Debate on the Address

My Lords, I start by welcoming my noble friend Lord Truscott to the Front Bench. I first knew him when he was an agent for the Labour Party, but he got over that and moved on to greater glory in the European Parliament and now, I am sure, on the Front Bench here. He is very welcome. I couple that by joining the tributes to my noble friend Lord Sainsbury, who not only was my roommate for many years but has made a great contribution to science and to the proceedings of this House. I intend to touch on three interrelated aspects of the economy and economic policy, all of which a few years ago probably would not have been regarded as mainstream, but which I now regard as mainstream. Climate change and the economics of climate change have been touched on by a number of noble Lords; the other two less so. Inequality is one of my other themes. My noble friends Lord Rosser and Lord Peston have latterly touched on that theme. The third is the interest of consumers in that process. On the latter, I declare an interest as chair of the National Consumer Council, and I probably should on the climate change issue as a member of the board of the Environment Agency and the London Climate Change Agency. Three Bills directly relate to consumer matters. We will debate the Consumers, Estate Agents and Redress Bill only next Monday, so I shall curtail my remarks on it, but I need to say that I very much welcome its broad thrust in its objectives of creating a single, cross-sectoral advocacy and policy body for consumer interests; improving the ombudsman function, particularly in the energy sector; and enhancing and making more comprehensive the role of Consumer Direct. That seems a sensible package for reorganising the institutions of consumer protection in this country, although we need to be concerned that the complaints functions of Energywatch and Postwatch are covered in the new structure. Also on the consumer front, we have the Legal Services Bill. I very much welcome it, partly because it was originally suggested by the National Consumer Council some years ago, well before my time. I hope that lawyers in this House and elsewhere back off from their initial great hostility to the Bill and recognise that legal services, like all others, have to take account of the consumer, client and customer interest. I also have an interest in the digital switchover Bill. I listened with interest to noble Lords discussing that, including my noble friend Lord Currie. It is important that, in the process of digital switchover, the interests of the more vulnerable consumers are recognised; I was glad that he referred to that. I particularly draw his attention, and that of the House and the Minister, to the position of people in council and other multi-occupied housing, for whom there is the possibility of paying a much higher cost for digital switchover than in areas where individual households make the choice. That needs to be covered by the Government, the regulator and the BBC’s approach to supporting vulnerable households. On climate change, we have had some differing views, and it is with great temerity that I have to say that I disagree with three of my most distinguished noble friends, two of whom have just disappeared, but I hope that they will be back in a moment. Here is one of them. Many years ago, one of them—he has probably forgotten—attempted to teach me economics, and the other two have taught me a lot about politics. It is important that we recognise that the Stern report finally gives us a robust analysis of the economics of climate change, although there are obviously wide ranges of probabilities involved in it, as there are in the science. I have been long convinced of the science of climate change but, on the Front Bench and since, I always felt slightly nervous that its economics had not been fully explored. The Stern report fills a major gap with that. One of Stern’s major recommendations is, in effect, on the cost-effectiveness of measures to not only mitigate climate change but, as my noble friend Lord Peston emphasised, adapt to inevitable climate change. The sooner we make decisions on that, the more economically sensible and rational it is. That means huge responsibilities on government, nationally and internationally, and on industry, but there is also a consumer dimension to the subject. One of the NCC’s responsibilities is to promote sustainable consumption, which is a difficult task. A proportion of consumers are of course very aware of climate change and other green-related issues, and make choices based on those values. We need to enable them more easily to make those choices, in terms of labelling, education and presentation of the various products that face them. They are, I hope, a growing minority of consumers, but they are nevertheless a minority. Frankly, most consumers still make their choice on price, availability and quality, as consumers always have. That will continue to be the case, but government and industry can affect the framework in which that choice is made. In relation to quality, I go back to some remarks by my noble friend Lord Haskel. Industry and government ought to deploy the creative design facility of this country—we have leadership in the area—to ensure that the products and services we offer maximise the take-up of the greener options. On availability, there is a significant role for regulation in setting standards and requiring labelling, and in banning some high energy-use or resource-use products. On price, there is a major role in relation to taxation. That is a difficult area as there is often regulation, and it is difficult in terms of presentation. It appears that the consensus among the political parties, at least in principle, is that there should be some shift towards green taxation. I approve; it should be done, broadly speaking, on a revenue-neutral basis. In other words, you tax the bads and incentivise the goods in terms of energy content or other green measures. We have to recognise, however, that there is another problem about the switch to green taxation—that, in some forms, it could disproportionately affect the lower-income groups. Even if operated on a revenue-neutral basis, green taxation, like all indirect taxation, can disproportionately affect the poor, and can be in some forms extremely aggressive. A concomitant of going for more green taxes as a proportion of the tax burden must therefore be that the rest of the tax system is put on a more progressive basis. That particularly applies to the structure of and threshold for income tax, and to council tax. If we have a more progressive system of that form of direct taxation, we can accommodate a shift to green taxation to deliver our environmental objectives in a way that does not penalise the weakest elements of our society. That also touches on my final theme, equality. By equality I make no apology for saying I do not just mean equality of opportunity; I mean equality of outcome. On both, the progress has been sadly lacking in the past two decades. Inequality in our society has grown over the past 25 years. After the war and for some time afterwards, the UK was one of the most equal societies in western Europe; it is now one of the least. That is true not only in the static sense of the immediate snapshot, but in social mobility, where we have gone backwards. The Government have engaged in major efforts to try to reverse or hold that trend. The tax credits system, the minimum wage, interventions such as the New Deal and other provisions of benefit into work have all attempted to do that, but the net effect of all that is that we have, broadly speaking, frozen the distribution of income at roughly the levels we inherited. There has been a slight improvement here and there, but in general that is the picture. The distribution of wealth has actually deteriorated in terms of equality over the past few years. Although pensioners, the poorest families and some people for whom the minimum wage is properly enforced have benefited in relative terms, others—those on benefit who are single; those who are just above the benefit level, particularly those living in social housing, where the costs have gone up significantly; and other groups of the working poor—have not fully benefited from the improvement in the economy over recent years, as the Conservative Party pointed out only this week. As my noble friend Lord Peston pointed out—I agree—there is still a clear poverty trap for such people moving in and out of benefit, of paying almost 100 per cent taxation as they move into work. At the other end of the scale, there is the situation pointed out by my noble friend Lord Rosser—that there are obscene increases in income in elements of the City and some of the boardrooms of our country. That is not justifiable on economic or social terms, and is extremely dangerous to our social cohesion. Frankly, it cannot be justified in terms of competitiveness and globalisation. I do not go along with the noble Lord, Lord Beaumont, or Nicolas Sarkozy in opposing globalisation; free trade brings many benefits. When I was taught economics—probably not by the noble Lord, Lord Peston, in this case—free trade and trade depended on a comparative advantage and an absolute advantage, certainly not an absolute advantage enforced by exploitative wage rates. Globalisation has many benefits and does not mean that we on the one hand should move towards Chinese wage levels for fruit pickers, cleaners and textile workers while we have Texan levels of remuneration in our boardrooms and among our City brokers. I would submit that that outcome of economic policy would seriously threaten the social cohesion of this country and cannot be justified in any economic policy terms.