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Lord Ezra: My Lords, I thought that I started and ended on a very positive note, but in between there was a degree of doubt.

Lord Mackay of Ardbrecknish: My Lords, I shall look at the middle of the noble Lord's speech and refer to the point of view of British business and how we are doing. The United Kingdom attracted one-third of all the stock of inward investment into the European Union. We are not doing that because we are the worst in the European Union--or anything like that--we are doing that because we are seen to have major advantages. A recent Financial Times survey of the top 500 companies in the world showed that the United Kingdom had 11 of Europe's top 25 quoted companies by market capitalisation and 16 of the top 25 by profitability. So, for all the difficulties that I freely accept that we have, for goodness sake let us not ignore for a moment our considerable success as a competitive manufacturing and servicing country, not only for our own people but for markets around the world.

Our macro-economic policies are aimed at delivering low and sustainable inflation and sound public finance. Commitment to the inflation target has given us much credibility in the financial markets. I am afraid that that leads me to reject the report's call for targeting nominal domestic demand because I believe that such a target implies a weaker commitment to low inflation.

My noble friend Lord Laing made, as always, an interesting speech. He made a terrific success of United Biscuits and I must advise him that, unfortunately, my doctor told me that my cholesterol rate and eating biscuits were incompatible and I was instructed to stop eating them, which seemed to me to be a profoundly bad idea. Perhaps that is why United Biscuits is not doing so well now. In the hope that this does not go further than your Lordships' House, perhaps I should add that I occasionally fall from grace in terms of avoiding the products of United Biscuits--

Lord McIntosh of Haringey: Chatham House rules!

Lord Mackay of Ardbrecknish: Yes, Chatham House rules. I thank the noble Lord for that.

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My noble friend talked about R&D and took what I thought was a rather over-pessimistic view. The G7 average for R&D expenditure as a percentage of GDP is 1.3 per cent. The United Kingdom's R&D expenditure is 1.4 per cent. I freely admit that the R&D expenditure of the United States and of Japan is 1.9 per cent., but although my noble friend could rightly say, "Could do better", I do not think that we should be as pessimistic as his remarks suggested.

Other problems were drawn to our attention by the noble Viscount, Lord Thurso, and my noble friend Lord Vinson. I refer to the problems facing small and medium companies which are in many ways our seedcorn future employers, large, medium and small. My noble friend Lord Vinson drew attention to the danger of over-regulation. The noble Lord, Lord McIntosh, did not think that that was a problem. However, when I sat through our debates on the Jobseekers Bill and listened to the impositions which some noble Lords wanted to place on businesses in terms of who they could or could not employ, I recognised the problem outlined by my noble friend and not the situation outlined by the noble Lord, Lord McIntosh, who does not think that there was any great problem with over-regulation. As my noble friend knows, through the deregulation initiative we are attempting to reduce the burden of regulation. We shall continue to do that vigorously.

In his interesting speech, the noble Viscount, Lord Thurso, talked about not doing enough for small companies. One of the problems is whether to help such companies by capital allowances and so on or by having a low burden of taxation. We have chosen to go for the low burden of taxation. The net result is that corporation tax in general, which stood at 52 per cent. in 1979, is 33 per cent. now. For small companies the corporation tax rate has been reduced from 42 per cent. in 1979 to 24 per cent. today. That reduction to 24 per cent. in the 1995 Budget will help something like 300,000 small companies. We also have a range of help for small firms seeking finance, and we are seeing considerable success in bringing finance to small and growing companies where they want it.

The other important issue in the report of the noble Lord, Lord Dahrendorf, is what I call "social security"--perhaps that is because I spend most of my life in that department--rather than "the welfare state" which I think encompasses a wider blackboard including health and education, which I do not want to go into any more than I have already. The noble Lord referred to where the social security system and the wealth creating system move together or clash. My right honourable friend the Chancellor of the Exchequer recently outlined that relationship. I agree with him absolutely when he says that our aim as a government is to foster an enterprise economy while ensuring that the welfare state provides positive support to that economy. My right honourable friend is also right when he says that it is vital that the system remains affordable and is therefore as efficient as possible. Our system provides an income for those who cannot earn because of sickness, disability, unemployment or old age. I believe that the social security system will remain a great reassurance to people, providing a safety net and reducing fear of change.

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The noble Lord, Lord Borrie, discussed the problem of moving from unemployment into work. As he will know if he has heard me before on the subject, we recognise that there is a problem and have taken considerable steps to attempt to improve it. One way is through the family credit system, which helps with the wages of those with family responsibilities. It helps about 600,000 families, encouraging them into work in the knowledge that they will get help with their family obligations if they need it. We have also attempted to remove the uncertainty in the period between unemployment and a new job by means of a run-on of housing benefit, the new back-to-work bonus, and by fast-tracking decisions on family credit so that people will not have to wait for a while once they have started a new job before they know to what help they might be entitled. By the national insurance contributions holiday we are encouraging employers to take on people who have been unemployed for two years or more.

We had an interesting speech about a citizen's income from the noble Lord, Lord Beaumont of Whitley, who "set up" the noble Lord, Lord Desai, so that the noble Lord would have to pursue the issue. I do not want to go into that in any great detail, but I presume that the idea of a guaranteed minimum income of some kind for pensioners--a guaranteed minimum pension--would be a subset of a guaranteed minimum income.

Indeed, the Leader of the Labour Party, Mr. Blair, said in his conference speech last year that the aim of the policy (on social security) is to remove the stigma of means-testing for ever and to guarantee a minimum income that provides dignity in old age. "That is New Labour", he said--but it was not New Labour for very long because in The Times of 20th February this year I read a letter on page 15 from Mr. Chris Smith, the Shadow Secretary of State for Social Security. He states:

    "Contrary to the assertions in your editorial 'Lilley's logic' (February 8), Labour has not made a commitment to a guaranteed minimum pension, though we certainly do not share the Social Security Secretary's complacency about the adequacy and coverage of support which is available for today's pensioners".
Despite the caveat, he makes it clear that he no longer agrees with the speech that his right honourable friend made last year. Interestingly enough--this brings me on to pensions--the letter goes on to say:

    "We do not propose a second-tier pension with additional compulsion, and we have specifically ruled out the Singaporean Central Provident Fund model".
So all the holidays in sunny Singapore over the Christmas and New Year period were in vain. We could have told them that and saved them the air fare.

The subject of pensions is important. I note that the report suggests--I read it with more care because of my involvement--that there should be a change in what has been the position since 1980, where the basic pension has been uprated in relation to prices rather than earnings. A change to uprating in line with earnings, as well as prices, or some sort of half way house, would be expensive. The change we made in 1980 has saved about £7 billion this year. That means that instead of £90 billion the social security budget would be pushing up towards £100 billion.

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We believe that the way to go on pensions is to encourage people to take out their own pensions. We have had considerable success in that. We have invested £600 billion in invested and funded pension funds in this country, which is more than the total for the whole of the rest of the EU put together.

My noble friend Lord Griffiths quite rightly took up a point made by my noble friend Lord Laing and the noble Lord, Lord Dahrendorf, who talked about short termism and the fact that too much in dividends was paid to institutional shareholders. Many of the institutional shareholders are the pension funds which are paying out pensions to pensioners who have seen their standard of living improve hugely over recent years because of the increasing number of occupational pensions.

This has been an interesting debate. I told myself that I would finish after 30 minutes. I apologise to other noble Lords if I have been unable to take up some of the interesting points that they have mentioned.

I want to conclude by mentioning that the noble Lord, Lord Holme of Cheltenham, spoke about shattered cohesion, and used several other expressions, including sackcloth and ashes, something about which--dare I say?--the noble Lord, Lord Borrie, also spoke. I remember the late 1970s when we had great problems leading to the winter of discontent. Learned newspaper articles were asking: is Britain governable? I was not then one of the dismal Jimmies, as I described them. I believed that Britain was governable. All it needed was a government led by my noble friend Lady Thatcher. Equally, I am not pessimistic today. I know that all that is required is continued government by my right honourable friend John Major.

The noble Lord, Lord Ashburton, talked about people holidaying in France. When I was a young boy we thought that the local doctor's wife was the most adventurous woman in the village, because she went abroad to France for her holidays. The only other people in the village who had been abroad were those who had come back from the Army. In that village, as in every village throughout the country, great numbers of our fellow citizens go abroad and expect to go abroad. They go much further to much more exotic places than France nowadays. That is part and parcel of the huge increase in the standard of living of ordinary people that we have seen in this half century. Of course there are some problems. Of course some people are excluded, but do not let us paint a picture which is totally false and without foundation.

7.14 p.m.

Lord Dahrendorf: My Lords, it remains for me to thank not only all those who have taken part in the debate for their contributions, but those who have listened to it. It was a thoughtful, informed and constructive debate. I shall remember the powerful maiden speech of the noble Lord, Lord Pilkington of Oxenford. It would be in breach of the rules of the House were I to go over again the ground which we have covered. I have learnt to respect the rules of the House in the short period during which I have had the honour to be a Member.

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I was naturally grateful to noble Lords for their generous comments on the report which we have been debating. I go away thoughtful about a number of criticisms which have been made. I would not claim that we have found the Holy Grail. The attempt was to contribute to the debate, and the debate will go on.

I was a little apprehensive when the Minister began with his research into my publications in other parts of the world, and grateful that he did not extend that research to provincial Italian newspapers and certain other publications in which I have occasionally written, and perhaps just a tiny bit puzzled when my friend, the noble Lord, Lord Desai, mentioned something about the banks and the City which is not in the report, although it is in the best selling book which one of the members of the commission published and which has no doubt found a much wider audience.

It is rather important, for me at any rate, to make it clear that in my view there is no simple explanation of a tendency towards short-termism, but I worry--I say this to the noble Lord, Lord Griffiths--about the role of institutions in that process. I am a trustee of one of the largest pension funds in the country. I am also the head of an Oxford college who sees, incidentally, the same fund managers and talks to them in much the same way. For someone like myself, it is a dreadful dilemma to see, on the one hand, how those funds are handled by fund managers, what their motives are, and what they do not say about companies, and to believe, on the other hand, in the longer term perspectives which I have advocated here. I have no simple answer to that. There is no simple answer. It is a worry for those of us who find ourselves, as it were, on both sides of the fence.

One way of expressing the worry would be to use the interesting statistics introduced by the Minister about the number of British companies, I believe he said, among the top 25 European companies in terms of market capitalisation and profitability. That is entirely correct. There is the vexing question of how many British companies are among the top 25 in terms of turnover. If the Minister were to extend his research to that question, he would make an odd discovery. I have looked at the top 100, and there are 34 British companies in the top 100 in terms of market capitalisation and 11 in terms of turnover; in other words, there is an attitude to profit and profitability which is significant for the progress of companies and of the economy of Britain, but which is significantly different from the fundamental attitudes and structures elsewhere.

However, I am now beginning to be in breach of your Lordships' rules. I am deeply grateful to all who have contributed. I go away, as I hope many noble Lords will, trying to think further about constructive answers to problems which are real, but which can be resolved if we build upon what we have at the moment. I beg leave to withdraw the Motion for Papers.

Motion for Papers, by leave, withdrawn.

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