---

Your Lordships will also want to note that under the new arrangements, Parliament will have a central responsibility for the first time in holding the statistical system to account. I welcome this structure developed by Treasury Ministers and officials and set out after a very helpful process of public consultation, for which we were grateful. The provisions were summarised in the Treasury's final document. So it is a great surprise to me, to put it mildly, that in one important respect the Bill, of which I have had sight, seems to take us in a different direction from that last Treasury document. By that I mean that the new statistics board, whose role we understood was to oversee, scrutinise and monitor the work of the ONS, is to become the ONS. I was most surprised to see in the Bill that the ONS is to be abolished.

I think I understand the legal reasons for that, but it goes a long way in a different direction from what was originally put to us in the consultative process. The Bill proposes to abolish not only the Statistics Commission, which we knew, but the ONS is to hand over its functions to the new board. That means that the new board will not only monitor statistics but will

27 Nov 2006 : Column 600

also produce them. I see in a remote subsection that the National Statistician is to create a new executive committee or company or board, which, I take it, is to recreate the ONS. So all I can say at this point is that I am puzzled, to put it mildly again, at this evident change in direction. That is one aspect of the Bill that will need further consideration.

In today's debate it would be improper to deal with details. So let me just mention three points which seem to me to be of particular importance. By far the most important relates to our decentralised statistical system. At the centre is the ONS with enormous responsibility, basically for economic data. As we know, all departments and some agencies have their own statistical offices. I have always believed in this system and I am glad that it is to remain. But it needs to be run and monitored as a single integrated system, a point which I think is recognised in the Bill. It means that the National Statistician—the role I occupied for many years—should not only have the authority to run the ONS if it is recreated in some form—as it must be—but should also have professional responsibilities throughout the whole of the government statistical service. That is why Prime Minister Wilson, the first Prime Minister I served directly, gave me the double title of director of the CSO and head of the GSS. The same must apply now.

Equally—and much more important now—the new independent board must have a clear responsibility, a non-executive authority, not only for the ONS but for statistics throughout all policy ministries. I cannot stress enough that the problems of public trust relate not to the ONS statistics, but to departmental statistics in fields such as crime, migration, waiting lists and so on. That is where the trouble arises and so the system must be run as a single system.

I have three more points of substance. First, where will the non-ministerial department be placed? I understand that there will be some residual—I think that is the term—role for Ministers, supported of course by civil servants and political advisers. I understand that the intention is for these residual responsibilities to remain with the Treasury. Secondly, there is the alternative—already mentioned by the noble Lord, Lord Jenkin—that the statistical office should be placed in the Cabinet Office. That was my position. I was in the Cabinet Office and reported through the Cabinet Secretary directly to the Prime Minister. It makes much more sense to have the statistical office located there finally, rather than in a key policy department like the Treasury.

My third point of substance concerns the trickiest issue of all; namely, the pre-release of government statistics. In this country a number of people get sight of key statistics 40 hours before they are published. Compare that with the President of the United States—not an unimportant person—who gets sight of the figures 30 minutes before they are published. This is the source of most public trust problems. Unfortunately, the legislation contains the proposal that this should be subject to secondary legislation, which is another point for discussion.

27 Nov 2006 : Column 601

I picked out these two or three points of substance. Wherever we end up, one thing seems very clear—and I concur totally with the remarks of the noble Lord, Lord Jenkin—Parliament will have a new and major role in overseeing all our official statistics. That is to be strongly welcomed. But it means there must be a proper structure for this. We have two relevant committees—the very powerful Treasury sub-committee in the other place and our own Economic Affairs Committee. However splendid they are in their traditions and work, as these reforms cover much more than economic issues, whatever committee is in place should be far more wide ranging in policy terms. It seems to me obvious that this House, as well as the other place, should be involved. So if ever there was an overwhelming case for a Select Committee of both Houses, this is surely it.

I end by reminding the House that this subject will come to us for proper consideration early next year. Whatever else, I hope I have said enough to remind your Lordships that official statistics are of importance across the whole range of topics we deal with, so that we should have a key role before the debate finalises.

6.19 pm

Lord Sheldon: My Lords, I am very happy to follow the noble Lord, Lord Moser, in this debate. His statistical expertise has had a valuable effect on our economic life over so many years. It is, as he has pointed out, crucial that public trust in government statistics is maintained and improved.

Climate change occupied the speeches of the noble Lords, Lord Newby and Lord Vallance of Tummel, and my noble friend Lord Barnett. China puts up a new coal-fired power station every week, while we are responsible for only around 2 per cent of total global warming. Why are we taking such a lead when other countries such as the United States and India expend so much energy? We should be supporting other countries rather than taking the lead ourselves. Other countries may become overheated, but it would be no great disaster to us if the south of England were to become like the Mediterranean. I would be quite happy if Manchester and the north of England were like the south of England. Manchester has had some improvements, but we can still go further.

The Intergovernmental Panel on Climate Change anticipates a large range of horrors at the end of the century—a hundred years from now, as my noble friend has pointed out. This is absolute nonsense. A hundred years ago, the question was what was going to happen when the coal ran out. Disasters were forecast, but of course oil, gas and nuclear energy came in to fill the gaps. Other countries, which may be more at risk, should take the lead in reducing fuel use. No one can doubt that technology 100 years from now will be a great improvement. We cannot tell how, but things will not have stood still 100 years from now. There are more scientists and technologists now than there have been in the whole of our history. There are large numbers of them, so there will be enormous changes that we cannot anticipate and cannot know. Our role is not to be the leader here.

27 Nov 2006 : Column 602

With 2 per cent of the problem, let us follow, by all means, but others should take the lead.

On the economy generally, when the Government gave the Bank of England the power to set interest rates, they did so with the reservation that they could give instructions for a limited period. In the 10 years since then, however, they have never done so. Their confidence has not been misplaced. It was quite important that the Bank of England did well in maintaining the levels of inflation. The Chancellor of the Exchequer took the major decision in 1997 to give this power away. The Government did so, and it has been successful. Inflation has never been under such control. People now regard it as normal. Memories of the years of inflation have faded away. Indeed, many younger members of society have never had them.

There was a time when government control of interest rates regularly involved the Prime Minister at a time of crisis. The reputation of the Chancellor of the Exchequer was affected by each crisis and the cause of each crisis. Governments were undone in a matter of days, and it was a long time before any political recovery could be made. We only have to think of Black Wednesday on 16 September 1992 to recall one of the most recent and memorable failures of post-war British economic policy.

How is the level of inflation influenced? The Monetary Policy Committee considers the economic and monetary factors and determines interest rates. But any change in interest rates means that a lengthy period—sometimes a year or two—is required to work through to inflation. People need time to adjust to the impact of changing interest rates and its effect on their purchasing, selling and investment decisions. We now have a Treasury participant at the MPC, but it is not clear what his role is. Does he comment or even, to some limited degree, influence the MPC? I must ask my noble friend to inform us of the activity of the Treasury member of the committee.

Then there is the question of house inflation. Ideally, if house inflation is very different from price inflation, one wants a system that can deal with each separately. They have moved further and further apart in the past 10 years. Eventually it is hoped that the two might come rather closer together, but hope is a poor alternative to some procedure that could act on both types of inflation. The difficulty is that we have no action that could bring house inflation nearer into line with price inflation. According to the Halifax, house prices have risen by an average of 187 per cent across the United Kingdom since 1996. All we can hope for is that the escalating rise of house prices will meet the difficulty of buyers unable to service their loans. There was a time when house purchases could be subject to capital gains tax, which limited the rise in house prices, but that period is long gone.

All this makes it very difficult for the Bank of England to get a proper balance between house inflation and price inflation. The sudden popularity of interest-only mortgages is a striking reflection of the change in the housing market. Three years ago, only 6 per cent of all mortgages were interest-only. Today, the figure is 16 per cent. Interest-only, of course, means that monthly mortgage payments pay

27 Nov 2006 : Column 603

off only the interest on the debt. At the end of the term, the capital—the original amount borrowed—is still outstanding. The big advantage for hard-pressed first-time buyers is that monthly repayments are lower. It is clear that an interest-only mortgage can make sense for some, for example for people who plan to move in a couple of years, but not for all. The danger comes when someone goes for an interest-only mortgage purely because it is cheap, but puts nothing in place to pay the capital sum back. They get to the end of their mortgage term, nearing retirement, and they still owe a lot of money. The housing market cannot continue in this way. The only hope is that a collapse might be avoided by a steadying over a period of years.

Another issue that I want to discuss is the manufacturing industry, which concerns me particularly. United Kingdom manufacturing does not have the role in our economy that it used to have, but it is still crucial to our country’s prosperity, now and in the future. The problem for our manufacturing industry is the rise of so many industrialising nations, in particular China and India. They have cheap labour, which will continue as there are many people in these countries who can be attracted into the manufacturing cities from outside. Those who hope for an exchange-rate rise in these countries, which will increase the prices of their manufactured goods, are likely to be disappointed. The only certainty of such an exchange-rate rise is when the manufacturing companies find themselves short of labour—a situation that is not likely to occur for a long time yet in these countries. Meanwhile, they are benefiting from western countries supplying technology and investment. Much of that investment comes from this country and diminishes the amount of employment that we can provide here.

Globalisation and trade liberalisation mean that our companies face increasing competition from goods and services produced in lower-wage economies. The UK cannot compete on low wages. Nor should we want to. The future of UK manufacturing depends on raising investment, and on applying science and innovation. Even so, successful companies are transferring much of their production to the East.

The reality is that manufacturing output still contributes 15 per cent of the United Kingdom gross domestic product and directly accounts for over 3 million jobs with an estimated 3 million further jobs dependent on the sector through related and supplier industries. It is responsible for around three-quarters of all business research and development. It also accounts for 55 per cent of UK exported goods and services and performs a critical role in our balance of payments. Our productivity has closed the gap with Germany on an output-per-worker basis, while the gap with France and the US has also narrowed. The productivity gap is often explained by poor performance in a range of factors, including capital expenditure, investment in R&D, and low-cost economies such as China and India.

Last Thursday the House of Lords European Union Committee reported that the addition of a

27 Nov 2006 : Column 604

“high-skilled, low-cost” workforce from eastern Europe has allowed UK companies to compete with their Asian counterparts. Economic immigrants from recently acceded European Union member states have been entirely beneficial. Immigration from the 10 new EU countries since 2004 has meant the influx of a skilled, low-cost workforce. The UK economy as a whole may have benefited from its policy towards migrant workers, but it is hard to estimate the benefits received. It has been said that European expansion has boosted the UK economy and put it in a strong position to deal with growing globalisation, but that many western Europeans feel that the prospect of cheap labour threatens their jobs.

I shall put it this way. The fact is that our economy is enjoying success, but more attention must be paid to our manufacturing industry. It creates the kind of advancement we enjoy throughout our entire economy and it is the sector to which we should now turn our attention.

6.32 pm

Lord Marlesford: My Lords, I believe that the capitalist system has developed and spread in such a way that it now has the potential to deliver unparalleled benefits to the peoples of all the continents of the world. Based on advances in technology and techniques of both government economic management and business practice, we seem to have found a way forward without the problems of world trade cycles which caused such misery in the 1930s and led eventually to world war. Even the long stagnation of Japan, the world’s second largest economy, was sustained with barely a few blips in the economies of the United States and Europe, while at the same time China and now India have been able to embark upon their amazing economic growth. This change is based at least in part on the Thatcherite revolution which has now become a consensus, one which Mr Blair as Prime Minister has tried, in part successfully, to maintain over the past nine years.

I am quite often asked, especially by members of the business community on the other side of the Atlantic, whether the general economic strategy in Britain will change under a Gordon Brown Government. I do not know whether Gordon Brown was one of the early believers, but I think that his nine years in No. 11 and as Chancellor of the Exchequer have probably made him someone who does believe in the sort of economy which the Government appear to be trying to run. So when I reply to that question, I usually quote a response made by President Deng Xiaoping to the late Lord MacLehose who as Governor of Hong Kong inquired in 1979 about the future of Hong Kong after the Chinese takeover in 1997:

“Set your hearts at ease”.

I am also asked what a Cameron Government would look like. In response to that question I say—without any great inside knowledge, but perhaps in hope—that a Conservative Government will hold fast to the essentials of economic Thatcherism, avoid the mistakes made over the past 10 years, and try to correct some of them.

I should like to refer to some of the specific issues which could be significant over the next two years to

27 Nov 2006 : Column 605

the leaders of all three political parties. The first is that I believe passionately in free trade, on which all economic progress and prosperity in the world must be based. In that context, as members of the European Union we are entitled to look at other major countries within the Union. I want particularly to talk about France, where what I can see augurs ill, regardless of the result of the next presidential election. Sadly, France seeks to be the nanny of Europe and is still suffering from the curse of 1789. It has long been a very difficult country to govern.

I do not know how many of your Lordships read the interview given on 13 November by Mr Sarkozy to Les Echos—which noble Lords will know is the French equivalent of the Financial Times—during which he set out an extremely clear and strong protectionist programme. He declared himself to be against globalisation and that the main objective of companies should be to employ people rather than try to make profits. He said that he believed in the differentiation of taxation between home-produced and imported products, and that neither EU preference nor protectionism were ugly words. He went on to say that he believed in progressive taxation and in toughening both wealth tax—which we avoided in this country 30 years ago—and inheritance tax. He also wanted to toughen up taxation on both second homes and all chattels. Of course he may not become the next president in April because I suspect that the French will find it hard to resist voting for the delightful Madame Royal. But in an interview through one of her people reported in the Daily Telegraph on 20 November she said that the French will insist on a new treaty for Europe, saying that if the British do not sign up to it they will have to go it alone. She says that she will get a new deal, along with Germany, Spain and Italy. That treaty would opt for widespread protection and convergence of tax rates. So this Government and the next, which I hope will be a Conservative one, will need to resist firmly.

I move on to public spending. The most important thing about public spending is that it should be efficient. I believe that there is a moral imperative not to use public money to help those who do not need help at the expense of those who do. The noble Lord, Lord Truscott, said that he praised particularly the winter fuel payment. That universal payment to all pensioners is not taxable and is, in my view, one of the worst possible uses of public money. It gives many Members of your Lordships’ House, including myself, untaxed money which we do not need at the expense of those who do need it. We need to look very carefully at spending on programmes such as the winter fuel payment.

That brings me to the question of poverty. There has been much discussion recently about relative and absolute poverty. I believe that absolute poverty should always have the priority. Relative poverty is a somewhat meaningless concept on the basis that, by definition, we can never bring everyone to the average and yet it is easy to describe relative poverty as relative in relation to the average. We must focus on the needs of those at the bottom, whether they are there through bad luck or inadequacy, or whether they are victims of structural changes in the economy.

27 Nov 2006 : Column 606

Whatever the reason, if they need a helping hand, that is where we should focus our efforts.

I am sorry that the noble Lord, Lord Barnett, is not in his place because I particularly enjoyed his remarks about taxation and inflation—not only because I share the general affection in which the noble Lord is held in this House but also because he played a very important part in the running of the economy of this country. He was the Chief Secretary of the Treasury between 1974 and 1979, when his noble friend Lord Healey was the Chancellor of the Exchequer. That, of course, was a period when taxation and inflation were very interesting. Taxation reached the level of 98 per cent—if you adjust the threshold at which it reached 98 per cent to today’s money it is about £76,000—and inflation reached 25 per cent. The noble Lord referred to the functions of the Monetary Policy Committee and said that it should not worry about a change in inflation of 1 or 2 per cent but, of course, in 1975 and 1976 inflation was running at 25 per cent.

It is useful for us to recollect some of those changes. When my noble friend Lord Lawson in his 1988 Budget cut the top rate of taxation to 40 per cent, for the first time ever during a Budget speech the House of Commons had to be suspended in disorder such was the outrage expressed from some on the Labour Benches. It is much to the credit of Prime Minister Blair and Chancellor Brown that we still have that 40 per cent top tax rate. I believe that it has made a significant contribution to the economic performance of this country.

Deregulation was referred to by the noble Lord, Lord Truscott, as a great aspiration but it is hellish difficult to achieve; all the forces are against it. The only government Minister in whom I would have confidence to tackle it is the noble Lord, Lord Rooker, because he is a tough guy; he could and he would. If I were Prime Minister, I would put him in charge of deregulation. The need for deregulation has been emphasised by many speakers in the debate today. It is a crucial point.

Perhaps I may raise a couple of other points which are of great importance to this or any other Government. First, probably the biggest single structural change needed to keep the economy balanced between the working and the retired population is to raise the age level of retirement. The efforts of the Government in this respect have so far been pathetic.

Secondly, the City of London has been a major contributor to the economy. It is taking over from New York and took over from Tokyo a long time ago. It has made a tremendous contribution to the prosperity of this country. It has no competitor in Europe and probably no competitor in the world. If it is involved in mergers and acquisitions, I do not mind. It is bringing prosperity to this country and therefore must be encouraged.

Let me say a word about the Monetary Policy Committee. I believe strongly in an interest rate policy; it is a valuable instrument for managing an economy. But, of course, to do so, you must be able to raise and lower interest rates. As a general rough rule, it is desirable that real interest rates should either be

27 Nov 2006 : Column 607

around the long-term growth rate of an economy or around 3 per cent, which are often quite close together. If you want a demonstration of the importance of being able to move interest rates you only have to look at Japan, where 10 years of stagnation with zero nominal interest rates meant that it was unable to use monetary policy to stimulate the economy. I was very worried when the Fed reduced interest rates to 1 per cent. I am glad they are now at a healthy 5-plus per cent. I believe that the current level of interest rates in Britain is about right.

---