Debate on the Address

My Lords, it is a pleasure to speak on the final day of the debate on the Address and I welcome the noble Lord, Lord Truscott, to what I think is his first major debate in his new role at the Dispatch Box. It is good to see that so many noble Lords have saved their contribution for our debate on industry, the economy and consumer affairs. It is also a privilege for us that two noble Lords, the noble Lords, Lord Bilimoria and Lord Rowe-Beddoe, have chosen today to make their maiden speeches. I look forward to hearing them and have one confident prediction for both noble Lords: in around an hour’s time they will both wonder why they worried so much about it. Today I shall speak on matters relating to the economy and from a Treasury perspective. My noble friend Lady Wilcox is our new shadow Minister for Trade and Industry and is to wind up for these Benches. She will focus more on industry and consumer affairs, and between us we hope to cover the whole pitch. The gracious Speech contained the words: "““My Government will continue to maintain low inflation, sound public finances and high employment””." This implies that the Government are currently successful on all these measures, but they have yet again, I fear, used the gracious Speech as an opportunity for spin. When the noble Lord, Lord Giddens, moved the humble Address nearly two weeks ago, he said that the health of an economy could be seen in its rate of employment, not its rate of unemployment. He then went on to compare the UK’s employment rate of 75 per cent with those of the sick economies of Europe: France, Germany and Italy. This is, at best, complacent. If we were not doing better than those countries we would be in very serious trouble indeed. On these Benches we have very real concerns about the rate of unemployment. It is increasing month after month and now stands at more than 1.7 million—that is 5.6 per cent—which is the highest for seven years. Real unemployment, including those out of work and on benefits, is over 5 million. Furthermore, the number of 16 to 18 year-olds not in employment, education or training has risen by more than 40 per cent since 1997 despite the New Deal for young people. These issues need to be addressed. We also need a word of caution about these statistics. We know that our population is rising, due largely to unplanned, rapid immigration. The governor of the Bank of England has cautioned that net migration has, "““become in the last two to three years a quantitatively more important phenomenon””," but that we do not have up-to-date or reliable statistics. So we do not know what is happening in the labour market. There is also the impact of immigration on GDP growth, especially as our recent performance, while better than originally forecast, has been below the EU average. I hope that the Minister will say something about the Government’s view of the impact of recent immigration on what is happening in our economy. The current rate of inflation means that the people of this country are experiencing falling living standards; wages are currently rising less than the prices experienced by ordinary people. The retail prices index currently shows inflation at 3.7 per cent. Fuel inflation, which of course hits the poor hardest, is running at nearly 30 per cent. People are less able to withstand this inflation hit because the Chancellor’s stealth taxes mean that there is also a squeeze on disposable incomes, which have been stagnating or even falling. So, when the gracious Speech referred to maintaining high employment and low inflation, it painted a picture that is contradicted by rising unemployment and falling living standards. The gracious Speech also referred to sound public finances being maintained. I do not understand how the Government’s record on borrowing can be regarded as sound. Debt has gone up 8 per cent in the past year and is now nearly 37 per cent of GDP—and that is on the basis of the Treasury’s own measures. The Centre for Policy Studies has today published a pamphlet which calculates that, once hidden debt is included, debt is well over 100 per cent of GDP. What the Queen’s Speech did not say was that her Government would carry on borrowing and raising taxes as if they were going out of fashion and then waste quite a lot of the proceeds by spending on unreformed public services. With regard to the NHS, since the Government came to power, spending on the NHS has doubled but efficiency has gone backwards in almost every year. A series of costly reorganisations does not amount to a reform programme. We now have the predictable results of cutbacks in major hospitals, closures of community hospitals and 20,000 NHS jobs being lost. Only last week the Chief Secretary was bragging that the Government have already achieved £13 billion of the £21 billion savings promised by the Gershon programme. But these assertions have not a shred of justification and we must remember that the NAO reported that savings which have been previously claimed by the Government from the Gershon programme were, "““not based on clear audit trails””." We simply do not believe these efficiency claims and we will not believe the Chief Secretary’s call for a further 3 per cent per annum of efficiency gains until they are delivered and audited. All Governments say, quite sincerely, that they want value for money from their public spending, but achieving it is a different matter. It is pretty obvious that value for money is impeded by secrecy and aided by openness and transparency. There was nothing in the Queen’s Speech on this, so I will help the Treasury to achieve a higher quality and quantity of public scrutiny of departmental spending programmes by introducing a Private Member’s Bill in this Session to achieve greater transparency. I look forward to support from the Government Benches in this endeavour. Our country needs a healthy business sector if we are to deliver the economic growth and prosperity that underpins healthy public finances and improved public services. But there is no evidence that the Government really understand this and nothing in the Queen’s Speech addressed the need to help British business to compete in the global economy, including in China and India. Under this Government, we have seen the UK plummet down the international competitiveness league tables. We have heard a lot of talk about removing regulatory burdens—the Prime Minister and the Minister were at it again today—but those have remained relentlessly in place. The Chancellor told us in 1997 that productivity is a fundamental yardstick of economic performance, but he has not yet explained why since 2001, our productivity growth is only 57 per cent of the rate achieved in the five years to 1997. The World Bank found recently that the UK has the longest corporate tax code of all developed countries, and it was no surprise to read this morning that the CBI’s latest research shows that the Chancellor’s tax changes have adversely affected the UK’s competitiveness. The tax commission report of my noble friend Lord Forsyth found that our system is too complex, too unfair and too unstable. The Treasury really should shake itself out of denial on this. The Queen’s Speech promised us a Bill on pensions. This will deal only with the reform of the state pension system. There is a degree of consensus on the direction of the Bill, but there remain important issues—not least the level of means testing—on which we have strong reservations. We will have to wait at least another year for the equally important Bill to reform the way in which individuals and their employers will accumulate savings for retirement. That delay will compound the catastrophic decline in the savings ratio under this Government. Neither Bill will undo the harm of the Chancellor’s raid on pension funds in 1997 which has cost those funds at least £100 billion and decimated defined benefit pensions in the private sector. Equally, neither Bill will deal with the increasing disparity between public and private sector pensions or with the unsustainability of the burden of public sector pensions. Two other Bills were mentioned in the Queen’s Speech which I must mention. The first, the Exchanges and Clearing Houses Bill, will allow the Financial Services Authority to protect our capital markets from unreasonable regulatory burdens. We give this Bill our wholehearted support and look forward to it arriving from the other place later this week. The Statistics and Registration Services Bill is quite another matter. I was unable to be present at the State Opening, but I am reliably informed that when Her Majesty reached the part about legislation to, "““create an independent board to enhance confidence in Government statistics””," laughter ensued. We have long argued that we need a new structure to deal with the loss of trust in national statistics, but that requires real independence running across the whole range of government statistics. It requires the role of Ministers and their spin machines to be minimised. The best that I can say about this Bill is that it is in the right direction of travel, but I serve notice that these Benches will be looking for significant changes to the Bill that has already been published. I look forward to hearing in particular the views of the noble Lord, Lord Moser, and my noble friend Lord Jenkin, who I believe will be covering this important Bill. The gracious Speech gave us no hope that the real issues facing the economy will be dealt with in this Session of Parliament.