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Baroness O'Cathain: Oh!

Lord Ewing of Kirkwood: I apologise. For the avoidance of doubt, I have never seen the noble Baroness at seven o'clock in the morning in her dressing gown. I apologise to the noble Baroness.

I turn quickly to the structural defects, as I see them, in the Scottish economy. There are serious structural defects that I would hope the incoming Parliament--of which my noble friend Lord Watson of Invergowrie will be a member, having been elected as the Labour candidate for the Glasgow constituency of Cathcart--will address. Down the years these structural defects have become more and more pronounced. In our history the main industries of coal mining, shipbuilding and heavy engineering have all gone. They were replaced during the Macmillan government in the mid-1950s--to be fair to that Conservative government--by the car industry at Linwood on the one hand and the light truck division of British Leyland at Bathgate on the other. That was to be the new industrial horizon in Scotland. They have gone as well. When they were gone they were replaced by the electronics industry, the micro-chip industry and the semi-conductor industry.

My noble friend Lord Bragg, in an excellent maiden speech yesterday, referred to Silicon Valley in California. When the micro-chip industry and semi-conductor industry came to Scotland, Scotland was nicknamed Silicon Glen. But there is a difference between Silicon Valley and Silicon Glen--and it is a very important difference. Silicon Valley kept the hi-tech jobs and Silicon Glen got the low-tech jobs. One of the reasons that the semi-conductor and micro-chip industries in Scotland are going through the difficult phase they are experiencing now is that these were low-tech jobs and not hi-tech jobs.

We are now faced with a massive influx of call centre jobs. Scotland is soon to become the call centre capital of Europe. Those jobs are welcome. I do not want any misunderstanding about that. They are the difference between very high unemployment and unemployment which the Government are beginning to manage and get the better of. But in themselves they mask a serious underlying structural problem in the Scottish economy.

In the late 1980s and early 1990s one million manufacturing jobs were lost in this country. For a year, interest rates were at 15 per cent. One million manufacturing jobs were lost, never to return. In case noble Lords think that massive capital investment brings about the re-creation of those manufacturing jobs, I shall disabuse them of any such thought. In my former parliamentary constituency of Grangemouth, BP, with which my noble friend Lord Simon is familiar, has announced in the past month a massive capital investment of £500 million. There is to be a new ethanol plant, an extension of the ethylene facility and the

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construction of a power station. When all that is finished, and after the £500 million of investment in the petro-chemical industry, because of the closure of an ethanol plant at Baglan Bay in Wales there will be 70 fewer jobs than there are at the present time.

I want the new Scottish parliament to seek a much higher quality of inward investment than has been attracted to Scotland over the past 20 years. As I drive from Edinburgh airport, along the M.90 motorway, to my home on the east coast of Scotland, I pass that massive plant that was built for Hyundai. It stands empty. It has car parking space for 2,000 cars. Two thousand jobs were promised but not one materialised. That was not just because of the collapse of the Korean economy but was primarily as a result of the low quality of inward investment that was attracted in that instance. Instead of the new Scottish parliament turning its attention to the reorganisation of the eight police forces in Scotland, it should leave the police alone to get on with the job of fighting crime and the drug problem. It should turn its attention to the much more serious long-term problem of the structural defects in the Scottish economy.

I conclude with two points. I listened carefully to my noble friend Lord Shore. One of my happiest times during my years in both Houses was when I worked with my noble friend shadowing the Department of Trade and Industry. I listened to my noble friend Lord Stoddart. I resile completely from his conditions for meeting the test of patriotism. It is dangerous for any individual to lay down conditions so that if a person fails to meet those conditions or takes the opposite view he is not regarded as a patriot. That is a complete mistake. It is 27 years since we joined the Common Market and 25 years since we had the referendum on whether or not to stay in. In listening to our debates I have been driven more and more to the conclusion that the question we shall have to put to the people of this country is not whether we join the single currency but whether we want to continue to be part of Europe. We cannot be sour partners. We have to be either enthusiastic or we have to face up to the realities of the approach that is being taken by those who do not want to be part of Europe.

I shall leave my comments at that. I have abused the courtesy of your Lordships this evening. I should be very grateful if my noble friend Lord Simon, because I know that he is not briefed to deal with Scottish Office matters--I have taken advantage of that--could ensure that my comments are passed to his colleagues in the Scottish Office.

8.25 p.m.

Lord Roll of Ipsden: My Lords, I must begin with an apology to the House and particularly to the noble Lord who will be winding up. Owing to a long-standing and now, I am afraid, rather delayed previous commitment, I shall not be able to stay until the end of the debate.

This debate, like others on the gracious Speech, has ranged over many issues, as indeed the gracious Speech did. The gracious Speech outlined a heavy and

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important legislative programme. On that I have little to say at this stage. Like many others, I regret the delay in the setting up of the food standards agency. I hope that the reassuring words which we heard yesterday will prove to be right. If funding is the issue, I find it difficult to believe that an effective and equitable method cannot be found. In my old days at the Ministry of Food, and later in the enlarged Ministry of Agriculture, I always found the leaders of the food distributive trades to be co-operative and enlightened. Therefore, I hope that we shall soon see the food standards agency on the statute book.

As regards the freedom of information legislation, what we heard yesterday was perhaps less precise and less reassuring. Obviously, this will be a much more circuitous and prolonged process, but I profoundly hope that the measure will not fall by the wayside.

The words "modern", "modernise" and "modernisation" enjoy great favour with the present Government. I have no quarrel with that. But if the Government are really, in the words of the gracious Speech, "to modernise" Britain, it is important to add to the more mundane measures which we are constantly discussing something of the order of a freedom of information Act. I cannot believe that that would really jeopardise the confidential nature of the relationship between Ministers or between Ministers and officials. Indeed, it may well be that the enormous volume of rumours that now surround these matters and that appear in the public prints all the time may be braked to some extent by the existence of a freedom of information Act.

The major part of the legislative programme is occupied by reform of welfare provisions. This corresponds to one of the major priorities of the Government, and that, too, I thoroughly support. They are difficult issues and will no doubt produce a prolonged process of debates in both Houses, which has in fact already started. Whether, when it is all done, we shall really have a fundamental restructuring of the welfare state remains to be seen. I confess to a slight doubt about that point because what is lacking at the moment is some concern about what I might call the more intellectual--dare I say?--ideological, aspects of this matter; namely, poverty and equality and the gap between poverty and wealth. These are difficult matters.

Poverty is too serious a subject to apply to it the famous remark by Mark Twain about the weather: everybody talks about it but nobody does anything about it. However, I believe that we shall not be able to escape this problem, which is still with us and is getting worse. Recently we were starkly reminded of that by the report of the former Chief Medical Officer of Health, Sir Donald Acheson, which produced some facts which I hope no one in the House would be prepared to ignore in regard to health, ill-health, expectation of life and so on. I believe that this will have to be tackled. It will probably have to be tackled not in an intellectual and ideological manner, but rather more in what I might call a technical and almost mechanical manner.

I am glad that the Government have decided to ask Mr. Martin Taylor to look into the whole question of the relationship between taxation and benefits, which is

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one way of getting into this problem. The matter has been discussed over the years and many imaginative, innovative but possibly not practical measures have been produced from time to time. I hope the current little local difficulty will not prevent Mr. Martin Taylor from producing his report and will not prevent the Government from giving their views on it in due course.

On broader aspects of economic policy, the gracious Speech--as has already been pointed out by the noble Lord, Lord Shore, among others--has relatively little to say. When I spoke in the economic debate on the Address last year during the first debate in this Parliament, I supported the Government against much criticism for having adopted a two-year standstill on taxation and spending. I did so not only on the ground that was so often mentioned by a former Labour Prime Minister--namely, that it was right that the government should have a chance to look at the books, as Harold Wilson was often quoted as saying--but also because I felt that after 18 years out of office a New Labour Government (New Labour in every sense of the word) was apt to be confronted with a flood of claims which it might be difficult to resist without the existence of the standstill.

I think this forbearance has been justified. As the Chancellor has announced, we shall shortly have before us a spending programme of £40 billion which is to be concentrated mainly on the Government's two priorities of health and education. As has been pointed out by a number of speakers--including the noble Lord, Lord Barnett--the present state of the public finances, as the gracious Speech rightly points out, is relatively good and provides a basis on which perhaps a more forward policy can now be pursued. We can then at the end of the day see whether in terms of household management the Government have done their job.

But, of course, macroeconomic policy--or economic policy in the large--is not only a matter of household management; it is also a matter of what effect it has on the economy generally, as has already been pointed out by a number of speakers. On that the gracious Speech has relatively little to say. It speaks of interest rates, or at least it mentions the fact that the Bank of England under its newly gained independence is now responsible for fixing short-term interest rates. This is a controversial subject. I, for one, support what has been done. A few years ago I chaired an independent panel on this very subject and naturally I was gratified when the legislation brought forward by the Government, and now embodied in the Bank of England Act, reflected to a large extent our recommendations.

I believe that there is a certain amount of misunderstanding about this. We are sometimes told--and some echoes of this view have been heard during this debate--that the Monetary Policy Committee of the Bank of England is not mindful enough of the needs of the economy for growth and employment. I believe that is to some extent misconceived. The remit of the Monetary Policy Committee is stability of prices. As I think the noble Lord, Lord Barnett, pointed out, it is supposed after that also to give some consideration to the Government's general economic policy. But not

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only does looking after growth and employment not fall directly into its remit, the means available to it to achieve stability of prices are nowadays confined to the movement of short-term interest rates. The quantitative and qualitative direct control of credit has long since fallen into disuse and indeed into disrepute. I think that is right as it is almost impossible even to conceive of a practicable way of doing that. However, this pitting of finance Ministers against central bankers--the one saying, "You must do this through your fiscal policy" and the other saying, "You must do this through your interest rate policy"--is, I think, neither fruitful, nor indeed seemly in the long run.

It is understandable that this now occupies a large part of the public debate. As has already been pointed out, the climate of opinion has changed dramatically from fear of inflation to fear--dare I say?--of deflation, but at any rate, of recession everywhere. Is this to be wondered at with 16 million unemployed in Europe, 4 million in Germany alone? We have heard some rather harsh words about Mr. Schroder and Mr. Lafontaine, but I wonder what we would say about our own Ministers if they were not concerned about a level of unemployment of that order. I believe that we might think somewhat differently about it. I am not saying for one minute that what has been proposed, or thought to have been proposed, by Mr. Lafontaine about this is necessarily right. However, I think it is absolutely right to be concerned about that matter.

Here I come back to the question of what monetary policy can do and what fiscal policy can do. Although this is not the time to go into this matter in any great detail, all I would say is that in my view, for what it is worth, and in my experience, the consequences of both, but certainly of monetary policy, on the economy generally vary from time to time and from country to country. They are not necessarily always the same. What the Monetary Policy Committee of the Bank of England can do with a half percentage point change in short-term interest rates is not necessarily what Mr. Alan Greenspan is able to do with a somewhat similar measure. If you extend that to fiscal policy more generally, you have to look only at Japan. The rate of inflation and indeed the interest rates in Japan are hardly visible. I happened to be in Tokyo on the day when the Japanese parliament in both Houses approved a 500 billion yen appropriation in order to remedy the weaknesses of the Japanese banking system, together with a programme of reform of the banking system. Since then, the Diet has voted something of the order of 200 billion yen to encourage consumption. Has anything happened so far? No, it has not. I do not think I need elaborate here on what would happen if we went in for that: we would have roaring inflation. However, in Japan nothing like that happened. Therefore, a certain amount of caution about these matters is clearly indicated.

Finally, I wish to say a few words about Europe. After the fire and brimstone we heard from a number of noble Lords--no doubt we shall hear some more from the noble Lord, Lord Bruce of Donington--including from noble Lords whom outside the Chamber I would address as friends, but here parliamentary usage makes that

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impossible, I am filled with fear and trembling at the thought of saying anything positive about any aspect of Europe. However, I cannot deny views which I have held for perhaps 50 years and certainly not views which I hold about the euro.

If I remember rightly, the only mention of Europe in the gracious Speech is in relation to enlargement. Enlargement has become almost like motherhood and sliced bread in that everyone is in favour of it. It is not universally welcome on the Continent, but everyone is in favour of it. Unfortunately, owing to the anti-European virus that was injected into the body politic during the previous administration, anything we support tends even today to carry a lingering suspicion that we do so in part at least as a diversionary tactic in order to take attention away from something which is of much more immediate interest to our European partners.

Enlargement is important. The form of the common agricultural policy is very important. Restructuring the institutions of the European Union on the basis of the Amsterdam Treaty or in any other way is very important. However, just a month from now something will happen that will probably be the single most important development in the 40 years of the European Common Market, later the European Community and now the European Union: the euro will be a fact--not perhaps on 1st January, which is a Friday, but on 4th January, which is a Monday and probably the first working day.

Despite the danger of incurring the wrath of some of my colleagues in the House, I must say that I agree entirely with the words of the noble Lords, Lord Newby and Lord Barnett. The noble Lord, Lord Barnett, as chairman of Sub-Committee A of the Select Committee on the European Communities, has done so much to enlighten and instruct us on all these matters. In the previous Session, he tabled a Motion which was designed not to force a decision on the Government, but to encourage the Government to be a little more forthright. That Motion languished on the Order Paper for a long time and now, of course, has gone.

Obviously, we cannot ask for a decision from the Government today. The Government are committed to wait until the next election and then to have a referendum when they are ready to recommend either joining the single currency or not. That is a long timetable. As the noble Lord, Lord Barnett, and others pointed out, that probably means waiting until the end of 2002 or perhaps until the middle of 2003. All right: I cannot help thinking of what the late Nikolai Lenin used to call the "hammer blows of history". It may be that even that cast-iron timetable will have to yield to developments that we cannot yet foresee in the next 12 to 24 months.

Let us assume that that is all it is. I think that the time is rapidly approaching--if it has not already come--for the Government to be a little more forthcoming and more forthright, not so much for the sake of our European partners, but for the sake of our own electorate. We have to prepare the electorate. Today, we have rumour: "This Secretary of State is in favour"; "That Secretary of State is wobbling"; and, "That

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Secretary of State might well be in favour but it is politically dangerous to come out in favour". And so it goes on. I do not believe that such hesitation is the right attitude. Perhaps we should now go in for an old-fashioned "vigorous vodka". I hope that the Government will try, in one way or another, to become more forthright and forthcoming.

With the greatest respect, I must confess that I cannot help thinking of the words of that wonderful, but today not much appreciated, poet Andrew Marvell. Admittedly, he used them in connection with a much more intimate matter: namely, when addressing "his coy mistress", but I cannot help feeling this:

    "Had we but world enough, and time, This coyness, Tony, were no crime. ... But at my back I always hear The euro's chariot hurrying near: ... All right, let them think it's safe and sound Must we wait 'til the media moguls have come round"?

8.43 p.m.

Lord Bruce of Donington: My Lords, it is always a most agreeable experience to listen to the noble Lord, Lord Roll of Ipsden. I entirely agree with him about the necessity for bringing forward as soon as possible a comprehensive freedom of information Bill. If there is one thing that all citizens (of whatever grade) really need, it is access to fact lest they be seduced unduly by myth, by the sheer volume of the press, by the sheer skill of orators and all the rest of it. The more facts we can acquire, the better--and the greater the amount of time we have to study those facts, the better. Some conclusions might be very surprising.

At the conclusion of the first Session of this Parliament, the Government had passed 52 Acts of Parliament--a formidable range of Acts, covering a variety of subjects. Not all of those Acts are immediately operable, but their implementation is, quite properly, to be spread over a period of some three years or so. That is all very acceptable. Indeed, it is perhaps useful to remember that the Attlee government of 1945 to 1950 passed 84 Acts during the same period. They were not exactly idle in the administrative field either. It will be recalled that it was our Chancellor of the Exchequer in those days, Dr. Dalton, who brought forward the Act nationalising the Bank of England and establishing a bank rate of 2 per cent. which persisted for 20 years thereafter. During that time, unemployment never exceeded 3 per cent; inflation exceeded 2.9 per cent. on one occasion only and, on the whole, we did fairly well despite the difficulties of that time.

I put the matter in that setting because sometimes, unless we are aged socialists like me, we tend to forget the past and the contribution that was made by the then government.

Let me say at once that I entirely support the Government's programme as laid down in the Queen's Speech. The programme will take some time to enact and will need much ingenuity and persuasion. I hope that the priorities will be set correctly--that is to say, that the evils and injustices from which so many of our population suffer will receive a greater priority in

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enactment than what I would call "mere constitutional measures" which have an effect on our citizens only over a longer period of time.

We must bear in mind that our unemployment rate is unacceptable. After all the doctoring of the figures has been revealed--and there have been numerous endeavours to indoctrinate the country as to their true nature--according to the International Labour Organisation, unemployment in the UK is running at over 6.4 per cent. The ILO's rate is the latest, lowest possible estimate of unemployment. According to the old claimant rate, our unemployment is now, apparently, rapidly declining, but that is mainly due to a reclassification.

What troubles me and my colleagues a little is that the existing unemployment rate, whatever it may be--and it is certainly a considerable multiple of the official version--seems to be taken for granted. It seems that the old doctrine that "Unemployment is a price worth paying" (which was enunciated by the then government of the Conservative Party) seems to have become more generally accepted, perhaps unconsciously, as the norm, including by some of our own people. However, I believe that the existing rate is unacceptable and that it remains a great sore affecting the whole country and poisoning the lives of millions of our people. It is to solving that that our endeavours should be directed.

We are committed to a programme of reform--and it is a very good one. I repeat that it is one that I support. However, it will need money, whereas we are continually enjoined that we have to have "sound finances"--I believe that is the term--and practise prudence in administration. Those terms have an echo in the distant past, when Mr. Philip Snowden was Chancellor of the Exchequer and Montague Norman was at the Bank. I do not say that they correspond precisely with the words of our present Chancellor of the Exchequer and Mr. Eddie George, but there is a vague echo which we must somehow dispel. So let us accept immediately that in order to implement the Government's programme we must have adequate funds with which to do so.

I respectfully suggest that that should precipitate a ruthless examination of the expenditures that now take place to see whether they are in any way to be lowered so that such things as hospital facilities or increases in nurses' pay can be implemented. Those matters must be examined carefully. With that in mind--noble Lords would expect me to come to this subject--we have to look to taxpayers' money being paid directly into Europe. That is of some importance.

Every year we have a deficit of £2,500 million in terms of cash from taxpayers' pockets that is payable direct to the European Communities. I shall not argue the merits of the reasons for that, but it is a fact. It is also a fact that, year by year, we have an abatement negotiated by the former Prime Minister, the noble Baroness, Lady Thatcher, worth £1,500 million a year. These are not inconsiderable sums.

But the reason why we must take a careful look at them in order that we can have the money to do what we wish to do, is that there are now moves afoot, notably on

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the part of the President of the European Commission, who has come out in forthright terms as advocating the abolition of the abatement that was negotiated on our behalf. I repeat: year by year, on average, it is worth about £1,500 million.

There have also been suggestions that even after that, Britain is receiving a much better deal than is implied by its payment of a mere £2,500 million into Europe every year and that measures have to be taken to correct that position downwards--so much so that it has been suggested, notably by the President of the European Parliament during the past month, that there has to be a new own resources tax for the European Commission. It has not been suggested what form it may take, except that it should be a separately levied tax payable by each country and levied on each citizen in order that the Community can have more funds to spend. These matters are beyond doubt. They are all documented and, as noble Lords know, I have documentation in my possession for practically everything I say and more.

A new proposal was brought forward only a couple of years ago to harmonise taxation. Needless to say, what the Commission meant--it was explained in memoranda which can be obtained by any Member of this House--was raising our VAT levels, which are lower than those in Europe, to the European level. That would involve taxing newspapers, babies' clothes, food and so on. These are all facts, and they are alive and kicking at the moment--so much so that even today our own Ministers were at an ECOFIN meeting discussing the code of conduct in regard to tax harmonisation. The code of conduct was defined in earlier memoranda which I have in my possession as an arrangement that was not binding but was acceptable to member states. Today, in Brussels, Ministers have been discussing the results of the various meetings that have taken place to draw up the code of conduct.

Are we really so naive in our relations with Europe as not to believe that a code of conduct will lead inevitably to tax harmonisation whether we like it or not? It is very simple. All the Commission has to do is to levy it. All that we can then do is to take the matter to the European Court. Two years later the court may decide. When it decides, it will do so on the basis of the preambles to the various Acts that bring the provision in, the recitals and so on, bearing in mind that the whole purpose of the EC, which is bound to be taken into account by the European Court, is ever closer union. Who doubts that the decision would go against us?

It may be said that the United Kingdom can use its veto. No, no, my Lords. I well remember when I had the honour of representing my party on the Opposition Benches challenging the then government on this point. I was assured that the veto would remain. Unhappily, it has been tried before. It happened in May 1982, when Britain exercised its veto. What promptly happened was that the rest of the member states ignored it, so the veto did not hold.

Moreover, European law is interpreted by the European Court of Justice. Its concept of justice is not quite the same as ours. The court can take into account presumed intentions in determining what the law means.

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I therefore hope that we shall receive some assurance that Her Majesty's Government have taken legal advice and are satisfied that they can exercise a veto against any such proposal as I have mentioned. Whether it be VAT, excise duty, income tax or corporation tax is immaterial. If I receive an assurance from the Government today that they are absolutely convinced that the veto will hold, it will considerably ease my mind and, I believe, the mind of the country.

In the meantime, in case all these matters may militate against our being at the heart of Europe, perhaps I may with respect notify noble Lords that there are only two states at the core of Europe; namely, Germany and France. Those two countries concluded the Elysee Treaty in 1963, by virtue of which they undertook to inform one another and arrive at a common position before every meeting of the Council of Ministers. Are we under any illusion that that does not still apply? They are there. They are at the core of Europe. In any case, what does being "at the core of Europe" really mean? On reflection, many may decide that it is a meaningless term, a merely emotive term which has no practical effect. What will happen, unless we are extremely vigilant, is that France and Germany between them will go on being the countries at the core of Europe, with the Commission as their obedient tool.

8.59 p.m.

Lord Nunburnholme: My Lords, the noble Lord, Lord Bruce, talked of the intention of our present Government to use the veto. I remind him that the road to hell is paved with good intentions. Two weeks ago I asked the question: "Would we be equalising our VAT rate on hotel accommodation?" To that question, there was no comment at the time. I no longer need to ask. It has been answered by M. Yves-Thibault de Silguy and Signor Mario Monti in Brussels, with their European tax harmonisation. M. Yves-Thibault said: "The momentum behind economic and monetary union, once the rocket is launched, there is no going back". Mr. Jamieson, of the Sunday Telegraph, wrote last Sunday:

    "Rockets do occasionally blow up and when they do it is on the whole better to not be on board".

I concentrate noble Lords' attention on a fait accompli intended for 1st January 2001. So far, Spain has our fishing grounds. Net agricultural food exporters on the continent have successfully minimalised our farming production by exacerbating the BSE crisis and the ridiculous false market of set-a-side. False marketing can only be upheld for a limited length of time.

I reiterate what the noble Lord, Lord Stoddart, said. There is now the 20 per cent. withholding tax directive, COM (98) 295, to be effective from 1st January 2001 on all interest paid on the international bond market. The US tried that in 1963. The federal rate was set at 16 per cent. The bond market left Wall Street for London the following morning. In 1987 the tax was withdrawn, but too late.

If we implement COM 295, that market will return to New York on the morning of 2nd January 2001. The City produces £1,100 million per annum, employing 11,000 highly qualified dealers from the bond market alone. The City contributes £25 billion to the balance of

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payments plus a further £2 billion on law and ancillary services per annum, four times more than North Sea oil. The City pays more business tax than Wales. Noble Lords might think that no one will gain with none of the tax going into any European coffer. They would be wrong. The pre-eminent international financial status of the City would be weakened and Frankfurt wants that business. How long are we to be forced to accept those polluted laws?

I crave your Lordships' indulgence for my pronunciation: "Europaische Wirtschaftlich Gemeinschaft" translates, I am told, as "European Economic Community." It is an expression used by a previous German chancellor in about 1937, or was it 1934?

With the 48-hour working week being slipped in--federalisation by stealth--there will be an inevitable increase in unemployment, and a large one too. Coincidence or not, last Saturday 4,200 redundancies were announced; on Monday a further possible 3,000 in the City of London, due to the merger of the Deutsche Bank and Bankers Trust.

Was the Government's large majority due to their possible future merit? Alternatively was it by default--negative voting against the Conservative Party? That was probably quite correct at the time. Did New Labour catch the market's ear? To me, it has musical connotations: "Variations on a washing powder." But the wash still needs a dryer--a spin dryer. I do not see the voters ever forgiving or forgetting.

There is one sentence from Dr. Faustus in the play by Christopher Marlowe:

    "How am I glutted with conceit of this".

9.6 p.m.

Lord Jacobs: My Lords, the noble Lord, Lord Ashley of Stoke, was to have spoken before me but he has asked me to express his regret that he had to withdraw because he is unwell.

My noble friend Lord Rodgers of Quarry Bank stated on the second day of the debate on the Address:

    "The Queen's Speech is very strong on the need for economic growth but we will have failed if, by the end of this Parliament, the rich have grown richer but the poor are no better off".--[Official Report, 25/11/98; col. 40.]

The Treasury has stated that this country ranks a humble 11th out of the 15 members of the European Union in terms of national income per head. But in one respect we top the tables: we have the highest retail prices of all the 15 countries. High prices cause the greatest suffering to those on lower incomes. If we could achieve an average reduction in retail prices of 7 per cent. this would be worth more than two years of economic growth.

Is this an unrealistic dream? Are the Government powerless in the face of the efforts by importers, manufacturers and retailers to keep prices high and prevent real competition? Improving competition is the recognised way of lowering prices. The Government have successfully introduced a new Competition Act. I applaud that but I must tell your Lordships that it will

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prove quite inadequate in exposing the informal cartels that manufacturers and retailers describe as price leadership.

Two reasons are put forward to explain high prices in the United Kingdom. The first is high shop rents, particularly in London. They are high but no higher than in New York. If it is high rent that keeps up prices, why are prices not lower in depressed areas in the north of England where rents are low? The second reasons is the strength of sterling. Frankly, I have never understood this, for a strong pound should mean lower prices for imported food, cars and televisions. The Competition Act may not realise the great hopes placed upon it, for high retail prices are seldom caused by provable illegal actions of the retailer or manufacturer. The Office of Fair Trading may require even stronger powers to carry out investigations as they have in the US.

I must declare an interest as an enthusiastic consumer. Take the price of cars. Many noble Lords will be aware that in the UK prices are on average 20 per cent. higher than in the rest of the Common Market. Recently, a UK car manufacturer, when asked about the state of the UK car market, described it as "Treasure Island". I guess that that is treasure for them.

The media have successfully proved that car dealers are afraid to offer discounts on new cars. However, the public are unaware that manufacturers have reduced dealers' margins from the European level of 17 per cent. to just 10 per cent. There is not much room for lower prices there! Car prices are high here because in the 1970s when employers were not permitted to give employees wage increases employees were provided with cars as a perk. As a direct result, more than 50 per cent. of all new cars are supplied to fleet users. These cars bypass the dealers and are offered at discounts of up to 40 per cent. Most manufacturers do not like this arrangement but none dares act alone to halve these discounts for fear of losing their share of the market. As a direct consequence, retail prices have to be kept very high to compensate manufacturers for huge fleet discounts. If these discounts were halved retail prices could come down by at least 15 per cent.

The Competition Act cannot help. I urge the Government either to secure an agreement directly with the manufacturers or to legislate as in the US to oblige manufacturers to supply cars only through dealers. Today, a dealer who sells 1,000 cars a year may receive a discount of little more than 10 per cent. while a 1,000 car fleet user gets 40 per cent.

We come to the problem of food prices. The Sunday Times for the past 12 months has carried out a remarkable investigation of food and other retail prices, resulting in a recent leader entitled "Rip-off Britain". The Sunday Times proved that UK supermarket food prices are the highest in Britain. They are higher than in France, Germany and Holland despite the fact that those countries also charge VAT. The cost of a mixed basket of food was 30 per cent. higher in the UK. Why? Years ago when Tesco, the first supermarket was founded the motto of its founder was, "pile 'em high and sell 'em cheap." What a betrayal of that principle we have today.

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Then every high street had two or three supermarkets really competing on price. Today many supermarkets operate within shopping centres as anchor stores without a competitor. Effectively they have a geographical monopoly. They are nevertheless popular because they offer a vast range of quality food products and other merchandise, but at high prices. Their gross margins are excessive and their net profit margins are the highest in the world--double those in the United States. To create real competition in this country we need more discount food clubs such as COSTCO in the US and others in Germany. If the Government want to lower food prices they should insist that every shopping centre includes a discount club or second supermarket. Then we would have real competition.

Finally, we come to televisions and computers. The Dixon retail chain has a 40 per cent. share of the retail market and is continually attacked for its prices. I do not defend it but I pose this question: why is it that John Lewis, Comet and even the discount shops in Tottenham Court Road sell identical products at identical prices? These are high margin products and yet no one offers a discount. The probable reason is fear that the manufacturer might cut off supplies or slow down deliveries. That is illegal but small firms might be out of business before the Office of Fair Trading or Brussels brought a case to court.

Television manufacturers are preventing price competition, but they are also charging inflated prices to retailers for their products. Take Sony, for example. Its televisions in the UK, excluding VAT, sell for 40 per cent. more than in the United States. Clearly the UK is "Treasure Island" for it also.

In conclusion, the Chancellor of the Exchequer has expressed serious concern about prices in this country. He wants to lower the cost of living but he must do more than rely on present legislation available to the DTI, the OFT and Brussels. A more radical and creative approach is needed. Improvement in living standards could be immense. I urge the Government to get real on this issue.

9.14 p.m.

Baroness Thornton: My Lords, I join with noble Lords in congratulating the--I shall not call them a bevy of maidens; I think that it is an inappropriate expression--the clutch of maidens we have heard today.

The gracious Speech centres around the importance of modernising,

    "the country, its institutions, the public services and its economy".
For that I think that we should be grateful. At the end of the 20th century I want Britain to be at the cutting edge of innovation and progress, so it seems entirely right and proper that the gracious Speech should concentrate on those themes. Part of the modernisation of our society and economy must involve the development and growth of new kinds of enterprises, of new ways of doing business, and the adaptation of old ways to meet new needs. It is on a specific aspect of that that I wish to address my remarks.

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At the outset I have to declare an interest, indeed a life-long passion, for the cause of co-operatives and social enterprise. I have been a co-operative member since the age of 16. I have worked for the co-operative movement at various times of my life. I am retiring as the chair of the Co-operative Retail Services London Political Committee this coming week; and I have recently been co-opted as a management board member of Social Enterprise London. Social Enterprise London is a recently created not-for-profit organisation which has been established to promote and develop new kinds of enterprise in the London area. It has been a great source of delight to me and many of my fellow co-operators that the present Government have taken such an enlightened view of the value and place of social enterprise in our society and has recognised the growing contribution of that sector.

It might be helpful to some if I describe more fully what is meant by the term "social enterprise". Briefly, social enterprises are self-help organisations which bring people and communities together to run their own businesses with the twin aims of economic empowerment and social gain. Specifically, they are democratic in practice and principle; they have explicit social and economic aims and values; and they earn income for their own financial independence and viability. Those who are familiar with the Rochdale Pioneers and the formation of the early co-operatives will recognise those aims as being the modern expression of the principles upon which the early co-operatives were formed.

What are the examples of social enterprise today? There are a great many and millions of people are involved in various forms of them across the world. They are common ownerships, worker co-operatives and other types of employee-owned businesses. They are community-based businesses where local people and organisations have got together and set up a trading organisation managed by them to provide services and create jobs, often, but by no means always, with the support of local churches.

We are all familiar with the important contribution of housing co-operatives in providing affordable homes for people who have difficulty in buying or renting. They can be social firms or projects set up to support the intermediate labour market. Those enterprises operate as trading businesses but are specifically designed to provide work experience and training for people with, for example, severe physical handicaps or learning difficulties. There are sometimes very local schemes called LETs (local exchange and trading schemes) which are trading networks, trading for services carried out rather than money.

By far the largest part of the social enterprise sector is the consumer co-operatives. Noble Lords will be aware of the range and scope of the traditional consumer co-operative sector--the CRS, the CWS, the Co-operative Bank, the Unity Trust Bank and Co-operative Insurance, Travel and Funeral Services. However, there are many other smaller consumer co-operative initiatives and I think that we are likely to see a growing number of hybrid and mixed co-operatives providing care services. There is a

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growing number of examples of co-operative nurseries, and co-operatives which provide care for elderly and disabled people.

There are also credit unions. It is about those which I wish to address the final part of my remarks to your Lordships' House. A credit union is a financial co-operative established to help people save and borrow money. They are formed around groups who share a common bond. They may be employees of a particular organisation or they may live in a particular geographical area; for example, a housing estate or a village. They can provide access to saving and borrowing on reasonable terms for people who may not be able to have access to banks or large financial institutions. They provide an alternative to high interest moneylenders.

It is estimated that there are 50,000 credit unions with an estimated 100 million members around the world. The total assets of credit unions are more than 359 billion dollars. That is not a small business. It has provided the impetus for economic development in many communities which have suffered or are suffering hardship, impoverishment and under-investment.

But credit unions do not enjoy the widespread recognition and support that they should have in the UK. One reason for that--and it was highlighted in a recent report by the Social Exclusion Unit--is the unsympathetic legal framework under which credit unions operate in the UK.

Despite that, in 1997 there were more than 520 credit unions in the UK with assets of approximately £80 million and new ones are coming on stream every week. Some of the most successful are those based in the workplace; for example, the West Midlands Police credit union.

Ironically, access to credit has always been difficult and expensive for those who may need it most. Financial exclusion is not new. The UK is a leading world finance centre yet in 1998 it served the poor of this country not at all well. A surprisingly large number of people in Britain have no current account at a bank or building society. The same social exclusion unit to which I referred earlier says that 2.25 million people have no bank account and many of those are likely to live in poor neighbourhoods where unscrupulous lenders thrive. Some lenders have been reported to charge interest rates of as much as 200 per cent.

That large group of people is made up mainly of women, the young, the old, the unemployed and those in low-paid jobs. They are more likely to live in rented accommodation. They often have restricted or no access not just to credit but to many of the financial services which most of us take for granted.

One of the Social Exclusion Unit's action teams is now looking at access to financial services and we can expect a report in July 1999. I am pleased to say that part of its brief is to examine:

    "the scope for development of credit unions, building on planned legislative change".
At present credit unions are governed by the Credit Unions Act 1979. Its main problems, as outlined by the Association of British Credit Unions, are that they have

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restricted and low lending limits, restrictions on the amount members can save and a maximum pay-back time which may be prohibitive. That pay-back time is a period of two years. For someone who is in difficulty with moneylenders or with their credit cards, two years is not a sufficiently long period for them to repay their debts. Moreover, community groups are debarred from using the local community credit union to deposit funds.

In fact, it occurred to me that the authors of the original legislation were so timid that they almost guaranteed that credit unions would find it impossible to prosper in the UK. There is little point in dwelling on the reasons for that. I prefer to look forwards rather than backwards.

It was with much anticipation that the credit union movement and its supporters awaited the consultation paper that was produced earlier this month by the Treasury. It proposes amendments to the 1979 Credit Unions Act and there is much in the document to be welcomed. Indeed, I join with my friends in the credit union industry in doing so. The Economic Secretary to the Treasury has responsibility in that area and she is a Minister who has a huge breadth and depth of knowledge of social exclusion issues. That gives me great confidence in the consultative process which is currently taking place.

However, the proposals in the consultative document do not go far enough. I have a suspicion that because credit unions are not part of the familiar traditional structures of the financial sector the innate conservatism of finance and Treasury advisers and draftsmen is leading them to be overly cautious. If the proposals are adopted as they are, credit unions will still lack the legal framework needed to help significantly the financially and socially excluded.

I shall not go into details about the many proposals that the credit union movement wish to have included, but I urge the Government to look at this area and perhaps find some way through.

In conclusion, I commend the gracious Speech for its wide-ranging commitment to change and development and I look forward to the Government applying its principles in relation to credit unions.

9.25 p.m.

Lord Burns: My Lords, it is a privilege to have the opportunity to contribute to this debate today. The gracious Speech referred to the need both to weather the international financial storms and to build stability for the longer term. In my contribution I would like to comment on both these aspects and to say a little bit about the development of the international financial storm, some implications for the UK and some aspects of the various economic policies directed to achieving long term stability.

As several noble Lords have mentioned throughout this debate over several days, the financial storm began in Japan and several south east Asian economies. It is worth recording that over the past year this region has suffered a substantial decline in industrial output; in other words a significant part of the world is already

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technically in recession, however much we may care to debate whether or not this is likely to happen in the West. Of course the most recent trigger was the Russian devaluation and default in the summer, which sparked off a very substantial widening of interest rate spreads and falling equity prices and raised real concerns about a more widespread recession.

Over the past few months we have seen some of the biggest downward revisions in forecasts of world activity that I can recall. On the positive side, of course, falling world prices have softened inflationary pressures and this in turn has increased the room for manoeuvre by the authorities in attempting to deal with these problems. We have seen short term interest rates come down in a number of countries, and long term interest rates have fallen to what are now historically low levels, which also serves to ease the pressures to quite an extent.

In south east Asia there are now some tentative signs of industrial production bottoming out after the sharp decline, and, as noble Lords have mentioned today, Japan has recently introduced a substantial package of measures directed towards supporting demand in the banking sector. Although it is not yet possible to judge how successful this will be--and I listened very carefully to what my noble friend Lord Roll had to say about this--I feel that the region is going to remain a source of considerable uncertainty for some time yet.

Perhaps more surprisingly--and again this has been mentioned by some noble Lords--the United States economy is also a source of some uncertainty. The fall in savings ratio and an expansion of credit have sustained growth there, but what we are seeing is an increasing number of observers who believe that demand cannot be sustained in this way. Perhaps the most cautious approach would be to say that it is quite unlikely that the United States is going to be the same engine for world growth in the period ahead as it has been in recent years, despite some of the more favourable indicators we have seen over the last few weeks.

Of course there are still dangers lurking elsewhere in the world, particularly in China and maybe South America. All of this, as a number of noble Lords have explained, has considerable significance so far as the United Kingdom is concerned. Until the explosive financial events of the summer, I think there had developed something of a consensus about the situation in the UK. The general view was that output was a little bit above trend, putting some pressure on domestically generated inflation (not a huge amount). It was generally thought that to reach the inflation target we would have to go through a period of slow growth and the quite fine balance of disagreement centred on whether that was going to require higher interest rates or whether sufficient action had already been taken to bring it about.

What we have seen in the last few months has been a very sharp weakening of consumer and business confidence. Exports have fallen, particularly to non-EU countries, by quite significant amounts. The signs are, as we keep seeing day by day from reports from the

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High Street, that retail demand has now softened considerably and business surveys are pointing to an unwanted build-up of stocks in the system.

The question being asked is whether the forces at work in the wider world have presented the Monetary Policy Committee with a different job. Falling world prices have made it easier to hit the inflation target and the weakness of world trade is threatening a slowdown in output which is greater than we need. The whole balance of the debate, as those who follow the minutes of the Monetary Policy Committee will know, changed significantly after the events of the summer.

What remains to be seen--there is still a considerable amount of uncertainty--is whether the business confidence indicators are exaggerating the present situation because of the financial fragility or whether they are telling us that there is a real risk of recession next year. I am second to none in the seriousness with which I study business indicators. Over the years, business confidence surveys have a good record as leading indicators, particularly of the short-term outlook. They are telling a grisly story at the moment. However, it is worth bearing in mind that on occasions they have also been misleading, particularly at times of financial uncertainty. Given the absence of major imbalances in the UK economy, it is perhaps surprising that the business confidence indicators are as bad as they are. My conclusion is that it would be wise to prepare for possible short-term weaknesses in the months ahead, even if they are relatively short lived.

That leads us on to the question of how robust is the policy framework that we have to deal with this tricky situation. I should like to make one or two comments on that. As a number of noble Lords explained, monetary policy is now in the hands of the Monetary Policy Committee of the Bank of England. That is the organisation we charged with undertaking that job. I have no desire to get into the business of guessing whether or not it is going to make the correct calls on interest rates. But, having watched the high standard of debate at the MPC on a number of occasions when I attended as the Treasury observer, we can be sure that the full range of arguments will be addressed. At the end of the day, there is a balancing process and only time will tell whether or not the correct decisions are reached.

I have not always been an advocate of this type of arrangement. People who have worked with me in the past will know that for some time I was unconvinced that it was wise to try to transplant central bank independence into the UK. It may be said that that is not surprising in a Treasury official. But my issues of substance were that I was worried about the difficulty of designing a workable remit for the committee in this complex world where there are short-term trade-offs even if there are no long-term ones. There was also the complicated task of designing an appropriate mechanism of accountability, which was something that concerned me.

More generally, again as one would expect from a Treasury official, I was unattracted to the argument that appeared in some quarters that we would be better off

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whoever set interest rates as long as it was not Treasury Ministers. There are some people who still feel that way, though I am not one of them. In the event I came to see operational independence as workable, and I should like to mention why. This is important in terms of the present debate. The real reason is the success of the arrangements we had had over the six years which led up to it, which were started by the noble Lord, Lord Lamont of Lerwick, when he was Chancellor of the Exchequer. He introduced the regime of inflation targets; he started the monthly round of monetary meetings with the Governor of the Bank of England; and he asked the Bank to produce a quarterly report setting out its views as to how we were performing in relation to the target. That got the whole process moving.

We then had the strengthening of accountability by the bold decision of Kenneth Clarke, as Chancellor, to publish the minutes of the monthly meetings, which again has been a great success. If one looks back over the six years during which this broadly similar system has been in place--it started in late 1992/early 1993--the target measure of inflation has been within a range of 2 per cent. to 3.5 per cent. It was that success with the inflation target remit, combined with the enhanced accountability achieved through the publication of the minutes, which persuaded me that it was sensible to go the further step of putting interest rate decisions into the hands of the Monetary Policy Committee. This was described in the gracious Speech as an historic decision by the new Government. I believe that to be absolutely correct. However, it can also be seen as a natural development of the previous arrangements and what led up to them.

It is right that your Lordships' House and Parliament generally should want to scrutinise various aspects of how the arrangement is working, and possibly to make suggestions. I have already heard a number of suggestions from noble Lords. It is not difficult to compile a list of matters suitable for ongoing scrutiny--for instance, the definition of the target; whether factors apart from inflation should be in the remit; the composition of the committee and the reporting arrangements.

It is right that we should continue to keep our attention on those matters. However, at the same time it is only reasonable to give the MPC a fair chance over a sustained period. I cannot help pointing out that it is characteristic of this country that any arrangements set up to control inflation are very quickly subject to extreme bouts of hostility whenever the going gets tough. That may go some way towards explaining why, on average, we have had higher inflation than other major countries over the past 30 years.

I also welcome the Government's success with public finances to date and their control of public expenditure. Again, the new Government have built upon the work of the previous government and improved it in some important respects.

Controlling borrowing over the business cycle is always tricky but, in my view, the combination of the code for fiscal stability and the process of the

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comprehensive spending review have given us a better chance of achieving the necessary control. However, it is important to recall that, while commitment to a clear framework helps, it does not solve all the problems. Judging what is happening to the underlying public finances will always be difficult. Unexpected events often take place. I hope that, simply because we have a code of fiscal stability in place, that will not persuade people to think the job is much easier than it has ever been before. Events will arise and difficulties will emerge.

Finally, I should like to offer a few observations on financial supervision. The gracious Speech stated:

    "Legislation will be introduced to improve the regulation of financial services and markets, with a new statutory regulator, the Financial Services Authority".
I suppose that I should declare a small interest here. Just as I was present at the birth of the MPC, I was also present at the birth of the Financial Services Authority. Therefore, I retain a parental interest in how well this infant is doing. Undoubtedly the legislation will come under a lot of scrutiny in this House, and I am sure that that is right. However, I should like to take the opportunity to ask noble Lords to bear a number of points in mind as we go through the process of scrutinising this legislation.

The first is the overwhelming case for bringing together the various financial regulatory agencies. Global financial institutions require new approaches to supervision. The international reaction to the FSA has been very positive and has established London in a leadership position in financial regulation.

Much work has been done to bring together the management of the various regulatory bodies in advance of the legislation, even though the legal powers remain with the individual boards. That has left a curious halfway position where the group has been managed as one group but the statutory responsibilities remain with the individual boards. I believe that that situation can be allowed to exist for only a relatively short interim period. There would be risks for the City of London and investors in allowing those arrangements to persist for too long. So, while it is right that there should be detailed scrutiny in this House and in another place, there is also a need to get on with this legislation with the minimum of delay.

Secondly, we all share a desire to avoid excessive regulation and burdens on the industry, and it is important that savers and investors have a significant responsibility to be intelligent customers. However, we should also recognise that financial products have special characteristics of their own. Often, people make a substantial financial commitment and it will take many years to see the full implications of their decisions. That points to a closer scrutiny of the selling process than would be necessary with many other goods and services.

In considering the new legislation, I am sure that noble Lords will be warned repeatedly about the costs to the industry. I believe it is right that we should be aware of them but it is also important that this House

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gives full consideration to these issues from the perspective of the consumer, because that also matters a great deal.

Finally, while we all share a desire to protect the rights of individuals working in the industry, and it is terribly important that justice must be done, we should also recognise that all is not well with the existing arrangements. As they consider the new legislation, noble Lords should remember that the current procedures have not been as effective as we would like in dealing with insider dealing and market abuse, because it has been very difficult to secure prosecutions against wrongdoers. That is bad for the long-term reputation of the City of London; it is also extremely damaging for the long-term success of the City.

I hope that those points will be borne in mind and I look forward to the debate on this important legislation. It is legislation which will actually make a powerful impact upon a vital part of our economy for a very long time.

9.40 p.m.

Lord Watson of Invergowrie: My Lords, I suppose that on every occasion we have debates in this House someone has to be the last to speak from the Back Benches. I am very pleased to see that so many noble Lords have remained in the Chamber, especially on the Front Benches, specifically to hear my contribution this evening; indeed, that is very much appreciated. Of course, I wish to add my good wishes and congratulations to those who made their maiden speeches today. I believe that my noble friend Lord Stoddart referred to them as a "bevy of maidens", while my noble friend Lady Thornton said she thought that that was an inappropriate description. In the part of the United Kingdom from which I come, the word "bevy" has a slightly different meaning. If those who made maiden speeches today feel the same sense of exhilaration that I experienced just about a year ago when I made mine, I should think that the word "bevy" is an appropriate adjective to apply to them at this moment. However, I enjoyed listening to them and very much wish to congratulate them on their maiden speeches.

My noble friend Lord Ewing of Kirkford made a typically enjoyable, well-informed and thought-provoking contribution this evening. He is a bit of a wily old fox and drew as much as possible about Scotland from his contribution as one could possibly have done in terms of the Scottish content of the Queen's Speech. We know very well the reasons for that. I should like to say briefly that I echo those views as regards the needs of the economy, and the macroeconomic policy as it applies to Scotland. Of course, that includes inward investment.

It is extremely important that the high quality of education both at school and post-school which exists in Scotland is turned into the kind of high quality jobs to which my noble friend referred. There is no reason why that should not be the case. We certainly have not only within Scotland but also within other parts of the UK a very well educated workforce or potential workforce. We must ensure that the kind of investment coming into

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the country, and indeed the investment generated from within, enables that workforce to be employed and boost the economy in a way which has perhaps been lacking in recent times. I very much hope that the contribution made by means of the decentralisation of government in this country through regional development agencies--not just as regards Scotland, Wales and Northern Ireland, but perhaps within the next five to 10 years in England as well--will assist that process.

I want this evening to concentrate on one particular issue. I shall not detain noble Lords for too long. I want especially to talk on an area which reflects my own immediate experience and, indeed, my experience further back before I became a Member of the other place. I refer to the Government's Fairness at Work White Paper. Some contributions have already been made in that respect during the debate. I should declare an interest here in that I worked for the Manufacturing, Science and Finance Union for some 12 years. Now, some people would say that I am on the other side--although the word "side" is perhaps much less appropriate these days--because I am director of a company with fewer than 20 employees which, in terms of recognition, is outwith the realms of the White Paper.

It is a matter of some concern to me that since the White Paper was published last May there has been a considerable amount of lobbying--to put it at its mildest--by employers and employers' organisations to have that document watered down. I find that saddening, especially because the White Paper was put together only as a result of a great deal of discussion, consultation and, indeed, compromise by both employers' and employees' representatives to reach the kind of consensus which is appropriate in modern industrial terms in order to produce the kind of entrepreneurial spirit within the economy to which my noble friend Lord Haskel referred.

That is why I believe it is unfortunate that there are attempts to water down the White Paper, which was a balanced outcome of discussions. Not everyone by any means got what he or she wanted; in fact, many people were dissatisfied with it. However, it was largely accepted as the kind of compromise which was appropriate for the times. The balance contained within that White Paper will be in danger of being destroyed if significant changes are made to it when it is published in the form of a Bill. It is particularly unfortunate that the new CBI president and the Newspaper Publishers Association--perhaps we should not be surprised by that last group--have made it clear that they do not accept the Labour manifesto commitments which were given such a resounding backing in May 1997 on issues such as those contained in Fairness at Work.

Had that campaign been mounted within the context of a wholesale reversal of 18 years of Conservative Party policies--the anti-trade union legislation, if you like, which was so clearly outlined and contrasted by the noble Lord, Lord Davies of Coity--it might be understandable. That is not the case. The White Paper does not seek to do that, but to create a level playing field from the steep slope assembled by the Thatcher

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and Major governments, some of whose former Ministers sit on the Benches opposite. They are not there at the moment, but they attend from time to time.

It was the whole ethos of fairness not favours put forward by the trade unions and the Trades Union Congress which led not only to the White Paper but to its name, Fairness at Work. It was widely accepted and it is unfortunate that the proposals are not being carried through.

In his introduction to Fairness at Work, the Prime Minister said that it represented a very minimum infrastructure of decency and fairness for people at the workplace--but still it seems to go too far for the liking of some employers and employer organisations. What do they have to fear? It would appear that they want a situation whereby workplace practices in this country are quite different from those applying in many of the EU member states which are the direct competitors of British industry.

What do they have to fear from "family friendly" policies, as they are described within the White Paper, such as maternity leave? What do they have to fear from the withdrawal of the upper limit on awards in industrial tribunals? I have spent a considerable amount of time representing trade union members at industrial tribunals. Going back to the 1980s, I can remember when the upper limit was £10,000. You had to be dealing with a situation where an individual had been very badly treated to get anywhere near that sum. The upper limit was £10,000 12 years ago; it currently stands at £12,000 for unfair dismissal. I would not like to make a calculation of what the cost of living increase would put that figure at now. The proposal in the White Paper is to remove that upper limit, as happens in sex and race discrimination industrial tribunal cases, and yet employers are arguing that the upper limit should be some £40,000.

It needs to be said that some 70 per cent. of all dismissal claims to industrial tribunals fail. If an employer has a proper procedure at work, it is unlikely that unfair dismissal proceedings will occur. Again, I come back to the question of what they have to fear. All they have to fear is that employees will take action against them if they have left themselves open to it. As ever, prevention is much better than cure.

The major issue which has emerged from this debate--some of it quite publicly over the past few months--is the proposal to grant automatic recognition to a trade union where 50 per cent. plus one of a workforce are in membership of a trade union. It seems that employers are now advocating that a whole raft of hurdles should be put in place to prevent this happening--for example, that the majority should be more than 50 per cent. and that members should have three or six or 12 months' membership while at the company. Even where both those hurdles are overcome, an affirmative ballot should be held. Without wishing to be flippant, as was said recently, it seems that the only condition that does not have to be met is that those forming a trade union membership should be left-handed and born on Thursdays. That seems to have as much logic as some of the other barriers which

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have been placed in front of trade unions seeking, quite democratically--and at 50 per cent. plus one it is democratic--to have recognition to represent their members who, by joining a trade union, have signified that that is what they want the trade union to do on their behalf. There is nothing revolutionary about that; it has been fairly well established over the years.

It seems that the aim of those trying to put up such barriers is to throw as much rubble as possible in the path of trade unions moving towards recognition. They are trying to put as much detail as possible in the Bill in order to cause interminable delays and perhaps to leave the process open to judicial review wherever possible. All this is happening where people are already members of a trade union. It is not to prevent them joining.

All of these provisions already apply in many other European Union member states where British industry's major competitors are to be found. It seems strange, to put it at its mildest, that some parts of British industry should feel that they need government assistance to allow them to trade on what they regard as a fair basis with their competitors.

I wish to finish on a point which I believe gives graphic evidence of the great need for the proposals in the White Paper. It might be felt that that was not the case just now but at the moment there is a dispute in London which highlights the need for the automatic recognition procedures to which I have just referred. It concerns a Danish company called Rosti. It is a multi-national electronics firm with some 340 workers in the Wembley area of London. Of the 340 workers, 62 per cent. are members of the Transport and General Workers Union. The vast majority of those workers are Asian. The supervisors--the cell leaders, as they are interestingly termed--and management are almost exclusively white.

Unionisation in the company began in November of last year following the introduction of a new, fairly severe 12-hour shift working pattern. In April of this year, management issued letters to certain shift workers threatening the sack if workers did not meet the requirements. It seems that management has deployed a range of union avoidance tactics, including victimisation and intimidation. I am aware that there are always two sides to any story, but the length of the dispute makes it clear that there is a need for the intervention of some representation on behalf of the workforce. There are elements of racism, with Asian workers being denied promotion, and health and safety has been compromised, with European and domestic legislation allegedly being flouted in a number of ways.

There is a bright spot on the horizon in that, after a year, the management has agreed to the Advisory, Conciliation and Arbitration Service intervening to hear the case for union recognition. I understand that that will take place next week. That, in itself, is good news. However, my argument is that none of this should have been necessary. In that situation, more than 60 per cent. of the workforce were in the union. When the management was approached to recognise the union,

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that did not happen. Had the White Paper proposals been in place, that would have happened and the stand-off that has taken place would not have been necessary.

If there can still be instances in 1998 of antics which are more reminiscent of Victorian times, it is clear that legislation is required to bring about harmony and to allow the kind of relations to which I referred earlier to flourish. Under the Fairness at Work proposals, that would happen.

There is much talk these days about flexibility at work. It seems to me that the idea of flexible workforces works almost inevitably in favour of the employer. All too often, flexibility tends to be a euphemism for an employer's ability to hire and fire with maximum haste and minimum responsibility. I suggest that that is not acceptable. It is not acceptable, I freely concede, to the vast majority of employers. We are talking about a minority. That is the whole point. Legislation like this is needed to bring the minority into line and to do the kind of things that the vast majority think nothing of doing and have done for years. It is really a question of dignity at work. Everyone in the work place ought to have that dignity. I say in closing that the White Paper provides that. I urge my noble friends on the Front Bench to convey that message to whatever they regard as the appropriate ears.

9.54 p.m.

Earl Russell: My Lords, I hope the House will forgive me if I do not make any attempt to reply to the debate as a whole. It is a debate of many parts. I enjoyed, of course, the speeches of the five maiden speakers and would like to congratulate them all. Five maidens actually is not a record. As I was listening I remembered John Arlott, who has become the voice of nostalgia in my mind, referring to a succession of 17 young maidens. But these have done better. Those to which John Arlott referred did not take a single wicket between them; these have taken a wicket with every over, and I congratulate them.

I say to the noble Lord, Lord Ewing of Kirkford, I do not know why he is so surprised at the thought of postmen in Parliament. Postmen, like sentries, have a contemplative profession, and the more of them we have, the better.

Perhaps the most notable speech was that of the noble Lord, Lord Barnett. I remember the noble Lord, Lord Barnett, many years back as the voice of fiscal rectitude. He is not, of course, always right but Ministers ignore the noble Lord, Lord Barnett, at their peril. On this occasion the noble Lord told us that fiscal rectitude had been carried too far. The shock was a little like God telling us we are too good! I hope Ministers will pay attention to what he said.

The noble Baroness, Lady Turner of Camden, made a notable and thought-provoking speech, to which I shall return at the proper places in my argument. The noble Lord, Lord Blackwell, perhaps a little unwisely, accused the Government of too high a level of spending. I do not know whether he has read the report of the Treasury Select Committee on the Comprehensive Spending Review. It was published on 27th July, which is not a

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wise time to publish a report that needs attention. What it showed is that if the Chancellor's spending increases are taken, as they should be, over five years and not over three, the annual rate of spending through the Parliament is 1.7 per cent., compared with 2.2 per cent. per annum under the Major government. If the noble Lord thinks that the rate of spending is excessive, what does he think of the rate of spending of the government which he had the pleasure to serve?

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