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Lord Richard: My Lords, I am very grateful to the noble and learned Lord for giving way. I am flattered by what he said about me. The only trouble is that it is not true.

Lord Fraser of Carmyllie: My Lords, I hoped that I would provoke an intervention from the noble Lord because I believed that Mandy's thought police did not operate much beyond the Central Lobby of this Palace and that we could expect from him an independence not exhibited down the corridor. If I am wrong, and he does not wish to accept the compliment, so be it.

Today's debate is on the economy, which is certainly in better shape than at any general election in living memory. That is confirmed by the recent unemployment figures, showing a continuing decline. I trust that at least in this Parliament we shall be spared the ritual of an incoming government claiming that now that they have had a chance to examine the books, they are in a far worse state than they had apprehended. On the contrary, the economy is proving to be in even better shape than when the Economist made the assessment in April to which my noble friend Lord Mackay referred.

I turn to the first important decision taken by this Government and the Chancellor of the Exchequer; namely, passing responsibility for interest rates to the Bank of England. First, I welcome the proposal that there should be representation on the committee from the whole of the United Kingdom. If that is, as I understand it, a nod to the financial importance of the city of Edinburgh, he will not be surprised to know that I approve of it. Secondly, the reasoning which the Chancellor of the Exchequer adopted for giving independence to the Bank of England seems to me to chime almost precisely with the arguments advanced in your Lordships' House before the Dissolution by a number of Conservative Back Benchers, most notably the noble Lords, Lord Kingsdown and Lord Lawson. I hope that the wise counsel on economic and fiscal matters from this side of the House continues to be accepted by the Chancellor of the Exchequer.

I promise my noble friend that, at the CBI dinner here in London last night when the Chancellor of the Exchequer spoke, I wore a dinner jacket, although the 10 permanent secretaries there seemed to be under orders that they were not allowed to wear black ties. I noticed that the Chancellor of the Exchequer interestingly indicated his faith in 19th century values. I was fascinated by that remark. I am bound to say to the noble Lord that I hope at some point in the early part of this Parliament we shall be given the theological division between support for the much-derided Victorian values and the new acknowledgement and recognition of 19th century values.

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If we have anxieties about the Bank, they echo those expressed by the noble Lord, Lord Harris of High Cross. We want to see membership of the all-important Monetary Policy Committee genuinely independent. At first flush the numbers within the appointment powers of the Chancellor of the Exchequer do not fill one with the greatest of confidence.

Having said that, we offer every support to this Government in maintaining an export-led recovery. Perhaps I may say to the noble Lord, Lord Clinton-Davis, that I welcome the fact that he is vested with responsibilities for both inward investment and export promotion. I hope that those on the Government Benches do not think that to be too constructive an observation. He will recognise, with some insider knowledge of the DTI, that that most logical joining together of functions is not one that will meet with immediate approval there. I believe it to be sensible and I hope that the noble Lord will fight his corner hard. After all, around 40 per cent. of exports from this country come from inward-investing companies. It is an absurdity in some way to put those inward-investing companies into a second category and not recognise them as being critical to our export effort. I wish the noble Lord well in resolving that conundrum when he leads a trade mission which is not made up of Rover, Morgan Grenfell and Parsons, but of BMW, Deutsche Bank and Siemens. I wish him well in trying to persuade the broader, commercial, industrial community that that is the same sort of thing.

I noted the noble Lord's proposal to establish a new trade forum. I do not expect an answer now--we shall watch its development with interest--but I am fascinated to know whether or not it is to meet in public; who will chair it; and whether it will report to Parliament.

The noble Lord spoke of a new optimism and a new confidence. I accept that the professionally orchestrated arrival at No. 10 Downing Street engendered something of a festival atmosphere. But I could not avoid noticing last night at the CBI some relief that what the Chancellor of the Exchequer said revealed so much an adoption of the policies that we had previously followed through, as my noble friend Lord Marlesford indicated. However, there was palpable unease in relation to a windfall tax.

I have to say also to the noble Lord with responsibilities for trade that there was real trepidation about the prissy and preachy statement of the Foreign Secretary. None of us cares for child labour. Certainly on this side of the House, with the tradition of Lord Shaftesbury in the 19th century, we do not need lectures about the undesirability of child labour. But if the noble Lord does not know already that countries in South-East Asia regard a preoccupation with that issue as not a genuine concern for children but as a smokescreen for western protectionism, he will soon learn.

Lord Clinton-Davis: My Lords, I thank the noble and learned Lord for giving way and for what he said

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earlier. However, is he suggesting that it would be inappropriate for Britain to ventilate its views about child labour in the international labour organisation?

Lord Fraser of Carmyllie: My Lords, I hope the noble Lord will read very carefully what I had to say. He knows very well that in the WTO there was a keen desire by those partners in South-East Asia with whom we wished to maintain a relationship that the matter of child labour should be kept for the ILO. If that is the noble Lord's intention, I express immediate agreement with him that that should be pursued. Otherwise, there is a genuine danger that, far from improving our export effort, the language and style that have been adopted will seriously damage it. Similarly, I am sure he is aware that, much as we all wish to see environmental issues approached, there is a concern from developing countries that what we are about is seeking to arrest their development rather than improving our global environment.

The noble Lord emphasised his determination to complete the single market. I cannot but wish the Government well in that endeavour. After all, along with him my noble friend Lord Cockfield, when Commissioner, first gave substantial impetus to that goal. The noble Lord mentioned a number of particular objectives--gas, electricity, telecommunications, financial services and the trans-European network. All are excellent objectives. I wish him well in pursuing them. In particular, I congratulate my successor as energy Minister, John Battle, who next week will have the first opportunity in the Energy Council to try to bring to a conclusion the negotiations on the gas directive. I thought we had got pretty close to it and I hope that he will be successful in achieving that.

In offering that support to him--I hope that Mr. Battle will accept my support--the noble Lord must appreciate that it causes us to bristle that from time to time the hustings language continues and we are caricatured as being destructive and negative in what we have done in Brussels. As the noble Lord well knows, on such matters as the completion of the single market we have been in the vanguard of securing both genuine and transparent liberalisation across Europe. That has been against some of the most powerful monopoly interests. I would enjoin those on the Government Benches to leave behind the language of the hustings and appreciate that we were the most powerful force in establishing the single market. Wherever one is positioned along the thermometer of warmth towards or coolness for the European Union, the whole exercise will be pointless if we do not drive towards the single market.

In contrast to the focus placed on liberalisation in the European Union--I do not know whether the noble Lord was short of time--he seemed reticent on further liberalisation within the United Kingdom itself. We would have wished to see a drive towards the completion of liberalisation in gas and electricity into the domestic market. After all, following liberalisation gas prices in the south west went down by some 20 per cent. That is of immeasurably greater importance to the consumer than taking some 3 per cent. off VAT. We had planned to achieve a further

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liberalisation from the north southwards from the autumn of this year. I hope that is maintained. I regret to say that there are hints of delay. Dominant players are certainly first through the door of the new administration and there is concern that they might be given exclusive access. If the Government are really concerned for pensioners, the liberalisation of gas over the next winter will allow them a saving of around £10 per month. That seems to be a far more reasonable objective than the 3 per cent. off VAT.

My noble friend Lord Mackay spelt out fully and effectively the problems about the windfall tax. Would it not be a most extraordinary absurdity if the utilities, which are at present offering a bonus to old age pensioners, were to find that as a consequence of the imposition of the windfall tax they could no longer pay such a bonus? I ask the Government to look at that point carefully.

I accept that there is one unequivocal commitment in the manifesto that could not have been more clearly or prominently put before the British people. I refer to Labour's commitment that some 250,000 young people will be taken off the dole and that that will be paid for from the proceeds of a windfall tax. Noble Lords opposite know that we are doubtful about the efficacy of that. We are concerned about whether there is sufficient funding and, as my noble friend Lord Mackay indicated, about the extent to which they will substitute for existing jobs. We are also concerned about the sustainability of such an approach.

There seemed to be an interesting coincidence of view between the noble Lord, Lord Dahrendorf, and the Chancellor of the Exchequer. The noble Lord spoke about the need for real figures and a proper identification of what is going on. Last night, the Chancellor of the Exchequer promised that all figures, estimates and forecasts relating to his Budget would be scrutinised in advance by the National Audit Office. If the Government are serious about achieving their objective, I invite them to apply the same approach to that most unequivocal of manifesto commitments so that we know on a regular basis that it is being achieved, how it is being costed and that we are not being conned in any fashion about how that number of 250,000 young people gaining work will be secured; otherwise, as the noble Lord, Lord Dahrendorf, said, I fear that those sitting at the Clerks' Table will have tired wrists, ringing the bell in anticipation of yet further misleading figures.

On the payment of debts to small businesses, I agree that there is evidence--from France, I think--that where such legislation is introduced, there is for some a decrease in the delay occasioned. However, what happens more broadly is that the periods of payment for all are extended. I would be fascinated to know from such distinguished economists as the noble Lord, Lord Desai, and others who now sit on the Government Benches how that weighs up as a balance of advantage.

This has been a long debate and I clearly do not have the time to reply to all aspects of it. However, perhaps I may advise the Leader of the House that I hope that it will be part of his proposals to provide us in advance with a clear acknowledgement of those parts of the

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legislation that he proposes to introduce which are provisions that we would have brought forward. I do not yet know what the competition Bill contains, but I guess that at least 90 per cent. of it comprises our proposals. If the business of this House is to be expedited, it would help if we could know in advance exactly where such matters lie. That would allow us to concentrate on what is important, to explore what has been ill thought out and to expose those issues on which it appears to us that there has been something of a deliberate effort to conceal.

I rest with only one example. This Government have placed great prominence on the desirability of education--and rightly so. Both my noble friend Lord Mackay and myself have family who, in pursuit of a lifetime of education and experience, have crossed from north of the Border to this side of the Border to expand their careers and their knowledge. In the main, they wish to return home to Scotland. However, as they do exactly that activity which, as I understand it, the Government would invite them to follow through, under the terms of the referendum Bill they will be deprived of the opportunity to vote on a constitutional matter which they are being told is one of the most important events in their young lives. That is absolutely absurd, as I shall illustrate.

On Thursday night I was served a pizza in Scotland by an exceedingly cheery Italian waiter who was so delighted with the result of the English Cup Final that he would gladly have voted for di Matteo to be President of Italy. He was dumbfounded to know that it would be open to him to vote in the referendum on whether there should be a Scottish Assembly but that my children would be excluded from such participation. It seems entirely right for this Opposition in this House vigorously to pursue such bizarre absurdities.

Rory Bremner said of the Tory Party--perhaps rather too aptly--that it could not agree on the convergence criteria for a single cabinet let alone a single currency. I fear that in recent weeks that has been too apt. But in this the oldest of democratic parties we will shortly reach that convergence. There has been much spoken in your Lordships' House and elsewhere about the great victory of the Labour Party in 1945. I console myself with the quite remarkable recovery that my party made after the 1945 election. It certainly should not be underestimated.

10.1 p.m.

The Minister of State, Department of Health (Baroness Jay of Paddington): My Lords, it is a great privilege to reply on the final day of your Lordships' debate on this historic gracious Speech. First, I should like to thank all Members of the House who have congratulated me on my new post. Their warm support is extremely welcome. I am particularly grateful to the noble and learned Lord, Lord Fraser of Carmyllie. Like him, I shall miss our joint appearances at the hospital friends--an altogether cosier experience than we share tonight. With the weight of government responsibility it is certainly more daunting to speak for the first time from this Dispatch Box than from the other side.

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Most of my noble friends and I who work in government for the first time have been buoyed up by the tide of enthusiasm for change that has been referred to several times this afternoon and enthusiasm for a new beginning that has swept the country since 1st May. I believe that that enthusiasm and the lively interest in the proposals in the gracious Speech have been reflected in all five days of debate in your Lordships' House. As always, that novel enthusiasm has been tempered by the measured authority and experience of your Lordships' opinions on every area of policy.

I confess that I was a little surprised by the rather uncharacteristically acerbic tones of some contributions in the early stages of the debate. Words like "arrogant" have appeared in the debate, as they have tonight. The noble Lord, Lord Jenkins of Hillhead, in replying to a remark by the noble Viscount, Lord Cranborne, described part of his speech as a farrago of nonsense. Those seemed to me to be somewhat uncharacteristic sentiments. However, by the second day the exchanges of noble Lords had settled into what I regarded as the customary friendly and courteous vein. That was perhaps best exemplified by the confession of my noble friend Lord Winston of his affection for the noble Baroness, Lady Blatch, based on late night gifts of chocolate biscuits. I ask noble Lords to note that these were chocolate biscuits, not boxes of chocolates nor bouquets of flowers.

This evening, I shall with your Lordships' permission attempt to reply to some of the points that have been made during today's extensive and erudite debate on economic and industrial matters. I shall then review some of the major themes in the gracious Speech. I hope that your Lordships will be forgiving and understand if I am unable to respond to each and every issue raised today. I shall write to any noble Lord who feels that a substantive point has not been appropriately answered. In reviewing the gracious Speech I hope not to offend the sensibilities of the noble Viscount, Lord Cranborne, about today's video technology if I refer to this as the edited highlights of the previous stages of the debate.

In turning first to today's debate, I begin by congratulating the distinguished maiden speakers, the noble Earls, Lord Cork and Orrery and Lord Derby. Their contributions were both interesting and extremely vigorous. I welcome the positive picture of economic life on Merseyside given by the noble Earl, Lord Derby, especially the role of his African elephants.

The aims of the Government's overall economic policies are equally positive. They are higher and more stable levels of growth and employment coupled with low inflation and rising living standards. First, we need more long-term stability in managing the economy. During the recessions of the 1980s and 1990s good businesses were bankrupted, good jobs destroyed and homes repossessed on the roller coaster ride of boom and bust. For too long British people and British business have been let down by governments that have not looked to the long term. That is why we aim to restore stability to economic management so that businesses can plan ahead and invest with confidence and people know that the jobs that they have today will be there tomorrow.

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One of the key challenges facing the Government is to put right the problems created by years of short-sighted economic management. We have always said that we would waste no time in taking steps to start to unravel those problems. That is why my right honourable friend the Chancellor of the Exchequer, within days of taking office, announced a fundamental reform of the Bank of England to give it operational responsibility for setting interest rates--a subject which has taken much of your Lordships' attention during today's debate.

I am glad that that change was welcomed by noble Lords on all sides of the House. Perhaps I may say--I know that he has had to leave--that I was particularly impressed by the lucid reflections of the noble Lord, Lord Roll of Ipsden. I think that I am right that the only generalised opposition expressed to the change came from my noble friend Lord Stoddart of Swindon, but he and I are used to disagreeing while remaining friends.

The noble Lords, Lord Tugendhat and Lord Ezra, sought reassurance that the Government and the Treasury will maintain close contact on policy. I am happy to offer that reassurance. The Chancellor has stated that the Treasury will be fully represented at the monetary meetings by the attendance of a member from the Treasury. In any case, both monetary and fiscal policy will be set to achieve the common goal of providing economic stability, and under the new arrangements there is no reason to fear that there will be any conflict of interest.

The noble Lord, Lord Mackay of Ardbrecknish, and other noble Lords were worried about the genuine independence of a reorganised court at the Bank of England. Perhaps I may remind noble Lords that the Statement yesterday specifically mentioned that the reformed court will take account of the full range of industrial and business views in this country, and will be representative of the whole of the UK.

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