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Lord Bruce of Donington: My Lords, I am most grateful to the noble Lord for permitting me to question him on this matter. Is he aware that the Eurostat figures are themselves based on figures provided by government? Is the noble Lord aware of a more detailed study by the Royal Statistical Society, a completely impartial body, which concludes that real unemployment is probably a million more than is stated in the current figures?

Lord Mackay of Ardbrecknish: My Lords, we have argued this point before. Of course the international figures are based on figures received from this country. However, they are not the same as the figures based on claimant count; they are based on different evidence, as

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well as claimant count, which comes through the three-monthly Labour Force Survey, which plays an important part in the compilation of these figures. It may not be the same report as that mentioned by the noble Lord, but one report I read recently stating that there was underestimation of unemployment in this country also earmarked exactly the same underestimation in most other countries. Therefore one has to take figures that are comparable, as these figures are. Quite simply, the position in this country is very much better than in most of our competitor countries in the European Community and indeed among all the big players.

Youth unemployment is a particularly serious matter. We are not good in that regard, and I have never pretended otherwise. It stands at 15.7 per cent. However, in Spain it is 41.8 per cent.; in Italy, 34.9 per cent.; in France, 27 per cent.; and the Germans do better, at 8.8 per cent. At 15.7 per cent., the percentage in this country is considerably below the countries quoted, except for Germany. We are trying to do our very best to tackle the problem in ways that are often explored across this Dispatch Box. The matter has to be viewed in an international context.

Le Monde recently commented:

    "How does one interpret the incredible change in unemployment in Great Britain?"--
down, as I mentioned, by three-quarters of a million from its high point--

    "If unemployment is dropping in Great Britain, it is because they have done everything to deserve it".
That says quite a lot from a French point of view about how successful we are being in coping with our unemployment problem.

The final point I wish to address is the matter of inflation, raised by a number of noble Lords. My noble friend Lord Cockfield quite rightly highlighted the question of inflation. He reminded the House of a question he asked me recently. I was grateful to him for appreciating that I accepted I did not know. The noble Lord, Lord Peston, then offered me some advice. I believe I went on to say that, as I found economists did not usually agree, I was not sure whether the noble Lord, Lord Peston, had offered me a totally agreed piece of advice. My doubt certainly turned out to be well founded. I asked three people in the course of the next two days, and received three or four different variations on the answer. They were sufficiently different to indicate that not everybody agreed on the matter. In addition, in March, for example, when we cut base rates, long-term interest rates increased around the world because of fears then about the strength of the US economy.

However, the real point that my noble friend raised related to the "drug" of inflation. He chided me for making inflation the last point in my short list. I assure my noble friend and the House that there was no pecking order in my list. It was done for the sake of elegance and all those other matters one takes into account when one writes a speech.

The battle against inflation is constant. It is never fully won. As the noble Lord, Lord Ezra, pointed out, some of our European competitors are still doing better

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than we are; he is right. Nevertheless, we are below the European average, which at least is something. The noble Lord reminded us that others do better than we do and therefore, in the same way as I suggested we did better than others on unemployment, I must take the same lesson.

I assure my noble friend that the Government are determined to stick to their anti-inflationary policy. As I said earlier, we are enjoying the lowest run of inflation for 50 years. That helps our economy. We are being more open and transparent about the monetary framework. However, I assure my noble friend that the number one objective of the Government is to continue to bear down on inflation. Keeping inflation within its target figures is our top priority.

My noble friend made a very good point when he said that, in large part, the lack of a feelgood factor was due to the fact that for almost all his adult life the drug of inflation had been drip-fed to the British people. Getting people off the drug of inflation is just as uncomfortable as are the withdrawal symptoms from other drugs. However, I assure him that we intend to continue with the withdrawal programme.

This country has the lowest inflation for almost 50 years; we have the lowest basic rate of tax for over 50 years; the lowest mortgage rates for over 30 years; and, as I said, the lowest unemployment rate of any major European economy.

The Bill before the House today shows that we are committed to low taxation and a tax system that raises revenues in ways that do the least damage to the economy and encourage enterprise. The Government are not prepared to take risks with the recovery. We are making real progress towards our goal of making Britain the enterprise centre of Europe. This Finance Bill ensures that the economy will continue to strengthen. It will improve incentives and boost enterprise. It is a Bill of action. It embodies our practices and our principles. I commend it to the House.

On Question, Bill read a second time; Committee negatived. Then, Standing Order No. 44 having been dispensed with (pursuant to Resolution of 16th April), Bill read a third time, and passed.

Trustee Investments (Division of Trust Fund) Order 1996

1.40 p.m.

Lord Mackay of Ardbrecknish rose to move, That the order laid before the House on 19th March be approved [15th Report from the Joint Committee].

The noble Lord said: My Lords, perhaps I should apologise to your Lordships for coming on again so quickly with another speech. However, noble Lords will be delighted to hear that this one is a good deal shorter than my two previous speeches.

I should explain that the second of the orders we are debating today, the charities order, revokes an earlier order made only last year, simply because the new trustee investments order before us today will cover all

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trustees, including charitable trustees. We shall thus have one order covering all trusts rather than two pieces of subordinate legislation.

The Trustee Investments Act 1961 extended the powers of trustees to make investments. The Act requires trustees who want to invest in shares to separate the trust fund into two parts, one of which must be invested in what the Act calls "narrower" investments and the other in "wider" investments. The first schedule, which has been amended over the years, sets out which forms of investment fall into the two groups. Broadly, "narrower" investments are fixed interest securities issued by public sector institutions and "wider" investments are a restricted range of shares listed on the stock exchange of countries in the European Economic Area.

The original Act required that the two parts that I mentioned should be equal in value when a trust fund was first invested. The order would change the ratio of 50:50 to 75:25, with trustees being allowed to use the larger part to buy "wider" range investments. My honourable friend the Economic Secretary to the Treasury announced the Government's decision in a Parliamentary Answer on 21st November last year.

I should draw your Lordships' attention to two points. First, trustees are bound by the Act only if their particular trust deed does not itself define their powers of investment; or, of course, if the deed specifies that the trustees are to invest as the Act requires. Trusts which are formed without deeds, usually in the case of intestacies, must be invested as the Act requires. As your Lordships may know, almost all new trusts have their own powers which are often far wider than those contained in the Act. Secondly, the original division of a trust fund is a once-for-all event. So, over time, a fund may come to hold a much higher proportion of its assets in the form of shares than when it was first invested.

The 50:50 ratio has come under increasing criticism. The main concern has been that inflation has tended to erode the real value of the "narrower" range of funds. It has been argued that the interests of trust beneficiaries would have been better served if more of the assets were in the form of equity investments rather than gilts.

The Deregulation Task Force on Charities and Voluntary Organisations recommended in 1994 that the Trustee Investments Act should be reformed to widen significantly the scope of trustees' investment powers. Using powers under the Charities Act of last year, my right honourable friend the Home Secretary changed the ratio for charitable trusts from 50:50 to 75:25 by an order which came into force in April last year. At much the same time, the Treasury published a consultation document proposing that that should be extended to non-charitable trusts. The Act does not allow the Treasury to go further than 75:25 by means of an order.

As the Government have already announced, we plan to consult widely on a more radical reform of the Act. I expect the consultation document to be published as planned by the beginning of next month. However, the Government decided that it would be wrong to allow the plans to produce a Green Paper to delay the useful, although limited, change before us today.

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The proposal is widely supported by interested parties, and I hope that the order implementing it will similarly commend itself to your Lordships. I commend the orders to the House, and I beg to move.

Moved, That the order laid before the House on 19th March be approved [15th Report from the Joint Committee].--(Lord Mackay of Ardbrecknish.)

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