| Previous Section | Back to Table of Contents | Lords Hansard Home Page |
Baroness Harris of Richmond: Good.
Lord Taverne: My Lords, I do not always necessarily agree with the Liberal Democrats. I am speaking from the Front Bench now, so I have to.
The Liberal Democrats propose that the council tax should be replaced with a local income tax. Ever since the Layfield report, I have been strongly in favour of a local income tax. That is not because it will be more popular. If the Liberal Democrats think that a local income tax will be more popular than the council tax, they may be mistaken: any new tax is unpopular. However, the great advantage of a local income tax is that it gives more independence to the local council to make a reality of local government and removes some of that centralised control, of which we have an excess in this country. In fact, one could put the same argument in favour of top-up fees, if they lessen, to some extent, the dependence of universities on centralised control. However, I would not dream of advancing that argument in my present position, speaking temporarily as a member of the Front Bench team.
There is no doubt that in this country we are over-centralised. It is a weakness of the Chancellor that he has tried to control too much. He has not achieved his goal of increasing productivity by his various efforts at target setting. He has not increased them by complicating the tax system. If we decentralised by, for example, abolishing council tax, we would do a great deal more for effectiveness and productivity in this country.
7.50 p.m.
Baroness Wilcox: My Lords, I am pleased to participate on one of the few occasions that we have in this House to debate money matters. It is a great shame that the huge wealth of experience and expertise to be found down this end is not mined more often. Whenever it is, the ensuing discussion is, without exception, of the highest quality. Tonight is no exception. We have covered a broad range of issues. I shall neither manage to mention them all nor delve too deeply into the detail of the proposals set out last week. Suffice to say that I am delighted to follow the noble Lord, Lord Taverne, who spoke interestingly and eloquently on simplifying the tax system. I am sure that we agree with him on much of that.
My noble friend Lord Higgins asked some important questions, to which we will be interested to hear the Minister respond; in particular, the questions about the Bank of England and the monetary committee. My noble friend Lord Northbrook asked questions about small businesses and growth in the public sector, which I shall not cover, but to which I shall be interested to hear answers.
Perhaps I may outline some of the issues that are most important to us in the debate. The Chancellor painted a very rosy picture in his Pre-Budget Report. But I would suggest that he should take a closer look at the situation on the ground. The Government's record of "tax, spend and fail" is one of the most depressing truths of our present time. One could perhaps forgive—or at least see some justice in relation to—a government who taxed aggressively, but spent money wisely to the benefit of high-performing schools, hospitals or transport systems of which we could be proud. Equally, we may feel more sympathetic to a government who rigorously pursued a low tax policy and, as a consequence, had less tax revenue to inject into public services. But it seems that with this Government we are caught with the worst of both worlds.
As my noble friend Lady Noakes said, there has been 60 per cent tax rises under Labour, but what has been achieved? There are more National Health Service hospital administrators than there are beds. There are endless bureaucrats generating targets and more bureaucrats, as my noble friend Lord Northbrook outlined so well.
My noble friend Lady Noakes gave an excellent and full account of the Chancellor's "golden"—or, as we have learnt, not so "golden"—rules, to which he referred in his Pre- Budget Report. The first rule of borrowing—only to invest and not to fund current spending—is met only when dubious assumptions are made. As we have heard tonight, independent forecasts suggest that Gordon Brown's £14 billion annual surplus figure is out by a significant margin. As my noble friend Lord Northbrook rightly said, those golden rules have turned awfully slippery under inspection.
The Pre-Budget Report included an announcement that the measure of inflation will change from the old RPIX to the harmonised consumer prices index. It is claimed that that will give a better indication of spending patterns. That seems to be yet another attempt at creative accountancy by the Chancellor, given the fact that the harmonised consumer prices index fails to take account of housing costs, such as council tax. I was very interested to share with the noble Lord, Lord Taverne, what were, I think, his party's views on the subject, as well as his own, which I hope are coincidental.
Surely, it is not coincidental that in the same year as some people have experienced council tax rises well into double figures—such as the Telford and Wrekin council rises of 25 per cent—the Treasury tweaks its measure of inflation to ensure that those hikes are not included in the calculation.
As other noble Lords have mentioned, the occasion for our debate today is Section 5 of the European Communities (Amendment) Act 1993. This calls on Parliament to assess the extent to which we are meeting the convergence criteria, especially those set out in Article 2. It states:
- "The Community shall have as its task, by establishing a common market, an economic and monetary union and by implementing the common policies . . . the promotion, throughout the Community . . . a high degree of convergence of economic performance".
All the while—as has been aptly brought to the attention of the House by my noble friend Lady Noakes—the growth and stability pact is being made a mockery of by France and Germany. How are we expected to endorse ever-closer integration while an agreement at the very heart of it is being so openly flouted? It certainly does not help to boost confidence in the system that we are being asked to put our faith in.
The Pre-Budget Report that we heard last week drew a picture of the British economy that few of the listening public would recognise. The Chancellor seems to be over-optimistic in his forecasts, in denial about failures of the Government's public sector policy and oblivious to the dangers ahead that are being consolidated with every new stealth tax rise. He would do well to be more cautious or we all shall be paying the price for years to come.
7.56 p.m.
Lord McIntosh of Haringey: My Lords, this certainly has been a wide-ranging debate, which is quite remarkable and admirable considering how few noble Lords have taken part. I congratulate the Official Opposition Benches on the way in which they have clearly considered their speeches, avoided duplication and covered the waterfront in a very effective manner. That has not always been the case, but it was tonight. I am not saying that in anything other than admiration for a professional Opposition. It was excellent. I was also glad to hear the intervention made by the noble Lord, Lord Taverne.
There are three major sections of the debate to which I must reply: first, the issues about the economy; secondly, the issues about our public finances; and, finally, the issues which relate to the stability and growth pact. I made a note that the noble Baroness, Lady Noakes, made almost no reference to the wider economy, except to say that there were seeds of weakness in the wider economy. I must say that the Opposition and Liberal Democrat Front Benches have been saying that for six-and-a-half years. They have been proved wrong on every occasion. I wish that I had political researchers available to me who could show that from Hansard and I could expound it in some detail. But I do not. However, if anyone looks back he will see that it has always grudgingly been said, "Yes,
the Chancellor's doing quite a reasonable job now, but it's all going to come to grief in the next 12 months". It has not.
Lord Taverne: My Lords, I have not said that.
Lord McIntosh of Haringey: My Lords, the noble Lord has not done so from the Front Bench, but the noble Lords, Lord Newby and Lord Oakeshott, have done it on many occasions.
Baroness Noakes: My Lords, with respect, I said that in the short term I did not think that there would be a problem. I was referring to more than 12 months.
Lord McIntosh of Haringey: My Lords, that is a fair comment. The other argument that I always hear—I have heard it again from the noble Lords, Lord Higgins and Lord Taverne—is that, "It really is no credit to Gordon Brown because it was all the wonderful Thatcher government that put us in such a good position".
If anyone refers back to my closing remarks on the Queen's Speech debate on 27th November, in response to the noble Lord, Lord Marlesford, they will see how far that is from my views, but, more importantly, from the truth. Yes, I have always acknowledged that after the debacle of the fall from ERM in 1992, Chancellor Clarke, in particular, pursued policies which were continued by Gordon Brown. I acknowledge that there has been a continuity of success over a period of about 10 years.
At the same time, when one looks back at the record of the Thatcher government as a whole, all the economic indicators on which we pride ourselves now are particularly different from the failures of the Thatcher government on almost every economic indicator. Of course, we are still paying the price for under-investment in our public services over a considerable period, which is notably the period of the Thatcher government.
Nevertheless, it is the case that the United Kingdom has had 45 consecutive quarters of unbroken economic growth, which is a period of 11 years—and that is what I acknowledge. UK growth has been above that in the euro area for nine of the past 11 quarters.
We have low inflation, averaging 2.3 per cent on RPIX criteria since 1997, which is the lowest level for 30 years. Our interest rates are close to their lowest level since 1955. Unemployment is close to its lowest level for a generation at 5 per cent, while employment, as I said in my opening remarks, is at record levels. So I do believe that we are well placed to benefit from the strengthening global economy
The noble Lord, Lord Higgins, and the noble Baroness, Lady Wilcox, both made the accusation that the change to a CPI-based target for inflation was somehow suspicious. That was my impression, but if I am wrong then I apologise. However, the change to a CPI-based target is not only a precursor to joining EMU, but is worth while even outside EMU. It is a better measure of inflation for monetary policy
purposes and we have always made it clear that it would not apply to other matters such as pensions. It allows us to compare the economic performance of the United Kingdom with that of the euro area and we believe that that is the right thing to do. Indeed, Mervyn King, the Governor of the Bank of England, also believes that.I want to refer to the issue of the convergence programme, which is in a sense a slightly, if not a very, popular summary of the PBR. That is the document which was sent to the European Commission at the time of the PBR, subject of course, as the Chancellor always made clear, to the usual parliamentary scrutiny and approval. The noble Lords, Lord Northbrook and Lord Higgins, both accused the Chancellor of ignoring the 3 per cent obligation for the stability and growth pact. The forecast for the United Kingdom economy and public finances set out in the updated programme shows that the UK's public finances remain robust and sustainable. Net debt is set to rise from 32.8 per cent in 2003 and is forecast to stabilise at 35.5 per cent in 2008–09. Since the general government gross debt is forecast to stabilise at 41.4 per cent, one of the lowest levels in the European Union, the Government are demonstrating their continued commitment to long-term sustainability.
In keeping with the 2003 broad economic policy guidelines, the programme also demonstrates the Government's commitment to address the historic under-investment in public services in the United Kingdom, to which I referred. We have given figures for the rise in public investment in cyclically adjusted terms, with the result that both public sector net borrowing and general government net borrowing will be 2.4 per cent in 2003–04, falling in the following years.
General government net borrowing will be 3.3 per cent in 2004, falling to 2.6 per cent in 2004–05 and to 1.8 per cent by the end of the projection period. What I say, and what we have always said, about the stability and growth pact is that the United Kingdom continues to meet a prudent interpretation of the pact that reflects low-debt, long-term fiscal sustainability more generally, the need for public investment in the United Kingdom and takes into account the economic cycle.
Next Section
Back to Table of Contents
Lords Hansard Home Page