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Baroness Seear: My Lords, I am sorry to interrupt the noble Lord. I was not aware that I was encouraging him.

Viscount Chandos: My Lords, I am sorry for misunderstanding the noble Baroness.

The long and distinguished service that my noble friend has given to the Labour Party, old and new, in no way diminishes the freshness and importance of his ideas, or my admiration for them. I am sure that the noble Lord, Lord Marlesford, after reading Hansard and perhaps an introduction to the works of Professor Gordon, will indeed appreciate the vigour that my noble friend brings to Labour's new policies.

The new Labour government will pursue the policies of a competitive market economy: competitive to prevent the abuse of market power and monopoly positions, as this Government have so regularly failed to do; competitive to support the small business sector, as my right honourable friend the Leader of the Opposition set out in a speech today.

The new Labour Government will be guided not just by the absolute level of public expenditure, which each contender to succeed the Prime Minister as Leader of the Conservative Party now bids down, but by the value and effectiveness of expenditure on the provision of services by the public sector in comparison with its provision by the private sector.

These and other measures, short- and long-term, such as those set out by my noble friend Lord Haskel, will directly strengthen the British economy and the social fabric. At the same time, the resulting restoration of confidence and trust in government and in government's competence will in time alleviate the insecurity that dampens and constrains the inherent resilience of the economy. Then, this country can enjoy a high growth, low inflation economy, with fair opportunities and fair rewards. Let us hope that, in the meantime, the actions of this Government between now and the general

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election, as they desperately try to stimulate the appetite of the jaded patient, do not further damage the economy that the new government will inherit.

The Viscount of Oxfuird: My Lords, will the noble Lord say when in history the Labour Government have not left office leaving the country facing bankruptcy?

Viscount Chandos: My Lords, I think the noble Viscount will find that in 1970 the Conservative Party inherited a strong economy and left it, in 1974, in bankruptcy and with a three-day week.

7.17 p.m.

The Minister of State, Department of Social Security (Lord Mackay of Ardbrecknish): My Lords, I noticed that the noble Viscount, Lord Chandos, certainly did not refer to 1979. In my recollection, it was rather a dreadful year with a dreadful winter. We saw all the splendid policies of the Labour Government at that time coming to a disastrous end in the winter of discontent. I do not think this Government need any lessons from the party opposite on how to run an economy when one remembers 1979 and what we inherited.

However, we are grateful for the opportunity to have this debate. I was certainly interested to hear the speech of the noble Lord, Lord Eatwell. Two messages were conveyed to me. One was the word "stakeholder". I stopped counting after the 12th mention that I logged at the top of my piece of paper. I think I now have that message on board. It is "New Labour" and "stakeholder". There is not much else, but those two words seem to be the flesh, bones and brains, indeed the whole body, of the Labour Party's policy at the moment.

In addition, I did get the message that the noble Lord, Lord Eatwell, was very critical about the highly adversarial nature of British politics. He said so in a very consensual and measured speech, with no adversarial sentences in it, let alone paragraphs. I suggest to the noble Lord that if he wants to persuade us all to be less adversarial, he might attempt to introduce a less adversarial tone in his own speeches--and certainly not just when it comes to the Government; I am used to that from this Dispatch Box. When his adversarial tone went beyond the government and embraced the whole of British industry and British managers in the same adversarial attack, I think British industry and managers might read with some interest the views that the noble Lord holds. If they are an indication of the actions of a potential future Labour Government, British industry and British managers might decide to run the proverbial 1,000 miles rather than have that kind of government.

The noble Viscount, Lord Chandos, redefined "not adversarial" to "no conflict". He accused us of creating a conflict economy. Given that the days lost to labour disputes in 1994-95 are the lowest since records began in 1891, I do not think we can be accused of running an adversarial economy. At risk of harking back to 1979, I remember the sweetness and light of the economy then as the poor Prime Minister and Chancellor were closeted in Downing Street with the warring trade union leaders.

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But perhaps I should not go on about that because the party opposite has decided that that is Old Labour and I ought to remember the new words New Labour and stakeholders.

We have had a very interesting debate. I shall come shortly to the various points that were made. First, I want to congratulate the noble Lord, Lord Sempill, on his maiden speech. He comes to us with a very distinguished old Scottish title, created in 1489. So he follows in a long traditional line. He also follows the old Scottish tradition of taking his entrepreneurial skills overseas, in his case to South Africa, and putting them to very good effect there for the benefit of that economy. I am happy to see that he has come back to live in Edinburgh, where he works for a company that I had better not advertise--but it makes quite splendid products, which some of us at least enjoy sampling.

The noble Lord will know that the Scottish economy--he mentioned it in his speech about the UK economy--has changed out of all recognition from what we used to have; namely, an economy in which we were traditionally used to our unemployment rate being above the UK average. For the past four years, the unemployment rate in the Scottish economy has been below the UK average. That is a measure of the considerable success that this Government have had in an area which has had the difficulties of serious areas of unemployment, which the noble Lord, Lord Bruce of Donington, continues to draw to my attention. We are making progress in the Scottish economy. It is certainly the first time for a very long time that we see Scottish unemployment rates below the United Kingdom rates.

I have just one last word to say about the noble Lord, Lord Sempill, before I start to look at the whole range of the debate. I was pleased--and I am sure that all your Lordships were pleased--to hear him suggest that the mindset of the people in South Africa was very much right for the challenges which lie ahead. I am sure that we all very much hope that his analysis of the situation in South Africa is correct and that we shall see some of the enormous problems which the government there have inherited being resolved, though I feel that it would be foolish to expect them to be resolved in the short term.

The British economy--I apologise to the noble Lord, Lord Eatwell; I shall just mention a few facts--is enjoying a stronger recovery than any other major European country. Output is at record levels, with exports, investment and consumer expenditure all growing in a balanced way. Unemployment has fallen by three-quarters of a million in the past three years and remains on a downward trend. Over half a million new jobs have been created since the recovery began.

We have had the longest run of low inflation for almost 50 years. My noble friend Lord Marlesford pointed out that "inflation is a very great evil". The noble Lord, Lord St. John of Bletso, also referred to the problems that arise because of high inflation. We have inflation down at a historically low level. We have the longest running level of low inflation for 50 years. Interest rates have been reduced three times since December, taking mortgage rates down to their lowest level for a generation.

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Living standards are rising. A family on average earnings should be £450 better off this year than last year, after both tax and inflation; and £4,500, which is about 40 per cent., better off than in 1979.

The noble Lord, Lord Eatwell, asked: what are the objectives of the Government's economic policy? I am surprised that he asked me that question. I thought he would know. It is found on page 15 of the Red Book, in the chapter headed "The Medium Term Financial Strategy". The objective of the Government's economic policy is:

    "to promote sustained economic growth and rising economic prosperity. This requires structural policies to improve the long-term performance of the economy and a stable macro-economic environment".
The document goes on to say:

    "This chapter describes the macroeconomic policy framework. Monetary and fiscal policies are directed at maintaining low inflation on a permanent basis and sound public finances".
That is the Government's objective.

What we see is output rising, unemployment down, low inflation, declining borrowing and rising living standards. It is no wonder--the noble Viscount, Lord Chandos, will not be disappointed to hear me refer to it--that the noble Lord Desai, a former economic policy adviser to the Labour Party, had to warn his Front Bench colleagues, in an article in the New Statesman earlier this month, that the economy was looking in rattling good shape.

Part of the reason for that, as my noble friend Lord Dean of Harptree mentioned, is the success of the privatised industries, a success which is in contrast to the failure that many of those industries had when the dead hand of socialism and nationalisation enveloped them. I found it interesting that the noble Lord, Lord Eatwell, in a passing phrase, seemed to be very critical of privatisation. Yet for all the criticism of privatisation, there is not a single Labour spokesman who ever mentions the word "renationalisation" or ever suggests that they might reverse the privatisations.

Privatisation has brought huge benefit to consumers. British Telecom's main prices are down more than 35 per cent. in real terms. Domestic gas prices are down 10 per cent. in real terms in the past five years. Domestic electricity prices are down 8 per cent. in real terms in the past two years. Over 95 per cent. of British Telecom's phoneboxes, which were once the butt of every music hall joke in our country, now work; and there are 50 per cent. more of them than there were on privatisation. Gas disconnections are down 70 per cent. since 1987, and electricity disconnections are down more than 95 per cent. since 1990. I could go on about the very considerable successes of those privatised companies which now help the British economy instead of hindering it, as they often did in the past.

The noble Lord, Lord Desai, is right about the British economy. As I accepted the other day in a Question put by the noble Lord, Lord Ezra, all the major economies slowed down during the last half of last year, and Britain was no exception. But we have proved much more resilient. In the final quarter of 1995, the British economy grew faster then the United States and Canada, while output actually fell in Germany, France and Italy.

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First, businesses are in the process of unwinding some of the unplanned stocks that they accumulated last year. Secondly, business investment should grow strongly. Thirdly, consumer expenditure should gain momentum. I do not share the worry of the noble Lord, Lord Ezra, about consumer expenditure. So long as one is careful with inflation targets--my right honourable friend the Chancellor and the Governor of the Bank of England will certainly be that at their monthly meetings--I do not believe that we should be frightened of people coming into the market place and spending more of their own money. That generates growth and production in our own industries. That must be what we want to see.

But it is not just the Government who expect growth to pick up. That is the view of most independent forecasters. Meanwhile, in its latest inflation report, the Bank of England said that underlying inflation was:

    "more likely than not to be somewhat below 2½ per cent. in two years' time",
putting the Government on track to meet its inflation target.

Our vision of Britain is as the enterprise centre of Europe. That is rapidly becoming a reality. I think it was the noble Lord, Lord Haskel, who drew my attention to the competitive White Paper and read out from paragraph 120 of it that the GDP in this country has grown more slowly than in most of our major competitors since 1990. He did not in fact read out the next part:

    "reflecting the timing of the economic cycle".
If one looks at the last European economic cycle, from 1981 to 1993, our GDP per person grew at the same rate as Germany's and faster than in France and Italy. Since 1993, we have enjoyed a stronger recovery than any other major European country. Indeed, anyone who remembers Britain of yesteryear, with its militant unions, inefficient nationalised industries and high tax rates, will gladly confirm that.

According to the Financial Times, Britain now has the lion's share of Europe's most successful companies. We are the number one destination in Europe for inward investment. Both my noble friends Lord Dean of Harptree and Lord Oxfuird mentioned the success in inward investment that we are having as an economy. We have taken over 40 per cent. of the United States and Japanese investment in the European Union. I say to the noble Lord, Lord Bruce of Donington, that I believe that that inward investment can be of huge benefit in some of the most difficult areas of this country when it comes to unemployment problems. For example, QPL International in Newport, a microchip manufacturer, announced that 770 jobs will come on line there this year; TRW Incorporated, an American engineering company, is to create 275 new jobs at a £24 million factory development in Peterlee, County Durham, and the Chung Hwa Picture Tube Company, a Taiwanese-based company, is planning to build a factory at Mossend in Lanarkshire, Scotland, where I know considerable employment problems exist. Up to 3,300 jobs are likely to arise there.

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Those inward investments not only benefit the whole of the United Kingdom, but also they often benefit where--as the noble Lord, Lord Bruce of Donington, and I agree--serious problems relating to high levels of unemployment exist, largely because traditional industries have declined in those areas. Those inward investments are coming to this country. We approve of them. They come here because we have one of the lowest burdens of public spending and taxation in Europe. We have deregulated markets and low overheads. As a result, we have the lowest rate of unemployment of any major European country and a higher proportion of our people are in work. It is no wonder that the OECD praised the Government's structural reforms and that other countries are increasingly being encouraged to emulate them.

The last time I used these figures I was chided; I was told I was not using comparable figures. But I was. I was using standard ILO definitions, seasonally-adjusted unemployment rates sourced from the OECD and Eurostat. On the last day for which I have figures, the German unemployment rate, for example, in December was 8.6 per cent.; in January the UK rate was 8.4 per cent; the Italian rate was 12.6; the Canadian rate was 9.4 and the French rate was 11.8. I fully accept the point made by the noble Lord, Lord Acton, that I should look at the United States and Japan, and I do that. The rate of unemployment in the United States in January was 5.7 per cent. and in Japan 3.4 per cent. We must look to those economies as doing better than Europe has done with unemployment. But it is not something that we alone should be looking at; it is something at which our European partners should be looking also. Perhaps issues like the social chapter and the like are one of the reasons why Europe is in danger of not being competitive in the modern world.

We intend to ensure that Britain turns in a world-beating performance in future. That is why we have set inflation targets that will give us an inflation performance to match the best. That is why we intend to reduce public spending and taxation to meet the competitive challenge of the Asian tigers and the emerging economies of Eastern Europe and Latin America. I agree with the noble Baroness, Lady Seear, that the noble Lord, Lord Eatwell, far too readily dismissed those economies in the Far East as challenges. As the noble Baroness said, we must bear them in mind not only as great markets for the future, as China will undoubtedly be, as long as we are competitive, but also as rivals in world markets.

We have placed emphasis on re-skilling the workforce. We have looked at improving education and training. We shall shortly be publishing our third annual competitiveness White Paper, taking another hard-headed look at our competitive position against our trading rivals.

That combination of steady growth, low inflation and rising prosperity is no accident. It is the direct result of the Government's economic policies; of tough decisions taken on taxation, public spending and interest rates and the structural reforms we have pursued since 1979 to improve Britain's competitiveness. As I sat and listened to noble Lords opposite I wondered where they stood

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on public spending and taxation. For example, I wonder whether the noble Lord, Lord Monkswell, speaks for the Labour Party. I understood from him that he was in favour of considerable increases in social security payments, pensions, unemployment benefit and increased taxation. If he speaks for the Labour Party, that is the first time that it has committed itself to anything very much for a long time. The noble Lord is either going to say that he does or does not.

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