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Earl Russell: My Lords, does the noble Lord agree that what he is saying about the failure to produce real cuts is true equally of Mr. Darling and Mr. Lilley, and that therefore we might constructively think about what are the forces which mean a continual increase in the budget. I believe that it is not in the social security system.

Lord Higgins: My Lords, with respect to the noble Earl, I do not believe that that is so. The reason that there was a move in the right direction was because the Chancellor of the Exchequer adopted for the initial two-year period the plans of the previous government. What has happened is that that has carried the Government through so that they will be able to say, to some extent, that over the Parliament, they have not

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done too badly. But that is because they stuck to our plans and subsequently changed them for the later part of the period.

I wish to return to the important points that I was making that there are now to be a series of cuts to the detriment of particularly disadvantaged groups. The noble Baroness Lady Turner of Camden, pointed out the way in which there have been cuts, for example, in widows' benefits. In particular they are benefits to which people had contributed.

This brings me to the next point which is very important. The Government are now increasingly undermining the contributory principle. Some people (widows of 45 to 55 mentioned by the noble Baroness opposite are an example) will not receive benefits to which they have contributed and to which they believe they are entitled. The Government are in the process of removing entitlement from people who have contributed. The contributory principle is getting more and more eroded.

On the other side of the equation, some people will now receive benefits, previously contributory, for which they have not contributed. Therefore, we should expect, in connection with specific legislation, such as the Social Security Contributions (Transfer of Functions, etc.) Bill, a huge explanatory memorandum for which no doubt at the Committee stage we shall be grateful. It says that national insurance contributions are paid into the National Insurance Fund and that payment of NICs gives entitlement to contributory benefits. There should have been added, "Unless the Government decide to take them away after the event" or, "Unless the Government decide to take away this entitlement." No doubt this is one of the major pieces of legislation we can turn to in subsequent debates.

This is not a minor matter. It is a fundamental change in the whole basis of expectations on which people have been relying. We are now told that we are going to have a new benefits entitlement test. This again appears in the explanatory notes. That sounds a pretty sinister idea, "a new benefits entitlement test." Why cannot we stay with the old benefits entitlement? This is a matter we will need to pursue. The Government's proposals are certainly massive as far as legislation is concerned. The noble Baroness and I and the noble Earl and others will spend many hours on, I think, five Bills now (I thought it was four) which are to be covered by the so-called social security reform programme.

We have, on the one hand, the Bill to which I have just referred. That is said to be technical. I think one should always be wary of any Bill which is said to be technical or an amendment. I remember once being told by my officials in the Treasury that something was a technical amendment and I found that retrospectively I had made about 25 people criminally liable. A technical Bill should be viewed with suspicion and we shall view it with quite a lot of suspicion.

We are also to have a Bill, I understand, on the working families tax credits. I have already spelt out in your Lordships' House what our objections are to those proposals, not just the cost but the way in which they are likely to encourage fraud and the fact that they are not well targeted as far as income groups are concerned.

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Thirdly, we have a Bill which is, I understand, the so-called welfare reform Bill, which will cover pensions, stakeholder pensions, what the noble Baroness now describes as pension sharing rather pension splitting (something which we shall certainly need to examine carefully), disabilities, widows and so on, of which a central feature is the so-called gateway. May I ask one question in relation to that? There are those who will be told they must apply and turn up for interviews in order to get through the new gateway. What sanctions will be imposed if they do not turn up? More specifically, what is going to happen if lone parents simply do not turn up for the interview? I think they are concerned about compulsion. We ought to know what the penalties are both in the general case for all applicants to the gateway and more particularly for lone parents.

Finally, I turn to the question of pensions. We have been promised a pensions Green Paper and we have been promised a pensions Green Paper and we have been promised a pensions Green Paper. The last promise was that it would appear in the autumn or towards the end of the year. Perhaps the Minister can tell us: is it the case that we are going to have that Green Paper before Christmas? Time is running out and it would too silly if it were delayed again. I presume the answer to that question will be yes.

In relation to pensions reform more generally, we need to see what the situation is with regard to the provision of second pensions and whether or not there is a degree of compulsion--a point made by the noble Lord, Lord Christopher, in his maiden speech. The noble Earl, referring to the noble Lord, Lord Barnett, said that he was rather wobbly on fiscal rectitude but suddenly seems to be wildly in favour of means-testing. I believe that was what he said. Certainly, more and more means testing is a feature of the present Government's policy and the direction in which they are moving.

Having said that--I know it has become fashionable to quote Mr. Frank Field--the way in which Mr. Field spelt out the arguments against the present Government's policy on means testing is important, as is the fact that he had the courage to criticise what the Government have done to date. For example, in an article in the New Statesman dated 27th November, he says that,


    "many widows without children will lose out after six months--to the tune, eventually, of £500 million a year ... national insurance rights of long-term sick and disabled workers were hacked away for savings of £750 million".
The trouble is that the Government, having announced that they were going to cut the social security bill, have failed to do so and are increasingly finding extremely mean ways in which they can seek to achieve their objective. That is something which we will debate during the course of legislation. We have already made it plain that we shall adopt a responsible attitude to each of the Bills. There are many features which require careful scrutiny but there are certainly some features which are extremely objectionable.

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10.36 p.m.

The Minister of State, Department of Trade and Industry (Lord Simon of Highbury): My Lords, I repeat the praise of the noble Lord, Lord Higgins. It is a great privilege to close this debate on industry, economic and social affairs. I thank the noble Lord for his sympathy--I feel that there was genuine sympathy from him for the task at hand. There is also consistency from government; and the presentation of policy which maintains consistency is, in my view, laudable. I prefer it to volatility.

I congratulate noble Lords sitting behind us on their maiden speeches. They are sitting behind and in front of me and after seven hours I am becoming a little confused as to which direction. The noble Earl, Lord Russell, likened them to 17 young maidens. I presume he was thinking of them as a left-arm bowler. That seems to fit very well.

I do not want to dwell too much on individuals. But from Highbury we always look up to Hampstead. Perhaps I can say to the noble Lord, looking from Highbury to Hampstead, that I have great sympathy for the very fine speech and points he made about the Post Office and its role in our economy.

I would also like to attempt to reply to some of the points made during today's wide-ranging debate, and to review some of the major themes in the gracious Speech; so this will be partially helicopter and partially ground troops. I hope your Lordships will understand that if I am unable to respond to each and every issue raised today--it will have been noticed that my noble friend Lady Hollis and I have been scribbling--we have undertaken to write to all those who feel that a substantive point has been missed.

The second legislative programme outlined in the gracious Speech will continue with economic policies designed to build stability in the long-term. I hope that both the noble Baroness and I have made that clear.

I believe that this is an appropriate occasion to welcome the noble Lord, Lord Skildelsky, to the Front Bench and to welcome his first intervention on Treasury matters. I look forward to deciding, in future, whether forecasts are fantasy or real. I do not think I shall talk much about that today. Time will tell. In my view, the noble Lord, Lord Desai, in his excellent intervention, answered clearly on the issue of scope for spending through the cycle and over the cycle while maintaining a prudent approach to public finances. That is a critical part of the policy of stability in the long term. I merely add that the fiscal policy is set out to achieve long-term stability, not for short-term demand management.

However, where it is consistent with the fiscal rules, fiscal policy can support monetary policy, as it has over the past year. In 1997 to 1998, there was a substantial fiscal tightening of around £20 billion. I believe that the noble Lord, Lord Razzell, was asking for more. However, as that was the largest tightening in any one year since 1981, I felt that to be quite significant already. The July 1997 Budget included significant tax increases in the personal sector, which I believe helped to encourage a more balanced recovery. Indeed, we have seen fiscal and monetary policy moving together.

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The noble Lord, Lord Skidelsky, asked whether the Bank was aware of the golden rule when it set out on its monetary policy. I believe that the MPC stated that it sets interest rates to meet the Government's inflation target "taking account of all available information". I was delighted to hear the noble Lord, Lord Burns, in his fascinating speech and update of recent history, welcome both the new monetary and fiscal policy frameworks. Both frameworks now focus on delivering economic stability. I believe that Britain is now better placed to steer this stable path than in the past.

In welcoming the noble Lord, Lord Skidelsky, I shall not continue on the topic of monetary stability, but I am sure that everybody knows the path we are trying to steer. We certainly know very well. If I speak for any of the three subjects tonight, it is for industry. My experience of 35 years has made clear to me that the present economic downturn has made this a tough year for business; there is no question of that.

With one quarter of the world in recession--including Japan--no country is immune from the effects of the current instability and the world economy. We all know that the world growth forecast this year has reduced from over 4 per cent. to 2 per cent. But we are determined not to be deflected from building long-term stability and from keeping on a consistent course. This is a macroeconomic policy. The consistent course has been marked thus far by low inflation, now declining interest rates and sound public finances. For those who doubt that we have a macroeconomic policy, I commend the pre-Budget Report, HM Treasury November 1998. It may be called "strategy", but I regard strategy and policy as similar issues. So, I do not think it is right to say that we do not have a policy.


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