Previous Section Back to Table of Contents Lords Hansard Home Page

Baroness Hollis of Heigham: My Lords, I referred to the poorest pensioners and the earnings-related aspect of the minimum income guarantee.

Lord Saatchi: My Lords, I shall see whether the point still relates to the poorest pensioners. I am sure that it does. I believe that the Government's solution to the poorest pensioners is what the noble Baroness called "MIG"; that is, the minimum income guarantee. I do not know whether any of your Lordships have ever attempted to fill in the claim form for minimum income guarantee. It consists of 40 pages. The last page--Part 18--asks "What happens next?". I shall tell your Lordships what happens next. Half a million of those vulnerable people are eligible for this income support. However, because of the complexity of the document, so far only 23,000 have attempted the feat of filling in the form.

Let us consider an issue mentioned by the noble Lord, Lord Razzall--the climate change levy, with which Parliament has been exercised for the past year. The noble Lord said that the original purpose of the levy was perhaps becoming lost in the fog of its complexity. We recall that the climate change levy was originally said by the Government to be a revenue neutral swap between a new energy tax and a new national insurance credit.

The Prime Minister was crystal clear on that point when he said:

The Minister, the noble Lord, Lord McIntosh, who I am pleased to see has come into the Chamber, said much the same. He said that the NIC cut would be an "offsetting cut".

However, some energy consumers have brains too. They may be the recipients of a document from London Electricity PLC which contains a helpful climate change calculator. London Electricity says

7 Dec 2000 : Column 79

that it will help one to assess the impact of the forthcoming climate change levy on one's budget. I quote from the document:

    "From 1 April next year, typical electricity bills will rise by about 10 per cent ... This means that, for the first time in almost a decade, energy costs will increase and it could leave a dent in your accounts. From London Electricity's point of view, however--

this is the real point--

    "it must be stressed that no part of the levy is retained by the company. Every penny collected by us is passed on directly to Whitehall".

That is hardly a neutral act by the Government.

I should like to consider perhaps the most important of all the pledges made by the Government--in the area of taxation. How marvellous to have been an FT reader in September 1995 and to have learned over bacon and eggs that Mr Blair had,

    "no plans to increase tax at all".

How wonderful to have been in the Guildhall in September 1996 to hear the future Prime Minister say:

    "We want people to pay lower taxes".

And how reassuring to have been a Member of your Lordships' House in July this year when the Minister told us that,

    "taxes are falling at the moment".

We all know that politics is a rough game and this is certainly what the noble Lord, Lord Roll, would call the "nitty-gritty". However, when Ministers look in the mirror in the morning or look up at the public galleries in your Lordships' House, how do they square those statements with Table B8 on page 175 of the Government's own November Pre-Budget Report statement which shows in black and white that the tax burden, which the Minister now prefers to call "net taxes and social security contributions", is rising this year from 36.9 to 37.3 per cent? That is shown in black and white in the Government's own document. When the Minister comes to reply today, will he withdraw that statement made in July from the Government Front Bench? Will he correct it or, better still, apologise for it?

What has made all this work so well for the Government is that they have--we must give them credit for it--implemented their plan impeccably. First, they said that they would,

    "give families the lowest direct tax burden for thirty years",

banking on the fact that no one knew the difference between direct and indirect taxes. When that did not work, Ministers said (I quote the Treasury Minister):

    "We should not overestimate the importance of the tax burden".

When that failed, they simply abolished the term "tax burden" from their vocabulary.

As did the noble Lord, Lord Desai, who I am sorry to see is not here, would it not be more honest to say simply, "We are not the party of low taxation"? Would that not be easier and relieve the Benches opposite of

7 Dec 2000 : Column 80

the tortuous means and mental anguish that they put themselves through in trying to prove that the opposite of what is true is true?

Lord Haskel: My Lords, I thank the noble Lord for giving way. I am a long-standing friend of the noble Lord, Lord Desai. I believe that if he were here he would say that he pointed out during his speech that he was a well known rebel in the Labour Party.

Lord Saatchi: My Lords, today is the first day of the Nice Summit, to which my noble friend Lord Higgins referred earlier. We can expect breathless communiques on how our lads fought them on the beaches of the Baie des Anges and how the Promenade des Anglais was littered with the bodies of the tax harmonisers. But, as always with this Government, actions speak louder than words. The plain fact is that, according to PricewaterhouseCooper, it makes no difference whatever whether the Government win the battle at Nice on taxation today and over the next few days because they have already lost the war.

Britain has already lost two-thirds of the tax gap advantage that existed between the UK and Euroland when this Government took office. When they took office, we had the advantage of a 6 per cent lower tax burden. Today, only three years later, it is 2 per cent.

But where brains are perhaps most needed is to decode the opening sentence of the gracious Speech, to which the noble Lord, Lord Roll, referred. It talks about a stable economy and so on. Other noble Lords have also referred to that opening sentence. The noble Baroness, Lady Hollis, referred to a strong and dynamic economy. The noble Lord, Lord Desai, said that the firm discipline on fiscal policy had paid off. The noble Lord, Lord Haskel, also spoke of the strong economy.

Noble Lords have used those phrases, but what are they really getting at? At their heart, they must mean that the Government are presiding over strong public finances, and I refer to the 46 billion of budget surpluses over the next four years described in this document.

Where have those strong finances come from? Is it because of the strong economy to which some noble Lords have referred or because of the excellent macro-economic management to which the noble Lord, Lord Roll, referred? No, it is not that, because trend growth of GDP is only 2.25 per cent, which is half as fast as America and slower even than Euroland.

But out of that modestly growing economy, there is one item which is miraculously growing much more rapidly; namely, government tax receipts, which are growing by over 6 per cent per year. This is the third year in a row in which government tax receipts are growing nearly three times as fast as people's earnings. That is how the economic miracle of the so-called strong public finances has actually come about.

As my noble friend Lord Skidelsky said, the Government have achieved that by taking full advantage of the complexity of the tax system--what he described as the constantly changing and

7 Dec 2000 : Column 81

unpredictable nature of the tax regime. There is not, for this Government, anything as simple as the cards with a plain and clear background which my noble friend Lady Gardner of Parkes described. That would be far too simple.

As the figures proved on the contrast between government tax receipts and people's earnings, no citizen, however intelligent, can match the massed ranks of No. 10, No. 11, the Treasury and Millbank--one man against the legions of Rome.

The impossibility was summed up by the opening speech of the noble Baroness, Lady Hollis. I made a quick calculation. The noble Baroness gave us 52 statistical facts in 20 minutes. That is one economic statistic every 30 seconds. Who can keep up with that?

That takes me to my final point. There was one great omission from the gracious Speech which we greatly regret; namely, the absence of any reference to the long endeavour by my noble and learned friend Lord Howe of Aberavon and his tax rewrite group. That has been a tremendous personal crusade on his part to bring more simplicity and transparency to tax legislation. That has now borne fruit in the form of a rewritten capital allowances Bill. But what a pity that in the gracious Speech there is no reference to that, nor to any other contribution by your Lordships' House in relation to the nation's economic affairs.

I touch on a point with which I have perhaps bored your Lordships before, but in relation to economic matters your Lordships must be satisfied with an hour or so of debate today and grateful for another hour or so in July on the Finance Bill, but for us that will be it, even though, as my noble friend Lord Higgins said, the House of Commons has all but given up on any close scrutiny beyond a Second Reading debate. What a pity.

6.15 p.m.

Lord Sainsbury of Turville: My Lords, first, I congratulate my noble friend Lord Mitchell on his outstanding maiden speech. The fact that he went to the same business school as I did in no way affects my judgment on that matter. Those of us who followed his enterprising and highly successful business career are in no way surprised by the excellence of his speech. But it is always a pleasure to hear an excellent maiden speech from someone who knows a lot about small business and can speak with real experience. I know that my noble friend will champion vigorously the cause of small businesses.

I very much agree with him that the grotesque over-valuation of companies last year should in no way confuse the fact that the Internet change that we are seeing will profoundly affect industry; that business-to-business Internet services will significantly drive down costs for business; and that computers will have a major and beneficial effect on education.

I was surprised that the noble Lord, Lord Saatchi, complained about the limited amount of time that we have to debate economic matters because, if he turns round and looks at the Benches behind him, he will see

7 Dec 2000 : Column 82

that when there is an opportunity to do so there is a striking lack of people sitting there waiting to jump to their feet in order to speak on that subject.

I turn to the current economic situation. Since coming to power, this Government have steered a course of economic stability. We inherited an economy with strong inflationary pressures. The Government put the economy back on a stable footing. We did so for a purpose. On those stable foundations, we are working to build a Britain where there is opportunity and security for all. Our aim is to build a fair society and a knowledge-based economy and, as my noble friend Lord Haskel said, social justice and the economy working together with industry and government sharing a productive relationship.

The Government will continue to pursue their central economic objective of high and stable levels of growth and employment. It is because we have taken the trouble to build the long-term foundations for success and have resisted the short-termism which would threaten stability that the economy will expand by about 3 per cent this year. Independent forecasts predict continued growth of 2.7 per cent next year.

I believe that the record is extremely good and the fact that we have praise from the noble Lord, Lord Roll, is praise indeed and is extremely gratifying.

Inflation will continue to meet its target of 2.5 per cent next year. Productivity growth is expected to strengthen in 2001-02 at about 3 per cent for the whole economy and 5 per cent in relation to manufacturing. Our exports to Europe are up almost 10 per cent on those a year earlier.

The noble Lord, Lord Higgins, said that all that could really be traced back to the previous government. I must point out to him that over the past three-and-a-half years, again and again, Members on the Opposition Benches have pointed to the action being taken by the Government and said that that would certainly lead to ruin for the economy. Again and again, they have been proved wrong. They cannot have it both ways. You cannot predict that what the Government are doing will lead to ruin and then lay claim to the fact that all the good in the economy goes back to the previous government.

The fact is that the Government inherited a mess in relation to public finances and the national debt had doubled. Borrowing was 28 billion.

I take the question of the independence of the Bank of England. Was that good or not? The Opposition have now accepted that it is good. Therefore, one must assume that that was an action of the Government which has had a beneficial impact on the economy.

I turn to the comments of the noble Earl, Lord Russell. We do not claim, and would not claim, that all of that is due to the Government. We are perfectly happy to give some credit to the previous government. However, looking at the record of this Government, over this period, and comparing it with the boom and bust of the previous government, there appears to be at least a modest step forward in the management of the economy.

7 Dec 2000 : Column 83

The economic stability that we have achieved provides a firm foundation for businesses to plan ahead and invest. At the same time we have introduced a fiscal environment that encourages business to invest, and we have maintained lower taxes than any major industrial country, apart from Japan and the USA, and OECD figures show that we have lower income taxes, business taxes and VAT rates than any other European economy.

We have cut the corporation tax rate to its lowest ever level and introduced cuts in capital gains tax to create the most favourable environment that Britain has ever seen for encouraging entrepreneurs, rewarding risk-taking and promoting wider share ownership among employees.

I was surprised at the lack of historical memory shown by the noble Lord, Lord Skidelsky, when he said that it was surprising that there had been an increase in the tax rate under this Government. He appears to have forgotten that under Margaret Thatcher's first term of office the tax rate increased from 33.3 per cent to 39.1 per cent.

Because of the stability that we have introduced into the economy, which is exactly what business wants, we have a higher level of business investment as a share of our economy than at any time in 40 years. UK business expenditure on research and development, as a proportion of GDP, has increased for the second year running. Last year business expenditure on R&D increased by 70 million in real terms on 1998 which is the largest year-on-year increase since 1986. We continue to attract record levels of inward investment, with more companies than ever before choosing to locate in the UK last year.

I agree with the noble Lord, Lord Newby, about the importance of investment for productivity. The great difficulty is how one stimulates that investment. I believe that macro-economic stability is absolutely fundamental in achieving investment as it is in achieving R&D expenditure. The fact that both of those indicators are moving in the right direction shows that macro-economic stability is beginning to have an impact. If that can be maintained in the future, we shall begin to see it coming through in investment in R&D and in the long-term in increased productivity.

We now have more people in work than ever before, rising prosperity and the basis for sustained economic growth. However, we must ensure that we spread the fruits of that economic progress to all parts of the country and to all people within Britain. Above all, we need to ensure that our regions are equipped to compete in the knowledge economy.

In these debates what is not said is often as interesting as what is said. I was surprised that there was no mention from the Opposition Benches of regional policy at all. On the other hand, we have set up the Regional Development Agencies to raise economic growth and competitiveness in our regions. We listen to business. That is why we are increasing the RDA's budgets by 500 million to 1.7 billion by 2003-04, including 100 million over the next two

7 Dec 2000 : Column 84

years to ensure that all regions can improve their performance on innovation and to support clusters of industry.

The noble Lord, Lord Newby, raised the relationship of the DTI and the DETR on this matter. A classic example of good, joined-up government, is that we work together on the management of the RDAs with great success.

Sadly, the party opposite appears not to be interested in the regions or in spreading wealth across the nation at all. Despite local businesses supporting them, despite the CBI supporting them, despite all their early successes, the Conservatives would abolish the Regional Development Agencies. Apparently, they have no regional policy, except abandoning large parts of the country to slow or no growth.

In the knowledge economy, more than at any time before, science and technology will provide the new products, services and processes which create economic growth. That is why this Government have made major steps forward in supporting the science base. But in the knowledge economy it is not enough to generate research; we also have to make the most of that research and turn ideas into products that can improve our lives.

We have already introduced incentives for universities to exploit the knowledge that their science generates. The University Challenge Fund is helping over 30 British universities to turn their research into real business opportunities; for example, the universities of Leeds, Sheffield and York won a 4.5 million grant to back 100 new high-tech companies arising from the research in the universities. Already government investment of 25 million has levered in a further 40 million, yet the party opposite would scrap the University Challenge Fund as part of their search for cost savings.

I shall now turn to an issue raised by many noble Lords in the debate, that of regulation. The noble Lord, Lord Higgins, raised the old chestnut that regulations introduced by this Government have cost 10 billion. That is a clear figure that has been circulated many times. I believe that, quite deliberately, it confuses the costs of entitlements and benefits with the administrative burden of delivering them--the red tape. Our policies for a fair wage, decent holiday entitlement and a safe workplace have cost about 5.04 billion. The vast majority of that figure--over four-fifths--has been spent on the national minimum wage and the working time regulation. That is not red tape. It is about building a fair, healthy and secure workplace and society, which is precisely what this Government were elected to do.

The question is which of our improvements to the working conditions of men and women would the party opposite cut: the national minimum wage, entitlement to four-weeks paid holiday, or new rights for part-time workers? We await their answer with interest. In fact, the cost of introducing our proposals has been competitive. The regulatory impact assessment shows that the cost of implementing our fairness agenda is in the region of 10 million to 14 million per year. In our

7 Dec 2000 : Column 85

view, and in the view of employees up and down the country, that is money well spent. It amounts to less than 50p per worker per year.

To show our commitment to cut burdensome red tape, we are introducing a regulatory reform Bill to increase the effectiveness of the power to reduce regulatory burdens by removing inappropriate and over-complex regulation. I can assure the noble Lord, Lord Razzall, that that will lead to action on the areas clearly stated in terms of bringing together large amounts of legislation in key areas that can be rationalised. Earlier this year we raised the statutory audit threshold from 350,000 to 1 million, relieving up to 150,000 small companies from statutory audit, with potential savings of up to 180 million a year and a fortnight ago the Prime Minister announced a series of measures to cut back unnecessary business regulation.

I turn to taxation--

Next Section Back to Table of Contents Lords Hansard Home Page