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I declare that interest because I do not want to see squandered the legacy that the previous government bequeathed to the nation. On reading the Labour Party's manifesto, I received some reassurances. When one reads that manifesto and sees the promises that were made in it about taxation, productivity, savings and regulation, one might think that the Government, who came into office in May 1997, are simply a continuation of the previous government.
And what an excellent record the previous government had! Between 1992 and 1997, they had the fastest growth of any major economy in the world; there were constantly falling unemployment figures--around 1.5 million people came out of unemployment during those years; 40 per cent of total external investment in the European Community came into the United Kingdom because of the attractiveness of the low tax, enterprise-inclined economy; and a low rate of inflation. There was much there of value.
Let us look at what has happened to those manifesto promises since May 1997. On the first, taxation, your Lordships are aware of the statements made by the Prime Minister about taxation and the right honourable gentleman's intentions with respect to it before the Labour Government came to office. As late
Your Lordships will be fully aware of the £5 billion increase in tax that resulted from the attack by the Government on the pensions industry. Your Lordships will be aware of the increasing taxes on fuel. Your Lordships will be aware of the increasing taxation of the family. Your Lordships will be aware of the increasing taxation on housing transactions. Indeed, throughout the expected life of the Government there will have been no less than a £40 billion increase. That is the scale of the tax bill that we shall face. That must be measured against the promise the Government gave before the election and the statement made by Mrs Roche not so long ago.
I turn finally to the question of regulation. Before the election, the right honourable gentleman the Chancellor of the Exchequer stated in the Labour business manifesto of April 1997 that Labour would,
Those are the facts that have to be measured against the promises made by the Government at the beginning of their term of office. Perhaps noble Lords should not be surprised at this record because it is clear to me--and I trust to your Lordships as well--that the Government brought with it into its term of office a great deal of ideological baggage. I listened with great interest to the speech of the noble Lord, Lord Harrison, about the single market, its benefits and the powerful cutting edge that the single market would apply to the entrepreneurial performance of the United Kingdom. But never forget that, when the Single European Act came before another place in 1986, the Labour Party voted against it.
The great problem that the Labour Party and the Government still have is that they cannot come to terms with the effect that international capital markets have on social justice. Although their policy may seem like the Conservative policy, the attitude of those members of the Government who formulate that policy is still ambiguous. A graphic illustration is the debate that we had on the IR 35 tax in the previous Session. In theory, the Government like enterprise, but in practice they cannot bear to see the fruits of enterprise kept by those who are entrepreneurial.
That ambiguity is manifest in the gracious Speech. On the one hand we find measures such as the trustees Bill, the Post Office Bill, the limited liability partnerships Bill and the insolvency Bill, all seeming to open up the market and underline the importance of entrepreneurship. But then, by contrast, we find the regulation of utilities Bill, the financial services and markets Bill, and the Bill which bears on rail regulation, all of which move in the other direction.
So which side of the fence are the Government going to fall when the chips are finally down? Are they going to go for enterprise and international competition? Are they going to go for all those things about which the noble Lord, Lord Harrison, spoke so eloquently? Or are we going to see the Government go back into their previous incarnation? It is very hard to discern from the gracious Speech in which direction the Government are going. But, on the record of the past two and a half years, my predictions are extremely pessimistic.
Lord McIntosh of Haringey: My Lords, I was stung momentarily by the noble Lord, Lord Saatchi, when in his opening speech he teased us about the use of the word "modernise". So I looked through my speaking notes--realising as the debate went on that I should use fewer and fewer of them--and found the word five times. I believe I have eliminated it without any difficulty. In other words, as so often, the noble Lord
I agree with the noble Earl, Lord Russell, that there is real difficulty in bringing together the three parts of this debate: industrial, economic and social affairs. My noble friend Lord Longford challenged me to do that, and at the end of my remarks I shall try to do so, foolhardy though that may be. The noble Earl is right. The debate has been wide-ranging and it has been very difficult to find a single theme--the noble Earl described it as being "in neutral". I do not know that I have been able to do that, although I believe there is a single theme in the way the Government are approaching these matters in the three departments with which the debate is concerned.
I shall not spend a great deal of time repeating what my noble friend Lord Sainsbury, in opening the debate, said so ably about the progress that we have made in the past two and a half years in the reform of the British economy. We have established a platform of economic stability, although some people do not like the phrase. That is evident because of the fruits of that platform in low and stable inflation and record levels of employment. But it is clear that we still have challenges ahead with which the gracious Speech is concerned, and it is upon those that I shall concentrate my remarks this evening.
Before I turn to the specific legislation which it is my duty to expound, it is necessary to respond to as many of the points raised in debate as I can. I begin with the issues raised by the noble Lord, Lord Taverne. In a generally supportive speech, he expressed concern about the high pound and, curiously, high interest rates. The slick answer to the high pound is that most of the rise that has taken place in recent years occurred under the previous government. I do not rely on that answer. There has been a rise in the value of the pound, but a look at the most recent quarterly figures indicates both that manufacturing output has risen over the period--it is the fastest quarterly rise for almost five years--and that the export of manufactured goods rose by 8 per cent in the third quarter of this year. That is a significant rise. Where manufacturing industry has had difficulties, which I do not underestimate in any way, the figures show that they have been based more on failures in overseas demand--which are now being rectified as the world economy recovers from some of the problems of recent years--than on the high pound or high interest rates.
I do not underestimate the problems in Sandwell, to which my noble friend Lord King of West Bromwich referred, and they apply also in many other parts of the country. My noble friend Lord Shore, the noble Viscount, Lord Oxfuird, and the noble Baroness, Lady O'Cathain, all spoke to this point eloquently. I described the attack on interest rates by the noble Lord, Lord Taverne, as curious because they are at a historically low level. In particular, as he acknowledged, long-term interest rates, which are the real determinants of investment, are at their lowest for
The noble Lord, Lord Wade, and others referred to variations in employment and development in different regions of the country. I agree that matters are still worse in many other parts of the country, but the differences in levels of employment between regions are less than they were and are declining rather than increasing. The main reason I want to challenge the view that we are not doing anything for manufacturing industry is because of the changes that we have made in business taxation particularly for small and medium enterprises. Corporation tax is, after all, at the lowest level ever. There have been so many competitive advantages given to business by government policy that I find it difficult to sustain the criticisms that I have heard from noble Lords.
The platform of stability that we have established and maintained in the past two and a half years has sought to put an end to the cycle of boom and bust which damaged our economy in the past. Surely, it is recognised by the many noble Lords on both sides of the House who have been in business--I make no party political point--that it is instability and insecurity about the future which is most damaging for business investment and decisions.
The noble Baroness, Lady O'Cathain, said that she was not a Cassandra, and I agree. Cassandra was always right. But the noble Baroness has fears for the future, which I respect. I respect her views a good deal more than those of Mr Maude, Mr Hague and Mr Redwood, who said only a year ago that we were engaging in Peter Pan economics, that this was a downturn made in Downing Street and that everything was heading for hell in a handcart. Unlike the noble Baroness, Lady O'Cathain, they opposed the independence of the Bank of England. They were wrong. I believe that the noble Baroness, too, is wrong, but only time will tell whether the measures that we have put in place work out in the long term. Surely, even the noble Baroness, Lady O'Cathain, will agree that the framework for monetary and fiscal policy which we have established and which is based on clear objectives, well-understood procedural rules and a greater degree of openness, has the capability of continuing to develop a platform for economic stability to which we have referred.
I have to return to the accusations about the tax burden. I was interested to hear the way in which the accusers have changed their tactic. The noble Lords, Lord Saatchi and Lord Boardman, both described the tax burden as being the fastest growing in Europe. I assume that both were relying on the OECD report which was published within the last month. They both appear to have forgotten that that report was based on 1997 figures--a year in which their government was in charge for four months out of the 12--and only on preliminary estimates for 1998. What is much more significant is that as a result of the last Budget the tax-GDP ratio is lower this year than last year. The tax ratio in the two following years will also be lower than last year. Under the plans of the previous government
I was slightly confused by the noble Lord, Lord Saatchi, who introduced a new measure of tax burden. He believes that the relevant criterion is taxes against prices against inflation. Is he saying that if inflation were to rise and the percentage were to change, we would be doing well? It is a very curious argument that we should seek to measure the tax burden against inflation rather than against the more normal criterion of GDP.