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Lord Shore of Stepney: My Lords, I am grateful to the noble Lord for giving way. I understand his emphasis on price stability generally, but it is not enough. One considers the state of the Japanese economy. If economic management was simply about controlling inflation, with a bank rate of 0.5 per cent and an inflation rate of 1 per cent, it should be paradise, but it is not.
Lord Harris of High Cross: My Lords, I shall not be drawn from my main argument by a trip to the Far East and back. I have been encouraged to hear from various speakers in this debate about the way in which the high exchange rate has compelled business to be more efficient and effective in its exporting. In his reply I ask the Minister whether he will indicate at least a preliminary view on my serious proposal for future policy.
The central importance of the Government's success on inflation--which, it has to be admitted, has been helped by a non-inflationary global climate--is that the economy has avoided a major source of the post-war economic instability of output and employment. An interesting question is whether anything can be
Let us recall that Mr Brown's reason for re-privatising the Bank of England was to rescue monetary policy and interest rates from the hands of the shortsighted party politician who, as I never tire of reminding your Lordships, was described by Adam Smith as,
Gordon Brown's solution to that dilemma was to contract-out monetary policy into the steadier hands of independent professionals and in effect to purge our monetary system of party politics. Yet the other main elements in a stabilisation policy--namely, taxation and spending--are still controlled by those "insidious and crafty animals" on the Treasury Bench. That is why we still have the Chancellor ceaselessly fiddling and disrupting expectations with his budgetary changes.
On the model of the Monetary Policy Committee, how about an independent tax commission to advise on a five-year programme of drastic simplification and reduction of taxation? I have a name to propose for the chairman, and that is the noble Lord, Lord Taverne, on the Liberal Democrat Benches.
Having congratulated the Chancellor, I just have time briefly to deplore his most disappointing colleague--a cross between Pooh-Bah in The Mikado and Mr Toad of Toad Hall. I refer to the amiable road hog now presiding over our environment, regions, transport and, as deputy Prime Minister, sundry other global distractions. It appears that his trendy advisers have told him--presumably through his car window--that the only way to force other people out of their cars is to let the roads clog up. So he mindlessly repeats that one must not build more roads for fear of attracting more motorists to use them. The same logic would dictate that we should not build more hospitals because more people would then queue up for more prompt treatment! That is what is meant by consumer choice.
Now that the Chancellor has thought again about the escalation of fuel taxes, might he allow Mr Prescott to spend a little more on the congested roads? Then we motorists could enjoy more freedom and more safety. In return we could fortify the Revenue by accepting the sensible, civilised economic case for road pricing and congestion charges.
Lord Davies of Coity: My Lords, I start by expressing a welcome for the contents of the gracious Speech. That, of course, is only to be expected. But I emphasise the point because Her Majesty's Official Opposition have seen fit to table an amendment about which I must express grave disappointment. That
In view of the Official Opposition's amendment, I believe that it is worth looking at what the Labour Government have done in their two and a half years in office and contrast that with what the opposition party did when it was in power for a long 18 years. The justification for what I am about to say is reinforced by the opening comments of the noble Lord, Lord Saatchi, when he likened the approach of the Labour Government to that of Marx and Stalin.
I refer to low wages. In the past two-and-a half years the Labour Government have introduced a national minimum wage thereby raising the standards of millions of low-paid workers. In attacking such a policy the Tories said that such a measure would result in lost jobs and in small businesses going to the wall--none of which has happened. That is confirmed by no less a body than the CBI.
In contrast, the Conservative government abolished the wages councils set up by none other than Winston Churchill. In justifying their action the Tories claimed that more jobs would be created. But that never happened. The only thing abolition of the wages councils achieved was to enable the most unscrupulous of employers to exploit the low paid and the most vulnerable workers even more.
I turn to employment. The present Government have taken measures to ensure high levels of employment as well as high levels of economic growth. There are more people in work in Britain today than ever before, with employment up by nearly 750,000. The New Deal has helped nearly 150,000 young people into employment. The number of long-term unemployed has been halved. In contrast, unemployment rose dramatically under successive Tory governments. Where once there had been industrial heartlands of Britain, deserts of mass unemployment were created, bringing with them agony and heartache for many families. As I recall, in order to massage the figures of the growing masses of unemployed, the Tory government changed the system of calculating the unemployment figures more than 20 times.
I turn now to industrial relations. In all that the Labour Government have done in the past two-and-a-half years, they have built a partnership in industry pulling the two sides of industry together and not driving them apart. They have talked meaningfully with both sides of industry. They have encouraged both sides to talk to each other more meaningfully and to work together more effectively. That is happening with new partnerships being forged.
This Government have gained the respect, the trust and the confidence of both sides of industry. They believe, as I do, that what we do together is much more successful than what we do separately. That is reflected in the employment relations legislation. In contrast, the Conservatives did all that they could to make the workers' side of industry as ineffectual as possible. That is not to say--before someone intervenes--that all the trade union legislation introduced by the Conservatives was unnecessary. Some was needed, but they went much too far.
When the Tories attacked the trade union contribution through deduction from wages scheme, which even the employers could not understand, their motives became very clear. They did nothing to reduce or remove conflict in the field of industrial relations.
I refer to the economy. As a major industrial and trading country, it is never easy to handle the factors that come into play and impact on the economy such as inflation, interest rates, the strength of the pound and balance of payments problems, all of which have to be addressed. But in the two-and-half years that this Government have been in office they have shown their determination not to be deflected from their goal of maintaining economic stability. This Government will not be pressurised or bullied into taking any short-term, easy route such as those which have plagued us so damagingly in the past. In contrast, we know all too well the result of the stop-go, boom-and-bust economics which eventually led to the fiasco to which the noble Lord, Lord Lamont, can so clearly testify. In my view the Opposition have not earned the right to charge this Government's programme as being either incoherent or lacking in vision.
For well over 40 years I have been involved in industrial relations and politics. At an early age I became aware of one fundamental difference between the party I support and the party opposite--and nothing has happened since to change my view. It may sound harsh, but the difference is this. In practice, the Tories seem to do things despite people whereas the Labour Party does things because of people. For me that reflects a difference of vision and of value.
The Conservative Party always claims that it is the guardian of the economy, although that claim was more than dented during 18 years in power. Its measures in respect of the economy always resulted in people having to sink or swim, depending on how strong or weak they were. That approach was epitomised by the noble Lord, Lord Tebbit, when he said, "Get on your bike".
The difference with the Labour Party is that it sees economic growth, social justice and environmental protection not as competing forces but as integral strands of the same programme, policy and vision. However, I suppose that to a greater or lesser extent we are all products of our environment, and perhaps our concept of coherence and vision stems from that.
When I was a small boy during the last war, I used to spend the summer months with my grandparents in Mardy, a village in the Rhondda Valley. They lived in a small terraced house built by the coalmasters. It had
That was their vision. That is my vision; and that is the vision of the party to which I am so proud to belong. The Government are doing all in their power to make that vision a reality, and the British people are supporting them in that endeavour.
I say in conclusion to noble Lords opposite: this amendment is neither scrutinising nor revising, so think long and hard before you press it to a vote. If you do not, you may forever have ringing in your ears the immortal words of Oscar Wilde:
Lord Blackwell: My Lords, in making my contribution to the debate I should like to deal with one general point and one specific point. On the general point, despite the glowing picture of this Government's record conjured up by the noble Lord, Lord Davies of Coity, I have to express my disappointment at the failure of the programme, and of the Government to live up to their rhetoric, on enterprise. I shall expand on why I believe that. On the specific point, I want to deal with the forthcoming Bill on electronic commerce. I declare an interest as an executive of a financial institution with specific responsibility for e-commerce.
Few would dispute that electronic commerce will be seen in years to come as one of the major industrial and social revolutions that this country has experienced, on a par with the development of factory systems, railways and computers. People marvel at the stock market valuations that some of the new Internet companies have achieved. Companies that did not exist a year or two years ago are now worth billions of pounds or dollars. That reflects the fact that the electronic commerce revolution that is hitting us is a major source of new wealth creation. I would not justify every one of those valuations, but the extent to which in many cases those companies are worth more than old established companies reflects not just displacement but the real wealth creation which will be brought about by this revolution.
We all recognise that because of the way in which electronic commerce will develop over the next few years, it is not just another trend or a small development. It will be revolutionary in its impact and a major source of wealth creation.
Fortunately, as with the first industrial revolution, the UK potentially has the opportunity to be one of the national leaders in electronic commerce. It is an industry based on inventiveness, creativity and the knowledge industry, as the Minister said in his introduction. The US will dominate, as it has many of the new knowledge industries, but the UK is out there in front, with 17 per cent penetration of Internet usage in the UK as opposed to, for example, 10 per cent in Germany and 6 per cent in France. The fact that the Government have not intervened has been an advantage. The government emphasis on Minitel in France has probably been one of the factors which has constrained the development of electronic commerce and the Internet in that country.
How has this come about? How have we reached this enviable position? It is because over the past 20 years government in the UK have got out of the way. They privatised BT, deregulated telecommunications and stopped protecting national champions. They did not have grand national investment programmes in infrastructure such as Minitel, to which I have referred, which fossilised old technology. We succeeded in achieving this position by allowing market forces to work. I welcome the electronic commerce Bill--although it is perhaps 12 months later than most of us would have liked--because it drives one of the key elements that is needed: the legal construct as regards legality of digital signatures.
I recognise that much of what I have said appears in statements made by the Government. However, I am concerned that their professed enthusiasm sits alongside a raft of policies which in their impact are anti-business and anti-enterprise. They work against the objective of higher productivity, to which many speakers have referred.
Many initiatives in the gracious Speech are aimed at productivity or innovation: innovation funds and centres of innovation. But productivity and innovation are not a consequence of what government do; they are a consequence of government getting out of the way and allowing initiative and enterprise to work. In the 1980s and 1990s, productivity growth in the UK put us in the top tier of our industrial
If we are to succeed in the new world of electronic trading, we need more than ever a true enterprise culture. The scale of the e-commerce revolution will need the raw power of market forces to make it happen, with the potential to create millionaires and, more importantly, the potential to drive established businesses to the wall when they do not adapt and change. Such a revolution will not come about in a protected environment. It will come about rapidly only if the full forces of market power are unleashed.
I believe that the Government, by their actions, have shown that, whatever is said, they do not like business or markets. Today, many noble Lords have spoken of the layers of red tape in regulations introduced in the past couple of years. Perhaps I may give a few examples. I refer first to the Working Time Directive, with the bureaucracy of record-keeping for small firms that that has imposed. Secondly, the new employment rights act as disincentives to taking on new staff if there is a risk that they will have to be laid off, such as exists in most e-commerce ventures. I refer thirdly to the whole panoply of stakeholder pensions, family tax credit and other measures where the burden of implementation falls on businesses. Finally, there is the IR35 regulation which this House recently debated. The imposition of such regulations work against innovation, enterprise and productivity.
Why do the Government have that dichotomy in their policies? I do not believe that it is malevolent. It must be that, despite the presence of distinguished and experienced business leaders on their Front Bench in this House, the Government as a whole do not understand business because few people in their leadership come from business. They are, for the most part, planners, not entrepreneurs. Apart, as I said, from some distinguished Members in this House, the leadership of the Government comes largely from professions where a few clever people sit down and sort things out and lay down the rules.
The notion of leaving things to raw market forces is an alien concept to the Government and to the party to which they belong. So they intervene and regulate. Because the Government have never really come to terms with profit as a good thing, Ministers have no qualms about loading all kinds of hidden taxes and burdens on business to try to achieve their social objectives without having to face up to the costs by imposing taxes through the front door. My only conclusion is that the Government are loading the burdens on business and, despite their rhetoric, are denying the opportunity for enterprise because at heart they do not like, understand or value enterprise except as an abstract, somewhat theoretical concept.
That does not fit with making Britain a world leader in electronic commerce. As I said, electronic commerce is a revolution which needs raw market power to drive it at the speed at which it must go. As much as anything else, and perhaps more so, electronic commerce is dependent on small businesses which are starting up and making the new initiatives work.
So, what is the answer? The best would be for the Government to live up to the words in the gracious Speech about deregulation and to repeal regulations on business generally. I should like to believe in the concept of a deregulation Bill. Against the background of a deregulation task force, a better regulation task force, a regulation star chamber, 2,700 regulations since the election, and an average compliance cost which over the past two years has risen by some 20 per cent, adding £4,000 to £5,000 a year to the costs for small firms, somehow I am not convinced that legislating for deregulation will be the answer. However, I wait in hope to see the Bill; it will be an interesting debate.
If it does not work, I suggest that the Government consider whether measures which help deregulation specifically associated with electronic commerce may be a way through. Part of that must be low-cost telephone access. Competition, if it is allowed, will get us there, but we need to ensure that telecomms' regulation and the social obligations placed on telephone companies do not get in the way. That includes mobile telephony as well as land lines. I note that measures are to be brought forward and we look forward to seeing whether they will achieve the required results.
The second suggestion that I want to put forward is that the Government should pick up on ideas relating to enterprise zones, but in this case have electronic commerce virtual enterprise zones. Rather than physical locations where businesses can be brought together and given special freedom from regulation, what about allowing businesses which qualify by being largely dependent for their income and business on the Internet to be exempted from a large range of government measures? I refer, for instance, to freedom from the regulations that I mentioned in the labour market; freedom from capital gains tax, freedom from IR35 and to the freedom to develop in the way in which those businesses need to develop.
Despite the Government's enthusiasm for electronic commerce, I do not believe that they have yet fully grasped the scale of the revolution, its potential for wealth creation and its impact on many areas in terms of the destruction of the established industrial order. I genuinely believe that they do not understand how damaging their bias towards regulation and imposing burdens on business is to the revolution that is taking place. Far from being modern, I have come to the conclusion that the Government, in their approach to regulation and burdens on business, are clinging to old-fashioned notions that government initiatives, regulations and intervention are the way to shape a new industrial order. In the world of electronic commerce, that would be the way to fossilise the past rather than to succeed in the future.
Baroness Hogg: My Lords, I am particularly sorry that I was unable to hear all the maiden speeches in the debate because those I heard were of an exceptionally high standard. We are all being given the opportunity to become expert judges. However, I am extremely
Perhaps I may begin with the Chancellor's pre-Budget report. The first conclusion one must draw is that there is scope for serious de-manning in government. For it is quite clear that the Chancellor is now responsible for everything. On page 98 of the report, one discovers that he has even become Minister for the weather. There is a helpful little chart showing the average temperature since 1860. On page 82 he tells us about the Disability Rights Commission and, on page 70, the National Learning and Skills Council. The Social Exclusion Unit seems mysteriously to come under the Treasury wing. Management, education, environmental policy, equal opportunity for women and special initiatives to support teenage parents in health action zones--all seem suddenly to be run by the Treasury.
Chancellors have always liked to announce anything requiring the spending of taxpayers' money, but much of the report's content has nothing to do with Budgets. The Minister may wish to assure me that that is merely packaging--a way of bulking out an otherwise rather uninformative set of public accounts. If so, I should refer him to page 110, since it seems that the Chancellor is now responsible for waste. That passage states that over 10 million tonnes of packaging entered the waste stream in 1998, and that the top priority of the new EC directive is to reduce that figure.
I am sure that the Chancellor would like to prove himself a good European by cutting those documents back to their previous modest scale and simple structure. That would certainly help to make them more transparent. The space-consuming habit of pre-announcing and re-announcing measures does not help. Nor is it entirely obvious why, for example, one should find technical details of the air passenger duty under the heading "Fairness to families". Nor do I understand why, in this lengthy report, the Chancellor could not find space for the usual table detailing the specific effect of each measure on public revenue and expenditure.
However, I believe that this bulk is more than mere padding. It is important evidence of the Chancellor's promotion to chief executive. Fair enough: our constitution is infinitely flexible. But then we must ask why the taxpayer needs to pay for all these other Ministers and departments. I am sure the noble Lord, Lord Sainsbury, would agree that that should allow layers of middle ministerial management elsewhere to be stripped out, but not, of course, in Downing Street. Every chief executive needs a chairman--preferably a non-executive one. But the streamlining of management that follows from Treasury imperialism must surely provide scope for de-manning elsewhere.
I hear some small voices whispering that things are not always best run by the Treasury. Of course I am not inclined to listen; some of my best friends are Treasury people. But even on taxation, which has always been and must remain a Treasury responsibility, this Chancellor could still do with a little outside help. I say at once that his pre-Budget statement shows some excellent intentions. I applaud the emphasis on business formation and growth, but he does have an unfortunate taste for complexity. The trouble is that that in itself imposes a burden on businesses, which have to waste time discovering whether they fit the precise shape of the Chancellor's loophole, and working out how they will have to distort their business plans to squeeze through. For example, while I greatly welcome his willingness to look again at CGT, the caveats and complications that sneaked out after his Commons speech have caused disappointment and some scepticism.
Moreover, complexity leads to contempt; contempt to evasion. I listened with some amazement to the noble Lord, Lord Sainsbury, explaining how smoothly the working time directive had been implemented. What is in fact happening is that those regulations are "Europeanising" us in the worst possible sense; that is, teaching business to ignore the unworkable even if it is the law of the land. The other problem with that kind of intervention is that markets move faster than governments. I cannot, for example, really understand why the Chancellor believes that he needs to kick-start a high-technology investment fund with taxpayers' money at a time when the markets are brimming over with money in search of high-technology investments.
The other slight defect seems to be a certain myopia with respect to the tax figures themselves. I have learned to read these documents from the back, because that is where officialdom still produces decent figures; perhaps the Minister never got quite that far. From Annex B to the pre-Budget report it is still just about possible to learn what is happening to tax revenue. It is absolutely clear that it is going up faster than the Government said it would in the Red Book in the spring. I fully recognise that that is in part because the economy is growing faster; but not all of it. On any consistent measure of current receipts, they are a higher proportion of national income today than before the Government took office, and they are expected to account for a still higher share of national income by 2001-02. Perhaps I may help the Minister with the page references.
I take a particular example. The Chancellor is now expecting income tax revenue to rise by about £6½ billion next year, clearly increasing its share of national income. That is £4 billion more than the Chancellor expected in the spring, and he now expects an even sharper increase in 2001-02. There is one particular element of that increase on which I should be grateful for guidance from the Minister. Higher interest rates this autumn have apparently added £1 billion to the personal tax burden. That of course is coming from savers. There used to be a
Lord Wade of Chorlton: My Lords, I come to this debate with a fairly pre-conceived idea of the importance of wealth creation. To me, that is the most important thing that any government can generate. It is the responsibility of any government. There are many elements of wealth creation that only governments can do. Those things which only governments can do, governments must do.
I believe in that not only because wealth creation is the driver of so many things from which others can benefit but, as the noble Lord, Lord Elder, stated, it also creates a background to provide social benefits, social security, the health service and all such matters that need to be paid for by those who generate the wealth. That is where I come from.
As I listened to the debate I was reminded of the story of the ancient king in his castle. One evening, over dinner, he heard a hammering on his front door. He went to see what it was. One of his knights collapsed in the doorway in front of him cut about the face, exhausted and in a terrible state. The king said, "By God, what have you been doing?" He said, "I've been out raping and pillaging your enemies in the north". The king said, "But I don't have any enemies in the north". He replied, "By God, you have now".
I cannot help but relate that story to some of the arguments we have heard. On the one hand the Government see the actions they are taking as having the support of everybody in the country in at least generating wealth. However, I am aware that there is concern in the north about the attitude of the Government to regulation and concern over control and interference. My noble friend Lord Blackwell referred to that.
There is a great danger that if we interfere too quickly and dramatically, the consumer will lose out. The flexibility of the market will always ultimately adapt to what the consumer most wants. If it is interfered with, there would not be the driving forward of certain businesses. The e-commerce sector has been referred to. That is now driven by the marketplace. The Government must be conscious of the fact that they are seen outside this place as a government which interferes too much; over-regulates and is anxious to have their hands on so many aspects of wealth creation.
I refer in particular to planning. I was pleased to see a report in the newspaper--how true it is, I do not know--stating that there is a view within the DTI and the Treasury that the planning system can be of great
I hear from my friends involved in development that many planning systems are seriously held up and investment held back because of delays in developing planning opportunities and getting the system working. I refer to commercial development, not housing.
I am pleased that the Government had a look at deregulation. However, the previous Government also passed a Bill to deregulate which did not have much impact then. What happens is that although the Government might want to deregulate, the army of people employed to regulate fights so hard against it that little happens. At the same time as we deregulate, we have to ensure that we have sufficient control over those who regulate to change their views.
The Minister referred in opening, as did others, to the fact that the manufacturing industry has been badly hit. Undoubtedly, that has happened. Many aspects of our manufacturing industry in the north-west have seen much unemployment. One company with which I was personally involved had to make many redundancies. That is a sad and unnecessary state of affairs. We were very much involved in export. The impact of the pound seriously undermined that business. That happened in many other manufacturing industries. That is something with which we have to live. We have to adjust and create other businesses.
However, the key to the future is that as one manufacturing system dies, we must generate a continuous flow of new business to take its place. I was delighted to hear the maiden speech of the noble Lord, Lord Gavron, and congratulate him on it. I endorse all he said about incubation and the development of new hi-tech businesses. Like him, I am involved in that area. I was the first chairman of Campus Ventures, which is our incubation unit in Manchester. I am now President of that organisation. But I am still quite involved as chairman of a number of companies we are creating in that incubation unit. I should like to take this last few minutes to offer the Government one or two ideas as to how we might improve that system.
The issue is that a business starts with a man with an idea. He may have no money and has probably been surviving on an income. Therefore when he starts up his business and the income stops, he takes a tremendous risk. Because he has no money, he has to find somebody to support him. That will no doubt be a seedcorn capital organisation of some kind or a wealthy individual who is willing to invest in his idea; invariably it will be a small amount of money.
The problem arises from the fact that a seedcorn capital company providing £25,000 to £50,000 is not a viable enterprise; it cannot make a profit out of that level of investment. As a result, the seedcorn capital sector is not growing big enough to support the level of
I should like to see a situation where we could link in with larger venture capital companies which can provide follow-on finance as the company grows, but at the same time create what I call a venture capital trust. The trust would provide support to encourage a flow of new investment opportunities; to encourage people to become entrepreneurs; and to encourage the movement of IPR out of universities, making it available for people to promote--that is an important aspect. But the trust would also be able to provide support to the venture capital company itself, to carry those costs it cannot carry out of its own profits because those profits are so small.
I feel that this is an important concept. I am working on it now and am in the process of establishing such a trust with a number of leading people in the north-west. However, at some stage we will need support from government organisations either in terms of finance or something similar. I wanted to take this opportunity to tell the Government what we are doing so that when I come knocking on their door saying, "My dear Lord I should like some support from you. I am a poor knight who has been beaten to death in the north", they will respond to me with a certain amount of hospitality and generosity in this particular instance.
Earl Russell: My Lords, a debate with nine maidens in succession is like watching a procession of all of the Muses. I cannot possibly at this time congratulate all the maiden speakers individually. It has been a pleasure to listen to them and a number of images from what they said will remain in my mind for a long time. But for the debate as a whole, it has been like Winston Churchill's pudding: it has had no theme.
The noble Lord, Lord Wade of Chorlton, in the last few minutes, recalled us to what should have been the central theme of the debate. It was billed as a debate on industry, economic and social affairs. We always have trouble dividing the debate on the gracious Speech. Today we chose a new experiment which has not worked; I hope one day it may.
The noble Lord, Lord Wade of Chorlton, called our attention to the relationship between wealth creation and social spending. The link between the "getters" and the "spenders" is the gearbox of politics, and this debate has been running in neutral. On the one hand we heard a number of excellent speeches, many of them of high quality and extremely interesting about the need for competitiveness, efficiency, productivity and being able to sell our goods cheaply enough to compete in the global market. Those arguments are sound; the global market will not go away.
However, when I heard the noble Lord, Lord Blackwell, speaking with, perhaps, the purist vision of the competitive market of all the people to whom we have listened today, I was reminded of a remark of my
The year my great-grandfather became a father while in 10 Downing Street was also the year when he over-ruled the Treasury to drive through the Public Health Board because of the urgent necessity of combating cholera. That is a very good example of the principle that you cannot ignore social costs if you want to consider economic competitiveness. After all, labour is one of the raw materials of business. Like other raw materials, when not in use it must be warehoused. If not warehoused, it deteriorates at a very alarming rate and the subsequent cost to the economy is considerable.
I wonder whether it is a coincidence that both the Prime Ministers to have become fathers while in office have done so immediately after putting through regulations limiting working hours.
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