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Lord Monkswell: My Lords, I thank the Minister for giving way. In fact, I suggested a policy whereby taxation for rich people should be increased and the tax burden for poorer people should be decreased. That could encompass a balancing situation where the level of overall taxation went neither up nor down.
Lord Mackay of Ardbrecknish: My Lords, if the noble Lord thinks that he can increase pensions and unemployment benefit, at the kind of level he indicated in his contribution, by soaking the rich, I suggest he studies how deeply he would have to tax in order to raise the money. He would need to tax the rich at 98 per cent.--I assume that is all right--but, as the Labour Party found at the last election, his party will need to tax people on average incomes to raise the kind of money he wants in order to realise the promises he was making.
The noble Lord, Lord Eatwell, went a bit further when it came to inflation. I was so surprised that I wrote down his words. He referred to the "foolish policies" of the Bundesbank. That contrasts with the usual view that people have of the Bundesbank; that is, that it has impeccable anti-inflationary credentials. I do not like to intrude on internal quarrels in the Labour Party, but one of the great arguments put forward by some of the proponents in the party opposite of going hell-for-leather into everything the European Community wants, including the single currency, is that we would then be controlled by the Bundesbank at large. Clearly, if it is now felt that its policies are foolish, we are beginning to see a change.
Perhaps I can mention that the Bundesbank is an independent central bank. Occasionally I had the impression that the party opposite was keen on an independent central bank. Perhaps that has changed and it is going off that policy as it has gone off so many policies that the Labour Party has flown in the past few years and decided to change a month or two later.
I turn to the serious question of investment raised by the noble Lord, Lord Ezra, the noble Baroness, Lady Seear, and others. First, since 1979 whole economy investment in Britain has grown faster than in any other major European country and is around double the average rate that it was in the 1970s. Indeed, I hold a paper from James Capel which contains an interesting graph. It shows--noble Lords make much of this--that investment in plant and machinery as a percentage of GDP, now standing at about 7 per cent., is down from a high of just over 8 per cent. at the beginning of the 1990s. It also shows that, for almost all the time of this Government's tenure in office since 1979, investment in plant and machinery as a percentage of GDP has been higher than at any time in the five preceding years under the party opposite.
We therefore do not need any lessons from the party opposite about investment. Indeed, investment as a proportion of output in 1994 was 10.1 per cent. in the United Kingdom. That contrasts with 5.5 per cent. in France for the first, second and third quarters of last year; 9.6 per cent. in Germany; 6.7 per cent. in Italy (those are 1993 figures; Italy must be slow in bringing its figures forward); 10 per cent. in the US and 10.4 per cent. in Canada. Again underlining a point made by the noble Lord, Lord Acton, the figure is 17 per cent. for Japan. I suspect that those figures suggest that the position is not quite as bleak as noble Lords sometimes suggest. Business investment has been higher than it was in the 1970s as a percentage of GDP.
Lord Mackay of Ardbrecknish: My Lords, I believe I made that point. That low base came immediately before 1979. It arose under a government presided over by the party opposite and sustained in office by the party of the noble Baroness, if memory serves me right--it was a long time ago.
The figures show that investment is not so bad as it is sometimes painted. I do not say that we would not like to see it higher, but it is not so dismal a picture as many people try to paint. My noble friend Lord Lawson, when he was Chancellor, reformed the corporation tax regime in the mid-1980s to encourage business to invest efficiently and profitably according to commercial criteria and not just because they wanted to reduce their tax bills. All too often in the past investment came forward for the wrong reasons. Business ought to invest because it sees business opportunities. That is what we are determined to continue to do.
Another key aspect of investment that is often ignored but that was picked up by the noble Lords, Lord St. John of Bletso and Lord Ezra, is the question of investment in people. We have given a high priority to improving education and training. The proportion of 16 and 17 year-olds staying on in full-time education has increased dramatically. Standards have improved at all levels of education, GCSE and A-levels. Almost one in three people enters higher education and we have one of the highest graduation rates in Europe. We believe that that is important.
I was amazed by one point in the speech of the noble Lord, Lord Eatwell, and if I have got it wrong I apologise. In discussing whether or not unemployment comes from structural reasons and from uses of new technology, he said that new jobs do not have excessive skill requirements. I wrote that down, and the noble Lord confirms it. If new jobs do not have excessive skill requirements, why does his honourable friend Mr. Gordon Brown continue to say that the way to get growth in our economy is to have more training and to get people off unemployment so that they can take up new jobs? I really am puzzled. Indeed, his noble friend Lord Haskel did not seem to agree with that--he mentioned skills as an important aspect--and his noble friend Lord Chandos did not agree.
He is probably not too anxious about them but I shall perhaps worry him a little when I say that I do not think the leader of his party agrees. In his article in the Daily Telegraph on 11th January 1996, Mr. Blair said:
It is important that we react to those things. Even though the noble Lord, Lord Eatwell, does not seem to think it is important, I certainly do, and the Government do. We have to look not just at our investment in plant, machinery and so on but also at our investment in people. Perhaps I may refer again, sparing, I trust, too much embarrassment, to the noble Lord, Lord Desai, who, in another of his New Statesman articles, said in describing the position of British investment:
We have heard a good deal about job insecurity. I notice that the Labour Party is moving away from talking about unemployment--presumably because unemployment is going down by 750,000--and is now talking about job insecurity. Apparently, the Labour Party has just discovered, although in his article in the Daily Telegraph its leader seems to know, that in a modern market economy, millions of people will change jobs every year and some will experience a short spell of unemployment in between. What noble Lords forget is that most people leave the unemployment register very quickly: a quarter within a month, half within three months, and two-thirds within six months.
Clearly, the combination of modern technology and free trade are bringing about massive changes to traditional patterns of employment. No government can change that. Fewer people will have jobs for life. But there is little evidence that jobs have become less secure, despite people's perceptions. The 1994 Labour Force Survey showed that almost two-thirds of men aged 30 to 49 had held their present job for more than five years-- a figure that was little changed from 10 years before. The duration of jobs has not changed markedly since the 1970s and 1980s. The proportion of the population making at least one unemployment claim in the previous five years has been fairly stable since the late 1980s.
The key to reducing job insecurity is to reduce unemployment, and that is exactly what we are doing. The real threat to job security will come from the Labour Party. Not only has it opposed almost every measure we have taken to create a more competitive and job-creating economy, but, given the chance, it would smother business with red tape and new regulations, sign up to the social chapter, and introduce a minimum wage as well.
I wish to round up by saying a few words about the speeches of the noble Earl, Lord Longford, the noble Lord, Lord Bruce of Donington, and the noble Baroness, Lady Seear. The noble Baroness dwelt a little on, as she described it herself in that not, as she said, very elegant phrase, the underclass--the problem of people who are
The Earl of Longford: My Lords, in my speech I put a question directly to the noble Lord. However, he has a lot of questions to answer and this one may have slipped his mind. Since 1979, reversing the previous trend, there has been a steady increase in inequality of income. Is the noble Lord proud of that?
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