Lords amendments agreed to.
[Lords](By Order) Orders for Second Reading read.
To be read a Second time on Thursday 24 June.
(No. 4) Bill-- (By Order) Order read for resuming adjourned debate on Question [8 February], That the Bill be now read a Second time.
Debate to be resumed on Thursday 24 June.
[Lords] (By Order)
(By Order) Orders for Second Reading read.
To be read a Second time on Thursday 24 June.
The Chief Secretary to the Treasury (Mr. Michael Portillo) : The Government are conducting a long-term review of public expenditure starting with the Department of Social Security, Department of Health, Department for Education and the Home Office.The Government have a duty to examine all areas of public spending to ensure that they give value for money. We would be failing in our duty if any area were to be exempt from scrutiny. The reviews will produce interim results that will be helpful in this year's public expenditure survey.
Column 976reference and scope. Given the Chief Secretary's meeting with the Prime Minister to rewrite invalidity benefit, will he confirm that the Government intend to exclude
"those who suffer from progressive diseases--for example, multiple sclerosis--and heart patients who are unable to walk on the flat for 200 yards"?
Before I am accused of scaremongering, I may say that that is a direct quote from the Department of Social Security document prepared for that meeting. Will the Chief Secretary explain what other cuts he intends to make to meet the £5,000 million target set for the DSS that is mentioned in that same document?
"I set up the Social Justice Commission to conduct a very wide-ranging view of the complex system of tax, benefits and rights We have not looked at any of this, almost since Beveridge." That is what the Government are doing. We are examining the way in which we provide value for money through the system. As to invalidity benefit, the hon. Gentleman knows that that must be looked at. There has been a massive increase in the number of claimants for invalidity benefit at a time when the health of the nation has been improving. That benefit now costs £6.2 billion a year. No decisions have been taken--in fact, no firm proposals have yet been put to Ministers. It is of course of great importance to us to ensure that the vulnerable are protected.
Ms Lynne : Now that the Chancellor has ruled out prescription charges for pensioners and charging for hospital beds, will he improve his left-wing credentials further by ruling out additional cuts in invalidity benefit and prescription charges in respect of children who are just above income support level? Or does the Chief Secretary feel that the Chancellor will be a little too worried about his own political advancement if the right wing of the Conservative party disapproved?
Mr. Portillo : The hon. Lady does not help the debate by trivialising it. We obviously have to address the question of social security spending rising faster than our national income, which presents us with a problem. We must examine the benefits that are growing fastest and ask ourselves why benefits are rising 3 per cent. a year in real terms, which is much faster than national income. We must take careful decisions. There will be no announcements before November, and it will be later than that, in respect of long-term questions, before we can reach decisions, because those serious matters need careful consideration.
Mr. John Townend : When my right hon. and learned Friend reviews public expenditure, will he bear in mind that every firm in the country that has survived during the recession--small, medium or large--has had to cut its overheads and slim down its staff? Meanwhile, the public sector and local government are still bloated. In the last year, we have increased the strength of the civil service by 2.5 per cent.--nearly 14,000 people. When he looks for savings, will my right hon. Friend set all Departments a target of a 5 per cent. reduction in manpower to cut the Government's overheads?
Mr. Portillo : My hon. Friend has made an important point. In examining Government spending, all we are really doing is ensuring that the public sector does what the private sector has had to do throughout the recession--make sure that it lives within its means. The same applies to every family in the country. It would be intolerable if people made sacrifices, while the Government continued to live beyond their means on the back of borrowing and taxation which are available to them but not to families and businesses. We need to consider civil service numbers and running costs very carefully. The civil service had quite a tight settlement last year, and I imagine that next year's figures may show the lowest number since the war. I think that that is quite appropriate.
Mr. Jessel : We all greatly admire the excellent work of the national health service, but will my right hon. Friend invite the Secretary of State for Health to consider whether she should continue to provide surgical operations on the NHS for the removal of tattoos? If a person has had printed on his skin signs, symbols, messages and coloured pictures--
Madam Speaker : Order. I have the impression that the hon. Gentleman's question might be better put to the Secretary of State for Health herself. The Chief Secretary has probably got the point by now.
Mr. Gordon Brown : Now that the Cabinet has met to discuss public spending, why does not the Chief Secretary use this opportunity to rule out cuts in invalidity benefit for those suffering from multiple sclerosis, and the heart patients who cannot walk 200 yards? Why does he not tell us that he will drop his proposal to privatise some national insurance benefits, and that anything other than full compensation for pensioners and others on low income who have been hit by VAT rises will not be enough? Why must the users of public services pay the price of the Government's economic mismanagement?
Mr. Portillo : I wonder why the hon. Gentleman does not use his own opportunity to desist from scaremongering. Is he not aware of the real anxiety and fear that he causes? Is he not aware of the disrepute in which he is now held because of the disgraceful tactics that he has used, day after day? Is he not aware that the British people are now pretty well fed up with him, and that he should stop?
Mr. Congdon : Does my right hon. Friend agree that, although it is important to review all aspects of public expenditure, many people are rightly concerned about the growth in the expenditure of the Department of Social Security? They expect the Government to review all the various benefits properly, and to ensure that they are targeted. At the same time, members of the public wish us to ensure that NHS expenditure is protected.
The Financial Secretary to the Treasury (Mr. Stephen Dorrell) : The Budget measures for business have been warmly welcomed by the business community. They provide an excellent environment for investment and job creation.
Mrs. Campbell : Given that the CBI's industrial trends survey shows that manufacturing firms are still cutting investment, will the Minister tell us what specific steps he will take to promote investment--especially in areas affected by coal pit closures, defence cuts and local authority capping?
Mr. Dorrell : In a week in which the Central Statistical Office has announced that manufacturing output is now rising at an annual rate of 5 per cent.--the House may be interested to learn that it fell by exactly the same amount when Labour was in power between 1974 and 1979--I do not feel disposed to take any lectures from Labour about how to create an environment in which businesses expand and jobs can be created.
The hon. Lady asked what measures had been introduced to promote business investment. Let me list the measures introduced in the Budget and the autumn statement, which have been welcomed by the business community. In those statements, the previous Chancellor increased the amount of export credit available, provided a £2 billion cash flow benefit to British industry through the advance corporation tax changes, abolished car tax, introduced capital allowances and put extra money into the housing market through changes in the housing associations and in the capital receipts regulations for local authorities.
Mr. John Greenway : My hon. Friend the Financial Secretary omitted from that list the £150 million leasing deal for new railway rolling stock, which was announced in the autumn statement and which is much needed to help preserve jobs in the train-making factory in York. Does he agree that the sooner we establish the leasing market for new trains, the sooner more of those who have been made redundant in York and other places can be put back to work? Would it not help that process if the Labour party dropped its objections to the Railways Bill?
Mr. Dorrell : My hon. Friend is absolutely right. The measure to which he refers reflects not only the Government's commitment to investment in railway rolling stock, which my hon. Friend is right to welcome, but, more importantly, the Government's commitment to improving the service available on British railways through the changes to be introduced in the Railways Bill.
Mr. Robert Hughes : Does not the Financial Secretary understand that the minuscule changes to the petroleum revenue tax announced in the Budget will do nothing to safeguard jobs in the oil industry? Is he aware that only yesterday the Association of Offshore Diving Contractors made it clear that there are likely to be about 21,000 job loses? How can he say that he is trying to deal with investment and improve business when he carries out that sort of action which produces high unemployment?
Mr. Dorrell : The hon. Gentleman's dismissive attitude to the changes that we annnounced yesterday is not reflected by Brindex, which made proposals very similar to those that we announced. As the House knows, the fundamental reason why we are changing the PRT system is that we do not believe that among the many calls on public resources which my right hon. Friend the Chief Secretary has to balance we should number subsidising the international oil industry.
Mrs. Peacock : Is my hon. Friend aware that many Yorkshire companies have been investing in new jobs, new factories and new manufacturing processes over the past nine years and that many have continued throughout the recession to invest their own money, not borrowed money? Perhaps he might persuade his colleague, the President of the Board of Trade, to come and look at some of that investment.
Mr. Dorrell I am sure that my right hon. Friend the President of the Board of Trade is capable of being responsible for his own travel arrangements. If he were to travel to Yorkshire, he would find, as my hon. Friend rightly points out, that British industry is benefiting from the more stable environment that has been created over the past two years as a result of lower inflation, lower interest rates, a more competitive exchange rate and the opportunity for British industry to expand, which the indicators show is now being taken.
The Paymaster General (Sir John Cope) : The visible deficit was much the same in the first quarter of this year as in the fourth quarter of last year. Some deterioration after the movement of the exchange rate is to be expected, but our trade prospects are now very good.
Mr. Burden : Is the Minister aware that the real story is that imports are growing at twice the rate of exports? Would he care to reflect on the report published this week by the Bank for International Settlements which concludes that the Government's failure to invest in manufacturing industry means that there is not enough manufacturing capacity to support even our domestic markets when demand is low. A total of 44 per cent. of manufacturing jobs in the west midlands have been lost since the Government took office. Does not that show how short-sighted the Government have been to ignore the importance of manufacturing industry?
Sir John Cope : We have not ignored the importance of manufacturing industry or manufacturing companies. After all, if the hon. Gentleman had looked at the Financial Times' survey of the top 500 companies in Europe, he would have seen that 10 United Kingdom companies were in the top 20 for profitability. That reflects their investment, as does the fact that our export volumes are at record level.
Sir Peter Tapsell : As my right hon. and learned Friend is the 13th Chancellor in whose Question Time I have ventured to pose a question, may I confidently express the hope that he will have a happier tenure of office than his 12 predecessors? Before his officials and special advisers
Column 980have time to bemuse him with contradictory economic theories and dogma, may I respectfully suggest that he should take a firm grasp of the basic proposition that if we had a large balance of payments surplus it would not matter if we had a large public sector borrowing requirement? In other words, the balance of payments is the critical statistic. So he was absolutely right in his Guildhall speech to stress the importance of helping British industry.
Sir John Cope : I am sure that my right hon. and learned Friend the Chancellor of the Exchequer will be very grateful for my hon. Friend's good wishes, especially as they come from such a wealth of experience, and for the advice that he has given.
Mr. Darling : On the question of growth in our manufacturing base, can we be told when the Chancellor will set out the detailed policy changes which will demonstrate a change in the substance rather than merely the style of his prececessor? Does he not accept that giving more television interviews than his predecessor, or the fact that he has spent most of his life in the midlands, do not in themselves add up to a new industrial policy?
Mr. Evennett : Can my right hon. Friend confirm that our exports to non-EC countries have grown in the past year? Should we not all be congratulating British business and business men for their export achievements?
congratulations. In value terms, exports, excluding oil and erratics, to the whole world were 12 per cent. higher in the first quarter of this year.
Mr. Boyce : What advice does the Chancellor think that he will receive which will boost the confidence of the country, given that in the current report the state--[ Hon. Members :-- "Reading."] Yes, that is what I went to school for. The current account deficit was £12 billion when the panel issued its last report. The Government's forecast for the coming year is that the current account deficit will be £15 billion : what encouraging advice does he think the panel will give him?
Mr. Clarke : I imagine that when I receive the advice of the panel I shall find that it contains the variety of advice to which my hon. Friend the Member for East Lindsey (Sir P. Tapsell) rightly referred. I accept that we have a balance of payments problem, which is why I am glad that our export performance is improving and that we are doing so well especially in non-EC markets where demand is not depressed as it is in the Community. Certainly, the Government must do everything possible--in my Department and that of my right hon. Friend the President
Column 981of the Board of Trade--to support our manufacturers in their efforts to export. Otherwise, I hope that the forecast will take some encouragement from the growth in GDP and manufacturing output and today's fall in the unemployment figures for the fourth successive month.
Mr. Horam : Is my right hon. and learned Friend aware that there was indeed a warm welcome for what he said in his Guildhall speech about growth and recovery and especially about listening to the views of business men? Is he also aware that business men have for some time been calling for a continuation of the process of lowering interest rates? In as far as my right hon. and learned Friend is able to achieve that and therefore able to enhance and maximise growth, he will ease his own problems with the fiscal balance.
Mr. Clarke : I am grateful to my hon. Friend. He sent me a copy of his own interesting suggestions for a policy for industry some months ago, and I have been carrying it around with me ever since. I shall refer to it once more.
One of the things that helps to show the modest signs of recovery is the nine point fall in interest rates which we have achieved recently. It has greatly helped British industry. Clearly, further changes in interest rates can be made only when we have the right circumstances. I set out at the Guildhall the type of circumstances and the type of advice that I would take before deciding on any movement of interest rates.
Mr. Gordon Brown : As the Chancellor has agreed today that the trade deficit is a problem, will he outline the detailed changes in industrial policy that he will introduce? As he said at the Mansion House that achieving higher growth is his objective, what investment in employment measures will he seek to introduce? As the Prime Minister has changed the Chancellor, will the Chancellor now announce the detailed changes in policy so that the country can see action instead of just words?
Mr. Clarke : It is not my intention to pre-empt the work of my right hon. Friend the President of the Board of Trade or my right hon. Friend the Secretary of State for Employment. All three of us will work in the same direction. My next major contribution will, no doubt, be November's Budget, but I assure the hon. Gentleman that he is facing a business-friendly Government who will take specific measures to sustain British industry and commerce in the recovery that it is beginning to make.
Mr. Willetts : Is not it likely that the panel of experts will be able to show in its next report that Britain is heading for an economic growth rate higher than its inflation rate? Would not that be a remarkable achievement?
Mr. Clarke : It would be a quite remarkable achievement. My hon. Friend will agree that it is important to ensure, first, that that is achieved, in so far as it is within the Government's power to do so, and, secondly, that this time we sustain it, because in the past Britain has done quite well for several periods but has always succumbed to various British diseases that held us up once more.
Mr. Beith : Does the right hon. and learned Gentleman recall being advised that interest rate changes should never be made to offset some unfavourable political event? Does he realise that that advice came from the eighth independent adviser, the right hon. Member for Kingston
Column 982upon Thames (Mr. Lamont)? Was the right hon. Member for Kingston upon Thames justified by anything in his term of office in giving that advice, and what is the Chancellor doing to change a system under which that could have happened?
Mr. Clarke : I have set out quite clearly the grounds on which decisions on monetary policy will be taken. I propose to take decisions in the light of the various criteria that I have set out. It is quite right that they should be taken on the best objective advice and for good economic reasons. We will persevere with that, so I do not think that the right hon. Gentleman will have cause for complaint on that ground in the coming months.
Mrs. Gorman : Will my right hon. and learned Friend take note of the very good advice of his adviser, Professor Patrick Minford, who said on the radio today that, as the Government's policy had brought inflation down to almost zero, it is time for us to consider lowering interest rates so that we can get the jobs going again, which would follow from the Government's admirable effort in killing off inflation?
Mr. Clarke : I know Professor Minford from times gone by. I have met him from time to time and have always listened to his advice with care. I know several members of the panel of forecasters, which my predecessor assembled, and they hold a variety of views. I am waiting to receive all their forecasts. I suspect that there will be a fairly wide range of advice, and I shall take careful regard of all of it.
7. Mr. O'Hara : To ask the Chancellor of the Exchequer if he will prepare an estimate of the average cost to the Treasury of one unemployed person in terms of (a) benefits paid and (b) tax revenue lost.
Mr. O'Hara : I am as pleasantly surprised as, no doubt, the Minister about today's slight decrease in the unemployment statistics--which prudent observers, I am sure, will distinguish from a reduction in those who are unemployed and seeking work--but does the hon. Gentleman agree that the cost of each unemployed person, which is authoritatively assessed at approximately £9,000 per year, is the single biggest cause of the ballooning public sector borrowing requirement? Does he agree that the best way to tackle the problem is not to punish unemployed people by reducing benefits but to take positive measures to put them back to work?
Mr. Dorrell : The best way of helping unemployed people is not to speculate on things that are unpredictable and unmeasurable but to create an economy that creates jobs and puts working people back to work. To achieve that, the best thing that the Government can do is to follow the precedent of their record of the 1980s, when manufacturing investment increased by 67 per cent., when the number of jobs created within the economy was 3 million and when manufacturing output rose by 30 per cent. That is the record of this Government between 1982 and 1990, which we wish to recreate.
Mr. Dorrell : My hon. Friend is absolutely right. One of the interesting contrasts to be drawn is that between the record of this country in the late 1980s and that of France during the same period. Our growth rates were roughly the same, but the difference was that in this country we converted that growth into jobs and in France, whose socialist Government espoused the cause of the social chapter, they failed to do so. The House should draw conclusions from that contrast.
Mr. John Evans : Will the Minister confirm that the Conservative Government, whose members constantly go on about sound money, are heading for a deficit of £1 billion a week--£50 billion a year--largely created by the incompetence of the previous three Chancellors?
Mr. Evans : My hon. Friend's views are just. Does the Minister accept that the way to cut the appalling deficit is not by slashing welfare payments or by charging the elderly VAT on energy, but by taking a knife to unemployment and getting this country back to work again?
Mr. Dorrell : The split between the two sides of the House is not over the desirability of creating extra jobs and getting unemployed people back to work--that is a shared ambition. The split is over how to achieve it. The hon. Gentleman is right to identify the budget deficit as one of the problems that have to be tackled if we are to deliver the objective that both sides of the House share. I look forward to hearing from him, and even more to hearing from his Front-Bench colleagues, how the Labour party proposes to deliver the reduction in the deficit that we all want.
Mr. Brazier : Will my hon. Friend confirm that the only Governments since the first world war to reduce unemployment have been Conservative Governments? Does he agree that the way to reduce unemployment does not lie through a minimum wage, greater regulation of the labour market or the kind of socialism that has delivered 19 per cent. unemployment in socialist Spain?
Mr. Dorrell : My hon. Friend is right to draw attention to the interesting historical fact that it is Tory Governments who cut unemployment and Labour Governments who increase it--just as, incidentally, it is Tory Governments who cut hospital waiting lists and Labour Governments who increase them.
As I said earlier, the best way to get people back to work is to create a vigorous and competitive economy. One of the best bits of news in that regard is the fact that manufacturing productivity is now rising by 7.8 per cent. a year, which means that unit wage costs in manufacturing are falling, for the first time in living memory. Those costs are falling by 2.8 per cent. a year, and that holds out the prospect of improved competitiveness and, therefore, of improved job creation. One would like to think that the Labour party would welcome that.
Column 984£9,000 a year for each unemployed person? Is not the greatest cost of unemployment the cost to unemployed people and their families, and the waste to society of the wealth that their employment would otherwise generate? Are not those costs most corrosive in the case of the 1 million people who have been out of work for more than a year, who loom behind today's welcome fall in the headline unemployment figures? Will the Financial Secretary now tell us what new measures the Government will introduce to counter unemployment and, in particular, what they intend to do to bring work to the long-term unemployed? Will he also examine the case for rebates on national insurance contributions for employers who take on workers from among the long-term unemployed, to whom we must give help?
Mr. Dorrell : Yet again, we have the spectacle of the Labour party recognising that the budget deficit is a problem, although the only ideas that are announced from the Opposition Dispatch Box are those that would have the effect of increasing that deficit. Of course, it is true that unemployment imposes both a social cost on the individuals concerned and an economic cost on the economy as a whole. We have to address the problem of how to make unemployment fall. We believe that the way to do that is by creating a competitive and vigorous economy. That is what we are about and that is what we are constantly being obstructed in doing by the Opposition.
he will continue to do everything in his power to ensure that we continue to provide the most where the need is greatest?
Mr. Dorrell : My hon. Friend is quite right. That, of course, is precisely the purpose of the review of public expenditure on which my right hon. Friend the Chief Secretary is engaged, in order to ensure that, within the public spending total, expenditure reflects today's priorities.
Mr. Kenneth Clarke : Business investment remains at an historically high level, despite the recession. In 1992, the share of business investment in gross domestic product was over 14 per cent., higher than in any year between 1970 and 1987.
Mr. Betts : Has the Chancellor read the report by the Bank for International Settlements, to which my hon. Friend the Member for Birmingham, Northfield (Mr. Burden) referred, which shows a major structural weakness in the economy of this country caused by long-term low manufacturing investment? It shows that any recovery is likely to be short lived, since a balance of payments crisis will stop the recovery because of that low level of investment. Will the Chancellor explain to the House what changes in action and policy he will bring about--not words--to rectify the appalling situation
Column 985caused by 14 years in which his Government have put manufacturing industry at the bottom of the political agenda?
Mr. Clarke : I regret to say that I do not think that that is historically correct. At the moment, business investment is low because we are just emerging from a recession and are in the early stages of recovery, but there was a substantial investment boom in the latter years of the 1980s. Business investment in this country was up more than 45 per cent. in the three years to 1989, which was the fastest three-year growth since the war. We have a much better record of manufacturing and business investment in this country than there has been historically. I will, of course, consider measures that might sustain that good record once the recovery gets under way.
Mr. Ian Taylor : Does my right hon. and learned Friend agree that one form of assistance that he could give to business investment is not to crowd out the borrowing market by the high level of Government borrowing and that, therefore, one of his key responsibilities must be to get down long-term Government borrowing, which would allow long-term interest rates also to fall?
Mr. Clarke : I wholly agree with my hon. Friend, which is why the Cabinet, in its decision this morning, places such a high priority on getting down as quickly as we can the level of Government borrowing. That message is simply not taken by the Opposition, who merely come forward with opposition to any revenue raising and proposals for more spending. Indeed, in the debate last Wednesday, the Leader of the Opposition would have added £12,000 million to the public sector borrowing requirement by that one speech alone. The interests of industry and manufacturing investment in this country lie in the direction suggested by my hon. Friend.
Mr. Hoon : Before Britain joined the exchange rate mechanism, it was well known that the Chancellor of the Exchequer encouraged membership on the basis that it would assist business investment. Will he argue the same case again?
Mr. Clarke : Our membership of the exchange rate mechanism certainly helped us to achieve the low level of inflation which is one of the best bases for making industry competitive as we move into the recovery. The five-point reductions in interest rates before we left the ERM were as valuable as the four additional point reductions that we have made since we left the ERM. All were based on this Government's success in getting down inflation. We now have to demonstrate the same success in getting down the public sector borrowing requirement.
Sir John Cope : We have introduced a number of measures to assist the housing market. The autumn statement announced additional housing measures of £750 million, plus time-limited measures to allow local authorities to spend nearly all their new capital receipts. The Budget doubled the stamp duty threshold to £60,000,
Column 986and, following the significant easing of monetary policy since last autumn, mortgage rates are now down to their lowest levels for 25 years.