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Lord McIntosh of Haringey: My Lords, as the House knows, I respect no one more than my noble friend, particularly when he speaks on this subject. I respect not only the strength and sincerity of his argument but the degree to which it is founded on personal experience.

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I hope that he will agree that the content of the Statement concentrates more on the encouragement that is given to those disabled people and those lone mothers who wish to take advantage of it to find work for themselves.

Clearly there are wide ranges of severity of disability. My noble friend is right in saying that there are very many disabled people for whom no earning work is possible. I can only say that a very thorough review of the matter is in progress. It will be completed in the late spring. All options will be considered at that time, and no decisions have been taken.

Lord Desai: My Lords, while I welcome the Statement, perhaps my noble friend will say rather more about the fiscal framework that the Chancellor hopes to adopt. I see from the useful background document that government projections for 1998-99 are for investment of £8.7 billion in net capital spending, and the PSBR is only £4.5 billion. That would mean that we are doing better than the golden rule. Is the Government's intention to produce a surplus even by the golden rule, rather than merely a surplus by the old Treasury rules?

Lord McIntosh of Haringey: My Lords, I believe it was David Heathcoat-Amory, who, during his service at the Treasury for the Conservative Party, said that the thing about the golden rule was that it was neither golden nor a rule. I agree.

We do not deliberately seek to improve on the golden rule. The difficulty with the golden rule is that, when we say we are to be constrained by the economic cycle, none of us knows at what stage in any economic cycle we find ourselves. It is not deliberate, but there may be occasions when it may be possible to have higher investment.

Lord Clark of Kempston: My Lords, does the noble Lord agree that the present Government are extremely fortunate in inheriting a very strong economy, in fact the strongest in Europe? Will he explain why, given the buoyancy of our economy--with falling unemployment, increased production and so on--it was necessary to increase taxation by 17 taxation matters, and particularly so far as the long-term economy is concerned? There are long-term savers in pension funds--which are the long-term investors. Why was it essential to penalise them by £5 billion per year so far as income is concerned? Finally, will the noble Lord give the House an assurance that, if there is any harmonisation in taxation between this country and our European partners, there will not be an extension of VAT on food?

Lord McIntosh of Haringey: My Lords, on reflection, I am glad that both I and my right honourable friend the Chancellor refrain from the sort of "yah-boo" cross-party, cross-Chamber comment that has given rise to the noble Lord's contribution. We did not abuse the previous government. We recognised, as I have always recognised, where there was virtue in what they did. At the same time, we have to recognise that the boom-and-bust instability that was characteristic of the

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previous government resulted in the loss of thousands of businesses and millions of jobs; that we inherited productivity at a level more than 20 per cent. lower than that of our major competitors; that we inherited an economy in which 3.5 million families have no one in work; and that we inherited a tax system that is blatantly and apparently unfair and is seen to be unfair by everybody who pays tax. Under those circumstances, and for the reasons that I have already given, we believe that our judgment on tax policy in the July Budget was correct.

Lord Monson: My Lords, perhaps I may take up one small point in the Statement. One can well understand why the Government propose giving £50 a year towards the fuel costs of pensioner households on income support. Nobody would quarrel with that. But will the noble Lord, Lord McIntosh, say why the Government propose to give £20 a year, which is presumably not taxable, to all other pensioner households, including those pensioners, of whom there are a great number, who can afford to take round-the-world trips on the "QE2" or 20-minute lunch-time flights on Concorde for £350? Is not the idea that all men become poverty stricken at the age of 65 and all women at the age of 60 a relic of the days of Andy Capp?

Lord McIntosh of Haringey: My Lords, as one who is five months off the age of 65, I would say that perhaps there is some sense in which people become more poverty stricken at the age of 65. The balance between means-tested and universal benefits contained in the fuel policy announcements which I have just repeated seem to me to be about right. The biggest challenge is that so many pensioners who, because of their economic circumstances, are entitled to benefits do not take advantage of them. One of the measures which my right honourable friend proposed was increased efforts to secure better take-up of benefits. I hope that the noble Lord would agree that that is right and that the balance is right.

Baroness Thomas of Walliswood: My Lords, perhaps I may ask the Minister a question on a slightly different subject allied to the previous question. He repeated the Government's commitment to their priorities of education and health, with which I do not disagree. When will improving personal social services for the elderly become a government priority? How do the Government expect to assist that arm of social care when authorities are criticised if they do not concentrate all their care on those most desperately in need, thereby leaving large numbers of people who could be helped to a healthier lifestyle completely unattended?

Lord McIntosh of Haringey: My Lords, it is not a question of when; it has already happened. Announcements already made about further funding for the National Health Service made it clear that a considerable part of that funding is to be allocated by health authorities to the social services departments of local authorities for the needs of those who are in a better position and prefer to be at home rather than in hospital when they do not need medical treatment. The

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issue of long-term care for the elderly--to which I think the noble Baroness is referring--is not one to be solved in six months. It is one of the major problems of developed societies; we take it with a great deal of seriousness. But we are not in a position to give answers to these major questions at this time.

Baroness O'Cathain: My Lords, I welcome the openness of the Statement and the fact that there will be continuing debate on the suggestions raised in it. I look forward to reading it. I believe that the Statement included the words "pro-business" and "pro-investment". Does that mean that the Government are prepared to reconsider some of the taxation measures taken in the last Budget which are neither pro-business nor pro-investment?

Lord McIntosh of Haringey: My Lords, I challenge the premise of the noble Baroness's question. I believe that the measures that we took in the last Budget were pro-business and that there is wide acceptance among the business community that that is so.

Baroness O'Cathain: My Lords, the real point is the effect of the measures upon pension funds. Many people say they are neither pro-business nor pro-investment.

Lord McIntosh of Haringey: My Lords, I rather thought that the noble Baroness was going to return to the removal of double tax credits. I do not in any way apologise for the removal of those. They were an anomaly that had to be dealt with quickly. I believe that the announcement which I have just repeated of the abolition of advance corporation tax will be welcomed by the business community and I think that it puts our decision in July into the proper context.

Lord Davies of Oldham: My Lords, my noble friend is to be congratulated on his riposte to the Opposition. He might have added that a sense of unfairness and gross inequality has been felt by the nation over the past 18 years about the general distribution of income and wealth.

One point raised by the Opposition today deserves further consideration. The problem with an early consultation exercise is that people may make dispositions against their judgments of what the Chancellor intends to do. For example, will not the proposal with regard to reducing VAT on the insulation of houses lead people to delay such work until that proposal is implemented? Or is there an indication that the measure will be backdated?

Lord McIntosh of Haringey: No, my Lords, there is no indication that it would be backdated. But we are talking about a period of only a few months. My understanding is that most energy-saving improvements take place in the second half of the year rather than in the first half when people are expecting the weather to get better rather than worse.

My noble friend is right in saying that there has been a sense of unfairness and injustice about economic policies over a considerable period of years. The

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Government believe that the most direct way to relieve poverty and therefore to remove injustice is by getting more people back to work.

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