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House of Lords

Tuesday, 21st March 2000.

The House met at half-past two of the clock: The LORD CHANCELLOR on the Woolsack.

Prayers--Read by the Lord Bishop of Southwark.

Royal Assent

The Lord Chancellor (Lord Irvine of Lairg): My Lords, I have to notify the House, in accordance with the Royal Assent Act 1967, that the Queen has signified her Royal Assent to the following Act:

Consolidated Fund Act.

Tax Policies

2.36 p.m.

The Earl of Northesk asked Her Majesty's Government:

    Whether their tax policies are redistributive.

Lord McIntosh of Haringey: My Lords, taxation policy is a matter for the Chancellor of Exchequer. As the noble Lord may be aware, the Chancellor of the Exchequer will this afternoon be delivering a Budget Statement in another place.

The Earl of Northesk: My Lords, I am bound to say that I did not anticipate much more of an Answer. Can the Minister confirm that net public investment has fallen in the past year? Does not that fact, taken together with the undoubted size of the Chancellor's war chest, show that the Government's tax policies, far from being based on the altruism of redistribution of Robin Hood, are more akin to a cross between the Artful Dodger picking our pockets by stealth and Scrooge hoarding the loot?

Lord McIntosh of Haringey: My Lords, the noble Earl may be at liberty to say in advance what the Leader of the Opposition will say in response to the Budget, but I am not in a position to anticipate what the Chancellor of the Exchequer will say. If I said something different, I would probably be fired; and if I got it right I would probably be fired.

Lord Newby: My Lords, does the Minister agree with Martin Wolf yesterday? In commenting on the latest effusion from Mr William Hague on tax policy, he described it as intellectually infantile?

Lord McIntosh of Haringey: This is safe ground! Yes, my Lords.

Lord Saatchi: My Lords, is the Minister aware of the recent admission by No. 10 that the tax burden is going

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up? In the light of that admission, what would the noble Lord say to your Lordships about his statement at col. 1246 of Hansard of 23rd July 1999:

    "[The noble Lord, Lord Saatchi,] said that the tax burden has increased"?

The Minister continued:

    "Those claims about ... tax are wrong".

He added:

    "Even if the claims were true--and they are not--there is no need for us to spend any more time on the issue".

How does the Minister describe his statement?

Lord McIntosh of Haringey: My Lords, I would refer the noble Lord now, as I did then, to the pre-Budget report and the figures on which all the calculations of the tax burden are based.

Euro/Sterling Exchange Rate

2.38 p.m.

Lord Boardman asked Her Majesty's Government:

    By what percentage the euro has depreciated against sterling since its introduction and what is the effect of this upon the British economy.

Lord McIntosh of Haringey: My Lords, the euro has depreciated against sterling by around 12 per cent since its introduction at the start of 1999. Over this period the euro has also depreciated by around 17 per cent against the dollar and by around 23 per cent against the yen.

It is, however, difficult to isolate the effects of exchange rate changes from other influences on the economy.

Lord Boardman: My Lords, because of the depreciation of the euro against sterling, are not United Kingdom exporters under severe pressure? Since the Chancellor of the Exchequer handed over the control of monetary policy to the Monetary Policy Committee, have the Government proposals to help our export industries in the present climate?

Lord McIntosh of Haringey: My Lords, I do not want in any way to underestimate the difficulties of a strong pound for manufacturing industries. However, our exports in the last quarter--October to December--of last year were 4.8 per cent above the figures in the similar period for 1998. Manufacturing output has risen by 2.7 per cent compared with the comparable period. Although the difficulties are great, manufacturing industry and our economy generally are responding well to the challenge.

Lord Marsh: My Lords, exporters are undoubtedly having a difficult time. However, importers are having a happy time as a result of the strength of sterling. Does the Minister have a net benefit/disbenefit figure?

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Lord McIntosh of Haringey: My Lords, I imagine that there must be hundreds of benefit/disbenefit figures which vary according to where one's interest lies. If one is an importer one's interests are one way; if one is an exporter they are another way. If one is a consumer it depends on whether the balance of one's consumption is from imports or home grown goods. I do not think that conceptually, let alone in terms of facts available, there is any such single figure.

Lord Taverne: My Lords, is it not becoming more evident by the day that in important parts of the manufacturing industry--I refer to the shipbuilding and motor industries--the high pound is having a devastating effect? Will the Government consider seriously the suggestion I made on 27th January that they ask the Bank of England to intervene on the exchanges by way of sterilised intervention? That can be done in a way which can bring down the value of the pound without adverse effects on interest rates or inflation.

Alternatively, do the Government take the same view as the Conservative spokesman in this House? The noble Lord said:

    "If we have a strong exchange rate for our currency, we should simply say 'Hooray'".--[Official Report, 27/1/00; col. 1665.]

Lord McIntosh of Haringey : My Lords, my answer has to be the same as that which I gave to the noble Lord on 27th January. I said:

    "the best contribution the Government can make to exchange rate stability consistent with their objective of a stable and competitive pound over the medium term is to maintain sound public finances and low inflation".--[Official Report, 27/1/00; col. 1663.]

I believe that the Chancellor will give some force to that statement later today.

Lord Stoddart of Swindon: My Lords, in the light of my noble friend's Answer, is it not dishonest of BMW to blame the strength of the pound for its difficulties when in fact what is to blame is the weakness of the euro? The euro has depreciated and the pound has appreciated. Will my noble friend confirm that since 1992 sterling has been firm and stable against the yen, the dollar and other currencies? Therefore, is not the BMW position just an excuse for wanting to get out of the British car industry?

Lord McIntosh of Haringey: My Lords, BMW gave a number of reasons for its action, but it is not appropriate for me to indulge in a detailed critique of the company. The Secretary of State for Trade and Industry has already made his views clear. However, as regards my noble friend's second point, it is true that the pound is strong principally against the euro and not against the dollar or the yen. Therefore, I believe that it is correct to say that instead of appreciation of the pound it is depreciation of the euro.

Lord Forsyth of Drumlean: My Lords, does not the Minister's original Answer and his last answer indicate that if the pound had been abandoned and we had joined the euro at the same time as other countries, the

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savings and pensions of people in this country would now be worth 12 per cent less? Had we taken the advice of those who wished to abandon the pound, our future purchasing power against other world countries would be greatly diminished. Therefore, given the figures that the Minister has announced, does he not believe that the enthusiasm on his Benches for the euro ought to be reconsidered?

Lord McIntosh of Haringey: My Lords, in response to the question from my noble friend Lord Stoddart, I refrained from saying--he would not have liked it--that one of the reasons BMW gave for selling Rover was that we had not entered the single currency. However, I really do think that noble Lords opposite must make up their minds as between attacking the strong pound as being damaging and saying, as did the noble Lord, Lord Forsyth, that a weaker pound aligned with the euro would be damaging in other ways. Of course there are swings and balances; some things are better and some things are worse.

Lord Tomlinson: My Lords, does my noble friend agree that, notwithstanding the impact on manufacturing, it is a far more satisfactory position to be grappling with the strength of sterling than the situation we were in a few years ago when we were forced into humiliating exit from the exchange rate mechanism?

Lord McIntosh of Haringey: My Lords, I believe that that is too simple. With due respect to my noble friend, there are advantages and disadvantages. As I tried to say to the noble Lord, Lord Taverne, and as some noble Lords opposite have said, we do not fully understand what makes exchange rates tick. Attempts to deal with them by direct intervention are likely to be doomed to failure.

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