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The Earl of Clanwilliam: My Lords, did not the report say that it was not dealing with morality but with facts? The report has nothing to do with morality at all; it says so.

Lord Peston: My Lords, the noble Earl may think that it has nothing to do with morality. I am simply telling him that I think it has.

The Earl of Clanwilliam: I did not say that it has nothing to do with morality; the report says that.

Lord Peston: My Lords, the noble Earl, if he wishes, can take the view that this has nothing to do with morality. If that is the line that he wishes to take, I shall not argue with him—particularly as he has taken a whole minute of my time, which has also to do with fairness. I happen to believe that there is a moral issue here.

I turn briefly to the "benefits in kind" problem. I do not believe that the problem is hard to explain. We are discussing a dynamic phenomenon. We are asking what has happened to incomes over time, relative or absolute incomes. Rowntree has certainly shown that, measured in the ordinary way, the position in regard to relative incomes has deteriorated. As the noble Lord, Lord Diamond, pointed out —this is enormously important—every other single study has shown it. That is worth bearing in mind.

The important point, as a matter of technical economics, is of course that the poor received benefits in kind at the start of the period we are considering. They

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also receive benefits in kind at the end of the period. But for benefits in kind to reverse the figures demonstrated by Rowntree, it is necessary for them (this is an arithmetic point) to have risen significantly more quickly than GDP in real terms—real terms being correctly measured, I might add. But they have not, and that is the point. I am sorry to be giving a lecture in elementary economics to one or two noble Lords, but they have mistaken the difference between statics and dynamics. Education in volume terms, which is the way in which we used to publish the figures, has risen by only 12 per cent. Health, again in volume terms, in the way we used to measure the figures and not the way the Secretary of State prefers, has also risen by hardly more than 25 per cent. since this Government came to power. That is not remotely sufficient to reverse the argument. What it says is that if we could do the calculation properly about benefits in kind, the position would look worse rather than better.

In that connection, I particularly address the noble Lord, Lord Jenkin of Roding and ask: why does he not use his common sense? Let us take that example. When we look at the schools with the leaking roofs, the schools that are short of teachers, and those which Her Majesty's inspectors say are not performing as well as they should, where are those schools? Who goes to them? The children of the poorest in our society, the ones who have suffered most, go to them. The notion that benefits in kind would offset this is simply absurd.

I say to my former pupil and good friend, the noble Lord, Lord Griffiths, that he is quite right to emphasise that a better study would be a lifetime income study. As he knows, 30 years ago I must have been one of the first people in this country ever to do a lifetime income study. The technical point is correct. Some of the present poor are temporarily poor, and some of the present rich are transitorily rich. That is perfectly right. Therefore, if we could measure lifetime incomes, we should see a smaller variance than measuring incomes at a point in time. But we should still see an enormous variance—unless the noble Lord, Lord Griffiths, believes, as I do not think he does, that today's poor will be tomorrow's rich, and today's rich will be tomorrow's poor. In other words, I agree with the noble Lord on the elementary technical economics; but that does not help the argument very much.

I come finally to the noble Baroness, Lady Elles. I apologise for missing the first minute of her speech because I was outside the Chamber. My remarks relate also to the noble Lord, Lord Beaumont of Whitley, whose speech I found immensely interesting. The noble Baroness asked about Labour Party policy. I was delighted to hear that question. I am bored out of my mind by the way in which the Government continually kick the ball into their own goal. Noble Lords did it again this afternoon. Let me try therefore to score a goal or two directly from our side.

The report makes many recommendations. Noble Lords opposite, including the Government, would do well to consider them rather than seek to undermine the report by impugning the integrity of one of its main authors, as my noble friend Lord Desai pointed out.

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Let me make a few points on policy. First, and central to this argument, is that we shall restore full employment. Full employment is a pot of gold. Noble Lords opposite constantly stand up—the noble Lord, Lord Mackay of Ardbrecknish, does it always to my great pleasure—and say that they are keeping a list of my commitments. I can say that if we get back to where we were in 1979, the GDP will be much higher. More to the point, the enormous waste on social security benefits will simply disappear.

In that connection a fact well worth considering is that the total average revenue taken by the Treasury in the decade up to the period that this Government came to power was 39 per cent. to the nearest whole number. Today it is still 39 per cent. to the nearest whole number. The greatest public relations success of modern times is that the party opposite have managed to convince the public that it is a tax-cutting party. Nothing could be further from the truth.

First, we shall restore full employment. Perhaps the Minister will say whether the Government are opposed to that. It may take five years, but that five years may start tomorrow. Secondly, we shall re-establish—echoing what many of my noble friends said—a sound system of education and training. In particular, we shall do nothing to stop people from pursuing such courses of education and training.

Thirdly, again following the Rowntree Report—I hope that the Government will not say that they are opposed to this—we shall give the highest priority to childcare provision. Fourthly, we shall change income support and similar benefits, so that they are not a disincentive to work, but become an incentive. I hope that the Government are not opposed to that. Lastly—this is the central point about policy—whatever the level of taxation (and until my right honourable friend gives his first Budget, I cannot predict what that will be), we shall make sure that in that Budget the burden borne by the poorest will decline and the burden borne by the richest will certainly not decline. Perhaps again the Minister will tell us what he thinks of that.

I apologise to your Lordships. I do not like to go beyond the assigned time. There are other topics with which I should have liked to deal, but there will be other days.

7.44 p.m.

Lord Mackay of Ardbrecknish: My Lords, as I expected, the noble Lord, Lord Peston, got nearer to fleshing out the bones of what he hopes will be a future Labour Government policy than anybody else this afternoon who speaks remotely for the new Labour Party. The attacks on privatised industries come from those who hark back to the days of Socialism and nationalisation. The one thing I believe I understand about the new Labour Party is that it is not committed to renationalisation of any of the privatised companies.

The noble Lord, Lord Peston, made a statement in relation to restoring full employment. We all want to see a reduction in the rate of unemployment, and I shall come to that in a moment. But I ask myself: if full employment was as easy to bring about as it is to say it, why did the last Labour Government—as did all governments since the

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1950s and 1960s—watch unemployment grow? Noble Lords may dissent from that. But the last time they dissented I checked the facts and they show a rising trend in unemployment over the past 20 or 30 years. If it were easy to bring about, why have none of our colleagues in the European Community, including those governed by Socialists over the past 10 or 15 years, not found the magic wand? Later in my speech I shall come to the problem of unemployment and what we are doing to address it.

The noble Lord, Lord Eatwell, did not give us much in the way of commitments. In fact, it was not until the 19th minute of his 20-minute speech that he spoke of what may be done. Even then it was all broad generalities, some of which most of us would agree with. I am not sure that I heard a specific commitment to all that is written in the Social Justice Commission report. I shall check that. If I did, I shall be interested to see how the party opposite responds when we come back to the Pensions Bill and the provisions regarding retirement at 65. That is one of the recommendations of the Social Justice Commission. I have a small feeling that it was not being supported a week or so ago in the Committee stage of the Bill.

The noble Earl, Lord Russell, with whom I sometimes agree, at least indicated his support for some specific policies and for the extra spending that would go with them. However, I hope that nobody will accuse me of trying to brush under the carpet or rubbish, or any of the other things of which I have been accused almost in advance, any of these matters. These are serious issues. But it is well worth putting one or two points on the record. To be fair to one or two noble Lords opposite, they agreed with the propositions I shall make, though they hastily started to qualify them.

The vast majority of people in our country are better off than they were in 1979. The average household disposable income has risen by 36 per cent. Those rises are not confined to a few top earners. Average income has risen for all family types. Indeed, far from falling behind other countries, the living standards of ordinary British people have been catching up. The latest OECD figures reported in last month's Employment Gazette confirmed that when it stated,

    "Estimated take home pay for a married couple [with two children] on an average production worker's earnings is higher in the UK than in all other EC countries except Luxembourg, Belgium and the former West Germany".

Overall, the 1980s saw a much more rapid growth in income of people under pension age than in the 1960s and 1970s. Of course, there will always be a bottom decile. I was not sure whether one or two noble Lords were equating poverty with the bottom decile. I caution them against that. I am sorry to tell them, not as an economist—I have no qualifications—but as a mathematician that the bottom decile is always with us. Therefore if we define the bottom decile as poverty, then whatever we do we will not get away from the fact that that bottom decile is going to be in poverty. But of course it is a group of people who are the least well off. It is not a constant group. During the course of our lives, we shall all slide up and down the income scale of the Gini coefficient as our circumstances change—when we marry; when we have children to support; when the

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children leave home; when we have two incomes coming in; and when we retire and have to live on a fixed income.

So it is not the case that there is a fixed group of people who are always left behind by the rest of society. Indeed, my noble friend Lord Griffiths drew attention to the appendix in Volume 2 and the piece about time periods. It is addressing the question on inequality of incomes over a longer period than the snapshot it took in 1991 which of course does not include the decline in unemployment which there has been since December 1992. But over a longer period such as a year, incomes will look less unequal. A year or two later some of those who have been in the poorest 10 per cent. may have escaped from it and others may have joined it. Taking the two years together, income is more likely to be more equally distributed than in either year looked at separately. The new British Household Panel Survey confirms that people move around the distribution. About one-quarter of those re-interviewed in 1992 had moved more than one place up or down the income distribution (and that is divided into deciles) since 1990 including 29 per cent. originally in the poorest decile. So a combined distribution for the two years would look less unequal than for a single year. As regards lifetime incomes, the survey goes on to say that they are much more equally distributed than annual incomes. Depending on the measure the inequality observed on an annual basis is reduced by between one-third and one-half.

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