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Baroness Cumberlege: My Lords, the noble Baroness mentioned the debt that the Government have inherited. Is she aware that it is less than 2 per cent. of the entire budget? Would not any FTSE company be proud to have hit the budget so near?

Baroness Jay of Paddington: My Lords, I am glad to say that the finances of the National Health Service are still in the public sector and I think that those concerns about the private market are probably irrelevant.

Noble Lords: Oh!

Lord Dean of Beswick: My Lords, is the Minister aware that the subject of the question by the noble Baroness, Lady Gardner of Parkes, is fully documented in Hansard of last week when the Housing Bill was progressed? If the noble Baroness cares to read that, she will find that a council cannot do anything it wants to with housing money under the provisions of that Bill. The position will be structured by the Government, who will keep an overall watch on it.

Baroness Jay of Paddington: My Lords, I thank my noble friend for making that point and for elucidating the point made by the noble Baroness. I believe that I said in my reply to her that, as I understood it, these moneys would be directed specifically towards housing and regeneration projects.

Lord Lucas: My Lords, would the noble Baroness agree that on three separate occasions she has denied in Written Answers that the Government have any commitment to reduce the absolute level of waiting lists? Does not her criticism of our sterling performance in that regard fall rather flat as a result?

Baroness Jay of Paddington: My Lords, I am not entirely sure to which Written Answers the noble Lord refers. I have always made clear that our manifesto commitment was to reduce the number of people waiting on elective lists for surgery by 100,000, and we certainly intend to do that within this Parliament.

Sterling: Effects of Appreciation

2.47 p.m.

Lord Spens asked Her Majesty's Government:

Lord McIntosh of Haringey: My Lords, the only sure path to long-term exchange rate stability is through

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the pursuit of sound macro-economic policies aimed at achieving sustained growth with low inflation. The Government have taken decisive steps towards achieving these goals by giving the Bank operational responsibility for setting interest rates and through the deficit-reduction plan announced in the Budget.

Lord Spens: My Lords, I thank the noble Lord for that answer. Can he explain the strange paradox which appears to exist at the heart of government policies? On the one hand, they have a welfare-to-work programme, costing some billions of pounds, designed to create what I can only describe as "virtual" jobs; on the other hand, they are pursuing a fiscal and possibly monetary policy designed to increase the strength of sterling which will destroy real jobs. What is the point of pouring money down a black hole on one side and destroying jobs on the other?

Lord McIntosh of Haringey: My Lords, I thought I had made it clear that our policies are not designed to increase the strength of sterling, as the noble Lord asserts. The policy of long-term investment in the creation of jobs will be achieved by cuts in corporation tax, the removal of tax credits and the doubling of capital allowances. All of those measures will directly benefit industry, including manufacturing industry, and work together with our welfare-to-work proposals.

Lord Boardman: My Lords, is not one of the problems that, while the Chancellor of the Exchequer has retained control of fiscal policy and taxation, he has delegated control of monetary policy and interest rates to the Bank of England? How can the Government expect to attain balanced economic control with that division?

Lord McIntosh of Haringey: My Lords, I thank the noble Lord for that thoughtful question, with which I do not agree. Immediately after the election and before the Budget we gave the Bank of England operational responsibility for short-term changes in interest rates. At the same time we set inflation targets to which the Bank must work. Those are the longer-term constraints within which the Bank works. In total, the control of fiscal and monetary policy is no less than it was.

Baroness Williams of Crosby: My Lords, does the noble Lord agree that, while much of the Budget must be welcomed, including the welfare-to-work programme, the limitations that the Chancellor and the Government put upon themselves by refusing to consider raising income tax in the first few years after taking office have been a major factor leading to consumer spending, which cannot now be devoted to the public investment which both the health service and the education service so desperately need, despite the provision made in the contingency reserve, which was relatively limited?

Lord McIntosh of Haringey: My Lords, the noble Baroness is right that we abjured raising income tax for a period of time after the election. But income tax is

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only one of the taxes. We have been criticised from Liberal Democrat Benches as well as other Benches for the increase in other taxes, including the windfall tax, and for the abolition of advance corporation tax. Noble Lords opposite cannot have it both ways. We have carried out what the International Monetary Fund describes as a "contractionary" budget, and that ought to meet the requirements demanded by the noble Baroness.

Lord Mackay of Ardbrecknish: My Lords, did I hear the noble Lord aright? Did he say that the policy of the Government was not designed to increase the value of sterling? If the policy is not designed to increase the value of sterling, is it not something of a failure?

Lord McIntosh of Haringey: My Lords, certainly, it is not designed to increase the value of sterling. In his post-Budget Statement on 3rd July, the Chancellor of the Exchequer made that very clear when he said that nobody can be happy about the rise in the pound in present circumstances. I must remind the noble Lord that, although sterling has appreciated by 26½ per cent. since August last year, 19 per cent. of that appreciation--nearly all of it--took place before the end of April, under the previous government. They were the ones who failed to take action to deal with it.

The Lord Bishop of Hereford: My Lords, the Question is about the manufacturing industry. Is the Minister in a position to offer any hope to the agricultural industry, which is suffering considerable distress at the moment because of the strength of sterling? There are European funds which could be drawn on at a time of particular strength of sterling. Is the Minister able to offer any hope to farmers, particularly livestock farmers, who are suffering considerable anxiety and distress at this time because of the strength of sterling?

Lord McIntosh of Haringey: My Lords, the measures to which I referred in my previous answers apply as much to farming as to manufacturing industry. I acknowledge the point made by the right reverend Prelate. I do not have an answer at the present time, but I shall certainly write to him.

Lord Ezra: My Lords, does the noble Lord agree that one of the factors affecting the strength of sterling, particularly as evidenced in the recent report by the CBI, is the uncertainty surrounding the single currency? Would the Government use their best endeavours, continuing with the negotiations in which they are involved, to try to remove that uncertainty, not only as regards the Union as a whole but also so far as concerns the UK?

Lord McIntosh of Haringey: Yes, my Lords, that is one of the matters remaining in the negotiation, which the present Opposition would apparently not wish to do. As the noble Lord's question acknowledges, the uncertainty is a matter not just of our policies but of

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those of a large number of other European countries as well. If we could achieve convergence and conformity with the Maastricht criteria across Europe, the prospects of a more stable currency would be enhanced.

Lord Stoddart of Swindon: My Lords, does the noble Lord agree that one of the reasons that people are ploughing into sterling at an enormous rate is their fear that the single currency will be a weak currency? Are they not hedging their bets on sterling because they have confidence in the British economy and in the pound remaining a major currency outside the single currency?

Lord McIntosh of Haringey: My Lords, I have not heard that argument suggested by any responsible authorities and I do not believe it to be true.

Lord Bruce of Donington: My Lords, will the noble Lord, on behalf of the Government, tell the House whether the Government consider that strict compliance with the Maastricht conditions is synonymous with pursuing a sound macro-economic policy?

Lord McIntosh of Haringey: My Lords, I acknowledge my noble friend as a responsible authority, but his question is very wide of the Question on the Order Paper.

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