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6.5 p.m.

Lord Gladwin of Clee: My Lords, in addressing your Lordships' House for the first time I should like to speak about what I believe, from a lifetime of service in the trade union movement, to be one of the keys to our future economic success. I refer to the skills needed in what I venture to call the productive economy. I wish also to say how grateful I am for the kindness and consideration that has been shown to me by your Lordships, by Officers of the House and by many members of the staff.

This House is a cosmopolitan community with Members from richly varied backgrounds. As your Lordships may be aware, I come from a career working with the trade union which today is called the GMB but which for most of my time was known as the General and Municipal Workers Union.

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I realise that the part played by trade unions in our society has been, and perhaps still is, a matter of some controversy. For instance, some economists have described trade unions as having no more than a fugitive role, an imperfection in the labour market. Whatever theory may say, in practice the fugitives have survived. However, the environment in which they operate today is more challenging than it has been for decades. The world of work is more insecure for everyone nowadays. Global markets have exposed British business to a colder competitive climate. Keeping up with the competition now means much more than matching their prices. Increasingly today product quality and standards of service decide whether customers are prepared to pay premium prices and whether businesses survive.

Last year in this House my noble friend Lord Haskel drew attention to the way in which worldwide competition was increasing the pressure on people at work. He summed up the situation by saying that nowadays our industry has to produce extraordinary results with ordinary people. I agree completely with that summary and with all that it implies about the education and training that working people need to do a good job.

In the debate on the Address in this House in 1962 Lord Williamson, a former GMB general secretary, warned that the commitment of Her Majesty's Government to a high and stable level of employment was threatened by the low level of training in British industry. Unfortunately that warning had a Cassandra-like quality. No one took it seriously, but it became disastrously true.

What was true of the 1960s is even more true of the 1990s. British industry is being held back, not by burdensome and bureaucratic regulations as some would have us believe. It is being stifled by skill shortages. The commanding heights of modern economies lie in the education and skills of their workforce, but too little is being done in this country by either side of industry or by the Government to scale those heights. Trade unions must accept their share of responsibility.

A survey by the Advisory, Conciliation and Arbitration Service (ACAS) showed that at the beginning of the 1990s trade unions only negotiated about training in two out of every 10 workplaces where they had membership. Unions have traditionally put pay at the top of their bargaining priorities. It is clear to me today that they need to broaden their bargaining agenda and shift the emphasis from pay to prospects. Bargaining has to be about building skills as well as about paying bills.

I have the honour to be chairman of Ruskin College, Oxford, which helped the Transport and General Workers Union and the Ford Motor Company to negotiate a bold scheme for the education and personal development of Ford workers. I have also had a limited involvement with the Rover Group where a similar scheme has been introduced. I believe that the Rover example is particularly interesting because, as I am sure many noble Lords will recall, the company was beset with major industrial relations problems in the 1970s

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and early 1980s. Now it is a successful manufacturer and recently announced the creation of nearly 1,500 new jobs.

With the co-operation and commitment of the trade unions, the company has transformed the method of production. All employees are encouraged to participate in, and contribute to, continuously improving processes and performance. But I am afraid that trade unions are having a much tougher time negotiating training agreements with indigenous small and medium-sized firms, the very sector of the economy from where the new jobs should come. That is a problem we need to address--and address urgently.

It is understandable that attention tends to be focused on education and training for young people entering the workforce for the first time. But we must remember that over 80 per cent. of the people who will be at work in the year 2000 are already working today. It is essential that their skills are improved.

Perhaps I may take as an example my own trade union. We are endeavouring to negotiate the right to one week's training per year every year for all employees. That is a start. The union is trying to take the CBI at its word when it calls for lifetime learning by British workers. It is trying to give effect to Article 15 of the European Social Charter which provides for lifetime training rights for all workers.

Learning, education and training must not stop when people start work. But the figures show that the less training you have had today, the less you are likely to get in the future. That represents a massive denial of opportunity to women, young people and members of black and ethnic minority groups.

In some circumstances the market system can and does work. But when it comes to skills and training something extra is needed to prompt employers into action. The CBI estimates that nearly two-thirds of United Kingdom employers invest less than 2 per cent. of payroll costs in training, whereas three-quarters of French employers invest more than that figure. Perhaps we should follow the practice in, for example, Germany, France, Japan and Singapore where employers are encouraged, and in some cases required, to invest a minimum percentage of their payroll costs in training.

The skills gap will not close of its own accord. Already a CBI survey shows that 10 per cent. of manufacturing firms report that a shortage of skilled labour is the factor most likely to limit their output. That is confirmed in a more recent survey published last week covering over 900 companies in the West Midlands. Nearly 30 per cent. of them report that it is more difficult now to recruit the labour they need than at any time since the winter of 1990 and that skill shortage is,

    "a reflection of the reduced emphasis upon training during the recent recessionary period".

I believe that there is considerable support in industry for a national training strategy which would replace the present market-driven voluntary system. Such a strategy would include measures to ensure that all employers contributed fairly to the training of their own workforce. It would limit poaching and encourage training in transferable skills.

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I fully appreciate the work being carried out by the training and enterprise councils and the National Council for Vocational Qualifications. But more is needed if we are to achieve sustained economic growth.

I see the position quite simply. The stark choice facing workers in modern economies is this. They can either sell their skills or work for low wages, or not work at all. I want Britain's employers to invest in their workers; to exploit their potential, to tap their talents, and to develop their capacity. The alternative is for Britain to slide down-market into a low skill, low wage economy, a future which I am sure no one in your Lordships' House would look forward to with anything other than dismay.

6.16 p.m.

Lord Tugendhat: My Lords, the noble Lord, Lord Jenkins of Hillhead, said earlier that the debate had been notable for the high quality of the maiden speeches. Today we have seen that quality still further enhanced with two notable contributions from the noble Lord, Lord Gladwin of Clee, and my noble friend Lord Nickson. The noble Lord, Lord Gladwin, comes to us with a lifetime of experience in industry--certainly in the trade union movement to which he referred --but also with great knowledge of the Post Office, the fishing industry and his experience at Ruskin College. He has demonstrated in the most eloquent possible way today his ability to transmit that experience and wisdom in a manner that will command the attention and influence the views of people in all parts of the House and not only on his own Benches.

The noble Lord, Lord Kingsdown, has already congratulated my noble friend Lord Nickson. Therefore, there is little more for me to say other than that in view of his reference to the opening of the first test match in Brisbane in less than six hours' time, I only hope that the English team do half as well as he did today.

Before I come to the substance of my speech, I must make one further point. It is to say how grateful I am for the opportunity to speak in this debate. I am, sadly, unable to stay until the end owing to a previous long-standing engagement. I therefore crave the indulgence of the House for my absence subsequently, especially of my noble friend who will wind up and of those who will wind up from the Opposition Front Benches.

I turn to the substance of my speech. The Government are under such sustained attack, in some respects more particularly from their own supporters, that it is difficult for one to realise that the economy is probably--indeed certainly--in better shape than at any time since most of us can remember. The rate of growth is nearly 4 per cent. The underlying rate of inflation is at 2 per cent., a level last seen in the early 1960s. The growth is export led. The balance of payments is improving rapidly, according to some independent experts, at perhaps an annual rate of £6 billion a year since 1992. Unemployment is falling; and even manufacturing industry, about which so much concern has rightly been expressed in recent years, is recovering.

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One could go on. Of course I recognise that the devaluation of 16th September 1992, to which the noble Lord, Lord Eatwell, drew attention, is perhaps the crucial factor on which this recovery has been based. But I believe that he was less than fair when he then appeared to attribute the remainder of the success to the fall that occurred some time ago--it is being reversed now--in commodity prices. We need to look at other factors as well. In particular, it is just, at this time in the early 1990s, to examine the impact that structural reforms carried out in the 1980s have had, or are having, in terms of flexible labour markets, more internal competition and more inward investment. Like most structural reforms, those that took place in the 1980s have taken time to bear fruit but they are doing so now in the 1990s. It is also right to remember the substantial reduction in the level of inflation that took place while we were members of the European exchange rate mechanism.

Finally, it is crucial to pay tribute to the tight fiscal and monetary policies that have been pursued since the devaluation, which have enabled the inflationary impact that normally follows a devaluation to be restrained and which have brought it down still further, reduced the public sector deficit and nurtured growth in the economy.

Of course, we have been helped--and it would be churlish to deny it--by the recovery in the United States and this year in continental Europe. But it is also fair to point out that this is the second year running in which the economy has greatly out-performed the forecasts and greatly out-performed expectations. That would not have been possible without the measures that I have listed. I therefore pay tribute not just to the present Chancellor for what has been done since the devaluation, but also to his predecessor, Mr. Norman Lamont, to whom the noble Lord, Lord Jenkins, paid a somewhat oblique compliment, I felt, in the course of his remarks.

There is one further point I also wish to make. That is the importance of the reforms initiated by Mr. Lamont when he was Chancellor and continued by Mr. Clarke, to enhance the role of the Bank of England in the formation of monetary policy and to make that formulation more transparent. Both those measures--the enhancement of the role and making it more transparent--have done much to improve the quality of policy making and the confidence reposed in it in this country and abroad.

What now? For God's sake, don't blow it. Having come as far as we have, the words of the noble Lord, Lord Kingsdown, speaking with all the authority of a former Governor of the Bank of England, ought to weigh heavily in the Government's ears. The Chancellor must keep his pledge on no premature tax cuts. If necessary--by which I mean if conditions demand it--the Governor must be prepared to recommend higher interest rates and, as he has already done, do so before rather than after the event. The willingness of the Governor to recommend, of the Chancellor to accept and for the decision to go ahead before rather than after inflationary pressures have begun to build up has had a

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beneficial effect on the way in which the United Kingdom economy is viewed. I hope that the Chancellor will continue to pay heed to the Bank of England's advice in these matters.

It is also important, I believe, to remind ourselves that it is not enough for the British rate of inflation simply to be better than we have been accustomed to in this country. Four per cent., the top end of the Government's range, may be much better than we have been accustomed to, but it is by no means good enough by international standards. We need to be not just below2½ per cent. but significantly so. In that connection, it is perhaps worth pointing out that the French rate of inflation at present is 1.6 per cent. or 1.7 per cent.

I shall give four reasons why it is important that the rate of inflation in this country should be low not just by our historic experience but also by the standards of our competitors and partners. The first is that our past record means that markets are much more suspicious of us in relation to inflation than they are of many others. Therefore, our Government's funding carries an interest rate premium that others do not have to carry and that we must get rid of.

Secondly--and this is a point which was eloquently made by my noble friend Lord Nickson--we must encourage as high a level of industrial investment as possible and as sensible an allocation of resources. That will be greatly aided by a low rate of inflation. Thirdly, we need to maintain competitiveness with our competitors abroad and especially with the newer ones who are becoming increasingly important in world export markets. As my noble friends Lord Nickson and Lord Ferrers pointed out, the British share in manufacturing exports has recently been increasing but the going will become tougher and it is important that we should operate from a sound domestic base.

Finally under that heading, we need to keep inflation low because our population is ageing. That means that people need to maintain the value of their savings in order to be able to provide for themselves, otherwise the cost to the public purse will be even greater than would normally be the case.

Before concluding I wish to make one further point. In economic terms we are living in revolutionary times. The market economy has expanded to embrace the whole world. Huge technological changes are taking place in every aspect of business life. The result is great upheavals in people's lives. That creates enormous opportunities for some; for those with the appropriate skills, the appropriate training and the adaptability that is needed. But it is also a cause of great anxiety to others. Those for whom it is a cause of great anxiety are to be found in all sectors and at all levels of our society.

As the noble Lord, Lord Kingsdown, indicated, the changes have already meant and will continue to mean that we shall see far-reaching changes in the traditional patterns of career and work. Periods of full-time employment will be punctuated by unemployment, part-time work and self-employment. Those experiences will be common across the whole of our society. For many people, part-time work and self-employment may well become the norm. Involuntary early retirements will also continue.

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I believe, therefore, that the Government need to bear that in mind and to cushion rather than to penalise those who lose out from these developments. In a nutshell, we must certainly continue to encourage dynamism and change; but dynamism and change and a faster rate of economic growth, with a low rate of inflation, will not benefit all the people all the time. Those who lose out temporarily or permanently still have rights as individuals and as citizens. Therefore, I urge the Government, in framing their tax and benefit policies and their public expenditure proposals, to take those factors, too, into account. If we think only of dynamism and change rather than of balancing those with people's need for security, there will be a backlash which could bring all the economic success which we have achieved to a juddering halt.

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