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10.7 p.m.

Viscount Cranborne: My Lords, this has been a most interesting debate. Before I come to some of the specific questions raised, I should like to offer my congratulations to two particularly notable maiden speakers. I know that sometimes such compliments take on a rather ritual flavour. All noble Lords who listened to the contributions of my noble friend Lord Nickson and the noble Lord, Lord Gladwin of Clee, will agree that ritual plaudits of the kind that are sometimes delivered in the wake of maiden speeches are wholly inappropriate. In the short time that I have spent in your Lordships' House, I have seldom heard two maiden speeches delivered with such authority which have added so much to the quality of our debate. I know that I speak for the whole House when I say that we greatly look forward to the contributions of both noble Lords during the course of the months and years to come.

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I shall try to pick up a number of points made in a long debate. However, I hope that noble Lords, and in particular my noble friend Lord Pearson of Rannoch, will forgive me if, because of the lateness of the hour, some of the points made are answered by letter rather than during the course of these remarks. I say to my noble friend Lord Boyd-Carpenter and to the noble Lord, Lord Bruce of Donington, that VAT rates are clearly matters for my right honourable friend. Despite the remarks of the noble Lord, Lord Jenkins of Hillhead, I can only point out to both noble Lords that they will not have very long to wait before they find out what my right honourable friend will deliver for us in that respect.

My noble friend Lord Ferrers set out in his opening remarks the remarkably favourable economic situation in which the country now finds itself. I am sorry that the noble Lord, Lord Richard, could not bring himself even to give one small acknowledgement of the justice of what my noble friend said. I do not intend to repeat his remarks. It is far too late and he said it better than I could. However, I feel that it is important to stress that the Government's object is to promote sustained economic growth with lower inflation. I noted particularly the remarks of the noble Lord, Lord Kingsdown, when he spoke with such authority on the matter, as well as the words of the noble Baroness, Lady O'Cathain.

This is a prerequisite for the achievement of higher living standards for the British people. It is also a prerequisite for looking after those who need help and for enabling the Government to finance their other expenditure. With the greatest respect to the Opposition--and with the honourable exception, if I may say so, of the noble Lord, Lord Haskel, but, sadly again, not with the honourable exception of the noble Lord, Lord Richard--I sometimes feel that the Labour Party's rhetoric suggests that there is no connection between the two; that hospitals, schools, teachers and training can be magicked into existence without creating the wealth to pay for them. I particularly listened to the remarks of my noble friend Lord Nickson on that subject.

Today, the first of those objectives is well within our grasp. My noble friend Lord Tugendhat made that perfectly clear. The economy is growing; it has been growing for two-and-a-half years and output has risen to a record high --over 4 per cent.--in the past 12 months. This recovery has not been financed by a housing boom and consumer credit. What we are now seeing is something different. Although consumer spending has been rising, this is a recovery increasingly based on low inflation and led by exports, as many noble Lords remarked--up by 12 per cent. in volume in the past 12 months. I was delighted again, particularly in view of the remarks made later by the noble Lord, Lord Richard, to see that my noble friend Lord Nickson pointed out that 70 per cent. of those exports come from the manufacturing sector.

We have entered that virtuous circle the key to which has eluded governments of all complexions since the war. We see evidence in many places and perhaps, above all, in falling unemployment--455,000

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below its peak. However, as many noble Lords remarked, that is far too high. Nevertheless, the remarkable record on strikes and a much improved balance of payments will begin to make a further impact on what we have begun to achieve.

In short, for the first time it looks as though we have a chance of breaking out of the boom and bust cycle of the past four decades. I listened with particular care to the remarks of the noble Lord, Lord Ezra, and a number of other noble Lords who referred to the difficulty of that particular phenomenon. I deliberately put this cautiously. I believe that the noble Lord, Lord Ezra, is right. It could so easily be blown away in an inflationary spiral. That was reason enough for my right honourable friend to raise interest rates by 0.5 per cent. when he did, as so rightly noted by my noble friend Lord Tugendhat.

It is the habit of politicians, particularly when in office, to claim credit for things that go right. Some even try and blame others when things go wrong. For instance, I seem to remember many years ago in my youth the rather insultingly named "gnomes of Zurich" coming in for a good lot of stick in that respect. Perhaps rather surprisingly therefore, I am not this evening going to try to take all the credit for this encouraging state of affairs on behalf of Her Majesty's Government--but I am going to take a good deal, and rightly so, as my noble friend Lord Boyd-Carpenter kindly acknowledged. After all, we are witnessing a world-wide recovery and a substantial expansion in world trade, which has undoubtedly helped to boost our exports. Nevertheless, underlying export volumes to the European Union have risen by 17 per cent. in the past 12 months, as the noble Lord, Lord Dahrendorf, pointed out, although the market has only grown by 5 per cent. That is perhaps the difference between 1994 and the situation the noble Lord, Lord Jenkins of Hillhead, left to my noble friend Lord Barber at the Treasury following what, by any standards if I may say so, was a most distinguished tenure, even though it may have proved a contributory factor to his party losing the election in 1970.

However, without this Government's reforms and determination to control inflation and public spending, we would never have been able to take advantage of the opportunities on offer. How right again was my noble friend Lord Tugendhat to draw attention to that. After all, the world economy has boomed more than once since 1945. The United Kingdom has benefited, it is true, from good times like that, but until now it has always lagged behind its main competitors. It is only fair to ask what has changed. It is equally fair to say--I say this to the noble Lord, Lord Haskel--that we are now in a position to compete strongly again in the cut-throat markets of the world. I was very pleased to hear the word "competition" on the noble Lord's lips, particularly from someone of his extraordinary technical knowledge on these matters.

We are entitled to ask why this has arisen. What has changed? The answer, to any dispassionate observer, is clear. There has been a sustained programme of reform by governments led by my noble friend Lady Thatcher and by my right

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honourable friend the Prime Minister. As my noble friend Lord Ferrers pointed out, all kinds of things can be attributed to these initiatives. The deregulation initiative is beginning to bear fruit. Nearly 900 regulations are already earmarked for repeal or reform. Indeed, at the very time that the noble Lord, Lord Haskel, was speaking on deregulation and allied matters, the deregulation procedure Motion was being debated in another place. We have denationalised swathes of British industry, we have transformed the country's strike record, and we have the lowest non-wage labour costs of any of the major countries in the European Union. In spite of what noble Lords have said, that is indeed an incentive for people to come and invest here. I shall have a word to say about investment in a moment.

We have secured in that respect an opt-out from restrictive social measures which will help to preserve the United Kingdom's flexible employment condition. We have reformed our education and training to improve the quality of our workforce. As the noble Lord, Lord Richard, said, the nature of work has changed. So perhaps education and training are as important as anything we have had to discuss today. The noble Lord and I can at least agree on that. However, I think he was less than fair to the Government. We have, after all, given a high priority to education and training. As he himself said, and as other noble Lords have pointed out, education does not stop when one leaves school. The noble Lords, Lord Ezra and Lord Gladwin, drew our attention to that very fact. We are extremely keen to encourage life-time learning and training among the workforce. The responsibility is shared by industry, and rightly so, for industry must involve itself in education. Employers must have the opportunity to influence the curriculum. That is why we have worked so hard to foster education and business links.

I do not want to weary the House for too long at this late hour, but we are beginning to see results. For instance, some 73 per cent. of 16 year-olds are opting to stay in full-time education. It is not nearly enough. The great majority of the rest, nevertheless, are opting to continue with part-time education or training courses. There are now more than 80 TECs in the country and 15 city technology colleges. We are promoting co-operation between colleges of further education and TECs, with a new £300 million package set out in the competitiveness White Paper, which will help provide both the young and adults with the skills that they need.

There has been a great deal of bandying of figures about skill shortages and about investment. I could produce a set of figures which would tend to contradict many of the figures produced by the noble Lord, Lord Richard. I would only do so if he insisted that I should. I would merely say that, on skill shortages, the latest CBI survey reported that they are a far more minor constraint on output than they were at a similar stage in the last recovery from recession. Only 10 per cent. of manufacturers cited it as a

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constraint. I would merely point out that in a similar survey, conducted in April 1978, the figure was as high as 20 per cent.

I cannot let the question of investment go by without referring to the remarks made by my noble friend Lord Eden in a remarkable and detailed speech about public and private investment projects. I wholly agree with my noble friend's support for the greater partnership between the public and private sectors. Since the launch of the private finance initiative in November 1992, I can confirm to him that £500 million will have been invested by the end of the current financial year across projects in fields ranging from health to transport to information technology. Private finance is set to become the main source of growth in investment projects in the public sector. I was delighted to hear that there was support for this initiative from all sides of the House this evening.

I have tried to correct a little some of the knocking copy which we have heard from noble Lords in parts of the House this evening. But I would like to underline that, unless these things had happened and unless my noble friend Lady Thatcher, the Prime Minister and their governments had acted as they did, the genius of the British people would have continued to languish as it has done for most of the past four decades, stifled by bureaucracy, drift and discord.

Of course the noble Lords, Lord Barnett and Lord Dahrendorf, were right. There is still much to be done. As somebody observed this evening, productivity is still far too low compared to that of many of our competitors, although I have to observe that it is beginning to improve fast. The measures which were announced in the gracious Speech will, I suspect, make a substantial contribution to the continuing process of reform both on the supply side of the economy and in the social security system. The gracious Speech included the gas competition Bill and that is a good example of a measure which will bring competition to the whole of the gas market.

I cannot help asking myself how these changes have been brought about. In particular, the noble Lord, Lord Eatwell, talked of discredited policies. I seem to remember that at one time he was a distinguished co-editor of a volume known as Palgrave's Dictionary of Economics. I do not know whether the noble Lord can confirm that. It was interesting when a noble kinsman of mine whom I believe to have been partly responsible for publishing that particular volume, described the noble Lord's product as "the last gasp of neo-Marxism". I therefore could not help wondering whether the charges of inconsistency coming from the noble Lord in his opening speech were not in the category of "It takes one to know one".

When our reforms were introduced, were they introduced to universal acclaim from the Opposition, at least in principle, with the political argument being confined to the ways and means? Not a bit of it. The Opposition denounced every single government measure that has contributed to the transformation of our prospects; any measure of any importance as described by my noble friend Lord Ferrers or myself.

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There was deregulation, denationalisation, industrial relations legislation, education reforms, our opt-out from the Social Chapter, our war against high taxation--a war, as I am sure the noble Lord, Lord Richard, would like to point out as I say it, that is still to be won--our battle against high government spending and even joining the European Community. As we have heard during questions following today's Statement on Railtrack, they are still at it. They are the Bourbons of the nationalised industries. I shall have to send them a white cockade because, like the Bourbons, they have clearly neither forgotten anything nor learnt anything. It will no doubt make a nice change substituting that for the red one which they have worn until now.

All these things and many more the Labour Party has opposed root and branch. In the light of all that, I believe that the call of the noble Lord, Lord Eatwell, for a stable, long-term policy seems all the more remarkable. Indeed, consistency is not always a strong point with the Labour Party. It is not always as strong a point as it clearly is over Railtrack. In some areas they are beginning to see their errors. There was yet another U-turn--on school league tables--this week, which I was happy to see, as indeed were all my noble friends.

I was pleased, as I said, that the noble Lord, Lord Haskel, saw fit to praise the virtues of competition--the bedrock, as my noble friend Lord Ferrers pointed out, of much of our own policy. I heard, despite the attack of the noble Lord, Lord Richard, no promises to renationalise. There were no promises to leave the Community. On Europe, the Opposition have changed their views to such a degree that they want, with the honourable exception of the noble Lord, Lord Bruce of Donington, to sign up to all the things that have ensured that Europe created only 6 million jobs between 1970 and 1992, whereas, over the same period, as the noble Lord, Lord Kingsdown, pointed out, 40 million were created in the USA.

That is the kind of vacillation that will not deliver the economic performance that this country needs. It is the sustained long distance running which has delivered the reforms of the past 15 years, and which will continue to do so in a world that is changing and one where flexibility and skills will deliver prosperity more effectively than will bureaucracy and big government.

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