be, first, a systematic identification of the barriers in each product market and the barriers to world-class productivity. A thorough assessment is then needed to understand the economic cost against social benefit together with a comprehensive reform of product market and land use regulation. I have personal experience of dealing with small and growing companies from both the financial and management points of view. I believe that those are extremely serious issues which the Government must address.
It is unfair to ask local planners to implement a more growth-orientated regulatory regime if their communities do not see any direct benefits from it. Local communities should derive financial benefits from new investment in their areas.
We need to develop a modern approach to competition and increase exposure to global best practice. Government and industry could sponsor international benchmarking studies to identify the rate of productivity improvement in the UK and the causes for the gaps. More positive action could be taken for the creation of incentives for companies, particularly overseas companies, to start operation in sectors of low productivity rather than in areas of low employment. In

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many of our activities we have put too much emphasis on employment creation rather than on improving productivity. There is no doubt that higher productivity is the best stimulus for creating jobs. The creation of jobs is not the key to economic growth but productivity is.
We must invest more in the capability and flexibility of the working population. The regional development agencies will have a responsibility for rural matters and rural economy issues. There is no question that there is a crying need for retraining and the development of ideas and enthusiasms in the populations which are now encountering serious problems in rural areas. We need a much better policy to deal with the retraining of those people. We need to remove barriers to entrepreneurship and technological innovation.
We need improvement in the commercialisation of academic research. I have been instrumental in the north west in the development of Campus Ventures, a special company of Manchester University set up to encourage the commercialisation of innovative ideas. I notice the noble Lord, Lord Sainsbury, looking at me. He was recently invited to visit but unfortunately had a more pressing engagement. I ask the noble Lord publicly again to put it on his agenda. I hope that at Manchester University he will see how we have been able to take 30 or 40 companies from scratch (no assets, only an idea) and turn many into successful businesses. It has needed outside resources and input from a whole range of people to make it happen. It is so important to the future of our economy.
The universities should improve their ability to develop more potentially high-tech entrepreneurs. In my view universities could provide courses for entrepreneurs which would give confidence to seedcorn capital and venture capital companies to back those who have passed such courses. The Government could underwrite such financial support. In Germany there is a special scheme supported by the government where people, if financed by banks, will be underwritten by the government if they have passed the appropriate courses. We need much more support to assist people with technological skills to run businesses. It is an area we need to examine more closely.
We need investors better educated in the needs of small businesses. The noble Lord, Lord Evans, in his maiden speech—I agree with so much of what he said—drew attention to the needs of small businesses by detailing how he had struggled in the early stages. Clearly, there is a wide gap between those who can provide the finance and the needs of small businesses. Neither understands the needs and the working mind of the other. A great deal could be done in that regard with the support of the Government.
Seedcorn investment needs particular attention and support. We need provision of a liquid exit market to provide finance for seedcorn investment companies to re-invest. I am involved with one or two seedcorn investment organisations. We find it extremely difficult to get our money out of company A in order to invest in company B because it is very often the only capital that was in that seedcorn company and the next stage
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cannot be brought in until we find a solution. We require the removal of barriers to the formation of natural clusters of entrepreneurial ventures. Clusters act as a magnet for talent and reduce costs. Many universities and centres of higher education wishing to create such clusters face problems of planning which prevent development along lines the market really needs.
It is my belief that tax and fiscal harmonisation in Europe would be against competition; it would be against economic growth in Europe; and it would be against the interests of all those who live in Europe. I hope the Government will stick by what they say and resist it at all costs.
I believe that what the Government are tackling and what is being discussed in this debate is the need for an economic policy which encourages all levels of entrepreneurship, ideas and the technology within that economy which is essential to achieving everything else we wish to see.
5.23 p.m.
Lord Newby: My Lords, it is a great pleasure for me to speak in a debate with so many maiden speeches. I do not know whether there is a collective noun for maiden speeches—perhaps it should be a lobby—but I have listened with great interest and wish that I were able to take up all the points that have been made. I was particularly sympathetic to some of the comments of the noble Lord, Lord Christopher, in respect of pensions. I would like to debate with the noble Lord, Lord Brookman, the alleged relationship between employment in the steel industry and the prowess of the Welsh rugby team. Although one could do a time-series which might or might not prove that in the case of Wales, one might have a bit more difficulty in applying the same principle to New Zealand.
Instead I wish to concentrate this afternoon on a number of international aspects of our economic and industrial affairs. I suspect the House will not be too surprised if I start with the vexed question of EMU. The Queen's Speech contains the following ringing declaration, that Her Majesty's Government,
"will encourage preparations in the United Kingdom for the introduction in other Member States of the Euro".
The biggest economic initiative since the Treaty of Rome receives in the UK a mere whimper by way of government response. One may disagree with Opposition policy but at least it is clear. There will be no entry into EMU for at least the life of this Parliament and the next.
It seems to me that the Government's position is truly inglorious. The Chancellor wants us in. The Secretary of State for Trade and Industry wants to get us in. Yet Rupert Murdoch does not want us in yet, at least until his European empire has grown somewhat. And so we have an elaborate device for the five economic tests to give spurious cover for a political decision to procrastinate. No wonder that industry is confused and unsure how to prepare for 1st January.
In Continental Europe, by comparison, dual pricing in the shops (the euro and the national currency) has graphically demonstrated to everyone that change is on

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the way. Here business is understandably loath to spend money preparing for the euro when it is often unsure how it will affect it in the short term and even less clear about the longer term. Given the lag between any decision to enter and the ability of banks, shops and industry to manage the transition to the euro, even a decision in principle now to enter would leave us a number of years behind the 11 initial members of the euro club.
We will, in January, see the Government's changeover plan for entry, which I suspect will show that the changeover period will be some three to four years. The earliest, therefore, that the UK could enter would be 2002, but even that would require a decision early next year and so far there has been no sign of this.
It seems to me that there are significant short- and long-term costs to this delay. It is particularly so because the pound and interest rates are still too high. As far as sterling is concerned, although the trade-weighted value of the pound appears to be only a little above its May 1997 level, looking at the real effective sterling exchange rate used in the OECD index, it is clear that it is some 8 per cent. higher than in May last year and fully 26 per cent. above the level in May 1996. In other words, it is clear that sterling is still somewhat over-valued and life is going to remain tough for exporters. The economists Goldman Sachs, in their weekly economic update, suggest this week that they consider the level of 2.50 deutschmarks to be close to the fair value of sterling, still some 30 pfennigs below where we are today.
A lack of government commitment over the coming months, I believe, runs the real risk of leaving the pound open to buffeting between the Scylla of the euro and the Charybdis of the dollar. It is hardly a stable basis on which our exporters can plan. If the pound is too high it is clear that our short-term interest rates are still extremely high in relation to those of Europe. At 6.75 per cent. it is around double the 3.3 per cent. average in the euro zone. With the retail side of the UK economy still softening it may well be that the Bank of England is able to cut interest rates by a further quarter point next Thursday, but this will still leave a yawning gap between the UK and the euro zone. The clear commitment to join the single currency now could help take pressure off our hard-pressed manufacturing sector.
If these are short-term problems, in the longer term we face the prospect yet again of Britain having no real ability to determine many of the rules of the euro game simply because we are not at the table. The Chancellor may have signed up to the new European way with his socialist and social-democratic colleagues, but the plans which this document sets out are predicated on the reality of the euro. The truth, of course, is that this Government still cling too much to the old British way of dealing with Europe: letting the other members take the risks and set the rules and then coming in late and expecting the rules to be changed to suit us.
An example of what we are missing by being left out relates to some of the principles on which the European Central Bank is now planning to operate. The effect of having had an independent central bank means that
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we have discovered a measure of openness and accountability in dealing with the central bank. The European Central Bank started off with a different tradition and, frankly, we had little input into that. Had we been at the table from the start it would have been easier for us to obtain a greater degree of openness and accountability from the European Central Bank.
The Government's lack of clarity on the euro is matched by their lack of clarity more widely on the question of taxation and the implications of EMU for taxation. It must be said that a tremendous amount of nonsense has been written on this issue over recent weeks. For example, contrary to what one might have thought on reading some of the tabloids, there are no plans to harmonise income tax; there is no conspiracy to set uniform business taxes. There has been some discussion about co-ordination and co-operation to avoid mutually harmful tax competition, and surely that makes sense. Even on the one issue on which there is a firm proposal which causes some concern in this country, to which the noble Lord, Lord Levene, referred—namely, the withholding of tax on savings—that is opposed not only by the UK but also by a number of other member states. Therefore, even if the veto on tax matters did not exist—and it does exist—that measure would not have obtained a qualified majority and stands no realistic chance of going through.
It seems to me that the paranoia in relation to tax reflects a lack of self-confidence in the country and an unwarranted assumption that if a Commissioner or Cabinet Minister in another member state floats an idea it is about to be imposed upon us virtually without our having any say, whereas, by comparison, if a UK Cabinet Minister floats an idea there is an assumption that it will necessarily meet a hostile reception and sink without trace. Neither of those stereotypes is true but they have bedevilled our relations with the EU from the start. I fear that this Government's policy will do little to change that.
Perhaps I can make a final point on tax. There may be some areas where a joint approach to taxation makes sense. One which is specifically in our minds on these Benches is the area of energy taxation, where there is a clear desire across Europe and in this country—as the noble Lord, Lord Marshall, demonstrated in his recent paper—to have a degree of taxation on energy matters. It makes sense that that is done in a co-ordinated rather than in a piecemeal way.
A final area to which I should like to refer this afternoon goes beyond the euro and our relations with the EU, but relates to a broadly similar matter; namely, the fact that increasingly our economic and industrial success depends on the actions of a range of international institutions. So far I have talked about the European Union. I should like to speak briefly about the international financial and economic institutions. They have an increasing importance across a whole range of matters affecting the UK, both directly and indirectly, by the impact they have on the economies of our trading partners, particularly in the developing world.
I have been pleased that over recent months the Government appear to be taking the lead in a number of major issues affecting those institutions, whether it is

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Internet commerce or an attempt to recast the MAI. But there is a gap in the way that Parliament deals with its scrutiny of those bodies.
Tremendous time and effort is taken both in another place and this House to call domestic institutions to account. When it comes to international financial and economic institutions, all of which have UK representation, there is little attempt, ability or opportunity to discuss what we are doing in, for example, the EBRD or the World Bank. That is a major gap which has the effect that those institutions not only are but are also seen to be unaccountable, and that diminishes their standing among politicians and more generally. I urge the Government, therefore, to give some consideration to how the principle of scrutiny which we have developed in domestic institutions can be extended to these increasingly important international counterparts.
5.34 p.m.
Lord Craigmyle: My Lords, a newcomer to your Lordships' House is frequently asked whether he feels nervous. I say "No. Their Lordships' House is a kind place, whose Members and officers epitomise helpfulness and encouragement", for which I am very grateful. However, I am awed by the content and majesty of your Lordships' deliberations. And with awe, I now crave your Lordships' indulgence.
We have a welfare system built up over 50 years, so complex in its results that it is almost impossible to predict the outcome of any change made to it. The effects of change can seldom be only those which were intended. I wonder sometimes whether Ministers wish that they could sweep away the entire edifice and start again with a clean slate. Plainly, the Government should be congratulated on taking on entrenched and systemic problems.
Along with the great majority of family men, I chose marriage. Families founded on marriage are most likely to produce children who do well in school; who go on to higher standards of education and who get jobs. Like their parents, they tend to be healthier than children from other families. They see their doctors and visit hospitals less often and are less likely to need social or financial assistance from the state. When the time comes, they have the best chance of repeating their satisfactory childhood experiences when raising their own children. Children of marriages are least likely to turn to substance abuse or to crime. Have I made a case for marriage yet? In the interests of fairness, I sought to find unflattering statistics about marriage. I failed. It has been shown that married people are even less likely to have road accidents—I do not know why.
Of course, we can be grateful that some unmarried families buck the trend in a positive direction. But we cannot escape the statistical probabilities that shape society. Plainly, there are huge benefits in being married and I am delighted that the Government have a stated aim of supporting and encouraging marriage; all the traits of marriage bring fulfilment and joy to relationships and stability to the country. They make the
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family, as the Home Secretary rightly said, the building blocks of society. They are of course also a gift to the Exchequer.
Frequently in a family, not just in marriage, one parent—usually the mother—stays with the children for their early years. She watches over their every development, understanding through an invisible bond their unspoken needs, and answering their questions at the rate of 20 to 30 an hour. Such diligence is not for sale. Love has no price. Yet a mother is often under great pressure, both social and financial, to seek paid employment while leaving her children in care. The suggestion seems to be that government agencies or non-related persons can make up for the lack of a parent. I am very uncomfortable with that suggestion.
Yet, some parents wish to work away from their children; we will never know just how many until they are presented with an unbiased choice. An unbiased choice means no loss of benefits for those who would look after their own children. It means that their spouses, if they have spouses, should not pay extra tax as a result of leaving their partners at home.
I have avoided numerical statistics. I shall resort to quoting some to express just what a pickle we are in. The medium gross income for families is now £407 per week. If that comes from the efforts of a single earner with, say, two children, it is reduced by tax and benefit losses to 48 per cent. of the net equivalised income of a single person earning the same amount. Less than half.
Poverty has become a marital issue. I am grateful to the analytical services division of the DSS which last week showed how children are affected by it. Taking poverty at half average income, most children affected by it are from married families. There are 1.8 million of them. The point, my Lords, is that marriage is being driven into poverty in spite of its intrinsic strengths.
These are gritty problems to embrace, but as long as the Government drive towards their stated aim of supporting marriage—and I hope that they will—I am sure they will receive wide support.
5.40 p.m.
Lord Barnett: My Lords, it is traditional to congratulate a maiden speaker. I do so not because it is traditional but because it is well deserved. That was an excellent speech. Indeed, we have heard many excellent speeches today, but that of the noble Lord, Lord Craigmyle, has given us all a great deal to think about. I declare an interest in the sense that my parents, I am happy to say, were married. I shall turn shortly to a few matters concerning tax, to which the noble Lord also referred.
I know that the noble Lord runs a successful string of SMEs; that is, small and medium enterprises. I declare an interest as chairman of an SME. For obvious reasons, I believe that small is beautiful.
The noble Lord also has a great social conscience and has a good deal to do with social and charitable organisations. I know that he will be a great Member of your Lordships' House for however long he is here!

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I look forward to hearing him speak as often as possible, as, I am sure, do other noble Lords. His views will be of great interest to us.
The noble Baroness, Lady Hollis, will forgive me if most of my speech is on the economy. However, perhaps I may comment first on means tests. The noble Baroness did not say much about them. However, there is no need for her to apologise if from time to time the Government need to use them in order to achieve their objective of helping those in greatest need. That would include taxation of child benefit. I know that that is not entirely a matter for her, but I hope that it will be a matter for my right honourable friend the Chancellor of the Exchequer. Traditionally, we in the party have always opposed means tests because of the way they worked in the past. However, provided that they are carried out so as to give dignity and respect to the recipients, we should not need to apologise for them. I urge that point on my noble friend.
I turn to the economy. There has been much talk in the press about crisis and recession. The media likes the word "crisis". It makes a nice headline and is a useful word to them. I do not blame them for using it; they have to fill their papers with something. However, I noticed that the Prime Minister, recognising that the word "stability" would not make a good headline, added another word. He said, "Stability is sexy". Even that did not prompt too many headlines!
I asked myself two questions: "Is there a crisis? Is there a recession?" I first had to answer the question: What is a recession? I asked a number of economists and received at least three different definitions—my learned friend Lord Desai will have many more. The first is that there are two successive quarters of negative growth. The second definition, by some economists, is that any fall in growth is a recession. The third, which might be a more recognised definition, is growth below a sustainable trend.
At least two of those definitions are effective now. There has certainly been—and there is now—a slow down in economic growth. More importantly, what will happen to economic growth next year and the year after? That is the real cause for worry about whether there is or is not a recession.
The Chancellor, in his recent pre-Budget Statement, forecasted that next year we shall see 1 to 1.5 per cent. growth; the following year 2.25 to 2.75 per cent., and in 2001 2.75 to 3.25 per cent. Other economists have more varied views. Perhaps not surprisingly, if one consults a large number of economists one will receive a large number of views. However, I am in the "don't know" category. I would not care to forecast tomorrow's weather, particularly in Manchester where I live.
The question is whether growth in the economy in two years' time will be affected by a quarter or a half per cent. cut or increase in interest rates. I find it astonishing that anybody is able to say that a quarter per cent. more or less will do this or that in two years' time. For those reasons, I have probably ruled myself out as a member of the Monetary Policy Committee, but
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perhaps not of the Select Committee which studies what the MPC is doing. I have always envied people who are able to make such forecasts.
On the one hand, we read that a quarter per cent. cut in interest rates is not enough, but, on the other hand, we read that a half per cent. cut causes panic. That is another buzzword. I do not know the answer. I would prefer to have lower rates than at present. Sadly, unemployment is set to rise. That seems true, whichever economists' views are taken into account.
Some manufacturers are having a bad time though not all. That, I understand. I have spoken to many manufacturers. Much of the problem is to do with high interest rates and the high exchange rate. However, I have to say that I have not heard those who criticise such high rates suggesting ways to reduce them. I shall put one or two suggestions to my noble friend in a moment. I would prefer higher rates of growth—to pay for so many of the things which need to be done—even with a small risk to the level of inflation. However, I do not believe there is much of a risk at present. I do not blame the Monetary Policy Committee for dealing with interest rates in the way it has. After all, your Lordships and another place gave it the powers in the Bank of England Act to give the highest priority to inflation and, as I said previously, only then to give consideration to the Government's own economic policy. I hope that might be changed in the not too distant future.
How much lower will growth fall? I fear it is distinctly possible that the Chancellor may have been too optimistic. I hope that I am wrong. However, I would have qualified the forecast if I had been the Chancellor. On the other hand, even if the gloom-mongers or doomsters are right about growth. It seems to me that the borrowing requirement—we no longer seem to use those four letters, the PSBR—leaves plenty of room to avoid an old-style slump or crisis. The plain fact is that in 1997–98 the borrowing requirement, or the PSBR, was £42.1 billion. Of course, that is a lot of money—unless one says it very quickly—but in 1998–99 GDP is likely to be around £855 billion. Therefore, the PSBR will be less than 40 per cent. However, if my noble friend will forgive me for using the term, the Maastricht criterion is 60 per cent. I know my noble friend will understand that we can well afford that kind of borrowing requirement.
I hope that the Government will allow the borrowing requirement to rise so as to prevent growth falling too low. It seems to me that there is today a low inflation culture both here and in Europe, and, indeed, in the western world. So I prefer stability, whether "sexy" or not, to the doomsters' predictions.
However, although this will upset my noble friends the Eurosceptics, we could have even greater stability if we were more positive on economic and monetary union. I hope that my noble friends will not just dismiss the scare stories about tax harmonisation because of our veto. I would not like to pretend that the tax system is perfect in every sense—I believe that there is clear room for improvement—but we should not dismiss every possible change as being ridiculous. It would not be. Indeed, there is also room for change in that respect! Of

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course, Eurosceptics will not believe what I say. During the debate a few weeks ago on the European elections Bill, I said that if they offered every member of the Community a bar of gold it would be turned down. Equally, any tax harmonisation would be turned down even if it were to our benefit. I hope that we will not turn that down.
The main issue is not tax; it is the consequences of economic and monetary union, whether we are in or out. EMU is due to start in a month's time. I know that some people believe that we can ignore it and live happily ever after—and I shall not mention names—but I hope that most of us will recognise that that is a ludicrous idea. The plain fact is that we will be affected whether we are in or out. As we said in our report on the European Central Bank, being in is not risk free but we also said unanimously that it will work.
So what should the UK be doing? I have one final, simple question for my noble friend the Minister to which he can give me an equally simple answer when he responds to the debate. I urge him not to repeat the Prime Minister's statements. He is an independent Minister here in this House and does not necessarily have to agree with everything that the Prime Minister says. As it stands, we seem unlikely to join much before the year 2003. I should like to focus briefly on the statements made by the Prime Minister and others that we will join economic and monetary union when the time is right and when it is in the UK's national interest.
Therefore, does my noble friend the Minister agree that it is not a question of if but of when we will join the EMU? After all, that will still leave us free to join when the time is right. Indeed, it will be a no-lose situation, because we will not join until the time is right. Interest rates would start to fall to the 3.3 per cent. average in Europe, and our exchange rate would also start to fall. Can my noble friend confirm that it is a question of when we join rather than if? I know that he will give me a truthful answer to that question.
5.54 p.m.
Baroness Sharp of Guildford: My Lords, it is a pleasure to be speaking in this debate when we have been treated to so many excellent maiden speeches. Indeed, I look forward to hearing another one very shortly. I put my name forward for the debate because I wish to record my endorsement of the Government's commitment recorded in the gracious Speech to promoting growth and higher levels of employment both within the UK and within the wider framework of the European Union. Like the noble Lord, Lord Barnett, I feel that those commitments are important.
However, I wish to address my remarks today to one of the issues which has already been fairly well covered; namely, the productivity gap. I should like to speak specifically about two issues arising from that gap which I believe to be very important and which have not received enough attention to date. The first issue is that of skills. As the noble Lord, Lord Barnett, said, last year the UK recorded a growth of 3.5 per cent. But that rate of growth, which is one of the highest rates that we have recorded over the past 25 years, was considered
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unsustainable. It was considered unsustainable because we would run into bottlenecks on the supply side which would force us into inflation. As a result, the Monetary Policy Committee stepped in and raised interest rates—as it is bound to do because legislation requires it to do so if it fears that inflation will rise—and, in so doing, has not only cooled the economy by raising the cost of credit but has also disproportionately hit manufacturing industry by raising the value of the pound.
As my noble friends Lord Razzall and Lord Newby pointed out, had the previous government, or even this Government, taken our advice and used taxation rather than interest rates to cool the economy and, on top of that, had they made a commitment to enter in the euro at the earliest possible point, we might have avoided these problems. But we did not. However, be that as it may, the point that I wish to bring to your Lordships' attention is that, even though the unemployment figure last year was still close to two million, nevertheless, with the growth rate 3.5 per cent., we teetered on the brink of inflation. Why is that? What are these supply-side bottlenecks that cause us to move into inflation so rapidly?
I believe that the most important of those bottlenecks is the one that we hear so much about; namely, the skills bottleneck. This year it has been computer programmers and systems engineers partly because of the millennium bug, but—and those who work in the property business will know this very well—we have also run out of electricians, bricklayers and plumbers. Indeed, we have run out of a great many ordinary skills which we might have been expected to have. But now that we have a deregulated market in all those areas, the moment the economy tightens, wages rise rapidly and the skills shortages show themselves very clearly.
The Government quite rightly identify education as a key priority. It lies at the heart of the productivity problem. Much has been achieved by increasing the proportion of 18 year-olds going into higher education and by encouraging many older people to go back into higher education. But we still have a disproportionate number of young people leaving school at the age of 16 and failing to achieve a proper post-16 education or training. A recent survey reported in The Times Higher Education Supplement found that standards on training schemes are extremely low and leave much to be desired. Many of those who have been put through training schemes then pass on to another such scheme and thereby miss the chance to get a proper job.
The old apprenticeship system that we had, which required seven years of sitting next to Nelly, quite rightly collapsed at the end of the 1970s and in the early 1980s. We now have what we call a modern apprenticeship system but far too few young people sign up for modern apprenticeships and far too few of those who do sign up carry on with the apprenticeship to the end. As a result we have far too few qualified plumbers, electricians, bricklayers and telecoms engineers and far too many cowboys who have done a little bit of a course here and there. It is precisely this lack of skills in core areas such as construction that makes a 3.5 per cent. rate

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of growth unsustainable for us. Unless we address this issue, we shall not be able to bring unemployment down.
I am not yet convinced that the Government have grappled with the issue of vocational training. Last year, an excellent report was published by a group led by the noble Baroness, Lady Kennedy, but we have yet to see the result of that report coming through. Perhaps too much emphasis is currently being put on the school and higher education sector and not enough on this sector. I look forward to hearing the Minister's comments on this issue.
I would like briefly to turn to the second issue of small and medium-sized businesses. We have already had some discussion of it in this House. Again, if we look at the productivity problem, it is the performance of these companies which lies at the root of it. In some senses it is a matter of needing to hi-tech our low-tech businesses. New technologies—particularly information and communication technologies—have transformed both industrial processes and administrative procedures for such companies. It is vital that these opportunities are seized by industry, large and small. It is in taking up these new technologies that the small business sector is the laggard.
How best can small business be helped? We have had many schemes put forward but they have been predominantly schemes concerned with what I call the hi-tech end of small business. They are concerned with seed corn capital, with venture capital, with helping to link up with universities in terms of hi-tech businesses. Yet the core problem of productivity lies not with our hi-tech businesses but with our non-hi-tech businesses and the way they take up new technologies and use them to improve their productivity. It is the tail of these small companies that weighs down our productivity performance.
I recommend to your Lordships a programme undertaken in the United States called the Manufacturing Extension Programme. It is deliberately based on the same sort of ideas as the agricultural extension programme, ideas about getting out and helping small businesses on the ground. There, they work in conjunction with state governments, local government, local universities and local community colleges to upgrade the performance of small businesses.
We see the same in Germany with the Frauenhofer Society institutes, which work in conjunction with their local chambers of commerce and serve the Mittelstadt, which is such an important part of German industry. I want to draw to your attention the transformation which has taken place in Germany over the past 10 years. I work a great deal in the area of biotechnology. I am fascinated that, in the past 10 years, Germany, from having lagged behind in terms of small biotechnology companies, is now leading Europe. When they decide to pick up and work on new technologies, the Germans work very fast indeed.
We need policies for small and medium-sized businesses which start bottom-up, not top-down. It is no good the DTI laying down policies that have to be
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followed through government offices of the regions, and so forth. We hope very much that the new regional development agencies may do some of this. But I fear that they also are too top-down. They have not been given enough discretion. We have not yet sufficiently cut the Treasury bond. We need to see more vitality and more creativity coming up from the bottom. If we are prepared to give some discretion to certain of these institutions and organisations, I believe we can do it. I do not believe we can do it if we continue to keep the reins too tight.
I recommend both areas as being important to the productivity issue. We have spoken a great deal about this in this debate. It is an issue that has bedevilled the UK economy for the past 50 years. Education and skills and the performance of small businesses are key factors in Britain's performance. I welcome the priority given to both issues by the Government within their overall economic strategy and I look forward to hearing from the noble Lord, Lord Simon, as to how it is proposed to carry forward these matters in future.
6.05 p.m.
Lord Clarke of Hampstead: My Lords, I am conscious of the fact that I am the fifth of the maiden speakers this afternoon, but I would like to offer my congratulations to the other four noble Lords who have preceded me in their maiden speeches. They were of excellent quality. I just hope that the standard will be continued for the next few moments.
I would like to spend a few moments remembering two noble Lords—now, sadly, no longer with us—who have sat in your Lordships' House and who bore the same title of Hampstead. I refer to the late Lord Pitt of Hampstead and the late Lord Finsberg of Hampstead. They were two noble Lords separated by their political allegiances but together in their desire to give of their best endeavours to help others throughout their distinguished public lives.
All three of us were candidates in the Hampstead Parliamentary constituency. The late Lord Pitt entered your Lordships' House in 1975. David Pitt, as he was in 1959, contested the Hampstead parliamentary seat in that year. I well recall that election. I canvassed many households seeking support for David. I am pleased to say that he never held me responsible for the fact that he was unsuccessful. In both the 1974 general elections, I stood as the Labour candidate and my opponent was the late Geoffrey Finsberg. Like the late Lord Pitt before me, I too was unsuccessful. Geoffrey Finsberg, as he was then, retained his seat until his retirement from the other House in 1992. Later that year he entered your Lordships' House.
It is with a little pride and a great deal of humility that I say during this, my first contribution to your Lordships' House, that I remember both noble Lords with much pleasure. I am proud to say that they were both my friends. I can only express the hope that in my time here I can get somewhere near the high standards that they both set. It is a very tall order. All I can say is that I shall try.

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I listened carefully to the gracious Speech. I was hoping that it would contain an indication that the industry that I have been associated with for over half a century would at long last know what its future would be. I speak of our great Post Office, a post office that I joined at the age of 14 in 1946.
I am aware that I am not the first postman to join your Lordships' House. That honour fell to my noble friend Lord Ewing of Kirkford. While I accept my place as the junior postman in this House, perhaps I can claim to be the first telegraph boy to arrive here. I have no doubt that someone will correct me on that point if I am wrong.
Speaking of postmen, I understand that my noble friend Lord McIntosh of Haringey, in a reply to a point made by the noble Lord, Lord Ewing, on the 10th November at col. 626 of the Official Report, said that the noble Lord, Lord Dearing, had informed your Lordships' House that he had been a postman. This information came as a bit of a surprise to me. 1 recall a number of delicate situations in the Post Office when the noble Lord, Lord Dearing, was in fact chairman of the Post Office Board and I was a senior negotiating officer for the Union of Communication Workers. I thought that I should check carefully what the noble Lord said, and col. 507 of the Official Report provided the answer. Declaring his interest in the Post Office, the noble Lord, Lord Dearing, described himself:
"as a former postman of sorts".—(Official Report. 9/12/98; col. 507.]
I can assure your Lordships that he was not the sort who got up at around half past four in the morning to deliver the mail. He did not join us in serving the 26 million addresses that our great Post Office serves every day. I have had the opportunity to speak to the noble Lord, Lord Dearing, about this. He was happy to concede that he had not delivered many letters but he said he had sold a lot of stamps.
The gracious Speech mentioned that other measures would be laid before Parliament. It is my hope that among those other measures will be a decision on the future of the Post Office. During my long years with it I have witnessed many reports and reviews of the Post Office. Recently they have come in thick and fast. Including select committee and Monopolies and Mergers Commission reports, they have averaged one per year for the past 13 years. To many employed in the industry—I include management and staff alike—such constant examination and re-examination appear to take up time and resources that could be better used in the ever-present determination to improve on the magnificent service that they already provide. I believe that it is the best service in the world—and I have seen many of them in my long time as a union official in the Post Office.
The Post Office that I am so proud of has contributed much to the Treasury over many, many years. This year, the financial targets set through the external financing limit have again been met, and met handsomely. Given an overall external financing limit target of £313 million for the Post Office as a whole, it actually achieved £338 million—£338 million paid direct to the Treasury on top of the £217 million paid in corporation tax.
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It is not only this year that the Post Office has met the target set for it by the Treasury. For 20 years the Post Office has achieved subsidy-free profits. It has exceeded the external financing limit target set for it in 13 of the past 16 years. It has contributed in excess of £2 billion to the Treasury during the same period of 16 years.
I would add that this success story has been achieved at a time when Royal Mail has been able to maintain 33 months of stable prices. With the price freeze that will last until next April, it is the longest period of price stability for more than 40 years.
The Post Office, all of it—the counters business, Parcelforce and Royal Mail—deserves better. It is my sincere hope that, when the current review is concluded, it will recommend that our Post Office should be allowed to get on with its job of serving the public. It should, in my view, be given the commercial freedom that it has asked for, real commercial freedom that will allow it to compete and grow unencumbered by the constraints of the public sector borrowing requirement.
The case for allowing the Post Office to have commercial freedom has been well made by both management and the unions in the industry. In July of this year, John Roberts, the Chief Executive of the Post Office, when presenting the 1997–98 accounts, said:
"We are planning our future on the basis that it is no longer a question of whether we will be getting commercial freedom, but when".
He added:
"But it must be real commercial freedom which will allow us to compete and grow our business, unfettered by the chains of the Public Sector Borrowing Requirement".
The Communication Workers Union, my union, has recently put its model for an independent publicly owned corporation to London Economics. That theory of an independent publicly owned corporation has been validated and supported by London Economics. The general secretary of my union, Derek Hodgson, has welcomed the firm backing given by such a highly regarded leader in the field of the economics of privatisation and regulation. Mr. Hodgson has said:
"The IPOC model, if accepted by the Government, will give the Post Office the commercial freedom it needs to compete, it will impose discipline on managers; at the same time it will give the public an assurance that the Post Office monopoly will not be exploited to produce excessive profits".
Commercial freedom will allow the Post Office to plan outside the Government's public expenditure cycle. It will give it freedom to borrow and invest, freedom to enter into acquisitions, joint ventures and strategic alliances and freedom to allow the workforce to share in the success of the Post Office.
The competition that faces the Post Office—and especially the Royal Mail—is real. At least eight overseas postal authorities are busy at work in the United Kingdom competing for business with Royal Mail. The uncertainty that has overshadowed the Post Office for so long has to be ended, and ended quickly, if our great publicly owned corporation is to beat off the challenges of foreign postal administrations.

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I am grateful for the opportunity to say a few words about the Post Office. Noble Lords will have gathered that I have a deep affection for it. It has given me so much. My hope is that the loyal and dedicated staff who work in the postal business will soon be told that their future employment will be within a publicly owned corporation, free of Treasury constraints. The Post Office should be given the commercial freedom that will help it to maintain its fine traditions and to ensure that our Post Office remains the world's best.
Finally, I join with others in placing on record my sincere thanks to the officers and staff of your Lordships' House, who, without exception, from the date of my introduction on 20th October and before, have been so courteous and helpful. I am most grateful to all of them. Thank you, my Lords, for your patience.
6.14 p.m.
Lord Harris of High Cross: My Lords, it is a real pleasure for me to express on behalf of the whole House our congratulations to the noble Lord who has just sat down. He told us that he joined the Post Office at the age of 14. He did not go on to say that he worked his way through the trade union ranks to become deputy general secretary of the Union of Post Office Workers, that he served on the Labour Party's national executive committee and that he was briefly chairman of the Labour Party. In his spare time he is also active with the Friends of Israel group and was one of the co-founders of One World in Action. In my 20 years' experience in the House, I have never seen five maidens perform such a lavish sacrifice of virginity in the space of a few hours. We all hope we will hear the noble Lord, Lord Clarke, speak frequently in the House. I personally hope he will address us constantly on the issue of commercial freedom for the Post Office, an issue on which he can count me a strong ally.
On the occasion of the last Queen's Speech in May 1997, I ventured to offer warm congratulations to the new Labour Government. I do not think it will do them much good if, as a Cross-Bench full-frontal market economist, I now appear too enthusiastic. I must confess to increasing reservations, although I am far from abandoning all hope, much less looking around for political asylum. The tribute I shall shortly pay to Gordon Brown as Chancellor is, I suspect, more generous than he might receive from others on the Labour Benches.
Before turning to economics, I want to express my own shared anxiety over the Government's headlong stampede into constitutional experimentation. I refer not only to the emasculation of your Lordships' House and to the threatened dismemberment of the United Kingdom but also to the denaturing of our vigorous politics through proportional representation, whether through open or closed lists. Perversely, as a Londoner, I am even fearful of the new layer of local government that is threatened, even if we can keep out of the mayor's parlour certain self-advertising, power-seeking individuals.
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Whenever I see amiable activists like Ken Livingstone or the less amiable activists like Mr. Alex Salmond in full cry I recall Adam Smith's distinction between the ideal which he described as,
"a legislator, whose deliberations ought to be governed by general principles which are always the same",
in contrast to what he called,
"that insidious and crafty animal, vulgarly called a statesman or politician, whose counsels are directed by the momentary fluctuation of affairs".
Here we glimpse two faces of new Labour: on the one hand, the insidious, indiscriminate constitutional experimentation; on the other, I am glad to say, the principled macro-economic strategy trumpeted in the gracious Speech as,
"the historic decision to give the Bank of England the power to set interest rates".
These two faces have precisely opposite tendencies. In place of constitutional recklessness, we have a Chancellor who displays financial prudence. Instead of half-baked adventurism, he will offer well considered construction. In contrast to short-term expediency, the Chancellor sticks resolutely to the long-term view. Come to think of it, Gordon Brown is about the only Scot in an administration dominated by Scots who appears to have any kinship with dear old Adam Smith.
By giving the Monetary Policy Committee the single objective of keeping inflation around the central target rate of 2½ per cent., the Chancellor has removed from all influence the insidious and crafty politicians around him who are always urging lower interest rates without too much concern for inflation. His simple aim is to entrench long-run expectations of a stable monetary environment. The absence of such stability has not only kept our interest rates higher than Germany's; it has also meant the disruption of production and employment by the alternation of stop-go policies throughout the 1950s, 1960s and 1970s. No one seems at the moment to have noticed that the Chancellor's first major step after the election of 1997 was to undo the first major step of an earlier Labour government after the election of 1945; namely, to reverse the nationalisation of the Bank of England. It has thus taken half a century to rumble Keynes and to rediscover the older wisdom that money is too important to be entrusted to politicians.
I am genuinely sorry that the Tories felt obliged to denounce this one promising innovation by new Labour, just as I am disappointed that Mr. Gordon Brown has failed to acknowledge that his success to date could not conceivably have been possible without the sound economic inheritance from the Tories. As regards the Monetary Policy Committee, I simply add that, in the unavoidable absence of Montague Norman, it seems to be doing a pretty good job. My own view is that this innovation by Gordon Brown displayed a personal courage not matched by a British Chancellor since my noble and learned friend Lord Howe of Aberavon struck down exchange control in 1979. Who would now try to reverse that particular initiative?
Alas, if the Chancellor deserves high praise for judgment and rare vision on this key issue, the same cannot be said for his other policies. Having won the

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election by promising to stick to Tory income tax rates, he promptly removed exemption on insurance company funds, raised stamp duty on buying and selling homes, and killed off personal equity plans. He thereby weakened both the Government's economic and social strategies by simultaneously discouraging private pensions, taxing mobility of labour, and attacking personal savings. We have then to add the future uncertain impact of minimum wages, the EU's social charter, the strengthening of trade union influence, loose talk about "fairness at work", and the ceaseless extension of regulation, which other noble Lords have mentioned. All such measures must cumulatively add to production costs and subtract from the very flexibility which was the unacknowledged inheritance Thatcherism gave to the new Labour Government.
In a recent article entitled Drifting back to bad old Labour days, my friend, Professor Colin Robinson, the scholarly editorial director of the Institute of Economic Affairs, exposed the Government's Achilles' heel. In a succinct sentence pregnant with warning, he wrote,
"The fundamental problem is that there are no obvious limits to regulation".
It is these cumulative burdens that will increasingly imperil the Government's hopes for sustained growth and employment and will undermine the very basis on which their burgeoning social policies are hopefully founded. A neglected paradox is that Gordon Brown's successful monetary strategy relies on depoliticisation; that is, getting government and the bureaucrats out of the action. Yet at the same time his colleagues are busy almost casually extending politicisation into every other department of policy.
In conclusion I suggest a last reason for welcoming the denationalisation of the Bank of England. It seems to me to remove the only respectable reason for joining EMU, which was to fix a chronically weak, suspect pound sterling against periodic devaluation. Henceforth we no longer need that anchor, whether it be the deutschmark or the wholly unproven euro. Therefore I commend even to Liberal Democrats the half dozen words in the gracious Speech pledging, without any of the customary ifs or buts, that Her Majesty's Government,
"will maintain the United Kingdom's abatement".
For those words alone I offer up a prayer of heartfelt thanks. For the rest I admit to thinking that we could have got along quite nicely without troubling Her Majesty to deliver this gracious Speech.
6.25 p.m.
Baroness Turner of Camden: My Lords, I welcome the opportunity to participate in this debate, which has been distinguished by so many excellent maiden speeches. I would like in the time at my disposal to discuss two aspects of the speech about which I have some knowledge and some concerns, although I speak against the background that I believe the Government's welfare package to be well-intentioned and benign, and therefore, generally speaking, I believe it should be supported.
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First, there is the question of pensions. We are promised a Green Paper, but in the meantime there will presumably be some interim legislation to bring in stakeholder pensions for those not able to be members of occupational schemes and unable for various reasons to be covered by personal pensions. I assume that many of these people will be self-employed. There has been an increase in the number of self-employed, largely as a result of the employment shake-out we saw under the previous government. Of course it is right that something should be done for such people, many of whom are far from well off.
However, pension provision in general continues to present a number of problems. There is never any difficulty about pension provision for people in secure, reasonably well-paid employment. Many of them will be covered by good occupational schemes or will make their own private arrangements. The difficulties always arise when considering how to protect people in retirement who have been in low-paid employment during their working years. Often such people have had a chequered work pattern, moving from job to job. Large numbers of women are in that situation. To expect such people voluntarily and individually to set aside money in order to provide for retirement, when many live from payday to payday, is really expecting rather a lot.
There has been much talk of making second-tier pensions—presumably stakeholder pensions—compul-sory. I think this will be difficult for the less well off and will be widely seen as another tax. My own view is that the previous Labour government in the mid-seventies were responsible for introducing the best pensions framework that this country has ever seen. It became known as the Castle Plan after my noble friend Lady Castle who was responsible for its introduction. For the first time everyone would have to be in a second-tier pension, either SERPS or a contracted-out occupational scheme. SERPS itself—with its provision that pensions would be based on the best 20 years' earnings uprated—was basically redistributive and enormously beneficial to women. It would have been possible to have transformed SERPS into a national pensions plan, and to make access available to the self-employed. Unfortunately, the line taken by the previous government that SERPS in its original form could not be afforded seems to have been widely accepted. I think that is wrong.
One way or another, retirement has to be paid for, if not through a good state scheme, then at much greater expense through private insurance schemes. In case it is claimed—as it sometimes is—that the problem with state schemes is that governments often change the goalposts so there is bound to be an element of uncertainty, I point out that the financial services industry is not exactly risk free. Many people who took out personal pensions have begun to find that out. Indeed, few seem to realise just how much they must set aside from current disposable income in order to be sure of a pension large enough to have a reasonable standard of life in retirement. "The value of investments can go down as well as up", as financial services providers now must tell their clients. There will, of

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course, be a need to establish standards for stakeholder pensions and a system of regulation. Perhaps the Minister will tell us about that.
The second matter with which I should like to deal is the welfare package. There is a great deal about it that is entirely good. I welcome the establishment of a disability rights commission. My noble friend Lady Gould spoke about that with some passion yesterday. She was quite right that it is an enormous step forward.
There seems to be a genuine attempt to deal with poverty. Who can disagree with the proposition that the only real, long-term way out of poverty is through work? The concept of the "single gateway" on to the benefits system is a good one. At present, the benefits system is extremely confusing and often people do not receive their entitlement. That is particularly true of older people.
On the other hand, there is undoubtedly benefit fraud. It is in no one's interest that that should continue. It is alleged that, along with errors, fraud has cost the system around £1 billion a year.
However, some aspects of the welfare package arouse a certain amount of disquiet. It is clear that the emphasis will be on work, rather than on benefits. But what kind of work? What will be available? Is it really to the advantage of very young children that someone else should be paid to look after them while their mother undertakes poorly paid work elsewhere, which may mean that she has all the extra hassle of working, plus the expense involved, plus keeping a home going for her family, but at the end of it she is only a few pounds a week better off?
I am glad to note that the acceptance of a job will be voluntary for a lone mother, but I am a little unhappy about the pressures that are likely to build up to get young women into low-paid employment, when they might prefer to stay with their children while they are young. I certainly think that no mother with children under the age of five should be subjected to any kind of pressure to work whatsoever. If she wants to work and good quality childcare is available, that is fine, but it must be a genuinely voluntary choice.
My other point—I have mentioned this before—relates to widows' benefits. My noble friend Lady Hollis will not be surprised that I have returned to this subject again. I was rather surprised to read in the Queen's Speech that widows' benefits are to be "modernised". One would not have realised from that that the intention is that for a number of widows such a benefit is in future to be removed altogether as an automatic entitlement. The reason is stated to be the need to treat widowers equally, as a result of a decision that is expected from the European Court of Justice. On that basis, both widows and widowers will receive a bereavement grant, which is to be increased to £2,000. Widowers and widows with dependent children will receive what seems to be the equivalent of the present widowed mothers' allowance. However, the benefit currently paid to widows between the ages of 45 and 55 will apparently disappear as an automatic entitlement, although present benefits will continue.
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The Government intend to save around £600 million by scrapping widows' benefits. Presumably, in future, a widow will be expected to present herself at the "single gateway" when an attempt will be made to find her suitable work. It is difficult to see what sort of work will be available for an ageing woman who has spent most of her life bringing up a family.
One reason advanced for that is that there have been very big changes in women's roles since Beveridge. Nearly 50 per cent. of all women work during marriage. It is also said that many receive generous occupational pension provision. Of course, there have been changes, but are they really as great as many would have us believe? More women may work, but often in part-time, badly paid employment. Many may benefit under a husband's occupational pension scheme, but it must be recognised that most occupational pensions are based on the assumption that they are second-tier provision. In other words, the basic state pension is an integral part of the total pension provision. The same is true as far as the widows' benefit is concerned, which, in any event, is only a portion of the full pension. That also is based on an assumption that there will, in the case of a widow, be a widow's pension in addition.
There may, of course, be a few wealthy widows around, just as there are well-to-do people entitled to the basic state pension. However, that is no reason for removing the automatic right to benefit from large numbers of other widows who are far from well off. Widowhood is a traumatic experience anyway, and for many there is the added burden of penury.
As I said in an earlier debate, the benefit is a contributory one. It is paid on the basis of the husband's contributions record. I gather that the benefit will be paid to widowers on the same basis—that is, the wife's contributions record. As women, in general, are more likely than men to have an incomplete contributions record, it follows that it is unlikely to cost as much to pay the full benefit to widowers as has been suggested. So it is possible that it would not cost so much to equalise benefits as between men and women without taking away benefits from women.
I am aware that previous governments have been only too willing to depart from the contributory principle, as the previous Conservative administration did over SERPS. However, that does not make it right. Therefore, I hope that the present Government, whose intentions, as I said before, are entirely benign, will not feel tempted to follow suit.
6.35 p.m.
Lord Skidelsky: My Lords, as this is my first speech as Opposition Treasury spokesman in your Lordships' House, I shall surprise your Lordships by talking about Treasury matters.
The Government have promised to make,
"high and stable levels of growth and employment"
their central economic objective. That wholly laudable aim is subject to two provisos in the gracious Speech: the freedom given to the Bank of England to set interest

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rates to meet the Government's low inflation target, and the Government's commitment to,
"abide by its fiscal rules".
Those rather bland phrases express the consensus view that the main contribution macro-economic policy can make to growth and employment is to provide a stable environment for business.
I agree with the noble Lord, Lord Harris of High Cross, when he said that no political party has a monopoly of wicked Chancellors. But it was partly at least because the Labour Party had the reputation of being an inflation-prone, high-tax, high-spend party that the Chancellor imposed those two self-denying ordinances on himself.
Monetary policy is safe because the Chancellor has given control of interest rates to the Bank of England, and fiscal policy is safe because he has shackled himself to the "golden rule". What is the "golden rule"? It states that the net increase in public debt must not exceed government spending on investment. That means that the current account must balance over the economic cycle. The Chancellor intones that rule on every ritual occasion. Perhaps he sings it to himself in the bath. I emphasise it because that is the test against which he wants his fiscal policy to be judged. The question is: will he stick to it? Has he stuck to it? I suggest to your Lordships that his lapse into virtue was a purely temporary aberration.
Before the Chancellor came into office, he pledged to stick for two years to the spending plans of his predecessor, Mr. Kenneth Clarke, and he did. Because he inherited a rapidly improving fiscal position and because the economy in 1998 grew faster than expected, he is now looking forward to a budget surplus for the first time in 10 years. All credit to him for that, although it is a bit rich of him to claim sole credit. He simply borrowed Mr. Clarke's hair shirt for a couple of years.
However, two years of virtue seem to be about as much as a Labour Chancellor can take. At the first opportunity, last July, Mr. Brown announced £40 billion-worth of new spending on health and education over the three years 1999 to 2001. It would be completely affordable, he said, because the economy would grow at 2¼ per cent. a year over that period. Our party warned at the time that his three-year spending commitment was reckless and based on hopelessly optimistic growth estimates. The noble Lord, Lord Barnett, apparently agrees with this. In July the Financial Times stated soberly:
"Gordon Brown is taking a risk, but one which a British Labour Chancellor could scarcely avoid".
That is an astonishing, but I think perfectly accurate, admission that a British Labour Chancellor is driven to take such risks because he is under constant spending pressure from his party.
We were right in our warning. A few weeks ago the Chancellor came to the House of Commons to announce that the economy will not grow by 2 per cent. next year, but by only 1 per cent. He blamed that on the global downturn following the east Asian crisis. But when
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Labour's forecasts were made in July, Asia was already in crisis. A prudent Chancellor would have waited for his surplus before telling us how he intended to spend it.
Mr. Brown is not in the least disconcerted by the rapid falsification of his most recent growth estimates. The new assumption, made a few weeks ago, is that after a small dip in 1999 the economy will resume its growth at an even faster pace than he previously forecast. That is how he now expects to balance the books.
So what is the current position? There will be a small budget surplus this year as a result of the Chancellor sticking to Conservative policies. He promises us another one in two years' time as a result of sticking to Labour forecasts.
Lord Bruce of Donington: My Lords, I am grateful to the noble Lord for giving way. Will he agree that the Chancellor did have a reserve to which the noble Lord has not referred, in that the coming into operation of self-assessment meant that over £10 billion came in six months earlier than it would have done under the normal tax arrangements? That was never discussed by anyone, but it constituted a reserve upon which he could lean.
Lord Skidelsky: My Lords, I am talking about the forecasts over the next three years on which the spending plans are based, not about the current position of the revenue.
It is worth reminding ourselves that surpluses do not actually exist until they turn up in the Treasury's coffers. They are predictions based on guesses. The Shadow Chancellor, Mr. Francis Maude, rightly called them "fantasy forecasts". Why? Because the Chancellor expects the economy to expand faster than most independent forecasters do. He seems to believe that he has abolished the business cycle single-handedly. He entirely discounts the effects of new Labour taxes and regulations on the costs of doing business, notably the windfall tax, the minimum wage and the working time directive. Has the Chancellor considered that those measures might worsen the supply side of the economy during the period of his forecast and therefore raise the natural rate of unemployment?
The truth is that the Government have taken a fearful gamble with taxpayers' money. The iron rods with which the Chancellor bound himself have turned into elastic bands. The gamble may come off; after all, gambles sometimes do. But if the downturn is deeper than he estimates, his present spending plans will land him seriously in the red.
Using more sombre estimates, the National Institute of Economic and Social Research predicts that the Chancellor will fail to meet his "golden rule" by £23 billion over the lifetime of this Government. The whole point of the golden rule is to ensure that over the cycle surpluses and deficits balance. By committing himself to spend his surplus before he has earned it, he has consumed his deficit before he needs it. The surpluses vanish in the fog; the debt remains.
The gamble is doubly reckless because it jeopardises the very credibility that the Chancellor has been at such pains to build up. There will be another opportunity to

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explain why I do not think the golden rule is a satisfactory fiscal rule, but at least he should have stuck to it so soon after announcing it.
The Chancellor's policy also jeopardises the operational independence of the Bank of England. Our party opposed that policy because it provided neither for proper ministerial responsibility nor for full independence. The Bank carries the blame for high interest rates without any statutory right to criticise government policy that may have brought them about. Ministers talk up the Bank's independence while pressing it in public to reduce interest rates. The danger in the future is that loose fiscal policy will drive interest rates up just at the moment when we need them to come down. The Bank will then be left in a politically exposed position.
I wish to put a question to the Minister who will reply to the debate. When the Bank was given its mandate to maintain price stability, did it request, or secure, any assurances from the Chancellor on fiscal policy?
These rather dry technical matters conceal a fundamental political reality. The Chancellor has to gamble with the public finances because he has to feed unrealistic expectations about what public spending can achieve. His prudence, which I believe is genuine, and his party's belief in high public spending pull him in opposite directions.
Our party believes in lower taxes, lower spending and a smaller state. We do not delude ourselves that those are easy goals to achieve, but we made a start and will go further in future. The Labour Party believes in the exact opposite. It exists to spend people's money, but dare not openly avow the need for higher taxes. The technical question of how to balance the national accounts is thus bound up with the philosophical question of how large the state should be and what it should do.
We on these Benches believe that the more freedom we give people to make their own choices, the easier it will be to stick to prudent finance and the better it will be for our economy and our country. I very much look forward to joining battle in that cause.
6.47 p.m.
Lord Shore of Stepney: My Lords, I find this Queen's Speech a rather difficult subject with which to grapple. There is plenty of material on a whole range of matters, certainly on constitutional alleged reforms and changes to the welfare state. Those will no doubt be discussed at great length as Bills come forward.
However, there is one conspicuous omission—economic policy and the economy. Indeed, apart from two bland references to the general objective of stability and growth, it earns no elaboration in terms of policy or measures. That is almost unique in my experience, which is now considerable. It accounts for the fact that the economy, instead of having a whole Queen's Speech day allotted to it, is jammed in the middle of industrial policy, and the entirely different, though very important, subject of social policy and welfare.
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I therefore ask: why are the economy and economic policy not being discussed? Is it because all is going well with the economy? Is it because affairs are working out so splendidly that we really have no reason to look again in any detail at economic policy or the way in which it is unfolding?
Like the noble and learned Lord, Lord Fraser, who led for the Opposition, I, too, looked at some recent publications. There are plenty to choose from, as he and I well know. I looked at the latest CBI bulletin and the latest government statistics. It is true that this last month has recorded the largest ever deficit in the gap between the export and import of goods that this country has recorded in the whole of its history. That includes the terrible year which I know well, 1974, when without warning we were faced with the quadrupling of world oil prices before we had a drop of our own indigenous oil to set against it. It was greater even than that. Something was happening.
When we look a little more closely at other economic factors, what do we find? The CBI Forecast, which is a regular publication, with its strengths and weaknesses, nevertheless forecasts the growth of the economy at no more than 0.7 per cent. in the forthcoming year, 1999. Its forecasts for manufacturing output is minus 1.2 per cent. For the following year, 2000, it forecasts a growth of 0.2 per cent.
We are all sufficiently familiar with economic statistics not to be overwhelmed by them. However, at least we can interpret them to some extent. My interpretation is that we face a growth in unemployment of not less than half a million over the next 12 to 18 months. I add to that a matter of considerable importance which may throw a little light on why we are doing so badly. I have in my hand the monthly statistics on trade which state that in September total exports of goods fell 3 per cent. while total imports of goods rose 5 per cent. Exports to EU countries—that zone of stability and prosperity—fell 1.5 per cent. Those to non-EU countries fell 5.5 per cent., a good deal more. Imports from EU countries rose 4.5 per cent., those from non-EU countries rose 6 per cent.
That serious deterioration of export performance and the propensity to import, as regards the rest of the world, can be substantially explained by the appalling collapse of the economies of so many parts of the world, beginning in south-east Asia and extending much more widely, including Russia and elsewhere.
The fall of our exports to Europe and the substantial increase in our imports from the European Union are not due to the collapse of economic activities inside the EU. In my view, they are the direct effect of the folly of allowing the British exchange rate to be decided by interest rates and by allowing those interest rates to be decided independently by the Bank of England. We have no control over our exchange rate because we have abandoned the only way of influencing the exchange rate, which is through interest rate policy. The first thing the Chancellor did, as we were cogently reminded from the Benches behind me not long ago, was to abandon what we had for 50 years; control over the Bank of England and interest rates.

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I return to my question: why are we not having a serious debate on the economy and economic policy? Certainly not because the economy is doing well, so we can put that on one side. I believe that I know the answer to the question. We are not debating economic policy because there is no United Kingdom macro-economic policy. We do not have one. To have a macro-economic policy, we must have at least three capabilities: first, an ability to influence interest rates, the bank rate; secondly, an ability to influence the exchange rate; thirdly, an ability to influence the volume of demand as a whole by operating on the balance between taxation and expenditure.
Lord Skidelsky: My Lords—
Lord Shore of Stepney: My Lords, I shall give way in a moment. It is not an accident, it happened deliberately. The Chancellor abandoned those things out of conviction, because he does not believe that any British government should in future even attempt to manage the economy in the interests of Britain and the British people. He believes and is ensuring that we should hand it over—he believes in macro-economic policy, yes; but not British macro-economic policy, European macro-economic policy instead. So he is happy to have the discipline of interest rates, provided only that it is a European central bank which determines them and not a bank based on London. He is happy indeed to have the Chancellor's judgment about the Budget and about the balance between expenditure and income decided by treaty, by Maastricht, by 3 per cent. of GDP. I shall now give way.
Lord Skidelsky: My Lords, I thank the noble Lord for giving way. He wants a debate on economic policy. I ask him this question: why does he believe that it is so important that our Government should retain these instruments when we have had such a relatively dismal record in the post-war period, when we were using those instruments freely? Why are they so important? What is the evidence that they will improve our economic performance?
Lord Shore of Stepney: My Lords, I shall not at present attempt to answer that not because, as the noble Lord will well understand, I lack any ability to answer, but because of time and the width of the debate.
I have directly related the debate to the economy and the fact that we have no macro-economic policy; that we have adopted a European macro-economic policy. Whether or not that is right, we can debate the implications at another time. But that is why we are not debating economic policy now—because we do not have one.
I come to the fundamental problem for the Government. Things have happened since the previous Queen's Speech; momentous events. First, the world economy has changed and, as we all know, the balance of risk is no longer inflation, it is deflation. Because of that, virtually all the arrangements made under Maastricht based on the fear of inflation are outmoded and out of date.
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The second great change is the political balance in Europe; the Left or centre Left has taken over. The centre Left has brought in two major new policies that have left our Government gasping. First, they want a policy of full employment and economic expansion. In pursuit of that policy, Lafontaine, Schröder and all the rest have taken head on the banker, Mr. Duisenberg, who will not allow them to cut interest rates, and the European commissioners, who will not allow them to relax the Growth and Stability Pact and who keep them squeezed within the parameters of the 3 per cent. borrowing requirement. This is a great problem, but the struggle is not yet resolved. Therefore the Government are left in the unhappy position of having to decide which European macro-economic policy to adopt: the old one embedded in the treaty or the new one which under German leadership will almost certainly emerge after a fierce conflict with Duisenberg and the European Commission.
The other great innovation is the vast new offensive to thrust forward the federal project. It is on the lips of the German Foreign Minister and Chancellor. All those who say that this has been invented by the Eurosceptics had better start thinking very hard. I believe that the Government face a very difficult choice. They do not know which way to turn and which Euro-policy to back and adopt. I believe that the sensible approach is to recognise that we are coming to the parting of the ways. There is a federal way, but it is not for us and we should not attempt to pursue it. We should be quite clear that very soon the choice is between the proper defence of British interests and the abandonment of those interests in the vain and foolish endeavour to be at the heart of Europe.
7.1 p.m.
Lord Desai: My Lords, first I apologise to my noble friend on the Front Bench for not being in my place at the beginning of the debate. Today we have heard five excellent maiden speeches. I want to concentrate on the sixth maiden speech made by the noble Lord. Lord Skidelsky, as Treasury spokesperson for the Opposition. I do not know whether I disagree more with the noble Lord, Lord Skidelsky, or my noble friend Lord Shore. I shall have difficulty in manoeuvring between them.
I refer first to one matter alluded to by the noble Lord, Lord Skidelsky. Does the prospect of recession face us? My noble friend Lord Barnett also spoke to this matter. He started by expressing scepticism about forecasts and then made one or two of his own. For the past five years we have had very good economic growth because we have had a stable monetary framework with or without an independent Bank of England. This began with a very high deficit. I need hardly remind the noble Lord, Lord Skidelsky, that the highest deficit in recent years was under a Conservative government and forecasts went very, very wrong. Forecasts have not just begun to go wrong. I recall that on that occasion the figure was £50 billion. We have had a stable monetary and fiscal policy and good growth. Quite unusually, we have had a five-year recovery boom period that puts us in a very good budgetary situation. Even if the worst fears of the

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noble Lord, Lord Skidelsky, were realised, an overspend of £24 billion over three years in an economy which averages £870 billion per year in GNP frankly is peanuts. It represents less than one per cent of GNP per year. Therefore, even on the basis of the worst fears of the noble Lord, we do not face a budgetary disaster. It may not be 1987 when we had a surplus, but it is not 1992. We must get the numbers into perspective. There is no great black hole.
My right honourable friend the Chancellor got into the bad habit of taking three-year totals and bandying them about as if they were one-year totals. He thought that he would spend £40 billion on health and education and everybody became excited, but that was £40 billion over three years. What I liked about both the July budget and his return to the House with revised forecasts was the comment that his three-year spending targets would not be abandoned although the forecast was a greater slowdown in growth than he had previously thought. That is remarkable. Every previous Chancellor of both parties has panicked and immediately begun to cut spending. I believe that what the Chancellor said about fiscal stability meets the point. I am in the unusual position of praising the Chancellor from the Back Benches, which is not my normal role, but in this he is right. He has said that these are three-year spending targets and he will stick to them. When the Budget was presented I recall saying from my position here that it was not actual spending but a steady state forecast. Actual spending would deviate from that because the economy would not behave as one expected—no economy does so—and that is why most forecasts must be revised. The first point to make is that perhaps there will be a slowdown in growth. We may even have technically a recession, as my noble friend Lord Barnett defined it: two quarters of lost output. I still say that that will not lead to a budgetary disaster because the worst assumptions that the National Institute can make still result only in £24 billion over three years. I believe that that is peanuts.
How bad is the economy? I come next to the point made by my noble friend Lord Shore about the balance of trade deficit. For some time we have not had the panic about the balance of trade that we used to have in the 1960s and 1970s because we now live in a very different regime. Once one has free capital mobility, balance of trade deficits can be financed by capital movements. They are a counterpart of capital movements. Many noble Lords will recall how in 1980 we had an over-valued pound and a large deficit but there were capital movements to compensate for it. We now live in a very different world. This is not the world of the 1950s, the 1960s or the 1970s. Welcome to globalisation. With free capital movements we do not have to think in the same terms. The fact is that despite this big deficit the pound has not collapsed—far from it. Manufacturers may be happy if it did. The rules of the game are now very different.
I remember going to the launch of the single issue of Marxism Today—I go to these kinds of events—and hearing a speech about how the Blair project had not understood globalisation. I remember saying to someone
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that the one thing the Government had understood properly was globalisation. The Government understand that with globalisation it is very important to get the framework right and not to swim against the tide, which is foolishness, and to minimise damage to the economy.
I believe that despite the balance of trade figures, to which my noble friend Lord Shore alluded, the impact of such a deficit on the real economy will be minimal in today's world because of the flows of capital. There may be a slowdown in growth and a recession but if action is taken it will go up again. I expect the recession to be short. Even if the recession was not short I do not believe that it would affect the real economy very much.
I wish to make two other points in this context. I agree with my noble friend Lord Shore that we are entering an era of deflation rather than inflation. It is a serious danger. When Sub-Committee A of the European Communities Committee, chaired by my noble friend Lord Barnett, had hearings on the European Central Bank, I asked almost every witness this question. Does a stable rate of inflation mean that one will have that rate of inflation? Is it 2.5 per cent. or less? Are you going to be symmetrical above and below the inflation target? Alternatively, will you say, "Let's get the prices down and don't let's worry about anything else?"
If the European Central Bank were to say that it would like a target but that if the rate falls below it is happy, we are in serious deflationary danger. The Bank of England's target is very different. It is 2.5 per cent., and that is that. If the figure goes below that, it is under a statutory duty to reflate the economy. That is the right way to set an inflation target, especially if one is in a deflationary situation. We have to say that there is no asymmetry; there is symmetry above and below the rate of inflation.
I agree with my noble friend Lord Shore in saying that I am not all that worried about hyperinflation. The noble Baroness, Lady Sharp, raised the question as to whether there are real limits to the ability of the economy to expand. If the economy hits a bottleneck, there will not be inflation but a balance of trade deficit. All that happens is that we import more if a bottleneck is hit. Deflation is a danger and we shall have to rethink our policies in the future. But I do not think that for the life of this Parliament there will be any great difficulty in following through the code laid down by my right honourable friend.
Finally, given the new labour market, the fragmentation of production, and so on, it is optimistic to think that work will be found for everyone who needs work. I am sceptical of that. As regards reform of the welfare state, although it would be very nice if everyone found work, it is wildly optimistic to think that everyone will do so. Therefore, the safety net that exists for people who, despite their best efforts, cannot find work should not be dismantled because it is unlikely that we shall attain the full employment levels that were prevalent in the 1950s and 1960s. As I said, the world has changed and we have to adapt to the world.
7.12 p.m.
Lord Cooke of Islandreagh: My Lords, I agree with the noble Lord, Lord Shore of Stepney, when he expresses surprise that the economy was not much mentioned in the Queen's Speech. However, it is clear that that has not stopped us talking about it today. My view of the economy is very simple. Unless the economy generates wealth and employs directly or indirectly most of the available workforce, the United Kingdom is in real trouble. That is what one has to consider.
I do not intend to compete with many of today's able and interesting speeches on the economy and different elements of it. I wish to speak about two aspects which I believe are important. Over the years we have suffered the CAP which affects agriculture. The policy has produced many undesirable distortions for the economy and economics of agriculture. Now I believe that they are almost at crisis point. Arable farms in the United Kingdom have been able to make good profits with such ridiculous things as set-aside, and so on. Unfortunately, the grassland farmers—they are important in Wales, Scotland and Northern Ireland—have an entirely different story to tell. They rear cattle and sheep, and grow very good grass. They are losing money, and the position is getting worse. It is not clear how it can be cured.
In Northern Ireland, the situation is very much worse. For years its agricultural food business was a success story. It employed 77,000 people, with 4.2 per cent. of the GDP of Northern Ireland. Unfortunately, that is no longer the case. The exchange rate is making it difficult to rebuild the foreign markets for beef which it enjoyed before the BSE-based embargo stopped all beef exports. Fat lamb prices are lower than 10 years ago; and in November the profit on a fat pig sold for bacon was minus £23 per pig. It is estimated that 30 per cent. of our pig farmers have already gone out of business, and many of them are bankrupt.
The noble Lord, Lord Dubs, is well aware of the situation and has been in close discussions with the leaders of the farming industry. Recently a package of aid for UK farmers was announced, but it is not enough to stop further bankruptcies.
In Northern Ireland, it is not just the rural economy which depends on agriculture; the rural social structure is based on farmers and their families. Any collapse of farming would have serious consequences. At present, farmers in Northern Ireland owe £500 million to banks and £45 million to feed merchants; and the situation is getting worse. The present income of farmers has dropped 78 per cent. from 1996 levels. These problems will not be easy to solve. They may have a world-wide base, but until the viability of the agricultural food business can be stabilised, I urge the Government to study more deeply the problems of the industry in Northern Ireland and to discuss with it the full situation. I hope that the Government will take whatever steps are necessary to offset the present rate of loss until the way forward to viability becomes clearer.
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I wish to speak about one element of the industrial economy and manufacturing. In manufacturing the large companies, which are often multinationals, receive all the attention. But we are dependent on small and medium businesses and start-up companies to refresh the large companies. Unless that refreshment is ongoing, we have real cause to worry. What is going on? On the face of it, the businesses are in reasonably good shape, and most small and medium companies are determined to overcome what they hope is a temporary downturn.
The noble Baroness, Lady O'Cathain, spoke about the effect of regulations and restrictions on businesses. I wish to speak about one specific element. Last week I studied the new working time regulations which became effective in October without discussion and with no warning. The working time regulations are detailed. They are restrictive and complex, covering all manner of things. They restrict the average maximum working week to 48 hours. They detail rest periods in work breaks. They require four weeks paid holiday. They list nine headings which employers must attend to or face the wrath of the various enforcement agencies. I know that small companies do not have much time to undertake such work in addition to what they are doing; and they certainly do not have the inclination. The majority of small firms work all hours of the day and night, as necessary to address and advance their business. Out of that, they derive a sense of achievement. They must now spend hours listing all manner of details which are far in excess of what any company would need to keep for pay purposes.
A survey by the Economist Intelligence Unit ranked Britain as second in the world for its business environment during the period 1994 to 1998. About 50 per cent. of companies starting up in Europe in those years came to the United Kingdom because of that favourable environment. What will prospective new companies think of those regulations? I am sure they will not think much of them. So why do we have them? The regulations have been introduced into the United Kingdom in compliance with a European directive in respect of which we have had no input. That is only a beginning. We are now threatened with similar restrictions applying to junior doctors and truck drivers. I am told that the directive may increase the cost of distribution involving night driving by as much as 30 per cent. That is not just alarming, but threatens the British economy which everyone in business knows is now part of the world economy where we are competing with east and west, north and south.
A few minutes thought about the history of the United Kingdom is relevant. Throughout the second millennium, in medieval times, our people have been energetic, imaginative and have accepted risk whether as brigands or tribal warriors, later as mercenaries and later still as business adventurers or colonisers. The citizens of these islands have been outstanding adventurers. The industrial revolution in this country led the world. We can continue to box beyond our weight in the new world economy by using our wits, inventiveness and so on.

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In the past 500 years, despite all efforts, European countries have failed to stop us. Have they at last found a way to bring us to heel by introducing new and restrictive directives to which they do not pay very much attention? I believe that that bears thinking about. With a few more regulations like that, can one imagine any man with ambition or initiative prepared to put up with such obstacles to development in the United Kingdom? Shall we continue to have start-up businesses to refresh our larger businesses? I very much doubt it.
I find the whole business of very detailed restriction and regulation in matters of great detail to be extremely worrying. If it continues, the inevitable result will be at first, a slow and later a rapid decline in company growth, and from that a decline in the economic health of the country. Unfortunately, politicians who have little or no experience of business are the last to be able to judge the effect of such regulations.
I believe that we should regard those regulations as an amber light for the United Kingdom economy. We must wake up before it is too late. For the first time I have felt that if I were younger, I should seriously consider emigration. We must stop that regulation and nannying. We do not need it. Employers, unions and workers, generally speaking, have arrived at good and appropriate arrangements. If we intend to compete in the world economy, we must just stop that nonsense.
In the press this morning I read that Brussels was taking exception to a small package of assistance to small and medium-sized companies in Northern Ireland, which was announced recently. It was apparently too much for Brussels. It has taken objection also to alleged assistance for ship repairers. That is ironic because anyone who knows anything about shipbuilding and ship repairing will know that there are all kinds of different devices available to countries on the Continent by which they can undercut UK repairers. We must watch out. I agree with the noble Lord, Lord Shore, that we must look seriously at our relationship with a Europe which adopts such devices.
7.25 p.m.
Lord Davies of Coity: My Lords, first, I too add my congratulations to those noble Lords who have made such excellent maiden speeches in this debate.
It is my intention to speak only on the Government's proposals to introduce legislation to improve and extend fairness at work. That legislation should be welcomed universally not only because of the specific benefits it will provide for working people but also, I believe, because it will enable workers to have the greater dignity and self-respect to which they are entitled in their employment where they spend so much of their lives. By raising the status of employment in that way, it will make for a much better workforce.
The legislation is not only intended to be fair. Its purpose is also to be enterprising, bringing both sides of industry closer together, encouraging working in partnership and enhancing greater co-operation, commitment and mutual respect. It is legislation which
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no employer with vision, understanding or feeling for those he employs need fear. Indeed, many employers already practise much of what the legislation proposes.
My best example of an employer fitting that description is Tesco. I first came to have dealings with Tesco as a trade union officer nearly 30 years ago. Over the years, I saw the company move from a pile-it-high, sell-it-cheap retailer to the United Kingdom's leading grocer. Most of us in this House, I have no doubt, know that the noble Lord, Lord MacLaurin, as chairman of Tesco—he now sits on the Conservative Benches—was largely responsible for that dramatic trading change.
When the noble Lord, Lord MacLaurin, headed Tesco, he was not only enterprising but his consideration and feeling for those in his employ was second to none. When I was elected general secretary of USDAW—the Union of Shop, Distributive and Allied Workers—in 1995, Ian MacLaurin and I became good friends and remain so today. Throughout the whole period of the previous government's anti-trade union legislation, he never lost faith in his belief that good relations with those he employed and those who represented them was both right and proper and made good business sense.
Tesco not only wanted to be among the business leaders but also wanted its staff to be among the best in terms of wages and conditions of employment. The joint work of Tesco and USDAW is one of the prime examples of how partnership is good for the employer and good for the employee. The company and the union, in good times and in bad, worked together to achieve success and both have benefited. On the one hand, Tesco profits have continually increased; its market share has increased; and the company is continuing to expand. On the other hand, the staff have security of employment and wages and conditions among the best in the retail sector, including share options, pensions and sick pay schemes.
Despite the constant bombardment the trade unions were receiving from the Conservative government, never once did Tesco lose faith in its relationship with USDAW. If anything during that period the relationship strengthened because both sides worked together to achieve common objectives. Indeed, following the introduction of one particular piece of anti-trade union legislation, I remember that Tesco was one of the last companies in this country to relinquish the union membership agreement. It did so only after the company and the union had renegotiated a further agreement for recruitment and retention of union members. Today, USDAW's membership among Tesco staff is only just short of 100,000. That is no doubt the largest membership that any union has with a single employer in the private sector in the United Kingdom.
Those employers with the vision and the approach of Tesco have nothing to fear from the legislation because they have nothing to fear from those they employ and nothing to fear from those whom the staff choose to represent them. Of course I appreciate that what I have described has not always been the case. But we have moved on, and it is now necessary to go even further and encourage the same approach to be adopted throughout the whole of industry.

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When I started work at 15 in the Port Talbot steelworks where I remained for nearly 20 years, except for two years in the Royal Air Force, I experienced a very different approach. Those were the days in the steel industry before the change to which my noble friend Lord Brookman so ably referred. The steel plant where I worked was large with nearly 20,000 workers, fully unionised, with full recognition and collective bargaining rights, and yet the two sides of industry were distinct, each side often entrenched in pursuing its own separate interests, a clear absence of common objectives and a culture of conflict rather than co-operation. The company was strong and the unions were strong—strong as distinct from influential, strong in an environment of conflict, not influential in an environment of partnership. The culture was based on management's right to manage and the union's right to organise, wholly lacking in the co-operation necessary to seek and pursue common interests that benefit both sides.
Yet I was well paid under the system—or so I thought. The work was hot, dirty and hard. My wages were made up of a relatively low basic wage supplemented by shift pay, tonnage pay and abnormal condition money. But what of the other employment conditions? There was no sick pay, no pension provision, minimum holidays and holiday pay savagely reduced because it did not include the supplementary payments. Nevertheless, as a shop steward I cut my eye teeth on this kind of employer/employee relationship and eventually learned that it was never going to be in the long-term interests of either side and certainly not in the interests of the nation.
There must be a balance, a balance between fairness and enterprise. If, at one time, the environment of conflict was damaging enterprise, there is no merit and nothing to be gained in swinging the pendulum so far in the other direction that unfairness becomes savagely acute, which I am afraid is exactly what occurred under the previous government. Before I contrast what the proposed legislation will achieve as distinct from what was introduced during the 18 years of Conservative rule, let me quote the embarrassing findings of the Committee of Experts of the ILO, the International Labour Organisation, of which Britain was one of the foundation cornerstones. It reported in July 1996:
"The International Labour Organisation (ILO) has again condemned UK employment laws because they do not meet international standards aimed at protecting the rights of trade union members. In a hard-hitting report, the ILO's Committee of Experts has said that the law which is supposed to protect trade unionists from victimisation is too weak. The Committee points to the change in the law in 1993 which says that where workers refuse to give up their rights to collective bargaining and are denied a pay increase, their employer is not guilty of victimisation."
I emphasise the word "again".
This was not the first time that the Conservative government were charged with ignoring and riding roughshod over international employment conventions. Other countries, to whom we would expect to show a good example, became more and more bemused as we were compared more and more with China, Cuba and other dictatorships for our violation of ILO standards. However, at a conference in Geneva in June 1997, at which I was present, my right honourable friend
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Andrew Smith made clear that the Government were anxious to repair the United Kingdom's poor reputation in the International Labour Organisation after a decade of formal complaints about UK breaches of ILO conventions. Speaking at the ILO conference, Mr Smith, Minister of State for Employment, said that he welcomed the opportunity to put on record the United Kingdom's,
"wholehearted commitment to human rights and our full support for the ILO's efforts to promote internationally recognised core labour standards".
In keeping with this commitment was the speedy restoration of union rights at GCHQ, reversing the Conservative government's 1984 ban on unions.
From those two extracts one sees the clear difference of approach between the two governments.
There are specific employment issues which further illustrate that difference of approach. Before a worker was entitled to make a claim to an employment tribunal for unfair dismissal the Tory Government in 1980 increased the service qualification to two years. The Labour Government now proposes to reduce the qualifying period to one year. In 1984 the Conservative Government banned trade unions at GCHQ and sacked workers who remained in trade unions. Throughout the 1980s they removed many of the rights enjoyed by trade unions and trade unionists. Additionally they made it easier for employers to prevent workers joining a trade union. In contrast the Labour Government have restored trade union rights at GCHQ and have provided justice for the sacked trade unionists. Now the Labour Government propose to allow as of right trade unions to represent their members where members wish it. Where 40 per cent. of the staff vote in a ballot, trade union recognition will be established. When more than 50 per cent. of the staff join, union recognition will be automatic.
In 1980 the Conservative government cut maternity rights. Now Labour will extend maternity rights, allow fathers to have paternity leave and introduce time off to care for sick children. The Tories removed the minimum protection for young workers in 1986 and for all workers in 1993 when they finalised the abolition of the wages councils which had been introduced by Winston Churchill at the beginning of this century. Labour, however, in an approach completely opposite to that of the Conservatives, has already introduced the provisions for a national minimum wage in order to protect the most vulnerable and most exploited of those in the world of work.
These are just some of the examples which demonstrate Labour's confidence that, given the encouragement, both sides of industry can work in partnership, can pursue common objectives of mutual interest and can work as one for the good of all. The Labour Government believe in wealth creation and in social justice. These two are the respective sides of the same coin in any civilised society. If enterprise and fairness do not go hand in hand, then in my view our civilisation is in great danger. As I do believe they go hand in hand, I welcome the Labour Government's proposals wholeheartedly and hope that many of your Lordships do as well.
7.38 p.m.
Lord Stoddart of Swindon: My Lords, like other noble Lords I, too, would like to congratulate the bevy of maidens we have heard from today and hope that we will hear much from them in the future.
In the gracious Speech the Government said that their policies were well placed to weather the international financial storms and to emerge stronger from them. I hope they are right. I do indeed believe that it is possible for them to be right provided they follow the economic and industrial policies which are suitable for Britain and which put Britain's interests first. My noble friend Lord Shore emphasised that point and wondered whether our Government was doing that. As it happens, I have with me Council recommendation 11393/97 which seeks to bring an end to the situation of excessive government deficit in the United Kingdom. It says,
"It hereby recommends that the Government of the United Kingdom should put an end to the present excessive deficit situation as rapidly as possible".
That seems to me to be the same as an instruction under the Maastricht Treaty and smacks of the sort of instruction we used to receive from the IMF in 1976. But, of course, it was lending us money. The difference is that we regularly give the European Union and the European Commission around £2.5 billion to £3 billion every year. Therefore my noble friend was absolutely right to draw attention to the fact that our policies do not appear to be putting business interests first, but putting those of Europe first.
As other noble Lords have mentioned, it is true that there are serious problems ahead, especially in relation to the balance of trade, which reached a huge deficit of £2.5 billion in September of this year and, indeed, after taking invisibles into account, £1.5 billion. That deficit can be managed over the medium and long term provided British industry, especially manufacturing industry, is given help and encouragement. In the short term that deficit will be cushioned by inward investment which continues to flow into Britain.
Indeed, investment flows into Britain in greater volume than into other European countries. The United Kingdom accounts for 34 per cent. of overseas direct investment into the EU. There must be good reasons why people want their trade to come to this country as opposed to going to other countries in the European Union. Those reasons are, of course, that they find the business and industrial environment in this country better than it is on the Continent. It is therefore extremely important that we do not adopt policies, practices and regulations emanating from the European Union which will hinder business and industry and curb their desire and ability to expand and maintain their operations in the United Kingdom.
The noble Lord, Lord Cooke of Islandreagh, who has experience of these matters, outlined the difficulties which small and medium businesses in particular are experiencing. But he is not the only one. No less than the chairman of Rolls-Royce warned that United Kingdom firms, including Rolls-Royce, could move abroad to escape industry costs and regulations imposed by the European Union. Industry does not need those
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regulations; it needs the freedom and encouragement to expand in this country so that our people are given jobs. That ought to be a priority of Her Majesty's Government.
I want to turn to taxation. We heard a little about that this afternoon and I am going to say a little more. Indeed, over the past week a great deal has been said in the newspapers about tax harmonisation in the European Union. They have been described by Joyce Quin, the Minister for Europe, the Chancellor of the Exchequer and other people in this House this afternoon as "scare stories". Unfortunately, in the past those scare stories often proved to be accurate and the British people found themselves faced with a fait accompli about which they could do nothing.
That is the problem. Newspapers running those articles and reports have no doubt been reading the Commission document 398Y0106(01). That was the conclusion of the ECOFIN council on 1st December 1997 laying down tax measures covered by the code on taxation and setting up the group to assess tax measures that may fall within that code. It will, of course, be widened. Once we have a code, from then on it will be built on. That has been the experience so far, and that, I am sure, will be the experience in the future. We know that once the Commission starts down a road it is never satisfied until it reaches the end and controls it.
One of the taxes the European Union wishes to impose upon us is the withholding tax. It will do this country a great deal of harm and lose many jobs. A failure by the Chancellor to state absolutely and unequivocally that he will veto that tax has led to fears that we are on the road to damaging tax harmonisation in that respect. As Aneurin Bevan so aptly said, "You don't have to gaze into a crystal ball when you can read an open book"; and there are many books to read about the activities of the European Union over the past 25 years since we have been members.
Then, of course, there are the statements of European leaders, particularly the new German Chancellor, the German Finance Minister and the German Foreign Minister. Mr. Schröder, the Chancellor, said in his inauguration speech that he wanted a federal Europe along German lines. There is no mistake about that. Mr. Lafontaine, the Finance Minister, wants high government spending and harmonisation of taxes. He is quoted as saying a united currency needs a fair and equal tax framework. There is no doubt about that; he said it. We cannot argue with him. Of course, Mr. Fischler, the Foreign Minister, believes that Germany should be at the heart of a new European political entity and he is quoted as saying,
"We ought to work on a common constitution to turn the EU into an entity under international law".
In plain English that means a country called "Europe".
Those are not scare stories. Those people are serious about European political as well as economic union. It does not matter what they call themselves—whether it be CDU, SPD or Green—the ambition is the same; that is, a European superstate under German suzerainty. As I said, it is there. Time and time again Kohl said it, and now his successor is saying it. The person has changed but the policy remains exactly the same as it was before.

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Taxation, monetary policy and central planning are the building blocks of such a European superstate. It is not the newspapers that raised these issues that are the scaremongers. They are doing their duty in raising awareness about what is going on in the European Union and telling people about it.
The House of Commons should be particularly concerned about the demand for euro taxation because its power derives from its ability to grant or withhold supply. If it once loses that power, it will become completely redundant. Indeed, we should not be worrying ourselves about the hereditary Peers; we should be concerning ourselves with the future of the House of Commons and its powers over the Executive. In case noble Lords think that I am scaremongering, they should read the reply to a Question to the noble Lord, Lord Tebbit on 2nd November at column WA28. In effect that makes absolutely clear that once a Minister has decided—and he does not have to have the authority to decide—to support a tax measure and it becomes a measure in Europe, that cannot be overturned by the House of Commons without the House of Commons committing an offence. It would be illegal under European law. That, in effect, removes the right of the House of Commons to bring Ministers to account and to decide what taxation is to be.
That is a serious matter. The House of Commons must take it seriously. We know only too well how the creeping competence of the European Union has taken over much of our government and decision-making. The Prime Minister—who declared in the Sun newspaper in March 1997, just before the election, that he was a British patriot—should, at the summit in a couple of weeks time, prove his patriotism by declaring firmly and unequivocally that taxation is not a matter for the European Union but for the British House of Commons, and that he will veto any attempt to extend the powers of the European Union any further into the realms of taxation. Further, he should reiterate firmly that Britain does not want, and will not be part of, a centralised European superstate. If he does that, he will find that he has much support in the country.
7.51 p.m.
Lord Blackwell: My Lords, in listening to the opening speech from the Government Front Bench, I was encouraged to believe that I might share with the Government the criteria by which I would wish to judge the various measures put forward in this programme. First, do these measures support wealth creation by free enterprise within a stable economy? Secondly, do they encourage people to take primary responsibility for looking after themselves and their family while protecting the needy? I would welcome confirmation that the Government share those objectives. I would applaud them for doing so. Having said that, I believe that on both points their rhetoric diverges substantially from the reality of what this programme and other measures brought forward by the Government will deliver. I shall summarise why I believe that to be the case.
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As regards free enterprise, I applaud the Government for having carried through a number of measures of privatisation against previous opposition. However, as mentioned by many noble Lords, their fondness for regulation and legislation, is the enemy of enterprise. I refer to the working time directive, the minimum wage and the introduction in this Session of the workers' rights of recognition. All that will add to the cost of employment and the burden on business. I agree with the noble Lord, Lord Davies, that the Government have a very different approach to these issues from that of the previous government.
When the Government speak in Europe, they applaud and recognise the benefits of flexibility in the UK economy and in the UK labour market. That flexibility has, over the past 10 to 15 years, led to a substantial share of inward investment from Europe to the UK. It has led to the on-costs on top of labour costs being half or less in the UK than in some other European countries. That has encouraged the growth of employment, with many more jobs being created in the UK than in other European countries. In practice, despite talking of encouraging flexibility in Europe, the Government's policies have been taking us in precisely the opposite direction. They have taken us away from the flexibility that we have enjoyed, imposing on us the same kind of inflexibility suffered by other European economies. Having signed the European social chapter, I fear that the Government now have no protection against further rigidities and costs entering the UK economy. I believe that there is nothing in this programme which will help enterprise to cope with those disadvantages.
I turn to economic stability. Like my noble friend Lord Skidelsky, I pay tribute to the fact that the Chancellor initially continued the constraints on public spending which he inherited. I also pay tribute to the sound finances which he inherited. However, I believe that those have been put at risk by the spending commitments which have been given. In particular, the contingency, which is traditionally provided for in future government spending plans, has, so far as I can see, been almost entirely eliminated in order to try to balance the books. Higher spending inevitably means higher taxes. I believe that the risks which have been taken are risks which we may well, in the future, consider to have been inappropriate.
I would welcome the Government stating not only their commitment to the golden rule, but restating the commitment of the previous government to keep public expenditure below 40 per cent. of GDP as a long-term, permanent target. I echo the words of the noble Lord, Lord Stoddart of Swindon, about the threat to taxation in this country—and low taxation in this country—from the European policy on taxation. Like the noble Lord, I, too, would welcome further confirmation from the Government that they would veto any such proposals for the harmonisation of taxes in Europe and where precisely they believe they have the power to veto if such proposals were put forward.
I turn to the third area of the programme, that of encouraging people to look after themselves and their families. Again, there are some good things in what the Government have done. The introduction of interviews

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for work is something that has been developed consistently over the past two decades. The noble Lord, Lord Young of Graffham, when he was Secretary of State for Employment, first introduced restart interviews. Unemployed people had interviews to encourage them back to work before receiving benefit. That principle was gradually extended by the previous government. I welcome the further extension of that principle to try to ensure that people are properly interviewed before receiving an automatic entitlement to benefit. I also welcome the continuing review of the criteria for benefit entitlement that the Government have proposed. However, we will need to look carefully at the details as with other measures, to ensure that they are fair and do not prejudice people.
Against those improvements, I believe that the Government's programme totally fails to address the wider issue of welfare reform, particularly in the area of pension development. Their only measure in that area so far has been the tax on private pensions. That will leave many existing pensioners worse off. Although there is promise of further progress on stakeholder pensions, we have yet to hear any details on what might be proposed to widen pension holding further.
If the Government really are having problems in coming up with ideas on this matter, they might look back at the proposals put forward by the previous government; namely, to use National Insurance contributions and a rebate from such contributions to start to build up private pension funds for individuals. Those proposals were initially welcomed by the then Opposition when they were put forward but were attacked shortly afterwards because that appeared to be opportunistic. However, those proposals had been worked out extensively over a period of time by officials in the Department of Social Security and the Treasury. They were well founded and by far the most exciting and innovative proposals to be brought forward on this topic. If the Government are unable to bring forward anything better, I would urge them to swallow their pride, reconsider those proposals and reintroduce them. At the minimum, I should like to suggest that any plan brought forward should be set alongside those proposals and tested against them to see whether it is better in terms of value for money and better as regards benefits and building up a long-term fund of investments to offset against pension costs in the next century.
So, as I look through the programme I agree with the objectives which are set out in a number of areas and which the noble Baroness outlined at the beginning of today's debate. However, an electorate will not judge this Government on the rhetoric; it will do so on the delivery. As regards the measures that we are talking about today, as in so many other areas of the Government's programme, I fear that the practical delivery falls a long way short of the rhetoric. On that basis, that I find that the programme as put forward fails to fill the gap.
8 p.m.
Lord Haskel: My Lords, I believe that it may have escaped the attention of the noble Lord, Lord Razzall, that, early in the gracious Speech, we were told that the Government will seek to improve productivity by,
"measures addressing competition, investment, entrepreneurship, and improving the skills of the British people".
I shall focus first on entrepreneurship. Like my noble friend Lord Evans, I am delighted that the Government are brave enough to grasp this matter. But I wonder if the Government realise the size of the task that they have taken upon themselves. Make no mistake, entrepreneurship is not some business technique to be taught in schools and introduced by consultants: it is a cultural shift in all areas of society—not just in business—and some of these areas are quite surprising.
Entrepreneurship is not pure self-interest or narrow opportunism, as the previous government might have thought. Individual self-interest is not a basic building block for a healthy economy. Entrepreneurship is showing individual initiative—individual initiative within acceptable social norms. The late John Smith said that part of the work of the Department of Trade and Industry was to balance the imperatives of the market with fairness and social justice in society. That is why the task of my noble friend the Minister as "Competitiveness Minister" is so difficult. He has to convert us into entrepreneurs while maintaining John Smith's delicate balance.
As with many changes of attitude, you have to start with education. Commercial awareness has received little attention in the debate on the curriculum, yet it could be introduced quite simply; for example, when teaching ways to solve problems, examples could be taken from present-day commercial success. But what is obvious is that young people will need to be entrepreneurial in their attitude because they will no longer have jobs for life, and this attitude will help them through the 21st century. Perhaps this is where GNVQs will score.
In his recent pre-Budget report, the Chancellor of the Exchequer outlined plans for up to eight institutes of enterprise at British universities. Unlike the noble Lord, Lord Wade, I am not sure if there can be formal training for enterprise. Institutions can teach business basics, but I suspect that enterprise and entrepreneurship are about a spark and a leap of imagination which cannot be taught; indeed, it can really only be demonstrated.
What is important when training people for enterprise is having the school or university plus an incubator together in the same premises. That mixture helps to generate enthusiasm and excitement which, in turn, can ignite the spark of imagination. This is important because the measure of an entrepreneurial economy is how fast and effectively it generates commercial ideas and exploits them.
Entrepreneurship is not just a matter of business training and awareness. It is also a matter of our attitude towards risk and reward, and towards success and failure. Our change of attitude towards these is the measure of our cultural shift to an entrepreneurial society. Investing in a hedge fund or moving money

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round the world short-term is not the kind of risk I mean. I mean the risk of being in business itself. The cultural shift is that instead of being resentful or jealous of reward, we view it as an accolade—as just reward.
As many of us know, it is also easy to fail. You are trying simultaneously to judge the movement of the market and the movement of money, and you have to get them both right at the same time. These are very difficult judgments to make. Sometimes you just have to be lucky. That is why the Secretary of State is right to suggest that we must change our attitude towards failure. I do not believe that he had in mind our English cricketers in Australia; indeed, I think he meant that an entrepreneurial society will benefit from the lessons of failure. Failure will encourage entrepreneurs to try again. So it is important to sort it out quickly. Perhaps this does mean leaving the debtor in charge so that the team, the skills and the knowledge gained can be kept intact to help turn the failure into a success.
Certainly protection is required against the unscrupulous, but an entrepreneurial culture assumes that not everyone is unscrupulous. Perhaps the cultural change required is that, instead of failure carrying the stigma, those who have never failed as entrepreneurs should be criticised for not trying hard enough.
Of course, many failures are due to companies being badly run. The DTI recognised this many years ago. It is to the credit of the previous government that they set about trying to reduce the number of failures not with money but with advice, support and training. Unfortunately this enthusiasm has resulted in a multiplicity of schemes which are sometimes bewildering: TECs, Business Links, Enterprise Agencies, personal business advisors, pre-start advice and training, export advice and assistance, IT for All, and entrepreneur clubs.
The noble Baroness, Lady Sharp, spoke about these things. I believe they do help to increase the success rate and, most importantly, they help to screen out some of the potential failures. But obviously some rationalisation is required. It is to be hoped that the regional development agencies will do this vigorously, and soon.
However, the real cultural shift, the really ambitious change needed to convert us into an entrepreneurial society, is to introduce entrepreneurial attitudes into areas of life other than just business and commerce. People have to be entrepreneurial about their own lives and careers in every kind of work, public and private, voluntary and paid.
My noble friend Lady Hollis said in her opening remarks that people would have to take more risks. She is quite right in that respect. They have to behave in an entrepreneurial way because they can no longer expect to climb the rungs of the company ladder; neither can they expect to receive big payouts in the event of failure.
The companies themselves have become unstable. This sort of risk may be more depressing than energising, but it is where the cultural change is needed. My noble friend Lord Evans reminded us that entrepreneurial people have to take responsibility for their own progress and continuous professional development.
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The Minister will also have to focus on the voluntary sector. The Government now depend on the voluntary sector to deliver quite a range of services. Indeed, those doing voluntary work already have to show entrepreneurial skills. My wife is a governor of an FE college, and the skills she needs are every bit as entrepreneurial as those needed to run a business. It is essential that this change in culture pervades the modern voluntary sector, because at some time or another we may all need to call on our voluntary work entrepreneur.
Cultural entrepreneurs are also to be encouraged. Within the word "cultural", I include design, fashion, film and graphics, as well as art, music and the theatre. An entrepreneurial society must embrace these activities too, but the means will have to be different for three main reasons: the assets are intangible, the skills are cultural and the people are—well—difficult. It is impossible to organise creative people. An entrepreneurial society understands this. That is why it is important to create an environment where they can be effective and flourish. It is to the credit of local authorities that they are doing so in a number of innovative ways. Planners are providing the infrastructure for them. Not only is there the famous cluster in Cambridge and the noble Lord, Lord Wade of Chorlton, mentioned Manchester, but Sussex has more than 350 companies covering all branches of new media. Glasgow, Sheffield and Newcastle are doing their version of the same thing. Nor does this apply only to hi-tech business. There is a cluster of caravan manufacturers and all their specialist component suppliers in Yorkshire. In this way the public sector is already making an important and imaginative contribution to the entrepreneurial society.
It is a big project to improve productivity by entrepreneurship because it means change in every sector of our society. But economics is not just about numbers. As the right reverend Bishop of Oxford said, it is about values and I think it is about change in society. Making it more possible to show individual initiative will not only improve our productivity, it will improve our lives.
8.10 p.m.
Lord Ewing of Kirkford: My Lords, I begin my contribution to this debate on the gracious Speech in the same way as last year in the debate on the first gracious Speech of the incoming Labour Government. I wish the occupants of the Government Front Bench well in the Session ahead. They will have realised today that the post they hold can sometimes be lonely and always difficult. When I offer my support I am the first to accept that, in terms of attendance, that support may be patchy; but in terms of loyalty to the job that my noble friends on the Front Bench are charged to discharge, they have my full support. In case any noble Lord thinks that in such an indication of support I buy favours, let me disabuse your Lordships of any such thing. The eloquent testimony is that number 26 on the list of speakers is hardly the greatest favour I have ever been awarded.

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I have listened over these last two days to 12 maiden speeches—seven yesterday and five today—all of them making a marvellous contribution to our discussions on the various aspects of the gracious Speech. A number of them were from trade unionists whom I know well. Each time one of my trade union colleagues has contributed to the debate—either in a maiden speech or as a contribution to the debate, as did the noble Lord, Lord Davies of Coity,—I am reminded of a rather virulent trade union conference which I once attended. The general secretary was having great difficulty with the unruly delegates. At the end of the general secretary's address he was faced with about 10 per cent. of the delegates booing him and 90 per cent. applauding. He turned to his deputy and he said, "Well, that's me won that debate". His deputy quickly disabused him of any such idea by explaining that the 90 per cent. who were applauding were applauding the 10 per cent. who were booing. There was no such thing in your Lordships' House; there was unanimous approval of the 12 maiden speeches.
There is no Scottish legislation in the gracious Speech, for very understandable reasons—although obviously in the National Health Service Bill that is to come before your Lordships' House in due course there will be a Scottish element. The Scottish Office requires legislation for the restructuring of the National Health Service—the reduction of the number of trusts in Scotland and the introduction of the new system. In my view, that will be the only opportunity between now and the establishment of the Scottish parliament to discuss Scottish business. I apologise to my noble friend Lord Simon, who has to respond to this debate, for taking advantage of this opportunity to address specifically Scottish problems.
Before I do so—and before I forget—I want to pay generous tribute to my noble friend Lord Clarke of Hampstead, who kindly referred to me in his maiden speech as the first postman to enter your Lordships' House. My noble friend Lord Simon is about to become the third postman because I am going to ask him to deliver my comments to the Scottish Office once I have concluded my speech.
I came to the other place after a by-election in 1971, having been a rural postman and delivered letters each morning to my local Member of Parliament, Sir John Gilmour. I can hear him even to this day, as I was being introduced to the other place, saying in a rather loud voice to his colleagues, "There is something going wrong with this place. They have got my postman here how". I do not know what he would say now that he can see two postmen here in your Lordships' House.
The important point is that when it comes to the reform of your Lordships' House, just as we would expect the other place to represent the make-up of the population of the United Kingdom in every aspect, whatever system is adopted for the appointment of Members of your Lordships' House it should be devised in such a way that the membership of your Lordships' House also reflects the make-up of the United Kingdom—and postmen are part of that make-up.
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If at any time in my constituency I was faced with an unruly lady at an election meeting, I used to remind her that I had seen her at seven o'clock in the morning in her dressing gown and her curlers. There was nothing better designed to quieten her down than reminding her of that.
Baroness O'Cathain: Oh!
Lord Ewing of Kirkwood: I apologise. For the avoidance of doubt, I have never seen the noble Baroness at seven o'clock in the morning in her dressing gown. I apologise to the noble Baroness.
I turn quickly to the structural defects, as I see them, in the Scottish economy. There are serious structural defects that I would hope the incoming Parliament—of which my noble friend Lord Watson of Invergowrie will be a member, having been elected as the Labour candidate for the Glasgow constituency of Cathcart—will address. Down the years these structural defects have become more and more pronounced. In our history the main industries of coal mining, shipbuilding and heavy engineering have all gone. They were replaced during the Macmillan government in the mid-1950s—to be fair to that Conservative government—by the car industry at Linwood on the one hand and the light truck division of British Leyland at Bathgate on the other. That was to be the new industrial horizon in Scotland. They have gone as well. When they were gone they were replaced by the electronics industry, the micro-chip industry and the semi-conductor industry.
My noble friend Lord Bragg, in an excellent maiden speech yesterday, referred to Silicon Valley in California. When the micro-chip industry and semi-conductor industry came to Scotland, Scotland was nicknamed Silicon Glen. But there is a difference between Silicon Valley and Silicon Glen—and it is a very important difference. Silicon Valley kept the hi-tech jobs and Silicon Glen got the low-tech jobs. One of the reasons that the semi-conductor and micro-chip industries in Scotland are going through the difficult phase they are experiencing now is that these were low-tech jobs and not hi-tech jobs.
We are now faced with a massive influx of call centre jobs. Scotland is soon to become the call centre capital of Europe. Those jobs are welcome. I do not want any misunderstanding about that. They are the difference between very high unemployment and unemployment which the Government are beginning to manage and get the better of. But in themselves they mask a serious underlying structural problem in the Scottish economy.
In the late 1980s and early 1990s one million manufacturing jobs were lost in this country. For a year, interest rates were at 15 per cent. One million manufacturing jobs were lost, never to return. In case noble Lords think that massive capital investment brings about the re-creation of those manufacturing jobs, I shall disabuse them of any such thought. In my former parliamentary constituency of Grangemouth, BP, with which my noble friend Lord Simon is familiar, has announced in the past month a massive capital investment of £500 million. There is to be a new ethanol plant, an extension of the ethylene facility and the

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construction of a power station. When all that is finished, and after the £500 million of investment in the petro-chemical industry, because of the closure of an ethanol plant at Baglan Bay in Wales there will be 70 fewer jobs than there are at the present time.
I want the new Scottish parliament to seek a much higher quality of inward investment than has been attracted to Scotland over the past 20 years. As I drive from Edinburgh airport, along the M.90 motorway, to my home on the east coast of Scotland, I pass that massive plant that was built for Hyundai. It stands empty. It has car parking space for 2,000 cars. Two thousand jobs were promised but not one materialised. That was not just because of the collapse of the Korean economy but was primarily as a result of the low quality of inward investment that was attracted in that instance. Instead of the new Scottish parliament turning its attention to the reorganisation of the eight police forces in Scotland, it should leave the police alone to get on with the job of fighting crime and the drug problem. It should turn its attention to the much more serious long-term problem of the structural defects in the Scottish economy.
I conclude with two points. I listened carefully to my noble friend Lord Shore. One of my happiest times during my years in both Houses was when I worked with my noble friend shadowing the Department of Trade and Industry. I listened to my noble friend Lord Stoddart. I resile completely from his conditions for meeting the test of patriotism. It is dangerous for any individual to lay down conditions so that if a person fails to meet those conditions or takes the opposite view he is not regarded as a patriot. That is a complete mistake. It is 27 years since we joined the Common Market and 25 years since we had the referendum on whether or not to stay in. In listening to our debates I have been driven more and more to the conclusion that the question we shall have to put to the people of this country is not whether we join the single currency but whether we want to continue to be part of Europe. We cannot be sour partners. We have to be either enthusiastic or we have to face up to the realities of the approach that is being taken by those who do not want to be part of Europe.
I shall leave my comments at that. I have abused the courtesy of your Lordships this evening. I should be very grateful if my noble friend Lord Simon, because I know that he is not briefed to deal with Scottish Office matters—I have taken advantage of that—could ensure that my comments are passed to his colleagues in the Scottish Office.
8.25 p.m.
Lord Roll of Ipsden: My Lords, I must begin with an apology to the House and particularly to the noble Lord who will be winding up. Owing to a long-standing and now, I am afraid, rather delayed previous commitment, I shall not be able to stay until the end of the debate.
This debate, like others on the gracious Speech, has ranged over many issues, as indeed the gracious Speech did. The gracious Speech outlined a heavy and
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important legislative programme. On that I have little to say at this stage. Like many others, I regret the delay in the setting up of the food standards agency. I hope that the reassuring words which we heard yesterday will prove to be right. If funding is the issue, I find it difficult to believe that an effective and equitable method cannot be found. In my old days at the Ministry of Food, and later in the enlarged Ministry of Agriculture, I always found the leaders of the food distributive trades to be co-operative and enlightened. Therefore, I hope that we shall soon see the food standards agency on the statute book.
As regards the freedom of information legislation, what we heard yesterday was perhaps less precise and less reassuring. Obviously, this will be a much more circuitous and prolonged process, but I profoundly hope that the measure will not fall by the wayside.
The words "modern", "modernise" and "modernisation" enjoy great favour with the present Government. I have no quarrel with that. But if the Government are really, in the words of the gracious Speech, "to modernise" Britain, it is important to add to the more mundane measures which we are constantly discussing something of the order of a freedom of information Act. I cannot believe that that would really jeopardise the confidential nature of the relationship between Ministers or between Ministers and officials. Indeed, it may well be that the enormous volume of rumours that now surround these matters and that appear in the public prints all the time may be braked to some extent by the existence of a freedom of information Act.
The major part of the legislative programme is occupied by reform of welfare provisions. This corresponds to one of the major priorities of the Government, and that, too, I thoroughly support. They are difficult issues and will no doubt produce a prolonged process of debates in both Houses, which has in fact already started. Whether, when it is all done, we shall really have a fundamental restructuring of the welfare state remains to be seen. I confess to a slight doubt about that point because what is lacking at the moment is some concern about what I might call the more intellectual—dare I say?—ideological, aspects of this matter; namely, poverty and equality and the gap between poverty and wealth. These are difficult matters.
Poverty is too serious a subject to apply to it the famous remark by Mark Twain about the weather: everybody talks about it but nobody does anything about it. However, I believe that we shall not be able to escape this problem, which is still with us and is getting worse. Recently we were starkly reminded of that by the report of the former Chief Medical Officer of Health, Sir Donald Acheson, which produced some facts which I hope no one in the House would be prepared to ignore in regard to health, ill-health, expectation of life and so on. I believe that this will have to be tackled. It will probably have to be tackled not in an intellectual and ideological manner, but rather more in what I might call a technical and almost mechanical manner.
I am glad that the Government have decided to ask Mr. Martin Taylor to look into the whole question of the relationship between taxation and benefits, which is

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one way of getting into this problem. The matter has been discussed over the years and many imaginative, innovative but possibly not practical measures have been produced from time to time. I hope the current little local difficulty will not prevent Mr. Martin Taylor from producing his report and will not prevent the Government from giving their views on it in due course.
On broader aspects of economic policy, the gracious Speech—as has already been pointed out by the noble Lord, Lord Shore, among others—has relatively little to say. When I spoke in the economic debate on the Address last year during the first debate in this Parliament, I supported the Government against much criticism for having adopted a two-year standstill on taxation and spending. I did so not only on the ground that was so often mentioned by a former Labour Prime Minister—namely, that it was right that the government should have a chance to look at the books, as Harold Wilson was often quoted as saying—but also because I felt that after 18 years out of office a New Labour Government (New Labour in every sense of the word) was apt to be confronted with a flood of claims which it might be difficult to resist without the existence of the standstill.
I think this forbearance has been justified. As the Chancellor has announced, we shall shortly have before us a spending programme of £40 billion which is to be concentrated mainly on the Government's two priorities of health and education. As has been pointed out by a number of speakers—including the noble Lord, Lord Barnett—the present state of the public finances, as the gracious Speech rightly points out, is relatively good and provides a basis on which perhaps a more forward policy can now be pursued. We can then at the end of the day see whether in terms of household management the Government have done their job.
But, of course, macroeconomic policy—or economic policy in the large—is not only a matter of household management; it is also a matter of what effect it has on the economy generally, as has already been pointed out by a number of speakers. On that the gracious Speech has relatively little to say. It speaks of interest rates, or at least it mentions the fact that the Bank of England under its newly gained independence is now responsible for fixing short-term interest rates. This is a controversial subject. I, for one, support what has been done. A few years ago I chaired an independent panel on this very subject and naturally I was gratified when the legislation brought forward by the Government, and now embodied in the Bank of England Act, reflected to a large extent our recommendations.
I believe that there is a certain amount of misunderstanding about this. We are sometimes told—and some echoes of this view have been heard during this debate—that the Monetary Policy Committee of the Bank of England is not mindful enough of the needs of the economy for growth and employment. I believe that is to some extent misconceived. The remit of the Monetary Policy Committee is stability of prices. As I think the noble Lord, Lord Barnett, pointed out, it is supposed after that also to give some consideration to the Government's general economic policy. But not
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only does looking after growth and employment not fall directly into its remit, the means available to it to achieve stability of prices are nowadays confined to the movement of short-term interest rates. The quantitative and qualitative direct control of credit has long since fallen into disuse and indeed into disrepute. I think that is right as it is almost impossible even to conceive of a practicable way of doing that. However, this pitting of finance Ministers against central bankers—the one saying, "You must do this through your fiscal policy" and the other saying, "You must do this through your interest rate policy"—is, I think, neither fruitful, nor indeed seemly in the long run.
It is understandable that this now occupies a large part of the public debate. As has already been pointed out, the climate of opinion has changed dramatically from fear of inflation to fear—dare I say?—of deflation, but at any rate, of recession everywhere. Is this to be wondered at with 16 million unemployed in Europe, 4 million in Germany alone? We have heard some rather harsh words about Mr. Schröder and Mr. Lafontaine, but I wonder what we would say about our own Ministers if they were not concerned about a level of unemployment of that order. I believe that we might think somewhat differently about it. I am not saying for one minute that what has been proposed, or thought to have been proposed, by Mr. Lafontaine about this is necessarily right. However, I think it is absolutely right to be concerned about that matter.
Here I come back to the question of what monetary policy can do and what fiscal policy can do. Although this is not the time to go into this matter in any great detail, all I would say is that in my view, for what it is worth, and in my experience, the consequences of both, but certainly of monetary policy, on the economy generally vary from time to time and from country to country. They are not necessarily always the same. What the Monetary Policy Committee of the Bank of England can do with a half percentage point change in short-term interest rates is not necessarily what Mr. Alan Greenspan is able to do with a somewhat similar measure. If you extend that to fiscal policy more generally, you have to look only at Japan. The rate of inflation and indeed the interest rates in Japan are hardly visible. I happened to be in Tokyo on the day when the Japanese parliament in both Houses approved a 500 billion yen appropriation in order to remedy the weaknesses of the Japanese banking system, together with a programme of reform of the banking system. Since then, the Diet has voted something of the order of 200 billion yen to encourage consumption. Has anything happened so far? No, it has not. I do not think I need elaborate here on what would happen if we went in for that: we would have roaring inflation. However, in Japan nothing like that happened. Therefore, a certain amount of caution about these matters is clearly indicated.
Finally, I wish to say a few words about Europe. After the fire and brimstone we heard from a number of noble Lords—no doubt we shall hear some more from the noble Lord, Lord Bruce of Donington—including from noble Lords whom outside the Chamber I would address as friends, but here parliamentary usage makes that

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impossible, I am filled with fear and trembling at the thought of saying anything positive about any aspect of Europe. However, I cannot deny views which I have held for perhaps 50 years and certainly not views which I hold about the euro.
If I remember rightly, the only mention of Europe in the gracious Speech is in relation to enlargement. Enlargement has become almost like motherhood and sliced bread in that everyone is in favour of it. It is not universally welcome on the Continent, but everyone is in favour of it. Unfortunately, owing to the anti-European virus that was injected into the body politic during the previous administration, anything we support tends even today to carry a lingering suspicion that we do so in part at least as a diversionary tactic in order to take attention away from something which is of much more immediate interest to our European partners.
Enlargement is important. The form of the common agricultural policy is very important. Restructuring the institutions of the European Union on the basis of the Amsterdam Treaty or in any other way is very important. However, just a month from now something will happen that will probably be the single most important development in the 40 years of the European Common Market, later the European Community and now the European Union: the euro will be a fact—not perhaps on 1st January, which is a Friday, but on 4th January, which is a Monday and probably the first working day.
Despite the danger of incurring the wrath of some of my colleagues in the House, I must say that I agree entirely with the words of the noble Lords, Lord Newby and Lord Barnett. The noble Lord, Lord Barnett, as chairman of Sub-Committee A of the Select Committee on the European Communities, has done so much to enlighten and instruct us on all these matters. In the previous Session, he tabled a Motion which was designed not to force a decision on the Government, but to encourage the Government to be a little more forthright. That Motion languished on the Order Paper for a long time and now, of course, has gone.
Obviously, we cannot ask for a decision from the Government today. The Government are committed to wait until the next election and then to have a referendum when they are ready to recommend either joining the single currency or not. That is a long timetable. As the noble Lord, Lord Barnett, and others pointed out, that probably means waiting until the end of 2002 or perhaps until the middle of 2003. All right: I cannot help thinking of what the late Nikolai Lenin used to call the "hammer blows of history". It may be that even that cast-iron timetable will have to yield to developments that we cannot yet foresee in the next 12 to 24 months.
Let us assume that that is all it is. I think that the time is rapidly approaching—if it has not already come—for the Government to be a little more forthcoming and more forthright, not so much for the sake of our European partners, but for the sake of our own electorate. We have to prepare the electorate. Today, we have rumour: "This Secretary of State is in favour"; "That Secretary of State is wobbling"; and, "That
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Secretary of State might well be in favour but it is politically dangerous to come out in favour". And so it goes on. I do not believe that such hesitation is the right attitude. Perhaps we should now go in for an old-fashioned "vigorous vodka". I hope that the Government will try, in one way or another, to become more forthright and forthcoming.
With the greatest respect, I must confess that I cannot help thinking of the words of that wonderful, but today not much appreciated, poet Andrew Marvell. Admittedly, he used them in connection with a much more intimate matter: namely, when addressing "his coy mistress", but I cannot help feeling this:
"Had we but world enough, and time,
This coyness, Tony, were no crime. …
But at my back I always hear
The euro's chariot hurrying near: …
All right, let them think it's safe and sound
Must we wait 'til the media moguls have come round"?
8.43 p.m.
Lord Bruce of Donington: My Lords, it is always a most agreeable experience to listen to the noble Lord, Lord Roll of Ipsden. I entirely agree with him about the necessity for bringing forward as soon as possible a comprehensive freedom of information Bill. If there is one thing that all citizens (of whatever grade) really need, it is access to fact lest they be seduced unduly by myth, by the sheer volume of the press, by the sheer skill of orators and all the rest of it. The more facts we can acquire, the better—and the greater the amount of time we have to study those facts, the better. Some conclusions might be very surprising.
At the conclusion of the first Session of this Parliament, the Government had passed 52 Acts of Parliament—a formidable range of Acts, covering a variety of subjects. Not all of those Acts are immediately operable, but their implementation is, quite properly, to be spread over a period of some three years or so. That is all very acceptable. Indeed, it is perhaps useful to remember that the Attlee government of 1945 to 1950 passed 84 Acts during the same period. They were not exactly idle in the administrative field either. It will be recalled that it was our Chancellor of the Exchequer in those days, Dr. Dalton, who brought forward the Act nationalising the Bank of England and establishing a bank rate of 2 per cent. which persisted for 20 years thereafter. During that time, unemployment never exceeded 3 per cent; inflation exceeded 2.9 per cent. on one occasion only and, on the whole, we did fairly well despite the difficulties of that time.
I put the matter in that setting because sometimes, unless we are aged socialists like me, we tend to forget the past and the contribution that was made by the then government.
Let me say at once that I entirely support the Government's programme as laid down in the Queen's Speech. The programme will take some time to enact and will need much ingenuity and persuasion. I hope that the priorities will be set correctly—that is to say, that the evils and injustices from which so many of our population suffer will receive a greater priority in

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enactment than what I would call "mere constitutional measures" which have an effect on our citizens only over a longer period of time.
We must bear in mind that our unemployment rate is unacceptable. After all the doctoring of the figures has been revealed—and there have been numerous endeavours to indoctrinate the country as to their true nature—according to the International Labour Organisation, unemployment in the UK is running at over 6.4 per cent. The ILO's rate is the latest, lowest possible estimate of unemployment. According to the old claimant rate, our unemployment is now, apparently, rapidly declining, but that is mainly due to a reclassification.
What troubles me and my colleagues a little is that the existing unemployment rate, whatever it may be—and it is certainly a considerable multiple of the official version—seems to be taken for granted. It seems that the old doctrine that "Unemployment is a price worth paying" (which was enunciated by the then government of the Conservative Party) seems to have become more generally accepted, perhaps unconsciously, as the norm, including by some of our own people. However, I believe that the existing rate is unacceptable and that it remains a great sore affecting the whole country and poisoning the lives of millions of our people. It is to solving that that our endeavours should be directed.
We are committed to a programme of reform—and it is a very good one. I repeat that it is one that I support. However, it will need money, whereas we are continually enjoined that we have to have "sound finances"—I believe that is the term—and practise prudence in administration. Those terms have an echo in the distant past, when Mr. Philip Snowden was Chancellor of the Exchequer and Montague Norman was at the Bank. I do not say that they correspond precisely with the words of our present Chancellor of the Exchequer and Mr. Eddie George, but there is a vague echo which we must somehow dispel. So let us accept immediately that in order to implement the Government's programme we must have adequate funds with which to do so.
I respectfully suggest that that should precipitate a ruthless examination of the expenditures that now take place to see whether they are in any way to be lowered so that such things as hospital facilities or increases in nurses' pay can be implemented. Those matters must be examined carefully. With that in mind—noble Lords would expect me to come to this subject—we have to look to taxpayers' money being paid directly into Europe. That is of some importance.
Every year we have a deficit of £2,500 million in terms of cash from taxpayers' pockets that is payable direct to the European Communities. I shall not argue the merits of the reasons for that, but it is a fact. It is also a fact that, year by year, we have an abatement negotiated by the former Prime Minister, the noble Baroness, Lady Thatcher, worth £1,500 million a year. These are not inconsiderable sums.
But the reason why we must take a careful look at them in order that we can have the money to do what we wish to do, is that there are now moves afoot, notably on
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the part of the President of the European Commission, who has come out in forthright terms as advocating the abolition of the abatement that was negotiated on our behalf. I repeat: year by year, on average, it is worth about £1,500 million.
There have also been suggestions that even after that, Britain is receiving a much better deal than is implied by its payment of a mere £2,500 million into Europe every year and that measures have to be taken to correct that position downwards—so much so that it has been suggested, notably by the President of the European Parliament during the past month, that there has to be a new own resources tax for the European Commission. It has not been suggested what form it may take, except that it should be a separately levied tax payable by each country and levied on each citizen in order that the Community can have more funds to spend. These matters are beyond doubt. They are all documented and, as noble Lords know, I have documentation in my possession for practically everything I say and more.
A new proposal was brought forward only a couple of years ago to harmonise taxation. Needless to say, what the Commission meant—it was explained in memoranda which can be obtained by any Member of this House—was raising our VAT levels, which are lower than those in Europe, to the European level. That would involve taxing newspapers, babies' clothes, food and so on. These are all facts, and they are alive and kicking at the moment—so much so that even today our own Ministers were at an ECOFIN meeting discussing the code of conduct in regard to tax harmonisation. The code of conduct was defined in earlier memoranda which I have in my possession as an arrangement that was not binding but was acceptable to member states. Today, in Brussels, Ministers have been discussing the results of the various meetings that have taken place to draw up the code of conduct.
Are we really so naïve in our relations with Europe as not to believe that a code of conduct will lead inevitably to tax harmonisation whether we like it or not? It is very simple. All the Commission has to do is to levy it. All that we can then do is to take the matter to the European Court. Two years later the court may decide. When it decides, it will do so on the basis of the preambles to the various Acts that bring the provision in, the recitals and so on, bearing in mind that the whole purpose of the EC, which is bound to be taken into account by the European Court, is ever closer union. Who doubts that the decision would go against us?
It may be said that the United Kingdom can use its veto. No, no, my Lords. I well remember when I had the honour of representing my party on the Opposition Benches challenging the then government on this point. I was assured that the veto would remain. Unhappily, it has been tried before. It happened in May 1982, when Britain exercised its veto. What promptly happened was that the rest of the member states ignored it, so the veto did not hold.
Moreover, European law is interpreted by the European Court of Justice. Its concept of justice is not quite the same as ours. The court can take into account presumed intentions in determining what the law means.

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I therefore hope that we shall receive some assurance that Her Majesty's Government have taken legal advice and are satisfied that they can exercise a veto against any such proposal as I have mentioned. Whether it be VAT, excise duty, income tax or corporation tax is immaterial. If I receive an assurance from the Government today that they are absolutely convinced that the veto will hold, it will considerably ease my mind and, I believe, the mind of the country.
In the meantime, in case all these matters may militate against our being at the heart of Europe, perhaps I may with respect notify noble Lords that there are only two states at the core of Europe; namely, Germany and France. Those two countries concluded the Elysée Treaty in 1963, by virtue of which they undertook to inform one another and arrive at a common position before every meeting of the Council of Ministers. Are we under any illusion that that does not still apply? They are there. They are at the core of Europe. In any case, what does being "at the core of Europe" really mean? On reflection, many may decide that it is a meaningless term, a merely emotive term which has no practical effect. What will happen, unless we are extremely vigilant, is that France and Germany between them will go on being the countries at the core of Europe, with the Commission as their obedient tool.
8.59 p.m.
Lord Nunburnholme: My Lords, the noble Lord, Lord Bruce, talked of the intention of our present Government to use the veto. I remind him that the road to hell is paved with good intentions. Two weeks ago I asked the question: "Would we be equalising our VAT rate on hotel accommodation?" To that question, there was no comment at the time. I no longer need to ask. It has been answered by M. Yves-Thibault de Silguy and Signor Mario Monti in Brussels, with their European tax harmonisation. M. Yves-Thibault said: "The momentum behind economic and monetary union, once the rocket is launched, there is no going back". Mr. Jamieson, of the Sunday Telegraph, wrote last Sunday:
"Rockets do occasionally blow up and when they do it is on the whole better to not be on board".
I concentrate noble Lords' attention on a fait accompli intended for 1st January 2001. So far, Spain has our fishing grounds. Net agricultural food exporters on the continent have successfully minimalised our farming production by exacerbating the BSE crisis and the ridiculous false market of set-a-side. False marketing can only be upheld for a limited length of time.
I reiterate what the noble Lord, Lord Stoddart, said. There is now the 20 per cent. withholding tax directive, COM (98) 295, to be effective from 1st January 2001 on all interest paid on the international bond market. The US tried that in 1963. The federal rate was set at 16 per cent. The bond market left Wall Street for London the following morning. In 1987 the tax was withdrawn, but too late.
If we implement COM 295, that market will return to New York on the morning of 2nd January 2001. The City produces £1,100 million per annum, employing 11,000 highly qualified dealers from the bond market alone. The City contributes £25 billion to the balance of
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payments plus a further £2 billion on law and ancillary services per annum, four times more than North Sea oil. The City pays more business tax than Wales. Noble Lords might think that no one will gain with none of the tax going into any European coffer. They would be wrong. The pre-eminent international financial status of the City would be weakened and Frankfurt wants that business. How long are we to be forced to accept those polluted laws?
I crave your Lordships' indulgence for my pronunciation: "Europäische Wirtschaftlich Gemeinschaft" translates, I am told, as "European Economic Community." It is an expression used by a previous German chancellor in about 1937, or was it 1934?
With the 48-hour working week being slipped in—federalisation by stealth—there will be an inevitable increase in unemployment, and a large one too. Coincidence or not, last Saturday 4,200 redundancies were announced; on Monday a further possible 3,000 in the City of London, due to the merger of the Deutsche Bank and Bankers Trust.
Was the Government's large majority due to their possible future merit? Alternatively was it by default—negative voting against the Conservative Party? That was probably quite correct at the time. Did New Labour catch the market's ear? To me, it has musical connotations: "Variations on a washing powder." But the wash still needs a dryer—a spin dryer. I do not see the voters ever forgiving or forgetting.
There is one sentence from Dr. Faustus in the play by Christopher Marlowe:
"How am I glutted with conceit of this".
9.6 p.m.
Lord Jacobs: My Lords, the noble Lord, Lord Ashley of Stoke, was to have spoken before me but he has asked me to express his regret that he had to withdraw because he is unwell.
My noble friend Lord Rodgers of Quarry Bank stated on the second day of the debate on the Address:
"The Queen's Speech is very strong on the need for economic growth but we will have failed if, by the end of this Parliament, the rich have grown richer but the poor are no better off'.—[Official Report, 25/11/98; col. 40.]
The Treasury has stated that this country ranks a humble 11th out of the 15 members of the European Union in terms of national income per head. But in one respect we top the tables: we have the highest retail prices of all the 15 countries. High prices cause the greatest suffering to those on lower incomes. If we could achieve an average reduction in retail prices of 7 per cent. this would be worth more than two years of economic growth.
Is this an unrealistic dream? Are the Government powerless in the face of the efforts by importers, manufacturers and retailers to keep prices high and prevent real competition? Improving competition is the recognised way of lowering prices. The Government have successfully introduced a new Competition Act. I applaud that but I must tell your Lordships that it will

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prove quite inadequate in exposing the informal cartels that manufacturers and retailers describe as price leadership.
Two reasons are put forward to explain high prices in the United Kingdom. The first is high shop rents, particularly in London. They are high but no higher than in New York. If it is high rent that keeps up prices, why are prices not lower in depressed areas in the north of England where rents are low? The second reasons is the strength of sterling. Frankly, I have never understood this, for a strong pound should mean lower prices for imported food, cars and televisions. The Competition Act may not realise the great hopes placed upon it, for high retail prices are seldom caused by provable illegal actions of the retailer or manufacturer. The Office of Fair Trading may require even stronger powers to carry out investigations as they have in the US.
I must declare an interest as an enthusiastic consumer. Take the price of cars. Many noble Lords will be aware that in the UK prices are on average 20 per cent. higher than in the rest of the Common Market. Recently, a UK car manufacturer, when asked about the state of the UK car market, described it as "Treasure Island". I guess that that is treasure for them.
The media have successfully proved that car dealers are afraid to offer discounts on new cars. However, the public are unaware that manufacturers have reduced dealers' margins from the European level of 17 per cent. to just 10 per cent. There is not much room for lower prices there! Car prices are high here because in the 1970s when employers were not permitted to give employees wage increases employees were provided with cars as a perk. As a direct result, more than 50 per cent. of all new cars are supplied to fleet users. These cars bypass the dealers and are offered at discounts of up to 40 per cent. Most manufacturers do not like this arrangement but none dares act alone to halve these discounts for fear of losing their share of the market. As a direct consequence, retail prices have to be kept very high to compensate manufacturers for huge fleet discounts. If these discounts were halved retail prices could come down by at least 15 per cent.
The Competition Act cannot help. I urge the Government either to secure an agreement directly with the manufacturers or to legislate as in the US to oblige manufacturers to supply cars only through dealers. Today, a dealer who sells 1,000 cars a year may receive a discount of little more than 10 per cent. while a 1,000 car fleet user gets 40 per cent.
We come to the problem of food prices. The Sunday Times for the past 12 months has carried out a remarkable investigation of food and other retail prices, resulting in a recent leader entitled "Rip-off Britain". The Sunday Times proved that UK supermarket food prices are the highest in Britain. They are higher than in France, Germany and Holland despite the fact that those countries also charge VAT. The cost of a mixed basket of food was 30 per cent. higher in the UK. Why? Years ago when Tesco, the first supermarket was founded the motto of its founder was, "pile 'em high and sell 'em cheap." What a betrayal of that principle we have today.
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Then every high street had two or three supermarkets really competing on price. Today many supermarkets operate within shopping centres as anchor stores without a competitor. Effectively they have a geographical monopoly. They are nevertheless popular because they offer a vast range of quality food products and other merchandise, but at high prices. Their gross margins are excessive and their net profit margins are the highest in the world—double those in the United States. To create real competition in this country we need more discount food clubs such as COSTCO in the US and others in Germany. If the Government want to lower food prices they should insist that every shopping centre includes a discount club or second supermarket. Then we would have real competition.
Finally, we come to televisions and computers. The Dixon retail chain has a 40 per cent. share of the retail market and is continually attacked for its prices. I do not defend it but I pose this question: why is it that John Lewis, Comet and even the discount shops in Tottenham Court Road sell identical products at identical prices? These are high margin products and yet no one offers a discount. The probable reason is fear that the manufacturer might cut off supplies or slow down deliveries. That is illegal but small firms might be out of business before the Office of Fair Trading or Brussels brought a case to court.
Television manufacturers are preventing price competition, but they are also charging inflated prices to retailers for their products. Take Sony, for example. Its televisions in the UK, excluding VAT, sell for 40 per cent. more than in the United States. Clearly the UK is "Treasure Island" for it also.
In conclusion, the Chancellor of the Exchequer has expressed serious concern about prices in this country. He wants to lower the cost of living but he must do more than rely on present legislation available to the DTI, the OFT and Brussels. A more radical and creative approach is needed. Improvement in living standards could be immense. I urge the Government to get real on this issue.
9.14 p.m.
Baroness Thornton: My Lords, I join with noble Lords in congratulating the—I shall not call them a bevy of maidens; I think that it is an inappropriate expression—the clutch of maidens we have heard today.
The gracious Speech centres around the importance of modernising,
"the country, its institutions, the public services and its economy".
For that I think that we should be grateful. At the end of the 20th century I want Britain to be at the cutting edge of innovation and progress, so it seems entirely right and proper that the gracious Speech should concentrate on those themes. Part of the modernisation of our society and economy must involve the development and growth of new kinds of enterprises, of new ways of doing business, and the adaptation of old ways to meet new needs. It is on a specific aspect of that that I wish to address my remarks.

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At the outset I have to declare an interest, indeed a life-long passion, for the cause of co-operatives and social enterprise. I have been a co-operative member since the age of 16. I have worked for the co-operative movement at various times of my life. I am retiring as the chair of the Co-operative Retail Services London Political Committee this coming week; and I have recently been co-opted as a management board member of Social Enterprise London. Social Enterprise London is a recently created not-for-profit organisation which has been established to promote and develop new kinds of enterprise in the London area. It has been a great source of delight to me and many of my fellow co-operators that the present Government have taken such an enlightened view of the value and place of social enterprise in our society and has recognised the growing contribution of that sector.
It might be helpful to some if I describe more fully what is meant by the term "social enterprise". Briefly, social enterprises are self-help organisations which bring people and communities together to run their own businesses with the twin aims of economic empowerment and social gain. Specifically, they are democratic in practice and principle; they have explicit social and economic aims and values; and they earn income for their own financial independence and viability. Those who are familiar with the Rochdale Pioneers and the formation of the early co-operatives will recognise those aims as being the modern expression of the principles upon which the early co-operatives were formed.
What are the examples of social enterprise today? There are a great many and millions of people are involved in various forms of them across the world. They are common ownerships, worker co-operatives and other types of employee-owned businesses. They are community-based businesses where local people and organisations have got together and set up a trading organisation managed by them to provide services and create jobs, often, but by no means always, with the support of local churches.
We are all familiar with the important contribution of housing co-operatives in providing affordable homes for people who have difficulty in buying or renting. They can be social firms or projects set up to support the intermediate labour market. Those enterprises operate as trading businesses but are specifically designed to provide work experience and training for people with, for example, severe physical handicaps or learning difficulties. There are sometimes very local schemes called LETs (local exchange and trading schemes) which are trading networks, trading for services carried out rather than money.
By far the largest part of the social enterprise sector is the consumer co-operatives. Noble Lords will be aware of the range and scope of the traditional consumer co-operative sector—the CRS, the CWS, the Co-operative Bank, the Unity Trust Bank and Co-operative Insurance, Travel and Funeral Services. However, there are many other smaller consumer co-operative initiatives and I think that we are likely to see a growing number of hybrid and mixed co-operatives providing care services. There is a
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growing number of examples of co-operative nurseries, and co-operatives which provide care for elderly and disabled people.
There are also credit unions. It is about those which I wish to address the final part of my remarks to your Lordships' House. A credit union is a financial co-operative established to help people save and borrow money. They are formed around groups who share a common bond. They may be employees of a particular organisation or they may live in a particular geographical area; for example, a housing estate or a village. They can provide access to saving and borrowing on reasonable terms for people who may not be able to have access to banks or large financial institutions. They provide an alternative to high interest moneylenders.
It is estimated that there are 50,000 credit unions with an estimated 100 million members around the world. The total assets of credit unions are more than 359 billion dollars. That is not a small business. It has provided the impetus for economic development in many communities which have suffered or are suffering hardship, impoverishment and under-investment.
But credit unions do not enjoy the widespread recognition and support that they should have in the UK. One reason for that—and it was highlighted in a recent report by the Social Exclusion Unit—is the unsympathetic legal framework under which credit unions operate in the UK.
Despite that, in 1997 there were more than 520 credit unions in the UK with assets of approximately £80 million and new ones are coming on stream every week. Some of the most successful are those based in the workplace; for example, the West Midlands Police credit union.
Ironically, access to credit has always been difficult and expensive for those who may need it most. Financial exclusion is not new. The UK is a leading world finance centre yet in 1998 it served the poor of this country not at all well. A surprisingly large number of people in Britain have no current account at a bank or building society. The same social exclusion unit to which I referred earlier says that 2.25 million people have no bank account and many of those are likely to live in poor neighbourhoods where unscrupulous lenders thrive. Some lenders have been reported to charge interest rates of as much as 200 per cent.
That large group of people is made up mainly of women, the young, the old, the unemployed and those in low-paid jobs. They are more likely to live in rented accommodation. They often have restricted or no access not just to credit but to many of the financial services which most of us take for granted.
One of the Social Exclusion Unit's action teams is now looking at access to financial services and we can expect a report in July 1999. I am pleased to say that part of its brief is to examine:
"the scope for development of credit unions, building on planned legislative change".
At present credit unions are governed by the Credit Unions Act 1979. Its main problems, as outlined by the Association of British Credit Unions, are that they have

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restricted and low lending limits, restrictions on the amount members can save and a maximum pay-back time which may be prohibitive. That pay-back time is a period of two years. For someone who is in difficulty with moneylenders or with their credit cards, two years is not a sufficiently long period for them to repay their debts. Moreover, community groups are debarred from using the local community credit union to deposit funds.
In fact, it occurred to me that the authors of the original legislation were so timid that they almost guaranteed that credit unions would find it impossible to prosper in the UK. There is little point in dwelling on the reasons for that. I prefer to look forwards rather than backwards.
It was with much anticipation that the credit union movement and its supporters awaited the consultation paper that was produced earlier this month by the Treasury. It proposes amendments to the 1979 Credit Unions Act and there is much in the document to be welcomed. Indeed, I join with my friends in the credit union industry in doing so. The Economic Secretary to the Treasury has responsibility in that area and she is a Minister who has a huge breadth and depth of knowledge of social exclusion issues. That gives me great confidence in the consultative process which is currently taking place.
However, the proposals in the consultative document do not go far enough. I have a suspicion that because credit unions are not part of the familiar traditional structures of the financial sector the innate conservatism of finance and Treasury advisers and draftsmen is leading them to be overly cautious. If the proposals are adopted as they are, credit unions will still lack the legal framework needed to help significantly the financially and socially excluded.
I shall not go into details about the many proposals that the credit union movement wish to have included, but I urge the Government to look at this area and perhaps find some way through.
In conclusion, I commend the gracious Speech for its wide-ranging commitment to change and development and I look forward to the Government applying its principles in relation to credit unions.
9.25 p.m.
Lord Burns: My Lords, it is a privilege to have the opportunity to contribute to this debate today. The gracious Speech referred to the need both to weather the international financial storms and to build stability for the longer term. In my contribution I would like to comment on both these aspects and to say a little bit about the development of the international financial storm, some implications for the UK and some aspects of the various economic policies directed to achieving long term stability.
As several noble Lords have mentioned throughout this debate over several days, the financial storm began in Japan and several south east Asian economies. It is worth recording that over the past year this region has suffered a substantial decline in industrial output; in other words a significant part of the world is already
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technically in recession, however much we may care to debate whether or not this is likely to happen in the West. Of course the most recent trigger was the Russian devaluation and default in the summer, which sparked off a very substantial widening of interest rate spreads and falling equity prices and raised real concerns about a more widespread recession.
Over the past few months we have seen some of the biggest downward revisions in forecasts of world activity that I can recall. On the positive side, of course, falling world prices have softened inflationary pressures and this in turn has increased the room for manoeuvre by the authorities in attempting to deal with these problems. We have seen short term interest rates come down in a number of countries, and long term interest rates have fallen to what are now historically low levels, which also serves to ease the pressures to quite an extent.
In south east Asia there are now some tentative signs of industrial production bottoming out after the sharp decline, and, as noble Lords have mentioned today, Japan has recently introduced a substantial package of measures directed towards supporting demand in the banking sector. Although it is not yet possible to judge how successful this will be—and I listened very carefully to what my noble friend Lord Roll had to say about this—I feel that the region is going to remain a source of considerable uncertainty for some time yet.
Perhaps more surprisingly—and again this has been mentioned by some noble Lords—the United States economy is also a source of some uncertainty. The fall in savings ratio and an expansion of credit have sustained growth there, but what we are seeing is an increasing number of observers who believe that demand cannot be sustained in this way. Perhaps the most cautious approach would be to say that it is quite unlikely that the United States is going to be the same engine for world growth in the period ahead as it has been in recent years, despite some of the more favourable indicators we have seen over the last few weeks.
Of course there are still dangers lurking elsewhere in the world, particularly in China and maybe South America. All of this, as a number of noble Lords have explained, has considerable significance so far as the United Kingdom is concerned. Until the explosive financial events of the summer, I think there had developed something of a consensus about the situation in the UK. The general view was that output was a little bit above trend, putting some pressure on domestically generated inflation (not a huge amount). It was generally thought that to reach the inflation target we would have to go through a period of slow growth and the quite fine balance of disagreement centred on whether that was going to require higher interest rates or whether sufficient action had already been taken to bring it about.
What we have seen in the last few months has been a very sharp weakening of consumer and business confidence. Exports have fallen, particularly to non-EU countries, by quite significant amounts. The signs are, as we keep seeing day by day from reports from the

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High Street, that retail demand has now softened considerably and business surveys are pointing to an unwanted build-up of stocks in the system.
The question being asked is whether the forces at work in the wider world have presented the Monetary Policy Committee with a different job. Falling world prices have made it easier to hit the inflation target and the weakness of world trade is threatening a slowdown in output which is greater than we need. The whole balance of the debate, as those who follow the minutes of the Monetary Policy Committee will know, changed significantly after the events of the summer.
What remains to be seen—there is still a considerable amount of uncertainty—is whether the business confidence indicators are exaggerating the present situation because of the financial fragility or whether they are telling us that there is a real risk of recession next year. I am second to none in the seriousness with which I study business indicators. Over the years, business confidence surveys have a good record as leading indicators, particularly of the short-term outlook. They are telling a grisly story at the moment. However, it is worth bearing in mind that on occasions they have also been misleading, particularly at times of financial uncertainty. Given the absence of major imbalances in the UK economy, it is perhaps surprising that the business confidence indicators are as bad as they are. My conclusion is that it would be wise to prepare for possible short-term weaknesses in the months ahead, even if they are relatively short lived.
That leads us on to the question of how robust is the policy framework that we have to deal with this tricky situation. I should like to make one or two comments on that. As a number of noble Lords explained, monetary policy is now in the hands of the Monetary Policy Committee of the Bank of England. That is the organisation we charged with undertaking that job. I have no desire to get into the business of guessing whether or not it is going to make the correct calls on interest rates. But, having watched the high standard of debate at the MPC on a number of occasions when I attended as the Treasury observer, we can be sure that the full range of arguments will be addressed. At the end of the day, there is a balancing process and only time will tell whether or not the correct decisions are reached.
I have not always been an advocate of this type of arrangement. People who have worked with me in the past will know that for some time I was unconvinced that it was wise to try to transplant central bank independence into the UK. It may be said that that is not surprising in a Treasury official. But my issues of substance were that I was worried about the difficulty of designing a workable remit for the committee in this complex world where there are short-term trade-offs even if there are no long-term ones. There was also the complicated task of designing an appropriate mechanism of accountability, which was something that concerned me.
More generally, again as one would expect from a Treasury official, I was unattracted to the argument that appeared in some quarters that we would be better off
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whoever set interest rates as long as it was not Treasury Ministers. There are some people who still feel that way, though I am not one of them. In the event I came to see operational independence as workable, and I should like to mention why. This is important in terms of the present debate. The real reason is the success of the arrangements we had had over the six years which led up to it, which were started by the noble Lord, Lord Lamont of Lerwick, when he was Chancellor of the Exchequer. He introduced the regime of inflation targets; he started the monthly round of monetary meetings with the Governor of the Bank of England; and he asked the Bank to produce a quarterly report setting out its views as to how we were performing in relation to the target. That got the whole process moving.
We then had the strengthening of accountability by the bold decision of Kenneth Clarke, as Chancellor, to publish the minutes of the monthly meetings, which again has been a great success. If one looks back over the six years during which this broadly similar system has been in place—it started in late 1992/early 1993—the target measure of inflation has been within a range of 2 per cent. to 3.5 per cent. It was that success with the inflation target remit, combined with the enhanced accountability achieved through the publication of the minutes, which persuaded me that it was sensible to go the further step of putting interest rate decisions into the hands of the Monetary Policy Committee. This was described in the gracious Speech as an historic decision by the new Government. I believe that to be absolutely correct. However, it can also be seen as a natural development of the previous arrangements and what led up to them.
It is right that your Lordships' House and Parliament generally should want to scrutinise various aspects of how the arrangement is working, and possibly to make suggestions. I have already heard a number of suggestions from noble Lords. It is not difficult to compile a list of matters suitable for ongoing scrutiny—for instance, the definition of the target; whether factors apart from inflation should be in the remit; the composition of the committee and the reporting arrangements.
It is right that we should continue to keep our attention on those matters. However, at the same time it is only reasonable to give the MPC a fair chance over a sustained period. I cannot help pointing out that it is characteristic of this country that any arrangements set up to control inflation are very quickly subject to extreme bouts of hostility whenever the going gets tough. That may go some way towards explaining why, on average, we have had higher inflation than other major countries over the past 30 years.
I also welcome the Government's success with public finances to date and their control of public expenditure. Again, the new Government have built upon the work of the previous government and improved it in some important respects.
Controlling borrowing over the business cycle is always tricky but, in my view, the combination of the code for fiscal stability and the process of the

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comprehensive spending review have given us a better chance of achieving the necessary control. However, it is important to recall that, while commitment to a clear framework helps, it does not solve all the problems. Judging what is happening to the underlying public finances will always be difficult. Unexpected events often take place. I hope that, simply because we have a code of fiscal stability in place, that will not persuade people to think the job is much easier than it has ever been before. Events will arise and difficulties will emerge.
Finally, I should like to offer a few observations on financial supervision. The gracious Speech stated:
"Legislation will be introduced to improve the regulation of financial services and markets, with a new statutory regulator, the Financial Services Authority".
I suppose that I should declare a small interest here. Just as I was present at the birth of the MPC, I was also present at the birth of the Financial Services Authority. Therefore, I retain a parental interest in how well this infant is doing. Undoubtedly the legislation will come under a lot of scrutiny in this House, and I am sure that that is right. However, I should like to take the opportunity to ask noble Lords to bear a number of points in mind as we go through the process of scrutinising this legislation.
The first is the overwhelming case for bringing together the various financial regulatory agencies. Global financial institutions require new approaches to supervision. The international reaction to the FSA has been very positive and has established London in a leadership position in financial regulation.
Much work has been done to bring together the management of the various regulatory bodies in advance of the legislation, even though the legal powers remain with the individual boards. That has left a curious halfway position where the group has been managed as one group but the statutory responsibilities remain with the individual boards. I believe that that situation can be allowed to exist for only a relatively short interim period. There would be risks for the City of London and investors in allowing those arrangements to persist for too long. So, while it is right that there should be detailed scrutiny in this House and in another place, there is also a need to get on with this legislation with the minimum of delay.
Secondly, we all share a desire to avoid excessive regulation and burdens on the industry, and it is important that savers and investors have a significant responsibility to be intelligent customers. However, we should also recognise that financial products have special characteristics of their own. Often, people make a substantial financial commitment and it will take many years to see the full implications of their decisions. That points to a closer scrutiny of the selling process than would be necessary with many other goods and services.
In considering the new legislation, I am sure that noble Lords will be warned repeatedly about the costs to the industry. I believe it is right that we should be aware of them but it is also important that this House
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gives full consideration to these issues from the perspective of the consumer, because that also matters a great deal.
Finally, while we all share a desire to protect the rights of individuals working in the industry, and it is terribly important that justice must be done, we should also recognise that all is not well with the existing arrangements. As they consider the new legislation, noble Lords should remember that the current procedures have not been as effective as we would like in dealing with insider dealing and market abuse, because it has been very difficult to secure prosecutions against wrongdoers. That is bad for the long-term reputation of the City of London; it is also extremely damaging for the long-term success of the City.
I hope that those points will be borne in mind and I look forward to the debate on this important legislation. It is legislation which will actually make a powerful impact upon a vital part of our economy for a very long time.
9.40 p.m.
Lord Watson of Invergowrie: My Lords, I suppose that on every occasion we have debates in this House someone has to be the last to speak from the Back Benches. I am very pleased to see that so many noble Lords have remained in the Chamber, especially on the Front Benches, specifically to hear my contribution this evening; indeed, that is very much appreciated. Of course, I wish to add my good wishes and congratulations to those who made their maiden speeches today. I believe that my noble friend Lord Stoddart referred to them as a "bevy of maidens", while my noble friend Lady Thornton said she thought that that was an inappropriate description. In the part of the United Kingdom from which I come, the word "bevy" has a slightly different meaning. If those who made maiden speeches today feel the same sense of exhilaration that I experienced just about a year ago when I made mine, I should think that the word "bevy" is an appropriate adjective to apply to them at this moment. However, I enjoyed listening to them and very much wish to congratulate them on their maiden speeches.
My noble friend Lord Ewing of Kirkford made a typically enjoyable, well-informed and thought-provoking contribution this evening. He is a bit of a wily old fox and drew as much as possible about Scotland from his contribution as one could possibly have done in terms of the Scottish content of the Queen's Speech. We know very well the reasons for that. I should like to say briefly that I echo those views as regards the needs of the economy, and the macroeconomic policy as it applies to Scotland. Of course, that includes inward investment.
It is extremely important that the high quality of education both at school and post-school which exists in Scotland is turned into the kind of high quality jobs to which my noble friend referred. There is no reason why that should not be the case. We certainly have not only within Scotland but also within other parts of the UK a very well educated workforce or potential workforce. We must ensure that the kind of investment coming into

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the country, and indeed the investment generated from within, enables that workforce to be employed and boost the economy in a way which has perhaps been lacking in recent times. I very much hope that the contribution made by means of the decentralisation of government in this country through regional development agencies—not just as regards Scotland, Wales and Northern Ireland, but perhaps within the next five to 10 years in England as well—will assist that process.
I want this evening to concentrate on one particular issue. I shall not detain noble Lords for too long. I want especially to talk on an area which reflects my own immediate experience and, indeed, my experience further back before I became a Member of the other place. I refer to the Government's Fairness at Work White Paper. Some contributions have already been made in that respect during the debate. I should declare an interest here in that I worked for the Manufacturing, Science and Finance Union for some 12 years. Now, some people would say that I am on the other side—although the word "side" is perhaps much less appropriate these days—because I am director of a company with fewer than 20 employees which, in terms of recognition, is outwith the realms of the White Paper.
It is a matter of some concern to me that since the White Paper was published last May there has been a considerable amount of lobbying—to put it at its mildest—by employers and employers' organisations to have that document watered down. I find that saddening, especially because the White Paper was put together only as a result of a great deal of discussion, consultation and, indeed, compromise by both employers' and employees' representatives to reach the kind of consensus which is appropriate in modern industrial terms in order to produce the kind of entrepreneurial spirit within the economy to which my noble friend Lord Haskel referred.
That is why I believe it is unfortunate that there are attempts to water down the White Paper, which was a balanced outcome of discussions. Not everyone by any means got what he or she wanted; in fact, many people were dissatisfied with it. However, it was largely accepted as the kind of compromise which was appropriate for the times. The balance contained within that White Paper will be in danger of being destroyed if significant changes are made to it when it is published in the form of a Bill. It is particularly unfortunate that the new CBI president and the Newspaper Publishers Association—perhaps we should not be surprised by that last group—have made it clear that they do not accept the Labour manifesto commitments which were given such a resounding backing in May 1997 on issues such as those contained in Fairness at Work.
Had that campaign been mounted within the context of a wholesale reversal of 18 years of Conservative Party policies—the anti-trade union legislation, if you like, which was so clearly outlined and contrasted by the noble Lord, Lord Davies of Coity—it might be understandable. That is not the case. The White Paper does not seek to do that, but to create a level playing field from the steep slope assembled by the Thatcher
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and Major governments, some of whose former Ministers sit on the Benches opposite. They are not there at the moment, but they attend from time to time.
It was the whole ethos of fairness not favours put forward by the trade unions and the Trades Union Congress which led not only to the White Paper but to its name, Fairness at Work. It was widely accepted and it is unfortunate that the proposals are not being carried through.
In his introduction to Fairness at Work, the Prime Minister said that it represented a very minimum infrastructure of decency and fairness for people at the workplace—but still it seems to go too far for the liking of some employers and employer organisations. What do they have to fear? It would appear that they want a situation whereby workplace practices in this country are quite different from those applying in many of the EU member states which are the direct competitors of British industry.
What do they have to fear from "family friendly" policies, as they are described within the White Paper, such as maternity leave? What do they have to fear from the withdrawal of the upper limit on awards in industrial tribunals? I have spent a considerable amount of time representing trade union members at industrial tribunals. Going back to the 1980s, I can remember when the upper limit was £10,000. You had to be dealing with a situation where an individual had been very badly treated to get anywhere near that sum. The upper limit was £10,000 12 years ago; it currently stands at £12,000 for unfair dismissal. I would not like to make a calculation of what the cost of living increase would put that figure at now. The proposal in the White Paper is to remove that upper limit, as happens in sex and race discrimination industrial tribunal cases, and yet employers are arguing that the upper limit should be some £40,000.
It needs to be said that some 70 per cent. of all dismissal claims to industrial tribunals fail. If an employer has a proper procedure at work, it is unlikely that unfair dismissal proceedings will occur. Again, I come back to the question of what they have to fear. All they have to fear is that employees will take action against them if they have left themselves open to it. As ever, prevention is much better than cure.
The major issue which has emerged from this debate—some of it quite publicly over the past few months—is the proposal to grant automatic recognition to a trade union where 50 per cent. plus one of a workforce are in membership of a trade union. It seems that employers are now advocating that a whole raft of hurdles should be put in place to prevent this happening—for example, that the majority should be more than 50 per cent. and that members should have three or six or 12 months' membership while at the company. Even where both those hurdles are overcome, an affirmative ballot should be held. Without wishing to be flippant, as was said recently, it seems that the only condition that does not have to be met is that those forming a trade union membership should be left-handed and born on Thursdays. That seems to have as much logic as some of the other barriers which

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have been placed in front of trade unions seeking, quite democratically—and at 50 per cent. plus one it is democratic—to have recognition to represent their members who, by joining a trade union, have signified that that is what they want the trade union to do on their behalf. There is nothing revolutionary about that; it has been fairly well established over the years.
It seems that the aim of those trying to put up such barriers is to throw as much rubble as possible in the path of trade unions moving towards recognition. They are trying to put as much detail as possible in the Bill in order to cause interminable delays and perhaps to leave the process open to judicial review wherever possible. All this is happening where people are already members of a trade union. It is not to prevent them joining.
All of these provisions already apply in many other European Union member states where British industry's major competitors are to be found. It seems strange, to put it at its mildest, that some parts of British industry should feel that they need government assistance to allow them to trade on what they regard as a fair basis with their competitors.
I wish to finish on a point which I believe gives graphic evidence of the great need for the proposals in the White Paper. It might be felt that that was not the case just now but at the moment there is a dispute in London which highlights the need for the automatic recognition procedures to which I have just referred. It concerns a Danish company called Rosti. It is a multi-national electronics firm with some 340 workers in the Wembley area of London. Of the 340 workers, 62 per cent. are members of the Transport and General Workers Union. The vast majority of those workers are Asian. The supervisors—the cell leaders, as they are interestingly termed—and management are almost exclusively white.
Unionisation in the company began in November of last year following the introduction of a new, fairly severe 12-hour shift working pattern. In April of this year, management issued letters to certain shift workers threatening the sack if workers did not meet the requirements. It seems that management has deployed a range of union avoidance tactics, including victimisation and intimidation. I am aware that there are always two sides to any story, but the length of the dispute makes it clear that there is a need for the intervention of some representation on behalf of the workforce. There are elements of racism, with Asian workers being denied promotion, and health and safety has been compromised, with European and domestic legislation allegedly being flouted in a number of ways.
There is a bright spot on the horizon in that, after a year, the management has agreed to the Advisory, Conciliation and Arbitration Service intervening to hear the case for union recognition. I understand that that will take place next week. That, in itself, is good news. However, my argument is that none of this should have been necessary. In that situation, more than 60 per cent. of the workforce were in the union. When the management was approached to recognise the union,
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that did not happen. Had the White Paper proposals been in place, that would have happened and the stand-off that has taken place would not have been necessary.
If there can still be instances in 1998 of antics which are more reminiscent of Victorian times, it is clear that legislation is required to bring about harmony and to allow the kind of relations to which I referred earlier to flourish. Under the Fairness at Work proposals, that would happen.
There is much talk these days about flexibility at work. It seems to me that the idea of flexible workforces works almost inevitably in favour of the employer. All too often, flexibility tends to be a euphemism for an employer's ability to hire and fire with maximum haste and minimum responsibility. I suggest that that is not acceptable. It is not acceptable, I freely concede, to the vast majority of employers. We are talking about a minority. That is the whole point. Legislation like this is needed to bring the minority into line and to do the kind of things that the vast majority think nothing of doing and have done for years. It is really a question of dignity at work. Everyone in the work place ought to have that dignity. I say in closing that the White Paper provides that. I urge my noble friends on the Front Bench to convey that message to whatever they regard as the appropriate ears.
9.54 p.m.
Earl Russell: My Lords, I hope the House will forgive me if I do not make any attempt to reply to the debate as a whole. It is a debate of many parts. I enjoyed, of course, the speeches of the five maiden speakers and would like to congratulate them all. Five maidens actually is not a record. As I was listening I remembered John Arlott, who has become the voice of nostalgia in my mind, referring to a succession of 17 young maidens. But these have done better. Those to which John Arlott referred did not take a single wicket between them; these have taken a wicket with every over, and I congratulate them.
I say to the noble Lord, Lord Ewing of Kirkford, I do not know why he is so surprised at the thought of postmen in Parliament. Postmen, like sentries, have a contemplative profession, and the more of them we have, the better.
Perhaps the most notable speech was that of the noble Lord, Lord Barnett. I remember the noble Lord, Lord Barnett, many years back as the voice of fiscal rectitude. He is not, of course, always right but Ministers ignore the noble Lord, Lord Barnett, at their peril. On this occasion the noble Lord told us that fiscal rectitude had been carried too far. The shock was a little like God telling us we are too good! I hope Ministers will pay attention to what he said.
The noble Baroness, Lady Turner of Camden, made a notable and thought-provoking speech, to which I shall return at the proper places in my argument. The noble Lord, Lord Blackwell, perhaps a little unwisely, accused the Government of too high a level of spending. I do not know whether he has read the report of the Treasury Select Committee on the Comprehensive Spending Review. It was published on 27th July, which is not a

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wise time to publish a report that needs attention. What it showed is that if the Chancellor's spending increases are taken, as they should be, over five years and not over three, the annual rate of spending through the Parliament is 1.7 per cent., compared with 2.2 per cent. per annum under the Major government. If the noble Lord thinks that the rate of spending is excessive, what does he think of the rate of spending of the government which he had the pleasure to serve?
Lord Blackwell: My Lords, I think the latest spending increase has to be related to what is going on in the economy at the time. The relevant comparison now is what the expenditure increase of this Government is compared with that which was projected under the previous government. When the economy is growing, expenditure as a percentage of GDP is expected to fall. I believe it was expected to fall from around 41 per cent. in 1996 to about 37.5 per cent. in 2001. It is now expected to be about 38 or 39 per cent. of GDP. After the latest forecasts I expect it will be even higher. That is why I asked the Government if they would confirm a target of keeping public expenditure below 40 per cent. of GDP.
Earl Russell: My Lords, the noble Lord takes the previous government's spending limits a little more seriously than the former Chancellor of the Exchequer, who once told my honourable friend Mr. Bruce that they were for the birds. Perhaps the noble Lord was one of the birds!
I was amused by the comments of the noble Lord, Lord Bruce of Donington. He is a good parliamentary sportsman. I do not think he will mind my saying the thought that came into my mind. If he were at the gates of Hell and watched Satan opening them before him—I mean nothing personal because this could happen to any of us—his first cry would be, "I exercised the veto". But I am afraid that really would not do him much good and I think he knows that himself.
I wish to mention one measure in the gracious Speech which has not been mentioned so far, and that is the measure to reduce the age of consent. I am extremely glad to see this measure coming back. I hope it will have a slightly quieter passage than it did last time. I congratulate the noble Baroness, Lady Young, on the care with which she has entered into consultation about details of some of the questions which arose last time. I thank also the noble Lord, Lord Williams of Mostyn, and his officials for the care which they have put into these consultations. It will not, of course, remove disagreement. We do not expect it to. However, it may at least narrow the area of disagreement and do something to lower the temperature.
Perhaps I may address one question to those who are thinking of opposing that measure. What do they hope will be the effect of success? A great many of them said then that they were not in favour of imprisoning 16 year-olds and 17 year-olds. They wanted the law simply in order to express disapproval. It was something of an eye-opener to read Matthew Parris's "Clapham Common" column, which is, I think, one of the great historical documents of the late 20th century, as well as
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a great piece of literature. It made me understand how difficult it is for anyone to lead a respectable sex life which they cannot avow in public. When that issue returns I hope that those points will be taken into account.
I should also like to mention briefly the draft law on sex discrimination and sexual harassment, recently offered by the Equal Opportunities Commission. I hope that that receives favourable consideration from the Government, although I appreciate that it can hardly be for the legislative programme of this Session.
My main area of concern must obviously be the welfare reform Bill and the points that go with it. My honourable friend Mr. Rendel, our social security spokesman in another place, recently said that social security has emerged as one of the most glaring gaps between our policy and that of the Government. That is truer of some areas of the welfare reform Bill than of others. I hope that pensions will be one area where that might be slightly less true.
I congratulate the Minister, the noble Baroness, Lady Hollis of Heigham, on the appearance of pension-splitting on divorce. The noble Baroness was in at the birth of that proposal and I am glad that she will have the chance to introduce it. However, as I am sure she will be the first to say, it will be an abominably complicated process. It may do more for women who have formerly been married and who have children than the Child Support Act has ever done or ever will do. However, the problem is that there is not enough to go round. Granted that that is so, it is right that the misery should be shared more equally, but we shall all have problems to address in that area.
On the stakeholder pension, we on these Benches have grasped the nettle of compulsion. I remember when I was 23, newly employed and entering into an occupational pension scheme, being absolutely furious to discover that the scheme was compulsory. Looking back on it, from the perspective of 40 years later, I am extremely glad it was. The principle of compulsion, after all, is well known in national insurance and I do not think there is anything so startling about it.
The difficulties are those to which the noble Baroness, Lady Turner of Camden, and indeed the Minister drew attention. What does one do for those with irregular patterns of employment who are unable to make up the regular pattern of contributions for that second pension? This, of course, will be further complicated by the proposals of the Taylor Report for the lower limit on national insurance, which are themselves good and constructive proposals. However, we have here two contradictory imperatives. I am sure that the Minister knows the problem. Indeed, she has already referred to it. I shall judge the success of what they do about pensions on how well the Government cope with that. I wish them luck.
For the rest, we on these Benches think that the welfare reform proposals rest on a largely mistaken diagnosis. They rest on the premise of defending modernisation, but I am not exactly clear what that is. I have never seen any government definition of it. It must mean either that everything new is for the better,

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which is a proposal too simple to be taken seriously, or it must be meant to be praise of a specific type of change. If it is the second, I should like to know what that specific type of change is.
The next point, which perhaps worries me most, is that the Government have to a large degree fallen for the notion of welfare dependency. In the Acheson Report, powerfully referred to by the noble Lord, Lord Roll of Ipsden, it is strongly stressed that benefit levels are too low to be compatible with good health. Indeed, there is a great deal in the report about what it terms "food poverty" on benefit. It is stressed that that is for many people a great deal worse because, not having cars, they have to add on the cost of bus journeys—if indeed there are any buses—to where they can obtain food. I am not altogether convinced that such low benefit levels have the attractive quality with which the Department of Social Security has always credited them. There is a certain implausibility about the notion of welfare dependency.
More generally, there seems to be a flaw running through the Government's thinking when they talk about "work for those who can"; namely, they believe that the way to get people into work is to change the social security system to encourage them to come off benefit. They have not gone so far as to use the Charles Murray phrase, "weaning them off" benefit. It appears to be government thinking that changing the benefits system is the best way to get people into jobs. It sounds like that. The Minister quoted the number of workless households as evidence of failure of the social security system. If that is not what she meant—and I should be very glad to hear that it was not—I should be glad to know what she did mean.
Obviously, there is a great deal going wrong. I have not been persuaded by anything in the Green Paper or any government statement on social security that matters are going wrong because of a failure of the social security system. It seems rather like blaming the ambulances for the casualties that they bring in.
The next matter that concerns me is the itch to compulsion. The manifesto merely said that if people did not take up welfare-to-work options, then life on full benefit is not an option. The Prime Minister, on the other hand, said in his Amsterdam speech that life on benefit is not an option. The Prime Minister has clearly won over the manifesto. We have an extension of total disentitlement, most recently in the new pilots for over-25s for welfare-to-work.
We really do need to think about what we are doing here. The Acheson Report has said that,
"all policies likely to have an impact on health should be evaluated in terms of their impact on health inequalities".
That is a perfectly reasonable request. But if benefit levels are too low to be compatible with general good health, what should we say about those who receive no benefit at all? It seems, prima facie, plausible to suppose that that effect would be rather worse. But there is no specialist research on the effects of disentitlement to benefit. No government have undertaken any. I ask the Government to undertake such research in the course of
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monitoring the sanctions for welfare-to-work before they introduce any further measures of disentitlement to benefit.
In a Written Answer a couple of days before Prorogation, the noble Baroness, Lady Blackstone, told me that in studying the effects of disentitlement on welfare-to-work the Government did not have records of the percentage, whether total or partial, of disentitlement or the length of sanction. Given that statistical limitation, I do not see how the Government will carry out the study. I should like to see this done rather better.
Turning to the more specific measures that the Government are bringing in, there are changes in incapacity benefit. I entirely agree with the Minister, who spoke very powerfully on this matter, that there are people on incapacity benefit who could do some forms of work. If they are to be offered "carrots", I am strongly in favour of that and it is a good thing. However, when we start thinking about sticks or pressures, it is another matter.
If we look at the Government's analysis of the rise in numbers on incapacity benefit, we run into another series of questionable assumptions. Last time, the Government thought that a lot of people who were on incapacity benefit should not be and that they could save money by getting them off it. But the incapacity benefit leavers survey in progress found that only 40 per cent. of people leaving incapacity benefit got into work and only 20 per cent. of those disentitled to incapacity benefit got into work. However, almost half of all incapacity benefit leavers claimed a new benefit within six months. A great many, one-fifth of incapacity benefit leavers, were back on incapacity benefit at the time of the search. That suggests that the alleged saving has more or less disappeared.
I ask the Minister when we can expect the study to be completed. I was quoting from the DSS 1996–97 research handbook and there is a further instalment to come. In the light of that, I wonder whether the assumptions being made about savings are a little optimistic. One should have expected this rise in numbers. Statistics on ill health in the Acheson Report show a significant class link between poverty and ill health between the years 1945 and 1964. The figures were 17 per cent. for professionals and 48 per cent. for the unskilled. In addition, we know from many studies that unemployment has a bad effect on health. I wonder whether we find here not abuse, as the department has been tempted to think, but a serious medical effect. We should bear in mind that medicine has reduced mortality but has not succeeded in reducing morbidity. Here we have a failure in joined up government.
I also wonder about the Government's decision not to allow incapacity benefit for those who have not paid contributions in the past two years. It is possible that some of those people may be ill partly because of unemployment. All the material in the Acheson Report would support that. In some areas, such as South Kilburn, the ward next door to where I live, there are not the jobs. One does not get a job, because one can

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go round the treadmill of the job centre a thousand times and there is nothing there to apply for. No amount of changes in social security can alter that.
The Government need to wonder about the attempt to change SDA to a contributory system for those over 20. What will happen to students, most of whom will not have made contributions during that time?
I hope the Government will think carefully about housing benefit. A view is being put forward, most notably by Frank Field, that one needs to do something to control housing benefit, to give the tenant an incentive to shop around and seek a cheaper rent. But so far as I can see, it is a sellers' market. There is not much available in the way of cheap private rented accommodation and the tenant who is made to shop around by a cap on his financial resources tends to end up homeless, at greater expense to public funds.
If we examine what has happened to caps on housing benefit in the single room rent and the local reference rate, what tends to happen is that either the landlords stop letting to people who are on benefit—and the newsagents where I live are full of such notices—or in periods of high interest they sell the house, stop letting at all and make more money out of the interest on capital than they would ever have made by doing anything.
So before the Government go further down that route, I hope they will think twice and three times. I hope they will look at the research by Centrepoint, Shelter, the citizens' advice bureaux and a good many other bodies and think hard about it. We should like to see first some mending of the holes cut in the safety net which allow people to fall through. I am raising the case of 16 and 17 year-olds for my 10th successive Session. I do not want to beat my great-grandfather's record of 12 Sessions before he got the Jewish Disabilities Bill on to the statute book, but if I have to I shall. When are we to get the results of the review of the habitual residence test? The Minister promised that to me at the end of the Government's first Summer Recess. It was promised at the end of the second Summer Recess. I know that a European Court case is pending because I have some involvement in it, but I should like to believe that that review will eventually be concluded.
Finally, the Minister will remember the feelings that I expressed when the previous government removed the entitlement of some asylum seekers to benefit. I did not expect this Government to disentitle the rest. The Minister will say that they have been left with visible means of support, but this is in kind, more expensive, less suited to anyone's needs and is tied to a condition that they live in a specified place. This is closer to internment than benefit and we shall hear more of it in this Session before it is through.
10.16 p.m.
Lord Higgins: My Lords, it is a somewhat daunting task to wind up at the conclusion of a debate that has already lasted over seven hours and has included 34 speeches. I do not envy the Minister's task in replying to it. The debate has been remarkable for the fact that we have heard no less than five maiden
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speeches. There has been speculation as to the correct words to describe such a group. Looking at noble Lords opposite, perhaps "a phalanx of maidens" is appropriate. I hesitate to use the expression "block vote" given the number of trade union affiliations.
The noble Lord, Lord Evans of Watford, dealt with small businesses; the noble Lord, Lord Brookman, dealt with the steel industry; and the noble Lord, Lord Clarke of Hampstead, dealt with the Post Office. Therefore, in terms of the subject matter of this debate—industry—they could not have covered a wider spectrum of expertise. We look forward to hearing more from them in the future. The noble Lord, Lord Christopher, concentrated on pensions. My experience over the past year in this House is that proceedings on pensions tend to be more like seminars than debates and consist of the noble Baroness, Lady Hollis, the noble Earl, Lord Russell, and myself. Any additional reinforcements are greatly welcomed. We shall look forward to hearing from the noble Lord on that subject.
Perhaps the most remarkable maiden was that of the noble Lord, Lord Craigmyle, who spoke exclusively and rightly about marriage. I believe that in the context of welfare reform an increasingly important issue is the way in which those within or without marriage should fit into the social security system. His contribution was very valuable. I have already said that we look forward to hearing the other maiden speakers on many occasions. Alas, as a consequence of the Government's proposals for your Lordships' House the number of occasions on which noble Lords can hear further from the noble Lord may be limited. That is very greatly to be regretted.
I concentrate my remarks on the question of welfare reform. First, perhaps I may say a word or two on the presentation of government policy in two respects. First, there is deep concern about the way in which increasingly over the past year we have had government by leak. It has become almost standard practice for the press to say that the Secretary of State for this or that department will tomorrow announce this or that particular proposal. It is a worrying development. The technique from the point of view of the spin doctors is clear. If it is good news the Government get it out the day before and have a second bite at the cherry when the Opposition can say something on it. If it is bad news they anticipate what will be said and when it is criticised by the Opposition the next day the spin doctors say to the press, "That's all out of date." It is a discourtesy to the House and a worrying development.
The curious thing is that it has been linked with another presentation device: to repeat as though new something which has been announced several times before. I pointed this out in the debate last week, as the noble Baroness will recall. And what do we find today? A large chunk of the noble Baroness's speech is a repetition of what was in the Chancellor of the Exchequer's last Budget speech as though it were new. Even stranger perhaps, the wording of the gracious Speech seems reminiscent of what was said only a few days before in the prorogation speech. The general presentation of government policy—it is an important parliamentary matter—gives some cause for concern.

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I said that I wished to concentrate on social security issues. However, perhaps I may say a few words on some of the other points raised. There has been much publicity in the past few days as regards the European Union and tax harmonisation. I had much sympathy with the view put forward by the noble Lord, Lord Stoddart, who pointed out that the whole basis of our parliamentary system, albeit now largely the responsibility of the House of Commons, rests on the control of money—the granting of supply, in particular the ability to raise taxes or to make expenditure. If that is being shifted elsewhere by way of tax harmonisation, inevitably the power of Parliament must be reduced. That is worrying.
I was somewhat worried by the Chancellor of the Exchequer's broadcast this morning. When talking about tax harmonisation he seemed to be totally unaware of the situation with regard to valued added tax and the sixth directive. When winding up, perhaps the Minister will tell us the up-to-date position as regards our resisting any proposal to remove zero rating on value added tax. I declare some historic interest since it was a tax that I had the pleasure—it is not quite the right word—of steering through the House of Commons originally. We need to know exactly how much control we still have.
In many ways this is a difficult debate because it has covered such a wide range of issues: industry, economic and social affairs. But there has been a fascinating debate within a debate which was started about halfway through the proceedings by my noble friend Lord Skidelsky and taken up by a number of noble Lords, in particular the noble Lords, Lord Shore and Lord Desai. It raised a number of important issues. Given my history I am tempted to go into the matter. However, I shall pick up only one important point which links the economic situation to social security. My noble friend Lord Skidelsky is, I think, universally recognised as probably the greatest authority on Lord Keynes. I pointed out recently that Lord Keynes's views are becoming more and more fashionable under the present Government. Lord Keynes was remarkable in his general theory of bringing together the important relationship between savings and investment—not ex post savings and investment, which are always equal, but the disparity between ex ante savings and investments.
In that context the way in which the Government are developing their policy of more and more means testing is creating a serious deterrent to saving. People within a wide range of incomes will feel that if they are to have this kind of social security system they will not find themselves any better off if they save than those who are more profligate, do not save, and end up on the social security system. That covers quite a wide range of issues. I see some assent from noble Lords opposite.
It is equally true in relation to those making provisions for pensions. There will be a serious danger that unless people receive a very large pension, they may well feel that it is scarcely worth contributing because they will end up on means-tested benefits. Therefore, that is a particular aspect of the matter—the
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link between the economic side of things and the whole question of savings and investment with the social security system.
I turn to the main points about the Government's welfare reform programme. It is becoming increasingly clear now what the outlines are. In my view it is also absolutely clear that it is not the programme on which they fought the election. They were very clear then. There was speech after speech by the present Prime Minister, when he was in opposition, saying very clearly, "Our intention is to cut the social security budget in order to spend more on health and education." It is absolutely clear that they have failed in that attempt. Indeed, far from being cut, the social security budget has gone up and up. It would be helpful if the Government would admit that that is so because at the moment it is clouding the entire debate on welfare reform.
Of course, it has been said, "We did not say we were going to cut it absolutely. We were merely going to cut it as a percentage of GNP or as percentage of spending." At Question Time the noble Lord, Lord McIntosh of Haringey, was saying just that. I can find absolutely no trace whatever of any statement by any Minister of the present Government in opposition, or in the manifesto, saying that they meant they would merely cut it as a percentage of GNP or of public spending. If that is wrong, perhaps the noble Baroness will write to me and tell me so.
The reality is that even in terms of a percentage of one or other of those two variables, the Government still are not succeeding. There are a number of reasons. If anything, the actions they have taken have increased expenditure on social security—notably £1.5 billion on the working families tax credit.
The relationship in terms of a percentage of national income is going in the wrong direction because the Chancellor has admitted that the growth rate will be significantly less than what he first predicted. Therefore, on both those grounds, the Government have not succeeded in what they said they were going to do. We shall now see an increasing number of relatively minor matters which are considerably to the disadvantage of particular groups of people.
Earl Russell: My Lords, does the noble Lord agree that what he is saying about the failure to produce real cuts is true equally of Mr. Darling and Mr. Lilley, and that therefore we might constructively think about what are the forces which mean a continual increase in the budget. I believe that it is not in the social security system.
Lord Higgins: My Lords, with respect to the noble Earl, I do not believe that that is so. The reason that there was a move in the right direction was because the Chancellor of the Exchequer adopted for the initial two-year period the plans of the previous government. What has happened is that that has carried the Government through so that they will be able to say, to some extent, that over the Parliament, they have not

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done too badly. But that is because they stuck to our plans and subsequently changed them for the later part of the period.
I wish to return to the important points that I was making that there are now to be a series of cuts to the detriment of particularly disadvantaged groups. The noble Baroness Lady Turner of Camden, pointed out the way in which there have been cuts, for example, in widows' benefits. In particular they are benefits to which people had contributed.
This brings me to the next point which is very important. The Government are now increasingly undermining the contributory principle. Some people (widows of 45 to 55 mentioned by the noble Baroness opposite are an example) will not receive benefits to which they have contributed and to which they believe they are entitled. The Government are in the process of removing entitlement from people who have contributed. The contributory principle is getting more and more eroded.
On the other side of the equation, some people will now receive benefits, previously contributory, for which they have not contributed. Therefore, we should expect, in connection with specific legislation, such as the Social Security Contributions (Transfer of Functions, etc.) Bill, a huge explanatory memorandum for which no doubt at the Committee stage we shall be grateful. It says that national insurance contributions are paid into the National Insurance Fund and that payment of NICs gives entitlement to contributory benefits. There should have been added, "Unless the Government decide to take them away after the event" or, "Unless the Government decide to take away this entitlement." No doubt this is one of the major pieces of legislation we can turn to in subsequent debates.
This is not a minor matter. It is a fundamental change in the whole basis of expectations on which people have been relying. We are now told that we are going to have a new benefits entitlement test. This again appears in the explanatory notes. That sounds a pretty sinister idea, "a new benefits entitlement test." Why cannot we stay with the old benefits entitlement? This is a matter we will need to pursue. The Government's proposals are certainly massive as far as legislation is concerned. The noble Baroness and I and the noble Earl and others will spend many hours on, I think, five Bills now (I thought it was four) which are to be covered by the so-called social security reform programme.
We have, on the one hand, the Bill to which I have just referred. That is said to be technical. I think one should always be wary of any Bill which is said to be technical or an amendment. I remember once being told by my officials in the Treasury that something was a technical amendment and I found that retrospectively I had made about 25 people criminally liable. A technical Bill should be viewed with suspicion and we shall view it with quite a lot of suspicion.
We are also to have a Bill, I understand, on the working families tax credits. I have already spelt out in your Lordships' House what our objections are to those proposals, not just the cost but the way in which they are likely to encourage fraud and the fact that they are not well targeted as far as income groups are concerned.
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Thirdly, we have a Bill which is, I understand, the so-called welfare reform Bill, which will cover pensions, stakeholder pensions, what the noble Baroness now describes as pension sharing rather pension splitting (something which we shall certainly need to examine carefully), disabilities, widows and so on, of which a central feature is the so-called gateway. May I ask one question in relation to that? There are those who will be told they must apply and turn up for interviews in order to get through the new gateway. What sanctions will be imposed if they do not turn up? More specifically, what is going to happen if lone parents simply do not turn up for the interview? I think they are concerned about compulsion. We ought to know what the penalties are both in the general case for all applicants to the gateway and more particularly for lone parents.
Finally, I turn to the question of pensions. We have been promised a pensions Green Paper and we have been promised a pensions Green Paper and we have been promised a pensions Green Paper. The last promise was that it would appear in the autumn or towards the end of the year. Perhaps the Minister can tell us: is it the case that we are going to have that Green Paper before Christmas? Time is running out and it would too silly if it were delayed again. I presume the answer to that question will be yes.
In relation to pensions reform more generally, we need to see what the situation is with regard to the provision of second pensions and whether or not there is a degree of compulsion—a point made by the noble Lord, Lord Christopher, in his maiden speech. The noble Earl, referring to the noble Lord, Lord Barnett, said that he was rather wobbly on fiscal rectitude but suddenly seems to be wildly in favour of means-testing. I believe that was what he said. Certainly, more and more means testing is a feature of the present Government's policy and the direction in which they are moving.
Having said that—I know it has become fashionable to quote Mr. Frank Field—the way in which Mr. Field spelt out the arguments against the present Government's policy on means testing is important, as is the fact that he had the courage to criticise what the Government have done to date. For example, in an article in the New Statesman dated 27th November, he says that,
"many widows without children will lose out after six months—to the tune, eventually, of £500 million a year… national insurance rights of long-term sick and disabled workers were hacked away for savings of £750 million".
The trouble is that the Government, having announced that they were going to cut the social security bill, have failed to do so and are increasingly finding extremely mean ways in which they can seek to achieve their objective. That is something which we will debate during the course of legislation. We have already made it plain that we shall adopt a responsible attitude to each of the Bills. There are many features which require careful scrutiny but there are certainly some features which are extremely objectionable.
10.36 p.m.
The Minister of State, Department of Trade and Industry (Lord Simon of Highbury): My Lords, I repeat the praise of the noble Lord, Lord Higgins. It is a great privilege to close this debate on industry, economic and social affairs. I thank the noble Lord for his sympathy—I feel that there was genuine sympathy from him for the task at hand. There is also consistency from government; and the presentation of policy which maintains consistency is, in my view, laudable. I prefer it to volatility.
I congratulate noble Lords sitting behind us on their maiden speeches. They are sitting behind and in front of me and after seven hours I am becoming a little confused as to which direction. The noble Earl, Lord Russell, likened them to 17 young maidens. I presume he was thinking of them as a left-arm bowler. That seems to fit very well.
I do not want to dwell too much on individuals. But from Highbury we always look up to Hampstead. Perhaps I can say to the noble Lord, looking from Highbury to Hampstead, that I have great sympathy for the very fine speech and points he made about the Post Office and its role in our economy.
I would also like to attempt to reply to some of the points made during today's wide-ranging debate, and to review some of the major themes in the gracious Speech; so this will be partially helicopter and partially ground troops. I hope your Lordships will understand that if I am unable to respond to each and every issue raised today—it will have been noticed that my noble friend Lady Hollis and I have been scribbling—we have undertaken to write to all those who feel that a substantive point has been missed.
The second legislative programme outlined in the gracious Speech will continue with economic policies designed to build stability in the long-term. I hope that both the noble Baroness and I have made that clear.
I believe that this is an appropriate occasion to welcome the noble Lord, Lord Skildelsky, to the Front Bench and to welcome his first intervention on Treasury matters. I look forward to deciding, in future, whether forecasts are fantasy or real. I do not think I shall talk much about that today. Time will tell. In my view, the noble Lord, Lord Desai, in his excellent intervention, answered clearly on the issue of scope for spending through the cycle and over the cycle while maintaining a prudent approach to public finances. That is a critical part of the policy of stability in the long term. I merely add that the fiscal policy is set out to achieve long-term stability, not for short-term demand management.
However, where it is consistent with the fiscal rules, fiscal policy can support monetary policy, as it has over the past year. In 1997 to 1998, there was a substantial fiscal tightening of around £20 billion. I believe that the noble Lord, Lord Razzell, was asking for more. However, as that was the largest tightening in any one year since 1981, I felt that to be quite significant already. The July 1997 Budget included significant tax increases in the personal sector, which I believe helped to encourage a more balanced recovery. Indeed, we have seen fiscal and monetary policy moving together.
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The noble Lord, Lord Skidelsky, asked whether the Bank was aware of the golden rule when it set out on its monetary policy. I believe that the MPC stated that it sets interest rates to meet the Government's inflation target "taking account of all available information". I was delighted to hear the noble Lord, Lord Burns, in his fascinating speech and update of recent history, welcome both the new monetary and fiscal policy frameworks. Both frameworks now focus on delivering economic stability. I believe that Britain is now better placed to steer this stable path than in the past.
In welcoming the noble Lord, Lord Skidelsky, I shall not continue on the topic of monetary stability, but I am sure that everybody knows the path we are trying to steer. We certainly know very well. If I speak for any of the three subjects tonight, it is for industry. My experience of 35 years has made clear to me that the present economic downturn has made this a tough year for business; there is no question of that.
With one quarter of the world in recession—including Japan—no country is immune from the effects of the current instability and the world economy. We all know that the world growth forecast this year has reduced from over 4 per cent. to 2 per cent. But we are determined not to be deflected from building long-term stability and from keeping on a consistent course. This is a macroeconomic policy. The consistent course has been marked thus far by low inflation, now declining interest rates and sound public finances. For those who doubt that we have a macroeconomic policy, I commend the pre-Budget Report, HM Treasury November 1998. It may be called "strategy", but I regard strategy and policy as similar issues. So, I do not think it is right to say that we do not have a policy.
Lord Shore of Stepney: My Lords, perhaps the Minister would be kind enough to give way?
Lord Simon of Highbury: My Lords, I will, immediately!
Lord Shore of Stepney: My Lords, the pre-Budget Statement carries just the same input of European macroeconomic policy as the Budget Statement and the Queen's Speech.
Lord Simon of Highbury: My Lords, we are both agreed that there is a policy. In my old oil company days, I was fond of saying that performance is strategy. It is important to underline the fact that delivering is a great feature of the Government's requirement and responsibility. We are delivering on the economy. Within the first legislative Session we put in place new frameworks for both monetary and fiscal policy to deliver macro-economic stability. Long-term interest rates are now the lowest for 35 years and inflation is at its 2.5 per cent. target. We were reminded that the latter was nearly 10 per cent. in the early 1990s. The exchange rate is now back down around the level that we inherited, with the inflation we inherited being squeezed from the system. So I think that we are performing.

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There are other elements of economic performance which are worth underlining. The economy is continuing to grow. In my view, we have heard some extraordinary statements which could force one seriously to doubt whether the economy is actually growing currently. In fact, it is growing at an annual rate which is still above 2 per cent., and employment is up by 400,000 since the election. Moreover, over 170,000 young people have entered the New Deal and 90,000 people will benefit from pilot programmes for the long-term unemployed. I believe that to be a mark of real performance.
However, the real point is that the latter has come about as a result of some quite tough decision-making. I agree that there were features of the inheritance that were certainly stronger than one could have hoped for when I was in my business life. But I think that we erred on the side of letting inflation back into the system and that we were slow to handle that situation. We had to put a lot of pressure into the system, as I have already described, to ensure that inflation was squeezed out, because industry needs low inflation, low-cost money and a financial background which is stable and understood. I know that I speak for many of my former colleagues in seeing that as the absolute keystone of macro-economic management.
I turn now to the future. On the basis of what I have said, I believe that we are better placed to weather the difficult storms that the global situation can present us with, and indeed still could. We have heard some sensible voices of caution about our capacity to forecast, which I heed with great care. But we are still forecasting growth of 1 per cent. to 1.5 per cent. next year, and that is not so out of line with, I believe, 44 current economic forecasts for next year. Indeed, the average is somewhere just below the 1 per cent. level, so we are in play with half of them and slightly out of step with the other half, which is not a bad place to be.
Of course, all of us will watch the growth rate with care and attention, but I am not sure that we are as out of line as some people have suggested tonight. I can certainly assure the noble and learned Lord, Lord Fraser, and my noble friend Lord Shore that the last time I looked at these statistics—last month—exports to the USA and Europe were still growing but that that was not the case with regard to Asia. Aggregated over the whole of the Asian marketplace, we have seen a significant downturn in the region of around 30 per cent. Although forecasts should always be treated with caution, I believe that they are still sound and that we are in the middle of most people's current expectations for growth for this economy next year. That includes the Bank of England, the IMF and other such noteworthy institutions.
I have tried to set out tonight the foundation for our future success. In my view, and as expressed in the gracious Speech, we shall only achieve our long-term goals through an even more radical modernisation of our economic policy in favour of opportunity, in favour of enterprise and in favour of work. Only the truly enterprising and innovative can hope to take advantage of the global economy. That is why encouraging enterprise and the knowledge-driven economy is at the forefront of our forward agenda. I believe that that
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recognises some of the issues which my noble friend Lord Haskel put on the table about understanding risk and delivery and, indeed, how to build entrepreneurialism in our society.
I have had the helicopter on macroeconomic management in broad terms and the stability we are seeking. I turn now to the supply side issues raised in the gracious Speech. The pre-Budget report last month set out measures to increase productivity and provide support for enterprise. These apply particularly in relation to the small and medium-sized enterprises within our economy. Areas to be considered were fiscal incentives for small business, support for research, help to broaden share ownership and the wider issue of skills training and the change of culture. These measures will be complemented by the publication later this month by my right honourable friend the Secretary of State for Trade and Industry of a White Paper setting out how we can boost Britain's competitiveness.
I would like to thank the noble Baroness, Lady Sharp of Guildford, and the noble Lord, Lord Wade of Chorlton, for their excellent contributions to the issue of supply side reforms. Whether it was in relation to the skills area and the requirement for further education, or whether it was in relation to the issue of regulation and the need to look at the regulatory package applied to small businesses, both followed very much our ideas. I can ask only for patience to develop those ideas further in a White Paper.
I believe that we are making great strides by concentrating on how to put in place a strategy to tackle our fundamental economic weakness; the productivity gap which exists with our most successful competitors. Two or three interesting speeches highlighted that gap. It is certainly no fantasy. Whether or not we find there to be fantasy in the forecasts, we will not find any fantasy in analysing the productivity gap. It is the main reason for our lower standard of living. Productivity is a fundamental yardstick of economic performance; poor productivity holds a nation back. We are determined to narrow that gap.
Again, I agree very much with the intervention of the noble Lord, Lord Wade, and the theme of advice that in today's world productivity creates the jobs, not central government diktat. Therefore, we must work very, very hard at the issues which lie behind our inability to bring productivity to a higher level. What does that mean? It means that we have to invest more, educate better and train more.
Our purpose for industry is not a criticism of industry. It is an observation about the outcome of a series of policies over decades. Our purpose for industry is to help it to create, add more value, produce better quality products and better services. The University of Industry, which my noble friend Lord Sainsbury will help bring to fruition early in the year 2000, will have the very strong job of training and educating the SME community.
I believe that we are moving in the right direction. We need to do so with pace because the ambition, although simple, will be complex in achieving—and that is to turn Britain into the leading knowledged-based economy of

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the world. If I may use an excellent quotation from the noble Baroness, Lady Sharp, we must all try to hi-tech our low-tech businesses. That is the secret. It is the right strap line or sound bite for what we wish to do in a knowledge-driven economy. I could not agree more.
In global markets, where products can be made and shipped anywhere and in which production technologies can soon be copied, we cannot base our future prosperity simply on the traditional building blocks of the old industrial economy, such as raw materials and cheap labour. I was interested to get a small lecture on the oil industry from the noble and learned Lord, Lord Fraser of Carmyllie, who has now become an expert since we swapped. However, I noticed that he was pointing out to me that the price of oil was low. Of course, that has its advantages for the community at large. I very rarely hear the other side of the strong exchange rate coin, which is that our input costs in industry are 10 per cent. lower this year than they were last year. By golly, if that does not give industry a benefit, I do not know what does. But I agree with the noble and learned Lord that we have to watch the level of taxation very carefully, as indeed the Chancellor did. That is why it has not been adjusted, but we will keep it under close review.
What we have to do is base our competitiveness on distinctive assets which cannot be so easily imitated—assets based on our creativity and talent. We have to bring them together to ensure a winning process. Competition of the future will be about the process that you put in place. Many people can copy your assets, and your competitive advantage in technology terms can have a short lifetime. But the process by which you put together knowledge, information and value will be the way to win in the future.
That is why we will introduce an electronic commerce Bill in this Parliament. It is estimated that within five years electronic commerce could be a market worth more than £300 billion. Our aim is to create the best climate for the UK for trading on line, so that British companies can build on a competitive market at home and expand those services abroad. The internet is literally transforming industries. We know that and we are determined that Britain shall lead this revolution and not follow it.
Enterprise will flourish best with an active partnership between government and business and between business and the unions. Many of my colleagues behind me have spoken about that partnership. I shall say no more than that noble Lords will have to wait for the publication of the papers. I heard clearly that noble Lords are in support of a sound partnership. I heard the comments of my noble friend Lord Brookman and have taken account of them.
We are talking about the culture of partnership at work, a culture which is already evident in most successful modern companies. As the right reverend Prelate the Bishop of Oxford rightly said, many modern companies espouse these principles, but current employment law does not always foster the objectives. We will correct that by establishing, through the fairness at work Bill, a balanced framework of workable and practical measures for the future. We welcome the
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positive remarks of the noble Lord, Lord Razzall, in that respect. We will provide rights for the individual at work, including greater protection against unfair dismissal. We will bring forward measures to establish a forward-looking balance of rights and responsibilities for employers and employees. An efficient and effective financial services industry is also vital for our prosperity, stability and international competitiveness. The financial services and markets Bill announced in the gracious Speech will improve the regulation of financial services and markets.
Lord Fraser of Carmyllie: My Lords, before the noble Lord passes from that point, I want to be clear what he is saying. In the gracious Speech there was express provision that legislation would be introduced to improve the regulation of financial services and markets with a new statutory regulator, the financial services authority. What I am still anxious to get is a clear indication, as we go forward in this Session, as to when that legislation will appear. I said in my speech that I understood that it would be introduced in the spring. I have subsequently had reason to believe that I was wrong in that and that it will not be introduced as a Bill at that time. The best we can hope in the spring of this year is that there will be some pre-legislative scrutiny proposal. If that is correct, it would seem to me there is a real danger that what is contained within the Queen's Speech will not be implemented or delivered during the course of this Session. It really is important that we know the Government's position on that.
Lord Simon of Highbury: My Lords, I was about to mention that. It has been announced that the Government's legislative programme for the current Session of Parliament will include the financial services and markets Bill. There will be a period of pre-legislative scrutiny by joint committee of the House of Commons and House of Lords. That answers, in part, the question of when the Bill will start. There will be pre-legislative consultation in both Houses because of the technical nature of the Bill.
Under the proposed new arrangements for carry-over of legislation, the Bill could, if necessary, complete its passage in the first half of the 1999–2000 Session. As has been rightly pointed out, these are requirements for the rationalisation of an industry which is absolutely crucial to the growth of the City of London and our economy at large.
An important part of the Government's strategy outlined by my noble friend Lady Hollis is to help make work pay. Many people on low incomes are trapped in poverty and the tax and benefits system stands in the way of people trying to get out of poverty. That trap frustrates ambition and locks people into poverty. The Government believe that the best route out of poverty and a life on benefits is through work. That is why we are introducing a series of measures to help make work pay. Reforms to the tax and benefits system have been mentioned at length today. We welcome the support of the noble Lord, Lord Razzall, for the minimum wage. As noble Lords are aware, we are also working extremely hard on the development of the working families' and disabled persons' tax credits.

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I welcome the timely contribution of my noble friend Lord Christopher. It will be considered carefully as we progress towards publication of the measure that I have discussed. I have noted many important points that were made on welfare reform in general. I shall content myself with discussing pensions and benefit structures. We are happy to assure my noble friend Lady Turner of Camden that SERPS will continue to play a valued part in our pensions policy. As regards widows' benefits, we confirm that existing widows, many of whom may not have worked, will have their benefits protected. However, nowadays as many women work as men. Therefore the right to review widows' benefits is constructed accordingly.
As regards lone parents and the single gateway we propose only that to obtain benefit lone parents should sign in by attending an interview. Thereafter it is their choice whether they join the New Deal or prefer to look after their children full time. Of course, if they cannot get to the—
Lord Higgins: My Lords, I am not clear what happens if they simply do not turn up.
Lord Simon of Highbury: My Lords, if they do not sign in, they do not get a benefit, but they do not have physically to turn up. They will be able to contact the gateway—if I can put it that way—to enrol themselves. However, I am sure we shall have plenty of time to discuss that as we progress through the Bill.
Lord Higgins: My Lords, what the noble Lord has just said—but he may wish to reconsider his reply—is that if they do not turn up, they do not get benefit. Is he really saying that if a lone parent fails to turn up, his or her benefit stops dead?
Lord Simon of Highbury: My Lords, this applies to new claimants only. They would have to make contact with the interviewer. I take it that there is confusion about this matter. I hope the noble Lord will permit this matter to be dealt with in correspondence as it is rather late in the day and I believe we shall discuss this detail at great length—
Noble Lords: Oh!
Lord Simon of Highbury: My Lords, we guarantee that they will receive benefits when they make contact.
Earl Russell: My Lords, before I ask my question, perhaps I may say that I shall be satisfied with a letter. May I ask for an assurance that, when people are interviewed, the interviewer will not be subject to any performance indicator depending on the number of people he or she places in work?
Lord Simon of Highbury: Yes, my Lords. The target relates only to contacts, not to work placements.
I turn now to the speech made by the noble Earl, to which, given the hour, perhaps I may make a sketchy response. Perhaps we shall have to indulge in some more letter-writing. I hope that the noble Lord,
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Lord Higgins, will understand that I am not the expert in this area. If there are any main points of policy on which the noble Lord is confused—
Lord Higgins: Oh!
Lord Simon of Highbury: My Lords, I meant to say that if there are any main points of policy on which I may be confused, my noble friend will assist. I am covering a wide range of subjects in only a short time.
On welfare to work, we are not saying that we must reform social security to coerce people into work; instead, we are seeking to make work pay so that low-paid workers do not lose 90p in the pound. That is why the working families tax credit, the minimum wage, the New Deal and our childcare arrangements are all focused on the objective of making work pay.
The noble Earl referred also to incapacity benefit. We are expecting the results of the study soon.
Our reforms of the all-work test are not savings-driven. They are about extending opportunity. The two-year contribution rate is to strengthen the contributory principle. I am referring to those in work who have to have such a benefit because of illness.
On the holes in the safety net for 16 and 17 year-olds, we believe that such young people should be in education and training. If they are in exceptional hardship, they are, of course, entitled to financial help.
On the habitual residence test, we are awaiting the outcome of the European Swaddling case, to which reference has been made, and we shall make recommendations in the light of that.
Perhaps I may now turn with enthusiasm to the points made about Europe. That will be a slightly unusual feature of the debate on this subject. The gracious Speech referred to Europe and economic reform in no fewer than three paragraphs. I should like to make it clear that we shall continue to work with our partners to improve our economies and, therefore, the economy of Europe; to liberalise markets for products, services and labour; to stimulate employment and, through greater flexibility at national level, to achieve national plans for labour market reforms.
We shall work for a successful euro because that is in the interests of the 11 partners and in our own interests. We shall prepare Britain for the option to join the euro in the next Parliament because—I hope that this is a clear response to my noble friend Lord Barnett—we have said clearly that we shall prepare and decide. That means that if you are on the side of those who are awaiting the referendum decision with any doubt in your mind, the question will be "if', but that if you are awaiting the referendum decision in the full expectation that the outcome will be positive, the question will be "when".
We are busily preparing for the exercise by working with small businesses. I personally have made contact with 1.6 million small businesses this year. That effort was carried out largely by my postal friends, for which I am extremely grateful. I have had 250,000 replies and I now understand that 300,000 small businesses are thinking about, and preparing for, the fact that the euro

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will be with us on 1st January 1999, whether or not we support it. Those small businesses are now preparing better than they would have done previously. That is a contribution to the British economy. I rather regretted our "semi-detached" approach to this matter under the previous administration. Fifty per cent. of our small businesses are now in contact with Euroland in a business sense. A quarter of those have already made good preparations.
I am delighted to tell my noble friend Lord Stoddart that the reason why people invest in the UK as the number one country for foreign investment in Europe, according to those to whom I speak, is the fact that they like the flexibility of our economy and are absolutely convinced that we shall join in economic and monetary union and the euro. That is why most of them like to come here.
Taxation is an interesting subject that has arisen during the debate. I shall attempt to respond to the interesting points raised. The Government have made it clear that we will not support any action at European level that will threaten jobs or the competitive position of British business. So any tax proposals will need to pass that acid test. Questions of tax require a unanimous decision. So there is no question of tax changes that we do not support being imposed on us by Brussels. The test has to be whether in any particular case the proposal delivers economic or financial benefits for the United Kingdom. If it does not, then we shall oppose it and argue our case. I agree with the noble Lord, Lord Newby, that we are much more effective when we are inside Europe arguing these cases rather than standing outside saying that we disapprove of the whole process. If necessary, at the end of the day we shall be prepared to use our veto to protect the national interest.
Having outlined those principles, perhaps I may comment on the three areas that have been subject to recent speculation; namely, VAT, corporation tax and withholding tax. On VAT, the House should be clear that there are no detailed proposals to change the existing rates. We were elected with a clear pledge to maintain the zero rate of VAT on food, children's clothes, books, newspapers and public transport fares. The UK's zero rates are fully safeguarded under existing EC arrangements.
On corporation tax, there are no Community proposals so far as the harmonisation of corporation tax is concerned. Indeed, no one proposed minimum rates of corporation tax at today's ECOFIN meeting. The political reality is that harmonisation of corporation tax across Europe is a non-starter. Rates, in Ireland at 10 per cent., in Finland at 28 per cent., in the UK at 30 per cent. from next year, and in Germany at over 40 per cent., pose some problems for the harmonisers. It is increasingly being realised that raising corporate tax rates would harm the competitiveness of the EU economy and we simply should not allow corporation tax rates to be raised to the existing level of some other countries.
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On the issue of withholding tax, the motive behind this measure is one that I hope we all support: to prevent tax evasion. That is its purpose. It is aimed chiefly at Belgian and German citizens who place funds in the highly secretive banking system in Luxembourg—
Lord Shore of Stepney: My Lords, will my noble friend give way on that point? I would indeed have his assurance that he does not look upon withholding tax, or the avoidance of withholding tax, as in any sense tax evasion, and therefore legitimate and to be preserved in the interests of the United Kingdom.
Lord Simon of Highbury: My Lords, if I may continue with my reply my noble friend may receive an answer to that question. The Chancellor called today at ECOFIN for other countries to tackle the problems of banking and banking secrecy. Having studied the draft directive on withholding tax, we believe that it is fundamentally flawed. In particular, it would be very damaging to the Euro-bond industry, as indeed our noble Lord Mayor informed us. The British Euro-bond market has earnings of £5 billion and employs nearly 11,000 people. So clearly the withholding of tax as presently proposed is unacceptable. The Chancellor has made it clear that exchange of information between banks and tax authorities is a much better solution, and I am sure he is right. We would not accept a directive including Euro-bonds, as the Chancellor made clear in Brussels today. If it remains unchanged, we will use our veto—
Lord Shore of Stepney: My Lords, when my noble friend uses the word "unacceptable" in reference to withholding tax and to the present position of London, to whom does he think it is unacceptable—the European partners or the United Kingdom?
Lord Simon of Highbury: My Lords, I cannot speak for all the partners. He was speaking for the United Kingdom, but I guess that some of us believe that it is also unacceptable to some of our partners.
With that, I hope I have clarified both the principle and the key issues behind the tax questions that have been raised.
I do not know whether noble Lords are aware that, at dinners in the City, normally there is a book running at this stage on how long the wind-up will take. I am constantly aware that by using the words "wind-up", I am in some danger, in the new British language, of being accused of overdoing it.
It has been a wide-ranging debate, and in conclusion I wish to return to the overall theme of the gracious Speech. This Government will continue with economic policies which steer a course of stability through a world economic slowdown. Our objective is that Britain not only steers a stable course but that, by building our long-term strength, is equal to any difficulty the global economy presents.
Because British inflation has been brought down to its target of 2.5 per cent., and because we have set in place a long-term monetary framework, with the independence of the Bank of England, Britain is better placed than in the past to meet these global challenges.

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Having reduced borrowing by £20 billion, we shall continue to pursue our prudent and sustainable expenditure plans. We shall invest in education, healthcare and our infrastructure to equip our country for the future. We will stay within prudent borrowing limits and maintain our aim to keep public expenditure below 40 per cent.
We will push ahead with measures to improve productivity, to expand opportunity and to encourage investment and entrepreneurship. This Government are steering a stable course, prudently investing in the future and continuing in their drive to increase productivity and provide support for enterprise.
This is the programme for which the British people voted. This is the programme we are delivering.
Baroness Amos: My Lords, on behalf of my noble friend Lady Hayman, I beg to move that the debate be now adjourned until tomorrow.
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Moved, That the debate be now adjourned until tomorrow.—(Baroness Amos.)
On Question, Motion agreed to, and debate adjourned until tomorrow.

City of Westminster Bill [H.L.]
The Chairman of Committees acquainted the House that pursuant to the resolution of 18 November last the Bill had been deposited in the Office of the Clerk of the Parliaments together with the declaration of the agent; the Bill was presented, read a first time, passed through all its remaining stages pro forma and sent to the Commons.
House adjourned at 17 minutes past eleven o'clock.

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