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The noble Lord, Lord Lee of Trafford, said that the Government are not interested in tourism. I reject that assertion. One has only to look at the Prime Minister’s engagement with the Olympic bid and what that could mean for this country and tourism and beyond. Total tourism consumption was £92 billion in 2003, which equates to 3.4 per cent of total UK GVA. The number of visits made to the UK by overseas residents in 2005 was the highest ever recorded—30 million—with investors spending a record £14.2 billion.
My noble friend Lord Brookman spoke with passion about the steel industry and its community. Despite major restructuring over the past 30 years, the UK
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The noble Lord, Lord Wade, referred to his RisingStars fund and the importance of technology and of spin-out companies from universities. I agree. He also referred to the importance of seed capital. Of course wealth creation depends in part on the infrastructure of skills, of education, of research and transport. The private and public sectors are inter-dependent.
On the public sector balance, the Government have set out their fiscal frameworks—the golden rule and the sustainable investment rules—which are being met.
On the investment funds for the start-up sector and finance for business, we successfully launched the first phase of the enterprise capital fund of Pathfinder 2006 to help the development of high-growth SMEs caught in the equity gap. There are other provisions, too.
The noble Lords, Lord Dykes and Lord Oakeshott, mentioned debt. The Government are aware of these issues and aim to provide a framework of macro-economic stability and awareness of financial issues within which people can make informed, responsible decisions about how much debt it is prudent to incur. The Treasury has worked closely with the DTI and the DWP on reform of consumer credit regulation—we had the Consumer Credit Act—and its Tackling Over-Indebtedness: Annual Report 2005 provided an update on the large amount of work that has already been done.
The noble Lord, Lord Dykes, tempted me on what the Chancellor is going to do about gas-guzzlers, but I think that is a matter for the Chancellor at Budget. He also referred to the public sector. The Government public sector is leading on a reduction in carbon emissions, which falls under Defra’s energy performance target. The Cabinet is leading by example with a pledge that the Government estate will go carbon-neutral by 2012.
The noble Lord, Lord Barnett, focused the spotlight on the Conservative’s tax reform commission proposals—a package which, if ever implemented, would be regressive. He probed the question of whether tax cuts would generate growth. Indeed, if the assertion is that they will, presumably they will become Conservative policy. We look forward to pronouncements in due course on that. He will understand, as will my noble friends Lord Sheldon and Lord Peston, that the Government do not comment on decisions of the MPC. It is truly independent, which is why it was created.
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The noble Lord, Lord Sheldon, asked why we should take the lead on climate change. Is it not right that this is an international problem above all others, and that we have particular responsibilities to developing countries?
The noble Lord, Lord Marlesford, asked whether the economic strategy would change under a Gordon Brown Government. The economic strategy is the strategy of the Government. The Chancellor has clearly been at the forefront of that strategy, and I have no doubt that it would not change under a Government of which he were the Prime Minister. The country can be assured of that. The noble Lord also spoke about the dangers of protectionism emerging in France. He is right: that is a worrying development.
The noble Lord, Lord Beaumont, offered some interesting views, which it is difficult for the Government to accept, on how to deal with the consequences of climate change. It is, of course, important that we have a full discussion on these matters.
The noble Lord, Lord Currie of Marylebone, talked about the importance of the telecommunication sector. There is a strong story to tell—prices are down, choice is wider, and satisfaction is up—but he supported targeted help for vulnerable people on switchover to digital. He illustrated some of the challenges that regulators face. An example is the complex area of food promotion to children, where Ofcom has sought to strike a balance that protects the health of children but also considers the impact on the broadcasting industry.
The noble Lord, Lord Peston, talked about productivity—I think I have dealt with that—and inequality. We should be clear on this. I think that my noble friend Lord Whitty recognised that the Gini coefficient, the measure of income inequality, has turned down a little after an inexorable rise from the 1980s. The bottom quintile of real growth in household net incomes before housing costs was 2.6 per cent over the period of this Government to 2004-05, while the top quintile was 2.1 per cent, so change is happening in the right direction. However, there is still much to do.
The noble Baroness, Lady Valentine, spoke of the significance of London; indeed, it is one of the only two truly global financial centres in the world. One of the Bills before the House aims to ensure that we keep our light-touch regulatory regime concerning exchanges. She also stressed the importance of transport infrastructure. Crossrail is important for London’s future and that is why the Government have introduced a hybrid Bill, but there are issues about how it should be funded. The Tube PPP is delivering a network capacity increase of 25 per cent by 2016, with eight lines to be upgraded and other investment.
When my noble friend Lord Rosser speaks, I am reminded of why I came into politics. He acknowledged the progress made by the Government on the economy, but stressed the issues that still remain in order to narrow the gap on inequalities. So far as private equity and hedge funds are concerned, these can bring financial benefits to markets by providing liquidity and help to drive financial innovation. However, the Government are mindful of
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My noble friend Lord Whitty welcomed the consumer legislation and that related to digital switchover. The proposed help on digital switchover is for the over 75s and households with one person with a significant disability, but I note his point about those in social housing. I have ranged over some of the key statistics related to inequality. I shall come on to green taxation in a moment, but increasing the percentage of GDP represented by green taxes is not necessarily the right outcome. Sweden and the Netherlands are the only two other countries likely to hit their Kyoto targets, but their percentage of green taxation has reduced over the past four or five years. That is because if you have climate change agreements, for example, you are reducing the take from green tax. There are also equity issues, about which my noble friend Lord Whitty made an important point.
The noble Lord, Lord Oakeshott, asked about loss of corporation tax from highly leveraged buyouts. I do not have the data and perhaps I should encourage him to listen to the Chancellor when he next pronounces on these matters. On debt, I think we do have to get away from challenging every decision made by the ONS or other government departments that is not acceptable to the Opposition. So far as concerns Network Rail going off balance sheet, the ONS is an independent statistical agency and its judgment was supported by the European statistical agency, Eurostat. On PFI liabilities, some were on balance sheet and some were off; an independent judgment is made on those.
The noble Baroness, Lady Wilcox, asked about redress schemes. The detail of those has not yet been decided, but such schemes will enable rogue estate agents to be banned. She challenged the issue of regulation, although I recall that the noble Baroness was involved in the consideration of the Regulatory Reform Act. We should look at what is happening in that area. We have the Davidson and Hampton reviews, the process of government in putting forward the code, regulatory impact assessments and new regulations. A great deal of work is going on, including work on the simplification plans to which my noble friend Lord Truscott referred. Consumer protection will be strengthened by providing a single point of contact on consumer issues. Business investment is not at a record low. It has risen by one-third since 1997, over twice the rate of growth seen in the preceding eight years.
I turn briefly to the Statistics and Registration Service Bill, to which several noble Lords have referred, including the noble Lords, Lord Moser, Lord Jenkin of Roding and Lord Oakeshott, and my noble friends Lord Peston and Lord Haskel. To ensure statistics produced across government are of the highest professional quality and integrity standards—and are seen to be so—the reforms will cover official statistics produced across government, a point probed by my noble friend Lord Peston. In particular, the independent board will oversee the ONS.
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The noble Lord, Lord Moser, of course, speaks with particular authority on this matter. He served with great distinction as the head of the Government’s statistical service and I welcome the fact that he welcomes the Chancellor’s initiatives, the structure and the consultation involved. I note his point about what seems to be a change of direction in the status of the board. Doubtless there will be opportunities to debate this in the passage of the Bill as we discuss the legislation in detail. The fact that it remains a decentralised system within a single integrated system is important. The Government recognise the pre-release and doubtless there will be discussion on that also.
The noble Lord, Lord Jenkin, raised a similar point about which government department should be involved. I am sure we will discuss that in due course.
The noble Lord’s other point related to—
Lord Jenkin of Roding: The Joint Select Committee.
Lord McKenzie of Luton: My Lords, yes, indeed, and how Parliament will be involved in that. I think that is a matter for Parliament. I am grateful to the noble Lord.
My noble friend Lord Haskel raised an interesting point about whether we are measuring the right things in the modern economy, with all its intangibles and what is happening in our changing world. The new arrangements certainly emphasise the fact that what statistics should be determined are an executive function. But we need the strength of the new arrangements to make sure that they are relevant.
A number of noble Lords referred to the Stern report, including the noble Lords, Lord Newby, Lord Vallance and Lord Beaumont, and my noble friends Lord Haskel, Lord Barnett, Lord Peston and Lord Whitty. I have dealt with the point about the percentage of GDP which is taken in green taxes. The Government welcome the Stern review of the economics of climate change. It leaves us in no doubt as to the seriousness of the threat to our economies.
The noble Lord, Lord Newby, attacked the Government’s record on the environment but he was less than fair. If he looks at the Government’s intervention and the principled framework outlined in the statement of intent on environmental taxation and tax in the environment, he will see that the strategy is, in a sense, consistent with what is coming out of Stern. Funding has been provided for newer, cleaner technologies.
The noble Lord, Lord Vallance, made some interesting propositions about the role of science. Indeed, the business community has helped to drive a solution on this. He acknowledged that we have funded, on a joint basis, the Energy Technologies Institute.
As to the upstream carbon tax, the Government’s approach is to ensure that the climate change levy is driving energy efficiency. The emissions trading scheme is the right way to get the pricing of carbon into the system.
The UK economy has performed extremely well since 1997, both compared with its own historical
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In 2005, the economy was affected by sustained rises in oil prices, weak euro-area demand and a subdued housing market. In previous decades, these factors would have risked being accompanied by recession. By contrast, through this challenging period, the Government’s macroeconomic framework has continued to deliver unprecedented macroeconomic stability, with GDP having grown for 57 consecutive quarters, compared with the previous longest expansion of 24 quarters.
Reforms to monetary and fiscal policy frameworks have been crucial in putting the UK economy on a sound and stable footing and strengthening underlying performance. My noble friend Lord Bhattacharyya reported how, on his travels around the world, this was widely acknowledged. My noble friend Lord Peston called it, I think, a near-Utopia. So the UK continues to strengthen and evolve to reflect the requirements of a modern global economy.
Let me spell out in more detail the benefits that our macroeconomic reforms have delivered. In 1996, Britain was seventh in the G7 for national income per head, while in 2005 it was second. Growth has been more stable and stronger than in the past, and by international standards. No other OECD economy has enjoyed an expansion as long as the current one in the UK in the post-war era.
Inflation has been kept low through policy credibility, and without high interest rates. Base rates in the UK remain low by historical standards; they averaged over 10 per cent between 1979 and 1997, hitting a peak of 15 per cent, compared with the current rate of 5 per cent. Mortgage rates have been at their lowest since the 1950s. We also have a robust labour market.
Whereas once low inflation came at the cost of high unemployment, now the UK labour market is an example of international best practice. Developments in the UK economy are obviously heavily influenced by what goes on in the world economy. The world economy presents challenges as well as opportunities, but the economy was able to weather these challenges well with a short and shallow downturn, contrasting with previous periods of prolonged recession, and has now gained momentum. GDP rose at its fastest rate
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Manufacturing output is rising, with growth in the first quarter of 0.9 per cent and 0.6 per cent in the second. Retail sales growth has picked up since 2005. The Treasury has long been expecting a slowdown in private consumption, and business surveys suggest further gains in activity in the business sector to come, consolidating this rebalancing.
Unprecedented macroeconomic stability and microeconomic reforms are providing the right environment for UK business to succeed in a competitive global economy. That is one reason that the UK remains at the heart of global direct investment patterns.
The UNCTAD World Investment Report 2006 shows that in 2005, the UK had the world’s largest stock of inward FDI. As a percentage of GDP, this is the highest stock of any G7 country.
The domestic stability delivered by the Government’s macroeconomic framework, with volatility in the UK economy at historically low levels and the lowest in the G7, puts the UK in a strong position to respond to the global economic challenges of the next decade. Far-reaching and fundamental changes in technology and trading patterns are transforming the global economy. Meeting the long-term economic challenges and opportunities will require sustained effort from across a range of policy areas aimed at entrenching macroeconomic stability; promoting an enterprise culture; strengthening innovation; opening up skills to all; ensuring fairness through a flexible and responsive welfare state; and promoting sustainable development, including through multilateral action.
There is no room for complacency and the Government are aiming even higher; they want the UK to become the global hub for international, high-value and creative economic activity, including inward investment from China and India.
The economy continues to perform strongly, with the best combination of economic fundamentals seen in a generation. It is open and flexible, and has responded quickly to changing global markets. Consumer spending and retail sales have undergone some necessary rebalancing. We should be proud of this record.
Since 1997, the Government have shown that they can deliver a strong economy and sound public finances hand in hand with sustained and substantial growth in investment in public services. But the world has not stood still, which is why we are publishing today the examination of the key long-term trends that will shape the decade ahead. It will also shape our debates in the coming Session and beyond.
On Question, Motion agreed to nemine dissentiente, and the Lord Chamberlain was ordered to present the Address to Her Majesty.
- House adjourned at 9 pm.
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