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Lord Acton: My Lords, before the noble Lord sits down, did I hear him aright? Did he say that he wanted to drive out nicotine but allow in other drugs?

Lord Rea: My Lords, I said that it is time now to have a widespread debate, possibly a Royal Commission, on the whole question of the law in relation to drugs and that it should be possible to regulate the supply of drugs and tax them rather than allowing them to be available only through the black market, with the attendant high cost to society that the present situation encourages.

7.50 p.m.

Lord Astor of Hever: My Lords, I congratulate the noble Lord, Lord Clinton-Davis, on his new post and wish him well for the future. I welcome many--though not all--aspects of his speech. I noted with great interest that the Government are ready to listen to industry and work together with it and that technology will be the centre of this Government's actions, particularly high tech, start-up companies. I was delighted that the Minister acknowledged the notable achievements of British companies in export markets and the importance of inward investment to our economy. I also congratulate the noble Baroness, Lady Jay, and look forward to her speech.

I should like to address one aspect of the gracious Speech--the proposed legislation to ban tobacco advertising, which the previous speaker touched on. I speak as a lifelong non-smoker. On Monday the Secretary of State for Health widened the ban to include the sponsorship of sports events, which was not in the manifesto or the gracious Speech. That is likely to have a dramatic effect on one sport in particular, British motorsport. I declare an interest as honorary president of the Motorsport Industry Association. I should like to draw attention to the success of the industry. I can safely say that Britain is looked upon as world leader. Estimates put the annual value of the industry at £1.3 billion, with over 40 per cent. of that accounted for by exports and inward investment. Approximately 50,000 people are directly employed and 100,000 indirectly.

While it is the success of Formula 1 teams such as Williams, Jordan, Stewart and McLaren that tends to feature in the media headlines, the real strength of the industry is the high number of small to medium-sized businesses that provide a range of motor sport-related products and services. These range from race car manufacturers such as Reynard and van Diemen, which have become world leaders in export sales of their cars, to specialist businesses such as racing driver schools and race circuit owners.

Worldwide demand for motor sport hardware and its leading edge technology is growing and UK firms are well placed to exploit that expansion. Technical

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expertise available in Britain, like the design and production of high performance transmission systems and electronic data logging, is being sold across the world. Major Japanese manufacturers such as Nissan, Toyota, Mitsubishi and Subaru base their motor sport divisions here and make great use of British technology. While the majority of the Formula 1 teams are based here, British manufacturers have for many years dominated the American scene, with the World Indycar Championship a prime example.

Commercial sponsorship is, without doubt, the lifeblood of the motor sport industry. In Formula 1 there has been a high level of tobacco sponsorship for many years and there will not be immediate adequate substitutes. The collapse of Lola, one of the UK's most internationally famous motor racing manufacturers, which went into receivership yesterday, should provide a salutary lesson. Despite being the sole provider for the Indy lights series and Formula 3000, it was unable to attract adequate sponsorship for its Formula 1 team.

If rapidly introduced legislation prevents teams from benefiting from tobacco sponsorship the ripple effect throughout the industry will be extremely damaging in terms of jobs and company stability. Sponsorship money flows to the top teams and permeates through to other sectors of the industry, from component manufacturers to engine tuners, from gearbox specialists to wheel manufacturers. If the flow of sponsorship is drastically reduced, this will have a far-reaching effect on what is now a highly successful British industry.

I have been encouraged by some of the responsible comments senior Ministers have made in the last few days. I was heartened that the Secretary of State for Health said that he did not wish to harm any sport and that he would give sports time and help them to replace their dependency on tobacco sponsorship. He said:

    "We intend to look at all the issues carefully".
I was also heartened by the comment of the Minister with responsibility for sport in the other place on Monday when he said that he did not want to see British motor sport suffer as this country benefits enormously from its technology, skills and other spin-offs. Tessa Jowell, Minister for Public Health, said that the Government would need to look carefully at how to remove tobacco advertising from sporting events without creating any risk to those events in the United Kingdom.

However, although no motor sport events are directly sponsored by tobacco manufacturers in Britain, many foreign events in the World Rally Championship and Formula 1 are held in countries which take a less restrictive view of tobacco sponsorship. This enables Formula 1 to attract an estimated £100 million a year from the industry, the lion's share of which is invested in this country. ITV coverage, and BBC and Sky highlights, of the series would be threatened as races in countries where a ban is not in place clearly show trackside hoardings and sponsors' logos on cars. Can the noble Baroness say whether the ban will include the broadcasting by television here of motor sport events in countries where sponsors' names are still allowed to be displayed? Britain is committed, as a member of those

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two championships, to showing the events on British television. If they were not allowed to be shown, we would be forced out of the British round of the championships. Other countries where there is no tobacco ban, which are eager to take our place, would ensure that that happened.

The RAC Rally and the British Grand Prix which both generate millions of pounds for this country and enormous worldwide prestige for the RAC--the world's largest motor sport governing body--would move abroad. If the ban will include foreign events and television contracts are unable to be honoured, can the noble Baroness tell me what timespan the Government have in mind?

I understand that the Government are organising a seminar of British and international experts to formulate a policy for a White Paper later this summer. I hope that the motor sport industry will be allowed to have some input. If legislation must be introduced, let it be done gradually, allowing teams to develop new commercial partners so as not to jeopardise many British jobs. I should be grateful for some assurance on the point.

8 p.m.

Lord Cobbold: My Lords, let me first add my congratulations to those of many other noble Lords to the new Government Front Bench and to the two maiden speakers earlier today. I should also like to congratulate the Government on the robust actions that they have taken in their first few days in office.

The first brave action I applaud is the delegation to the Bank of England of operational responsibility for setting interest rates. As the son of a central banker, no doubt your Lordships would expect me to approve of such a step. My experience, naturally, of central bankers is that they are honourable men. I have no doubt that the present Governor and his new committee will serve the country well, but I hope that the Government will take note of the warnings of the noble Lord, Lord Tugendhat, that the government appointees to the new committee should not be just creatures of the Treasury.

Perhaps I might be allowed to quote two short sentences from a speech made by my father to the Overseas Bankers Club in 1958. My father was deputy governor at the time of the nationalisation of the Bank in 1946 and was subsequently appointed Governor by the Labour Government of that time. He said:

    "The Bank of England must be a bank and not a study group. The prime requirement must be operational competence";

    "The only thing which matters is that the Bank should be in the best position possible to perform its duties as a servant of the public and as banker and adviser to the Government of the day".
I believe that both those comments are apt in the present circumstances.

The move to partial independence is long overdue. It was recommended by the noble Lord, Lord Lawson, when he was Chancellor, and by his successor Norman Lamont. In the run up to the election, we have seen a clear case of political imperative clashing with the recommendations of the Bank. We shall not know for

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several months to come whether the political decision not to raise interest rates before the election has done any lasting damage to the economy.

I also welcome the second part of the Chancellor's Statement yesterday; namely, the restructuring of the regulatory system. There will be plenty of time to debate the new proposals in detail, but at this stage it is important to stress that the expanded SIB must not be allowed to become a monolithic, bureaucratic burden on the financial services industry. It must allow for innovation and be quick to respond. The tradition of innovation and quick response has made the City of London the financial capital of the world. The new SIB must not just become an expensive, stifling bureaucracy, loved only by lawyers.

I also welcome in the gracious Speech the commitment to:

    "play a full part in the debate about Economic and Monetary Union".
Despite the disarray on this subject in the previous administration, this country has been participating actively at the technical level in the discussions on how monetary union will work in practice. Such issues as the continuity of contracts, redenomination of debt and interlinking of real time wholesale payment systems have been actively debated within the City of London Joint Working Group, under the watchful eye of the Bank of England. Detailed representations have been made to both the European Monetary Institute and the Commission and the majority have been adopted.

It is simply not true, as some of our press insists, that monetary union will be a German closed shop. This country is immensely strong in financial services. Our influence, our experience, our legal system, our language and the size, depth and variety of our financial markets have and will continue to have a crucial impact on the development and subsequent operation of the single currency, whether or not we join it. The key decisions on monetary union are due to be taken next spring, during the life of this Parliament and during the six months' presidency of the United Kingdom. It will thus be a testing time for the new Government.

So far, the level of public debate on that vitally important issue has been pathetic. I hope that the Government will raise the level of debate and set out clearly the pros and cons of British membership, instead of indulging in the yah-boo slanging match of the recent campaign. The big decision that faces this country is whether we are more likely to be able to maintain, let alone increase, our standard of living and quality of life in the next century by going it alone or by working together with our European partners. Can we best compete with the emerging economies of Asia by ourselves, a small nation of 60 million people, or as part of a single European market of perhaps 500 million people? If it is the latter, we must work hard at building the European single market and making it more and more efficient. We are winning, not losing, the arguments in Europe these days.

Despite the feelings of the noble Lord, Lord Pearson of Rannoch, a single currency is potentially a big step towards greater efficiency. A single

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currency in a single market of 500 million people could produce huge economies of scale. It would create the largest and most liquid capital market in the world. Such a huge pool of savings should lower the overall cost of capital for European business, encouraging investment and jobs. Government and industry would no longer have to pay a risk premium to borrow in sterling. One balance of payments for Europe would reduce the exposure of the whole economy to external trade to around 15 per cent., compared with 12 per cent. in the United States and about 40 per cent. currently for Britain. That means less volatility and less buffeting in the international storms--the stability desired by the noble Lord, Lord Clinton-Davis, in his speech earlier today.

Those are just some of the economic opportunities presented by monetary union. I hope that the Government will make sure that they are expanded and explained to the British people well in advance of any referendum. Happily, the noble Lord, Lord Simon of Highbury--again I congratulate the Government on his appointment--has personal experience of the value of joint management of money flows within a pan-European business, and, indeed, of the entrenched resistance to such moves encountered in most countries. His experience will be of great value to the Government on this subject. I wish him well in his move from BP to UK plc.

Finally, I make one suggestion. The Government have announced plans to look at the distribution of lottery money and have pinpointed health and education as potential new recipients. I suggest that another worthy use of lottery funds would be to establish what I might call an Enterprise Lottery Fund that would support business start-ups. We have a well established venture capital industry in this country but that cuts in only when a new business has proved itself. The first £25,000 to £50,000 to succour the fledgling entrepreneur is where there is a huge gap. I believe that that would be a good use of lottery funds and would be a real stimulus to enterprise and job creation. I hope, therefore, that something along those lines might fit into the plans of this new Government of reform.

8.7 p.m.

Lord Stoddart of Swindon: My Lords, like other noble Lords I welcome my noble friends who have become Ministers. I congratulate them on the speed with which they have mastered their briefs and their competence in presenting their case at the Dispatch Box. I also congratulate the Prime Minister on his stunning victory on 1st May. The incompetence, betrayal, vacillation, lack of democracy and profligacy of the previous Government were all swept away at the election by the steely determination of the voters to bring about a change. And what a change it is!

However, a government with such a huge majority have the duty to use power responsibly, especially when they have pledged to unite the nation and heal the divisions of the past 18 years. I trust, therefore, that the new Government will not only act in the interests of the majority but will also protect and uphold the rights of minorities. Above all, I trust that they will strengthen

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Parliament and recognise the rights and privileges of Members of Parliament and indeed Members of this House.

It must be recognised by all of us that, while Members of Parliament owe a loyalty to their party, they owe also a loyalty to their constituents and have a duty to represent their interests and protect their rights through Parliament. Members of Parliament also have a duty to their country and should understand that they are there to represent the interests of the British people and to ensure that the British interest is paramount. They are there to resist all measures to undermine the sovereignty of Parliament itself.

This House too has its responsibilities, and we should discharge those responsibilities without fear. It is the only second Chamber that Britain has and it must do its duty within the existing constitutional framework. Gutlessness will not enhance our reputation; it will merely earn contempt and hasten rather than retard abolition. An early test of our resolve will come about when the Firearms (Amendment) Bill arrives here. I know what I shall do. I did what I had to do in the last Parliament, and I know what I shall do in relation to the Bill in this Parliament. It will be interesting to see how many others join me in opposing the Bill. There will be a free vote on this side of the Chamber.

One of the reasons for the utter rout of the Tory party was its querulous, wimpish policy on Europe. Mr. Major put himself at the heart of Europe. Had he put himself at the heart of Britain he might have saved himself and his party from humiliating defeat. My right honourable friend the Prime Minister made sure that he did not make the same mistake. The whole country noted his declaration that he was a British patriot.

It is about time people were proud of being British. I am therefore glad that my right honourable friend the Prime Minister made it clear where he stood at the general election. Indeed, I was pleased to note that at all the press conferences and party meetings the backcloth was the Union Jack. Even in the hour of victory when the Prime Minister arrived at 10 Downing Street to take his proper place, Labour Party officials were handing out Union Jacks to wave. We know now therefore where the new Prime Minister stands; that is, at the heart of Britain. At last we have a British patriot at 10 Downing Street. For so long as he remains a British patriot, resists any further erosion of parliamentary sovereignty and makes British interests paramount, he will receive my support.

As an earnest of my right honourable friend's intentions he could announce now that Britain will not join a single European currency in the lifetime of this Parliament. There are many claims made for a single European currency. I have to say to the noble Lord, Lord Cobbold: we have heard it all before. We heard it about the "snake"; we heard it about the ERM. What a disaster that was and how Mr. Major must wish that he had not taken us in. So we have heard it all before.

I am sure that this Prime Minister is sensible enough to realise the dangers ahead from a single currency. If he ruled it out during the lifetime of this Parliament, that would not only establish that his patriotism was more

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than empty election rhetoric; it might also stop this crazy venture in its tracks and save Europe from future disintegration and humiliation. Furthermore, it would enable economic planning and decision-making to proceed in a more stable climate and foreign investors would know exactly where they stood.

The most far-reaching measure of the past 18 days has been to hand over monetary policy to the Bank of England. That was not in the manifesto. I regret that because such a profound change of policy--it is a profound change of policy--should have been foreshadowed during the election in order that it could be debated. In my view, to hand over such an economic power to the Bank of England virtually without consultation is a huge mistake. In fact, within a couple of days of his new freedom Mr. George was advocating higher interest rates, thus talking up the pound. That is the reverse of what the real economy needs at this time.

The City and big business, which welcomed the move, were soon whining that the higher pound was hurting exports. As most noble Lords are aware, real interest rates are extremely high at 3.75 per cent. and unsustainable if our economy is to continue to grow at a reasonable pace. There is no need for higher interest rates at this stage, bearing in mind that the British people are saving as they have never saved before. I hope that that will be taken into account. Fears have been expressed that the transfer of monetary policy to the Bank of England is in preparation for joining the single currency. That need not be so and I sincerely trust that it is not so.

In his address to the CBI last night the Chancellor repeated that this Government are committed to business and industry. There is nothing wrong in that--I applaud it--provided he remembers that business and industrial success depends on people working in those areas just as much as on those who are the leaders. Furthermore, I remind the Government that, with their huge majority, they do not need to join the social chapter to bring about the desirable reforms for workers' rights that are needed. They can do that without joining the social chapter and without the constraints that exist in other countries.

I hope it will also be remembered that monopolistic big business and City short-termism are bad for long-term economic success. Small and medium-sized businesses are vital to our economy and are entitled to proper assistance, consultation and consideration. The CBI speaks for the monopolists and corporatists. I sincerely trust that the Government will not allow the voice of the small and medium-sized businesses to be drowned out by the juggernaut of big business and corporatism represented by the CBI. Let the Government ensure that one nationism extends to business as well.

Having said all that, I wish the Government well; I hope sincerely that they do well. I shall be watching them, as will other noble Lords. As long as they do what is right for this country, I shall support them.

8.18 p.m.

Lord Marlesford: My Lords, in the privacy of your Lordships' Chamber--and at about 8.15 in the evening

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there are few more private places in London--I should like to make a small confession that I regarded it as fortunate to be one of all of us in this Chamber without a vote in the election. It is not that I felt that the Conservative Government would not have continued to perform extremely well. I have the highest possible admiration for John Major and a number of his colleagues. But perhaps it is as a result of being too long a mere observer and commentator on politics--some 16 years--rather than an active participant that I have taken this slightly detached view.

There is no doubt in my mind that the new Labour Party--let it never lose the word "new"--deserved to win and that is why it won. Why Labour won by so much may be partly due to foolish behaviour inside the Conservative Party. But overall Labour had become safe to elect and so New Labour was elected. The tribute for that must go to my noble friend Lady Thatcher, because had she not confronted socialism in all its forms and removed it from the political map virtually of the whole world, we would not have had the long manifesto, for which one paid £1.99--it was extremely good value--without the word "socialism" anywhere in it. That I regard as a huge achievement. Incidentally, I think it is a pity that W. H. Smith, which used to sell them, withdrew them immediately after the election. That showed a certain lack of commercial nous because I believe that it would have been a best seller for many months to come.

It is quite exciting for someone like me--this probably applies to everyone in your Lordships' House--that for the first time in my life capitalism has not been up for grabs in this country. That is a huge change and it is one which I think we should celebrate. I believe, therefore, that the Conservatives have nothing to reproach themselves for. There is no need for them to go back to the drawing board and rethink all the policies. The present Government have taken on virtually all the policies. I cannot expect the noble Lords, Lord Bruce of Donington and Lord Stoddart of Swindon, and my noble friend Lord Pearson to agree with me when I say that there cannot have been a more sensible statement from Mr. Major than that he wished to be at the heart of Europe and it was right for him to have kept open the options in order that decisions were made in the interests of this country.

I greatly admire the new Prime Minister for the way in which he is handling his party. He clearly has a majority somewhat larger than may be healthy for him. But to relegate Mr. Tony Banks to the football field and to exile Mr. Peter Hain to a remote valley in south Wales was brilliant man management.

I feel that we probably need in this country to end to some extent politicking. That means that the Tories must take New Labour at face value. We must not have premature or carping criticism of the Government. Equally, the new Labour Government must stop saying that they had a bad inheritance. For some time politicians have never been less powerful in the face of international markets. Mrs. Thatcher once said, "You can't buck the market". Now the action of any government almost anywhere in the world has its

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financial consequences certainly within weeks, sometimes within days and occasionally even within hours. That means that all governments in the capitalist world today--the greater part of the world--have to play by the same rules of the same economic game.

Perhaps I may emphasise some of the crucial points of the economic inheritance. I cannot agree statistically with the noble Lord, Lord Bruce of Donington. There were a number of occasions on which inflation was high in the late 1940s and early 1950s. Inflation was 12 per cent. at the time of the Korean war. I have the figures. Perhaps we can discuss them later. It was essential to make inflation our first objective. Previously dealing with unemployment had been the first objective. We had whole flocks of lame ducks and many people without real jobs. Making inflation the first objective--it has very successfully been made so--enabled us to deal to a large extent with structural unemployment.

There are all kinds of definitions of unemployment but I strongly recommend to your Lordships the excellent monthly publication produced by the House of Commons Library which sets out unemployment measured by constituency. The number of claimants is expressed as a percentage of the economically active population resident in the constituency. In saying that, I hope that if the noble Lord, Lord Dahrendorf, were here, he would not be ringing his bell. The figures expressed as a percentage are available at the moment only for England and Wales. The base figures for Scotland under the new boundaries have not yet been produced. For England and Wales, out of 569 constituencies, 93 have unemployment of below 3 per cent., the Beveridge full employment measure. Two hundred and fifty-one constituencies have unemployment of under 5 per cent. and only 66 have unemployment over 10 per cent. There are, of course, islands of deprivation and degradation in this sea of prosperity. I recognise fully that that is where the targeting must take place.

I greatly welcome the fact that Mr. Frank Field has such a crucial role in helping to re-shape social services. He will continue on very much the same radical lines as Mr. Peter Lilley started. One word expresses how to get right our social services and welfare system. The word is "targeting". I am sorry that no right reverend Prelate is present, but in so far as there is an ethical dimension to this matter, I believe that it is immoral to hand out welfare benefits to those who do not need them at the cost of having insufficient for those who do need them.

Perhaps I may move on to one of the hardest problems with which politicians have to deal. I refer to the restructuring of an economy. It is hard because it has a long-term return and a short-term cost. On the whole, politicians do not like taking hard short-term decisions which will be unpopular. In the case of Britain, we have carried out the most remarkable degree of restructuring of our industry. Few people at work in this country today do not have real productive jobs. I admit that we had a big bonus to enable us to carry out the restructuring. We had North Sea oil, which came at exactly the right time. North Sea oil revenues hardly exist now. North Sea oil revenues in 1995 were in real terms only 6 per cent. of the level in 1985, but North

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Sea oil revenues did their job. They enabled us to make tolerable temporarily a high rate of structural unemployment while we made our economy a home for much good foreign investment.

I am sorry to keep getting at the noble Lord, Lord Bruce of Donington, but he was talking all the time as though what mattered was British investment. That simply is not the case. I do not think it matters at all where investment comes from provided it comes. Our motor car industry was virtually eliminated. We now have a wonderful motor car industry, but it is basically not British owned.

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