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6.53 p.m.

Lord Boyd-Carpenter: My Lords, this is the last evening on which we are debating the reply to the gracious Speech with which Her Majesty opened the present Session. So far we have had an extremely interesting discussion with an authoritative expression of the trade union attitude in the speech of the noble Lord, Lord Gladwin of Clee, and an equally impressive speech by my noble friend Lord Nickson on the employers' angle in industry. We have seen a good example of the wide body of expertise in a whole variety of directions which is to be found in your Lordships' House and which enables our discussions to be participated in by people who really know what they are talking about.

The gracious Speech and the address in reply contain some important words. For example:

Those are important words, as are those which immediately follow:

    "Fiscal policy will continue to be set to bring the budget deficit back towards balance over the medium term. My Government will reduce the share of national income taken by the public sector".--[Official Report, 16/11/94; col. 3.]

That is an extremely important statement and my first question is whether the proposals now before us fall in with that undertaking. There are proposals for increased taxation. There are the small but irritating taxes on air passenger flights and on insurance. But much more important is the major build-up of tax which contributes to legal aid. That is an important economic aspect. Despite the efforts --very real and sincere--of the noble and learned Lord the Lord Chancellor, the cost of legal aid has been allowed to rise steadily year after year. In the current year it rises from approximately £1,200

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million to £1,300 million. That is a substantial amount. When my noble friend replies, perhaps he can say whether the Government are satisfied with that or whether they are prepared to tackle taxation being levied in order to finance such an enormous payment for legal aid.

There are some possibilities for modification. Why is it necessary to give legal aid at all in civil cases? Why is it not possible, in lieu of that, to do as they do in the United States and simply say that lawyers may arrange for payment by results? Why is it necessary for people of great wealth to be given legal aid? There have been a number of cases--Mr. Nadir, Mr. Jawed Hashim and others--where people of considerable wealth have been allowed large sums by way of legal aid. We must ask why that is permitted. Indeed, it is an open question--and the mention of those gentlemen prompt it--as to why, if legal aid is to be given at all, even in criminal cases, it should be given to people who are not citizens of this country? Many of those people come to this country and get into trouble, but they come from countries that do not grant comparable facilities to British citizens who get into trouble in their countries.

Those are all real and serious questions. They involve substantial expenditure. I come therefore to what seems to me to be the central point of the debate; that is, if we are to secure (as I hope we are) a continuance of the economic recovery which the Government's policies have so far contributed towards bringing about--a situation in which there is stability; in which prices have risen little; in which inflation is small--it is essential that we should not make matters more difficult by increases in taxation. Increases in taxation are being effected now, no doubt because of the increased expenditure.

A considerable increase of VAT is proposed next year, particularly on domestic fuel. I regard VAT as, on the whole, a bad tax in principle. It is quite plainly inflationary. It adds directly to the price of commodities and there is no difficulty in concealing it. To increase it, as is proposed, as from next April from the present onerous 8 per cent. to a figure of 17.5 per cent. is a very serious decision to take. It would undoubtedly cause hardship, particularly to elderly people who feel the cold and require fuel, especially in the winter. I know it is proposed that it should not come into force until April but it is presumably intended to run through into the following winter, so that is a factor to be taken into account.

The tax is extremely unpopular. I very much hope that when my noble friend the Leader of the House replies he will indicate that the Government are giving some further thought to this matter. It would be a great mistake, at the time when public opinion is having to decide on the Government's future, deliberately to inflict a desperately unpopular proposal of this kind which it is not possible to justify on its merits. Why, if one requires fuel to keep warm, should one be charged tax of 17.5 per cent. on what one is paying for it? I do beg of my noble friend, as I beg of the Government, to think twice. It is bad enough to have installed the 8 per cent. increase, but to install the proposed figure would be extremely hard.

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The gracious Speech also contains an interesting sentence:

    "Legislation will be introduced to equalise the State pension age between men and women and to improve security, equality and choice in non-state pensions".--[Col. 3.]

It is about 35 years ago, when I was the Minister in charge of social security, that the question was raised of the rather curious situation in which the retirement pension was paid to men and women at different ages and why indeed women, who have an expectation of life generally of three or four years more than that of men, should become entitled to the retirement pension five years before their male contemporaries. I had to consider, as Minister, whether we could tackle this problem. It was obviously an extremely sensitive and difficult one. I came to the conclusion that it would be impossible to handle unless one had agreement between the parties so that the change could be spread over a number of years and not suddenly confront the ladies with a big increase in the age at which they would become entitled to a retirement pension.

I shall be extremely interested to hear from my noble friend the Minister what the intentions are. I assume that it is not intended that the change should be made quickly. Indeed, the gracious Speech does not even indicate whether the change will be to alter the age for women or for men or to produce a compromise between the two. I suspect that it is proposed to raise the ladies' pension age of entitlement, but presumably that cannot be done quickly. It cannot be done when a lady is at the point of retirement--suddenly to be told that for some years she will not receive her pension after all. It has to be phased in. It was that problem of phasing in which deterred me, when I was the Minister, from going forward with what was quite obviously a sensible reform.

There is no justification whatever in principle why women, whose expectation of life is longer than that of men, should draw their retirement pension five years earlier. On the other hand, suddenly to withdraw from people the expectation of the right to draw one's pension is a very serious matter indeed. The fact that the Government have put this matter in the gracious Speech indicates that they are very bravely seeking to tackle it. But I wonder whether we could be told --and told very soon because there is great anxiety about this outside among future pensioners--what the Government's intentions are, particularly with respect to phasing in.

The central problem to which we all have to address ourselves is making sure that the economy works. The Government are to be congratulated on the improvement which has taken place. Despite the gallant efforts of the noble Lord, Lord Eatwell, to denigrate it, the economy has very considerably improved and there are very wholesome aspects of it: the stability of prices, the virtual departure of inflation and the improvement--the considerable improvement--in the unemployment figures. This result of the Government's policy is going forward at this moment, despite the efforts of the noble Lord opposite in criticising it. But if it is to continue it is essential not only that a certain measure of stability should be maintained but that taxation should not be

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increased. If taxation is not to be increased, then it is necessary--because there is the question of the balance of payments--for expenditure to be restrained.

I have suggested one direction--legal aid--in which it could well be restrained and where at the moment it is still rising. And although I know that this is a highly sensitive issue, the question of our contribution to the European Community simply will not go away. I do not understand why the European Community needs to increase the amounts that it exacts from its members. One would have thought that with three, and perhaps four, new members joining the European Union there should be a surplus, enabling a reduction to take place. The fact that that has not happened, the fact that we now have this demand for more money, suggests that there is a great deal of extravagance in the European Community. I suggest that it is the duty of the British Government to the British people to attack that with very considerable firmness. Since we have to raise another £150 million in the coming year, rising by several times in the years ahead, this will make it just that bit more difficult to maintain reasonably low levels of taxation and therefore opportunities for industrial expansion which will result from that.

We are at a most interesting moment in the economy of this country. I believe that we are coming through--indeed, that we have come through--some of the worst of our problems of recent years. I believe that we can continue with this recovery, but only if the Government remain determined to restrain, and indeed prevent, increases in taxation and for that purpose, therefore, to restrain the demands for expenditure. I would welcome any statement that my noble friend the Minister is able to make on this issue. I know that he realises how anxious people are outside this House in the City, in industry, in business generally, and the ordinary citizen, as to the future. Such reassurance as can be given tonight will be of great value and will be a very happy termination to what has been a most successful debate.

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