Previous Section Back to Table of Contents Lords Hansard Home Page


Lord Bruce of Donington: My Lords, I am obliged to the noble Lord for giving way to me. Will he please bear in mind the complete truth: British capital was exported abroad at roughly twice the rate it was invested at home?

Lord Marlesford: My Lords, I have no problem with that. It gets itself good returns and it goes where it thinks it can do best. The important point is that our country is now seen as a place in which it is desirable to invest. More than 40 per cent. of all investment in the EU from both Japan and the United States has been in Britain. That is a tremendous achievement.

We have made this great progress with restructuring which other countries are only just beginning to face up to. Germany, having had to make that one-for-one deutschmark decision to prevent a huge uncontrolled exodus from East to West, is now faced with very real problems in its uneconomic industries in the East.

France is a very special problem. The French have never been able to face up to restructuring. The difference between France and Britain is interesting. In Britain, if the Government decide to do something which is unpopular with the people adversely affected and those people protest, that is acceptable. However, if the protests become violent on the streets, public opinion swings behind the Government. We have seen it again and again at Grunwick, Wapping and with the miners. In France, on the other hand, the more violent the opposition becomes, the more public opinion swings behind the protesters. Again and again, French Governments have had to give in to protests. I have often wondered why, but I believe that the crucial difference--this might be a little more melodious to the ears of the noble Lords, Lord Bruce and Lord Stoddart--is the very special position enjoyed in Britain by Parliament. For all their sniping and sneering at politicians through the media, the British people fundamentally believe that when there is a real problem, Parliament is there to protect them. I do not believe that the French people feel that. They often appear to believe that they must support the protesters because they might well be the next ones to have to take to the streets.

I believe that that is one of the reasons why France is encountering such considerable difficulties and why President Chirac has had to call an election prematurely. I believe that one of France's few opportunities to restructure will come if M. Chirac--this is assuming that M. Chirac wins the election--were to appoint as Prime Minister M. Alain Madelin, who was briefly

21 May 1997 : Column 464

Chirac's finance minister when he first became president but who left because he found that he did not get the support that was needed to make the necessary changes.

I should like to refer briefly to the windfall tax. I am not against it in principle. The companies that will be affected were certainly sold too cheaply, but I do not blame the Government for that because the important thing was to sell them. Once those companies had been sold, we could then think again. The Government will have considerable difficulties with the legislation because the spectre of hybridity will hang over it. If the windfall tax Bill were once declared hybrid, it would be for the birds. It would not be a matter of receiving two years of revenue; rather it would be two years before the legislation would be enacted. The Government may talk about reforming the House of Lords, but I advise them that getting a hybrid Bill on a windfall tax through Parliament will be far more difficult. Indeed, I cannot see quite how they can avoid hybridity. If I have the definition correctly, "hybridity" is where a Bill discriminates on a material matter between bodies which are in other relevant respects similar.

Why do I support a windfall tax? I believe firmly that once companies have been privatised, it is crucial that they are properly regulated. It is far easier for a government to regulate industries which they do not also own. The regulation has not been tough enough and the behaviour of the utilities has sometimes been very bad. There have been excessive share options. I know of particular cases where the standard of corporate governance has been deplorable. British Gas, for example, has behaved in the sort of arrogant way which, in the days of Rackman, gave private landlords a bad reputation.

I believe that to some extent the windfall tax is acceptable to the people of this country because it is seen as a justifiable penalty for misbehaviour. However, the consumers should not have to pay for that windfall tax. There should be no question of that. The regulators must ensure that the consumers do not pay. The people who should pay are the shareholders. I hope that in the future shareholders--I am talking primarily about institutional shareholders--will be much tougher with companies which risk doing things against their own advantage. That is an important lesson to learn.

There are other ways in which tax revenue could be increased. I am obviously talking against my own book, but the council tax, which was introduced by Mr. Michael Heseltine to replace the extremely unpopular poll tax, has been a considerable success. However, I do not think that it is equitable that the top band, band H, should cover all properties worth more than £320,000. I suggest that we need three further bands: one covering properties up to £500,000; one covering properties up to £750,000, with a further top band for houses that are worth more than £1 million. I suggest that there should be a 20 per cent. difference between each band in the

21 May 1997 : Column 465

amount of tax to be paid. That might raise quite a sum. I have overshot my allotted time. I am most apologetic and I thank your Lordships for listening.

8.35 p.m.

Lord Harris of High Cross: My Lords, it is without the least hesitation that I join the noble Lord, Lord Marlesford, and others on both sides of the House in warmly congratulating New Labour on forming its first government. Of course, I have a number of reservations although perhaps fewer than some of the old loyalists on the Benches behind the Ministers.

My favourite comment on the election result comes from a correspondent to The Times who wrote succinctly:


    "In the past I have always voted Labour, but they did not seem to be running this time".
So far, so good.

If I may speak plainly, my own modified rapture at Mr. Blair's remarkable success dates from the leadership campaign in 1994 when he courageously committed himself to what he called "a dynamic market economy". I hope that I may be forgiven for claiming to have been a little ahead of Mr. Blair in that respect. Indeed, back in 1957, about half a dozen members of what was thought of as the awkward squad joined me in founding the Institute of Economic Affairs. Our modest purpose was to question the post-war all-party collectivist consensus--which used to ride by the name of "Butskellism". But our ultimate goal was to try to restore an earlier 19th century consensus when both of the great parties of state broadly accepted a market economy as the indispensable bedrock of a free society. So for me this Government appear to mark a decisive stride in the right direction.

By far the most welcome feature of the Queen's Speech is all the mangy dogs that did not bark. I hesitate to speak with the noble Lord, Lord Bruce of Donington, watching me. I looked for some ringing declaration on renationalising the commanding heights of the economy, or on restoring the ancient rights and privileges of the trade unions, or on throwing more billions at the failing welfare state or on pursuing full employment without concern for inflation, or on squeezing the rich until the pips squeak. I echo what the noble Lord, Lord Marlesford, dared to say: we are all tending to be somewhat Thatcherite now.

Against Labour's understandable euphoria, I have a sobering reflection on that party's great victory which is prompted by, of all things, the threatened ban on the advertising of tobacco. The journalists who helped Labour considerably on its way to victory during the election campaign have begun to whisper about signs of the Prime Minister's moral authoritarianism. Now we have this trifling persecution of smoking, paraded in the gracious Speech amidst grandiloquent talk of global poverty, world peace, human rights and the proliferation of weapons of war. A ban on tobacco advertising! What priority do we think that such a piffling piece of nonsense would really rate?

21 May 1997 : Column 466

In my view, the war on smoking is revealing. It is unquestionably fuelled by the calculation that we smokers are a declining minority whose opinions or preferences merit scant respect. I have news for Mr. Blair. His record share of the poll on 1st May was 44 per cent. of those who voted. The turnout was unusually low at 71 per cent. of the total electorate. That gave New Labour the support of a mere 31.6 per cent. of the entire adult population. This compares with almost 33 per cent. of voters who still choose to smoke. As a general proposition I argue that a little modesty from New Labour on all fronts is very much in order.

As an economist I and others strongly welcome the bold decision to give the Bank of England control over interest rates. Its success would be more certain if the monetary committee about which we have heard was not over stuffed with Labour placemen but left room for one or possibly two of the awkward squad with special experience of these matters, such as Tim Congdon, Patrick Minford or even the dreaded Sir Alan Walters. These are shrewd and successful operators in the foreign exchange and monetary world. One good reason for welcoming this move is the effort to strengthen the defences against inflation. I was enthralled to hear the Chancellor describe his motive as being to insulate decisions on interest rates from short-term party political pressures, which after all have cumulatively reduced the value of the 1945 pound to about 5 pence today. However, this wholesome depoliticisation contrasts with a good deal of needless repoliticisation elsewhere. One example is the proposal to inflict on my native London a new political authority and an elected mayor. I predict that no good will come of that particular initiative.

To return to the dynamic market economy, New Labour is doing well but it has not quite got the hang of how free markets work. The centrepiece of market analysis is the role of price signals in checking demand and encouraging supply. But New Labour still believes that on occasions it can have it both ways. In the field of employment, on the one hand it proposes wage subsidies that are designed to reduce the cost of employment and so increase jobs. On the other hand, it bows to trade union pressure for a statutory minimum wage, which must tend to raise the cost of employment and therefore reduce jobs--all the more if it has a knock-on effect on wages above the minimum. Poor Mr. Rodney Bickerstaffe even claims that the higher the minimum wage the better it will be for employment because it will increase spending power and therefore jobs. He has not noticed that higher wages tend not only to reduce jobs but to be passed on in higher prices which then absorb the increased spending power and, at the same time, threaten to reduce the real value of wages. There is also the doctrinaire European Social Chapter. I join the noble Lord, Lord Pearson, in solemnly warning the Government that this is a Trojan horse pregnant with cost-raising and job-destroying initiatives.

Another flawed wheeze of the Chancellor is the promise of measures,


    "to enable capital receipts from the sale of council houses to be invested in house-building and renovations."

21 May 1997 : Column 467

I believe that is a bogus free lunch. Elementary logic confirms that increased local authority spending from hitherto idle balances will simply add to total demand on the economy and raise the effective borrowing requirement in the consolidated public accounts--the very thing he has committed himself to avoiding, saying in the Queen's Speech that he would,


    "ensure that public borrowing is controlled through tough fiscal rules and that the burden of public debt is kept at a stable and prudent level."
At one time I was a member of the Magic Circle and I would very much like to hear from the noble Baroness, Lady Jay, who is to wind up, how the Chancellor will manage to produce that rabbit from his non-existent top hat.

My broad conclusion on the Queen's Speech is that, although it is a bit of an indigestible omelette of curates' eggs, it is above all welcome for what it leaves out. Like old lags who find that crime does not pay, after 18 years the Government appear intent not so much on turning over a new leaf as starting out on a whole new life. I welcome that. They will long remain on probation but I believe that they have made a promising start.

In a genuine spirit of goodwill I offer a warning against two economic dangers. First, in their efforts to assume responsibility for running the country the Government have tended in the direction of promising too much. It is likely that when economic difficulties occur they will have to draw in their horns. I suggest that they ask Mr. Mandelson as a penance to prepare a contingency plan to delay or ditch some of the aspirations for when the going gets tough. Secondly, in the global economy about which we have heard, which is at all times subject to unprecedented and unforeseeable changes, unalluring economic realities will in the end always prevail over well-intentioned politics. However important education and employment undoubtedly are for all our people, the economic watchwords for these and other shared hopes must be: alertness, flexibility and adaptability.

8.47 p.m.

Lord Ashbourne: My Lords, it is getting late and I shall not detain your Lordships long. As I am sandwiched in the speaking order between two eminent economists your Lordships will be glad to hear that I shall not pontificate this evening on economics. I observe that there are a great number of experts on economics in this House. Having said that, I always reflect on the words of a well known staff college lecturer. He defined an expert as someone who had made every possible mistake in a very narrow field. Obviously, that comment does not apply to your Lordships' House.

I begin by congratulating the new Government on the gracious Speech, in particular the concern for young people referred to therein. In this context I should like to make a short plea for the family in this debate. Last year there were a number of debates in this place about the family and the need to support it both through practical means and public policy and the costs of so doing. Last week in another place the Prime Minister referred to the decline in strong family life as one of the

21 May 1997 : Column 468

reasons for some of the problems that faced our society. I strongly support that statement. I go further and say that I believe the breakdown of the traditional family in this country is one of the most serious problems that we face today. It has financial, social and spiritual implications.

Perhaps we may consider for a moment the situation with regard to law and order in this country. Noble Lords will judge for themselves and have their own opinions on law and order. This issue causes me great concern. For example, I will not allow my wife to travel on the Underground after 10 o'clock at night because I judge the risk to her health to be unacceptably high. That is an appalling situation. It is one of which every Member of your Lordships' House should be thoroughly ashamed. It should be put right as soon as possible. It is not good. The law and order situation in this country is caused more than anything else by the breakdown of the traditional family.

It exasperates me when one listens, in particular, to the Home Office. It is always saying that it is putting another 10,000 policemen on the beat. I am not against more policemen on the beat, but they will not solve the problem. That problem is the breakdown of the family. So a wise government would focus on building up the family.

With that in mind, I have been surprised by recent press reports suggesting the abolition of the married couple's tax allowance in the forthcoming Budget. Those reports are even more surprising as the Labour Party election manifesto contained commitments to supporting the family, and stated:


    "We will also examine the interaction of the tax and benefits systems ... so as to fulfil our objectives of ... strengthening community and family life".

As noble Lords will be aware, I believe that the family forms the basic building block of our society. By that I mean what is commonly referred to as the traditional family unit of the married man and woman bringing up children. That fundamental unit should be considered when new policies are drawn up and there should be fiscal support for married couples. There is ample evidence that a stable marriage benefits both spouses and offspring. I urge the Government to study that research before making changes to family taxation.

A concern to support families through fiscal policy is a subject which has attracted cross-party support in another place. It resulted in a recent commitment to a major inquiry by the Inland Revenue into the taxation of married couples. I hope that the Government will ensure that that review is carried out. I understand that the Prime Minister recently made a written commitment that it would be. Perhaps the Minister will report on the review's progress when she replies on behalf of the Government this evening.

8.52 p.m.

Lord Desai: My Lords, it is a great pleasure to be on this side of the House, from where I am facing the noble and learned Lord who was a Minister in the DTI and the noble Viscount the leader of the Conservative Party in the House of Lords. It is also a great pleasure to see

21 May 1997 : Column 469

many of the people whom I have known over a long period of time becoming Ministers. I congratulate them all on the quick way they have learnt the job and adopted the good habits of power. The nice thing about being a government Back Bencher is that one has power without office.

It has been a good debate. The right reverend Prelate and the noble Lord, Lord Dahrendorf, may have put their finger on the problem with which I wish to begin. It is that in this country there is good macro-performance but a great deal of misery. We should put our minds to understanding what it is that has caused that contrast between the good growth record--there is no doubt that since 1993 we have had a good growth record: the inflation rate is down; house prices are rising, which is supposed to be a good thing; and more money is being spent by consumers--and the fact that there is a great deal of evidence at the micro-economic level that many people are unhappy.

One of the things we should do in the coming months is to try to achieve a real factual grip on why that is the case. A number of statistics has been bandied about. I agree with the noble Lord, Lord Dahrendorf, that statistics are often not properly interpreted. The idea that one household in four or one household in five has no one working is not a good statistic because we know that households can contain from one person to five. So that is not a good thing to say. It is using other people's misery for party political purposes.

It is important to understand that there are two phenomena. We have recorded unemployment, which I hope will be measured better. I should like to propose to my noble friend the Minister that she convey to the Government the idea that we should spend as much time measuring unemployment as we spend measuring inflation. Our measurement of inflation is good now. The Bank of England has put a great deal of money into three, four or five measures of inflation, and has done a great deal of research on it. We should have regular publications, carefully done, of different measures of unemployment, because they tell us different things.

The claimant count is one measure of unemployment by one definition. It is a good definition because basically that is where the budgetary expenditure takes place. But there are other measures. The Labour Force Survey is a more reliable measure obviously, but there are broader definitions and every month we should have published, perhaps in as colourful a format as the inflation report, a clear explanation of what the measures of unemployment mean. If we had that we might better understand the problem.

Many people who are miserable are not unemployed, according to the definition as we understand it. They are economically inactive for one reason or another. Because they are economically inactive and they cannot be economically active, their income entitlements have not kept pace with inflation or average earnings. Those people who are not in the labour market and who cannot be in the labour market for various reasons will not be looked after by any full employment programme. We

21 May 1997 : Column 470

will have to understand that that is a big gap in our understanding of society with which we shall have to come to terms.

Unlike the noble Lord, Lord Marlesford, whom I greatly admire, I am not a targeting man. I am a universalist when it comes to the welfare state. I would rather ensure, through something like a basic income, that everyone in society, whether they can or cannot work for payment--we all work, although some work in paid jobs and some in unpaid jobs--has some income entitlement to protect them from complete misery. Good as the safety net is, it is not good enough. That is the message that emerges from the micro-misery that we have.

When we reform pensions and welfare dependency we must also solve that problem. I think we delude ourselves when we think that welfare dependency relates just to the poor. Mortgage interest relief is welfare dependency really. So is cheap higher education. The middle classes have cheap higher education. That is welfare dependency. We should think about the people who have had good tax cuts over the past 18 years. Where did that money come from? It came from someone else. We delude ourselves if we think that welfare dependency relates only to the poor and not to the rich. We should correct that misapprehension.

Having, as it were, got that off my chest, I shall speak about the two major reforms which have been proposed since 2nd May. I have debated the independence of the Bank of England on previous occasions with the noble Lord, Lord Ezra. I am not quite sure that I am all for the Bank of England's independence, partly because what we really want is not reforms but results, and results about low inflation are not always delivered by an independent central bank. Some central banks are good and even some central bankers are good. Mr. Greenspan is good, not because of the Federal Reserve system which is independent--because the Federal Reserve system has made a mess in the past. Mr. Greenspan is very good, but that is another issue.

I do think that we should have rules, of course, but we should also have discretion. The much maligned Ken and Eddie show had a combination of rules and discretion and they had a target--the rules--and they had discretion. We have not abandoned discretion: we have abandoned one part of their discretion (i.e. the Chancellor) and left it all to the discretion of the Bank of England.

I am hoping that the monetary policy committee will temper the discretion of the Governor alone, because I think it is quite true to say that the Governor has not proved, in the monetary policy minutes that we have seen, to have the best judgment on inflation. Therefore, perhaps the monetary policy committee will improve that. We have gained, and the Chancellor has gained, the market's support, and what has to be said to his credit is that the long-term interest rate which used to be in excess has come down. We used to pay 1.5 per cent. in excess of what other countries used to pay. The market has welcomed the Bank of England's independence and marked down the long-term rate of interest by half a percentage point.

21 May 1997 : Column 471

What we are going to see in the near future is high short-term rates of interest and lower longer rates of interest. If that continues it is not a bad thing because what we want is a shift, as the noble Lord, Lord Ezra, said, a shift in the economy from consumption to investment, and it is because of the lower, shorter interest rates the consumption is high and we have higher, longer interest rates as investment is discouraged. If we can have that shift it will be better. I think it will arrive sooner or later because basically the problem of UK financial policy was lack of credibility.

In the past four years we have had a good macro-economic framework, but perhaps when a new Government come to power I am afraid politics requires that an extra effort of credibility be made by a Labour Chancellor; and I think that is what forced the hand of my right honourable friend and he gave the Bank of England independence. I am hoping that the monetary policy committee will add the right mixture of opinion and discretion to the Bank of England which I think a central bank's independence alone will not guarantee. So I am looking forward to the members of the monetary policy committee.

Now the noble Lord, Lord Harris of High Cross, for whom I have great admiration, suggested a few names as to who ought to be on the monetary policy committee. One of the things that one has to do in these matters is to make quite sure that people who are appointed to these places are not too friendly with the Government, otherwise they lose independence, while monitoring the activity formally. Of course, if you appoint your friend to an independent position, as happened to Thomas a Becket, there could be murderous consequences.

I have a suggestion which may appeal to some members of the party opposite--that the right honourable Member for Rushcliffe would be eminently qualified to be the next Governor of the Bank of England, if not a member of the monetary policy committee. That would give him something better to do than leading the party opposite.

I welcome the withdrawal of bank supervision from the Bank of England. Again, as I have said in the past, the Bank of England has not shown competence in this matter and therefore it should not supervise. Although it did try in the past year to get Arthur Andersen to look after its surveillance systems and that did improve matters a little, I do not think it was good enough, and I hope that some expertise in the Bank can be used by the new SIB. But I think it will be a good idea for the Bank of England not to supervise.

When it comes to an expanded SIB I have to say this: this will be the first experiment of any major financial market anywhere in the world where a single authority will look after banking supervision, building societies, insurance and the standard stock market. I think Sweden and Denmark are the only two countries who have it all under one roof. We must be very careful, because there is going to be a lot of sorting out and co-ordination to do between now and when we get the system ready. And in the meantime we shall have to keep an eye on the

21 May 1997 : Column 472

ball about the main task of regulation when trying to set up a new system since the transition is going to be a problem.

There is another matter which I hope will be taken into account. A lot of financial innovations take place, new products come up in the market, and if you make it too rigid new products will escape the system. You have to have a system that is flexible enough to take account of new product innovations but at the same time does not discourage competition. As the noble Lord, Lord Tugendhat, said before: do not be afraid of failure.

Lastly, I shall not attempt to say anything with regard to a single currency because that will take far too long. When the new Budget is introduced I want to add a small request to my noble friend on the Front Bench. I hope the Government will give time for a debate on the Budget as we have had in the past immediately after the Budget has been introduced. I have one caveat. Windfall taxes will be all right. However, I think that the problem with the labour market is more complex than we used to believe three or four years ago. When we come to look at the Labour Force Survey or the claimant count, we see that the labour market is running rather tight and not loose. In the past four years, if you look at the unemployment of youth (from the ages of 16 to 25), 348,000 young unemployed people were taken off the unemployment register and 600,000-odd are left. At this stage one must begin to think carefully. When jobs are created and when people are taken off the unemployment register, it must be done in a way that does not create inflationary pressure on the economy. It seems heartless to say that, but one must say it, because soon there may be a problem and one may end up spending money without creating new jobs, or creating jobs which lead to considerable labour market tensions.

I believe that, on the whole, a very good start has been made by our team and it can only get better.

9.8 p.m.

The Earl of Harrowby: My Lords, for the second time, I have discovered that there is considerable advantage in being last on the list of Back Benchers to speak. The House tends to fill up in case the speaker sits down rapidly and the Front Bench are found to be absent. I wish to make only one point, which I have made previously, so I shall not detain your Lordships for long.

We have had a great deal of discussion in a fascinating debate and frequently it has turned on the single currency. It has surprised me that there is an assumption--the Minister who opened the debate, the noble Lord, Lord Clinton-Davis, first made the assumption--that there can be only two answers to whether we should go in; yes or no. However, that does not mean that there should be only two answers to the course of action we should take. I submit to your Lordships that it is worth carefully examining whether there is a mid-course--I believe that there is--which is not one of weakness. It is that in the year 2002 the euro should be legalised.

I was first discussing the problem with Barclays Bank 10 years ago in connection with the ecu. Then came the recommendations for the hard ecu, which received

21 May 1997 : Column 473

considerable support in this country. However, the recommendation was dropped because our partners had no enthusiasm for it; they wanted to travel the federal road and I can understand that. They discouraged us and we dropped the idea.

I submit to your Lordships that that possibility represents a very sensible way out for us. If we legalise the euro in 2002--I believe that it will not happen by that date because for various reasons not many countries will match up to the conditions, but that is a different subject--it is worth considering whether we should not do so alongside sterling, which would please the Euro-sceptics no end. Incidentally, I was slightly amused to hear my noble friend Lord Pearson of Rannoch describe himself as a mild Euro-sceptic. I thought that that was a bit of an understatement. I am sorry that he is not here to hear that.

Nevertheless the move would please the Euro-sceptics; it would be the end of submission to the European Central Bank; it would be the end of surrendering one's gold reserves and foreign currency reserves; and it would take away so many of the objections which the Euro-sceptics rightly have--I believe that they have a very good case. Furthermore, it would please our Europhile colleagues and it would please our business partners in Europe.

It emerges time and again that we are in danger almost of regarding Europeans as our enemies. For many of us, they are our personal friends and business partners and we do the bulk of our business with them. The move would please them and it would be a halfway house towards Europe. It would be much better than saying "No, we won't have anything to do with the common currency".

Above all, the euro would float against sterling; above all, it would obviate the need for a referendum because the British public would be deciding for themselves. If the euro were strong and were a sound currency, which it might not be, over the years people would gradually do more and more business in the euro and less and less in sterling. If, on the other hand, it was not a success or had patches of weakness people would move back to sterling.

The first question people ask, which I submit is not valid, is, "Is it practical?". It is perfectly practical. In fact, it will happen in tourist areas whether we like it or not. There will be a dual currency situation where the euro will be prominently and regularly offered. Above all, it happens in our country already. It happens all over the world. In Moscow, it is happening every day against the dollar. On the Canadian/American border two currencies run side by side. In Mexico, there is the same situation. In our country, it happens on the Ulster border.

There is no practical reason why, with modern machinery and equipment, you cannot run two currencies side by side. I am not being dogmatic about this subject but there are so many advantages in that situation. The issue does not arise yet. Although we must prepare for it, it will not arise in practical form until the year 2002. But I submit to the Government that that proposition is well worth examination.

21 May 1997 : Column 474

9.15 p.m.

Viscount Thurso: My Lords, I begin by joining with other noble Lords, particularly on these Benches, who have congratulated the Government on their outstanding victory. It is a great pleasure to see so many of our erstwhile friends from the front.

I offer also my congratulations to the noble Lord, Lord Clinton-Davis, on his ministerial appointment. He returns to the Department of Trade. In fact, it is a rather overdue promotion since I believe that when he was last at the department he was a Parliamentary Under-Secretary of State and he is now a Minister. Since I came into your Lordships' House not so long ago, I have formed a very high regard for the noble Lord. I have watched him at the Dispatch Box on this side of the House on many occasions. If it is not a youthful presumption, perhaps I may say that I have very high hopes for him now that he is on that side of the House.

I also wish to congratulate the noble Lord on his speech. In the extremely unlikely event that I ever found myself at a Government Dispatch Box, it is exactly the sort of speech, or very much the sort of speech, that I should like to make. I particularly liked some of the phrases he used with regard to the overall vision of the nation and the feeling of renewal. I think he used the phrase, "the vision of national renewal".

I offer to your Lordships two points. First, in his remarks, the noble Lord used the word "partnership". He spoke a great deal about partnership of various kinds. I should like to see the Government use the word "leadership" more often, particularly when it comes to small businesses and the sector of small business that I am in; that is, tourism. By definition, small business is very much fragmented and we need leadership from the Government. All too often I felt that the previous Government used the word "partnership" to hide their dislike of taking a lead. Therefore, I hope that this Government, as I am sure they will, will take on leadership as well as partnership.

Secondly, the words "humility" or "humble" have been much used by the Government. Indeed, on the second day of the debate on the Address, the noble Lord the Lord Privy Seal said:


    "This new Government are humbly aware of the hopes and expectations which the electorate has placed in them ... As a government with such a massive majority in another place, we are, I believe, under a duty to use that power sensibly and wisely in the execution of our mandate".--[Official Report, 15/5/97; col. 30.]
In all humility, perhaps I may offer one point on that. Our rather quaint voting system allows 44 or 45 per cent. of the national vote to give 65 per cent. of the seats. It could well be argued that in cases of very fundamental change, particularly constitutional reform, that is not necessarily a sufficient mandate.

However, if you add to that the 17 per cent. who voted for the Liberal Democrats--and we agree, I think, on some 80 per cent. of constitutional reform--then there is a very clear mandate for change. Therefore, in a spirit of consensus and co-operation, I ask whether it is better to have 80 per cent. of the reform with 65 per cent. of the popular vote than 100 per cent. of the reform with 45 per cent. of the popular vote. Let us work on the common ground.

21 May 1997 : Column 475

I am delighted to congratulate the noble Baroness, Lady Jay of Paddington, although I was fascinated to discover the Minister of Health replying to a debate on industry and economic affairs. It is a rather novel approach to combine health, the DTI and the Treasury. If I may borrow a phrase which my own industry, the health resort industry, currently uses, it is a rather holistic approach to our national well-being. I look forward to her remarks.

The noble Lord, Lord Mackay of Ardbrecknish, was in his usual sprightly form. He is a great debater and I always enjoy listening to him. But his debating style is rather like a well-executed Scottish reel. There is lots of style, much movement, lots of euching, and at the end you find that you are back where you started.

I should also like to congratulate the two maiden speakers. The noble Earl, Lord Cork and Orrery, spoke with authority and showed his great commitment to his chosen field of engineering. I felt most sympathetic to much of what he said. I rather worried about his criticisms--or almost criticisms--regarding economists when he said that no two economists ever agree, especially as my noble friend Lord Dahrendorf was due to speak after him. Indeed, I observed that my noble friend Lord Dahrendorf, the noble Lord, Lord Desai, and others seemed to agree in today's debate.

The noble Earl, Lord Derby, gave an inspiring and positive view of Liverpool, which his family has served extremely well. Given his Liberal antecedents, about which he spoke, and his praise for the city, which I believe has had a fairly substantial Liberal Democrat presence in local government, perhaps I may say to him that, if ever he feels like coming home, he will receive a warm welcome. I should also tell the noble Earl that I knew his predecessor well, although not actually in this House. He was a frequent guest at Claridge's when I worked there as a junior receptionist and I showed his Lordship to his room on many occasions.

There have been many fascinating contributions to today's debate. I have greatly enjoyed listening to all the speeches. In particular, I shall pick out the contribution made by my noble friend Lord Dahrendorf. The point he made, which was echoed by the noble Lord, Lord Desai, regarding the difference of feeling in the country between the micro and the macro economy was well made; indeed, it is one that should be well taken. On the macro level, there is no doubt that we are apparently doing quite well. However, when you go out to talk to people on the doorstep it becomes quite clear that something has gone wrong at the micro level. When a taxi driver in Luton of some 50 years of age who is running a firm of minicabs tells you that, for the first time in his life, he is going to vote Labour and not Conservative, you understand that that micro-economic level really has impacted deep into the nation.

I also felt that my noble friend's comments in regard to figures were extremely well made. I am afraid that I must confess that I shall be quoting some figures. However, I sincerely hope that I shall not cause that bell, to which my noble friend referred, to be rung. With his customary style, my noble friend Lord Ezra put what

21 May 1997 : Column 476

I felt to be the case for the macro economy extremely well, especially as regards stability and investment. If I may, I shall return to that aspect a little later.

When I put down my name to speak in the debate it had been my intention simply to ride my own favourite hobbyhorse of tourism. I did not realise at the time that I would be given the honour of winding up from this Front Bench. Consequently, perhaps I may crave your Lordships' indulgence to speak for a few moments on my own subject. The tourism and hospitality industry is one of the major employers in the country. Indeed, in 1996 some 86,000 to 87,000 new jobs were created in the industry. That is more than the entire manufacturing sector in that year. The industry currently employs about 2.5 million people, which is equivalent to 11 per cent. of our national workforce. The industry spend is currently £50 billion, which is equivalent to 10 per cent. of annual UK GDP.

For the future, it is estimated that some 130,000 new direct jobs will be created before the end of the century and, indeed, the immediate previous Secretary of State at the Department of National Heritage estimated that something in the order of 1 million jobs would be created over the next 10 years. I have been told that the three great growth industries throughout the world are predicted to be telecommunications, information technology and travel and tourism. Britain has a substantial tourism industry. We are world leaders. It is therefore essential that this position is maintained and reinforced and that the Government are committed to supporting it.

While in Opposition, Labour produced an excellent policy document entitled Breaking New Ground. The document was largely the work of the then spokesman in another place, Tom Pendry, and clearly reflected the considerable time and trouble he had taken to consult within the industry. I was very disappointed that when the appointments were announced for the Department of National Heritage no place had been found for him since, through his tireless work, he has gained the trust and respect of the industry. I must tell the Government that within the hospitality and tourism industry high expectations have been created. It is important that those expectations are fulfilled. For most of the past Government's life tourism received little or no attention. It was only in the past few years that the industry saw itself being taken seriously and felt able to join in a constructive dialogue with Government. It would be a great shame indeed if that were to be reversed.

However, I have to say that I am fearful. I scanned the list of new appointments as they were being made with a growing sense of disappointment as no mention of tourism was made within the Department of National Heritage. Indeed, it is most disappointing to see that in the list of Principal Officers of State of Her Majesty's Government printed in the Official Report of 14th May the Department of National Heritage no longer contains any mention of tourism. Furthermore, the new Secretary of State has received wide publicity, and has spoken considerably, and so far as I am aware, has not yet made mention of tourism, concentrating instead almost wholly on the film industry, the arts and the cultural side of his department. I very much hope that that is not an

21 May 1997 : Column 477

indication of the relegation of tourism and that we may look forward to that omission being corrected in the near future.

It seems clear to me that the focus of the Department of National Heritage is now firmly towards the cultural aspects of the department. That may not be a bad thing. If I may offer a personal suggestion to the Government, and one which I hope they will take constructively, I would say that it may well be right that the Department of National Heritage should become more culturally focused. Perhaps the time has now come for the formidable industrial force of tourism in Britain to move back within the Department of Trade and Industry. And that is my small riding of my personal hobbyhorse.

I now turn to the main subject of the debate. As I said at the outset, there is much in the gracious Speech upon which to congratulate the Government, and much which I shall look forward with pleasure to supporting. In particular, I wish to mention the minimum wage. When I spoke in the debate on the Address last October, I said that I believed the minimum wage to be a necessity if the jobs we are to create are to be sustainable and worthwhile. I simply cannot understand the logic which says, as so many managers do, that the biggest problem is that we do not pay people properly or train them enough; and in the same breath we vehemently oppose the most logical methods of remedying those ills. I also told your Lordships that in my own company I had introduced a minimum wage of £4 an hour.

In the Financial Times shortly before the election, I think it was Friday, 25th April, there was a letter from Professor Alan Walters in which he sought to argue that the minimum wage was immoral. If I understood his argument correctly, it was that the creation of the minimum wage meant that fewer people would do the same jobs for more money and consequently fewer people would be employed. I found that argument to be so daft as to confirm my view that the best place for economists is in institutions--academic institutions, that is.

What I find immoral is the persistence in the creation of jobs which are so ill rewarded that they are a form of institutionalised slave labour. It is essential to create jobs in quantity; but it is also crucial to create jobs of quality. What Professor Walters missed completely is that in the real world of companies it is not the amount you pay to any individual that counts but the total payroll cost. The introduction of a minimum wage means that the people at the bottom of the company are guaranteed a minimum income. Faced with that, I believe that management will simply rearrange how it spends the total package, most probably by reducing differentials. It is perhaps a little too much to hope that the directors will forego their annual bonus, but we live in hope. Certainly in my company the effect of the introduction of our £4 an hour minimum has been most interesting. The total payroll has remained within the budget that we set but some of the more arbitrary and archaic differentials which existed have ceased to be. Furthermore, when I wrote to all the staff to explain to

21 May 1997 : Column 478

them what we were doing and why we were doing it, it was widely accepted as being perfectly just and understandable.

Earlier this week I had an opportunity to speak to the chief executive of a company which is probably the largest employer of staff in the hospitality industry. I asked him what the effect of the minimum wage would be on his business. His response was to say virtually none. In my view, therefore, the threat that the minimum wage will either destroy or prevent the creation of jobs is in my view complete bluster.

The key to a successful business remains successful people. In order for people to succeed at whatever level they operate within an enterprise it is essential that they are well equipped with good training. Furthermore, training is not about providing people with a skill and then forgetting about them; it is a continuous development process. My noble friend Lord Ezra spoke of "employability". I refer to precisely that. The training budget in a business is to people management what depreciation is to building management--it is a necessary and vital expenditure that must be made each year if the human resource is to be properly maintained. I therefore warmly welcome the statement in the gracious Speech that the education of young people will be the Government's first priority. Without doubt, a well educated workforce is one that has the potential to receive training. Although the gracious Speech did not mention training specifically, I believe that the Government are thoroughly committed to it. I suggest to them that the policy we advocated in our manifesto of the remissible training levy may well be a useful tool in achieving our mutual objectives.

I turn briefly to the thorny question of the social chapter. A moment ago I described the noble Lord, Lord Mackay of Ardbrecknish, as debating like a well executed Scottish reel. I have to say that the noble Lord, Lord Pearson of Rannoch, debates rather like line dancing--endless repetition of monotonous steps requiring great effort while remaining in the same place. I am sorry he is not in his place and had to leave earlier, as I should have liked to say that to his face. He strikes me as being to the Conservative Party what the Militant Tendency used to be to the Labour Party. He seems single-handedly to be trying to sink any form of recovery.

The last Government made a great deal of their opt-out from the social chapter and rather like an overbearing nanny threatened the infant child with the bogey man and warned us repeatedly of the dangerous evils contained within it. When I first read it I wondered whether Members of that Government and I had read the same document. My noble friend Lord Jenkins of Hillhead put it very succinctly in his remarks last Thursday when he said:


    "As a matter of fact, the social chapter has been a greatly exaggerated King Charles's head: it does not do all that much for welfare, but nor does it do all that much damage".--[Official Report, 15/5/97; col. 41.]
The significance of signing up to the social chapter is that the Government have sent an extremely important signal to Europe that we are opting in. That is the real value of their action. I was delighted, listening to the

21 May 1997 : Column 479

Chancellor of the Exchequer's speech to the CBI on television last night, to note the very great emphasis that he placed on Europe, something of which British business is well aware and has known for some time. Everything contained within the social chapter as it currently stands is simply good business practice and human resources management. I have no fear of it whatsoever.

In conclusion, I have listened to some of the debates on all of the days, and I listened to today's debate almost in its entirety. I have been struck by the uplifting feeling that seems to have been derived from this gracious Speech. It reflects the mood of the country. I do not think it is any exaggeration to say that there is a great mood of renewal and a great mood of optimism throughout the land. It is a credit to the Government that in so short a time they have achieved such a revival of the national spirit. However, there is a danger with great expectations that the higher the expectations the greater must be the delivery if one is not to create disillusion. I am sure that the Government will deliver. But, if I may, I caution the Government that, while spin is fine in opposition, once you are in the driving seat it has a somewhat different connotation.

I was struck by a quotation which I read recently and which, not inappropriately, comes from the New World. It is from Oliver Wendell Holmes Junior and I feel that in certain ways it sums up the mood of the nation:


    "It is now the moment when by common consent we pause to become conscious of our national life and to rejoice in it, to recall what our country has done for each of us, and to ask ourselves what we can do for our country in return".

9.35 p.m.

Lord Fraser of Carmyllie: My Lords, I begin by congratulating the noble Lord, Lord Clinton-Davis, and the noble Baroness, Lady Jay, on their appointments to high government office. In balmier days I used to play golf with the noble Lord, Lord Clinton-Davis, and on those occasions he invariably got the better of me. However, given the responsibilities now placed on him, if he has the odd afternoon off I have no doubt that in the coming years his handicap will not improve and I might have occasion for revenge. I congratulate the noble Lord. If in his time as Minister for Trade he becomes a greater expert than I on the most appalling waiting lounges at airports around the world, I shall willingly cede that position to him.

I say to the noble Baroness, Lady Jay, not as a political observation but on a personal basis, that I regret her elevation to high office. I have had occasion to work with her in organisations outside Parliament and I am sorry that, because of her promotion, it will be necessary for her to resign. I believe that she discharged her duties outside with great distinction and energy.

I too, at one time in my career, was a health Minister. Indeed, in the history of the National Health Service, coming from Scotland where health spending is about 23 per cent. higher than in the rest of the United Kingdom, I can claim to be the highest spending health Minister in the history of the NHS. I have to reflect though that at the end of that period, I received a public approval rating of 8 per cent. However poorly

21 May 1997 : Column 480

the noble Baroness discharges her duties as health Minister--and I do not suggest that she will--I have to reflect ruefully that I have no doubt that her rating will be better than my 8 per cent.

I join in paying compliments to the two maiden speakers. The noble Earl, Lord Derby, is a passionate and powerful advocate for the city of Liverpool and wider Merseyside. I have no doubt that the city ought to be grateful that he has continued the tradition of his family in supporting it. I have no doubt that your Lordships' House will continue to hear that powerful advocacy.

I also welcome the powerful advocacy of my noble friend Lord Cork and Orrery for the profession of engineering. I confess that as education is being highlighted at the moment, it seems that we need voices such as his since he specialises in particular aspects of the profession. I reflect with some dismay that when I was Minister for the north-east of England it was possible to find that a hairdressing course would be at least four times over-subscribed. However, the new and exciting developing university of Robert Gordon in Aberdeen runs an excellent course on offshore engineering. I regret that today the course remains under-subscribed. I hope that in this year of engineering excellence we shall hear more from my noble friend on that most important profession.

I conclude the debate on the Queen's Speech for the Opposition. I say to the Leader of the House that I thought the debate began badly. Making one reference to the Labour Party manifesto proposal to exclude the hereditary elements in your Lordships' House from voting was bad enough in its gloating form. To have it expressed twice seemed to me, to say the least, unnecessary. If it were in any sense intended to be a threat or a warning to us that we should be compliant or that those of my noble friends who are hereditary Peers should keep their silence, let me say that he is wasting his breath. We shall continue to discharge the duty of a second Chamber, which is to scrutinise and revise. That is not just a legitimate function. I believe that in this Parliament there is every prospect that it will be more necessary than ever. Indeed, as my noble friend the shadow Leader of the House said, we now probably for the first time have a new role: to highlight the arrogance of this Government.

In another place the Liberals seem to me to have been extraordinarily supine. I trust that in this Parliament the Liberals in this House will not show the same attitude. So far, I am encouraged by one of them, namely, the noble Earl, Lord Russell, who yesterday made it quite clear that he will expose the extraordinary volte face exhibited by the Government over social security matters.

I regret having to offer that criticism of the Leader of the House. I wanted to compliment him on what I understand to be his very worthwhile intervention behind the scenes over the referendum Bill. I understand that but for his intervention that Bill would not even have revealed the questions to be put to the people of Scotland or Wales. Indeed, there was every prospect that your Lordships would have been confronted by a

21 May 1997 : Column 481

Henry VIII clause to beat all Henry VIII clauses. If I am right, I applaud the noble Lord for that intervention. So far as I am concerned, it is certainly a recognition from him that his responsibilities as Leader of the House extend beyond a narrow party interest and are duties that are owed to the House as a whole.


Next Section Back to Table of Contents Lords Hansard Home Page